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View Full Version : Glass-Steagall Again???



Buzz
07-25-2012, 02:25 PM
I never did see anything on here about the libor scandal on here so I assumed you all were OK with it.

When I saw this on CNBC this morning, I had to see what the conservative take on it is.

For your viewing pleasure:

http://video.cnbc.com/gallery/?video=3000105372&play=1

Marvin S
07-25-2012, 05:44 PM
I never did see anything on here about the libor scandal on here so I assumed you all were OK with it.

When I saw this on CNBC this morning, I had to see what the conservative take on it is.

For your viewing pleasure:

http://video.cnbc.com/gallery/?video=3000105372&play=1

Buzz - I'd like to hear Hoggatt's take on returning to the past, he's the only banker on this forum with a lick of sense :) - TBS your video won't show but I think I caught a little of it - When BA was trying to acquire Countrywide & Merrill Lynch I voted against it - voiced my displeasure on this forum & was told to sell my stock if I wasn't pleased by some guy from Raleigh - Don't see him around any forum, so wonder if he still thinks BA is OK. As you know ML recovered quickly but Countrywide is still causing issues. My 2.40 a share div went to .01 & no one has a clue about when we'll see some progress.

I really have an issue making someone better than whole who was stupid - & Dodd-Frank is a pretty sad piece of legislation. Basically fixed nothing :o.

Add on ------ Meredith Whitney says the banks are going that way on their own - says Sandy Weill is proposing something that would be very expensive

J Hoggatt
07-25-2012, 11:23 PM
Apples VS Oranges---- A Commercial/Community Bank - has so little in common with the "Investment Banking" is almost unrecognizable.

Yet - they all get lumped into "Banks".

The amount of Regulations that we currently deal with - let alone the amount that Regulations that are coming down under this administration is going to KILL the small community banking industry - we are being forced to get bigger. Just to deal with the amount of Regs.

Splitting them -- on the surface appears to be a good idea. Yet - you have to have the ability to make money with either or we will see the small banks get bought up by the big guys.... I think a strength of our economy - is small indepenent banks - making local loans to people they know / trust. This is getting harder everyday.

BTW= Buzz made me watch something on CNBC-- (leftist TV ha hah).... had to quickly turn to FOX to get my eyes and ears from burning!!! LOL

Uncle Bill
07-26-2012, 02:46 PM
Buzz - I'd like to hear Hoggatt's take on returning to the past, he's the only banker on this forum with a lick of sense :) - TBS your video won't show but I think I caught a little of it - When BA was trying to acquire Countrywide & Merrill Lynch I voted against it - voiced my displeasure on this forum & was told to sell my stock if I wasn't pleased by some guy from Raleigh - Don't see him around any forum, so wonder if he still thinks BA is OK. As you know ML recovered quickly but Countrywide is still causing issues. My 2.40 a share div went to .01 & no one has a clue about when we'll see some progress.

I really have an issue making someone better than whole who was stupid - & Dodd-Frank is a pretty sad piece of legislation. Basically fixed nothing :o.

Add on ------ Meredith Whitney says the banks are going that way on their own - says Sandy Weill is proposing something that would be very expensive

Always amazing to see another 'fat cat' admitting to the John Kerry adage..."I voted for it before I voted against it."

The dude that got Glass-Steagall thrown out, now thinks that was a bad decision???? After he made gazillions with his 'supermarket of banking' system?

Here's a view and comment from someone I subscribe to, concerning Glass-Steagall.

UB

Look who suddenly thinks modern too-big-to-fail banks are a bad idea…

Sanford "Sandy" Weill is one of the most famous bankers in the world. In the 1980s and '90s, Weill built the first mega-financial institution… known today as Citigroup. It was the first firm to house under one roof commercial lending, brokerage, insurance, and all the services large investment banks now offer.

Weill began his career as a lowly "runner" at Bear Stearns – handling stock orders for higher-ups. Then, he started a securities firm and later sold it to American Express for hundreds of millions of dollars.

Using that capital, Weill purchased Commercial Credit Corp., a low-end Baltimore lender, in 1986. He used Commercial Credit as the foundation for what is now Citigroup… Over nearly two decades, Weill bought a myriad of companies (including Smith Barney and Travelers)… all thanks to the free-flowing credit of yesteryear.

http://www.stansberryresearch.com/secure/images/icon.gif In April 1998, Weill wanted to merge his Travelers Group (which now included Aetna Life & Casualty, Shearson-Lehman, and Salomon Inc. – parent company of Solomon Brothers) with Citicorp. It was a $76 billion deal…

But federal law – specifically, the Glass-Steagall Act – stood in his way… Also known as the Banking Act of 1933, the law limited the activities and affiliations between commercial banks and securities/insurance firms. The details are arcane, but in essence… the newly formed Citigroup had up to five years to operate. If Congress did not repeal Glass-Steagall by the end of the grace period, the company would have to disband.

