Financial reform, as it is called, shouldn't be all that complicated. Break up the banks deemed "too big to fail," since that offends any possibility of market discipline and puts taxpayers on the hook for future bailouts. Crack down on gambling with other peoples' money in the financial casino. Give consumers a cop on the beat to protect them from the cons and frauds. Tax the big guys to get our money back. Outlaw compensation schemes that give million dollar incentives to make risky bets.
But, of course, finance is its own world, with its own patois, ethos and interests. And banks and regulators have a strong interest in making this stuff complicated. So the debate turns to the intricacies of trading derivatives on an exchange, resolution authority, credit default swaps, policing "systemic risk." For most Americans, the eyes glaze over, and they reach for the remote. That leaves legislators free to deal with the banking lobby and the regulators mobilized to protect their interests and turf. With the White House still focused on passing health care, and Finance Committee Chair Senator Dodd replaying a poor man's version of the bipartisan farce that Max Baucus staged on health care, wasting time in backrooms trying to seduce a couple of reluctant Republicans, it is no surprise that reform isn't going so well.
How bad is it? The independent Consumer Financial Protection Agency is about to be buried in the Federal Reserve. The only talk of banning naked credit default swaps is in Europe. The market oxymoron -- banks that are too big to fail -- seems about to be embraced in law. I could go on, but again, I can feel the eyes begin to droop.
So how bad is it? All you really need to know was provided by a lead article in Sunday's Washington Post business page, entitled "Financial reform bill likely to lose measure to protect Main Street investors."
Tomoeh Murakami Tse reports that when the new bill's language is released (reportedly sometime this week), it is likely to drop the simple "requirement for stock brokers and insurance agents to act in the best interests of their clients."
This common sense statement passed the House without mention. It was included in Chairman Dodd's original draft language. Then the lobbyists went to work and apparently have convinced the Senators that requiring an agent to act in the best interests of his or her client is, well, complicated. So Tse reports that instead of a requirement, the new draft will direct the Securities and Exchange Commission to study the varying rules that govern brokers and investment advisors.
Consider this a tribute to Goldman Sachs. You remember Lloyd Blankfein told the Financial Crisis Inquiry Commission that it was just business as usual for Goldman to create and peddle packages of mortgage-backed securities, lobby for them to be rated triple AAA, and then make independent bets that the securities would go bust. (Astonished Commission Chair Phil Angelides responded: "It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.")
So at the retail level, your broker -- who usually works for a bank or investment house -- will have the banks' interests in mind, not yours. He or she may be encouraged to recommend that you buy the toxic junk in the basement that the bank is trying to get rid of. So it would be complicated -- worth study, surely -- to require your broker to have your best interests in mind.
Yeah, it's come to that. Reforms prospects are bleak, but not entirely hopeless. One small thing constrains the Senators, outside of their individual own sense of decency (which is a dependent variable).
The public is furious at the bank ripoffs and bailouts. Across the spectrum, from conservative to liberal, Democrat, Independent and Republican, vast majorities want a crack down on the banks. Folks are looking for tumbrels and guillotines, not SEC studies.
So the bank lobby has millions of dollars and legions of high dollar lobbyists, including literally dozens of retired legislators, who can buttonhole their former colleagues, as Rep. Massa reveals, in the showers of the House gym. (Giving new meaning to whole notion of naked credit default swaps).
The reform coalition -- anchored by Americans for Financial Reform -- has 200 organizations, and mobilizes citizens, not money. But even obstructionist Republicans (who provided not one vote for financial reform in the House) and corporate Democrats are nervous about appearing to be too deep in the pocket of the banks.
So, folks, you don't have to have a MBA, or be a sophisticated investor to make a difference. You don't have to learn what a credit default swap is. All you've got to use is your common sense.
If the Senate isn't prepared to give consumers an independent cop on the beat, if it isn't prepared to break up banks that taxpayers will have to bail out, if it isn't even willing to require that your stock broker act in your best interests -- then raise bloody hell. Take down names and mobilize.
Check out Americans for Financial Reform Come to the Campaign for America's Future,. We'll track the debate and provide a chart on who stands with you and who stands with the banks, with links on how to call them.
We're not likely to get sufficient reform this year. But, if a few legislators pay the penalty for taking the bank lobby money and voting the bank lobby program -- things may get a lot simpler next year.
Follow Robert L. Borosage on Twitter: www.twitter.com/borosage
Matthew Bishop and Michael Green: The Road From Ruin: Wake Up, You Can Fix This Financial Mess
Obama called for innovation and that's what it will take to fix this broken system, so where are the big new ideas about building a financial sector that can support real job and wealth creation rather than the phantom growth?
