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Thread: Obama pushes new bank regulation

  1. #1

    Default Obama pushes new bank regulation

    http://news.bbc.co.uk/2/hi/business/8473294.stm

    Obama pushes new bank regulation

    US President Barack Obama has proposed significant new curbs on the activities of banks to try to prevent future financial crises.

    The plans - the most far-reaching yet -include limits to the size of banks and restrictions on riskier trading.

    "Never again will the American taxpayer be held hostage by banks that are too big to fail," Mr Obama said.

    He added he was ready for a "fight" with any banks prepared to lobby against tougher regulations.

    US stocks such as JP Morgan Chase and Bank of America fell sharply as the sweeping planned reforms were announced.

    JP Morgan lost 6.6%, while Bank of America gave up 6.2%.

    Limiting risk taking

    "While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse," Mr Obama said.


    His proposals also include a ban on retail banks from using their own money in investments - known as proprietary trading. Instead, banks would be limited to investing their customers' funds.

    "Banking reforms do not come bigger than those proposed by President Obama," the BBC's business editor Robert Peston said.

    This may mean that some of the US' biggest banks, such as Bank of America and JP Morgan, whose shares were badly hit, may have to be broken up.

    The industry lobby group for banks suggested Mr Obama was trying to return the US to the past.

    "The better answer is to modernise the regulatory framework and not take the industry and the economy back to the 1930s," said the Financial Services Roundtable, an industry group that represents large Wall Street institutions.

    In the UK, shadow chancellor George Osborne said that if the Conservatives won the next general election, they would impose an identical dismantling of UK banks to those suggested by the US president.

    City Minister Lord Myners said the US proposals were "very much in accordance with the direction we have been setting".

    Fighting talk

    Mr Obama's move is his first proposal since Republican Scott Brown's shock victory in Massachusetts to win a Senate seat.

    The Republican victory may make it harder to get Mr Obama's proposals passed in the Senate, as they are more likely to get held up in political wrangling.

    "This is a political effort because of what happened in Massachusetts," said economist Peter Morici of the University of Maryland.

    Banks have also been lobbying against more stringent regulation.

    "If these folks want a fight, it's a fight I'm ready to have," Mr Obama vowed.

    The president dubbed his proposals on limiting bank risk the Volcker rule - after Paul Volcker, one of his economic advisors and a former chairman of the Federal Reserve central bank.

    The moves follow popular anger at financial institutions, who have been paying large bonuses to staff even as they accepted government bail-outs to keep them going.

    Mr Obama's proposals appear to be a return to the principles underlying the Glass-Steagall Act.

    That law - from the 1930s in the aftermath of the Great Depression - separated commercial and investment banking and was eventually abolished in 1999 under President Bill Clinton.

    Mr Clinton's financial secretary at the time, Robert Rubin, previously worked at Goldman Sachs and went on to be an advisor to Citigroup until last year.


    The latest proposals follow a $117bn (£72bn) levy on banks to recoup money US taxpayers spent bailing out the banks.

    The tax will claw back some of the losses from a $700bn taxpayer bail-out of US banks known as the Troubled Asset Relief Program (Tarp).

    It was drawn up in the midst of the financial crisis in 2008, following the collapse of US investment bank Lehman Brothers and rescue of insurance giant American International Group (AIG).
    Throwing this out here to let the more economically proficient people comment on it so I can absorb their wisdom.
    I could have had class. I could have been a contender.
    I could have been somebody. Instead of a bum
    Which is what I am

    I aim at the stars
    But sometimes I hit London

  2. #2

    Default Re: Obama pushes new bank regulation

    I'm not sure I understand all the proposals yet (haven't had time to look that carefully). But this strikes me as odd:

    His proposals also include a ban on retail banks from using their own money in investments - known as proprietary trading. Instead, banks would be limited to investing their customers' funds.
    So, this will make it better because they will invest with your money, instead of their own profits?

  3. #3

    Default Re: Obama pushes new bank regulation

    I found that odd as well.

    edit: I really did, this is not an auto-agree statement
    I could have had class. I could have been a contender.
    I could have been somebody. Instead of a bum
    Which is what I am

    I aim at the stars
    But sometimes I hit London

  4. #4

    Default Re: Obama pushes new bank regulation

    Obama proposed new rules to prevent banks or financial institutions that own banks from owning, investing in or sponsoring a hedge fund or private equity fund.

