Tigerhawk calls it “the most terrifying paragraph you are likely to read all year”.
World leaders holding an emergency meeting to combat the economic crisis agreed yesterday to a far-reaching action plan that, over the next 4 1/2 months, would begin to reshape international financial institutions and reform worldwide regulatory and accounting rules. … The Europeans got “virtually everything” they sought at the summit, French President Nicholas Sarkozy crowed afterward at a news conference. …
The leaders agreed to set up a new regulatory body, “a college of supervisors,” to examine the books of major financial institutions that operate across national borders, so regulators could begin to have a more complete picture of banks’ operations. They demanded greater scrutiny of hedge funds and the completion of a clearinghouse system to help standardize and limit risk on some of the opaque and exotic financial derivatives that helped bring down Wall Street’s investment banks.
Tigerhawk writes:
I can smell it now, a global “Sarbanes-Oxley” law that neither replaces nor is consistent with American securities regulation or generally accepted accounting principles.
Sure as God made little green apples, new global regulation will not prevent the next bubble and the crash that follows it. As I have written before to the point of tedium, the best and only insurance against that is human memory. There will be no insane bubble and no crash that follows it as long as the generation scarred by this one is running the show, but once it has passed its memories will only be history, and people will again be free to argue that “it is different this time” without being mocked.
In a previous post, I recalled the incident of how tying down all the circuit breakers of the USS South Dakota during the Naval Battle of Guadalcanal put the entire ship’s electrical at risk to a single point of failure, which nearly caused its loss to the IJN Kirishima. It was saved because the USS Washington was uninvolved its self-inflicted fiasco and won the battle. The analogous question is whether this regulatory “college of supervisors” might not create yet another point of failure for the entire system.
“College of Supervisors,” eh?
Perfect name for it. College is the place where adolescents go to enjoy all of the benefits of adulthood with none of the responsibilities. It is subsidized by the government, and dominated by people who construct theories of the world that often have no basis in reality. I wonder if it will have tenure as well. Or keg parties. Maybe I’ll apply to get in. Do I have to take the SAT?
We don’t need more regulation. We need more standardization and transparency. It’s likely neither will come from this “College.” The more power this group acquires, the more likely the next crisis will be a true disaster, one that precipitates violent conflict.
But hey, maybe they’ll all have to wear funny red hats like that other college. That would be kinda cool.
L3
I would like to argue that regulation is not going to help but when people do breathtakingly stupid things, how do you stop them? If they just hurt themselves, that’s life. And yet they wind up hurting others. Motorcyclists have long argued it’s nobody’s business but their own if they wear helmets and they are entitled to take the risk. Until they wind up in the hospital, getting extremely expensive medical care paid for by people who aren’t stupid.
Your right to conduct your business free of government regulation ends at my wallet. Until Wall Street shows they can be responsible for their own mistakes, they can’t argue they should not be regulated more.
Terrified? Why, has Switzerland agreed?
Thrasymachus,
I hear you, but my concern is that there will be more “innocent victims” from over-regulation than from under-regulation.
Right now, it looks like the following people have been hurt from the Wall Street fiasco:
1. Wall Street investment banks and their employees. Well, they’re the motorcyclists in your example.
2. People who took out mortgages they couldn’t afford. It’s sad, but when you over-consume, there is a day of reckoning.
3. Investors in the stock market. But the market is down for other reasons than simply the financial crisis. Companies that over-levered to get “excess” returns for their investors; money managers who kept piling into the market even when valuations made no sense; hedge fund guys who thought they had hedged their risks, so didn’t worry about fundamentals; etc. Now, people close to retirement are probably feeling the pinch of this drop, but if they’re that close to retirement, they should not have had much equity exposure. And if they’re 10 years from retirement, the market will recover and they’ll be OK (although admittedly not where they hoped).
4. Banks who made bad loans and are likely to be bought or shut down. More motorcyclists.
5. New York City, which built its fiscal model on the assumption that investment banks and those who support them would always generate huge returns, and therefore could afford to pay huge taxes.
6. Companies with huge pension liabilities exposed to the stock market. This will be a drag on their earnings as they shovel more cash into the plans to bring them into alignment, but that’s the deal they negotiated.
Everyone else is pretty scared of the situation (me included), but we haven’t been hurt yet. And while the recession will hurt us all, that was more caused by government intervention (Fannie+Freddie+CRA+Congress) than by the “free market” everyone is bad-mouthing.
I’m not saying there aren’t people who are hurt unfairly, or that we shouldn’t help them. But slathering on another layer or two of regulation is unlikely to help, and is likely to hurt in the long run. Better direct support of those few who are undeserving of punishment than punishing more who don’t deserve it.
In sum, then, I think we’re aligned on what we’d like to see happen: a system that isn’t stupid. But we may disagree on whether a global regulatory regime gets us closer to or further from that goal.
One final aside: I have a good friend who is a cardiovascular surgeon who does lots of heart transplants. The number of donor hearts available for his patients dropped dramatically after California passed its helmet law. Seems many of the hearts came from crash victims. Not sure that this is apropos of anything, but since you mentioned motorcycles and helmets, I thought I’d share it.
Cheers.
L3
So what’s the enforcement mechanism? If Bank of America declines to have some froggy college-type come snooping around in their books, who’s going to force them?
Bill Gates and Microsoft have been fighting with the EU and France for years now, with the Yurpizoids demanding that American computery entrepreneurs give up their secrets and share and share alike. Why do I think that a European “college of supervisors” will be just another way of stripping American patents of their potency and sharing not only the hidden dangers of too much borrowing but also the intellectual property behind the worth of American companies?
Leo,
You left out one class of victims. Any one who owns a home has been hurt by foreclosures and the sudden tightening of credit which has brought the price and value of homes down greatly. Responsible people have been hurt by the people who over reached and by the mortgage hustlers.
What about this little thing called national sovereignty?
We would have to relinquish some of our voting rights for this agreement to work, would we not? Sounds like a one world/ EU bureaucratic scheme to me. We can’t get the Euro-weenies to go along on trade, Iraq and missile defense, how are going to achieve agreement on this?
My opinion is similar to Leo’s. I think what went wrong is that the Democrats were allowed to compromise the financial regulation system in too many significant ways, cover their tracks and blame the two big ever present bogeymen, Republicans and the free market. The financial system needs to be fine tuned to address the new realities, expose and punish the fraudulent practices and move forward.
A new massive international bureaucracy would compromise us in literally millions of unforeseen ways. Brain cramp time.
I have always thought myself fortunate for living through the 1930s. For me, the main benefit of those memories is knowing in the years since then that I could live happily with far, far less than I have acquired since then.
Although I have been retired for many years, I have had substantial exposure to the equity market–perhaps not the most prudent choice, as Leo Linbeck suggests above. I made that choice because I wanted to pass on enough for college expenses for grandchildren. As it turns out, not only will I live more frugally but also they and my children will be on their own, as I was at their ages. And who knows, it may not be bad for them. I never thought it was bad for me.
And maybe as a country we shall not be hurt if we are forced to live far more frugally.
Incidentally, I do agree that some will be hurt so badly that they should be helped.
Jim
Nobody has the answer? They Helvetii were subdued by Caesar. The Quebecois have nothing over the Suisse version of “Je me souviens.” The Swiss are much more than simply a pain in the butt to the EU.
aren’t these all the same people that were in charge when this current crash happened?
Mr. Frank,
In many cases, you are right. But if you owned a home and it increased in value from $200,000 to $400,000 and you didn’t refinance, when the value falls back to $250,000, you’re really not worse off. The high value may have created hope for a different future, but that’s different from running out of cash and not being able to pay for food, water, and electricity.
And that’s where it gets tough. The mortgage industry was filled with hustlers, and we need to help many of those who were victimized. But many people who refinance can continue to service their higher mortgage, and they got the benefit of having the cash. They may regret what they spent it on, but they got it nevertheless.
There is also a group of people who will never be able to pay back the mortgage because they don’t make enough money. Some of these people were victims, in that they lost their job or had a medical problem or some other reason, and they are people we should try to help if they need it. But some of these people misrepresented their income. They lied to get the mortgage. They are not victims, and the fact they will lose their house should not be the public’s problem.
The meta-problem is that sorting this out from Washington is impossible. That is why the latest decision to shore up the banks is the right one. The banks still hold these loans, and they can sort out the victims from the perps better that we can, and bear the consequences. The victims who still fall through the cracks will be few enough to where we can directly assist them, preferably through private philanthropy, lest we create a permanent mortgage welfare industry.
Anyway, regulation never gets rid of the hustlers. It does, however, lower everyone’s guard, making it easier for the hustler to operate. After all, why should I worry about being taken by a con man if he’s been certified by the government?
Cheers.
L3
Jim Nicholas,
I’m sorry about your exposure to the equity markets, and I greatly respect your reason for doing so. Depending upon when they go to college, you may yet be able to achieve your goal. The markets will come back, perhaps late 2009. It will be a slow recovery, but recover we will.
Still, I think you’re right about their paying for their own education not being bad for them. One of the problems with my generation (I was born in 1961) and younger is that we have a strong sense of entitlement. We’re entitled to a great education, a great job, a great life, a great family, a great vacation, etc. We deserve it because, you know, because we do!
We grew used to having all of this stuff delivered to us on a silver platter for no good reason other than we won the sperm lottery and were born in this great country. (Not saying your kids or grandkids are like this – painting with a pretty broad brush here.) This setback will be good for the younger generations. It’s been too easy for them (at least those who didn’t enter the military
, and it’s about time for a realignment with reality. Not all suffering, after all, is bad.
Besides, there’s a fine line between generosity and creating dependency. It’s a line that easier to spot when it’s your money being given away.
Regardless, based on your posts that I’ve read here, I’d say that if your values have rubbed off on your descendants, they’ll be fine. That is the greatest gift you can give them anyway.
Cheers.
L3
Would this new international “college” have caught Fannie Mae’s and Freddie Mac’s fuzzy math five years ago, before they imploded? Three years ago? One year ago? If so, could they have forced Dodd and Frank to swerve?
If the “leaders” pushing this supervisory council can’t answer “Yes,” to this question, then I’m afraid this thing is a waste of time.
My take is, the reason “leaders” want to stand-up a “supervisory college” is to absolve individual nations’ governing parties (ie. the “leaders” themselves) for overseeing the corruption endemic to their own local jurisdictions.
Put another way, if you can’t fill the pot-holes in Chicago, Paris or Gaza, then you hope to blame some larger, insuperable entity for making you fail – or, more likely, for not allowing you to succeed.
Improve your deniability by depersonalizing your own roles: the Boss made me do it! Point up at your artificial Ivory Tower, and say “It did it.” The result is, you prevent the voting citizens from fingering the cranks responsible, accountability wanes and the autocracy skips on ahead with renewed verve and vigor.
Statist welfare roles, forced EU membership and Bush’s “Six-Party Talks” with North Korea share this, that all of the program’s individual clients bear a need for a super-structure. But, looking at the fruits that each effort has borne so far, can anyone argue that hiding in a herd has served modern republics very well?
Do we want to do business with Europe? If so, we will have to meet their requirements. If we don’t care, and they want our custom, then we don’t have to meet their requirements, they will have to meet ours. One of the reasons Microsoft continues the dance with the Europeans is that they are making more money than they are spending jousting with the European courts.
Well they should call it a “Court” — I mean like the places where they get to wear crowns on their pointy little heads.
Just what we need: Another tranzi power grab.
Yet one more venue for the parasites to romp around in.
Another attempt to lay to waste the evil USA.
And no amount of rational argument will stop it, only the ballot box in the short term and catastrophe in the long term.
I do not know which is sadder: The hideous, narcissistic vain-glory of the tranzis for hatching up this nonsense, the arrogance with which they try to fob it off on the rest of us or the childish fearfulness of the public that lets them stampede us all into this nonsense.
It is like handing hand grenade to an Orangutan.
Next will be an attempt to push the Euro as reserve currency or some sort of basket.
What a disaster. Watch them get away with this.
