Geithner and Bernanke Call for More Power

Earlier today, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke called on Congress to expand the government's power to deal with non-bank financial institutions in trouble.

In prepared remarks, Geithner said, "Our regulatory system was not equipped to prevent the build-up of dangerous levels of risk. Compensation practices encouraged risk-taking and rewarded short-term profits over financial stability, overwhelming the checks and balances in the system."

We saw an overwhelmed system bring down banks Washington Mutual (gobbled up by JPMorgan Chase (NYSE: JPM  ) ) and National City (now property of PNC (NYSE: PNC  ) ), among others. But Geithner's focus today wasn't the traditional banks. "The U.S. government does not have the legal means today to manage the orderly restructuring of a large, complex non-bank financial institution that poses a threat to the stability of our financial system," he went on to say.

Expanding the power of the federal government would mean that Uncle Sam could seize control of a non-bank financial company and reduce its exposure to risky investments by selling or transferring parts of the company, among other things.

How do Fools feel about this latest move by Geithner and Bernanke? Nine Motley Fool analysts and writers share their thoughts.

Morgan Housel, Motley Fool Writer: Despite the obvious failure to self-regulate over the past decade, I think the trauma of the past eight months will do more to rein in the financial industry than any amount of government regulation will achieve. They can slap as many new rules and regulations on banks as they wish, but, look, the shadow-banking industry is pretty much already gone. The non-bank mortgage lending industry has almost ceased to exist. Hedge funds are dying off in droves. The remaining investment banks -- Goldman Sachs (NYSE: GS  ) and Morgan Stanley (NYSE: MS  ) -- opted to become bank holding companies, essentially volunteering to become part of an industry already effectively regulated. Banks don't want to be part of a failed system anymore. The reason self-regulation didn't work over the past decade was because Wall Street hadn't seen widespread failure since the Great Depression. Well, guess what? Now we've seen it. And it's bad. It's no fun. It'll bankrupt you. Regulation or no regulation, the biggest problems that plagued us over the past decade are vanishing on their own accord.

Nick Kapur, Motley Fool Analyst: Given the government's inability to effectively monitor and regulate financial institutions in the past, what makes anyone believe that an increase in control and oversight would lead to an improvement in the future? I fail to see why giving more power to the federal government would correct the fundamental problems affecting our economy. I urge Bernanke and Geithner to spend more time restructuring the incentives and practices of our nation's financial systems rather than increasing the scope of their authority. Address the root causes of this financial calamity. Fix the ratings agencies, create sustainable lending standards, establish real risk management practices on Wall Street, improve transparency across the board -- these are the initiatives worthy of your time. Ditch the power play. Cure us of what ails us most!

Matt Koppenheffer, Motley Fool Writer: Bernanke and Geithner's call for FDIC-like powers over non-bank financial institutions is a good reminder that the U.S. banking system is not a free market system. It's more of a public-private partnership that the government (attempts) to carefully control so that we can prevent another 1930s-style banking collapse. What we've found with the current financial mess is that not only is it not advisable to loosen regulations designed to keep banks in check, but we also need to make sure that we are on top of systemic threats that originate outside of the banking system.

I think about it like this -- let's say we put locking down our borders as our No. 1 priority to keep out terrorists. Let's also say it actually worked and it became easier to become president of the United States and American Idol winner in one year than to be a terrorist and get into the U.S. But what happens when terrorists start sitting just across the Mexican and Canadian borders lobbing ICBMs into the U.S.? In both cases -- financial and defense -- we need to make sure we have the power to combat all threats.

Joe Magyer, Senior Analyst for Income Investor: Sure, we can rely on our trusty regulators to get us out of this mess: Just ask any Bernie Madoff investor. Look, I'm sorry, but you need more control? Congress spent most of last week arguing over $165 million of AIG (NYSE: AIG  ) bonus money. Meanwhile, you announced you're going to paradrop over $1 trillion into the bond markets -- without approval from our elected legislature, no less. Sounds like you already control the conch shell, fellas. Thanks, but no thanks.

Ilan Moscovitz, Motley Fool Editor: This seems like a no-brainer to me. We have a system in place for seizing conventional banks when they fail because bankruptcies would have ugly systemic consequences. Why should it be any different for larger, more complex financial institutions whose bankruptcies would have even uglier effects? It's silly to think that the FDIC has the authority to regulate or seize Colorado National Bank because it's a traditional bank, but there'd be no mechanism in place for regulating or seizing a complex entity like Citigroup (NYSE: C  ) , whose bankruptcy would pose a much greater threat.

Michael Olsen, Senior Analyst for Motley Fool Hidden Gems: The perils of increased government intervention, particularly in our financial system, have been pretty thoroughly parsed. On the high level, it's pretty hard to split the opportunity cost of moral hazard and systemic failure. So I won't. Instead, I'll ask Mr. Geithner and the many fine members of Congress: How? I'm not trying to get all Ron Paul on you. But the perils of a too-powerful Fed are all but evident, as we sit amid this mess. And a regulatory body, with political appointees (let's take the Treasury, as an example) running the show? Now that portends yet another blend of risk. Do we really want a financial system whose agenda pivots on four- and/or eight-year timetables? And conversely, do we want the Fed biting off even more power? So, pray tell -- what constitutes a balanced, unpartisan breed of broader government power?

Jim Royal, Motley Fool Editor: In principle, the plan sounds acceptable, at least before the nitty-gritty has been publicized. But I have to question its long-term feasibility. As an arbiter of the larger public interest, the federal government must regulate massive interconnected financial institutions whose fate could have ramifications well beyond their shareholders. Such a mission involves not just permitting corporate profits, but safeguarding the financial (and derivatively, the political and social) stability of American society. However, as we have seen, the American government has been woefully inept at enforcing the regulations already on the books and protecting its oversight role from undue political (read: bank lobby) influence. I'm looking at the slippery slope of Glass-Steagall's demise, which was whittled away piecemeal by the banking industry over several decades. Nevertheless, if the federal government abrogates its duty to the broader public, the foxes really will be in control of the henhouse. Who watches the watchmen?  

Chuck Saletta, Motley Fool Writer: I think it's yet another example of rewarding failure, punishing success, and dismantling the market's ability to cleanse away bad ideas through bankruptcy and restructuring. The economy cannot and will not recover until the zombie companies are allowed to fail in peace. The ones that operated more successfully should be allowed to grow into the markets vacated by those failures. Instead, they're being severely punished by being forced to compete against the government -- an institution that has an unlimited printing press and the ability to regulate everyone else out of existence.

It is a horrendous idea and one that will further push back the day when the economy can finally recover.

Nate Weisshaar, Analyst for Global Gains: The U.S. government already owns 80% of AIG. Why don't we have the authority to seize it? The only reason we stopped at 80% was because of a completely irrational political fear of "nationalization," which is just rhetoric at this point since we are using unheard-of amounts of public money to "support" these companies.

If anyone else had taken an 80% position in a company, they would have booted the previously failed management and installed their own team and proceeded to wind down the garbage. If this sounds familiar, it should. This is what Geithner did with Bear Stearns (and chose not to do with Lehman Brothers) when he was just a lowly member of the New York Federal Reserve. So, why exactly does he need Congress to grant him some new level of power? Weren't we just in an uproar because former Treasury Secretary Hank Paulson wanted increased power for the office?

Todd Wenning, Analyst for Motley Fool Pro: There's no question that existing regulations need to be updated to adapt to a market that's exponentially more dynamic than it was even 10 years ago. However, it's also imperative for government to fully consider any and all long-term systemic consequences of the actions they decide to take. There must be incentive, for instance, for our financial institutions to attract and retain top talent and lead financial innovations into this century, otherwise we may very well fall behind the rapidly modernizing emerging markets in this field. Our country and economy remain a "city upon a hill" to the world in so many ways, and I hope our government representatives -- both elected and unelected -- keep this in mind as they craft new regulations.

Do you agree? Disagree? Agree to disagree? We want to hear your thoughts in the comments box below.

