Scott: Overhaul Plan Could Create a 'Zombie Financial System at Great Public Expense'

The director of the independent and nonpartisan Committee on Capital Markets Regulation, Hal S. Scott of Harvard University, says that the Obama Administration’s proposal on the resolution of systemically-important financial institutions, if adopted, would lead to the creation of ‘a zombie financial system’ where financial institutions can neither die nor restructure sufficiently to be viable and where the burden of sustaining them falls on the taxpayer.

The Committee recommends instead that financial institutions determined by Treasury to be systemically important should be resolved by the Federal Deposit Insurance Act and not under either bankruptcy law or the open bank assistance provided under a too-big-to-fail policy (or under a too-systemically-important-to-fail policy). Derivatives contracts could be sold rather than liquidated to limit systemic issues. Scott made his comments at a forum sponsored by the American Enterprise Institute where a panel of experts commented on his presentation.

By Robert Stowe England

September 26, 2009

There's very little doubt that moral hazard is fostered by an unofficial, but still very real, too-big-to-fail policy embraced repeatedly over the last several decades by federal regulators and the Washington political establishment.

American taxpayers are the ones who have to foot the bill for these rescues and they, for the most part, have been vehemently opposed to them and to the staggering amount of federal funds – $700 billion – authorized under the Troubled Asset Relief Program (TARP) enacted in October 2008 to rescue banks from their bad decisions.

Further, a majority of Americans continue to be strongly opposed to all sorts of bailouts that have poured out of Washington since last October.

The ‘too-big-to-fail’ policy that has been so costly to current and future taxpayers has operated on an ad hoc basis for many years. However, under the Obama Administration's proposal to overhaul financial regulation, it would be codified into federal law.

The Obama resolution proposal, part of a sweeping plan for regulatory overhaul of financial institutions outlined in a Treasury White Paper in June, would provide funds to deal with the failure of financial institutions that were deemed to be systemically important.

See the Treasury's full White Paper report in pdf format at this link:

If enacted into law, the Administration’s proposed resolution process would lead to the creation and perpetuation of “zombie” banks and other financial institutions in the United States.

That’s the view of Hal S. Scott, director of the Committee on Capital Markets Regulation, who also heads the Program on International Financial Systems at Harvard University.

“The avoidance of bankruptcy for insolvent institutions, even for banks whose holding companies are not subject to the Federal Deposit Insurance Act receivership provisions, has the potential of creating a zombie financial system at great public expense as public money is infused to keep the zombies from actually dying in the bankruptcy process,” Scott said at a forum hosted by the American Enterpise Institute (AEI) September 21.

A video recording of Scott's presentation and the panel discussion that followed can be seen at this link:

“It would be better to put insolvent banks and their holding companies into a Federal Deposit Insurance Act type receivership so that they can be restructured and sold and while being kept open if necessary,” Scott said.

“This would permit imposing more losses on debt holders rather than the tax payer, which we did for banks in the case of [Washington Mutual] and Indymac,” he added.

Scott explained his reasoning as follows: “The amount of systemic risk can be greatly affected by how we deal with insolvent financial institutions. We may not allow insolvent institutions to fail if we believe such failure will increase systemic risk,” he said.

“Thus, the limits the bankruptcy code puts on keeping institutions alive . . . and the fact that crucial decisions of the Administration will be in the hands of courts rather than regulators, appears to be a major reason – and we said so – why authorities have sought to avoid the bankruptcy system for systemically-important institutions, including bank holding companies,” Scott explained.

“This appears to also have been a major consideration for the Administration in the creation of the AIG receivership structure,” Scott said.

The committee also sees a further benefit in how the FDIC would treat derivatives contracts above and beyond how they would be treated if a firm were allowed to fail under bankruptcy law instead of under the open bank assistance of a rescue under “too- big-to-fail” procedures, such as those that were put into place with the rescue of AIG.

Scott explained: “The [bankruptcy] code permits counterparties to liquidate collateral on in-the-money contracts, which . . . . can drive collateral prices sufficiently downward that the collateral becomes inadequate, triggering possible failures of counterparties,” he says.

“In an FDIC receivership, the derivative book can be and is usually transferred to third parties without triggering the rights of counterparties to liquidate collateral,” he added.

The Administration’s proposal would also create “a permanent TARP” or bailout fund under the control of Treasury, according to Peter Wallison, co-director of the American Enterprise Institute’s program on financial policy studies.

