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Consumer Groups: Breaking Up Banks is ‘Crucial’ Element
Volcker rule 'most important reform initiative'
WASHINGTON - As the Senate debates financial reform, consumer groups are urging Congress to break up the biggest banks and impose strict limits on proprietary lending, virtually guaranteeing a "repeat" of the 2008 meltdown if those actions aren't taken.
Paul Volcker rejected opposition from Wall Street over a regulatory crackdown. (Photograph: Cliff Owen/AP) The two components
comprise the "Volcker rule" for financial reform, named after former
Fed chairman Paul Volcker, who proposed them. President Obama has backed it, citing Volcker as a key ally.
The prospects for its inclusion in the final bill are unclear. On Monday, dealReporter alleged that the proposal "will be either be dropped or significantly modified in the Senate" at the request of Banking Committee Chairman, Sen. Chris Dodd (D-CT). But on Tuesday, Dodd refuted the claim, telling Time Magazine he supports the Volcker rule.
Robert Weissman, president of the consumer advocacy group Public Citizen and an expert on financial market regulation, said implementing the Volcker rule is "crucial for promoting stability in the system."
"Conceptually, what the president is proposing with regard to the Volcker rule is the most important reform initiative on the financial front," he said in an interview with Raw Story.
"If we don't deal with the problem of excessive size, there's every reason to think we're going to have a repeat of the crisis," he said. "These too-big-to-fail institutions have structural incentives to take excessive risks, and that's a huge problem."
The group Americans for Financial Reform concurred, highlighting "'Too Big to Fail' Policy" in a post called "Preventing the Next Financial Crisis and Bailout."
"[R]egulatory policy should not only forbid [bank] bailouts and provide a means of resolving failed firms, but also minimize the likelihood of pressure to engage the bailouts," the group argued. "This largely means separating risky activities from safe activities and preventing firms from becoming too large or interconnected.
AFR promoted on its Web site Volcker's New York Times op-ed from Sunday that explained the provisions.
Banks, GOP vociferously opposed
The details of the regulatory provisions are critical to their success, as the banking community fully intends to dodge them.
As one senior banker told the New York Times, "They can go ahead and impose the [Volcker] rule on Friday, and I can assure you that by Monday, we'll find a way around it." Another described it "using more four-letter words in one sentence - as nouns and verbs - than I thought possible," reported Andrew Ross Sorkin.
Avoiding that outcome requires the details of the restrictions to be iron-clad. According to Weissman, that means defining proprietary trading in an encompassing way that involves breaking up big banks, as opposed to simply limiting their growth henceforth.
"It does not seem that some of the details in what's being proposed measure up to what's necessary," Weissman told Raw Story.
But it remains to be seen whether Democrats in Congress, facing notable opposition from the Republicans, will crack down.
"The political problem is that concentrations of enormous economic power give rise to concentrations of enormous political power," Weissman said. "That's what enabled Wall Street and the big banks to spend so wildly out of control and ultimately melt down."
Democrats are unlikely to unite their caucus, but are facing virtually unanimous opposition from Republicans, who have said the initiatives "show contempt for capitalism and continue to destroy jobs."
Roll Call reported in December, while the House was debating its legislation, that Republicans "met with more than 100 lobbyists...to try to fight back against financial regulatory overhaul legislation."
"The too-big-to-fail issue is crucial for promoting stability in the system, better service for consumers and preventing the political capture of the policy-making process by Wall Street."
While the financial reform bill passed by the House in December contains the Volcker rule provisions, they face an uphill battle in the Senate.
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17 Comments so far
Show AllSame old show. Monopolies and Oligopolies
One Judge: Jackson, found Microsloth guilty of price fixing and monopolistic practices and ordered it broke in two; but MS won on appeal. Even breaking these giants into two is not good enough. They need to be broken into fifty pieces: in each state so that they will start fostering local interests.
Sounds like we're going to have another economic meltdown in a few years the way things are going. More gambling, more racketeering, more war syndicate, more superbonuses for executives; ALL bailed out by the taxpayer.