This roundtable article was compiled by Katrina Chan. Katrina does not own shares of any of the companies mentioned. The Motley Fool has a disclosure policy that loves opposing viewpoints. Go ahead and leave a comment -- it makes the disclosure policy happy!


Read/Post Comments (74) | Recommend This Article (62)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 24, 2009, at 4:45 PM, whereaminow wrote:

    Centralizing power, concentrating it in a few hands, and replacing business calculation with political calculation is always a great idea. Right? Right?

  • Report this Comment On March 24, 2009, at 4:51 PM, TMFKopp wrote:

    Where was business calculation when lenders were giving short term loans to Bear Stearns as it levered its balance sheet to ridiculous heights to bet on securitized mortgage debt?

  • Report this Comment On March 24, 2009, at 4:57 PM, whereaminow wrote:

    And which lenders were giving these short term loans?

  • Report this Comment On March 24, 2009, at 5:13 PM, beatnik11 wrote:

    I think the fundamental problem with the discourse in this country actually seems to stem from the near paralyzing fear of cold war propaganda that still lingers on well past the Soviet Unions demise. There seems to be plenty of people who hear the word regulation or nationalization and are convinced that they are tools of the red menace. Much of the reason why this crisis got so large is exactly because of the constant mantra of deregulation over the decades on top of the corruption of the regulator who were in charge of keeping things kosher (fox guarding the hen house). Regulations are not evil, they are in place to make sure that there are certain ground rules that every company must play by and to keep a check on some of mankinds more negative traits.

  • Report this Comment On March 24, 2009, at 5:19 PM, whereaminow wrote:

    Nonsense. Sarbanes-Oxley is the most comprehensive regulatory bill ever passed in America.

    Again, I ask, where did the money come from?

  • Report this Comment On March 24, 2009, at 6:01 PM, slpmn wrote:

    Everybody loves to spout the free market mantra because it seems so simple and obvious. Combine that with the ever popular government bashing and you've got instant cocktail party chatter. Problem is, it doesn't work as advertised. The banking system in this country has been HEAVILY regulated for 70 years, and you know what? It was a great business model. Lots and lots of banks and bankers have gotten very rich over the years taking deposits and making loans. There is no reason to think extending that level of regulation to non-bank financial service providers would harm anything. That said, its not something that should be done quickly, or without vigorous debate.

  • Report this Comment On March 24, 2009, at 6:10 PM, XMFSinchiruna wrote:

    In response to Morgan's comments...

    One can not consider the shadow banking system defunct until we slay the $684-trillion gorilla in the room. :)

    http://www.fool.com/investing/international/2009/03/24/102-t...

    More generally, I have two thoughts to share:

    1. Over the very long haul, it hardly matters what regulatory framework they adopt to prevent a recurrence of this meltdown. The only clear lesson we've learned from this fiasco is that as a society we have a limited collective memory span. After a few decades pass, and the financial corporations are done licking their wounds, a resurgent appetite for risk will erode that framework just as surely as Glass-Steagall was destined to be perceived -- a generation after its passage -- as some sort of barbarous relic ripe for repealing.

    http://www.fool.com/investing/dividends-income/2008/09/25/th...

    Undoubtedly, the government will once again overshoot with careless regulatory responses that will be judged by historians decades later as having further prolonged the economic woes via unintended consequences. Although so many aspects of this crisis are unprecedented, where human nature comes into play, repetition becomes predictable.

    Since any regulatory framework will therefore likely be repealed in time for the next bout with irrational exuberance, I find myself rather indifferent regarding the looming regulatory crack-down.

    2. I hope no one is presuming that these broader powers are being sought as some forward-looking pre-emptive strike against a future recurrence of a de-leveraging cycle. Far from it... I believe this power grab is purely targeting the next domino to fall within the PRESENT event. I found little discussion of this distinction within the coverage of this news today, and hope that people will begin asking the next obvious question... which too-big-to-fail, non-banking corporation could be so ill as to have Geithernanke seeking such emergency powers at a moment in time when their political capital is such a precious commodity?

    Hint: look for another major derivatives player like AIG, although not necessarily an insurer.

  • Report this Comment On March 24, 2009, at 6:28 PM, benoitlj wrote:

    What is the reason the current financial problems of AIG, Citigroup, BAC, etc. have led to a crisis? I think the answer lies in the fact that so many financial institutions were deemed "too big to fail." There were institutions selling insurance (CDO's) under another name and were therefore not subject to the REGULATIONS that would have prevented the consequences of unanticipated risks. When one company can be a bank, a brokerage firm, an investment firm, an insurance company, a mortgage company, etc., and is so big that it cannot be allowed to fail withouth threatening the global financial system, something is wrong. Monopolies are not healthy. Clear boundaries are healthy. Regulation can be good when it keeps boundaries clear and keeps us from having all our eggs in one basket. That breeds healthy competition and a resilient market.

  • Report this Comment On March 24, 2009, at 6:30 PM, slpmn wrote:

    Its more likely he's looking for additional leverage to pressure these firms into doing what the government wants without having to actually nationalize them, or even take them into receivership. That's what they do in the banking regulatory framework. They have a menu of options ranging from written agreements to cease and desist orders to civil money penalities - all ways to force banks to take steps needed to reduce risk. These powers are used all the time with commercial banks, but the public never sees it. The Snake knows all about it.

  • Report this Comment On March 24, 2009, at 6:33 PM, pbsa wrote:

    I have a dream; these banks go down; those with mortgages in them get their papers back and now there is equity; the strong banks survive and lend smartly to those who might have learned their lesson; and the umemployed are the smart ones

    what a Fool I am

  • Report this Comment On March 24, 2009, at 6:41 PM, JPerryE wrote:

    Let's see. Scenario one: If I'm loaning my own money, I assess the risk. If there’s not a reasonable likelihood of being paid back. I don’t make a loan.

    Scenario two: My congress person would like to see me loaning more money. He says “I’ll pass a law that allows you to charge a fee for making loans to poor credit risks.” You won’t have to have proof that the loan will be repaid.” I’ll even make it possible for you to package your loans and sell them to investors.” “You can then loan your dollars over and over!” I like that plan. I give money to my congress person’s campaign because he gives me a real chance to do good!

    Scenario three: I make many loans to people who don’t have to show ability to repay them but was able to package and sell most of them to investors. Many of the loans go into default. My congress person begins blaming greedy bankers and wall street types. He created the problem in the first place but is able to shift blame. He’s very good, I’ll give again to his re-election campaign! Maybe I'll get another chance to do good.

  • Report this Comment On March 24, 2009, at 6:47 PM, AWF wrote:

    The French say its a BAD Idea these bailouts and regulations.

    The French government!!!

    Need I say more.

  • Report this Comment On March 24, 2009, at 6:57 PM, halftide wrote:

    AS far as I can tell there are two "corrects" Politically Correct and what I submit is Rigorously Correct. Rigorously Correct is a decision based upon a rational world model focused upon optimizing causative decisions and subsequent effect. Both of these corrects come with powerful incentives for choosing the particular perspective.

    If there are no assets in the game then "Politically Correct" has more leverage. If one has assets at risk, then "Rationally Correct" is more attractive but is balanced by the potential Political damage and punishment of entering into a rational analysis of the choices.

    Frankly without a negative impact we could vote to keep the tide out... if it were politically expedient. Rationally we would dismiss the thought.

    The shrill personal attacks are the purview of the "Politically Correct" crowd taking their pound of flesh from a rational discussion of a number of issues that should cause some honest concern about the short and long term effect of the decisions and trends unveiled by the actions. In one world it is exceedingly reasonable to discuss them. In another it is an attempt to make rational sense of an ideology. Rational discussion is a threat and amounts to an attack on the credibility of the ideology and elicits a less than graceful response from the proponents. They want to skip the justification step.

    I have no interest in anything more than having a better understanding of the world and make better decisions for that understanding. I have never learned anything significant from some one who agrees with me and so I value a constructive and vigorous discussion. On the other hand I have come to suspect that personal attacks indicate a lack of familiarity with the subject and or a reaction to vulnerability.

