Glass-Steagall Act of 1933 - Separation of Commercial and Investment banks
-
The Fed feeds the banks endless amounts of easy credit at low interest rates.
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
You really need to read about how credit works. And black propaganda. and strawmen. and milli-meter wave scanners. and... oh heck forget it...
-
You really need to read about how credit works. And black propaganda. and strawmen. and milli-meter wave scanners. and... oh heck forget it...
ragnaroknrol wrote:
You really need to read about how credit works.
Oh? Perhaps it is you who need to learn how credit works in our Federal Reserve & fractional reserve banking system.
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
-
Ok, so the latest move by the Obama administration is to attack the "To Big to Fail" problem, which Robin Williams amusingly equated to "Too Fat to Diet." Well, time for some weight loss, if Obama gets his way. Basically, what he wants to do is instate something similar to the Glass-Steagall Act of 1933 (Which also started the FDIC), enacted after the Great Depression and partially repealed in 1999. This law prohibited commercial banks from doing business on Wall Street. Right now, the big four (J.P. Morgan, Citigroup, Bank of America, and Wells Fargo) all include both a market security arm and a commercial banking arm (They're not the only ones, just the best examples). That means they're both taking customer deposits, and investing in risky instruments on the market. If they go bankrupt because of those risky instruments, as was happening in '08 and '09, they put the customer accounts (FDIC-insured) at risk, making it the taxpayers' problem. This is only allowed because of the repeal of the Glass-Steagall Act (Well, the parts that prohibited this) in 1999. Now the government wants to reinstate this, which would pretty much force the big guys to do one of three things: 1) Get out of the market, and just work with customer deposits and loans, like a commercial bank (Considerably lowers profits). 2) Close out customer accounts, and operate exclusively as an investment firm (Considerably lowers buying power and market "muscle"). 3) Split into two or more companies, each of which does only one of the above, hence reversing many of the recent mergers (JP Morgan + Chase, Citi + Travelers, etc). Now, the street hates it... When Obama announced it, the market dropped a few hundred points for two days. Personally, I think this might be a good thing, but I'd like to see some other viewpoints. So... Good idea? Bad idea? References: * Wikipedia[^] - Notice the section on the proposed reinstatement, backed by Senator McCain (R-Arizona), Senator Cantwell (D-Washington), and Paul Volcker (Former Fed chairman) * Ratical.com[^] - Some explanation on why it was originally instated *
Replying instead of editing, so as not to interrupt the flow. A quick example to illustrate the difference between having and not having this separation... "Bob's Investment Co." is a hedge fund, or mutual fund, or any sort of investor not including a commercial bank... They're trying to decide where to invest their money. Now, they have $100mln to invest (As an example)... They find a security that can invest in that will net them a 30% profit, but there's a 10% chance it'll go belly-up and they'll lose their investment. So basically, they can make 30% or lose 100%. I don't care what models you use... That's a bonehead move. If they have any brains at all, they'll find something a little more sensible. If they want to take that risk, then they deserve the pain if they lose. "Bank of Bob" is an investment bank that includes a commercial bank... They see the same security... 30% profit, and a 10% chance it goes under. The Bank of Bob, however, is investing mostly customer money. $90mln of that is from insured customer accounts, and the last $10mln is from investors Now, their upside is still 30%, so they can make $30 million, but their downside is much less. If that security defaults, and they lose their entire investment, then how much did they really lose for their clients? $10mln. The other $90mln is FDIC-insured, so the government has to rescue all of those savings accounts. Suddenly, this is looking like a really good investment, because it really doesn't matter as much if it fails. Obviously, the real life situation is considerably more complex, but as I see it, the calculation is similar. So the Glass-Steagall Act basically removes the downside protection. Every company has to choose: 1) Invest in anything they want. Do whatever they want with their money. If they screw up, however, no one's going to save them. (Investment firm) 2) Government provides a safety net (FDIC insurance, Fed backing), which allows them to promise their customers that their money will be safe. As a condition of this protection, they're not allowed to play the market. (Commercial bank)
Proud to have finally moved to the A-Ark. Which one are you in? Author of Guardians of Xen (Sci-Fi/Fantasy novel)
-
Ok, so the latest move by the Obama administration is to attack the "To Big to Fail" problem, which Robin Williams amusingly equated to "Too Fat to Diet." Well, time for some weight loss, if Obama gets his way. Basically, what he wants to do is instate something similar to the Glass-Steagall Act of 1933 (Which also started the FDIC), enacted after the Great Depression and partially repealed in 1999. This law prohibited commercial banks from doing business on Wall Street. Right now, the big four (J.P. Morgan, Citigroup, Bank of America, and Wells Fargo) all include both a market security arm and a commercial banking arm (They're not the only ones, just the best examples). That means they're both taking customer deposits, and investing in risky instruments on the market. If they go bankrupt because of those risky instruments, as was happening in '08 and '09, they put the customer accounts (FDIC-insured) at risk, making it the taxpayers' problem. This is only allowed because of the repeal of the Glass-Steagall Act (Well, the parts that prohibited this) in 1999. Now the government wants to reinstate this, which would pretty much force the big guys to do one of three things: 1) Get out of the market, and just work with customer deposits and loans, like a commercial bank (Considerably lowers profits). 2) Close out customer accounts, and operate exclusively as an investment firm (Considerably lowers buying power and market "muscle"). 3) Split into two or more companies, each of which does only one of the above, hence reversing many of the recent mergers (JP Morgan + Chase, Citi + Travelers, etc). Now, the street hates it... When Obama announced it, the market dropped a few hundred points for two days. Personally, I think this might be a good thing, but I'd like to see some other viewpoints. So... Good idea? Bad idea? References: * Wikipedia[^] - Notice the section on the proposed reinstatement, backed by Senator McCain (R-Arizona), Senator Cantwell (D-Washington), and Paul Volcker (Former Fed chairman) * Ratical.com[^] - Some explanation on why it was originally instated *
How about this, FDIC insured accounts are not available for any wall street maneuvering. However people may open accounts which are not insured(at a higher interest rate I'd assume), without the insurance that the company may then use. Put little statements on the contract to the effect of 'this bank may loose all of your money in a ponzi scheme, but if they don't you get a few fractions of a cent extra each year' for the second kind of account. If the banks do well they do well, if they don't it only hurts those who can't come crying to the tax payer.
-
Irrelevant. If you don't have anything intelligent to say, then get back in your cage.
Proud to have finally moved to the A-Ark. Which one are you in? Author of Guardians of Xen (Sci-Fi/Fantasy novel)
Ian, he's saying the same thing I'm saying, only doing it bluntly. In order to fix a problem, you go to the source. You shouldn't make the problem worse by making more problems. You're basing your whole argument on believing that people don't know what to do. But I say that giving more power to the government is never a good idea. Think of the founding fathers. "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -- Thomas Jefferson Do you see any kind of correlation, or do you think that this is just rhetoric?
-
ragnaroknrol wrote:
You really need to read about how credit works.
Oh? Perhaps it is you who need to learn how credit works in our Federal Reserve & fractional reserve banking system.
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
Oi, I leveraged that banking system into affording something I couldn't at the time by paying the guy I was borrowing the money interest on it. I'm actually sending out a check today to finish paying that debt. Dude got his money, I got a method of transport, and someone earned a fraction of a percent on money they weren't using. Credit is easy, responsible credit is the problem.
-
How is the Fed the root when it was the banks being allowed to do this that caused the issue?
Before the rest of that response list grows any further, I want to cut this one off at the source. The Fed IS a bank. It is fully indpendent... which is why we can't audit them... in the real sense. Ian would respond here by saying, "yes, it does get audited". Yes. But all of the most important stuff does not get audited. So it is a private independent bank, which answers to literally nobody. It is the only bank in the entire world without any independent auditing system. I call that a problem.
-
Oi, I leveraged that banking system into affording something I couldn't at the time by paying the guy I was borrowing the money interest on it. I'm actually sending out a check today to finish paying that debt. Dude got his money, I got a method of transport, and someone earned a fraction of a percent on money they weren't using. Credit is easy, responsible credit is the problem.
Distind wrote:
Credit is easy, responsible credit is the problem.
The difference between a private loan from a bank or individual is that when you borrow from them, everyone from the private individual to the bank volunteer and the conditions are known across the board. With the Federal Reserve however, there are the serious problems of morality and the corruption that immoral and inherently corrupt power breeds. With the Federal Reserve system, unlimited money comes from the power to devalue currency. The bank, and the people that profit from it steal unlimited money and throw it out to however it pleases (national or international, private or public).
