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Obama Still Hasn't Taken Our Advice

June 28, 2009

Check out this article by MIT Professor Simon Johnson

"Writing in the New York Times today, Joe Nocera sums up, "If Mr. Obama hopes to create a regulatory environment that stands for another six decades, he is going to have to do what Roosevelt did once upon a time. He is going to have make some bankers mad."

Good point – but Nocera is thinking about the wrong Roosevelt (FDR). In order to get to the point where you can reform like FDR, you first have to break the political power of the big banks, and that requires substantially reducing their economic power - the moment calls more for Teddy Roosevelt-type trustbusting, and it appears that is exactly what we will not get."

It's time for the people to insist on trustbusting and real regulation in the public interest (rather than in the interest of the banks which pay the salaries of the regional Fed officials). That is, to insist that your employees (President Obama, Treasury Secretary Geithner, Federal Reserve Chair Bernanke, Presidential advisor Summers, and each member of the Congress) implement the steps PSACOT urged more than four months ago. Since then the Obama Administration has shockingly done nothing to implement PSACOT's proposals (and most members of Congress have done very little).

Those proposals included:

  1. restore the Glass-Steagall Act
  2. close the insolvent banks
  3. help the banks and the bankers by limiting the assets which may be held by a single bank to about $100B
  4. reform the currently big banks by having their shareholders split them into banks holding no more than about $75B in assets thus allowing for growth up to the $100B limit
  5. help the banks and their shareholders by eliminating the risk currently posed by tranche-laden Collateralized Debt Obligations and Credit Default Swaps by:
    1. banning any trading or new sales of these toxic derivatives effective immediately in the United States or by anyone dealing with the U.S. financial system
    2. banning the holding of naked Credit Default Swaps (a CDS not owned by an owner of the entire underlying credit) after December 31, 2009, or the due date of the next insurance payment due on the CDS, whichever comes first)
    3. allowing the current obligations of current CDOs and CDSs to be met
  1. help the housing industry and the banks by requiring down payments of at least 25% on any new loans for the purchase of homes or commercial properties
  2. require any new securitized debt obligations to be without tranches (all purchasers share pro rata in the payments received) and to be rated by agencies not paid by the issuers or sellers of the securities (the assessment of creditworthiness will be by the purchasers or agencies paid directly by the purchasers)
  3. ban off balance sheet activities (effective with any financial report filed on or after December 31, 2009) by any company whose securities are traded in the United States or which deals with the U.S. financial system
  4. use mark-to-market accounting
  5. assess, effective October 1, 2009, an additional fee of 2 cents per share and $20 per bond on all equity and bond trades on any U.S. stock exchange or bond market including NASDAQ. A fee of $2 per option contract and $20 per commodities, future, or option on future contract subject to limited exceptions for agricultural commodities and physical goods. The proceeds will be available first to hire additional trained and experienced bank examiners and staff at the SEC and CFTC and second to reduce the national debt.

Call your members of Congress, tell them to implement the needed changes, announce their retirements, or be retired.

Also:

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Briefs

Posted at 04:05 PM in Politics |