Bankers Winning Again

Two weeks ago, I reported on President Obama’s announcing his sudden desire to reform banks after Republican Scott Brown won the Massachusetts Senate seat formerly occupied by Ted Kennedy. I wrote that “after a year of following the traditional Washington way of bending over backwards to hand taxpayer money to financial firms, he was ready to put an end to risky bank activities like proprietary trading.”

I went on:

While the market reacted in a way that predicted crashing bank profits ahead, history suggests that banks will win this scuffle. With the help of Robert Rubin and Larry Summers, they succeeded in getting the 1933 Glass-Steagall Act repealed in 1999, a measure that cleared the way for the housing bubble’s now-infamous toxic derivative assets. If banks could whittle away a protection that had held for almost seven decades, why not block a too-little-too-late regulatory gesture that involves terms most citizens don’t even understand?

Keep an eye on this issue, but do not be surprised when big bank money decides the outcome. . . . Nobody is more vulnerable to big money buy-offs than members of Congress, so all factors suggest banks will not be reined in.

It’s already going that way. On Tuesday, Senate Banking Committee Chairman Christopher Dodd criticized the Obama administration for complicating the effort to overhaul financial-market rules, and said the late addition of a new idea for limiting risky behavior had threatened the process.

He said the announcement of the so-called Volcker Rule “seemed to many to be transparently political,” as in Obama was trying to appeal to voters upset with Wall Street right after his party lost the Massachusetts Senate seat.

Senator Richard Shelby said Obama had “air-dropped” his new idea into the deliberations on fixing the financial system. Other Senators made similarly resistive comments.

Former Federal Reserve Chairman Paul Volcker, after whom Obama’s new proposal is named, told the committee in testimony last week, “I tell you sure as I am sitting here, that if banking institutions are protected by the taxpayer and they are given free rein to speculate, I may not live long enough to see the crisis, but my soul is going to come back and haunt you.”

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • The Kelly Letter
    A Complete Investment Management System
    The Kelly Letter  every Sunday morning by email.
    Like no other. Many subscribers say this is the best read of their week, astonishing in its ability to distill seven days of noise into one succinct overview of the very few items that might matter. Start your Sundays right!
    A one-page Quick Start Guide
    with page number references to full information in The 3% Signal. You'll receive access to this right away so you can begin transforming your portfolio into a performance machine immediately.
    The 3Sig Calculator.
    A thing of beauty! You'll use it to generate your own personal signals every quarter including exact share amounts to buy and sell based on your account balances. It emails you the results to make later quarters easy by keeping last quarter's numbers at your fingertips. Some subscribers say this tool alone justifies their subscription price.
    The subscriber-only section of this website
    where likeminded investors are commenting on notes and discussing in forums. Jason joins these interactions every day. They're a treasure trove of investing tips and wisdom.
    The archive of Kelly Letter notes.
    It’s a research center, searchable and smartly tagged to make gathering time-stamped material on covered subjects easy.
    The subscriber podcast.
    Jason reads every letter word-for-word. This feature was requested by subscribers who prefer audio learning. They listen on their Monday morning commute, during a workout, or while reading along at their computer.



    $200/year
    Save 17%



    $20/month
    Pay as you go
    Or sign up to receive free email and learn more about the system.
Bestselling Financial Author