Anybody here familiar with the new banking regulations proposed by President Obama? I think anything that produces a stable banking system is good for the country. Heard that banks will be prohibited from proprietary trading which I think is a good idea as proprietary trading is a "zero sum" game. Every dollar of trading profit made by Goldman Sachs is a dollar lost by a dumber bank. The result is "zero value added" for the banking system.
New Banking Regulations
- Thread starter SkyRider
- Start date
Thats not true at all. Just because someone sells something doesn't mean the buyer loses. i.e. if a house is sold 5 times, every buyer and seller can make money. Losses only kick in when the value of the underlying asset deteriorates, as they did in 2008. Then all hell breaks loose.
As for the new proposal, its useless and ill conceived. How coincidental Obama announes it to deflect the Dems shit kicking in Mass. Even Barney Frank said he wouldn't support it unless it was done over a 3-5 year period. Funny Volker was on the podium with Obama today. No sign of Bernanke or Geithner.
LOL
Not property trading, but proprietary trading - which is the bank trading with it's own money (say, buying derivatives or stocks/bonds/securities).
I think even the Treasury Sec. is questioning the validity....
Clearly just a mis-direction play to his bitch-slap in MA.
OTB
Times Article: Barack Obama declares war on Wall Street
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6997741.ece
Barack Obama declared war on Wall Street last night as he unveiled a sweeping series of measures aimed at checking the behaviour of banks and clamping down on risky deals.
The proposals, regarded as the biggest regulatory crackdown on banks since the 1930s, would limit the size of institutions and bar them from the most cavalier trading practices. Mr Obama hopes that the move will reset his flagging presidency.
“We should no longer allow banks to stray too far from their central mission of serving their customers,” he said. “My resolve to reform the system is only strengthened when I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low and cannot refund taxpayers for the bailout. If these folks want a fight, it’s a fight I’m ready to have. Never again will the American taxpayer be held hostage by a bank that is too big to fail.”
Flanked by his economic advisers, he said that Wall Street banks must: halt “proprietary trading”, where banks risk huge sums predicting the outcome of future moves in the price of commodities such as oil; operate more cautiously and have more available funds; not become too large by limiting the amount of ordinary banking business they can undertake.
Related Links
In Britain, the Conservatives and Liberal Democrats pounced on the President’s words, claiming that they had been calling for similar measures for some time. The Treasury said that it would study his moves carefully.
Mr Obama’s comments prompted heavy falls in stock markets on both sides of the Atlantic. The FTSE100 fell 85.70 points to 5335.1 — a fall of 1.6 per cent — while on Wall Street share prices fell by more than 2 per cent at one stage.
Among those with the biggest share price falls on Wall Street were the banks seen as being most wounded by Mr Obama’s proposals. Shares of JPMorgan Chase and Bank of America each fell by more than 6 per cent, while Citigroup shares fell by more than 5 per cent and Goldman Sachs shares by more than 3 per cent.
George Osborne, the Shadow Chancellor, hailed Mr Obama’s intervention as a welcome move. “I have said consistently that we should look at separating retail banking from activities like large-scale proprietary trading — and that this was best done internationally,” he said. “Coming on top of growing agreement on a bank levy, it shows that Conservatives are part of an emerging international consensus on these issues.”
Vince Cable, the Liberal Democrat Shadow Chancellor, said: “Barack Obama understands that the bonus culture in the banking system has got entirely out of hand and must be curbed. The days of excessive risk-taking on the back of taxpayers’ money must stop now. While Obama’s proposals to prevent the worst elements of proprietary trading are welcome, this is merely a halfway house.
“We must break up British banks to ensure that taxpayers are not forced to underwrite unnecessary risks and to make the system more competitive. What is clear is that we would not be acting alone — we are already lagging behind the US.”
The Treasury said that it would consider the President’s proposed reforms but there was no reaction from the Bank of England, whose Governor, Mervyn King, has indicated that he would prefer to see a separation of “casino” banking activities from traditional activities such as deposit-taking and the provision of loans.
