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smh
Yes, Geithner and his treasury took it easy on the banks, but it has been the Repugs who have gutted any and all financial regulation.
smh
Dodd-Frank waves it's collective testicles at you.
D-F was gutted, loopholed, rendered toothless.
Republicans: CFPB’s funding ‘recipe for disaster’
http://articles.marke ch.com/2012...nancial-crisis
......
Last edited by boutons_deux; 07-25-2012 at 04:53 PM.
...and passed by the Democratically controlled 111th congress and signed by Obama.
...which I offer up only as a riposte to your unihinged partisaniac thrust.
So what did we decide on re-ins uting Glass-Steagall?
All for it.
Won't happen though...........
In for GS.
Even Volcker isn't for G-S again.
The Man Who Invented “Too Big to Fail” Banks Finally Recants. Will Obama or Romney Follow?
This is big game.
If any single person is responsible for Wall Street banks becoming too big to fail it’s Sandy Weill. In 1998 he created the financial powerhouse Citigroup by combining Traveler’s Insurance and Citibank. To cash in on the combination, Weill then successfully lobbied the Clinton administration to repeal the Glass-Steagall Act – the Depression-era law that separated commercial from investment banking. And he hired my former colleague Bob Rubin, then Clinton’s Secretary of the Treasury, to oversee his new empire.
Weill created the business model that Wall Street uses to this day — unleashing traders to make big, risky bets with other peoples’ money that deliver gigantic bonuses when they turn out well and cost taxpayers dearly when they don’t. And Weill made a fortune – as did all the other executives and traders. JPMorgan and Bank of America soon followed Weill’s example with their own mega-deals, and their bonus pools exploded as well.
Citigroup was bailed out in 2008, as was much of the rest of the Street, but that didn’t alter the business model in any fundamental way. The Street neutered the Dodd-Frank act that was supposed to stop the gambling. JPMorgan, headed by one of Weill’s protégés, Jamie Dimon, just lost $5.8 billion on some risky bets. Dimon continues to claim that giant banks like his can be managed so as to avoid any risk to taxpayers.
http://robertreich.org/post/27990127891
naked capitalism, with lots of comments
The Real Significance of Sandy Weill’s “Break Up Big Banks” Recommendation
Read more at http://www.nakedcapitalism.com/2012/...e1YwFyUpziw.99
http://www.nakedcapitalism.com/2012/...=Google+Reader
Pretty much.In the wake of Vikram Pandit’s resignation as CEO of Citigroup, John Gapper pointed out in the Financial Times that “Citi’s shares trade at less than a third of the multiple to book value of Wells Fargo,” because the latter is a “steady, predictable bank,” whereas Citigroup has become too complex. Gapper also quotes Mike Mayo, a leading analyst of the banking sector: “Citi is too big to fail, too big to regulate, too big to manage, and it has operated as if it’s too big to care.”Even Sandy Weill, who built Citi into a megabank, has turned against his own creation.
I am all for massively scaling up capital requirements for banks as they hit certain sizes. Oh yes, I want progressive requirements.
The larger you get, the larger your % of capital on hand should be. Let market discipline do the rest.
This has the double effect of making these banks more stable, and still allowing for well run banks to get as big as their return on equity will let them.
I don't think breaking them up is really all that feasible or desirable, but if you make it so that they themselves want to spin off subsidiaries to get under the cap they want, you don't have to have a government directed plan.
Probably a good idea.
I think though, that one could use the level of capital requirements even here, meaning that if you don't hew to this as a policy (as opposed to a legal requirement), then we simply require more capital.
At the risk of taking my idea as a panacea. It seems the most pragmatic solution to reducing systematic risks all around.
ain't nobody gonna break up the TBTF regulated banks. Banks CREATED the Fed for their own benefit, it's their ATM. And the crimninal financial sector OWNS the Exec AND Congress. break up? G M A F B
Even if the regulated banks were broken up and restrained, the unregulated derivatives markets are many $10Ts, and untouchable, while containing much more risk than the TBTF.
http://blogs.reuters.com/great-debat...banks-winning/While Dodd-Frank is aimed at preventing another cycle of bubble-and-bust, shrinking the financial sector is crucial for other reasons. One is a mass of evidence demonstrating that hyper-financialized economies have lower growth. Another is the appalling ethical record of large financial companies. The chance of making huge paydays by risking other people’s money, it seems, can sometimes derange moral compasses.
