Should We Re-enact Glass-Steagall?

[Toddsterpatriot]

Funny..you've agreed with each of my points..yet my knowledge in lacking.



Gotta love it.

Each of your points was wrong.

You're a very confused person.

Then why agree?

Look up confusion, ace.

It doesn't mean what you think it means.

I haven't agreed with a single of your error filled points.

 

[Staidhup]

With out sufficient oversight and regulatory procedures in place it makes no sense not to overturn the Gramm Leach bill. The primary argument in defense and support insuring passage of Gramm Leach was the accompanying part, regulatory and oversight, which was thrown back into committee to be swept under the rug.

 

[Polk]

Banks shouldn't be trading with FDIC insured deposits.

Even if the subsidiaries are bankruptcy remote entities, the government will be prone to bailing out these banks if they're big enough.

Get rid of FDIC insurance and you solve that problem without taxpayer subsidy.

Never thought I'd hear someone argue we should bring back bank runs.

 

[Polk]

Banks shouldn't be trading with FDIC insured deposits.

Even if the subsidiaries are bankruptcy remote entities, the government will be prone to bailing out these banks if they're big enough.

Get rid of FDIC insurance and you solve that problem without taxpayer subsidy.

Well no..you don't.

Because prior to FDIC insurance..people lost their savings because private entities didn't have the means or inclination to pay them back when they were lost.

The Depression was a huge problem and the government as well as the financial industry was on the brink of collapse. Had FDR not taken the steps we might have become a very different country.

It's an worse than knowing. Since you know that could happen, everyone is going to mob the bank to withdraw all their money at the first sign of trouble. Even if the bank itself is fund mentally healthy, it will still collapse under that strain.

 

[Polk]

Get rid of FDIC insurance and you solve that problem without taxpayer subsidy.

Well no..you don't.

Because prior to FDIC insurance..people lost their savings because private entities didn't have the means or inclination to pay them back when they were lost.

The Depression was a huge problem and the government as well as the financial industry was on the brink of collapse. Had FDR not taken the steps we might have become a very different country.

So? Banks can get insurance privately for their deposits. Organizations can rank banks and consumer can make decisions for themselves as to the level of risk. Etc.
People invest in mutual funds and lose all their money today. Why should a bank deposit account be any different from that? Why should taxpayers be on the hook for decisions by banksters? I am surprised to see a committed marxist like you arguing for the right of banksters to make lousy decisions up to and including fraud.

Taxpayers are hooked for the decision in either case, realistically. If we got rid of the FDIC tomorrow and Wells Fargo collapsed, do you really think the response, by any government would be "sorry you don't have money to buy food, shouldn't have put your money in a bank"?

 

[AmazonTania]

They make these "mistakes" because those "mistakes" aren't mistakes at all. They are, in part, what caused the crisis. They're not allow sufficient to explain the crisis, but no set of factors is. The problem is that the list of "causes" coming from your side of the aisle bare no relationship to reality.

These banks got in big financial trouble because they were heavily leveraged up with short term commercial paper and mortgage-backed securities. This was just as much of trouble with the merged banks and the ones which remained separate.

That is the reality. Glass Steagall wouldn't have prevented this. At all.

That's astounding.

Sure Glass Steagall would have prevented what happened.

Handily.

These guys knew what they were doing..and they knew it could go horribly wrong.

So they took out insurance with AIG.

And they knew if that failed..the government would have to come in to save their asses because of FDIC.

Glass-Steagall prevented Commercial Banks and Investment Banks from merging and each bank from taking on the roles and responsibilities of their opposing banks. AIG is not a bank, and never merged with any other entity.

You don't have a clue what happened during this crisis, do you... So, just to clarify on what you do understand, lets go over:

Banks got in trouble because they bought short term commercial paper and were heavily leveraged in mortgage-backed securities.

How would have Glass Steagall prevented any of this?

Add in we had an administration that fueled the housing bubble by dropping interest rates to zero, defunding regulators, populating those regulators with vulture capitalists and encouraging entrepreneurship. That last part is important because in addition to having people doing home improvements via what they thought was a cheap loan, you had people opening up first time businesses by taking out mortgages.

This was a perfect storm caused by de-regulation.

