Elizabeth Warren introduced a bill today to split nice old-timey banking (taking deposits, making loans to people and corporates) from investment banking and other assorted eeeeevil activities (trading, derivatives, etc.) and it comes with a poster. It also comes with a throwback name, “The 21st Century Glass-Steagall Act of 2013,” after the guys who last split commercial and investment banking from 1933 until their Act’s repeal in 1999ish. Some people are calling the new proposal the Warren-McCain bill, because John McCain is a co-sponsor of this/every bill. I will compromise and refer to it as “The Warren-McCain 21st Century Glass-Steagall Act of 1933 of 2013.”
That’s roughly all I have to say about it? It probably won’t happen, and the goal of keeping depositors safe by limiting depository institutions to boring regular banking is mostly a silly one.1 Mortgages! Mooooooooooooooooortgages! The boring, take-deposits-and-make-real-estate-loans banks in Spain and Ireland and Cyprus and Bedford Falls and 1989 managed to blow themselves up just fine without any help from investment banking.
But you knew all that, gah. This bill is not really about depositor safety in any sort of empirical way. It’s a more ancient and anthropological theory of the dangers posed by banking: there are pure activities and impure activities, and the danger comes from mingling the pure and the impure. You build two buckets and you keep them apart, not because one bucket is riskier than the other but because things just belong in their own buckets: Read more »
If Elizabeth Warren offers you a cup of tea, don’t accept. I’ve been known to pinch a penny myself, but when President Obama’s choice to run the new Consumer Financial Protection Bureau pulls a rumpled gray object with a tail out of her desk drawer, even I blanch. It looks more like a dead mouse than a used tea bag. “I know,” she says, laughing, when I express surprise. “But I just can’t stand the waste of throwing out a tea bag after one use. It’s like a knife in the gut for me.” [Vogue]
Elitzabeth Warren, the chair of the Congressional Oversight Panel for TARP, believes that the problems couldn’t be more obvious and solutions for financial regulation are as obvious but for some reason, “we can’t seem to put the two together.”
“Six months ago, I thought we were on brink of financial reform, I really did,” Liz told Bill Maher. “The reason we’re not changing things right now is that banks have lobbies in Washington in numbers I’ve never seen. They’re coming not just once a month, once a week or even once a day. These guys are coming two, three times a day. And they just keep slamming in the same direction over and over and over. It’s a David and Goliath story.”
Elizabeth Warren, head of the Congressional Oversight Panel for TARP, said in her monthly report that it would be nice if the government would wake up and do something about the commercial real estate losses yet to come, ’cause until they do, “the crisis will not end.” The “CRE is the next shit to hit the fan” lullaby has been going on for about two years now and despite a lukewarm consensus that something, anything, has to be done, seems like no one has a real clue how to go about it, or dare we say, give two cents about it?
“The most serious wave of commercial real estate difficulties is just now beginning. Experts believe that the volume of bank write-downs and potential loan defaults may swell in the coming years, in the absence of a strong immediate improvement in the economy.”
Riiiight. Given that the unemployment rate is not likely to decrease anytime soon, that vacancy rates are increasing, that the economy’s fundamentals remain weak and that between 2010 and 2014, about $1.4 trillion in CRE loans will reach the end of their terms, it’s totally fine to write a 189-page exposé on the subject, but solutions anyone?