This week, ex-banker Charles Morris, who was featured in the documentary Inside Job, brings us compelling evidence that countries with a large financial sector create lesser economic growth than countries that have restrained that sector. While a well-functioning financial system is key to growth, there’s a balance that needs to be struck.
|By: David Dayen Monday May 24, 2010 6:30 pm|
One of Wall Street’s finest slipped and told the New York Times that the financial reform bill wouldn’t affect their core business to any major degree.
|By: David Dayen Monday May 24, 2010 6:00 am|
We learned during this months-long debate that the progressive space for economics and finance is perilously narrow. The institutional players either don’t know how to pitch this to their audiences, have been bought off from the beginning, or don’t view it as a problem. That’s unfortunate, but a newer class of activists have engaged with this problem, and now they have a coherent critique. It has not yet been successful, but it sets up very well for campaigns in the future.
|By: David Dayen Friday April 30, 2010 1:15 pm|
The amendment to audit the Federal Reserve had well over 300 co-sponsors in the House of Representatives, and it passed easily in the House Financial Services Committee. It lives in their version of Wall Street reform. The Senate, as part of a bankruptcy reform bill last year, passed a version of auditing the Fed, through an amendment by Chuck Grassley, by a count of 95-1. Simply put, of all the amendments to the financial reform bill on the floor of the Senate right now, the one with the most likely chance of passing is one that would bring some transparency to the Federal Reserve.
That’s precisely the measure which the Obama Administration is opposing the most
With auditing the Fed, everyone knows the numbers. It has overwhelming support if it comes up for a vote. And that’s why the Administration is targeting their efforts. The calculus out of Treasury is to express little opinion on what they feel is in control, and vociferously oppose what they feel is not.
|By: David Dayen Monday April 26, 2010 6:12 am|
The Sunday talk shows gave the impression that both sides are moving closer to agreement, but aren’t there yet. I wouldn’t be surprised to see Republicans block consideration of the bill when it gets a vote tonight. That doesn’t mean the bill dies, however; Republicans Sunday morning took pains to say they wanted a bill and just wanted to reach an agreement first before bringing it to the floor.
|By: David Dayen Thursday April 22, 2010 1:30 pm|
Dodd seems to think that the discretionary threat of dissolution will act as a deterrent to bankers to staying within the lines of size and particularly risk. Tim Geithner basically said the same thing on Good Morning America today. While he acknowledged the danger in having the six largest banks control 63% of all assets, he focused far more on what would happen “in the future” if they treated those assets like a stake at a casino again.
|By: David Dayen Wednesday April 21, 2010 12:00 pm|
The bill would place a cap on any financial institution, limiting their total assets to 3% of GDP (that would lower to 2% for banks, as opposed to 3% for non-bank institutions). Currently, the 6 largest banks have holdings that equal 63% of GDP. The Safe Banking Act would also impose a 10% cap on any bank holding company’s share of insured deposits. Bank holding companies and “selected nonbank financial institutions” would have a leverage limit of 6%, meaning that they would not be able to lend out more than around sixteen dollars for every dollar of capital in house.
|By: David Dayen Wednesday April 21, 2010 8:45 am|
The headline story in the Washington Post today states that Republicans, worried about being seen as too close to the big banks, especially in the wake of the Goldman Sachs scandal, are returning to the bargaining table and supportive of a bipartisan deal. This was how Democrats hoped this would turn out, that they could play a game of chicken and win, and that appears to be the case right now.
However, there’s nothing specific about any deal being discussed, just the notion that there is one in the works.
|By: David Dayen Friday April 16, 2010 8:45 am|
The Republicans are perhaps trying to use the Volcker rule as a poison pill, but it really would be the significant way to reduce the political power of the financial sector and end the practice of “too politically connected to fail,” which is the bigger problem. No less than three Federal Reserve regional bank presidents are calling for breaking up the banks, and even Sheila Bair’s FDIC, whose interview was passed around by Democratic operatives yesterday, said the day before that Too Big To Fail banks “pose unique concentrated risks” and should be forced to give more FDIC deposit insurance into the system.
|By: David Dayen Monday April 5, 2010 2:29 pm|
Well, this is EXACTLY WHAT PEOPLE WHO FAVOR REGULATING BANK SIZE HAVE BEEN SAYING. The non-financial bloggers in the wonkosphere seem to be constructing the mother of all straw men, arguing that those who want to break up the banks think that alone can solve the systemic problems at the root of the financial sector. Nobody I’ve read has been saying that. They all favor a both/and approach, including things like, well, derivative reform, and stronger regulations on shadow banking, and ending the accounting tricks, and even leverage and capital requirements. I don’t see the two sides in this debate at all in disagreement, other than what reforms they choose to emphasize. But there’s sure a lot of misunderstanding and misinterpreting at work. Maybe it’s because those making these arguments know them to be theoretical, as the likely outcome will probably be pathetic on all counts, with Democrats happier to get a “win” than anything fundamentally shaking up the system. Maybe everyone’s staking out higher ground.