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Obama to Propose Limits on Risks Taken by Banks

obama---the pivoting populist who raises the debt ceiling ONE POINT NINE TRIL

LOL!

what an idiot

the grassroots guy whose own geithner guaranteed all aig obligations in full, then obviously embarrassed by all the grease for the bigwigs, bid the obscenely bailed out bankrupts to bear falsely their books

what a phony

massachusetts, virginia and new jersey can see clean thru
 
apdst said:
Now wait, wasn't PBO just complaining a few weeks ago about banks not making enough loans?

This is some dumbass regulation in the making.
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If banks can't use the money to buy securities, they may be forced to make old fashion loans that are less profitable but also less risky. Not that that ought to be the aim of this regulation.
 
donsutherland1 said:
The New York Times reported:



Obama to Propose Limits on Big Banks - NYTimes.com

IMO, this is a potentially important and welcome development for a number of reasons:

1. Human nature, being what it is, assures the temptation to pursue large risks will not dissipate.

Agreed

2. In spite of the financial crisis and deep recession that occurred from the collapse of the housing bubble, stunning little has changed in the financial sector. Failure to change includes:

Little sign of fundamental improvements to risk management. A lack of credit growth due to financial constraints and fear has provided the biggest check to risky practices, but once the fear dissipates the underlying risk management framework remains essentially the same


This is not correct. Leverage ratios at have come down at the major institutions. Credit standards have been tightened.

1. Little evidence that the financial sector is giving substantially greater consideration to history relative to modeling in its risk management practices, even as risk is largely a human nature/behavior + firm/industry structure & linkages problem

Do you have a basis for this comment? The CEOs of the companies at the FCIC meeting stated the opposite.

2. The failure to junk, dramatically revise, or narrow the focus of the use of models, including but not limited to VaR (value-at-risk), that performed poorly during the crisis and failed to flag important risks ahead of the financial crisis and, according to some noted economists e.g., Nobel Laureate Joseph Stiglitz, actually amplified risks. IMO, VaR can and should play a modest role in understanding risk, but it should not be the full or even largest answer to understanding risk. In effect, it could offer one set of scenarios, but other methods, including a rigorous and continuing assessment of history and structure, should be a regular part of any robust and dynamic risk management system that incorporates new lessons and evolves as industry and linkages evolve. Such an approach would require more human and financial capital, but the financial crisis is just the latest such event to demonstrate that risk management cannot be completely automated, models (simplifications themselves) cannot provide the whole answer to understanding risk, and models should guide but not replace human judgment when it comes to managing risk.

This statement is agreed by all I think. I have not heard any financial institution that said " the model " did it. Models played a role, faulty judgement played a role, lousy ratings from the rating agencies ( who Obama never mentions) were a big problem, Fannie and Freddie with fed guarentees of trillions in bad loans, mortgage origination was a huge problem. The list goes on.

Simple answers are fun, but hardly ever accurate.

3. Bonuses being awarded as a share of revenue not profits in several financial sector firms, in effect rewarding top line growth even if bottom line growth is sacrificed or does not materialize during the compensation period. Down the road, such behavior would lead to a renewed acceleration of credit growth and decline in credit standards.

How do you think revenue is defined for a financial company like GS?

4. A Continuing mismatch between bank insurance premiums and the size/risk of such institutions. IMO, just as risk scales with firm size, insurance premiums should scale with size so as to provide a better match between future costs to the insurance fund and a firm's risk.

Just not accurate in my view. I do not understand the concept of a larger portfolio means higher risk. Did you mean higher leverage. Size is meaningless if the leverage ratios are in line.

5. Absence of accounting reform, to date, that would largely eliminate practices that keep risk off the financial statements, require the grossing of derivatives exposures on the balance sheet, and new financial sector presentation introduced by several accounting professors that would require differentiating between actual outcomes and forecasted outcomes (that's a technical detail that goes beyond the scope of this message, but suffice it to say valuations of certain items are really forecasts based on the assumption that the cash amounts will be realized as they are stated), etc.

Agreed. But this is not something that the financial institutions have control of. Speak to the AICPA. The SEC could ask for different type of reporting. So could the bank regulators.

All said, I believe the Volcker approach contributes toward a regulatory structure that would address the financial sector risk/risk management environment as it actually exists, not the idealized idea that predated the rise of the housing bubble prior to the financial crisis.
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Our banking system has to be able to compete on the world stage. Credit is a key to growth of any economy. If folks think things are bad now ( and they are) continue to find ways to shrink our credit markets and see what happens to this economy.

