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Paul Volcker on Financial Reform

We have after all a system that broke down in the most serious crisis in 75 years. The cost has been enormous in terms of unemployment and lost production. The repercussions have been international.

Aggressive action by governments and central banks — really unprecedented in both magnitude and scope — has been necessary to revive and maintain market functions. Some of that support has continued to this day. Here in the United States as elsewhere, some of the largest and proudest financial institutions — including both investment and commercial banks — have been rescued or merged with the help of massive official funds. Those actions were taken out of well-justified concern that their outright failure would irreparably impair market functioning and further damage the real economy already in recession...

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Peter Schiff on Banking Reform

Once again, President Obama completely missed the mark on the causes of and solutions to the financial crisis. In his speech this morning, the President outlined a major initiative to increase regulation of banks. He claims the financial crisis was caused by reckless speculation by greedy bankers in search of quick profits. What he fails to acknowledge is that this behavior was the direct result of the cheap credit supplied by the Federal Reserve and the moral hazard supplied by government regulations and subsidies.

In his efforts to prevent the next financial crisis, the President is focused on the symptoms rather than the disease. Therefore, his attempt to prevent future financial crises is doomed to failure, as the misguided policies that led to the last crisis are preserved while even more damaging policies are added. Current Fed policy is more reckless than before; continued subsidies to the mortgage market and the bailouts for banks are creating even bigger moral hazards; and, as a result, the economy is even more leveraged and more vulnerable to rising interest rates than ever.

The only way to prevent another financial crisis would be to reverse the fiscal and monetary policies that lead to the last crisis, and which now threaten to bring on an ever larger one. However, this Administration seems to lack the brains or the guts to do it.

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