We should all agree with this!

[Kimura]

Glass-Steagall restricted proprietary trading by bank entities and transactions with financial affiliates.

It set up a wall betweein banking functions and brokerage functions. IT wasn't necessary when it was passed and it became more irrelevant as time went on. It didnt prevent any previous financial crises nor would it have prevented this one. It did artificially suppress earnings and increase inefficiency in the economy.

Do you understand why concentration in the banking industry is extremely dangerous? If so, please elaborate, and if not, I'll do my best to explain it to you.

 

[The Rabbi]

In December 2007, I attended a dinner party hosted by Bank of America (BofA) to promote the bank’s renewed partnership with Epiq Systems providing management and automated accounting programs for fiduciary accounts. At the party, I had the opportunity to speak at some length with (then) CEO Ken Lewis about the bank’s proposed acquisition of Countrywide Financial, which had not yet been announced to the public. (At that time, BofA was heavily into fiduciary banking services that required a very high cash collateralization; and there was concern that the Countrywide deal would create an "impairment of capital" situation for the bank due to the large portfolio of at risk loans subject to "repurchase agreements" for securitized mortgages that had been traded on the financial markets.) Lewis was all for the deal (the bank was acquiring Countrywide at a "fire sale" price and the bank already had a substantial equity position); however this was questionable considering just the loses already posted by Countrywide that would have to be absorbed. And, as it turned out, the acquisition of Countrywide was a big mistake resulting in huge losses in settlements with state and the federal government agencies. As a consequence, BofA was forced to downsize, closing hundreds of branches, cutting thousands of jobs and eliminating many departments, including fiduciary banking services that terminated in October 2012. That is what happens when there is a lapse in regulatory oversight of banking entities.

He made a bad business decision. Ken Lewis spent I dont know how many years in the banking business and I am sure knew it backwards and forwards. Why do you think a regulator, who maybe has never worked in banking, will have better judgement than a CEO?
You can eliminate all risk out of banking. But you have to eliminate all profit out of it too. Banks would become simply regulated utilities under the control of government. Is that really what you want?

 

[Kimura]

What is needed is to reimpose the restrictions of Glass-Steagall on proprietary trading by banks and their affiliates that were repealed by the Gramm-Leach-Bliley Act. The problem was the unregulated wholesale marketing of subprime mortgages as debt securities. Allowing banks to deal in these high-risk, secret transactions is against all rules of bank accountability. There has to be a clear dividing line between banking that is insured, and market trading that is not (e.g., Great American Bank vs. Great American, Inc.). Banks should be in the business of lending money and providing financial services, not speculating on the stock market.

What is needed is to reimpose the restrictions of Glass-Steagall on proprietary trading by banks and their affiliates that were repealed by the Gramm-Leach-Bliley Act.

I can't think of a single bank that got in trouble because of proprietary trading.
Glass-Steagall would have prevented JPMorgan from buying Bear Stearns and Bank of America from buying Merrill.

That would have made things worse. So why bring it back?

Glass-Steagall enforced bank diversity, we had investment banks on one side of the firewall and depository institutions on the other. When Glass-Steagall was repealed, the mega-banks started engaging in both types of banking. It's akin to a virus (the mega-banks) infecting the host (the financial system).

 

[EdwardBaiamonte]

What is needed is to reimpose the restrictions of Glass-Steagall on proprietary trading by banks and their affiliates that were repealed by the Gramm-Leach-Bliley Act. The problem was the unregulated wholesale marketing of subprime mortgages as debt securities. Allowing banks to deal in these high-risk, secret transactions is against all rules of bank accountability. There has to be a clear dividing line between banking that is insured, and market trading that is not (e.g., Great American Bank vs. Great American, Inc.). Banks should be in the business of lending money and providing financial services, not speculating on the stock market.

What is needed is to reimpose the restrictions of Glass-Steagall on proprietary trading by banks and their affiliates that were repealed by the Gramm-Leach-Bliley Act.

