Five Laws That Government Should Pass

The Gramm-Leach-Bliley [GLB] act repealed Glass-Steagall [G-S] - which was the law of the land here in the USA from 1933 to 1999. G-S created the FDIC, and prohibited large private banks - whose primary business is the investment business - from receiving deposits from the public. In fact, one in five banks failed during the great depression. Senator Carter Glass and the Congressman from Alabama Henry Steagall wanted to create a system to gain the public’s trust so as to not ever have a run on banks [which received much coverage in the press - even without television or the internet].

In the nineteenth and early twentieth centuries [and after GLB], bankers and brokers were indistinguishable. Then, after the Banking Collapse of 1933, Congress examined the mixing of the “commercial” and “investment” banking industries that occurred in the years prior. There were TWO G-S acts passed in 1933. The second G-S act was called the Treasury Act of 1933, and was passed on the 16th of June, 1933. Hearings back in 1933 revealed conflicts of interest and fraud in many banking institutions’ securities activities [the more things change, the more they stay the same]. A formidable barrier to the mixing of these activities was then set up by the Glass Steagall Act - [only to be pissed away in 1999, by GLB].

Now what makes me shudder is the fact that today, Morgan Stanley (MS), Goldman Sachs (GS) and American Express (AXP) are “banks”. Instead of bankruptcy [that these institutions much deserve], they get to dip into the Fed’s discount window where they can get greenbacks for almost nothing in interest. Sure, the interest rates are set by the “market”, and the Fed only determines the discount rate, but the fact that a credit card company can dip into a near-infinite pool of taxpayer money is mind-boggingly stupid.

The real reason that both political parties are getting away with this highway robbery is that highway robbers are not prosecuted these days - instead, they are rewarded with cabinet positions. Steal a hundred, and go to jail. Steal a hundred million, and you can write the next set of rules for G-S version 3. Version 3? In fact, I know a chap who fooled some very smart people and stole in excess of ten billion dollars. Since he will have a lot of time in his hands, I recommend that he author G-S v3.0.

But I digress…..

I think that it is the responsibility of the new administration - and all the peddlers of hope - to come together and pass a new set of laws that:

1. Reinstate G-S v3.0 - authored by the best hedge fund manager in NYC/Florida.
2. Split up Banking, Credit Card Issuing companies and Investment Banks.
3. If the Investment Banks or Credit Card Companies go under, so be it. Nobody is saving the jobs of much more deserving technology employees in the Bay Area - while incompetent Investment Bankers get their 2008 bonuses from TARP funds.
4. All “saved” banks need to forgive all loans for which they took money from TARP funds. Yeah - free houses to all those who had the sense to borrow from weak banks. After all, we want the fittest to survive - correct? The Banks which received TARP funds aren’t exactly the fittest.
5. No free $$$ to non-US banks.

Burn baby, burn!

Disclosures: No positions in any stock mentioned. I want to be the Secretary of the Treasury when Geithner resigns/steps down/or is forced out.

Comments

[James Wilson:]

add one more thing. Credit cards can only bill on a 30 day cycle.

This 22 day cycle of bill has customers paying compounded compound interest.

That is interest on interest on interest.

That is like Las Vagas adding the "00" to the rouletee wheel. This doubled their profits.

Feb 16 06:54 AM

[AHJ:]

Stand in line for the treasury secretary job. See my prior psot.

1. I am smarter than timmy since I am an acturay and know more about financial risk management than timmy (of course so does my 3 year old dog, Padfoot).

2. I have never used the override routines in Turbo tax to get around the automatic generation of the self employment taxes that turbo tax generates and can't be avoided "innocently" unless one lies to turbotax in the entries or responds 3 times to turbo tax that one wants to over ride the self employment tax. Therefore, my confimation hearings will be easier than timmy's and won't embarrass Barrack even though I am a "prominent" person and hence don't really need to be paying taxes in the first place.

