View Full Version : Monopoly Capital vs. Capital as Power: Socialist economics then and now

03-19-12, 05:20 PM
Quite a number of interesting points in this paper:

1) FIRE can be analyzed by examining the differences between investment and commercial banks over time

2) Regulation Q - once a part of Glass Steagall - was responsible in large part for the resurgence of investment banks in the 1975 to 1985 decade due to its limits on interest rates commercial banks could charge. Investment banks, via money market funds, had no such limitation thus enjoyed a decade long heyday

3) In no small part due to this situation, regulation Q was phased out over 5 years starting in 1981

4) Greenspan was a member of both Morgan Guaranty Trust's and J.P. Morgan's boards of directors - both commercial banks - and (unsurprisingly) worked hard in concert with commercial banks to repeal the rest of Glass Steagall.

5) In response to increasing commercial bank competition in hitherto investment bank spheres (commercial banks were still much larger despite the 1975-1985 investment bank growth spurt), Henry Paulson led the charge to remove the then rule of investment bank risk limited to 12x capital (i.e. leverage ratios of 12 to 1 or capitalization rate of 8.33%) which was accomplished in 2004, but only for the 'big 5' investment banks.

6) FIRE as a percent of market capitalization fell from 23% to 13% due to the GFC, but since has rebounded to 18% as of summer 2010.

7) The paper provides an interesting breakdown of investment bank income - investment banking is actually is very small part of it

8) The author (Sandy Brian Hager) does not believe financial re-regulation will occur to any significant degree in the US as US FIRE competitiveness in the world is falling, despite US FIRE competitiveness in domestically resurging.

9) Cool quote:

‘The bank is something else than men. It happens that every man in a bank hates what the bank does and yet the bank does it. The bank is something more than men, I tell you. It’s the monster. Men made it, but they can’t control it’
−John Steinbeck, The Grapes of Wrath