I can't think of a single bank that got in trouble because of proprietary trading.
Glass-Steagall would have prevented JPMorgan from buying Bear Stearns and Bank of America from buying Merrill.

That would have made things worse. So why bring it back?

Glass-Steagall enforced bank diversity, we had investment banks on one side of the firewall and depository institutions on the other. When Glass-Steagall was repealed, the mega-banks started engaging in both types of banking. It's akin to a virus (the mega-banks) infecting the host (the financial system).

nice try but it was always illegal to fix funds between depository and investment bank so it had nothing to do with crisis.

 

[Dad2three]

What is needed is to set in place regulatory authority and restrictions that will avoid a future banking crisis. That is the raison d'être of the proposed reenactment of the provisions of Glass-Steagall.

Yes. We need to further empower regulators who can't back up their email.
Regulators who push banks to lend to poor risks.

Regulators and policymakers enabled this process at virtually every turn. Part of the reason they failed to understand the housing bubble was willful ignorance: they bought into the argument that the market would equilibrate itself. In particular, financial actors and regulatory officials both believed that secondary and tertiary markets could effectively control risk through pricing.


http://www.tobinproject.org/sites/tobinproject.org/files/assets/Fligstein_Catalyst of Disaster_0.pdf



“When regulators don’t believe in regulation and don’t get what is going on at the companies they oversee, there can be no major white-collar crime prosecutions,”...“If they don’t understand what we call collective embezzlement, where people are literally looting their own firms, then it’s impossible to bring cases.”

http://www.nytimes.com/2011/04/14/business/14prosecute.html?pagewanted=all

The FBI correctly identified the epidemic of mortgage control fraud at such an early point that the financial crisis could have been averted had the Bush administration acted with even minimal competence.
'
William K. Black: The Two Documents Everyone Should Read to Better Understand the Crisis

Dubya was warned by the FBI of an "epidemic" of mortgage fraud in 2004. He gave them less resources.

FBI saw threat of loan crisis - Los Angeles Times

Shockingly, the FBI clearly makes the case for the need to combat mortgage fraud in 2005, the height of the housing crisis:

Financial Crimes Report to the Public 2005

FBI ? Financial Crimes Report 2005

The Bush Rubber Stamp Congress ignored the obvious and extremely detailed and well reported crime spree by the FBI.

THE BUSH ADMINISTRATION and CONGRESS stripped the White Collar Crime divisions of money and manpower.

http://www.nytimes.com/2008/10/19/washington/19fbi.html?pagewanted=all

 

[Dad2three]

What is needed is to set in place regulatory authority and restrictions that will avoid a future banking crisis. That is the raison d'être of the proposed reenactment of the provisions of Glass-Steagall.

Yes. We need to further empower regulators who can't back up their email.
Regulators who push banks to lend to poor risks.

1) Glass Steagall had nothing to do with housing crisis issues so would not have helped.

2) yes more regulatoty authority!! THere are plenty of regulators looking for work from the USSR and Red China and our own VA and Fanny Freddie!!

3) a liberal lacks the IQ to understand how capitalism works so prefers magical regulation

Warren Buffett: "There are significant limits to what regulation can accomplish. As a dramatic illustration, take two of the biggest accounting disasters in the past ten years: Freddie Mac and Fannie Mae. We're talking billions and billions of dollars of misstatements at both places".

Now, these are two incredibly important institutions. I mean, they accounted for over 40% of the mortgage flow a few years back. Right now I think they're up to 70%. They're quasi-governmental in nature. So the government set up an organization called OFHEO. I'm not sure what all the letters stand for. [Note to Warren: They stand for Office of Federal Housing Enterprise Oversight.] But if you go to OFHEO's website, you'll find that its purpose was to just watch over these two companies. OFHEO had 200 employees. Their job was simply to look at two companies and say, "Are these guys behaving like they're supposed to?" And of course what happened were two of the greatest accounting misstatements in history while these 200 people had their jobs. It's incredible. I mean, two for two!