Analysts said that the proposals, if enacted unilaterally by the US, could damage Wall Street’s standing as a global financial centre. Ralph Fogel, investment strategist at Fogel Neale Partners in New York, said: “This is going to have a tremendous impact on big-name brokerage firms. If they stop prop trading it will not only dry up liquidity in the market but it will change the whole structure of Wall Street.”
Tim Roberts, fund manager at Cavendish Asset Management, said: “Attacking the heart and soul of Wall Street is not the answer, and will not necessarily prevent other crises in the future. Hindsight is no substitute for foresight. Nor is punitive, retrospective judgment a criteria for assessing future dangers to the system.
“The consumer may have tired of paying for Wall Street’s excess and been angered by the rudest, remorseless return to health that followed. Yet smothering Wall Street will only hamper economic recovery, meaning that access to capital becomes harder for private businesses and consumers, while institutional and private investors battle with an anaesthetised market already highly fragile.”
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6997741.ece
Barack Obama declared war on Wall Street last night as he unveiled a sweeping series of measures aimed at checking the behaviour of banks and clamping down on risky deals.
The proposals, regarded as the biggest regulatory crackdown on banks since the 1930s, would limit the size of institutions and bar them from the most cavalier trading practices. Mr Obama hopes that the move will reset his flagging presidency.
“We should no longer allow banks to stray too far from their central mission of serving their customers,” he said. “My resolve to reform the system is only strengthened when I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low and cannot refund taxpayers for the bailout. If these folks want a fight, it’s a fight I’m ready to have. Never again will the American taxpayer be held hostage by a bank that is too big to fail.”
Flanked by his economic advisers, he said that Wall Street banks must: halt “proprietary trading”, where banks risk huge sums predicting the outcome of future moves in the price of commodities such as oil; operate more cautiously and have more available funds; not become too large by limiting the amount of ordinary banking business they can undertake.
Related Links
In Britain, the Conservatives and Liberal Democrats pounced on the President’s words, claiming that they had been calling for similar measures for some time. The Treasury said that it would study his moves carefully.
Mr Obama’s comments prompted heavy falls in stock markets on both sides of the Atlantic. The FTSE100 fell 85.70 points to 5335.1 — a fall of 1.6 per cent — while on Wall Street share prices fell by more than 2 per cent at one stage.
Among those with the biggest share price falls on Wall Street were the banks seen as being most wounded by Mr Obama’s proposals. Shares of JPMorgan Chase and Bank of America each fell by more than 6 per cent, while Citigroup shares fell by more than 5 per cent and Goldman Sachs shares by more than 3 per cent.
George Osborne, the Shadow Chancellor, hailed Mr Obama’s intervention as a welcome move. “I have said consistently that we should look at separating retail banking from activities like large-scale proprietary trading — and that this was best done internationally,” he said. “Coming on top of growing agreement on a bank levy, it shows that Conservatives are part of an emerging international consensus on these issues.”
Vince Cable, the Liberal Democrat Shadow Chancellor, said: “Barack Obama understands that the bonus culture in the banking system has got entirely out of hand and must be curbed. The days of excessive risk-taking on the back of taxpayers’ money must stop now. While Obama’s proposals to prevent the worst elements of proprietary trading are welcome, this is merely a halfway house.
“We must break up British banks to ensure that taxpayers are not forced to underwrite unnecessary risks and to make the system more competitive. What is clear is that we would not be acting alone — we are already lagging behind the US.”
The Treasury said that it would consider the President’s proposed reforms but there was no reaction from the Bank of England, whose Governor, Mervyn King, has indicated that he would prefer to see a separation of “casino” banking activities from traditional activities such as deposit-taking and the provision of loans.
Analysts said that the proposals, if enacted unilaterally by the US, could damage Wall Street’s standing as a global financial centre. Ralph Fogel, investment strategist at Fogel Neale Partners in New York, said: “This is going to have a tremendous impact on big-name brokerage firms. If they stop prop trading it will not only dry up liquidity in the market but it will change the whole structure of Wall Street.”
