Comments on: The Consensus On Big Banks Begins To Move

By: Chris Rogers

Chris Rogers — Fri, 23 Oct 2009 13:59:36 +0000

Simon,
Governor King was a proponent of moral hazard as far as supporting highly speculative banking behaviour was concerned.
During 2007 and 2008 I supported his stance on not bailing out failing banks and raising interest rates – given that easy credit was one of many forces that gave us the problems we witness today.
During the final six months of 2008, Prof. Blanchflower – then an MPC member, was calling for interest rate reductions – a matter I thought was counter-productive as far as curtailing easy credit was concerned.
Danny Blanchflower at the end of the day was proved correct in his analysis, the remainder of the MPC were caught rather off guard, including myself.
However, and here’s the crux, I 100% support Governor King’s aversion to moral hazard and his statements since late 2008 on the banking crisis.
Too Big To Fail is a huge issue, as the failure of Lehman’s demonstrated, and in the US at least, legislation exists to put an end to these great beasts – see Standard Oil for this resolution.
Its clear from the mouth of the CEO of Goldman Sachs that they – in this instance the Bankster – clearly do not understand the outrage they themselves have caused by their financial recklessness and inability not to award themselves obscene salaries and bonuses.
Lord Turner of the FSA has suggested one way forward, Governor King another, whilst the US at least has begun capping salaries within banks the taxpayer has funds in.
Unfortunately, for all parties concerned in both governance and regulation, the big banks are in fact multinational corporations that can uproot and establish themselves anywhere – although the loss of US Treasury business may stop some relocating outside of the USA.
As such, only international action can curtail the activities of the top ten global too big to fail banks – which was rather short in coming forward at Pittsburg last month.
My own opinion would be to return to the pre-financial reform act of 1999 – when Glass Steagal was abolished – I note one year after this we got the first mega bank, JP Morgan Chase and CitiGroup.
So the simple answer is yes, break them up and divorce deposit taking institutions from gambling institutions – if Governor King can achieve a consensus on this, he gets my vote.

By: Dirk van Dijk

Dirk van Dijk — Thu, 22 Oct 2009 22:40:56 +0000

We need to go back to the days of sleepy 3-6-3 banking.

Banks borrow at 3%, lend it out to nice safe boring way at 6%, and the bankers can be on the first tee by 3 pm. Worked for decades just fine. Extreme risk taking is needed int the economy, but banks should not be the ones doing it.

By: Brenda

Brenda — Thu, 22 Oct 2009 20:22:14 +0000

click on the blue (full speech) above in the post and you will get it.

By: Laurie

Laurie — Thu, 22 Oct 2009 20:18:51 +0000

Could not agree more!

By: redleg

redleg — Thu, 22 Oct 2009 17:18:02 +0000

Does anyone have a link to Mervyn King’s speech?

By: Paul Handover

Paul Handover — Thu, 22 Oct 2009 15:29:19 +0000

Just a footnote. Governor King is nearing the end of his second term at the Bank of England and not wanting a renewal of office. Thus his comments may be less subjected to political influence and closer to what he truly believes. As Simon says, King punches well above his weight. We may well look back in a year’s time and see that speech as highly significant.

By: C. Curtis Dillon

C. Curtis Dillon — Thu, 22 Oct 2009 13:40:03 +0000

One comment: Regulation is only as good as the regulator enforcing it. During the Bush admin, we had a group of regulators who were fundamentally opposed to any regulatory action which allowed Madoff and others to get away with murder. So the Obama stance on regulations being the solution is flawed. We need to break up the big banks so they can be allowed to fail when they screw up. Then the free market can really work as designed. Also, force commercial operations away from the risky investment banking activities that caused the crash. Restore them to regional status so they answer to the communities where they operate. Ever try dealing with a problem at BofA or Citi? Hard to find a real person let alone a solution! Let the investment bankers do whatever they want but with oversight and reporting so trends and abuses can at least be identified. But, keep them small too so failure is true failure, not a bailout. They can run a casino on Wall Street but isn’t it better to have hundreds of small casinos rather than a few big ones? When a big offering comes along, let several of the smaller casinos work together to get it done but prohibit them forming cartels which can then act as a single, large entity. Finally, require transparency in operations and oversight of complex derivatives and other instruments. No more slapping down of regulators who try to set off signal flares but run into the big brutes (Sommers, Geitner and company) who have a different agenda.