Federal expenditures went up on all sectors of Government. There was no de-funding of regulators. When thousands of pages of regulation are added every year, that's not de-regulation.

I'm beginning to notice how people in this forum don't understand the difference between de-regulation, mis-regulation and no regulation.

 

[AmazonTania]

Banks shouldn't be trading with FDIC insured deposits.

Even if the subsidiaries are bankruptcy remote entities, the government will be prone to bailing out these banks if they're big enough.

Get rid of FDIC insurance and you solve that problem without taxpayer subsidy.

Never thought I'd hear someone argue we should bring back bank runs.

There are still runs on banks, and banks fail all the time. Probably even more now that there is Federal Insurance on Deposits.

You may not know or understand, but the moment you put your money in the bank, you become a creditor of the bank. Being a creditor of any business does not obligate or entitle one to have their losses covered. Before deposit insurance, banks competed on soundness. They competed on interest rates. They competed on capitalisation.

Banks no longer have to compete on these standards. Not because the public is ignorant, but because the public doesn't care. The public doesn't care because they believe their money is covered. They will put their money into any bank. The bank will do foolish things with it, and the people will be none the wiser. Chances are that your bank is probably doing risky things with your money right this moment.

What is even sadder is the fact that these people believe their deposits are actually safe. Poor saps.

 

[The Rabbi]

Well no..you don't.

Because prior to FDIC insurance..people lost their savings because private entities didn't have the means or inclination to pay them back when they were lost.

The Depression was a huge problem and the government as well as the financial industry was on the brink of collapse. Had FDR not taken the steps we might have become a very different country.

So? Banks can get insurance privately for their deposits. Organizations can rank banks and consumer can make decisions for themselves as to the level of risk. Etc.
People invest in mutual funds and lose all their money today. Why should a bank deposit account be any different from that? Why should taxpayers be on the hook for decisions by banksters? I am surprised to see a committed marxist like you arguing for the right of banksters to make lousy decisions up to and including fraud.

Taxpayers are hooked for the decision in either case, realistically. If we got rid of the FDIC tomorrow and Wells Fargo collapsed, do you really think the response, by any government would be "sorry you don't have money to buy food, shouldn't have put your money in a bank"?

Because when a mutual fund collapses people are starving in the streets, right?

No. People would change their behavior if there were no FDIC. Banks would change their behavior too. No one would put all his savings into one bank. Just like no one puts all his savings into one mutual fund or stock (OK some people do but so what?). Banks would work out private ratings and insurance and they would compete for customers not just on rates and toasters but also on safety. The market would impose discipline in lending. No more lending $130M on crappy loans just because everyone else is.
But I guess libs have limited imaginations.

 

[Polk]

Get rid of FDIC insurance and you solve that problem without taxpayer subsidy.

Never thought I'd hear someone argue we should bring back bank runs.

There are still runs on banks, and banks fail all the time. Probably even more now that there is Federal Insurance on Deposits.

You may not know or understand, but the moment you put your money in the bank, you become a creditor of the bank. Being a creditor of any business does not obligate or entitle one to have their losses covered. Before deposit insurance, banks competed on soundness. They competed on interest rates. They competed on capitalisation.

Banks no longer have to compete on these standards. Not because the public is ignorant, but because the public doesn't care. The public doesn't care because they believe their money is covered. They will put their money into any bank. The bank will do foolish things with it, and the people will be none the wiser.

What is even sadder is the fact that these people believe their deposits are actually safe. Poor saps.

1. Bank failures are far more rare today than they were before the existence of FDIC.
2. Banks still compete on the same functions they've always competed on.
3. There is no sound reason that the general public should need to understand the details of how a bank's balance sheet works.
4. Their deposits are safe to the extent the government is solvent. If the government is insolvent, then it doesn't matter where accounts are safe or not.

 

[Polk]

So? Banks can get insurance privately for their deposits. Organizations can rank banks and consumer can make decisions for themselves as to the level of risk. Etc.
People invest in mutual funds and lose all their money today. Why should a bank deposit account be any different from that? Why should taxpayers be on the hook for decisions by banksters? I am surprised to see a committed marxist like you arguing for the right of banksters to make lousy decisions up to and including fraud.

