Barney Frank and Christopher Dodd are examining ways in which to regulate systemic risk in the financial system, according to the Wall Street Journal. Both Dodd and Frank are considering giving the Federal Reserve responsibility for task, which will include some oversight over “hedge funds, credit-rating firms and executive compensation”. It will be part of a broader, international effort which is still emerging, aimed at reshaping the total financial environment.
Leaving aside the ironies of watching Frank and Dodd craft a defense against systemic risk, a number of challenges face anyone who attempts it. The first is the breadth in the sources of danger. Systemic risk, is by definition, posed by forces beyond the power of individual market participants to control. Timothy Geithner, in testimony before Barney Frank himself on July 2008, described how the financial system evolved away from one centered around banks to a new system involving a larger number of actors across the globe.
Our system was once organized around banks—defined narrowly as institutions that take deposits and make loans. Over time there has been a gradual but pronounced decline in the share of financial assets originated and held by banks, and a corresponding increase in the share of financial assets held across a variety of non-bank financial institutions, funds and complex financial structures. … These changes within U.S. financial markets were complemented by a rise in global financial integration as technology and deregulation made it easier for savings to flow across international borders.
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In other words the systemic risks came from the dark peripheries of the system, from new financial territories of which the traditional administrators had only a tenuous grasp. In order to get on top of the situation again, the boundaries of the new system must be defined so it can be properly administered. Thus the first problem is to identify the relevant system to be managed. To use a metaphor from science fiction, the intrepid space pilot must find the control room which operates the vast starship whose course he is trying to direct. Defining the extent of the starship and the places from where it can be flown, is the first order of business. This will not be a simple task. You can include too little or too much.
The second problem, which may prove thornier than the first, is that much of the systemic risk may originate from the political decisions of those who appoint the regulators themselves. They may arise from the regulator’s own political masters, from things such as programs to provide affordable housing to those who cannot afford it. That is a component of systemic risk. How do you tell the political system what to do when by definition, it is supreme? Politics is a major component of the system, and when the political solvers are part of the problem, the task of systemic risk regulation becomes very difficult. A more prosaic example is whether the Fed or any other Central Bank, can manage fiscal irresponsibility. Chronic deficit spending is a contributor to systemic risk. How can the Fed do anything about it?
It’s clear from reading Geithner’s testimony that the systemic risk management he envisions is less than total. It consists, in his words, of “simplifying and consolidating the regulatory architecture [that] will be instrumental to these efforts by establishing a common framework of rules, clear responsibility and authority” and “close coordination across central banks, supervisors and market regulators, we need to adopt an integrated approach to the design and enforcement of capital standards and other prudential regulations critical to systemic stability”. The first might realistically be accomplished within the boundaries of a single nation; the second, the task of ‘close coordination across central banks’ will depend on persuasion.
One thing the effort will involve in any case is a vast transfer of power between those who have benefited from the previous system and those who now seek to control it. As the system risk regulator spreads his mantle over activities previously beyond his purview there will be winners and losers. Many fiefdoms will not go gentle into the good night or surrender their prerogatives at great cost. That process may in turn produce a future financial regulatory environment where the linkages between the systems will be the result of deals, surrenders, truces and ad hoc arrangements that are reached in the process of bureaucratic expansion and consolidation. My guess is that the successor system guiding the financial world will be as fully complex and opaque in its own way as the one it will replace. Which brings us to the question of systemic risk. It will still exist, but it will exist by definition, in the very places where Barney Frank and Chris Dodd’s regulator cannot go.
Systemic has another meaning – Poison. And if those three guys are going to write the rules, that’s just what it will be.
TRANSLATION: “I am clueless.”
It was once noted that an engineer takes big problems, breaks them into small components and solves them seperately.
The bureaucrat takes little problems and combines them into one big gooey mess that nobody can possibly solve.
I leave it to your imagination if Geithner is an engineer or a bureaucrat.
In the USA, (1) Keep commercial banks adequately liquid and (2) Practice Chapter 13 on investment banks (and others) that have debts they cannot pay. That is about all a Treasury Secretary can do, or needs to.
Other countries can either (a) do the same or
(b) wish that they had.
The deflation will end in reasonable time (NFI) thereafter with our economic colon properly cleansed of accumulated waste and we will do just fine, thank you.
