hat tip: Washington’s blog
Monday, March 29, 2010
On March 3rd, Richard Fisher – President of the Federal Reserve Bank of Dallas – told the Council on Foreign Relations:
A truly effective restructuring of our regulatory regime will have to neutralize what I consider to be the greatest threat to our financial system’s stability—the so-called too-big-to-fail, or TBTF, banks. In the past two decades, the biggest banks have grown significantly bigger. In 1990, the 10 largest U.S. banks had almost 25 percent of the industry’s assets. Their share grew to 44 percent in 2000 and almost 60 percent in 2009.
The existing rules and oversight are not up to the acute regulatory challenge imposed by the biggest banks. First, they are sprawling and complex—so vast that their own management teams may not fully understand their own risk exposures. If that is so, it would be futile to expect that their regulators and creditors could untangle all the threads, especially under rapidly changing market conditions. Second, big banks may believe they can act recklessly without fear of paying the ultimate penalty. They and many of their creditors assume the Fed and other government agencies will cushion the fall and assume the damages, even if their troubles stem from negligence or trickery. They have only to look to recent experience to confirm that assumption.
Some argue that bigness is not bad, per se. Many ask how the U.S. can keep its competitive edge on the global stage if we cede LFI territory to other nations—an argument I consider hollow given the experience of the Japanese and others who came to regret seeking the distinction of having the world’s biggest financial institutions. I know this much: Big banks interact with the economy and financial markets in a multitude of ways, creating connections that transcend the limits of industry and geography. Because of their deep and wide connections to other banks and financial institutions, a few really big banks can send tidal waves of troubles through the financial system if they falter, leading to a downward spiral of bad loans and contracting credit that destroys many jobs and many businesses.
by Marc Gallagher
hat tip: Liberty Maven
February 27th, 2010
Editor’s Note: Sometimes it’s good to listen to the other side with an open mind because perhaps they know better. This article about Ron Paul was sent to us by our neo-conservative friend, Richard Deekbag, founder of the following website (we apologize for the length of the URL):
I mean just look at the guy. Ron Paul is all skinny, old, and wrinkly. His speeches are rambling diatribes supporting the long debunked conspiracy theory known as the U.S. Constitution. Everyone knows the Constitution expired more than 100 years ago and has no place in our Conservative-Progressive-Democratic-Socialist-Liberal-Republican (ConProDemSocLibRep) society.
After all it was Ru Paul’s isolationist ideas that lead America into its darkest period following the Revolutionary War after his idiotic idols, the Founding Fathers, defeated the British occupiers. Well, they were more like friendly visitors than occupiers. Visitors that honored the American colonies by taxing them heavily and treating them like peasants.
Everyone knows by now that Ron Paul’s efforts to abolish the massively successful Federal Reserve bank is kookier than cookies. The Fed has been our savior over and over and over and over and over again over the years. If it weren’t for the Fed the so-called “Great Depression” would have been much shorter. That’s a gigantic problem because we needed it to last much longer just to prove that government regulation is the lifeblood of the economy!
“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”
– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s
The Federal Reserve (or Fed) has assumed sweeping new powers in the last year. In an unprecedented move in March 2008, the New York Fed advanced the funds for JP Morgan Chase Bank to buy investment bank Bear Stearns for pennies on the dollar. The deal was particularly controversial because Jamie Dimon, CEO of JP Morgan, sits on the board of the New York Fed and participated in the secret weekend negotiations. In September 2008, the Federal Reserve did something even more unprecedented, when it bought the world’s largest insurance company. The Fed announced on September 16 that it was giving an $85 billion loan to American International Group (AIG) for a nearly 80% stake in the mega-insurer. The Associated Press called it a “government takeover,” but this was no ordinary nationalization. Unlike the U.S. Treasury, which took over Fannie Mae and Freddie Mac the week before, the Fed is not a government-owned agency.