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
-
Distind wrote:
Credit is easy, responsible credit is the problem.
The difference between a private loan from a bank or individual is that when you borrow from them, everyone from the private individual to the bank volunteer and the conditions are known across the board. With the Federal Reserve however, there are the serious problems of morality and the corruption that immoral and inherently corrupt power breeds. With the Federal Reserve system, unlimited money comes from the power to devalue currency. The bank, and the people that profit from it steal unlimited money and throw it out to however it pleases (national or international, private or public).
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
CaptainSeeSharp wrote:
With the Federal Reserve system, unlimited money comes from the power to devalue currency. The bank, and the people that profit from it steal unlimited money and throw it out to however it pleases (national or international, private or public).
So what you're saying is it isn't the bank that's the problem, but the treasury.
-
CaptainSeeSharp wrote:
With the Federal Reserve system, unlimited money comes from the power to devalue currency. The bank, and the people that profit from it steal unlimited money and throw it out to however it pleases (national or international, private or public).
So what you're saying is it isn't the bank that's the problem, but the treasury.
Distind wrote:
So what you're saying is it isn't the bank that's the problem, but the treasury.
I clearly stated Federal Reserve as in the bank, and the people that profit from it. The Treasury does "borrow" astronomical amounts of money from the bank, they are "the people who profit from it... (national or international, private or public)"
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
-
Distind wrote:
So what you're saying is it isn't the bank that's the problem, but the treasury.
I clearly stated Federal Reserve as in the bank, and the people that profit from it. The Treasury does "borrow" astronomical amounts of money from the bank, they are "the people who profit from it... (national or international, private or public)"
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
The problem is, the bank doesn't make it's own money. The treasury maintains the currency creation and destruction. They control the total available supply, while the fed acts as a quick retraction/expansion mechanism for the amount of currency in circulation. The fed does not have unlimited funds, or at least by itself. The question of unlimited currency production potential does not trace back to the fed.
-
The problem is, the bank doesn't make it's own money. The treasury maintains the currency creation and destruction. They control the total available supply, while the fed acts as a quick retraction/expansion mechanism for the amount of currency in circulation. The fed does not have unlimited funds, or at least by itself. The question of unlimited currency production potential does not trace back to the fed.
Distind wrote:
The problem is, the Treasury doesn't make it's own money. (Which it shouldn't, only Congress after both house and senate pass a bill signed by the presedent to expand or contract the money supply) The Federal Reserve maintains the currency creation and destruction. They control the total available supply, and act as a quick retraction/expansion mechanism for the amount of currency in circulation. The fed creates new money by itself. The unlimited currency production potential is dangerous
FIFY
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
-
Ian, he's saying the same thing I'm saying, only doing it bluntly. In order to fix a problem, you go to the source. You shouldn't make the problem worse by making more problems. You're basing your whole argument on believing that people don't know what to do. But I say that giving more power to the government is never a good idea. Think of the founding fathers. "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -- Thomas Jefferson Do you see any kind of correlation, or do you think that this is just rhetoric?
There's a counter point here though, would we really be better off without the FBI to resolve interstate crimes? Without a national highway system? Without the vast majority of the expansions of federal power since the 1900s which more or less allowed us to be a nation rather than a federation of petty states? Sure, some power shouldn't be given, but not all power is a horrible thing.
-
Distind wrote:
The problem is, the Treasury doesn't make it's own money. (Which it shouldn't, only Congress after both house and senate pass a bill signed by the presedent to expand or contract the money supply) The Federal Reserve maintains the currency creation and destruction. They control the total available supply, and act as a quick retraction/expansion mechanism for the amount of currency in circulation. The fed creates new money by itself. The unlimited currency production potential is dangerous
FIFY
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
I know your opinion of wikipedia, and I'll admit I checked myself a few times, but for reference: The Department prints and mints all paper currency and coins in circulation through the Bureau of Engraving and Printing and the United States Mint. The Department also collects all federal taxes through the Internal Revenue Service, and manages U.S. government debt instruments. http://en.wikipedia.org/wiki/US_Treasury[^]
-
I know your opinion of wikipedia, and I'll admit I checked myself a few times, but for reference: The Department prints and mints all paper currency and coins in circulation through the Bureau of Engraving and Printing and the United States Mint. The Department also collects all federal taxes through the Internal Revenue Service, and manages U.S. government debt instruments. http://en.wikipedia.org/wiki/US_Treasury[^]
Distind wrote:
The Department prints and mints all paper currency and coins in circulation through the Bureau of Engraving and Printing and the United States Mint.
