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Obama’s Plan To Be Judged By A Goldman Breakup
Commentary by Simon Johnson, first appearing in BusinessWeek
At the broad level, there was much to applaud in
yesterday’s announcement from the White House regarding potential new
constraints on the scale and scope of our largest banks.
After more than a year of tough argument, Paul
Volcker has finally persuaded top aides to President Barack Obama that
the unconditional bailouts of 2008-2009 planted the seeds for another
major economic crisis. Unfortunately, in their scramble to announce
this major policy shift ahead of Wall Street’s bonus season, the
administration didn’t line up all relevant details.
In particular, the White House background briefing
yesterday morning -- while somewhat ambiguous -- gave listeners the
strong impression that these new proposals would freeze the size of our
largest banks “as is.” This makes no sense. Why would anyone regard 20
years of reckless expansion, a massive global crisis, and the
most-generous bailout in recorded history as the recipe for creating
right-sized banks?
There is no evidence, for example, that the increase
in bank size since the mid-1990s has brought anything other than huge
social costs in terms of direct financial rescues, the fiscal stimulus
needed to prevent another Great Depression, and millions of lost jobs.
The administration has most evidently not done a
great deal of other preparatory work. How will off-balance-sheet
activities be treated? Should some hedge funds also be regarded as too
big to fail? And why would merely controlling proprietary trading be
enough to de-risk out-of-control behemoths, such as Citigroup?
Still, we should treat the next few weeks as the
public- comment phase for potentially serious principles and an
opportunity to press for workable details.
Pushing Back
The big banks, naturally, are already hard at work
pushing in the other direction. This is actually good and exactly what
we need. The banks have hidden behind their lobbyists and
disinformation managers for too long. The administration has decided to
take the fight to them, face-to-face, with the full backing of a
president at last willing to press for change. The goal should be to
flush both the big bankers and their Republican -- and Democratic --
backers into the open.
There are sensible people on both sides of the
political aisle on this issue. But there is also Senator Richard Shelby
of Alabama, the ranking minority member of the Senate banking
committee, who has been arguing that the morass of massive financial
institutions can be handled through minor modifications of our
bankruptcy code.
Not Like Canada
This is as nonsensical, and as unconnected to
reality, as the view -- also current among some pro-banking
constituencies - - that the U.S. can just become more like Canada, in
the mythical sense of having four big banks that are well regulated.
Please, just spend some time with people who know the facts and review
in detail the breakdown of risk management at Canada’s greatest
financial institutions.
President Obama finally has economic logic and solid
history on his side. If he comes out clear and strong on this issue in
his State of the Union address on Jan. 27 and in all the ensuing
congressional discussions, he will flush out into the open the
self-serving greed and frank stupidity that underpins the idea that
bigger finance is good, unregulated big finance is better, and today’s
mammoth unfettered global banks are best.
This could turn out to be a huge policy change with
important and positive ramifications around the world. But it is not
for the faint of heart or weak of mind.
Taking Side
The serious debate with big finance is just
beginning; it will get very nasty, hundreds of millions of dollars will
be spent, and everyone, in the end, must take a side.
What we need is for sensible legislation to come to
the floor of the Senate and for all senators to go on the record, in
detail.
A public debate of historic proportions -- the kind
that shaped this republic -- will set up the Democrats for the midterm
elections. If you would like to run on a pro-too-big-to- fail platform,
go ahead.
As we drill down into the details of ideas for
breaking the economic and political power of oversized banks, we need
this litmus test against which serious suggestions should be judged:
Does a proposal, at the end of the day, imply that Goldman Sachs should
break itself up into at least four or five independent pieces, with the
biggest being no more than 1 percent of gross domestic product, or
roughly $150 billion?
If the answer is yes, we are making progress in
moving our financial system back toward where it was in the early
1990s, when it worked fine (and Goldman was a world-class investment
bank) and was much less threatening to the global economy. If the
answer is no, we are merely repainting -- ever so gently -- the
deckchairs on the Titanic.
(Simon Johnson, a professor at MIT’s Sloan School of
Management and former chief economist of the International Monetary
Fund, is co-author of “13 Bankers” to be published in April 2010. The
opinions expressed are his own.)
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"What we need is for sensible legislation to come to the floor of the Senate and for all senators to go on the record, in detail."
What we NEED is to abolish ALL lobbying activies immediately and totally. Offshore the SOB's to Beijing or Hanoi like the millions of jobs they were responsible for shipping out.
But what we got today from the Supreme Court's 5 judges that are not "activists" was a total unleashing of the hounds to spend and lobby relentlessly. Because corporations need the exact same rights as individual citizens -- so the good part of all this, is that I, as a private citizen can now run unlimited amounts of robocalling, run as many prime time attack ads as I want, etc.
Yay justice!
I am very fearful of any attempt to restrict the ability to speak freely.
corporations are nothing more than a group of people.
perhaps Mary Schapiro might think about that for a bit.
deadhead,
Don't forget -- the unions are just a group of people too. And they were given the "all clear" to spend their dues as if they themselves serviced Ben's printing press.
