Now We're talking

[Zebo]

Five House Democrats will call this week for a return to a Depression-era law that separated Wall Street investment banking from Main Street commercial banking.

If adopted, the measure would give banks one year to choose between being commercial banks or investment banks. The nation's biggest -- those now commonly referred to as "too big to fail" -- would be broken up. The Obama administration opposes the measure.

The amendment's five co-sponsors -- Maurice Hinchey of New York, John Conyers of Michigan, Peter DeFazio of Oregon, Jay Inslee of Washington, and John Tierney of Massachusetts - want to restore the Glass-Steagall Act of 1933, which prohibited commercial banks from underwriting stocks and bonds. The act was repealed in 1999 at the urging of, among others, Larry Summers, now President Barack Obama's chief economic adviser.
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Black Bush of course opposes it but I applaud these gentlemen for trying.
http://www.huffingtonpost.com/2009/12/07/congressmen-to-call-for-b_n_383128.html
GS prevents the economic meltdown we are in the middle of from ever happening because lending shifts primarily to productive investments instead of speculative investments.

 

[JS80]

Not surprising that Obama opposes.

 

[jonks]

Not surprising that Obama opposes.

So are you in favor of the measure of govt intervention into our capitalist banking system or do you oppose it, or do you see which way Obama goes and then decide?

 

[Hacp]

So are you in favor of the measure of govt intervention into our capitalist banking system or do you oppose it, or do you see which way Obama goes and then decide?

Once you get to the big corporations, the government has already intervened. Guess who gives corporations their charters? Government!

 

[werepossum]

Five House Democrats will call this week for a return to a Depression-era law that separated Wall Street investment banking from Main Street commercial banking.

If adopted, the measure would give banks one year to choose between being commercial banks or investment banks. The nation's biggest -- those now commonly referred to as "too big to fail" -- would be broken up. The Obama administration opposes the measure.

The amendment's five co-sponsors -- Maurice Hinchey of New York, John Conyers of Michigan, Peter DeFazio of Oregon, Jay Inslee of Washington, and John Tierney of Massachusetts - want to restore the Glass-Steagall Act of 1933, which prohibited commercial banks from underwriting stocks and bonds. The act was repealed in 1999 at the urging of, among others, Larry Summers, now President Barack Obama's chief economic adviser.
------------------
Black Bush of course opposes it but I applaud these gentlemen for trying.
http://www.huffingtonpost.com/2009/12/07/congressmen-to-call-for-b_n_383128.html
GS prevents the economic meltdown we are in the middle of from ever happening because lending shifts primarily to productive investments instead of speculative investments.

Thank heavens, a little sanity! 'Bout damned time. Anything that must be bailed out because it's "too big to fail" needs to be knocked into little pieces that AREN'T too big to fail.

Now for the insane regulations for Fannie Mae and Freddie Mac . . .

And I am firmly in favor of government intervention in this case. I think sensible, proven regulation to establish stability is worth the (hopefully small) hit in overall wealth production. And I think that one of our problems is that both parties don't change the policies the other party put in place, even when those policies are proven to be disastrous. Had Glass-Steagal remained the law of the land the crash caused by the stupid changes to the GSEs' charters would have taken down only the housing industry and the associated financing market; instead the banks were allowed to get into boom and bust derivatives and the crash damned near took down the entire world economy. And I predict Obama will get behind this restoration as soon as he realizes the potential damage to the Republicans' reputation, such as it is. (Nothing a politician loves more than doing a smart thing that also makes his opposition look bad.)

It's ironic that the Glass-Steagall Act would arguably not have prevented the Great Depression, but could conceivably have great lessened this later mini-depression.

 

[heyheybooboo]

I foresee tremendous Fail and hypocrisy in this thread ....





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[Darwin333]

Its about damn time we have this debate. How much better would we be today if GS was never revoked and the leverage limits weren't removed?

 

[Darwin333]

I foresee tremendous Fail and hypocrisy in this thread ....





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In an Anand P&N thread, NEVER!

 

[Zebo]

So are you in favor of the measure of govt intervention into our capitalist banking system or do you oppose it, or do you see which way Obama goes and then decide?