Wallison was on a panel of two who provided comments on Scott’s presentation. The other participating panelist was Douglas J. Elliott, fellow in economic studies and the Initiative on Business and Public Policy at The Brookings Institution.

The panel was moderated by Alex J. Pollock, resident fellow at American Enterprise Institute.

Appearing below are selected comments by both Wallison and Elliott to the resolution procedures contained in the Administration’s proposals, as well as the committee’s proposal and Scott’s presentation.

Committee on Capital Markets Regulation

The Committee on Capital Markets Regulation is an independent non-partisan research organization dedicated to improving the regulation of U.S. capital markets. It has 27 members from the investor community, business, finance, law, accounting and academia.

The committee is co-chaired by R. Glenn Hubbard, dean of Columbia Business School, and John L. Thornton, chairman of the Brookings Institution.

The committee completed a 228-page report, “The Global Financial Crisis: A Plan for Regulatory Reform,” in May in response to the Obama Administration’s description of its regulatory reform proposal in March.

The committee's report can be downloaded at this link:

Scott’s comments represent an updated assessment of the Administration’s proposal since the report was completed in May.

Scott noted: “Our May report was issued against the background of an earlier March 2009 Treasury proposal for a new resolution procedure which was later refined as part of its White Paper in June. So, our report reacted in large part to the Treasury’s March proposal and there have been a few adjustments.”

Scott explained the reasoning behind committee’s own resolution proposal. “The committee believes that we need a comprehensive and unified resolution process for all financial institutions. The Treasury proposal falls short in achieving this.”

“It creates a new procedure for only some financial institutions, holding companies of regulated entities, such as bank holding companies; but, hedge funds and insurance companies would not be eligible for such procedures unless they were regulated by the Fed as systemically-important institutions, which is another part of the Administration’s proposal,” he said.

“And broker dealers would remain covered by SIPA, the Securities Investor Protection Act [of 1970]. So, it is not a comprehensive and unified resolution procedure for all financial institutions,” Scott explained.

Further, Scott noted, the potential systemic damage from a failing institution could be exacerbated under the Administration’s proposal due to a delay in determining if it is systemically important.

“These new procedures under the Treasury proposal would only be used if a determination were made at the time of the problem that the failure of an institution would have important systemic effects,” Scott said.

“This makes it difficult for counterparties to know in advance to which regime its counterparty will be subject,” he added.

“So, we’re going to have this decision made. Are you systemically important, [then you] move the Treasury [for resolution]. If not, [you move to] bankruptcy or some other procedure,” Scott said.

“We’re not going to know in advance, [if an institution will determined by the Treasury to be systemically important] except possibly for those institutions the Fed decides are systemically important,” Scott said.

“But, this doesn’t preclude an institution that was never decided to be systemically important from subject to the Treasury procedures if the Treasury thinks at the time that they are systemically important,” Scott told the AEI gathering.

“So, the point is we don’t have certainty as to how these various institutions are going to be handled,” he added.

Committee’s Recommendation

“We recommended the creation of a comprehensive Financial Company Resolution Act, applicable to all financial companies, not just those that were determined to be systemically important, which is the same approach we take today with banks,” Scott said. This approach “creates more certainty,” he added.

“If it makes sense to handle all banks, whether or not [they are] systemically important, under this special procedure, which we do today, we believe is true of all financial companies,” Scott said of the committee’s views.

“I want to stress, however, that this does not mean that any financial company subject to this act would be eligible for public support. It doesn’t mean that for banks,” Scott explained.

“A special determination would be had in this process as to whether a particular financial company should get public support. This is what we do for banks today in terms of open bank assistance. Absent such a determination, these cost procedures would be used,” he said.

“We would also permit financial companies now eligible for resolution today under the bankruptcy code to petition for reorganization under chapter 11 of the code as opposed to being caught up in this new procedure, provided that the regulator would be empowered to convert such a proceeding into a disposition with the Financial Company Resolution Act,” Scott explained.

“So, if the regulator said we don’t really need this special procedure, the company, if it desires, can go into a chapter 11 proceeding,” he explained.

The committee’s approach would also solve problems surrounding derivatives. Indeed, it was the presence of toxic credit derivatives on the balance sheets of banks and related structure enetities that prompted the call for TARP funds and the intervention of Treasury and the Fed to provide guarantees and funds to prevent the failure of major financial institutions.

