big insurance for big banks is a good idea. Tell the FDIC you think so

[Stella_Omega]

Dear MoveOn member,

Wall Street wants us to believe that the causes of the financial crash are too complicated for regular folks to understand. But fundamentally, it all came down to greed.

Mortgage brokers sold unaffordable mortgages to collect their commissions. Stock brokers made huge, risky bets to get big bonuses. And now that taxpayers rescued Wall Street, greed is making a comeback.

But the FDIC—the agency that insures bank deposits—is trying to do something about it. The FDIC wants banks that hand out big bonuses for risky behavior to pay higher insurance premiums. Just like a reckless driver pays more for auto insurance, these banks would pay more if they insist on rewarding recklessness.1

The FDIC is taking public comments on the proposed new rule until this Thursday, February 18. But banks are pushing hard against it, and many of the comments so far are from bankers. The FDIC needs to hear from regular Americans who got stuck with the bill when these bankers wrecked the economy. Can you let the FDIC know you support the new rule by submitting a comment?

Click here to email your comment

The FDIC takes these public comments very seriously, but usually, only receives a handful from industry insiders. But this is a rule that would affect all of us. The FDIC needs to know that millions of regular folks are watching and that we want accountability for the risky behavior that cost taxpayers billions of dollars.

Your comment will have the biggest impact if it's respectful and in your own words. You can view the comments that have been submitted so far here. These are some things you may want to mention in your comment:

* If Wall Street traders are allowed to gamble heedlessly with other people's money, it won't be long before we face another financial crisis. They cannot be allowed to keep the profits when their risky bets pay off, but get bailed out by taxpayers when they don't.
* Despite the banks' pleas to "trust us," Wall Street has proven incapable of regulating itself. The fact that the biggest banks are giving out $145 billion in compensation this year—more than before the crash—is proof that they have not learned their lesson.2
* The FDIC should not wait for Congress or the Federal Reserve to create new rules of the road for compensation practices—especially when there's no guarantee either will act. The proposed rule is a common-sense change that should be implemented immediately and can be supplemented by further improvements.

Sending your comment to the FDIC is really easy. Just click the link below to open an email, write your comment, and submit it before the Thursday deadline.

Send your comment

Thanks for all you do.

–Daniel, Laura, Stephen, Kat, and the rest of the team

P.S. If you're having trouble using the link provided, just send your comment in a regular email to comments@fdic.gov and put "RIN 3064—AD56" in the subject line.

P.P.S. Your email address and any contact information you provide in the email you send will be posted on the FDIC's website, so you shouldn't include any personal information you would not want disclosed publicly. We recommend providing just your full name, city and state.

Sources:

1. "FDIC Proposes Linking Banks' Executive Pay Risks, Deposit Fees," Bloomberg News, January 12, 2010
http://www.moveon.org/r?r=86477&id=18953-17481097-nlyglhx&t=2

2. "Wall Street Bankers Make Stunning $145 Billion for 2009," DailyFinance, January 15, 2010
http://www.moveon.org/r?r=86478&id=18953-17481097-nlyglhx&t=3

 

[JamesSD]

I actually favor a Total free market solution. There's no such thing as "too big to fail". More like "Too crappy to survive" (I'm looking at you Citibank, AIG). If a big bank fails to the point it would affect the national and global economy, it gets nationalized.

Still, the FDIC should charge a fair rate to insure banks that take exceptional risk. The FDIC needs to charge a rate that ensures when one of the big banks fails it has enough of a war chest to make up the difference. In good times the FDIC needs to run a surplus, not cut rates.

 

[Zeb_Carter]

I actually favor a Total free market solution. There's no such thing as "too big to fail". More like "Too crappy to survive" (I'm looking at you Citibank, AIG). If a big bank fails to the point it would affect the national and global economy, it gets nationalized.

Still, the FDIC should charge a fair rate to insure banks that take exceptional risk. The FDIC needs to charge a rate that ensures when one of the big banks fails it has enough of a war chest to make up the difference. In good times the FDIC needs to run a surplus, not cut rates.

You know I agree with you on this point...but, and you knew there would be a but, if the FDIC runs a surplus at some point in time the congress will see that money as needing to be used to...take a pick...grow government, hand it out to their buddies...what.

