Wall Street's six largest banks are far bigger than they were in 2008 when they were deemed "too big to fail," now accounting for more than half of the assets of the entire financial industry. Their combined profits rose $70 billion over the last year, a 30% increase over the year before. Yet much of the Dodd-Frank law that's supposed to prevent another "too big to fail" bailout is still on the drawing boards because the banks are delaying and watering it down. Last week Treasury Secretary Jack Lew threatened stricter measures if they won't allow Dodd-Frank to be fully implemented, but it sounded like empty bluster to me. The banks are also too big to nail (the Attorney General admits he doesn't have the resources to prosecute them); too big to jail executives or traders (the Federal Energy Regulatory Commission won't even go after a JPMorgan executive who allegedly lied about rigging energy prices); too big to derail their market manipulations (...not only energy prices but aluminum, copper, and other commodities, according to yesterday's Times); and too big to curtail their trading on inside information (as they buy warehouses, pipelines, and ports they also gain inside information about firms and industries that no other investors have).
What should be done? (1) Senators Warren and McCain have just introduced a new version of the Glass-Steagall Act, to separate investment from commercial banking. We all need to get behind it. (2) The Fed is becoming more serious about capping the size of the biggest banks, a measure long overdue. Fed member Daniel Tarullo is pushing this. (3) In addition, a small tax (say, 1/10 of 1%) should be imposed on all financial transactions to both slow speculation and raise funds that could be used for, say, our schools (human capital is more important than financial capital). But will reform really occur before we face another Wall Street disaster?
Wall Street's six largest banks are far bigger than they were in 2008 when they were deemed "too big to fail," now accounting for more than half of the assets of the entire financial industry. Their combined profits rose $70 billion over the last year, a 30% increase over the year before. Yet much of the Dodd-Frank law that's supposed to prevent another "too big to fail" bailout is still on the drawing boards because the banks are delaying and watering it down. Last week Treasury Secretary Jack Lew threatened stricter measures if they won't allow Dodd-Frank to be fully implemented, but it sounded like empty bluster to me. The banks are also too big to nail (the Attorney General admits he doesn't have the resources to prosecute them); too big to jail executives or traders (the Federal Energy Regulatory Commission won't even go after a JPMorgan executive who allegedly lied about rigging energy prices); too big to derail their market manipulations (...not only energy prices but aluminum, copper, and other commodities, according to yesterday's Times); and too big to curtail their trading on inside information (as they buy warehouses, pipelines, and ports they also gain inside information about firms and industries that no other investors have).
What should be done? (1) Senators Warren and McCain have just introduced a new version of the Glass-Steagall Act, to separate investment from commercial banking. We all need to get behind it. (2) The Fed is becoming more serious about capping the size of the biggest banks, a measure long overdue. Fed member Daniel Tarullo is pushing this. (3) In addition, a small tax (say, 1/10 of 1%) should be imposed on all financial transactions to both slow speculation and raise funds that could be used for, say, our schools (human capital is more important than financial capital). But will reform really occur before we face another Wall Street disaster?
What should be done? (1) Senators Warren and McCain have just introduced a new version of the Glass-Steagall Act, to separate investment from commercial banking. We all need to get behind it. (2) The Fed is becoming more serious about capping the size of the biggest banks, a measure long overdue. Fed member Daniel Tarullo is pushing this. (3) In addition, a small tax (say, 1/10 of 1%) should be imposed on all financial transactions to both slow speculation and raise funds that could be used for, say, our schools (human capital is more important than financial capital). But will reform really occur before we face another Wall Street disaster?
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