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Monday Morning Exchange

Monday, March 15, 2010

BusinessWeek senior writer Roben Farzad talks about financial regulation and other business news on the table.

Guests:

Roben Farzad

Comments [7]

jawbone from Parsippany

Link for Simon Johnson's "Too Big to Fail" post:

http://baselinescenario.com/2009/06/18/too-big-to-fail-politically/

From the piece:

...based on what we see so far, there is little reason to be encouraged. The reform process appears to be have been captured at an early stage – by design the lobbyists were let into the executive branch’s working, so we don’t even get to have a transparent debate or to hear specious arguments about why we really need big banks.

Writing in the New York Times today, Joe Nocera sums up, “If Mr. Obama hopes to create a regulatory environment that stands for another six decades, he is going to have to do what Roosevelt did once upon a time. He is going to have make some bankers mad.”

Good point – but Nocera is thinking about the wrong Roosevelt (FDR). In order to get to the point where you can reform like FDR, you first have to break the political power of the big banks, and that requires substantially reducing their economic power - the moment calls more for Teddy Roosevelt-type trustbusting, and it appears that is exactly what we will not get.
~~~~

Johnson lists several problems with current regulatory "reform"; it remains to be seen what Dodd's new proposal contains...and even more what can be passed given the political pressure the financial giants can bring to bear.

Mar. 15 2010 10:36 AM
jawbone from Parsippany

What Billy Gray said -- thanks for presenting this so well.

Mar. 15 2010 10:29 AM
jawbone from Parsippany

Also, altho' this segment is now over, this might be a topic for a future program, this article from the BBC:

http://www.bbc.co.uk/worldservice/news/2010/02/100226_vulture_funds_nh_sl.shtml

Vulture funds: UK MPs propose law to end debt relief profiteering

The idea is to restrict the activities of "vulture funds" which work like this:

•A developing country borrows money.
•It cannot pay it back.
•A vulture fund buys the debt at a heavy discount to reflect the possibility that it may never get the money.
•The rich governments then say they are writing off much of the developing country's debts.
•The vulture fund is still there and says it will not write anything off and will sue to get the money.
Recently, two funds won the right to recover $30m from Liberia, which is over 5% of the government's annual revenue.

Greg Palast has been researching this for the BBC.

Mar. 15 2010 10:28 AM
Billy Gray from Greenpoint, Brooklyn

I think the "cynicism" being discussed on the show is a touch misplaced -- the notion that regulators could never be "smart enough" or well-paid enough to catch crooks in the act is absurd, and was never the problem. The problem was that the regulators at many different and critical points either had no power to act, had their power to act removed when they moved to act, or failed to act because many of them were foxes guarding the hen-house. The notion that you can't have regulators could enough to catch crooks is standard conservative obfuscation because they just don't believe in government.

Mar. 15 2010 10:25 AM
jawbone from Parsippany

Simon Johnson this past week wrote that now we have not only financial organizations which are too big to fail, but TOO BIG TO SAVE.

Please ask the guest about that: With the increased consolidation of the banks, what can be done if they continue to play casino as they did in the lead up to this recent mess?

Mar. 15 2010 10:20 AM
Chris from Yonkers

Please everybody. Strengthen the anti-trust laws to maintain reasonably sized institutions (for example, 7% of total market?) and then deregulate massively. If they fail, let them fail - they are too small to matter that much.

Mar. 15 2010 10:16 AM
Nick from NYC

When we hear the banks truly howling in protest, then we'll know that we've hit the right note on regulation.

Mar. 15 2010 10:14 AM

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