Taxpayers are hooked for the decision in either case, realistically. If we got rid of the FDIC tomorrow and Wells Fargo collapsed, do you really think the response, by any government would be "sorry you don't have money to buy food, shouldn't have put your money in a bank"?

Because when a mutual fund collapses people are starving in the streets, right?

No. People would change their behavior if there were no FDIC. Banks would change their behavior too. No one would put all his savings into one bank. Just like no one puts all his savings into one mutual fund or stock (OK some people do but so what?). Banks would work out private ratings and insurance and they would compete for customers not just on rates and toasters but also on safety. The market would impose discipline in lending. No more lending $130M on crappy loans just because everyone else is.
But I guess libs have limited imaginations.

That's an asinine comparison. People don't stick their liquid funds for daily expenses in mutual funds.

 

[The Rabbi]

Never thought I'd hear someone argue we should bring back bank runs.

There are still runs on banks, and banks fail all the time. Probably even more now that there is Federal Insurance on Deposits.

You may not know or understand, but the moment you put your money in the bank, you become a creditor of the bank. Being a creditor of any business does not obligate or entitle one to have their losses covered. Before deposit insurance, banks competed on soundness. They competed on interest rates. They competed on capitalisation.

Banks no longer have to compete on these standards. Not because the public is ignorant, but because the public doesn't care. The public doesn't care because they believe their money is covered. They will put their money into any bank. The bank will do foolish things with it, and the people will be none the wiser.

What is even sadder is the fact that these people believe their deposits are actually safe. Poor saps.

1. Bank failures are far more rare today than they were before the existence of FDIC.
2. Banks still compete on the same functions they've always competed on.
3. There is no sound reason that the general public should need to understand the details of how a bank's balance sheet works.
4. Their deposits are safe to the extent the government is solvent. If the government is insolvent, then it doesn't matter where accounts are safe or not.

1, So?
2. Wrong.
3. Trust us. We're from the gov't and know better than you do. No thanks.
4. The liability those accounts incur make gov't insolvency more likely rather than less likely. It also encourages the very bad behavior you are constantly harping on.

 

[AmazonTania]

1. Bank failures are far more rare today than they were before the existence of FDIC.

This is false. Bank failures before the existence of the FDIC generally only happened during a recession. A recession ensued a financial panic, which resulted in a bank run, which ultimately resulted in a bank failure.

Today, banks are failing even when there no threat of an economic downturn at all. There were over 50 bank failures in 2012 alone. To say that bank failures are far more rare today is completely erroneous.

2. Banks still compete on the same functions they've always competed on.

Some banks might, but the vast majority does not. The public just doesn't care. There is really no difference between competing banks these days. Interest rates are at historic lows, so there really isn't much of a difference between a few basis points when it comes to Time Deposits and Savings.

These days, the only thing banks compete on are fees on checking accounts and late fees on credit cards and overdraft features on accounts. That's about it.

3. There is no sound reason that the general public should need to understand the details of how a bank's balance sheet works.

T accounting is not so difficult to understand. And you really don't need to be an accounting expert to know the type of investments your bank is making. You should know what risky investments your bank is making before you decide to become a creditor. That is, if you actually care what happens to your money when you deposit into one of these banks.

4. Their deposits are safe to the extent the government is solvent. If the government is insolvent, then it doesn't matter where accounts are safe or not.

The FDIC wouldn't be able to insure the deposits of the Top 20 banks in the country if another financial collapse were to occur in the country.The FDIC simply does not have the funds to cover them all, let alone just one.

 

[Dugdale_Jukes]

Did ending Glass-Steagall directly "cause" the collapse of 2008? No.

Was ending G-S instrumental in the collapse? Absolutely.

Ending the absolute barrier between commercial banking and investment banking fed into the collapse of 2008 in two ways:

1. It exacerbated systemic risks, specifically by encouraging "too big too fail" (combining assets if not commingling funds)

2. It made banks functionally impossible to regulate. Under G-S investigators had clear walls and fences. After vaporizing the "wall" prohibiting commercial banking and investment banking under one corporate umbrella, regulation became a fog of conflicts made worse by patchwork regulations of 2009-2010.
​

G-S was regulation at its best. No question about it.

