At the heart of the currently proposed legislation on financial reform (e.g., the Dodd bill and what we are expecting on derivatives from the Senate Agriculture committee), there is a simple premise: Key decisions about exact rules going forward must be made by regulators, not Congress. This is obviously the approach being pushed for capital requirements, but it is also the White House's strong preference for any implementation of the Volcker Rule - first it must be studied by the systemic risk council (or similar body) and only then (potentially) applied.
Treasury insists that Congress is not capable of writing the detailed rules necessary for a complex financial system - only the regulators can do this. This is either a mistake of breathtaking proportions, or an indication that the ideology of unfettered finance continues to reign supreme.
The regulators who got us into our current mess include Ben Bernanke (a Republican from the Greenspan tradition of financial regulation), John Dugan (also a Republican, who makes Bernanke look progressive), and of course Alan Greenspan himself.
If legislation can only empower regulators then, given regulators are only as strong a newly elected president wants them to be, the approach in the Dodd bill simply will not work.
There is still a feasible alternative, based on a different approach - that proposed by Representative Paul Kanjorski (chairman of the Capital Market Subcommittee of the House Financial Services Committee) and adopted as an amendment in the House bill.
This amendment will allow federal regulators to preemptively break up large financial institutions that - for any reason - pose a threat to financial or economic stability in the United States. (Yes, there is a weak version of this idea currently in the Dodd draft, but it is very weak - allowing regulators to act "only as a last resort"; see p.3 of the official bill summary.)
Representative Kanjorski has exactly the right idea, but we need to go a step further - because we cannot at this point reasonably expect regulators to implement properly. Remember, in the Catch-22 type nature of these issues, the regulators can easily say: Implicit in Congress's decision not to mandate a break-up, will infer a congressional intent that no institutions currently meet the criteria.
The reality is this. As documented in 13 Bankers (see Chapter 7), six banks currently fit the Kanjorski criteria - they are, by any definition, "too big to fail." Congress should mandate their break-up rather than leaving this to the judgment of regulators.
We can discuss the best language and exact terms but the broader point is that we need change by statute, not "after further study."
Even if you trust and believe in the new-found regulatory zeal of our current regulators, Senator Dodd and all other Democrats should be concerned that the next president may be a free market Republican who will appoint regulators captured by Wall Street.
The Dodd legacy should be to break the doom loop for future generations. It would be unwise to let that legacy depend on the judgment of regulators to be named later.
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13 Bankers: http://13bankers.com (on sale now)
The Baseline Scenario: http://baselinescenario.com (economics blog)
13 Bankers is the rare book than can actually have an impact on the vital debate happening right now in Washington. READ MORE Why the Fight for Financial Reform Needs to Get Much More Personal When it comes to the fight over financial reform, Democrats are making the same mistake they did with health care: failing to put the effect reform would have on the lives of real Americans front and center. READ MORE Announcing HuffPost's Twitter Editions We are launching Twitter editions for each of our 19 sections -- a mash-up of breaking tweets and HuffPost stories that are attracting interest on Twitter. READ MORE WATCH: Arianna Discusses RNC's "Bondage-Gate" with Joy Behar WATCH: Arianna Spars with Rudy Giuliani Over Rubio, Kerik, and Waterboarding on Morning Joe
The Office of Thrift Supervision gets its authority to regulate, supervise and enforce those violations under the US Code and the Federal Code of Regulations Title 12-Banks.
The Office of Thrift Supervision (OTS) was negligent and malfeasant in their enforecment responsibilities.
One outstanding example would be that of Hamilton vs Ohio Savings Bank (name change to AmTrust Bank) in a class action lawsuit filed in 1985 for manipulation of the calculation of mortgage interest. This was a Truth in Lending violation. This involved some 23,000 of the bank's borrowers.
The bank settled this Lawsuit in 1970 for a cash payment of 14 million dollars. The OTS never in 22 years cited this bank for that Truty in Lending violation.
Had the OTS done its job in supervising and enforcing the 10 groups of violations committed by this bank regarding my mortgage I would have not gone through an unethical foreclosure.
The Office of Thrift Supervision stated in writing in December 16 2006 that they could not help me since there were “No Federal Consumer Banking Regulations.
Simply put- the consumer has no rights to address,contest, object or question the mortgage Banker.
Accordingly Congress who sells its legislative gifts to the wealthy and powerful banks that financially endow them has no interest in protecting the mortgage loan borrower.
Vote in 2010 for change.
Michael LittleBig
Cleveland Ohio
MLB
As for the Kanjorski Amendment ... I think you're probably right, but the REAL solution to what ails the financial sector is Very Simple .... raise margin requirements to 80% of the full value of the asset. Yep, 80% ... just enough for a little steerage and tax planning. All others are just gambling and should be directed to the nearest casino, where 50% of their losses will go towards the pertinent State budget.
It used to be that Congress was our watchdog, and monopolies were broken up routinely. Our congress gets an F for failing us.
If the constitution is silent on removing Congressmen, it means we can.
http://www.propublica.org/feature/all-the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble
There are three simple criteria that must ALL be present within any Regulatory body:
1. Capability
2. Independence from that which is regulated
3. Responsibility and authority to enforce regulations
Congress fails miserably on 1, 2, and 3!
The Federal Reserve fails miserably on 2!
Treasury could do it with the right additional skilled resources. The GAO also needs additional skilled resources to provide independent audit.
However, without new laws to underpin regulations, nobody is doing anything! An economic gun (e.g., CDS) is being held to the head of the entire world.
An example of such an outcome was made perfectly clear in the Bernie Madoff scam where the SEC turned a blind eye to obvious fraud even when they were handed the evidence on a silver platter. Madoff was wired to the SEC, and he and his trusting wealthy investors (who didn't want Madoff investigated) were wired to members of the Senate that had the influence to squelch any investigation. Now these "victims" are still lobbying to made whole by Wall Street and by taxpayers who had nothing to do with their reckless non-diversified investing. Millions of Americans who diversified their investments were scammed by a financial system, that in total was almost as corrupt as Madoff's and Stanfords, but they will see nothing because they aren't connected.
That's what is revealed in www.SecretOfOz.com
You will will love this CD.
Ronk’s Steven Wright Quote Du-Jour:
“If “con” is the opposite of “pro”, then what is the opposite of progress?”