Extreme Vetting, But Not For Banks

Tyler Durden's picture

Authored by Matt Taibbi, originally posted at RollingStone.com,

Donald Trump, the man who positioned himself as the common man's shield against Wall Street, signed a series of orders today calling for reviews or rollbacks of financial regulations. He did so after meeting with some friendly helpers.

Here's how CNBC described the crowd of Wall Street CEOs Trump received, before he ordered a review of both the Dodd-Frank Act and the fiduciary rule requiring investment advisors to act in their clients' interests:

"Trump also will meet at the White House with leading CEOs, including JPMorgan's Jamie Dimon, Blackstone's Steve Schwarzman, and BlackRock's Larry Fink."

Leading the way for this assortment of populist heroes will be former Goldman honcho Gary Cohn, now Trump's chief economic advisor.

Dimon, Schwarzman, Fink and Cohn collectively represent a rogues' gallery of the creeps most responsible for the 2008 crash. It would be hard to put together a group of people less sympathetic to the non-wealthy.

Trump's approach to Wall Street is in sharp contrast to his tough-talking stances on terrorism. He talks a big game when slamming the door on penniless refugees, but curls up like a beach weakling around guys who have more money than he does.

The two primary disasters in American history this century (if we're not counting Trump's election) have been 9/11 and the 2008 financial crisis, which cost 8.7 million people their jobs and may have destroyed as much as 45 percent of the world's wealth.

The response to 9/11 we know: major military actions all over the world, plus a radical reshaping of our legal structure, with voters embracing warrantless surveillance, a suspension of habeas corpus, even torture.

But the crisis response? Basically, we gave trillions of dollars to bail out the very actors who caused the mess. Now, with Trump's election, we've triumphantly put those same actors back in charge of non-policing themselves.

In between, we passed a few weak-sauce rules designed to scale back some of the worst excesses. Those rules presumably will be tossed aside now.

Trump's "extreme vetting" plan for immigrants and refugees is based upon a safety argument – i.e., that the smallest chance of a disaster justifies the most extreme measures. Infamously this week, administration spokesdunce Kellyanne Conway resorted to citing a disaster that never even happened – the "Bowling Green Massacre" – as a justification for the crazy visa policy.

This makes Trump's embrace of the Mortgage Crash Dream Team as his advisory panel for how to make Wall Street run more smoothly all the more preposterous.

The crisis was caused by the financial equivalent of open borders. Virtually no one was monitoring risk levels or credit worthiness at the world's biggest companies.

The watchdogs who are supposed to be making sure the morons on Wall Street don't blow up the planet all failed: the compliance people within private companies, the so-called self-regulating organizations like the NYSE, and finally the government agencies like the OCC and the OTS.

These companies are now so enormous that they can't keep track of their own positions. Also, in sharp contrast to the propaganda about what brainy people they all are, many of them lack even the most basic understanding of the potential consequences of deals they might be making.

The leadership of AIG, for instance, basically had no clue how its derivatives portfolio worked, despite the fact that they had $79 billion worth of exposure. Similarly, then-CEO Chuck Prince of Citigroup told the Financial Crisis Inquiry Commission that a $40 billion mortgage position "would not in any way have excited my attention." Both companies ended up needing massive bailouts.

Not only can they not keep track of their own books, they already blow off regulators whenever they get the chance. Take JPMorgan Chase's "London Whale" episode, in which some $6.2 billion in losses in one portfolio accumulated practically overnight. In that case, Dimon simply refused to give the federal regulators routine, required reports as to what was going on with his bank's positions, probably because he himself had no idea how big the hole was at the time.

"Mr. Dimon said it was his decision whether to send the reports to the OCC," a regulator later told the Senate.

 

This is the same Jamie Dimon about whom Trump said today, "There's nobody better to tell me about Dodd-Frank than Jamie Dimon, so thank you, Jamie."

The enduring lesson of the financial crisis is that in markets as complex as this one, the most extreme danger is in opacity. The big problem is that these egomaniacal Wall Street titans want markets as opaque as possible.

This is why they want to get rid of the fiduciary rule, because they don't think it's anyone's business if they choose to bet against their clients (as Cohn's Goldman famously did), or overcharge them, or otherwise screw them.

They don't want to have to submit to even the most basic capital requirements, or be classified a systemically important company, or have to keep their depository businesses separate from their gambling businesses, or have to have a plan for dissolution if they melt down, or really deal with any intrusions at all.

Trump – a man who doesn't want you to see what's going on underneath his hair, let alone in his books – naturally sympathizes with Wall Street's efforts to keep the markets opaque. The obvious conclusion is that these orders will eventually lead us back to ballooning risk, overheated markets (the NYSE is already soaring) and speculative bubbles.

If we're very lucky, it won't crash soon. But can we at least put an end to the "drain the swamp" nonsense?

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LordDampNut's picture
LordDampNut (not verified) Feb 5, 2017 9:46 PM

Trump Voter=Retard

DontGive's picture

You can be a Trump too, when you know how to use debt and put fiatbux to work.