Tim Roberts, fund manager at Cavendish Asset Management, said: “Attacking the heart and soul of Wall Street is not the answer, and will not necessarily prevent other crises in the future. Hindsight is no substitute for foresight. Nor is punitive, retrospective judgment a criteria for assessing future dangers to the system.
“The consumer may have tired of paying for Wall Street’s excess and been angered by the rudest, remorseless return to health that followed. Yet smothering Wall Street will only hamper economic recovery, meaning that access to capital becomes harder for private businesses and consumers, while institutional and private investors battle with an anaesthetised market already highly fragile.”
Personally, I would like to see banks run like utilities. Slow, steady, stable , safe, etc. We should leave the roller coast rides to the tech companies.
That's how it USED TO BE until the GOP turned the crooked Banksters loose through their Deregulation!....
LOLThat's how it USED TO BE until the GOP turned the crooked Banksters loose through their Deregulation!....
You'll notice the noted Republican sitting at the table.....
http://images.google.com/imgres?img...steagall&hl=en&client=safari&rls=en&sa=N&um=1
LMAO
OTB
How many times do you need to be told...Clinton overturned Glass Steagall. His regime is who set them loose.That's how it USED TO BE until the GOP turned the crooked Banksters loose through their Deregulation!....
I know. Was only using the house thing as an example. Doesn't really matter what the underlying asset is.
I approve of trying to hold bankers responsible for thie actions. If they want to indulge in casino type gambling, they should be allowed to fail if they mess up. I know why the govt bailed them out in 2008/9 - they were too big to fail, etc., but they shouldn't be too big to fail. If the mess up, they should fail. They shouldn't be allowed to reap profits when they are successful in their bets, and go to taxpayers when they are unsuccessful and lose their shirts. One solution is the banking levy whereby banks must pay into a govt fund to be used to bail them out in future if the mess up again. So future bailouts would coem from bank's own money withheld by government. Of course if they built up their own reserves and didn't do risky trades they wouldn't need government holding their hands.
An issue is here public perception. The general public might not have a problem with sports stars or film stars getting tens of millions a year in pay, but Investment Bankers they don't think deserve this, esp. when the bank fails and is bailed out by taxpayers. The bank's position is that the failure was in 2008 and in 2009 the bankers made good deals and made the bank money, so it should be be back to normal for big bonuses. If one bank isn't allowed to pay out these, they argue, the talent will move to another bank who will pay these sums. Sort of like saying if The Blue Jays suck last season the players should only make $90,000 a year each. Not a bad idea at all lol. However, the team manager would say "If you reduce their pay to $90,000 they will balk and go to other teams who will pay them 6, 7 , 8 figure salaries, so you'll in fact just be wrecking this team, not reforming baseball's pay structure back to the good old days of the 1940's when running around a baseball diamond was paid what it is actually worth lol. The only way to get it to work is if all teams did this so the players had nowhere to go to get more. So it is in banking. Since all banks are not regulated under the control of any one country, there are always those who will pay top dollar for top talent. An international political agreement by all countries to restrict bank pay at banks in their jurisdictions would be needed, and that isn't very feasible.
Obama points out that credit card rates are too high, banks say they need to be high, yet banks make huge profits. True, credit card profits are MASSIVE at banks. There is no way interest rates of 19% on a Visa card are fair to consumers. The banks would make lots of money if credit card interest rates were maxed at 10%. However, banks like making massive profits as it makes their shares go up, their investors get happy, the execs like it as it contributes to their own very big bonuses, etc. Should they be allowed to make profits that compared to say, retail department store chains or hotel chains or airlines, are MASSIVE in comparison? Well, in a capitalist sense, yes. Some will quip that no one is forcing people to borrow on a Visa card at 19% but lets' face it, many do - about 40% of cardholders. Fairness says they shouldn't be forced to pay through the nose for it, but they often are forced to as banks don't say "what is fair" but rather "what can I make off of them to boost my profits without being too undercut by another lender?" The argument could be applied to cell phone providers like Rogers. Should they be allowed to make massive profits when people view their products as essential services? Should the govt say "you guys can still make a tidy profit, outperforming retail chains, if you reduce your prices by say 40%" Consumers will be happy, Rogers will still turn a healthy profit (not MASSIVE, but healthy), etc. In a communist or socialist country we could do that (and many would say it would be great). But is it govt's job to do this? Should competition be allowed to fulfil this role, or the threat of the company failing reign in reckless decisions? Food for thought.
