Banking deregulation at hand next in US Senate

Discussion in 'Politics, Religion, Social Issues' started by LizKat, Mar 1, 2018.

  1. LizKat macrumors 601

    LizKat

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    #1
    The House has been earnestly working dozens of corners on this stuff for months. Now the Senate's ready to weigh in and has a dozen or so Democrats already in tow. So... buckle up, some restraints are coming off banking, and they're not insubstantial even if they're not the complete tear-downs the Republicans still long for in their wildest dreams. If you always wanted to be a hedge fund cowboy, and plan on managing less than 10 billion bucks for starters, your moment of fairly unfettered bliss is probably at hand... for the rest of us, try to keep those flashes of déja vu down to a dull roar so you don't scare the horses all at once.


     
  2. 0007776 Suspended

    0007776

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    #2
    I guess Trump wants to gamble that the bubble this would trigger won’t have popped by 2020 so he can claim that the economy is doing better than ever.
     
  3. LizKat thread starter macrumors 601

    LizKat

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    #3
    Some of these markets are pretty rich now. A meteorological phenomenon comes to mind...

     
  4. mobilehaathi macrumors G3

    mobilehaathi

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    #4
    This suggests he has some higher cognitive functions that have yet to publicly manifest.
     
  5. Eraserhead macrumors G4

    Eraserhead

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    #5
    What a bunch of rubbish.
     
  6. NT1440 macrumors G5

    NT1440

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    #6
    Rubbish which won’t come to roost until well after the next election.
     
  7. Huntn macrumors P6

    Huntn

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    #7
    THE GOP- WE TRUST BANKERS TO MAXIMIZE PROFITS and if there is a little bubble that pops along the way we’ll know who the smart ones are and who to invest with the next time. The little people who lost their life Savings? Hmm, they’ll bounce back scrape by as they always do... who needs a house anyway? There are lots of apartments to rent. Yeah, that’ll fly. :rolleyes::oops:
     
  8. chagla macrumors 6502a

    chagla

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    #8
    recipe for failure. wuhu! another 2008?
     
  9. LizKat thread starter macrumors 601

    LizKat

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    #9
    Maybe. When the thumb comes off a spring in the financial markets nowadays there's no telling how long it could take before some bright idea gets scarfed up by too many or an inappropriate set of investors. But today a lot of these newer hedge fund guys are still just like a horse taking the bit and heading down the road when given a chance.

    It took one month flat for two young natural gas traders playing each other off for one of them to go bust contesting the machinations of the other in the marketplace, and so take the Amaranth hedge fund with him, but there were days on which one or the other of those two guys had close to half the natural gas contracts out there in hand, and their game ended up a zero sum gig. This despite a bunch of warnings about risk from the eventual loser's managers and regulators, plus banks demanding billions more in collateral to be willing to tolerate the downside possibilities.

    The problem was no one could face saying NO because the potential to make hundreds of millions was real. Or hey, to lose everything, that too, but why would one want to focus on that? Money was pouring in over the transoms, everyone with a couple million wanted to get in on double-digit returns.

    Maybe we're not that crazy since Brian Hunter of Amaranth and John Arnold (formerly of Enron, but thereafter running his own hedge fund) duked it out in the month of August 2006, but that's what it took back then, one month for six billion bucks to depart the six-year-old Amaranth hedge fund and cause it to shut down.

    And then there were all the derivatives-based debacles of 2006-2008 and the trillions of fictional worth spun off derivatives of subprime mortgages so exotic they could not but fail, yet when securitized were all billed as "AAA" safe investments because they were based on house mortgages,,,, what could be safer? Well... credit default swaps? CDOs? In the end everyone still wants to leave the dance hall at the same time.

    Maybe we are still that crazy. If all we can think to say is yeah but it's not like commodities trading is the same as betting on a house mortgage, and anyway in the latter situation, "mistakes were made" by the ratings agencies, well, we must have slept through the analysis of how we ended up in 2008 with a global financial collapse. We got there for the usual reason: thinking that greed works.

    We haven't learned that much, although it takes turning a blind eye to avoid the lessons. Anyway after the collapse a lot of municipalities and pension funds figured they had to try to make up their losses so they stuck what they had left into hedge funds all over again and pitched any new dough into them as well. A retirement fund in Texas even took that a notch further and actually bought a stake in a hedge fund.

    Now not a decade later --and knowing all this-- this 115th Congress is ready to give these guys the green light once again. Different administration, new Fed, new Treasury dude, same old "investing" instincts to take bigger and bigger risks with other people's money. Too big to fail? Nah. Too big to get a grip on, looks like. A greased pig, except that it's the pig doing the greasing and the Congress possessed of campaign contribution-accepting hands not quite able to commit to maintaining the controls it tried to apply in 2010.
     
  10. ericgtr12 macrumors 65816

    ericgtr12

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    #10
    2007 called and asked "what could possibly go wrong".
     
  11. LizKat thread starter macrumors 601

    LizKat

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    #11
    Yes, and the House of the 115th Congress is happy to supply suggestions. Here's one of their deregulation measures, passed earlier this week. Notes below are from Rep. Capuano (D-MA) along with the vote counts.

