File this under:
"Well, that didn't take long."
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A couple of days ago, In the aftermath of Tuesday's senate election in Massachusetts, I posted the following diary: "Sticks and Stones."
It is time for DEMOCRATS to go POPULIST and focus upon JOBS and TRULY TAKING ON WALL STREET, not just with admonishments and congressional dog and pony shows fraught with softball kabuki, but with REAL action.
Yesterday, I wrote this diary: "
Devil's In the Details of the Deal With Wall St. Devils," in which I cautiously and optimistically--and quite sincerely--praised this latest political development: "
Proposal Set to Curb Bank Giants."
Proposal Set to Curb Bank Giants
Wall Street Journal
By DAMIAN PALETTA and JONATHAN WEISMAN
Thursday, January 21st, 2010
WASHINGTON--President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country's biggest banks, marking the administration's latest assault on Wall Street in what could mark a return, at least in spirit, to some of the curbs on finance put in place during the Great Depression, according to congressional sources and administration officials...
--SNIP--
...If Congress approves the proposal, the White House plan could permanently impose government constraints on the size and nature of banking.
Mr. Obama's proposal is expected to include new scale restrictions on the size of the country's largest financial institutions. The goal would be to deter banks from becoming so large they put the broader economy at risk and to also prevent banks from becoming so large they distort normal competitive forces...
--SNIP--
...Mr. Obama is also expected to endorse, for the first time publicly, measures pushed by former Federal Reserve Chairman Paul Volcker, which would place restrictions on the proprietary trading done by commercial banks, essentially limiting the way banks bet with their own capital. Administration officials say they want to place "firewalls" between different divisions of financial companies to ensure banks don't indirectly subsidize "speculative" trading through other subsidiaries that hold federally insured deposits.
Then, over the past couple of hours, I stumbled across this, via a link from Alternet.org: "Big Banks Have Already Figured Out The Loophole In Obama's New Rules."
Big Banks Have Already Figured Out The Loophole In Obama's New Rules
John Carney | Jan. 21, 2010, 3:39 PM
The Business Insider, Clusterstock
The president promised this morning to work with Congress to ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.
But sources at three banks tell us that they are already finding ways to own, invest in and sponsor hedge funds and private equity funds. Even prop trading seems safe.
A person familiar with the operations of one big Wall Street bank said it expects that new regulation will affect less than 1% of its overall business.
The key phrase is "operations unrelated to serving customers." The banks plan to claim that much of the business in which it engages is related in one way or another to serving customers. Even proprietary trading, for instance, can become related to customer service if it is done through internal hedge funds in which some outside clients are permitted to invest.
Carney continues on his story to point out that:
1.) JP Morgan Chase's ownership of the hedge fund Highbridge Capital will not be affected by Thursday's announcement from the White House due to the fact that Chase's outside clients are enabled to invest in it.
2.) According to Carney, an even "more devious" manner by which large banks could own hedge funds would be to enable the banks' employees to become customers of those internal entities.
That way trading operations can remain closed to outsiders while the regulatory requirement of relating the trading to customer service is met. Goldman Sachs is rumored to be considering this approach. (Goldman isn't commenting on the regs right now.)
Essentially, as Carney explains it, the implementation of these latest White House' plans "...will require far less change than people think right now," he noted, quoting "...a person familiar with the thinking at the upper echelons of one of our largest banks..."
From Daniel Tencer, over at Raw Story: "Banks already finding ways around Obama financial reforms."
Banks already finding ways around Obama financial reforms
By Daniel Tencer
Thursday, January 21st, 2010 -- 6:31 pm
...news that banks are already easily finding ways around the proposed reforms will likely lead to questions over whether Obama's proposed fixes are tough enough, or whether any reforms can actually be effective in the current business environment.
"This thing is about showing the public that Obama is standing up to Wall Street," an unnamed Wall Street insider told BusinessInsider. "So the rhetoric is heated. But the implementation will require far less change than people think right now."
Yes, Wall Street never met a loophole it didn't like. And, if a bankster can't find one, they'll just make one up.
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Some additional, recent (I've published over 20 of them on this subject) posts on our legislative branch's financial services regulatory reform efforts, and a link to a WSJ from last month, and an NY Times piece from Gretchen Morgenson from this past June:
"On Propaganda and Krugman's 'Disaster and Denial'." (12/14/09)
"Loopholes Lurk in Bank Bill" (WSJ: 12/13/09)
"New Economic Travesties: GDP Revision, Goldman/AIG, Reform."
(11/24/09)
"...Tuesday's just as bad..." (11/17/09)
"The past is never dead. It's not even past." (10/12/09)
"In Crisis, Banks Dig In for Fight Against Rules." (NYT: 6/1/09)