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Originally Posted by Cannon Shell
I am not exactly clear on what regulation you are pushing for? If you want to argue that banks should have not been allowed to expand into so many other non-banking areas like insurance, i would probably agree to some degree though obviously with 20/20 hindsight.
However I dont see how any of this proves your point???
But it pays to remember what a bad idea TARP capital injections were in the first place.
The nature of the problem was first apparent, ironically, in the rush of healthy banks to join Citi and friends under the so-called Troubled Asset Relief Program, fearing the lack of an imprimatur as a bank Washington had decided would not "fail."
That dynamic ran in reverse last week as banks rushed to pay back TARP money and shed the onus of government support. Bank of America had to be hurried out because Bank of America was looking for a CEO and couldn't find or pay one as long as it was laboring under Washington's populist pay restrictions.
Acknowledging TARP's perverse impact on Bank of America's CEO dilemma, Treasury and FDIC could hardly pretend it wasn't deleterious for Citi and Wells Fargo's ability to run their own businesses. Terms were quickly hammered out to let them escape, too.
Voila, a scheme designed to strengthen confidence in the financial system had become the opposite, in compounding fashion.
Let's have a moment of realism: Policy toward these giant banks always had as its primary goal saving the government from having to take them over and run them, as it has (wretchedly) AIG. It was to avoid the disaster of nationalization.
Legs one and two (plus the FDIC's guaranteeing of bank debts) were always sufficient to meet this goal and keep the giant banks stumbling along under private management and control. TARP capital injections were not only superfluous but invited the calamity they were meant to avoid, with politicians running rampant in the hallways. Take the cautionary example of Fannie and Freddie, which today are not being "conserved' in federal conservatorship but are being used to prop up home prices. For the banks, exiting TARP at least reduces the risk of similar corruption.
Washington chose not to dismantle Citi, so it should have expected no less. Oh well. In a crisis, politicians will look around for businesses "too big to fail," and any conceivable Citi would likely fit the bill, as it has since the 1970s. This problem may not be fixable, but what are fixable are the deeper antecedents of last year's troubles.
Fewer banks would have inflicted such damage on themselves if not for the government's role in encouraging Americans to incur housing debt, with direct subsidies, tax incentives and the use of Fannie and Freddie to channel China's surpluses into a U.S. housing boom.
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i don't think i'm pushing for any specific regulation. i think it's more pushing back against the right wing meme of all government involvement in the economy being bad.
the article suggests that the regulation could have been different. other decisions could have been made. things could have been done better.
i can't argue against any of that.
i'd just like one of the fox poster's here to acknowledge that there's a legitimate role for government in the economy.