Analyst: Obama's bank reform misses point entirely
One of my go-to guys here on Economy Watch is Miller Tabak equity strategist Peter Boockvar, because he's smart, fast and pithy. His morning note today is no exception.
Boockvar had a take on President Obama's attempt to rein in the nation's big banks, a plan he announced Thursday. Under the subject line, "Have we learned nothing?," Boockvar writes:
"Whether the Volcker Rule becomes law one day or banks get broken up or bankers are forced to accept five-figure paydays or long/short hedge funds are deemed legally riskier -- by some systemic risk-regulating czar -- than long-only mutual funds who get mauled in bear markets, we can all be confident that we've learned nothing about what was the genesis of the credit bubble and what can be a foundation for responsible behavior in the future. The genesis being artificially cheap money whose sole intention is to encourage borrowing, artificial demand in housing spurred on by the financing of [Fannie Mae] and [Freddie Mac] and the inability to allow failure as a result of bad decisions that can be controlled by bankruptcy law."
Okay, maybe that wasn't so pithy. It was pretty long. And its sentence construction was positively Faulknerian. But his point is salient: The cause of the financial crisis wasn't that banks were too big; that became a problem once the financial crisis began.
The cause of the crisis, Boockvar writes, is that too-low interest rates set by the Fed combined with terrible, gimmick mortgages implicitly backed by the government via the securitization schemes of Fannie and Freddie. Then, it was made worse when the government stepped in -- with taxpayer money -- to prop up the banks.
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January 22, 2010; 1:29 PM ET
Categories: The Ticker | Tags: Fannie Mae, Freddie Mac, Miller Tabak, Obama, Peter Boockvar
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