That testimony is nothing but gobbledygook.
Perhaps a little session with the waterboard might produce a higher quality of both questions and answers.
“I leave it to your imagination if Geithner is an engineer or a bureaucrat.”
One thing about Tim requires no immagination:
We KNOW he’s a Crook!
Translation, BF, CD, CR (Charlie Rangel) and HC (Hillary Clinton) and the rest of the elitist crowd have raped and pillaged the current financial system to its near demise, BF, CD and the rest of the Democrat’s need a new method (Money COW) to rape and pillage the “little people” blind whilst not looking like they are raping and pillaging the deaf, dumb and blind people of the Socialist States of America the rest of the way into servitude. Really, when will the good men stop standing idly by while evil does its best to kill off what’s left of the Tree of Liberty and destroys the seeds of Freedom?
I had already read this when I responded to Unsk at number 89 and especially 90 of thread “What can we know?” Anger has a place here and now.
“WE’rE MaD as HeLL aNd wE’rE pRoBabLY gOnNa TaKe iT soMe mOrE!”
Having worked for cash, it’s the only way to go.
“It must have been hugely disappointing when the fabled Columbia River did not present itself. Instead, the Rocky Mountains spread in all directions: a gorgeous, frightening prospect of high jagged peaks. As Lewis and Clark understood at a glance, a substantial overland journey lay ahead of them, and without horses it would prove impossible. Yet they struggled on, trusting to their luck, until the hoped for miracle occured in the shape of a few Shoshone tribesmen, who appeared on horseback. One of them was obviously a chief, and when Sacagawea saw him, she broke into a dance of joy, then wept profusely. This was, in fact, her brother. The reunion was bittersweet, however, as she learned from him the sad news that most of her family were dead, except for two brothers and one nephew, the son of a deceased sister. The presence of Sacagawea (however coincidental and unlikely) was crucial here, as through her intercession the Indians supplied the necessary horses as well as sound advice on crossing the Rockies.”
“Promised Land” Jay Parini
Sacagawea had aborted herself of a second child by Charbonneu a little earlier on the trip. Her first child was still trucking along with the group, newly born.
How likely is it that they would pick up Sacagawea, and then later bump into her brother?
If not for getting those horses then they would have turned back.
Sacagewea had been taken early in her life at age 11 from the Shoshone after a fight, later was wifed at 16 to this trapper Charbonneu. She was a tough cookie. Clark later paid for her child’s education in St Louis.
Lewis and Clark have been replaced by guys like Chris Dodd and Barney Frank.
We need fellows like Lewis and Clark, and some lucky breaks.
later, up in the high snowy reaches of the Pass, along timberline of a south face, they encountered an indian village of the mysterious Fookeymfreazen. Mysterious because they stayed so bundled up all the time they used to have trouble telling themselves apart from the nearby Heyhu Aryew.
Wretchard:
My guess is that the successor system guiding the financial world will be as fully complex and opaque in its own way as the one it will replace. Which brings us to the question of systemic risk. It will still exist, but it will exist by definition, in the very places where Barney Frank and Chris Dodd’s regulator cannot go.
So if I were to assemble the main thoughts of the last couple threads I would follow this up by saying:
The efforts now underway are to going to be to replace American chicanery with International chicanery. They will do it by way of privatizing profit and socializing risk using mechanisms that are are very opaque–just as the US has done.
Does this mean the problems we are currently facing would happen more frequently?
Likely yes.
Why?
Because people are likely to take more chances if the risks of failure are lowered.
What was the problem for which the internationals will offer a solution? We were creating bad property debt properly ranked junk and selling it at home and on the international market as triple A. US & Major international entities bought the junk. US and European banks then used the junk to leverage what was often more junk.
This was not a problem that affected Asian banks in a big way. Rather the problem of over leveraging was focused mainly in the US and Europe.
What’s especially galling to some countries like Russia is that when US debt unwinds — its effects seems to more adversely effect them. The US economy goes in the tank, oil prices collapse. Russia goes in the tank. What’s fair about that?
The virtuous circle seems to work against them. The Russians reason that just because the US economy collapses — doesn’t mean that oil prices should collapse. Are they wrong? Well duh. Yes.