Whoa to the middle class American (what's left of him anyway.) The Inflation boogieman's going to get him in a few years.
All because we didn't rise up and join a National Boycott and a National Strike to hit em where it hurts. All because we let our liberties erode one after another without drawing a line in the sand. We are a most pathetic generation of Americans.
TJ
"All tyranny needs to gain a foothold is for people of good conscience to remain silent." - Thomas Jefferson
From a non-US citizen:
Is there any constitutional way to deal with what appears to be a completely dysfunctional Senate?
Our founding document, the Declaration of Independence, gives the American Citizens the right and duty to overthrow tyrany. Exciting times ahead!
non-US citizen, Yes, line all the bastards up against a wall and offer them a last cigarette.
The GOP (and presumably likeminded cretins) say that :
".......the initiatives "show contempt for capitalism and continue to destroy jobs."
REALLY?
CAPITALISM DESERVES CONTEMPT....IT is the one that DESTROYED jobs!
Here they go again:
-Breaking Up Banks is ‘Crucial’ Element...but
...-The prospects for its inclusion in the final bill are unclear.
-Democrats are unlikely to unite their caucus...and...
...-unanimous opposition from Republicans, who have said the initiatives "show contempt for capitalism and continue to destroy jobs."
er,...how exactly does the provision "continue to destroy jobs",...before it is even enacted? Just wondering.
and let me understand this...the purpose of the "Volcker rule" is to combat "concentrations of enormous political power"...and the Democrats are likely to fail at this because The Republicans "met with more than 100 lobbyists"?
... and instead of supporting the "most important reform initiative", the Democrats "are unlikely to unite their caucus"?
How many times are you guys going to fall for this good cop/bad cop routine?
You need a real opposition party, one that doesn't depend on money from the corporations, and you need it yesterday. Congress members that are not beholden to a corporate party for their re-election will be free to do what you ask them to do, in all those letters you send them.
Open a government bank and let the people decide where to put their money, in a private bank or in a government run bank.
I hope everybody noticed that Weissman's support for the Volcker Rule was in fact severely qualified. On the one hand, "Conceptually, what the president is proposing with regard to the Volcker rule is the most important reform initiative on the financial front." On the other hand, what is needed is ". . . defining proprietary trading in an encompassing way that involves breaking up big banks, as opposed to simply limiting their growth henceforth . . . . It does not seem that some of the details in what's being proposed measure up to what's necessary," Weissman told Raw Story.
Weissman was probably drawing from Volcker's op-ed in last Sunday's NY Times (link in the above article). This article is well worth reading and confirms Weissman's doubts: Volcker himself waffles not only on capping the size of big finance (he says we can't go back to small banks) but he calls for a "limit" (not a "ban") of banks' proprietary trading; while toward the end of the article he reveals that an exact definition of proprietary trading is lacking.
In other words, the Volcker Rule in the words of the man himself has enough loopholes to allow free passage to the next financial crisis. To this dubious situation we should note that Obama didn't add the Volcker Plan to the previously pronounced Obama position until the shocking win of Scott Brown in the Massachusetts senatorial race--which contributes to the suspicion voiced in the financial media to the effect that Volcker is being used as window dressing for the populist card that Obama began playing post-Massachusetts.
Moral of the story: Watch your hat and coat. Big finance usually gets what it wants sooner or later, no matter of which team of clowns is nominally in control of the government.
If the Boyars will not re-instate the Glass-Steagall Act then we must elect an Ivan the Terrible to purge these creatures.
Reinstate the Glass-Steagall Act and while we're at it, reinstate the progressive income tax an all income (wages, bonuses, investments). It's not right that 1% of the people have 40% of the wealth!
Let me assure you that Raw Story is framing the issue in a way to help keep the crazies in control of the asylum. Quoting "experts" on the arithmetic operation 1 + 1 = 2 is an invitation for the reader to fall into a phantom teacup of self-doubt and scream for elites to rescue him/her from drowning. It's absolutely evil. A grasshopper knows the banksters must be crushed with the "invisible hand" of the government, the people's arm. However, the people have a crucial role to play too. The people can move all their accounts to independent non-profit credit unions.
