Resolution Authority ASAP
Liberals will probably find a fair amount to disagree with in these remarks from Ben Bernanke, especially the lead elements that involve vague assertions about the “economic benefit of multi-function, international (financial) firms.” That said, there’s no reason whatsoever to disagree with this:
Both in answering the question and in his prepared text, Mr. Bernanke again beseeched Congress to act soon to give regulators “resolution authority” to cope with the imminent collapse of a big financial firm other than a bank, and to address other vulnerabilities in the regulatory regime exposed during the crisis.
There’s plenty of room for disagreement as to whether an approach to “too big to fail” that’s centered on this resolution authority point is sufficient. But I think everyone can agree that it’s necessary. And unlike other elements of regulatory reform, this is something that at least might come into play during the current crisis if things get worse. I see no reason why congress couldn’t or shouldn’t move quickly on this point irrespective of controversy over the rest.
26 Responses to “Resolution Authority ASAP”
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October 25th, 2009 at 11:33 am
Gee, perhaps you’re not actual qualified OR honest enough to admit this, but you don’t actually get to determine where there is room for debate and where there isn’t. Especially on class issues, finance issues, economics, labor or any of issue where the elite has decided that what they want goes, regardless of the democratic process or public opinion.
October 25th, 2009 at 12:01 pm
And how might those companies be wound down? Given Bernanke’s track record. What makes you confident the Fed can perform the role he desires?
October 25th, 2009 at 12:04 pm
What soullite seems to have said.
WTF, Matt? As far as I can tell, Bernanke’s demanding Congress immediately grant “regulators” more unmonitored power to shovel taxpayer money at more too-big-to-fail institutions because it’s “necessary?” Fuck that!
October 25th, 2009 at 12:17 pm
In a way American Congress has a crisis of ‘execution’ on hand. This Congress is barely trying to deliver on Health Care Reform. Even after understanding the complexity of the issue, it is apparent that the performance here is poor. Add to that another complex bill is in making – Climate Control.
Obama made the decision that before addressing these weighty issues of Finance, he would rather go for Health Care Reform. As Ezra pointed out sometime back, in the long run potentially this is going to be marked as the single most blunder by this Administration – to let go the leverage on Finance industry at the height of TARP to control that industry. It is a basic common sense that whenever you write a check, that is the most powerful time to get things in order on the recalcitrant boys. Obama has squandered that opportunity and including this Congress, they all want now to do the rush job. But hold on, we have got a ‘traffic jam’ in Congress…
Except the ‘built in healing’ capacity of this Economy which can very well be the lottery Obama is looking for (Niall Fergusson’s lucky President….); there does not seem to be anything exiciting and encouraging happening on the front where Congress or Administration can make the difference. What Matt is pointing here – the urgency of Resolution Authority – it is one more manifestation of missed buses by our rulers.
Thank God Bush has conditioned we Americans to get screwed again and again for years. Probably that will come handy to us in Obama reign too.
October 25th, 2009 at 12:21 pm
What soulite said, but in addition, what do you think Bernanke would do with his new authority, haircut the bondholders or slash pensions and healthcare of labor? Do we want to let him make that decision?
The example of GM can give us a clue.
But I am no longer sure what side MY is on anymore.
October 25th, 2009 at 12:23 pm
The basic problem is that over the last 30 years, it has become possible for financial firms to appropriate public money.
That must be corrected but the Fed cannot do it. The Fed is a bank and supervises banks and acts as lender of last resort for commercial banks. Anything else is a distraction from their role.
The Fed had ZERO role in the New Deal reforms, and rightly so.
The congress needs to step up to their responsibilities and institute a new financial framework for the US. Most of that would be reenacting the New Deal legislation. Beyond that a clear, legal barrier between speculation and productive finance must be created.
October 25th, 2009 at 12:40 pm
No, such authority is not only not needed, it’s harmful. Let existing bankruptcy law handle these things, so as to to allow for consequences for bad actions. By having continuing bailouts. all we do is ensure that we’ll have more of them: because all the players in the financial game understand that it’s the following game:
“heads I win, tails you lose”
It’s kind of amusing that progressives – allegedly pulling for the little guy – want to perpetuate this kind of “welfare for fatcats” thing indefinitely into the future…
October 25th, 2009 at 1:12 pm
But I am no longer sure what side MY is on anymore.
He appears to be a David Broder-like character.
October 25th, 2009 at 1:22 pm
Hasn’t the government lacked the “political will” to use all currently available laws to deal with issue because it would be too costly for the financial class?
I mistrust the design Bernanke would want for his new laws.