    My suspicion is that while we are dithering around with contrived insults, which conveniently obscure the real issue, the horse is leaving the barn so to speak.

    I offer this video link not because of subscribing to the hubris of the speakers claim of responsibility but for the close correlation between the situation he predicted and the present situation. If we agree that the condition, which was forecast and possibly exists, is not a good result then we might think about the ramifications to each of us.

    http://www.dailymotion.com/video/x32cxf_yuri-bezmenov

    If you have the 15 minutes to listen, I submit to any one who has taken the time to step back for perspective that we probably ought to be working together to make sure we have a moral foundation for good decisions.

    Good decisions produce good results. Don’t let any one tell you otherwise. It is preposterous to attribute a bad result to a good decision.

  • Report this Comment On March 24, 2009, at 7:12 PM, catoismymotor wrote:

    Government is not reason; it is not eloquence; it is force. Like fire, it is a dangerous servant and a fearful master. – George Washington

  • Report this Comment On March 24, 2009, at 7:15 PM, maccdw wrote:

    Why so much loathing of regulation? A few changes could go a long way toward ensuring that we don’t fall prey to this again: (1) Put Glass-Steagall back into place. (2) Return the bank leverage ceiling to 10-1. (3) Create a (or enlarge the current) super-sized FDIC which can wind down Citi et al, in an orderly fashion by saving and selling the profit centers and slaying the toxic business groups. (4) Change FASB to disallow banks (or any form) from carrying CDS and other garbage anywhere but on their Balance Sheets. (5) While the feds should never tell privates HOW to compensate their execs, require that shareholders are provided FULL DISCLOSURE and VOTING CONTROL for all compensation actions at share-holder-owned firms. (6) Call up Janet Reno and let her apply a little bit of Anti-Trust magic across the board. Too big to fail is…too big (duh!).

    As a bonus, impeach Chris Dodd and Barney Frank for dereliction of duty. It might be helpful to place Congressional responsibility for our national finances with someone who actually has the skill set to govern.

    The above alone won’t get it done, but it would provide a nice start.

  • Report this Comment On March 24, 2009, at 7:16 PM, eldetorre wrote:

    "They can slap as many new rules and regulations on banks as they wish, but, look, the shadow-banking industry is pretty much already gone." "Regulation or no regulation, the biggest problems that plagued us over the past decade are vanishing on their own accord."

    I am absolutely amazed at the complete stupidity of these remarks! Just because the shadow banking industry is supposedly gone now doesn't mean it is gone forever. ( Witnessing the number of players scheming to take advantage of the current situation proves otherwise.) Greed is the ultimate amnesia inducing factor here. Unless the financial sector industry is regulated these abuses will occur again!

  • Report this Comment On March 24, 2009, at 7:22 PM, eldetorre wrote:

    "Given the government's inability to effectively monitor and regulate financial institutions in the past, what makes anyone believe that an increase in control and oversight would lead to an improvement in the future?"

    This is a distortion if not an outright lie. The government had been quite able to regulate these institutions in the past. It is only after these restrictions were weakened or unenforced that things started to go bad. It is only when our government either explicitly weakened regulations or implicitly killed enforcement by dramatically cutting funding to enforcing agencies that things got worse!

  • Report this Comment On March 24, 2009, at 7:24 PM, starfish36 wrote:

    AWF, you could say more if you could set aside your uncharitable views of the French government and inform yourself as to the policies of other countries as well as this country's past. An official of the current Swedish government recently stated, when asked about Saab, essentially that the Swedish government did not wish to be in the automobile business.

    The Sewdish government!

    Need you say more?

    Well, actually yes, you should say more. For perspective, you should mention that the top marginal federal income tax rates in this country from 1932 through the early 1960s were somewhere between about 63% and 91-92%. That period included the Eisenhower years. Ike refused to support cutting income taxes for the very wealthy during the Korena War -- and thereafter during his administration. The rates were dropped to 77% during the Kennedy administration and then remained in the 70s or higher for sometime, actually until the 1980s. Of course, most people did not pay the top rate -- just those who could, most of whom did without whining.

    The United States -- for decades when people still believed in paying their way and did not feel that it unfair for a low wage earner to pay much less of his income than a person with far more income.

    Need you say more?

  • Report this Comment On March 24, 2009, at 7:36 PM, whereaminow wrote:

    Let me see if I can get this straight:

    The Federal Reserve, which is a private for-profit money producer with a legal monopoly, creates money.

    Then it passes this money to junior banks, who in turn lend it out to investment banks and hedge funds and finance executives.

    Meanwhile, these financial genuises make speculative investments with this new wealth, created from nothing but the whims of the Fed and its cartel of fractional reserve backs.

    Nothing has actually been produced. No new technology has been created. No products have been made. Nothing. We have money created out of nothing, either in electronic or paper form, that destroys the value of my savings. Then it's given to so-called financial genuises who then swap it to their friends, who then make ever increasing speculative bets.

    Then... when the system collapses... when everyone who is not a complete idiot says, "hey, wait a second. You haven''t actually added any VALUE to our economy," they have the gall to scare us into thinking the whole world is going to collapse because their shell game is up.

    To top it all off, they then tell us that the only way to fix it, and to make sure it doesn't happen again, is to give the Fed and the bankers MORE POWER.

    OMFG ROFL

    Please, investigate why money production can not be handled on the free market. Give a coherent, complete analysis presenting the case that the government should be allowed to designate a monopoly on the production of money.

    I am making my case, patiently, one article at a time, that our current system of unbacked paper money is the cause of our problems, is unethical, and incompatible with a free and prosperous society. I am making the case for free market money.

    I ask you because I want you to look into it. I want you to see what I see. I want you to understand why we are here, so we can propose ideas that move us away from tyranny and back towards liberty.

    David in Qatar

  • Report this Comment On March 24, 2009, at 7:44 PM, xetn wrote:

    The real cause of the financial crisis is not unregulated banking; banks are very heavily regulated already. The real culprit is the Fed, an uncontrolled private entity that was created by some of the biggest bank executives and politicians in secret in 1913. The Fed requires all member banks to keep deposits with it and "allows" them to engage in fractional-reserve banking. A fractional-reserve bank is only required to maintain about 10% of your deposits and can and does lend the rest. The Fed is supposed to be a lender of last resort and bail out weak banks. On top of this we have the FDIC which is supposed to protect all member bank deposits up to $250,000. The Fed's primary role is to maintain the money supply, set interest rates and determine bank liquidity through it reserve requirements. The Fed is able to create money out of thin air without any oversight and cannot be audited for any reason (by law). All of the foregoing is to illustrate that the Fed was created to protect its member banks, by the most powerful bankers of the day. Since its creation, the US dollar has been inflated to the point that it is now only worth 3 cents. With the supposed protection of the Fed and the FDIC, bankers are no longer concerned with risky loans or other types of activity and the combination of all of this has led to the current problems.

    Rather than giving the Fed and Treasury more power, we should limit the abilities of the Fed to create money and eliminate fractional-reserve banking. Require all banks to maintain 100% reserves. Eliminate the FDIC and they will be much more concerned about their level of risk. The fear of bank runs will keep them a lot more honest.

    Removing the Fed's power to create money will help keep the value of the dollar.

  • Report this Comment On March 24, 2009, at 8:03 PM, stan8331 wrote:

    The real problem is not that these financial and quasi-financial institutions took insane risks. Human beings have always had a propensity to take insane risks, and to eventually forget hard-earned lessons of the past. There is no possible solution to that basic reality, short of mass-lobotomization.

    The last thing we need is the government running the banks, but there has to be some mechanism to prevent the situation in which we currently find ourselves. The free market works just fine, when it is actually free to work. When institutions are allowed to become so massive that they have few or no effective competitors and their failure would bring devastation to our entire socio-economic system, we are basically screwed.

    The solution is to effectively apply existing anti-trust laws (and create new ones where necessary). Since the Great Depression, people have forgotten that anti-trust law exists for a reason. It came to be viewed as a quaint anachronism. As we have seen all too clearly demonstrated in recent months, preventing companies from becoming so massive that they distort and pervert the market is not some silly idea from the history books. It is vital to the health and well-being of our capitalist economy.

