Friday, September 16, 2011

Wanna Fix the Banks? The 10-Step Program

Unlike Congress, the Banks, and the President, Ritholtz grants that 'there is a problem.'

He goes on to propose the solution, in 10 relatively easy steps.  The Banks will screech, of course.

Tough patooties for them.

A couple from the list:

1.  Depression era Glass Steagall legislation needs to be restored (it was repealed in 1998). Separating FDIC deposit banks with much riskier Wall Street iBanks and speculators is imperative.

2. The Commodity Futures Modernization Act of 2000 needs to be repealed, (Those opposed to this repeal should be deported).

4. The SEC issued “Bear Stearns exemption” — replacing the 1975 Net Capitalization Rule’s 12 to 1 leverage limit to with essentially unlimited leverage — needs to be legislatively revoked, and the old rule officially reinstated.

The bought-and-paid-for Congressional shills (Dodd retired, Schumer took over) will scratch and claw.  No matter.  Glass-Steagall worked very well; the CFMA regulates highly-leveraged (and very dangerous) trades; and 12-1 leverage is actually pretty generous, given what we saw in the last few years.


GOR said...

He’s certainly right to make Glass-Steagall number one. It should never have been repealed. It always irked me that because of the machinations of investment banks all banks were tarred with the same brush. That said, many depository banks - jumping on the gravy train (Citi and BAC among others, come to mind…) - brought it upon themselves.

He’s also on the mark about Reserves, Nonbank Mortgage Underwriters and Underwriting Standards. Years ago in banking one of our biggest beefs was with S&Ls and Credit Unions who were not under the same regulatory restrictions as banks. We viewed it as unfair competition. Recently, with the advent of so many nonbank entities that are engaged in ‘banking’ – with little or no supervision – the waters have been muddied even more.

A lot of cleanup to be done – but will anyone have the stomach for it?

J. Strupp said...

Amen Dadster.

But I would add that REAL campaign finance reform should be first on this list.

There's no question that Ritholtz's list would go to great lengths to reduce the financializaton of our country (world) and they shouldn't be controversial in political terms.

But they are on BOTH sides.


Because rich people elect other rich people to do rich's people's work and financial deregulation runs contrary to their interests. Income inequality, financialization of markets via deregulation, regressive tax policy and on and on are the result of this effed up system. It's no coincidence that income inequality exploded in the 80's. The 80's were the reversal of almost everything that was gained for the average American since the Depression.

This "ruling class" has us believing that the welfare leaches are to blame for our problems. But look at the data. We've destroyed our manufacturing base via a strong dollar policy, "free" trade agreements and stupid tax policy, all the while deregulating financial markets and sending money up the food chain via regressive tax policy favoring the job creators (which is simply a code word for rich people who are mostly living on asset appreciation they've had for decades). So real income growth for the average American has been flat or negative for 30 years. Poverty (real poverty) is spiking. This is what these people have created. They don't care about you or I which is fine (it's not in their interest to do so) but it's our damn fault for letting these people run the world.

Yet the middle and lower class should be in favor of gutting SS and Medicare because the pigs at the top can't stop sucking on the government's tit? These folks pay good money to make the average schmuck think this way. They pay good money to make sure that their people in office keep listening to them.

It's a scam. And until we do something about the poeple who are elected to do the rich man's work, it's not going to get any better.

Sorry, off topic rant but I just went with it.

And BTW, I openly admit that this problem is a bipartisan problem. I have plenty of disgust for Democrats, Obama in particular. At least we know where the GOP is coming from. Obama has stabbed the people who voted for him in the back as far as I'm concerned.

J. Strupp said...

That was way too long sorry.

Dad29 said...

Nah, it's good to rant now and then.

We've destroyed our manufacturing base via a strong dollar policy, "free" trade agreements and stupid tax policy,

You could add 'regulatory nightmares' to that list.

J. Strupp said...


J. Strupp said...

Ritholtz linked to Robert Reich a coupleof weeks backs which frames the income inequality issue pretty well. I'm sure you saw it but FWIW: