[magprob]

Bush proposes financial regulation overhaul - Stocks & economy - MSNBC.com

Is it just me? Is there something wrong with handing the key to Americas financial system to private bankers? What does this mean to you? The stock market is being manipulated by them. They have the power to manipulate our entire economy. No, that can't be possible. I must be paranoid.

[tomder55]

Is it just me? Is there something wrong with handing the key to Americas financial system to private bankers?

I don't know .It is the way the US has conducted business since 1791 . I will have to see the details. Certainly the idea of a private institution to manage the financial system has been controviersial since Hamilton proposed the creation of the First Bank of the United States. As you know ,both Jefferson and in particular James Madison opposed the creation .But a compromise was negotiated between the 3 that the Bank would be created in return for the Capital being moved to the Potomic River area.

My initial reaction is that I generally oppose gvt. Manipulation of market forces. Recessions can easily become depressions as we have seen in the past. I have not been thrilled with the Fed.' s performance in the last few years so I would be cautious about expanding their mandate.

I guess I will have to weigh this proposal against some of the idiotic knee-jerk reaction proposals coming out of the Democrats in Congress and Presidential candidates. I am pretty sure that government feels compelled to act based on the financial news in recent weeks. But the cure may be worse than the disease. John McCain in his speech was very cautious about government over-reaction . But all people remember is a one liner he made about being weak on economic policy. But it seems he is right about this one .

[excon]

I don't know .It is the way the US has conducted business since 1791 .

Hello tom:

Nope. The fed just became the lender of last resort. They've never done that before. The fed opened the discount window to the investment banks. They've never done that before.

It's true. We're entering uncharted waters. The dufus in chief'll probably do another tax cut... Bwa ha ha ha ha.

excon

PS> Buy gold.

[tomder55]

Excon ;my point was that the First Bank of the United States ;created to handle the financial dealings of the United States was a private bank and not a branch of the government . The fact is that we have always placed the financial system in the hands of private bankers.

I probalby do not agree with giving the Fed the expanded powers but I have to look into the details . I will wait until Paulson's speech on the issue.

Nope. The fed just became the lender of last resort. They've never done that before. The fed opened the discount window to the investment banks. They've never done that before.

Nothing of the sort has happened yet.

[inthebox]

http://www.nytimes.com/2008/03/29/bu...gewanted=print

"That would be a significant expansion of the central bank's regulatory mission.

When Fed officials agreed this month to rescue Bear Stearns, once the nation's fifth-largest investment bank, they pointedly noted that the Fed never had the authority to monitor its financial condition or order it to bolster its protections against a collapse.

In two UNPRECEDENTED moves, the Fed engineered a marriage between JPMorgan Chase and Bear Stearns, lending $29 billion to JPMorgan to prevent a Bear bankruptcy and a chain of defaults that might have felled much of the financial system.

For the first time since the 1930s, the Fed also agreed to let investment banks borrow hundreds of billions of dollars from its discount window, an emergency lending program reserved for commercial banks and other depository institutions"

Economics Blog : Behind the Fed's Unprecedented Steps

"The Fed was created in 1913 in part to be “lender of last resort” during crises such as the one now sweeping through the financial system. But it was equipped for an economy in which banks provided most credit. Now banks share that role with institutional investors, finance companies, asset-backed pools and securities dealers such as Bear Stearns.

Since the current credit crisis began in August, the Fed has taken ever more innovative steps to push its remedies beyond the banking system"




Agree Ex and Mag,

All this fed activity does not inspire confidence.:(

[magprob]

Confidence? What Confidence? I lost that quite a while back. What this really means is that the private bankers have usurped the power from the Government of the United States of America. When they call in their loans and we are unable to pay, America will be foreclosed on. That is what has happened in the housing market... it has begun. The thieves have pillaged our country. That has been the plan all along.
To whom do you suppose we, the American taxpayers, owe the near 10 TRILLION dollar deficit to any way? The owners of the Federal Reserve, that's who. There ain't enough dollars on the entire planet to pay it off! There ain't enough dollars, Euros, Pesos or anything else to pay them off.

.: NEW BUSH COINS

"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs."
- Thomas Jefferson

"The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our constitutions, which, if not covered, will end in their destruction. I sincerely believe, with you...that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."
- Thomas Jefferson

"I wish it were possible to obtain a single amendment to our Constitution - taking from the Federal government their power of borrowing (from privately-owned corporate banks)."
- Thomas Jefferson

"We are undone, my dear sir, if legislation is still permitted which makes our money, much or little, real or imaginary, as the moneyed interests shall choose to make it."
- Thomas Jefferson

[tomder55]

Yeah Jefferson and Madison went so far as to accuse a couple of our greatest founders the most vile accusations over the issue of the First National Bank. The truth is that Jefferson wanted to maintain the supremacy of Virginia's economic and political dominance and the slave trade .In 1795 Jefferson entrusted the leadership of the “Southern interest” to Madison. He then crossed out the word “Southern” and replaced it with “Republican.”(the politcal party they founded that is now called Democratic)The truth of their concerns was later exposed and revealed by Nathaniel Macon in 1818 who said “Tell me if Congress can establish banks, make roads and canals, whether they cannot free all the Slaves in the U.S.”

The truth is that the luckiest thing that happened in the countries founding was that Jefferson was in Paris at the time of the Convention or the Federal Government most likely would not have happened. I find it ironic that when he became President he had no problem exercising expanded powers of the executive. But that is in line with Jefferson who's whole life was one inconsistent contradiction after another .

