"Don’t Break Up the Banks. They’re Not Our Real Problem." NYT Op-Ed
- Thread starter mjvcaj
- Start date
hardly a credible messenger.
the political power thing alone is more than enough to debunk, as well as the reality that oligopolies behave like monopolies, which again, by itself is enough to debunk.
that said, you can never watchdog enough in a million yrs, if you set things up in a manor where the banks aren't forced to police themselves.
the leverage arguments are lame, and the derivative side of the collapse was way under accounted for.
and as long as they are too big to fail, they will never be forced to control their own behavior, as why would they ever.
too big to fail, over the top over concentration of political and economic power, inevitability of monopolistic practices, lack of accountability, are all by themselves immediate disqualifiers of the author's argument, not to mention the disqualifying impact of all those factors put together.
the political power thing alone is more than enough to debunk, as well as the reality that oligopolies behave like monopolies, which again, by itself is enough to debunk.
that said, you can never watchdog enough in a million yrs, if you set things up in a manor where the banks aren't forced to police themselves.
the leverage arguments are lame, and the derivative side of the collapse was way under accounted for.
and as long as they are too big to fail, they will never be forced to control their own behavior, as why would they ever.
too big to fail, over the top over concentration of political and economic power, inevitability of monopolistic practices, lack of accountability, are all by themselves immediate disqualifiers of the author's argument, not to mention the disqualifying impact of all those factors put together.
The biggest banks definitely need to be broken up for the reasons you have mentioned. Another reason is that when these huge banks were created by takeovers of other large banks, many big cities lost thousands of jobs when their bank was taken over, and shut down. Just one example, Cleveland had the sixth largest bank in the country (National City Bank) which employed several thousand people in Cleveland. With the help of TARP money and huge tax breaks from the Treasury, Pittsburg's PNC bank was enabled to take over National City Bank. The stockholder's got screwed because the bank's stock was at historic lows due to rumors of the bank's troubles (all false) released by the FDIC. So, Cleveland got screwed, and lost several thousand good jobs, millions in taxes, and a great civic asset.
so true, as with all over consolidation of industries, thanks to corp takeover of our legislatures and regulatory agencies. (telecom, air travel, pharma, healthcare, finance, media, etc, etc, etc).
it's also been bad news for consumer and small business loans, which have been diverted from community bank loans to credit cards, at usurious interest rates and fees on said cards, for reasons directly attributable to said monopolistic landscape noted above.
I've missed your silly posts. National City was a shitty bank that made shitty loans and was going to fail. Don't blame PNC for coming in and trimming the fat. If it hadn't, there would be even less jobs.
How is this an oligopoly? You have many alternatives for almost every area of banking.
Your post screams of nothing but rhetoric. You eat up Michael Lewis' and now you are refuting one of the key people he documents just because he doesn't fit your narrative? You cannot have it both ways.
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no idea who Michael Lewis is, (unless he played point guard at IU), nor do i need to.
obviously i have a much greater grasp of the issue, and business in general, as well as much more pure common sense and BS detector than you, but nothing new about that.
perhaps you should link us another BS article on how low wages, no benefits, and horrible job security, are all really in the best interests of the working man.
that would pair nicely with the total BS laugher you linked above.
obviously i have a much greater grasp of the issue, and business in general, as well as much more pure common sense and BS detector than you, but nothing new about that.
perhaps you should link us another BS article on how low wages, no benefits, and horrible job security, are all really in the best interests of the working man.
that would pair nicely with the total BS laugher you linked above.
None of this has anything to do with the original article discussion. But, thanks for getting all bent out of shape over it.
I don't know, that second sentence fragment, or whatever you call those things he types, was actually very funny.
As long as we are in the regulatory environment we are in, and there is another huge push coming down the road to increase regulation significantly, there is no way smaller banks and brokerage firms can survive. You will continue to see merger activity, and the smaller banks and firms gobbled up. The same thing is happening in medicine. Everyone thinks regulation is the answer, and yet what it produces, those same people hate the result.
lmao, wtf are you talking about?
it has everything to do with it, and you know it.
don't start an argument based on a flawed premise you can never credibly defend.
you tried, it blew up in your face.
so as usual, you try attacking the messenger when you can't credibly defend your original stance, and realize you can't.
While the Big Banks are reducing risk...
...and using less leverage as a consequence of lessons learned during the banking crisis, the next threat to the economy and banking may come from a new style of banking. A new style using the internet, little underwriting, and guaranteeing quick loans with less hassle.
