Luckily for the banksters the health care debate is far from over.
The distraction is alive and well
One year plus coincidentally takes us back to the mkt bottom
Clinton's advice was good
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Sen. Kaufman: Bring Back Glass-Steagall, Break Up 'Too Big to Fail' Banks
Posted Mar 25, 2010 01:05pm EDT by Aaron Task in Newsmakers, Banking
Related: GS, JPM, C, BAC, MS, WFC, XLF
With health-care reform presumably a done deal, Congress is now turning its attention to Wall Street reform.
Senate Banking Chair Christopher Dodd's financial reform bill has "an excellent chance to pass," according to Delaware Senator Ted Kaufman, who was appointed to fill Joe Biden's term after the 2008 election. "I just cannot believe after what happened to this country that we're not going to do something about...regulating Wall Street and getting things back under control. I find it hard to believe people will vote against a bill to do what we have to do."
But that's not to say Sen. Kaufman is enamored with all aspects of the bill. Most notably, Sen. Kaufman is critical of how the bill deals - or doesn't deal - with the issue of 'too big to fail.'
"Putting our hopes in a resolution authority is an illusion," he said last week; Sen. Kaufman reiterates and expands up that view in the accompanying video.
"I have some concerns about the 'too big to fail' section, I really do," he says.
"I think we have to have something to separate the commercial banks and the investment banks: We should go back to [Glass-Steagall]."
Sen. Kaufman believes commercial and investment banking should be separated, so that the government-insured deposits of ordinary Americans can't be used to backstop the riskier aspects of investment banking. He also expressed concern about concentration among the nation's biggest banks, which have gotten even bigger since the 2008 crisis, citing the following:
* -- The top 6 American banks have assets equal to 63% of U.S. GDP. "We've got to deal with 'too big to fail,'" he says.
* -- The top 5 American banks are engaged in over 80% of all over-the-counter derivatives trades. "We never designed commercial banks to be involved in anything like OTC derivatives," he says. "We should get them out of that business."
On a related note, Sen. Kaufman says "it's time" for Goldman Sachs and Morgan Stanley "to go back to being investment banks." (In September 2008, the Fed granted the two firms commercial bank status so they could access the Fed's discount window and other facilities put in place to prevent more financial failures during the heart of the crisis.)
Reinstating Glass-Steagall doesn't seem to have much support in Congress, which seems to have dragged its feet on the issue of financial reform generally. Sen. Kaufman attributed the lag to the "extraordinary complexity" of Wall Street and the fact health-care reform and the economic recovery have dominated Senators' attention for the past year-plus.
"My hope is as my colleagues begin to focus on this situation they will see the wisdom of doing something serious about [separating] banks and investment banks," he says. |