Free speech is a treasured right, and I am deeply grateful to be able to enjoy this right. I hope all the extra free speech that is financed by all the folks in unions and corporations that want to change the rules in their favor brings about a hastening of the collapse of our broken system.
Monkey wrench this sucker -- let's get on with life in America version 2.0.
Silence free speach and you get to hear the second ammendment.
Do realize laws restricting speech never work out well.. just look at what happened with McCain's campign reform bill. Then some people are unable to release a smear film on the Clintons because of how it was funded. Total bullshit. You are insane.
Edit: unable to broadcast I should say.. simply because of who funded it.
I say we let em crash
They bought their tickets, they knew what they were getting into
I find it so interesting in a country that cherishes the First ammendment so much that it considers lobbyists contributions to corrupted politicians free speech, but we still can't see bare breasts on primetime TV.
well, duh. what did you expect from a country that was founded by people the UK got to leave because they were too uptight?
I don't see corporations or unions mentioned anywhere in the First Amendment. My read of the Constitution is that those rights are guaranteed to citizens. While corporations and unions are nothing more than a group of people, neither of them are citizens. Therefore, I am fairly certain that most of the Constitution's framers would be APPALLED by yesterday's USSC decision.
If we are going to protect corps and unions "right" to free speech, why don't we just go the whole nine yards and allow each of these groups to have supervotes in elections?
one of my problems is when people always start talking about 'rights'. As George Carlin pointed out, ask Japanese Americans in WWII about 'rights'. If they can be taken away whenever the govt wants , they are privileges, not rights.
I like this idea of supervotes. We could scale the number of supervotes a corporation or union gets based on company market value, union pension fund assets (not less unfunded liabilities) hedge fund assets under management, you name it. But why stop there?
We could give supervotes to churches and other non-profits, non union pensions and other retirement plans, etc. Let's just get the perversion and destruction of the representative government in the US to its terminus as quickly as possible. Why stop at unlimited campaign spending for non-natural persons in the name of free speech?
Perhaps you should be more fearful of rights of "vapor entities" having precedent over you as an individual.
Corporations - pay far less in taxes than individuals (if any at all)
Corporations - can now leverage their wealth against individuals and have a political voice far louder than an individuals.
Corporations - still aren't accountable as an individual, nor are they accountable at all, nothing but smoke and mirrors of self-interest.
Corporations - can now protect themselves with guns, they can now kill you but you cannot kill them.
This isn't about free speech (don't be the sucker) this is about the Constitution applying to entities such as groups, animals, and anything else that can make noise... not first amendment rights, but THE Constitution.
Don't be fooled by the framing of this argument, this is now the Corporate States of America, soon to drop below 50.
Zay say zat "Breaking up is hard to do"
"Now I know... I know zat iss true"
http://www.time.com/time/magazine/article/0,9171,990531,00.html
Undt zat vass only Microsoft. I place zee odds at 5 to 4 against!
Ha ha ha hahahahhah! Ooops! I think I just pooped in my Lederhosen!
I have no idea how big of an issue will be on scaling the largest of the large, but Simon make some decent points here. Except for the sensible legislation part.
P.S. Who in the world is Amy Calistri... and why is the lady wearing an Amish hat?
It's actually a Stetson. It's the Tanya Tucker model with4X felt. I've had it since 1993. I'm not sure if it's lucky. But it's seen me through both bull and bear markets.
It's beginning to sound not only like war, but revolution in the making (note the Supreme Court decision on corporate ownership of government.) I wonder if it will be televised?
obama must be pushing the market down on purpose.
the banks probably sold already and need a good buying op.
mwaaaaaahahahahahahahahahahaha (stolen concept)
you mean as opposed to just going short and engineering the top?
Lost all respect for Simon Johnson's point right here. The Crash of 2008 wasn't a non-linear event, it was the logical extension of the Ponzi. I don't want to go back to the 1990's, but I think the best outcome would be the repeal of the Federal Reserve Act. It is human nature to have booms and busts. The FRB only exacerbates the severity of those peaks and troughs. We don't need the FRB.
I pretty much agree with those thoughts... and he really should have gone back to 1982 instead of the early 1990's... apparently forgotten was the excesses of the Michael Milken years.
Just for curiosity's sake... if we don't have a US central banking system, what is the alternative? And how does one facilitate global exchange under that regime? That question is open to the floor...
Damn good question... no good alternative really... especially when you consider national security issues.
So new central bank it will be... perhaps global even. Something transparent to all and 'controlled' by us preferably... but located in Basel.
Fiatsco's may be dead until people once again forget the horror soon to unfold. Perhaps a global currency of electronic credits set to the value of commodities...
Gold and silver of course but there is not enough PM's to meet the full needs of monetization... Kilo of copper?, bushel of wheat?, floating yet interchangable to protect against central bank devaluation...
Who knows... anyone?
Assetman
We do not need central banks even in a global exchange environment.
Gold-Silver worldwide monetary standard (we can argue about other kind of backing, however it should not be unbacked fiat) and full reserve banking.
Slower but much more stable growth matching real productivity environment.