“Whatever regulatory changes are made, they will pale in comparison to the change already evident in today’s markets,” he said. “Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime.”-Alan Greenspan

OFHEO

YES, PART OF HUD, AN EXECUTIVE BRANCH AGENCY (CABINET LEVEL). Weird Dubya fought ALL 50 states on predatory lending, ignored FBI warnings that started in 2004 AND allowed the five investment banks to triple their leverage in 2004 which flooded the market with cheap monies


Right-wingers Want To Erase How George Bush's "Homeowner Society" Helped Cause The Economic Collapse


Q When did the Bush Mortgage Bubble start?

A The general timeframe is it started late 2004.

From Bush’s President’s Working Group on Financial Markets October 2008

“The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.”


http://www.usmessageboard.com/economy/362889-facts-on-dubya-s-great-recession.html




The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn't work and then they get elected and prove it.
P. J. O'Rourke


No, the GSEs Did Not Cause the Financial Meltdown (but thats just according to the data)

Hey Mayor Bloomberg! No, the GSEs Did Not Cause the Financial Meltdown (but thats just according to the data) | The Big Picture


Private sector loans, not Fannie or Freddie, triggered crisis


Private sector loans, not Fannie or Freddie, triggered crisis | Economics | McClatchy DC

 

[Dad2three]

What is needed is to set in place regulatory authority and restrictions that will avoid a future banking crisis. That is the raison d'être of the proposed reenactment of the provisions of Glass-Steagall.

Yes. We need to further empower regulators who can't back up their email.
Regulators who push banks to lend to poor risks.

Loans that were under government regulation did better than private loans, especially if they were regulated by the "Community Reinvestment Act."





Center for Public Integrity reported in 2011, mortgages financed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.

 

[EdwardBaiamonte]

“When regulators don’t believe in regulation and don’t get what is going on at the companies they oversee,

right,!! like the VA Post Office Soviet Red Chinese and East German regulators didn't get it either. You don't become a regulator unless you want to succeed and get promoted!A liberal simply lacks the IQ to understand how capitalist regulation works so prefers magical liberal regulation.


Warren Buffett: "There are significant limits to what regulation can accomplish. As a dramatic illustration, take two of the biggest accounting disasters in the past ten years: Freddie Mac and Fannie Mae. We're talking billions and billions of dollars of misstatements at both places".

Now, these are two incredibly important institutions. I mean, they accounted for over 40% of the mortgage flow a few years back. Right now I think they're up to 70%. They're quasi-governmental in nature. So the government set up an organization called OFHEO. I'm not sure what all the letters stand for. [Note to Warren: They stand for Office of Federal Housing Enterprise Oversight.] But if you go to OFHEO's website, you'll find that its purpose was to just watch over these two companies. OFHEO had 200 employees. Their job was simply to look at two companies and say, "Are these guys behaving like they're supposed to?" And of course what happened were two of the greatest accounting misstatements in history while these 200 people had their jobs. It's incredible. I mean, two for two!

“Whatever regulatory changes are made, they will pale in comparison to the change already evident in today’s markets,” he said. “Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime.”-Alan Greenspan

 

[Dad2three]

When it was not regulated financial panics, depressions and recessions were still happening in the USA..

And when they were regulated they were still happening. So how effective is regulation at preventing any of that?

Weird how conservatives (GOPers) were in charge leading up to 1929, Reagan's S&L crisis (where he ignored the warning of Mr Gray that started in 1984 and would've stopped 90% of the crisis) AND DUBYA HAD HIS HOME OWNERSHIP SOCIETY WHERE HE FOUGHT ALL 50 STATES, TRIPLED THE LEVERAGE RULES AND IGNORED REGULATOR WARNINGS RIGHT?

The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn't work and then they get elected and prove it.
P. J. O'Rourke

 

[Kimura]

What is needed is to reimpose the restrictions of Glass-Steagall on proprietary trading by banks and their affiliates that were repealed by the Gramm-Leach-Bliley Act.