First, the pro-growth argument for clamping down on the banks: Once the financial sector achieves a certain size, its continued expansion reduces economic growth, according to a new study by two senior economists at the Bank for International Settlements, Stephen Cecchetti and Enisse Kharroubi, using a large international data base stretching back more than 30 years.
Their conclusions are unambiguous. No country can achieve a high rate of growth without a well-functioning financial system. China, for example, lacks a deep system of consumer finance, forcing it into a lop-sided development strategy. The result is the creation of dangerous imbalances that could threaten continued rapid growth.
An outsized financial sector expansion can actually reduce economic growth, according to their data. This relationship holds for country after country, and the tipping points are fairly consistent. When private credit grows to between 90 percent and 100 percent of gross domestic product, it is tilting toward too big. In the runup to the 1997-98 Asian financial crises, Thai private credit outstanding grew to 150 percent of GDP and growth turned sharply down. As soon as credit was ratcheted back to 95 percent of GDP, however, Thai productivity picked up sharply.
New Zealand’s economy offers much the same picture. As its financial sector expanded beyond the 100 percent mark, productivity dropped sharply, then rose again as credit was brought under control. Ireland and Spain show a similar pattern.
The sector that typically bears the brunt of hyper-financialization is manufacturing – especially the heavy industries that need working capital to finance materials and work in process. The next most damaged are research-and-development-intensive businesses, perhaps because finance siphons away too much of the best science and math talent. Whatever the reason, when American finance bulked up in the 2000s, there was a cataclysmic fall in manufacturing employment.
Simon Johnson reads the tea leaves:
http://www.bloomberg.com/news/2012-1...bank-size.htmlTarullo Telegraphs Fed’s Plans to Cap Bank Size
By Simon Johnson Dec 9, 2012 5:30 PM CT
Here’s a puzzle to entertain your friends this holiday season. Why would a senior governor of the Federal Reserve System publicly ask a question to which he plainly knows the answer?
We are all familiar with the dark art of reading central bank communications as they pertain to interest rates. The opacity of former Fed Chairman Alan Greenspan was legendary; his successor, Ben S. Bernanke, and other current central bankers lean toward greater transparency and signaling their intentions.
Simon Johnson, who served as chief economist at the International Monetary Fund in 2007 and 2008, is a professor ... MORE
But today’s puzzle isn’t directly about interest rates. It is about regulation in general, and the Fed’s policy toward big banks in particular.
In the bad old days -- before October -- the Fed would elide such issues more often than not. Officials would point out that there are many other bank regulators or that it was up to Congress to make the big decisions. Even the Dodd-Frank financial-reform legislation didn’t immediately inspire Fed governors to take up the role of thought leaders on the nature of systemic financial risk, and what to do about it.
Yet, in prominent speeches delivered Oct. 10, Nov. 28 and Dec. 4, the Fed governor responsible for bank supervision, Daniel K. Tarullo, seemed intent on asserting a leadership role for the central bank. The speech in October laid out a broad agenda and floated the idea of size caps on the largest U.S. banks.
Capitalization Rules
In November, he sensibly proposed actions to ensure that the U.S. operations of foreign banks are capitalized separately. To borrow a phrase from the former Bank of England official Charles Goodhart, big banks live globally but die locally, and we should prepare accordingly.
Lawyers for the bankers reply that such arrangements will make cross-border resolution of failing banks harder. That argument makes no sense. In fact, the opposite is true; resolution would become easier. The Fed will prevail on this issue.
The most interesting speech was delivered last week, when Tarullo asked whether there are significant economies of scale or scope in global megabanks. In other words, is there a good reason not to force these ins utions to shrink over time?
It is well established that there are no such economies. In fact, we know that the scale of public subsidies for these banks -- and the damage they can cause -- increases as the banks become larger.
