"the Obama administration is now genuflecting at the altar of financial regulation"

[Better Believe It]

Shuffle, Kick, Shuffle
By Case Wagenvoord
November 4, 2009

Having paid its requisite lip service to the public option that probably won’t see the light of day in any recognizable form, the Obama administration is now genuflecting at the altar of financial regulation. Like most genuflects, it is a knee-jerk reaction devoid of meaning.

These theatrics are necessary to placate an increasingly restive public that is beginning to realize that it’s been scammed into believing that Wall Street, the Pentagon and the Beltway are America when, in fact, they are alien entities inimical to all we stand for. Their goal is to transform America into a country that is foreign unto herself.

The keystone of the reform proposal is to require banks deemed too big to fail to prepare living wills, which are action plans that will facilitate their winding down the next time they plunge us into another financial crisis. In theory, these plans are to list the amount and location of all the banks toxic assets that would be defaulted on in the event the bank went under.

That is: the plan would list the toxic assets except for those excluded under the various and assorted loopholes that would turn any reform bill into a slice of Swiss cheese. It’s kind of like letting a criminal sentence himself.

Financial reform is simply a Mother Goose story that is the product of a larger metanarrative. There will be no comprehensive financial regulatory legislation passed just as no meaningful healthcare reform is going to see the light of day ....

Read the complete article at:

http://www.countercurrents.org/wagenvoord041109.htm

[emulatorloo]

1. Could be a good article, but my brain has HYPERBOLE overload.

Limbaugh says Obama is bent on "destroying American" by killing the economy/private sector. This one says Obama is going to destroy America by coddling the private sector.

[Better Believe It]

3. Limbaugh is lying and is full of shit. Hope this information helps your brain!

:)

[Laelth]

6. Exactly. Which one is more likely telling the truth? n/t

:dem:

-Laelth

[mkultra]

9. the answer is neither.

[Better Believe It]

2. Too-Big-To-Fail: Regulatory Reforms of Systemically Important Institutions

Too-Big-To-Fail: Regulatory Reforms of Systemically Important Institutions
By Elisa Parisi-Capone
November 4, 2009

Elisa Parisi-Capone is RGE Monitor’s lead analyst for finance and banking and Western Europe. Elisa holds a Masters Degree in economics from New York University (NYU) and a Lizentiat in economics (6-year program) from the University of Zurich, Switzerland. Elisa spent two years as financial markets analyst at the Swiss Federal Finance Administration in Berne before pursuing her M.A. in New York and joining RGE Monitor in 2005.


Although the G20 finance ministers pledged stronger prudential regulation and financial oversight of systemically important firms at their September meeting, there is no consensus yet among regulators, lawmakers and academics on how best to proceed. Nouriel Roubini noted recently that the problem of banks being too big to fail is even bigger now than it was before the crisis: “Why don't we go to a system where they're not too big to fail to begin with? The true solution to the too-big-to-fail problem requires more radical choices. In addition to an insolvency regime, such institutions should be broken up and unsecured creditors of insolvent institutions should have their claim automatically converted into equity. A separation of commercial banking and risky investment banking should also be considered. Thus, some variant of the Glass-Steagall Act should be reintroduced.”

If the government creates a new firewall between deposit-taking institutions and investment banks, as was the case before the repeal of the 1935 Glass-Steagall Act in 1999, only the former group would receive access to lender of last resort facilities and deposit insurance. The latter should be subject to receivership should they get in trouble. Advocates of this solution include Paul Volcker (who chaired the Group of 30 report), Mervyn King (Governor of the Bank of England), and even Alan Greenspan favors a breakup, according to recent statements (although he supported the repeal of Glass-Steagall). Among policymakers, King has made a particularly forceful case, noting that "it is important that banks in receipt of public support are not encouraged to try to earn their way out of that support by resuming the very activities that got them into trouble in the first place.”

In the U.S., on the other hand, the House Financial Services Committee presented a draft law on October 27, 2009 based on the administration’s June 17, 2009 proposal for comprehensive regulatory reform. The draft law conveys broad supervisory powers of designated systemically important institutions to the Federal Reserve Board. In addition to higher risk-based capital requirements, the new prudential standards for systemic institutions include leverage limits, liquidity rules, concentration limits and the drafting of a "living will" (i.e. a resolution plan). The Fed also receives authority to ask any systemically important firm to sell or otherwise transfer assets or off-balance sheet items to unaffiliated firms, to terminate one or more activities or to impose conditions on business activities. Rep. Barney Frank also agreed to a Financial Company Resolution Fund (FCRF) to be pre-funded through risk-based assessments of all financial institutions with US$10+ billion in assets. However, in a sign that a final agreement is still far agreed upon, the Senate Committee is preparing an alternative bill that would consolidate the current four bank regulators into a single supervisory body in a move that would significantly curtail the Fed’s authority. Similarly, according to this alternative proposal, the Fed would be one among equals in the Council of Regulators whose task is to monitor systemic risk.

Once the roles are assigned, the regulator has to decide on the exact quantity and composition of the new capital requirements. Since the adoption of a certain ratio is somewhat artificial and not very indicative as an early warning system—as the recent crisis has shown—economists are advocating market indicator-based contingent debt to equity swaps as an efficient restructuring tool for large institutions that wouldn’t put taxpayer money at risk or trigger derivatives contracts. Nonetheless, Mervyn King cautions that while the inclusion of convertible debt in capital requirements is worth a try, this tool does nothing to address the moral hazard of designated TBTF institutions. On the contrary, “they still have an incentive to take really big risks because the government would provide some back-stop catastrophe insurance.”

Read the complete article at:

http://www.rgemonitor.com/blog/economonitor/257933/too-big-to-fail_regulatory_reforms_of_systemically_important_institutions

[OHdem10]

4. They had best pay attention to Paul Volker and other wise people

are advising to separate Commercial Banks from Investment Banks.

[ej510]

5. Obama would want to regulate the financial services industry,

to make sure there is no economic collapse on his watch.

[Dr Robert]

7. why isn't the headline of the article being used as the Title?

oh, right.
that wouldn't be offensive enough towards Obama.

why bother with posting rules, huh?

[sudopod]

8. Srsly. nt