“Derivative contracts could, as under the current Federal Deposit Insurance Act for banks, be transferred to third parties and liquidation of collateral would be prohibited” under the committee’s proposal.

Scott recognized that the financing to resolve the failure of large financial institutions would present a challenge, as it did with AIG.

“Under the FDIC Act, regularly-imposed deposit insurance premiums fund resolutions. Under the Treasury proposal, for its new resolution regime, the FDIC would borrow funds from the Treasury, which would later be paid through an assessment on $10 billion or larger bank holding companies,” Scott said.

“Now, it’s far from clear that large bank holding companies should pay for resolutions of systemically important insurance companies or hedge funds, which would be covered under the Treasury proposal, if regulated by the Fed,” he noted.

“We believe further study is needed – I’m punting on this – as to the proper financing technique because I don’t think the existing one that’s put out there is fair [even though it might be feasible],” Scott said.

He pointed out that the Administration’s proposal would give authority to decide how to resolve a systemically important institution to the Treasury Department, “whereas, the actual control of the disposition would be managed by the FDIC,” he said.

Scott noted that in the March report the Administration did not make it clear who would handle the disposition of a large failed financial institution, but in its legislative proposal it was made clear that it would be the FDIC.

"Under the committee’s proposal that covers all financial institutions, not just banks," Scott explained, "the Treasury would still, as it currently does for banks, have to approve funds for a particular institution [that was rescued under the resolution process.”]

Panelist Peter Wallison

Wallison, who is not a member of the Committee on Capital Markets Regulation, said he agreed with much of what the committee recommended and with Scott’s warnings that the Administration’s approach would lead to a ‘zombie financial system.’

Wallison, however, also faulted parts of the committee’s proposal for dealing with the resolution of large financial institutions.

He pointed out that the committee’s report failed to address the causes of the crisis, a significant oversight.

“The causes of the crisis are exceedingly important,” Wallison asserted. Noting that he is a member of the Financial Crisis Enquiry Commission, he had told the chairman and other members of the commission that “I will follow the evidence wherever it leads.”

Wallison said he was still investigating the causes of the crisis and that his views at this time were subject to change if new evidence emerged that would challenge his conclusions so far.

“First of all, I think the crisis, at least up to now, was caused by the housing policies of the United States,” Wallison said.

“Because of the affordable housing requirements that were placed on Fannie Mae and Freddie Mac, and the requirements of the Community Reinvestment Act that were placed on banks, we have 25 million subprime and Alt-A mortgages in this country,” he said.

These mortgages, which represent $4 trillion in principal and half of all U.S. residential mortgages, are on the books of banks and other financial institutions in the United States and abroad, Wallison said. “This is quite extraordinary and unprecedented,” he added. “In all previous bubbles we’ve had in the real estate market and the housing market, we’ve never had anything like this percentage of weak and failing mortgages,” he observed.

Wallison noted that these same mortgages “are defaulting at rates that are also unprecedented, sometimes at 7 to 15 times the rates at which other mortgages, that is prime mortgages, are failing.”

He contended that it was the rising defaults in subprime and Alt-A mortgages that caused the mortgage-backed securities and other asset-backed markets to crash in 2007.

“This [crash] is another unprecedented fact,” Wallison said. “That meant that many institutions could not finance themselves when there was no asset-backed market. This caused Bear Stearns to fail. It caused Lehman and AIG to fail. And, thus, was ultimately the cause of the financial crisis that we are facing today and the economic recession,” he said.

This means, Wallison explained, that if the federal government’s housing policies caused the crash, “it was not caused by any inherent weakness in our financial or regulatory system, let alone as the Left has been contending, an inherent weakness in capitalism,” he said.

“In effect, the crisis that began in 2007 and culminated in 2008 was, in my view, sui generis,” Wallison said.

“Unless the government embarks on more foolish housing policies in the future, this crisis and crises like it will not in my judgment recur again,” he said. “Under these circumstances there is very little point in designing responses that assume that a crisis will occur again, especially if those responses will suppress economic growth, suppress innovation, increase costs, and create moral hazard.”

“Now, some of the proposals in this report, in my view, address real problems that should be addressed. That’s good,” Wallison said. “I would put capital requirements in that category.”

“As Hal Scott said,” Wallison continued, “the report recommends counter-cyclical capital ratios. This is a really sensible idea. It also proposes that the largest banks should hold more capital for unit of risk. This is another good idea, but it should apply only to commercial banks. I don’t believe non-bank financial institutions can create systemic risk.”

