Home› Precious Metals

Gramm–Leach–Bliley

57loaded57loaded Posts: 4,967 ✭✭✭
in Precious Metals
i think this was one big, big, big reason for the mess we are in today.

any thoughts?

Comments

  • ebaytraderebaytrader Posts: 3,312 ✭✭✭


    << <i>i think this was one big, big, big reason for the mess we are in today.

    any thoughts? >>




    Yes, it exacerbated the problem. It wasn't the cause.

    Is there a reason you would mention this and not the the big, big, big reasons?
  • gsa1fangsa1fan Posts: 5,566 ✭✭✭
    Banking Act 1999
    Avid collector of GSA's.
  • derrybderryb Posts: 36,795 ✭✭✭✭✭
    Repealed the Glass-Steagal Act that kept the financial industry honest ever since the great depresssion. This was the beginning of our current economic crisis and a MAJOR cause of our current predicament. It opened the floodgates of corruption and greed.

    The Gramm-Leach-Bliley Act allowed commercial banks, investment banks, securities firms, and insurance companies to consolidate. For example, Citicorp (a commercial bank holding company) merged with Travelers Group (an insurance company) in 1998 to form the conglomerate Citigroup, a corporation combining banking, securities and insurance services under a house of brands that included Citibank, Smith Barney, Primerica, and Travelers. This combination, announced in 1998, violated the Glass-Steagall Act and the Bank Holding Company Act of 1956 by combining securities, insurance, and banking. However, and this is a prime example of Washington corruption, Citigroup was given a two-year forbearance that was based on an assumption that they would be able to force a change in the law. In other words they violated the law, but were given two years to have the law changed instead of being prosecuted. It should also be noted that Treasury Secretary Robert Rubin, while secretly in negotiations to head Citigroup, helped broker the final deal to pass the bill. He later became one of three CEOs that headed up CitiCorp.

    Merger of banking and investement resulted in many new, exciting and toxic investment products such as derivatives, CDS's, and countless other alphabet soup items. It allowed Wall Street to become a backroom poker parlor where, using other people's money, bets would be placed on anything including the outcome of the last bet. It set the stage for runaway credit abuse by allowing banks to engage in fractional lending - the loaning of up to 50 times actual cash on hand. Keep in mind that this cash being loaned is not the bank's money, it belongs to depositers. This set banks up to fail, which they did not fear, because the FDIC and federal bailout programs would, and have, covered their greed and stupidity.

    The 2000 page finance bill just passed by Congress is a joke. The fact that banking stocks skyrocketed immediately after passage should tell you what you need to know. A 36 page Glass-Stegal Act kept them in line for 50 years.

    But, the good news is that all of this will strengthen precious metals.

    "Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey

  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    G-L-B opened up the door wide for investment and commercial banks to game the system. But it was the Commodities Futures Modernization Act of 2000 that allowed unregulated otc derivatives to proliferate. That allowed a totally unregulated alternative "monetary" system to go from tens of TRILLIONS to over a thousand TRILLION. This was and still is the Big Kahuna. The scope of the problem is still beyond any means we have to subdue it. Tens of trillions in mortgage failures and other problems were surmountable on their own. The remaining otc derivatives mess is 50-100X the scope of the housing problem.

    roadrunner
    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • wpr101wpr101 Posts: 59


    << <i> The remaining otc derivatives mess is 50-100X the scope of the housing problem.
    >>



    That's what I am worried about too. It seems like a financial apocalypse is going to hit at some point.
  • ebaytraderebaytrader Posts: 3,312 ✭✭✭


    << <i>

    << <i> The remaining otc derivatives mess is 50-100X the scope of the housing problem.
    >>



    That's what I am worried about too. It seems like a financial apocalypse is going to hit at some point. >>




    The meltdown was a result of a fraud perpetrated by Fannie & Freddie. The rest of the derivatives market, at least on the surface, appears healthy, albeit an opaque market. The test is the litigation, or the lack of it, reimageerivs. Deriv litigation is a drop in the bucket, and basically non-existent outside of the sub-prime mortgage related issue, compared to the perceived market.
  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    The meltdown was a result of a fraud perpetrated by Fannie & Freddie. The rest of the derivatives market, at least on the surface, appears healthy, albeit an opaque market. The test is the litigation, or the lack of it, reerivs. Deriv litigation is a drop in the bucket, and basically non-existent outside of the sub-prime mortgage related issue, compared to the perceived market.

    The housing meltdown was just one issue....a minor one really in the scope of the entire derivatives mess. We could have bailed out the entire residential mortgage field including Fannie and Freddie with <$10 TRILLION....and it would have been done. In essence the govt could have bought all the underwater mortgages and made the homeowners whole, at the expense of a weaker dollar of course. The mortgage problem is/was on the order of $10 TRILL, the credit default swap mess about $60 TRILL, and the interest rate swaps at around $180 TRILL. Those are only for the USA. To include the entire world multiply by 4X. Just because none of the IRSwap failures have yet to hit the front pages doesn't mean those failures won't occur or aren't occuring. It's one of the reasons why the FED won't change interest rates yet, for fear of triggering massive failures in IRSwaps.

    Derivatives litigation is just in its infancy. Otc/unregulated derivatives were in their infancy just slightly over 10 yrs ago. Give it some time. 2-3 yrs ago most of our elected officials didn't even know what a otc derivative was and how the big banks were employing them. Once this area gets rolling mortgage related derivatives lawsuits will be just a tiny fraction of the overall cases. Because of the potential sizes of these lawsuits (ie tens/hundreds of BILLIONS) it could become the biggest money making area ever for trial lawyers. Piling on dozens to hundreds of plaintiffs in class action suits will produce monstrous settlements...and bankruptcies.

    roadrunner

    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • renman95renman95 Posts: 7,037 ✭✭✭✭✭
    ...because this time is different(?)

    Remember when The Maestro said he underestimated sub-prime when promoting his book? I thought he was either lying and playing dumb or we are in a greater mess than thought....that was a year before the meltdown.

    He did predict a recession in 2008 in early 2007 but that was not news to anyone here. The question was how deep?
Sign In or Register to comment.