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This is big news. It’s one thing for a few wayward Congressmen to talk about restoring Glass-Steagall protections, and quite another when one of the regional Federal Reserve Presidents endorses it. Thomas Hoenig of the Kansas City Fed has been better than most Fed Presidents during the crisis, even pushing for some kind of nationalization or resolution authority at one point. So perhaps he’s just an outlier, but hopefully he’s more like the proverbial canary in the coal mine:
Responding to a suggestion made by University of Maryland Professor Carmen Reinhardt, Hoenig said “dismembering firms is a fair thing to consider.” He said regulators “have people who are experts who understand what’s going on inside institutions” who could figure out how to “carve out” some parts of a financial institution if they are taking undue risks with taxpayer backing.
“We do need to consider some activities that are in these largest institutions that probably should not be trading for their account, gambling,” he said. “That portion probably does need to be separated out.”
This is part of a larger trend in the direction of restoring Glass-Steagall, even from the perspective of Wall Street. In addition to Hoenig, such people as John Reed, the former Citi CEO who pushed for Glass-Steagall repeal, have acknowledged that putting up a wall between commercial and investment banks makes sense. And in Congress, the push continues.
Ultimately, the White House would have to embrace the policy in order to really see some momentum. But Hoenig signing on is a good sign.
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It’s about time! Sometimes the simplist solution is the best way – and easiest way – to do things.
And for even “more-better” reform we have to work on getting the health insurance companies off of the protected monopoly list as well.
Our 2010 action plan has to be “Elect more liberals, more progressives and more dems – we’ll sort out their flavors later”. Once we are successful in increasing our majority we can work out the pressure politics for getting these kind of reforms done.
But remember folks – we gotta WIN FIRST. Once we do that the rest will come our way…
Restoring something like Glass-Steagall that applies to current financial innovation would be a good first step. So says Volker, so say we all. Of course bringing Glass-Steagall back could hamstring Goldman Sachs a bit more than some of the other too-large-to-bail banks since Goldman Sachs only converted to a bank on paper a bit more than a year ago in order to partake of US government largess. Since the Fed and the Treasury are dominated by Goldman Sachs alumni the motivation for politicians to act would have to come from people in other areas.
Maybe they might offer explicit exemptions for the favored few. Which of course would be exactly the wrong approach.
I thought we, which is to say they, did win.
Guess I should get some of my news from the TV instead reading stuff on the Inner-tubes.
Now if I could just figure out who we are. By my tally we got a lot of changin’ to do.
Baucus – NO on nearly everything
Dodd – YES except on financial issues
Sanders – YES (I’ll forgive the current insurance indiscretion this one time)
Paul – YES on a small subset of financial issues and military expansion, no on everything else.
Schumer – YES except on financial issues and the middle east
Since I tend to value current financial indiscretions, that are currently in the trillions of dollars, as immensely important it’s likely that my ‘we” list is a bit smaller than yours.
Maybe some Mo is building, with glacial swiftness. After all, who was talking about restoring Glass-Steagall 18 months ago? Maddow featured Glass-Steagall on her show 10 months ago (See my Cops and Robber Barons).
What would be really sweet if Chris Dodd would make restoring Glass-Steagall a major mission of his Finances committee in the next year before retiring.
Bob in AZ