Financial Regulatory Reform: Did Jamie Dimon stop the re-enactment of Glass-Steagall?
Update: Oh this is rich, Andy Stern and SEIU are having an ‘end too big to fail’ rally outside Golden Slacks, it sounds like they are actually supporting the Dodd position which the WH is NOT supporting but we know Andy Stern is there (WH) more than anyone else…so are they ‘accidentally’ using the same words as Jamie? Are they helping to keep Golden Slacks’ negative profile so high they don’t bid on taking any of the assets in the FDIC bank seizure sales? (Jamie is against the Dodd too big to fail legislation because he reportedly wants to buy some of those assets and Golden is a competitor…is the WH not really against the Dodd legislation and lying to Jamie? Is Stern just greedy or is this planned? man oh man…)
…a couple hundred of them — led by Service Unions International Union president Andy Stern — plan to gather outside of Goldman Sachs’ Washington offices Monday morning to protest the firm’s mega-bonuses, and demand the end of the “too big to fail” doctrine, according to a press release.
The event will be held outside 101 Constitution Ave. N.W., an office building that’s home to many of the most powerful lobbyists and corporations in town, including Goldman. It’s also where you can find POLITICO’s Capitol Hill bureau (in the basement).
Among their demands, the protesters will say that Goldman bankers should donate their reported $23 billion in bonuses to foreclosure prevention programs….
wow. We supported Jamie Dimon for Treasury Secretary. Face it Geithner already gave billions to the banks via AIG and CITI, may as well have a TOUGH fox guarding the hen house, and Jamie is the toughest. Paul Volcker who gets wheeled out for the occasional photo-op is clearly being ignored, treated like the ‘crazy Uncle’, as Charlie Gasparino puts it. Obama is listening to only one banker it seems, Jamie who has vested interests in keeping things as they are.
Airtime-Fri. Nov. 13 2009 – 12:50 PM ET – CNBC’s Charlie Gasparino has the details on whether Jamie Dimon is too powerful.
Jamie Dimon- ‘No Bank Should be Considered Too Big to Fail’
…Dimon, in a Washington Post opinion piece, said the government shouldn’t provide artificial life support to banks that don’t perform. “The term ‘too big to fail’ must be excised from our vocabulary,'” Dimon wrote in Friday’s Post.Yet he said it shouldn’t be the size of the institution that drives the new regulatory policies being considered in Congress but rather their ability to manage risk and provide the best services for customers.
The government should be able to lead an orderly failure of banks but shouldn’t impose arbitrary size limits on the institutions, he added….
The pixxing contest/turf wars are fully underway with Dodd trying to strip regulatory authority from not just the Federal Reserve, but no less than 3 other agencies including the FDIC and the Office of Thrift Supervision.
…Running 1,136 pages long, the bill includes provisions to create a consolidated bank regulator, limit the fallout if a bank deemed “too big to fail” collapses, and set up a consumer-protection agency to oversee mortgages and credit cards.
It would also give the Federal Reserve a considerably smaller role in banking oversight and set up a systemic risk agency with a board to identify risk and take actions such as forcing big banks to sell assets…
Dodd initially presented his plan for Uber-regulator as the WH idea, since both Dodd and the WH really need a perceived ‘push for the people’ (since they think regular Americans hate their financial ‘betters’. That is also why the punditry keep commenting on how AMAZING it is that a blue collar jury was able to see past their hatred of Wall St blah blah blah, listen to Dennie Kneale at about 2:21, he actually said that, ‘I was so amazed!, it went right over his head he is a classist idiot)
Anywho Dodd is getting his’ VIP mortgage/sit down and stop running Hillary’ axx handed to him in CT, and IMO he thought he had a deal with the WH to lead this regulatory reform through and ‘get good poll’ but now the WH flipped on him and he just looks out of touch and ineffectual, again. The WH threw the Dodd plan unda da bus today. Twice!:
The Obama administration Friday pushed back against a proposal in the U.S. Senate to create a single bank super-regulator and strip the Federal Reserve of its supervisory powers.
U.S. Deputy Treasury Neal Wolin firmly backed the Fed as the premier banking regulator in a speech to lawyers, saying this function was critical for its role as a lender of last resort. “No regulator had a perfect record leading up to the crisis,” Wolin told an American Bar Association committee.”But in our view, the Federal Reserve is the agency best equipped for the task of supervising the largest, most complex firms.” Senate Banking Committee Chairman Christopher Dodd on Tuesday proposed consolidating bank supervisory powers into a single agency, which would strip the Fed of its role as a direct bank supervisor.
U.S. lawmakers are shaping far-reaching legislation to prevent a repeat of the financial crisis that nearly paralyzed the banking system last year. Dodd’s proposal went beyond a separate effort moving through the House of Representatives Financial Services Committee. Whatever emerges in the House and Senate will need to be reconciled before going to President Barack Obama to sign into law.
