How to Reform Our Financial System (By Paul Volcker)

Former Federal Reserve Chairman Paul Volcker laid out his plan for reforming the financial landscape this weekend in an editorial published by the New York Times.

Video added of Volcker at the WSJ's Forum on economic reform from mid January.

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PRESIDENT OBAMA 10 days ago set out one important element in the needed structural reform of the financial system. No one can reasonably contest the need for such reform, in the United States and in other countries as well. We have after all a system that broke down in the most serious crisis in 75 years. The cost has been enormous in terms of unemployment and lost production. The repercussions have been international.

Aggressive action by governments and central banks — really unprecedented in both magnitude and scope — has been necessary to revive and maintain market functions. Some of that support has continued to this day. Here in the United States as elsewhere, some of the largest and proudest financial institutions — including both investment and commercial banks — have been rescued or merged with the help of massive official funds. Those actions were taken out of well-justified concern that their outright failure would irreparably impair market functioning and further damage the real economy already in recession.

Now the economy is recovering, if at a still modest pace. Funds are flowing more readily in financial markets, but still far from normally. Discussion is underway here and abroad about specific reforms, many of which have been set out by the United States administration: appropriate capital and liquidity requirements for banks; better official supervision on the one hand and on the other improved risk management and board oversight for private institutions; a review of accounting approaches toward financial institutions; and others.

As President Obama has emphasized, some central structural issues have not yet been satisfactorily addressed.

A large concern is the residue of moral hazard from the extensive and successful efforts of central banks and governments to rescue large failing and potentially failing financial institutions. The long-established “safety net” undergirding the stability of commercial banks — deposit insurance and lender of last resort facilities — has been both reinforced and extended in a series of ad hoc decisions to support investment banks, mortgage providers and the world’s largest insurance company. In the process, managements, creditors and to some extent stockholders of these non-banks have been protected.

The phrase “too big to fail” has entered into our everyday vocabulary. It carries the implication that really large, complex and highly interconnected financial institutions can count on public support at critical times. The sense of public outrage over seemingly unfair treatment is palpable. Beyond the emotion, the result is to provide those institutions with a competitive advantage in their financing, in their size and in their ability to take and absorb risks.

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Continue reading at the NYT  >>

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Video:  Volcker answers questions on his proposed reform from industry economists at the WSJ's Future of Finance Forum -- January 12, 2010

Comments

[DailyBail]

http://www.businessinsider.com/rumors-spread-that-the-volcker-rule-wont-move-forward-in-the-senate-2010-2

Rumor: "Volcker Rule" Already Dead, Has Zero Chance In The Senate

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Now Senate Republicans are starting to piss me off...

[Ken]

Increasing Anti-Bank Sentiment
We've come to learn that regulators giveth and taketh.

The anti-bank sentiment is gaining strength. Obama favors increased regulation, the public has singled out the banks as the primary reason for the financial crisis, and now George Soros, one of the most powerful, well-respected and active members of Wall St, is asking for banks to be split up.

We went through a 30 year era of de-regulation of financial institutions to the point that their profits were 40% of GDP profits. We're now entering an era of regulation, which will depress earnings for years.

Regulation of financial institutions will not be good for financial stocks.
http://news.bbc.co.uk/2/hi/business/8483328.stm?source=patrick.net

[gobias]

Paul Volcker is the big shot at the Group of Thirty (this group is made up of the worker bees of the world’s central bank – made up of all the central banks by nation (Bank of England, Bank of France, and so on). In July 2008 (yes, the report was published then – yes, very timely), the Group of Thirty published a report called Financial Reform – A Framework for Financial Stability. Here is the link from their site…

http://www.group30.org/pubs/reformreport.pdf

Volcker and his crew have already outlined what control the central bankers want going forward (they will be the regulators). In the report, they write such things as…

“The quality and effectiveness of prudential regulation and supervision must be improved. This will require better-resourced prudential regulators and central banks operating within structures that afford much higher levels of national and international policy coordination.”

“Finally, there is a growing appreciation of the importance of ensuring that central bank responsibility for promoting financial stability is supported by adequate authority and capacity.”

The top tier of the branches of the world’s central banks realized that they needed more transparency and more power over private sector firms (private capital) and the nation’s where they are not already in control (yes, Iraq and Afghanistan were on that list until they established their control using the U.S. military over the past decade). A lot of oil money (U.S. dollars) was being spent by the oil rich nation’s that were out of the iron grip of the central banking system for the most part (leading to Dubai collapse). They want the global economy (New World Order) to be under their financial control with their worthless currency. Yes, it is still you and I that give it its value. The lender of last resort comment is bullshit, the central bankers always get primo collateral. Bernanke loves telling us how the Fed has never lost a dime making last resort loans. In fact, this is when the central bankers strike it rich taking back property and assets when the prices are low.

