Toro
Diamond Member
Please show us exactly where there is an "implied guarantee" in the bill.
Be sure to give us the exact location.
As far as I can tell, the government is making the banks set up a system between themselves to stop individual banks from failing.
Apparently the concept of "implied" is lost on you.
Creating a $50 (to begin with) billion dollar fund for bailouts for companies that are considered too big to fail amounts to an implicit guarantee that they will not be allowed to fail without government intervention. That guarantee will cause investors to rely on that implied guarantee, and like Fan and Fred these companies will grow faster than those without that guaranteee, thus they will be presumed to be already too big to fail. They know it, the Congress knows it, and anyone who does business will recognize it.
Notice that Fanny and Freddy are still intact, and remain too big to fail with their implicit guarantee, such that they aren't even mentioned in the legislation. They were and are GSEs (government Sponsored Enterprises) which endowed them with an implied guarantee which was the subject of warnings even into the late nineties.
It does not matter that the funding for that guarantee will come in part from the companies themselves, the guarantee is the same.
The Republicans would prefer to take action to see that they don't get that big in the first place, and a good way to accomplish that is to dismember them now.
im·ply - 1 obsolete : enfold, entwine
2 : to involve or indicate by inference, association, or necessary consequence rather than by direct statement <rights imply obligations>
3 : to contain potentially
4 : to express indirectly <his silence implied consent>
This bill will be funded by the banks, not by taxpayers. Wall Street doesn't want it because they would have to pay for it. They would rather you, the taxpayer, pay for their losses, just like they have over the past two years. They keep the profits, you pay for the losses.
The idea that this would somehow increase the amount of risk taking is sheer nonsense. Wall Street has already levered up the global derivatives market to the tune of $700 trillion - that's $700,000,000,000,000, 5 times the size of the global economy - without a bailout fund. Wall Street already is a giant casino. Governments already bailout and support financial firms, and will do so in the future. I'd rather have Wall Street take the first $50 billion hit than the taxpayers. But the Republicans don't.
The Republican Party is also fighting breaking up the big banks. The big banks want to keep things as is because they make an egregious amount of money already, knowing full well that the government will come in and bail them out if they get into trouble. So they are pouring tons and tons of it into DC to fight this bill, most of which is winding up in the coffers of the Republican Party.