If .gov wont break up the big banks, we can. Go to moveyourmoney.info to find smaller good banks that you can move your money to. I have, you can too...
Headline at World Socialists Website:
Bankers defiant at Davos World Economic Forum
>>Two years on from the biggest financial crisis to strike world capitalism since the 1930s, leading international bankers made clear at last week’s World Economic Forum in Davos, Switzerland that they will resist any attempts to reign in the speculative practices that have led to governments running up unprecedented levels of debt and the loss of tens of millions of jobs.
----
The fears of impending trade war between the US and China were stoked by comments in Davos from Larry Summers, the chief economic adviser to President Obama. In a panel discussion with Zhu Min, deputy minister of China’s central bank, Summers attacked China’s trade and monetary policies and warned that the US was prepared to respond by stepping up its protectionist measures.
Pointing out the consequences of the huge sums of money pumped into the economy by governments around the world, Harvard University economics professor Kenneth Rogoff bluntly declared that for those in their 30s, “It will be terrible for you.” Addressing the huge indebtedness of the German economy, Rogoff told a young German at the forum that Germany’s debt was exploding and there was no alternative to austerity measures and significant tax increases. “It will be very, very painful,” Rogoff added.<<
http://www.wsws.org/articles/2010/feb2010/pers-f04.shtml
Big Banks won't let their pet politicians dare to vote for any substantial reform. The only real reform would be to FIRST nationalize the Federal Reserve, Than the oversize commercial banks, get them out of the stock market and derivatives, and cut them up.
But in the name of the "free market" these measures will not even be mentioned except in whispers, and never reported by the Fawning Corporate Media.
Gary
“Believing would be easier if God would show himself by depositing a million dollars in a Swiss bank account in my name”
-- Woody Allen
>>Wall Street bankers, along with the rest of the players in the financial industry, like to think of themselves as swashbuckling capitalists. They battle cutthroat competition with one hand and oppressive government bureaucracy with the other. In reality, the financial industry is deeply dependent on the government. Far from the rugged, go-it-alone types they wish they were, they are more like well-dressed, coddled adolescents. And this is true in good times and bad.
---
The economy thrived in the three decades following World War II with a financial sector that was proportionately one-fourth of its current size. There is no reason that the financial sector should use up a larger share of the economy's resources today than it did three decades ago. Effective regulation will restore the financial sector to its proper role in the economy<<
Dean Baker, "Big Banks Are Feeding Like Parasites on the Govt.'s Money," Boston Review http://tinyurl.com/yaqrhtr
Banks should have never crossed the Rubicon of trading stocks, bonds, and derivatives in the first place. The privately owned Federal Reserve should have put the kabosh on the whole scheme in the first place. Government should have never knuckled under to the banks in the first place. We should have never allowed any of this in the first place.
Gary
“I saw a bank that said "24 Hour Banking", but I don't have that much time”
-- Stephen Wright
gdgoodman: Thanks for posting the article. Why am I NOT surprised that Larry Summers, of all people, is continuing to stir the hornet's nest?!? He is so arrogant, and I really believe he is completely lacking in any sense of humanity -- compassion, empathy and/or sympathy for "we the people" of this country and around the world as well.
Obama chose Larry Summers! And, he chose Timothy Geithner, among others, to be his advisers.
I still remember Summers' comments about women when he was running Harvard. Oh, and he screwed up their endowment funds, too. Not to mention the attitude he took with Cornell West.
But, Summers is among the "best and the brightest?"!?! Of course, the original meaning of the phrase, as written by David Halberstam, included more than a hint of sarcasm.
The Bankers openly say that they will defy the law and evade it even if it is put into effect. They would only be so brazen if didn't already own the politicians who they "warn." They media tone is not to be surprised-- they would be more surprised if the rule was enacted and enforced.
"But on Tuesday, Dodd refuted the claim, telling Time Magazine he supports the Volcker rule."
One day he looks like a whore, the next day he wraps himself in the holy shroud. I wish he would decide who the hell he is!