Next big fight - Financial Reform?

Discussion in 'Politics, Religion, Social Issues' started by mcrain, Apr 16, 2010.

  1. mcrain macrumors 68000

    mcrain

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    #1
    Republicans met with top Wall St. executives to discuss financial reform and political donations.

    http://www.foxbusiness.com/story/ma...nt/street-execs-pols-earful-financial-reform/

    In addition to discussing the reform and the banks concerns, McConnell and Cornyn indicated their need for financial support so they can make political gains and oppose other Democratic reforms.

    So, how would the GOP oppose banking reform?

    http://www.huffingtonpost.com/2010/02/01/frank-luntz-pens-memo-to_n_444332.html

    (Luntz was the guy who came up with the GOP anti-healthcare playbook -> http://www.pnhp.org/news/2009/may/frank_luntzs_the_l.php)

    http://www.huffingtonpost.com/2010/04/14/democrats-batter-mitch-mc_n_537441.html
     
  2. chrmjenkins macrumors 603

    chrmjenkins

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    #2
    They can't simply be the part of no on this one. Everyone wants to see reform of some sort, and many want the same things. I don't think the ability of the Fed to prop up big banks will be as big a problem as their direct involvement in citizens' insurance purchases was to healthcare reform.
     
  3. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #3
    Screw a $50 billion dollar slush fund, we need to break these banks into pieces if they are still wanting to be riding the tax payers dime while taking huge risks. Providing a safety net for private banks is the worst idea I have ever heard.
     
  4. Raid macrumors 68020

    Raid

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    Does the USA have something like the Canadian Deposit Insurance Corporation? Institutions like this ensures regular customers deposits are protected (within limits). The banking structure in Canada is vastly different than that of the US, so I'm curious.
     
  5. mcrain thread starter macrumors 68000

    mcrain

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    So, the banks pooling $50 billion dollars of their money to prevent the need of a taxpayer bail out, and to push them to take precautions to avoid risking their own money is a bad idea?

    No taxpayer dimes by the way. That's a republican lie talking point.

    The law also requires that the banks create funderal plans so that in the event they fail, there is a plan in place to allow them to be broken up in an orderly fashion.
     
  6. leekohler macrumors G5

    leekohler

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    #6
    Yes, we do- the FDIC.
     
  7. NT1440 macrumors G4

    NT1440

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    #7
    THE BANKS are the ones that put into that fund, no the American people. That means that they pay their own damn bailouts from now on.

    I do agree that no banks should be allowed to be as big as some are right now though.
     
  8. Raid macrumors 68020

    Raid

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    Good, that's the first step in protecting the little guy in terms of bank failure. Next on to regulation of Asset Backed Commercial Paper and regular rating audits for those products! :)

    While I'm not a big fan of the bailout, it highlighted the need for financial reform for many people. Better checks and balances for asset swaps are needed and more accountability needs to be placed on the issuing financial institution. I'd also like to see banks pay back those bailouts (with interest) as a bit of poetic justice.
     
  9. Desertrat macrumors newbie

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    #9
    Most anything to control derivatives is fine by me. Derivatives were a major part of the Enron meltdown, along with that of Long Term Capital Management and Barclay's Bank. In general, the investor guys I follow view derivatives with a mixture of scorn and fear because of the consequences of wong-way bets on interest rates.

    "The plan, which passed through Dodd's Banking Committee on a party-line vote, uses a tax on banks to create a $50 billion fund to wind down and liquidate major failing financial institutions."

    Okay, no problem there. But the Heritage Foundation folks read the fine print, and the fund can be used--apparently, only used--with the approval of the SecTreas. Further, there seems to be more funding available, guaranteed by the government--as in tax dollars.

    Overall, though, IMO, there's just no such thing as "too big to fail". Better that an inefficient gang fails, is broken up into usable groups, sold off and then a re-start gets back in business at a more reasonable amount of investment. That way, debts are cleared--which is as it should be.
     
  10. mactastic macrumors 68040

    mactastic

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    #10
    That doesn't seem like nearly enough to me, considering they blew something like a $9 trillion hole in the economy this time around.

    I don't really trust this mechanism much either, as companies are then incentivized to find ways to slip a 'poison pill' into the funeral plan that would put the gun to the taxpayers head again. It could work with strict oversight from the agency they would be required to file such a plan with, but I could easily see a firm filing a plan, then changing the company structure in such a way that the plan no longer worked. And I'm sure they'd only be required to file a plan once every couple of years, otherwise the bureaucracy necessary to process all the plans would be massive.

    Let's just break them up preemptively, and be done with it. Reinstitute Glass-Steagal, and get investment banks and insurance companies re-separated. Overhaul the ratings agency rules so that ratings agencies aren't beholden for their profits on those whose instruments they rate. And while we're at it, let's slap a very small transaction tax on trading to eliminate the high-volume traders who have introduced such high levels of volatility into the markets.
     
  11. Desertrat macrumors newbie

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    #11
    "Reinstitute Glass-Steagal, and get investment banks and insurance companies re-separated."

    For sure. I've read several commentaries where it is believed that G-S alone would have obviated this mess. I dunno.

    At any rate, using depositors' money when the FDIC guarantees the depositors gives the investment banksters a free ride. That's a wrong thing.

    To me, all this bail-out and "too big to fail" stuff is BS. If this sort of attitude had been in place a hundred years back, we'd still be subsidizing buggy-whip factories.
     
  12. Eraserhead macrumors G4

    Eraserhead

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    #12
    A $50 billion protection fund is a joke for a country the size of the US.
     