“Also, a strengthened leverage ratio makes a lot of sense, based on common equity,” hen said. “That’s also a good idea. But again, only, in my view, for commercial banks. Non-bank financial institutions should not be regulated. They should be allowed to fail. That’s how the market works. That’s how we prevent moral hazard. That’s how we improve market discipline. Companies like that should be allowed to fail.”

Having agreed on these points with the Committee on Capital Markets Regulation, Wallison said he had a “profound” disagreement with both the Administration’s andcommittee’s, recommendation on the resolution of large institutions that might fail in the future.

“This brings me to the question of the resolution authority and here I will take issue with Hal and the report.

“The major flaw in the Administration’s proposal is that no one can tell in advance which institution will cause a systemic breakdown when it fails and which will only cause a disruption in the economy,” Wallison said.

“To illustrate how this works, the General Motors and Chrysler bailout was not done because there was any thought [that] the failure of either or both of those companies would create a systemic catastrophe of some kind, a systemic breakdown.”

Instead it was “simply because (a) there were political reasons for doing it and (b) they were going to cause major disruptions in our economy if they failed,” Wallison said.

“And, so, in any system in which the government has a choice between or is given the opportunity to resolve, that is take over, bailout, control, [or] otherwise finance, instead of bankruptcy, the most powerful companies will be bailed out,” Wallison said. “But their smaller competitors will not be. Those smaller competitors will be sent over to bankruptcy and allowed to fail.”

“This will create the same moral hazard, the same competitive inequality that would have been created by designating systemically-important firms in advance,” Wallison said.

Designating institutions in advance as systemically important “would cause enormous moral hazard,” Wallison said. “It’s like establishing Fannies and Freddies in every one of our financial sectors.”

“In effect, when the government has an opportunity to make a decision to take over a company, since there’s no way of knowing whether or not that company will cause a systemic risk, the choice will be made in most cases to take it over because if it fails, it will cause major disruption in the economy. So, any resolution authority set up for this purpose is going to become what I think is a permanent TARP. That’s where this whole thing is leading,” Wallison said.

He also found that the proposal from the Committee on Capital Markets Regulation, while seeking to address the problems of “too-big-to-fail” offered a recommendation that has all the moral hazards of the Administration’s proposal plus more.

The committee’s recommendation is that all financial firms, no matter what their size, but subject to a resolution system like that the one that FDIC operates for commercial banks and other depository institutions.

Wallsion objected to extending the coverage beyond depository institutions to all financial firms. “First, what is a financial firm? This is the same problem we have right now today when the Fed has to decide whether something is financial in nature and can thus be engaged in my bank holding company or a financial holding company. It’s an impossible task. One can’t distinguish between a financial firm and any other kind of firm,” he said.

“Many, many firms have financial activities,” Wallison added, including manufacturing or retail firms. “In some cases, retailers make more money, it is said, from their financial activities than they do from actually selling the products.”

“And if we are indeed, as Hal’s report suggests, going to create a bailout system or a workout system or a resolution system for financial companies, we first have to decide what financial companies are and that is in my view impossible,” Wallison said.

He identified a further issue in determining whether or not a firm “will cause a systemic breakdown if it fails,” an idea included in the committee’s resolution recommendation.

“Now, it seems to me that Hal’s group is attempting to solve this problem by saying all firms would be covered by this resolution system. But, if someone decides that one of these firms that would otherwise be subjected to the normal resolution system under the committee’s proposal, would create systemic risk, whatever that is, then they can be subject to a special resolution system, which would involve something like the open bank assistance that the FDIC now provides,” Wallison said.

“In the Administration’s plan, as in Hal’s plan, no one knows the difference between a firm that is going to be systemically important and one that is not,” Wallison stated.

Under the terms of the committee’s recommendation on resolution, if it were to be adopted, “there will be a tremendous amount of uncertainty [about how] that a particular firm is going to be resolved” meaning they will know whether they will be given open bank assistance and preserved or liquidated, Wallison said.

“It will also create moral hazard and competitive inequity,” Wallison said.

“It’s not clear whether nonbank financial institutions will be regulated, although as you heard, they are to be subject to capital requirements. Now banks are regulated, so someone in the government, the FDIC in particular, has the ability to determine whether an institution is failing before it actually fails. Even under prompt corrective action, our FDIC has been losing an average of 25 percent of total assets, and sometimes they average more in some periods, on every bank that it closes. And, this is regulated institutions,” Wallison said.

