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View Full Version : Why is this concept so difficult to understand?



peb
10-14-2012, 06:52 PM
A bank that is too big to fail, is too big to exist. Finally we read of people advocating breaking up those banks:

http://www.washingtonpost.com/opinions/george-will-too-big-to-maintain/2012/10/12/9f8f8e94-1497-11e2-be82-c3411b7680a9_story.html

George Jung
10-14-2012, 07:06 PM
I'm curious - anyone recall who was responsible for the legislation allowing these banks to get this big in the first place? Should be some accountability.

PeterSibley
10-14-2012, 07:11 PM
Very sensible but another useful step might be to REGULATE the banks in the way Australia did under it's last conservative treasurer. All of our banks survived and frankly thrived.http://australia.gov.au/topics/economy-money-and-tax/financial-regulation

Paul Pless
10-14-2012, 07:18 PM
I'm curious - anyone recall who was responsible for the legislation allowing these banks to get this big in the first place? Should be some accountability.

It had a lot to do with that favourite democratic president, Bill Clinton. . .

Peter Malcolm Jardine
10-14-2012, 08:24 PM
I have no idea what peb is talking about, but that isn't new. The USA has only 5 banks in the top fifty. Hell, even Canada has 3 in the top 50. This isn't about size, it's about regulation. Once again, simplistic solutions proposed for complex problems, and ones that don't have the remotest possibility of changing things.

Our banks are in better shape than the USA's because of REGULATION. That, of course, is socialism in action, which is evil, and we're communists. Commies with a better banking system in times likes these, but commies nonetheless

PeterSibley
10-14-2012, 08:29 PM
I have no idea what peb is talking about, but that isn't new. The USA has only 5 banks in the top fifty. Hell, even Canada has 3 in the top 50. This isn't about size, it's about regulation. Once again, simplistic solutions proposed for complex problems, and ones that don't have the remotest possibility of changing things.

Our banks are in better shape than the USA's because of REGULATION. That, of course, is socialism in action, which is evil, and we're communists. Commies with a better banking system in times likes these, but commies nonetheless

Precisely ... despite the fact that our regulation was brought in by our conservative party, of course they were the only ones who could do it politically. They're not noted as communists :d.

Peter Malcolm Jardine
10-14-2012, 08:37 PM
The USA is quickly becoming the country of domestic policies that quite clearly don't work, and they seem to be unwilling to look at other nations who have great success in all kinds of internal policies.... and, oddly enough many countries use similiar systems... just look at banking, health, even taxation in the top 25 nations. But you guys do it your way... vote in Mr Romney. Oh things will be allllll better instantly. NOT.

Nicholas Carey
10-14-2012, 08:51 PM
Anyone who thinks the GOP will break up big banks (or any big business) is smoking crack and living in fantasy land.

Gerarddm
10-14-2012, 09:15 PM
It had a lot to do with that favourite democratic president, Bill Clinton. . .


Yes, yes, and Phil Gramm et al too.

Break 'em, I say.

PeterSibley
10-15-2012, 01:46 AM
Anyone who thinks ANY AMERICAN POLITICIAN will break up big banks (or any big business) is smoking crack and living in fantasy land.

I hope you don't mind that Mr Carey but it seems closer to the truth. Your system of corporate donations ensures no politician aspiring to high office can afford (literally) to offend Wall St.

Andrew Craig-Bennett
10-15-2012, 03:58 AM
At the moment, the sun does not go down without a new horror story about the Royal Bank of Scotland - which was too big to fail, did fail, and was bailed out by the British taxpayer. This bank was run irresponsibly for a good many years - certainly its board of directors thought it was "too big to fail".

Meli
10-15-2012, 04:01 AM
Very sensible but another useful step might be to REGULATE the banks in the way Australia did under it's last conservative treasurer. All of our banks survived and frankly thrived.http://australia.gov.au/topics/economy-money-and-tax/financial-regulation

:) regulate the free world!! bloody socialist!! :D

PeterSibley
10-15-2012, 04:04 AM
They hate us cos we're free or at least quite cheap.

Curtism
10-15-2012, 04:40 AM
I hope you don't mind that Mr Carey but it seems closer to the truth. Your system of corporate donations ensures no politician aspiring to high office can afford (literally) to offend Wall St.

For a most recent example of this, note the track record of our current president (vs some of the stances he's taken in past stump speeches . . .)

genglandoh
10-15-2012, 05:47 AM
I agree Big Business is bad.