3. Any fool can use turbo tax to do a personal tax return. I have used it for 10 years for my fairly complicated return with no problem. If timmy can't figure it out, he shouldn' be hired to get coffee for the office staff at H&R Block much less be hired to play treasury secretary like a big boy. He clearly isn't smart enough for the job if he made an "innocent mistake" with all the prompts turbo tax provides. Padfoot does his own return with my help only where Padfoot's lack of thumbs cause problems for him with some of the key entries.

Feb 16 09:31 AM

[Did U Think...:]

Here are my 5 laws:
1) Abolish the Federal Reserve, fiat currency and fictional reserve lending. Before the Fed is disbanded, demand a full and detailed accounting including how much gold the USA really has on reserve. Return to some form of honest money, preferably based on commodities like gold and silver.

2) Abolish Keynesian thinking in the government. Return control of the markets to the markets. Allow failures to actually fail and thus stop competing with the winners.

3) Make politicians legally accountable (jail time) for gross negligence and corruption. Start by indicting Bush and Cheney and Greenspan. Set a good example here and we will have a much better behaved government for a very long time.

4) Jail time for CEOs who have lied to shareholders in material ways about the prospects for their business.

5) Demand a balanced budget at state and government levels. Disallow CA from handing out scrip for that is just another way of counterfeiting. If you can't pay your bills you must cut back on spending. The resources will eventually be redeployed productively. Gov't cannot mandate prosperity. All it can do is perturb the normal workings of the free market until a massive dislocation occurs. Excess gov't spending is a major cause of the problems we have.

Feb 16 10:12 AM

[kelm:]

There is sdefinitely an accountability issue that has been lost in this country. It really grates when I hear Barney Frank lecture the bank presidents when he is as culpable as they are for not enacting the laws and holding the regulators accountable. There should be mass firings.

A mistake can be worse than a crime and between our banks and investment houses, the Fed, elected members of Congress, the executive branch and the regulators there are some thousands of people who's mistake has cost this country dearly. They should be fired and restricted from the industry, government, and government lobbying for life. We must uphold the rule of law so if a crime in the strict definition of the law has not been committed then fine - no prosecution. But they need to leave. Otherwise there is no incentive to those who replace them to perform any better.

I almost wonder if that is what Obama is really doing with the pay caps. make it painful that they leave on their own. Or make staying so painful that they figure out how to solve the problem themselves without government.

Feb 16 10:39 AM

[Did U Think...:]

"There is sdefinitely an accountability issue that has been lost in this country."

The only missing accountability of import is the one regarding our currency. Return to honest money and all the other issues go away because the system would no longer allow "financial innovation" as exists today. Financial innovation really = accounting shell games. Fix this and everything else fixes itself because it cannot break in the first place.

"It really grates when I hear Barney Frank lecture the bank presidents when he is as culpable as they are for not enacting the laws and holding the regulators accountable. There should be mass firings."

This is just a show for the sheeple. They rape and pillage our financial system, and their punishment is a public tongue lashing. Were only it so easy for the common man. I agree with you-jail time is the only deterrent. The only problem is that we encourage cheating. Look at all the tax evaders in Obama's cabinet who were told to come clean if they wanted a big job. What a joke - anyone who evades like this should be barred from public service for having failed a basic fitness test of the job.

"A mistake can be worse than a crime and between our banks and investment houses, the Fed, elected members of Congress..."

This is where American's need to wake the Hell up. There are no mistakes being made. THEY DID IT ON PURPOSE because it was profitable for them. Stop treating them like hapless fools. These are some of the smartest guys on the planet when it comes to money. Their crime is that they had no problem blowing 5 billion of OPM if it meant that 5 million would stick to their dirty fingers. Do you really think Greenspan did not understand that he was blowing up the housing bubble? Puhlease!!!! THEY KNOW EXACTLY what they did. It was a criminal act wrapped in enough implausible deniability that they could escape prosecution because sheeple don't recognize a fraking CON JOB when they see it.

WAKE UP America. Stop being the patsy in this monetary Ponzi scheme.