This adminsistration feels that the economy needs to shrink and perhaps they are correct. Just be prepared for a downtrend in our standard of living. We have been living beyond our means for the last 20+ years as debt grew; federal, state and individuals.
 
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donsutherland1 said:
So long as such institutions do not depend on government for any direct or indirect support e.g., they cannot depend on FDIC insurance on the deposits they hold or the Fed's myriad facilities for liquidity, I would have no objection.
FDIC is insurance paid for by the banks why wouldn't we want that

However, it is not very likely that the major banks would be willing to forego deposit insurance and access to the Fed window even as they would like to be free to take risks that could trigger harm to taxpayers via use of the FDIC insurance fund or Fed intervention.

This only makes snese if you go along with the " to big to fail" concept. If there is resolution authority for failed large banks who cares if they go out of business


I believe both those institutions should be cleaned up, broken into small pieces, and then those small pieces privatized. It should also be abundantly clear that the federal government would not back the paper of such successor organizations.

This is exactly what got Feddie and Fannie in trouble. These are institutions that guarentee home loans. If the government backs the loan there is no value in privitizing them, without the government backing they are useless.



That is exactly why financial institutions should not be leveraging their own investments using funds that are directly or indirectly tied to taxpayer support.



If funds tied directly or indirectly to taxpayer support e.g., deposit insurance, were segregated from all other funds, then when a major financial institution collapsed, there would not be a cascading impact that would lead to the kind of bailouts that occurred during the most recent financial crisis. In other words, funds that are FDIC insured for funds that originate from FDIC insured institutions should be segregated. A firm's own capital above and beyond those funds should be permitted to be invested as the firm sees fit. However, I suspect that the financial institutions want government to stay out of all of their investment decisions and, at the same time, want the benefits of taxpayer support for their deposits/access to Fed facilities should their investment decisions backfire.
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What the financial institutions want ( the best of both worlds) and what we allow can be seperate things without blowing up one of the most important parts of our economy.

Just think of the ramifications of the totality of Obama's gameplan. Single payor health care, control over the banking sector, growth in federal spending. What percent of the overall economy would be under the federal government control. Oh wait I forgot cap and trade, and that to the pot!
 
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Washunut,

Several quick points:

1) I favor FDIC insurance. It was an invaluable reform from the Great Depression. My point was that if financial institutions want unfettered ability to take on risk, then those institutions should forego any direct or indirect taxpayer support. I was not calling for the elimination of FDIC insurance. Such a move would be highly counterproductive.

2) I favor resolution authority to deal with institutions that pose systemic risk. Unfortunately, I have serious concerns that political interests will generally trump the kind of difficult decisions that would be necessary to resolve a large, failed institution.

3) The GSEs had no government guarantee. That the federal government intervened to bail them out instead of cleaning them up, breaking them into small pieces, etc., does not change the reality that there actually was no statutory guarantee. As a result of a perceived guarantee, not to mention very bad practices, there was an inherent bias toward underwriting too many mortgages at abnormally low rates of interest. Allowing them access to additional Treasury funds is counterproductive and may well be delaying their making the structural and policy reforms necessary to become viable.
 
washunut said:
Our banking system has to be able to compete on the world stage. Credit is a key to growth of any economy. If folks think things are bad now ( and they are) continue to find ways to shrink our credit markets and see what happens to this economy.

This adminsistration feels that the economy needs to shrink and perhaps they are correct. Just be prepared for a downtrend in our standard of living. We have been living beyond our means for the last 20+ years as debt grew; federal, state and individuals.
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Where do you get that idea from? :confused:

And other countries which seek tighter regulation all come across that arguement: "our financial system need to be able to compete in the world stage". But think about the nature of some of these firms, they have offices in most financial centres in the world. If New York becomes tougher about capital requirement, would they pull their offices out of New York? I highly doubt it. Follow that argument will allow banks to play governments against each other. On the other hand, there are of course costs to regulations, the key is to seek the best trade-off between tax-payer protection and less regulation. I think partitioning the commercial banks from investment bank is really not that heavy a burden on the banks, and of course, whatever the government comes up with, be sure that there will be lots of smart ambitious bankers looking for ways around them.
 
