President Obama: "we can isolate them, quarantine them, and let them fail"

[ProSense]

President Obama:

<...>

Q Thank you, Mr. President. As you travel the country, you also take credit for tightening regulations on Wall Street through the Dodd-Frank law, and about your efforts to combat income inequality. There’s this movement -- Occupy Wall Street -- which has spread from Wall Street to other cities. They clearly don’t think that you or Republicans have done enough, that you’re in fact part of the problem.

Are you following this movement, and what would you say to its -- people that are attracted to it?

THE PRESIDENT: Obviously I’ve heard of it. I’ve seen it on television. I think it expresses the frustrations that the American people feel -- that we had the biggest financial crisis since the Great Depression, huge collateral damage all throughout the country, all across Main Street, and yet you’re still seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on abusive practices that got us into this problem in the first place.

So, yes, I think people are frustrated, and the protestors are giving voice to a more broad-based frustration about how our financial system works. Now, keep in mind I have said before and I will continue to repeat, we have to have a strong, effective financial sector in order for us to grow. And I used up a lot of political capital, and I’ve got the dings and bruises to prove it, in order to make sure that we prevented a financial meltdown, and that banks stayed afloat. And that was the right thing to do, because had we seen a financial collapse then the damage to the American economy would have been even worse.

But what I’ve also said is that for us to have a healthy financial system, that requires that banks and other financial institutions compete on the basis of the best service and the best products and the best price, and it can’t be competing on the basis of hidden fees, deceptive practices, or derivative cocktails that nobody understands and that expose the entire economy to enormous risks. That’s what Dodd-Frank was designed to do. It was designed to make sure that we didn’t have the necessity of taxpayer bailouts; that we said, you know what? We’re going to be able to control these situations so that if these guys get into trouble, we can isolate them, quarantine them, and let them fail. It says that we’re going to have a consumer watchdog on the job, all the time, who’s going to make sure that they are dealing with customers in a fair way, and we’re eliminating hidden fees on credit cards, and mortgage brokers are going to have to -- actually have to be straight with people about what they’re purchasing.

And what we’ve seen over the last year is not only did the financial sector -- with the Republican Party in Congress -- fight us every inch of the way, but now you’ve got these same folks suggesting that we should roll back all those reforms and go back to the way it was before the crisis. Today, my understanding is we’re going to have a hearing on Richard Cordray, who is my nominee to head up the Consumer Financial Protection Bureau. He would be America’s chief consumer watchdog when it comes to financial products. This is a guy who is well regarded in his home state of Ohio, has been the treasurer of Ohio, the attorney general of Ohio. Republicans and Democrats in Ohio all say that he is a serious person who looks out for consumers. He has a good reputation. And Republicans have threatened not to confirm him not because of anything he’s done, but because they want to roll back the whole notion of having a consumer watchdog.

You’ve got Republican presidential candidates whose main economic policy proposals is, we’ll get rid of the financial reforms that are designed to prevent the abuses that got us into this mess in the first place. That does not make sense to the American people. They are frustrated by it. And they will continue to be frustrated by it until they get a sense that everybody is playing by the same set of rules, and that you’re rewarded for responsibility and doing the right thing as opposed to gaining the system.

So I’m going to be fighting every inch of the way here in Washington to make sure that we have a consumer watchdog that is preventing abusive practices by the financial sector.

I will be hugely supportive of banks and financial institutions that are doing the right thing by their customers. We need them to be lending. We need them to be lending more to small businesses. We need them to help do what traditionally banks and financial services are supposed to be doing, which is providing business and families resources to make productive investments that will actually build the economy. But until the American people see that happening, yes, they are going to continue to express frustrations about what they see as two sets of rules.

<...>

Dodd-Frank created the Financial Stability Oversight Council and gave new liquidation authority to the FDIC.

[dionysus]

1. kick

[gateley]

2. K&R nt

[Oceansaway]

3. K&R...n/t

[CoffeeCat]

4. We're going to have another implosion...

...of the big banks again. Count on it. The fact remains--these stupid banks
are still packaging mortgage-backed securities with a combination of good loans and
more risky (subprime) loans. They're still selling these things on the secondary
market and making a boatload off of them.

Just as we had the problem in the 2008 implosion--this shit is a worthless mess. And it's
a cancer on their books--once again.

