Friday, January 22, 2010

President Obama Gets It, And Now The Banks Will Too


It appears that President Obama has seen the light. Paul Volcker and those that we might consider in his camp for tougher banking regulations, have made a dent in the Summers/Geithner philosophy of deregulation.

As I have written too many times over the last two years, this stuff, money and banking, is not difficult to understand. And, it appears that President Obama has finally gotten it. How bright does one have to be to understand that running a banking operation out the front door and a trading operation out the back door leaves a bank at too much risk. But, when the risk is shifted to the shareholders, senior management feels no pain or for that matter accountability for the losses that mount up as a result of the trading operation.

Let us have commercial banks do what commercial banks do best. Take in deposits and make loans, and where they can charge fees for services provided. Investment bankers should go back to being partnerships and stop using shareholders for capital to trade on. That is my opinion. Too big to fail is totally unacceptable by any standard, but it will take more than the U.S. Congress to make that point stick.

I believe in capitalism and I believe in the NFL, and I know that neither can function without the proper rules and enforcement. For my simple mind, it is just that simple.

Stay tuned.

5 comments:

LceeL said...

You certainly understand this stuff a hell of a lot better than I do - but I understand it better now for having read you for all this time. Thank you, Fred, for helping me and everyone else who reads you, understand.

moneythoughts said...

That is very kind Lou.

I am delighted that Paul Volcker is being listened to now within The White House. I hope Summers and Geithner are on their way out.

True capitalism, for me, means everyone faces the same pitches and the same strike zone. Certain big shot players don't get a pass and then strut like they are All-Stars. Too Big To Fail must be stopped. As a nation we can't afford it. As a people, it is most undemocratic.

Obama's populist speech may be an indication that he is now getting it. I sure hope that is the case. The rest of us can not afford going through this kind of shit again.

Kathryn Brimblecombe-Fox said...

I was happy to hear what Obama said. Your post is good and to the point. Glad your bag was found too.
Kathryn

Jientje said...

I enjoy reading your posts too Fred. You make complicated and "boring" stuff become interesting and what you say makes sense. Even to an apolitical girl like me.

Butch said...

Here's something, in part, that I have read that I think is too the point. Seems this guy believes what you believe is happening with our economy and the way it has been handled. If you want more of his comment just let me know.

"The heyday of the Bush-Obama bailout frenzy is coming to an end.

The bailout's base of public support, tenuous from the outset, is collapsing.

Its chief architects — Treasury Secretary Geithner and Fed Chairman Bernanke — are politically dead or dying; its loyal opposition — Obama adviser Paul Volcker and FDIC Chairman Bair — is gaining rapidly in influence.

Suddenly and with growing momentum, America is shifting into a brand new phase of the crisis ...

The Rude Awakening of 2010

You and I knew all along; we were not among those sleepwalking through the storm. Nor did we ever support those who stumbled from one ill-conceived government rescue to another.

We knew all along that TARP was a classic financial blunder and ultimate moral hazard: It rewarded guilty bankers, while shafting innocent taxpayers now stuck with the bill.

We knew all along that the Fed's zero-interest-rate policy is a ticking time bomb: It subsidizes and stimulates high-stakes gambling on Wall Street, while it robs America's prudent savers of nearly every penny they hoped to earn in interest....."