So why did Tarullo ask the question? Here are three possibilities:
The first is that he isn’t aware of the careful studies on this issue. But Tarullo is, among other things, a leading academic expert on banking. And, just in case he is too busy, the Fed is full of really good economists who have read everything on this issue. There is zero chance that Tarullo has overlooked the work showing that big banks aren’t more efficient, and receive much larger implicit subsidies than smaller ones.
The definitive summary is the Oct. 25 speech by Andrew Haldane of the Bank of England, “On Being the Right Size.” In particular, study Chart 9, which demonstrates that there are no economies of scale when you adjust for the undeniable implicit subsidies received by megabanks.
For anyone on the Fed staff wanting to catch up on the literature, I also recommend: “The Implicit Subsidy of Banks,” by Joseph Noss and Rhiannon Sowerbutts, also of the BOE. Or have a look at “The Social Costs and Benefits of Too-Big-To-Fail Banks: A Bounding Exercise,” by John Boyd and Amanda Heitz, or “Too Big to Be Efficient? The Impact of Implicit Funding Subsidies on Scale Economies in Banking,” by Richard Davies and Belinda Tracey, or “Size Anomalies in U.S. Bank Stock Returns,” by Priyank Gandhi and Hanno Lustig.
Disagreement Maybe
And there is also a comprehensive soon-to-be-published book, “The Bankers’ New Clothes: What’s Wrong With Banking and What to Do About It,” by Anat Admati and Martin wig. It isn’t officially available, though the galleys are a hot property.
The second possible way to explain Tarullo’s question is that he disagrees with the findings in this literature. But in his speech he didn’t mention any of the important findings or take issue with any of the authors and the substantive points they make.
However, he did cite a recent Clearing House study that claims big advantages in having humongous banks. Wisely, he didn’t appear to take seriously this lobbying do ent, which is based on claims that can’t be independently verified because they are based on “proprietary data” and “interviews.” Why would anyone take such propaganda seriously?
The main proposals on the table -- for example, the Safe, Accountable, Fair and Efficient Banking Act sponsored by Senator Sherrod Brown of Ohio -- would roll back the largest banks to the size they were in the mid-1990s. What great positive impact for the broader economy have we seen from the increase in bank size over the past 15 years? Tarullo didn’t claim any, because there are none.
The last possibility is that Tarullo and his colleagues understand the facts and agree that the largest banks are too big, and he framed his speech to send a signal. What is it?
The Fed agrees that the largest banks are too big. Eradicating the problem of too big to fail may be impossible, though we can move in the right direction by strengthening capital and leverage requirements (more equity for bigger banks), by putting in place a resolution regime that could work (but the cross-border problems loom large), and by removing the funding-cost advantage that big banks enjoy because their creditors know there is effective downside protection from the government.
Still, the Fed isn’t ready to move on this issue by itself. It wants to first stir the hornets’ nest, with angry comment letters from bankers and high-profile congressional hearings.
The Fed has the authority to cap bank size, but it wants to shift the consensus first. The banks will push back hard, which will expose the weakness of their arguments.
The major reform battleground for 2013 is a focused question with a clear answer: Are there economies of scale or scope in banking that outweigh the unfair, nontransparent and highly dangerous government subsidies that megabanks receive? No, there aren’t.
DoJ admitted that HSBC was Too Big Too Indict (or revoke its US banking license) so it just fined HSBC $1.9B for criminal systematic laundering of money from Iran and drug cartels. HSBC annual profits are about $20B.
HSBC said it was really really really sorry, and that it was completely reformed and virtuous now.
Bankers laughing their asses off at how they have TOTAL CONTROL of the world's financial system and TOTAL IMMUNITY for govt interference.
paying a $2B fine isn't total impunity and total control. it's the exact opposite.
It's laughable peanuts to the financial sector, and 100% NON-dissuasive.
The 2 billion fine was a record amount, right? We'll see if this is enough to impact the TBTF moral hazard.
Since the HSBC included stuff like this, 2 bill sounds kinda light:
For example, an HSBC executive at one point argued that the bank should continue working with the Saudi Al Rajhi bank, which has supported Al Qaeda, according to the Congressional report.
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