Honest Debate on Financial Reform

[sgreger1]

I know this is a tall request, but I was hoping we could have a real conversation about this financial reform bill. I am not particularly educated in what it all means and perhaps some of you can help educate us on exactly what is going on. Some of the aspects of it sound good in principal, but then again I don’t really trust that Obama suddenly doesn’t like the idea of “too big to fail” or bailouts, since he seemed to be a champion of those two concepts last year.



Anyways, here’s some info from whitehouse.gov (so you know there’s no spin whatsoever). 10 things about financial reform:

1. Stronger protections for consumers against unfair credit card practices like rate hikes for existing credit card balances.
2. Mortgage brokers will be prohibited from making higher commissions by selling mortgages they know consumers can’t afford.
3. Free annual credit scores so people can stay on top of their finances. [Clarification: free credit scores are available if you receive worse terms on a loan because of something on your credit report, or if you are rejected.]
4. No more taxpayer-funded bailouts. If a company can’t make it, it will have to liquidate.
5. Greater input by company shareholders over how much a CEO gets paid. And companies’ compensation boards are now required to be truly independent.
6. Brokers who offer investment advice will have to act in the best interests of their customers, not their own financial interests.
7. Financial firms won't be allowed to grow so large that if one fails, it will affect the entire financial system.
8. There will be one agency whose sole job is to make sure that consumers get the protections they deserve and to set clear rules to hold banks, mortgage companies, payday lenders, and credit card lenders accountable.
9. Businesses can't be charged extra fees for debit card “swipe fees” that exceed the cost of processing transactions.
10. You can learn plenty more here at WhiteHouse,gov or at financialstability.gov

So on the surface, I gotta say, this all sounds like amazingly good news. I mean this sounds like something I wrote myself. But then I start thinking about how some of this will actually work, I mean we have shareholders being able to dictate how much the CEO makes, breaking up companies that are too big to fail, no more bailouts etc. So does this mean we will break up all the “too big to fail” companies effective immediately? Will they be taking down any corporation or bank that is so big that if it failed it would adversely affect the economy? This sounds like a LOT of power for the government to have, to be able to dictate who is “too big” and may affect the economy, and to be able to shut them down or break them up at will. And no more bailouts, does this mean the unspent stimulus or TARP money won’t be spent? I am so unclear on what this all means.


# 7 worries me the most. “Financial firms won't be allowed to grow so large that if one fails, it will affect the entire financial system”. Does this mean there will be a cap on how successful a “financial firm” can become before the government breaks it up? That’s what it sounds like. And will they break up existing financial firms that are too big? I find it highly unlikely that the Obama admin is going to break up Goldman Sachs any time soon.





Can someone who knows more about this explain to me whether this is a good thing or if it is somehow just signing more power over to the regulators/fed reserve to be able to micromanage businesses and extend control over private enterprise in a way the government should not be allowed to?

[tom502]

We simply need to halt all job exports, and limit goods imports. Communities must surround a variety of factories, and shops of various kinda. Everyone must have a job, and be required to have a job. No more usery, no more abused welfare and government aid. When everyone works and it required to, then we can have real socialized medicine, an end to insurance racketeering, where health care providers get a government check just like the police do, as well as education, and public transportation. We also need a secure border, a giant iron wall, we need to deport illegals as fast as we can. We need to quickly execute vile killers and criminals that are beyond hope, where there is no question of guilt. We need to impose birthing regulations, where the prospective parents must pass intellegence and physical tests, as well as having financial ability to care for their children. We need to end the drug war. We need to have zero tolerance on crime, gang activity, and gun crime, where a legal citizen should be legally able to purchase any type of firearm legally, but anyone not doing so, gets an automatic 20 yrs in hard labor camp, anyone caught using a gun in a crime, gets automatic 50 yrs in labor camp, anyone murdering anyone with gun, get automatic death to be carried out within 2 weeks.

