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Comment by yardie | Hacker News Reader

What do the bailouts have to do with the regulation of banks?

In the US, banks are regulated by the Federal Reserve. They have the authority to close and liquidate a bank. They have no authority to bailout a bank. That authority is the responsibility of Congress.

I'm pretty sure it's the same in other countries with a regulated banking sector. The UK parliament decided to bailout their banks, the German senate chose not to.

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In the US, banks are regulated by the Federal Reserve.

That's way too simple a statement for the US banking system. Banks in the US are regulated by the Federal Reserve, by the Federal Deposit Insurance Corporation, by the Office of Foreign Assets Control and a few others.

"Banks" is a catchall for a place to deposit or get money. Not all banks are under the regulations of FDIC, like GS, but all banks are under the regulations of the Reserve.

I'm not sure you mean otherwise, but part of the bailout process in 2008 was to allow Goldman Sachs and Merrill Lynch (now part of Bank of America) to become bank holding companies. The major reason was so they could shore up their balance sheets with cheap and safe FDIC insured accounts.

>so they could shore up their balance sheets with cheap and safe FDIC insured accounts.

FDIC insured accounts are liabilities on a bank's balance sheet.

You are right, they did it to access a lending facility that was only available to them if they switched their structure.

(I made the mistake of talking when I shouldn't have, I wasn't trying to mislead)

Only commercial banks are under the regulatory authority of the Fed. Until they converted to a bank holding company, Goldmann Sachs was not regulated by the Fed. As an "ivesemt bank" (which is not actually a bank at all), they were regulated by a mishmash of other authorities including the SEC and FTC. That was a major contributing factor to the financial crisis in the first place, and the reason Dodd-Frank expanded the authority of the Fed and FDIC to cover "systemically important financial institutions"--even if they are not banks.

> They have no authority to bailout a bank.

Is the understanding of the financial crisis really this poor? Paulson literally forced the banks to take TARP. The CEO of BofA and other banks that didn't need it spent a lot of time in the media complaining about it.

He also forced the retail banks to merge with and absorb the losses of the investment banks.

He wasn't able to do this because of direct permission, but because the Fed has so much power that everybody just has to listen to what they say.

Paulson was Secretary of the Treasury; the bailout was a government program, not Federal Reserve.

That said, the quantitative easing programs are basically bailouts, just not as overt as opening up the public treasury.

It was Paulson who lead it, but Bernanke and Blair were right there next to him during the TARP ultimatum meeting. The implicit threat was that if they turned it down, the regulators would force it upon them.

The meeting minutes came out in an FOIA request and lawsuit[0]:

> Ben, Sheila, John, Tim and I have asked you here ..

> If a capital fusion is not appealing, you should be aware that your regulator will require it in any circumstance.

[0] http://www.judicialwatch.org/press-room/press-releases/judic...

>Is the understanding of the financial crisis really this poor?

Yes. One of the great tricks of this disaster (as in most financial crises) is that the powers that be were able to convince to public that there was some single enemy that caused this problem, in this case the "banks", completely ignoring the banks' customers and clients (businesses small and large, mortgage brokers, house-flippers, home-buyers, honest investors, fraudsters, sovereign nations) or the fact that the banks consists of hundreds of thousands of actors working and thinking independently.

This crisis was so much more complicated than "The banks were too greedy". But that's as deep as most people care to get.

In the US, banks are regulated by the Federal Reserve

I hope you know that the FED is not a independent institution, but owned by the banks themselves?

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