Thank you, C. Dodd and B. Franks.
Think on your remark about USS South Dakota…she had the electrical failure, and her performance, as Richard Frank put it, was “lackluster” but the battle was won because Admiral Lee moved into a good position (all unseen and noticed by Admiral Kondo) with USS Washington and then let HIJMS Kirishima have it…
Who (or what) will be our Admiral Lee? What resources can be kept from the global goo-goos, and do gooders? What can be deployed beyond their vision and grasp?
The universe rejects stupidity. In the end, Caesar beats Pompey every time (okay pick your metaphor, but that’s how I read that one). Intelligence wins, however long it takes. But how much blood do the bad guys get to draw first? My question is not rhetorical, entirely: I have a 13 year old son, and the day he was born, I was afraid (knew?) somehow, someday he’d carry a rifle. I’ve read way too much history to be optimistic about the near future.
Can the west beat the declinists, the routiners and the hedonists? I still think so. I hope to live to see it.
Leo Linbeck,
Thank you.
I value your comments, not only # 12 today but also many others since you have become an active participant in the Belmont Club.
My best wishes,
Jim
Could this just be an opportunity for the rest of the world to get in line for a bail-out from Washington?
“College of Supervisors”
I like the sound of “More Nonproductive Bureaucracy” better.
Will George Soros be regulated by the “College of Supervisors?” I doubt it. His ability to manipulate trading and trading laws will continue – as will others with money and influence.
The whole “College of Supervisors” smacks of a shake-down racket. I suspect Americans and American business will soon be the poorer for it.
College of Supervisors, Comfort Rooms, National Security Force. We’re going downhill fast.
I found my answer.
First of all, let me correct a misconception. Wretchard implies “you” will be terrified, but tigerhawk says it’s money managers who might be terrified.
Anyway, as I suspected, The G20 does NOT include Switzerland. The Swiss have their own organization to help them keep some leverage on the “G20″
Middle of the second page of the WaPo article that Tigerhawk based his post is this little tidbit:
The Swiss know where all “the bodies are buried.” So Sarkozy is strutting about saying the EU has all it wants. Funny that. Look to the Swiss to let the EU hacker “find” some accounts of Sarkozy’s favorites, and watch how quickly he backtracks.
This is looking more and more like a show. G8 wasn’t big enough, so it’s now G20. C’mon Belmont Clubbers; you know my suspicions are well founded.
“Maggie’s Farm” has the most beautiful song up now by Maria McCool. Go click on it. Heaven is made at least partly out of music.
Just so it is clear who attended:
G20 Members
Countries
Other Participants
And SteveAZ: yes there is pressure to join the EU; however little old landlocked Switzerland, deep in the heart of the beast, has somehow has been allowed to bow out of the stinkpot.
Them bank accounts.
Yep. I’d say the Swiss OWN the sword of Damocles.
The Swiss are tricky –about ten percent oof their cheese is just holes. You’re buying air. So that’s a hidden ten percent premium. So, you have to watch those guys.
Soros will be the Dean Wurmser of the Faber College of Global Finance Supervisors.
Speaking of Soros, I’m waiting for the time when Obama and Soros eventually get into a serious disagreement with one another. As much as I may strongly disagree with Obama’s agenda and track record, I wouldn’t shed any tears for Soros if Obama were to orchestrate a crackdown against him.
No king likes a kingmaker. Barack Obama may find that George Soros isn’t shy about calling in favors from a man he probably regards as his puppet. Soros probably thinks he can overthrow Obama just like he’s overthrown dozens of other governments in the past twenty years. Somehow, I think Barack Obama may have his own opinions about which man should be in charge.
@Alexis,
Internet rumor had it that Obama ran a second security service staffed by the NOI because he does not trust the USSS. That may be just wingnuttery but the people around Obama, including Farrakhan of the NOI, have been living and breathing conspiracy theories for 40 years. If it were true then Obama’s problem if he turns on Soros becomes can he trust Farrakhan? Who is working for whom here?
Actually their solution is going to be a one-world currency. Saw it somewhere- Trade and Taxes blog mebbe?
And yes without your currency your sovereignty is a moot point.