    Increasing Risk for Big Banks

    On Tuesday the House considered H.R. 4296, to place requirements on operational risk capital requirements for banking organizations established by an appropriate federal banking agency. This legislation loosens rules on “operational risk capital” which is the amount of money and assets the largest banks must have on hand as protection against risk. Only about 10 U.S. banks are big enough to require this. The amount of operational risk capital a bank must hold is currently calculated by taking into account the bank’s past history as well as current circumstances. H.R. 4296 would allow banks to disregard prior conduct and experiences when determining how much operational risk capital they must have on hand. Factoring in a bank’s past behavior, which could include poor management or illegal activities is clearly relevant to a bank’s overall risk. This legislation weakens an important safeguard for the economy if a “too big to fail” bank runs into trouble. I voted NO. H.R. 4296 passed and the entire vote is recorded below:

    HR4296-2018-vote.jpg
     
  12. RootBeerMan macrumors 65816

    RootBeerMan

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    #12
    Well, if they remove the regulations that's all well and good. But they should definitely put in place a new law that says there will be no such things as "too big to fail" and that the banks will be on their own if we have a repeat of the last time.
     
  13. Snoopy4 macrumors 6502a

    Snoopy4

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    #13
    Don’t like Capitalism I see.
     
  14. LizKat thread starter macrumors 601

    LizKat

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    #14

    Even if they did that they'd find a way not to crush the future of too-big banks... they'd probably do something like round up the other banks and "tell them" to buy the assets of the one that's floundering, "or else". That assumes the next time doesn't look like the set of dominoes the banks rolled out for us last time around.

    In the end no government of the sort we elect these days is going to take an option off the table in the crunch when the alternative looks like a global depression. We've already engaged the moral hazard argument and watched a Treasury Secretary override it in the face of his own deep misgivings last time around. Rinse and repeat is not impossible. I don't envy the new Fed chair, nor for that matter whoever comes after Cohn in the Treasury department. The combination of dereg and Mr. LooseCannon in the White House is chill pill material.

    We'll have to see what the Senate has in mind for the overarching version of all these House bills that have been passed during the term tweaking this or that regulation to their liking. I hope the Senate language is to be unveiled in advance of a pro forma debate, and not just pushed through to a quick vote by McConnell after he manages to tweak it to the liking of the Senators he thinks he's already rounded up.
     
  15. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #15
    If small and medium sized banks are cheering it and big banks don't like it, they must be doing something right. They still need to break up these bigger banking institutions IMO.
     
  16. Snoopy4 macrumors 6502a

    Snoopy4

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    #16
    Good. The regulation in place is overkill. Time to back off a bit.
     
  17. BeeGood macrumors 68000

    BeeGood

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    #17
    What am I missing here?

    The bill seems to be designed to relax the regulations on small and midsize banks, which have been consolidating into larger banks because it’s hard to operate under the same restrictions, capital requirement, etc that large banks do.

    People here seem to be concerned with “too big to fail” and don’t seem to realize that this current regulatory environment is actually creating more of these institutions and making them bigger than ever.
     
  18. Eraserhead macrumors G4

    Eraserhead

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    #18
    Good point actually.
     
  19. LizKat thread starter macrumors 601

    LizKat

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    #19
    The point that's being missed is the language in HR4296 that permits disregard of prior conduct and experience when considering revision of a bank's operational capital requirements.

    Why should any bank skate on "prior conduct" anyway? When you hire someone do you check their resumé or just assume they've managed a hot dog stand expertly just as they claim? Nobody wants to hire an ex con but no one minds if a bank tries to rip off whoever stands in their way after they mess up executing some gig they should never have engaged in to begin with?

    I have no problem with some of the adjustments already made to allow Main Street banks to function without undeserved scrutiny. But on these sweeping deregulations that don't distinguish between types of banks, what do we think any bank will choose to remember if we let them off the hook on prior conduct and past performance after ten years? We're in real estate and other asset class bubbles right now. This pending set of deregulation measures is being shoved into place right on time. :rolleyes: Buckle up, and check your parachute.
     
  20. Huntn macrumors P6

    Huntn

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    #20
    You see wrong. I like regulated Capitalism. Efforts to remove Dodd Frank are a mistake in my opinion. Just look at the last bubble. People will scheme to benefit themselves even if their short term profits result in the system eventually blowing up. They just can’t help themselves, the appeal of $$ does things to some people.
     
  21. BeeGood macrumors 68000

    BeeGood

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    #21
    Wouldn’t it be better to identify the individual bad actors and punish/kick them out vs punishing the hundreds of thousands of employees at the 10 largest banks who had nothing to do with any of the prior misconduct?

    Not everyone who works for a bank today was committing mortgage origination fraud and packaging junk mortgage-backed securities a decade ago.
     
  22. Bug-Creator macrumors 6502a

    Bug-Creator

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    #22
    The problem was and still is systemic, nobody made a career at these banks without taking part in "the party".

    And even if there actually were "good guys" at those banks, those wouldn't have any problem with the extra scrutiny.
     
  23. Eraserhead macrumors G4

    Eraserhead

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    #23
    On the other hand smaller banks are probably better as there is less systemic risk from their failure and they have fewer layers of management. And those institutions can be harmed by excessive regulation.
     
  24. BeeGood macrumors 68000

    BeeGood

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    #24
    There are, what, maybe a dozen banks at which some sort of impropriety took place...out of some 9,000 state and federally chartered banks in the country? That doesn’t sound systemic to me.

    Yes, there were actually “good guys” at those banks. A quarter of a million people work at Wells Fargo (for example). Do you believe that they’re all crooked?

    And it’s not just that someone is watching you more carefully. Meeting regulatory requirement means some sort of action on your part. You have to prepare and submit data. You have to take time out of your day to explain it to regulators (often several times). I’ve never worked in a lending or an originations role at my bank and I can tell you that I have easily spent hours out of a day doing the above. I’m less productive, so yes, I do have a problem with things that affect my livelyhood in ways that don’t make a lot of sense.
     
  25. Snoopy4 macrumors 6502a

    Snoopy4

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    #25
    Regulated capitalism. Another made up term.
     

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26 March 1, 2018