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Discussion Starter · #1 ·
CHARLOTTE, North Carolina (Reuters) - Big banks like Bank of America Corp and Citigroup Inc should be reclassified as government-sponsored entities and have their activities restricted, a senior Fed official said on Tuesday.

The 2008 bank bailouts at the height of the financial crisis and other implicit guarantees effectively make the largest U.S. banks government-guaranteed enterprises, like mortgage finance companies Fannie Mae and Freddie Mac, said Kansas City Fed President Thomas Hoenig.

"That's what they are," Hoenig said at the National Association of Attorneys General 2011 conference.

He said these lenders should be restricted to commercial banking activities, advocating a policy that existed for decades barring banks from engaging in investment banking activities.

"You're a public utility, for crying out loud," he said.

The Kansas City Fed president has been a vocal critic of rescuing the biggest banks rather than allowing them to fail. He has criticized the Fed's easy money policies in the wake of the crisis.

There are slim chances his proposal to classify banks as government-guaranteed enterprises would be adopted. Eighteen out of the 19 biggest U.S. banks have repaid 2008 bailout aid, removing most government investment over the last 18 months.

In a later session, Bank of America Chief Executive Brian Moynihan rejected the notion that the largest banks should divorce their commercial and investment banking operations.

"I think customers want it together," said Moynihan, noting he sees the combination as necessary to effectively serve large American companies with global operations.

The longest serving Fed bank president, Hoenig began his career in the Fed system in 1973 as an economist in the bank supervision group. The anti-inflation hawk will step down as president of the Kansas City Fed in October.

Hoenig's experiences shuttering banks during the savings and loan crisis of the 1980s, when over-investment in real estate caused hundreds of bank failures and necessitated a massive government bailout, shaped his views about how to emerge from the most recent crisis.

Hoenig also said banks are still not adequately prepared for the next financial crisis, despite new capital rules requiring lenders to raise billions of dollars to buttress against future losses.

Hoenig said the proposed Basel III capital requirements -- which demand as much as 8 percent core capital ratio -- will not be enough to weather catastrophic losses.

"That is far too little capital with this complexity and this risk profile," he said.

(Reporting by Joe Rauch; Editing by Tim Dobbyn, Matthew Lewis and Andrew Hay)

(We know Tex, it's not thier fault :laughing:)

http://ca.news.yahoo.com/big-banks-government-backed-feds-hoenig-20110412-112137-434.html
 

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(We know Tex, it's not thier fault :laughing:)
I never said it wasn't their fault. I'm saying what's the alternative? Got a finance system in mind that doesn't involve banks? Let the banks go under and have millions lose their deposits? I don't like what happened. But I think all we can do is stabilize the system and then go back and try to correct the loopholes that allowed the problem in the first place. And I have always said, if a banker is caught breaking the law, try him, convict him, lock him up and throw away the key. :cheers:
 

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And I have always said, if a banker is caught breaking the law, try him, convict him, lock him up and throw away the key. :cheers:
:laughing: In a lot of countries, stealing is punishable by cutting off the perp's hands. So, if at some point that became law here, would you defend the guy who cuts off the hungry dude's hands for stealing food? I know I won't help you, but hopefully some people will wake up during our exchanges. :cheers:

Just because you can manipulate a government to the point of making your criminal activity legal, don't make it right. :huh:
 

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Just because you can manipulate a government to the point of making your criminal activity legal, don't make it right. :huh:
You're right. At some point there is ethics and morality to consider, and bankers should have a big dose of both. But there are two ways to get to the point we have gotten to. If you go back 10 years, bankers might have figured out these arcane investments, and thought, "Wow, there are billions to be made here by our investors, and our fees will reap hundreds of millions". If this was their mindset, and they weren't breaking rules, there is nothing unethical about that - even if the world economic situation changed and their plans resulted in giant losses.
On the other hand, if their mindset was, "Wow, we've figured out a way to make hundreds of millions in fees on these investments. Our investors might lose their shirts, but we'll get paid either way." This is unethical whether it's legal or not. Now, which was it? I don't know and you don't know. We can both guess, but in my mind, assuming the techniques were legal, it makes a big difference if the bankers expected big losses for their clients or if they really thought everyone was going to make a lot of money. It's just not as simple as - a lot of people lost a lot of money while bankers got rich, so bankers are evil.
 

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Discussion Starter · #6 ·
You're right. At some point there is ethics and morality to consider, and bankers should have a big dose of both. But there are two ways to get to the point we have gotten to. If you go back 10 years, bankers might have figured out these arcane investments, and thought, "Wow, there are billions to be made here by our investors, and our fees will reap hundreds of millions". If this was their mindset, and they weren't breaking rules, there is nothing unethical about that - even if the world economic situation changed and their plans resulted in giant losses.
On the other hand, if their mindset was, "Wow, we've figured out a way to make hundreds of millions in fees on these investments. Our investors might lose their shirts, but we'll get paid either way." This is unethical whether it's legal or not. Now, which was it? I don't know and you don't know. We can both guess, but in my mind, assuming the techniques were legal, it makes a big difference if the bankers expected big losses for their clients or if they really thought everyone was going to make a lot of money. It's just not as simple as - a lot of people lost a lot of money while bankers got rich, so bankers are evil.
:laughing: It's perfectly legal Tex.. as long as they can buy a few politicians to manipulate the system they should be left to their own devices. Law is law after all.. and when in Rome..
 
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