    If AIG had never been allowed to become too big to fail in the first place, then we could have allowed it to receive its just desserts without threatening our entire way of life. Vigorous application of anti-trust law isn't some socialist plot - it's a necessary tool to prevent capitalism from running off the tracks. Far from destroying free markets, it PRESERVES them.

  • Report this Comment On March 24, 2009, at 8:03 PM, starfish36 wrote:

    xetn:Since the banking industry is so heavily regulated, it must follow that the bankers at Citi, BAC WFC and JPM violated laws and regulations on their way to miring their respective banks in insolvency and then begging for help from, well, the government -- you know, the Fed, which you describe as the "real culprit." May we know which laws were violated? May we know who can be prosecuted and for what? Bankers may be greedy, but they don't need to commit crimes to make do quite well. In the current era, they can do flips and run rings around the existing scheme of moribund laws and regulations governing banks, and they can do (indeed, probably have done) it legally.

  • Report this Comment On March 24, 2009, at 8:04 PM, Dart65GTConv wrote:

    Be patient, we'll get it right this time. Besides the Fox is tentative on entry so he can be voted into a re entry. Patients my SWEETIES.

  • Report this Comment On March 24, 2009, at 8:09 PM, dbman5 wrote:

    Not to pick on one person but comments like this are in themselves very short sighted: "...was because Wall Street hadn't seen widespread failure since the Great Depression. Well, guess what? Now we've seen it." Using this type of logic to support reduced legislation is completely backward.

    While it is a true statement, think back to what people were probably saying just after the Great Depression. It was probably something like, "This will never happen again because businesses know what it's like now." It's only a wild guess but I bet the people running the businesses that are in trouble now weren't directly involved with the Great Depression and, therefore, don't remember what it was like.

    So now we are supposed to assume that all future generations will remember the lessons learned in the past few months??? Not likely. Think long term folks - and "long term" doesn't mean just 5-10 years.

  • Report this Comment On March 24, 2009, at 8:11 PM, dbman5 wrote:

    By the way, I'm not necessarily supporting more regulations. I just don't think that's good justification for *not* doing so.

  • Report this Comment On March 24, 2009, at 8:18 PM, Johnwzee wrote:

    1984 didnt happen....until now....

  • Report this Comment On March 24, 2009, at 8:37 PM, Clod50 wrote:

    Words are being spoken about taking steps that one could never have envisioned for America. I truly am beginning to question what country I woke up in today.

  • Report this Comment On March 24, 2009, at 8:39 PM, jerryguru69 wrote:

    I will be a mugwump on this. Yes, true, the problem of Wall Street and leverage has cured itself by self-destructing, and there are now 100,000’s of financial folk who bragged about income in 7 figures at cocktail parties now unemployed. Besides, it is hard to see how HedFed or SecTreas (either past or present) has really solved the problem. OTOH, we are going to feel the financial pain for many years, and this cannot be allowed to happen again, so something has to be done, but like many other things, the devil is in the details. Yeah, give ‘em dictatorial powers by simply allowing them to declare a financial emergency; or let the FDIC go in and seize any institution too big to fail and let ‘em carve it up like a Christmas goose and sell off the bits to whoever has cash (and let us start with C, AIG, GM); or how about an “office of leverage oversight” that determines how much leverage you can have and if you exceed your number then game-over-dude. What we need is smarter regulation that reflects the financial and legal truths of 2009 rather than 1929, 1946, 1961, or 1982.

  • Report this Comment On March 24, 2009, at 8:39 PM, jerryguru69 wrote:

    I will be a mugwump on this. Yes, true, the problem of Wall Street and leverage has cured itself by self-destructing, and there are now 100,000’s of financial folk who bragged about income in 7 figures at cocktail parties now unemployed. Besides, it is hard to see how HedFed or SecTreas (either past or present) has really solved the problem. OTOH, we are going to feel the financial pain for many years, and this cannot be allowed to happen again, so something has to be done, but like many other things, the devil is in the details. Yeah, give ‘em dictatorial powers by simply allowing them to declare a financial emergency; or let the FDIC go in and seize any institution too big to fail and let ‘em carve it up like a Christmas goose and sell off the bits to whoever has cash (and let us start with C, AIG, GM); or how about an “office of leverage oversight” that determines how much leverage you can have and if you exceed your number then game-over-dude. What we need is smarter regulation that reflects the financial and legal truths of 2009 rather than 1929, 1946, 1961, or 1982.

  • Report this Comment On March 24, 2009, at 8:41 PM, eldetorre wrote:

    I'm not advocating more regulation, but better regulation, more transparent regulation, with quality enforcement.

  • Report this Comment On March 24, 2009, at 8:57 PM, snegri45 wrote:

    One way or another all of us have a stake in the health of the financial world. Some ways are obvious, like IRAs, 401(k)s, and SEPs. Other ways are less visible; pension plan assets and insurance company reserves are invested in the markets. Even less obvious are university endowments; their health and stability influence both tuition and research budgets. Finally, as we see quite plainly right now, as taxpayers we may end up paying some very large bills.

    Individually we have no influence over the health of the financial system. With the possible exception of the next congressional election, thoughtful discussion of balanced regulatory reform is rarely a hot-button political issue. Yet the current situation has resulted in significant losses for the vast majority of us.

    Most of us make our money by working for it while our retirement may depend upon our capital working for us; consequently we would like the system to be healthy and protective of our money. While the market may go astray (tech bubble); such straying should not result in systemic failure.

    Without getting overly partisan it seems clear that the last 28 years have increasingly changed the regulatory system away from protecting the many toward rewarding the few who either gain their income from investing in the markets or gaming them.

    We have met the enemy, and he is us. Over and over we let ourselves be told that the government was the problem. The government (as it was 30 years ago) may have been problematic for those who told the story but probably not for most of us. As business and markets have evolved, regulations have been prevented from evolving apace and regulators denied there were any problems whatsoever.

    Our financial system is dynamic; we need a regulatory framework that can be equally dynamic in protecting us. Regulation is not communism; nor is it socialism. It is protection from predators who individually are vastly more powerful than we are individually.

  • Report this Comment On March 24, 2009, at 9:23 PM, tradewire wrote:

    The only way to move our economy forward is to accept the true price of assets! Assets are worth dramatically less and until we accept that, we are delaying a recovery. There will be no growth in this economy again until we accept the true price of these deflating assets. That will be the first day we can begin to grow our economy again. Apperantly, Japan's "lost decade" is the model we are attempting to achieve. What happened in Japan seems to be what the Federal Reserve thinks is the best route for our country to take using the "bailout the entire world" strategy. Print money, kill the dollar, cause inflation, and reinflate asset prices artifically. Japan kicked their printing presses into high gear after their real estate led bubble that burst in the early 90's economic crisis. Has anyone noticed they doubled unemployment over that 10 years and they still are in a monster, 21 year secular bear market?

    I personally believe we have to clear out the bad debt, not prop it up, by liquidating debt and assets at fire sale prices. All the old companies can go bankrupt, people can not have mortgage insurance for a few years, and society will learn to care about their families and what really matters again. College kids won't be given $10,000 dollar credit card limits for a few decades again, but at least maybe in 2 years from today, they could get a job at a growing company? Brand new companies will come along and rebuild a great economy again much faster then following Japan's lead. If we let large companies fail, new companies can buy their assets for 10 cents on the dollar, hire new employee's, and grow. Imagine if we were to let top financial companies fail though. Where would that leave all these poor politicians? It could take several years to bring back Croney capatalism as it exists in Washington DC today. WOW, imagine what a great benefit that would be if all the lobbyists and large corporations were in dissaray for a year or two. I know, I know, what about systematic risk? The system is broken and we can either fix it quick or draw it out for decades and pretend it's not broken.

