Comments on: A Former Regulator on the Fed Allowing Deposits to Fund Investment Banking Operations http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html Sun, 22 Nov 2009 11:45:14 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: dh http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15536 dh Tue, 16 Sep 2008 17:22:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15536 Yves,<br/><br/>Thanks, re: Reader dh<br/><br/>Hope it all works out! Yves,

Thanks, re: Reader dh

Hope it all works out!

]]> By: briareus http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15535 briareus Tue, 16 Sep 2008 16:17:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15535 Regarding the 23a rule suspension, I have an important question: Who has the authority to grant such a suspension anyway? <br/><br/>I'm looking for it but so far I haven't found who is enabled to grant such a suspension in the first place. To me it looks like the 23a and 23b of the Federal Reserve Act that dh discusses are not optional. <br/><br/>Please someone enlighten or correct me. Regarding the 23a rule suspension, I have an important question: Who has the authority to grant such a suspension anyway?

I’m looking for it but so far I haven’t found who is enabled to grant such a suspension in the first place. To me it looks like the 23a and 23b of the Federal Reserve Act that dh discusses are not optional.

Please someone enlighten or correct me.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15522 Anonymous Tue, 16 Sep 2008 14:29:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15522 First they allow and even encouraged the creation of > $1 QUADRILLION in derivatives (nominal), now they are rbeaking very basic banking rules. <br/><br/>It is far past time to revoke the charter of the Fed and start over.<br/><br/>Mark<br/>www.TakeBackTheFed.com First they allow and even encouraged the creation of > $1 QUADRILLION in derivatives (nominal), now they are rbeaking very basic banking rules.

It is far past time to revoke the charter of the Fed and start over.

Mark
http://www.TakeBackTheFed.com

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15514 Anonymous Tue, 16 Sep 2008 13:41:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15514 At some level, we need to have investment banks that are more lightly regulated than commercial and consumer banks. If the government becomes the sole arbriter of what investments are "sound" and therefore worthwhile, then innovation will be choked off and the Xerox's and Microsoft's of the future will not succeed. But freedom to succeed equals freedom to fail. And we do NOT want failure of risky investments to imperil the funds of depositors. This is WHY we created the walls between the two in the first place. Retail banks = Safe, insured by the FDIC and heavily regulated. Investment Banks = no FDIC insurance, less governmetn regulation, the possibility of greater returns.<br/><br/>There has been a slow erosion of the walls between investments, insurance and retail banking for the past few decades in the name of innovation. But you can't build levees when the hurricaine is hours away. This has been a long time comming, and we've greatly increased the connections between retail banks, investment banks, the insurance business etc. The levels of debt that we have in this country are great, and for many, exceed any reasonable expectation of payment. But everything has become so linked together that we have no idea what the ultimate consequences of all the upcomming defaults will have.<br/>--Jim A. At some level, we need to have investment banks that are more lightly regulated than commercial and consumer banks. If the government becomes the sole arbriter of what investments are “sound” and therefore worthwhile, then innovation will be choked off and the Xerox’s and Microsoft’s of the future will not succeed. But freedom to succeed equals freedom to fail. And we do NOT want failure of risky investments to imperil the funds of depositors. This is WHY we created the walls between the two in the first place. Retail banks = Safe, insured by the FDIC and heavily regulated. Investment Banks = no FDIC insurance, less governmetn regulation, the possibility of greater returns.

There has been a slow erosion of the walls between investments, insurance and retail banking for the past few decades in the name of innovation. But you can’t build levees when the hurricaine is hours away. This has been a long time comming, and we’ve greatly increased the connections between retail banks, investment banks, the insurance business etc. The levels of debt that we have in this country are great, and for many, exceed any reasonable expectation of payment. But everything has become so linked together that we have no idea what the ultimate consequences of all the upcomming defaults will have.
–Jim A.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15508 Anonymous Tue, 16 Sep 2008 12:45:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15508 It's all a shell game. Keep moving those lousy assets around as fast as possible and keep hoping and praying that somehow, someway things can get back to the heady days of financial innovation. <br/><br/>It won't work.<br/><br/>But the shell games continue. And, Bernanke, Paulson et al are not the only ones moving the shells. Read the established, high end business press today and you'll find out that Bush/Paulson drew a line in the sand and did nothing to come to the aid of LEH or Merrill.<br/><br/>But, in putting deposits in play, these masterminds of the apocalypse have most certainly continued the policy of socializing losses after a Robber Baron age of privatizing gains. It’s all a shell game. Keep moving those lousy assets around as fast as possible and keep hoping and praying that somehow, someway things can get back to the heady days of financial innovation.

It won’t work.