I can not understand my the Government allowed Exxon and Moble to merge into one hugh oil company.

skuthorp
10-15-2012, 06:04 AM
The Aussie 'big 4' banks have wanted to merge as it happens but regulation does not allow it on competition grounds.

John Smith
10-15-2012, 06:14 AM
It had a lot to do with that favourite democratic president, Bill Clinton. . .

Yes. He signed that bill that had the (apparently) unintended consequence of tying the hands of the regulators.Repealing Glass/Steagull was very popular and only a small handful of people in the house and senate voted against it.

Fast Forward to now. There is a reason the big boys on Wall Street don't like Dodd/Frank. What do you suppose that reason is?


The more they don't like it, the more I like it. Their reaction to Dodd/Frank tells me it does have provisions to break up the too big banks by absolutely not bailing them out, but carefully chopping them up.

John Smith
10-15-2012, 06:16 AM
The USA is quickly becoming the country of domestic policies that quite clearly don't work, and they seem to be unwilling to look at other nations who have great success in all kinds of internal policies.... and, oddly enough many countries use similiar systems... just look at banking, health, even taxation in the top 25 nations. But you guys do it your way... vote in Mr Romney. Oh things will be allllll better instantly. NOT.

This is because we have been brainwashed that we do everything better than anyone else. As Romney says, "If the world needs something big done, you need an American to do it."

bob winter
10-15-2012, 06:38 AM
The Aussie 'big 4' banks have wanted to merge as it happens but regulation does not allow it on competition grounds.

We had a situation like that in Canada a few years ago. Public reaction to the idea was negative, to say the least. Government didn't let it happen.

John Smith
10-15-2012, 07:47 AM
You don't think that's a bit simplistic?

I know for a fact that banks failed -- and were bailed out -- before Clinton was in office. (At least one, due to the Bush family!)

Sure, Clinton may have changed a rule or two, but it's not like he invented banking.

I'm sorry, but the fact is Clinton signed the bill that ended Glass/Steagull. What that bill failed to address is how to align regulators aimed at specific types of banks at the merging banks. From my perspective this is one of those unintended consequences that happen all too frequently.

And, it's not like all the Republicans voted against it.

Tom Hunter
10-15-2012, 07:57 AM
@PMJ the Canadian banking system has a lot to reccomend it, but it also has something the US will never have, Canadian business culture. Our guys will happily bet the bank if they know there will be a bailout. Some of them said this on the record.

There is more and more evidence that big banks are holding back out economy, too big to manage effectively, and present a danger to the whole country. George Will writing "break them up" is a pretty big shift. They still own both presidential candidates, but their grip on the media is weakening.

hanleyclifford
10-15-2012, 08:00 AM
Didn't we have a thing called Taft/Hartley? The banksters only get away with their criminal activity by having both major political parties in their pockets.

John Smith
10-15-2012, 08:13 AM
Thinking about this, I don't think it was the size that caused the problem, but the lack of regulating that followed the allowance of different types of banks to merge.

I believe Dodd/Frank addresses bank failure. It provides a method for liquidating, carefully and controlled, large banks.

Wall Street money is going very heavily in Romney's direction. That should be cause to vote for Obama. They want Dodd/Frank repealed. You might ask yourself why they would want that.

hanleyclifford
10-15-2012, 08:17 AM
The problem, John, is called monopoly and/or collusion in restraint of trade.

Kevin T
10-15-2012, 08:21 AM
The problem, John, is called monopoly and/or collusion in restraint of trade.

Isn't that just a fancy way of saying "free market forces" and isn't the alternative the dreaded socialism we hear so much about?:rolleyes:

hanleyclifford
10-15-2012, 08:23 AM
Since the corporation is an artificial creation of government by the people, it can and should be regulated by that same government.

Kevin T
10-15-2012, 08:27 AM
Since the corporation is an artificial creation of government by the people, it can and should be regulated by that same government.

I absolutely agree, but to hear some tell it around here, any regulation is seen as the first step on a slippery slope to socialism.

I was kidding by the way in the previous post, and don't forget that we have had recent rulings by SCOTUS that give corporations the same rights as people and apparently without any of the same punishments that actual flesh and blood people might receive.

hanleyclifford
10-15-2012, 08:31 AM
I absolutely agree, but to hear some tell it around here, any regulation is seen as the first step on a slippery slope to socialism.

