Obama Takes on Big Banks
President Obama Takes on Big Banks: ‘If They Want a Fight, That’s a Fight I’m Willing to Have’
January 21, 2010 12:28 PM
ABC News
Jake Tapper and Sunlen Miller report:
Two days after the voters of Massachusetts sent a Republican to the Senate for the first time since 1972 – many of them fueled by populist anger at Washington, DC, and Wall Street – President Obama used fiery, populist rhetoric to introduce new regulations on the financial industry — almost daring the financial sector to take him on.
“Never again will the American taxpayer be held hostage by a bank that is ‘Too Big to Fail,”the president vowed, suggesting ways to limit the size and scope of financial institutions.
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I understand the need to keep banks and financial institutions from being reckless in their dealings, but they do need to be able to be risky as there is no growth without risk. We all know what happens when the banks are not willing to take on risk. It is happening right now as we speak.
The president, today used the phrase “Too Big to Fail” which I believe is very popular right now due to the books by Gary H. Stern, Ron J. Feldman and Andrew Ross Sorkin. Gary and Ron are, officers with the Federal Reserve, who warn that not enough has been done to reduce creditors’ expectations of TBTF protection. Many of the existing pledges and policies meant to convince creditors that they will bear market losses when large banks fail are not credible, resulting in significant net costs to the economy. The authors recommend that policymakers enact a series of reforms to reduce expectations of bailouts when large banks fail. Andrew Sorkin writes about the incredible story of the recent bank crises.
I am a bit afraid that the government will get over zealous and give too much power to the fed unless you trust them not to corrupt, misuse or just F-up. Big companies need big banks and financial institutions and it is true that unchecked or unregulated projects and activities of these big banks can lead to financial disasters which the American taxpayer bears the brunt for.
So what is the answer? It is hard to say, but it seems that we have to be careful not to tie the hands of these institutions while making sure that past policies that open the door to corruption are closed. It does make sense that if an organization does well and makes a profit then they should get paid and if they fail or screw up they should lose and not get bailed out.
Over leveraging and black box financial schemes need to really be looked at. I understand protecting your corporate secrets, but if you have nothing to hide you hide nothing and over leveraging by the homeowner, developers, investors, large banks and financial institutions have caused nothing but kaos.
I would love to hear your comments and thoughts.
Here are the Amazon Links to the books mentioned:
Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves
Too Big to Fail: The Hazards of Bank Bailouts
JW Najarian
