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Wednesday, January 20, 2010
Possible Bank Regulations
The new Obama banking regulations being discussed will possibly limit the size of banks and what banks are allowed to do. After this past recession, the government has been forced to look into a way to prevent future banks from failing and bringing down the economic infrastructure. The specifics of these new limits are not released, but the basics are that many of the big banks might be forced to break with their investing banking units and also stop certain activities such as real estate and hedge funds. This new regulation calls into question how much our government should be involved in regulating our economy. This new regulation seems pretty strong and might be too extreme and could possibly hurt the banks by breaking them up. Although letting these banks go without strong regulations might also be a mistake.
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Well befor the economy went down the government was involved with banks. The Fdic Protected people with money in the banks so they were able to get their money. So these new regulations may help the people with money in the banks once more. But you never know what will happen right?
Sorry I Ment The FDIC.
One word: moderation.
When you offset the balance, bad things happen.
Simple as that.
I view this return to banking regulation as a hope to capitalize again off of public discontent with large corporations and Wall Street. Several articles have referred to this as Obama seeking "populism" as a way to ride out rising discontent with his administration's policies. See below for links to these, if you're interested in this angle. Both Scott Brown and President Obama rode the need for change into office, arguably opposite forces at work in the American political culture. I think Obama may push at Wall Street and executives, because it's clearly a desire seated in the American public right now.
These are for anyone interested in my comment above:
http://www.nytimes.com/2010/01/22/business/economy/22policy.html
http://www.huffingtonpost.com/2010/01/21/obama-turns-to-populist-p_n_431272.html
Ari, you make a good point. Additionally, should Obama get strict bank regulation legislation on the table, the Republicans in congress (who will of course try to block the legislation) will find themselves in the sticky situation of defending the rights of the banks, which, through all the bailouts and bonuses, have proven to be undoubtedly corrupt. If everything goes according to plan, Obama could have a win-win situation in the foreseeable future: renewed trust and confidence from the public, and an exposed and injured Republican Party.
I think it'll be interesting to see how banks react to these proposals in the upcoming midterm elections given the recent verdict in Citizens United v. Federal Election Commission.
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