 

[Handley_Page]

I actually favor a Total free market solution. There's no such thing as "too big to fail". More like "Too crappy to survive" (I'm looking at you Citibank, AIG). If a big bank fails to the point it would affect the national and global economy, it gets nationalized.

Still, the FDIC should charge a fair rate to insure banks that take exceptional risk. The FDIC needs to charge a rate that ensures when one of the big banks fails it has enough of a war chest to make up the difference. In good times the FDIC needs to run a surplus, not cut rates.

1. I wish someone would dream up this sort of scheme for the UK.

2. If it was a totally free market, why is the taxpayer (in both countries) paying for the mistakes of a few greedy idiots, and why is "the house they could not afford" not knocked down in value so they can afford it, if only to clear up the mess?.

 

[Zeb_Carter]

That's the process of being a nanny state...you try to make them all dependent on you (the government) even if it costs you (the tax payer) a left nut and your spleen.

 

[Katyusha]

That's the process of being a nanny state...you try to make them all dependent on you (the government) even if it costs you (the tax payer) a left nut and your spleen.

What about those of us who don't have nuts?

 

[fifty5]

"Modern bankers, like Lloyds Names a while ago,need to be taught that finance is a zero sum game - for everyone who wins, someone else loses.

Insurance companies *seem* to get that point.

Anyone who wants to gamble on financial issues should have to insure themselves against loss, so that innocent parties don't suffer from 'friendly fire.'

More, their winning gambles should be subject to a sufficient tax rate so that a large enough pool of resources exists to carry out any essential bail-out. The ordinary tax-payer shouldn't need to pay anything!

Finally, if ordinary tax-payers, via their governments, are required to put their hands in their pockets, that investment should be a 'preference' investment, paying out before any other commitment, including the gamblers' bonuses.

If the system can't afford to let bankers go bust, then the bankers ought to pay the premiums to take out insurance that they don't!"

 

[voluptuary_manque]

I sent mine!

 

[trysail]

(1) Who do you think has been paying the deposit insurance premiums up until now?

(2) How have the insurance premiums been calculated heretofore?

(3) What is the difference between "Wall Street" and a "bank?"

You're right; this is a test— you will be graded.

 

[Zeb_Carter]

What about those of us who don't have nuts?

Then they take a right ovary!

 

[Zeb_Carter]

(1) Who do you think has been paying the deposit insurance premiums up until now?

depositors of the bank as fees, who else?

(2) How have the insurance premiums been calculated heretofore?
Don't know. I assume there is some type of risk assessment that takes place and tables of probabilities and turnover involved.

(3) What is the difference between "Wall Street" and a "bank?"
To most people "Wall Street" are the stock brokers and commodity traders, banks are where they put their money because the mattress got to lumpy.


You're right; this is a test— you will be graded.

. .

 

[Stella_Omega]

You who are complaining on the forum, are you calling your senators as well?

 

[sadangel]

Sent my email off Stella. Thank you.

 

[JAMESBJOHNSON]

Back before our Revolution GEORGE III and Parliament gave the East India Tea Company a license to exploit the American colony. The tea company paid a large bribe for the concession. And petitioning GEORGE and Parliament did no good at all, because they were bought.

This is the situation we have today. Congress and the President are bought.

What Americans of 1775 did was pick the pockets of the East India Tea Company by smuggling and using Spanish dollars for commerce. Our illicit trade was what brought the British troops to Boston, to quell the smuggling and enforce the taxes the Tea Company imposed on America.

Muslims did the same to spread as far as they did. Muslims paid no taxes, infidels did; so folks became Muslims.

If you hope to defeat Wall Street the only strategy that works is to cease doing business with Wall Street; the only way to defeat Pols owned by Wall Street is to cut off their money.

Petitions and emails are bullshit. As long as money flows to Wall Street you stay a slave.

 

[trysail]

Geithner May Give Regulators Leeway in Applying Volcker Rule
By Rebecca Christie

Feb. 24 (Bloomberg) -- The U.S. Treasury Department wants to give regulators discretion to define proprietary trading as the White House tries to revive its plan to bar banks from making risky bets that could cause another financial crisis.

One month after President Barack Obama said firms “will no longer be allowed” to trade for their own accounts, officials say they need flexibility to avoid impairing the $7.2 trillion Treasury securities market.

