Sunday, December 13, 2009


If the Financial Reform Bill that just passed the House, survives the Senate process, we will see some serious changes in the way Wall Street firms invest and frankly, risk their investors money. The range of problems that threaten the solvency of our larger firms is so complex, that administration's plan for financial reform mirrors that complexity.

Looking at numerous accounts of what the bill does, I conclude the package includes everything from rules to rein in dangerous financial derivatives to a new process for coping with the collapse of large financial institutions without taxpayer-funded bailouts. One comment I see everywhere is: There will no longer be companies deemed "too big to fail." Remember that one?

Enter...the new Consumer Financial Protection Agency (CFPA). This oversight group would focus on protecting consumers from dangerous financial risks. I see there are numerous accounts that such an agency would have diverted the financial disaster that hit us in 2008/2009. Including the rates associated with your credit cards and mortgages.

The bill, which passed 223-202, forces the large firms to pay a total of as much as $150 billion into an emergency fund that could be tapped when a troubled company needs to be taken over and broken up. Again; I see the term "Capital Cushion" used in several reports.

Rep Barney Frank has been the main drive behind these overdue changes. They're not some small nips at the corners either. This is big and will take time for the industry to get used to. It will also take time for the industry to find ways of raping the middle class again, so our Congressional leaders will have to stay on top of this.

While on CNN, Barney Frank said "The bailouts of AIG and Bear Stearns wouldn't be possible, rather they'd be illegal, under this bill, if a company fails, it'll be put to death."

Although our tax dollars were put at risk when Pres. Bush & Obama bailed out these large firms, most have survived, and even have paid back their loans. The money coming back is the subject of more debate regarding the choice between reinvesting in small business or to pay down the debt, but I'll leave that to the cable news pundits.

Obama said this comprehensive reform will create clearer rules of the road. With proper enforcement of those rules, consumers and investors have a fighting chance as our economy gets back on it's feet.

Regarding the House vote; the Republicans indicated they liked the system as it stands. Our Representatives Hinchey, Hall and Murphy all voted in favor of change.

* I stole a list below from the POLITICO website with further descriptions pertaining to the Bill...

Federal Reserve: The bill would allow Congress to order the Government Accountability Office to audit Fed activities, which the Fed says would interfere with the central bank's ability to carry out independent monetary policy.

Derivatives: The bill attempts to shine a brighter light on some of the different kinds of complex financial products, called derivatives, that are blamed for bringing down financial companies such as American International Group (AIG, Fortune 500) and Lehman Brothers. It would pass some of these derivatives on to clearinghouses, which would help pinpoint the value of such trades. However, some derivatives would still be unregulated, including those traded by big agricultural and airline companies to mitigate risk.

Oversight: It creates a new oversight council that would look out for major problems at large financial firms, giving the Federal Reserve a key role in enforcing tougher regulations on larger firms.

Breaking up: It would also give regulators new powers to break up companies that have grown too big, if they threaten to destabilize the financial system.

Executive Compensation: It would give shareholders the right to a nonbinding proxy vote on corporate pay packages.

One thing I didnt see online, but heard on AC360 is that it would also redirect another $1 billion of bailout money into federal neighborhood stabilization programs to redevelop abandoned or foreclosed homes. I don't know if that money will ever see action in Ulster County, but it could stave off further neighborhood decay if it did.


Anonymous said...

The financial reform bill that just passed the House of Representatives is a positive step to guard against a repeat of the financial meltdown we experienced in the fall of 2008. The idea of a "capital cushion" or reserve fund to help offset future situations where large firms find themselves in a credit or cash squeeze makes sense. The money deposited into the fund would be provided by the firms themselves and would work similar to the fund New York State now mandates for insurance companies doing business in the state. It's a giant step in the right direction and hopefully will find support in the Senate and be signed into law.

Larry Delarose

Anonymous said...

John F. Kennedy singed Executive Order 11110 in June of 1963, with the intent of stripping the Federal Reserve Bank of its power to loan money to the US Government 'at interest'.Kennedy had identified the Federal Reserve as a threat to our nation's sovereignty so he declared that the privately owned Federal Reserve Bank would soon be dissolved. Kennedy gave the Treasury Department direct authority to issue the legal and properly backed currency to the people, eliminating the private banking cartel known as the Federal Reserve as the middle man.

US notes were issued as interest-free, debt-free currency, printed by the Treasury and backed by the value of silver and gold held by the government. Federal Reserve notes are issued with debt attached at interest (set by the the Reserve Board). They are printed by the U.S. Treasury at taxpayer expense.

In November of 1963, five months after the signing of that Order, Kennedy was assassinated. There are many who have speculated that this measure, coupled with his administration's desire not to escalate the Vietnam Conflict, both of which went against profit potential for the Federal Reserve, may have been one of the final straws that lead to his assassination, but I leave that to the many theorists out there.

Anonymous said...

As long as there is a money stream flowing somewhere, the rest is logistics. Storm clouds of fear seem to keep the streams moving. Thunder clouds of anxiety push the flash floods from time to time. Showing pictures of a dried oasis in the desert cause the people to pour back the water they've conserved. Keep the rivers flowing, every flowing. Then, will come the flood of inevitable intangible debt that will cover the earth for forty days and forty nights. The Nationally Outsourced and Homeless (NOAH) for short will have to try to save the world by building an Alliance of Resource Knowledge (ARK). Will NOAH's ARK find the mountain?

Anonymous said...

I suspect that what we have right now is a one party system; heads I win, tails you lose! It appears as if both parties are owned by Wall Street so I don't expect to see an issue being made about Wall Street. New Democrats equal Old Republicans! If that's true, where do we go?

In the most recent elections there were unprecedented victories at the city and state levels by independent and third party candidates. It is genuinely grassroots. Could that expand to the federal level? Let's hope so!

Anonymous said...

The CFPA already exists for smaller loaning institutions in the form of FDIC...

FDIC Mission: The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system by:

* insuring deposits,
* examining and supervising financial institutions for safety and soundness and consumer protection, and
* managing receiverships.

Vision: The FDIC is a recognized leader in promoting sound public policies, addressing risks in the nation's financial system, and carrying out its insurance, supervisory, consumer protection, and receivership management responsibilities.