On top of that--those bastards like AIG are still selling insurance on ALL OF THOSE
MORTGAGE-BACKED-SECURITIES. That's how AIG and those insurance companies make their
money--buy selling insurance on those securities. Those "insurance polices"--or CREDIT-DEFAULT SWAPS--
caused a complete tanking of AIG, which the US government had to purchase.

ALL OF THIS SHIT IS STILL HAPPENING, PEOPLE!!

What happens as the economy continues to crater and more people default on their mortgages? What
happens as more people pull their money from these banks as they raise fees? What happens as
more people walk way from these banks as awareness about their crimes is raised further?

Another implosion is inevitable. Look at what is happening in Europe. The house of cards
is falling.

So, in 2008 when this happened--the entire economy could have gone down. The aftermath of these
banks failures--was avoided because TARP saved them. But really, what would have happened? The
entire credit markets would freeze. The CEO of GE called Henry Paulsen, during the 2008 implosion--and
told him that he didn't have enough money to pay for day-to-day operations, because the crisis
had frozen credit. If these banks fail again---so many large companies will be in utter
turmoil. People will freak out and pull out their funds--from the big banks, but also from smaller
banks as well. There will be widespread panic.

So really--I'm not impressed--AT ALL--with some bill that would portend to "control the situation...if
these guys get into trouble" that provides answers such as "isolate them" "quarantine them" and
"let them fail".

Does that really sound like a plan to anyone? Does that even sound feasible? These big banks know
damn well they're "too big to fail" because they've ORCHESTRATED IT THAT WAY! They implode, so does
America. They bribed our politicians and purchased legislation that ensures that they can make millions
off of their criminal schemes and then hold the country hostage until they are rescued--with our tax
dollars.

Dodd-Frank will not prevent any of this. Glass Steagall would have. So would other regulations that
put a REAL END to the bullshit--such as outlawing subprime mortgages and making it a federal crime to
package worthless shit into securities and then selling them. I mean, really! Why not make that illegal?
I'll tell you why...because the banks WANT TO DO THIS. That's why! I'm so sick of the lies and the
language that tap dances around obvious solutions that will NEVER be discussed--because Wall Street
owns our politicians.

Please, just give me a break! So sick of being lied to and insulted--as if I'm some schmuck who
doesn't know that these bankers are up to their old tricks and that "Dodd-Frank" will just save the ol' day!

No! It won't. Seriously. Kill me now. I can't listen to any more bullshit from our politicians and I
can't stand that anyone would buy it.

[ProSense]

5. This

So really--I'm not impressed--AT ALL--with some bill that would portend to "control the situation...if
these guys get into trouble" you could somehow "isolate them" "quarantine them" and "let them fail".

Does that really sound like a plan to anyone? Does that even sound feasible? These big banks know
damn well they're "too big to fail" because they've ORCHESTRATED IT THAT WAY! They implode, so does
America. They bribed our politicians and purchased legislation that ensures that they can make millions
off of their criminal schemes and then hold the country hostage until they are rescued--with our tax
dollars.

Dodd-Frank will not prevent any of this. Glass Steagall would have. So would other regulations that
put a REAL END to the bullshit--such as subprime mortgages and packaging them into bullshit, worthless
securities. I mean, really! I'm so sick of the lies and the language that means NOTHING--and tap
dances around obvious solutions that will NEVER be discussed--because Wall Street owns our politicians.

...makes no sense. You're not impressed with "some bill"? What was Glass-Steagall?

Summary: If I say Dodd-Frank isn't going to work, it's a fact.

[CoffeeCat]

6. I said I wasn't impressed with Dodd-Frank...

and when I said "some bill" that clearly referred specifically to Dodd-Frank. The quotes
that I included were Obama's own words--when Obama discussed Dodd-Frank.

Glass Steagall was great. It should be reinstated. It won't be. Wall Street won't allow it.

And no--Dodd Frank won't solve the major problems with the banking system--in particular
the problems I outlined.

----Subprime Mortgages
----The banks rolling worthless subprime mortgages and less risky mortgages together into Mortgage-Backed
Securities and selling them on the secondary market
----Credit Default Swaps

Those things caused the 2008 implosion. Those things will cause another implosion.

Dodd-Frank stops NONE OF THOSE THINGS.

That is the problem.

[ProSense]

7. First

Glass Steagall was great. It should be reinstated. It won't be. Wall Street won't allow it.

And no--Dodd Frank won't solve the major problems with the banking system--in particular
the problems I outlined.