I can't think of a single bank that got in trouble because of proprietary trading.
Glass-Steagall would have prevented JPMorgan from buying Bear Stearns and Bank of America from buying Merrill.

That would have made things worse. So why bring it back?

Glass-Steagall enforced bank diversity, we had investment banks on one side of the firewall and depository institutions on the other. When Glass-Steagall was repealed, the mega-banks started engaging in both types of banking. It's akin to a virus (the mega-banks) infecting the host (the financial system).

nice try but it was always illegal to fix funds between depository and investment bank so it had nothing to do with crisis.

Oy vey....

The largest banks owning and trading risky securities in the first place is what got them into trouble.

We've now seen a huge amount of activity move from banks to the capital markets. And due to a multitude of factors (network effects, high barriers to entry and deregulation which let these large institutions traverse products and global markets) we have capital markets run by a small number of institutions. And these institutions have become too-big-too-fail by the roles deregulation have enabled them to obtain, not just the magnitude of their size.

The financial sector has become so leveraged and concentrated that it's prone to failure. I do agree that simply separating investment and commercial banking is not enough. We have to do do something to stop the insane risk taking by the major players in the capital markets. Network effects in trading are incredibly powerful, and left alone to their own devices, the propensity is for more consolidation being the norm and not the exception. It would take much more government intervention via legislation (barriers between products, Tobin taxes, geographical barriers in markets, etc). It requires more than restructuring of the financial sector, the factors which create concentration need to removed from the equation.

The 800 pound gorilla in the room is derivatives. The big players have OTC derivatives exposure that borders on comical if it wasn't so serious and catastrophic. You need a MASSIVE balance sheet to to make OTC derivatives cost effective. The books are huge and most exposure is hedged in a nutty and pyramid like structure.


[MENTION=2926]Toro[/MENTION]

 

[Dad2three]

“When regulators don’t believe in regulation and don’t get what is going on at the companies they oversee,

right,!! like the VA Post Office Soviet Red Chinese and East German regulators didn't get it either. You don't become a regulator unless you want to succeed and get promoted!A liberal simply lacks the IQ to understand how capitalist regulation works so prefers magical liberal regulation.


Warren Buffett: "There are significant limits to what regulation can accomplish. As a dramatic illustration, take two of the biggest accounting disasters in the past ten years: Freddie Mac and Fannie Mae. We're talking billions and billions of dollars of misstatements at both places".

Now, these are two incredibly important institutions. I mean, they accounted for over 40% of the mortgage flow a few years back. Right now I think they're up to 70%. They're quasi-governmental in nature. So the government set up an organization called OFHEO. I'm not sure what all the letters stand for. [Note to Warren: They stand for Office of Federal Housing Enterprise Oversight.] But if you go to OFHEO's website, you'll find that its purpose was to just watch over these two companies. OFHEO had 200 employees. Their job was simply to look at two companies and say, "Are these guys behaving like they're supposed to?" And of course what happened were two of the greatest accounting misstatements in history while these 200 people had their jobs. It's incredible. I mean, two for two!

“Whatever regulatory changes are made, they will pale in comparison to the change already evident in today’s markets,” he said. “Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime.”-Alan Greenspan

Warren Buffett called Credit Default Swaps financial weapons of mass destruction



Alan Greenspan, has conceded that the global financial crisis has exposed a "mistake" in the free market ideology which guided his 18-year stewardship of US monetary policy.

A long-time cheerleader for deregulation, Greenspan admitted to a congressional committee yesterday that he had been "partially wrong" in his hands-off approach towards the banking industry and that the credit crunch had left him in a state of shocked disbelief. "I have found a flaw," said Greenspan, referring to his economic philosophy. "I don't know how significant or permanent it is. But I have been very distressed by that fact."



..."I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan.


Greenspan - I was wrong about the economy. Sort of | Business | The Guardian

 

[Dad2three]

When it was not regulated financial panics, depressions and recessions were still happening in the USA..

And when they were regulated they were still happening. So how effective is regulation at preventing any of that?