A lot of US capital has been vaporized. The US has lost the time cushion it once enjoyed. That the USA needs to recapitalize–and do so relatively quickly–not just for the sake of the USA but also for the sake of the rest of the world so as to retain the value of their dollar reserves.
Since much of the world’s economic health depends on the Health of the US economy and the dollar remains the world’s reserve currency and the USA remains safe harbor– the US is being funded in such a way as to enable dollars to be invested in such a way as to change capital flows.
The two biggest changes in the international monetary flows since WWII occurred 1.) in the 1970′s when the US started importing oil and US dollars went overseas to pay for the oil 2.)in the 1990′s when the US started running up huge deficits to the chinese to pay for cheap goods.
The US dollar can no longer sustain the international system while the US is importing both oil and chinese goods. The US has to stop sending dollars overseas for at least oil or chinese goods in order for the dollar in the world’s banks to retain its value. ie if the value of the US dollar goes Wiemar worthless then the rest of the world’s built up wealth goes down too.
Which one –oil or chinese goods — will the US concentrate on stopping importing.
The choice is oil. I think the Obama administration is on track to create a lot of new US oil supply in the next three years–much of it from renewable sources. I don’t know whether this will be enough to keep world oil prices down–which is key.
I think all the international bankers get this and all are onboard. Its in their interest for the US to succeed.
The dollar is essentially the world’s reserve currency. That’s why you hear talk from the Russians at Davos of the world exercising more control over the US Fed. What’s not spoken publicly was that the reason the Fed has been very opaque about where the first trillion or so of TARP dollars went — is that likely several hundred billion or so of that went to overseas banks–to make good on junk the US was selling.
The Russians want more credit for the control the Chinese say, already exercise over the fed. As well, they may understand that on these matters–Chinese interests are not aligned with Russia. That is Chinese interests would align with the US on oil and monetary policies for the same reason that Russian interests would align with OPEC on oil and monetary policies–with the Russians joining the ranks of the Iranians wishing to oust the dollar as the world’s reserve currency for political reasons.
Politics is the art of being right even when you are wrong.
I don’t know what this means in this context. For example, will support for change in the international system materialize if the current solutions in place solve the problem.
I heard Neal Cavuto say the other day that last time he checked in international capital flows were starting to return to normal.
So Sacagawea got preggers with the second while still breast feeding the first?
“One thing the effort will involve in any case is a vast transfer of power between those who have benefited from the previous system and those who now seek to control it.”
But are they not the same people?
But are they not the same people?
Not any more, I think. The politicans — the Franks, Dodds, et al — while all magically wealthy beyond their salaries, have never been in the class of the uber-wealthy (except for a few, like Kerry, that gigaloed their way into it, or the Kennedys, who got there through parental crime). I think the Clintons are a great example of a not-that-rich power couple. Their greed is palpable, but no matter how many speaking fees Bill racks up, he’s no Soros or Buffett or any of a thousand Wall Street machers whose names we don’t know. Where is Bill’s Hamptons mansion? His private jets?
This financial mess will let the political side grab not just the power, but ultimately the wealth that comes with it. Is it a coincidence that Obama is already moving to cap compensation for executives? I wonder. Is this the beginning of a shooting match between the power class and the monied class?
Although Wretchard definitely has my vote as the wisest person on the planet, the spaceship analogy is belied by the rest of this discussion. The spaceship is a closed system and economies/cultures/political systems are open ones. A system must be open to evolve, which implies that the evolution is always dictated by forces outside of the system to some extent.
Timothy seems to be unaware of this distinction, since we know that he already thought his personal finances embodied a closed system when they didn’t.
I suggest that the proper analogy for what’s being discussed here is in the first pages of Genesis.
Peterike: Is this the beginning of a shooting match between the power class and the monied class?
Isn’t that the essense of socialism?
Part of the problem, I think, is related to the ability to assess risk. There has been a trend over the past 30+ years to try and quantify risk. As we all know, the interest rate charged on any given loan reflects the assessment of the risk by the lended – the more risk, the higher the interest rate charged as a result.
