The proposals so far do nothing to break-up or prevent (4.00 / 5)

"too big" financial conglomerates.  They only provide a mechanism to deal with potential liquidation of financial conglomerate or risk monitoring.  Both are inadequate.

Potential liquidation, while needed, all deals with after the fact.  The damage to economy may already have taken place before FDIC/Treasury step in to take over financial conglomerate.  Risk monitoring, so far, leaves the discretion to regulators and we know that could mean if an ideology is in charge of regulators.

RebelCapitalist - Financial Information for the Rest of Us.

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by: RebelCapitalist @ Tue May 12, 2009 at 14:08:14 PM UTC

Isn't the push going in the other direction? (4.00 / 4)

The healthier banks buying up the less solvent banks and some using TARP funds to finance buy-outs of banks that used to be competitors.

The "too big to fail" banks are geting bigger.

"It sounds wrong...
     ...but its right."

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by: SpitBall @ Tue May 12, 2009 at 15:43:51 PM UTC

[ Parent ]

Yes, we could be heading in that direction. (4.00 / 2)

Question is whether regulators are going to stop financial conglomerates from going on buying spree.  Something tell me that won't.

RebelCapitalist - Financial Information for the Rest of Us.

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by: RebelCapitalist @ Tue May 12, 2009 at 17:05:27 PM UTC

[ Parent ]

One might contend (4.00 / 1)

that those in positions to make, or break, particular conglomerates might still be influenced in such decisions based on which bank they used to work for, or with. Crony Capitalism continues with a different set of cronies crowding around the trough.

Break up the bigger banks? Not after they worked so hard to build them up.

"It sounds wrong...
     ...but its right."

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by: SpitBall @ Tue May 12, 2009 at 17:29:16 PM UTC

[ Parent ]

Concentrated wealth (4.00 / 4)

undermined democracy during the last decade.  The two are connected.

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by: Tom Wells @ Tue May 12, 2009 at 14:35:30 PM UTC

Concentrated Wealth has been a problem for longer than the last decade. (4.00 / 5)

Some of the problems have been hidden, ignored and covered up by the same press that covered up the last ten years.

But I agree that the last ten years have made all of that much more open, the pain imposed obvious and direct.

What is the coverup of environmental disaster but the influence of concentrated wealth, for example.

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

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by: HousesofProgress @ Tue May 12, 2009 at 14:50:54 PM UTC

[ Parent ]

I agree. (4.00 / 2)

Back in 1980, I thought concentrarted wealth was a big problem.  Those were the good old days compared to what Reagan created.  

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by: Tom Wells @ Tue May 12, 2009 at 16:17:13 PM UTC

[ Parent ]

FDIC, not the Fed, should be given expanded authority (4.00 / 4)

The FDIC is the one regulatory body which has showed a willingness during the financial crisis to intervene and close banks.  The primary institutions whose dealing in derivatives caused the crisis such as Bank of America, Citigroup, Wells Fargo, and JP Morgan are all classified as bank holding companies under the watch of the Federal Reserve.  Judging by their track record, the Federal Reserve has zero interest in performing their existing regulatory duties.  

FDIC Chairwoman Sheila Bair recognizes the problem of "too big to exist" and has demonstrated the capability of resolving distressed financial institutions.

Federal Deposit Insurance Corp. Chairman Sheila Bair sought authority to close "systemically important" financial firms, marking her boldest attempt yet to expand the agency's reach.

The FDIC should be able to take over and shut bank-holding companies and other large institutions instead of just failed commercial banks, Bair said today in a speech at the Economic Club of New York. Such power would shield taxpayers from losses when government protects companies deemed "too big to fail," a concept that should be "tossed into the dustbin," she said.

"The FDIC is up to the task, and whether alone or in conjunction with other agencies, the FDIC is central to the solution," Bair said. "Given our many years of experience resolving banks and closing them, we're well-suited to run a new resolution program."

 

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by: counterspin @ Tue May 12, 2009 at 14:50:54 PM UTC

This cannot be done (4.00 / 2)

on a US only basis.  The large financial instiutions are global, and a US move to break up the US banks would result in international banks dominating the financial world.  

