Wednesday, May 6, 2009
oh no! or maybe okay with enforced regulations
So many things to say, but let's start with an article in today's New York Times entitled "As Investors Circle Ailing Banks, Fed Sets Limits" that talks about some private equity groups wanting to buy sick banks. Okay, on the one hand, we want folks to buy banks and turn them around, and these are the folks with money BUT we don't want all the upside to be captured by these guys while we taxpayers take the whole downside risk (and in fact get a subsidy on top of it). My immediate reaction was "no, no, no" but then I thought about how at least the Fed here is talking about regulation and keeping the silos separate across activities. This brings up broader questions about what financial institutions should be allowed to do. Once the silos exist, and certainly under current regs, it is hard to image that there wouldn't be some joint databases that could cause problems. I'm more worried about a group that is widely considered as among the most risk-loving and freewheeling financial wheeler-dealers. While we might pine for the boring bankers of the old days, we still need to figure out how to get back to that state.