What is so complicated about financial reform? Can't they just reinstate Glass Steagall?

[Atman]

All this hype about the Dodd bill, blah, blah, blah... what's the point? We had laws and regulations that worked for decades, and repealed them. Why are we starting from scratch instead of using GS as the foundation, with the updates needed to address current trading and banking issues?

I know part of the reason...the repeal of GS created new financial mega-institutions which would have to restructure themselves or break up certain operations. Fine, if that is what is needed to keep us economically secure. They NEED to be broken up.

[daleanime]

1. That part of the problem...

they don't want to.

[MadHound]

2. What, and piss off their corporate masters? There's an election coming up after all,

And with the recent Supreme Court ruling, the incumbents need all the money they can get. Thus they will act like they're doing some serious reform, when in reality they're just whitewashing the problem.

[alfredo]

3. I just sent "reinstate Glass Steagall" to Ben Chandler. That's all

nothing else.

[msongs]

4. lobbyists who are writing the bill don't want to do that - nt

[Kalun D]

5. It's Not Complicated At All

The only problem is that the perpetrators, the banks, own the politicians. In this case in 2 key places, the Senate and the White House.

Goldman Sachs invested more in Obama, $996,000, than Enron did in Bush. And Obama has appointed the banking fraud perpetrators (Geitner, Summers, Bernanke) to the top key positions of banking oversight.

The Grayson/Paul bill tries for the first time to audit the Fed, it passed the house. Don't know what it does as far as what G.S. did. The Dodd bill is a joke.

I think what also needs to be addressed is derivatives, not sure if either the G.P. or the G.S. do that. I also think they should go further than just an audit of the Fed, I think they should abolish it.

As far as your question I'm not sure but would imagine modern times might require more than G.S.

[FrenchieCat]

6. Because I'm not sure a company like Goldman Sachs would be considered a Commercial Bank......

And I think that Glass Steagall was enacted in direct relation to regulating the commercial banking industry (who were the culprit at the time) not so much the investment Banking industry. It was meant to keep the two separate, but nowdays, the problem of derivatives, Hedge Funds, and AIG wouldn't be addressed by simply re-enacting Glass Steagall.

So the problem maybe that in these modern times, the Glass Steagall act is to the banking industry what the Fairness Doctrine is to the Broacast industry; which if re-enacted would only affect the television networks, but not the cable industry....which of course means that the Fairness Doctrine wouldn't quite do the trick as it once did, based on what the current problems are.

Modern times most likely need modern solutions/regulations, as nothing is the same as it once was.

Of course, I may be off base on this, as I don't claim to be an expert, but unless someone actually has thoroughly read and totally understands the Wall Street regulations currently moving through congress, it's hard to say that they themselves know what they are talking about.

Glass Steagall - http://www.investopedia.com/articles/03/071603.asp?viewed=1

Obama takes on America's banks with new Glass-Steagall act
President Obama targets Wall Street with reforms that echo classic Depression-era legislation that prevented commercial banks from making risky trades
http://www.guardian.co.uk/business/2010/jan/21/obama-bank-reform-glass-steagall


Rather than folks making endless posts denouncing this administration, and Obama in particular as being part of conspiracies based on campaign donations and blah-blah-blah, I suggest that they actually try and discuss the issue in something other than a childish acussatory manner. This thread up to this point provides no hint at solving anything; doesn't inform on the points of facts, and really does a disservice in posters attempts to indict this President for wrongdoing, when I don't believe any of this shit was truly his fault to begin with. Those who try so hard to paint Obama as a dishonest pol willing to do anything to save his monied friends is the teabagging theory. Certainly if they would replace Obama's name with Bush or Clinton, they may have a point, as both had a direct hand in getting us to where we are......but to blame or suspect this President of what has gone on in the past decade, since Glass Steagall was repealed is pretty ridiculous....but I guess, expected.

[Stephanie]

7. I think GS *became* a commercial bank after the meltdown

Didn't they all?

[FrenchieCat]

8. Yes, it appears so......

WASHINGTON — The Federal Reserve said Sunday it had granted a request by the country's last two major investment banks _ Goldman Sachs and Morgan Stanley _ to change their status to bank holding companies.