Billy the Poet's picture

The two primary disasters in American history this century (if we're not counting Trump's election)

 

Some folks want their World War 3 so bad.

Mustafa Kemal's picture

Billy, if Trump can keep us out of WWIII and bring jobs back to the US, I dont care about the other stuff. But we will see. Im getting that War-time president feeling again.

Notice how the seven countries on the ban are almost identical with Wolfowitz' seven? 

Iran is number 7. 

Kabbalists love gematria

JamesBond's picture

Trump is a businessman, first and foremost and that means close ties to the banking/finance sector. He doesn't view it as debt, he views it as operating expenses.

jb

Paul Kersey's picture

"Trump also will meet at the White House with leading CEOs, including JPMorgan's Jamie Dimon, Blackstone's Steve Schwarzman, and BlackRock's Larry Fink."

"Dimon, Schwarzman, Fink and Cohn collectively represent a rogues' gallery of the creeps most responsible for the 2008 crash."

 

The "Lost Tribes of Israel" have been missing since 722 B.C. Who knew, that almost three thousand years later, they would be found hanging out in the Trump White House?

brianshell's picture

I recall Obama in 2008 promising to rein in the banks.

I don't recall Trump saying that.

Paul Kersey's picture

Do you recall Trump trashing Ted Cruz and Hillary for their Goldmanite connections? Do you remember the anti-goldmanite commercial Trump ran showing the Goldman CEO and Hillary, yucking it up? Do you recall Trump saying that they need to bring Glass-Steagall back? Well, I do.

Trump said: Hillary Clinton may be the most corrupt person ever to run for President of the United States. The Wall Street banks own her." 5/22/16

Trump on Cruz: ‘Canadian’ Who Goldman Sachs, Citibank ‘Owns’ 1/16

CrankyCurmudgeon's picture

Look at what he's done. Not what he said.

Paul Kersey's picture

"Look at what he's done. Not what he said."

You mean like appointing five Goldmanites to run the nation's economy? Yeah, I looked at that, and I hate it.

francis_the_wonder_hamster's picture

I've been taking the wait-and-see approach with Trump's policies, and thought I've been pleasantly surprised on some fronts, I don't like what I see on this front.  The only positive is that perhaps the smaller banks will stop getting crushed,

not dead yet's picture

Yep, former Goldmanites who went off on their own and accomplished a lot. Goldman always went for top talent so it's no surprise these guys used to work there. If you want someone in the swamp wrasslin the gaters you're going to need experienced people or the gaters are going to eat them. So let's wait and see. Although The Donald has done a lot it's only bee a little over 2 weeks in office. I was disappointed in his latest on the bankers but he may have something differnent in mind to reign them in so let's wait and see.

Paul Kersey's picture

"Goldman always went for top talent so it's no surprise these guys used to work there."

What you should have said was, "Goldman always went for top psychopaths, so it's no surprise these guys used to work there."

These guys aren't going to drain the gators from the swamp, these guys are the biggest gators in the swamp. Cohen, Trump's chief economic advisor, is the former president of Goldman Sachs and was a chief architect of the subprime mortgage CDO swindle that destroyed the U.S. economy. He's already dismantling Dodd-Frank. Dodd-Frank was weak, but at least it had this going for it:

"As part of the Dodd-Frank Act, Congress adopted a ban on proprietary trading and restricted investment in hedge funds and private equity by commercial banks and their affiliates, the so-called "Volcker Rule."

divingengineer's picture

Those guys are some of the biggest assholes on the planet.
I don't like them hanging around the White House, dirtying up the place.

Obadiah's picture

When u say "Lost Tribes"?  are you speaking of the 10 northern ones that crossed the Caucasian Mountains or the two that went to Babylon?

sessinpo's picture

No one in DC has the intest of keeping us out of war. For them, that is what the serfs are bred for. That and taxes.

Uchtdorf's picture

ZHers should know better than anyone to never trust politicians. Results first, then maybe...maybe...we'll believe them.

Billy the Poet's picture

I don't agree with everything Trump says or does but I'm already far more satisfied with his performance than that of any other person for whom I've voted.

Paul Kersey's picture

"I don't agree with everything Trump says or does but I'm already far more satisfied with his performance than that of any other person for whom I've voted."

What the hell did you do in past elections, vote for Obama, Al Sharpton, Anthony Weiner and Larry Craig?

Paul Kersey's picture

No, but I might have voted for Sharpton, if he'd run for Grand Kleagle.

JID's picture

What is your implication, that he should have voted for Clinton?  Are you friggin' nuts?

Paul Kersey's picture

"What is your implication, that he should have voted for Clinton? Are you friggin' nuts?"

No, you are nuts if you think that I'm locked into dualistic thinking and would have considered Hillay Clinton for any public office, let alone the Presidency, where I'd be forced to hear her death rattle of a voice for four years.

