Obama steps up campaign against Wall Street banks

[pratikshah]

Obama takes aim at Wall Street, wants tough federal oversight of nation's biggest banks
Obama said the government should have the power to limit the size and complexity of large financial institutions as well as their ability to make high-risk trades.
This action of administrative committee of Obama may weaken fin sec especially banking sector .So It may cause to decrease jobs opportunity at several financial institute as a result of new policies.

 

[Uncle Max]

Those all are just words. Pretty much like everything else he says. He already has promised to close Guantanamo Bay, end war in Iraq and Afghanistan, reform health care system etc. You know the results.

His team is nervous after election in Massachusetts and they are desperate to do something. Obama does the best he can - talks.

 

[bigbadwolf]

Those all are just words. Pretty much like everything else he says. He already has promised to close Guantanamo Bay, end war in Iraq and Afghanistan, reform health care system etc. You know the results.

His team is nervous after election in Massachusetts and they are desperate to do something. Obama does the best he can - talks.

Hehe, right you are and bang on target. A spineless wonder who can talk the talk but can't walk the walk. No cojones at all. At least he knows how to look grave and sombre ...

 

[GoIllini]

I'm not sure if these regulations are that awful of an idea.

Obviously, the CFO of JP Morgan shouldn't be showing up with 30 armored cars and having the firm wager $5 Billion on red at the Golden Nugget in Vegas if that money is insured by the FDIC- or at least promised to be safe to depositors.

At first glance, it sounds like Obama is asking to reimpose a very relaxed form of Glass-Steagall on the commercial banks. Given that Glass-Steagall worked very well for our economy for 70 years, I think this is much better than the alternative that many in Congress would be pushing for- the full reimposition of Glass-Steagall.

If Obama is talking about better capital requirements for banks and risk-weighting those requirements, that actually sounds pretty sensible. We get to keep the universal banking system, but universal banks have to play a more conservative game if it wants to take risks with deposits.

If I were a lobbyist, and it's safe to assume this is all this bill does, I'd be advising bankers to support the compromise. The bill only prevents commercial banks from doing stuff that would be pretty stupid in the first place, and it averts the need for Glass-Steagall II.

 

[Uncle Max]

It will never go through. Here is first response from Congress:


WASHINGTON (MarketWatch) -- A key lawmaker on Thursday said he would be supportive of an Obama Administration proposal to impose strict limits on the size and trading activities of the nation's biggest banks, as long as divestitures of hedge funds and investments in private equity are not required right away.

"I will be supportive of this with a time frame of no less than 3 or 5 years before it gets done,"

said House Financial Services Committee Chairman Barney Frank, D-Mass., on CNBC TV. "To have all these sales at the same time would be a fire sale and I can't support that."

 

[Adam]

Hehe, right you are and bang on target. A spineless wonder who can talk the talk but can't walk the walk. No cojones at all. At least he knows how to look grave and sombre ...

Let's say the Democrats suggest we order pasta for dinner. The Republicans threaten to filibuster, suggesting that we eat broken glass, instead. The Democrats respond by offering a compromise: we'll eat broken glass for dinner, but we'll have tiramisu for dessert.

These are our choices in America: insane nutjobs with terrible ideas, or timid weaklings who keep letting the nutjobs win.

 

[IlyaKEightSix]

And this is why I wish Eric Schmidt would run for President. I wish scientists would take over Congress instead of these blowhard talking heads.

That said, I would support a re-imposition of Glass Steagall. I believe the hedge fund industry is the perfect model of what our financial industry should strive to look like--perfectly competitive, and if one goes boom, it's like a pebble into a pond. Maybe a few ripples, but nowhere near threatening. When Amaranth went bust, nobody really cared besides its own investors.

In the meantime, I believe that those who borrow money from the government (taxpayer dollars) and need government action to prevent a total catastrophe should they collapse (a ton more taxpayer dollars) have no business taking absurd risks with it.

If you have access to the government dole, I think that you have no business gambling, period. If you want to gamble, then you should not be a potential government liability for even one penny.

Win on your own terms; lose on your own terms.

The whole too big to fail to me is like playing a video game with an invincibility cheat code. What's the point of even winning if your risk of losing is so diminished?

 

[Uncle Max]

Eric Schmidt was an informal adviser to the Barack Obama presidential campaign and began campaigning the week of October 19, 2008, on behalf of the candidate.

He had been mentioned as a possible candidate for the new Chief Technology Officer position which Obama created in his administration. After Obama won, Schmidt was a member of President Obama's transition advisory board.

 

[bob]

Should be fun coming up with securities that fit the technical definition of commerical loans but have the characteristics of prop trades.

 

[Uncle Max]

Like a loan with subprime MBS tranche posted as a collateral. Of course, interest on this loan will be equal to tranche's coupon.

Second step is to repackage pool of these "commercial loans" and underwrite ABS deal formerly known as CDO.

 

[bob]

Yes, or start up a hedge fund with an initial capital infusion from Commercial Bank A that's debt in the capital structure but gives the borrower the option to defer interest payments, the lender the option to extend, and links the coupon to fund performance....

 

[IlyaKEightSix]

That or in the event of a government bailout, the share price immediately goes to a perfect 0, not the $10 a share that Bear execs got. The creditors get whatever is left of the firm in the appropriate order of the capital structure. It doesn't matter if your holdings of company stock were worth $300 million, and/or if you had your entire nest-egg in your firm's stock.

In the event of the firm failing, all equity is wiped out, and the company is sold off at fire-sale prices.

Just make sure that those who are too big too fail get the message that if they bust, the government will try all it can to stop the systemic fallout, but all the upside anybody held gets wiped out in a heartbeat.

 

[Stefan Zota]

These "solutions" to rebrand a financial product show the core fallacy of this politician approach. People may say CDO are bad, we just ban them, so the politician jumps to meet public sentiment.
Laws will be behind the market all the time, no point in trying to catch up.

The goal is to create an environment (e.g. create exchanges, revise ratings) for a fair competition. If the market is mature, it can handle the rest.