Carper and Coons Give a Big Thumbs Up to TBTF

Filed in Delaware, National by on July 22, 2013

And a big thumbs up to letting banks put the money in deposit accounts in the same kind of risky bets that their investment accounts are in. I can’t say that I’m too surprised at this — banks do own the road here — but I’m still appalled at this position. It is a position that is ONLY good for banks — the rest of us with deposit accounts (and who pay taxes) are definitely the losers here. Because the point of a Glass-Steagall 2 is to separate the deposit accounts (the only part of the banking business explicitly guaranteed by the feds), from the investment business (which is not insured). The point of Glass-Steagall 2 is to dismantle one more part of the TBTF scheme — specifically the part where banks get to privatize their profits and get to socialize their losses. Until taxpayers get a say in the risks (and get a cut of the benefits) of the TBTF business, taxpayers should not backstop what the banks do here.

But look:

Carper spokeswoman Emily Spain said “broadly speaking,” Carper “does have some concerns about returning to Glass-Steagall given that this law was established in the 1930s and since then much about our economy has changed including many aspects of our global marketplace. “He is particularly concerned that the Glass-Steagall provisions crafted in the 1930s wouldn’t necessarily have been able to prevent the events that led to the 2008 financial crisis,” she said.

Coons spokesman Ian Koski said Glass-Steagall was “effective legislation when it was adopted after the Great Depression and for several decades after that, but the nature of financial institutions has changed since then. Dodd-Frank includes several provisions that would address too-big-to-fail institutions, including an enhanced regulatory regime and liquidation authority.”

“While the governor supports safeguards that will protect taxpayers from future financial crisis, Glass-Steagall provisions may not have averted the 2008 financial crisis and are probably not appropriate for today’s global financial marketplace,” Markell spokeswoman Cathy Rossi said about the governor’s opposition.

Right? Everyone is concerned about the changes in financial institutions since the first implementation of Glass-Steagall. What these synchronized talking points don’t tell you is that financial institutions changed as Glass-Steagall was chipped away and then finally repealed. What these synchronized talking points won’t remind you of is that Glass Steagall was implemented after the Great Depression (with much pushback from banks) and it took 70+ years for the next major banking crisis — occurring 8 years after Glass Steagall was repealed. What these synchonized talking points won’t tell you is exactly *what* it is about competing in the global banking system that would be restrained by re-implementing Glass Steagall. What these talking points also don’t tell you is that the British and the EU are in the process of implementing some of the Glass-Steagall separations. Interesting that European and British banks will still be competitive after an effort to protect deposit accounts and taxpayers. The Financial Times has been a big advocate of some of the Glass Steagll provisions, and makes the case that it is the markets themselves that dictate re-implementing these regulations:

How did that work out? Let the market be the measure. On the eve of the agreement to repeal Glass-Steagall, on October 24 1999, the S&P 500 financial services index traded at almost 3 times book value. It now trades at 1.3 times book. Trailing 12-month earnings per share for the sector are lower now than they were in October 1999. The financials index as a whole has fallen 15 per cent – although with dividends included, it has made a positive return of 15.2 per cent, or about 1 per cent per year. Repealing Glass-Steagall was terrible for shareholders.

Notice also, that this clear and definite backing of the bank’s position on re-implementing Glass-Steagall comes from Senators who are much less resolute in their support of making sure that Social Security is safe, solvent and delivers on its promises. Banks are to be protected from being hurt so they can continue to live with taxpayers backstopping that risk. Taxpayers counting on Social Security will be subject to “hard choices”, without either of these Senators championing the cause of Social Security with the same vigor they’ll champion banks.

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Comments (20)

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  1. cassandra_m says:

    Ted Kaufman has taken to Forbes to write an 11-piece deconstruction of how Dodd-Frank fails.

  2. June says:

    Carper is no surprise, but Coons — very disappointed in him. It’s so obvious.

