Comments on: Financial regulation: The alphabet soup gets much worse

By: Ethan Farber

Ethan Farber — Thu, 18 Jun 2009 12:18:42 +0000

“Why perpetuate these distinctions between federally-chartered banks, state-chartered banks, and credit unions? I have no idea.”There was this thing called the S&L crisis about 20 years ago. Go read up on it. Since then, there has been a distinction between these organizations.”Treasury has decided that no financial institution can be allowed to engage in any nonbanking activities at all — basically there’s no way that Walmart, for instance, or Safeway, will ever get a banking license. That’s bad for consumers.”GM persisted as long as it did and did not correct its underlying difficulties because its banking arm supported its crumbling industrial arm. If this was not the case, the problems with the latter would have been worked out before they became systemic. Having powerful retailers and employers also have power of banker over citizens opens the way to corporate dictatorship. It has happened before, and that was why reforms were undertaken in the first half of the 20th century.”In other words, if you thought the bureaucracy was bad until now, just wait until you see what’s coming down the pike.”Regulation did not lead us down this path to ruin – absence of regulation did. It is because these organizations cannot regulate themselves bureaucracy has been put in place to do it for them. This has been the case after each and every systemic failure for centuries and nations are without exception the better for it, from John Law to the world of Sinclair to FDR to today.

By: Zak

Zak — Thu, 18 Jun 2009 02:31:25 +0000

If the raft of new financial sector regulation is put together it is woefully inadequate to stop another financial melt down.Now let the senate and the lobbyists pull it apart and it will not be worth the paper it is written on!!!After another couple of these boom and bust cycles the US will effectively isolated itself from the world economy because nobody will want to deal with it except China and Russia “their main creditors”. The rest of the world will see the US’s poor regulatory system as to much of a risk and will shun it and justifiably so. It will take time for this to occur but unless change its embraced the out come will in the long term be sustain instability where the few benefit mightily and most of the US citizens suffer under increased tax burdens to pay for what is essentially wanton greed.Hmmmm all sounds every familiar!

By: Eric Dewey

Eric Dewey — Wed, 17 Jun 2009 17:58:56 +0000

the reason why the regulators are so dead-set against banks engaging in non-bank activities is because they don’t want non-bank parent companies to be taking money out of their regulated bank subsidiary. there have been some instances of that already (Spiegel was doing it in the 90′s to the bank I worked at).Keep in mind that their legal authority over a non-bank parent is not as clear as the MSM or blogging community might think…

By: Jeffrey Wernick

Jeffrey Wernick — Wed, 17 Jun 2009 17:51:21 +0000

whenever you get regulators pricing risk, which is what Basel essentially does, the market will always to to arbitrage it if the price is wrong. That is what arbitrageurs do and what is expected of profit-maximizing entities. The problems of banks, like all other heavily regulated, network industries; is that financial disclosures are obscure and the regulatory audits are undisclosed. There should be a greater push towards transparency and disclosure. Not more obscure regulation which will hamper innovation and potentially increase the cost of capital to finance, which, as a consequence, will increase the cost of capital to all. And we need a credible, transparent bankruptcy procedure for all financial institutions.

By: PS

PS — Wed, 17 Jun 2009 17:24:37 +0000

Why on earth is it bad for consumers not to be able to bank at Walmart or Safeway? That’s a minor inconvenience at worst. It sounds more like it’s bad for financial-sector executives — which is very good for consumers, and good for the nation as a whole.

By: joann swanson

joann swanson — Wed, 17 Jun 2009 16:55:43 +0000

Did it say what the new Office of National Insurance is for? What will they be regulating?

By: franko

franko — Wed, 17 Jun 2009 15:18:27 +0000

i swear your decoding of the 85page doc reminded me of pentagon analysts (or TIME Magazine columnists) decoding Kremlin utterances back in 1977 – has it really come to this?will nobody state that the emperor has no clothes?carry on

By: The Beav

The Beav — Wed, 17 Jun 2009 14:45:57 +0000

Good job of framing this in a way that illustrates the impossibility of the concept. Now, staff all of it with left-over Reaganistas who know their collective job is to do nothing or incoming corporation-haters who know their job is to impede, blame and hold endless meetings. Nothing much will happen, but what does happen will be counter-productive. I voted for Obama (rather, against McCain/Palin) but I don’t think he gets it.

By: purplepatriot

purplepatriot — Wed, 17 Jun 2009 14:32:31 +0000

This column is a rather sarcastic over simplification of the administration’s proposals. McClatchy News has a more succinct explanation. It all sounds reasonable given the complexity of the situation and the number of players. Now we’ll have to wait to see what congress does with it.

By: Bob W

Bob W — Wed, 17 Jun 2009 14:23:21 +0000

According to the Washington Post, the new CFPA “… would have a mandate to increase the availability of financial products in lower-income and underserved communities, in part by enforcing the Community Reinvestment Act, which requires banks to make loans everywhere that they collect deposits.”Are you kidding me?!?!? This is what started the sub-prime mess in the first place!! What are they trying to do—start it all over again?!???

By: Imasickofthis

Imasickofthis — Wed, 17 Jun 2009 13:48:22 +0000

I love it the way Wall Street turns around and pretends they had nothing to do with the financial crisis, they were all just innocent bystanders.

By: Kelli K

Kelli K — Wed, 17 Jun 2009 13:00:21 +0000

Thanks, Felix.I will put you in the “no” column on this one. Suspect you’ll have a lot of expert company in the next few days.

By: The Nam

The Nam — Wed, 17 Jun 2009 11:29:05 +0000

Guess this is in keeping with the Federal government’s attempt to help out on unemployment? What would voters think if the administration actually fired unnecessary government employees?

By: Tom Lindmark

Tom Lindmark — Wed, 17 Jun 2009 04:07:50 +0000

Nicely done. With respect to the part that says that non-banking companies cannot get a license to operate a bank, is there any parallel language that says a non-banking company can\’t own a bank? I ask that question because I would like to know if they addressed the issue of private equity buying failed banks from the FDIC. Since you\’ve waded through the whold thing maybe you can save me some time.