This is a special edition to review the years of Obama's administration. From the policy we could know the possible future paths that Americans could choose. Please do not expect it could come out with some good ideas all the time. We do review many Obama's policies on finance.

  I really hope Mr. Trump would not regret on the result after the election. I hope he could stick with his belief to make America great again. To be honest, Mr. Obama's policy makes Mr. Trump to be even wealthier but not to the whole American people. Those people should be taken care from Mr. Trump's new policy. Please do not hurt those people and do not shatter their dream. Please give people hope instead of unreal fantasy.

Dodd-Frank Act

  Dodd-Frank Act is thought to be a replacement of Glass-Steagall Act. It intends to let big bank trim itself down by increasing the capital requirement burden. Unfortunately, financial technology brings more harm than good to the Dodd-Frank Act's intention. Big conglomerate banks do not want to break themselves into commercial banks and investment banks. Now, we even see the collapsing of Barclay and Deutsche Bank amid the self-destruction of investment bank business. How to revive the business of investment banking may not be an important issue. But how to stop the downsize of financial industry jobs may be the first priority to the United States.

  Wells Fargo uses a wrong way to expand. It forces its sales team members cross-selling customers again and again. American people are not that wealthy as twenty years ago. Cross-selling has its limitation. That is the reason why there are more than two million fake accounts produced inside Wells Fargo. We see the fraud and can not help it. It is obvious that Wells Frago's intention is not wrong under the condition that the economy still grows a lot and makes a lot of people richer. A stronger economy brings people with money in their pockets. So Wells Fargo could serve their financial needs in every way from mortage, credit card, investment and insurance. Unfortunately, the growth of American is not that stronger as we expect. Low GDP growth and wealth distribution problem bring severe wealth discrepancies among American people.

  I still remember my first finance course in the university. My finance teacher says that" Finance is a service to serve the industry in the first place. You should have some stronger industries, then we could talk about finance." Bank provides services to people who need those most. If people have no money in their pockets, how could you expect they need bank services? The story of Alibaba in China tells us that Alibaba provides a platform for people to buy and sell things. Then Alibaba provides financial service to sellers on the platform. Alibaba create a fund to help sellers funding their own business. The fund even opens to others to save money which makes the fund size bigger. The shipping merchandise may face the unsatisfaction of customers. Customer may ask for a refund and give back the merchandise. For the need, Alibaba cooperate with others to build an online insurance company to sell refund insurace to sellers on the platform. Then we see a big jump of those cheaper insurances selling. From above, we see an ecosystem is built from the need of people in the ecommerce business. We  further find that Ali-pay is rising for electronic wallet which make people don't have to bring money in daily life. Those services are not built by Chinese banks, but by a technology firm, Alibaba. It is a brand new ecosystem. It is what we call the financial technology (FinTech). It also satisfy people's financial need.

  It is hard for Mr. Trump to rebuild a firewall between investment bank and commercial bank. Investment banking service is largely replaced by the FinTech activities lately. A P2P platform helps people get loans from the platform's arrangement. Apple-pay replaces cash and credit card for daily life. Yes, it is undeniable that if we want the Galss-Steagall Act to be useful, then American people need new jobs first. To create new needs of investment banking may be the first priority to let people have a job. We need American people have higher-paid jobs, then they could have money to invest and build their own fortune. Then we could talk about the finance and others.

  It is not easy. It is the reason why Mr. Obama tries hard to help people. Higher-paid job is hard to find because American people can not help each other anymore. American people need some new ecosystems in some industries in which American people could live upon. Therefore, financial industry could grow as the old days. Before that, financial technology still plays its part. It is hard to ask big banks to break up into investment bank and commercial bank. The old day is gone if there is no new financial needs.

Captial Reserve Requirement on financial institutions

  You may question if the Dodd-Frank Act ask too much capital reserves for big banks. It is an act to prevent the big banks creating financial instability and further bring great impact of financial crisis to the financial world. AIG is an example which uses the bail-out from the government. Lately, there is a new terminology of bail-in showing the bank saves itself using its own shareholders' capital when facing a financial disaster. It is the reason why the Fed and American financial authority ask big banks to preserve higher capital. The higher capital requirement is used to save the bank itself. In the old day, the Glass-Steagall Act doesn't have the mechanism to ask banks prepare more capital. It may bring another government bail-out if the Glass-Steagall Act is revived amid lower capital preservation of big banks. No matter investment bank or commercial bank has problem in the situation when the Glass-Steagall Act is alive, the government's bail-out is still there if big banks do not have enough capital reserves.

  It makes people wonder how come Mr. Trump's team want a revival of Glass-Steagall act but not a modified version of Dodd-Frank Act. Mr. Trump may ask big banks to downsize themselves. Just like AT&T had been asked to break itself into several small telecom companies. It may be a good idea this time. It could let smaller financial corporation to have less capital requirement thereafter. Maybe, it is what Mr. Trump's team wants.

Transparent Trading System for Swaps market

  Another contribution is to prevent a Lehman-Brother's style financial crisis which lets all those unregulated and regulated financial institutions to trade specified swaps on their free wills in the old days. Before the Dodd-Frank Act, the financial market makes all those trasactions under table and creates a lot of porblems for regulators. In short, it builds some information obscurity of those tradings. We don't know how many trading volumes AIG has on the Credit Default Swaps before 2008 financial crisis. We don't even know if those managers in the AIG know what they are doing and what knid of risk they face when trading with such a large volumes of CDS(Credit Default Swaps) in the British market. We have nonidea if those stuffs in the AOG could manage their financial risk well before 2008. It makes US regulators hard to monitor and ask for further restrictions, or even ask for more capital reserve to bail in the respective AIG own business. In the end, we see capital shortage for the AIG to face the suddenly bankruptcy of Lehman Brother investment bank. We also find out the financial market systematic risk for those larger financial institutions, with market value more than 10-50 billion US dollars, rises more than we expect to the whole world. Now, the Dodd-Frank Act ask all those swaps trading must be trade in a more trasparency way which makes two important impacts to the financial market, the first one is to make those swaps contract to be standardized, a standardization make swap contract easy to trade among participants and the second one is make those swaps to trade in the electronic trading system which increases its transparency for all market participants and let financial regulators easy to monitor and regulate all those wrong doings in the trading process. The futures market on US Treasuries takes ten years to make it happen to trade all in the electronic system, but the Dodd-Frank Act make the swaps market all trade in an electronic form just in one year. It makes the probability of financial crisis much lower amid the launch of the Dodd-Frank Act.




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