But the shell games continue. And, Bernanke, Paulson et al are not the only ones moving the shells. Read the established, high end business press today and you’ll find out that Bush/Paulson drew a line in the sand and did nothing to come to the aid of LEH or Merrill.

But, in putting deposits in play, these masterminds of the apocalypse have most certainly continued the policy of socializing losses after a Robber Baron age of privatizing gains.

]]> By: dd http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15505 dd Tue, 16 Sep 2008 12:36:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15505 Depends on the regulators. The Fed in the last 30 years pretty much rode rough shod over investor protection agencies and when things didn't turn out the participants were bailed out under the banner of systemic risk. Innovation trumped regulation and you can thank Greenspan. His self-congratulatory speeches are readily available but here's a start:<br/>Financial derivatives<br/>http://www.federalreserve.gov/boarddocs/speeches/1999/19990319.htm<br/>The mortgage market and consumer debt<br/>http://www.federalreserve.gov/boardDocs/Speeches/2004/20041019/default.htm<br/>Risk Transfer and Financial Stability<br/>http://www.federalreserve.gov/Boarddocs/Speeches/2005/20050505/default.htm<br/><br/>When you're done with that go read his testimony supporting Gramm Leach and the Commodity Futures Modernization Act. Depends on the regulators. The Fed in the last 30 years pretty much rode rough shod over investor protection agencies and when things didn’t turn out the participants were bailed out under the banner of systemic risk. Innovation trumped regulation and you can thank Greenspan. His self-congratulatory speeches are readily available but here’s a start:
Financial derivatives
http://www.federalreserve.gov/boarddocs/speeches/1999/19990319.htm
The mortgage market and consumer debt
http://www.federalreserve.gov/boardDocs/Speeches/2004/20041019/default.htm
Risk Transfer and Financial Stability
http://www.federalreserve.gov/Boarddocs/Speeches/2005/20050505/default.htm

When you’re done with that go read his testimony supporting Gramm Leach and the Commodity Futures Modernization Act.

]]> By: Richard Kline http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15504 Richard Kline Tue, 16 Sep 2008 12:34:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15504 So Danny, no, I don't expect those faux regulators to fix the problem: I expect them to 'fix the solution,' as in game the problem and spin the outcome. It's what the top level knows so it's what they do. It will be up to their replacements, and the successors to the present feckless Congress to fix the problem. By which time Wall Street may look like Central Italy, November, 1945, but there it is. So Danny, no, I don’t expect those faux regulators to fix the problem: I expect them to ‘fix the solution,’ as in game the problem and spin the outcome. It’s what the top level knows so it’s what they do. It will be up to their replacements, and the successors to the present feckless Congress to fix the problem. By which time Wall Street may look like Central Italy, November, 1945, but there it is.

]]> By: Danny http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15499 Danny Tue, 16 Sep 2008 11:33:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15499 Not only were regulators not enforcing the laws on the books, they were also actively manipulating markets that were fully capable of regulating themselves. The credit default swaps market has been on the edge of failure multiple times. Instead of allowing it to fail early on in its development, and teaching market players the discipline of counterparty risk, regulators intervened, and caused false signals to be sent that the CDS market was indeed safe. So in an odd twist of fate, regulators have actually increased systemic risk.<br/><br/>Now we expect these very same people who oversaw these developments, who even encouraged them, to fix the problem? Not only were regulators not enforcing the laws on the books, they were also actively manipulating markets that were fully capable of regulating themselves. The credit default swaps market has been on the edge of failure multiple times. Instead of allowing it to fail early on in its development, and teaching market players the discipline of counterparty risk, regulators intervened, and caused false signals to be sent that the CDS market was indeed safe. So in an odd twist of fate, regulators have actually increased systemic risk.

Now we expect these very same people who oversaw these developments, who even encouraged them, to fix the problem?

]]> By: böcek ilaçlama http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15497 böcek ilaçlama Tue, 16 Sep 2008 11:01:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15497 In other words this “emergency measure” may potentially allow the transfer of funds from the FDIC towards the funding of BoA’s purchase of Merrill Lynch? A rathre stealthy government bailout. In other words this “emergency measure” may potentially allow the transfer of funds from the FDIC towards the funding of BoA’s purchase of Merrill Lynch? A rathre stealthy government bailout.

]]> By: dearieme http://www.nakedcapitalism.com/2008/09/former-regulator-on-fed-allowing.html#comment-15496 dearieme Tue, 16 Sep 2008 10:56:00 +0000 http://www.nakedcapitalism.com/2008/09/a-former-regulator-on-the-fed-allowing-deposits-to-fund-investment-banking-operations/#comment-15496 Well said, Fresno Dan. Well said, Fresno Dan.

]]>