Simon Johnson: Serious Megabank Problems Headed Our Way

The New York Times:

A powerful new voice for financial reform emerged this week - Sarah Bloom Raskin, a governor of the Federal Reserve System. In a speech on Tuesday, she laid out a clear and compelling vision for why the financial system should focus on providing old-fashioned but essential intermediation between savers and borrowers in the nonfinancial sector.

Read the whole story at The New York Times

Comments

[Matt12]

03:12 PM on 07/27/2012

Simon Johnson knows how this whole thing happened and who did it; he's picking up straws of hope in order to show the Feds collusion with the banksters/ fraudsters.

The take over of the US economy by the Brooklyn brilliant set has been an incredible bounty for them, but a calamity for the rest. It may very well be that now that all the money has been siphoned off and the governmetn is beholden to a foreign power that looking at the global landscape, Western Europe in particular, that "they" want to give off the semblance of ethics.

[FogBelter]

11:29 AM on 07/27/2012

-As Ms. Raskin explained in her speech, “I view proprietary trading as an activity of low or no real economic value that should not be part of any banking model that has an implicit government backstop.”-

When you go to a Casino and lose, you don't expect to have your losses refunded as you leave the gaming table. I think that might be Raskin's point here.

[FogBelter]

11:23 AM on 07/27/2012

The "Too Big To Fail" Bank myth ends when a crash causes a quadrillion dollars in derivatives fraud to unwind, and the Central Banks of Earth don't have the resources to backstop the losses. When the economies of nations begin to collapse due to a financial crash the end of "Too Big To Fail" Banks will have arrived.

[Cypher6]

11:55 PM on 07/26/2012

The reforms have been gutted so as to be a non-factor.

Read...

How Wall Street Killed Financial Reform

http://www.rollingstone.com/politics/news/how-wall-street-killed-financial-reform-20120510

[Janzee12000]

11:20 PM on 07/26/2012

The first thing we need to do is to create a 'no escape zone' around NYC and DC. Then when Greece defaults we make sure no one escapes the noose.

[themodernleader]

05:41 PM on 07/26/2012

 Big  Banker's Utopia.  The big banks have virtually unlimited access to the American treasury at virtually zero interest to lend and to speculate with.  Speculation with derivatives that are leveraged at a 30:1 ratio guarantee big money and huge commissions.   Other monies are loaned out to equity groups to purchase American corporations at inflated prices.  American corporations are loaded with huge debt that will cause them to go busted when high interest rates return.  Natural monopolies under the control of such corporations are forcing unconscionable rate increases across the nation.  No more cheap energy, telephone, cable TV. or air plane transportation.
    Allowing big money to destroy our economy is a criminal offense in itself.  This government needs toe be investigated.

[No1Liberal]

05:00 PM on 07/26/2012

Bring it on! May they all go bankrupt!

[Jen Celli]

04:42 PM on 07/26/2012

Until the perp walks start, there is no incentive on Wall Street or with banksters to stop the collusion and fraud. It's too much money to leave on the table. You can't ask a thief to steal only a little when it's all right there in front of them for the taking. The problem is, now we know just how dirty the game is and they'd prefer that we didn't, so they deny, deny, deny. Too bad there isn't anyone that will take them down because our bought and paid for electorate sure doesn't have the will to deal with any of it.

[somewhatodd]

04:37 PM on 07/26/2012

lets look on the bright side. if the wall street mafia crashes the global economy again, our greenhouse gas emmissions will drop.

[Ian McCullough]

03:00 PM on 07/26/2012

Since when is transparency, accountability and security old fashioned?

[Y3rMawm]

05:37 PM on 07/26/2012

Ask Harry Reid. He was for an Audit of the Fed....until he was against it.

http://www.zerohedge.com/news/harry-reid-most-hypocritical-man-world

Perhaps he's just jealous that it wasn't his bill?

[2garen]

01:38 PM on 07/26/2012

The problems have been there and the only reason people don't know about it is the media is run by the one and same banksters.
The system has been so destroyed over the last 12 years , the only way to possibly fix it is go back and start with the investigation of Phil Grahmn and his wife and every congressman and senator that voted for the disembowelment of RICO let alone Glas Stegal. The destruction of every law that was on the books that prevented collusion, price fixing and The in your face pay or play mentality was implemented by the Bush administration and that continues on to this very day, thank you very much.George senior laid the ground work, Clinton ran with it and George junior help implement it.
When politicians have to raise million for a 150,000 job it only stands to reason they have to sell themselves to the highest bidder.Conflict of interest anyone? No one wants to admit this.

