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Monday, November 25, 2013

Clockwork Orange Fools

The reforms to the financial system are not sufficient to preserve it from its own folly again.

What kind of fools actively put their futures at such a risk?

Senator Ted Kaufman in Forbes:
If you have read any of my previous posts, you know I believe Dodd-Frank has failed to achieve its announced objective: to make the systemic changes necessary to prevent another financial meltdown.
Doing nothing to reduce the size of our too-big-to-fail banks has been its greatest failure. We know our four largest banks are bigger and more complex now than they were when we bailed them out in 2008, with combined assets that amount to 97 percent of 2012 U.S. GDP. We must also acknowledge that for the foreseeable future we have nothing in place that would protect American taxpayers from another necessary bailout if one or all of those banks were in danger of failing.

Since 2009, when I co-sponsored a bill with Senators McCain and Cantwell to reinstate Glass-Steagall in an updated form, I have believed that was by far the best solution to the TBTF  (Too Big To Fail)  problem. The bill went nowhere then, and a similar bill introduced a month ago by Senators McCain, Cantwell and Warren will no doubt suffer the same fate. The Volcker Rule started out as Glass-Steagall-lite three years ago. It has been so watered down that, whatever it looks like when the regulators release it in some final form, it will do nothing about TBTF.

We are left with the “Orderly Liquidation Authority” included in Dodd-Frank—weak tea indeed for a number of reasons. Most importantly, that OLA requires agreements across national borders. Yet the G20’s Financial Stability Board has said that international regulators still lack the power to impose losses on creditors and resolve banks without taxpayer bailouts and that “few jurisdictions have equipped administrative authorities with the full set of powers to resolves banks.” Unless and until we make major changes in the size and complexity of megabanks, Dodd-Frank’s OLA is a paper tiger.

As I write this, the TV news has something about "Knockout Games" where teens go around knocking down older folks. I may as well ask why Life imitates Art so much, and why this society chooses the ignoble choices, such as Clockwork Orange to model itself after.


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