Thursday, January 21, 2010

Obama/Volcker - Return of Glass-Steagall?

President Obama today is set to announce reforms aimed at curbing the size of our nation's banks and the risks they are allowed to take. It appears that Paul Volcker is beginning to have the influence many of us hoped for on the Obama administration. The details are sparse at this point, though it appears to fall short of nixing the Too Big Too Fail doctrine that has permeated the Republican and Democrat parties these past few decades.

While this appears to be a good first step it is unclear what the new regs will be, how they will be applied and whether the financial industry will be able to defeat them. Its too early to tell.

The good news is that we are finally starting to see a move in the right direction (I think, remember, there aren't many details yet). The existence of Too Big Too Fail is a huge moral hazard to our economy and must be dealt with, this might not be the preferred way and at the end of the day I may oppose, but for the first time in this financial crisis their might be the signs of a ray of hope emerging.

On a separate note, for those who care, I don't support the "bank fee" that the administration wants to levy on bank liabilities. Its not that I have any love for Wall Street, I just don't see the merit in it. The fee will end up being paid by consumers and it punishes in the wrong way some of those that helped cause the financial crisis while ignoring the government responsibility in the crisis.

Scott Dauenhauer CFP, MSFP, AIF