Not according to stock valuations
Bank of America...
Citigroup
Posted on 07/13/2013 9:40:05 AM PDT by whitedog57
US Senator Elizabeth Warren, the architect of the Consumer Financial Protect Bureau (CFPB), wants to put Glass-Steagall back into place. One of the purposes of the originial Glass-Steagall Act of 1933 was to separate commercial and investment banking.
“The four biggest banks are now 30% larger than they were just five years ago, and they have continued to engage in dangerous, high-risk practices that could once again put our economy at risk,” according to Senator Warren.
Hmm. The enormous spike in excess reserves may be what she is thinking about.
EXCRESNS
But Senator Warren forgets a few things.
First, the Dodd–Frank “Wall Street Reform and Consumer Protection Act” was passed into law in 2010 with the intent of separating banks/ from investment banking operations. Dodd-Frank created the Consumer Financial Protection Bureau which micro-manages banks and their relationship with clients. So, we have the massively flawed Dodd-Frank and the “financial puritan” Consumer Financial Protection Bureau already strangling the banking sector. Do we really need more (since Dodd-Frank gives the power to downsize the banks already?)
Second, too-big-to-fail entities are rampant in our economy, yet Senator Warren ignores these entities. Both Fannie Mae and Freddie Mac are too-big-to-fail and have already been rescued. What about them? Here is a chart of Fannie Mae’s assets AFTER they failed.
fannieltassets
Add in General Motors and Chrysler that also received bailout and were not allowed to fail.
Should banks be downsized? The argument that has been made that if the banks are systemically important (and can drag down the economy), then they should be downsized. But once again, what about Fannie Mae, Freddie Mac, GM, Chrysler and other bailed out firms?
And what about the penultimate too-big-too-fail entity: The US Federal Government? I don’t hear Warren calling for government downsizing or the shrinking of OTHER systemically important entities.
With sagging Money Multiplier and Velocity, I am curious to see how disruptive Glass-Steagall: the Sequel will be with Dodd-Frank and the Consumer Financial Protection Bureau already in place. With declining labor force participation and employment as a percentage of the population.
m1multiemppop
m2velpart
My advice? Get rid of Dodd-Frank and the Consumer Financial Protection Bureau. Ask the Fed and FDIC to enforce laws already on the books concerning bank size and deposits.
There. That was simple!
Senator Elizabeth Warren indicating the optimal size of US banks.
I'm sure our government spending has grown at an even greater rate in five years. Course she won't whine about that.
No, Fauxcahontas. Massive government and overspending puts our economy at risk.
This is why BOTH have to be reined in.
Of course, the four biggest banks acquired (and thereby "grew") other banks that were failing and saved the banking system. But facts don't matter to a liberal...
If Glass-Steagall was such a necessary regulation, how come Europe didn’t suffer crashes after never enacting such legislation ever?
If Glass-Steagall was still operative, there would have been no housing based derivatives, no MBS, no big bank bailouts, and no big political contributions from the big banks.
European bankers are much more conservative. In some countries the bank CEO is PERSONALLY liable for bank losses. That is opposite in good ole USA.
Citigroup
Speaking of Fannie Mae:
“Fannie Mae’s role in debt reduction is merely creative accounting”
http://www.washingtonpost.com/business/economy/fannie-maes-role-in-debt-reduction-is-merely-creative-accounting/2013/07/11/ee25a362-ea62-11e2-aa9f-c03a72e2d342_story.html
DITTO. Dodd Franks should be repealed and replaced with Glass Steagal. DF is very complicated and have rules that contradict because the banking lobby was able to influence its creation. Result is small banks cannot grow, big banks preserve most of their risky instruments, and worst its confusing regs make it easy for bankers to commit fraud. Glass Steagal is simple, separate savings accounts and investment accounts. Banks cannot take out loans and use the entire bank assets as collateral which includes savings accounts protected by FDIC. Bankers do not like that because they want all the money to play the stock market. Problem is when they screw up we can have a MF Global situation where segregated customer accounts are raided to pay off debt to big banks where the banker made leveraged bets at. Worst if the investment was initiated overseas like Britain, the banker can pay off their bad debt by stealing customer accounts, and unlike the US the losses are between the bank and its customer and there is no return of stolen money. Before freepers attack Warren (she is a liberal) read what happen with MF Global. Glass Steagal is the way to prevent another 2008. Frank Dodd Act left too many loopholes for bankers to play games and too complicated that it can camouflage frauds and scams (gov regulators are never too bright in enforcing complicated laws or regs).
G-S repeal was a mistake, and “Too big to fail” was a faulty regulatory policy for years before it really came back to bite us. Dodd-Frank was largely feckless and counterproductive legislation. That Fannie and Freddie should be reined in and haven’t been is no argument for whether or not the commercial bank guarantees should be separated from investment bank risks.
I’m no Warren fan at all, but the return of G-S in a lot of ways makes a lot of sense.
Good luck trying to get back what we already gave away. Considering that politicians continue to get rich on these nooks and crannies, I don’t like the chances.
Thanks, I always wondered about that. Especially since the EU is grumbling about the need for a Glass-Stegall II.
Dodd and Frank still free men like corzine and maxine waters
But the Bank executives of BOA & Citi were paid more money than ever right through the banking crisis.
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