“So, here’s the situation where we know a lot about the financial conditions of the companies and nevertheless there are tremendous losses. Under the plan Hal is talking about, the losses will of course be large, because [they] will be compounding in these firms before a decision is made about whether or not they are going to be treated in an open bank situation or simply another situation, because it is the government’s decision and that will take awhile, and meanwhile the creditors will find their losses compounding,” Wallison explained.

“Finally, the huge losses that will be occurring in each systemically-important company will mean cost to the industry because the industry under Hal’s plan is going to be taxed in a post-event context to pay for the losses,” he said.

“And, so as these systemically important companies are bailed out and taken over, the industry will be taxed. This will be a devastating tax on the industry, and the FDIC is now noticing it can’t do the same for the banking industry because to increase their insurance premiums afterward will cause more losses. So, some other agency has to be found to pay for this and I’m afraid that agency will be all of you out there and up here even, taxpayers,” Wallison said.

Panelist Douglas J. Elliott

Elliott said he agreed with Wallison that, “You need to know why the crisis happened in order to know what you should do.”

However, Elliott added, there are three major “narratives going on” that claim to explain what caused the crisis. The first one, advocated by Wallison, says, “It’s the government’s fault. It’s pretty much the housing bubble and the government created the bubble,” Elliott said.

“The second narrative is more favored by the Left wing in this country. It was Wall Street’s fault. It was basically greed and some bad incentives and you throw in some stupidity,” he explained.

“The third narrative, which is closer to my own view, is that it was everybody’s fault,” Elliott said.

Why does Elliott think it’s everybody’s fault?

“The reason I think it could come to that point – and I don’t mean literally everybody of course, but that it was spread across different institutions and individuals – is we had 25 really good years in the financial markets from 1982, when Dow bottomed at 800, and 2007, when the Dow was about 20 times higher,” Elliott said. “Other financial markets also did well over that time,” he added.

“People learned that, on average, taking risk made sense because not only did you expect to do better, but in the lived experience of a quarter entury you did a lot better and all you had to do was wait if things worked out badly for awhile,” Elliott said.

“I was working in the financial sector when things started to blow up – I was at JP Morgan at that time – and I strongly disagree with Peter’s view that further financial crises are unlikely,” Elliott said.

“I absolutely do agree the housing crisis was unique in its own way and larger than what will likely hit in the future, but I believe that by the time the housing crisis was hitting we had so many imbalances and so much risk taking in all forms of the financial sector, something was going to blow up,” Elliott explained.

“Now, maybe it would have been the stock market bubble that burst very badly, a commodities bubble, and maybe it wouldn’t have been as bad, because housing is uniquely pervasive in our economy,” he said. “But, I do believe it makes sense to assume we are going to have further crises in the future as we have over the history of the United States and work to try to deal with them.”

“I do agree with one thing that would be implicit in Peter [Wallison’s] logic that if there is a financial crisis we probably won’t know why it’s happening,” Elliott said.

Elliott continued: “Much of what I favor – things like higher capital requirements that protect through a wide range of circumstances – I certainly agree with Peter on this – It doesn’t make sense to design regulation for what we just went through.”

“What we just went through identified a number of weaknesses that are general that we must correct. But, the next crisis will catch us by surprise. If it doesn’t catch us by surprise, it won’t have engendered behavior that is so pervasive that it will be a crisis that we care much about,” Elliott said. “So, I do agree and I certainly hope that the commission that Peter is on can come to a good view of what happened, something to guide us going forward because I do believe that’s important.”

Elliott said he also placed “a great deal of value on higher capital requirements because capital is there to protect financial institutions against mistakes and accidents and what we just went through. And, I want to underline that those mistakes and accidents can be a lot more severe than you think beforehand. So, we should have more capital.”

He noted that “the biggest argument against higher capital . . . is that higher capital will on the margin make it harder to get loans, and make loans more expensive. So, that’s not a good thing,” he said.

“However, and here I will shamelessly plug a paper of mine coming out in the next couple of days, I’ve done some quantitative analyses to make some reasonable guesses as to what kind of the more the outer bounds of how much loan pricing might change in the event of higher capital requirements, and it doesn’t look that bad frankly,” Elliott said.