It's NOT regulation per se, but WHO is in charge of the executive branch, SEC, FBI, DOJ, GSE's, etc


Weird how GOPers HATE 'regulations' and were in charge before 1929, Ronnie's S&L and then Dubya's subprime crisis. Just coincidence!

 

[EdwardBaiamonte]

Alan Greenspan, has conceded that the global financial crisis has exposed a "mistake" in the free market ideology which guided his 18-year stewardship of US monetary policy.

dear, you just changed the subject from regulation to Alan. Maybe one of the reasons you're so slow is because you are so disorganized you don' know what your subject is?

Also, Greenspan is as pro capitalist as ever. He just has less faith in its ability to adjust to massive govt interference.

 

[Dad2three]

Alan Greenspan, has conceded that the global financial crisis has exposed a "mistake" in the free market ideology which guided his 18-year stewardship of US monetary policy.

dear, you just changed the subject from regulation to Alan. Maybe one of the reasons you're so slow is because you are so disorganized you don' know what your subject is?

Also, Greenspan is as pro capitalist as ever. He just has less faith in its ability to adjust to massive govt interference.

Weird you don't note I used what Warren Buffet said AND what Greenspan said in response to YOUR quotes of them..lol

Yes, Allen 'Ayn Rand' Greenspan is as big of an ideologue as ever, believing in the myths and fairy tales of laizze affaire...

KINDA THINK THIS WAS PART OF REGULATION THOUGH

"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan.

 

[EdwardBaiamonte]

believing in the myths and fairy tales of laizze affaire...
[/B]

dear why would you call names without providing your reason for say
myths and fairy tales. China just switched to freedom and capitalism and saved 50 million from slow starvation. See why we say slow?

 

[Toddsterpatriot]

No one pushed the banks to make bad loans. The banks lobbied Congress to repeal the restriction of Glass-Steagall on proprietary trading, and the government failed to exercise proper regulatory oversight of the sale of mortgage-backed securities. Prior to Gramm-Leach-Bliley, the banks operated under warehouse loan agreements in which the mortgages were pledged as security, and the banks retained ownership of the pledged mortgages. Once the restrictions on trading were repealed, the warehouse loans were replaced repurchase agreements in which the mortgage-backed securities were sold to the repo counterparty with the bank putting up cash collateral. When the mortgages starting going into default in 2006, this triggered the repo contracts that required the banks to buy back the nonperforming mortgages, leaving the banks with insufficient capital to meet obligations. Ironically, the purpose of the repurchase agreements was to provide liquidity and avoid risk of systemic failure; however it did not work in 2008 because in the hands of the bank a nonperforming mortgage is an illiquid asset. In this regard, there is nothing wrong with subprime loans per se. Virtually every VA and FHA loan is subprime. The same is true with commercial loans guaranteed by the SBA. These loans are not a problem provided that they are made with proper due diligence for collateralization and retained and serviced in house by the bank. The problem was the unregulated wholesale marketing of them as debt securities.

No one pushed the banks to make bad loans.

Baloney. I remember clowns protesting banks here in Chicago for not making enough loans to people with sketchy credit. One of those clowns is the whiner in the White House.

Prior to Gramm-Leach-Bliley, the banks operated under warehouse loan agreements in which the mortgages were pledged as security, and the banks retained ownership of the pledged mortgages.

Banks sold mortgages under Glass Steagall.
MBS existed under Glass Steagall.

 

[Toddsterpatriot]

What is needed is to reimpose the restrictions of Glass-Steagall on proprietary trading by banks and their affiliates that were repealed by the Gramm-Leach-Bliley Act. The problem was the unregulated wholesale marketing of subprime mortgages as debt securities. Allowing banks to deal in these high-risk, secret transactions is against all rules of bank accountability. There has to be a clear dividing line between banking that is insured, and market trading that is not (e.g., Great American Bank vs. Great American, Inc.). Banks should be in the business of lending money and providing financial services, not speculating on the stock market.

