New Banking regulations in US

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zippy

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http://news.bbc.co.uk/1/hi/business/8473294.stm

Forcing banks to split their retail banking from investment banks was talked about while the bail-outs where going on. Now it seems the US is going forward this.

Be interesting to see how far they can go and how far the UK, Europe and other countries will go as a result.
 
The Obama administration is caving to public sentiment, how do you limit the size of banks??? You tell a bank that has been successful and has grown, to now split up becuase its gotten past the size that Obama and co think is cool?

The moves follow popular anger at financial institutions, who have been paying large bonuses to staff even as they accepted government bail-outs to keep them going.
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If the banks havent been paying back the money, then nail them. However, on CNBC and other channels I've noticed some banks making moves to paying back the TARP cash, one them being Goldman Sachs.

The banks might as well move ops to China...
 
Yeah tough balancing act. Got to regulate enough to prevent abuse but not so much it chases them away. They faced the same problem after Enron.

Hopefully this is something concrete and not empty suit populist pandering.
 
Economist coverage of was pretty cool

The Economist said:
The proposals have already been dubbed “Basel 3”—which tells you regulators have been here twice before. Alas, the record of bank-capital rules is crushingly bad. The Basel regime (European and American banks use either version 1 or 2) represents a monumental, decades-long effort at perfection, with minimum capital requirements carefully calculated from detailed formulae. The answers were precisely wrong. Five days before its bankruptcy Lehman Brothers boasted a “Tier 1” capital ratio of 11%, almost three times the regulatory minimum.

That poses an obvious question for bank supervisors: if they have already tried and failed to make capital rules foolproof, why should they do better this time?
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Basel 3...I lol'd
 
The problem is people want the upside to free markets, the ability to make monumental profits when you get things right, but none of the risks or downside.

I say go pure free market. If the banks lose, they should go bankrupt, free up the resources and capital for businesses that have been successful. The real tragedy is not that they gambled and lost, but that they lost and are still around.

You can't have it both ways.
 
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Lack of regulation does the same. It's then a question of which does least harm.
 
If we're going to have a pure free market why don't we save time and go straight back to peasants and aristocracy?
 
noxibox said:
If we're going to have a pure free market why don't we save time and go straight back to peasants and aristocracy?
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I am confused. You think peasants and a ruling aristocracy equals a pure free market?
 
noxibox said:
Lack of regulation does the same. It's then a question of which does least harm.
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You cannot prove either way does "least" harm.

The beauty of lack of regulation, is the idiots get weeded out by more successful businesses. However you still need to go back to 100% reserve with a commodity backing to solve the problem of devastating boom and bust.

You will always have boom and bust. No economist or entrepreneur can perfectly predict the market with 100% accuracy. Some people will make wrong decision leading to a bust.

The cycles are perpetuated, bigger boom and thus bigger bust, by the fractional reserve system as credit can easily be created. Also entrepreneurs can be misguided by central banks who lower and raise interest rates according to "their" whims. Basically what ever justification they give.

Interest rates should be linked to market forces, the supply and demand of capital. If there is no capital because people aren't saving and high demand then interest rates should've increased drastically. Central bank kept them low .

The problem is the central bank/fractional reserve system is a monopoly on the creation of money. They alone determine interest rates and not the market.

This leads to a distortion of the structure of production. This leads to a misallocation of resources resulting in the eventual bust.
 
What a ****ing retarded idea. When you divide infinity into pieces, it stays big. When you divide a small bank into pieces, it gets bought by competition.

Excellent - let's see how the banks enjoy a good shafting.
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Come on dave, you're joking right? The banks caused the crash, the man in charge of TARP is a former banker, some of the largest campaign contributions in history went from banks to Obama's election campaign; do you really, for a moment, believe the large banks will hurt from this?

If anything, it prevents smaller banks from becoming bigger.

http://en.wikipedia.org/wiki/JPMorgan_Chase

And, as some of the more interested forumites will notice, history is repeating itself.

In the 1930s, all J.P. Morgan & Co. along with all integrated banking businesses in the United States, was required by the provisions of the Glass-Steagall Act to separate its investment banking from its commercial banking operations.
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I wonder if this means we'll be seeing a repeat of the 1930's in the next decade.
 
Well New Deal economics is the Keynesian answer to recessions. That is happening now as well. So yes, we are repeating 1930 FDR Keynesian policies.
 
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