danarhea said:
I disagree. The big banks survived because of the Bush-Obama bailouts. These new regulations are the first step in restoring the type of Glass-Steagal regulation that was removed by government, via Gramm-Bliley, and once again walling off sectors of the financial markets from each other, so that one sector does not take the other sectors down with it if it fails.
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actually if the government enforced the laws many of the big banks are still dead, all of the regional ones and about 4000 of the smaller ones

few banks can actually meet the lawful reserve requirements without cooking the crap of their books and the FED is holding massive amounts of paper for them that if sold might get 5-10 cents on the dollar which if that happens means the losses become realized and the banks are dead anyway

the Treasury and FED have painted themselves into a corner with no exit

have they decided to enforce exiting law? no

have they hired like 20,000 forensic accountants to unravel all the corrupt books and closeout the dead banks? no

have they reigned in Freddie Mac and Fannie Mae? no, they removed the debt caps

do not be fooled by the ruse of regulation and actual action towards the banks unless it has some teeth and meanigful action behind it

GSE losses to the tax payer by year end should be up around $1 trillion with much more coming later

basic math and leverage.......you ramp up to 25 or 30 or even 60:1 and even tiny little changes in assets put you out of business and quickly and the banks did exactly that.....they can't meet the margin calls and the assets based on residential realestate and commercial realesate are WORTHLESS, no amount of time will cure this

they can't lend which means they can't earn and they are underwater already, only thing allowing most banks to live is the govt refuses to enforce the law and shut them down because it is politically untenable cause the banks own them and have been openly extorting the govt for months
 
washunut said:
Our banking system has to be able to compete on the world stage. Credit is a key to growth of any economy. If folks think things are bad now ( and they are) continue to find ways to shrink our credit markets and see what happens to this economy.

This adminsistration feels that the economy needs to shrink and perhaps they are correct. Just be prepared for a downtrend in our standard of living. We have been living beyond our means for the last 20+ years as debt grew; federal, state and individuals.
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Household overleverage was a big reason the financial crisis unfolded. As recently as 2000, household debt came to 70% of GDP. In 2009 Q3, even after household deleveraging had been occurring for a year, household debt stood at 96% of GDP as it had been rising at a multiple of GDP on a consistent basis. Debt cannot grow at a multiple of income indefinitely with no adverse consequences.

All said, credit is important. But easy credit at a time when too much leverage exists or risk management practices are ineffectual is a problem.

It should be noted that the lack of a robust regulatory structure in an environment of dismal risk management fueled the housing bubble. When that bubble collapsed, its collapse led to a full-blown credit crunch, as typically follows housing busts. Reducing prospects for excessive risktaking will, in the long-run, assure better credit market performance.

Finally, no Administration official has made any statements that the economy needs to shrink. They have all argued that it is in the national interest for economic growth to resume and become sustained.
 
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I'm happy to see more conservatives voicing their support of the idea. In additional to the National Review, the Wall Street Journal and Bloomberg have now signaled their tentative approval as well.
 
donsutherland1 said:
Washunut,

Several quick points:

1) I favor FDIC insurance. It was an invaluable reform from the Great Depression. My point was that if financial institutions want unfettered ability to take on risk, then those institutions should forego any direct or indirect taxpayer support. I was not calling for the elimination of FDIC insurance. Such a move would be highly counterproductive.

2) I favor resolution authority to deal with institutions that pose systemic risk. Unfortunately, I have serious concerns that political interests will generally trump the kind of difficult decisions that would be necessary to resolve a large, failed institution.

3) The GSEs had no government guarantee. That the federal government intervened to bail them out instead of cleaning them up, breaking them into small pieces, etc., does not change the reality that there actually was no statutory guarantee. As a result of a perceived guarantee, not to mention very bad practices, there was an inherent bias toward underwriting too many mortgages at abnormally low rates of interest. Allowing them access to additional Treasury funds is counterproductive and may well be delaying their making the structural and policy reforms necessary to become viable.
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All fair points but allow me to rebut:

1. FDIC is for the pure banking side of any institution. If we had a proper. regulated Chineese wall between entites so that the monies you are rightfully concerned about do not get siphoned off that would materially sove the problem here. Also it would be appropriate to have different leverage ratios for different types of risk. This could be established under current law.
We did a poor job in many areas, risk management, ratings of securities and regulatory. Let's not pounce on one area, that by the way creates a lot of wealth in America albeit the last couple of years for political expediency.

