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(CNBC)   Fed's new rule mandates that U.S. banks must become either too big to fail or too small to succeed   (cnbc.com) divider line 24
    More: Fail, u.s. banks, weights, leverage ratios, Federal Reserve, risk management, Comptroller of the Currency  
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1757 clicks; posted to Business » on 02 Jul 2013 at 3:54 PM (2 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



24 Comments   (+0 »)
   
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2013-07-02 03:09:03 PM  
That's a strange way to view stiffer leverage requirements, subby.
 
2013-07-02 04:24:20 PM  
I do like the requirement to keep enough wealth on hand to stay liquid, but it doesn't really address the core issues at hand. Can we please get the personal and banking credit rating agencies into government control, please? And more regulation, too.
 
2013-07-02 04:31:59 PM  
So this is a way to muscle out smaller banks in favor of ginormous political bribery institutions?
 
2013-07-02 04:43:03 PM  
I don't see how these rules will prevent anything.  They had rules prior to the last meltdown, too.  The banks then requested exemptions to the rules, and got them.
 
2013-07-02 04:52:15 PM  
Why don't we just copy Canada's regulations, they seem to work well.
 
2013-07-02 04:56:17 PM  

Random Anonymous Blackmail: So this is a way to muscle out smaller banks in favor of ginormous political bribery institutions?


Trollmitter was trolling.  See what impaler said, above.  It's the big banks that will get the additional capital requirements (read: additional costs).

A proportion of smaller banks will continue to screw up and go tits up; the US has too many too-small banks that aren't of economic scale and/or aren't big enough to employ competent risk functions.  No change from the last 30 years.

dj_spanmaster:. Can we please get the personal and banking credit rating agencies into government control, please?

All the 'personal' credit rating agencies really do is collate the data sent to them by all the banks/credit card companies etc on what accounts you have and whether you pay on time.  It won't make a bit of difference if the government runs them.  (Except of course the government is also not always famous for being good at running businesses efficiently without screwing up.)
 
2013-07-02 05:00:34 PM  

dragonchild: I don't see how these rules will prevent anything.  They had rules prior to the last meltdown, too.  The banks then requested exemptions to the rules, and got them.


Minimum capital requirements aren't intended to stop big banks screwing up and losing all their shareholders' investments.  They're only a buffer to prevent the taxpayer from having to step in when they do screw up.

Perhaps the big US banks will negotiate exemptions with the US regulators.  But they'll find it hard doing business with non-US banks if they do.
 
2013-07-02 05:16:37 PM  

dragonchild: I don't see how these rules will prevent anything.  They had rules prior to the last meltdown, too.  The banks then requested exemptions to the rules, and got them.


The banks melted down worse than they would have, because they got loser leverage standards.

This is the opposite of that. That's how it helps.
 
2013-07-02 05:27:02 PM  
I'll stick my Credit Union, kthxbye.
 
2013-07-02 05:40:46 PM  

enry: I'll stick my Credit Union, kthxbye.


With. Stick with.
 
2013-07-02 06:03:02 PM  
I think subby is trying to say that having capital requirements to back up your investments with a percentage of real cash will prevent small banks from competing effectively with the big ones, as the big ones will inevitably find sympathetic lawmakers & bureaucrats that will exempt them from these capital requirements.

A much better idea would be to reinstate the law which separated investment houses & regular banks, preventing the kind of bullshiat market manipulation & speculation that's been going on since it was repealed.
 
2013-07-02 06:13:50 PM  

Lexx: A much better idea would be to reinstate the law which separated investment houses & regular banks, preventing the kind of bullshiat market manipulation & speculation that's been going on since it was repealed.


Yep.

Yet no one in charge even brings it up as an off-the-wall suggestion.

Idiots.
 
2013-07-02 06:40:35 PM  

impaler: Lexx: A much better idea would be to reinstate the law which separated investment houses & regular banks, preventing the kind of bullshiat market manipulation & speculation that's been going on since it was repealed.

Yep.

Yet no one in charge even brings it up as an off-the-wall suggestion.

Idiots.


Congress is exempt from insider trading rules, and these banks make ridiculous profits the way they're currently set up.  No one, and I mean NO ONE, wants to admit that an economy can only safely grow at a certain rate, and expecting returns in the double digits is fraught with peril.
 
2013-07-02 07:15:05 PM  

opiumpoopy: It won't make a bit of difference if the government runs them.


If the government ran them we could more easily do things like:
1) Provide a cheap and legally enforceable procedure to contest errors
2) Require that they not track people using social security numbers
3) Require that output data be calculable via public algorithms
4) More easily regulate the use of such data
5) More easily regulate access to one's own data

That being said, I'm not sure government ownership is necessarily better. But there are certainly changes that could be made if the government were in charge that would be difficult and/or slow if the industry is allowed to continue to operate independently. Some of them could also happen simply under strong regulation (i.e. licensed operators only, like insurance), but even at that it would be complicated to force some of the changes one might like to see.
 
