Baker: Glass-Steagall now, tomorrow and forever

Here's how Baker sums it up [emphasis mine]:

What is striking about the argument on re-instating Glass-Steagall is that there really is no downside. The banks argue that it will be inconvenient to separate their divisions, but companies sell off divisions all the time.

They also argue that foreign banks are not generally required to adhere to this sort of separation. This is in part true, but irrelevant.

Stronger regulations might lead us to do more business with foreign-owned banks since weaker regulations could give them some competitive edge. That should bother us as much as it does that we buy clothes and toys from Bangladesh and China.

If foreign governments want to subject themselves and their economies to greater risk as a result of bad financial regulation, that is not an argument for us to do the same.  Are we anxious to be the next Iceland or Cyprus?

Glass-Steagall now: Because the banks own Washington

By Dean Baker

August 5, 2013 | Al Jazeera

URL: http://www.aljazeera.com/indepth/opinion/2013/08/201384183347752450.html

Fed prez at CPAC: Break up TBTF banks!

The Left and the Right, perhaps for different reasons, may be converging on a consensus that it's time to break up the unmanageable Too Big To Fail banks.

About Dallas Fed President Richard Fisher's critique of Dodd-Frank, I would remind everybody that Congress has been been waiting for more than two years to adopt regulations while banking industry lobbyists have spent $400 million and submitted thousands of pages of comments and suggested corrections. Thus the very banks that say Dodd-Frank is overly complex are the same ones making it overly complex. For a detailed post-mortem of the Dodd-Frank bill, read Matt Taibbi's "How Wall Street Killed Financial Reform."

Richard Fisher Says Too-Big-To-Fail Banks Need To Be Broken Up

March 16, 2013 | Reuters

By Pedro Nicolaci da Costa

The largest U.S. banks are "practitioners of crony capitalism," need to be broken up to ensure they are no longer considered too big to fail, and continue to threaten financial stability, a top Federal Reserve official said on Saturday.

Richard Fisher, president of the Dallas Fed, has been a critic of Wall Street's disproportionate influence since the financial crisis. But he was now taking his message to an unusual audience for a central banker: a high-profile Republican political action committee.

Fisher said the existence of banks that are seen as likely to receive government bailouts if they fail gives them an unfair advantage, hurting economic competitiveness.

"These institutions operate under a privileged status that exacts an unfair tax upon the American people," he said on the last day of the annual Conservative Political Action Conference (CPAC).

"They represent not only a threat to financial stability but to fair and open competition (and) are the practitioners of crony capitalism and not the agents of democratic capitalism that makes our country great," said Fisher, who has also been a vocal opponent of the Fed's unconventional monetary stimulus policies.

Fisher's vision pits him directly against Fed Chairman Ben Bernanke, who recently argued during congressional testimony that regulators had made significant progress in addressing the problem of too big to fail. Bernanke asserted that market expectations that large financial institutions would be rescued is wrong.

But Fisher said mega banks still have a significant funding advantage over its competitors, as well as other advantages. To address this problem, he called for a rolling back of deposit insurance so that it would extend only to deposits of commercial banks, not the investment arms of bank holding companies.

"At the Dallas Fed, we believe that whatever the precise subsidy number is, it exists, it is significant, and it allows the biggest banking organizations, along with their many nonbank subsidiaries - investment firms, securities lenders, finance companies - to grow larger and riskier," he said.

Fisher argued Dodd-Frank financial reforms were overly complex and therefore counterproductive.

"Regulators cannot enforce rules that are not easily understood," he said. 

Taibbi: U.S. Gov't. let banksters get away with murder

Here's how Matt Taibbi sums up what British bank HSBC did:

For at least half a decade, the storied British colonial banking power helped to wash hundreds of millions of dollars for drug mobs, including Mexico's Sinaloa drug cartel, suspected in tens of thousands of murders just in the past 10 years – people so totally evil, jokes former New York Attorney General Eliot Spitzer, that "they make the guys on Wall Street look good." The bank also moved money for organizations linked to Al Qaeda and Hezbollah, and for Russian gangsters; helped countries like Iran, the Sudan and North Korea evade sanctions; and, in between helping murderers and terrorists and rogue states, aided countless common tax cheats in hiding their cash.

