Thread: Experts Say Bills Won't End 'Too Big To Fail'

Originally Posted by mtm1963

i've heard that the republicans are "lying" about this issue. maybe it seems they are not and the some just continue to eat up obama's\democrats political BS.

Experts Say Bills Won't End 'Too Big To Fail' : NPR

Hmm, this is from the article, mtm:

We at Planet Money did an informal survey of economists and regulatory experts on the left and the right. We couldn't find any who fully endorse the reforms backed by President Obama and Democrats in Congress.

Everyone thinks the reforms just aren't enough to solve the problem.

Take, for example, "too big to fail" -- the idea that if one of the largest banks in the country gets into trouble, the government will save it with taxpayer money.

"A vote for reform is a vote to put a stop to taxpayer-funded bailouts," Obama said in his speech in New York on Thursday.

I cannot find any experts -- of any party -- who are willing to agree with Obama on this one.

"We're not seeing a very forceful step on the too-big-to-fail problem," said Carmen Reinhart, an economist at the University of Maryland. "If there's any doubt that the crisis may be systemic, we will bail out again."

Weren't you arguing in another thread that the "reforms go to far"? Seems these financial experts disagree with you. They don't think they go far enough. I agree with that sentiment. As I said in that thread, I think the "insurance" fund for winding down these huge banks should be at least doubled, from $50B to at least $100B.

Now, Reinhart may very well be right. If there's any doubt that the problem is systemic, meaning across all of the financial institutions, simultaneously, as in the 2008 meltdown, then we probably wiil be bailing them out again. On the other hand, that's what a lot of this financial reform bill is about - preventing something like this from becoming systemic. And using the insurance fund, like with the FDIC for commercial banks, to place the bank into receivership, sell off the assets to another firm, and absorb much of the bad debt in an orderly fashion.

But aside from another systemic, industry-wide problem, I fail to see where closing a single investment bank or insurance company down, and using the insurance fund that they and all the other investment banks had to pay into to do it is a "taxpayer bailout", as Mitch McConnel kept trying to tell us last week. He, and you, are failing to realize, or just plain want to ignore, that the $50B comes not from us, but from the banks themselves.

So, is it possible that there might be another financial crisis that requires a taxpayer bailout? Sure. But the bill in front of congress right now is designed to prevent much of what happened two years ago from happening again. And provides for a bank-funded insurance fund so that any single investment bank can be brought down without serious consequences to the national economy.

Sounds like a fair trade to me.

Originally Posted by mtm1963

Rick Sanchez of CNN ran a story on his show serveral weeks ago about the government bailout of the banks where the Fed bailout ran into 3 plus trillion dollars, not the total we have been told by the media or this admin.

Got a link to this?

Originally Posted by NiteGuy

Got a link to this?

I can't find the original Sanchez interview but one source to the revised numbers is here.

Today, the Real Economy Project of the Center for Media and Democracy (CMD) released an assessment of the total cost to taxpayers of the Wall Street bailout. CMD concludes that multiple federal agencies have disbursed $4.6 trillion dollars in supporting the financial sector since the meltdown in 2007-2008. Of that, $2 trillion is still outstanding.

Originally Posted by doug_yvr

I can't find the original Sanchez interview but one source to the revised numbers is here.

Thanks for that.

It looks like we have a lot of institutions that are still in the process of repaying loans, etc. And we knew that there were some funds we probably wouldn't be getting back. All in all, I would say that getting more than half of it back already bodes well for getting most of it back.

And as Chase said, what were we really going to do - allow every single investment firm, all of the auto companies, and the two largest financial insurance companies in the world collapse? MTM1963's complaining about the economy now, and we spent, according to your link, $4.6 trillion, with about $1.9 trillion left to be repaid. How much worse would it have been, hed we allowed these banks to fail completely, and taken hundreds of trillions of dollars with them? MTM complains about his 401k losing half it's value? How much more would he be complaining if it had dropped to zero?

That's the thing I don't get about folks like mtm, I guess. They bitched and moaned about the government over-regulating banks, mortgage and utilities investments back in the late 90's, and got a bunch of regulations repealed, most notably Glass-Steagal, and prevented legislation that would have regulated derivative transactions. The two actions most directly responsible for the fix we are currently in. They've got first hand, direct experience with the consequences of those actions. Enron, Adelphia, the Wall Street meltdown.

And yet, they still insist that these companies and industries are perfectly capable of policing themselves, and that all government has to do is get out of their way. How many times do these people have to have deregulated companies slap them in the face, or kick them in the ass, before they get the idea that maybe, just maybe, these corporations really do need to be regulated, if for no other reason than to keep them from stealing everyone blind. And blowing up the financial world in the process.

Originally Posted by NiteGuy

And yet, they still insist that these companies and industries are perfectly capable of policing themselves, and that all government has to do is get out of their way. How many times do these people have to have deregulated companies slap them in the face, or kick them in the ass, before they get the idea that maybe, just maybe, these corporations really do need to be regulated, if for no other reason than to keep them from stealing everyone blind. And blowing up the financial world in the process.

Well if your entire political philosophy was based on limited government - especially concerning the free market system - you would probably find as many ways as you could to avoid reality too.

The guy who should get most of the blame for this mess is Alan Greenspan. His theory that the economy will work best with the least regulation, debunked by himself in 2008, led to a situation where the foxes were given the keys to the hen house. His disastrous advice was embraced by several Presidents, including but not limited to Clinton, and several Congresses led by both sides.