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Obama's New Bank Regulations
These proposed regulations sounded more forceful when they first leaked last night...
I'm having a hard time discerning the point of these new regulations. While re-instituting Glass-Steagall would be of dubious worth, what's the point of half-assing it if you're going to force a separation between commercial and investment banking?
Even more puzzling is the attempt to limit bank size that won't "force existing financial firms to downsize". The financial industry is more centralized and dominated by large firms than ever in the wake of the financial crisis; how exactly are you going to solve the problem of having banks that are too big to fail if you don't force the downsizing of the huge banks that dominate Wall Street?
This reform effort seems more concerned with scoring political points while limiting the pain inflicted on influential Wall Street donors than in being a serious attempt to re-structure the financial system in a way that might prevent future crises.
President Barack Obama proposed new limits on the size and activities of the nation's largest banks, pushing a more muscular approach toward regulation that yanked down bank stocks and raised the stakes in his campaign to show he's tough on Wall Street.
With former Federal Reserve Chairman Paul Volcker at his side, Mr. Obama said he wanted to toughen existing limits on the size of financial firms and force them to choose between the protection of the government's safety net and the often-lucrative business of trading for their own accounts or owning hedge funds or private-equity. Mr. Volcker has been an outspoken advocate of such rules; until recently Mr. Obama's top economic advisers, including Treasury Secretary Timothy Geithner and Lawrence Summers, were less than enthusiastic.
"Never again will the American taxpayer be held hostage by a bank that is too big to fail," Mr. Obama said Thursday, two days after voters crimped his ability to pursue his agenda by sending a Republican to the Senate to fill a vacancy created by the death of Edward M. Kennedy. The election deprived Democrats of the 60 votes often needed to get major measures through the Senate.
Administration officials said they weren't trying to resurrect the Depression-era law–known as Glass Steagall–that strictly divided commercial banks from the business of underwriting securities. Nor would their proposals force existing financial firms to downsize, officials said.
If accepted by Congress, the Obama proposals could force significant changes in how the nation's biggest banks do business.The specter of new profit-crimping regulation battered bank stocks Thursday, dragging down the Dow Jones Industrial Average by 213.27 points, or 2%, to 10,398.88. Some financial stocks sank by more than 5%, though they recovered slightly after Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, said the new rules would take effect over three to five years, not immediately. J.P. Morgan Chase & Co.'s stock was the hardest hit, sinking 6.6%.
With former Federal Reserve Chairman Paul Volcker at his side, Mr. Obama said he wanted to toughen existing limits on the size of financial firms and force them to choose between the protection of the government's safety net and the often-lucrative business of trading for their own accounts or owning hedge funds or private-equity. Mr. Volcker has been an outspoken advocate of such rules; until recently Mr. Obama's top economic advisers, including Treasury Secretary Timothy Geithner and Lawrence Summers, were less than enthusiastic.
"Never again will the American taxpayer be held hostage by a bank that is too big to fail," Mr. Obama said Thursday, two days after voters crimped his ability to pursue his agenda by sending a Republican to the Senate to fill a vacancy created by the death of Edward M. Kennedy. The election deprived Democrats of the 60 votes often needed to get major measures through the Senate.
Administration officials said they weren't trying to resurrect the Depression-era law–known as Glass Steagall–that strictly divided commercial banks from the business of underwriting securities. Nor would their proposals force existing financial firms to downsize, officials said.
If accepted by Congress, the Obama proposals could force significant changes in how the nation's biggest banks do business.The specter of new profit-crimping regulation battered bank stocks Thursday, dragging down the Dow Jones Industrial Average by 213.27 points, or 2%, to 10,398.88. Some financial stocks sank by more than 5%, though they recovered slightly after Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, said the new rules would take effect over three to five years, not immediately. J.P. Morgan Chase & Co.'s stock was the hardest hit, sinking 6.6%.
I'm having a hard time discerning the point of these new regulations. While re-instituting Glass-Steagall would be of dubious worth, what's the point of half-assing it if you're going to force a separation between commercial and investment banking?
Even more puzzling is the attempt to limit bank size that won't "force existing financial firms to downsize". The financial industry is more centralized and dominated by large firms than ever in the wake of the financial crisis; how exactly are you going to solve the problem of having banks that are too big to fail if you don't force the downsizing of the huge banks that dominate Wall Street?
This reform effort seems more concerned with scoring political points while limiting the pain inflicted on influential Wall Street donors than in being a serious attempt to re-structure the financial system in a way that might prevent future crises.
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