After reading the 10/13/15 article in the Next New Deal , entitled “Structural Reform beyond Glass Steagall”, by Mike Konczal. I’ve changed my mind. Peter Orzag was right, I was wrong. Look at the facts.
8 years into the Recession, Dodd Frank and it’s enforcement are not happening fast enough to correct the existing culture of Greed. We are still peering down into another Fiscal Crisis abyss. Faced with reality, we should consider, What works? Apparently, instituting higher Capital requirements for Banks , Too Big Too Fail , works. If the Banks put aside enough Capital, they will shrink. JP Morgan Chase has already shrunk by 6%. Can we do better? Sure, make Banks put aside more capital to protect them and US in case of a liquidity crisis. Let the ” market”, ensure that they become less risky.
- I’m not sure how much capital is enough (Greenspan proposes 30%), but according to the data presented by Mike Konczal, a minor increase in Capital reserves, shrank JP Morgan Chase by 6%. It’s still TBTF , but it’s a beginning.http://www.nextnewdeal.net/rortybomb/jp-morgan-slimming-down-because-dodd-franks-capital-requirements-are-working
The next structural change Mike cites, is derivative trades performed by The Shadow Banking sector. ( I’ve stated repeatedly, #TaxRisk StopInequality! ) We differ on how to make these financial products less speculative.
- Mike Konczal would make their activity insurable.
- While BUFFETT thought they could be replaced by an insurance product and saw no purpose for their existence at all.
- My thought, why allow risky products to exist ? My suggestion , tax each transaction @6 cents on every $100.00 bundled per trade and gross $660 Billion. Once again, the market forces would take the risk out of the system without regulation. The same tax could be levied on millisecond trades and bring in a few extra Billion. http://thevoiceofjoyce.me/2015/07/30/the-voice-of-joyce-taxriskstopinequality-correction-of-earlier-posts/
- Adapting and tweaking both concepts, would prevent TBTF without incurring more Regulation.
- A win win for the Country and for investors. We would have Financial Stability with minimal Regulation. As I said, a win win.
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