    I actually believe hyper-inflation is the most likely scenario we are facing here now. Following this bailout the globe and keep the bubble inflated strategy is ridiculous. We do not have the luxury of having a booming world economy that would allow us to export our goods and services and still allow for some corporate profits like Japan had when they went through a debt collapse and deflationary period. Uncle Ben is going to expand the balance sheet at the Fed this year another $3+ Trillion if he isn't stopped somehow from projections I've read. This Federal Reserve has complete authority over monetary policy now from setting the interest rates, controlling the printing presses (money supply), to being able to guide all other foreign central bank economic policy. Honest to god, if we give the same people that guided us into a MASSIVE credit and debt bubble the keys to dismantling more crappy companies that have to fail for our economy to move forward, I'm moving somewhere else. There will not be a MotleyFool business or hardly any stock market investors to come back to in the U.S. in 10 years either if we don't start letting the bad debts liquidate quickly! We are screwed here, make it quick instead of drawing it out please. Here is a paper that was submitted to the National Press Club on Friday that tells it like it is and has more evidence then you find in any other article or paper. We need to start auditing the Federal Reserve as well!

    Brian Cook

    http://www.moneyandmarkets.com/dangerous-unintended-conseque...

  • Report this Comment On March 24, 2009, at 9:26 PM, seti2egy wrote:

    The initial stages of conversion to a socialist country is to capture the financial sectors and control them. The rest is history.

  • Report this Comment On March 24, 2009, at 9:26 PM, TMFThump wrote:

    History has apparently taught us nothing. The Savings and Loan crisis of the 1980's was the product of unsound real estate lending and the deregulation of thrifts through Depository Institutions Deregulation and Monetary Control Act (1980) and Garn-St. Germain (1982). Nearly 750 thrifts went belly up, and it cost the taxpayers $125B.

    The primary reason it wasn't more costly was that restrictions remained on the oversight that segregated investment banks from commercial lending and having stricter controls on leverage.

    Less that 20 years later 92 senators saw fit to repeal the Glass-Steagall Act. The banking industry has since consolidated into a handful of major players controlling incomprehensible sums of money, with little to no control over the amount leverage they were accumulating. Throw in government sponsored mortgage lending programs that injected massive amounts of debt on borrowers who lack credit-worthiness, and you have the underpinnings of an economic collapse.

    A fool (lowercase f) who ignores history is destined to repeat it. The worst part is we have even fewer players in the banking business today and no independent investment banks at all.

  • Report this Comment On March 24, 2009, at 9:30 PM, xbklnite wrote:

    Motley Fool "experts"

    What Hubris....Too motley a cru to warn the rest of us fools about the Armageddon, but obviously smarter than the top bananas in the treasury. Like, awesome!

  • Report this Comment On March 24, 2009, at 9:33 PM, tradewire wrote:

    Here is the link to the full paper and not just the executive summary. The FDIC has some 250 banking instituitons on the high risk to fail list. (Citi and Indymac never made it on the list) This paper proves it's in the thousands and growing daily with the continued decline in asset values.

    http://www.moneyandmarkets.com/files/documents/banking-white...

  • Report this Comment On March 24, 2009, at 9:49 PM, xbklnite wrote:

    Motley Fool "experts"

    What Hubris....Too motley a cru to warn the rest of us fools about the Armageddon, but obviously smarter than the top bananas in the treasury. Like, awesome!

  • Report this Comment On March 24, 2009, at 9:58 PM, teebeecan wrote:

    I resent Koppnehffer's comment "About lobbing ICBMs from Canada". Canada takes terrorist security for Canada and for the USA very seriously. We may have some differences in what constitues a terrorist or terrorist organization but we are not Mexico or France, etc.We know the USers are the greatest people in the world and our best friends even if you do forget us sometimes. WE JUST BROUGHT HOME 4 MORE DEAD CANADIAN SOLDIERS FROM AFGANISTAN. However, we ate already a nanny state and have no rights to private property or security of person.

  • Report this Comment On March 24, 2009, at 10:32 PM, AustinAndy wrote:

    Gee, our government regulators did so well with Lehman Brothers allowing it to fail, and the world's credit system imploded. Sarbanes-Oxsley brought us mark-to-market rules for the auditors, and no one to this day can tell us what the toxic assets are really worth! And S-O stopped the payment of bonuses to executives in Country Wide Mortgage, Merrill Lynch, and Washington Mutual from occurring because the boards were so transparent and responsive to the stockholders. Our politicians never used Fannie Mae and Freddie Mac to give loans to people who had no means to pay off their loans (No Income, No Job or Assets) and forced by executive order and law to increase those loans until they were over 56% of the total made. When some people suggested that this should be better regulated, a number of our present "leaders" in Congress courageously stood in the way and are still rspected and in charge of their respective banking committees. Let us not forget the rules against naked short sales and upticks before short sales could take place were "relaxed" and hedge funds and short traders were allowed to shaft the stocks of financial institutes which had no exposure to the mortgage crisis without any repercussion. Why don't we distract ourselves with the bonuses that AIG executives get and forget the hundreds of billions siphoned through AIG from US Treasury assets and sent to banks and institutions which had already received billions of taxpayer dollars from the TARP funds. So let us put "helicopter" Ben Bernanke and tax-cheat Geithner in charge of even more of our finances because they have been so frugal with the taxpayer's dollars. This is just so well thought out and I can really see the benefits of a socialistic government stabilizing our financial markets so that we can tax away the salaries of anyone who dares to make any money from this economy!?

    AustinAndy

    P.S. Are you people completely nuts or have I just missed the obvious here???!!!

  • Report this Comment On March 24, 2009, at 11:21 PM, ETQ wrote:

    Please keep in mind that this administration has an announced SOCIALIST agenda!! They abhor capitalism and want to change our very way of life in America. Do not be meek or neutral; speak up about the preservation of our country. Get involved. Be heard!

  • Report this Comment On March 24, 2009, at 11:22 PM, sidecarracer wrote:

    MORE power ??? Too bad the whole country can't vote

    on Barney Fwank and Chris Dodd ( among others ).

    KONgress should get "downsized" - lose their pensions, medical benefits, and other perks - in other words, have to get by on Social Security and Medicare just like

    people who WORK for a living !

    "All the animals are equal - but some are more equal than others." -George Orwell was right !

  • Report this Comment On March 25, 2009, at 12:16 AM, jomueller1 wrote:

    As much as I see the failure of industries to regulate itself I do not see the government doing any better.

    I want to say it in a way that is very inconvenient: The often mentioned values are distorted. Therefor it takes a whole lot of reeducation and rethinking for everyone to stay within ethical borders. The aggressive nature of many people needs to be calmed down into a sense of social responsibility. The excesses of competitive sports and all the weird "entertainment" have to go.

    Then we would not see as much crime, as much poverty, and not everyone trying to skin everyone else. Try understanding instead of fighting!

  • Report this Comment On March 25, 2009, at 12:34 AM, tradewire wrote:

    MUST WATCH: The private Federal Reserve bank is the primary cause of the bubble economy! Give them no more power please! Both George Bush's spending policies and now Obama's proposals are going to bankrupt our country soon if we don't stop this immediately! Please explain to me how the Soviets arrived at bankruptcy and we will not?

    http://video.google.com/videoplay?docid=6223232123104914517&...

  • Report this Comment On March 25, 2009, at 12:52 AM, easyrob wrote:

    Recognize that the individual will almost always act to obtain advantage over others if no social constraint exists.

    Civilization is socialism by definition, and provides sideboards (good or bad) for behaviour in order to secure the future of the group. Can be by praise/censure as in a tribal group or by codified laws in a vast society like ours.

    Capitalism recognizes the inherent self interest of the individual, but does not recognize the interest of others if no feedback loops occur.

    We are in a time where we are becoming increasingly aware of feedback loops growing in force upon us. As population rises the slack in the economic ecosystem is tightened. No simple formula will show us the path through this reality.

    Yes, mistakes were and are being made, our civilization has grown so complex that we desire to let "the smart boys" (eg. "quants" expert

  • Report this Comment On March 25, 2009, at 12:57 AM, easyrob wrote:

    sorry internet malfunction.....