    The rules would also bar institutions from proprietary trading operations, unrelated to serving customers, for their own profit.

    Proprietary trading refers to a firm making bets on financial markets with its own money, rather than executing a trade for a client.

    These expert trading operations, which can bet on stocks and other financial instruments to rise or fall, have been enormously profitable for the banks but also increase market volatility.

    The White House has blamed the practice for reckless gambling on the U.S. property market that resulted in massive losses that almost destroyed the financial system in 2008 and spurred the taxpayer-backed $700 billion bank bailout to temper the most severe U.S. recession since the 1930s.


    "We have to enact common-sense reforms that will protect American taxpayers and the American economy from future crises,'' Obama told reporters, flanked by his top economic advisers and key lawmakers.

    "In recent years, too many financial firms have put taxpayer money at risk by operating hedge funds and private equity funds and making riskier investments to reap a quick reward,'' he said.
    Seems like it's a way to split investment banks from commercial banks, which makes sense, but why they don't just re-enact the Glass Steagal act, I don't know. There was a similar proposal by McCain-Cantwell, just sitting in the finance committee?

    I also don't know why they don't enforce existing regulation and have SEC and FDIC actually do their damn jobs.


    edit oops I put that in there for the prop trading definition--http://www.cnbc.com/id/34975288

  5. #5

    Default Re: Obama pushes new bank regulation

    The thing is...commercial banks invest with your money and their money too.

  6. #6

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by Dreadnaught
    The thing is...commercial banks invest with your money and their money too.
    But what is Goldman Sachs? An investment bank that became a bank holding company, to enjoy the full protection of the government/tax payer safety net.

    I think they're trying to make them decide what they want to be....but they can't be both.

  7. #7

    Default Re: Obama pushes new bank regulation

    There will not be new financial sector regulation. Republican strategy has been and will continue to be stop everything the democrats try to pass then call them an inept do-nothing congress for the fall election. Or claim "see, we stopped the democrat's communist agenda." Now that the filibuster proof majority, such as it was, is gone, then so is bank regulation.
    The Rules
    Copper- behave toward others to elicit treatment you would like (the manipulative rule)
    Gold- treat others how you would like them to treat you (the self regard rule)
    Platinum - treat others the way they would like to be treated (the PC rule)

  8. #8

    Default Re: Obama pushes new bank regulation

    Glass-Steagall was repealed under Clinton. It doesn't do much good to assign this mess to one party---they're both involved in this mess.

    Just look at this administration seeming to favor big banks and Wall Street, and the Fed connections to Goldman.

  9. #9

    Default Re: Obama pushes new bank regulation

    This isn't an attempt at bank regulation. This is an attempt to play the populist card to get public approval up. Nice to see that Obama has no qualms with sacrificing the long-term health of the economy for a short-term boost to his ratings.
    Hope is the denial of reality

  10. #10

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by Loki
    This isn't an attempt at bank regulation. This is an attempt to play the populist card to get public approval up. Nice to see that Obama has no qualms with sacrificing the long-term health of the economy for a short-term boost to his ratings.
    Only if you see this as a 'timing' issue. They've been working on this for months. It just so happens to come right after the Mass. election.

    I think what's interesting is the WH photo, where Volcker is standing next to Obama, and Geithner is farther out on the wing.

    And I don't see how you can think the long-term health of the economy won't benefit from reining in some of the banks' risky behavior that almost brought us to our knees. After all, we had a lot of growth even when Glass-Steagal was still in place.

  11. #11

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by GGT
    Glass-Steagall was repealed under Clinton. It doesn't do much good to assign this mess to one party---they're both involved in this mess.
    I'm talking about what's going to happen in the next 10 months. I'd be surprised if any significant legislation gets passed at all.

