“We’ve got a financial regulatory system that is completely inadequate to control the excessive risks and irresponsible behavior of financial players all around the world,”
Quote President Obama.
FINALLY! THEY GET IT.
President Obama(and especialy his predecessor Bush)and his administration is not without responsebility in this mess. President Obama, Treasury Secretary Timothy F. Geithner and his predecessor H. Paulson in their eager to "save" the financial system was very very quick to deem some banks, but even worse some Investment Banks too big to fail. At that point they totally missed the core issue, that Investment Banks was is in no way essential for the financial system working. When H. Paulson and Bernanke scacrified Lehman Brothers, they got everybody so scared that they took the bait and bought the "Too big to fail" fallacy, but Paul Vokler is about to change that.
Paul Volker hit the nail on the head yesterday saying
"The heart of my argument is who we are going to save and who we are not going to save. And I don’t want to save what is not at the heart of commercial banking".
Therefore President Obama yesterday proposed wide-ranging moves on bank regulation, which was first proposed by his economic advisor Paul Volcker, the former Federal Reserve Chairman. We still need the details of the proposal to fully know the range of the proposal. However, the focus is expected to center on strict bank size limits and a limitation on proprietary trading at regulated banks with access to the Fed discount window. This is a dramatic re-alignment in policy away from the no-strings attached bailouts backed by Hank Paulson, Geithner and Summers last year toward much more substantive financial reform.
- but will it pass Congress? Let's hope so, because the moral hassard we have seen from mid-1990's to October 2007 and from March 2009 until now can't be going on forever.
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