October 25th, 2009 at 1:27 pm
If the regulators get the power to seize companies that are “too big to fail”, break them into smaller “small enough to fail” pieces and sell the pieces off – I’m all for it.
If we’re just in for another round of Wall Street roulette where the financial institutes make wildly risky bets with big potential upsides and disastrous downsides, secure in the knowledge that they get to keep any winnings while sticking us with any losses – I’d say take a long walk off a short pier.
October 25th, 2009 at 1:36 pm
More power for the Federal Reserve is an absolute no no. If you do not believe that the Fed and the Treasury didn’t anticipate the ability to gather power when panics have come over the last 22 years your naive. OK, maybe not, but if you don’t consider the probability they you are.
The Treasury by the way had zero authority to use $200 billion to save AIG. So what? These guys do whatever they want. As Mish says, it’s much easier to ask forgiveness than ask permission.
The Fed doesn’t need permission from congress. Congress! Gimme a break. These guys are going to continue to gamble and print and bail until they die. Nobody can stop them. Ben asking for authority is a formality. There is no authority in the world which will allow them to save C and JPM because they cannot be saved as real honest enterprises. Can’t be done.
October 25th, 2009 at 2:05 pm
Well, I can find a reason to disagree with it.
First, one of the biggest commercial mortage companies is about to tank so they want to be able to give out more money.
Second, the authority Geithner wants and testified about the other day would be LIMITLESS. In other words, if they decided to spend $10 Trillion they could and on whatever they wanted to “save”.
Let the darn things fail. It will not be worse than where we are now with the same banks doing the same things that got us here. No one failed, no one lost, so no one learned anything. We lived through the Great Depression and we’ll get through its sister too if we just reinstate the darn laws that Congress has stripped over the past few years (those dating back to the Roosevelt era) and start cutting programs rather than adding any new ones.
October 25th, 2009 at 2:32 pm
Too big to fail is to big to exist. Break the trusts.
October 25th, 2009 at 3:57 pm
BERNAKE BUTTERFLY EFFECT
[Double or Triple Diget Ravenous Inflation]
Empire Treasury Secretary Timothy Geithner said earlier in October that strengthening the Dollar was very important with the inflation risk that would come from the collapse of the dollar and the resulting increase in the price of imports, and for a nation addicted to imports that could be a sobering experience. And that risk is a significant one, with all those American-Israeli public and private debt instruments floating around the world.
* THE DOLLAR COLLAPSES: With the Dollar having now begun its devaluation within the (60) Sixty-Days period as predicted, with (www.Forbes.Com) reporting the Dollar has already Collapsed, (The Dollar Collapses), by Carl Gutierrez. (1 USD = 0.69 Eur. / 1 EUR. = 1.45 USD), and Kevin Brown, reporting from Singapore, on (FT.com), Published on Thursday, Oct. 08, 2009 1:01PM EDT Last updated on Thursday, Oct. 08, 2009 3:04PM EDT., has reported the dollar came under fresh pressure across the board on Thursday. The Euro rose [0.4%] per cent to [$1.4745] against the American-Israeli Empire currency, while the yen rose [0.2%] per cent to [Y88.47]. Against a basket of traded currencies the dollar fell [0.6%] per cent to [76.008], close to the lowest level of the year;
& CASH AND CARRY TRADE: Trade is abounding the practice of borrow cheap worthless Empire dollars from the Fed, which are then plowed into higher-yielding assets, or into Gold as a Storage Place of Value, though the price fluctuates, context-free with a value that’s not likely to disappear entirely.
* WAGES: Average weekly wages are dropping.
OIL;
$$ [$71/€48.57] The Bloomberg Energy Market Watch is reporting the upward climb on crude oil trading with the Empire continuing to play fast and loose with its own economy, having move upward from [$34/€23.26] Thirty-Four-Empire Dollars/Twenty-Three-Point-Twenty-Six Euros, to [$71/€48.57] Forty-Eight-Point-Fifty-Seven Euros, per barrel.
$$ [$80/€53.23] Surging past [$80/€53.23] Eighty-Dollars/Fifty-Three-Point-Twenty-Three-Euros-a-barrel, up [150%] One-Hundred-Fifty percent from the December low.
$$ ($145/€99) With the cost of oil per barrel expected to once again rise to their post highest level and surpass it of ($145/€99) One-Hundred-Forty-Five-Empire Dollar/Ninety-Nine-Euro’s, per barrel.
* GASOLINE/PETRO: Higher prices at the pump, Wholesale prices are up more than [$0.40/€0.27] Forty-cents/Zero-Point-Twenty-Seven Euros a gallon in just under a month. The Previous cost of gas at the pump highs were [$5/€3.42] Five-Empire Dollars/Three-Point-Forty-Two Euros, per gallon now think [$10/€6.84] Ten-Empire Dollars/Six-Point-Eighty-Four Euros, per gallon, or higher.