----Subprime Mortgages
----The banks rolling worthless subprime mortgages and less risky mortgages together into Mortgage-Backed
Securities and selling them on the secondary market
----Credit Default Swaps

Those things caused the 2008 implosion. Those things will cause another implosion.

Dodd-Frank stops NONE OF THOSE THINGS.

...of all Glass-Steagall was great, but it was also outdated. The Volcker rule is basically Glass-Steagall. Secondly, there are numerous other reforms in the current law that were not addressed by Glass-Steagall.

[CoffeeCat]

8. A few points...

First: The Volcker Rule addresses the practice of insuring these bad securities. The
Volcker rule says NOTHING and does NOTHING about the horrendous banking practices that
cratered the economy (namely bundling sub-prime garbage with good loans and selling the
package on the secondary market).

So, absolutely not--the Volcker rule--which addresses the insurance issue only--is
not Glass Steagall. Not even close.

Secondly: Glass Steagall disallowed banks from engaging in commercial banking and investment
banking. The entire reason these banks became "too big to fail" is because they
grew into these huge banking and investment houses. Wall Street and the financial
community lobbied our politicians hard to repeal it. They wanted it gone. And so it was.

I'm sure we've passed a lot of "reform", but most of it does not solve the huge problems
we face. Yes--financial institutions can no longer have hidden credit-card fees. But guess what, look
at the newspaper--now those same financial institutions are charging $60 a year just to
use a debit card. The banks don't mind that kind of non-reform "reform". They always
find a way around it. It's meaningless.

Now, bring back Glass Steagall--which was a great law from 1933-1999, by the way!--and that
means real change. We won't get real, meaningful change. We'll get more "reform", because
Wall Street doesn't want to change-and they call the shots with our elected officials.

And so it goes...

[ProSense]

9. Actually,

First: The Volcker Rule addresses the practice of insuring these bad securities. The
Volcker rule says NOTHING and does NOTHING about the horrendous banking practices that
cratered the economy (namely bundling sub-prime garbage with good loans and selling the
package on the secondary market).

So, absolutely not--the Volcker rule--which addresses the insurance issue only--is
not Glass Steagall. Not even close.

Secondly: Glass Steagall disallowed banks from engaging in commercial banking and investment
banking. The entire reason these banks became "too big to fail" is because they
grew into these huge banking and investment houses. Wall Street and the financial
community lobbied our politicians hard to repeal it. They wanted it gone. And so it was.

I'm sure we've passed a lot of "reform", but most of it does not solve the huge problems
we face. Yes--financial institutions can no longer have hidden credit-card fees. But guess what, look
at the newspaper--now those same financial institutions are charging $60 a year just to
use a debit card. The banks don't mind that kind of non-reform "reform". They always
find a way around it. It's meaningless.

Now, bring back Glass Steagall--which was a great law from 1933-1999, by the way!--and that
means real change. We won't get real, meaningful change. We'll get more "reform", because
Wall Street doesn't want to change-and they call the shots with our elected officials.

...this is nonsense.



Glass-Steagall wasn't about the systemic risk posed by the size of commericial banks. Glass-Steagall was about separating commercial banking from investment banking:

•Banking Act of 1933 (P.L. 73-66, 48 STAT. 162).
Also known as the Glass-Steagall Act. Established the FDIC as a temporary agency. Separated commercial banking from investment banking, establishing them as separate lines of commerce.

Krugman: Too big to fail FAIL

I’m a big advocate of much strengthened financial regulation. One argument I don’t buy, however, is that we should try to shrink financial institutions down to the point where nobody is too big to fail. Basically, it’s just not possible.

The point is that finance is deeply interconnected, so that even a moderately large player can take down the system if it implodes. Remember, it was Lehman — not Citi or B of A — that brought the world to the brink.

<...>

They certainly were worried about systemic risk in 1982, when I had something of a front-row seat. There were fears that the Latin debt crisis would take down one or more money center banks — Citi, or Chase, say. And policy was shaped in part by the desire to make sure that didn’t happen. Bear in mind that this was in the days before the repeal of Glass-Steagal, before finance got so big and wild; the New Deal regulations were mostly still in place. Yet even then major banks were too big to fail.

So I think of the pursuit of a world in which everyone is small enough to fail as the pursuit of a golden age that never was. Regulate and supervise, then rescue if necessary; there’s no way to make this automatic.

When has there ever been a law that allows the break up big banks that pose a systemic risk? The Volcker rule does exactly what Glass Steagall did---separate commercial banking from investment banking.

