To say that the year-old Dodd-Frank Wall Street Reform and Consumer Protection Act is under attack in Washington is like describing Little Big Horn as an engagement between the cavalry and the Indians. What we are watching looks more and more like a one-sided massacre, and the hordes of financial industry lobbyists and their Republican enablers are taking all the scalps.
I take no pleasure in saying I told you so. But what many of us saw as the fatal flaws in Dodd-Frank are now fully exposed. I repeatedly said in the Senate debates last year that the bill did not include the kind of tough laws that were passed in the 1930s by the last Congress that had to deal with a catastrophic financial meltdown. It was painfully obvious to me and many others that banks that are "too big to fail" are exactly that -- too big. But there was nothing in Dodd-Frank that faced this reality, nothing that put hard statutory limits on the size and complexity of our megabanks. Instead, the bill passed the buck to future regulators.
We are now witnessing the consequences of that decision.
Efforts by U.S. regulators to require megabanks to maintain more capital have been pitifully weak. Internationally, the Basel Committee on Banking Supervision has proposed (Basel III) that banks hold 7% of common capital as a percentage of their risk-weighted assets, with a possible 2-3% surcharge for the megabanks. But Basel III is not binding on individual nations and in any case its new capital requirements would not go fully into effect until 2019.
The banks that were deemed too big to fail in 2008 and had to be saved by the massive Troubled Asset Relief Program and unprecedented help from the Federal Reserve have never been forced to slim down. The blind hand of the market charges the big six banks lower interest rates than smaller banks. The message of the market is clear: the government is still on the hook and cannot allow these banks to fail.
The central solution proposed in Dodd-Frank to avoid future bailouts is resolution authority. But no one has yet come up with a workable resolution plan for massive financial institutions with outlets everywhere. Different countries are promulgating different resolution rules -- the U.S. with a "living will" for the banks and other countries with proposals for special bonds or contingent capital. Three years after it went down, Lehman Brothers is still in bankruptcy, primarily because of creditors in the U. K. and around the world. How long would it take, and what would be the effect on the markets, if an institution the size of $1.8 trillion Citibank (according to National Journal "in 171 countries, with 550 clearance and settlement systems") were to fail? This month, Standard and Poor's said they believe that "systemically important financial institutions" could still receive government support.
The best way to curb the risky activities of megabanks would have been to reinstate a new version of the Glass-Steagall Act. From its enactment in 1933 until it was repealed in 1999, Glass-Steagall required that commercial banks, insured by the FDIC, be separate from investment banks and the risky investments those banks make. Instead, Dodd-Frank includes a much weakened version of a proposal by former Federal Reserve Chairman Paul Volcker requiring banks to separate proprietary trading from commercial activities. Many of us thought at the time that it would be impossible to create a proprietary trading definition that does not allow creative Wall Streeters to proceed with business as usual. Sadly, it looks like we were right.
No one questions the major role derivatives played in the financial meltdown. The Commodity Futures Trading Commission was supposed to come up with regulations on derivatives by July 16. The Commission recently announced that there would be a delay of six months or so. Why? Certainly because the task is complicated, but also because the Commission is dealing with a new Republican House of Representatives that seems dead-set against any kind of regulation at all.
One of the most promising parts of Dodd-Frank was the Consumer Finance Protection Board. Led by Interim Director Elizabeth Warren, the CFPB has been successfully staffed and organized. Now President Obama has nominated Richard Cordray to be its first Director. Unfortunately, Senate Republicans say they will confirm no one until there are "major structural changes" (i.e. severe limits to its ability to protect consumers) in the agency. The CFPB can make no rules without a confirmed Director.
Wall Street is winning the public relations and lobbying fight, but markets are for real. When they fall like they did in 2008, they send an unmistakable message. No amount of Wall Street lobbying money can change that. If we do not heed that message and institute real change, the next meltdown will be even worse.
We have seen the end result of unregulated free enterprise at the News of the World, our banks cannot be next.
http://www.citizen.org/documents/FinanceReregulationFactSheetFINAL.pdf
To Rescue Main Street, We Need to Curb the WTO
"...Starting in the late 1970s, the U.S. government and corporations pushed to redefine “finance” from a service that supports the real economy to a tradable commodity whose flow across borders should be uninhibited. Starting in the late 1980s, they successfully pushed for financial services to be included in “trade” negotiations, including those establishing the World Trade Organization (WTO). “The sector was truly unique in that respect, and there is little doubt within the trade policy community that financial sector support in the European Union and the United States was a determining force in concluding the FSA [WTO Financial Services Agreement]” notes a study posted on the WTO’s own website “Financial Services and the WTO: What Next?”
