tag:blogger.com,1999:blog-12897315.post3532661686763522116..comments2024-03-28T09:54:55.115-05:00Comments on Dad29: It's Not "Financial Regulation"; It's Just More of the SameDad29http://www.blogger.com/profile/08554276286736923821noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-12897315.post-4181547591123316812010-04-18T10:02:28.374-05:002010-04-18T10:02:28.374-05:00Yah, well, King mentioned re-instituting Glass-Ste...Yah, well, King mentioned re-instituting Glass-Steagall (100% a good idea).<br /><br />AND he mentions, very delicately, the problem of "Easy Al" Greenspan--whose real motto is 'let the good times roll.' <br /><br />Back in the good old days, banks were also required to maintain an 85% (or less) loan/deposit ratio, which is no longer operative; they're now running over 100%, albeit marginally. WTF?<br /><br />So in the end, it's not really a question of TBTF. We're back to examining the character of both the bankers AND the FRB, which had plenty of power to crank down on lending.<br /><br />AND, of course, the GSE's, which became political sandboxes and treasure-chests for favored constituencies, aided and abetted by Clinton and GWB.<br /><br />More capital. Separate investment-houses from commercial banks. Make the FRB and the GSE's independent of political interference.<br /><br />IOW, govern. Govern for the good of the country, not of the Partie(s) in Gummint (PIGS.)Dad29https://www.blogger.com/profile/08554276286736923821noreply@blogger.comtag:blogger.com,1999:blog-12897315.post-3393856780071095022010-04-17T16:03:33.991-05:002010-04-17T16:03:33.991-05:00Sorry it got cut off. He's the speech:
http...Sorry it got cut off. He's the speech:<br /><br /><br />http://www.bankofengland.co.uk/publications/speeches/2009/speech406.pdfJ. Struppnoreply@blogger.comtag:blogger.com,1999:blog-12897315.post-81476551531840755462010-04-17T15:55:07.953-05:002010-04-17T15:55:07.953-05:00Because how much capital is "enough" dad...Because how much capital is "enough" dadster? Simply requiring the banks to add capital may help but it won't eliminate the existence of TBTF institutions. How do I know this? Because before every financial crisis in our history, we have always assumed that the big banks had "enough" capital to weather the storm. We don't have a crystal ball. We have no idea how much capital is "enough".<br /><br />Tell you what, the following is a speech given by Meryvn King, Governor of the Bank of England. I would say that it's probably the most influential speech given in regards to the direction this nation NEEDS to take on this subject. King answers the question of why capital requirements won't do the job. It's a short read: <br /><br /><br />http://www.bankofengland.co.uk/publications/speeches/2009/speech406.pdfJ. Struppnoreply@blogger.comtag:blogger.com,1999:blog-12897315.post-27166124312382874702010-04-17T08:46:34.290-05:002010-04-17T08:46:34.290-05:00They just need to be at market cap that doesn'...<i>They just need to be at market cap that doesn't threaten systemic risk to the entire system.</i><br /><br />So.<br /><br />Change the capital requirements (upward, of course) and that's that.Dad29https://www.blogger.com/profile/08554276286736923821noreply@blogger.comtag:blogger.com,1999:blog-12897315.post-9870767044825609452010-04-17T08:39:42.832-05:002010-04-17T08:39:42.832-05:00Keep in mind that I don't support the break up...Keep in mind that I don't support the break up of big banks into something resembling a thousand regional banks. They just need to be at market cap that doesn't threaten systemic risk to the entire system. These banks can still be quite large to provide financing to companies like GE without blowing up the whole system if they fail. <br /><br />And agree that stupidity was the culprit in regards to Citi, etc. But I don't care how stupid these guys are. That's not the issue. The issue is that these guys were stupid AND posed a massive systemic risk to the global economy. Citi can be as irresponsible as they want as long as they are small enough to be resolved by the FDIC or some other institution created to wind them down. <br /><br />As for most of the bank failures in this country consisting of mostly small banks, I agree. But remember one VERY important thing dadster. The only reason every major bank in this country (besides maybe J.P. Morgan and Goldman) didn't fold in Sept. of 2008 is because of government intervention in AIG. Small banks fail in financial crisis. TBTF banks do not. This is, was and always will be how it works. <br /><br />P.S. it has been prove time and time again that massive banks provide no major advantage to a nation or it's economy.J. Struppnoreply@blogger.comtag:blogger.com,1999:blog-12897315.post-90520199672977284432010-04-16T17:11:31.159-05:002010-04-16T17:11:31.159-05:00Any politician, regardless of political affiliatio...<i>Any politician, regardless of political affiliation, who does not support the limiting the size of the big banks in this country is not for effective FinReg.</i><br /><br />Here we differ.<br /><br />The fact of the matter is that when GE wants to obtain a $5Bn letter of credit, it's a lot easier to go to ONE bank than 50 of them. When you propose to 'limit the size' you also propose to increase the costs of that transaction (inter alia.)<br /><br />What you and I saw in the Citi-Zombie picture was NOT a matter of size; it was a matter of stupidity (and, probably, some avarice). BIG difference.<br /><br />We also both know that around 80% of Citi's loan portfolio is very solid stuff. All of that could be sold off easily. The last 20%? Shareholders, beware, and too bad for you.<br /><br />Look at the other side, by the way. Most of the bank failures in the last 2 years have been small banks (i.e. less than $2Bn in total assets, and most are FAR less than that.)<br /><br />So if large assets are the problem, how come the tiny-bank fails?Dad29https://www.blogger.com/profile/08554276286736923821noreply@blogger.comtag:blogger.com,1999:blog-12897315.post-63550472422863956342010-04-16T13:45:51.631-05:002010-04-16T13:45:51.631-05:00Chris Dodd is a bankwhore. McConnell is a bankwho...Chris Dodd is a bankwhore. McConnell is a bankwhore who is projecting his incompetence on to other bankwhores in Congress. <br /><br />Bottom line, TBTF institutions will always be bailed out by the government. This is a fact of life so we might as well swallow it down and get on to dealing with the elephant in the room: The fact that we allow banking institutions to grow to the size where their risk to society far outweighs their benefit. Where they BECOME TBTF institutions in the first place.<br /><br />Any politician, regardless of political affiliation, who does not support the limiting the size of the big banks in this country is not for effective FinReg. Any politician, regardless of political affiliation, who does not support massive increases in capital reserve requirements by the biggest banks in this country is not for effective finReg. <br /><br />As finanical regulation progresses, there will be two parties. One which openly dismisses bank size limits and increases to capital requirements and one who talks about "permanent bailouts" because it politically calculating to link their opponents to the recent bailout. McConnell is for as much finanical regulation as any other greaseball politician bought and paid for by Wall Street.J. Struppnoreply@blogger.com