Now I have not decided on this issue yet but I knew that you had a historical objection to it that went back as far as the Founding. It has been central to the debate in the country since then . My initial reaction is that the Fed now has the power to lend and have oversight over commercial banks like JP Morgan ,but was never given similar powers by Congress to give loans and oversight to the investment banks like Bear Stearns.(the dismantling of the Glass-Steigel act) Had the Fed had the authority they could've given the loan they gave to JP Morgan directly to Bear Stearns ;they could've told them to get their house in order and perhaps this crisis could've been averted . Perhaps President Bush is right that the regulatory system is too disjointed and should be centralized. The devil is in the details. I have no doubt that Congress will have a big say on the final outcome of this proposal.

[magprob]

“Tell me if Congress can establish banks, make roads and canals, whether they cannot free all the Slaves in the U.S.”

Can Congress put a private coporation in charge of our entire financial process in which none of their profits go to make roads and canals and will enslave us all to their inevitable need to raise the federal income taxes?
A private corporation with a monopoly on the creation of a fiat currency. Now can you even measure the power that comes with that?

[ordinaryguy]

Nothing of the sort has happened yet.

Oh, yes, it has. The Fed has indeed opened the discount window to investment banks. Try to keep up.

[magprob]

OG, Whazz up! What do you make of this?

[ordinaryguy]

OG, Whazz up!? What do you make of this?

A monetary authority with the power to regulate the money supply is an essential institution of a market economy. It's not a conspiracy.

[magprob]

Gee, you're no fun.

[tomder55]

The Fed has indeed opened the discount window to investment banks. Try to keep up

Yeah your right sort of .

First, the Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets.... Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities.

FRB: Press Release--Federal Reserve announces two initiatives designed to bolster market liquidity and promote orderly market functioning--March 16, 2008

this is why JP Morgan got the deal and not Bear Stearns directly .

But they should've done that once Glass-Stegall was repealed .

[ordinaryguy]

But they should've done that once Glass-Stegall was repealed .

Yeah, your right, sort of.

The fundamental problem is that the proliferation of non-bank, and therefore mostly non-regulated, financial intermediaries has seriously undermined the Fed's ability to control the money supply. Or more precisely, the supply of credit. When credit is cheap and easy to obtain, people use more of it.

What really happened in the housing market was that the mortgage brokers and investment banks figured out how to tap the huge reservoir of Dollars held by foreigners, and make it available to the domestic US residential real estate market. Not only that, they could do it at rates that undercut the rates offered by the domestic (regulated and insured) banks, whose primary source of funds is domestic deposits. The resulting flood of money into a single sector of the US economy (residential real estate) produced the predictable bubble.

Rather than seeing this for what it was--loss of control of the money (credit) supply--Greenspan cheered it on. Bernanke may be right that the danger (likelihood and consequences) of a total collapse of the credit market is so great that it justifies taking the large and well-known risk of future inflation and yet another speculative asset bubble by pumping huge infusions of cash into BOTH the regulated and unregulated sectors of the financial industry. The consequences of allowing the unregulated segment to self-destruct would indeed be dire, probably taking the regulated segment with it.

It's a real catch-22. We got in this mess because of excess credit, yet to keep the train from going off the rails entirely, we have to supply even more credit. I expect the train to stay on the tracks, but go very fast and furiously for awhile. For how long depends on how soon the Fed starts standing on the brakes instead of the accelerator.

[tomder55]

How much of the real estate crisis do you attribute to the unintended consequences of the pressure put on lending institutions by the liberalizing changes of the Community Reivestment Act in 1995 and 2005 ?

[excon]

How much of the real estate crisis do you attribute to the unintended consequences of the pressure put on lending institutions by the liberalizing changes of the Community Reivestment Act in 1995 and 2005 ?

Hello again, tom:

You're looking for a bad guy, and of course he'd be the liberal... YOUR guys are innocent...

But, it ain't true. You know who the bad guys are?? Everybody!

It's not the guys who flip houses... It's not the banks who did a number on poor borrowers... It's not the borrowers who did a number on poor banks... It's not the brokers who made the loans... It's not the packagers who bundled the loans and sold them... It's not the hedge funds, or Fanny Mae or Freddy Mac, or any of the speculators who bought the packages, like Bear Stearns... It's not congress who passed the law you referred to, then did nothing... And finally, it's not the federal regulators who stood by and did NOTHING while everybody (including ALL of the above) was getting rich - really RICH!

It's every single one of them, and a few more!

Now, the fed/gov is going where they've never gone before, and have no idea how it's going to turn out.

Buy gold.

excon

[tomder55]

Not at all Excon . In this case I think the Congress should do their job and investigate and make sober recommendations to correct the problem. Will they ? To a degree yeah ;they will look for some failure from "my guys" and ignore the fact that they share the responsibility by mandating that the lending institutions make bad loans in the 1st place.

By the way ;I am still undecided about the new proposal but am leaning against it .

[ordinaryguy]

How much of the real estate crisis do you attribute to the unintended consequences of the pressure put on lending institutions by the liberalizing changes of the Community Reivestment Act in 1995 and 2005 ?

Not much. The CRA was an attempt to get regulated lenders to take risks they didn't want to take, precisely because they knew how high those risks were. The unregulated sector's "competitive advantage" was the ability to sell highly risky mortgages as "investment grade" securities, thus obtaining international capital at rates well below the cost of domestic deposits. As we now know, those "investment grade" ratings were imprudent at best, possibly fraudulent.

[tomder55]

Just finished reading Paulson's speech and I cannot support this idea.

hp-897: Remarks by Secretary Henry M. Paulson, Jr. on Blueprint for Regulatory Reform

Not only would this consolidate the regulatory agencies into another Soviet looking politburo under the Fed ;instead of streamlining the process he is actually proposing even more agencies to add to the confusion. The funny thing is that the left blogs are belly aching that it doesn't go far enough.

[magprob]

Power corrupts. Total power totally corrupts. There is no conspiracy about it, that's just the way it is and that is how this will work out.