What is needed is to reimpose the restrictions of Glass-Steagall on proprietary trading by banks and their affiliates that were repealed by the Gramm-Leach-Bliley Act.

I can't think of a single bank that got in trouble because of proprietary trading.
Glass-Steagall would have prevented JPMorgan from buying Bear Stearns and Bank of America from buying Merrill.

That would have made things worse. So why bring it back?

Glass-Steagall enforced bank diversity, we had investment banks on one side of the firewall and depository institutions on the other. When Glass-Steagall was repealed, the mega-banks started engaging in both types of banking. It's akin to a virus (the mega-banks) infecting the host (the financial system).

Glass-Steagall enforced bank diversity,

It's repeal helped banks to diversify.

When Glass-Steagall was repealed, the mega-banks started engaging in both types of banking.

Which banks got in trouble because of securities trading? Or derivatives?

 

[Toddsterpatriot]

What is needed is to set in place regulatory authority and restrictions that will avoid a future banking crisis. That is the raison d'être of the proposed reenactment of the provisions of Glass-Steagall.

Yes. We need to further empower regulators who can't back up their email.
Regulators who push banks to lend to poor risks.

Regulators and policymakers enabled this process at virtually every turn. Part of the reason they failed to understand the housing bubble was willful ignorance: they bought into the argument that the market would equilibrate itself. In particular, financial actors and regulatory officials both believed that secondary and tertiary markets could effectively control risk through pricing.


http://www.tobinproject.org/sites/tobinproject.org/files/assets/Fligstein_Catalyst of Disaster_0.pdf



“When regulators don’t believe in regulation and don’t get what is going on at the companies they oversee, there can be no major white-collar crime prosecutions,”...“If they don’t understand what we call collective embezzlement, where people are literally looting their own firms, then it’s impossible to bring cases.”

http://www.nytimes.com/2011/04/14/business/14prosecute.html?pagewanted=all

The FBI correctly identified the epidemic of mortgage control fraud at such an early point that the financial crisis could have been averted had the Bush administration acted with even minimal competence.
'
William K. Black: The Two Documents Everyone Should Read to Better Understand the Crisis

Dubya was warned by the FBI of an "epidemic" of mortgage fraud in 2004. He gave them less resources.

FBI saw threat of loan crisis - Los Angeles Times

Shockingly, the FBI clearly makes the case for the need to combat mortgage fraud in 2005, the height of the housing crisis:

Financial Crimes Report to the Public 2005

FBI ? Financial Crimes Report 2005

The Bush Rubber Stamp Congress ignored the obvious and extremely detailed and well reported crime spree by the FBI.

THE BUSH ADMINISTRATION and CONGRESS stripped the White Collar Crime divisions of money and manpower.

http://www.nytimes.com/2008/10/19/washington/19fbi.html?pagewanted=all

Regulators and policymakers enabled this process at virtually every turn.

I know. Bankers wouldn't have made those loans without government insistence.

 

[Toddsterpatriot]

What is needed is to set in place regulatory authority and restrictions that will avoid a future banking crisis. That is the raison d'être of the proposed reenactment of the provisions of Glass-Steagall.

Yes. We need to further empower regulators who can't back up their email.
Regulators who push banks to lend to poor risks.

Loans that were under government regulation did better than private loans, especially if they were regulated by the "Community Reinvestment Act."




Center for Public Integrity reported in 2011, mortgages financed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.

Loans that were under government regulation did better than private loans

Loans that were made to people with good credit did better than those made to people with bad credit.

 

[Dad2three]

believing in the myths and fairy tales of laizze affaire...
[/B]

dear why would you call names without providing your reason for say
myths and fairy tales. China just switched to freedom and capitalism and saved 50 million from slow starvation. See why we say slow?

Keynes wrote "The End of Laissez Faire" in 1926. He was correct then, and his insight remains more valid than any economics that conservative Libertarians propound ad infinitum and ad nauseum. Laissez Faire is nothing more than a childish Christmas wish of no substance; just hope and myth, and smoke and mirrors. Fails every time we try even the tiniest bit.