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| Economy |
| Obama plan to limit the size of banks - report |
| 2010-01-21 |
| US President Barack Obama will tonight propose new limits on the size of US banks after spending billions of tax-payer dollars to bail out "too-big-to-fail'' firms, a senior official says. Throttling back the Malefactors of Great Wealth? Busting the money trusts? Finally something I can agree with... The measures would place sweeping new restrictions on a sector seen as responsible for sparking the largest recession since the Great Depression of the 1930s. Oh. Wait a minute. Seems like during the Great Depression of the 1930s there were a load of restrictions put on the banks. Whatever happened to them? "A couple of months ago the President began discussing with his economic team the need to include in financial reform more specific and stronger provisions to limit the size and scope of financial institutions'' the official said. If it's actually doing away with single points of failure it's an actual good idea. My suspicion is that it's not that simple... The proposals aim "to cut down on excessive risk taking'' among the largest banks, after crises at a handful of the largest firms threatened to choke the flow of cash to the US economy. That statement kinda confirms my suspicion. Risk taking is what makes institutions thrive. Being over-conservative makes them hidebound. As Potemkin once said: "That which ceases to grow begins to rot." The trick is to have enough competition going so that when one bunch takes the wrong kind of risk it doesn't drag the entire country with it into oblivion. ''The President will announce a series of measures that address size and scope'' of the institutions the official said. That'll likely be tricky, but it could be something as simple is enforcing existing antitrust laws. Mr Obama's first year in office was dominated by efforts to rescue banks that were exposed to massive loses on the sub-prime mortgage market. Large contributing banks, in fact... The official, who asked not to be named, said the new measures would limit banks' ability to use their own cash to buy such financial instruments, so-called proprietary trading. "The proposal will include size and complexity limits specifically on proprietary trading,'' the source said. They'll come up with new instruments that skirt the regs. It's happened over and over again. Makes a lot more sense to impose restrictions on them gobbling each other up. Facing widespread voter anger over state take-overs of the troubled firms, Mr Obama earlier this month proposed a tax on big banks and warned the banking industry not to block or water down his planned regulatory reforms. "It is both in the country's interests and ultimately in the financial industry's interest to have updated rules of the road to prevent abuse and excess.'' It'd be more in the country's interest to have a network of strong regionally based banks competing with each other, a function that's more and more being left to credit unions. Without strict enforcement of some pretty stringent liquidity requirements and anti-milking provisions we're going to see the banking industry continue grabbing the easy money. The new measures will have to be approved by Congress before becoming law. |
| Posted by:tipper |
| #19 BP why should smaller banks have higher regulatory costs? Because they don't have enough money for pay-offs? |
| Posted by: Deacon Blues 2010-01-21 19:20 |
| #18 So, do his 2008 donors get off easy with this, or do they get hammered, too? Oblahblah got a nice chunk of change from those chumps. If they don't get special consideration....how's that hopeychangey stuff working out for youse guys on Wall Street??? ;) |
| Posted by: Cornsilk Blondie 2010-01-21 16:57 |
| #17 AlanC: small banks have much higher regulatory costs a percentage of their overall expenses. overall gross costs are probably lower but for the big banks, it is a marginally larger slice of a much much bigger pie |
| Posted by: abu do you love 2010-01-21 14:29 |
| #16 HARD Dammit. |
| Posted by: Redneck Jim 2010-01-21 14:21 |
| #15 There's one huge overlooked problem, and that's Obama, who doesn't know how to run any profitible company, Especially Big Banks. If you think that's not true, look NARD at the United States Government. (Wincing is permitted) |
| Posted by: Redneck Jim 2010-01-21 14:19 |
