Opinion

Felix Salmon

Counterparties

By Felix Salmon
March 14, 2011

Transcript of Warren Buffett’s Interview With the FCIC — Santangel’s Review

State Department’s P.J. Crowley stepping down — CNN

$60k fine for blogger who reported truth — Boing Boing

Japan Earthquake: before and after — ABC

A great post on the Economics of Bike Lanes — Olaf Storbeck

Knight donates nearly $1 million for a news-tailored CMS — Nieman Lab

Some great news on the Gaby Giffords front — Politico

Banks and merchants are trying to turn the debit interchange debate into a consumer issue, which it really isn’t — Fee Fighters

Comments
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The correct link for the Olaf Storbeck post on bike lanes is: http://olafstorbeck.com/2011/03/11/the-e conomics-of-bike-lanes-%E2%80%93-how-can -john-cassidy-get-it-so-wrong/

Posted by hutchie2 | Report as abusive
 

The debit card fee issue is interesting.

The banks want to be able to charge what they want, just as if they were working in a free-market, capitalist system. Government regulators setting fees is very similar to a heavily-regulated utility.

On the other hand, they fully expect to be treated as privileged TBTF institutions, able to uniquely tap into very low interest funds at the Fed and Treasury windows. In a crisis, they expect to have their incredibly risky behavior covered by the government so that they can survive intact, without bond-holder, share-holder or employee losses.

So we have a conundrum. They are either a regulated utility or a free-wheeling hedge fund. Being both is unacceptable from a societal standpoint.

I say we let them choose.

They can be either: TBTF status with utility-like regulation, including setting compensation limits and fees; or they can be free-wheeling with the ability to fail in a crisis.

This latter category would need to come with some required limits on either size or leverage ratios to avoid massive economic and financial system damage. So the entrepreneurial spirits within the organization could haive off separate units as it gets bigger, so that they can continue to make large profits and reap the rewards without endangering the system.

Posted by ErnieD | Report as abusive
 

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