For example, G-S's FDIC regs allowed banks to lend double what they could lend before. Equity capital requirements were relaxed to 10% from 20%, which is one of the handful of regulations to directly increase competition PLUS increase the flow of cash on Main Street. Which was at least partly responsible for the longest period of financial stability in US history.

 

[Toro]

Glass-Steagall prevented Commercial Banks and Investment Banks from merging and each bank from taking on the roles and responsibilities of their opposing banks. AIG is not a bank, and never merged with any other entity.

You don't have a clue what happened during this crisis, do you... So, just to clarify on what you do understand, lets go over:

Banks got in trouble because they bought short term commercial paper and were heavily leveraged in mortgage-backed securities.

How would have Glass Steagall prevented any of this?

Hard to say but banks like JP Morgan underwrote the structured products and kept the equity piece on their books. They then insured that piece with AIG, which allowed them to underwrite even more crappy structured products to keep them on their books.

 

[Toro]

1. Bank failures are far more rare today than they were before the existence of FDIC.

This is false. Bank failures before the existence of the FDIC generally only happened during a recession. A recession ensued a financial panic, which resulted in a bank run, which ultimately resulted in a bank failure.

http://www.calculatedriskblog.com/2009/07/fdic-bank-failures-update.html

There were more bank failures in the 1920s during the booming "Roaring 20s" than at any time since The Great Depression. This is because there was a rolling depression and collapsing commodity prices in the farm industry in the 1920s, which caused bank failures in rural areas.

accounting is not so difficult to understand. And you really don't need to be an accounting expert to know the type of investments your bank is making. You should know what risky investments your bank is making before you decide to become a creditor. That is, if you actually care what happens to your money when you deposit into one of these banks.

Most investment professionals had no idea what were on the banks' balance sheets before the Financial Crisis. If professionals don't know, how can members of the public?

 

[The Rabbi]

The graph is misleading. Many banks that would have failed pre FDIC got merged into stronger healthier banks in a forced merger. That was especially so during the real estatemarket collapse after 1986.

Most people don't understand income, balance sheets, and cash flow statements in annual reports. But many do and give advice to those who dont.

 

[AmazonTania]

Glass-Steagall prevented Commercial Banks and Investment Banks from merging and each bank from taking on the roles and responsibilities of their opposing banks. AIG is not a bank, and never merged with any other entity.

You don't have a clue what happened during this crisis, do you... So, just to clarify on what you do understand, lets go over:

Banks got in trouble because they bought short term commercial paper and were heavily leveraged in mortgage-backed securities.

How would have Glass Steagall prevented any of this?

Hard to say but banks like JP Morgan underwrote the structured products and kept the equity piece on their books. They then insured that piece with AIG, which allowed them to underwrite even more crappy structured products to keep them on their books.

That's great and all, but Glass Steagall wasn't designed to prevent that.

 

[The Rabbi]

Glass-Steagall prevented Commercial Banks and Investment Banks from merging and each bank from taking on the roles and responsibilities of their opposing banks. AIG is not a bank, and never merged with any other entity.

You don't have a clue what happened during this crisis, do you... So, just to clarify on what you do understand, lets go over:

Banks got in trouble because they bought short term commercial paper and were heavily leveraged in mortgage-backed securities.

How would have Glass Steagall prevented any of this?

Hard to say but banks like JP Morgan underwrote the structured products and kept the equity piece on their books. They then insured that piece with AIG, which allowed them to underwrite even more crappy structured products to keep them on their books.

That's great and all, but Glass Steagall wasn't designed to prevent that.

There were certainly MBS under GS.

 

[AmazonTania]

1. Bank failures are far more rare today than they were before the existence of FDIC.

This is false. Bank failures before the existence of the FDIC generally only happened during a recession. A recession ensued a financial panic, which resulted in a bank run, which ultimately resulted in a bank failure.

http://www.calculatedriskblog.com/2...fail again the Government will bail them out.

 

[Toro]

The graph is misleading. Many banks that would have failed pre FDIC got merged into stronger healthier banks in a forced merger. That was especially so during the real estatemarket collapse after 1986.

That may be, but bank failures weren't rare prior to the FDIC either.