If only financial reform really were funny
Corker: Reform Plan 'Is Very Imminent'
Odd, that if you applied this rational to our everyday society, you would have to also argue that we should do away with all laws and policemen. After all, society from which all of these noble businessmen and financial expert are drawn, should than be perfect. But in the end, these same conservative are the strongest proponents of very restrictive laws and police that we have. Somehow, society that can produce drug dealers, murders, and other felons, somehow selects only the most noble creatures to go into business. While society as a whole needs strong police and laws, business does not. Very, strange dichotomy.
If you had a lot of money to invest, would you go to Las Vegas and gamble with that money -- and consider that a good investment?
Well, realize that the stock market, and the products offered by financial planners are little more than playing the slots at Vegas. For years it has been obvious that housing prices bore no relation to reality. It has been equally apparent that banks have engaged in reckless lending.. One merely had to look through one's daily mail, with its flood of credit card offers, to know that banks were not engaging in careful lending.
What happened is little different than if the banksters set up a corporation, "Bad Loans, Inc." whose whole business plan was to make loans to people who could not repay the money. Then they resold those bad loans as securities. "But the amount we receive in interest and penalties makes up for the fact the borrower cannot repay the loan," the Bankster tells you. What's wrong with this picture?
If Congress will not drain the swamp, people will not want to invest in American securities. Who wants to purchase a AAA rated mortgage backed security today? After losing trillions, we now know the scam. What foreign investor or pension fund wants to play this game again?
Regulation does not protect individuals as much as it protects the marketplace itself.
Banks need to be nationalized and regulated with a very heavy hand. There is no other way out of this situation. The current lot of banking execs need to be rounded up and spend jail time in Guantanamo, or taken out to the back alley and shot. They have done more to terrorize Americans by the financial devastation they have left behind, than any Al Qaeda terrorsts ever did to our country. And, bankers do it on a personal level to every American, by foreclosing on their homes, not giving them anything on savings accounts, charging obscene interests rates on loans, socking you with all sorts of penalties and petty fees, hooking you up with phony investment schemes, and playing the market with your own money. They are predatory in every sense of the word.
raise hell?
Not necessary. Just follow the law and send the traitors right where they belong.
And don't forget the traitors of the last government wither. THEY even massacred 2 million innocents for the profit of those parasites, so treason for them would be an understatement.
The families have nothing to do witht he crimes of the parasites except where they themselves became traitors.
Revenge is the worst possible motivator. Look at 9/11. We were screaming for revenge so loudly that the blatant lies of Bush and the other criminals were lost just as the destruction of evidence, the fake videos, the non existen planes, the impossible phone calls from planes, the scientific evidence of residu of thermate in the molten steel,....
AND of course the fact that the FBI repeatedly told us Bin Laden DID NOT DO IT.
Only because we were - and still are - raving for revenge could the ones who did it direct our hatred towards innocents whos oil they wanted.
what people really should do NOW, is use their power to rise up and demand rules to control the banks, and keep them honest. Of course we need that, look at the crisis we just went through , and had to bail out...and if left to their own 'freedom" they, the banks, will do this again , and we as people will always pay the price for it , in lost homes , lost revenues, lost jobs, lost investments. while they continue to collect huge bonusses. over our suffering.
Same with insurance companies and all corporations...rules are necessary to keep them honest.
There is absolutely no argument against this!
This should be a bipartisan effort...and whoever seeks to favor the banks, or corps, beware of them!!! they should be exposed as corrupt politicians, taking money from the banks in order that they can screw the people they are paid and supposed to be serving. There is nothing complicated about this notion and everyone should agree, Our politicians and news media are such prostitutes for the big corps that , not even this is easy to do anymore and will need some smart heroes to lead us through this.Where are our heroes? Come forward as we really need you now! Barney Frank....etc...
'r
http://www.cato.org/pubs/policy_report/v32n1/cpr32n1-1.html
It talks about the concept of moral hazard.
"Too Big to Fail" is Anti Market & Anti Capitalistic. In a Ideal Capitalistic System & America is About as Close to that as anyone else in the World there wouldn't be Company's that are "Too Big to Fail". So I think an Ideal Financial Reform Bill would Require Company's that to sell off some of their Assets once they Operate a certain % of their Market for Market Value. That alone would keep them from being "Too Big to Fail" because there would be Competition for them if they did Fail like there's Competition for just about any other Company when they Fail. Also Requiring every Company in America thats Worth lets say 50B$ to use as an Example to Pay for Bankruptcy Insurance so if they go Under, an Insurance Company would Decide if these Company's are Worth Saving or not & Under what Circumstances in the Future not Congress or the Administration & the Tax Payers wouldn't get Stuck with the Bill or put on the National Debt Card. Their Insurance Premiums would be Based on their Net Worth & Risk. Put a Tax on the Company's that Benefited well from TARP & used that Money to Pay their CEO's Bonus's & put that Money Towards Debt Reduction & set up an Independent Financial Regulator Paid for by the Company's their Regulating.
That how my Financial Reform Bill would look.