Feb 16 12:07 PM

[JohnL:]

"Sure, the interest rates are set by the “market”, and the Fed only determines the discount rate, but the fact that a credit card company can dip into a near-infinite pool of taxpayer money is mind-boggingly stupid."

Interest rates are not set by the market, since one half of the market, Supply, is controlled by the government.

The fact that ANY company -- even a bank -- can dip into a near-infinite pool of taxpayer money is mind-bogglingly stupid!

Feb 16 12:11 PM

[john s. gordon:]

did u think - your 5 laws are quite a substantial program & ill take a while to be enacted.

as mark twain said, if a man steals a loaf of bread he goes to jail. if a man steals a railroad (or the 21st century equivalent of a railroad) he goes to congress (or the treasury department).
> jack

Feb 16 03:01 PM

[henarl:]

The elite run the country (and the world) to suit themselves and the rest of us just suck along as best we can. So it has always been and so it will always be. If this really upsets you, then your best solution is to try to become one of the elite, as the above order wont ever change.

Feb 16 03:20 PM

[Doc 224899:]

Credit cards should only be issued by banks to customers who maintain minimum balances in their deposit accounts, as a courtesy, with a minimal service charge. This is what credit cards used to be about, and what they should go back to.

Now, credit cards are money traps that lure immature and unsuspecting dupes into years of debt servitude with unreadable fine print and deals that sound too good to be true because they aren't.

Feb 16 04:12 PM

[Moon Kil Woong:]

How about requiring derivatives to be exchange tradable so they can be valued, proved that the writers have the ability to pay, and require some sort of collateral to prevent them from making infinite leverage? Right now AIG and others can write derivatives to the tune of billions when they have 0 assets. What gives? Why is taxpayers dollars staking these bozos in the biggest casino in town?

Feb 16 10:38 PM

[Seen All It...:]

You are absolutely correct that the damage done by Gramm-Leach-Bliley must be reversed and Glass Steagall functional separations be reinstated. Lets also eliminate the off-balance sheet smoke and mirror accounting and require the investment banks to have a capital reserve requirement for all the derivatives and SIV's that they issue. The payment systems are supposed to be regulated by the Fed Reserve, but the credit cards and debit cards are processed by VISA and MasterCard in this country. The EU tried to put some parameters and requirements on VISA and MC before they could transact business in Europe, but there are no such controls here in the US. Credit and Debit cards are very scary stuff should not replace the US currency. The Fed Reserve made lots of money when it processed all the checks written on US banks. Since the interest rate they charge at the discount window to banks is non-existent, where are they getting all the money to fund their bank bailout programs? The FHLB's are pretty much bankrupt, will the Fed be next?

Feb 16 11:04 PM

[ghmoore:]

You forgot about Barney Franks, Chris Dodd and the others who pushed the housing bubble.


On Feb 16 10:12 AM Did U Think The Ponzi Scheme Would Last? wrote:

> Here are my 5 laws:
> 1) Abolish the Federal Reserve, fiat currency and fictional reserve
> lending. Before the Fed is disbanded, demand a full and detailed
> accounting including how much gold the USA really has on reserve.
> Return to some form of honest money, preferably based on commodities
> like gold and silver.
>
> 2) Abolish Keynesian thinking in the government. Return control of
> the markets to the markets. Allow failures to actually fail and thus
> stop competing with the winners.
>
> 3) Make politicians legally accountable (jail time) for gross negligence
> and corruption. Start by indicting Bush and Cheney and Greenspan.
> Set a good example here and we will have a much better behaved government
> for a very long time.
>
> 4) Jail time for CEOs who have lied to shareholders in material ways
> about the prospects for their business.
>
> 5) Demand a balanced budget at state and government levels. Disallow
> CA from handing out scrip for that is just another way of counterfeiting.
> If you can't pay your bills you must cut back on spending. The resources
> will eventually be redeployed productively. Gov't cannot mandate
> prosperity. All it can do is perturb the normal workings of the free
> market until a massive dislocation occurs. Excess gov't spending
> is a major cause of the problems we have.

Feb 17 10:28 AM