In the video clip, Volcker is just restating long planned changes. They are still struggling with transparency and the nations of the world are making them work harder than they want to. It is not all bad, credit default swaps only help the criminals in finance (Goldman Sachs and the like). Not one slice of bread will be on your table because of these card cheat financial tactics. Yes, end the financial casino of making money without adding anything real and productive to the economy.

DB, this is a good post to remind us what is at stake but I hope it is not anything new to you or your devotees. Always good to take a few steps back and take another look at what is at stake and the big picture. Hey DB, I understand that you can’t stop Kenbot (computer program at Pushhamburger.com) from posting but if you delete the adverts right away, the guy running the site might move on. Just a thought. It always breaks up the good commenting.

[DailyBail]

Gobias...i'm trying...i edited the one above...ken please don't post the same stuff in more than 1 thread...thanks

[DailyBail]

gobias...you have made these solid points in the past about volcker and the group of 30...and there is no doubt they wield considerable influence...but NOT in congress...i've suspected since the moment it was announced that Chris Dodd's committee would not pass this legislation...there is no way in Haedes...

and with Republicans now protecting the banks as well, the possibility just became non-existent...so in a sense it shoots a whole in your theory that Volcker rules the world secretly...

and don't forget, he couldn't even get Obama to accept his ideas until 2 weeks ago...he's been largely ignored inside the White House for 12 months....

interested in your response...

[gobias]

DB, you are partly right (did I just say that, hmmmm). For a while, Bernanke looked like he was on his way to becoming a Capo (maybe even the main one – U.S. Central Bank crew being the major crew). Mervyn King is the Capo of the Bank of England crew (another key Capo). As you know, I have always pegged Volcker as the Capo but he is old and his better days are behind him. Bernanke was/is a rising star as he has been a good soldier and he is a soldier with aspirations of becoming a Capo. Geithner, on the other hand, is a soldier who will always be a soldier. Geithner is there for the dirty work and to take the fall if need be.

I don’t think you should doubt the strength of the central bank family over the governments of the world. They will take a behind the curtain role only if they can do that and regulate and dictate as they wish. This is based on history, like the role they played in the Battle of Waterloo. Their allegiance is not to one nation or democracy (or even capitalism for that matter as it creates the most financial opaqueness and destruction for them (credit default swaps for example). They manage their role across the globe with many different ruling parties, that is their forte.

That does not mean I am ignoring your points, again, good ones. Our government is at the crossroads and in the main cross hairs. One way or another, the United States could break free of these central bank thieves. It has been tried before, President Kennedy was last to try to do it. It is dangerous and could fracture our Union.

You say Obama needs to accept Volcker’s idea. Keep in mind that Obama knows nothing about this big game of control using currency printing and manipulation to rule. Obama barely knows the basics of a capitalist system. Obama definitely doesn’t understand or know how Goldman Sachs (and others) used credit default swaps to make money on the way up and on the controlled way down. Obama is the model in the glossy magazine. He is a figurehead and nothing more. A figurehead that could be easily replaced with one document (I will let you guess what document I am talking about).

Here is the rundown again…if you are a Sopranos fan (if NJ was NYC)…

The Boss - ???
Underboss - ???
Capo – Carrado Soprano is Volcker (Junior crew to be taken over by Soprano crew)
Capo – Jackie Aprili Sr. is Mervyn King
Capo – Tony Soprano is now Bernanke
Capo – Jimmy Altieri is Lawrence Summers

Soldier – Paulie Gualtieri is Timmy Geithner
Soldier – Silvio Dante is Rahm Emanuel
Advisor – Hesh Rabkin is Goldman Sachs (always gets his cut off the top)
Associate – Christopher Moltisanti is Peter Orszag

Did I miss anyone? Well, you get the picture.

p.s. Ken is not a person, he is a computer posting program.

[RecoverylessRecovery]

"How to Reform Our Financial System (By Paul Volcker)"

with DYNAMITE?.

[Ken]

@DB JOKERS

DEBATE ON?LOL

FELLOW AMERICANS READ THIS: RIOTS WILL UNFOLD NEXT

WHY NO REVOLT ?

Neil Barofsky Promises Handcuffs; Police Pay Dispute In Miami; Workers Protest In NM; California Muni Bond Outlook, Other Potpourri
http://globaleconomicanalysis.blogspot.com/

SENATE BURGLARY: CIA DOMESTIC BLACK-OP TEAM ARRESTED
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_G/threadview?m=tm&bn=8089&tid=537200&mid=537200&tof=35&frt=1

[Sonic Ninja Kitty]

Gobias--These are great points. I never thought Volker was someone 'new'--he's still part of the overall central banking system--slightly better than the others.