Back in the day, lenders knew their borrowers personally, or by reputation, and lent money accordingly. With the rise of state and federal regulation and oversight, the auditors/regulators did not know the borrower as well as the lender did and therefore wanted/demanded a quantifiable indicator of the risk – hence the rise of the “credit score” as a suitable metric. The dependence on this and other metrics meant that a loan, or group of loans, could then be packaged in such a way as to statistically reduce the risk to near zero – which opened a secondary market far removed from the initial borrower and lender.
Now we are seeing the results of those policies. Reducing risk statistically does NOT eliminate it. When there are enough risky loans, and when they fail as they must due to the feeble financial underpinings of that particular loan, it is enough to bring the system down.
Further, those lenders who have joined the business recently have no knowledge of how to assess risk without using the metrics – they never learned how to do the math without using a calculator, as it were. So, they are sitting on they bailout money, waiting for the regulators to tell them how to do their job or perhaps to relax the rules so that they can go back to the old fashioned way of doing their job.
It is a standoff of the first order.
Charbonneu seems to have been sort of a thoughtless oaf. Don’t do that on the trail.
Risk has always been defined as a lack of information. If these “assets” cant be audited or examined they are pure risk. You cannot manage that which you cannot measure.
Capital comes from profits. Not wages. Not taxes. Not interest. Profits. You get profits from productivity and you get productivity from rational investment of capital. Nowhere in all this pile of refuse is an opportunity to create capital.
The idea that money can stimulate the economy isnt really a bad idea. The problem is that if the injection is so atomized that the dosage cant be sufficiently concentrated to create rational investment, then the injection will fail.
Its failure doesnt matter to the government because the goal is not to save the economy (except as a source of funds and indirectly votes) but to increase the power of the government and the power class.
The earlier discussion of the book “Generations” made me think that this may get bad enough to spur a revolution against this vandalism.
The corrupt, dis-honorable, rolling train wreck that is Congress is the prime reason for the ‘systemic risk’ in financial industry. The reason why this movement is global is due to the election of the Socialist Barack Obama and control of Congress by the Socialist Party in America (aka the Democrat Party)
I think we should derive the mythology the Democrats are operating under based on their words and actions. Here is my attempt to do so:
1. The rich are rich today primarily because of the Bush tax cuts.
2. Companies are in trouble primarily because of paying their top executives too much.
3. We need more regulation of the banking and mortgage industries but there was absolutely positively nothing wrong with Fannie and Freddie operating without the normal regulations.
4. The problem was not that many people bought houses they could not pay for but that they were actually expected to meet the terms of their loans.
5. Requiring minorities to pay down payments on houses is racist.
6. The real problem was derivatives and they could prove that if anyone could ever figure out just what they are. The fact that the derivative market has remained more liquid that the mortgage market is irrelevant.
That is all I can come up with right now. Anyone got any more?
President Reagan used to point out, that saying Congress spends money like a drunken sailor is an insult to sailors. Because at least drunken sailors are spending their own money.
So I guess greed is good, Herr Dodd, und Herr Geithner.
Especially if sanctified by the imprimatur of an “open” sub-senate sub-committee sub-hearing, and cleansed in the sanctimony of the waters of John Maynard Keynes the baptist.
I thought when Herr Geithner said “These changes within U.S. financial markets were complemented by a rise in global financial integration as technology and deregulation made it easier for savings to flow across international borders.”, that what he was referring to, was the fact that rogue elements within the scope of a (broadening) global economy act with a self interest that threatens to destroy both lives and property here or within the borders of trusted allies, with the prime example being that saudi foreign investors, with full advance pre-knowledge of the impending Sept. 11 2001 attacks, promptly sold short against the plunging stock market value when the market re-opened a week later.
Allowing all those “sympathetic” to the “issues” of the enemies of humanity, and, who were privy to the plot, to profit handsomely from those attacks.
I thought wrong. I guess we all now know what happens when one “assumes” that Herrs Dodd, Geithner, Meeks, Cain und Damen Waters, Farney Brank et alnia conduct “open” sub-senate, sub-commiittee sub-hearings will say when the blunt truth, regarding what we face from those rogue elements of a global economy, would serve us all better.
I guess those on a privileged sub-commiittee are as rogue as any of the other looters one would find in a den of pirates elsewhere in the world.
One can’t help but wonder as to just where and when the interests of “saudi investors” and those Kensians such as Dodd, Geithner, Meeks, Cain, Waters, and Brank intersect as these fellow travelers become fellow travelers indeed and in fact.
P.S. I would remind us all that the definition of the word “Soviet” is nothing more than the word “committee”. Yeah right, “all power to the Soviet(s)!, …can you spare a dime, …of my own money?” (Check out how many wasted, redundant letters in the word “committee”.)
From a perspective of a regulator or a system operator, a concentration of authority is not necessarily a good thing. Why? Responsibility.
If an intelligence agency says “Trust us” while also saying it can’t be successful 100% of the time, the agency is a waste of money. It makes more sense to rely on simple vigilance from the public than to rely upon a gang of goofballs who reply with “Sorry about that chief” whenever the fertilizer hits the fan.
When a restaurant serves its customers, they expect to not get poisoned. Ever. “Sorry about that chief” doesn’t bring the dead back to life.
Regulation comes with the expectation that people will be safe as a result. Not merely safer – safe.
The concentration of power and authority means a concentration of responsibility. Responsibility means that if something bad happens, it’s the regulator’s neck on the line. In previous eras, that was literal. If the magic of the king failed, he got overthrown. Under Hammurabi’s Code, when a building collapsed and killed its occupants, the architect was put to death. An astrologer who got his predictions wrong usually wound up dead.
When people consent to a concentration of power over their lives, they expect results. If a disaster happens on the watch of a regulator who has concentrated power into his hands, the regulator WILL get blamed. However, if a system is built upon public vigilance rather than government regulation, the regulator won’t get vilified because he presides over the system rather than controlling it.
This applies to gun control. When people are permitted to bear arms, criminals get blamed for crime. When people are not permitted to bear arms, the police get blamed for crime – and rightly so.
So, does the Obama administration positively want to get vilified once something goes wrong?
Before I hear all this talk about regulation I would like to have the Obama Administration define its economic goals. The off the cuff remarks from Dear Leader himself and many Democratic Congress critters suggests that they intend to punish the rich folks for engaging in that evil activity called business.
Good sounding stuff for a populist looking for the plebian vote but not very encouraging for the budding entrepreneur who may have to factor in social approbation as another cost of success.
FDR used the same populist tactic of vilifying businessmen to justify the authoritarian intrusions of his central planning schemes.
Small business has accounted for almost 100% of the job growth in the economy for the past several decades. Any regulation that raises the cost of small business formation or makes it more difficult will negatively affect job formation and economic growth. I do not get the impression that Geitner or anybody else in Washington gives a hoot about the consequences of their schemes so long as it gets good play in the editorial pages.
If Geitner and Franks read a little history they would have known that international capital flows have been the primary fuel of capital growth since at least the days of the earliest Dutch mercantilists.
Once upon a time, lurking on the bummer side of risk was termination, paying the piper, accountability, these days its, LOOK OUT, a crazy uncle scam bailout. Dodd, Franks and Geithner? Pah-leaze! Hens in houses across the globe are being introduced to their new overseers the foxes.
RWE, you forgot the single biggest myth of all from the Democrats.
If I have a dollar, that necessarily means that there is one less total dollar in the system. Forever.
Or, to put it another way, the rich get rich at the expense of the poor.
Wretchard,
As one who has some experience with these issues, I disagree with your assessment of the role of the regulator. The regulator can create more systemic risk or reduce it, but the problem is not the regulator as the regulator.
I recommend that you take a look at [at least the Amazon synopses of] “Demon of Our Own Design” by Bookstaber and “Normal Accidents” by Perrow. Systemic risk is created by complex systems. Sometimes regulation does create more risk, as you imply, by introducing layers of complexity and inflexibility that end up paralyzing a response to a problem or exacerbating the problem. But regulation can also recognize the complexity and purposely slow things down (acting as the opposite of a chemical catalyst) or attempt to target the complexity itself.
One of your posters called risk a product of lack of information. This is sort of on the right track but we need to go to the source of the lack of information. Risk in betting on a boxing match can be viewed as a lack of knowledge about who will have a good day that day. But maybe it is from evem low levels of complexity: the interaction of training, the emotional states of the performers, the officiating of the referee, exposure to various environmental contaminants (alcohol included).