    ...........quant experts) to solve our problems because they seem so intractable.

    But if we are to survive in a sustainable way, we must learn how to lift the whole boat together, not just a few of us at the expense of everyone else.

    Kudos to MF for initiating rational discussions.

  • Report this Comment On March 25, 2009, at 2:47 AM, JGPage wrote:

    Centrally managed economies do not work - think Soviet Union, post-war Britain, etc.. There are NO examples of success. Limiting risk means earlier exposure to the consequences of risk - and potential earlier failure. Hedge funds, derivatives and the like are just ways to attempt to limit the downside of an investment. Not a bad idea - until it causes increasingly risky investing. I compare this to what happened to my kids when they first learned to drive - it took so long for the consequences of bad driving (i.e. tickets) to be reflected in the increased auto insurance rates that they ended up with the maximum tickets and the highest premiums possible. If their 'failure' had occurred sooner, they would have had to deal with the consequences earlier.

    The government sponsors sub-prime lending debacle got us where we are today, coupled with increasingly higher levels of risk taking by financial institutions. How about we get government out of the private sector NOW! And develop a means to limit the risky behavior of the financial institutions?

  • Report this Comment On March 25, 2009, at 6:12 AM, Xciteddon wrote:

    I think they need to step back and take a good look at the overall picture. I don't think one man or two men or even three can solve this. They need to call in some of the most educated and experienced financial experts and put a think tank together and really solve the problem. We can all sit here and conjecture all day but do we really know what the problem is? Until we really get down to the brass tacks we are just throwing money out there to see what sticks and wasting our time and it will eventually fail anyway. Giving more power to any one department or any one person is only going to defeat us. Taking a little more time can't hurt us when nothing is working anyway.

    I also think that while they are at it these people could come up with revises to banking regulations that would keep all of this from happening again. I guess we should have taken it as a warning with the failures of the Savings and loans. The really small guys failed first.

    D

  • Report this Comment On March 25, 2009, at 6:44 AM, Knifecatcher1 wrote:

    Geithner said, "Our regulatory system was not equipped to prevent the build-up of dangerous levels of risk. Compensation practices encouraged risk-taking and rewarded short-term profits over financial stability, overwhelming the checks and balances in the system."

    Sounds like a good grasp on reality. Bravo

    The financial institutions were unable to see beyond a quest for short term profits. To think they have collectively "learned something" along the way is naive and wishful thinking.

    If they want to run their own enterprises into the ground with chronically myopic thinking, fine. I for one am sick and tired of lightly regulated business interests taking the rest of us and our posterity with them.

  • Report this Comment On March 25, 2009, at 7:45 AM, rmiers wrote:

    My family was ready to throw me out of the house for a rant over the constant naked shorting. It defies all reason to have a growing company and product, a great market, a constant 40-50 growth rate, 50 million free cash flow, no competition, a huge moat, no legal problems or clouds of any kind on the horizon and watch the stock sell off 10%. Graham? Buffet? not a chance. Big money gaming the system. Glass/Stegall, mark to market, and the uptick where custom made to set up the system. Prime it with some bad loans, and get rid of the evidence (selling) newly named worthless instruments with warranties not worth the paper they were printed on.

    All this in full view of the treasury, SEC, regulators, ratings agencies, and so called honest investment houses. Where is the sanity and right thinking to think that the same guys who participated, watched, and abetted this circus, can or will fix this thing?

    Nope, they are busy lining up to purchase the wreckage at ten cents on the dollar.

    The crisis is too valuable to waste, full speed ahead for the bad guys. More, More, More,.......of the same

  • Report this Comment On March 25, 2009, at 8:09 AM, downisland wrote:

    Do you have any female points of View at the Fool? Not many.

  • Report this Comment On March 25, 2009, at 10:14 AM, Windsurfing1 wrote:

    Gosh, quite a lot of feedback... OK, I make it short. I fully support what " maccdw " wrote.

  • Report this Comment On March 25, 2009, at 11:09 AM, AWF wrote:

    starfish36 needs to vary his news sources he would have seen or heard the French PM responed to questions about the US bailouts and regulations . Also the Pres.of the World Bank another frenchman warned of the path the US is taking.

    The French PM said he was NOT elected to bailout banks and takeover companies--he was elected to improve business conditions and get companies to consider France as a business location.

    What a concept!

    As to tax policy--If EVERYONE benefited from increased taxes--I would say ok. BUT thats not the case-the us tax policy today is based on special interest projects that do no more that keep the current politicians in office.

    There are projects that do benefit ALL but you need a microscope to find them!!

    I

    Taxes and Inflation do the same thing : They reduce your purchasing power.

    The Obama administration is advancing on both fronts --Lucky Us !

  • Report this Comment On March 25, 2009, at 12:09 PM, astewboy2 wrote:

    I think my point has been made, but I'm trying to say it succinctly. Let's try enforcing the regulations we already have first. That may be a start. And I have to say that a Congressional knee-jerk overreaction to a situation that has already occurred and won't likely happen on it's own again anytime soon because of public short-term memory has never ended well. Exhibit A: the recently enacted Consumer Product Safety Improvement Act (CPSIA), one of these well-meaning laws that is having a devastating impact on small businesses, retailers, resellers, cottage manufacturers, and large manufacturers of children's products AND IT DIDN'T MAKE ANYTHING SAFER, JUST OUR ECONOMY WORSE. http://nationalbankruptcyday.com So why do I get the sneaking suspicion that would be the case with giving these guys (and their successors) more power.

  • Report this Comment On March 25, 2009, at 12:10 PM, texjammer wrote:

    If you like what Obambi has done so far, you'll LOVE what's coming next!!

    STOP SPENDING MONEY THAT DOESN'T EXIST!

    The massive deficits that are being pushed are going to drive us into a Weimar Republic type failure. Are we going to print $50,000,000,000 (50 BILLION DOLLARS) bills, like Zimbabwe??

    This administration already has TOO MUCH power, thanks to Bush signing TARP.

    Stop the madness and let the failures fail!

  • Report this Comment On March 25, 2009, at 12:16 PM, texjammer wrote:

    maccdw - you're right, that would be a good start. But then where do you go? TERM LIMITS would be a great next step. Maybe 12 years combined House and/or Senate? Then kill the Golden Parachute with NO GOVERNMENT BENEFITS after your service.

    Dave in Qatar - you have explained the failures of the Federal Reserve, Keynesian economics and the failed policies from the Great Depression very well in the past few weeks. Perhaps we should push our Congressional representatives for force an audit on the Fed. Once they see what it REALLY is, they might finally shut it down.

    "Those who fail to learn from History are bound to repeat it."

  • Report this Comment On March 25, 2009, at 1:20 PM, cherokeewoman wrote:

    Another added layer of rules and regulations will only create more ways in which the greedy operators develop ways to defraud any system that is established.

    Beware of more power given to any governmental agency to control our everyday lives and ability to subsist without government intervention. Every American citizen should review how Hitler rose to absolute power.

  • Report this Comment On March 25, 2009, at 1:24 PM, Liebch wrote:

    Chuck Saletta has it just right. We have a system which works well when it's allowed to. We need to let it work.

  • Report this Comment On March 25, 2009, at 1:33 PM, RaulChapin wrote:

    They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety

    Benjamin Franklin

    Regulate away, papa government will save us from ourselves. The voting majority in the USA is looking for a nanny state, that or they rather a nanny state that the sad option the Republican's offered.

    to David in Qatar:

    Free market money has existed before, and will continue to exist, as long as it is the minority (or the powerful) that use it. Once the majority catches on, the goverment(s) will be swift in acting. Nothing prevents you and me from drawing a contract that requires me to pay you in pounds of copper or equivalent certificates, to make it legal in the country where we set the contract, we can add that i have the choice of paying you in say Dollars (if that country were the USA) at a 5% premium to the market price of copper (Giving you the ability to quickly buy copper with your dollars and have little risk of holding the Dollar for long). If Everyone starts doing the same though, the pound of copper becomes the new de facto currency and but a few moments later, you get the following letter except with Gold substituted by Copper, the trick is in staying ahead of the crowd.