* HEATING OIL: A dramatic escalation in heating bills as the cost has jumped to the highest price in almost a year.
FOOD/PRODUCE: And all it will mean is [DOUBLE DIGET INFLATION IS NEXT], it cost an [Energy Currency] to produce items, [Food/Produce], the cost to the Farmer goes up, The cost to Truckers to Deliver the Produce to Market’s goes up and the cost is passed to the consumers, and that is capitalism, Commodities are the most obvious example;
% CORN: It’s up almost a [$1/€0.66] One-Dollar/Zero-Point-Sixty-six Euros a bushel since mid-September, with the cost of wheat and soybeans on the rise.
% SUGAR: is at a [26] Twenty-Six year high [More profit putting it into the gasoline /petro business tanks than in Commodities Coffee and Tea Cups ].
% WHEAT: futures are the highest level in almost [3] three decades.
% BREAD: Bread: More Expensive
% CEREAL: More Expensive
[Bernanke Third Times a Charm Bubble]
But the Federal Reserve under the stewardship of Fed boss Ben Bernanke, seems not to have talked to Empire Treasury Timothy Geithner about the Empire’s Dollar devaluation, and Fed Boss Ben Bernanke is choosing not to change strategies, and seems to have made his decision. And, so Bernanke has chosen to continue a tidal wave release of liquidity out of the Fed hoping the resulting flood will be able to float every boat out there, planning to just keep printing and spewing out more toxic cheap and easy stimulus money, flooding the economy with Dollars and Bonds tolerating a weaker devaluing Empire Dollar in an effort it seems to boost Empire exports and hoping the at the same time to stimulate a lagging Empire Economy. Which is creating yet another [Economic Bubble] this time in asset prices, hoping the third time is a charm and it won’t blow up in his face as the last [2] Two Economic Bubbles [Stocks & Housing] but with this bubble covering just about everything the missed with the previous [2] two.
[The Special Undefined Business Downturn]
Fed boss Ben Bernanke, feels that we are in an undefined [Special Business Downturn] that need not be remediated through stimulation of aggregate demand, as long as inflation is abnormally low. A general price surge in el increasing the cost of domestic goods and services, was not seen as a problem, the plan is to deliberately have the Dollar Devalue, creating a third Fed Managed [Economic Bubble] of Asset Inflation, which is nothing to worry about, but will mean growth and expansion in small business, so everyone should (a) stop worrying about inflation (b) engage in more expansion. [Undefined means the guy hasn’t got a clue what’s going on].
[Reaping Whirlwind Profits]
There is not, nor will there be any Reaping of The Whirlwind, during this Special Undefined Business Downturn Cycle, and a little controlled [Asset Inflation Bubble] will only make lives a little uncomfortable for many with a slight increase in the cost of living but which must be viewed as nothing more than a short period of macroeconomic moral panic, the evidence suggests that the controlled [Economic Asset Inflation Bubble] is working; [ Working as a resource-sector investor Larry Edelson, or Ron Burkle the owner of several grocery chains worth [$3.5B/€2.33B] Three-Point-Five-Billion Dollars/Two-Point-Thirty-Three-Billion Euros, and Former Impeached President William Jefferson Clinton Burkles Investment Business Partner reaping a whirlwind of profits] and this is all great news!
* DOLLAR DEFLATION: Most American-Israeli Empire indices continue to warn of deflation ahead, not inflation, which mean small business growth.
* NO SSI/COLA INCREASES: For the first time since [1975], there will be no [COLA] Cost-Of-Living Increase, in Empire [SSI] Social Security Insurance payments to retirees. (The Imperial Media Messiah President is proposing to distribute an additional [$250/€166.44] Two-hundred-Fifty-Dollars/ One-Hundred-Sixty-Six-Point-Forty-Four-Euros to retiree anyway, but this largesse will require a vote in Congress.)
* CONSUMER PRICES: Consumer price indexes are dropping, not rising. [Store need to drop prices no one has any money].
* CASH AND CARRY TRADE GOLD BUGS: David Frum and Ben Bernanke both feel that inflation is a phantom menace, and both frown upon Gold Bugs, and Storage Area’s feeling that Gold or other higher-yielding assets at today’s prices as a Storage Area for value worth, is a high price to insure against the risk of inflation. [As the value of their Dollars melts away in banks or elsewhere].
So, what’s in your wallet, Bernake Butterfly Effect Dollars, or have you switched to a value based method of retaining at least part of your declining economic security?
