hvactec
VIP Member
Now were begging: Will someone PLEASE bring back Glass-Steagall? The Glass-Steagall Act was, of course, the legislation passed in the early 1930s in response to a certain banking crisis that led to a particular Great Depression. Among other things, the Act erected a Chinese wall between a financial institutions investment banking and merchant banking functions. In less complicated terms, the law forced banks to separate any business it was transacting on behalf of clients from the speculative moves it made with its own money. For the layman: banks cant make dumb bets with clients money.
Sort of makes sense, doesnt it?
Well apparently it seemed a bit stingy for President Clinton and the Republicans in Congress in 1999. We have Senator Phil Gramm and Representative Jim Leach to thank for that one. Heres the problem: The heads of big banks have this terrible habit of thinking that theyre the smartest guys in the room. Anyone who doesnt believe that need only watch Ben Bernanke talk for more than 30 seconds. Actually, lets refine that a bit. The problem isnt that banking executives think theyre savants, the real problem is that they arent.
In the modern financial age, a lot of very highly paid guys with impressive titles who look at way too many numbers and think they make sense have concocted some very complex hedging strategies for managing risk. They think they understand the crafty derivatives theyve invented which are completely unregulated and totally opaque and all the counterparty risk involved. They dont, and therein lies the rub.
Mark Twain once said Its not what you dont know that gets you into trouble. Its what you know for sure that just aint so.
Truth be told, what bankers are doing wouldnt be so bad if they were the only ones who suffered from their own idiocy. Enter Congressmen Gramm, Leach, President Clinton, then President Bush (II), hammerin Hank Paulson, and Bernanke. Its not just that banks are using complicated models that they dont understand to speculate on securities they think they comprehend but dont, theyre now doing it with client money. Starting to get the picture?
The end of October brought with it a new addition to the top 10 biggest bankruptcies of all-time when MF Global went belly-up under the incredible leadership of ex-Goldman chief and New Jersey governor Jon Corzine. Yes, MF Global has been the subject of a good deal of headlines lately, but bear with us for a moment while we take a closer look and apply it to a growing and scary trend.
read more » A Regulation That’s Right: Bring Back Glass-Steagall - Big Government
Sort of makes sense, doesnt it?
Well apparently it seemed a bit stingy for President Clinton and the Republicans in Congress in 1999. We have Senator Phil Gramm and Representative Jim Leach to thank for that one. Heres the problem: The heads of big banks have this terrible habit of thinking that theyre the smartest guys in the room. Anyone who doesnt believe that need only watch Ben Bernanke talk for more than 30 seconds. Actually, lets refine that a bit. The problem isnt that banking executives think theyre savants, the real problem is that they arent.
In the modern financial age, a lot of very highly paid guys with impressive titles who look at way too many numbers and think they make sense have concocted some very complex hedging strategies for managing risk. They think they understand the crafty derivatives theyve invented which are completely unregulated and totally opaque and all the counterparty risk involved. They dont, and therein lies the rub.
Mark Twain once said Its not what you dont know that gets you into trouble. Its what you know for sure that just aint so.
Truth be told, what bankers are doing wouldnt be so bad if they were the only ones who suffered from their own idiocy. Enter Congressmen Gramm, Leach, President Clinton, then President Bush (II), hammerin Hank Paulson, and Bernanke. Its not just that banks are using complicated models that they dont understand to speculate on securities they think they comprehend but dont, theyre now doing it with client money. Starting to get the picture?
The end of October brought with it a new addition to the top 10 biggest bankruptcies of all-time when MF Global went belly-up under the incredible leadership of ex-Goldman chief and New Jersey governor Jon Corzine. Yes, MF Global has been the subject of a good deal of headlines lately, but bear with us for a moment while we take a closer look and apply it to a growing and scary trend.
read more » A Regulation That’s Right: Bring Back Glass-Steagall - Big Government