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Ending Glass-Steagall was another straw stacked on the camel’s back of American workers by the beloved Democrat, Bill Clinton. Folks still love him for being a centrist, now-respectable celebrity.
Frankly, I’ll stick with courageous Dems like Elizabeth Warren and Recovering Republicans like Barry Ritholtz.
‘They should have let Bear Stearns fail,” Sheila Bair said.
It was midmorning on a crisp June day, and Bair, the 57-year-old outgoing chairwoman of the Federal Deposit Insurance Corporation — the federal agency that insures bank deposits and winds down failing banks — was sitting on a couch, sipping a Starbucks latte. We were in the first hour of several lengthy on-the-record interviews. She seemed ever-so-slightly nervous.
Long viewed as a bureaucratic backwater, the F.D.I.C. has had a tumultuous five years while being transformed under Bair’s stewardship. Not long after she took charge in June 2006, Bair began sounding the alarm about the dangers posed by the explosive growth of subprime mortgages, which she feared would not only ravage neighborhoods when homeowners began to default — as they inevitably did — but also wreak havoc on the banking system. The F.D.I.C. was the only bank regulator in Washington to do so.
During the financial crisis of 2008, Bair insisted that she and her agency have a seat at the table, where she worked — and fought — with Henry Paulson, then the treasury secretary, and Timothy Geithner, the president of the New York Federal Reserve, as they tried to cobble together solutions that would keep the financial system from going over a cliff. She and the F.D.I.C. managed a number of huge failing institutions during the crisis, including IndyMac, Wachovia and Washington Mutual. She was a key player in shaping the Dodd-Frank reform law, especially the part that seeks to forestall future bailouts.
Since the law passed, she has made an immense effort to convince Wall Street and the country that the nation’s giant banks — the same ones that required bailouts in 2008 and became known as “too big to fail” institutions — will never again be bailed out, thanks in part to new powers at the F.D.I.C.
Just a few months ago, she went so far as to send a letter to Standard & Poor’s, the credit-ratings agency, suggesting that its ratings of the big banks were too high because they reflected an expectation of government support. If a too-big-to-fail bank got into trouble, she wrote, the F.D.I.C. would wind it down, not bail it out…
She didn’t spend a lot of time fretting over bank profitability; if banks had to become less profitable, postcrisis, in order to reduce the threat they posed to the system, so be it. (“Our job is to protect bank customers, not banks,” she told me.) And she was a fierce, and often lonely, proponent of widespread mortgage modification, for reasons both compassionate (to help struggling homeowners stay in their homes) and economic (fewer foreclosures would help the troubled housing market recover more quickly).
I’m just giving you a taste of the beginning of this interview. It’s quite long, detailed, and near as I can tell an accurate picture of the individual who acted throughout the crisis of the Great Recession to defend local community banks, the historic integrity of banking regulation – how this was corrupted and almost destroyed along with our national economy – and as an aside, a reminder to younger folks who know only the deceit and corruption of Bush, Cheney, the racism of Nixonian Republicans, the nutballs of the Kool Aid Party – what a traditional American conservative used to sound like.
All 41 Republican members of the U.S. Senate have signed a letter, obtained by Reuters on Friday, opposing a Democratic financial reform bill…
“We are united in our opposition to the partisan legislation reported by the Senate Banking Committee,” said the letter addressed to Senate Democratic Leader Harry Reid.
“As currently constructed, this bill allows for endless taxpayer bailouts of Wall Street and establishes new and unlimited regulatory powers that will stifle small businesses and community banks,” the letter said.
Which is a lie – an historic lie. Since [1] the bill provides only for so-called bailouts with the participation of Congress. Uh, just like the last one. And [2] it restores regulatory powers that have existed for over a half-century – that were squashed by Republican and Democrats in bed with Wall Street lobbyists.
It comes as Democrats move to bring their 1,336-page bill, hammered out over months of debate and bipartisan negotiations, to the Senate floor for a vote, expected this month.
Democrats want to tighten government regulation of banks and capital markets to prevent a repeat of the 2007-2009 financial crisis that tipped the U.S. economy into a deep recession and unleashed a global drive for reforms.
Republicans want more money from their corporate handlers.
Goldman Sachs and Morgan Stanley, the last two independent investment banks, will become bank holding companies, says the Federal Reserve, a move that will fundamentally alter the landscape of Wall Street.
The move alters one of the models of modern Wall Street, the independent investment bank, soon after the federal government unveiled the biggest market intervention since the New Deal. It heralds new regulations and supervision of previously lightly regulated investment banks, as well as an end to the outsize paychecks that helped shape the image of the chest-thumping Wall Street banker.
It is also the latest signal by the Federal Reserve that it will not let Goldman or Morgan fail. The move comes after the bankruptcy of Lehman Brothers and the near collapses of Bear Stearns and Merrill Lynch…
Being a bank holding company would also give the two banks access to the discount window of the Federal Reserve. While they have had access to Fed lending facilities in recent months, regulators had planned to take away discount window access in January.
Should be an interesting morning in the world of bourses.
Eideard 