Friday, May 21, 2010

So-Called Financial "Reform" Bill Passage Is Greeted Favorably

by the US stock market, and particularly by the big bank stocks.


Goldman Sachs (GS): up 4.4%
Morgan Stanley (MS): up 4.8%
JP Morgan Chase (JPM): up 5.45%
Citigroup (C): up 4.1%
Bank of America (BAC): up 4%
Wells Fargo Bank (WFC): up 4.6%

The broader market as measured by Dow Jones Industrial Average is up 0.78%, by S&P500 up 1.1%.

That alone should tell you that these big banks will benefit from the so-called "reform". Smaller regional banks are generally up, but not by much. Some of the more prudent banks like Hudson City Bankcorp (HCBK) are actually in red, albeit very slightly.

The so-called consumer "protection" will be in the domain of their cartel, the Federal Reserve. The Fed will be able to write any regulation it wants without the Congress approval.

Caps on interests on loans and fees mean the government will impose a price control on money. Banks will be prohibited from pricing the cost of money (interest) according to the risk that they see. The likely end-result: Banks won't lend, except to large businesses and high net worth individuals. Since ancient times, price controls have never worked for the benefit of the hapless consumers. They have always backfired, driving goods and services underground, or to the black market.

The lesson from history is that people (particularly those in power) will never bother to learn from history.


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