Next consider investors turning to the internet and "investments" through the new style of investing. New style investing which include invisible internet clouds and off shore accounts. Very much the same model as the gambling operations using "fantasy sports" are doing to avoid gambling regulators.
...and using less leverage as a consequence of lessons learned during the banking crisis, the next threat to the economy and banking may come from a new style of banking. A new style using the internet, little underwriting, and guaranteeing quick loans with less hassle.
Next consider investors turning to the internet and "investments" through the new style of investing. New style investing which include invisible internet clouds and off shore accounts. Very much the same model as the gambling operations using "fantasy sports" are doing to avoid gambling regulators.
Mike Konczal, no apologist for the financial sector, has a useful explainer on the divergent tacks Clinton and Sanders take:
Here’s a useful way to think about it: Bernie Sanders sees the problem of shadow banking primarily as a problem of major institutions. Tackle the biggest banks, weakening their political power and their ability to engage in questionable financial practices by breaking them up, and that largely solves the problem. Hillary Clinton, however, sees the problem of shadow banking as primarily one of activities. In this case, you need to cast a wider regulatory net, aiming at the specific types of actions financial people are taking rather than the size and strength of specific institutions.
At this point most people would say that this is a “both/and” kind of problem, and there’s no reason we can’t confront both. That’s normally good advice. But the way this debate is evolving tends to limit the degree of overlap that’s possible. Addressing shadow banking as a type of activity means formalizing it within the regulatory infrastructure we have. Approaching it as a problem of the largest institutions tends to limit and silo those activities, which leaves them outside the regulatory system. These approaches point to two different problems and, consequently, two different theories of what must be done.
Ultimately Konczal is closer to Clinton than Sanders:At this point most people would say that this is a “both/and” kind of problem, and there’s no reason we can’t confront both. That’s normally good advice. But the way this debate is evolving tends to limit the degree of overlap that’s possible. Addressing shadow banking as a type of activity means formalizing it within the regulatory infrastructure we have. Approaching it as a problem of the largest institutions tends to limit and silo those activities, which leaves them outside the regulatory system. These approaches point to two different problems and, consequently, two different theories of what must be done.
Sanders’s approach is to block the largest institutions from trying to engage in any types of shadow banking. In addition to breaking up the banks by size, you break them up by activity. This is how I understand the centrality of a 21st century Glass-Steagall to the Sanders plan, which prohibits firms from being able to “invest in a structured or synthetic product,” thus blocking the largest banks from engaging in shadow banking.
There are two problems with this approach. The first is that it’s often difficult to structurally reform banks along these lines. Glass-Steagall, even before its repeal, didn’t prevent banks from lending to mortgage-backed securities and getting involved in the crisis, which is a normal banking function. Either you draw the lines vaguely enough that banks can maneuver around them, or you draw them so tough that it’s difficult for normal banks to do anything that banks do.
The second is more important. These activities will simply migrate elsewhere, often to places where there is less regulatory infrastructure. That’s part of the problem of shadow banking – it exists in places where the backstops in times of emergency are poorly defined or privately provided and prone to collapse.This will happen even more as regulations are tightened on the biggest banks. So if you focus on the largest institution, you need to emphasize the broader regulatory net even more, not less.
Sanders emphasizes breaking up the big banks because that's the approach consistent with his broader theme that concentrated wealth produces concentrated political power that rigs the rules in favor of the wealthy. That's an important point even if critics of Sanders' approach are right that we can't rely on breaking up the biggest banks to keep us safe from another financial crisis.There are two problems with this approach. The first is that it’s often difficult to structurally reform banks along these lines. Glass-Steagall, even before its repeal, didn’t prevent banks from lending to mortgage-backed securities and getting involved in the crisis, which is a normal banking function. Either you draw the lines vaguely enough that banks can maneuver around them, or you draw them so tough that it’s difficult for normal banks to do anything that banks do.
The second is more important. These activities will simply migrate elsewhere, often to places where there is less regulatory infrastructure. That’s part of the problem of shadow banking – it exists in places where the backstops in times of emergency are poorly defined or privately provided and prone to collapse.This will happen even more as regulations are tightened on the biggest banks. So if you focus on the largest institution, you need to emphasize the broader regulatory net even more, not less.
You mean, operations like Lending Club?
Also, don't you find it ironic that the big banks have reduced risk through reducing loans to the riskier borrowers that Bernie is claiming to represent?
this, like so many threads, is an example of
merger activity happens for the simple reasons of eliminating competition, and all the
"synergies" that brings with it, besides the most obvious one of not having to compete on price and service for the customer's business.