    And to Loki's point, I believe this whole finance regulation thing is timed for votes. The democrats know the voters are really pissed off about the big bonus' and want to see someone get their ass kicked over it. So they start this very public hearing, start talking openly about regulating banks, and so on. The hope is that:

    A. The Republicans cave and vote for it under election year pressure.

    or

    B. The Republicans stick with their plan and don't vote for anything and the voters get pissed at them.

    Personally, I think they'll stick with the plan but I don't expect the Democrats to be able to use it to piss off the public. So we get no legislation this year and we get a new Conservative congress in November.
    The Rules
    Copper- behave toward others to elicit treatment you would like (the manipulative rule)
    Gold- treat others how you would like them to treat you (the self regard rule)
    Platinum - treat others the way they would like to be treated (the PC rule)

  12. #12

    Default Re: Obama pushes new bank regulation

    I think this regulation would be great for America. I think most people would be for it, and if Republican senators get in the way they will be the ones with the black eye on this one.

    Dreadnaught/Ziggy: basically that's saying that banks won't be able to work as investment banks and as savings&lending banks at the same time. An investment bank gives a profit or loss to their shareholders, while a purely savings/lending bank gives a profit or loss to their savers.

    This regulation would completely decouple the two types of risk that banks have now: the loan faults of their customers and investment risk. I think it makes perfect sense.

  13. #13

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by agamemnus
    I think this regulation would be great for America. I think most people would be for it, and if Republican senators get in the way they will be the ones with the black eye on this one.
    I really don't think so. They're extremely good at propaganda. They'll pin "Do Nothing Democratic Congress" or "We Stopped the March To Socialism" on it and do really well in the election. Just look at how they ran circles around the Democrats with health reform - they have the majority of people who stand to benefit most railing against it because they think the President is implementing communism. Admittedly they have powerful allies (aka MONEY $$$) in this one but damn. Crazy shit.
    The Rules
    Copper- behave toward others to elicit treatment you would like (the manipulative rule)
    Gold- treat others how you would like them to treat you (the self regard rule)
    Platinum - treat others the way they would like to be treated (the PC rule)

  14. #14

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by EyeKhan
    I really don't think so. They're extremely good at propaganda. They'll pin "Do Nothing Democratic Congress" or "We Stopped the March To Socialism" on it and do really well in the election. Just look at how they ran circles around the Democrats with health reform - they have the majority of people who stand to benefit most railing against it because they think the President is implementing communism. Admittedly they have powerful allies (aka MONEY $$$) in this one but damn. Crazy shit.
    But... the Democrats' health reform was bad. But, it is arguably true that the Republicans didn't put a whole lot of thought into whether it was bad or not. On the other other hand, the Republicans were not really allowed into crafting the current health reform bill..

    I guess we'll see what happens?

  15. #15

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by agamemnus
    But... the Democrats' health reform was bad.
    Not when you compare it to what we have right now!

    I guess we'll see what happens?
    Unless Democrats suddenly get cut-throat, or Republicans suddenly decide they want to give Obama a win, this legislative session may as well be over.
    The Rules
    Copper- behave toward others to elicit treatment you would like (the manipulative rule)
    Gold- treat others how you would like them to treat you (the self regard rule)
    Platinum - treat others the way they would like to be treated (the PC rule)

  16. #16

    Default Re: Obama pushes new bank regulation

    So? Delay won't make the issue go away. You're doing exactly what the politicians are doing, Choobs. Talking about the process and not the principle.

  17. #17

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by GGT
    So? Delay won't make the issue go away. You're doing exactly what the politicians are doing, Choobs. Talking about the process and not the principle.
    I can talk about the issue of health care reform until I'm blue in the face but that's not going to get it passed this session. The fact is our 'system' of health care is embarrassingly fucked up and getting worse every day. AFAIC that fact's not up for discussion - its settled. Either bill the Democrats have come up with would be a huge improvement over the status quo, despite their many flaws. But that's not going to get a Republican to vote for it. Hell, it almost didn't get all the Democrats to vote for it and they need it passed to have a hope and prayer of keeping a majority next November! But Republicans arn't going to vote for it because they won't deliver that kind of win to the president. Large segments of our 'leadership' have become less concerned about the citizens of this country and than about how they're going to maintain power so they can serve the interests of the MONEY$.
    The Rules
    Copper- behave toward others to elicit treatment you would like (the manipulative rule)
    Gold- treat others how you would like them to treat you (the self regard rule)
    Platinum - treat others the way they would like to be treated (the PC rule)

  18. #18

    Default Re: Obama pushes new bank regulation

    *Checks thread title* Yep, still says bank regulation.

