Saturday, May 08, 2010

Rounds One and Two to the Public; Round Three to Big Finance

I am not sure whether a day of global mourning should be announced.

The Brown-Kaufman amendment, which would have limited the size and leverage of the largest banks, was defeated in the Senate.

What was galling was not merely the defeat but the size of the defeat: 33-61.

So that was Round Three.

In Round One, a 93-5 majority passed the bi-partisan Dodd Shelby Amendment which dropped the possibility of a $50 billion industry-supported fund to cover the cost of unwinding a firm and ensure shareholders and unsecured creditors bear losses when the government liquidates a business.

In Round Two, a 96-1 majority voted in the Boxer Amendment to bar use of taxpayer funds to rescue failing financial companies (as I have written earlier, what matters is the exact wording of these amendments, and I have not yet had the opportunity of looking at these).

So winning Rounds One and Two was good news; losing Round Three was bad news. Now there is nothing to stop the tendency of the largest players to gobble up smaller banks. There is already a trend toward oligopoly...

However, what is even more important is Round Four: the Kanjorski amendment, which allows the preemptive break up of large financial institutions that – for any reason – pose a threat to financial or economic stability in the United States. The only flaw in the Amendment is that it empowers regulators to do so, rather than instructing the immediate breakup of the six largest banks in the USA which do in fact right now pose such a threat.

If you are a US citizen or know any of the Senators, write and encourage them to do the right thing: approve the Kanjorski amendment, preferably in the tighter form referred to in the preceding para. Sphere: Related Content

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