The WTO rules require deregulation – and lock-in – of financial services that countries “liberalize” under these terms.
[snip]
For instance, the Glass-Steagall Act created a firewall between commercial and investment banks to prevent the former from speculating with consumers’ savings. But the U.S.’ 1997 FSA commitments noted an intent to change Glass-Steagall to conform with WTO rules. The Gramm-Leach-Bliley Act, which did so, passed in 1999 – the year the FSA went into effect...."
http://www.globalexchange.org/campaigns/wto/OpposeWTO.html
Top Reasons to Oppose the WTO
"1. The WTO Is Fundamentally Undemocratic
2. The WTO Will Not Make Us Safer
3. The WTO Tramples Labor and Human Rights
4. The WTO Would Privatize Essential Services
5. The WTO Is Destroying the Environment
6. The WTO is Killing People
7. The WTO is Increasing Inequality
8. The WTO is Increasing Hunger
9. The WTO Hurts Poor, Small Countries in Favor of Rich Powerful Nations
10. The WTO Undermines Local Level Decision-Making and National Sovereignty..."
(the text of each point has been omitted)
Who are the ppl dealing in the derivative market that the people shouldn't know about??
What kind of deals are they about? Money laundering? Why so secret?
What about this Fed situation that is dumping money into the central banks to collect dust?
Why does the Dodd diversion hurt the small local banks? It's all pointing to a purposeful money squeeze that's doing just the opposite of what it's talking pts say its going to do..
Small banks service the economy with loans to small business--get them the money---because small business is being forced to use 17% credit cards for everyday expenses--Is that being done on purpose? Profits for the credit issuer--but slowing job creation.. It looks like its being done on purpose.
"History repeats itself, that's the worst damn thing there is about history", I don't know who said that but it's true, and without rigid controls and oversight we will be doomed to repeat the past because, let's face it, people, by and large, cannot be trusted. They will buy a way around any attempt at slowing their greed, and, at present, they have their pick of people who, for a price, will help them.
As I said, Capitolism will fail,and with it our country, because the very people who are tasked with it's protection, are the ones who, through averice and short sighted self-interest, are insuring its destruction.
why is America fighting minimum wage laws in these countries and nothing is ever said about it?
i'll never look at coke--chiquita--or fruit of the loom the same way ever again..
Outsoucing is promoted to these oppressed areas thru free trade agreements which is just as much a war against the american middle class as it is the poor ppl of those being oppressed.
http://www.globalexchange.org/campaigns/econ101/survey.html
Globalization Survey Reveals U.S. Corporations Prefer Dictatorships
"Democratic countries in the developing sector, such as Poland and South Africa, are losing out in the race for American export markets and American foreign investment. Dictatorships such as China or semidictatorships such as Indonesia are winning.
And the trend is growing. As more of the world's countries adopt democracy, more American businesses appear to prefer dictatorships.
If trade and investment strengthen developing countries, then U.S. businesses may be weakening the very countries they say they most want to help.
These are the conclusions of a report recently released by the New Economy Information Service (NEIS), a think tank set up to gauge the effects of globalization.
"The democratic countries in the developing world are losing ground to more authoritarian countries when it comes to competing for U.S. trade and investment dollars," NEIS said.
"This finding," it said, "raises the question of whether foreign purchasing and investment decisions by U.S. corporations may be inadvertently undermining the chances for survival of fragile democracies."
NEIS compiled the report using U.S. government and World Bank figures on trade and investment. It borrowed political ratings compiled by Freedom House, a human rights organization that ranks countries as "free," "partly free" or "not free" based on the level of their political rights and civil liberties..."
The big banks need fixed--the small banks did nothing wrong---the derivative casino market wasn't touched--and that's because that's where all the black dark shadow banks live---they're laughing at the people who don't understand why the recession isn't over---the demand small banks provide are being shut out to hold up the economy--they'd be better off adding 50 grand to every banking account so the ppl will go out spend the money which now just sitting in central banks collecting dust.. WHY?
the economy is being deprived of demand---which is half of what's needed in every economy..
Society needs to ask the banks why the money isn't being sent to local bamks instead of to the criminals who created the mess in the first place..
http://www.globalresearch.ca/index.php?context=va&aid=25586
http://www.democracynow.org/2011/7/15/alec_exposed_state_legislative_bills_drafted
http://www.prwatch.org/news/2011/07/10883/about-alec-exposed
http://crooksandliars.com/karoli/alec-exposed-and-it-aint-pretty
http://www.alecexposed.org/wiki/About_ALEC_Exposed