[jhNY]

12:54 PM on 07/26/2012

"Sadly, it seems that our regulators are likely to implement a Volcker Rule with loopholes that may still allow mega-banks to gamble excessively."

SADLY? Has political impotence ever been more visible in a sentence on this troubling subject?

[ema123]

01:28 PM on 07/26/2012

Yep just like the article pointed out GS is trying to expand its regular banking, so you can deposit savings and the pay you 1% interest, and they use it to gamble and keep all winnings, they lose you get your principal back from the government!!!!! This is so wrong!!!

[Cypher6]

11:58 PM on 07/26/2012

Great article about how the reforms have been gutted rendering them useless. Banks and the government colluding to steal from the American people.

http://www.rollingstone.com/politics/news/how-wall-street-killed-financial-reform-20120510

[harpo73]

11:24 AM on 07/26/2012

One of my most abiding disspaointments with Obama is he has done NOTHING to bring the banksters under control - NOTHING

[blohrd3]

12:58 PM on 07/26/2012

I don't think it is within his power. Banksters have become immensely rich and powerful. They've bought one of our political parties and placed a large down payment on the other. They have a their own powerful news outlets, Fox, Rush and the like. They have a populous political movement in the Tea Party to champion their interest. I think we the people will have to throw our bodies into the gears of the machinery to bring it to a halt.

[drkazmd65]

01:09 PM on 07/26/2012

I might quibble with you about the 'large down payment' statement,... but only because I view it as more a 'lease to own' situation.

Otherwise - you are a cynic after my own heart.

[the gorn]

01:28 PM on 07/26/2012

Even with the mild rebuke Obama gave, bankers are throwing their wealth behind Romney. Unfortunately, banking's influence in our economy and politics is outsized. Without banking, Obama has to rely on the entertainment industry and gays for campaign funding.

[ema123]

01:30 PM on 07/26/2012

BS, the GOP congress blocks it, Dodd Frank passed yet congress wont implement it, wont fund it and waste time accusing law abiding civil employees of being part of the muslim brotherhood

[DeepThought24]

10:27 AM on 07/26/2012

These banks need to get back into banking, financing American business, rather than Proprietary trading (speculating).

[propackage]

11:43 AM on 07/26/2012

when interest rates are at .25% there is no money in it. Inflation is here but it has to be officially recognized. Then the quandary begins. We need to increase interest to reign in inflation but the debt is at 2 trillion dollars. We can't pay it back now pretty much paying principal only. what will they do when the prime is at 1%. Additionally raising interest adds to borrowing costs of businesses. This would not be the best time to do this. So the free lunch program of govenment has to come to an end. While you would like to help everyone with every problem, the reality is that people have to help themselves, and if they don't want to they can probably afford to loose a little of the pounds that they have amassed sitting on the couch while the rest of us work.

[DeepThought24]

11:50 AM on 07/26/2012

Well said. So far, us old people with savings earning zero are not only paying for this with our taxes but no income from savings. This government manipulation of the economy is only for the well connected and socialists.

[jhNY]

01:02 PM on 07/26/2012

The problem at hand is a failed economic system in its last throes, wherein profit from financial 'services' makes up the lion's share of reported profit deriving out of all economic activity, not lazy people living on the dole-- unless the dole in this case is free money lent at negligible rates to folks who will not plow it back into the traditional economy, but instead, go gambling on commodities, currencies, bonds and swaps. 1% of the population owns 50% of the wealth. There's your problem.

[crankyontheleftcoast]

10:24 AM on 07/26/2012

The two key issues that need to be addressed, to me, are the government backstop that reduces the downside risk for speculators, and the breakdown of the wall between traditional banking (saving and lending) and speculative high-stake investments. Rebuild that wall, and then allow speculators to fail if their investments go bad. There also will need to be enhanced transparency laws so consumers will be able to see how their investments in tools like like IRAs are bundled. I'm sure more changes would be required, but these elements would at least be a start to bringing safety and sanity back to the financial sector.

[ema123]

01:39 PM on 07/26/2012

The biggest issue and solution is putting that wall back in place!! IRAs are transparent you control where the money is invested.