I was kidding by the way in the previous post, and don't forget that we have had recent rulings by SCOTUS that give corporations the same rights as people and apparently without any of the same punishments that actual flesh and blood people might receive. The corporation is basically a device for limiting and/or compartmentalizing liability and responsibility. Forget that BS about organizing capital (capital formation is a thing of the past; we are a creditalist economy now). I think it is time the very concept of the corporation is revisited.

AndyG
10-15-2012, 08:47 AM
The corporation is basically a device for limiting and/or compartmentalizing liability and responsibility. Forget that BS about organizing capital (capital formation is a thing of the past; we are a creditalist economy now). I think it is time the very concept of the corporation is revisited.

The US litigation mindset strikes again. Corporations are far more than that.

Andy

hanleyclifford
10-15-2012, 08:53 AM
The US litigation mindset strikes again. Corporations are far more than that.

Andy Please elaborate.

AndyG
10-15-2012, 09:03 AM
Please elaborate.

What do corporations do? Merely exist to protect themselves against legal threats? That's what you're apparently saying.

It's a strangely one-tracked approach to a complex subject.

Andy

hanleyclifford
10-15-2012, 09:12 AM
What do corporations do? Merely exist to protect themselves against legal threats? That's what you're apparently saying.

It's a strangely one-tracked approach to a complex subject.

Andy It isn't the corporation that is protected from liability; it's the stockholders. The original (ostensible) purpose of the corporation was to organize capital for business while limiting the exposure of the participants. But the system has been abused and the corporation is now being used to do other things such as circumvent tax laws and enhance the wealth of the 1%.

peb
10-15-2012, 09:27 AM
Thinking about this, I don't think it was the size that caused the problem, but the lack of regulating that followed the allowance of different types of banks to merge.

I believe Dodd/Frank addresses bank failure. It provides a method for liquidating, carefully and controlled, large banks.

Wall Street money is going very heavily in Romney's direction. That should be cause to vote for Obama. They want Dodd/Frank repealed. You might ask yourself why they would want that.


It was certainly the size of the individual financial institutions which caused the problem to be so severe. Dodd/Frank does not address the problem of regulation. We do not need 5 institutions holding over 50% of all banking assets in the country, the very idea is absurd.

We have a very good way of liquidating, carefully and controlled, large banks. The FDIC handled it quite well for years. It is only when banks became huge and did more than banks should do that it doesn't work. There is little evidence that Dodd/Frank provides a way of liquidating large banks, it obstensibly provides a way to make sure large banks do not get into trouble in the first place. That is a solution that will fail over time.

Andrew Craig-Bennett
10-15-2012, 09:49 AM
We in Britain are a smaller economy than the USA but with a relatively much larger banking sector; we are heroically over-banked.

I am concerned that Vince Cable, a politician whom I admire, and who talked a great deal of sense in 2008, was very much in favour of shrinking banks until he found himself in Government.

I can see that, confronted with, say, HSBC and Standard Chartered, neither of whom "have to be" British banks, and both of whom will certainly decamp to another jurisdiction if threatened with being cut up, it becomes effectively impossible for the British politician to take action to cut banks down.

However, another solution presents itself - which would cause Standard Chartered no pain at all (they do no retail in the UK) and which would merely force HSBC to sell its Midland retail operation - we could say that British retail banks must not be bigger than X and limit deposit guarantees to retail banks.

Landrith
10-15-2012, 09:49 AM
No such thing as too big to fail. The administration that fails to enforce the criminal and securities laws gets voted outed of office. Watch.

wardd
10-15-2012, 10:35 AM
also it seems the bankers are too big to go to jail

peb
10-15-2012, 10:36 AM
I'm sorry, but the fact is Clinton signed the bill that ended Glass/Steagull. What that bill failed to address is how to align regulators aimed at specific types of banks at the merging banks. From my perspective this is one of those unintended consequences that happen all too frequently.

And, it's not like all the Republicans voted against it.

No they did not vote against it. Both parties have this all wrong.
Well, I might be radical on this point, but the more I think about it, the more I think the problem was not the end of Glass/Stengel near as much as the the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 which allowed interstate banking in this country. I think that law passed the senate with 94 votes in favor. Maybe bipartisonship is overrated.

htom
10-15-2012, 11:39 AM
I think I've been saying "if it's too big to be allowed to fail, it should have been broken up" since before the Chrysler bailout. I haven't stopped.

Fictional treatment of modern economics -- Cory Doctorow, "For the Win".

Tom Hunter
10-15-2012, 07:58 PM
@ John, I agree with peb, and if you read our posts I think we did a fair job of explaining why you are wrong to think these very large banks can be regulated to provide economic benefit to the marketplace.