Wednesday, February 03, 2010

The LuLac Edition #1086, Feb. 3rd, 2010



Tom Ridge is a draw wherever he goes these days. From the Luzerne County GOP: "We have sold out all of the tickets for the Ridge/Solano dinner. If you have made your reservation and paid for your dinner, you're OK. If you still would like to come, call 208-4671 and we'll put you on the wait list." This is going to be a great time for all attending.


The true mark of a legislator is not how effective he is in his own Chamber but whether a President listens to what he has to say. The embattled Congressman representing the 11th seems to be getting some very nice attention from the Chief Executive. Earlier this month, President Obama announced a proposal similar to the Kanjorski amendment. These excerpts show that the President’s similar proposal, which former Federal Reserve Chairman Paul Volcker helped craft, was based on of the Kanjorski amendment Congressman Kanjorski’s “too big to fail” amendment would enable the government to take preventative action to rein in or dismantle financial companies that are so risky that they could threaten the American economic system. Therefore, American taxpayers should no longer be on the hook for bailouts, as financial companies would not be able to become “too big to fail.”
American Prospect – January 27, 2010 (excerpts)
“Rep. Paul Kanjorski of Pennsylvania agreed not enough was being done to limit the types of risks that banks could take and was receptive to Volcker's critique. He authored an amendment that would allow regulators to order any financial firm out of a certain line of business if it proved a risk to the system; for instance, American International Group could have been ordered to divest its risky Financial Products division…
“In December, Obama, reacting to both Volcker's policy critique and bank risk-taking, specifically asked his team to build on the Kanjorski amendment by creating a mandatory regulation rather than a firm-by-firm approach, according to a White House official…
"’It's quite an accomplishment for the president to pick up [this idea] into the red zone, a football analogy. We just made up 30 yards,’ Kanjorski told me. ‘Some people are of the opinion that it may be an afterthought; I just don't think it is. I anticipated that they would either at some point endorse it or the president would endorse it.’”
Background briefing with senior Obama Administration officials after President announced his proposal which is similar to the Kanjorski amendment – January 21, 2010 (excerpt)
“In December we worked very closely with Chairman Kanjorski to be sure his amendment to strengthen that core provision gave the regulators the tools they needed to break apart large firms or to prevent risky activities in the event they threaten the system. And today what we’re saying is as part of that effort we want to be sure that the regulators are not only authorized to take that step, but with respect to proprietary trading that they’re required to do so.”
The Hill January 29, 2010.
Big banks will come under heightened scrutiny next week as the Senate Banking Committee considers administration proposals to limit "high risk" activities in the industry.White House economic adviser Paul Volcker will testify before the committee as senators begin considering the administration's new proposals that impact on the financial industry's largest firms. President Barack Obama wants to impose a fee on firms with at least $50 billion in assets to recoup bailout money, limit the size and scope of the biggest firms and prevent commercial banks from doing proprietary trading.Volcker pushed for the rule on proprietary trading, and Obama dubbed the proposal the "Volcker rule" when he announced it at the White House.Big banks have come under increasing criticism on Capitol Hill since last fall when the first proposals began gaining steam in the House. Rep. Paul Kanjorski (D-Pa.) authored a provision designed to give regulators power to restrict or break up what big banks can do.Sens. John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) later introduced legislation that would create a new form of Glass Steagall, the 1933 law that set up a wall between commercial and investment banking.The Kanjorski provision was included in the broad overhaul bill that passed the House in December. And while there was some doubt that such a provision had the legs to pass the Senate, the president's support and rising anger at Wall Street has lent it more momentum."We have a groundswell it seems in the country at large," Kanjorski said in a recent interview. "I think if we started out on the 30 yard line, passed it through committee, and got to the 50 yard line through the House, we’re in the red zone now. If the Senate moves, we’re going to add more yardage."


At 9:41 PM, Blogger Stephen Albert said...

"Too Big To Fail" is a slogan, designed around the notion that American's are too stupid to grasp complex issues.

Case in point: Explaining the necessity of an effective regulatory where, for example, the SEC doesn't outsource regulatory authority to the industry it regulates via a Self Regulating Organization...isn't glamorous or sexy enough for a sound-byte Congress or media.

The REAL ISSUE here isn't "too big to fail"...the issue is "why do we allow companies in the financial services sector to engage in ridiculously risky behavior in the first place?" THAT would be an example of being proactive. Of course taking that tact would amount to the federal government having to admit that it has allowed much of the financial services industry to regulate it self for decades.

"Too big to fail"? Wrong slogan. How about "Fox guarding the hen house" instead?


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