Some measures to address too-big-to-fail, the central policy platform of ANWF - the G20 summit of economic leaders in Pittsburgh today and tomorrow will be urged to deal with capital reserves, meaning the big banks need to hold back (in reserves) more of the money they put out to gamble with as an insurance for safer activity. Would be good. Let's see what Obama does -- more and more groups are calling for movement on TBTF -- let's keep pushing in our own circles.

Geithner has now said he will pursue reforming TBTF, requiring higher capital reserves. "“It is very important that these institutions that matter, whose future could threaten the economy as a whole, are subject to higher constraints on leverage in the future, more conservative cushions of capital and liquidity, so that they can absorb losses they face when they make big mistakes,” said Mr Geithner."

From James Kwak at Baseline Scenario, a great explanation on what Bank of America has been given through bailouts and loans from the Fed, how much they are legally supposed to give back, and whether or not we should be infuriated.

Since people are getting angry about overdraft fees, banks are deciding to limit how often they charge people an overdraft fee. Usually people can't opt out of their overdraft program and are charged multiple times throughout the day for each $1 and up purchase. Corporations are weasley as in this example where they will just find a more discrete way to charge you the same. Wash Post here.

Steve Perstein as WPost has an article titled, "A New Bubble Of the Fed's Creation". It's worth reading if you have time to understand how things work. He says,

"Less encouraging is what's happening on Wall Street. It turns out that all those bold and necessary steps by the Federal Reserve to prevent the financial system from collapsing wound up creating so much liquidity that it has now spawned another financial bubble... As it was printing all that money, the Fed was also lowering the interest rate at which banks borrow from the Fed and each other, to pretty close to zero. What didn't change was the interest rate banks charged everyone else. As a result, "spreads" between what banks pay for money and what they charge are near record highs."

The basic idea is that the Fed offered some 1.45 trillion to help move bonds that originated from Fannie/Frediie which were bought up by investors and the same banks that failed last year aand resold. The 1.45 trillion was simply printed up. These are the ingredients of a bubble.

A few good quotes from Prof. Hudson, via Randy and Val:

1. "The financial oligarchy's idea of "regulation" is to make sure that deregulators are installed in the key positions and given only a minimal skeleton staff and little funding."

2. "This pretence for excluding government from meaningful regulation is that finance is so technical that only someone from the financial "industry" is capable of regulating it. To add insult to injury, the additional counter-intuitive claim is made that a hallmark of democracy is to make the central bank "independent" of elected government. In reality, of course, that is just the opposite of democracy. Finance is the crux of the economic system. If it is not regulated democratically in the public interest, then it is "free" to be captured by special interests. So this becomes the oligarchic definition of "market freedom."

3. "The danger is that governments will let the financial sector determine how "regulation" will be applied. Special interests seek to make money from the economy, and the financial sector does this in an extractive way. That is its marketing plan. Finance today is acting in a way that de-industrializes economies, not builds them up. The "plan" is austerity for labor, industry and all sectors outside of finance, as in the IMF programs imposed on hapless Third World debtor countries. The experience of Iceland, Latvia and other "financialized" economies should be examined as object lessons, if only because they top the World Bank's ranking of countries in terms of the "ease of doing business."

Good article on the effects of pay caps -- what do pay caps get us? There are some reform measures that matter a lot and some that matter a little less. Here's one proposed layout:

"The administration has it wrong. It wasn't reckless schemes and excessive risk that sunk banks and Wall Street; it was excessive leverage. And thanks to cheap money and twisty regulations, risk was extremely undervalued. Banks owned huge portfolios of real-estate loans and mortgages specifically because they, and regulators, didn't think they were taking much risk at all."

• tiffiniy's blog
• Add new comment