Not a bad idea on banking regulation--go back to the Glass/Stegall act of 1933

[oreo]

While I disagree with Obama 99.9% of the time, I do agree that banking in this country needs to be regulated--in order to prevent another economic collapse--such as we are going through right now.

We may be going back to the Glass-Stegall act--that was instituted in 1933--& again which was deregulated in 1999. 1999--does that sound familiar to you all? Fannie/Freddie were also deregulated--no one needed a good credit rating, no collateral was needed & of course no down payment was required--this while banks were pressured into lending to people who could not repay the loans. Wall street banking firms bought them up (mortage backed securities) as fast as they could--& started trading them in the black hole--called the derivatives market--aka hedge funds. They with the help & full support of our federal government built a house of cards that collapsed leavinig the American tax payer holding the bag.

The Banking Act of 1933 was a law that established the Federal Deposit Insurance Corporation (FDIC) in the United States and introduced banking reforms, some of which were designed to control speculation[1]. It is most commonly known as the Glass–Steagall Act, after its legislative sponsors, Carter Glass and Henry B. Steagall.

Some provisions of the Act, such as Regulation Q, which allowed the Federal Reserve to regulate interest rates in savings accounts, were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm–Leach–Bliley Act.[2][3]

Goldman Sacs grew 5 times larger after the deregulation. In fact all Wall Street banking firms grew so BIG--that they "were too big to fail."

Now, I know that everyone is having a fit over the stock market losses over the last few days. BUT--in reality--where exactly are the "profits" that make for bull markets? Banking stocks have gone up dramatically over the last several months on the euforia that they "survived." This of course, thanks to billions in tax payer bail-outs. Long term financial security & growth depends on solid banking practices.

So my question to all of you nay-sayers. When Joe on the street heads to a casino to spend his money--are you going to back him with your credit card for his losses? I kind of doubt it. Shouldn't we expect the same from our banks? Because, if banks lose--it's our loss--because it's our money.

It looks like this bill will require banks to keep their investments--made from the profit of their operations separate from depositor money--(or our deposits) from being bet on the casino table. In my opinon--that's not a bad idea.

Your thoughts--on this new bill & please feel free to correct me--if you are reading it differently.

 

[uscitizen]

Yep just put the regulations back that were removed. And maybe a bit more regulations on unregulated securities.
It worked fine for a long time till we broke it.

 

[Oddball]

A lot of this had to do with mega-mergers of banks as well.

Wells Fargo alone has swallowed up (by extension) dozens of what used to be regional banks.

 

[oreo]

Yep just put the regulations back that were removed. And maybe a bit more regulations on unregulated securities.
It worked fine for a long time till we broke it.

I think we can safely go back, but you don't want government over-reaching on new regulations--because that can do damage also.

 

[oreo]

A lot of this had to do with mega-mergers of banks as well.

Wells Fargo alone has swallowed up (by extension) dozens of what used to be regional banks.

As an example: I went to my small home town bank 6 weeks ago to re-finance a loan on an investment property.

So I closed on the loan one day & it was sold to JP Morgan before I made my first payment--

In my opinion--this kind of activity has to stop.

 

[uptownlivin90]

I think I could agree to this.

 

[Oddball]

Well, that's just a matter of timing.

But you're certainly not going to stop the secondary market for mortgages and other receivables.

 

[oreo]

Well, that's just a matter of timing.

But you're certainly not going to stop the secondary market for mortgages and other receivables.

We can stop them from using mortgage backed securities as collateral to place bets in the derivatives markets.

Again--this is akin to you backing Joe on the street for his losses in a casino.

Also your home town bank is going to be much more conservative when loaning money--if they know they can't sell it to someone else the day after closing the loan. At minimum, they should be required to hold the mortgage for a certain amount of time.