CEOs love to throw the word "synergies" around when talking M & A, as benefits above and beyond eliminating a competitor, and how "synergies" from the acquisition help justify the inflated share price to land the deal.
let's break down just what "synergies" is code for. aside from just having to compete less on price and service for the customer.
less management needed, (less jobs, less compensation for remaining jobs).
less staff/labor needed. (less jobs, less compensation for remaining jobs).
less facilities needed. (less jobs, less capitol expense, less maintenance)
less need to compete compensation wise for both management and labor.
less marketing needed.
ability to strong arm the entire supply chain of anything and everything used, human or goods, to both drop what they charge for anything and everything they supply or provide, while at the same time strong arming the entire supply chain of anything and everything, including labor, to increase their level of service provided, even at the lowered rate they are now compensated for.
and on and on, you get the picture.
point being, mergers aren't just to manipulate said parties position as to the relationship between said parties and the customer.
but to equally manipulate the position between said parties, and everyone who has said parties as a customer or employer.
the whole purpose of M & A is to derail market competition on both ends. (talking horizontal, but it works for vertical as well).
every M & A concentrates wealth and power on the M & A ownership end, and lessens it on the management/labor/supply chain/support/infrastructure, end, on a much broader scope than just the obvious and most visible aspect of one company getting a larger share of the business.
REGULATION,
i love how the term is demonized by Wall Street and all those subservient to their ends, including all the politicians and regulators themselves, either totally beholden to them, or in hopes of being so in the future.
let's get one thing straight right now.
without regulation, we wouldn't have only a few very powerful "too big to fail" banks with too much economic and political power as it is.
we would have, ONE BANK AND ONLY ONE BANK of note, not nation wide, but world wide, with dictatorial level economic and political power, who's only interest is maximizing the best interests of it's majority ownership, and nothing else.
everyone please spare me all the crap about "regulation" being bad.
without regulation, our economy ceases to exist as we know it.
regulation isn't the bad guy, the bad guy is anyone and everyone using political and economic power to hijack both the regulatory process and the regulators themselves, for the purpose of anything other than ensuring and maintaining a competitive marketplace/true market competition. (not to confused with "free markets", which is usually the prime enemy of "competitive markets").
regulations can be good, in fact vital, to serve the interests of market competition, or they can be deliberately written so as to have the exact opposite effect, and totally undermine the competitive marketplace concept.
regulators themselves can act to serve the competitive marketplace or greater good, or they can be bought off or act in hopes of being compensated after the fact, and serve the interests of undermining the competitive marketplace or greater good, for personal gain or in hopes of deferred personal gain.
critiquing or pursuing any specific "regulation", is a positive and necessary exercise for the overall best interests of the economy and the citizenry.
but when "regulation" itself, rather than any specific regulation, is demonized, it is usually done,
A), by those trying to undermine the competitive marketplace or environment or something other that is regulated for the common good, in hopes of getting beneficial and needed regulations thrown out with the bath water, along with any admittedly undesirable ones that are usually the ones targeted to the public, without anyone noticing that the positive and needed regulations got thrown out along with the undesirable ones.
B), to quash any needed and positive regulation from ever being enacted or implemented, not on the specific merits of said regulation itself, (which say would be hard to impossible to ever make a compelling case against to the public), but therefore by making an end run around having to ever make that case against said specific regulation itself, and just demonize "regulations" as a whole through a propaganda blitz, and attempt to achieve their goal through shouting over and over, "REGULATIONS ARE BAD BY DEFINITION, THIS IS A REGULATION, THEREFORE IT IS BAD".
a regulation indeed can be bad.
that doesn't mean "regulations" are bad.
regulation is just another word for rule.
regulations/rules are an absolute necessity to maintain our economy, environment, and anything and everything else that requires a set of rules and a body to enforce those rules.
any concentration of power, political or economic, (and they usually go hand in hand), will always work to undermine any and all rules that stand in their way of further concentrating their economic and political power, or of avoiding market competition, and promote, enact, and enforce any and all rules that can further their concentration of wealth and power and stifle any current or future competition.
regulations/rules can work for or against the citizenry and greater good, yet are a necessity if our economy as we know it and the greater good is to be protected and maintained.
just looking at who is for or against any specific rule/regulation, usually is a pretty good indicator of who's interests are served by it.
if someone is against rules/regulations as a whole, that's a giant red flag their agenda is not the greater good or a competitive marketplace.
"the devil is in the details".
merger activity happens for the simple reasons of eliminating competition, and all the
"synergies" that brings with it, besides the most obvious one of not having to compete on price and service for the customer's business.