If it wasn’t so cynical I’d say this current crisis was orchestrated just to bring about this result-
Obama (talking from the Podium): “I am pleased to announce our member into the College of Supervisors which will oversee the United States Banking System.”
“Chairman Sarkozy accepted our three representatives to the Board of the College of Supervisors.”
“They are in no particular order of importance: George Soros, Professor William Ayers and Legal scholar Bernardine Dohrn.”
“Would you like to say a few words Bernardine?”
Bernardine Dohrn: “Yes. Dig it. First they killed those pigs, then they ate dinner in the same room with them. They even shoved a fork into a victim’s stomach! Wild!… Kill all the capitalistic…”
Obama: “Thank you Professor Dohrn but, we have to move on. I will also happy to introduce the Secretary of the Board Mahmoud Ahmadinejad. Would you like to say a few words to the Public?”
Mahmoud Ahmadineja: “First I want to thank board member Kim Jong-il for all of his technical assistance. Israel is a stinking corps. With the proper funding and atomic fuel I can wipe…”
Obama: “Thanks Mahmoud. I am with you on that one! Well discuss it over lunch. Now, to the Treasurer of College of Supervisors, Vladimir Putin.”
Vladimir Putin: “We were asserting our right to self-defense when we vaporized Georgia. With the proper level of funding we spread the Russian Ruble to Germany and beyond. There is no reason why it should not trade on par with the dollar! All we need is 7.6 trillion US dollars to…”
Obama: “Thank you Vladimir! We will discuss that behind closed doors. Moving to new board member Venezuelan President Hugo Chavez.”
Hugo Chavez: “I smell something burning and it is America.”
“With a few trillion dollars and help from my good friends Treasurer Ahmadineja and PLO leader Mahmoud Abbas we can destroy the war mongering US military and bring Social Paradise to all of the Americas. I call it the Hugo Paradise City Plan…”
Obama: “Oh, thanks for reminding me Hugo but I forgot to mention new board Member and PLO leader Mahmoud Abbas. Would you like to say a few words Mahmoud?”
Mahmoud Abbas: “Yes, when is that next $200 million dollar installment coming?”
“Those rockets and explosive vests are not possible without the necessary funding. Although, we have divided Israel in half and we are still having trouble driving the Jews into the…”
Obama: “I will check with my trusted adviser Tony Rezko on the issue of expanding your real estate. Now the money should be coming as soon as I can get those 401K taxed.”
“Oh, I forgot to congratulate Fidel Castro on his new board seat. I know he can’t make it but we will keep it warm for him!”
Obama: “Now let’s take a vote on reparations the Black Panthers and ACORN.”
Vladimir Putin: “I am in favor if the long suffering USSR is also compensated with 6 trillion US dollars.”
Obama: “I think that is fair!”
Mahmoud Ahmadineja: “I am in favor only if I get the money and the nuclear fuel…”
Obama: “Done!”
Mahmoud Abbas: “I am in favor on the condition of $200 million per month to my people – and more explosives.”
Obama: “Can do!”
“Just talk to Bill Ayers. He is great with explosives and nails.”
Hugo Chavez: “I am in favor as long as I get my Latin America Paradise City and 2 trillion dollars…”
Obama: “OK, but make sure the coke and smoke keep flowing. Wink. Wink.”
Kim Jong-il: “I am in favor but I want 3 trillion US dollars and everything south of the 38th Parallel – and my good friend Ayman al-Zawahiri flown here to assist in the Reunification.”
Obama: “It is done. Bernardine can help you and al-Zawahiri those troublesome South Koreans.”
“Soros, please head over to the Treasury and dispense the needed money – and George try not too let too much money stick to your fingers!”
Why cannot fractal theory be applied to banking as well as to accounting? It would allow all this globalization stuff to sort itself out. To that end a standard set of accounting rules that can be applied with rigor at varying levels of business and government makes sense. It would also stop the derivatives and similar such nonsense in its tracks.
