Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Recession Safeguards Are Coming Under Heavy Attack

admin by admin
August 7, 2014
in Uncategorized
0
0
SHARES
6
VIEWS
Share on FacebookShare on Twitter

Special Report from Money Morning

by Shah Gilani, Money Morning

Lackluster economic growth in the U.S. has nothing to do with financial services regulatory overreach inherent in new Dodd-Frank rules – as some neo-conservatives would have the American public believe.

Let me say, I’m a staunch fiscal conservative. I am a dyed-in-the-wool free markets entrepreneur. But there’s a world of difference between free markets and a free-for-all for financial services oligarchs and officers.

In a July 21, 2014 American Banker article commemorating the four-year anniversary of the signing into law of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Paul H. Kupiec, a resident scholar at the American Enterprise Institute (AEI), makes the misguided case that Dodd-Frank is what’s holding back the recovery.

Here’s a look at how a recession prevention backstop is coming under siege…

Understanding the (Flawed) American Banker Argument

Just because Mr. Kupiec has been a director of the Center for Financial Research at the Federal Deposit Insurance Corporation and chairman of the Research Task Force of the Basel Committee on Banking Supervision, before hanging his hat at the AEI, doesn’t mean his position on behalf of the big-business-centric American Enterprise Institute is objective. It’s not.

You can see the July 21 issue for the entire article, but here are excerpts of what Mr. Kupiec wrote in American Banker with my counterpoints attached; see the July 21 issue for the article in its entirety.


The primary goal of Dodd-Frank – preventing another financial crisis – is not at issue. However, well-designed policies must balance costs against benefits. This is where Dodd-Frank fails. It excludes controls that prevent over-regulation and thereby creates incentives that encourage financial stability at the expense of financial intermediation – the monetary transactions that allow goods and services to be efficiently produced and traded, and the means by which consumers’ savings are invested.


Shah: The goal of Dodd-Frank preventing another meltdown has not been remotely achieved. Dodd-Frank is barely 60% written and what’s been put into place to safeguard the financial system from imploding and ruining the economy again is being challenged by academics and regulators as being unworkable. Dodd-Frank hasn’t already failed, that’s neo-conservative rhetoric. Mr. Kupiec would rather encourage expensive financial intermediation (for the sake of big banks profiteering) over financial stability. He’s got it backwards.


Dodd-Frank grants the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corp. and the Financial Stability Oversight Council vast new powers to regulate, with no checks on the exercise of these powers. Regulators are directed to exercise their new powers to ensure financial stability and mitigate systemic risk, but financial stability and systemic risk are never defined in the legislation.


Shah: One reason financial stability and systemic risks aren’t defined is that the rules and regulations are still being written. Another reason they’re not defined is that bankers don’t want them defined, they don’t want transparency into their inner workings. Mr Kupiec says, “Regulators are directed to exercise their new powers to ensure financial stability and mitigate systemic risk,” isn’t that the whole point?

Mr. Kupiec seems to worry that the Financial Stability Oversight Council (FSOC), whose members are supposedly the most-in-the-know heads of the country’s regulatory agencies, wouldn’t be up the task of determining which institutions actually pose a threat to the economy if they were to fail.


The ambiguity of the designation standard provides the FSOC with virtually unlimited discretion. For example, under what conditions should the consequences of failure be evaluated: when the firm fails in isolation, or when the firm fails in a recession during which many other financial institutions are also distressed? Two very different standards may generate very different FSOC conclusions, and yet Dodd-Frank is silent on the issue.


Shah: There is no ambiguity as Mr. Kupiec believes. He asks:

“Under what conditions should the consequences of failure be evaluated: when the firm fails in isolation, or when the firm fails in a recession during which many other financial institutions are also distressed?“

Shah: Who cares if a firm fails in isolation or in a recession along with other distressed institutions? A failure is a failure and any failure of any too-big-too-fail institution, by definition, is a threat in isolation and especially en masse to the system they’re all interconnected to. Dodd-Frank isn’t silent on the issue, Mr. Kupiec’s rhetoric is deafening.


Moreover, recent speeches by senior Federal Reserve officials suggest that they will push to use Dodd-Frank powers to extend the Fed’s ability to restrict financial investments and the use of short-term debt finance beyond the banking system to control the activities of shadow banks. The stated goal in each case is to prevent “bad” financial intermediation and promote financial stability. But in no case do any of the new rules recognize the cost on economic growth.


Shah: Mr. Kupiec wants us to consider the “cost on economic growth” of bad financial intermediation. Really? The cost is immeasurable once the damage is done. Bad financial intermediation is what Dodd-Frank is trying to address. No-one cares about plain vanilla, transparent lending with reserves and transparency. It’s the exotic intermediation conducted in the shadows, most of which are cast by big banks, that has to be considered.


It is easy to understand how the imbalances in the Dodd-Frank Act led to over-regulation. Regulators’ highest priority is ensuring that the financial system is stable; for them, slow or moderate economic growth is simply business as usual. But should a financial crisis arise, regulators would be disgraced. Dodd-Frank creates a clear bias encouraging over-regulation in the pursuit of financial stability because, for financial regulators, regulations are costless.


Shah: Apparently, we all don’t get it, “Dodd-Frank led (emphasis added) to over-regulation” and that’s why we have no economic growth. Who knew we were living in the past already? I also didn’t know that regulators ensuring financial system stability empowered them to simultaneously ratchet down economic growth (do they have a lever somewhere?) to their “business as usual” low-water mark.


Four years after the passage of Dodd-Frank, it is clear that Congress needs to revisit the legislation to prevent over-regulation in the pursuit of a single goal of financial stability. Dodd-Frank must be amended to require a balance of the following goals: financial stability, economic growth, and full employment. Otherwise, the economy will continue to get too much regulation and be short-changed on economic growth.


Shah: Mr. Kupiec’s closing paragraph speaks to the failure, not of regulators’ abilities to prevent economic catastrophes, they’ve certainly failed, but the failure of financial services institutions to safeguard their own businesses and the country from their greed-mongering. Congress needs to have Dodd-Frank legislation finished before it’s revisited midstream by lobbyists and the financial power elites who’ve commandeered once free markets and the country.

The Great Recession wasn’t caused by over-regulation; it was caused by over-leveraged financial intermediaries who hid their pyramid scheming from regulators.

As far as our slow recovery from that travesty, that has nothing to do with regulation, and everything to do with what inadequate regulation wrought…


Previous Post

Bolivia: Deforestation Reduced

Next Post

Three New MLPs Headed to Market

Related Posts

Unlock the Future of Fashion with NFTs and Wearables
Business

Unlock the Future of Fashion with NFTs and Wearables

by John Wanguba
May 27, 2023
Are Bitcoin Casinos Legal?
Business

Are Bitcoin Casinos Legal?

by John Wanguba
May 26, 2023
What Are Deposit Tokens?
Economics

What Are Deposit Tokens?

by John Wanguba
May 22, 2023
If The Stock Market Crashes, What Will Happen To Bitcoin?
Finance

If The Stock Market Crashes, What Will Happen To Bitcoin?

by John Wanguba
May 20, 2023
Who Will Win XRP vs SEC Case?
Econ Intersect News

Who Will Win XRP vs SEC Case?

by John Wanguba
May 20, 2023
Next Post

Three New MLPs Headed to Market

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin adoption Bitcoin market blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe Federal Reserve finance FTX inflation investment market analysis Metaverse NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Unlock the Future of Fashion with NFTs and Wearables
  • Are Bitcoin Casinos Legal?
  • What Are Deposit Tokens?

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish