This still looks to me like a turkey shoot for profits that the private equity and hedge fund supergroups will get to enjoy. AIG and Citigroup are DEAD. The only question is how to keep foreign vultures out of the remains. As I said before, all those 'non-bank financial entities' can buy up, sell off, hold, make profits from ANYTHING, including retail banks. So big deal if a handful of large retail banks/bank holding companies can't invest in private equity and hedge funds. Looks like the US is set to trash the very things they used to be pushing for through the WTO. Just like they abandoned 'free trade' in telecommunications after it was found out that Enron's telecommunications arm did nothing but bankrupt the otherwise profitable--but criminal--company.
http://dealbook.blogs.nytimes.com/2010/01/22/yearning-for-glass-steagall-on-capitol-hill/ While a majority of problems that occurred centered mostly on the pure-play investment banks like Lehman Brothers, the huge banks born out of the revocation of Glass-Steagall, especially Citigroup, and the insurance companies that were allowed to deal in securities, like the American International Group, might not have run into so much trouble had the law still been in place. In December, Senator John McCain, Republican of Arizona, and Senator Maria Cantwell, Democrat of Washington, jointly introduced a bill that would bring back Glass-Steagall and force commercial banks to split off their lucrative, but risky, investment banking operations from their government-insured depository banking business. The bill was gaining traction in the Senate, racking up several co-sponsors. Still, it had yet to be attached to the larger financial regulatory bill set to be debated in the coming months. But the Volcker Rule seems to have usurped attempts to bring back to Glass-Steagall. The president’s proposal, announced Thursday, would ban bank holding companies from owning, investing in or sponsoring hedge funds or private equity funds and from engaging in proprietary trading, or trading on their own accounts, as opposed to the money of their customers. Mr. Obama has called the ban the Volcker Rule, in recognition of his outside adviser, Paul A. Volcker, the former Federal Reserve chairman, who has championed the proposal. In light of Mr. Obama’s proposal, Ms. Cantwell applauded the president for his efforts, but she remained by her bill. “I still support our legislation because I think it is a cleaner simpler way to get at the problem, so that would be my preference,” Ms. Cantwell told DealBook. “We’ll see what the president’s language is in specific, because I think the details matter here.” Under the Volcker Rule, for example, Bank of America would still be able to keep Merrill Lynch’s brokerage services and investment banking units. But if Glass-Steagall were to return, Bank of America would need to sell virtually all of Merrill Lynch and return to being just a retail bank. That major change is too much for some lawmakers to swallow, especially after the government helped orchestrate Bank of America’s acquisition of Merrill Lynch in the first place in 2009 — not to mention JPMorgan Chase’s takeover of Bear Stearns earlier in the year. “I think introducing Glass-Steagall now across the board in a weak economy would be counterproductive because you would force sales and the like,” said Representative Barney Frank of Massachusetts, the Democratic chairman of the House Financial Services Committee and a supporter of the president’s plan. “And I think people have exaggerated the importance of Glass-Steagall in this crisis as it wasn’t the main source of problem for Lehman Brothers or A.I.G.” Mr. Frank told DealBook that the current financial regulatory bill he introduced in the House already had a provision that would give regulators the power to break up banks along the lines of Glass-Steagall if they felt the institution was seen as a major risk to the financial system. The provision was introduced in a contentious amendment submitted by Representative Paul E. Kanjorski, Democrat of Pennsylvania. It was attached to the bill after passing a party-line vote in the House Financial Services Committee, with all the Republicans voting against the provision. The Volcker Rule, Mr. Frank said, goes beyond the Kanjorski amendment by splitting off parts of the banks so that “other administrations couldn’t undue” the separation without passing a new law. Mr. Frank says he and his counterpart in the Senate, Christopher J. Dodd of Connecticut, the Democratic chairman of the Senate Banking Committee, both support the Volcker Rule and would be introducing it in both of their versions of the financial regulatory overhaul bill. Several senators and representatives on both sides of the aisle are calling for hearings on the president’s proposal before it is attached to either versions of the bill, including Senator Richard C. Shelby, the ranking Republican on the Senate Banking Committee, and Senator Tim Johnson, Democrat of South Dakota, who said in a statement that he hoped “the banking committee is able to examine the issue soon.” But debate in the House and Senate committees could water down the bill’s impact on the banks, but it could also toughen the bill up to look a bit more like Glass-Steagall. Senator Byron Dorgan, Democrat of North Dakota, praised the president’s proposal but said that it doesn’t go far enough in addressing the problem of banks too big to fail. “The Volcker Rule is important to do, but that is not the end point at all,” Mr. Dorgan said, “Should we do more? Absolutely. The other piece of this is that we have to recognize that putting F.D.I.C.-insured banks with investment banks in big holding companies was the wrong thing to do.” Meanwhile, Senator Ted Kaufman, Democrat of Delaware and one of the co-sponsors of the McCain-Cantwell bill, told DealBook that the Volcker Rule and reinstating Glass-Steagall were “two sides of the same coin.” “We simply must ensure taxpayers never again bail out major banks engaged in risky trading activities, and we must deal with the ‘too big to fail’ problem,” Mr. Kaufman said. “Both ideas share those objectives.” How those objectives will be attained is the multibillion-dollar question. The Democrats control both the House and Senate committees and could pass through a tougher Volcker Rule if they wish. While the Democrats may have lost their super-majority of 60 in the Senate this week, the Republicans would need to filibuster the entire financial regulatory reform bill to prevent the Volcker Rule from going into effect. While such a feat could be attained in the debate over health care, it could prove far more difficult to justify given the bipartisan populist anger at Wall Street, especially in an election year. – Cyrus Sanati http://www.wsws.org/articles/2010/jan2010/obam-j22.shtml Obama’s phony bank-bashing was for public consumption. Next Tuesday, Treasury Secretary Timothy Geithner, who as president of the Federal Reserve Bank of New York played a key role in the bank bailout, will meet behind closed doors with more than 40 chief executives of financial institutions to reassure them and give them the real dope on Obama’s proposals. http://blogs.news.sky.com/kleinman/Post:e919ee6b-64a7-4352-bebc-47644b3e2a72 "In the coming weeks, the President will continue to work closely with Chairman Dodd and others to craft a strong, comprehensive financial reform bill that puts in place common sense rules of the road and robust safeguards for the benefit of consumers, closes loopholes, and ends the mentality of "Too Big to Fail"." These are hugely significant words, but what do they mean for British banks? Well, under the Obama proposals it's not clear that the likes of Barclays and Royal Bank of Scotland would be affected too harshly if they were to be enacted on a US-only basis. Where it gets ominous for the UK banks is the prospect of a Conservative government, which would be far more likely to implement these Obama-led proposals. George Osborne, the shadow chancellor, said in a statement tonight: "This is a welcome move by President Obama that accords very much with our thinking. I have said consistently that we should look at separating retail banking from activities like large scale propriety trading - and that this was best done internationally. Coming on top of growing agreement on a bank levy, it shows that Conservatives are part of an emerging international consensus on these issues." Of course, there's a big difference between being in opposition and being in government, but even so, it's pretty clear that the Tories' enthusiasm about such a separation of retail and investment banking could well gain traction. That's not to say that it would happen anytime soon. The Tories have committed to scrapping the Financial Services Authority and folding its responsibilities into the Bank of England - needless to say, that would be a vast undertaking, and attempting to oversee at the same time the separation of banking activities would in the views of many seasoned practitioners be regulatory suicide. And if they did attempt it, then there would be an immediate and aggressive response from Britain's major banks, some of which would no doubt attempt to move overseas. _______________________________________________ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