Don't quite work that way. It's government money they get to play with (based on reserve) at prime to speculate instead of grow businesses and get worthy people into homes. It's causes a gross misallocation of capital like tech boom pump and dumps and mortgage crises when they fail. If act were passed you'd see an explosion of growth in America that we have not seen in the last 50 years because money would be forced onto main street productive businesses instead of a few on wall street who are basically making all the money in USA right now..

The whole point of the act and why we came roaring out of the 50's was to finance productive assets factories, machines, tractors, combines, instead of financial speculation as it had in the 1920s. (and 1990's and 2000's for that matter)

If it's our money and our financial future on the line you bet I want gov't involved. Involved just enough so boom and bust can't happen and everyone has opportunity to get rich.

 

[Ausm]

The repeal of the Glass-Steagall act was a HUGE mistake.

 

[drebo]

If it's our money and our financial future on the line you bet I want gov't involved. Involved just enough so boom and bust can't happen and everyone has opportunity to get rich.

That will only happen if the Fed is dissolved.

 

[Zebo]

Thank heavens, a little sanity! 'Bout damned time. Anything that must be bailed out because it's "too big to fail" needs to be knocked into little pieces that AREN'T too big to fail.

Now for the insane regulations for Fannie Mae and Freddie Mac . . .

You mean like gotten rid of? Or at least asking for traditional 20% down so buyer has skin in the game. Absolutely.

 

[bamacre]

our capitalist banking system

LOL

We don't have one, and haven't had one in a long, long time.

 

[Fern]

So are you in favor of the measure of govt intervention into our capitalist banking system or do you oppose it, or do you see which way Obama goes and then decide?

Well that's a good question.

Generally I'm opposed to (excessive) govt intervention. See, if a bank used it's own money I don't have a problem with them doing whatever they want.

However, and here's the complication, they don't. They get cheap money from the fed, we're paying for that. They get guarantees for their loans, we're paying for that. Some needed and got bailouts, we're paying for that.

Do what you what you want with your own money, but not 'public' money.

As far as them using their depositors' money, I think disclosure is necessary but likely not enough. We don't open bank accounts so they can gamble with our money, so some regulation is needed there too.

Fern

 

[Zebo]

Thank heavens, a little sanity! 'Bout damned time. Anything that must be bailed out because it's "too big to fail" needs to be knocked into little pieces that AREN'T too big to fail.

Now for the insane regulations for Fannie Mae and Freddie Mac . . .

And I am firmly in favor of government intervention in this case. I think sensible, proven regulation to establish stability is worth the (hopefully small) hit in overall wealth production. And I think that one of our problems is that both parties don't change the policies the other party put in place, even when those policies are proven to be disastrous. Had Glass-Steagal remained the law of the land the crash caused by the stupid changes to the GSEs' charters would have taken down only the housing industry and the associated financing market; instead the banks were allowed to get into boom and bust derivatives and the crash damned near took down the entire world economy. And I predict Obama will get behind this restoration as soon as he realizes the potential damage to the Republicans' reputation, such as it is. (Nothing a politician loves more than doing a smart thing that also makes his opposition look bad.)

It's ironic that the Glass-Steagall Act would arguably not have prevented the Great Depression, but could conceivably have great lessened this later mini-depression.

Don't count on it Obama is owned lock stock and barrel by these guys. Everyday he shows it. But we can't recover w/o it. Main-street is tapped and in massive debt to income ratios like never before and jobs are disappearing! Not to mention governmental debt burdens we are all liable for as tax payers. And you can bet your behind Wall Street will get their money before a SS recipient which BenB already said we need to look at.

 

[Zebo]

That will only happen if the Fed is dissolved.

Well That's not going to happen and it's needed under our current system of fractional reserve. Even Austrian Economists (which I'm sure you're a fan of) Robert Ekelund and Mark Thornton have criticized the repeal of GS as a major contributor to the crisis. http://mises.org/story/3098

"in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act which repealed Glass Steagall would have made "perfect sense" as a legitimate act of deregulation, under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly".

 

[drebo]

As far as them using their depositors' money, I think disclosure is necessary but likely not enough. We don't open bank accounts so they can gamble with our money, so some regulation is needed there too.

