Greetings, loyal minions. Your Maximum Leader is still thinking a lot about his recent banking post and the follow up it has generated.

If you haven’t read it… Your Maximum Leader’s post and comments are here. Then FLG was kind enough to follow-on. FLG’s first post is here, his second post is here, his third post is here, his fourth post is here, and his fifth post is here. Your Maximum Leader has actually been following FLG’s posts quite carefully. It makes him wish he took more finance classes in college. (He is still reading Niall Ferguson’s “Ascent of Money” which is a history of finance and pretty interesting.)

Your Maximum Leader also listened to a very interesting podcast recently from The Economist about increasing capital requirements at banks. It is here:

There is a lot to think about in all of this, and this post is (at best) going to be a clumsy mish-mash of ideas. Your Maximum Leader favors an upward adjustment of capital requirements at banks. How much should that adjustment be, he can’t tell. After listening to the Economist piece his isn’t confident of any number he’s heard out there on news programs. There has to be a number it seems to be a matter of pinning it down.

Then you have the talk of Glass-Steagall and Gramm-Leach-Biley… Your Maximum Leader has never advocated a return to the days of Glass-Steagall. But GLB probably needs to be tweaked some. Again, what do you tweak? Your Maximum Leader knows enough to say he isn’t sure. He would like to see restrictions on proprietary trading by banks, but as Buttonwood and FLG point out in one of the previously linked peices; how do you do that? He would also like to see the riskier elements of the “too big to fail” banks moved to small subsidiaries - or divested altogether to limit the exposure of the taxpayer who still seems to be guaranteeing all these businesses. Again… The devil is in the details here…

Look, your Maximum Leader realizes that the markets will adapt and change faster than any government regulatory regimen. But we are at a point at which there have been events from which we need to learn and make changes to the regulatory regimen. The hand of government will always be clumsy and slow, but we can take the time now to try and attempt to modify the environment to avoid the recurrence of the catastrophic meltdown we have just experienced (and are still experiencing).

In other economic news… Your Maximum Leader would like to see the President go further in his spending freeze. He would like to see Social Security and other Federal entitlements put into the “frozen” spending. He’d also like to see the President urge that the tax cuts passed during the Bush Administration be made permanent. Both of these positions seem to be prudent ones. Especially considering that billions of dollars of “stimulus” money has yet to be spent. That money is still out there hanging ’round…

As much as your Maximum Leader would like to see budget cutting and more deficit control, he feels the most he can (and should) ask for now is restraint. Let’s let things stabilize and then see where we stand.

And because all the cool kidz are posting it…

Thanks to Joan of Arrgghh for the video. Love it.

Carry on.

UPDATE FROM YOUR MAXIMUM LEADER: The Economist podcast he linked above was not the correct one - although it is pertinent to the discussion. This is the one he meant to link:

Carry on.

ANOTHER UPDATE FROM YOUR MAXIMUM LEADER: (NB to Huck Foley: Your Maximum Leader appreciates your comments and is glad that you stepped up to speak on the topic. Your Maximum Leader is in agreement with your point about the Community Redevelopment Act playing a large part in creating the bubble that recently burst. Thanks for the food for thought.)