Yeah, it's there job to take in old worn out cash, and replace with with newer cash. This sub-compartment of the Treasury gets its orders to manufacture new paper and coins comes from whoever has the authority and money to turn into paper and coin. All money comes from the Federal Reserve by wire or check. The most important consideration for this discussion is to realize that less than 5% of actual money supply is actually represented by physical cash.
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
-
Distind wrote:
The Department prints and mints all paper currency and coins in circulation through the Bureau of Engraving and Printing and the United States Mint.
Yeah, it's there job to take in old worn out cash, and replace with with newer cash. This sub-compartment of the Treasury gets its orders to manufacture new paper and coins comes from whoever has the authority and money to turn into paper and coin. All money comes from the Federal Reserve by wire or check. The most important consideration for this discussion is to realize that less than 5% of actual money supply is actually represented by physical cash.
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
-
Define money supply for me, I have the niggling feeling you're including things with 'cash value' which is likely horribly over inflated. I'm curious where the 5% is coming from.
I have a niggling feeling that there is something seriously wrong with you.
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
-
There's a counter point here though, would we really be better off without the FBI to resolve interstate crimes? Without a national highway system? Without the vast majority of the expansions of federal power since the 1900s which more or less allowed us to be a nation rather than a federation of petty states? Sure, some power shouldn't be given, but not all power is a horrible thing.
Distind wrote:
would we really be better off without the FBI to resolve interstate crimes?
of course not. Since this is a Confederation, we do need to give the federal government some federal jurisdiction.
Distind wrote:
Without a national highway system?
Do we really need them to be federal? They still fall under state jurisdiction. The federal government just gives the states money to keep them from falling apart and to set the speed limits, even though there are speed limit signs everywhere.
Distind wrote:
Without the vast majority of the expansions of federal power since the 1900s which more or less allowed us to be a nation rather than a federation of petty states?
Glad you pointed this out. I think that more power to the federal government gives too much power away, and it's definitely not outlined in the constitution for what they do. the states are giving up their sovereignty, outlined in: Amendment 10 "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." This is the one amendment that changed the whole nature of the Constitution. A) The states created the Confederation, not vice-versa. B) This Amendment specifies the very fact it's a Confederation, not a Federation. The power resides in the States, not in the federal government. C) The "Articles of Confederation" was named precisely that for a reason.
Distind wrote:
Sure, some power shouldn't be given, but not all power is a horrible thing.
Agreed. That's why the founders only allowed Congress a few delegated powers, outlined in Article I, Section 8. They were more like federal powers, not governing powers. That was the point of the central "government", even though it wasn't supposed to be a government at all. The states were supposed to be their own countries, if you will. That's precisely why they were called states. I know, these are radical thoughts... but that's what we were 200 years ago. Now the federal government has grown out of control. I think that's pretty clear now.
-
Define money supply for me, I have the niggling feeling you're including things with 'cash value' which is likely horribly over inflated. I'm curious where the 5% is coming from.
Actually, CSS is right about this, in part (I know, it's strange to say). The Fed actually does have the power to create and destroy money electronically, by simply editing the number in their account. These are known as "Open Market Operations," and are TEMPORARY actions done to correct problems in the economy. When the operation is complete, the change is reversed. Under normal circumstances, the Fed adjusts lending rates, and adjusts the currency supply by controlling how much they keep in reserve.
Proud to have finally moved to the A-Ark. Which one are you in? Author of Guardians of Xen (Sci-Fi/Fantasy novel)
-
I have a niggling feeling that there is something seriously wrong with you.
Watch the Fall of the Republic (High Quality 2:24:19)[^] Sons Of Liberty - Free Album (They sound very much like Metallica, great lyrics too)[^]
So you're quoting something you don't know the real meaning of again? I say that having taken a handful of finance classes and seen how easy it could be to misrepresent financial figures with a bit of hand waving and a stupid audience. In fact I'm fairly sure my teacher was trying to do that a few times, unfortunately for him he had at least 4 5th year engineers in his class that would have none of it.