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Forum Post: Bank reform needs unlimited owner liability

Posted 2 years ago on Jan. 9, 2012, 4:12 p.m. EST by dcosts (69) from St Petersburg, FL
This content is user submitted and not an official statement

Any discussion of financial regulation and its chronic failures should start with a simple, jarring truth: It’s impossible to outregulate a banker.

Align incentives: requiring all bank equity holders to have full liability.

Unlimited-liability equity ensures that before the government steps in, every shareholder would need to first declare personal bankruptcy.

Thoughts? dcosts.com

55 Comments

55 Comments


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[-] 2 points by MonetizingDiscontent (1257) 2 years ago

::::::::A short Max Keiser rant: "Assassins, whores, punks & bankers"::::::::

(((Video))) http://maxkeiser.com/2012/01/11/assassins-whores-punks-bankers/

Posted on January 11, 2012 by stacyherbert

(((Power to the Peaceful)))


[-] 2 points by opensociety4us (914) from Norwalk, CT 2 years ago

this is very true. goldman sachs was not a systemic problem to the us economy when it was a private partnership. it's amazing how the ethics and practices of an entity change when the owner's asses are on the line.

[-] 1 points by aries (463) from Nutley, NJ 2 years ago

What happened? I thought your hope & change savior passed Dodd Frank - the solution to all our problems lol!

[-] 2 points by opensociety4us (914) from Norwalk, CT 2 years ago

and for a simpleton such as yourself, it's all about a politician or a political party. with the thoughtfulness of the original post, the least you could do is extend the same in your comment

[-] 1 points by aries (463) from Nutley, NJ 2 years ago

extend the same what? I didnt mention any party - I just made an observation.

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

thoughtfulness.

"I didnt mention any party - I just made an observation."

now you're just being a coward

[-] 1 points by aries (463) from Nutley, NJ 2 years ago

you make no sense. do you have a question?

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

a question for you, no.

i see right through you.

[-] 1 points by aries (463) from Nutley, NJ 2 years ago

hahaha! please elaborate

[-] 1 points by francismjenkins (3713) 2 years ago

Funny, but private banks existed, and were generously giving loans, long before these liability protections were enacted? In fact small and medium sized companies rarely enjoy these sort of liability protections today, yet they're able to get loans. We do have this thing called insurance, and these extraordinary liability protections have never been necessary to attract investors.

[-] 1 points by francismjenkins (3713) 2 years ago

I absolutely agree that laws which limit liability have stripped away stockholder rights, shifted power to managers, and thereby increased centralized control over our economy. Doesn't mean I like the idea of getting rid of the liability protections contained in corporate law, because those protections are designed to protect stockholders (who do not manage the corporation).

However, the right of stockholders to file derivative suits has been slowly chipped away at over the years. Also, some federal regulatory schemes are overly generous with liability protection (for example, take the case of the BP oil disaster, there's a statutory cap on liability in cases like that ... and although BP was pressured to pay damages above that cap, it's hardly comforting to know that our laws could have allowed them to escape the level of liability that would have compensated for their negligence).

In fact, they probably have been able to escape the liability they would have had if victims were simply able to sue BP without dealing with a federal regulatory scheme (in state courts under tort law). Not to say we don't need federal regulations, but those regulations should not (in most cases) limit tort liability. If victims of this sort of thing could sue in state courts, it would go a long way in solving the "revolving door" problem (where agency employees leave government service, to work for the a company they were regulating while in federal service).

[-] 1 points by dcosts (69) from St Petersburg, FL 2 years ago

agree

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[-] 0 points by ineptcongress (648) 2 years ago

limited liability is absolutely required in business, otherwise people would not even engage in business--to think the owner's house, car and accounts are up for grabs--what if that doesn't satisfy--take their children too?? ridiculous suggestion.

[-] 0 points by dcosts (69) from St Petersburg, FL 2 years ago

agree:)

[-] 0 points by smartcapitalist (143) 2 years ago

Great. Then there will be no private banks. As simple as that. Or even if there are private banks, they would be very reluctant to give loans. Therefore interest rates would be very high. Any entrepreneur(or startup) would find it very hard to get a loan and therefore you would also effectively kill innovation. In the long run, the economy is screwed.

Seriously, do you guys have any capacity to think long term?

[-] 2 points by dcosts (69) from St Petersburg, FL 2 years ago

Long Term...Yes, for example, aligning incentives that reward true growth, not bubbles.

