The Fed on Glass-Steagall; Me on STFU, Fed Boys, We Got This

Thumbnail image for Solutions.jpgKansas City Federal Reserve President Thomas Hoenig is a voting member of the FOMC this year and apparently he got my note.
He is charging into the year as a cheerleader of long-dead regulation and ending TBTF. This is a song and dance we’ve seen from the Fed about a bazillion times now. Just because regulation is my shit doesn’t mean I’m entertained in the least by this.


WSJ:

A top U.S. Federal Reserve official said Tuesday it’s necessary to consider how banks considered too big to fail can be broken up so they no longer pose a systemic risk to the U.S. economy.
“Beginning to break them, to dismember them, is a fair thing to consider,” Federal Reserve Bank of Kansas City President Thomas Hoenig told a panel at the annual meeting of the American Economics Association.

Well if insisting too big to fail is too big to continue isn’t enough, maybe Hoenig’s declaration of “bring back Glass-Steagall!” will make the panties drop?
Nope.

“We’ve got to start somewhere — and size matters,” Hoening said, calling for rules to address the problem that are simple and easy to enforce.
“We’ve got to strike while the iron is hot … but we must also do it right,” Hoenig said, adding there was a “chance” that new rules could be passed this year.

I’m going to go ahead and resist the easy joke here.
So? Should commercial banking and investment banking once again be absolutely distinct from each other?
I think if we’ve learned anything from this crisis it’s that the lines are blurred; accountants should know finance, finance professionals should know accounting and Christ, no one let the quants near the securitization models again. I have seen a noticeable increase in bankers, CFOs, etc pursuing CPA licensure since 2007. I can’t tell you numbers (if I did I’d be making them up) but a lot more of them call and the line is no longer as definitive as it was.
Our rules need to change. It’s not that we should bring back Glass-Steagall, it’s that two new guys need to write one hell of a regulatory bill that redefines our financial system as we know it and slap their names on it.
The financial system we’ve got sucks and if we don’t do that, Fed guys like this will keep yammering on about interest rates they never plan to raise and popping future bubbles.

Thumbnail image for Solutions.jpgKansas City Federal Reserve President Thomas Hoenig is a voting member of the FOMC this year and apparently he got my note.
He is charging into the year as a cheerleader of long-dead regulation and ending TBTF. This is a song and dance we’ve seen from the Fed about a bazillion times now. Just because regulation is my shit doesn’t mean I’m entertained in the least by this.


WSJ:

A top U.S. Federal Reserve official said Tuesday it’s necessary to consider how banks considered too big to fail can be broken up so they no longer pose a systemic risk to the U.S. economy.
“Beginning to break them, to dismember them, is a fair thing to consider,” Federal Reserve Bank of Kansas City President Thomas Hoenig told a panel at the annual meeting of the American Economics Association.

Well if insisting too big to fail is too big to continue isn’t enough, maybe Hoenig’s declaration of “bring back Glass-Steagall!” will make the panties drop?
Nope.

“We’ve got to start somewhere — and size matters,” Hoening said, calling for rules to address the problem that are simple and easy to enforce.
“We’ve got to strike while the iron is hot … but we must also do it right,” Hoenig said, adding there was a “chance” that new rules could be passed this year.

I’m going to go ahead and resist the easy joke here.
So? Should commercial banking and investment banking once again be absolutely distinct from each other?
I think if we’ve learned anything from this crisis it’s that the lines are blurred; accountants should know finance, finance professionals should know accounting and Christ, no one let the quants near the securitization models again. I have seen a noticeable increase in bankers, CFOs, etc pursuing CPA licensure since 2007. I can’t tell you numbers (if I did I’d be making them up) but a lot more of them call and the line is no longer as definitive as it was.
Our rules need to change. It’s not that we should bring back Glass-Steagall, it’s that two new guys need to write one hell of a regulatory bill that redefines our financial system as we know it and slap their names on it.
The financial system we’ve got sucks and if we don’t do that, Fed guys like this will keep yammering on about interest rates they never plan to raise and popping future bubbles.

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