Banking needs a serious overhaul with serious regulation
There's been a lot of debate since the recession began about banks, greed, regulation etc.
The problem is, political points are being awarded for the most ridiculous of claims. We need to seriously address the issue of banking and finance in this country, and recognize the impact risk has on our economy.
The down and dirty:
Currently banks are required only to keep a small portion of your deposits in holding. If they maintain such deposits (among other things) they can be federally insured by FDIC. This guarantees bank customers that their money is safe. The downside being, that banks are far more willing to be risky with their investments because consumers don't have to care about the institution's risk.
Most banks also do not separate accounts. As in, your savings account money is used just like your checking account money, which is why interest is practically worthless on any bank account.
The advantage of such a design is clear. Far more money is put into the system speeding up the economy and driving up prices, values, wages, etc. The major problem exists when risk exceeds sustainability and banks start failing. This is a very serious concern today, as many hundreds of small banks went out of control investing in speculative deals.
FDIC cannot be expected to cover all of the deposits of all of the member banks; it's simply not possible financially, nor should it be. Any member bank MUST be required to deal with risk on their own, and face the consequence of customer "runs" if they don't. Not saying there isn't any purpose to FDIC insurance, but the coverage is far too high, as are the number of member banks.
If we are going to insure countless banks across the country, and not regulate them properly, we are just asking for another crisis.
Federally insured banks MUST be required to have higher deposit ratios than they currently are. They MUST separate investment accounts from savings accounts and offer rates based upon the risk associated with each account. Their investments should be classified as it is the market, and a simple risk assessment would determine their viability as an institution.
Finally, if these criteria are not met, they must lose their federal insurance and deal with the consequences personally.
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I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents-J. Madison
I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents-J. Madison
The govenment should not have stepped in to bail out the big banks. The Federal Reserve should be disbanned and give the control back to the treasury where it should be in the first place. The secret vote to create the Federal Reserve was the biggest mistake ever done to this country. Woodrow Wilson wrote that he was ashamed of signing that law and doomed the country.
The socialist test case for using society's poor and disadvantaged people as sacrificial "shock troops," in accordance with the Cloward-Piven strategy, was demonstrated in 1975, when new prospective welfare recipients flooded New York City with payment demands, bankrupting the government. As a consequence, New York state also teetered on the edge of financial collapse when the federal government stepped in with a bailout rescue.
The 2008 financial crisis has all of the earmarks of a Cloward-Piven strategy assault against the capitalist system. Stanley Kurtz of the Ethics and Public Policy Center recently explained that "community organizers" (1) "intimidate banks into making high risk loans to customers with poor credit," (2) "occupy private offices, chant inside bank lobbies, and confront executives at their homes," and, through these thuggish tactics, (3) compel "financial institutions to direct hundreds of millions dollars in mortgages to low-credit customers." "In other words," Mr. Kurtz explained during a presentation at the Hudson Institute's Bradley Center for Philanthropy and Civic Renewal, "community organizers help to undermine America's economy by pushing the banking system into a sink-hole of bad loans."
Banks are the most regulated industry in the US as anyone who has signed mortgage papers for a home can attest.
The problem is in the laws that are written and the court decisions that interpet those laws is the main problem.
The fault is in Congress.
Banks are the most regulated industry in the US as anyone who has signed mortgage papers for a home can attest.
The problem is in the laws that are written and the court decisions that interpet those laws is the main problem.
The fault is in Congress.
Current regulation is heavy and worthless. And the reserve ratios are minuscule.
If banks are given federal protection they need to be required to maintain security. A community bank in Colorado has no business speculating on land in Florida when they are already way over leveraged. They are free to gamble like this at every turn, and it's precisely why thousands of them are in trouble.
Federally insured banks shouldn't be able to speculate greatly, unless they do so from a speculative account, which depositors accept.
This includes bank investments, or loans to risky consumers.
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I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents-J. Madison
Do away with the Federal Reserve and fractional reserve banking.
Follow through with that line of thought please. Who deals with money? How do banks lend and get loans? What happens when there is a run on one of them? What happens if there is a currency problem?
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I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents-J. Madison
Location: central FL <winter> N.E. Pennsylvania <summer
Posts: 3,583
It is not an issue of regulation. The entire banking system as it exists now needs to be destroyed and completely replaced. Commodity money, 100% reserve and abolish the Federal Reserve. Credit must again become scarce, as it should be. The problems of our society stem from easy money and easy credit.
Banking needs a serious overhaul with serious regulation
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