There is more, but that's part of my plan to make America good again.

[texastorm]

We simply need to halt all job exports, and limit goods imports. Communities must surround a variety of factories, and shops of various kinda. Everyone must have a job, and be required to have a job. No more usery, no more abused welfare and government aid. When everyone works and it required to, then we can have real socialized medicine, an end to insurance racketeering, where health care providers get a government check just like the police do, as well as education, and public transportation. We also need a secure border, a giant iron wall, we need to deport illegals as fast as we can. We need to quickly execute vile killers and criminals that are beyond hope, where there is no question of guilt. We need to impose birthing regulations, where the prospective parents must pass intellegence and physical tests, as well as having financial ability to care for their children. We need to end the drug war. We need to have zero tolerance on crime, gang activity, and gun crime, where a legal citizen should be legally able to purchase any type of firearm legally, but anyone not doing so, gets an automatic 20 yrs in hard labor camp, anyone caught using a gun in a crime, gets automatic 50 yrs in labor camp, anyone murdering anyone with gun, get automatic death to be carried out within 2 weeks.

There is more, but that's part of my plan to make America good again.

Anytime I see someone with a post about "everyone must do this" I cringe. You can't force everyone to have a job, you can't force everyone to get medical care when and where you choose, and you can't get people to easily give up their free handouts. The trouble with the socialist movement in America is it requires people to give up some freedoms for the good of everyone, and believe me I am unprepared to do this. I like my freedoms. I am a firm believer in the strong survive.. for a reason. If I am not strong enough to survive so be it. We are all created equal, but we are not all equals, and we never should be. What you describe is a very scary totalitarian state that I would be fearful to live in.

As far as the bill in question, I read somewhere that the largest banks will remain unaffected by the bill as it is written, but I am utterly clueless about what it is, or what it means to me. I would love to see better regulations of the type of secretive hedge funds that caused the banking meltdown, but I believe if we make it illegal here, people will just move that business to another country. The more we try to squeeze the slippery demons, the more they slip out of our grasp.

[RobsanX]

It's hard to say. It took years for deregulation to cause this mess we're in now, so it will take years to see how the new regulations will affect our economy.

[tom502]

Yeah, my post was just a general rant, but I don't see anything officially changing for the better, if at least some of what I said is implemented, which it seems it's not going to be. So, I believe we are on the one-way trip to Soylent Green society. We can only hope 2012 is really it. I feel bad for the kids today.

[truthwolf1]

Yeah, my post was just a general rant, but I don't see anything officially changing for the better, if at least some of what I said is implemented, which it seems it's not going to be. So, I believe we are on the one-way trip to Soylent Green society. We can only hope 2012 is really it. I feel bad for the kids today.

I thought it was bad in the late nineties finding my first job until the internet hit.
This is just a pure depression if you are out of school and trying to find your place in the rat-race.
My belief is that this is the "new economy" and stagnant salaries and lack of jobs is just going to be the reality for the next 5 years or more.

[sgreger1]

My problem with this list is that all the bulletpoints SOUND good, but I can see how major abuse or bad side effects could come from some of these mandates, depending on how they are enforced.

For example: "6. Brokers who offer investment advice will have to act in the best interests of their customers, not their own financial interests."

Wtf does that mean? It sounds good but how can they do that? How can they prevent someone from acting in their own financial intirest while still serving the customer? For example, if right now WalMart stock is a good stock to buy, and a broker says "hey buy this NOW!". What if he also gets a cut for selling WalMart stock. Since this benefits him personally, is this a breach of the new rule? Even if it IS a good stock and the investor who is seeking advice SHOULD buy the stock? I am just curious how they are going to enforce things such as this.

Or how about this one: "2. Mortgage brokers will be prohibited from making higher commissions by selling mortgages they know consumers can’t afford."