The Fed announced that it had approved the request of the two investment banks. The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions.

The change continued the biggest restructuring on Wall Street since the Great Depression.

The request for the change to bank holding companies was granted by a unanimous vote of the Fed's board of governors during a late Sunday meeting in Washington.

The change of status means both companies will come under the direct regulation of the Federal Reserve, which regulates the nation's bank holding companies. The banking subsidiaries of the two institutions will face the stricter regulations that commercial banks are required to meet. Previously, the primary regulator for Goldman and Morgan Stanley was the Securities and Exchange Commission.
http://www.huffingtonpost.com/2008/09/21/morgan-stanley-goldman-sa_n_128147.html


That may be why reinacting Glass Steagall would be of no consequences, and that more regulations are needed than simply that.

Again, as stated in my other post, I'm no expert, but the discussion in this thread didn't point to anyone else providing any real facts......so I thought that I would try to.

[kentuck]

9. Why did they want to change their status?

and I think you have answered your own questions. They wanted the protection of taxpayers to continue gambling.

[FarCenter]

12. So theoretically, the government should not have let GS and MS become banks and let them fail

But that would have collapsed the financial system.

Only about 40% of the financial system is in the commercial banks. About 60% of the financial system is non-bank financial institutions. They are the problem that needs to be addressed, not the banks.

The only banks that got into trouble were the ones that had merged with large thrifts -- Bank of America with the thrift Countrywide, and Wachovia with the thrift Golden West. The bad mortgages in the thrifts nearly collapsed BofA and caused Wachovia to be rescued by Wells Fargo.

[kentuck]

14. The commercial banks should be separated from the investment banks...

The investment banks have produced nothing but money profits to be handed out as bonuses and big salaries. Nothing. Nada. They have produced wealth out of thin air. Why should we bail them out when they go under??

GS go under? They made money off the crisis by selling short. The bailout money was only a bonus for them. They had profits above and beyond the bailout. They were not about to go under. But thanks for the bailout money. We can give our people another big bonus. Suckers!

[FarCenter]

20. But you still have the problem of how to rescue the investment banks

and other non-bank finanacial institutions.

The commercial banks, with the exception of Citicorp and Wachovia did not fail and were not in deep trouble.

The institutions that failed or were failing were not commercial banks. They included --

- thrifts like Countrywide, WaMu, IndyMac, Wachovia because it had acquired Golden West

- investment banks like Bear Stearns, Lehman, Merrill Lynch, and Morgan Stanley would have been next to go,

- insurance companies like AIG and the mono-lines like MBIA,

- loan companies like GMAC, Chrysler Financial, CIT, (and GE Captial was getting shaky).

So with the downfall of these non-commercial bank financial institutions mortgages had dried up, short term credit was unavailable for businesses, state and local government couldn't get funds, and commercial loans and commercial real estate mortgages were unavailable.

There was no commercial banking crisis or bailout. The crisis was in the non-bank financial institutions, many of which were merged into commercial banks that were strong enough to carry them (e.g. WaMu and Bear Stearns by JPM), while other non-bank FIs were converted to commercial banks so that the Federal Reserve could provide them with liquidity in order to keep them afloat (e.g. GMAC).

[kentuck]

29. Why should "we" rescue the "investment" banks.

That's their gambling house. They played and lost. They can still maintain their commercial banking business. They should not be asked to surrender that license. But the taxpayers should not have to fork over all this money to rescue these 5 or 6 big banks.

Would there be repercussions? Absolutely! They have put 8 million people out of work already. Who knows how much damage they could wreck upon this economy. Justice? Where art thou?

[laughingliberal]

13. +1 nt

[Demeter]

10. the Problem Has Gotten Much Bigger Since the Repeal

Glass-Steagal would need to be strongly and massively updated to cover all the creative ways the banksters have invented to screw over the world.

Needless to say, that's not what will come out of Congress. Not this year.

[kentuck]

11. investment banks should not be protected by the FDIC...

the taxpayers, in my opinion. Let them gamble on their own money. It is reported that there are $600 trillion dollars in these derivatives!!!!!!!!!!!