An issue is here public perception. The general public might not have a problem with sports stars or film stars getting tens of millions a year in pay, but Investment Bankers they don't think deserve this, esp. when the bank fails and is bailed out by taxpayers. The bank's position is that the failure was in 2008 and in 2009 the bankers made good deals and made the bank money, so it should be be back to normal for big bonuses. If one bank isn't allowed to pay out these, they argue, the talent will move to another bank who will pay these sums. Sort of like saying if The Blue Jays suck last season the players should only make $90,000 a year each. Not a bad idea at all lol. However, the team manager would say "If you reduce their pay to $90,000 they will balk and go to other teams who will pay them 6, 7 , 8 figure salaries, so you'll in fact just be wrecking this team, not reforming baseball's pay structure back to the good old days of the 1940's when running around a baseball diamond was paid what it is actually worth lol. The only way to get it to work is if all teams did this so the players had nowhere to go to get more. So it is in banking. Since all banks are not regulated under the control of any one country, there are always those who will pay top dollar for top talent. An international political agreement by all countries to restrict bank pay at banks in their jurisdictions would be needed, and that isn't very feasible.
Obama points out that credit card rates are too high, banks say they need to be high, yet banks make huge profits. True, credit card profits are MASSIVE at banks. There is no way interest rates of 19% on a Visa card are fair to consumers. The banks would make lots of money if credit card interest rates were maxed at 10%. However, banks like making massive profits as it makes their shares go up, their investors get happy, the execs like it as it contributes to their own very big bonuses, etc. Should they be allowed to make profits that compared to say, retail department store chains or hotel chains or airlines, are MASSIVE in comparison? Well, in a capitalist sense, yes. Some will quip that no one is forcing people to borrow on a Visa card at 19% but lets' face it, many do - about 40% of cardholders. Fairness says they shouldn't be forced to pay through the nose for it, but they often are forced to as banks don't say "what is fair" but rather "what can I make off of them to boost my profits without being too undercut by another lender?" The argument could be applied to cell phone providers like Rogers. Should they be allowed to make massive profits when people view their products as essential services? Should the govt say "you guys can still make a tidy profit, outperforming retail chains, if you reduce your prices by say 40%" Consumers will be happy, Rogers will still turn a healthy profit (not MASSIVE, but healthy), etc. In a communist or socialist country we could do that (and many would say it would be great). But is it govt's job to do this? Should competition be allowed to fulfil this role, or the threat of the company failing reign in reckless decisions? Food for thought.
And HOW MANY times do you GOPers have to be reminded the GOP was behind all this Deregulation since brainless Ronnie napped in the White House....
Wrong again my myopic friend......
The GOP has ALWAYS BEEN pushing for Deregulation for decades.
The Crooked Bankster Weasels they grovel for demanded it!....
Much easier to build their Ponzi Schemes.....
Repealing the Glass l Steagal act set the stage for all the abusses that have followed. If the act was in place most of what happened would ahve been at least slowed down if not stopped. The Clinton administration repealled the act in theory to allow banks to give out mortgages to people who were not at teh top of the list of credit worthy customer lists. Acorn and other groups either initiated or jumped on the bandwagon to force banks to make loans that were less than 100% shall we say. THis led to " interesting mortgage vehicles" zero down, no principle payments low payments for five years balloon payments all sorts of things done by really inventive people who had no resposiibility for what they did.