…White House economic adviser Austan Goolsbee, also speaking Friday, said Dodd’s proposal may take too long to implement. Speaking at a forum sponsored by Bloomberg, Goolsbee characterized Dodd’s plan as creating an agency similar to Britain’s consolidated regulatory agency, the Financial Services Authority, which has come under some criticism for failing to rein in risky activity.
“I would say first as a general statement they had a lot of problems in the UK, as well, so I don’t think the division of what box goes where is the central” issue in creating a strong regulatory framework, Goolsbee said. “I am a little worried that to create that new agency would take a long time,” he added….
Barney Frank’s bill actually expands the Federal Reserve’s powers, and Barney Frank has had Sheila Bair’s back before and it seems again now, this time in keeping the FDIC mandate intact (which I wholeheartedly endorse, Sheila is the best, our other Treasury pick was Sheila Bair, and Sheila gets in Timmeh’s face and will not back down when she is right).
…Representative Barney Frank, chairman of the House Financial Services Committee, has favored creating a fund that would exist prior to any financial firm shutdowns, while Dodd’s proposal includes post-event funding, an approach advocated by Federal Deposit Insurance Corp. Chairman Sheila Bair…
Meanwhile Obama is looking for a pro Main St kind of win on a ‘consumer protection’ bill to tout in his January State of the Union. And everyone else is fighting over turf and the GOP is fighting the entire idea of another regulator, good luck pushing this through quickly while ramming through health care.
As far as the wisdom of Glass Steagall, when Big Dawg repealed it, it was legislation that hampered financial market growth, BUT none of the regulators especially the NY Fed, and yes I am looking at you Geithner, acted to push Congress or acted within their own authority to RAISE THE CAPITAL RESERVE requirements once the CDS market and the other crxp was expanding to trillions of dollars.You don’t give the car keys to your kid and never check on them again, I mean come on..
That was a FAILURE of the existing regulators, how does establishing yet ANOTHER level of paper pushers solve the recurring problem of political pressure on government agencies? which is what seems have happened in both individual cases like Madoff, and large systemic risks and payoffs like IMO, Geithner apparently using AIG to shovel money to the big bank behemoths, (whether they thought it was necessary or not, only have a hammer everything looks like a nail yada yada).
As for the case that it would be GOOD to re -enact it, here is where went to ‘put me some knowledge’, but many of them are in some way advising or working for Team Obama FWIW:
…The banking industry had sought the repeal since the 1980s. In 1987, the Congressional Research Service prepared this report exploring the pros and cons of preserving the act.
The controversy lives on, with many claiming that the breaking down of the banking walls helped cause the global financial crisis. You can get a sense of the debate with just a quick trip around the Web, which we did for you:
•John Reed, former chairman of Citigroup:“Reed, who helped engineer the merger that created Citigroup, apologized for his role in building a company that has taken $45 billion in direct U.S. aid, according to this Bloomberg article. Citigroup, of course, was formed in 1998 when Citicorp, a commercial bank, combined with Sanford Weill’s Travelers, which owned the investment firm Salomon Smith Barney. It was a deal that contributed to the momentum behind the Glass-Steagal repeal.
“I would compartmentalize the industry for the same reason you compartmentalize ships,” Reed said in an interview in his office on Park Avenue in New York. “If you have a leak, the leak doesn’t spread and sink the whole vessel. So generally speaking you’d have consumer banking separate from trading bonds and equity.”
• Vikram Pandit, current Citigroup chief executive:
“Pandit told a group of Washington University students on Monday that securities underwriting wasn’t the problem in the recent financial crisis, Proprietary trading was the dangerous activity this time around, according to this St. Louis Post-Dispatch article.
“It makes sense to me to say you don’t take deposits as an institution and turn around and run a hedge fund,” Pandit said. “That’s the new form of Glass-Steagall to me. … If the business plan is around client facilitation, a client-centered strategy, firms can be in those (securities) businesses and the regulators can agree to let it run. Underwriting is not the thing that took this market down. It was a lot of highly leveraged balance sheets, a lot of assets on the books that were non-core assets.”
• Paul Volcker, chairman of the newly formed Economic Recovery Advisory Board: Volcker, the former Federal Reserve chairman, favors breaking up big banks with a modern version of Glass Steagall, according to this New York Times article. In the Volcker resurrection, commercial banks would take deposits, manage the nation’s payments system, make standard loans and even trade securities for their customers—just not for themselves. The government, in return, would rescue banks that fail. On the other side of the wall, investment houses would be free to buy and sell securities for their own accounts, borrowing to leverage these trades and thus multiplying the profits, and the risks.
“Being separated from banks, the investment houses would no longer have access to federally insured deposits to finance this trading,” Volker said. “If one failed, the government would supervise an orderly liquidation. None would be too big to fail — a designation that could arise for a handful of institutions under the administration’s proposal.”
To read the rest of the reactions, click here.