Dealers who trade in government bonds on behalf of clients need to be able to maintain inventories in their firms’ own accounts to insure market liquidity, said Lee Sachs, a counselor to Treasury Secretary Timothy F. Geithner. “This measure is not aimed at anything having to do with customer business, market- making or hedging,” Sachs, a former senior managing director in charge of debt capital markets at Bears Stearns & Co., said in an interview.

The Obama administration is working with the Senate on legislation to forbid banks that take government-insured deposits from trading exclusively for their own profit or investing in hedge funds or private-equity operations. At the same time, proprietary trading will need to be defined in a way that doesn’t prevent banks from keeping their own trading accounts that may be used to offset customer bets or to ensure that securities are easily traded.

“Obviously some Treasury activity is necessary, and it is extremely hard -- impossible -- to distinguish between facilitating customer trades and proprietary trading,” said John Brynjolfsson, chief investment officer of Aliso Viejo, California-based Armored Wolf LLC, an investment management firm.

Opposition in Congress
The proposed ban on proprietary trading has met opposition in Congress, hampered by criticism that the administration waited too long and offered too few details.

Senator Judd Gregg, a New Hampshire Republican who is helping to write parts of the Senate’s regulatory overhaul bill, said in an interview yesterday that he thinks the administration is “having troubles getting their arms around it.”

The Treasury’s effort comes as the Senate Banking Committee prepares a new draft of regulatory overhaul legislation. Senator Christopher Dodd of Connecticut, the panel chairman, has been working on the bill while negotiating with Republicans on a range of issues, including whether to add a stand-alone consumer protection agency.

Obama named the Jan. 21 trading-ban proposal after its chief proponent, former Federal Reserve Chairman Paul Volcker, who is now chairman of the White House’s Economic Recovery Advisory Board.

Gibbs Comments
Asked if the Obama administration is softening its insistence on the Volcker rule, White House Press Secretary Robert Gibbs yesterday said, “absolutely not.”

“We’re not walking away from, and we’re not watering down that proposal one bit,” Gibbs said.

In negotiations with Congress, administration officials have focused on giving regulators the power to set limits and to design the program in a way that avoids market disruptions.

“Regulators have to be very careful to get this right,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “Daily trading activity adds tremendous liquidity to these markets. If you eliminate trading for the house account at the investment banks, you risk harming overall market liquidity and could do irreparable damage to the functioning of markets.”

The Treasury is financing a budget deficit that the White House earlier this month predicted will reach a record $1.6 trillion in the 12-month period ending Sept. 30. U.S. government borrowing will total a net $392 billion from January through March and $268 billion in the three months to June 30, the Treasury said Feb. 1.

Legislative Details
Congressional officials say the legislative details of the proposed proprietary-trading ban are still under discussion. “We’re continuing to consider the president’s proposal,” Kirstin Brost, a spokeswoman for Dodd and the banking committee, said yesterday.

Obama’s proposal builds on one element of the House of Representatives regulatory bill that passed last year. That measure, added by Representative Paul Kanjorski, would enable regulators to set limits on the size and scope of financial firms.

Kanjorski said yesterday that the Volcker rule “would be very helpful in stabilizing the system long-term,” in comments after his remarks at the Credit Union National Association conference in Washington.

Moving Along
“It is being pursued,” said Kanjorski, a Pennsylvania Democrat and a member of the House Financial Services Committee. “I would be probably optimistic that we’re going to move along.”

Treasury spokesman Andrew Williams said yesterday that “we continue to work closely with congressional members from both sides of the aisle.”

At a Feb. 2 hearing, Deputy Treasury Secretary Neal Wolin said the administration did not want the law to be too prescriptive. “Certainly a lot of the detail would be left over to specific application in the rule-making process or the advisory process,” Wolin told the Senate Banking Committee.

This week, Republicans continued to question whether additional legislation was needed for regulators to crack down on risky activity. Senator Richard Shelby, the top Republican on the banking panel, said it will be difficult to define proprietary trading in the legislation.

If regulators need additional powers, “we ought to look seriously at giving it to them,” Shelby said in a Feb. 22 interview. “It might just be a question of exercising the power they already have.”


http://www.bloomberg.com/apps/news?pid=20601103&sid=aieZ19R8J5HI