CEOs love to throw the word "synergies" around when talking M & A, as benefits above and beyond eliminating a competitor, and how "synergies" from the acquisition help justify the inflated share price to land the deal.
let's break down just what "synergies" is code for. aside from just having to compete less on price and service for the customer.
less management needed, (less jobs, less compensation for remaining jobs).
less staff/labor needed. (less jobs, less compensation for remaining jobs).
less facilities needed. (less jobs, less capitol expense, less maintenance)
less need to compete compensation wise for both management and labor.
less marketing needed.
ability to strong arm the entire supply chain of anything and everything used, human or goods, to both drop what they charge for anything and everything they supply or provide, while at the same time strong arming the entire supply chain of anything and everything, including labor, to increase their level of service provided, even at the lowered rate they are now compensated for.
and on and on, you get the picture.
point being, mergers aren't just to manipulate said parties position as to the relationship between said parties and the customer.
but to equally manipulate the position between said parties, and everyone who has said parties as a customer or employer.
the whole purpose of M & A is to derail market competition on both ends. (talking horizontal, but it works for vertical as well).
every M & A concentrates wealth and power on the M & A ownership end, and lessens it on the management/labor/supply chain/support/infrastructure, end, on a much broader scope than just the obvious and most visible aspect of one company getting a larger share of the business.
REGULATION,
i love how the term is demonized by Wall Street and all those subservient to their ends, including all the politicians and regulators themselves, either totally beholden to them, or in hopes of being so in the future.
let's get one thing straight right now.
without regulation, we wouldn't have only a few very powerful "too big to fail" banks with too much economic and political power as it is.
we would have, ONE BANK AND ONLY ONE BANK of note, not nation wide, but world wide, with dictatorial level economic and political power, who's only interest is maximizing the best interests of it's majority ownership, and nothing else.
everyone please spare me all the crap about "regulation" being bad.
without regulation, our economy ceases to exist as we know it.
regulation isn't the bad guy, the bad guy is anyone and everyone using political and economic power to hijack both the regulatory process and the regulators themselves, for the purpose of anything other than ensuring and maintaining a competitive marketplace/true market competition. (not to confused with "free markets", which is usually the prime enemy of "competitive markets").
regulations can be good, in fact vital, to serve the interests of market competition, or they can be deliberately written so as to have the exact opposite effect, and totally undermine the competitive marketplace concept.
regulators themselves can act to serve the competitive marketplace or greater good, or they can be bought off or act in hopes of being compensated after the fact, and serve the interests of undermining the competitive marketplace or greater good, for personal gain or in hopes of deferred personal gain.
critiquing or pursuing any specific "regulation", is a positive and necessary exercise for the overall best interests of the economy and the citizenry.
but when "regulation" itself, rather than any specific regulation, is demonized, it is usually done,
A), by those trying to undermine the competitive marketplace or environment or something other that is regulated for the common good, in hopes of getting beneficial and needed regulations thrown out with the bath water, along with any admittedly undesirable ones that are usually the ones targeted to the public, without anyone noticing that the positive and needed regulations got thrown out along with the undesirable ones.
B), to quash any needed and positive regulation from ever being enacted or implemented, not on the specific merits of said regulation itself, (which say would be hard to impossible to ever make a compelling case against to the public), but therefore by making an end run around having to ever make that case against said specific regulation itself, and just demonize "regulations" as a whole through a propaganda blitz, and attempt to achieve their goal through shouting over and over, "REGULATIONS ARE BAD BY DEFINITION, THIS IS A REGULATION, THEREFORE IT IS BAD".
a regulation indeed can be bad.
that doesn't mean "regulations" are bad.
regulation is just another word for rule.
regulations/rules are an absolute necessity to maintain our economy, environment, and anything and everything else that requires a set of rules and a body to enforce those rules.
any concentration of power, political or economic, (and they usually go hand in hand), will always work to undermine any and all rules that stand in their way of further concentrating their economic and political power, or of avoiding market competition, and promote, enact, and enforce any and all rules that can further their concentration of wealth and power and stifle any current or future competition.
regulations/rules can work for or against the citizenry and greater good, yet are a necessity if our economy as we know it and the greater good is to be protected and maintained.
just looking at who is for or against any specific rule/regulation, usually is a pretty good indicator of who's interests are served by it.
if someone is against rules/regulations as a whole, that's a giant red flag their agenda is not the greater good or a competitive marketplace.
"the devil is in the details".
