The Banking and Strategy Initiative

Chillin' out till it needs to be funded

The argument of Too Big to fail or of small is better

Or, Let’s just get on with business

nytimes opined in april

In the sweeping legislation before the Senate, there is no attempt to break up big banks as a means of creating a less risky financial system. Treasury Department and Federal Reserve officials have rejected calls for doing so, saying bank size alone is not the most important threat.

Instead, the bill directs regulators to compel the largest banks to hold more capital as a cushion against losses. It sets up a procedure intended to allow big banks to fail, with the cost borne not by taxpayers but by the biggest financial institutions.

As the debate over the regulatory overhaul heated up this week, a populist minority in both Congress and the Fed requested a revisit to the size issue. They would like to go beyond a provision in the bill, suggested by Paul A. Volcker, the former Fed chairman, and supported by President Obama, that would seek to keep banks from growing any larger but not force any to shrink.

“By splitting up these megabanks, we by definition will make them smaller, safer and more manageable,” Senator Edward E. Kaufman Jr., Democrat of Delaware, said in a speech Tuesday.

It seems to me as even Grrenspan acknowledged that regulation and supervision is still about, You ‘ve got to do what you’ve got too do, or so it reads to me. You are not going to change the nature of the beast by making smaller sizes and the street banks are more than happy to acquiesce with any such regulation which will only change minor operational limits. Each trader would still have a business and fortunately for all of us we have gotten in limits that decide that he must have fair enough capital to back it up. Also Basel 3 has tackled the inter bank market that suports each other immediately, the other provisions taking a decade to come about but not limiting a fair market or its supervision.

Trading will come back a little latee as unwinding leverage takes away a zero but trading within the holding co. is finally not going to stymie myself as a big bank in any way

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This entry was posted on August 5, 2010 by in Amitonomics, Banking.


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