Comments on: Waging War on Wall Street?

By: Edwin

Edwin — Mon, 01 Feb 2010 22:46:16 +0000

I disagree with people that banks are “too big to fail” as that’s not really the issue. The problem is that banks fail because they aren’t regulated, not because of their size. The only thing the size does is force the government to react when they do fail. What regulation does is make it so they don’t fail so miserably in the first place.

Stan the main issue I have with your viewpoint is that you rely on one very important assumption. Which is that through deregulation, banks create “innovative” products that make the free market more efficient.

These are both false and have proven to be. The new products created by banks are not good for an economy whatsoever, they are good for the banks and their shareholders. The products are created to mathematically (with variables based on what increases profits) earn them more money with disregard for anything else. And they did a damn fine job figuring out the formulas behind these products, but the people who did this weren’t taking into account any outside effects.

By: Stan

Stan — Fri, 29 Jan 2010 18:48:23 +0000

As I stated, in the long term, I do agree that big banks should be separated. This financial crisis stemmed from banks taking on way too much risk, given how much our economy depended on them.

However, I just don’t agree with Obama’s timing. I think it was very political move to deflect attention away from the Massachusetts loss and the healthcare bill.

Banks need stability for any economic recovery to occur, and by clouding the future profitability of the banks, this hurts the recovery that’s barely existent in the first place.

Also, remember that a financial crisis can happen even with Glass-Steagall in place. Long-Term Capital Management, which was a large hedge fund ran by Nobel Prize winners folded in late 1998. They were bailed out by other major banks, supervised by the Fed. Had the bailout not happened, this would have had a significant negative impact the economy. So this separation does not guarantee the total stability of the financial system by any means.

By: Honey

Honey — Fri, 29 Jan 2010 17:03:18 +0000

I also agree with Obama. I don’t know much about economics and the history of banking regulation, but it seems like given the outline above that the Glass-Steagall act did an amazing job of protecting us for something like 70 years and that repealing it is what enabled the conditions that led to this crash.

I find myself rooting for the economy to go in the dumps again – I think that overall folks have had it too easy and unless we have another short-term retraction then no one will have the stones to enact the desperately needed reforms Obama is proposing.

By: 20smoney

20smoney — Fri, 29 Jan 2010 15:44:12 +0000

I think Obama is all about political points, but I do think we should break up the banks, simply so that no bailouts are ever needed. “Too big to fail” is a lie and a joke. If TBTF, then break them up so that we can actually allow failure in the future. Privatized profits and socialized losses are screwing our country. I’m for private profits and private losses. Social nothing.

By: Jason

Jason — Fri, 29 Jan 2010 15:13:26 +0000

Whoa, I couldn’t disagree with this more. Here’s what I think is the fundamental flaw: If banks can become “too big to fail,” i.e., they need to become the government/taxpayer’s responsibility if something goes wrong, then there’s a regulatory problem. Regulations should prevent any private business from becoming so singularly large and important that it becomes the responsibility of the government and taxpayers to bail out. This isn’t even a “big government” argument, really, if anything its an argument in favor of SMALLER government because it allows us to stay out of the business and interests of private banks.