I Feel Like I’ve Heard This Song Before
Carper, a member of the Senate Finance Committee, said that he thinks a bipartisan deal can be reached on financial regulatory reform legislation, and argued it should be done by dropping the most contentious areas of the bill.
“At the end of the day…we agree on about 80 percent of the stuff here,” Carper said during an appearance on Fox News. “I think what we need to do is focus on the 80 percent on which we agree and set aside the 20 percent for another day.”
Among those provisions creating friction is a $50 billion, industry-funded pool of money to help wind down financial institutions if they begin to fail. Republicans have derided this provision as a pool for endless bailouts, though they’ve also maintained other objections to the legislation.
Democrats are actually on the verge of winning this one without dropping this provision. Senator Corker (R-TN) has defended the fund from the “permanent bailout” rhetoric of Mitch McConnell and Goldman Sachs gave a big boost to the prospects of reform by being giant douches. Even the media is calling out Republicans on their bogus talking points ripped straight from a Luntz memo.
I’ll give you a one guess on why Tom Carper is ready to throw in the towel on the provisions Big Wall Street hates most…
Tags: Financial Reform, Tom Carper
Tom Carper being himself..what do you expect !
Carper aside, what are the merits of this $50 billion fund?
In my mind it comes down to: What are the terms for tapping this fund?
Basically, I think to get this money you should have to turn your business over to receivership, cancel all bonuses, and submit your resignation. All the money should be used to protect the markets from your fall – not even necessarily your own investors, who should take a bath.
The fund should be burial insurance, not health care. Anything less than those kinds of controls would in fact create a moral hazard.
Do you know how the FDIC works? This %50B would work in pretty much the same way, except for larger banks — banks with businesses and assets tied up in more than traditional deposits banking. The $50B lets the FDIC or whatever the resolution authority is step in and unwind a dead big bank in an orderly way. The way they do for the smaller banks now. Even though the FDIC is taking over smaller banks at a pace of two or so per week, what you don’t hear of are long term impacts to their customers. That is because they step in before the run happens — they replace management, keep the lights on, dole out the losses to shareholders and sell what assets they can to an entity that wants them.
In terms of getting to the 50B, wouldn’t that pretty much match the way insurance companies are carefully dissolved when the government is able to get in and wind them down (don’t think they have a fund established, tho, but not sure)? The example I am thinking of happened in PA in the 90’s. I’m not certain if I have this name correct, tho…Reliant?
If it’s the FDIC model, that is cool. But taking the money needs to be a death penalty.
It is less about taking the money than it is about giving the FDIC or whatever resolution authority the funds to kill it in an orderly way. The FDIC adds nothing to a failed bank’s balance sheets and would not do it here.
The Reliant thing went to liquidation, I think and that process is more about making sure that valid claims are paid to policyholders as the company is wound down. But given that these big banks are in multiple businesses it seems that it could work like that too. They key to this is trying to hold harmless and make whole the people who had nothing to do with the failure — depositors or other account holders.
It is all just a con-game. Where do you think that money is going to come from? That’s right, a bank’s customers. Who is going to get it back in the end? That’s right, the banks. Until there is regulation of derivatives, rules around risk, ability to do clawbacks, and a few bankers go to jail for stealing from the public, there will be no reform, just more money taken from the public to subsidize corrupt politicians and bankers.
Carper’s been defending the $50B fund. The decision to drop it comes from a higher authority.
http://www.businessweek.com/news/2010-04-17/obama-administration-tells-democrats-to-drop-50-billion-fund.html
From JM’s linked article:
Sounds reasonable. I don’t really want to go to the mat for this fund.
Who is going to get it back in the end? That’s right, the banks.
The current FDIC doesn’t act like this know so you would be quite wrong on this. But I guess we just add this to the list of stuff that you know nothing about.
For anyone confused about the $50 billion liquidaton fund, my post yesterday tries to explain it a bit. Long story short, the fund is there to help KILL a company, not save it. It’s the exact opposite of a bailout — it’s an execution.
cassandra_m wrote: “The current FDIC doesn’t act like this know so you would be quite wrong on this.”
When the FDIC takes over a bank, they usually try to get another bank to assume it by subsidizing it in some way, which, of course, includes covering the deposits lost by the insolvent bank.
So, for example, if Bank A becomes insolvent, the FDIC will close the bank, make the depositors whole (up to $200K/each), and then give those deposited assets and other non-toxic assets to another bank. So who gets the money? Another bank.
Your pompous naivety isn’t very becoming.
Deposits. Which are definitively NOT the bank’s money.
And the assets of he failed back are mostly *sold* to other banks. In that instance, they are making depositors whole, not the bank, which dies its death.
You’d think you’d get tired of putting your idiocy on display like this.
Deposits are not the banks money, obviously, but deposits are the life-blood what banks use to make money. So getting free the FDIC-filled insured accounts is a pretty good deal. Plus, they get to assume the insolvent bank’s portfolio of good loans, and the selling prices for these things are cents on the dollar compared to what it would cost for a bank to acquire those accounts and loans from scratch.
In the end, it is the taxpayers and customers who pay for the FDIC insurance, and it is the taxpayers and customers who will pay for this $50 billion dollar fund.
I think my friend Fay has addressed some interesting points on this subject. I posted it.
Cassandra and Scott P have it right, which is why this fund is a very good idea to protect the public.
Anonone’s views parrot those of industry, which invariably claims that any tax or assessment does not eat into profits but instead is paid by consumers. That is incorrect. Do you think that banks will pay a higher rate of interest on savings accounts if this fund is not established? If so, I have a span for sale.
John Manifold, why don’t you check the rate of bank fee increase versus the rate of inflation in the last 10 years? Or credit card interest rates? Or ATM fees? Do you think that banks only make money from interest?
I didn’t say this pool was a bad idea. I meant that in the absence of any meaningful regulatory reform with some teeth in it, it isn’t going to do much more than take money from the American public for the benefit of corporate America.
By the way, do you think that the banks will lower their interest and fees if this fund is not established? Of course not. But they won’t let it cut into their profits and bonuses if it is; that you can count on.
Supposedly there’s a deal in the works right now. Sen. Shelby says Republicans are going to vote for the bill. Sen. Grassley actually voted for the bill in committee.
Crapper
what do we expect.
Bring back the pix of Crapper wearing the faux NASCAR jacket with the logo of all his ‘sponsors’…..run it everytime you need his pix….I never tire of looking at it (and shiny objects 😉
Krugman describes Anonone:
http://krugman.blogs.nytimes.com/2010/04/21/low-information-voters/
LOL! Very funny, JM.