usta in Portland
Daily Driver
I don't think you are....
going to get any argument about the political class. But who, precisely do you nominate to do all this here investigating who is not also part of the political class? Ken Starr?
This is the problem with polarized politics-it is all about dividing up into contending camps and in doing so we surrender our authority over those who lead. I'm not in disagreement with you on any of this really. But the issues you raised are derivative not fundamental. And the solutions will be the laziest way out. Dodd-Frank is a sham, just as all such bills will be in the absence of a real change in the relationship between the taxpayers and the banking system. Matthew has mentioned the first obvious change which is to remove regulation from the system altogether-let banks rise and fall on their own merits. But that system would likely be able to withstand one calamity before we would be right back to insured deposits and some form of tacit government guarantee. The country has been there before in the 30s and the whole of the recent crisis was more about preventing runs on the banks than anything else. It's pretty easy to just throw the bathwater out but you had better check for the baby before you do.
The other way would be to peel the FDIC banks off from everything else into a 'safe' bank system with relatively srict capital ratios and limits on loan pass throughs. But that would raise borrowing costs and eat into bank profits and interest paid to depositors. Sheila Bair made exactly this recommendation and got nowhere. The banks apparently want both the freedom to place capital at risk and the safety of government backup. If the investment banks are going to constantly push for higher leverage allowances in order to maximize profits and commercial banks are tied into that system we are at risk of repeating the past 5 years. Until that conflict of basic interests is resolved it is hard to see how things are going to be any better no matter who you put in jail.
going to get any argument about the political class. But who, precisely do you nominate to do all this here investigating who is not also part of the political class? Ken Starr?
This is the problem with polarized politics-it is all about dividing up into contending camps and in doing so we surrender our authority over those who lead. I'm not in disagreement with you on any of this really. But the issues you raised are derivative not fundamental. And the solutions will be the laziest way out. Dodd-Frank is a sham, just as all such bills will be in the absence of a real change in the relationship between the taxpayers and the banking system. Matthew has mentioned the first obvious change which is to remove regulation from the system altogether-let banks rise and fall on their own merits. But that system would likely be able to withstand one calamity before we would be right back to insured deposits and some form of tacit government guarantee. The country has been there before in the 30s and the whole of the recent crisis was more about preventing runs on the banks than anything else. It's pretty easy to just throw the bathwater out but you had better check for the baby before you do.
The other way would be to peel the FDIC banks off from everything else into a 'safe' bank system with relatively srict capital ratios and limits on loan pass throughs. But that would raise borrowing costs and eat into bank profits and interest paid to depositors. Sheila Bair made exactly this recommendation and got nowhere. The banks apparently want both the freedom to place capital at risk and the safety of government backup. If the investment banks are going to constantly push for higher leverage allowances in order to maximize profits and commercial banks are tied into that system we are at risk of repeating the past 5 years. Until that conflict of basic interests is resolved it is hard to see how things are going to be any better no matter who you put in jail.