| #14 In large part, the problem is individuals (traders) within the banks risking other peoples (stock holders and depositors) money for their own personal gain (very large bonuses). Banning retail banks from proprietary trading is really the only solution. |
| Posted by: phil_b 2010-01-21 13:21 |
| #13 If the 0 runs true to form, whatever regulations are carried out will have minimal if any effect on the real ailments & will serve only to paper over the cracks in the walls and assuage (or distract) the public outrage. Perhaps a financial aftershock will yet occur to bring the whole system down. |
| Posted by: Anguper Hupomosing9418 2010-01-21 12:43 |
| #12 I just caught a bit of The Once's speach. He sad taxpayers were forced to bail out the financial institutions. He got that right, but we all no that it was Congress doing the forcing. |
| Posted by: Deacon Blues 2010-01-21 12:10 |
| #11 BP why should smaller banks have higher regulatory costs? |
| Posted by: AlanC 2010-01-21 12:05 |
| #10 Risk taking is what makes institutions thrive. Excessive and stupid risk-taking is what got us into this fix. Moderation in all things is a worthwhile principle. The famed June 2003 photo of the Chairman of the Office of Thrift Supervision taking a chainsaw to a stack of federal regulations was a sign the government was jumping the shark. Banks are mere utilities like electric & water companies & should be regulated accordingly. They'll come up with new instruments that skirt the regs. It's happened over and over again. This line of reasoning is almost a tautology. There was no reason to have laws against fraud until someone invented fraud. It is now illegal to take out a life insurance policy on someone without their permission. Guess why? Legislatures meet periodically, and are capable (if often not willing) to deal with scams and other cunning evasions as they surface. On the executive side, for every Alan Greenspan, there's a Paul Volcker, for every Larry Summers, there's a Brooksley Born. |
| Posted by: Anguper Hupomosing9418 2010-01-21 12:04 |
| #9 > Whether they'll do anything useful is still in question. Smaller banks have higher fixed and regulatory costs, so no it won't help (quite the opposite). |
| Posted by: Bright Pebbles 2010-01-21 11:28 |
| #8 Whether they'll do anything useful is still in question. No it isn't. |
| Posted by: AzCat 2010-01-21 11:10 |
| #7 After wasting an entire year pushing cap-&-trade and health care, the failed Obama administration finally turns to a really pressing issue. Whether they'll do anything useful is still in question. Meanwhile those who were unemployed on Election Day 2008 are, for the most part, still without work. |
| Posted by: Anguper Hupomosing9418 2010-01-21 10:17 |
| #6 Mr Obama earlier this month proposed a tax on big banks and warned the banking industry not to block or water down his planned regulatory reforms. Warned? Mr. Obama who's political coat tails have to be measured in nanometers, it going to get Congresscritter, the majority of whom are Donks with target on their back this 2010, to ignore their one solid source of campaign reelection funds. Yep, that's a plan. |
| Posted by: Procopius2k 2010-01-21 10:04 |
| #5 So the Fed is not too big? |
| Posted by: 3dc 2010-01-21 09:58 |
| #4 Just raise reserve ratios when M4 increases... Over-lowering reserve s a systematic problem that just means large number of small banks will go bust (for exactly the same loss, but with less economies of scale). |
| Posted by: Bright Pebbles 2010-01-21 09:35 |
| #3 Keep the gov't out of business. In 1911, the Supreme Court of the United States ruled that John D. Rockefeller's evil, money making Standard Oil must be dissolved and split into 34 companies. Two of these companies were Jersey Standard ("Standard Oil Company of New Jersey"), which eventually became Exxon, and Socony ("Standard Oil Company of New York"), which eventually became Mobil. Rockefeller retained a piece of each Standard Oil spin-off company and quietly made billions more from each of them. |
| Posted by: Besoeker 2010-01-21 08:41 |
| #2 ...and not encouraged lenders to make sub-prime mortgages. |
| Posted by: Parabellum 2010-01-21 08:40 |
| #1 Much of the problem could have been avoided if (at least) the last three administrations had just enforced the laws. |
| Posted by: Glenmore 2010-01-21 07:43 |