    The Gold Confiscation Of April 5, 1933

    From: President of the United States Franklin Delano Roosevelt

    To: The United States Congress

    Dated: 5 April, 1933

    Presidential Executive Order 6102

    Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates By virtue of the authority vested in me by Section 5(b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled

    An Act to provide relief in the existing national emergency in banking, and for other purposes~',

    in which amendatory Act Congress declared that a serious emergency exists,

    I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order:

    Section 1. For the purpose of this regulation, the term 'hoarding" means the withdrawal and withholding of gold coin, gold bullion, and gold certificates from the recognized and customary channels of trade. The term "person" means any individual, partnership, association or corporation.

    Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:

    (a) Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.

  • Report this Comment On March 25, 2009, at 2:38 PM, thisislabor wrote:

    They can't do their job correctly as it is what makes me think that they should have more power to do it incorrectly? really? is our bernanke and geithner really serious? really? come on, that really was a funny joke. that was a good one chairmen. now get back to work.

    Rec.

  • Report this Comment On March 25, 2009, at 3:45 PM, thisislabor wrote:

    whereaminow or David in Qatar,

    the Fed sells a service, to us and to the world. that service is the use of the promise to pay, the US dollar. we all use it, it is a moral obligation based on the premise that in God we Trust, so our promise to labor for xyz amounts of labor is a good promise... because we trust in God.

    They sell a service, and that service is a promise to labor.

  • Report this Comment On March 25, 2009, at 3:47 PM, zephod0 wrote:

    Quite a spread of opinions among the Motley Fool staff! From the Fed can't do anything right and shouldn't even try, to agreement with the need for more and wider spread regulation.

    Given that financial institutions last longer than any of us and our memories, something has to act as the memory of the Last financial meltdown. Obviously the facts existing in history books of crashes from the Tulip Bulb crash, Great Depression, and our current mess, this isn't enough to keep human greed from taking its toll.

    Imagine if we didn't have speed limits, rules of the road, etc. Would you be able to drive with safety? Personally I know it would be much worse for me on my bicycle!

    Rules that govern our driving improve the ability of business to depend on deliveries. Rules to control our financial world might also enable businesses to do better. Think maybe we should give it a try.

  • Report this Comment On March 25, 2009, at 4:21 PM, thisislabor wrote:

    if the Fed Reserve board, a for profit entity, was owned by the people instead of by the banks what would happen to the earnings accrued?

  • Report this Comment On March 25, 2009, at 4:35 PM, thisislabor wrote:

    uh oh... I smell an audit.

  • Report this Comment On March 25, 2009, at 6:21 PM, tradewire wrote:

    Obama Denounces Global Currency While Creating The Very Means For Its Introduction

    Geithner, Bernanke & Obama scoff at demise of dollar while feverishly concocting perfect storm for its collapse

    Paul Joseph Watson

    Prison Planet.com

    Wednesday, March 25, 2009

    Obama, Geithner and Bernanke yesterday publicly defended the dollar and denounced proposals by China and Russia to supplant the greenback with a new global currency, and yet the very policies of the Obama administration, the Treasury and the Federal Reserve are creating the perfect storm for the dollar’s death and its replacement with a new international reserve currency.

    As we reported on Monday, China has expressed support for Russia ’s proposal to hand the IMF the power to create a new supra-national global currency in response to the call for an alternative to the U.S. dollar as the world reserve currency.

    Last week the Kremlin called for the “creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system.”

    Yesterday, Barack Obama, Timothy Geithner and Ben Bernanke all separately expressed support for the dollar and denounced the Chinese-Russian proposal for a new global currency.

    “… The dollar is extraordinarily strong right now,” said Obama during his prime-time press conference. “The reason the dollar is strong right now is because investors consider the United States the strongest economy in the world, with the most stable political system in the world. So, you don’t have to take my word for it.”

    When asked if he supported the introduction of a new global currency, Obama flatly stated, “No, I don’t support a global currency.”

    Watch the clip below courtesy of Raw Story.

    During Tuesday’s congressional hearing, both Geithner and Bernanke echoed Obama’s statement.

    “Would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested by China ?” a lawmaker asked Treasury Secretary Geithner.

    Geithner immediately responded, “I would.”

    “And the chair?” the lawmaker asked, after turning to Fed chairman Bernanke.

    “I would also,” Bernanke said.

    The creation of a new supra-national global reserve currency to supplant the U.S. dollar would likely lead to a complete collapse of the greenback, of which trillions are held in in foreign exchange reserves by foreign countries such as China and Japan.

    In the case of Obama, Geithner and Bernanke, actions certainly speak louder than words, because while publicly denouncing the demise of the dollar and the call for a new global currency, their every policy is creating the very means and justification for its introduction.

    Bernanke himself has vehemently supported efforts to create a global regulatory framework that would act as the vehicle for the introduction of a new global currency to replace the dollar.

    He has echoed the sentiments of Blair, Brown, Merkel, Sarkozy and others in calling for a new world economic order and “A strategy that regulates the financial system as a whole, in a holistic way, not just its individual components,” Bernanke told a CFR audience at a speech earlier this month.

    “I also will not say much about the international dimensions of the issue but will take as self-evident that, in light of the global nature of financial institutions and markets, the reform of financial regulation and supervision should be coordinated internationally to the greatest extent possible,” said Bernanke, adding that the crisis is “very much an international problem, and it requires international solutions.”

    The endgame of a form of supervision “coordinated internationally to the greatest extent possible” can mean little else but the creation of a global currency that can be tightly regulated and controlled by international bodies such as the IMF and World Bank, therefore Bernanke’s public denouncement of a “global currency” is nothing more than a two faced stunt.

    In addition, as Ron Paul has warned, Bernanke’s policies are leading to the destruction of the dollar and the creation of a vacuum that would create the perfect pretext for the introduction of a global currency.

    Trillions upon trillions of freshly printed federal reserve notes that are being used to throw good money after bad, pay corrupt banker’s bonuses and bailout failed, inept and incompetent banks and corporations at the expense of the taxpayer are going to create a hyperinflationary holocaust that will plunge the dollar into a crisis never before experienced and will undoubtedly put massive pressure on China and Japan to liquidate their holdings of U.S. debt and replace it with a new form of international reserve currency.

    The fact that banks are still holding on to the trillions printed since September last year has delayed any significant inflationary impact, but when the lending starts again, confidence in the greenback’s ability to act as an international reserve currency will sink and calls for its replacement will reach a crescendo.

    Treasury Secretary Geithner has played a leading role in the wholesale looting of the greenback, announcing this week that the printing presses will be cranked to the tune of at least another $1 trillion to buy more “toxic assets” from the sagging balance sheets of failing institutions - again, all at the expense of the taxpayer who will pay for it with rampant tax hikes and runaway inflation on fuel and food later down the road.

    This will mirror the situation in Iceland , where massive devaluation of the krona has destroyed savings and led to calls for the country to abandon their currency altogether and join the Euro. A similar fate awaits the U.S. with “helicopter Ben” and his loyal sidekick Geithner doing everything in their power to destroy the dollar’s value with ceaseless so-called “stimulus” plans.

    Some analysts have gone even further, suggesting that the hyperinflationary backlash will not be on a par with Iceland , but with Zimbabwe , where the Zimbabwean dollar has suffered annual inflation of over 200 million per cent over the last few years.

    Of course, the pound sterling and the Euro, on the back of identical hyperinflation caused by central banks overprinting money, will also collapse, leaving no alternative but for the introduction of a new global reserve currency to “restore confidence”.

    And so we turn to Obama - the man who has used his political capital, slick speeches and confident smile to oversee the greatest destruction of American wealth since the great depression. Obama has acted as the slimy salesman for the introduction of Bernanke and Geithner’s multi-trillion dollar programs that can have no other effect but to weaken the position of the dollar as the global reserve currency, so for him to glibly express his opposition to a new global reserve currency that will replace the dollar is an act of gut-wrenching hypocrisy.