By: Dan Palanza

Dan Palanza — Thu, 22 Oct 2009 12:22:15 +0000

Priscianusjr, I sure hope this scenario plays out as you have framed it. It would be an untold blessing for the nation. Volcker is going way beyond what even Simon seems to be advocating in that he, Volcker, sees the clear need to go back to the complete separation of commercial banking from gambling banking. Commercial banking will be government supported, gambling will be on its own.

By: priscianusjr

priscianusjr — Thu, 22 Oct 2009 11:41:47 +0000

I think Obama saw initially that Summers’ way was the only politically possible way to stabilize the banks and the markets. The political situation was very difficult for Obama first coming into office. To take a guy like Summers head on, with Wall St and the banksters behind him, would have been political suicide. But I suspect Obama’s been setting Summers up all along, or rather, letting him set himself up, for a fall. When you’ve got Volcker, Greenspan, and Mervyn King against you, you’re vulnerable. I can’t believe Obama’s not really paying attention. He’s just biding his time. That moment will not come until after health care is passed. The Volcker/Summers debate will be increasingly in the spotlight (note, Obama keeps himself well off to the side), and then at the right moment it’s bye bye Summers. “I guess you were right, Mr. Volcker.”

By: joedee1969

joedee1969 — Thu, 22 Oct 2009 09:24:27 +0000

Maybe we could bust up is administration like the phone companies or something.Seems The White House is too big to fail these days:

http://americaspeaksink.com/2009/10/wall-street-the-president-and-the-rest-of-us/

By: carping demon

carping demon — Thu, 22 Oct 2009 05:37:16 +0000

Hang in there, Don.

By: sophie

sophie — Thu, 22 Oct 2009 04:50:23 +0000

cracking consensus will have no effect on the fact that the privately held federal reserve is a monopoly and it’s owners buy most elected officials to legislate much that is criminal–it should be criminal to gamble with depositors money–Glass-Steagall Act revoked was in effect, legislating criminality. I am so worn out with the lies, and the scumbag criminals which include all the legislators that are making all the bailoutheists possible, basiclly understand that they don’t need consensus, they just need to be able to keep their jobs to legislate the criminality for the people who answer to NO ONE.

Yesterday, Merkly and Corker came out with a new bit of legislation to usurp Ron Paul’s legislation to audit the Fed–their press release indicated that they wanted to keep the fed “independent” but to audit the new programs that are now being run because of the extraordinary time…this move makes it quite obvious that Merkley and Corker have sold their soul to the devil by trying to lie, once again, to the public about the fed’s independence: the concept of the fed being “independent” is a complete red herring–the owners of the fed, buy and sell all politicians so it is the politicians that have no independence from the criminals that own the fed.

By: Bayard

Bayard — Thu, 22 Oct 2009 03:27:03 +0000

Is it only obvious to me why Vollker is not in Summers position. Because the financial community decided that Summers was their guy (see Front Line from two nights ago), since he ALWAYS has the big guys at the top of his SAVE AT ANY COST LIST.

Mervyn King is the right man to be speaking so loudly, and, I daresay that his advice will not go unnoticed by the rest of the world. International pressure has been moving this way, and now will probably intensify since he gave voice to it in public.

We could accomplish the same ends through aggressive re-regulation, but Congress will never pass such strenuous regulation. Geithner and Bernanke would have to move toward it by taking a strong public stance, and even that is unlikely to happen in the current climate engendered by the massive financial lobby.

I think that it is time for the President to go much further in his demand for the break up of those who would pay each other so generous bonuses for screwing up the lives of our society’s prolateriat.

By: phoenix mattress

phoenix mattress — Thu, 22 Oct 2009 03:07:47 +0000

we are going to see banking basically turned over to the european financial powers, the stock market has already gone that way!

By: Francis

Francis — Thu, 22 Oct 2009 02:31:06 +0000

Or stressing a “strong dollar” without anyone asking him exactly what he intends ot do or recommend to stop it falling off a cliff!