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Proposed New York State Virtual Currency Regulations [pdf]

dfs.ny.gov

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Re: Proposed New York State Virtual Currency Regulations [pdf]

#51

Post by murbard2 »

jerf wrote: post #20
innguest wrote: post #13

This is absolutely ridiculous. That some part of "The Government" thinks they can regulate something that is not theirs is laughable. They've done (and continue to do) enough harm regulating their fiat currency. Who gives them the right, and more importantly, how can they be so delusional to think they can actually regulate something that is built in such a way as to be regulation-proof? Where's the torrent regulatio…

'That some part of "The Government" thinks they can regulate something that is not theirs is laughable.' Bwuh? I can not come up with a sensible interpretation of this sentence. And I've tried.

s/can/may/

Re: Proposed New York State Virtual Currency Regulations [pdf]

#52

Post by wdewind »

murbard2 wrote: post #50
wdewind wrote: post #49

Earlier quoted context omitted.

The goal is not to make it so commercial banks cannot buy certain securities. The goal is to make it so they don't feel like they have to just to keep up with the Joneses. If they decide independently that they want to run their banks by investing in higher risk securities I'm fine with that, because in the history of banking that's just not what's happened (until, of course, the major parts of Glass Steagall were re…

>Don't you agree the strategic outlook of an investment bank is entirely different than that of a commercial bank? I do which is why banks will specialize in different niches regardless of regulation. No law prevents a cement making company from leveraging itself like crazy and invest it all in high risk / high reward biotech research. And yet you don't see that happening. Also, you fail to address the argument that…

> No law prevents a cement making company from leveraging itself like crazy and invest it all in high risk / high reward biotech research. And yet you don't see that happening.

And yet we did see commercial banks taking massive risk and going bankrupt because of it. Maybe that's ok though, I could certainly buy the argument that that's just the market.

> Also, you fail to address the argument that a liquid commercial paper market gives ibanks de facto access to deposits.

I don't know what you mean by that. Do you mean ibanks can buy publicly traded commercial bank stocks?

Edit: And let's bring this back around: if this is not the appropriate regulation, what is? Open to hearing something better for sure.

Re: Proposed New York State Virtual Currency Regulations [pdf]

#54

Post by murbard2 »

wdewind wrote: post #52
murbard2 wrote: post #50

Earlier quoted context omitted.

>Don't you agree the strategic outlook of an investment bank is entirely different than that of a commercial bank? I do which is why banks will specialize in different niches regardless of regulation. No law prevents a cement making company from leveraging itself like crazy and invest it all in high risk / high reward biotech research. And yet you don't see that happening. Also, you fail to address the argument that…

> No law prevents a cement making company from leveraging itself like crazy and invest it all in high risk / high reward biotech research. And yet you don't see that happening. And yet we did see commercial banks taking massive risk and going bankrupt because of it. Maybe that's ok though, I could certainly buy the argument that that's just the market. > Also, you fail to address the argument that a liquid commercial…

>And yet we did see commercial banks taking massive risk and going bankrupt because of it

The depositors were insured, so the depositors didn't care. The bank shareholders had a free call option from the federal government in the form of an an implicit bailout guarantee, so they were incentivised to take as much risk as possible.

> I don't know what you mean by that. Do you mean ibanks can buy publicly traded commercial bank stocks?

Without Glass-Steagall: commercial bank takes 90$ from Joe's 100$ deposit and invests it in leveraged CDO^2 on Bhutanese real estate.

With Glass-Steagall: commercial bank takes 90$ from Joe's 100$ deposit and buys 30-day debt from an ibank. The ibank use the money to invest in leveraged CDO^2 on Bhutanese real estate.

Re: Proposed New York State Virtual Currency Regulations [pdf]

#55

Post by wdewind »

murbard2 wrote: post #54
wdewind wrote: post #52

Earlier quoted context omitted.

> No law prevents a cement making company from leveraging itself like crazy and invest it all in high risk / high reward biotech research. And yet you don't see that happening. And yet we did see commercial banks taking massive risk and going bankrupt because of it. Maybe that's ok though, I could certainly buy the argument that that's just the market. > Also, you fail to address the argument that a liquid commercial…

>And yet we did see commercial banks taking massive risk and going bankrupt because of it The depositors were insured, so the depositors didn't care. The bank shareholders had a free call option from the federal government in the form of an an implicit bailout guarantee, so they were incentivised to take as much risk as possible. > I don't know what you mean by that. Do you mean ibanks can buy publicly traded commerc…

Yeah that all makes sense, but if we aren't going to prevent commercial banks from buying high risk securities, it also seems like the FDIC shouldn't be insuring them.

Re: Proposed New York State Virtual Currency Regulations [pdf]

#56

Post by murbard2 »

wdewind wrote: post #55
murbard2 wrote: post #54

Earlier quoted context omitted.

>And yet we did see commercial banks taking massive risk and going bankrupt because of it The depositors were insured, so the depositors didn't care. The bank shareholders had a free call option from the federal government in the form of an an implicit bailout guarantee, so they were incentivised to take as much risk as possible. > I don't know what you mean by that. Do you mean ibanks can buy publicly traded commerc…

Yeah that all makes sense, but if we aren't going to prevent commercial banks from buying high risk securities, it also seems like the FDIC shouldn't be insuring them.

The whole point is that even if you prevent them from buying high risk securities, they will buy AAA rated commercial paper from ibanks that will.

And surely you're not going to prevent a bank from making loans, that's their whole raison d'etre (safekeeping of money is incidental).

Short of getting rid of central banking, I don't think you can do anything about this.

Re: Proposed New York State Virtual Currency Regulations [pdf]

#57

Post by wdewind »

murbard2 wrote: post #56
wdewind wrote: post #55

Earlier quoted context omitted.

Yeah that all makes sense, but if we aren't going to prevent commercial banks from buying high risk securities, it also seems like the FDIC shouldn't be insuring them.

The whole point is that even if you prevent them from buying high risk securities, they will buy AAA rated commercial paper from ibanks that will. And surely you're not going to prevent a bank from making loans, that's their whole raison d'etre (safekeeping of money is incidental). Short of getting rid of central banking, I don't think you can do anything about this.

Yeah, I am convinced. Thanks for a great conversation.
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