There are two ways to deal with that risk. One is by reducing the lack of information through almost invasive reporting on psychological, physical and genetic profiles. The other is to reduce the exposure to the risk by limiting the maximum bets on the match (whether based on percentage of income/assets or on absolute numbers).
The boxing match analogy is an oversimplification. There really are some things that regulators can do to to reduce the information failure (the boxing match would really have a complexity issue if the boxers first had to play “Connect 4″ and the outcome of the fight was somehow related to the outcome of the game). And for some bettors, we may not care if they get wiped out.
But let’s not create the rule: regulator bad, market good. Let’s not create its opposite. The obligation to use judgment and constantly adjust never ceases.
@RWE,
The government must place hundreds of billions of $ in banks or nationalize them.
Add to the list.
7) Banks are not making loans because they lack Capital.
9) The rebates failed because people did not spend their money but put it in the bank.
High school students should be able to see through this. Here is an alternative model that I call “Capitalism.” Cut taxes and people have more money, people start saving money instead of borrowing trillions from China for transient consumables, banks have money and make loans, interest rates go down without government manipulation, businesses borrow money to hire people and start production lines, result abundant goods and services, people borrow and buy houses they can afford, government has little to do but focus on tasks like hunting down medieval maniacs, repeat as necessary.
Weird, the eight) came out as a Smiley, this WordPress interface without a Preview, Quote, Boldface, Link or Italics tools is so bad that we should be in government.
Harry Markopolos, Madoff whistleblower, is testifying in front of Congress with the same incisive clarity and unflappable professionalism that Capt Sullenberger used to glide that airbus into the Hudson. Holy cow. That’s two.
#24 Alexis-
I always blame criminals for crime, thats why they’re called crim-i-nals.
I would’t be opposed to a modern day Cincinnatus striding into Washington.
The obligation to use judgment and constantly adjust never ceases. – In the Industry
Pretty much what Markopolos said – something to the effect that SEC – or any securities/finance/banking regulatory entity (he’s recommending one super agency with centralized database) – restructuring must elevate the ethical component over the regulatory component by hiring senior pros (“with little to no hair”) who have made their bones in the industry, climbed the ladder to a place where they reside in relative immunity to the usual suite of inducements. But given the link between Madoff and the Russian mafia, one wonders if the route to effective oversight and enforcement will be that simple. Markopolos also said Madoff absolutely had help – a lot of it – to the extent that Madoff is becoming more of a figurehead, grey curls and all. Markopolos also stated that he has concerns for his physical safety.
When regulation and taxes make profits impossible one of two things happen; either the investors go to ground and wait out the situation or an underground economy develops. In Canada they have crushing income taxes that make earning over $100,000.00CN very counterproductive. A huge econonmy has developed that is under the table, either cash or barter. This has led to higher taxes as the government tried to recoup the loss of tax income. I have seen some estimates that put a full third of all economic activity in Canada in the underground economy.
Hyper-regulation (especially when veiwed as just another form of governmental theft) of money and capital markets will likewise cause different “off the book” techniques for handling cash-flows. The Islamic world has long had a banking system that leaves little room for Federal regulation but allows transfers of signiicant amounts of cash.
As the screws get tighter people will become more creative and secretive in the ways they handle their money. This will of course cause the screws to get even tighter, until they have the system totally locked down. Then it will collapse.
Capitalism (the only system that generates the wealth the socialists want to steal) lives on risk, no risk=no profit. Trying to legislate the risk away is pointless, particluarly when thethose doing the legislation are the most unpredictable and uncontrollable risk factor.
The part of all this that would be endlessly amusing if it weren’t for the fact they will ruin the economy (and with it my chance of retiring before I die) is having Barney Frank et al “fixing” the problem. It is rather like having a wolf guard your flock of sheep.
Maintaining the ethical component is a constant struggle. In any organization, private or public, the unctuous and sociopathic find ways to subvert the rules to their own private benefit at the expense of the private and public stakeholders. Regardless of which rules we establish, people must always fight to ensure that the rules augment conscience rather than be used as a shield against conscience.
Here’s how ridiculous it is to think that such complexities can be controlled or monitored:
My expectation is that the tax-cheat modeling that’s already gone on will have a pervasive and unpredicted psychosocial impact. It should produce an explosion of tax evaders in the immediate future, thereby further reducing the revenues that these new policies already assault.
