"Dave" wrote in message
...
Generally accurate, but with two exceptions. First, removing the guvmint's
ability to dictate interest rates under Regulation Q has very little or
nothing to do with the present problems. Those of us who were dealing with
the financial sector back then recall the economic distortion those
guvmint
fixed rates caused. The one small exception is that repeal of Regulation Q
opened up the possibility of brokered deposits, which are somewhat more
volatile than other CDs. However, the regulators have been fairly vigilant
in keeping an eye on brokered deposits. For example, a bank that is not
well
capitalized under the regulations is prohibited from taking brokered
deposits, and the term "brokered deposits" is very broadly interpreted.
Even
before this rule kicks into play, there is a fair amount of informal
pressure to reduce brokered deposits. The rule can, however, become
significant if a bank holds large amounts of brokered deposits and then
falls below the well capitalized level. The result is that the bank is
unable to roll over maturing high rate CDs, reducing its lending ability.

Second, repeal of Glass-Steagall by Gramm-Leach-Bliley also has little to
do
with the present problems. It simply added a new category, called
financial
holding companies, to the universe of bank holding companies. Financial
holding companies can own a somewhat broader range of finance-related
businesses than bank holding companies. A bank holding company cannot
convert to a financial holding company unless it is well capitalized, well
managed, and received a satisfactory rating on its last CRA exam. This
last
requirement was insisted upon by the Dems as a condition to voting for the
bill, making it veto-proof. It may have some bearing on the current crisis
in that it provided an added incentive to lend in poorer areas.

Banks remained subject to the same regulations and regulators as
previously.
Federally chartered commercial banks remained subject to regulation by the
OCC; state chartered banks remained subject to regulation by the FDIC at
the
federal level and the state banking departments at the state level;
thrifts
and thrift holding companies remained subject to regulation by the OTS and
FDIC and, if state chartered, the state banking authorities; bank holding
companies and financial holding companies remained subject to regulation
by
the Federal Reserve Board; securities brokers and dealers remained subject
to regulation by the SEC.

Note that in both cases the passage you quoted gives no reasons whatever
to
support the assertion that those two changes play a role on the present
crisis.


Yeah, and you forgot to tell us the economy is in great shape!

--
"j" ganz @@
www.sailnow.com