This is actually the business of banking: to pay interest to depositors in exchange for using depositors money to loan out. Traditionally, the amount banks can loan out has been limited by the amount of deposits.

The problems of today were created when the government injected artificial credit and artificially lowered interest rates for banks borrowing from other banks. As a result, the banks were no longer limited in what they lend based on the deposits they had.

Had the government stayed out of banking, the problem would not have existed.

Dividing investment and commercial banks likely won't have much impact either way as long as the government stays out of the market (by which I mean the Fed is dissolved).

 

[Genx87]

Reading a book called "After the Fall:Saving Capitalism from Wall Street and Washington". And it is noted by the time Glass Steagull was repealed it was nearly irrelevant anyways. Many banks simply ignored or were allowed to violate it. And no regulators enforced it. Because DC took on the mentality of Too Big to Fail.

 

[Zebo]

Reading a book called "After the Fall:Saving Capitalism from Wall Street and Washington". And it is noted by the time Glass Steagull was repealed it was nearly irrelevant anyways. Many banks simply ignored or were allowed to violate it. And no regulators enforced it. Because DC took on the mentality of Too Big to Fail.

Doesn't surprise me congress knows where it's bread is buttered..They are breaking the law right now by not seizing these banks and not jailing these fraudsters but rewarding them with tax dollars and Federal promotions. When did they say it started becoming irrelevant? I guessing starting in the 1970's when pretty much all tenets of saving, value and prudence the great depression taught us started going out the window in exchange for massive debt and speculation.

 

[Craig234]

Excellent move by the Congressman, and another boggling position by Obama. It shouldn't even be controversial.

Zebo, you know what else is interesting is to post the corresponding chart for the increase in *prvaite* debt for individuals - that's increased even worse than the public debt.

 

[werepossum]

You mean like gotten rid of? Or at least asking for traditional 20% down so buyer has skin in the game. Absolutely.

I was referring to the almost 50% requirement that the GSEs are required to have in low income and disadvantaged buyers, people that in many markets simply cannot afford to buy a house other than through subprime loans. But I would require at least a real 10% down, fixed rate loans of 10 to 30 years duration, no initial second mortgage, and criminal culpability on the part of appraisers found to have over-appraised houses. And I'd require the lending bank or mortgage company to hold the paper for at least two years, with no late payments, before the loan qualifies to be bundled. Right now the GSEs engage in all sorts of bizarre behavior to meet that mandate. We have adjustable rate loans that the borrower can't afford after the first year's adjustment even if the interest rates remain the same, 50 year mortgages, 30 year interest-only mortgages, mortgages that go five or ten years paying less than interest and then have a balloon payment. We have mortgages that cost the very most for which a buyer qualifies, with an initial second subprime mortgage (at a higher and usually variable rate) to make up the difference. We have mortgage companies in cahoots with shady appraisers (sometimes even of the same company) to make mortgages look viable when the buyer has in fact no money in the deal and is buying a house that's worth much less than he's buying it for, while thinking he's getting a bargain. We have mortgages for 105%, 110%, even 125% of appraised value.

None of this shit would go on with the banks or mortgage companies holding the paper, but everyone knows that the GSEs are starved for enough loans to meet their Congressional mandate and won't look at any individual loan; as long as you can quickly bundle them, the GSEs will snap 'em up. By removing all risk from the mortgage companies in subprime loans, Congress set the stage for rampant fraud and abuse.

And let's all remember that TARP, which was initially cast to buy up and dispose of these toxic assets, was instead used to gain control of the finance companies. In fact, the government has actively opposed its companies liquidating these securities and mortgages. Not only is the stage set for all this to repeat, but with most of the original toxic assets still being held.

 

[StageLeft]

Reading a book called "After the Fall:Saving Capitalism from Wall Street and Washington". And it is noted by the time Glass Steagull was repealed it was nearly irrelevant anyways. Many banks simply ignored or were allowed to violate it. And no regulators enforced it. Because DC took on the mentality of Too Big to Fail.

Corporations own much of the US government. The system is so corrupt that people don't even bother to hide it, aka lobbyists.