    Obama has continually demonized private enterprise in favor of government intervention and has acted as the engine for the gargantuan transfer of wealth from American taxpayers to the Wall Street oligarchs that pull his strings.

    While publicly denouncing a move towards a global currency yesterday, Obama has conversely announced that he will pursue a new world economic order, a “new global deal” in alliance with British Prime Minister Gordon Brown.

    When we hear the terms “new world economic order,” and a “new global deal,” they are interchangeable with the agenda to create a new global currency. It’s all about taking more power and centralizing it into fewer hands and creating a de facto banking dictatorship that will have complete control over global currencies and exchange rate mechanisms.

    Obama, Geithner and Bernanke are the three biggest culprits behind the destruction of the dollar and are culpable for creating the perfect storm for its replacement with a new global reserve currency - so for all three to claim yesterday that they support a strong dollar and oppose a global currency is like Bernie Madoff lecturing you that Ponzi schemes are immoral.

  • Report this Comment On March 25, 2009, at 10:48 PM, bmialone wrote:

    Blaming Obama and his administration when they've been in the mass public eye for only a short time and in office for an even much shorter time is, well, ludicrous.

    I agree with the contention that Americans react to certain words with hysteria left over from cold war rhetoric.

    Some of the arguments against regulation are bogus because those regulations were dismantled-the haven't bee in place for the last several years and after they were dismantled abuses by the finance and insurance industries exploded, as well as the complete breakdown of our consumer protection agencies. That was no accident.

    Regulations were put in place after the world wide depression in order to avoid it "ever happening again." They worked. The United States had a strong, thriving middle class. Therefore, demonizing reasonable regulation is disingenuous at best.

    Having said that, though, our legislators are continuing to do what they've done for the past 30 years, leap in response to manipulative hysteria that ends up benefiting a few at the expense of the rest of us. Not all failing businesses and industries deserve a bailout; Not all of them will survive in the long run anyway so we are throwing our money away on some of them. The best use of our money is directly into the pockets of citizens, rolling back a much too large criminal justice system, reforming healthcare by getting rid of those parasites, medical insurance companies, and providing jobs to Americans rebuilding our infrastructure, redesigning our public school system, and designing and building products of the future.

  • Report this Comment On March 25, 2009, at 10:52 PM, bmialone wrote:

    Blaming Obama and his administration when they've been in the mass public eye for only a short time and in office for an even much shorter time is, well, ludicrous.

    I agree with the contention that Americans react to certain words with hysteria left over from cold war rhetoric.

    Some of the arguments against regulation are bogus because those regulations were dismantled-they haven't been in place for the last several years and after they were dismantled abuses by the finance and insurance industries exploded, as well as the complete breakdown of our consumer protection agencies. That was no accident.

    Regulations were put in place after the world wide Depression in order to avoid it "ever happening again." They worked. The United States had a strong, thriving middle class. Therefore, demonizing reasonable regulation is disingenuous at best.

    Having said that, though, our legislators are continuing to do what they've done for the past 30 years, leap in response to manipulative hysteria that ends up benefiting a few at the expense of the rest of us. Not all failing businesses and industries deserve a bailout; not all of them will survive in the long run anyway so we are throwing our money away on some of them. The best use of our money is directly into the pockets of citizens; rolling back a much too large criminal justice system; reforming healthcare by getting rid of those parasites, medical insurance companies; and providing jobs to Americans rebuilding our infrastructure, redesigning our public school system, and designing and building products of the future.

  • Report this Comment On March 25, 2009, at 11:01 PM, hikerdude7088 wrote:

    I say, open them up and lets look at what they have been doing. Bet, it will be ugly.

  • Report this Comment On March 26, 2009, at 11:15 AM, sa44ron wrote:

    Great, just what we need, more power in the hands of government, so they can fiddle with the economy even more. What else would you expect of the Democrats? It's an obama-nation. The only way out of this mess is inflation, and the government has been lying about that since the Clinton era. We are already in an inflationary depression, andhave been since 2001. Howlong has it been since you had money at the end of the month?

  • Report this Comment On March 26, 2009, at 11:46 AM, lucas1985 wrote:

    @bmialone,

    "Americans react to certain words with hysteria left over from cold war rhetoric".

    Spot on. See the "arguments" used by climate change denialists.

    http://www.guardian.co.uk/environment/blog/2009/mar/10/clima...

    Mix cold war rhetoric with vested interests, hate radio, televangelists and you get a powerful noise machine.

    @whereaminow,

    "the whims of the Fed and its cartel of fractional reserve backs"

    Since you seem to be against the exponential growth of the money supply, I assume that compounding is also a sin in your eyes?

    "Please, investigate why money production can not be handled on the free market. Give a coherent, complete analysis presenting the case that the government should be allowed to designate a monopoly on the production of money"

    This is not the place to publish an scholarly article on the State Theory of Money but I'm sure you did know that. I also don't want to scare you away with facts, figures, dialectic and my poor English.

    "our current system of unbacked paper money is the cause of our problems, is unethical, and incompatible with a free and prosperous society. I am making the case for free market money."

    I really loathe soundbites but you're telling me that Barrick Gold can handle the money supply more efficiently than the Fed? Are you telling me that gold miners can provide "ethical" money?

    "I ask you because I want you to look into it. I want you to see what I see. I want you to understand why we are here, so we can propose ideas that move us away from tyranny and back towards liberty"

    Thanks but I really don't want to argue using conspiracy theories, massaged facts, recurrent lies and other distortions freely propagated by the neocon/libertarian machine.

    I want to move away from tyranny and towards liberty. Libertarianism is not the answer; it never was and it will never be. It's an ideological self-serving dead end. There are much better answers, such as this one: http://www.press.umich.edu/titleDetailDesc.do?id=93585

  • Report this Comment On March 26, 2009, at 2:21 PM, windyhill8 wrote:

    Thank you for the opportunity to express an opinion and a concern.It is VERY obvious that, left to their own devises, with no oversight, we are all humanly inclined to be greedy.That said, obviously he non-bank financial institutions, with no regulations nor controls(i.e. federal audits) played fast and lose with the investor's money.

    I vote for educating the investing public of the Difference in "Banking " and " Financial managment."

    Lets get back to controling conglomerate mergers, just for the power it vests in a few, to the detriment of the many, shareholders, employees and customers, as well as the General Good.

    What gives any one human being the audacity to imagine he or she has the mental (and Physical ) capability to oversee and manage Billion and Trillion dollar annual sales in any industry, and to not have a substantial amount of that fall thru the 'cracks' or into some devious one's handy pockets.

    Nuff said!! .Lets get back to morality, honesty, and the good old American way of earning your wages!And not expecting a rediculious number of zeros on your pay check.

    Get Real, already!!

  • Report this Comment On March 27, 2009, at 12:21 PM, Celtics17 wrote:

    Give Geithner, Obama, and the rest of our toxic government more control? I wouldn't give any of them a mop job. When Chinese communists and EU socialists are condemning Obama's spending plans, we should be very concerned.

  • Report this Comment On March 27, 2009, at 1:18 PM, farmnut1985 wrote:

    Europe is now trying to privatize all of their industries and banks because they found out that the government owning them doesn't work. The government has so much corruption it can't even regulate itself correctly let alone a company or business that it knows nothing about.

    Imagine if you will, the government takes control of GM. GM's new '10 models are the Democrat and Republican.

    It just makes no sense to try and control something you know nothing about. It would be like me trying to build a space shuttle and sell it.

  • Report this Comment On March 30, 2009, at 11:10 PM, ldbattles wrote:

    After having read most of the comments very few

    tried to answer the question. I also learned that I'm

    not alone at being pissed at our system. Basically

    if honesty and integrity are lacking regulations will not likely fill the void. As has already been written

    "goverment is not reason--it is a force" Geo.Washington.

    I also agree that some congressmen need to find other work-- and preferablly honest work.

    Is the IRS in good hands--with the new regulator?

  • Report this Comment On March 31, 2009, at 4:32 AM, ggkandy wrote:

    can i use this article on my blog: http://top-stocks-market.blogspot.com ?

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