No more competitive "race to the bottom" devaluations, no more obscene arbitrage opportunities (financial, labor, etc...) unleashed by central banks activities.
I very much appreciate the insights... some good food for thought.
In the global currency scenario, I'm left thinking we may be giving up a central piece of out own autonomy under the auspicies of the global financial system. If we (the US) can control it, would be a primary consideration, one would think.
As for the gold standard, it has been adopted and shelved numerous times in the past-- in and outside the U.S.. Why is that? Is there enough gold (or silver) to support a medium of exchange globally?
Sorry for all the questions... ;)
"As for the gold standard, it has been adopted and shelved numerous times in the past-- in and outside the U.S.. "
The gold standard has been shelved several times because governments eventually do not want to live within their means like any household have to (not lately but let's not digress...).
The state needs to pay for wars, political corruption and patronage, etc...and they do not want to raise citizen's taxes (and anger level) to pay for it.
Historically the gold standard has often been suspended before military adventures....however as much as many times has been suspended it has been reinstated when the folly of fiat unbacked currencies eventually run its inevitable course...people wants stability and the despised "barbarous relic" monetary linkage is reintroduced.
We can discuss if the Gold-Silver standard or some other form of backing (Energy?) is the optimal solution...what do we know is that fiat currencies do not work and never will in the long run...give to someone the power to print money and he will abuse it.
One very important thing to remember is that reintroducing the Gold standard will not resolve the problem of boom and bust cycles if the fraudulent fractional reserve banking system is left in place. Full reserve should be the way to go.
The "need" to increase the money supply in order to grow the economy is a fallacious concept....real growth is obtained with real productivity and efficiency improvement...you do not need more money....in a gold standard and full reserve banking system price would decline with time, it should be the natural course of progress...in the 19th century we had robust growth in a general price deflation environment on average.
Take the tech sector for example....the constant price deflation does not hurt that thriving industry...because it is backed by continuous improvement and efficiency advancements.
The math of a fiat debt backed currency system is extremely straightforward and horrendous at the same time...you do not need fancy charts of complex equations...money is generated out of thin air backed by debt but the system does not create the money necessary to repay that debt.....so we are like hamsters spinning that wheel faster and faster trying to repay the debt that is increasingly created in the system...society, as a whole, will never pay off its debts because you need more debt to pay the outstanding balances....few will have no debt while others will be leveraged up to their eyeballs (sounds familiar??) eventually the system crashes because there is too much outstanding debt....we keep pulling future demand forward in a mad race to stay ahead of the game.
If everybody pay off (impossible by the very nature of the system) or default on their debt, deflation sets in, money vanishes into thin air in the same way has been created....including the money of people with no leverage.
If someone tries to pull the wool in front of your eyes with fancy jargon and math acrobatics do not be fooled...this is the way the system works in its essence, there is no escape.
If the public is unwilling (or unable) to take more debt, the government will have no alternative other than eventually assuming the debt of the system on its own books taking it to unsustainable levels even for a sovereign entity and put money directly in the hands of people, deflation will not be tolerated....this is when currency crises occurs and hyperinflation sets in....it's the terminal stage of a fiat currency...debtors (those with cash flow positive assets) will be able to wipe out their outstanding balances in real terms.
The Weimar Republic hyperinflationary period did wonder for the heavily indebted German industrialists of the time.
I'm an engineering major and I was not much interested in economics until the early 2000s...and when I did learn about it I could not believe we are trapped in such monstrosity...it is slavery pure and simple....
Fiat currencies distort reality, good real production businesses cannot take sound informed long term decisions...they have to constantly worry about devaluation, exchange rates, changes in interest rates decided by a bunch of academics......bright ambitious people will be inevitably attracted by the institutions, groups and activities that benefit the most from the system....the first privileged recipients of the funny money which will have all the advantages.....they will get the money before it trickle down to Joe Six Pack, before price rises....they have special channels of communication with the money wizards.....so many graduates wanted to be in investment banking, hedge funds or private equity in the last 15 years....why doing real productive work when with the magic of leverage you can trade, strip and flip assets around and make a killing thanks to your reserved pipes to the money cornucopia.....a casino mentality takes over....
The system grants enormous powers to the money wizards, they can, intentionally if they are evil or untentionally if they are incompetent, destroy an economy at the flip of a monetary switch.
"Give me control of a nation's money and I care not who makes the laws"
Mayer Amschel Rothschild (1744 -1812), Godfather of the Rothschild Banking Cartel of Europe
"I care not what puppet is placed on the throne of England to rule the Empire, ...The man that controls Britain's money supply controls the British Empire. And I control the money supply."
Baron Nathan Mayer Rothschild (1777-1836) London financier, one of the founders of the international Rothschild banking dynasty
“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”
The Rothschild brothers of London writing to associates in New York, 1863, laying the groundwork for the eventual passage of their catastrophic Federal Reserve Act on December 23, 1913
Finally, the return to sound money (and full reserve banking) it may be the best outcome for the ecological balance of the planet....no more indiscriminated stripping of natural resources financed by cheap money of infinite supply....Environmental activists should be the strongest supporter of Austrian economics.
