Tag Archives: TBTF

GOP platform pushes for big-bank breakup, return of Glass-Steagall

hahamouse

lol! I wonder what Sen. Warren and Sen. Sanders have to say on this since GOP Congress and Senators have been trying many times to dismantle the Dodd-Frank bill and the bank lobbyists have been lobbying against the Glass-Steagall. And now their platform pushed to break up the banks??? Don’t buy the beans, folks! The GOP party are going after votes, not the banks!

The Republican Party is going after the big banks.

As the GOP convention gets under way in Cleveland, a top adviser to presumptive nominee Donald Trump said the party wants to revive the Glass-Steagall Act, Depression-era legislation that helped prevent big bank “supermarkets” but which was repealed in 1999.

Critics of the banking industry believe the repeal created too-big-to-fail institutions that required a massive government bailout when the financial crisis exploded in 2008. The repeal often is cited as a cause of the crisis, even though two of the investment banks at the core of the crisis, Lehman Brothers and Bear Stearns, were unaffected by the act’s prohibition of combining investment and commercial banks.

“We believe the Obama-Clinton years have passed legislation that has been favorable to the big banks, which is why you see all the Wall Street money going to her,” Trump campaign manger Paul Manafort told reporters, according to an account in The Hill. “We are supporting the small banks and Main Street.”

Read on.

Fed’s Focus on “Too-Big-to-Fail” Won’t Save Taxpayers From the Next Bank Bailout

Last month, the Federal Reserve announced that 31 out of 33 U.S. banks had passed its latest “stress test,” designed to ensure that the largest financial institutions have enough capital to withstand a severe economic shock.

Passing the test amounts to being given a clean bill of health by the Fed. So are taxpayers — who were on the hook for the initial US$700 billion TARP bill to bail out the banks in 2008 — now safe?

Yes, but only until the next crisis.

Skeptics of these tests (myself included) argue that passing them will not prevent any bank (large or small) from failing, in part because they’re not stressful enough and the proposed capital requirements are not high enough.

But beyond this, the stress tests highlight a significant shortcoming in how regulators hope to prevent the next wave of bank failures: They’re focusing way too much on size, particularly with the designation of so-called systemically important, “too-big-to-fail” banks.

U.S. lawmakers in search of a solution are currently working on legislation that would make it easier for too-big-to-fail banks to actually fail through bankruptcy. While doing so would be a good thing, it still raises important questions.

Are policymakers right to focus on size in determining whether a bank poses a major risk to the financial system and taxpayers? Would splitting larger banks into smaller ones free taxpayers from the repeated burden of rescuing them during times of crisis? Does calling a bank “too big to fail” even mean anything?

To me, this focus on size and “too big to fail” seems misplaced. I’m among those who advocate replacing our current system with something known as “narrow banking,” which would totally separate deposits from riskier lending activities. This would have the best chance of protecting taxpayers from having to foot the bill for future bailouts, as I’ll explain below.

Read on.

 

GE Says Too-Big-to-Fail Exit Puts Stamp of Approval on Overhaul

  • Lew: Finance unit made ‘fundamental strategic changes’
  • Firm could seek acquisitions of up to $7 billion, analyst says

General Electric Co. isn’t too big to fail anymore. All it took was the most sweeping transformation in the company’s 124-year history.

The Financial Stability Oversight Council released GE from the designation as asystemically important institution, saying Wednesday that the industrial giant no longer poses a threat to U.S. financial stability. The decision came after the company agreed to sell almost $200 billion of lending assets since early last year.

“Getting de-designated in this time frame is a great milestone for us,” Keith Sherin, chief executive officer of GE Capital, said in a telephone interview. Regulators “recognized that we’ve transformed the company. It validates the change in strategy.”

Read on.

Republican Policy Proposals: Wall Street Regulation Plan Released By Texas Rep Would Change How Washington Works

On a  side note: Volcker rule never went into effect yet due to the bank lobbyists pushing Congress to stall at rule to take into effect.

Hoping to find a way to show American voters the Republican Party doesn’t just represent stalled legislation and gridlock, members of the GOP in Washington have recently rolling out extensive policy proposals to reform the way taxes and — most recently — banks on Wall Street are handled.

Republican Rep. Jeb Hensarling of Texas, the chairman of the House Financial Services Committee, plans on unveiling a series of reforms to the country’s financial regulatory palate in the coming week, including what would effectively be a gutting of the Dodd-Frank Wall Street reform measure instituted in the wake of the 2008 financial crisis. Hensarling doesn’t want to change all of the bill — which has been cheered by members on the opposite side of the aisle, including Hillary Clinton — just “89.7 percent,” he says .