[-] 1 points by FrogWithWings (1367) 2 years ago

I think this retardedcapitalist supported TARP bailouts. I had no idea any but those being handed the money, did indeed.

[-] 1 points by dcosts (69) from St Petersburg, FL 2 years ago

I do and did not support TARP - nor the Trillions in free loans; please try again...

[-] 1 points by FrogWithWings (1367) 2 years ago

Wrong guy, I was interjecting my comment, addressed to you, about the hypocritical and antagonist BS'er with which you were having a conversation.

Do we now agree?

[-] 0 points by smartcapitalist (143) 2 years ago

There is a reason no one takes your 'movement' seriously.

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

maybe you don't take the movement seriously but, given all of your comments so far, that's not saying much.

[-] 1 points by dcosts (69) from St Petersburg, FL 2 years ago

If you think such an idea is naive and unrealistic, you should know that as recently as the 1990s, the world’s most successful bank, Goldman Sachs Group Inc. (GS), was essentially organized this way. Thirty years before, so were most top non- commercial banks, including giants such as Morgan Stanley (MS) and Salomon Brothers.

And, by the way, with your comments so far, I certainly don't take you seriously;)

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

don't bother with this clown. once backed into a corner, he/she will become vague and write things like, "There is a reason no one takes your 'movement' seriously." or "OWS has a way too simplistic view of life." trust me you're not going to grow by engaging with this one.

[-] 1 points by dcosts (69) from St Petersburg, FL 2 years ago

I hate clowns and love to be bothered...dcosts.com

[-] 1 points by FrogWithWings (1367) 2 years ago

agreed

[-] 0 points by smartcapitalist (143) 2 years ago

No GS wasn't. What you are talking about is the repeal of Glass Stegall. That's very different from what is being suggested above

[-] 1 points by dcosts (69) from St Petersburg, FL 2 years ago

different can be good and more then likely, what is needed.

[-] 1 points by flip (6398) 2 years ago

boy are you getting slapped here - do you know much about the banking system - doesn't seem like it - change your name maybe?

[-] 0 points by smartcapitalist (143) 2 years ago

Yeah you are right. I guess I need to learn from hippies who shit in public places

[-] 1 points by flip (6398) 2 years ago

very smart comment - it does look those public shitters understand the banking system better than a smart capitalist - what does that tell you- don't rush - it will take you a while to figure that one out. call a friend maybe or try something like - i know you are but what am i? or maybe - your mother wears army boots - change your name to dumbcapitalist - no that is redundant - how about childishcapitalist - ok, not so good but that is not my strong suit - recognizing winners and losers is - and you are losing! badly i might add

[-] 0 points by smartcapitalist (143) 2 years ago

oh...breaks my heart...i m devastated. What will I do now? Hippies dont think good about me... nooooooooooooooooo

[-] 1 points by flip (6398) 2 years ago

well that was for sure better than "your mother wears army boots" - can't answer the question though - didn't think you could. seems your memory is not good so i will help - here it is again - it does look those public shitters understand the banking system better than a smart capitalist - what does that tell you??? try - you can come up with something. you are like "cool hand luke" - you do not know when to stay down - even though you got nothing - nothing! unlike in the movie (and you should see it - it is excellent!) nothing is not a cool hand here! people are talking to each other and it seems your side is getting eased out - reasonable people are finding each other and discussing real problems and real solutions. responses like nooooooooooooooo are not impressing anyone - including your bosses smartie!

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

you're an idiot. GS was a private partnership until it went public in the late 90s.

[-] 1 points by flip (6398) 2 years ago

i would say you bitch slapped him but that is a bit sexist for this site i would think. nice job! i am not sure i agree completely on the issue but you are for sure on the right track. the banking system in the 50's functioned pretty well - bad banks were dismantled by the gov't and goldman and the like were private partnerships as you say - they put their money where their mouth was! in 2007 those banks ruined themselves but the top management made off with billions! as you seem to know!

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

"in 2007 those banks ruined themselves but the top management made off with billions!"

if you're top management and you have no downside, why wouldn't you? it's the rational economic thing to do. solution - make sure they have downside or limit their upside

[-] 1 points by flip (6398) 2 years ago

yes - the system is the problem - if it encourages this type of behavior then that is what you will get - surprise!