"They violated every goddamn law in the book," says Jack Blum, an attorney and former Senate investigator who headed a major bribery investigation against Lockheed in the 1970s that led to the passage of the Foreign Corrupt Practices Act. "They took every imaginable form of illegal and illicit business."

But here's why the U.S Government didn't prosecute HSBC in its own words:

"Had the U.S. authorities decided to press criminal charges," said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, "HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized."

Again, about a week later, the U.S. Justice Department gave a pass to UBS, which helped to illegally fix the LIBOR rate:

But the Justice Department wasn't finished handing out Christmas goodies. A little over a week later, Breuer was back in front of the press, giving a cushy deal to another huge international firm, the Swiss bank UBS, which had just admitted to a key role in perhaps the biggest antitrust/price-fixing case in history, the so-called LIBOR scandal, a massive interest-rate­rigging conspiracy involving hundreds of trillions ("trillions," with a "t") of dollars in financial products. While two minor players did face charges, Breuer and the Justice Department worried aloud about global stability as they explained why no criminal charges were being filed against the parent company.

"Our goal here," Breuer said, "is not to destroy a major financial institution."

HSBC was given warning after warning. An HSBC employee charged with detecting money-laundering blew the whistle to the FBI. Nothing. This gives the lie, once again, that businesses can be left to regulate themselves. 

And, not to sound like a blood-and-guts conservative, but, without the death penalty (prosecutions, jail time) there is no deterrent. We now have, according to our own government, "an unarrestable class" of banksters who are too socially and economically important to prosecute. To which I say: destroy away!  Off with their heads!  After all, isn't "creative destruction" what free enterprise is all about?  

Gangster Bankers: Too Big to Jail

How HSBC hooked up with drug traffickers and terrorists. And got away with it

By Matt Taibbi

February 14, 2013 | Rolling Stone

URL: http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214#ixzz2L6TJerww

Basel III: TBTF banks drag us back to the brink

(HT: Vern).  I don't pretend to get this 100%. But here's the upshot: the evil TBTF banks have successfully lobbied for lower liquidity (i.e. cash) requirements from the international "Basel III" Committee on Banking Supervision. Specifically, the banksters have been fighting to include riskier (read: shittier) securities in the numerator of the so-called Liquidity Coverage Ratio that banking regulators use to assess the riskiness of a bank.

Why is liquidity important, and why are the mega-banks lobbying to lower the liquidity requirements? Because the 2007-08 financial crisis started with the collapse of AIG, which in turn caused a run on banks when they couldn't honor their deposits and pay their creditors (because AIG was supposed to "insure" the banks' riskier investments that were a toxic house of cards). In other words, everybody everywhere had a shortage of cash simultaneously, leading us to near-collapse of the global financial system... until the U.S. Treasury, Federal Reserve and other central banks stepped in with huge amounts of free cash for the banks, which continues to this day.

So... now older and wiser, our banking regulators were supposed to pass Basel III reforms to prevent this from happening again... but the banksters and their lobbyists are patient and persistent, and have continued pushing to restore risk, since the only way they can make huge profits for themselves at our expense is through huge amounts of leverage (i.e. using borrowed money to buy assets and securities).  

I know it's tempting to let your eyes glaze over and ignore this stuff, or just buy into the myth that "irresponsible borrowers" and the FMs caused the Great Recession, but you really need to pay attention and tell your Congressmen that you care about banking supervision.  The mere fact that they (the banksters) care about this and spend $ billions to prove it, while you and I are silent, puts them at a huge advantage. 

You Call That Liquid? New Basel III Liquidity Rules Ineffectual

By Mayra Rodriguez Valladares

January 7, 2013 | American Banker

URL: http://www.americanbanker.com/bankthink/you-call-that-liquid-new-basel-iii-liquidity-rules-ineffectual-1055635-1.html