HERCULE TRIATHLON SAVINIEN
October 25th, 2009 at 4:42 pm
Stop the madess…. let it fall… we will re build… rather than make our children pay.
Why should we PAY… we the people did not do anything wrong.
how about asking all involved to RETURN their past 5 years of BONUS.
October 25th, 2009 at 4:48 pm
Yeah, this needs to happen. Those so cogently arguing “fuck that” should realize that what Bernanke is requesting would be the power to wind down the non-bank institutions, not to bail them out! This would be similar to the FDIC’s ability to wind down failing banks, and most people see the benefit in that.
Matt’s right–there’s no reason not to support this, knee-jerk Fed-hating notwithstanding.
October 25th, 2009 at 5:50 pm
Will that “resolution Authority’ include the ability to compel the offending institution to deliver itself to Goldman Sachs at whatever price comes into Bernanke’s head?
No business should be too big to fail. Therefore, if it turns out that we have some businesses that currently are too big to fail, then mechanisms must be created that can cope with their demise, or they should be broken up into chunks that are able to be digested.
October 25th, 2009 at 6:56 pm
I think that people need to be reminded of the fact that the failed banks didn’t cost them a cent. It was the politicians who stole their money.
The easiest way to crack the “too big to fail ” myth is to have a cap on the amount of FDIC insured deposits : oldest accounts get paid first, start reducing the cap 10% every year.
I’ve looked at the balance sheets of a couple of local banks, 10 branches or so, they are immaculate. Apparently these hicks are too dumb to fuck up.
October 25th, 2009 at 7:42 pm
ASAP, indeed. Giving all power to the banksters is the only way forward.
October 25th, 2009 at 7:54 pm
Yes, Bernanke wants more authority, to bail out banksters among other things, and some legislators are willing to give it to him. But how can this be a good thing for the rest of us? In what way has he used the considerable authority he has had to benefit other than bankers?
October 25th, 2009 at 8:01 pm
There is no reason with investing the Fed with any authority. The Fed is answerable to no one. It is a profoundly undemocratic institution.
What he is asking for is permission to do what the Fed has already done. Monetize totally worthless assets. Except he is asking to be able to do it for non bank assets. Here we are again on the horns of a dilemma. A word people refuse to understand. There is no better bad alternative in these situations where banks and corporations are bankrupt. It only seems saving them and us for one more day or one more quarter is better, but it is not.
If Bernanke is given his “authority” he inevitably use it to give the assets of the failed non banks to the huge banks at fire sale prices. The Feds entire existence and operation are confined to inflating the financial assets of the giant banks, on the presumption that this serves the general good. At what point will people realize the general good is being destroyed by the financial sector. For the vast majority of Americans the future holds an economic future far worse than the past. Deal with it. If we allow a few gigantic banks and the financial elites to control all that’s left it will be very very sad.
October 25th, 2009 at 11:14 pm
James Robertson wrote:
No, progressives wanted to nationalize the banks that were on the brink of failure last year so that any upside after the crisis ebbed (after any bailouts) would have to be distributed back to the taxpayers who provided the funds for the bailout rather than having the upside distributed in the form of “guaranteed bonuses” to fatcat Wall Street banksters.
The presence of Larry Summers in the Administration prevented this option from being taken.
October 26th, 2009 at 4:20 am
The presence of Larry Summers in the Administration prevented this option from being taken.
Come on. If President Obama wanted to nationalize the banks he would have tried to nationalize the banks. Despite all the recent puff pieces on Summers he is not actually in charge.
Barack Obama when asked, “Why not nationalize the banks?”
Nightline 2/10/09
Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you’d think looking at it, Sweden looks like a good model. Here’s the problem; Sweden had like five banks. [LAUGHS] We’ve got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would — our assessment was that it wouldn’t make sense. And we also have different traditions in this country.
Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America’s different. And we want to retain a strong sense of that private capital fulfilling the core — core investment needs of this country.
And so, what we’ve tried to do is to apply some of the tough love that’s going to be necessary, but do it in a way that’s also recognizing we’ve got big private capital markets and ultimately that’s going to be the key to getting credit flowing again.
October 26th, 2009 at 5:26 pm
[...] pointed out yesterday that even conservatives like Ben Bernanke agree on the need for congress to pass some form of “resolution authority” regulation, empowering the [...]
October 26th, 2009 at 9:36 pm
[...] pointed out yesterday that even conservatives like Ben Bernanke agree on the need for congress to pass some form of “resolution authority” regulation, empowering the government [...]
October 27th, 2009 at 5:31 am
You do have a point here
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