"It appears to some of the financial prognosticators that the anticipated total financial meltdown has been avoided.
I remain agnostic on that point,"
..............
From: maxncompany 9/11/2009 8:31:19 PM
1 Recommendation of 101856
"Hope and change." If there's no change how can there be any hope? (my comment)
From Naked Capitalism Today
Friday, September 11, 2009
Guest Post: Top Economists Say We Must Break Up the Insolvent Banks (Government Says Let’s Make Them Bigger)
By George Washington of Washington’s Blog.
The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashion:
Nobel prize-winning economist, Joseph Stiglitz
Nobel prize-winning economist, Ed Prescott
Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard
MIT economics professor and former IMF chief economist, Simon Johnson
President of the Federal Reserve Bank of Kansas City, Thomas Hoenig
Deputy Treasury Secretary, Neal S. Wolin
The President of the Independent Community Bankers of America, a Washington-based trade group with about 5,000 members, Camden R. Fine
The Congressional panel overseeing the bailout
The head of the FDIC, Sheila Bair
The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz
Economics professor and senior regulator during the S & L crisis, William K. Black
Economics professor, Nouriel Roubini
Economist, Marc Faber
Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales
Economics professor, Thomas F. Cooley
Former investment banker, Philip Augar
Chairman of the Commons Treasury, John McFall
Others, like Nobel prize-winning economist Paul Krugman, think that the giant insolvent banks may need to be temporarily nationalized.
In addition, many top economists and financial experts, including Bank of Israel Governor Stanley Fischer - who was Ben Bernanke’s thesis adviser at MIT - say that - at the very least - the size of the financial giants should be limited.
And yet, the top economic policy makers (Summer, Geithner and Bernanke) are doing just the opposite - allowing the giant banks to get even bigger. The Washington Post put it succinctly with a story entitled “Banks ‘Too Big to Fail’ Have Grown Even Bigger”.
As Bloomberg points out:
The Obama plan would label Bank of America, New York-based Citigroup and others as “systemically important.” It would subject them to capital and liquidity requirements and stricter oversight, relying on the same regulators who didn’t understand the consequences of a Lehman failure. And while companies could be dismantled if they got into trouble, they, their creditors and shareholders could also be bailed out with taxpayer money, according to the plan.
The chief architects, Geithner, 48, and National Economic Council Director Lawrence H. Summers, 54, say they don’t think it would be practical to outlaw banks of a certain size or limit trading activities by deposit-taking banks, according to people familiar with their thinking. They said the two men, who declined to be interviewed, and others on Obama’s team believe the lines are too fuzzy between banking and investing products and that forcing the divestiture of units and assets would create bedlam.
“It’s a very difficult thing to say as a national policy goal that we’re going to limit the success of an American firm,” said Tony Fratto, 43, a spokesman for President George W. Bush and former Treasury Secretary Henry M. Paulson who now heads a Washington consulting firm.
In other words, the people guiding America’s economic policy don’t want to break up the insolvent giants or even keep them from growing, don’t want to reinstate Glass-Steagall, and want to let the banks keep using their same inaccurate models, overseen by the same spineless regulators.
The President of the Independent Community Bankers of America put it succinctly when he said:
“Does anyone think it’s a coincidence that less than 10 years after they repealed Glass-Steagall, the financial markets collapsed?” … He called current rules for banking a recipe for a “Molotov cocktail.” |