[FrenchieCat]

17. List the current investment banks that exist.....

[kentuck]

30. In name, there are none...

In practice, they are the same as before....except worse.

[Atman]

15. Well, I did bring that up in my OP. FrenchieCat take note:

While FC's posts provide some good insight, I don't really see the need to belittle other DUers for not offering up their comprehensive solutions. It's kind of above and beyond the purview of a DU discussion thread.

I don't deny that G-S would have to be strongly updated, never said otherwise. In fact, it's what I alluded to in my second paragraph; of course things are different now, as a very result of the repeal of G-S. But much of what G-S did worked and could work again. I don't see why it has to be prohibitively complicated to start with the basic framework of the old law and add to it, update it and modify to address all the new hocus-pocus financial instruments which arose from deregulation of the industry. If it means we have to tell Goldman Sachs or Citi that they'll have to shut down divisions and/or get out of certain businesses, so be it.

This is where I part ways with Frenchie; it isn't any more helpful for you to call out DUers who are upset with Obama than it is for those DUers to post without offering a solution of their own. In each of those angry posts, there are truths which cannot be overlooked. Just because they don't actually answer the problem, they provide background and insight as to why people are so upset, and why the same old Washington pols are likely to screw us over once again as they protect the people who pay their bills.

I believe this is part of why the GOP keeps calling for "incremental reform" and "starting over." They're actually afraid of a comprehensive, sweeping bill because it might actually DO SOMETHING. For instance, the way I see it, we should throw Campaign Finance and Lobbying Reform into the mix, because as long as these guys are getting bankrolled by the people they're supposed to be regulating, very little will change. So fuck "incremental." Go huge. Do it large, address the real issues and not just the sound bites. Reform can't stop at Wall Street, it must include K-Street to be truly effective.

[FrenchieCat]

16. I was simply addressing the point of your OP asking about "re-instating" Glass Steagall?

If GS has to be massively updated in order to be effective,
than it would no longer be Glass-Steagall technically.....
which I though was what your OP was kind of saying initially.

Is it possible that some of the updates you are want to see (that you don't detail in your Op)
may be in the current Wall Street Reforms?

We can certainly discuss what other provisions should be showing up
that aren't, as this would be a fruitful discussion.

But what I read in your OP was....
"What is so complicated about financial reform? Can't they just reinstate Glass Steagall?"

[Atman]

18. Those were questions, Frenchie.

Thus the question marks following them. They indicate that I was looking for some answers, not that I was issueing an edict.

Again, in my second paragraph I stated that I understood things have changed. But I don't believe things have changed so drastically legally. Where they've changed is in the corporate structure of the banks and trading firms who are now virtually inseparable, and too damned big. Inseparable only because they don't want to be separated. They're making too much money. They built fancy new offices. They pay themselves insane bonuses with the money-making schemes they're inventing. That is why I don't see it as a major deal reverting the fundamentals of G-S; separate the banks and gambling firms once again. Require realistic capital reserves. Break them up back to what the structure was before...we simply don't need these Wall Street casinos insured as banks with taxpayer money. Break 'em up, and much of G-S could be reinstated just the way it was before.

Or is all this "too big to fail" talk just that; talk? Without breaking them up, and reinstating most of the old rules which actually worked, I don't see how we'll accomplish much.

[FrenchieCat]

19. I understand what you were asking......

but did you read the answers you got?

[grahamhgreen]

21. Repeal GS - and the financial sevices modernization act!

[Cleita]

22. Because our government has been corrupted by big business and

that restructuring or breaking up certain operations is the last thing those businesses want. So the Senators and Congressmen that they have invested in all these years now have to pay back the investment.

[Sebastian Doyle]

23. Roll back every law passed since 1981

And then we might have a chance at some actual recovery.

[Enthusiast]

24. +1 nt

[merkins]

25. Just like the single payer health-care

Coin operated government is bought and paid for. One Dollar = One Vote

[Festivito]

26. Because we have lying lobbyists lying though a sole lying media. /nt

[BlooInBloo]

27. "What is so complicated about.." - Americans' favorite opening.

[Atman]

28. It's not my favorite opening.

In fact, I think it's the first time I've used it to start a thread.

:hi: