Should commercial banking be treated as a public utility?

A very interesting article. I've captured the conclusion here, but it's worth reading in its entirety:

In fact, it sounds more and more like commercial banking, in a world where risks are priced and capitalized properly, is a world of modest profit and modest returns for shareholders. Doesn’t that sound like a utility to you? That’s what banks were for most of the past century, until free market theory was used to push banking into a world of aggressive risk taking, outsized profits, and Midas-like bonuses. It worked only because banking has a “put” to the federal government to come to its rescue in times of trouble.

This put has never been applied so vigorously as today, now that Chase and its big competitors have become the ultimate conduit financial vehicle for the federal government. The Treasury and the Fed are propping up so many different markets that it is estimated some 30% of all finance comes from Washington now. Chase is one of the selected vehicles for channeling all this money, and it is allowed to take a generous transaction fee on every dollar. This is no longer banking, but rentier finance for a few institutions granted monopoly rights – again, the classic definition of a public utility.

Despite all this, Chase, as one of the biggest and best of its breed, is unable to generate anything but a 6% return on equity, and that is a variable 6% at that, prone to disappear in any quarter. What must life be like at Bank of America or Citigroup, where the troubles are worse? Or at Goldman Sachs, which is operating in an alternate universe that allows it to receive bank benefits without any of the discipline?

Essentially, what this is calling for is a highly regulated industry that is in return guaranteed monopoly: the definition of a public utility. It is worth, then, providing a counterargument to that thought. This piece is of the opinion that regulation was in place to deal with the instruments that led to the crisis; instead, what was lacking was enforcement of these regulations, which resulted in fraud.

I've been meaning to post for a month now...

...finally getting around to it.

In this first post I want to put up links to some of the more fascinating articles/issues I've tracked since the start of this recent recession and market crash.

1. Michael Lewis is a pretty famous guy at this point. He is the author of Liar's Poker, which was one of the defining chronicles of Wall Street excess in the 1980's. He's still of course well connected and wrote this piece: The End of Wall Street's Boom
2. Zerohedge is a website I follow regularly, though it's clearly a little more conspiracy-oriented than the mainstream. It does, however, bring to light some very interesting issues: it's efforts have highlighted the issue of high frequency trading and flash orders, for example. One aspect on the 'conspiracy' side that has been echoed by a few others is the number of Goldman Sachs alumni in influential government positions. At the very least, there's some moral hazard, no?
3. I need to make a separate post on the more fundamental issues that I think led to this recent crash: lack of adequate government regulation, greed by financiers and bankers, and greed by regular people. All three are to blame, in my mind, though Wall Street seems to take the brunt of the anger. I have a lot of thoughts on each of the three parties that I want to share - will do shortly.

I decided to create this blog after meeting Adit, and realizing that many people read and research economics and finance on their own; why don't we just collaberate and share all of our ideas, thoughts, and information on these topics?

After all, we will be dealing with the current economic and finance quagmire for years to come, so the better we understand it, the better we can learn from it.