Anjon Roy from the Metro DC / Northern VA group will be meeting with the staff of VA Senator Mark Warner. The staff members will be those that focus on financial re-regulation. Please sign onto the position letter we will deliver to Senator Warner in the comments or email anjonroy@gmail.com
As we have limited time, it is critical that we stay on message. Though there are many highly worthy issues to talk about and many great approaches, we have decided that this would be the most strategic approach to this particular Senator, based on his public statements, investigative research, pending legislation, and limited time.
The meeting will be at 11:30am this Wednesday November 18 in Washington DC. Please email anjonroy@gmail.com if you are interested in coordinating. Virginia residents only please.
Here is some key background on the Senator:
· Member of the Banking Committee
· Close relationship with Banking Committee Chair Chris Dodd (D-CT) going back to the early 1980s when he served on Dodd’s staff
· Has sponsored some (small) bi-partisan bills on financial re-reg. with Senator Bob Corker (R-TN) and is continuing to work closely with himSome of his known stated positions on financial re-reg. are as follows:
· Critical of regulatory arbitrage where banks shop for the least stringent regulatory framework
· In favor of consolidating the OCC & OTS with the supervisory duties of the Fed & FDIC into an independent single banking regulator
· Supporter of a “systemic risk council”, similar to the DOD Joint Chiefs. Skeptical of significantly increasing the concentration of power at the Fed
· Seems to be favorable to OTC-derivatives legislation without exemptions/carve-outs.
· Is somewhat skeptical of the CFPA, especially with regards to its interaction with other regulators, and the complexity of setting up a brand new government agency
The Agenda for the meeting will be as follows:
1. Push on CFPA with no major exemptions
2. Push for strong TBTF regulation for tier 1 FHCs
a. Ask him to support the Sanders bill to break up the banks or sponsor a similar bill of his own (Bold. He probably won’t go for this, but good to try and see if he takes a lesser position below)
b. Short of that, ask him to support a highly progressive, size-weighted capital and liquidity requirements that will incentivize the large banks to voluntarily break up (somewhat of a stretch depending upon how aggressive the “progressive requirements” are).
c. 21st century Glass Steagall separating traditional banking from investment banking. Explicit government support extended only to Depository institutions. This includes not only FDIC guarantees, but also access to the Fed discount window and other Fed support programs (probably doable).
3. Make sure he’s definitely on board with comprehensive OTC-derivative regulation (no exemptions, through an exchange, possibly consolidating the SEC and CFTC)
Tell Congress
New laws should be put in place that minimize the risk of companies becoming “too big to fail.”
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1)Lawrence Goodwyn’s “The Populist Moment: A Short History of the Agrarian Revolt in America,” one of the truly great works of American history and how to build a foundation for 20th century American political economy.
2)William Greider’s “Secrets of the Temple: How the Federal Reserve Runs the Country,” picks up where Goodwyn’s left off. An essential read in understanding money, banking and finance in the 20th century.
3)Kevin Phillips’ “Bad
Money: Reckless Finance, Failed Politics, and the Global Crisis of
American Capitalism,”
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MELTDOWN CAUSES: Articles and Interviews 1. Finger of blame points to shadow banking’s implosion -Financial Times "FINANCIAL INNOVATIONS" 1. Genesis of the Debt Disaster -Financial Times WHAT TO DO ABOUT THE BIG BANKS THAT FAIL? 1. Willem Buiter -FT ANTITRUST 1. Breaking up the Banks -Zephyr Teachout REGULATION 1. Regulatory Capture -Thomas Frank WHAT'S IT MEAN FOR THE ECONOMY? 1. Evolution or Revolution -Bill Gross Blogs |
By Michael McKee and Scott Lanman
Oct. 15 (Bloomberg) -- U.S. regulators should consider breaking up large financial institutions considered “too big to fail,” former Federal Reserve Chairman Alan Greenspan said.
Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on Foreign Relations in New York.
“If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil -- so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.”
At one point, no bank was considered too big to fail, Greenspan said. That changed after the Treasury Department under then-Secretary Hank Paulson effectively nationalized Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns Cos. and American International Group Inc.
“It’s going to be very difficult to repair their credibility on that because when push came to shove, they didn’t stand up,” Greenspan said.
Fed officials have suggested imposing a tax or requiring higher capital ratios on larger banks to ensure the firms’ safety and reduce some of the competitive advantage from the implied subsidy. Greenspan said that won’t work.
“I don’t think merely raising the fees or capital on large institutions or taxing them is enough,” Greenspan said. “I think they’ll absorb that, they’ll work with that, and it’s totally inefficient and they’ll still be using the savings.”
‘Really Arbitrarily’
The former Fed chairman said while “just really arbitrarily breaking down organizations into various different sizes” goes against his philosophical leanings, something must be done to solve the too-big-to-fail issue.
“If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society,” he said.
“Failure is an integral part, a necessary part of a market system,” he said. “If you start focusing on those who should be shrinking, it undermines growing standards of living and can even bring them down.”
To contact the reporter on this story: Michael McKee in New York at mmckee@bloomberg.net; Scott Lanman in Washington at slanman@bloomberg.net
Comments
Will be meeting with Senator Mark Warner's office
Please email me if you want to be involved in a meeting with Senator Warner's staff that is focused on Financial re-reg. Senator Warner is on the Banking Committee and is one of the most prominent and thoughtfull members on this topic. We need Virginia constituents.
Me email is: Anjonroy@gmail.com
Lobby effort
We're trying to get Metro DC people (especially Virginia residents) together for a meeting with Senator Mark Warner's office. He is on the Senate Banking Cmte and is a key player in the financial Re-Reg efforts. Please let me know who is interested in joining us. Date is TBD, but will be Late October/Early November
Going in Early November
Please let me know who is interested in goin. I spoke with a staffer who handles Fin-Reg, and have setup a meeting.
Summary On Warner's position
1. Sit's on Banking Cmte - has lots of respect in both parties on this issue because of his business background
2. Has called for a "Council of Regulators" to manage systemic risk - is against giving the Fed more power to being the systemic risk regulator.
3. Has called for consolidating regulators (OTC, OCC, with Reg duties of the Fed and FDIC) and has spoken out on the problems of regulatory arbitrage.
4. Has not made clear public pronoucements yet on Derivatives and CFPA