Wrong cite, here’s the right one:
http://www.moneyandmarkets.com/the-g-20s-secret-debt-solution-27996
I knew it was sumthin’ and sumthin’… ; )
*tell your friends*
haw –i been having them dreams too, ledger –i wouldn’t worry about it none though –them old dreams are only in your head
It’s a spoof buddy
ledger, that’s what charlie chaplin said, too!
“Attention Walmart Associates: Mr. George Soros is now the Associate. So Sorey.”
so US chicanery will be replaced by another international chicanery.
the US party responsible for the US chicanery –the democrats –has been rewarded for their failure with the reigns of the US government.
will the democrats in turn cede more power to this international body?
because they were not self governing — they are bringing more international rule down on the US.
I have little understanding of the financial instruments and less still of the regulators.
My understanding is that even as one country after another now slips into recession–the LIBR and TED spreads are falling fast. My understanding is that their very height of these financial instruments forcast the current recession. Their fast fall predicts a future recovery.
The price of oil is falling fast too. That takes the pressure off the demand for change in energy policy.
Will the same thing happen with banking policy. Will the pressure for change abate?
While the fear now is of deflation–that could change–once interbank lending resumes in force — the danger will be of vast inflation. If the central bankers are able to drain liquidity from the system as fast as they were able to inject it–then actually the present system can be seen as a success.
BCers
The current problems are caused by reality catching up with ignorance – ignorance of what was in the Collateralized Debt Obligations.
Does any reader think that any of the clowns at the G20 summit now knows what was in the CDOs? Of course not.
So where did they get their “solution” from – that great idea for a college of supervisors?
Why from the recommenders behind the scenes, of course. And their recommendations were completely impartial. In no way were they swayed one bit by the international conferences, talkshows, fee charging, pontification, rock god status, etc that they see for themselves in their college.
Here’s a Wiki entry on Fractional Reserve Banking. Even they can’t agree on it, and it is funsdamental.
ADE
And Oliver Camm agrees with me.
So that’s all right then.
ADE
Oliver is THE man. Thanks for the link, ADE.
Do we call each other Comrade? Citizen? Brother and Sister?
What has The One told us we should do?
Unfortunately, it’s easy to see where all this is going. The industrialized world is getting divided into two classes.
The Government, which includes its public relations minions in the MSM, and its muscle – the big unions on one side.
The Subjects. The rest of us. The suckers that pay the bills for a gigantic bureaucracy from which nobody can ever be fired. The New Patriotism is paying your taxes, keeping your mouth shut, and publicly fawning over our ever-so-smart masters. Watch a network news show if you need any help with the fawning.
“I would like to argue that regulation is not going to help but when people do breathtakingly stupid things,how do you stop them?”
Or, as we say in the South on occasion “One of ya’ll hold my beer and watch this”.
the shiny new car has a flat tire, granted, but that’s better than not having a flat via not having a shiny new car.
Utopian dreams induced by the midnight snack of totalitarian sausage.
Utoliatrians ?, then come forward with these nocturnal incontinencies, with great fervor and sincerity.
The College of Coaches was tried by the Chicago Cubs in 1961 and 1962. By the time it took hold in 1962, the Cubs lost a record 103 games, worst in their history.
When the utopians mate with totalitarians, do-goodersism gone bad erupts. The merger of “I want to cure all the ills of the world, let’s break it down into a billion component parts and manage each part….is swallowed by I want to impose my will on the world, let’s break down a billion people and master each of them.”
The totalitarian stallion mating with the braying ass utopian, produces the hinny. Sort of like the UN, only on steroids. Loud, stubborn and infertile.
LOL –how bout, Duckbill Platypus mating with Dodo Bird –the baby is half UN one-world and half Union protectionist, and can’t grow up to be anything but an ardent Global Nationalist whose angry misery is due to the unfair competition from Outer Space.
Or the intensely dedicated Librarian being treated for exhaustion over the last eight years whose “Bueller Bueller” valium drip got mixed up with Roseanne’s acai berry diet treatment.
The Thunder Run has linked to this post in the – Web Reconnaissance for 11/17/2008 A short recon of what’s out there that might draw your attention, updated throughout the day…so check back often.
NahnCee:
So what’s the enforcement mechanism?