Among the reforms House Republicans like Hensarling are pushing are reduced independence for the Consumer Finance Protection Bureau (funding would come from Congress rather than directly from the Federal Reserve) and taking away the bureau’s ability to prohibit arbitration clauses in financial contracts. Hensarling would also like parts of the Fed — particularly the area that regulates financial institutions — to be under congressional budgetary oversight, the Economist reported.

Hensarling would like to repeal the so-called Volcker rule that bars banks and investment firms from trading on their own account. He would also like to replace government regulations on traders with hefty capital requirements (say, 10 percent of funding coming from equity from the firms themselves). Big banks would no longer be able to be bailed out by the government under his plans, either.

Read on.

Hillary Clinton, Elizabeth Warren both blast Republican Dodd-Frank repeal plan

Wet kiss for Wall Street.. lol! Go Elizabeth!

Warren: Republican plan is a “wet kiss for Wall Street”

Considering how many times House Financial Services Committee Chairman Rep. Jeb Hensarling, R-TX, blamed “the Left” for the consequences of the Dodd-Frank Wall Street Reform and Consumer Protection Act during his speech announcing aRepublican-crafted plan to repeal Dodd-Frank, it was highly likely that those on “the Left” would be quick to condemn Hensarling’s plan.

And two of the top names in the Democratic party didn’t disappoint, with a top advisor to Hillary Clinton’s campaign saying Tuesday that Hensarling’s plan is “ill-conceived” and Sen. Elizabeth Warren, D-MA, saying in a Senate hearing that Hensarling’s plan is a “wet kiss for Wall Street.”

Read on.

 

Rules for ‘too big to fail’ insurance firms coming soon: Fed official

The Federal Reserve will soon take up rules for insurance companies deemed “too big to fail” intended to head off risks to U.S. financial stability, Fed Governor Daniel Tarullo said on Friday.

It will also in coming weeks propose requirements on how much capital that firms across the industry should hold, he said in a speech to the National Association of Insurance Commissioners.

The industry has waited for more than five years to see the proposals, which are tied to the Dodd-Frank Wall Street reform law passed in 2010 after the financial crisis.

Under the law, federal regulators can determine that non-bank companies such as American International Group Inc (>> American International Group Inc) could put the entire financial system in danger if they fail, and require they take certain measures to stave off threats.

Read on.

Forbes: Five Biggest U.S. Banks Control Nearly Half Industry’s $15 Trillion In Assets

This is an article in 2014.

DEC 3, 2014 @ 10:37 AM

Bank concentration

Forbes:

The wreckage of the financial crisis led to pages upon pages of financial reform aimed at ending the era of Too Big To Fail, but six years after the banking system blew up the five biggest firms control 44% of the $15.3 trillion in assets held by U.S. banks according to data compiled by SNL Financial. Those banks — JPMorgan Chase JPM -0.63%, Bank of America BAC -1.56%, Wells Fargo WFC -0.85%,Citigroup C -0.96% and US Bancorp USB -1.02% — collectively held $6.8 trillion in assets as of Sept. 30.

JPMorgan holds just over $2 trillion in assets, or 13.1% of the industry’s total, followed by BofA at $1.5 trillion (9.9%), Wells Fargo just under $1.5 trillion (9.7%) and Citi at $1.4 trillion (9%), before a substantial dropoff to US Bank at $387 billion (2.5%).

SNL’s analysis, which considered only commercial banks, notes the drastic increase in banking industry concentration over the past few decades. In 1990, the five biggest U.S. banks held less than 10% of industry assets, but that figure has steadily marched higher ever since, pausing only for the year from 1999 to 2000. Today, Wells Fargo, the third biggest bank, controls basically the same percentage of assets the entire top five did in 1990.

That increased concentration is largely thanks to banking industry consolidation that accelerated in the 1990s then hit overdrive after Sandy Weill’s controversial deal to create the modern Citigroup prompted the repeal of Glass-Steagall, the legislation that forced a separation of church and state between commercial and investment banks.

On a side note: According to the OECD, general government gross debt (federal, state, and local) in the United States in the third quarter of 2012 was$16.3 trillion, 108% of GDP. We are at $16.3 trillion in debt while the 5 big banks combined assets could wipe out most or all of the government gross debt. Real sad and yet too dangerous that Congress and government have given so much financial power to the 5 big banks…

Sanders
“Today, you have six financial institutions, the largest six, that have assets that are the equivalent of 60 percent of the GDP of the United States of America.”

Bernie Sanders on Tuesday, October 4th, 2011 in an interview with MSNBC

True

Source: Politifact