With a Central bank we have had an arguably ongoing depression and have had before, many times.
Without a central bank we had depressions in the long ago past.
So, with or without a central bank, depressions occur.
The alternative, if we must choose, is do without it and let Congress, the people, decide what the interest rate will be.
For sure the central banks have always wound up screwing the masses and wealth easily confiscated by a cabal of mostly people from one Tribe, who make up a small fraction of the world population but own more than 51% of all the wealth). I, for one, would rather screw myself if given the choice to have that or someone do it to me. (exemptions for T-shirt contest winners, Doutzen Kroes, and naturally gifted east-european, swedish, finnish, and eurasian stunners).
"The Secret of Oz"
It was a cold January night when Paul Adolf Volker was called into the Oval Office. He had been summoned because it was he who slew the inflation dragon of the 80's. Earlier that night, President Obama had sat down by the fire with a hot cup of Coco feeling something was not right with his economic policy. "What could it be?" he asked. "I have given tens of trillions of dollars to Walled St, I have let the Sarkozy brothers sleep with Michelle, and I wax BS Bernanke's head twice a day. What could I do differently to help the American people?" He had almost finished the drink when at last he realized it. "I will summone Mr. Volker and listen to him!"
Now that the man had arrived, Barrok asked him, "Mr. Volker, what can we do to help the American people?" To that Paul A. Volker responded, "BAAAAAAAAAAWAABBAAAWAABBAAAWAABBAA!"
Once a puppet, always a puppet. Obama did not learn fiscal and monetary policy overnight.
Busting up the Banksters is a necessary beginning to repair this great country. Making a living by earning a living is a start.
Conjuring up more and more patty cake paper, while engorging yourself on unearned profits, financed and backstopped by the American Middle Class, is not just shameful, it is criminal.
Our President already has his Secretary of the Treasury showing who he really works for. Timmy is against the Presidents proposals. Gosh, I'm shocked. Lloyd's inside guy is not happy being trumped by Volker.
No bank or group of banks should ever again get away with the daylight robbery of the people of this country.
All incumbents, Remocrat or Depublican, better think about who they are supposed to represent, come November.
And Obama has 3 short years to catch up to the "change we can believe in" mantra he got elected on, or he will be another Jimmy Carter.
Massachussetts is a good start, but it is only a beginning.
Next time a Hank Paulson beats the drum and threatens that the sky will fall in, unless we give his buddies $700 billion, we should pack him a cheese sandwich and send him home.
One thing will save this ship, jobs, and there are none. Iceberg hit, Oslama et al. are just bailing water. Imho the bucket ain't big enough.
unfortunately all of this blather is a crock of shit....i am all for restrictions on banks in order to reduce systemic risk but systemic risk exists because there is no moral hazard....it started evaporating in 1913....and went up in a nuclear cloud in 2008....
the solution is not more laws and regulations - it is allowing crapass banks to fail and go gurgling down to their graves....
the business schools are morticians to the economy and should be razed to the ground along with their quack professors....
I say shatter the big banks into unrecognizable pieces. Leave nothing to remember and vector the industry into the ground. IMO
Do something Chumba would be proud of. Something spectacular.
What kind of an idiot says something like this? Hello?? Savings and Loan Crisis? Anybody? This is the kind of stupidity that makes you chief economist of the IMF and a professor at MIT.
He really dropped an oBOMBa today,
Nikkei got whipped today
You know Forrest Gump was right! Go ahead and include yourself, just for shits and giggles ya know.
Isn't the Volker rule a boon to Goldman? They, since they don't have deposits, will one of the only firms still allowed to do prop trading.
Ghost - if you are out there.. Jesse has an article that you might find of interest.
http://jessescrossroadscafe.blogspot.com/2010/01/is-fed-timing-its-mortg...
Would be interesting to see a closer look at this..
Gub
If GS goes private I want my money back first!!
Goldman Sachs break-up or Goldman Sachs demise?
Serious legislation is worth a strong effort. Serious prosecution also is worth a strong effort. Both can be pursued at the same time. Both are long shots, but my bet is on serious prosecution.
To get serious legislation, it must run the gauntlet of 535 earmarkers, tolltakers, bribetakers, loopholers, and lobbylickers. If Obama and Congress are serious, Congress could, for a start, repeal the Graham-Leach-Bliley Act and make an immediate impact on Wall Street. And if other serious legislation follows, then, as Simon Johnson proposes, the success could be judged by the break up of Goldman Sachs into four or five pieces.
To get serious prosecution, it takes only one prosecutor...any one of the 50 state AGs, any federal prosecutor, any prosecutor. And many prosecutions are already germinating and bubbling. It takes only one prosecutor to investigate just one crime, and follow the money and the connected crimes, and bring down the overlapping criminal enterprises using Racketeer Influenced and Corrupt Organizations Act (RICO) prosecutions.
This is a target rich environment, and the criminal activities (fraud, Ponzi schemes, extortion, looting of treasury, cover-ups, etc.) are continuing today. So the investigation and prosecution can begin anywhere and follow the trail: Countrywide, the mortgage industry and the appraisers or Freddie and Fannie or Citi and the big banksters or with Goldman Sachs and other Wall Street banks or the rating agencies or AIG or with the federal co-conspirators at U.S. Treasury, SEC, OTS, and the Federal Reserve, especially FRBNY, and any members of Congress who aided and abetted.
These overlapping criminal enterprises raped and pillaged the mortgage industry, ruined the housing market, destroyed the credit system, endangered federal/state/municipal financing, pension funds, and the banking system, caused massive unemployment, sent the economy into a downward spiral, endangered the world financial system, extorted the U.S. and the world to pay them billions in ransom or face the destruction of the world financial system and economy, and now are costing taxpayers hundreds of billions, even trillions of $.
New legislation efforts are good but insufficient; rampant criminal activity must be attacked head on. The greatest financial crimes in U.S. history cry out for justice! Take off the kid gloves, and hit these criminals with the iron fist of justice. We need coast-to-coast arrests, from Countrywide to ratings agencies to Goldman Sachs and every one in between. We need Shock and Awe RICO prosecutions and mass trials in style of the Maxiprocesso (Maxi Trial) of the Mafia in Sicily during the mid-1980s that resulted in hundreds of defendants convicted. We need RICO confiscations of the hundreds of billions in illegal "profits" from the criminal enterprises of the banks, mortgage industry, and Wall Street Mafia.
In contrast to Johnson's plan, the success of this plan would be judged by the total demise of Goldman Sachs: prosecution, RICO conviction, RICO confiscations of mega-billions of dollars of ill-gotten gains, repayment of taxpayers, bankruptcy, and prison sentences. Remember, the bankruptcy and demise of Goldman Sachs would have occurred already in 2008 were it not for what appears to be rampant criminal activities: criminal conflict-of-interest, malfeasance, fraud, extortion, collusion by Treasury, Fed, FRBNY, and Goldman Sachs, and fraudulent, unjustified 100% bailout of Goldman Sachs using AIG front man.
Another measure of the success of this plan would be the prosecutor becomes a national hero.
This could put a bitch into Goldie's bonus pool plans.
However I'm sure they'll just rollover and let Congress follow through when they're basically on their offline payroll.
Let me know when it happens. And yeah, I'm holding my breath too.
Sheila Bair Takes Bogus Mortgage Loans for Personal Account from Bank of America While Negotiating Bailout of Bank of America
then she Violates the Covenants...
Ponzi Banking by FDIC Chief
http://www.huffingtonpost.com/2010/01/21/fdic-chief-got-bank-of-am_n_431...
denninger had a piece on it as well.
it will be interesting to see BAC's reaction if any. i imagine Bair will say that she was not aware of the covenant.
To: Deadhead
No doubt it will be, like Geithner's tax problems, "an innocent mistake"
However:
1. A person who makes such a blunder on a simple bank deal is not qualified to run the FDIC
2. A person capable of such bad judgement for failing to disclose the conflict is not qualified to run the FDIC
3. How can she renegotiate the deal while head of FDIC?...How does BofA treat such cases with respect to borrowers who are not regulators with powers over them?
The stench of fraud and abuse emanating from meetings of Obama's top staff and economics team has become overpowering.:
!. Rahm Emanuel collected $13million from Wasserstein Perella for selling toxic derivatives to municipalities.
2. Larry Summers looted Harvard's endowment for the bankers' benefit, got fired and then collected $5million from DEShaw for peddling toxic CDO's to Asian banks/SWF's.
3. Geithner admitted tax evasion.
(p.s., miscellaneous Obama-team fraudsters like Rattner who had to resign as Auto czar when he was exposed for having bribed NY State pension fund officials to invest in his money-losing but big fee-paying Quadrangle funds)
Obama should drop the pretense and hire Madoff and Ezra Merkin to run the economy... at least we would have the best world-class ponzi schemers instead of these runner-up/wannabee's.
Maybe Obama lost his way when his svengali Rezko went to prison.
full disclosure: I voted enthusiastically for Obama in 2008.
What is fascinating about Obama's torpedo into the engine room of the big banks and brokers is how it affected the market. Given that stocks and commodities began to collapse, en masse, in a substantial and high-volume way after the speech, suggest that these very institutions, and their prop desks, were very long, and have to sell to pare down their risk. Hell, look at platinum and palladium this morning. Down huge. Guess we know who has been walking those two metals up the past few months. Gold and silver too. On the other hand, oil is strangely quiet, because, the spec positions in oil must have been relatively low. The curtain has been pulled back!
Seems to me that one should be judged on effectiveness and
being able to accurately and effectively address issues....
Here are some of them.....
Main problems....
1) Securitzation with no skin in the game and improper credit ratings....
2) Conflictive practices....Business models in conflict with their customers....
3) OTC derivative markets not being regulated or exchange traded....
4) Excessive leverage....30...20 to 1 ????
Where is the prudence ....common sense...seriously why would a bank subject its existence to a 5% downward and common price movement ????
5) Fake accounting.....
Items are worth what the market says they are worth....
6) Unfair trading practices....ie legal forms of securites front running....and the difficulty regulating this....
Solution is simple.....Electronic surveillance of a defragmented exchange...
7) Ability to re-create valuations that were created in a false economy....
Simple....restructure the tax code to a 15% consumption tax only....
And the list goes on....but these would go a long way....
The reason why we haven't had any meaningful reform yet is because it's all interconnected. If Obama has finally decided to reject our corporate overlords, then any remedial actions implemented will necessarily be an admission of failure up until meaningful change occurs. In other words, if Goldman is broken up into many small parts (like what should have happened with the "roubini" nationalization), then how can he reconcile their bailout(s)? He will then have to ensure: (a) all monies are clawed back (including executive pay); (b) they no longer get to have every day but 3 be positive trading days in the quarter; (c) no more guarantees of anything (counterparty risk); (d) legislation is passed that actually curtails an institution's ability to become systemically overbearing, without upsetting other areas of the economy; (e) prosecutions to the fullest extent of the law; and, by implication (f) no more QE and no more raise in debt ceiling for TBTF because all the systemically charged institutions should be controlled demolitions.
I just don't see this happening. I believe it is all grandstanding. If the market recovery has been solely initiated by the TBTF, then Obama will simply replace their actions directly with the FED/Treasury. The reason the market has recovered is because IT HAD TO. Food stamps and wellfare are not implemented because we care about poor people. They are implemented to protect property rights and ensure enrollees are too docile to break shit (in the case of black people, "loot", and in the case of white people, "survive"). The PPT is simply an extension of the concept of food stamps and welfare to what once were more wealthy people simply because our decline over the last few decades has increased the number of affected parties, e.g. the middle class, who have been deep captured.
And, if our solution for systemically important institutions is to break them into smaller parts, how do we handle the states? GSE's? Will they just "get their shit together on their own"? What about the blank check given for christmas? Once we stepped down the path of printing, we must stay on it as there is always an outstretched hand. The banks issue is just a smokescreen. Fine, break them up, but without an accountant in congress, we'll be on poor street in no time (not because we aren't already there conceptually, but because our creditors will have foreclosed our McMansion). What about state budgetary shortfalls, fannie, freddie, fha, necessary road and infrastructure improvements, the state of our educational system, entitlements, health care reform, you name it. We've got a lot more stuff to buy in the near future or else finally admit we're broke. All these things are interconnected and, simply put, are rooted in moral hazard. The current administration, nor any of their predecessors or successors, will ever concede the ineptitude necessary to be oblivious to these problems. Which, again is why Obama has to grandstand rather than clean house, because to venture too far into remedial action necessarily means admitting failure and ineptitude (despite trying to blame it all on G.W.).
If he will come out right now and be honest with the american public, addressing the lion's share of our "conspiracy theories", and at the same time propose viable solutions and fight tooth and nail to ensure they're implemented, I believe he still has one last chance to rekindle america's spirit (as he had a firm grasp of the night of his election). If, on the other hand, he keeps attempting piece meal approaches and thawing out dinosaurs every once and a while as political gestures to roar in agreement with us, then he will continue to squander his opportunity to unite us all and we will have Massachusetts revisited for the upcoming elections, aka Judgment Day for his party. No amount of machiavellian aptitude can save one from mutually exclusive positions nor the pitchforks of legions of madmen.
Instead of rejecting the corporate overlords, Obama simply answers to a higher power -- the globalists' agenda. The globalists are acutely aware that the current financial and political system will collapse since they engineered its destruction to make way for an international monetary regime and centrally planned global economy.
Just like an old broken down casino in Las Vegas that is demolished with strategically located explosive charges so too must the American political and financial casino system be razed to the ground in a relatively controlled fashion.
Everything from the coopting of the Tea Party movement by Glenn Beck and Sarah Palin, the intentional whipping up of populist furor against US domestic banks through TARP shock and awe, the Patriot Act and the on the job training of the US military in counterinsurgency techniques is designed to prepare for the end game.
The globalists know that system fail is coming because they planned it.
Our points aren't mutually exclusive and I certainly agree that there are an incredible amount of bread crumbs leading to a directed universal/world plan. But with that said, I just have to stop and wonder whether these things really are planned. Whether thinking that at least someone is in control, even if they have a counter interest, is simply a self serving and deep down soothing endeavor. If my desire for there to be structure and design in the world is simply so strong as to overcome the chaotic truth rooted in the ineptitude of the world's smartest monkey. Whether the simpler answer isn't just that idiotic people got us here and are now scrambling to pick up the pieces. Whether a world government is a certainty without the need for a diabolical fueling organization.
I dunno... There are plenty of things which might lead me to believe the world has been intelligently designed, humans for example... but some that don't, like the sun's eventual implosion and the disappearance of the stars as we are hurled farther and farther away from our only potential expansion points. Likewise, we've got things such as climategate and general environmental agenda that point towards universal control as well as the IMF conveniently popping up all the time to whackthegoldmole by "selling" its gold. But, on the other hand, we've got a conspiracy that necessarily has too many principle actors and eager ears... aside from the fact that collusion never works on a long enough time line (and this has been in the making for a long time).
I dunno... nor do I want to as that would mean I was either about to be suicided or had my boot on the world's throat... neither of which are desirable existences. If there is a big conspiracy, its muscle has no idea.
I believe he still has one last chance to rekindle america's spirit (as he had a firm grasp of the night of his election).
Every president has one last chance.........until they don't. Seriously, how can anyone believe Obama at this point? You have to be smoking a lot.
TO:Clinteastwood-
The debate...
"Is Obama FDR or Hoover?"
Maybe Obama is simply Warren G Harding with a collection of sleazy scammers inside the White House.
Don't be an idiot, Obama is the front man for Rahm. This is all about Rahm's mafia agenda.
Watch next for your 2nd amendments to disappear or be affirmed to anyTHING but the individual.
Rahm is a mobster and is doing the bidding of the mafia - just open your eyes and seek truth and you shall see.
I don't believe him nor any other politician. Well, I should restate that. I believe politicians insofar as I can determine their self interest, because knowing that is like putting the inflatable rails on the gutter lanes. I guess in this regard we're all politicians. But you have to realize that we're (this site's visitors) weirdos and ultimately democracy is a tyranny of the majority. So please do not interpret my post as any blanket approval or trust. It's meant as a guestimate of popular sentiment.
Also, if obama implemented, right now, everything you desire as a policy... Let's say for example that there was a controlled destruction of TBTF, the principle actors are all prosecuted to the furthest extent of the law, education and healthcare are reformed according to your liking, then you would not be the least bit happy? Sometimes, unfortunately, we can't function as robots. There is something deep in our spirit that can't be sequestered... it's ultimately what always leads us astray and subject to manipulation from all directions... But I doubt you could possibly sit idly by without the slightest of emotional confirmation when you believed his actions were correct and presumably have a higher mental trajectory for the country and world.
And I believe he has one last chance in the context that if he came out right now and said, you know what guys, I'm just a know it all from harvard, I thought I had this thing all figured out, but really, I have no business background, my personal philosophies are unsustainable and I can't tell you what is the best thing for you, the blueprint for change was something an idealistic teenager should have written and is not the least bit practical, and in the end, I'm simply a smooth talking politician that spoke a little more clearly than the next guy. However, I am now aware of my ineptitude and am going to implement meaningful reform, etc.
He only gets one shot at this and his chance may have already passed. Implicit in making any reform is exactly the statement above, "i fucked up." Which, is why he is impotent to implement the meaningful change he promised. He's going to have to suck up his pride and admit that an ivy league j.d. isn't a certification in all worldly endeavors.
If he waits too late to have this moment, which he may already have, he will have been panic stricken too long, and incapable of leading us through the necessary changes because he cannot act quickly enough to very fast changing circumstances (nor, conceptually, his political party).
But I don't think that the piecemeal approach will work, it's got to be the WHOLE shebang (not william hung shebang). And no, he doesn't get an infinite amount of lives. He's got a deadline with elections coming and the debt ceiling being hit. A "tie" (in approval) is going to go to republicans... he's got to put up or shut up. This is his last chance (speaking from the perception of joe sixpack, not myself). And he knows its his last chance because of the recent measures he's been jawboning.
I'm not sure why you distinguish between black and white people. In fact, not only does is it distract from your message, but it makes you look racist (which may be the case--I don't know). Your message is good, so why mess it up with comments like that?
I did not distinguish between black and white people.
It was a statement on the media's portrayal of katrina victims who were just trying to find basic necessities after the shit had hit the fan. In other words, when our pacifiers are removed, our claws come out and we revert to the most fundamental behavior, survival. This is the reason for basic governmental assistance.
While I don't condone watching too much MSM, I'm not sure how you could miss the reference... If you're unsure about whether something is racist, it's not... racism will remove all doubts for you.
Johnson is not only a great economist, he is among the millions of frustrated disciples of Barack who became disillusioned as they watched Obama sell out to the banks (or perhaps always owned by). It would appear that Johnson now believes, as do many, that the president has miraculously come to his senses. The president, as it were, has emerged from a cult like trance where Summers and Geithner somehow controlled his perceptions of the economy.
Like so many, Simon appears all too willing to give Obama the benefit of the doubt while ignoring a track record that speaks for itself.
Johnson calls for:
Why such a weak litmus test "a proposal that implies"? Why would he not call for an explicit commitment to break up the too big to fails?
What concerns me is someone such as Johnson has great influence yet he seems to have sipped the Kool Aid of the Axelrod propaganda machine buying once again into the politics of hope and change and the vague possibilities it implies.
Hello Anon 202109
RE: Simon Johnson, MIT Professor..
The Gruber scandal at MIT, which Krugman is caught up in, the paid network of "Fed Economists" who parrot the party line and numerous other disasters have pulled the curtain from "mainstream economics" of which Simon Johnson remains a member.
