The End of 'Too Big to Fail'
"Too big to fail" must die. I am preparing legislation to empower federal regulators to rein in and dismantle financial firms that are so large, inter-connected, or risky that their collapse would put at risk the entire American economic system, even if those firms currently appear to be well-capitalized and healthy. Never again should American taxpayers have to bail out high-flying financiers when their risky bets go sour.
The economic meltdown we narrowly averted last year rightfully convinced the American people that we need to re-examine the fundamental structure of our financial system. Wall Street financiers, however, seem to think that -- now that they are basically stable thanks to American tax dollars that kept them afloat during the worst of the crisis -- they can just go back to business as usual. I have news for Wall Street: The world shifted, and it will never return to the way it was before mid-September, 2008.
Our only two living former chairmen of the Federal Reserve Board -- Paul Volcker and Alan Greenspan -- have both indicated they support making sure that our nation's largest financial institutions become smaller so that none would be too big to fail. Even John Reed, who helped engineer the merger that created Citigroup, now recognizes it was a mistake to create such a huge institution. "I would compartmentalize the industry for the same reason you compartmentalize ships," he recently told a Bloomberg reporter. "If you have a leak, the leak doesn't spread and sink the whole vessel."
Capitalism is the most vibrant, flexible, and efficient economic system mankind has yet devised, and it is essential that we limit governmental interference in the distribution of capital as much as possible. At the same time, however, we must forever bear in mind that the purpose of any economic system is to serve the needs of people through the efficient distribution of goods and services. In addition to being inherently risky to systemic collapse, unfettered capitalism can lead to the extreme concentration of resources in the hands of the wealthy few, which can ultimately lead to political instability. Look to the example of the French Revolution to understand how the hungry masses will destroy the institutions of civilization to survive.
I am not suggesting that the American people are anywhere close to a violent revolt, but they have an intuitive queasiness about having a very small number of very huge financial institutions control an enormous amount of this nation's capital. They are still furious about the trillions of tax dollars spent to prop up financial entities which seemingly do nothing to serve their needs; all they know about organizations like Citigroup is that they are charging them outrageous fees on their credit cards.
Americans are not the only ones who feel burned by giant financial firms relying on tax dollars to remain afloat. Our most important economic partner, the European Union, has begun pressuring its largest financial institutions to divest operations as a condition of receiving additional state aid. Approximately 80% of all securities traded in the world emanate from firms based in the U.S. and the EU; the United States and the European Union working in partnership can still wrest some level of control over multi-national financial behemoths before they become so huge and powerful that they forever escape control of any governmental entity. If we do not set reasonable standards for both sides of the Atlantic, the global economy will forever be at risk of future collapse that no government would have the power to prevent.
President Obama has proposed restricting the activities of our largest financial firms and establishing rules for the orderly dissolution of those entities should they begin to fail. I believe we need to go further by preventing institutions from becoming systemically risky in the first place. As we restructure our regulatory framework, I hope that we can find agreement on this goal and focus on the mechanism by which we reach it.
Congressman Paul E. Kanjorski serves as the Chairman of the U.S. House of Representatives Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. He represents the 11th Congressional District of Pennsylvania.
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Exactly what we DO NEED is
legislation to empower federal regulators to rein in and dismantle financial firms that are so large, inter-connected, or risky that their collapse would put at risk the entire American economic system.
The quickie profiteers will play their game until the economy collapses again and again,
while they run off with all the money they can!
This is not just a guess. It's what they've already done!
Spare us The B.S. Congressman and reinstate Glass Steagall...!
If we don't have a President that's with the people, over the corrupt bankers then our days as a democracy are numbered...
"I believe we need to go further by preventing institutions from becoming systemically risky in the first place. As we restructure our regulatory framework, I hope that we can find agreement on this goal and focus on the mechanism by which we reach it."
A pretty sentiment and totally beside the fact that this Congress and administration are prepared to perpetuate the bubble machine in financial services. Chris Dodd and Barney Frank continue to weaken real reform legislation.
Vote them out and hold a national plebiscite to recall all sitting members of both houses of congress.
We need a national plebiscite to PROTEST CORPORATE LOBBYING
that is CORRUPTING GOVERNMENT in America.
Corporate profiteering is "above reproach", but that's what is
drowning the American Dream and has created a nightmare.
"Capitalism is the most vibrant, flexible, and efficient economic system mankind has yet devised, and it is essential that we limit governmental interference in the distribution of capital as much as possible."
No it isn't -- it died when corporations obtained rights of personhood and their hired lobbyists bought the American government. There isn't any "free enterprise" when cartels collude to fix prices by deliberately withholding supply, e.g., the Enron debacle in California. There isn't a "free market" when corporations eliminate competition, e.g. the situation most states face regarding health insurance.
Capitalism destroyed our society when corporations moved our jobs overseas to exploit cheap, unorganized labor. Rep. Paul Kanjorski is one of their shills -- a cheerleader for the Robber Barons who have reduced our people to poverty, fear and desperation.
We need to think outside the box and create a new system whereby there is competition, opportunity, and social responsibility. Capitalism is a sociopath attempting to describe greed as a system and a virtue. It is neither.
That stuff you described is not capitalism. Capitalism is about individuals choosing freely in a lawful marketplace. No part of capitalism legitimizes fraud and aggression.
We've been victimized by a fascist/corporatist system that is totally opposed to a free market and true capitalism. The system we have is all about corrupt use of unjust power and authority to lock in profits for preferred individuals and groups.