2. The Fed with of all the actors is probably the most apolitical also took some drastic actions. I wish they had had done so earlier. leading up to the bubble. That talks to the individual philosophy of the charmen , not our ability to take tough stances.

Let's remember that these people essentiallt wiped out the equity of Bear Sterns, Lehman and Merrill. From the secretaries up, peoples like savings and retirement funds were wiped out not to mention the billions lost by investors, like pension funds etc. So they showed they would step up and make hard decisions when needed. I think if they had the resolution authority they would have taken down Citi and maybe Bank of America. Let's remember that GS raised $12 billion in provate money before TARP, including something like $5 billion from Buffet the greatest investor of our time.

3. While the guarentee of the GSEs is only implied. There was no way the government would step away from that implied guarentee. The dirty little secret here is not keeping this company alive for stockholders they are essentially wiped out already. The bonds had to be saved because so such of this debt is held by Chineese and other foreigners. They considered this debt guarenteed.

Now we have shown we can afford to screw the US investors and managers, what we will not do is wipe out the Chineese debt in Fannie and Freddie, thus the need to save them.
 
nonpareil said:
Where do you get that idea from? :confused:

And other countries which seek tighter regulation all come across that arguement: "our financial system need to be able to compete in the world stage". But think about the nature of some of these firms, they have offices in most financial centres in the world. If New York becomes tougher about capital requirement, would they pull their offices out of New York? I highly doubt it. Follow that argument will allow banks to play governments against each other. On the other hand, there are of course costs to regulations, the key is to seek the best trade-off between tax-payer protection and less regulation. I think partitioning the commercial banks from investment bank is really not that heavy a burden on the banks, and of course, whatever the government comes up with, be sure that there will be lots of smart ambitious bankers looking for ways around them.
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Not sure what the first comment refers to.

Capital will flow to whereever it is allowed to earn the best return. So if regulation creates a difference in regulation between London and America, yes capital will flow there. No one has to completely leave town like you mention, they shift the work, profit, employment, taxes paid to government ( which is never mentioned) to another part of the world.

This is an international world, we should have learned that over the last 15 years as our manufacturing base has been hollowed out by foreign competition. Those factories in China are there because they get a greater return than building one in Ohio.

I am in favor of finding ways to not contaminate the the money guarenteed by FDIC from more speculative trades. Although almost everyone will concede that is not the reason for the banking problems.

This is another political gimmick so that the administrative can turn the pitchforks against bankers. It is Obama being a politician which he is.

Not change we can believe in. But we were the dopes who bought that snake oil in 2008.
 
Whew! You guy's are way over my head with some of this....But in simplistic terms, what I see is that after years of demo's driving the banks to do the practices that landed them in the gutter, Bush, and Obama (both Progressive btw.) swoop in to bail them out. However, it was Obama that carried it over to the unions, and Auto sector, as well as his buddies in non traditional lending sources like GE. Now, he needs to assert his power that he holds over them, and in what should be apparent as a blatant move on his part he is taxing those large entities that have already paid back their portions and letting off the hook those that submitted to his Marx like take over of their industries.

He is displaying the tendencies of most hard core progressives in here and in the world of forcing large capitalist entities to shrink in order to avoid this unconstitutional move on his part. It is unconscionable, and corrupt, and should be called out.

What have you libs subjected us to with this despot?


j-mac
 
Baralis said:
Im not sure If I agree with Obamas approach but I agree something needs to be done. The free market is one area I disagree with the right on simply because we have no "free" market. It has become as corrupt as washington thanks in a large part to washington. The banking sector is just one aspect that needs a overhaul from the bottom up. I read an article recently that stated that if you allocated all the wealth in the world that 3/5's of it is based on absolutly nothing. Its all a numbers game that starts in the banking sector. The banking sector is allowed to purchase items with no hard capital to back it up. This in a large part has led to many of our recent issues. Its all a shell game and when it goes wrong we all pay for it.
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I agree somewhat... however, the party in power has a track record of supporting the most corrupt banking policies in recent history - not that the republicans are totally innocent. I flat out do not trust Obama, Pelosi, and Reid to do anything that is truly good for the American people, especially new banking policy. Let's see this saga aired out with TRUE TRANSPARENCY... something we've yet to see from Obama and company.
 
j-mac said:
Whew! You guy's are way over my head with some of this....But in simplistic terms, what I see is that after years of demo's driving the banks to do the practices that landed them in the gutter, Bush, and Obama (both Progressive btw.) swoop in to bail them out.
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Any president that cared at all about the country would've done the same thing. It would have been unbelievably irresponsible to let the entire financial sector collapse.That's exactly why these reforms are necessary. To prevent this from happening again, where the banks put us in a position where we HAVE to bail them out.
 
