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Da Costa writes: "US lawmakers are on the verge of substantially weakening post-crisis regulations on Wall Street banks - and they have decided the tenth anniversary of the worst financial meltdown in modern history is just the right time to do it."

Senator Elizabeth Warren. (photo: Justin Sullivan/Getty)
Senator Elizabeth Warren. (photo: Justin Sullivan/Getty)

The Politicians Who Are About to Reverse Post-Crisis Wall Street Rules Are 'Just Asking for Another Horrific Crash'

By Pedro Nicolaci da Costa, Business Insider

08 March 18

US lawmakers are about to reverse post-crisis rules meant to shield taxpayers from having to bail out large banks in case of another meltdown.

S lawmakers are on the verge of substantially weakening post-crisis regulations on Wall Street banks — and they have decided the tenth anniversary of the worst financial meltdown in modern history is just the right time to do it.

In particular, the new law, which appears to have ample political support from majority Republicans and several Democrats, would sharply narrow the number of banks considered "too big to fail" and thus open to greater scrutiny from regulators like the Fed as well as tougher capital requirements.

Dennis Kelleher, president of advocacy group Better Markets, told Business Insider he is deeply concerned by the new legislation's reversal of many key rules in the so-called Dodd-Frank law passed in 2010.

"It is grossly irresponsible at this late very stage of the business cycle, to add legislative deregulation of the biggest banks in the country to widespread regulatory agency deregulation and non-enforcement," Kelleher said. "Unleashing the biggest banks is just asking for another horrific crash."

The bills proponents, which include 13 Democrats, argue that the Dodd-Frank rules went too far and became overly cumbersome for all but the biggest Wall Street banks. Their strong financial performance, Kelleher says, suggests otherwise.

"Every single argument for deregulation has been objectively rebutted by rising if not historic bank revenues, profits, bonuses and lending," he said.

Losing battle

Despite its likely passage, several senior Democratic senators, including Elizabeth Warren and Sherrod Brown, have come out against the bill.

"People in this building may forget the devastating impact of the financial crisis 10 years ago, but the American people have not forgotten," Warren told reporters at a Senate press briefing Tuesday.

"The importance of fighting now is to stop this bill, but it's also to make clear we're not just going to lay down for the big financial institutions."

Warren opposes the legislation's mandate to raise the threshold at which banks are considered systemically important — and thus potentially needing government bailouts and subject to stricter oversight — to $250 billion from $50 billion. Banks of smaller but still substantial size needed plenty of government help during the 2008 financial crisis, Warren says.

The new rules would also exempts banks with less than $10 billion in assets from rules banning proprietary trading.

Kelleher says a fairly strong economic backdrop and record bank profits should be an indication that financial institutions should be strengthening their balance sheets, not facing looser oversight.

"In a rational world, this is exactly when counter-cyclical measures would require increasing bank capital, liquidity and other buffers for the inevitable downturn, thereby ensuring that the financial sector is strong enough to lend through the cycle rather than contract to repair fragile, broken and over-leveraged balance sheets," he said. your social media marketing partner


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+13 # Benign Observer 2018-03-08 16:20
Please add an amendment that guarantees there will be no more bailouts.
+12 # tedrey 2018-03-08 23:11
And please add an amendment that guarantees that if another bailout becomes necessary the CEOs and officials that presided over it will be in jail for life, no deals..
+6 # Rodion Raskolnikov 2018-03-09 07:50
I don't think such a thing would ever be possible. Wall Street controls the government. It will be bailed out no matter what. We have a real problem. We need to break up these big banks -- and yet that would also be impossible.
+2 # bread and butter 2018-03-09 10:28
Question: WHO gave "Rodion" a red thumb for that comment? And why?
0 # Benign Observer 2018-03-09 15:46
I think there are people who give Rodion a negative no matter what s/he says.

I suspect sbessho. Did you catch the post telling people not to give Rodion upvotes?!