So be angry, but be angry at the right thing. You can't blame capitalism for the current economic problems when we haven't had capitalism for decades.
People act like "capitalism" is a recent invention. It is not. where ever there is trade, there is capitalism. The problem facing everyone today is not just the"too big to fail" ridiculousness that came after the repeal of Glass-Steagal but the lack of government oversight that initiated.
Now, we're pretty much seeing the end of America, unless courageous steps are taken. People always said America could never be taken down except from the inside, well, that is what has happened From Reagan to Obama, everyone's at the same party. The end result is America goes hat in hand to China who now owns US.
Why can't Congress just take Glass-Steagal out of the dust bin? It worked fine for 70 years.
Why create new legislation that will most certainly have as many loopholes as swiss cheese, like everything else Congress does these days, while you up there ....HELLO! Try to please everyone and wind up pleasing only the plutocrats.
The "health reform" is a perfect example.
I think America is closer to revolution than you think, sir.
I agree that America is closer to revolution than Kanjorski thinks. Marie Antoinette has been replaced by the international bankers - same greed and not listening to what is going on outside their doors. Same thing that happened in Russia. The Czar's ministers were begging him to enact reforms, but he ignored them to his peril.
Get Geithner out. He is the banking patsy and would bail them out again and again. Same with Summers and Bernanke.
I'm WAY past "intuitive queasiness", myself. End the Federal Reserve. Bring our money back from these conscienceless monsters. If I could fight in the streets for it I would, but I'm old and disabled. Don't let them keep getting away with this!
Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.
Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=worldwide
“We are coming to a point where, eventually, the Government will own nothing, the people will own nothing, and the Bankers will own everything! We are becoming enslaved by the financial institutions of the nation!”
http://www.michaeljournal.org/fedreserve.htm
"Some private Bankers, who call themselves the Federal Reserve, have the legal right to create and control the money to run the country — as they so wish!"
“A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the world — no longer a Government of free opinion no longer a Government by conviction and vote of the majority, but a Government by the opinion and duress of small groups of dominant men.” President Woodrow Wilson --the Federal Reserve Act passed during his Presidency
Do you feel banks that are too big to fail are too big to exist? Bernie Sanders Bank Petition link.
http://sanders.senate.gov/petition/?uid=c53f1aca-5881-403e-928b-a25980cb4e0c
The fundamental problem with TBTF is that our entire economy has morphed from an inventing/developing/manufacturing/exporting one to one in which our GDP is dependent on financial sleights of hand. We maintain our power as the economic center of the Earth only by vauge and dubious accounting tricks. Our economy has been becoming a paper tiger since the very early 90s.
Go ahead and reform the financial sector if you want - but if we don't retake our position as the center of gravity in invention, development and manufacturing of physical goods and services, we're going to crumble and fall.
I think you are correct, and there is something else too. Government is doing backflips to preserve the status quo, moving heaven and earth to deny the economic reality that you brought up, in favor of preserving a fantasy of American exceptionalism. If government would stop meddling, stop propping up failure and concealing the fraud, then the American economy might have a chance to adjust to a more rational basis.
But we can't have that. When speculative real estate bubbles lead to an over production of homes, and an inevitable crash in the housing market, government's only answer is to stimulate more home building and to artificially prop up prices. Under any rational economy those housing prices would drop to a sustainable level where people could buy them, and the home developers would then be getting true data about the demand for housing, instead of the endless happy bubbles being blown by D.C. and Wall Street.
It's all going to end in tears if this keeps up. Economic catastrophe in America will spark world war 3 when our military moves to seize control of the commodities that we can no longer trade for with our worthless dollars.
Rep. Kanjorski: Best Wishes on your legislative efforts in these perilous times. Aside from complications as noted in other comments, TBTF isn't only about size, but about motives; we allow corporations under the premise that they serve us, not just themselves via profits. In these times, the corporations seems only concerned with their own interests, and content to pillage (to the full extent possible!) to further their most ignoble ideas. We certainly need to change that. Thank you for recognizing the need for action.
Go for it, Congressman! We need to get the foundation right and sound, it cost 10 times more to monitor a flawed system like what Obama is doing. All these new Czar, Commission, watch dog cost money, not to mention when the system collapse.
On the other subject, in the prior financial crisis, people saw justice. Michael Milkan, Charles Keating went to jail in S&L, Ken Lay died tangled in the prosecution, Jeff Skillings, Ebbert.... in jail. Even Martha Steward was show case as a Wall Street Greed. Perception is Reality. Do something!
Actually, it has made some of us think we need to re-examine the politicians who enacted the horrible legislation that caused the financial meltdown.
Yes, but the majority of our politicans don't have the real will to end TBTF, bring back Antitrust laws with teeth, a return to separate consumer and investment banking corporations and end speculative banking and financial practices.
Perhaps a real change would occur if we could end the current private campaign financing and spending system we have, to remove the excessive control by corporate and rich America.
You can prepare all the legislation you want but you're not going to end "too big to fail" until you reform campaign finance. You see, "To Big To Fail" isn't an accounting or economic term. So you can't fix it by fixing the numbers associated with a business or industry. "To Big To Fail" means they're big enough to bribe congressmen and/or the president. That's all.
So until you pass legislation to either raise the ethical standards of elected officials or prevent a business from buying influence you're either incompetently or dishonestly deceiving the public.
Exactly so jm!
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