2013-07-02 09:54:45 PM  

profplump: opiumpoopy: It won't make a bit of difference if the government runs them.

If the government ran them we could more easily do things like:
1) Provide a cheap and legally enforceable procedure to contest errors
2) Require that they not track people using social security numbers
3) Require that output data be calculable via public algorithms
4) More easily regulate the use of such data
5) More easily regulate access to one's own data

That being said, I'm not sure government ownership is necessarily better. But there are certainly changes that could be made if the government were in charge that would be difficult and/or slow if the industry is allowed to continue to operate independently. Some of them could also happen simply under strong regulation (i.e. licensed operators only, like insurance), but even at that it would be complicated to force some of the changes one might like to see.


Actually, if the government ran it it would more or less only make sense to track people using social security numbers.
 
2013-07-02 09:57:48 PM  
So this is why the banks have been hoarding all their cash and farking over people who are still underwater on their mortgages. They knew, KNEW, these rules were coming and they had to cover their leveraged assets.

Fractional reserve banking FTW!
 
2013-07-02 10:14:46 PM  

Lexx: I think subby is trying to say that having capital requirements to back up your investments with a percentage of real cash will prevent small banks from competing effectively with the big ones, as the big ones will inevitably find sympathetic lawmakers & bureaucrats that will exempt them from these capital requirements.

A much better idea would be to reinstate the law which separated investment houses & regular banks, preventing the kind of bullshiat market manipulation & speculation that's been going on since it was repealed.


That wouldn't have done any such thing and wouldn't have prevented the crisis. But it would cost a shiatload of money, so there's that.
 
2013-07-02 10:20:05 PM  

Kuta: So this is why the banks have been hoarding all their cash and farking over people who are still underwater on their mortgages. They knew, KNEW, these rules were coming and they had to cover their leveraged assets.

Fractional reserve banking FTW!


Well, sort of. You are on the right track understanding that more onerous regulation reduces investment and harms the economy.

The question as always is whether the reduction in risk from tighter regulation and higher capital standards is worth the economic detriment. I won't argue whether the rules discussedin TFA are appropriate, but directionally higher capital requirements post crisis make sense.
 
2013-07-02 10:43:43 PM  

Debeo Summa Credo: That wouldn't have done any such thing and wouldn't have prevented the crisis


How so?
 
2013-07-03 12:37:45 AM  

impaler: Debeo Summa Credo: That wouldn't have done any such thing and wouldn't have prevented the crisis

How so?


They were still packing $hiat into the goody bags that eveyone wanted. And if they found some in their bag, they mixed it into ten others and sold them for cost.

\those goodies being mortgage securities
\\the poop being bad ones and fake ones
 
2013-07-03 07:55:28 AM  

impaler: Debeo Summa Credo: That wouldn't have done any such thing and wouldn't have prevented the crisis

How so?


http://thinkprogress.org/yglesias/2011 /10/17/345217/glass-steagall-is- mostly-a-red-herring/?mobile=wp

It wouldn't have prevented the financial institutions involved in the crisis from doing what they did.
 
2013-07-03 08:56:48 AM  

Debeo Summa Credo: Lexx: I think subby is trying to say that having capital requirements to back up your investments with a percentage of real cash will prevent small banks from competing effectively with the big ones, as the big ones will inevitably find sympathetic lawmakers & bureaucrats that will exempt them from these capital requirements.

A much better idea would be to reinstate the law which separated investment houses & regular banks, preventing the kind of bullshiat market manipulation & speculation that's been going on since it was repealed.

That wouldn't have done any such thing and wouldn't have prevented the crisis. But it would cost a shiatload of money, so there's that.


It would've MASSIVELY defunded investment houses by denying them access to ordinary deposited bank accounts.  Risky investments are fine, in small amounts.
 
2013-07-03 12:48:59 PM  

DarkLancelot: Why don't we just copy Canada's regulations, they seem to work well.


Because Socialism?
 
2013-07-03 01:41:59 PM  

Dwight_Yeast: DarkLancelot: Why don't we just copy Canada's regulations, they seem to work well.

Because Socialism?


Nope, more like "very boring, very unexciting capitalism".  Our banks can't pull any of the shiat that American banks can, which means both that they don't get to make the big bucks, and they don't get to risk it all.  You don't really have this image of naked-sushi-eating, million-dollar-bonus, maserati-driving Gordon-Gecko-style shark banker here.
 
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