Getbig.com: American Bodybuilding, Fitness and Figure
Getbig Main Boards => Politics and Political Issues Board => Topic started by: kcballer on January 21, 2010, 10:38:08 AM
-
WASHINGTON — President Obama on Thursday will publicly propose giving bank regulators the power to limit the size of the nation’s largest banks and the scope of their risk-taking activities, an administration official said late Wednesday.
Skip to next paragraph
Jin Lee/Bloomberg
Paul Volcker
Multimedia
The Takeaway With Louise Story
Related
Times Topics: Paul A. Volcker
Readers' Comments
Share your thoughts.
* Post a Comment »
* Read All Comments (243) »
The president, for the first time, will throw his weight behind an approach long championed by Paul A. Volcker, former chairman of the Federal Reserve and an adviser to the Obama administration. The proposal will put limits on bank size and prohibit commercial banks from trading for their own accounts — known as proprietary trading.
The White House intends to work closely with the House and Senate to include these proposals in whatever bill dealing with financial regulation finally emerges from Congress.
Mr. Volcker flew to Washington for the announcement on Thursday. His chief goal has been to prohibit proprietary trading of financial securities, including mortgage-backed securities, by commercial banks using deposits in their commercial banking sectors. Big losses in the trading of those securities precipitated the credit crisis in 2008 and the federal bailout.
The president will speak at an appearance on Thursday at the White House with Treasury Secretary Timothy F. Geithner, an administration official said, speaking on the condition of anonymity because the talks were private. It will come after a meeting with Mr. Volcker.
A similar discussion is percolating in Europe, led by Mervyn King, head of the Bank of England.
The president’s announcement comes as his popularity in public opinion polls is falling because of stubborn unemployment and the stagnant economy, and just days after he suffered a stinging loss when the Republicans won the Senate seat from Massachusetts.
It will be the third time in just a week that he has waded into the battle heating up in Congress over tightening regulation of financial institutions to avoid the sort of abuses that contributed to the near collapse on Wall Street. Last week he proposed a new tax on some 50 of the largest banks to raise enough money to recover the losses from the financial bailout, which ultimately could cost up to $117 billion, the Treasury estimates.
And this week, he served notice to senior lawmakers that he wants an independent agency to protect consumers as part of any financial overhaul legislation.
Only a handful of large banks would be the targets of the proposal, among them Citigroup, Bank of America, JPMorgan Chase and Wells Fargo. Goldman Sachs, the Wall Street trading house, became a commercial bank during this latest crisis, and it would presumably have to give up that status.
“The heart of my argument,” Mr. Volcker said, “is who we are going to save and who we are not going to save. And I don’t want to save what is not at the heart of commercial banking.”
Mr. Volcker has been trying for weeks to drum up support — on Wall Street and in Washington — for restrictions similar to those passed in the Glass-Steagall Act in 1933. That law separated commercial banking and investment banking, so that the investment arm could no longer use a depositor’s money to purchase stocks, sometimes drawing money from a savings account, for example, without the depositor’s knowledge.
The 1929 stock market crash and subsequent Depression made a shambles of that practice. But Glass-Steagall was watered down over the years and revoked in 1999.
Now the concern is a new type of activity in which financial giants like Citigroup, Bank of America and JPMorgan Chase engage. They now operate on two fronts. On the one hand, they are commercial banks, taking deposits, making standard loans and managing the nation’s payment system. On the other hand, they trade securities for their own accounts, a hugely profitable endeavor. This proprietary trading, mainly in risky mortgage-backed securities, precipitated the credit crisis in 2008 and the federal bailout.
Mr. Volcker, chairman of the president’s Economic Recovery Advisory Board, a panel of outside advisers set up at the start of the Obama administration, has gradually lined up big-name support for restrictions on such trading.
But the Obama administration until now focused on regulating the activities of the existing financial institutions, not breaking them up or limiting their activities. Under the new approach, commercial banks would no longer be allowed to engage in proprietary trading, using customers’ deposits and borrowed money to carry out these trades.
“Major institutions with a deposit facility should not be allowed to invest in subprime obligations under any conditions,” said Henry Kaufman, an economist and money manager, and one of a dozen prominent Wall Street figures who have told Mr. Volcker that they support his proposal, in principle if not in detail.
Others include William H. Donaldson, former chairman of the Securities and Exchange Commission; Roger C. Altman, chairman of Evercore and a Treasury official in the Clinton administration, and John S. Reed, a former chairman of Citigroup.
“When I was running Citi,” Mr. Reed said of his tenure in the 1980s and 1990s, “we simply did not trade for our own account.”
Thoughts on this - good idea, bad idea and why?
-
I agree, we need to end too big to fail. Its going to cause a lot of pain, but we need to do it.
-
I agree, we need to end too big to fail. Its going to cause a lot of pain, but we need to do it.
I like how they are going to stop the gambling with deposit money. If people are to trust banks again (i personally belong to a credit union) this is a necessary step.
-
I like how they are going to stop the gambling with deposit money. If people are to trust banks again (i personally belong to a credit union) this is a necessary step.
KC - you know I like you, go get a book called Creature from Jekyll Island. It explains out banking system in way like you have never been taught or explained.
After reading this book, I agree we need to put the boot to these gamblers.
-
I dont know ANYONE here who will disagree with this common sense move.
-
KC - you know I like you, go get a book called Creature from Jekyll Island. It explains out banking system in way like you have never been taught or explained.
After reading this book, I agree we need to put the boot to these gamblers.
Thanks for the heads up on the book 333 i will look into acquiring it
-
Here's what I want my bank to do:
1 - look after my money
2 - make loans to small businesses after carrying out proper due dilligence
3 - make mortgage loans to people that can afford to repay them
4 - run a credit card business
5 - run a proprietary trading desk, not telling me how they are gambling my money, risk it on complex derivatives trades they don't even understand themselved risking my entire deposit with ridculously huge leverage
6 - not pay me a fucking penny of the profits they make from 5