  3. puck says:

    Next crash, we need to bail out the people and let the banks fail instead of the other way around. We can always get new banks, but it isn’t so easy to get a new middle class once we’ve killed it.

  4. There is no clearer proof that our entire delegation is a wholly-owned subsidiary of the banking industry than this. As if we needed proof in the first place.

    Our delegation is part of the problem, including Coons.

    Had Glass-Steagall not been dismantled, we probably could have avoided the last financial crisis. No matter WHAT Carper says. Not only was it good for its time, it’s good for OUR time.

    Of course, Carper was an enthusiastic accomplice in the decimation of Glass/Steagall, so he’s not about to admit that he helped screw those of us who are not the megabanks. No public official in Delaware history has done more to screw us so that the banks would bankroll a worthless political career.

    Carper and Coons must believe they’re talking to idiots. Well, not here they’re not.

  5. Blue says:

    None of the bailed out banks operated in both investment and commercial banking. (A few received TARP funds which needed to be paid back, but none got bailed out).

    Plus, if Bank of America weren’t allowed to purchase Merrill Lynch, things would have been much worse than they are. All banks do is make risky decisions with deposits- why is it different if it is a loan vs an investment?

  6. cassandra_m says:

    TARP was called the Troubled Assets Relief Program. At its inception, TARP was meant to buy the “troubled assets” of banks/investment companies — bad Mortgage Backed Securities. That counts as a bailout — buying MBS and taking them off of the books of these institutions. It didn’t take long after TARP started, before the Treasury was convinced that buying MBS wasn’t enough — so they started buying stock in these firms as a cash infusion. Counts as a bailout, because taxpayer moneies were being used to patch up pretty dodgy balance sheets AND supposedly to let banks get in the position to lend again. But lending wasn’t the top priority of these banks — paying down their own debt, making acquisitions or even making their own investments was the plan for this taxpayer largess.

    These are the first 8 banks who got money when TARP first started:

    Bank of America Corporation
    Bank of New York Mellon Corporation
    Citigroup Incorporated
    Goldman Sachs Group Incorporated
    JPMorgan Chase & Company
    Morgan Stanley
    State Street Corporation
    Wells Fargo and Company

    And yep, most of them had investment arms, which was why they were stuck with these dodgy MBS’. BoA did have an investment banking unit before it acquired ML — and when they did, they merged those operations.

    There is little doubt that markets and banking would have been worse without TARP and the various other programs that used taxpayer funds to bolster the balance sheets of these banks. But the pain would have been short and sharp; the economic pain may have been shorter; and certainly the free market would have worked. Importantly, banks would have it built into their DNA that they own their own risk taking. Now they think taxpayers do.

  7. jim center says:

    Isn’t it amazing what passes for a Democrat in DE?
    I’ve never given a single dollar to any DE politician, I’ve given my money to Bernie Sanders over the years and to Elizabeth Warren recently.
    I gave Coon’s staff hell over the vote to cut SNAP. Then pointed out Coon’s support of the bulletproof vests for the cops that he’s been touting. If you’re voting to starve people, you certainly want to make sure that the folks that will need to protect you when those folks get desperate.
    Kaufman needs to be our Senator!
    Let’s go for Sanders/Edwards for our 2016 Progressive, Democratic ticket

  8. geezer says:

    “A few received TARP funds which needed to be paid back, but none got bailed out”

    But all were owed by those bailed out; no bailouts and all the dominoes fall. Try not to be a tool.

  9. kavips says:

    It is practically impossible for any Delaware national representative to be anti- bank. It is not about balls or caving in. It is about Delaware’s reputation and the very fine line our state has between good jobs and no jobs.

    Just put yourself in their shoes. Now get blamed for causing 5,000 jobs to disappear from Delaware. How many votes are you getting now? Not to mention unlimited funding for your primary challenger. I have come to the conclusion that all Delaware’s national politicians will and must, be supportive of pro-bank legislation. Yes, if they are Democrats they have to know they are in the wrong, as was Biden with the bankruptcy act revision. But if a bank comes to Delaware for our corporate protection, then gets stabbed in the back by our Senators, what was the point in coming here?

