Banking Regulation

[Magox]

Well, we know that the current administration is going to sign in to law some sort of Banking regulation reform. I don't have any problems with this what so ever, however I am highly skeptical of what they write in to law. Usually when there is some sort of problem, our legislators tend to overshoot, and do things that have a populist undertone to them, that at the end of the day make things very tough for industries to move forward efficiently, like capping pay on executives.

 

What I would like to see, and hopefully they do this, is define what is "too big too fail". It seems to be that some of the banks have gotten even bigger than before the crisis, and I think that is a shame. Somehow we need to limit the size of how big banks can get, because if another situation were to arise, and it will one day (greed will always be around), then it's unfortunate that we will have todepend so greatly on these private institutions and what protective mechanisms they have to prevent another collapse.

 

It is imperative that we limit the size of the banks, and that we limit leverage. The repeal of GS did encourage banks to lever up, and that definitely played a role in the financial crisis.

 

So hopefuly, they do these two things, as opposed to some stupid populist reform that does no good for this economy.

[DC Tom]

Well, we know that the current administration is going to sign in to law some sort of Banking regulation reform. I don't have any problems with this what so ever, however I am highly skeptical of what they write in to law. Usually when there is some sort of problem, our legislators tend to overshoot, and do things that have a populist undertone to them, that at the end of the day make things very tough for industries to move forward efficiently, like capping pay on executives.

 

What I would like to see, and hopefully they do this, is define what is "too big too fail". It seems to be that some of the banks have gotten even bigger than before the crisis, and I think that is a shame. Somehow we need to limit the size of how big banks can get, because if another situation were to arise, and it will one day (greed will always be around), then it's unfortunate that we will have todepend so greatly on these private institutions and what protective mechanisms they have to prevent another collapse.

 

It is imperative that we limit the size of the banks, and that we limit leverage. The repeal of GS did encourage banks to lever up, and that definitely played a role in the financial crisis.

 

So hopefuly, they do these two things, as opposed to some stupid populist reform that does no good for this economy.

 

Still...I'm betting on stupid populist reform. The only upside of that is that there's no union to hand over the banks to.

[YellowLinesandArmadillos]

Still...I'm betting on stupid populist reform. The only upside of that is that there's no union to hand over the banks to.

Except for the Union comment, agreed, however there are insurance companies to hand it over to and the other side has tried to do that go the way of health insurance...

 

Seriously, they can't help themselves in writing something populist except maybe in the Senate and with the flack Pelosi is catching maybe, just maybe the Senate can win the debate. The old adage on when I worked on the Senate side was it wasn't the Republicans (Senators) that were the problem it was the whole House.

[Magox]

There is a conundrum and a big one at that, the Treasury all ready screwed the pooch with the decision to allow these poor running banks buy up other failed banks. I never understood the logic behind this, I guess they figured if we combine 2 bad banks together we will produce one good bank

 

Now how do you undo this? You probably don't, not in the short run anyways. I don't want to hear an empty statement regarding how we need to do something about banks that are "too big to fail". I want the administration to define it, and explain what it is that they will do. My guess is that they won't tackle it effectively, all though I do understand that it seems as if it is all ready an impossible task to deal with. I would imagine that they would have to incentivize or disincentivize I should say banks from getting larger and to size down.

 

It will be an unpopular decision with the banks, but in the long run a good decision for the economy.

[DC Tom]

Except for the Union comment, agreed, however there are insurance companies to hand it over to and the other side has tried to do that go the way of health insurance...

 

The union comment was tongue-in-cheek, anyway. (I'll be pissed for a while about the GM bondholders).

 

Seriously, they can't help themselves in writing something populist except maybe in the Senate and with the flack Pelosi is catching maybe, just maybe the Senate can win the debate. The old adage on when I worked on the Senate side was it wasn't the Republicans (Senators) that were the problem it was the whole House.

 

It's funny that I get that same feeling (the whole House is the problem) without even remotely being an insider.

[DC Tom]

There is a conundrum and a big one at that, the Treasury all ready screwed the pooch with the decision to allow these poor running banks buy up other failed banks. I never understood the logic behind this, I guess they figured if we combine 2 bad banks together we will produce one good bank

 

The best I have is that it strengthened the buyer's balance sheet by amortizing all the toxic asset devaluation as "goodwill". Which is not very good logic, admittedly...the simple fact is that the toxic assets were so toxic that they - and the banks holding them - were grossly undervalued.

 

It's a reasonable model (in that it's common) for corporate growth. Which doesn't mean the larger banks are suddenly healthy...just bigger.