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Kandahar said:
Any president that cared at all about the country would've done the same thing. It would have been unbelievably irresponsible to let the entire financial sector collapse.That's exactly why these reforms are necessary. To prevent this from happening again, where the banks put us in a position where we HAVE to bail them out.
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So, in your opinion it was these banks that screwed the pooch so to speak, with NO outside pressure to do these things from oh, say congress, ACORN, and alike? Nah, I don't buy it. And what is the unintended consequence to this would you say?


j-mac
 
Kandahar said:
Any president that cared at all about the country would've done the same thing. It would have been unbelievably irresponsible to let the entire financial sector collapse.That's exactly why these reforms are necessary. To prevent this from happening again, where the banks put us in a position where we HAVE to bail them out.
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the whole system wouldn't have collapsed, we do have laws and methods of dealing with insolvency even on a massive scale

plus nothing has been stopped or fixed instead it has just been delayed for awhile at massive expense to the tax payer and it can still collapse quite easily, ponzi schemes are unstable as it is part of their nature
 
j-mac said:
So, in your opinion it was these banks that screwed the pooch so to speak, with NO outside pressure to do these things from oh, say congress, ACORN, and alike? Nah, I don't buy it. And what is the unintended consequence to this would you say?


j-mac
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would you borrow 60-100 times your yearly salary? would you loan someone else 60-100 times their yearly salary?

the banks did and did so of their own free will no prompting or coercion needed, and why not the money was free and no consequences for failure
 
elbatrop said:
would you borrow 60-100 times your yearly salary? would you loan someone else 60-100 times their yearly salary?

the banks did and did so of their own free will no prompting or coercion needed, and why not the money was free and no consequences for failure
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Not true.....I suggest reading up on the history of the CRA.


j-mac
 
washunut said:
Not sure what the first comment refers to.
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It refers to your comment that the administration thinks that the economy should shrink.

Capital will flow to whereever it is allowed to earn the best return. So if regulation creates a difference in regulation between London and America, yes capital will flow there. No one has to completely leave town like you mention, they shift the work, profit, employment, taxes paid to government ( which is never mentioned) to another part of the world.

This is an international world, we should have learned that over the last 15 years as our manufacturing base has been hollowed out by foreign competition. Those factories in China are there because they get a greater return than building one in Ohio.
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Capital already flows where they think the returns is biggest, from England to Iceland via the deposits schemes, from Germany to America via investment securities, from Japan and US to Australia via the carry trade. Yet through out all that time, the standing of financial centres like the City, Frankfurt, Tokyo, or New York, were not lessened. What will change? You know they said the same thing when Sarbanes-Oxley was passed, and yet New York is still a world financial centre. The people in the City is grumbling about the new tax on bonuses, I can bet you that a decade from now the City will still be the financial centre of the world. It is where the contacts are, where the money gathers. You can relocate factories, but it's harder to relocate a well entrenched industry/connections like the City.

I am in favor of finding ways to not contaminate the the money guarenteed by FDIC from more speculative trades. Although almost everyone will concede that is not the reason for the banking problems.

This is another political gimmick so that the administrative can turn the pitchforks against bankers. It is Obama being a politician which he is.

Not change we can believe in. But we were the dopes who bought that snake oil in 2008.
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You agree with the measure, but because Obama is the one who push the legislation, it's a "political gimmick so that the administrative can turn the pitchforks against bankers"? :confused:

But I don't care about what it is to the politicians, I care about the merits of the proposal. I think it does two good things: one is to limit the amount of risks the bank can take by limiting the amount of capital available for those activities. Second, it lessens the government's implied support for the banks, though not far enough.
 
j-mac said:
Not true.....I suggest reading up on the history of the CRA.


j-mac
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I have and the volume of loans you are talking about is PUNY.

please explain why prime loans are defaulting at a rate north of 5%, and that btw puts most banks out of business if they follow the reserve requirements

