Celebrity CEO Jamie Dimon has made a compelling case against breaking up major US financial institutions. He cites the advantages inherent to economies of scale and claims that bigger banks are able to get better leverage out of their assets and thereby give average customers like little old me a better deal on financial products.
What doesn’t get mentioned by Dimon and his entourage is the power of moral hazard, the implicit subsidy and the blackmail potential that all come implicitly with being a bank that is too big to fail. Without indulging in paranoia worthy of Beppe Grillo and looking for the Bankster under the bed, we still can make a reasonable case that bigger banks are given significant advantages that exempt them from the laws that mere mortals like little old me are forced to obey if we desire a peaceful life.
Proposing solutions to the financial crisis without looking into the federal involvement in housing is akin to enacting immigration reform without dealing with our southern border and points of entry. The federal involvement in housing, via the monstrosities know ad Freddie Mac and Fannie Mae, is what created the asset bubbles, propelled the growth of subprime mortgages, and took down the rest of the economy | Read More »
In 2010, Congress passed the Dodd-Frank Act, which created the new “Bureau of Consumer Financial Protection (CFPB),” an all-powerful agency vested with the power to limit the choices of consumers in financial markets, making it harder and more expensive to obtain credit. This unaccountable agency operates autonomously within the Federal Reserve and will not be subjected to congressional appropriations or oversight. Yesterday, the CFPB announced | Read More »
On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the market fallout of Obama’s re-election, replacements for Timothy Geithner and what Elizabeth Warren’s election means for the banking industry.
We can statistically quantify “Too Big To Fail” in a number of different ways. George Will of the Washington Post is man familiar with the uses (and perhaps the nefarious uses) of quantitative data. He tells us 5 banks hold assets equal to 60% of the GDP. The top 10 banks hold 61% of all commercial banking assets; they only had 26% 20 years ago.
Will’s basically Conservative bent leads him to not be fond of the Dodd-Frank Act inflicted upon American Industry by the current Obama Regime. I certainly agree and sympathize with this point of view. However, not liking Dodd-Frank is one thing, getting rid of it and the systematic problems that made its overreach tenable is a taller order than merely quantified complaining. To actually dismantle the TBTF Empire and the implicit guarantee it enjoys via Dodd-Frank, it may help us to indulge in some Presidential History involving too great men. President Andrew Jackson foresaw and attempted to prevent this problem. President Theodore Roosevelt solved TBTF in some industries other than banking.
If Obamacare is the worst piece of legislation passed by Obama and the Democrats, Dodd-Frank is clearly close behind on the list. This pernicious bill, sponsored by the instigators of the financial and housing crises, will permanently alter our financial markets for the worst just as Obamacare will kill the healthcare sector if it’s not repealed. I’ve met many small business owners who are contemplating | Read More »
Download Podcast | iTunes | Podcast Feed On today’s edition of Coffee and Markets, Pejman Yousefzadeh and Kevin Holtsberry are joined by Stephen Bainbridge to discuss his book, Corporate Governance After the Financial Crisis, the general shortcomings of policy approaches to financial crises, and the shortcomings of Sarbanes-Oxley, and Dodd-Frank. We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d | Read More »
“Why are we bailing them out from their biggest debt with the voting public? Why are Republicans in a rush to move on from issues that embarrass Democrats?” It is still inexplicable to me why Republicans should violate their pledge against passing an Omnibus, in order to meet an artificial deadline set by those who never passed a budget. Democrats were too incompetent to pass | Read More »
By now, we are all intimately acquainted with the bromide that “Republican’s only control one-half of one-third of government.” Nonetheless, we must remember that, in the realm of appropriations, they control the most consequential body of government; the House of Representatives. Unfortunately, almost a year into their stewardship of that body, they have shown only a tepid inclination to defund Obamacare. Despite months of diligent | Read More »
Richard Cordray, President Obama’s pick to lead the Consumer Financial Protection Bureau, won approval from the Senate Banking Committee last week on a party-line vote. His confirmation to run the new agency faces fierce opposition from Republicans, who have vowed to block Senate approval until reforms are made to the agency. Sen. Richard Shelby (R-AL) is leading those calls for reform. As the ranking Republican on the | Read More »
Congratulations, Congressional Democrats: you’ve managed to soak the working poor again. Bank of America will start charging debit-card users $5 a month to pay for purchases. The move comes as the cards increasingly replace cash and as banks look for ways to offset the loss of revenue from a new rule that will limit how much they can collect from merchants. Via Instapundit. You see, | Read More »
Download Podcast | iTunes | Podcast Feed On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Kelly Cobb, Government Affairs Manager for Americans for Tax Reform to discuss the section of the Dodd-Frank bill that institutes price-controls on debit card transactions, how this new law is effecting banks and how the changes mean a worse, not better environment for | Read More »
James MacDonald of ForeignPolicy.com describes the current Seldon Crisis occurring in Western economies as the end of a seven decade experiment. This seven decade experiment is described by Walter Russell Mead as The Blue Social Model. He talks us through its particulars below. Graduate from high school and you were pretty much guaranteed lifetime employment in a job that gave you a comfortable lower middle | Read More »
Download Podcast | iTunes | Podcast Feed On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss Anthony Weiner, Barack Obama’s ATM comments this week, and his administration’s failed outreach to business. We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at | Read More »
John Berlau has a must read piece today over at OpenMarket.org on delaying the Dodd-Frank price controls on banks. In voting this afternoon on a one-year delay of the Durbin Amendment and study of its effects on consumers and small banks and credit unions, sponsored by Sen. Jon Tester (D-Mont.) with Republican such as Sen. Jon Kyl (R-Ariz.) signing on, the Senate also has the | Read More »