Bill Moyer's again: Big Banks' Accountability Deficit - great interview of Mother Jones contributors

[JohnWxy]

how Wall Street banks are undermining reforms which are meant to prevent or reduce the likelihood/severity of another Banking System collapse.

THis is MUST view (or read stuff). The banks are succeeding in watering down reforms meant to preclude another banking disaster. This is an issue which gets fairly technical so if you plan on writing your legislators about it it's good to have some familiarity with the terms used and the features of reform the banks are trying to kill.


http://www.pbs.org/moyers/journal/01082010/profile.html


While the great wealth of Wall Street allows it to lavish campaign contributions on Congress, it is not money alone that gives the financial industry so much power. The influence of Wall Street has managed to change the national conversation. MOTHER JONES political blogger Kevin Drum explained the phenomenon using a term used by economist Simon Johnson:

It goes beyond regulatory capture, where, say the banks control the S.E.C. That's one thing. "Intellectual capture" means that essentially the financial industry has convinced us — you know, in the '50s what was good for General Motors was good for America — now it's what's good for Wall Street is good for America. And they've somehow convinced us that we shouldn't ask about what's right or what works or what's good for America. We should ask what's productive, what's efficient, what helps grow the economy.


It is this "intellectual capture" that prevents a reform movement from taking hold. David Corn, Washington bureau chief for MOTHER JONES, explains:


While angry at Wall Street, particularly on the corporate compensation front — which is very easy to get angry about — they also are fearful of taking Wall Street on, because they've been taught that if the Dow falls, if you take on the big banks, it's going to be bad for all of us. So, it really is this "Stockholm Syndrome," where we're forced to identify with people who are holding us hostage without our interest in mind.

[Vidar]

1. K&R.

[3waygeek]

2. Watching it now...

here in Atlanta, the PBS station airs it on Sundays when they're not running viewer favorites or pledge drives.

[azul]

3. Debt is the key that requires regulation.

"KEVIN DRUM: You know, the key thing, I mean, the key thing that drove the housing bubble of the last decade was debt. Was leverage. Banks weren't just making investments, they were borrowing huge sums of money to make investments. That's what makes a bubble bad. Is huge amounts of leverage. Huge amounts of debt.

DAVID CORN: And betting on those--

KEVIN DRUM: Right. Betting with borrowed money. That's the key. You know, the dotcom bubble, when it burst, it was not that bad. There was a recession that followed, but no banks failed. The financial system didn't meltdown. The reason is because it was a bubble, but it wasn't debt-fueled. The housing bubble was debt-fueled. The--

DAVID CORN: 'Cause when we've had housing bubbles in the past that have failed, without, you know, the daisy chain effect.

KEVIN DRUM: We had one in Southern California, where I live. Back in the late '80s and early '90s. And it was bad for Southern California, because again, it was debt-fueled. Now, the regulations that are being pushed through Congress right now, they do almost nothing about that. I mean, they talk about derivatives. They have a consumer finance protection agency. Those are good things.

But the key thing they ought to be getting at is debt. They need to restrict the amount of debt, the amount of leverage that the financial system can use. You don't get rid of it. Credit is the oxygen of the financial system. But you've got to limit it. And they've done almost nothing about that.

BILL MOYERS: And this is-- why?

KEVIN DRUM: Because debt and leverage are the keys to making money. The one thing that Wall Street needs to make money is lots of leverage. They have to have that to make money. So, that's the one thing they will fight for harder than almost anything. And they fought for it so hard that, in fact, the regulations hardly do anything at all."

[JohnWxy]

4. Right. I thought that was a key part too. And also with this urge to gamble to make money in mind

we need to separate Investment banks from Commercial banks. INvestment banks are there to take on risks of customized situations. THey are of a mind set to take on risk (this is why they need regulation too). But commercial banks (should) have more of a mind-set to limit risk; be more conservative in their approach. THe two do not mix.

Plus this would to some degree reduce the problem of "too big to fail". The investment banks became much bigger when they were allowed to take on commercial business too. They salivated over all that money they would have to play with. Let those who are interested in taking on risk do their thing (with real regulation, (in particular of Debt to Equity ratios). But commercial banks should not be involved in things like Credit Default Swaps (at least not until there is an established market and unequivocal values can be determined for the CDSs). We have to be able to depend on Commercial Banks to BE THERE - tomorrow and the next day.

Let investmeent bankers do there thing but not with deposits that back the loans that enable our economy to function.

[azul]

5. It is amazing how far financial corporations,

and all corporations for that matter, have come in the way of buying influence and obtaining rights. And now the supreme court is about ready to remove limits on their political peddling, and the corruption will, I suppose, become even more brazen.

It is a gamed financial scheme where there is no downside for the big fish and bad behavior is rewarded. Just who wrote the rules? The authors of legislation should be attached to it, with disclosures.