Sunday, May 27, 2012

BANKING REGULATIONS ARE NEEDED...




I feel a need to preach on economics once again since the headlines announced that JP Morgan Chase (my bank) lost $2Billion and probably much more, on some as yet unknown, financial shenanigans and why that should matter to us.

Rana Foroohar who writes THE CURIOUS CAPITALIST column for TIME Magazine made some very important observations in her THE CASE FOR BANKING REGULATION (June 4, 2012).

I have written in the past how after the 1929 crash the GLASS-STEAGALL BANKING LAW (1933) separated the banking industry into regular banking (loans to people) from investment banking (gambling).

The law worked very well until it was repealed in 1999 largely by banks pressuring Congress to allow them to do both; regular banking and investment banking.

Our recent decent into financial chaos (2008) was, in my opinion, due in part to unregulated banking/investing/insurance etc. people in Congress realized that regulations need to be implemented to prevent financial chaos from happening again and so the DODD-FRANK bill came to life.

The bill had what was called the VOLKER RULE which prohibited banks from gambling with depositor money. Well the banking industry must be very powerful because it appears that they control Congress and so weakened Dodd-Frank regulations to the point of meaninglessness.

Let me also make the point here that Republicans hate regulations and especially when the regulations try to regulate business and that is a purely capitalist attitude which I like but not when capitalism in this country is harmed by the lack of regulations; people are a greedy lot and will do anything to make more and more money including placing your hard earned dollars at RISK.

I want my money (deposits) to be held at a bank that makes money the old fashioned way, by making smart and secure loans to people who need money to buy homes, cars, etc. I do not want my bank to be also an investment bank like JP Morgan Chase is.

Now for those who like to gamble with their money, deposit that money in an investment bank where at least, you will know the risks you are taking.

JP Morgan lost $2 Billion plus and probably does not really know how it lost the money but if the bank collapses, it will come to us with its hand out looking for a bailout…not this time buddy.

Tell our politicians to go back to the good ole’ days and make banks behave like banks again and to do that we need commercial banks separated from investment banks…once again…why do we let history repeat itself…have we learned nothing?





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