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Obama’s Plan To Be Judged By A Goldman Breakup
Zero
Hedge
Friday, January 22nd, 2010
Commentary by Simon Johnson, first appearing in
BusinessWeek
At the broad level, there was much to applaud in yesterday’s
announcement from the White House regarding potential new constraints
on the scale and scope of our largest banks.
After more than a year of tough argument, Paul Volcker has
finally persuaded top aides to President Barack Obama that the
unconditional bailouts of 2008-2009 planted the seeds for another
major economic crisis. Unfortunately, in their scramble to announce
this major policy shift ahead of Wall Street’s bonus season,
the administration didn’t line up all relevant details.
In particular, the White House background briefing yesterday
morning -- while somewhat ambiguous -- gave listeners the strong
impression that these new proposals would freeze the size of
our largest banks “as is.” This makes no sense.
Why would anyone regard 20 years of reckless expansion, a massive
global crisis, and the most-generous bailout in recorded history
as the recipe for creating right-sized banks?
There is no evidence, for example, that the increase in bank
size since the mid-1990s has brought anything other than huge
social costs in terms of direct financial rescues, the fiscal
stimulus needed to prevent another Great Depression, and millions
of lost jobs.
The administration has most evidently not done a great deal
of other preparatory work. How will off-balance-sheet activities
be treated? Should some hedge funds also be regarded as too
big to fail? And why would merely controlling proprietary trading
be enough to de-risk out-of-control behemoths, such as Citigroup?
Still, we should treat the next few weeks as the public- comment
phase for potentially serious principles and an opportunity
to press for workable details.
Pushing Back
The big banks, naturally, are already hard at work pushing
in the other direction. This is actually good and exactly what
we need. The banks have hidden behind their lobbyists and disinformation
managers for too long. The administration has decided to take
the fight to them, face-to-face, with the full backing of a
president at last willing to press for change. The goal should
be to flush both the big bankers and their Republican -- and
Democratic -- backers into the open.
There are sensible people on both sides of the political aisle
on this issue. But there is also Senator Richard Shelby of Alabama,
the ranking minority member of the Senate banking committee,
who has been arguing that the morass of massive financial institutions
can be handled through minor modifications of our bankruptcy
code.
Full
article here
"When the people find they can vote themselves
money, that will herald the end of the republic."
- Fall Of The Republic - Buy
the DVD here
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INFOWARS:
BECAUSE THERE'S A WAR ON FOR YOUR MIND
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