  13. SactoGuy18 macrumors 68020

    SactoGuy18

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    #13
    What we really need are the following:

    1) SERIOUSLY look at massive income tax reform, up to point we should repeal the 16th Amendment and go to a national consumption tax instead of an income tax. Such a radical change would encourage American residents and businesses to keep their personal savings and capital investments in the USA because we no longer impose taxes on earning money. It means that US$15 TRILLION in American owned assets now out of the US financial system returns, not to mention millions upon millions of outsourced jobs.

    2) Require REAL liquidity backing to trade in hedge funds, derivatives, credit default swaps and other "exotic" investments. These investments--which had no liquid backing--caused disastrous effects when the stock market crashed in September 2008.

    3) Increase the minimum margin requirements for trading in stock and commodity futures from 5% to 15%, with a 25% requirement for strategically critical items like crude oil, natural gas, certain industrial metals, certain foodstuffs and precious metals. This drastically slows down the "make a fast buck" speculators that can drive up and down the price of stocks and commodities severely in a short period of time, which has seriously inflationary and deflationary consequences.

    4) Re-impose the full aspects of the 1933 Glass-Steagall Act to separate out banking and investment operations, with an 18-month grace period to separate out the operations. This protects bank assets from the ups and downs of the stock market, as demonstrated by how bank assets kept the US economy going even after the 1987 stock market crash and the 1997-1999 Asian financial crisis.
     
  14. Desertrat macrumors newbie

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    #14
    #1 would go a long way toward solving the deficit/debt problem, if one believes that Congress would relinquish these new and added controls over business activity. It's rare that any government would ever volunarily give up power.

    2, 3 and 4 are possibly doable in the present atmosphere of public pressure against "Da Boyz" and their manipulations--and the obvious results from the mistakes due to their poor judgement.
     
  15. Eraserhead macrumors G4

    Eraserhead

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    #15
    Why would having VAT rather than Income tax solve the deficit problem?
     
  16. Sydde macrumors 68020

    Sydde

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    In theory, a VAT is unavoidable. Income tax, at least in .us, has huge holes in it that accountants can find for you to slip through. Hence, revenue that has heretofore gone uncollected would be captured. The other theoretical benefit is that the manpower and paperwork involved in collecting taxes is greatly reduced (and many of the aforementioned accountants would have to get real jobs).

    One complaint that crops up from time to time is that the byzantine tax code is full of social engineering designed to encourage or discourage certain uses of ones money. Unfortunately, for a VAT to be truly fair and not regressive, many of the same principles have to be applied to it. Should a can of beans be taxed at the same rate as a Louis Vuitton dress? One is clearly a necessity while the other is clearly a luxury. How does one structure a VAT fairly? Flat just fails to make sense to me.
     
  17. Eraserhead macrumors G4

    Eraserhead

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    #17
    Not entirely - you can just buy stuff in another country.
     
  18. Sydde macrumors 68020

    Sydde

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    #18
    And smuggle it past customs?
     
  19. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #19
    Mexico would be the only place, Canada has a VAT already iirc.
     
  20. Sydde macrumors 68020

    Sydde

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    #20
    The thing they call a GST? Last I looked, a visitor could get a break on that stuff bought in Canada when leaving the country. Has to be over a certain amount, though.
     
  21. Eraserhead macrumors G4

    Eraserhead

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    #21
    I don't know if you can still get that, I couldn't on a 64GB iPod touch.
     
  22. mactastic macrumors 68040

    mactastic

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    #22
    Second Verse, Same As The First!

    Republican leadership, talking about financial reform: "We ought to go back to the drawing board and fix it."

    Wasn't it just a few months ago we were being told that we "ought to go back to the drawing board and fix" health insurance reform?

    And really Mitch, you shouldn't be going around having closed door meetings with bankers after accusing your opponents of operating in that fashion. What kind of back-room deals were cut after all the cameras were ushered out of the room in actions harkening back to Stalinist USSR days?

    It's obvious what the GOP tactic to kill financial reform will be -- water the bill down to the point where it is toothless, then vote against it and blame the lack of any teeth in the compromise bill on Democrats.

    If the Democrat's bill actually continued the policy of bailing out banks, the banksters would be in full support. They don't like what they see, and are worried about stricter regulation and oversight, so they called their congressional lap dog to Wall Street, and gave him his Frank Luntz-drafted talking points, and sent him off the the Sunday talk shows to demand that we "go back to the drawing board".

    Pssst... Hey, Mitch! The time to get in on the drawing board action has passed. You chose not to be a constructive partner in the process, just as you did with HIR. Waiting around for Republicans to negotiate in good faith means Democrats will never get anything done, so they're moving along anyway. If you or any of your fellow Republican Party members would like to offer your vote in exchange for alterations to the bill, they're all ears. But concessions given that result in you voting against the bill anyway might as well not be conceded in the first place.
     
  23. leekohler macrumors G5

    leekohler

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    #23
    Now this is one thing I'm for. We definitely need better regulation with regards to finance.

    Go for it, Dems!
     
  24. rhsgolfer33 macrumors 6502a

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    #24
    A consumption tax would also be considered regressive. We could just eliminate capital gains taxes, that would encourage people to keep investments in the US without creating an overall regressive tax structure like the consumption tax would. I also don't think a consumption tax would have the same effect on jobs you do; jobs didn't move solely because of taxes, there is a vast wage differential between developed and undeveloped countries that would still make it favorable to produce in the later.

    How do you trade in a hedge fund? A hedge fund is not something you can buy and sell like derivatives and credit default swaps, its a company that invests money for, generally, very wealth individuals.
     
  25. chrmjenkins macrumors 603

    chrmjenkins

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    #25
    I would imagine they have fewer points on which they can hang for this reform, but I won't put it past them to come up with irrational fears out of nowhere.
     

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