So like any egomaniacal bank titan, Weill set out to have Glass-Steagall repealed.

http://www.stansberryresearch.com/secure/images/icon.gif Weill launched a relentless lobbying campaign and appointed former Republican President Gerald Ford and former Democratic Treasury Secretary Robert Rubin to his board.

The Citigroup merger was completed on October 8, 1998. Glass-Steagall was repealed the next year. Weill ran the company until October 2003, when he was replaced by Chuck Prince (who ran Citi until it buckled during the crisis).

http://www.stansberryresearch.com/secure/images/icon.gif Imagine our surprise when we saw Weill on CNBC this morning essentially calling for the return of Glass-Steagall (which many blame for the financial crisis)… Weill said…



What we should probably do is go and split up investment banking from banking. Have banks be deposit takers. Have banks make commercial loans and real estate loans. Have banks do something that's not going to risk the taxpayer dollars, that's "not too big to fail."






I'm suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won't be at risk. The leverage of the banks will be something reasonable, and the investment banks can do trading. They're not subject to a Volker rule. They can make some mistakes, but they'll have everything that clears with each other every single night so they can be mark-to-market.




Weill suggested banks should operate at leverage ratios of 12 to 15 times. This would ratchet down profitability and risk. Leading up to the 2008 crisis, investment banks had leverage ratios exceeding 50.

http://www.stansberryresearch.com/secure/images/icon.gif No one benefited more than Weill from the repeal of Glass-Steagall. Now, he is essentially closing the door on hyper-aggressive bankers who would follow in his footsteps. Should his recommendations be carried out, it would be impossible for anyone to build an empire like Weill did (though his creation proved to be a heap of highly leveraged garbage, which would have collapsed without government intervention). He's happy to risk taxpayer funds to save his own creation, but using it to save others is out of the question…

menmon
07-26-2012, 03:19 PM
I have never been an advocate of Commercial Banks, Insuance Companies and Investment Banks being under the same roof. It is a recipe for disaster. Dodd and Franks wanted to return to the past, just too much headwind to get it done, so what was done was what the lobbist of the big banks would accept. So its better than nothing, but going back to the past is not going to happen even though it should.

As far as community banks are concerned, they need better oversight. This goodoboy approach is why so many are in trouble now. I don't care who the borrower is, you need sound underwriting and that is severly lacking at the community bank level. It is hard for them to compete for the comerical & industrial type loans because their cost of funds is to high, nor do they have the expertise for underwriting them nor the people necessary to mointor them. Therefore, they do commercial real estate and the deals they get usually do not have quality tenents, so a downturn in the market and their deal stop cash flowing. Having said this, big banks don't like using their resources on the smaller deals so the community bank is needed, but with more check and balances.

Gerry Clinchy
07-26-2012, 10:06 PM
Perhaps not commonly known, the banks also wanted to be able to become real estate brokerages and control the title insurance as well. That did not come about ... some lobbying there by RealtorsŪ and the title insurance industry. Can you imagine if banks were allowed to be in the real estate business? And title insurance? And appraisers? What a mess that would have become when the bubble burst.

Buzz
07-27-2012, 08:33 AM
Perhaps not commonly known, the banks also wanted to be able to become real estate brokerages and control the title insurance as well. That did not come about ... some lobbying there by RealtorsŪ and the title insurance industry. Can you imagine if banks were allowed to be in the real estate business? And title insurance? And appraisers? What a mess that would have become when the bubble burst.


Finally, something we agree on...

Gerry Clinchy
07-27-2012, 09:03 AM
Finally, something we agree on...

Buzz, there are probably many things we could agree on ... if the media/politicians didn't reduce all debate to sound bites.

Being in favor of the Keystone XL, does not equate to being in favor of business having free reign to pollute the air, water & soil. You and I both know that.

Being in favor of allowing the present tax rates to continue, does not equate to believing that the needy should be ignored. You and I both know that.

Believing in smaller govt, and less Fed control, does not equate to believing in anarchy or civil war. You and I both know that.

But as long as each side adopts the sound bites as debating points, we will not get closer to the solutions that are needed for the nation's many problems.