“This is probably counter-intuitive, but the fact [is that] banks are highly levered institutions; they don’t have that much equity backing each loan. And so, even if you substantially increase the amount of equity, it doesn’t have nearly the effect you think,” he explained, “and there are a number of things banks can do to counteract that.”

“The financial markets will also charge less for equity and debt on banks that are safer, which they unquestionably would be with higher capital requirements, all else [being] equal,” Elliott stated.

He noted that the only thing he probably disagrees with Scott and the committee on is the statement that “We’re going to take a fair amount of time to decide on the higher capital requirements; I do hope that we don’t get so focused on studying it that we just don’t act or take too long to act.”

“I do think it’s pretty clear that creating higher capital ratios now, even if it’s just increasing the leverage ratio, which I do agree was the most effective of the measures that are out there, I think that would be good,” Elliott observed.

He said also agreed with the idea of banks issuing subordinate debt, which the Committee on Capital Markets Regulation supports. This will provide market discipline if the structure is set up so that “investors knew they wouldn’t be rescued – that’s the hard part,” he said.

“I actually favor a version in which it would be agreed in advance that under certain triggers, the debt would convert into common equity,” Elliott remarked. “Doing that wouldn’t be terribly punitive to the holders of that security, but it would immediately provide extra capital. Because it wouldn’t be that punitive, it’s a lot easier to believe it would actually happen, which is very important,” he said.

As for the problem of too big to fail, Elliot said, “the markets currently believe, with very good reason, that for now and for some time into the future, the government will rescue any major financial institution above a certain size level.”

“In fact, for the 19 banks subjected to the stress test the government has pretty much explicitly said they will make capital available as needed,” he noted.

“Too-big-to-fail brings many problems with it, generically described as the moral hazard problem, that people who know they are going to be rescued take more chances. I agree it’s a problem,” Elliott said.

“I haven’t heard any approach to eliminating [too-big-to-fail] that would be credible to the markets and wouldn’t create more harm than good,” Elliott says. “So, in my view, we are going to be stuck with too big to fail.”

“I do favor having systemically-important financial institutions be dealt with, with tougher requirements. I actually favor naming who they are – because I happen to believe the moral hazard ship . . . sailed some time back.”

“Even before this crisis, debt investors were assuming [that] the largest of the financial institutions, at least on the banking side, would be rescued. You can see that with what the pricing was. We’ve now made that crystal clear,” he observed, “and, I hope I’m wrong, but I’m very pessimistic [that there is a way to avoid] giving that impression to people.”

“Therefore, many of the negatives that have been described by Peter and others that relate to moral hazard, we’re already stuck with, so . . . anything we do to minimize them is great, but I don’t think it should keep us from doing other sensible things.”

As for resolution authority, Elliott said, his views are probably somewhere between those of Scott and Wallison. “I do think it’s very important that we have expanded resolution authority. One place where I may disagree with Peter [is based] my experience working at a large bank holding company and related subsidiaries and having them as clients,” he noted.

Large banking groups “make decisions as a single entity, and then what they do is they look at the legal restrictions within specific entities within the group, then figure out exactly how to implement,” Elliott said. “And occasionally, those legal restrictions are severe enough [that] they have to rethink, but very rarely.”

Elliott continued: “So it’s very awkward having a resolution authority for the banks that’s different from the bankruptcy authority used for the bank holding companies, or for the securities subsidiaries of the same banking group.”

“At a minimum, I want the same resolution authority to be used broadly for everything within a holding group that is financial in nature, however we define that,” Elliott commented. “Bank holding companies are pretty much allowed to do things within their group that are financial in nature.”

He said he does "agree with the need to have clarity about what the regime will be.” If it is not clear, creditors may be surprised that the financial institution is not part of that regime, he added.

Copyright © 2009 Robert Stowe England


  1. The government would deepen its tentacles into big banks with the “permanent tarp”. This government/big bank partnership could then force the smaller banks out of business eventually giving government total control over banking. It sounds like a similar MO to the public option in ObamaCare. (imo)

  2. A valuable post and it much helpfull to all.Thanks a lot for your post.

    Karim - Positive thinking

  3. Hello. Even though I am Canadian I agree that this government/ huge bank partnership creates a monopoly over the financial system. I also dislike the massive spending on all the bills including the health care insurance system and fisrt time homebuyer credit. These acts only contribute to more and more housing bubbles. If people don't learn to live with no debts the economical recovery will remain to be just a dream.
    Take care,


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