WASHINGTON -- Regulatory overhaul legislation working its way through Congress will end taxpayer-funded bailouts "once and for all," President Barack Obama said Saturday.(WSJ)The problem? Nobody with a brain believes him. Oh, don't take my word for it! Let's see what National Public Radio has to say:
We at Planet Money did an informal survey of economists and regulatory experts on the left and the right. We couldn't find any who fully endorse the reforms backed by President Obama and Democrats in Congress.
Everyone thinks the reforms just aren't enough to solve the problem.Take, for example, "too big to fail" -- the idea that if one of the largest banks in the country gets into trouble, the government will save it with taxpayer money.
"A vote for reform is a vote to put a stop to taxpayer-funded bailouts," Obama said in his speech in New York on ThursdayI cannot find any experts -- of any party -- who are willing to agree with Obama on this one.Will at least one reporter in this country besides Jake Tapper get up off his knees long enough to ask Minister of Propaganda Gibbs this question:
If this ends bailouts, why is there a clause in the bill authorizing up to $4 Trillion in "secured loans," and why is congress not striking existing language in 12 U.S.C. 343 that authorizes the Federal Reserve to hand out taxpayer money to foundering businesses that are favored by the US Government? (BigGov - Obama's Backdoor Bailout)
Reform that doesn't take 1,300 pages of congressionally-produced bureaucratic BS
John Steele Gordon sees this for what it is: More Crony Capitalism. He touts the solution of Niall Ferguson and Ted Forstmann:
(In a nutshell: moving derivatives trading from back rooms to exchanges and limiting the leverage that banks can use.)
The Senate bill wouldn’t do that. Instead it would move most derivatives trading to exchanges but allow the chairman of the Commodity Futures Trading Commission to decide what derivatives can still be traded over the counter. Does anyone see there a hugely empowered federal official (not to mention a golden lobbying opportunity for banks and members of Congress alike)? Is a back room at the CFTC an improvement over a back room at Goldman Sachs?
You want real reform? Let 'Em Fail!
The trouble with Wall Street isn't that too many bankers get rich in the booms. The trouble, rather, is that too few get poor -- really, suitably poor -- in the busts. To the titans of finance go the upside. To we, the people, nowadays, goes the downside. How much better it would be if the bankers took the losses just as they do the profits.Personal Profits, Socialized Losses
Happily, there's a ready-made and time-tested solution. Let the senior financiers keep their salaries and bonuses, and let them do with their banks what they will. If, however, their bank fails, let the bankers themselves fail. Let the value of their houses, cars, yachts, paintings, etc. be assigned to the firm's creditors. (WaPo - James Grant)
No surprise, then, the perversity of Wall Street's incentives. For rolling the dice, the payoff is potentially immense. For failure, the personal cost -- while regrettable -- is manageable.End the perverse incentive to gamble (Heads I win, tails the taxpayer loses), and the gambling will end. The prospect of having to eat their immense losses will restore some needed sanity to the market.
Personal responsibility. What a concept.