PS--You are one of us. You just don't want to admit it yet. Come on. :)

[gobias]

SNK...I have always felt that the economic collapse is a controlled demolition to redistribute the world’s wealth back to the central bank cartel and to solidify their position to run the money printing monopoly. The best comparison is the diamond cartel. De Beers is owned primarily by Rothschild (yes, the same ones that are knee deep in the central bank). They also control much of the mining (Rio Tinto). From 1940 to the 1950s, GE and the U.S. government pooled their resources to create an industrial grade diamond used mostly for diamond-tipped drill bits and saws. GE later used the same technology to make synthetic diamonds. The company was sold by GE and is now called Diamond Innovations (as profit margins fell below 10% / GE moved on to more profitable endeavors). Well, GE also made diamonds so that two lesbians could marry in Vermont. De Beers at one time was so worried about their monopoly that they started laser etching the diamonds God made with their mark. They saw the writing on the wall, the diamonds were the same to the naked eye (no visable flaws and getting better and better on the diamond scales (three c’s). I am not talking cubic zarconia, I am talking just like God makes the diamond but just a hell of a lot quicker. Don’t worry, these people will never let the synthetic diamond market catch on, heck, a diamond is forever and their monopoly of price fixing is too. This is just another huge example of a scam by the real money makers of the world. These people make Trump look like a have not. And yes, they are all the same small group of families as they were a hundred years ago. Money doesn’t mean anything to them. They are all about power and control. They don’t think about tomorrow or how much this downturn will slow them down, they think about the next century and the one after that. They think about population control, world resources, and their big big big picture. They are a select few feudal lords and we are their game of Risk. They have a very big job right now. They have trouble managing free people and capitalism. They know that fascism and socialism on a grand scale is the way to go. When people depend on their governments, the governments and the people are easy to control and manipulate. Private equity is no longer a problem. This was done by the church and resulted in the Dark Ages. Make people feel guilty (like with the global warming nonsense) until they suffer with the guilt and look outside of themselves to relieve their awful feeling. They know that religion was the solution of the past but they know very well the dangers of religion (radicalization of religion). So you see, I do understand some aspects of what you and DB like to talk about but to focus solely on the ins and outs of this economic collapse ignores a more valuable tool, history, and focuses on the wheels of the car moving without taking a look under the hood.

http://www.youtube.com/watch?v=_cqN4NIEtOY

This is much bigger than Obama but he knows very well what his marching orders are.

[Sonic Ninja Kitty]

OK--wow! Information smackdown! :0

Nice.

[S. Gompers]

Yes Gobias the expansions and contractions are always engineered. It is interesting that you brought up the diamond monopoly, did you know they are at best semi precious stones, and almost as common as sand? The monopoly and marketing are the only thing that give them value. Many stones of lesser value are way more precious.

They all know their marching orders, otherwise someone would have broken the cycle years ago. To date only Lincoln and Kennedy tried, and look what happened to them...

The marching orders are clear, TO THE POT!!! And everyone please hurry, the bankers already have the butter melting...


http://www.theatlantic.com/doc/198202/diamond

[DailyBail]

interesting reading and links...

gobias wrote:

Capo – Carrado Soprano is Volcker (Junior crew to be taken over by Soprano crew)
Capo – Jackie Aprili Sr. is Mervyn King
Capo – Tony Soprano is now Bernanke
Capo – Jimmy Altieri is Lawrence Summers

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the only problem with this analysis is every person on your list has been vilified publicly and wields little power...

Volcker....no on elistens to him, least of which the Congress...shelby said tonight that the Volcker Rule is a non-starter...no chance of passing...

Bernanke....he is scorned by most...79% of voters think he should not have been reappointed....

Mervyn King...he is even less popular with Brits than Bernanke is with us...

Larry Summers...are you kidding...the guy is a joke...sleep, larry, sleep....no one outside of Brad delong even listens to him...

[gobias]

Okay DB...question...

If all the central bank worker bees are losing, tell me who is winning?
or
Are you sayiing that their love of money and outright theft and fraud is unpopular?
"For the love of money is a root of all kinds of evil". The Bible

[DailyBail]

i'm not sure who is winning per se....several have won...hank paulson won big...geithner will win big when he goes to goldman sachs later this year...stephen friedman won...

originally, all i was saying is that volcker has less power than you think...not a big point of contention...just my thoughts...