Obama’s homey goon squad he’s dreaming up to keep us all civil. The core of which will come from the Nation of Islam.
buddy larsen:
The Swiss are tricky –about ten percent oof their cheese is just holes. You’re buying air. So that’s a hidden ten percent premium. So, you have to watch those guys.
Buddy, you’re buying the cheese and clean fresh mountain air !! Just like buying mountain spring water.
“College of Supervisors,”
I don’t see a problem. If they do half as good a job as the IAEA the world will be a better place and Miss America contestants can move on to the next canned answer.
I hear John and Yoko in the background.
Would like to think that John Lennon would have called “bullsh*t” at the sight of Obama’s toy army from the NOI. There was nothing effete about him or any of the Liverpool lads. What will the LEOs do when ordered to submit to this? I predict some will retire and most will submit. There will be very little confrontation. People who think that the Secret Service will function as a Praetorian Guard or that the ATF, now ATFE, will protect unhappy gun owners in a 2nd amendment crusade that will save the Union with militias are to speak reservedly, simply nuts.
I blame the selfish stupid extremists on the right who yelled that McCain wasn’t pure enough for them and stayed home and sulked on Election Day. Despite the propaganda Obama did not gain vast new armies of voters from the youth of America. He had a bump up from single women and some benefits from fraud but the biggest shift was in a depressed Republican vote. Thanks guys I hope the self pity tastes good to you because 6,000,000,000 people will have to eat this dish.
They are still avoiding the fundamental issue of the way the 1977 Community Reinvestment Act was reinterpreted in 1995. All those various exotic instruments related to the sub prime market exist in order to pass along the risks associated with that class of mortgages, many of which stink to high heaven and the banks that originate them just want to sell them after collecting the origination fees and closing costs. The current proposal thinks that the financial crisis was created by hedge funds, but the hedge funds are only, in some cases, buying what others are buying (or selling what they are selling) more aggressively.
Will anything be done about the lax or nonexistent underwriting standards at Freddie Mac and Sallie Mae? Not while Barney Frank has a say in it and a bunch of Cloward-Piven Crisis people running the dog and pony show in Washington now.
Fred is right –one could call up the 80-20 rule and not be far wrong.
Split the 20 between the hedges and the rating services, and split the 80 between the barney frankses (who never hide the fact that their identity-agenda always trumps all else) and their colleagues from the real world, who in the best spirit of Sabinus could but shrink & shrivel at the merest thought of the raging Franks throwing “Racist” and “Elitist” and “Hater of the Poor” thunderbolts from his sanctuary atop the summit of Mount Aggrieved.
The rating agencies have been successful at keeping out of the news but the fact is they continued to rate the paper AAA when they knew the securitization bundles were full of junk.
There probably is at least a case for criminal negligence if not outright complicity.
Peter, one great problem (routinely avoided by little kids on any playground –determining before every game ‘whose side am i on, and whose side are YOU on?’) is that the security sellers are who hires & pays the rating agencies. As some are now asking, why aren’t the buyers procuring their own ratings? Tradition? Or endemic CYA legerdemain before-the-fact?
“LOL –how bout, Duckbill Platypus mating with Dodo Bird –the baby is half UN one-world and half Union protectionist, and can’t grow up to be anything but an ardent Global Nationalist whose angry misery is due to the unfair competition from Outer Space.”
I love this blog.
Over-leverage and lack of transparency turned 5% (sub-prime) to 10% (incl alt-a) of the domestic mortgage industry into a financial “crisis” that went global in a matter of weeks, trimmed 40% from equity portfolios in USA to 60% (plus market closure) in Russia, crippled a vulnerable manufacturing sector potentially exacerbating unemployment during a recession, and led to G20 mandates for international regulatory control of financial markets via the IMF or some similar vehicle known primarily for bringing us the Asian Currency Crisis of 1997/98. Something wrong with that picture. Way too many dominoes to blame a little tap from CRA. The entire process train was vulnerable and if the international efforts take hold in any form we haven’t seen the last of the fallout from the little “tap.”
Regulation is difficult, it gets used for political ends and it eventually gets circumvented by highly trained and motivated thieves. But don’t try to do without it.