The ability to bundle these mortgages up and have the federal govt through Fannie MAy and Freddy MAc be responsible for them simply removed any aspect of responsibility from the issuers. The mortgage giants then moved these things all over the world as top class investments. Investments in what is a question I will leave to others. The availabliity of easy cheap money led to people using homes as ATMS need money hit the bank refinance the house the value went up yesterday. Unfortunatly the underling value of the asset was what ever somebody else would pay for it. When the economy slowed down and jobs became scarce, the problems began, balloon payments , smaller or non existant paychecks banks suddenly saying NO to refinancing all the fun stuff.
Bring on a world wide financial crisis, brought to you by your friendly American banking system , let nobody interfere with our right to make billions and screw everybody else.
Stiffer regulations are a good thing . A little regulation or a lot of regulation given the stunts some of these idiots pulled would not be out of line. Given that all of them are currently screaming that it is UNAMERICAN to regulate capitalism perhaps the rest of the world should say fine, do as you please but you will not operate outside of the USA without regulations. Do as you will in the states but you don't get to destroy the rest of us.
And just so I am not accused of anyhting the same rules should apply everybody, if you want to play internationally there will be rules.
The problem of course is just what the rules should be
The ability to bundle these mortgages up and have the federal govt through Fannie MAy and Freddy MAc be responsible for them simply removed any aspect of responsibility from the issuers. The mortgage giants then moved these things all over the world as top class investments. Investments in what is a question I will leave to others. The availabliity of easy cheap money led to people using homes as ATMS need money hit the bank refinance the house the value went up yesterday. Unfortunatly the underling value of the asset was what ever somebody else would pay for it. When the economy slowed down and jobs became scarce, the problems began, balloon payments , smaller or non existant paychecks banks suddenly saying NO to refinancing all the fun stuff.
Bring on a world wide financial crisis, brought to you by your friendly American banking system , let nobody interfere with our right to make billions and screw everybody else.
Stiffer regulations are a good thing . A little regulation or a lot of regulation given the stunts some of these idiots pulled would not be out of line. Given that all of them are currently screaming that it is UNAMERICAN to regulate capitalism perhaps the rest of the world should say fine, do as you please but you will not operate outside of the USA without regulations. Do as you will in the states but you don't get to destroy the rest of us.
And just so I am not accused of anyhting the same rules should apply everybody, if you want to play internationally there will be rules.
The problem of course is just what the rules should be
If you want to know what happened read: http://www.bankstocks.com/ArticleViewer.aspx?ArticleID=6024&ArticleTypeID=2
This is a very good site for keeping track of the FSI industry - and they are by no means cheerleaders for Wall Street.....
OTB
This is a very good site for keeping track of the FSI industry - and they are by no means cheerleaders for Wall Street.....
OTB
Woodpeker is resistant to many things other than facts
ie. common sense, the ability to look objectively at an issue and applying logic before forming an opinion.
WoodPecker is a moron who does not understand the issues and the ramifications of the proposed changes.
He has predetermined that banks are evil & any change that regulates them must be good.
I do not read his useless drivel anymore as he is on ignore, however his response is sure to be short on fact and reason, but filled with rhetoric and probably insults (usually referring to his fantasy - man on man oral sex)
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The biggest or one of the biggest culprits has to be AIG. They took fees for CDO's that they knew could never be honoured if the "s--t hit the fan".
Spot on, and probably the only org where the US government won't get it's money back......
OTB
This coming from one of the biggest corporate lap-puppies here!
Hard to tell at times who is the bigger corporate lickspittle here bottie or Frenchie.
They both never met a crooked Bankster they couldn't wait to service under their desk.....
The problem is that Obama believes in capitalism for all not just the poor and middle class. He has said that he will not all ow banks to be come so big and to get into businesses that are so far afield from banking that they could once gain hold the American people and the world for that matter for hostage. I know that is a crazy notion to some, making banks, which depend on government guarantees etc, have to actually make money from banking and not from proprietary trading etc. Crazy.