I'm making a list....
0 # lfeuille 2018-03-09 19:41
I didn't but I'll answer. Never say never. I discourages people from even trying and that ENSURES it will never happen.
0 # bread and butter 2018-03-10 09:03
OK. That was a pretty good comment. Thanks for pointing that out.
+1 # lfeuille 2018-03-09 19:33
Right, if it happens again, take over the banks.
+15 # krazykwiltkatt 2018-03-08 18:54
'Let's Do The Time Warp Again' NOT! Bank failures of 1893, Panic of 1907,Crash of '29, Failures of '08. 'When will they ever learn?'
0 # MikeAF48 2018-03-08 19:48
Hats off to woman on national woman day Helen Reddy had a hit song titled I am woman.
+5 # elkingo 2018-03-08 23:11
-1 # economagic 2018-03-09 08:50
Pro or con?
+11 # Texas Aggie 2018-03-09 09:58
Exactly. The big banks' debts are socialized while their profits are privatized. It has ever been so that the well-to-do have had soft cushions for their falls while working stiffs have to fall on concrete.
+2 # bread and butter 2018-03-09 10:29
+9 # economagic 2018-03-09 06:49
DUH! There is no basis whatsoever for the claim that markets in general, and financial markets in particular, are intrinsically "self regulating" (stable) is the underlying justification for claiming they need no "interference" from government in the form of rules ("regulations") . It is an article of faith in classical-tradi tion economics from the earliest days of political economy (17th century), and is contradicted by everything we have learned about markets since that time. Charles Kindleberger's "Manias, Panics, and Crashes" (1978) recounts the evidence going back to the early 18th century.

The reason banks WANT the cycle of boom and bust--well-know n to Adam Smith (1776)--is that they make money on the down side (the crash) in a variety of ways.
+6 # Texas Aggie 2018-03-09 10:04
Of course there's a reason to believe in self-regulation . How are the banks supposed to get away with chicanery if they are regulated from the outside? Don't you understand that Ayn Rand is god? If you don't believe me, just ask Lyin Ryan or Alan Greenspan and they'll be happy to set you straight.

Poe's law says I should put a "S/" here, but it shouldn't be necessary.
0 # economagic 2018-03-09 13:50
Geez, I really am living in a bubble: had to look up "Poe's Law"!
+9 # laborequalswealth 2018-03-09 11:12
First, there are no real economists in the USA. They are all indoctrinated into neocon-ism and using "mathmatical models" to manage and predict how markets will move.

In other words, American "economists" ignore HISTORY aka FACTS aka REALITY.

So while these intellectual hypocrites sell us economic lies, real people are hurting and the psychopathic money-hoarders - a form of mental illness - continue to rape working people.

PS: If an old woman hoards a 100 cats, we call her crazy. If an old man piles magazines to the ceiling, we call him nuts. But HOARD a billion $$$$ - more money than anyone could use in 100 lifetimes - we call the hoarder a "success" and they get to call the shots (literally) on the lives of the rest of us.

Why isn't money-hoarding listed in the DSM IV?
+7 # economagic 2018-03-09 14:05

You will almost certainly be surprised to learn that there ARE some genuine economists alive and working even in USia. They even come in different strengths, ranging from Richard Wolff's Marxian or old-line socialist takes, to people mired in the mathematics of complex systems, to people such as those at the Schumacher Center in Great Barrington, MA, who aren't very interested in theory but in creating their own little local economy right there on the ground. A few of those also in the Research Triangle area here in NC, and elsewhere.

The World Economic Association, formerly the Post Autistic Economics Network, also does some good work, and there are several university economics departments that promote various "heterodox" schools of economic thought, notably UMKC, U Mass Amherst, and a good part of the department at UT Austin.

"Barefoot Economist" Manfred Max-Neef and the late physicist Philip Smith wrote a wonderful little book titled "Economics Unmasked," in which they argue that the "disciplne" (sic) that we call "economics" developed not to provide scientific explanations but as apologia for the rising wealth and power of the bourgeoisie of the 17th-18th centuries, who were not covered under the Divine Right of Kings.

Glass-Steagall or something like it is indeed necessary, but because of the proliferation of financial schemes and scams it is not sufficient by itself.
+7 # laborequalswealth 2018-03-09 11:05
Dodd-Frank, like the ACA, is a piece of shit. REINSTATE GLASS-STEAGALL.

Disgusting that so-called Demos actually vote for this crap instead of WHAT THE PEOPLE WANT.
+2 # dquandle 2018-03-09 15:55
Dems have never been interested in what people want. They are interested in reaping stratospheric profits for mega-corporatio ns and billionaires, and of course large contributions (kickbacks) for themselves, and eternal war, throughout the world, for empire, just like the Repubs with whom they continuously collude
+9 # DongiC 2018-03-09 13:37
If a bank fails and has to bo bailed out, its leaders can no longer participate in the banking business. Good ridance! Restore Glass - Steagall and rescind "Citizens United." Let's make the banking practice whole.

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