"Dualistic thinking, according to William Perry's model of intellectual development, is the intellectual ability to understand good and evil but not the nuances in between. He believed it was the base level of intellectual development that most college freshmen possessed.

In dualistic thinking, students rely on authority figures for direction on what is right or wrong. They prefer to memorize and repeat as opposed to analyze and examine, and they are uncomfortable with active and cooperative learning. Facts and figures are comfortable at this level of development; abstract concepts are not."

That ain't me. I'm post grad after cheating my way through grad school.

not dead yet's picture

Intellectual bullshit and double talk. Say a lot but is just a smoking pile of dog doodoo.

SubjectivObject's picture

I suggest bearing in mind that dualistic thinking is under written by the emotional state.  Here, the intellect, in the pattern of biological survival self interest, rationalizes, justifies, and defends the yes/no dualistic mammalian emotional preference (flight/fight, here/gone, settled/disturbed) of the unevolved human.  Noting too that mammals do not emotionally nuace ambiguity, for them, for their survival in the wild, the polarization as an instinctual reaction works to keep the species strong, and the significance of individual animals does not figure into those priorities.

caconhma's picture

Tramp's made in America approach will destroy America since all these stuff we are getting close for nothing from China, Mexico, India, etc., will cost us a fortune leading to runaway inflation, high interest rates, and collapse of real estate and other interest sensitive industries.

Billy the Poet's picture

The US doesn't destroy so easily. Hire an American kid, fer Crissake.

matermaker's picture

if you don't produce a surplus of anything, you have no wealth.   if your argument is that we will have extremely painful withdrawl from below dirt cheap slave labor made electronics and such, then let the ac/dc song, 'dt' commence.   I have no debt, so an actual interest rate might be nice.  quit fucking the savers and fuck the loose borrowers for once.  I own all my real estate outright, so fuck the speculators and the idiots that have fluxuating rates.

bankrupt this bitch, cull the weakest links, live within our means, save again, produce again out of necessity.

 

even fat lazy americans will pick produce and fruits if they are hungry enough.  won't need the southern dwellers.

 

in the end, jackson's revenge will touch the twenty dollar bill.

reality check, i have 4k in credit card debt.  minus my assets.... fuck it...

not dead yet's picture

Yet the kiidies are whining about how bad they have it when they can get house for little or no money down, cars too, and interest rates of 2 to 3 percent. Pleny of cars going for zero percent. A guy I know showed me one of his savings bank account statements where he averaged $37 grand for the month. His interest was 36 cents.

sun tzu's picture

Dodd Frank was written by Wall St to kill the local banks through regulations, you stupid DC swamp sons of whores

Kanjiklub's picture

Here's a link to a George Mason study, that explains the damage Dodd Frank did to small banks-
https://www.mercatus.org/system/files/Peirce_SmallBankSurvey_v1.pdf

And, a Forbes article - http://www.forbes.com/sites/carriesheffield/2015/02/09/dodd-frank-is-kil...

The central planners's picture

I supported Trump and i have no shame in admit that i was deceived once again. And i will not apologise his disaster.

Proctologist's picture

If that's true the Hitlery voter was = Brain dead

StopBeingstupid's picture

Drain the swamp and put the sludge in charge . Nice!!

ersatz007's picture

Meet the new boss. Same as the old boss…ad nauseum.

Billy the Poet's picture

There are always similarities. Both Obama and Trump have noses, for example.

ersatz007's picture

Given the similarity that both noses also appear to be placed between bankers' buttocks, the irony is rich.

ersatz007's picture

Given the similarity that both noses also appear to be placed between bankers' buttocks, the irony is rich.

ersatz007's picture

I consider the source of this article and thus take it with a big grain of salt. However, the executive order regarding Dodd-Frank doesn't seem to be oriented towards the common man. And the travel ban oddly excludes Saudi Arabia.

Maybe I'm missing something but neither of these acts seem to comport with the concept of of being anti-establishment.

None of this detracts from my enjoyment of your wit even if it seems to peak when your cognitive dissonance is at its zenith.

Billy the Poet's picture

I have no expectations regarding Trump's policies and make no representations in regard to his principles. If one must engage in the statist paradigm then Trump is an interesting spin of the wheel (or pick of the nose, if you will).

matermaker's picture

50/50 shot that Trump is fully aware that if given enough rope, the banks will hang themselves again.  even the ZH editors fail to grasp that it was the reaction in 2008/9 that was so important.  what do you think Trump would say if Paulson told him, "there will be tanks in the streets!"    My guess is, "good"

 

jackson and kennedy tried to take them head on.  jackson won with a cost.  kennedy lost badly.   if you want to bring down the banks, make them needy, first.

the treasury could go back to minting the coin of the realm, tomorrow.  just like kennedy was thinking about.   HOWEVER, you need the FRN on it's death bed first.

ersatz007's picture

Interesting perspective. +1

Miskondukt's picture

Rolling Stones should stick to music. 

Billy the Poet's picture

And give up the fake news concession?

ersatz007's picture

And, even at that, they suck