Does anybody here think that rules limiting margin debt or prohibiting naked short selling or allowing uptick-only short selling were bad things? They were good things. But the good things invented half a century ago got circumvented and defeated. The old good things need to be replaced by new good things, like regulated clearing of credit default swaps, and maybe banning public companies from holding derivative contracts that can’t clear in the forseeable future or can’t be valued except by using some bullshit model. And how about treating naked short sellers like federal drug offenders with mandatory sentencing?
Bad guys don’t like these kinds of rules but they do like to mock the rules and brag about how they easily they can circumvent them. This is perp talk. I want to see them do the perp walk.
I can’t for the life of me understnd why SEC made some of those changes –I know the rationales in a few of the cases –such as the uptick rule making it difficult to maintaim real-time valuations of ETFs –but other changes (allowable leverage, such as) and the flat-out ignoring of the laws re naked shorting –are just baffling, in that the mal effects were not only predictable but very quickly empirical. It’s almost like Chris Cox is a KGB agent or something. I mean –jeez –people are ruined over this shit. Innocent people, i mean –passive investors –hell everybody –main street –is suffering. WTF, man –i mean, WTF???
There is unresolved tension on this board on this subject.
A: Government interference through social policy via CRA. Everything else will self-adjust in the absence of unsustainable government interference.
B: Yes, but, a poorly regulated financial system coupled with a corrupt rating/oversight system amplified the damage – magnitude, depth, and duration. The financial mechanics would have failed regardless of the “jump-start.”
Other things as well: including labor shifts from manufacturing to services, the specific “Detroit Issue”, volatility in commodities, free trade agreements, and the destabilizing effects of energy/environmental issues in transition and under dispute.
I am in camp B. Others here clearly are not. Interesting.
Several years ago I posted elsewhere that tax reform would be the biggest economic incentive we could provide at the legislative level. I was told by someone who wrote with grist and grizzle that it ain’t gonna happen – too complicated for our system at present. I believe that to be true. I no longer advocate “comprehensive” anything.
But, transparency and some explicit caps on leverage under specific circumstances (taking all the high risk spikes out is not good, IMO, but they need to be clearly contained so the investor knows which poker room he is entering), and some other simple changes, like bringing back the uptick rule, should be something that Congress can accomplish.
I doubt that will happen. My prediction is that they will go with more SOX-type constraints.
Chris Cox a KGB agent.
You always do that, buddy.
I’m trying for gravitas and I crack up.
Now I’ll never be a Serious Person.
Confucius say, woman doing barrel rolls in airplane occasionally have crack up.
Well that’s the first time anyone accused me of being Hank Paulson in drag.
The way things have been going in the press, that may be Hank’s best bet for getting outta town come January –
:-\
Who’s your daddy now?
::))
haw –Eggs Ackley –
well mine are scrambled not sunny-side up that’s for sure.
Rumor has it habu is taking a sabbatical day-trading on shorts. Wonder when he will be back.
Just scanning the front page of PajamasMedia, 250 plus comments on Palin and 30-50 on economics.
If Palin isn’t careful she will turn herself into a soap opera and walk away with a cool fortune.
There’s stupid and then there’s stupid.
Wonder what would appen if Palin just went ahead and started drilling in the ANWR. Just called up some drilling outfits and sent ‘em on up there to produce oil for Alaska. What would the Brave Congresspersons do? Shit a brick?
Reminds me of that joke that I told once before which someone informed me wasn’t very funny. The hypnotist performs at the senior citizens center. He swings his watch back and forth until the crowed is out. The watch drops to the floor and breaks. Hypnotist says “sh^t.” Took them three days to clean out the place.
I hear he’s over in Europe now.
damn –good thing he didn’t say um, something else, next level up –THAT could’ve caused some real commotion –
slade/buddy:
You guys have probably moved on to another thread by now, but in case you have a last look here, I gotta tip my hat to you both – I’ve thoroughly enjoyed this thread – that last little bit, in particular, was dang near pee-in-my-pants hilarious. Many thanks for the mood lifter.
Triton