    We are lucky to have Democrats instead of Republicans for other political reasons; but when it comes to banks, all Representatives or Senators from Delaware will vote the same regardless of party.. If they want re-elected, they really have no choice. (Kaufman for that reason was the exception). Hopefully the rest of the Senators, whose state’s economies are not dependent on the business of finance, can with their majority keep harm from being done and overcome two votes the banking industry will always be able to count on….

  10. puck says:

    Our banks are like spoiled children. We give them candy and ice cream for dinner and let them play video games all day because we are afraid we will lose their love if we don’t, and we are probably correct in that assessment. When they inevitably got sick, we even let them blame it on lazy brown people.

  11. Truth Teller says:

    So it’s finally out in the open our two senators are bought and paid for by the bankesters and serve their masters well

  12. mediawatch says:

    Kavips wrote: “Just put yourself in their shoes. Now get blamed for causing 5,000 jobs to disappear from Delaware. How many votes are you getting now? ”

    OK, so that’s how our senators think. Why? Because of their inflated sense of self-importance.
    Sorry, it’s not reasonable to believe that 5,000 jobs in Delaware require our senators to cast pro-banking votes every time they have a chance in Washington. Say Carper votes no on one. (OK, hardly likely.) Is that going to make BoA or Capital One pull up stakes and move to South Dakota?
    Far more significant to the banks are the ability to get the General Assembly to pass any legislation they desire and the reliability of our courts to issue decisions that go their way.
    Banks are in Delaware because of what the state does for them, not because of how two guys in Washington vote.
    The problem with our senators, however, is that, as you suggest, they think it is their duty to protect jobs by protecting the banks. All they’re doing is protecting the banks.

  13. cassandra_m says:

    Sorry, it’s not reasonable to believe that 5,000 jobs in Delaware require our senators to cast pro-banking votes every time they have a chance in Washington. Say Carper votes no on one. (OK, hardly likely.) Is that going to make BoA or Capital One pull up stakes and move to South Dakota?

    More importantly, none of them are going to go out of business or even be especially less profitable by living with Glass Steagall. They’ve been accommodating Dodd Frank pretty well. But the point that kavips is running right past is that taxpayers should not be on the hook for the bad risk behavior of banks, jobs or no jobs. That’s not how markets are supposed to work. And as long as we have crumbling infrastructure, that’s not how tax money is supposed to be spent, either.

  14. Truth Teller: We’ve been calling attention to this for years here.

    Not too many others have, though…

  15. The banks are also heavily funding these DE politicians campaigns. There is a direct financial reward for toeing the line.

  16. Geezer says:

    “There is a direct financial reward for toeing the line.”

    Piffle. Neither one has any re-election worries to speak of. They vote as they want to, not as finances demand.

  17. jim center says:

    Called Coon’s office again to complain about his position on Glass-Steagall.
    I told them that if a rule that kept us out of bank crashes for sixty years was repealed and then we had one of the those crashes less than fifteen years later, that rule ought to be reinstated immediately.
    I also pointed out to the aide that Ms. O’Donnell was thinking about running again, and, that maybe it was time for me to reconsider voting for someone who was not acting like a Democrat and think about voting for someone who was not acting like a Witch!

  18. Steve Newton says:

    Piffle. geezer said, Piffle?

    All my illusions about his profane crustiness have been shattered.

    Are we sure this is the real geezer?

  19. Geezer spoke with an expert on royal lineage today.

    Perhaps he found the discussion both propitious and salutory.

  20. liberals are mike protack says:

    Bob Rubin, the past Goldman Sachs head sold Bill Clinton on the wall breakdown between commercial and investment banks and became Citi’s Chief of Exec Board for $115 million with no official duties.

    The Democrats are such liars on caring about the Middle Class.