Quote:
Originally Posted by Relentless
DTK we agree much more than we disagree.
I'm ok with them doing that with a very small percentage of their capital if they think they can profit from it. I'm not at all ok with the size of the bets they make. If they were doing it with one percent of their capital, it wouldn't be a risk to the economy. If they do it with 99% its a major problem. The question is what percent should be allowed, and I'm not sure 0% is the only acceptable answer. Banks with a high percentage of capital in reserve can absorb their losses, just like any other entity that takes risks. If the regulation relies on making sure they have enough capital in reserve (and putting law breaking executives in jail) it's a better and more durable solution than glass steagall was.
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We totally do
I'd agree on them only being allowed to make crazy bets with only a tiny portion of their bankroll, if those banks were required to account for the full notional value of their positions. That is literally at least 100 times more than they're required to do now.
I'll just say that almost every economist I check out (aside from the obvious TBTF shills) agree that reinstating Glass-Steagall is vital. It makes sense because that was the thing that kept us safe from banking catastrophe for 65 years.
The problem now is that TBTFs (in their role as "investment bankers", aka gamblers) have access to virtually free money from the Federal Reserve. As separate investment banks, they would not. Then, they'd have to go back to having their own "skin in the game". That would lead to sane investment decisions, like Investment Bankers used to make.
Have you ever seen
Inside Job? It won the Best Documentary Academy Award. It's a chronicle of Financial Crisis and the history of what led up to it. If you haven't, I can't recommend it enough.