How to cut megabanks down to size

Post by temphn » Mon, Jan 21, 2013, 12:04 AM UTC

RockyMcNuts wrote: post #50

rayiner wrote: post #42

Earlier quoted context omitted.

Because it's a narrative with no basis in fact? The smaller banks were the ones hardest hit by the popping of the financial bubble. GS/MS/JPM didn't need the bailout, Lehman and Bear Stearns failed in a free market manner, and Merrill Lynch was bought out. It was the smaller banks that really needed the bailout money.

1) that's factually incorrect, 2 of the top five Wall Street firms failed (Lehman and Bear Stearns). 2) the other 3 (Goldman, Morgan Stanley, Merrill Lynch) would have failed after Lehman, the entire financial system had to be backstopped by the government. (If you look beyond pure securities firms, the largest insurance company (AIG) failed as well as the largest bank (Citibank - it effectively got nationalized and…

  Fannie Mae, Freddie Mac and the federal Home Loan Banks -- 
  the government-sponsored corporations that handle home 
  mortgages -- will increase their commitment to minority 
  markets by more than $440 billion, Bush said.

  Under one of the initiatives launched by Freddie Mac, 
  consumers with poor credit will be able to obtain mortgages 
  with interest rates that automatically decline after a 
  period of consistent payments, he added.

  To fight this recession the Fed needs more than a snapback;   
  it needs soaring household spending to offset moribund 
  business investment. And to do that, as Paul McCulley of 
  Pimco put it, Alan Greenspan needs to create a housing 
  bubble to replace the Nasdaq bubble.
 
  Paul Krugman, 2002

Post by anigbrowl » Mon, Jan 21, 2013, 12:53 AM UTC

cynicalkane wrote: post #26

ataggart wrote: post #6

>small institutions must submit to the rigors of the free market. >market discipline has worked to keep smaller institutions on the straight and narrow, it has been ineffective with megabanks >market participants have proved [in]effective in monitoring risks at these [huge banks]. >They know they will be protected by a taxpayer rescue should a large institution teeter. How is this not obvious to everyone involved?

They are obvious and breaking up the banks is a popular topic of speculation in the finance industry. What's a mystery is why it is taking so long for mainstream econ and op-ed writers to catch on. Paul Krugman, for example, proposed that big banks like Citibank provide value by having a huge service network, and therefore he's skeptical of breaking up banks. Which is true--Citibank's size is the primary (and probabl…

Post by yummyfajitas » Mon, Jan 21, 2013, 1:52 AM UTC

alexqgb wrote: post #10

pdog wrote: post #8

We already know how. The political will just isn't there.

Bullshit. If you're talking about the American people, the political will is there in spades. But thanks to gerrymandering and the filibuster, their voices been successfully nullified. The GOP holds the House by a wide majority, even though their members in it received fewer votes than the "minority" in opposition. And while the GOP has a numerical minority in the Senate, they still control the chamber since it (alon…

Post by snitko » Mon, Jan 21, 2013, 2:04 AM UTC

charonn0 wrote: post #60

The criminal actions[1] of Wachovia, Lloyds, Credit Suisse, Barclays, HSBC, et al have shown that the megabanks cannot be trusted to follow existing laws. The robo-signing debacle[2] has demonstrated amply that the financial sector can't be bothered to verify their data before destroying the lives of thousands of people. The LIBOR manipulation scandal[3] proves that even the industry's own measuring rods are bent and…

Post by drgolden » Mon, Jan 21, 2013, 2:30 AM UTC

charonn0 wrote: post #54

My first reaction to hearing the term "too big to fail" was "then make them smaller." I'm surprised that it's taken this long for such an idea to be seriously considered.