Thank you, Cato and Wharton are good sources. Restoring Glass-Steagall would only make it less convenient for both the Wall Street and Main Street to do business (sort of like recreating the infamous Jamie Gorelick's Wall between FBI and CIA) and just roll back the advances in US banking system that the Main Street benefited from. It would not in the least affect the root causes of economic near-collapse and would make economic recovery more difficult, in the similar way that hastily created Sarbanes-Oxley hindered the recovery post-Enron and post-Internet bubble.
Sarbox R.I.P.?
Could the Sarbanes-Oxley Act of 2002 be repealed? The question is not quite as far-fetched as it once was. For one, the House of Representatives is likely to consider a Sarbox amendment that would permanently exempt small publicly traded companies (those with a market cap of $75 million or less) from the requirement to have an auditor opinion on internal controls. At the same time, the U.S. Supreme Court is slated to hear a case this month alleging that the Public Company Accounting Oversight Board (PCAOB), which was created by Sarbox, is unconstitutional. .....
In the meantime, the Chair of FDIC (which closes banks almost every week due to insufficient reserves or other going concerns) and Treasury Secretary are pushing the banks to loosen the lending to people who obviously can't repay the loans. And Obama administration is ratcheting up the stimulus just as the Fed is being responsible and starting the exit strategy by pulling back:
Taxpayer Burden Eases to $8.2 Trillion as Obama Supplants Fed - BL, 2009 December 23
The amount the Fed and U.S. agencies have lent, spent or guaranteed has fallen 15 percent since September to $8.2 trillion, the lowest in a year, based on data compiled by Bloomberg. Spending on infrastructure, tax breaks and other fiscal measures account for 52 percent of the total, up from 39 percent in March, as central bank loan programs are phased out. The change marks a new phase of public intervention in the economy. Congress and the administration’s $4.2 trillion portion, which amounts to 30 percent of everything produced in the country this year, also complicates any future exit strategy. It may be tough for elected officials to quit spending, prolonging the bailout and adding to the federal budget deficit. “There’s a danger of getting addicted to fiscal stimulus programs,” said David Wyss, chief economist with New York-based Standard & Poor’s, in an interview. ..... Congress and the Obama administration are taking a bigger role in the rescue of the economy from the Federal Reserve, shifting the strategy to stimulus spending from central bank lending.
I appreciate the info. I try to be careful with sources, still I find problems where the experts are wrong or partly wrong. (I still have questions on deregulation.) Here’s a good example:
THE FIFTY-NINE-STORY CRISIS
http://www.duke.edu/~hpgavin/ce131/citicorp1.htm
Capitalism Does Not Work
Henry Waxman: In other words you found that your view of the world, your ideology was not right. It was not working
Alan Greenspan: Precisely. It’s precisely the reason I was shocked because I’ve been going for forty years of more with very considerable evidence that it was working exceptionally well.
In other words the dirty secret is out: capitalism doesn’t work. Capitalism is a 0 sum game where by the creation of currency out of the value of existing currency you eventually reach a state where it is impossible to create new currency because there is no further value to extract. This is the law of diminished returns.
http://stockrankings.istockanalyst.com/article/viewarticle/articleid/2738244
The Logic of Trade
Whenever an expert touts a totally new theory, invention or miracle medicine, a healthy dose of skepticism is called for.
http://www.cato.org/pub_display.php?pub_id=3216
Also my comments here:
http://www.freerepublic.com/focus/f-news/2413110/posts
Management and the Financial Crisis(We have met the enemy and he is us …)
William A. Sahlman
In studying the financial crisis as it unfolded over the past couple of years, it seems clear that many organizations suffered from a lethal combination of powerful, sometimes misguided incentives; inadequate control and risk management systems; misleading accounting; and, low quality human capital in terms of integrity and/or competence, all wrapped in a culture that failed to provide a sensible guide for managerial behavior.
Every aspect of the system needs change – from government accounting to corporate board roles and structure – and changes to any single element of the system will fail unless all elements are changed. The most important and most difficult changes are those required of corporate managers. Managers bear a disproportionate share of the responsibility for what transpired and therefore for what must change.
Sadly, there seem to be few new lessons from this crisis. What happened recently has happened before though perhaps not at the same scale. There were some unique contextual factors that created and sustained a larger and more pervasive than average financial bubble, but the underlying managerial failures were no different than in previous episodes of financial excess. Managers made dangerous and foolish decisions, consumers and investors engaged in risky behavior, and regulators were ineffective.
Senior managers are paid private market salaries and have substantial stock ownership. If large losses occur, the U.S. government is on the hook. If the companies do well, the executives make a mint. That amounts to privatizing reward and socializing risk, a classic example of heads I win, tails you lose.
http://www.hbs.edu/research/pdf/10-033.pdf
Income Inequalities in the Age of Financial Globalization
Indeed, higher income inequality is associated with higher crime rates and lower life expectancy. Higher inequality may also deepen macroeconomic instability in the sense that low-income households may adjust more slowly to economic shocks. In addition, there are instances where richer groups may secure economically-inefficient advantages, such as distortive taxes or an allocation of public funds that goes against the economic interests of the country as a whole.
http://www.ilo.org/public/english/bureau/inst/download/world08.pdf
Credit Expansion, Economic Inequality, and Stagnant Wages
http://mises.org/story/2847
The Kennedy/Reagan/Bush (KRB) Tax Policy Paradox*
http://www.bus.ucf.edu/seminars/public/current/eco/downloads/2006_11_09_01_02.pdf
Asset Price Bubbles
http://www.frbsf.org/publications/economics/letter/2007/el2007-32.pdf