2. No bundling of mortgages …
3. The bank that wants to sell off their mortgage, on a property, must guarantee the mortgage and provide appropriate links as to the origination of the loan and each person who purchases the loan.
4. The banks have to set up a “Mortgage Reserve†equal to 50 percent of the value of the loan or debt …
5. All loan brokers must be licensed by the Federal Banking system that sets up the lending agencies …
6. Get rid of Fannie Mae and Freddie Mac … only need one agency to guarantee loans … remember each bank is now going to guarantee the loans … or else Fannie Mae and Freddie Mac must be required to inform the public about any financial difficulties that they may be having. In the event that there is some sort of financial collapse within either of these companies, U.S. taxpayers must be informed could be held responsible for hundreds of billions of dollars in outstanding debts.
7. An aside …. Companies that make investment grade ratings must never be paid by the companies they are rating ….
The weak point that will haunt the housing market is going to be the lack of good, high quality jobs. As America moved to being a service society and away from manufacturing, we now have a plethora of low paying, short term employment jobs. Holding one of these type jobs is not going to get you a mortgage.
Mortgages fail for a lot of reasons, but I think high on the priority list is that of loss of employment and subsequent loss of income. Foreclosures are now rising again in the U.S. and most due to job loss with income reduction (e.g., going from full time employment to part time). The mortgages given out in the past 10 years or so, cannot be met with the current job situation.
8. Go after the leaders of Moodys, Standard and Poors, Fitch.
9. Moody’s, Standard and Poors, and Fitch should be held responsible for the bond ratings that were factious. They should pay severe penalties for their improper evaluations … the leaders at the time should be thrown in jail … after a somewhat fair trial …
10. Why was congress not informed when the Administration … treasury… the Fed … Mr. Barnake … and other US Government agencies like the SEC lead by Mr. Cox … felt something was not functioning correctly … these Governmental Departments, had the fiduciary responsibility to go to congress and tell all and ask for corrective legislation … all the high-paying officials were negligent ….
WPPS was raising money to build nuclear reactors for power generation and was plagued by cost overruns due to a myriad of design changes demanded by the then Atomic Energy Commission or AEC. A local TV station did an economic analysis of the WPPS project about 1-1/2 years prior to bankruptcy and found it impossible for the system to ever make money or even break even. Now if a local TV station can figure this out, then why couldn't Standard & Poors???
12. Please stop the double speak … To Big To Fail … is totally outrageous … what you really mean is The company is To Big to Not Bail Out … or … if we don’t bail out this stupid company we will cause a major employment failure around the country … and maybe around the world … no more double speak …
13. The Madoff type scandals must be stopped before they occur … what were the missing controls??
14. If a bank accepts money from the Government through the Federal Reserve or Treasury, than that is similar to FDIC taking over a bank. Hence, the government agency making the loan can set the restrictions, along with removal of executive of the bank.
15. Must remove the Gramm-Leach-Bliley legislation created under the Clinton Administration that permitted the tearing down of the wall, built by Glass-Steagall, separating banks that did risky investing from those that did basic lending. (The mingling of those two helped create a cascade of bank failures during the Depression.) Thus were born Citigroup, Bank of America and J. P. Morgan Chase, behemoths that owned bank branches, bought and sold stocks and shepherded corporate mergers.
17. Remove the extreme effects of the Reagan and Clinton administration and the congressional legislation to deregulate Banks and Financial Institutions.
18. The Federal Reserve must come to congress to set up appropriate legislation aimed at preventing conflicts of interest when some directors of its 12 regional banks own shares of bank holding companies supervised by the Fed.
19. When the TARP money is returned, at least 50% should be taken out of the Bailout system that was set up. Note: legislation may have to be set up to modify the use of returned TARP money.
20. The credit card system has to set up so there are no bailouts for banks issuing credit cards.
21. The United States Government … “We the People†…will not forgive any of the debt owned by banks that accepted Bailout money or the automobile companies accepting Bailout money.
23. For all you Constitutional Originalist … regulation of US commerce are one of the purposes of Government …Check out Article I Section 8. Article I also defines the other roles of Government … you should re-read the Constitution, especially Article 1!!
24. Think about combining the Federal Reserve, FDIC, Treasury under one umbrella to regulate the Banking System. That will force the various agencies to communicate so that we will prevent the debacle of the Banking and Financial system.
25. Establish appropriate Regulations developed for the International financial system by the G-20.
I have suggested, on the INTERNET, we have a vote at the end of March. The first seven issues you can comment on, the next would be divided by state and all federal politicians where you can yea or nay them then the third would be by the state politicians being allowed, with the click of a button to explain their views on issues and you again voting on agreement or cut them from the public money mill.
A pre-vote to channel the vote in June. A way to allow you and them to express your ideas and a vote to see where we the people actually stand. One day, twenty four hours, not with the many checks and balances a real little choice vote gives you but an expression of America that day.
I need your help to accomplish this....
Casey