Another $4 Trillion For The Banks From Barney The Elf


Barney Frank did some last minute shopping and picked up the following gifts for the banking industry. These are the visions of sugarplums dancing in the bank’s heads from HR 4173, the 1,279-page “Wall Street Reform and Consumer Protection Act”:

It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.

They have to be 99% confident they’ll get the $4 trillion back, but do we really need to talk more about risk models, black swans and fail? But don’t worry, even if you can’t get emergency funding, you can probably get financial backing:

The bill also allows the government, in a crisis, to back financial firms’ debts. Bondholders can sleep easy — there are more bailouts to come.

The legislation does create a council of regulators to spot risks to the financial system and big financial firms. Unfortunately this group is made up of folks who missed the problems that led to the current crisis.

Don’t worry, this time regulators will have better tools. Six months after being created, the council will report to Congress on “whether setting up an electronic database” would be a help. Maybe they’ll even get to use that Internet thingy.

An electronic database of what? I like to think LOLFed is kind of an electronic database of bankfail, maybe I can give them access to our archives. They appear to have authorized no less than a billion studies, so expect Washington to be hiring more wonks in the near term.

On the downside for the bankers, it looks like HR 4173 can restrict the ability of certain vampire squids to make profitable trades for themselves, and also to pay out incentives, whether you’re still down with TARP or not.  They’ve also authorized a shiny logo for the newly-created Consumer Financial Protection Agency, and we can only hope they ask us to make an entry. This article’s author suggested Elizabeth Warren flinging lightning bolts at Ben Bernanke, but I was thinking something more along the lines of a rainbow, a yellow brick road, and smiling consumers with pockets stuffed with cash on their way to a shiny new mall.

Oh, and maybe some unicorns ‘cuz we all know that real reform is mythical.