New Rules – New Game?

Posted on 9 December 2013 by Erik Hare | 9 Comments

Tuesday is scheduled to be the day that everything changes. Not everything, really, but it’s the day that the “Volcker Rule” will finally go into effect. “Leave the capital markets to their own devices without any expectation of government protection and keep the existing safety net for the commercial banking system,” Volcker said in 2009. In practice, this means that commercial banking, with deposits backed by the FDIC, have to be separated from stock trading and similar activities.

It’s not the Glass-Steagall Act, which required completely separate kinds of banks operating as different companies to perform the different kinds of investing. But it’s not bad. And if it sounds simple in principle the regulation authorized by Dodd-Frank takes 800 pages. Four years from its proposal and 3 years from its passage, it’s ready to roll out. How will it go?

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Bank Regulation That Makes Sense

Posted on 22 May 2013 by Erik Hare | 11 Comments

“Too Big To Fail” (TBTF) is the standard for socialized risk and privatized profits. The biggest banks enjoy an implied bailout under Dodd-Frank regulations that give them a tremendous advantage over smaller banks. The complex weave of financial innovations that are their signature is impossible for anyone to understand, making the risk we have taken on as taxpayers almost impossible to quantify.

What can be done about it? Try TBTF – the “Terminating Bailouts for Taxpayer Fairness” Act of 2013.

This legislation, introduced by Sherrod Brown, an Ohio Democrat, and David Vitter, a Louisiana Republican, cuts through the complexity, levels the playing field among banks, and ends “Too Big To Fail” once and for all. What chance does it have? Actually, a very good one because of some terrific politics.

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Just Too Big

Posted on 25 March 2013 by Erik Hare | 18 Comments

“Too Big to Fail” has been a standard for a number of international investment banks, including JP Morgan (JPM) for many years now. We’ve seen that turn into “Too Big to Jail” where major violations of law result in nothing more than fines which have clearly been absorbed into the cost of doing business as they please. But the real problem is one of consistent hubris from a company too big for anyone to understand or even manage effectively. That’s the conclusion of the report issued by Sen Carl Levin into the “London Whale” losses at JPM’s London Office last April.

What happens when a company this large becomes so reckless that a major problem is inevitable? We might soon find out – at terrible expense. No matter what, their behavior is becoming a major problem that could give life to a movement that puts an end to the cozy relationship once and for all. Assuming, of course, we aren’t already too late.

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