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

an economic system with many banks of which there can be failures, with no consequence to the depositors or innocent bystanders, occurring all the time seems reasonable to me.

but i guess that makes me a communist

[-] 1 points by flip (6398) 2 years ago

or an old fashioned capitalist - bring back bretton woods? not the gold standard anyway

[-] 0 points by smartcapitalist (143) 2 years ago

See do you really think having unlimited liability would deter risk taking? Take the case of hedge funds or mutual funds. there is no government to bail us out. But risk are taken, in fact far larger than most ibanks. You win some, you lose some

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

you really are an idiot if you don't get it by now.

yes, you win some, you lose some.

but when the losses go beyond the original risk taker (who had the claim on the upside) and negatively impact innocent bystanders such as me and you, we have a problem of fairness and justice that needs to be dealt with.

i don't think much more can be done for you

[-] 0 points by smartcapitalist (143) 2 years ago

I understand that and you whole desire to protect the public. Agreed. And I also understand that a bank failing is far more catastrophic than a hedge fund going bust (which they do with unflinching regularity). But we have had private banks in the past and that didn't prevent the Great Depression. Did it?

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

a lack of regulation of banks (regardless of their status) and their subsequent failure contributed greatly to the Great Depression. bottom line - if your business activities (particularly banks) have the potential for wide negative impact on innocent bystanders, then your business needs to be regulated by the people through a democratically elected government. it's really not that hard or unreasonable.

the regulation can come in many forms - explicit regulations, personal liability, etc.

[-] 0 points by smartcapitalist (143) 2 years ago

I wish the cause of the great depression was this simple.

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

Whether making the system more fair and just helps avoid a Great Depression or not is irrelevant to me. That shouldn't be the reason we strive for justice. Although, I'd bet that a more just system is less susceptible to a Great Depression.

[-] 0 points by smartcapitalist (143) 2 years ago

I am sorry I dont see much 'injustice' in this system, at least not in America. May be it's just me, I was a middle class son of hard working parents, who now makes good money and lives a nice life, and most of my good friends have a similar past and present. So I don't buy the whole injustice gambit. Sorry

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

So you have no problem with the financial losses of others (the ones who had the claim on the upside) extending beyond them and negatively impacting innocent bystanders such as me and you. That does not strike you as unjust and nothing should be done about it because you are "a middle class son of hard working parents, who now makes good money and lives a nice life, and most of my good friends have a similar past and present".

You really are an idiot.

[-] 0 points by smartcapitalist (143) 2 years ago

Businesses fail, there is nothing new in that. No one purposefully tried to screw up the economy. It hurt Wall Street as much. Many have lost their jobs, bonuses haven't been very high for some time, lay offs continue in Wall St. Everyone has lost money. I know kids right out of college, joining an Investment bank with huge hopes getting laid off in 6 months because of the downturn. I don't see them whining.

[-] 0 points by smartcapitalist (143) 2 years ago

And? As it is, they never wanted to go public. They were very reluctant and rightfully so

[-] 1 points by opensociety4us (914) from Norwalk, CT 2 years ago

nonetheless, it was never a systemic problem to our economy while the owner's asses were on the line (before it went public). and that is the point of the original post. why and how they got to be public is your own mental masturbation which you're free to engage in but is irrelevant to the very good point of the original post.

[-] 1 points by jinzhao (68) 2 years ago

Society as a whole doesn't have much need for private banks. From what I can see, they are mostly just institutions that are meant to allow the wealthy to gamble.

What society needs is a national bank to finance large scale economic development projects to create productive jobs for millions of people that improve the economy.

[-] 0 points by smartcapitalist (143) 2 years ago

My dear friend, you can think whatever you like. It does not have to be correct. If society did not require banks, they wouldn't have existed. But they do, don't they?

[-] 1 points by jinzhao (68) 2 years ago

Yes, banks do exist. But private banks, I believe, mostly have the purpose of allowing wealthy people to risk their money with the expectation of attaining high returns. They should be separated from commercial banks so that the people don't have to bail them out if they lose money and go into debt.

The American people need a national bank now to create millions of productive jobs that improve the economy. Without this, our economy will continue to collapse.

[-] 0 points by smartcapitalist (143) 2 years ago

private banks vs commercial banks? I am sorry but you are a little confused here.

[-] 1 points by jinzhao (68) 2 years ago

Please explain.