The Republican (Mass.), July 22:
Get smaller, or get stronger. That’s the choice the Federal Reserve is giving the nation’s biggest banks with a wise new set of rules it instituted on July 20.
If a bank grows to be so large that it cannot be allowed to fail, it would be best to see that it is standing on a rock solid foundation. Or, the bank could decide to shrink so that its failure would not imperil the whole of the intricate and interconnected financial system.
The new rules, simply stated, would seek to head off the sort of problems that crippled much of the overall economy in the summer of 2008. Fed chief Janet Yellen and her colleagues deserve praise for acting now ”“ instead of scrambling to try to react after another crisis.
The new rules will require the nation’s largest banks ”“ including JPMorgan Chase, Citigroup and Bank of America ”“ to maintain larger capital reserves that would allow them to ride out a future storm. The amounts would vary depending on several factors, including the size of the institution and the degree of risk contained in its investments. Banks could also decide to downsize, to get out of some arenas, to refrain from certain behaviors.
To remember, even in outline form, what happened in the summer of 2008 is to relive the terrifying days of economic collapse. The gears of the financial world seized up. For a time, there was effectively no lending, no real economic activity. When financial giant Lehman Brothers turned to vapor overnight, there was real reason to wonder if we were at the start of a collapse that would be even more dire than the Great Depression.
While we were able to avoid that terrible fate, no one would wish to come so perilously close to the edge again. Ever. This is the reason for the new regulations.
The rules are based on sound thinking, seeing banks as distinctly different from those high-flying investment houses with their exotic and esoteric methods of making money out of the thinnest air imaginable. Effectively, a bank can make a choice: have more money at the ready, or shrink. The former would help head off disaster in case of an emergency; the latter would reduce the number of potential crises.
The Telegraph of Nashua (N.H.), July 22:
Former Florida Gov. Jeb Bush took aim at Congress on Monday in a speech in which he said lawmakers should be docked for missed votes and banned from working as lobbyists for six years after they leave office.
He may be onto something.
Congress is an easy target, after all, what with its public approval rating at only 15 percent, according to the website Real Clear Politics. That figure is undoubtedly higher among members of Congress, but heck, even they routinely campaign against their own institution when they seek reelection. They know an easy ground ball when they see one.
House members and senior staffers who leave office are now prohibited from lobbying for at least a year under the so-called “revolving door” law. Former senators have to wait at least two years before they can get paid to influence their former colleagues.
The problem is that the law contains so many exemptions that it is widely regarded as a joke. One popular loophole allows a congressional aide to leave a job on Friday and go to work on Monday as a lobbyist, so long as the pay in the new position is below a certain six-figure threshold.
The idea to ban members of Congress from lobbying for six years after they leave office may have merit, but it has little chance of passing Congress.
It is worth noting that Bush did not address the issue of fixing the campaign finance system that many have likened to legalized bribery, where candidates take money from wealthy special interests whose donations buy access and, some say, undue influence. Then again, as the recipient of more than $100 million in contributions to his presidential campaign and political action committee, Bush is hardly in a position to champion that issue, and he’s not the only one.
The best idea Bush laid out on Monday may be one that involves nothing more dramatic than mere transparency: require members of Congress to publish weekly reports on their websites detailing the lobbyists with whom they meet. Expanding that to the White House wouldn’t be a bad idea, either.
In fact, there’s nothing to stop members of Congress from doing that now if they wanted. We’d love to see New Hampshire’s congressional delegation take the lead by doing it preemptively, but people shouldn’t hold their breath.
Such transparency could even be expanded to the governor’s office, legislative leaders and state agency heads.
If we can’t stop the flow of money from tainting the political system, then let’s at least make the governing process more open to give the public a clearer look at who’s coming and going.
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