Robert Reich - Obama Should Call for Glass-Steagall and a Breakup of Big Banks

[kentuck]

<snip>
If you want more evidence, consider the fancy footwork by Bank of America in recent days. Hit by a credit downgrade last month, BofA just moved its riskiest derivatives from its Merrill Lynch unit to a retail subsidiary flush with insured deposits. That unit has a higher credit rating because the Federal Deposit Insurance Corporation (that is, you and me and other taxpayers) are backing the deposits. Result: BofA improves its bottom line at the expense of American taxpayers.

<snip>
In the wake of the bailout, the biggest banks are bigger than ever. Twenty years ago the ten largest banks on the Street held 10 percent of America's total bank assets. Now they hold over 70 percent. And the biggest four have a larger market share than ever -- so large, in fact, they've almost surely been colluding. How else to explain their apparent coordination on charging debit card fees?

The banks aren't even fulfilling their fiduciary duties to investors. Last summer, after Groupon selected Goldman Sachs, Morgan Stanley, and Credit Suisse to underwrite its initial public offering, the trio valued it at a generous $30 billion. Subsequent accounting and disclosure problems showed this estimate to be absurdly high. Did the banks care? Not a wit. The higher the valuation, the fatter their fees.

Just last week Citigroup settled charges (without admitting or denying guilt) that it defrauded investors by selling them a package of mortgage-backed securities rife with mortgages it knew were likely to default, but didn't disclose the hazard. It then bet against the package for its own benefit -- earning fees of $34 million and net profits of at least $126 million. So what's Citi paying to settle this outrage? A mere $285 million. Its CEO at time (Charles Prince) doesn't pay a dime.



http://www.huffingtonpost.com/robert-reich/wall-street-is-still-out-_b_1032446.html

[annabanana]

1. It's the right thing to do AND politically smart...

Which means some damn blue dog will talk him out of it (If he found himself so inclined)

[Selatius]

2. That is how a cartel operates. The problem is proving it with evidence in a court of law.

Now they hold over 70 percent. And the biggest four have a larger market share than ever -- so large, in fact, they've almost surely been colluding. How else to explain their apparent coordination on charging debit card fees?

If Wikileaks or somebody could ever obtain documents, phone records, or any data indicating communication between the biggest four in terms of price fixing (e.g. setting coordinated pricing schemes on debit card fees), that would be bona fide evidence of a breach of the Sherman/Clayton Anti-Trust Act. They would face a major lawsuit from the Dept. of Justice, provided the DoJ isn't also run by people from the banking industry.

[dkf]

3. You don't think the debit card fees are an obvious reaction to changes in the law

limiting debit card swipe fees?

[Bake]

4. The repeal of Glass-Stegall enabled this crisis.

Pres. Clinton, I love ya, but this was a mistake of the highest magnitude.

Bake