So they can still give loans to people who they KNOW beforehand can't afford it, they just can't make as high a commission as they used to? What are the criteria for being able to know if someone can or can't afford something? What factors go into the decision? Why not say banks CANNOT give loans to those who they know can't afford it instead of just saying the brokers can't make as much money. This may lead to the brokers giving out a higher volume of these types of loans to make up that extra money they lost in commissions.


4. "No more taxpayer-funded bailouts. If a company can’t make it, it will have to liquidate."

What is the criteria for this? Gm for example, they are bankrupt but since they are holding a lot of that stimulus money still, they look like they have cash on hand, when really their liabilities outweigh their assets. Will they be forced to liquidate? And how will that affect us considering the government owns a majority of their stock? Also, will this be retrospective, will this only be companies that are failing going forward or will this liquidate existing companies underwater such as GM?

"7. Financial firms won't be allowed to grow so large that if one fails, it will affect the entire financial system. "

Again, who decides this? Does this mean there is a new cap in place, stating that financial firms cannot grow toa certain size? By what authority can the government say "you can't be too successfull". And again is this retrospective? Will they liquidate existing financial firms such as Goldman Sachs that are so big they can't afford to fail because it may affect the economy. To me this sounds like a new power for regulators to be able to blackmail companies with, to say that if they don't play nice they might get shut down for being "too big". It sounds like a cap on success, which may lead our financial institutions to move overseas.

"9. Businesses can't be charged extra fees for debit card “swipe fees” that exceed the cost of processing transactions. "

This is another grey area. It sounds good, but what else comes along with it? Like here.

"The financial reform compromise may keep our financial system from reprising Chernobyl anytime soon, but it will also change the way consumers use their credit cards. Merchants will soon be allowed to refuse plastic for purchases of less than $10, a rate the Fed can boost as they see fit. Both the Fed and universities will also gain the power to set maximum credit charges. That means no more free flights to Europe after charging your kid's tuition to your rewards card. The changes will go into effect the day after the compromise is signed into law."




I mean these all sound good on the surface, but a lot of it seems like the patriot act of wall street. It sounds like we are signing away more power to the government in order to save us from the possibility of the economy being tanked. Is this the right decision to make? Is it worth the tradeoff?

[dxh]

Anytime I see someone with a post about "everyone must do this" I cringe. You can't force everyone to have a job, you can't force everyone to get medical care when and where you choose, and you can't get people to easily give up their free handouts. The trouble with the socialist movement in America is it requires people to give up some freedoms for the good of everyone, and believe me I am unprepared to do this. I like my freedoms. I am a firm believer in the strong survive.. for a reason. If I am not strong enough to survive so be it. We are all created equal, but we are not all equals, and we never should be. What you describe is a very scary totalitarian state that I would be fearful to live in

I was thinking the same thing. Nothing against Tom, but that seems like increasing government power to me

[tom502]

It's all meaningless words that won't make any change or difference at all.

[MGX]

Its all feel-good claptrap meant to drum up public support. The guys who wrecked the system are far smarter than politicians and regulators and will find another way to get rich in short order.

Once specifics are nailed down going around them might take a bit of creativity but it'll be done and we'll revisit the whole (perhaps different) mess in another 10 years or so.

[ratcheer]

I think what it all basically means is that the financial bureaucrats will have the same power over the financial industry that the FDA has over tobacco products with PACT. And, to me, that ain't a good thing.

Tim

[Darwin]

This bill contains at least one unintended consequence in each and every sentence, sometimes two. Par for the course.

[Roo]

Tom your description of an ideal social and political system sheds tremendous light on your admiration for North Korea! You gotta go check it out dude. I could point you in the right direction regarding travel plans and how to secure entry with an organized tour group via Beijing. That would be your trip of a lifetime. It would be badass to say you've never traveled anywhere, except for that week you spent in the DPRK. A passport with 19 blank pages and 1 visa to North Korea. That would get you laid at a cocktail party.

[tom502]

I'd love to visit N. Korea. It is the ideal nation.