What then? Taxes might go up to compensate, the black market expand, and a vicious cycle of tax evasion ensue. None of which looks like it’s even being considered by the powers that be.
Gaffe Prices:
I always blame criminals for crime, thats why they’re called crim-i-nals.
That means that you don’t trust the government with your life. Good for you.
Whenever a government prevents you from defending yourself against a criminal, the government shares in the fault for whatever the criminal does to you. For example, when a prisoner is locked up in protective custody, the state assumes complete responsibility for whatever happens to the prisoner on its watch. So, when the New Mexico State Penitentiary failed to protect men in protective custody from a prison riot in 1980, it was not merely the rioters who were responsible for the atrocities there, but also the State of New Mexico.
ItI,
“The obligation to use judgment and constantly adjust never ceases.”
Agreed, but “whose gorgeous vesture heaps the ground”? Obligated to inquire, I am.
Alexis:
An astrologer who got his predictions wrong usually wound up dead.
One clarification. I was specifically referring to court astrologers. Court astrology could be a hazardous profession. As for bazaar astrologers, buyer beware.
maineman,
It only ends up that way if policy ties itself in knots to prevent every evasion of taxes at every moment rather than set some internal rule of reason to determine where success is.
For violent crime, we would never go to the extreme of stationing a police officer in every home to prevent domestic violence. We cannot even have a police officer on every street at every time. And we do not arrest people for every harm done by a person to another person, we only do this for certain actions that the public has deemed worthy of such attention.
But because we cannot do that, we would not go to the other end and say no police on any street at any time. Same with taxes. Same with financial regulation. We do what we should and what we can.
Anton: or they just buy into the corruption, or they go oeverseas.
William #34: Yes, I agree, but then again, I would not be opposed to the Cockroach That Ate Cincinnati striding into Washington.
Anton #36: I think that is what derivatives were all about. An underground way of making money on the loans required by the Community Reinvestment Act and ACORN’s activism. Reference my item no.6; the Democrats would have you believe that the derivatives caused the mortgage market to crash, when in reality it was the exact opposite.
joe buzz
That is a political negotiation among the members of the polity. I do not say that to be flip, but because it is the only answer available. We can appoint technicians to carry out the results of the negotiation, but that is not to elevate the technicians to an elite. The idea is that they serve the polity and explain what they are doing. And if the explanation is too opaque, that needs to be called out as their failure, not the public’s. And I apologize if I have misunderstood your question.
RWE:
derivatives are just fancy insurance. With insurance, you can go into the insurance business or you can buy insurance. Or if dealing in derivatives you can alternatively have a fuzzy understanding of what you are doing or just lie about it. Everything else is footnotes.
RWE, nice list.
Working at abolishing “risk” for the people is nothing more than ersatz welfarism dressed in the Precautionary Principle. Its mechanism must by needs be increased criminalization of large swaths of Americans’ daily transactions.
We all know where that leads: the black market in the prohibited transactions will balloon, and the government will expand its enforcement regimes in an ever less-free economy.
When I think of the outcome of this, I’m reminded of the duct-based economy portrayed in that macabre futurist film, Brazil.
To put it in a way that any urban design maven can understand, what Geithner is suggesting is a lot like pretending to walk every old lady safely across a busy street by permanently rerouting the traffic. In the end, the political class gains control of our private economic traffic – which, more and more looks to be its ultimate aim.
I wonder where the GOP stands on this.
steveaz,
Abolishing risk is as bad as you say. Containing it is mutual obligation.
I am completely comfortable with unlimited nuclear explosions to generate energy 93 million miles away. That’s the sun! I want some control over nuclear reactions in my country and I want even a few nuclear reactions to be highly regulated if within driving distance of my home. Mind you, I am not asking for this risk to be banned.
#24 Alexis-
Jamie Gorelick put up the wall forbidding the FBI and CIA from sharing intelligence. She’s got the blood of 3000 on her filthy hands, and she was second only to Janet “the waco kid” Reno as being the chief law enforcement officer in the country. She hasn’t clocked a single day in prison. And she’s going back to work in the ubamas administration. So what’s that about responsibility?