Lending Club relies on the internet so it meets some of the criteria I mentioned which offers a new model to compete with the Big Banks. However, Lending Club has not ducked into the shadows to avoid oversight and regulation.
Bernie speaks in such broad generalities that I really don't know exactly about whom or what he is referring to most of the time. Just as Daddy Bush had trouble with bar codes when visiting a grocery store in years past, I would wager neither Bernie or Hillary could navigate the internet to secure a loan from the Lending Club.
Is it regulated? If so, is that because its loans are processed via an FDIC-insured bank?
Lending Club was the first peer-to-peer lender to register with the Securities Exchange Commission but doesn't consider itself to be a FDIC-insured bank.
As to risk, a member/borrower must have a FICO score which exceeds 660, so it isn't exactly a place to go for a small business or individual with credit problems.
You're wrong. National City Bank was the nation's sixth largest bank; hardly "shitty" as you call it. Also, you missed the part where it was explained that PNC was only able to take them over because of TARP money and huge tax breaks. That amounted to about a ten billion dollar govt. subsidy, something you probably are against. Also, the stock price was artificially low. Thousands of average people lost a lot of money in the takeover, money they were depending on for their retirement. The NCB CEO walked away with a big payoff of millions, though, so he didn't care.
Drew Carey, is that you? If it wasn't shitty, why did the market value the business at virtually zero? It's loan book was junk and because it made shitty loans, it was therefore, a shitty bank.
And using the 6th largest bank (which by the way, it was the 7th largest bank by assets, not the 6th) makes zero sense considering the failure of WaMu, the largest S&L bank, and Wachovia, which was the fourth largest bank in the country at the time of its failure.
Perhaps you need to reread the story on the failure of National City. None of the banks were interested or willing to acquire it without Treasury support for its shitty loans. And the UST wasn't interested in backstopping the shitty bank without being sold to a bank with more prudent risk management more substantial wherewithal.
http://www.cleveland.com/nationalcity/index.ssf/2009/06/national_city_3.html
I'm certainly not for it, but at least the banks made whole the UST, with profits from interest. If only those deadbeat automakers had done the same.
How was it artificially low? Please explain.
You must have been one of them. Why would you ever hold a single bank stock?
Why not throw in the CFO, CCO, CIO and BOD with him? That anger is warranted.
Interesting perspective, but you do realize that the crappy banks that are struggling are European and Chinese banks, correct? The U.S. regulatory system and structure has no control over those institutions.
If DB were to fail along with one or two of the French banks, CA, BNP, SG, that would obviously be a huge problem for US banks. But, they can't really help the incompetence of the Europeans and Chinese can they?
The effects of austerity policies continue . . . .
As Kashkari says, we need to think of banks in terms of systemic risks. Part of the problem with the potential failures of DB, the French and Chinese banks is that they are so large that they can affect the global economy significantly . . . including being a "huge problem for US banks". That's a good reason to adopt the smaller bank policy here and let it spread elsewhere when the benefits of that policy are made apparent by not having an economy rise and fall with a monopoly or oligopoly in banking.
BTW, the reason the US moved to allow larger banks was so that US banks would be able to compete against huge foreign banks - particularly the dominant Japanese banks at the time - that were not constrained in the way state law regulation constrained the geographic scope - and therefore the size - of US banks at the time. The fact that Japanese banks are no longer the fearsome threat we once considered them, and that European and Chinese banks are foundering, ought to give us more reason, not less, to rethink the current laws allowing huge US banks to exist.
I'm not sure that I subscribe to the notion that austerity was a primary driver of bank problems in the EU or and certainly not China. The ECB was far too passive and timid in regards to QE and, perhaps as importantly, bank restructuring.
I don't really disagree with the rest of the post though, except for the fact that we've had several financial sector problems involving a less concentrated group of banks (S&L). I also don't believe that shrinking variety in revenue streams is every a positive long-term benefit for a Company, regardless of the spin-off / carve-out craze that has occurred in the past decade.
While the European and Chinese banks may be down now, don't you expect other competitors to continue popping up globally? I can imagine strong competitors emerge in India, LatAm, Sinagpore, etc. For all of their flaws, the US banks seem to be crushing their peers, particularly in some of the higher margin businesses (e.g. advisory).
NY Fed Economist explains why Glass-Steagall had minimal impact on financial sector activities and takes a jab at Krugman's 2009 opinion piece.
http://libertystreeteconomics.newyo...ring-before-the-repeal-of-glass-steagall.html
http://libertystreeteconomics.newyo...ring-before-the-repeal-of-glass-steagall.html
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