In fact, the larger issue of finacial regulation has to be done globally.  There is a reason that AIG wrote may of the CDS in their London office: the UK had the loosest rules on writing certain types.

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by: fladem @ Tue May 12, 2009 at 15:09:36 PM UTC

came to say much the same (4.00 / 3)

It was the same argument in Canada for why we simply had to let our big banks merge, in order to keep up with other global players and not get gobbled up.  And really there was lamentable merit in that, I'm sure it did hurt Canada's banks to be so much smaller than the other big banks in the G7 nations.  But some prices must be paid.

It really is a case for protectionism in the form of foreign ownership limits.  Don't let them merge into institutions too large relative to your economy, and don't let foreign companies own more than 49% of them.

Until we build some form of effective supranational global financial regulation, nation states will have to cobble along under less than ideal circumstances.

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by: Daniel De Groot @ Tue May 12, 2009 at 15:18:32 PM UTC

[ Parent ]

There are many intenational regulations for financial institutions (4.00 / 1)

Mostly written by banks lately but Breton Woods is an effectiuve overarching set of rules. A new Bretton woods is not a good idea, it is a necessity.

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

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by: HousesofProgress @ Tue May 12, 2009 at 16:56:08 PM UTC

[ Parent ]

Yes (4.00 / 1)

Sometimes I think we are in a transition period where the political and financial power that once resided in nations, is transitioning to the "multi-nationals". We need to start thinking about some kind of Global Government based on civil society, else we will cede the global "governance" to the corporations and banks, which will be (are?) the de facto world government.


"It sounds wrong...
     ...but its right."

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by: SpitBall @ Tue May 12, 2009 at 15:47:45 PM UTC

[ Parent ]

Has to be done quickly then (0.00 / 0)

After a decade asleep on the job, the British government is slowly waking up to the idea that there's a need for regulation. They haven't actually put any effective regulation in yet and they're still appointing tax evaders to the boards of government-run banks, but they're at least beginning to talk the talk.

The only trouble is that in June 2010 the present government is going to lose badly to the Conservatives, who identify very closely with the City and will be too busy cutting government spending and fucking the country up for at least a decade to impose any form of regulation whatsoever.

If Obama moves now, Brown is weak enough that pressure from his own backbenchers and from a president who's more popular than he's ever been that he could cave.

I doubt the Germans will help, but they don't really have monsters, the Spanish banks are run fairly reputably and don't really have any important US links as yet and the big Swiss banks aren't going to be allowed to buy US banks while they're still being investigated for tax evasion.

Forgotten Countries - a foreign policy-focused blog

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by: Englishlefty @ Wed May 13, 2009 at 09:56:42 AM UTC

[ Parent ]

What's infuriating (4.00 / 2)

about the attitude Obama and other corporatist Democrats have toward the finance industry is how regulations should be imposed only if there is indisputable historical evidence that not imposing the regulation would lead to disaster.

Consider how Obama is arguing here, regarding re-instating a regulation akin to Glass-Steagall. He doesn't grant the obvious: that the current financial crisis shows the peril of allowing entities that include both lending and investing arms. Instead, he draws a distinction that seems to show nothing: that, in some contexts, such combined entities have not led to a crisis. Somehow, this implies in his mind that such a combination is likely safe. Yet if in many contexts, including our own current one, such a combination leads to crisis, isn't it far more sensible to believe that  the combination is highly risky? Why should there be a presumption in favor of allowing the combination if in crucial cases it seems to bring about great damage? Are we, or are we not, attempting to reduce our risk of a crisis?

It is the presumption in favor of allowing potentially risky activities that never gets explained by Obama and other corporatist Democrats. What does the larger economy have to gain by allowing a monstrosity like Citigroup? What does such a thing actually contribute to our overall economic well being?

That question never gets answered out loud, because the truth is not a politically palatable one: the only reason for a Citigroup is to enrich its management and investors.

How can Obama or any other corporatist Democrat admit to that truth? Even the Republicans don't like to say such things in the hearing of voters.

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by: frankly0 @ Tue May 12, 2009 at 16:02:29 PM UTC