  19. #19

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by GGT
    *Checks thread title* Yep, still says bank regulation.
    The Rules
    Copper- behave toward others to elicit treatment you would like (the manipulative rule)
    Gold- treat others how you would like them to treat you (the self regard rule)
    Platinum - treat others the way they would like to be treated (the PC rule)

  20. #20

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by GGT

    But what is Goldman Sachs? An investment bank that became a bank holding company, to enjoy the full protection of the government/tax payer safety net.

    I think they're trying to make them decide what they want to be....but they can't be both.
    Yes, but they can easily walk away from that? And what exactly was so wrong with banks trading with their own money, as opposed to their clients?

    The entire banking community seems to be scratching its head, shrugging and waiting to oppose whatever inanities Congress is going to throw into this bill.

  21. #21

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by Dreadnaught
    ... And what exactly was so wrong with banks trading with their own money, as opposed to their clients?
    When their money is bet against their clients money, that's a fucking problem. Go ahead, tell me that didn't happen or that it won't happen again. :lol:
    Faith is Hope (see Loki's sig for details)
    If hindsight is 20-20, why is it so often ignored?

  22. #22

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by Dreadnaught

    Yes, but they can easily walk away from that? And what exactly was so wrong with banks trading with their own money, as opposed to their clients?

    The entire banking community seems to be scratching its head, shrugging and waiting to oppose whatever inanities Congress is going to throw into this bill.
    I did not click your links. Mostly because my computer is lame, but also because it says NYT which I read daily. There seems to be the notion that paying back TARP funds plus interest relieves banks from their OMG HELP US plea.

    TARP is a trap, in more ways than one. Only 2% of the trillions, let me repeat that TRILLIONS of US Treasury dollars (aka tax payer money) was used to prop up the big banks and bank holding firms.

    The rest is still unaccounted for, and most people don't have the time or fortitude to track it. TALF is one, but there are many others. Special programs to prop up the cheap borrowing from Treasury, afforded only to Big Banks or VIPs. At the expense of the people who actually OWN the money....US citizens.

    Meanwhile, the actual owners of commercial paper, The People, are getting a paltry 1% interest on their deposit savings. But the speculators and math quants are making the biggest gains in history, to the tune of Billions, using Citizen Joe's money.

    Feel free to tell me how this clusterfuck makes any sense.

  23. #23

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by Being
    When their money is bet against their clients money, that's a **** problem. Go ahead, tell me that didn't happen or that it won't happen again. :lol:
    Trading isn't a zero sum game unless you make distinctly losing bets. No one is trading "against" you unless you're buying pixie dust.

  24. #24

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by Dreadnaught

    Trading isn't a zero sum game unless you make distinctly losing bets. No one is trading "against" you unless you're buying pixie dust.
    So herein we have Pixie Dust provided by Tinkerbell, given to Peter Pan, so he can magically fly around and walk the Pirate Plank.

    Action-fiction entertainment based on real life, that isn't so entertaining.

    You do know what the Peter Pan Principle is, don't you?

  25. #25

    Default Re: Obama pushes new bank regulation

    That Captain Hook was a metaphor for pedophiles?

  26. #26

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by Dreadnaught
    That Captain Hook was a metaphor for pedophiles?
    :lol:

    Thanks, I needed that.

  27. #27

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by Dreadnaught

    Trading isn't a zero sum game unless you make distinctly losing bets. No one is trading "against" you unless you're buying pixie dust.
    When your financial adviser guides you in one direction yet places their own bets in the opposite direction, there is no pixie dust.
    Faith is Hope (see Loki's sig for details)
    If hindsight is 20-20, why is it so often ignored?

  28. #28

    Default Re: Obama pushes new bank regulation

    Is your financial adviser Goldman Sachs? Is your financial adviser also on the prop trade desk of a bank?

  29. #29

    Default Re: Obama pushes new bank regulation

    Quote Originally Posted by Dreadnaught
    Is your financial adviser Goldman Sachs? Is your financial adviser also on the prop trade desk of a bank?
    What the hell does that have to do with anything?

  30. #30

    Default Re: Obama pushes new bank regulation

    It's what he's suggesting is the situation at hand.

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