They are all circling the wagons now,
and Johnson may be rehabilitating himself for a spot in Washington.
There are a few who are not beholden...Roubini, Stiglitz, Galbreath, Black...but economics is primarily political sophistry for sale behind a smokescreen of useless math which would flunk any Statistics 101 course.
Do you have any links re this Gruber scandal? - what you suggest makes sense. As for Roubini - he is a big supporter of Tim and Larry.
Gruber scandal link: ttp://www.facebook.com/l.php?u=http%3A%2F%2Ffdlaction.firedoglake.com%2F2010%2...
to: Anon 202153
I know Roubini used to be their favorite grunt on emerging market crises in the Clinton adminand he's loyal, but it doesn't seem to affect his analyses
but otherwise he is an independent voice on financial crises, not on Fed payroll, for sure!...but he is a member of "the Club" at the end of the day, I admit-he completely opposed the bailouts at the time but he has since clammed up on the subject and parrots the alogical party line "it saved us from a depression".
link to Gruber scandal:
http://fdlaction.firedoglake.com/2010/01/08/does-consulting-contract-explain-gruber’s-false-claims-about-senate-health-bill/
http://fdlaction.firedoglake.com/2010/01/12/jonathan-gruber-paid-consultant-to-the-obama-administration/
Let me try that again. Link for Gruber scandal:
http://fdlaction.firedoglake.com/2010/01/12/grassley-sends-letter-to-seb...
Why not explicit?
Its never going to happen. Period.
Frustrated? Obama has punked me so many times already, when I try to sit on a bar stool, my ass hits the floor.
It has gone so far, nobody believes he is actually going to do anything substantive with the Big Banks. Very few of the bought-and-paid-fors on The Hill are going to risk any political capital for the Admin on this. And the people around Obama, who should be pushing the hardest, will be worthless. Summers pushed to kill Glass-Steagall. Geithner babysat at the NYFRB, during the Wall Street race to 40-1 leveraging. They have to revise and equivocate their past performances, before they even start a discussion on the WH's plans.
Maybe after this initiative gets gound into sausage and swiss cheese, Obama will re-evaluate the people surrounding him. He can tell Emanuel to stop taking phone calls from the DLC all day, or resign. Realize that Summers and Geithner are lousy poster boys for anything but a Bank agenda. And call Schapiro and tell her to stop rearranging the furniture at the SEC, and get on the front of this, or go back to WS fluffing at FINRA.
If Obama has gotten a wake-up call, he needs to realize the people around him are a bad dream.
Looking at what cabals these people belong to would go a long way to figuring out why they say what they say, write what they write, and do what they do.
Conspiracies?
"Any man who admits to nothing but what can be plainly demonstrated, may be sure of nothing but perishing quickly."
Locke
1. Bankers inevitably do dumb things and blow up. The last 150 years or so bear this out pretty clearly.
2. Separating higher risk from more utilitarian banking activities so that they don't coexist under one roof is wise. Taleb is very good on this point.
3. Size matters in any case. A blowup of a big bank is less threatening to the overall economy than a blowup of a small or even many smaller banks. Plus, there is less pressure to save big banks (too big to fail) and all the problems that go with bailouts can be avoided. The S&L crisis at the end of the 80's was destructive but orderly; The Resolution Trust Company dismantled bankrupt thrifts/S&Ls and life went on.
4. It's good that Obama is suddenly getting the religion that smaller is better and I support that view but I think he's just flailing around in the dark. He certainly doesn't seem to think that smaller anything else is better and his team has abetted big bank moral hazard and systemic risk escalation more than anyone else in the history of finance.
But sure, yeah, bust 'em up, lets see some more failures if need be and allow others to come in and fill the vacuum. Whatever happened to regional deposit market share limits anyway?
1. Bankers inevitably do dumb things and blow up. The last 150 years or so bear this out pretty clearly.
2. Separating higher risk from more utilitarian banking activities so that they don't coexist under one roof is wise. Taleb is very good on this point.
3. Size matters in any case. A blowup of a big bank is less threatening to the overall economy than a blowup of a small or even many smaller banks. Plus, there is less pressure to save big banks (too big to fail) and all the problems that go with bailouts can be avoided. The S&L crisis at the end of the 80's was destructive but orderly; The Resolution Trust Company dismantled bankrupt thrifts/S&Ls and life went on.
4. It's good that Obama is suddenly getting the religion that smaller is better and I support that view but I think he's just flailing around in the dark. He certainly doesn't seem to think that smaller anything else is better and his team has abetted big bank moral hazard and systemic risk escalation more than anyone else in the history of finance.
But sure, yeah, bust 'em up, lets see some more failures if need be and allow others to come in and fill the vacuum. Whatever happened to regional deposit market share limits anyway?
If you can't judge Obama by now - you won't judge
him after he does/doesn't break up Goldman.
ok, here's what the "banks" like GS are gonna do.
They will spin off their TLGP-affected portions containing all their liabilities and then BK those institutions, taking *advantage* of the G in TLGP.
GS spins its BHC into one company and all its profitable activities into another. Say bye bye Treasury