Ron Paul on Financial Reform, Europe, Greece, Currency Swaps, and Bailouts (2010)

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United States President Barack Obama and key advisers introduced a series of regulatory proposals in June 2009. The proposals address consumer protection, executive pay, bank financial cushions or capital requirements, expanded regulation of the shadow banking system and derivatives, and enhanced authority for the Federal Reserve to safely wind-down systemically important institutions, among others. In January 2010, Obama proposed additional regulations limiting the ability of banks to engage in proprietary trading. The proposals were dubbed "The Volcker Rule", in recognition of Paul Volcker, who has publicly argued for the proposed changes.

The U.S. Senate passed a regulatory reform bill in May 2010, following the House which passed a bill in December 2009. These bills must now be reconciled. The New York Times provided a comparative summary of the features of the two bills, which address to varying extent the principles enumerated by the Obama administration. For instance, the Volcker Rule against proprietary trading is not part of the legislation, though in the Senate bill regulators have the discretion but not the obligation to prohibit these trades.

A variety of other regulatory changes have been proposed by economists, politicians, journalists, and business leaders to minimize the impact of the current crisis and prevent recurrence. None of the proposed solutions have yet been implemented. These include: * Ben Bernanke: Establish resolution procedures for closing troubled financial institutions in the shadow banking system, such as investment banks and hedge funds. * Joseph Stiglitz: Restrict the leverage that financial institutions can assume. Require executive compensation to be more related to long-term performance. Re-instate the separation of commercial (depository) and investment banking established by the Glass-Steagall Act in 1933 and repealed in 1999 by the Gramm-Leach-Bliley Act. * Simon Johnson: Break-up institutions that are "too big to fail" to limit systemic risk. * Paul Krugman: Regulate institutions that "act like banks" similarly to banks. * Alan Greenspan: Banks should have a stronger capital cushion, with graduated regulatory capital requirements (i.e., capital ratios that increase with bank size), to "discourage them from becoming too big and to offset their competitive advantage." * Warren Buffett: Require minimum down payments for home mortgages of at least 10% and income verification. * Eric Dinallo: Ensure any financial institution has the necessary capital to support its financial commitments. Regulate credit derivatives and ensure they are traded on well-capitalized exchanges to limit counterparty risk. * Raghuram Rajan: Require financial institutions to maintain sufficient "contingent capital" (i.e., pay insurance premiums to the government during boom periods, in exchange for payments during a downturn.). * HM Treasury: Contingent capital or capital insurance held by the private sector could supplement common equity in times of crisis. There are a variety of proposals (e.g. Raviv 2004, Flannery 2009) under which banks would issue fixed income debt that would convert into capital according to a predetermined mechanism, either bank-specific (related to levels of regulatory capital) or a more general measure of crisis. Alternatively, under capital insurance, an insurer would receive a premium for agreeing to provide an amount of capital to the bank in case of systemic crisis. Following Raviv (2004) proposal, on November 3 Lloyds Banking Group (LBG), Britain's biggest retail bank, said it would convert existing debt into about £7.5 billion ($12.3 billion) of "contingent core Tier-1 capital" (dubbed CoCos). This is a kind of debt that will automatically convert into shares if the bank's cushion of equity capital falls below 5%. * A. Michael Spence and Gordon Brown: Establish an early-warning system to help detect systemic risk. * Niall Ferguson and Jeffrey Sachs: Impose haircuts on bondholders and counterparties prior to using taxpayer money in bailouts. In other words, bondholders with a claim of $100 would have their claim reduced to $80, creating $20 in equity. This is also called a debt for equity swap. This is frequently done in bankruptcies, where the current shareholders are wiped out and the bondholders become the new stockholders, agreeing to reduce the company's debt burden in the process. This is being done with General Motors, for example. * Nouriel Roubini: Nationalize insolvent banks. Reduce mortgage balances to assist homeowners, giving the lender a share in any future home appreciation.

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[LifeLibertyNow]

2 people like a secret bank governing the value of their currency...

[CariHenley]

We are so lucky to have him in our congress i wish more people knew this

[aseohosting]

lurve it…



[danboy524]

Privateering and government were supposed to support eachother. The greed factor made an assault on America beginning in the 70’s. It matured in blatant reality with Goldman Sachs insertion inside YOUR white house. This meant the govt and pricateering partnered up,keeping you in your place forever. Here is the truth behind the running of a system correctly (privateering and govt control CAN coexist); you tueb this: greed banksters and the finance industry destroying america.

[Uhmu45]

gold and silver are bad money, the trust based money works better. he is right on the spending part though, the US is joining the piigs after japan

[TinyArts]

Northern Europe always has to pay for the lazy half corrupt countrys in the south...

[TheMEK3]

WE R FUCKING BAILING OUT GREECE!!!??

[edarotag84]

Boy, now I understand what my grand parents were talking about, "never trust lawyers, bankers and politicians" !

[aviomaster]

Bluetobaccoburst -- Because it is going to foreign dictators and USA goverment ass lickers ...

and USA military bases .