Fact is the banks over leveraged and gambled and did it on their own free will and when crunch time came they got burned and this has happened many many times in history. They assumed the ponzi scheme of securitization would hold up under pressure and it didn't and here we are.

oh ya and while I am here, take a look at some of the failed banks foreclosed on by the FDIC in 2009, yes they levered up in some cases to as high as 60:1 and the losses show it and most had no CRA involvement AT ALL
 
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elbatrop said:
I have and the volume of loans you are talking about is PUNY.

please explain why prime loans are defaulting at a rate north of 5%, and that btw puts most banks out of business if they follow the reserve requirements

Fact is the banks over leveraged and gambled and did it on their own free will and when crunch time came they got burned and this has happened many many times in history. They assumed the ponzi scheme of securitization would hold up under pressure and it didn't and here we are.
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I am not totally disagreeing with you here. But, I have to say that had not the pressure from demo's and progressive repubs been put on these banks to get people into homes, and make loans they couldn't afford, then we would be looking at a totally different scenario right now. To punish one side of the equation is not being genuine.


j-mac
 
j-mac said:
I am not totally disagreeing with you here. But, I have to say that had not the pressure from demo's and progressive repubs been put on these banks to get people into homes, and make loans they couldn't afford, then we would be looking at a totally different scenario right now. To punish one side of the equation is not being genuine.


j-mac
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contract law j-mac, two parties are involved both are expected to act in their best interests and follow the law

banks have reserve requirements they ignored, mortgage underwriters have standards they ignored, and citizens that knew better borrowed money they couldn't repay and they all deserve the appropriate punishments that is why we have laws to deal with all of it

banks have no excuses at all, they create money from nothing and have no excuse at all to screw that up, they got greedy and now they are insolvent
 
nonpareil said:
It refers to your comment that the administration thinks that the economy should shrink.



Capital already flows where they think the returns is biggest, from England to Iceland via the deposits schemes, from Germany to America via investment securities, from Japan and US to Australia via the carry trade. Yet through out all that time, the standing of financial centres like the City, Frankfurt, Tokyo, or New York, were not lessened. What will change? You know they said the same thing when Sarbanes-Oxley was passed, and yet New York is still a world financial centre. The people in the City is grumbling about the new tax on bonuses, I can bet you that a decade from now the City will still be the financial centre of the world. It is where the contacts are, where the money gathers. You can relocate factories, but it's harder to relocate a well entrenched industry/connections like the City.



You agree with the measure, but because Obama is the one who push the legislation, it's a "political gimmick so that the administrative can turn the pitchforks against bankers"? :confused:

But I don't care about what it is to the politicians, I care about the merits of the proposal. I think it does two good things: one is to limit the amount of risks the bank can take by limiting the amount of capital available for those activities. Second, it lessens the government's implied support for the banks, though not far enough.
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On the first point, I think the administration was clear in saying that we had to move past an economy based on consumerism and get back to making things and living within our means. I agree with that it is how we get there that counts as well.

Next, if companies have to disconnect their trading from pure banking this will be a competitive disadvantage against European entities that have one shop banking. Over time the relationships you rightly point out are essential will erode as large corporations will find banking partners who can handle all of their needs. One won't forever go to one bank for a loan and another to hedge your currency positions.

On the last point, I am a lifelong democrat. So it isn't because it is Obama I am against these policies. I can be and am for some type of reform as I mentioned with better regulation, enforcing Chinese walls etc. I am not for the method expressed by the President yesterday.
 
j-mac said:
So, in your opinion it was these banks that screwed the pooch so to speak, with NO outside pressure to do these things from oh, say congress, ACORN, and alike?
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I wouldn't say the banks had no help, but it's mostly their fault. Congress certainly helped "screw the pooch" by repealing Glass-Steagall in the 1990s. Obama's latest proposal is basically a variant on McCain/Cantwell's idea to reinstate Glass-Steagall, and would be an excellent idea.

ACORN? Uhh no. A nonprofit organization did not cause a financial meltdown. :roll:

j-mac said:
Nah, I don't buy it. And what is the unintended consequence to this would you say?
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The unintended consequence was putting our government in a situation where it was faced with the choice of allowing the entire financial system to collapse or bailing out the banks with taxpayer money. It did the responsible thing and chose the latter. Some regulatory reforms are necessary to minimize the risk of it happening again, and to eliminate the moral hazard of banks taking big risks knowing that Congress will bail them out.
 
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