In addition, look at the new powers given to the FDIC that were not covered by Glass-Steagall.

Something the bill does for the first time ever, regulate hedge funds:

Raising Standards and Regulating Hedge Funds

• Fills Regulatory Gaps: Ends the “shadow” financial system by requiring hedge funds and private equity advisors to register with the SEC as investment advisers and provide information about their trades and portfolios necessary to assess systemic risk. This data will be shared with the systemic risk regulator and the SEC will report to Congress annually on how it uses this data to protect investors and market integrity.
  
  
• Greater State Supervision: Raises the assets threshold for federal regulation of investment advisers from $30 million to $100 million, a move expected to significantly increase the number of advisors under state supervision. States have proven to be strong regulators in this area and subjecting more entities to state supervision will allow the SEC to focus its resources on newly registered hedge funds.

So the current bill separates commercial from investment banking and in addition, regulates hedge funds for the first time and empowers the FDIC to deal with large complex institutions that pose a systemic risks, which Glass-Steagall did not address.

[Admiral Loinpresser]

10. Can you quote some language

from Frank-Dodd, or elsewhere, which prohibits commercial banks from engaging in investment banking?

[YellowCosmicSun]

12. When does the sky fall?

[CoffeeCat]

13. "The definition of insanity...

...is doing the same thing over and over again--and expecting different results".

The banks are currently engaging in the same risky behaviors that crashed the economy in 2008.

What leads you to believe that there will be a different result this time?

[Sheepshank]

17. You are ignoring several huge risk factors that no longer exists......so, it's not all the same

.....the bubble that was the escalating home prices has popped. Homes currently being financed are not for these over inflated sales prices. The job loss has been stymied, fewer people are walking away....and new home sales are definitely down.

You are ignoring all of these factors that played into the previous problems. How is all of this the same as before?

While I'm not attempting to say that the financial sector by any means isn't still culpable on many levels, to equate the current housing situation with that of several years ago is misleading.

[Safetykitten]

11. Well of course we will let them fail. What's that Tim? Not a good idea...oh...OK.

[flpoljunkie]

14. It's really difficult to believe they will be allowed to fail because they are even bigger now

The results would be too catastrophic for our economy.

[ProSense]

15. There

It's really difficult to believe they will be allowed to fail because they are even bigger now

The results would be too catastrophic for our economy.

...is a reason the President said: "we can isolate them, quarantine them, and let them fail"

More information at the links in the OP: "Dodd-Frank created the Financial Stability Oversight Council and gave new liquidation authority to the FDIC."

[flpoljunkie]

16. That is much easier said than done.

[polichick]

21. True - if Congress was serious, the banks would be broken up.

[lsewpershad]

18. This is why

he is our president and why I am so proud of him.

[bvar22]

19. Aren't the "Bailouts" NOW automatic thanks to Dodd-Frank?

If not "automatic", at least hidden in the bowels of The FED beyond the eyes of the American Public.


Emergency Bailout Authorization

"Upon the written approval of the Board of Governors of the Federal Reserve System… and the Board of Directors of the Corporation … and with the written consent of the Secretary of the Treasury (after consulting with the President), the Corporation may extend credit to or guarantee obligations of solvent insured depository institutions or other solvent companies that are predominantly engaged in activities that are financial in nature, if necessary to prevent financial instability during times of severe economic distress. There shall be available to the Corporation to carry out this section amounts in the Treasury not otherwise appropriated, including for the payment of reasonable administrative expenses.” (pages 43-44)"

That way, Congress & the President can avoid the nasty PR from having to vote on another bailout for the Big Banks.
What the people don't SEE can't come back and bite at election time.


Bernie Sanders

Among the investigation's key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.

<snip>

The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.

The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.

http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

Maybe next time, he really will "isolate them, quarantine them, and let them fail",
but so far it looks like he is just fine with the results of this scam when he is away from the TV cameras.



You will know them by their WORKS,
not by their campaign rhetoric.

Solidarity!
--------------------------------------------------------------------------------------------------------------------------------

[Honeycombe8]

20. Sounds good, if it works that way. But I don't trust Dodd. Dodd got special

treatment and favors from the mortgage industry when he financed some huge house. A number of politicians got "special" rates and terms. Dodd was one of them.

Frank is another matter.

We'll see.

[Bake]

22. I think it will prove impossible to isolate and quarantine a major bank.

There are far too many interbank transactions with parties and counterparties and shared interests. Quarantine is impossible.

Bake