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Posts Tagged ‘Financial Regulation’

Wall Street Bill

I obviously haven’t read the new bill, nor do I know all its details, but I do know that the new financial reform does relatively little to prevent the use of leverage or get rid of the prop desk or do much else that would be needed to take away banks’ (particularly investment banks’) incentives to take huge risks with other people’s money.  The current incentives to do so create systemic risks for the economy and the banks’ depositers.  Since many deposits are FDIC insured, this creates huge risk for the rest of us.  Under the bill, Fannie Mae and Freddie Mac will remain on lifesupport status, courtesy of massive and continuing subsidies.  The circumstances under which bailouts take place will remain murky and likely, with Obama types at the helm, continue to involve Chicago-style decisionmaking, i.e., patronage and small ball politics.

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