Originally Posted by G.R.A. Garner

The reason why banks have gotten so big is because they have been allowed to speculate on the financial markets with immunity. The banks lobbied Congress to immunize trading in derivatives, which was codified in the provisions of the Bankruptcy Abuse Prevention and Consumer Protection act of 2005. This set the stage in the marketing of securitized mortgages traded as debt securities on the financial markets, which precipitated the current economic crisis and necessitating the government bailout. The reason why the Congress should repeal the “safe harbor” provisions for derivatives is that, unlike their parent holding companies (e.g., Washington Mutual, Inc. vs. Washington Mutual Bank), banks are ineligible for bankruptcy reorganization. 11 U.S.C. § 109(b)(2). An insolvent bank gets taken over by the FDIC, which puts the risk of loss on the government, and, ultimately, the taxpayer. The exemption for derivative contracts acts like a government subsidy that favors big banks at greater risk and higher potential for consequential damage and loss. The question is whether this is a good thing. It is not, as the current financial crisis and bailout attest, as well as the recent losses sustained by J.P. Morgan Chase, and the bankruptcy case of MF Global Funding. There needs to be a clear dividing line between banking that is federally insured, and market trading that is not. (This was the purpose of the Volcker Rule against proprietary trading by banking entities.) Banks should be in the business of lending and not gambling on the stock market.

Originally Posted by G.R.A. Garner

As I told you before, even Alan Greenspan admitted that he was wrong in thinking that the market could be left to its own devices; and he, of all persons, should know. As it stands now, the "free market" is rigged because of the exemption for financial derivative contracts. All Congress need do is repeal the "safe harbor" provisions for derivatives and LBO's under title 11, and the market for these high risk securities will be forced to regulate itself.

Originally Posted by G.R.A. Garner

Without government, there is no law; and without the law, there would be no rules for business and commerce to exist. Business does not operate in a vacuum; but only within the structure of organized society. You can't have one without the other.

Originally Posted by G.R.A. Garner

Without government, there is no law; and without the law, there would be no rules for business and commerce to exist. Business does not operate in a vacuum; but only within the structure of organized society. You can't have one without the other.

Originally Posted by G.R.A. Garner

No, we don't disagree on this. As I have said before, regulation must be measured, but effective; and not so heavy-handed as to stifle economic growth. I also provided the solution: repeal the "safe harbor" provisions of title 11 for derivatives. Without the exemption for derivative contracts, the market will be forced to regulate itself.

Originally Posted by G.R.A. Garner

As I told you in another thread, what President Obama did do was too little too late. That said, I would add that at least he is on the right track, as evidenced with the government funding of the GM bankruptcy reorganization, and the efforts to wean our dependency on foreign oil. Unto this last, there were admittedly some false starts (e.g., Solyndra), but it is still a step in the right direction. Unhappily, results won't happen overnight - whoever is elected next term - and it will be a slow recovery. (As you intimated in your several posts, we were a long time getting into this mess; and, I would add, that it will take some time getting out of it.) We've got to get out of this get-rich-quick mindset; and get back to basics. In this, what is needed is to get back to an economy that is based on making things rather than making deals.