Lifeofthemind # 29: I think your no. 7 addition to my list should read: “The bailout funds went to the banks who caused the problem when they should have gone to the people from item no.4 to pay off their houses for them.”
The free market has its ups and downs – and a gravity that cannot be contained. In our most recent upheaval, the gravity was earth-shaking.
The down side: lots of people lost lots of money.
Reasons: US Gov’t intervention – socialist engineering, “creative” finacial instruments with unknown levels of risk, mis-information about dirivative risk, greed (worldwide).
The up side: Lessons learned.
The lessons learned will become an historical sign to all future investors – but only if they are headed.
I don’t know why Mr. Frank and other socialists are trying to erase this historical event and the reasons for its manifestation.
In the Industry,
If I’m reading you correctly, you are nonplussed by the government’s limited scope of awareness as it undertakes a new regulatory scheme, and untroubled by its inordinate and proven ability to screw things up, AND you are advocating that we critics should, effectively, get out of the way and let the government do its fine work.
If that’s your take, then, you are abdicating all of your due-diligence duties, and with them, your right to credibly criticize the outcome of this process later on down the road. That is a tacit surrender of your personal sovereignty to “others-on-high” that is, at base, un-American. De-Toqueville would not approve.
And, to dress it with just a little exaggeration to make my point, when this abdication of an essential Helenistic faculty manifests itself in the majority of a democracy’s populace, it is patently dangerous to the republic.
Just sayin’s all, and, that is, only IF I’m reading you correctly.
Wait, I think I can hear Mr. Larson typing or is that him outside working the 1911?
sorry LarsEn.
Steveaz,
No, critics should not get out of the way. Critics should be highly engaged in the process and help to shape it and make it better, but not shut it down.
Everything that we delegate still remains our responsibility, whether it is Predator strikes on al Qaeda in Pakistan or regulation of derivatives.
But the fact that we cannot perfectly regulate derivatives or ensure that everyone at the business end of a missile is not a civilian does not mean that we throw up our hands and stop. It means we factor in the limitations, understand them, and be judicious.
Maineman,
I noticed we’re on the same wavelength, dude.
Here’s a link that suggests that outside of the theater that is Washington, DC, working people who pay taxes are busy, well, working and paying taxes, and the economy is self-correcting just fine on its own.
Which’d make this whole “stimulus” discussion kinda mute. Hmmmm.
Maybe it’s just that, until certain, media-engineered sectors of the economy, like high-fashion, high-rents, and “green” stuff, recover to the satisfaction of the sectors’ creators, America simply can not be said to be in “recovery.”
If you turn off CNN, MSNBC and view from the ground up the stealth recovery taking place all around, the media’s hyped DC-centered “Depression”, like its “Global Warming” movement, reveals a tawdry, clown-show aspect.
If we are to be a republic then the voters have to understand the economic system the laws are based upon. We currently use classical eonomics (or for some austrian economics) in our daily lives and bussinesses, but Keynesian economics as the basis of our banking system and government policies. Keynesian economics is abstruse, it’s key determinants unmeasuarable, and no-one has any real life experience with it. Conseuently most voters, and their representatives don’t have any idea as to what is being done or what to do. Fiat money and a central issuing bank are not compatable with a governement of the people and a goverment of delegated powers. The people are unable to delegate the power to counterfeit, since they never had that power.
The problem is self correcting as unlimited monetary issuing power has and will always will result in the destruction of the issued currency. It won’t be much fun to live through and we will still be left with shills for the very system that is destroying us firmly ensconced within the faculties of our universities . They will have to be culled .
Re #28 by IntheIndustry:
The book “Normal Accidents” was a very poor examination of risks in complex systems. I read it cover to cover when it came out and found it less that useless for dealing with the real world.
In general, we have to deal with TWO types of risk. One is of the unknown as pointed out by others. But players in the financial system have to deal with the unknown as members of a COOPERATIVE system and with the second kind of risk – COMPETITION. In the latter case, unknowns are there because there is an adversary who is playing, at least in part, a zero sum game.
Politicans have had a hand in the current problems by playing a zero sum game. Increased future financial losses by the regulated (banks and other housing lenders) where to be expected by the INCREASED political power gained by the Barney Franks of Congress.
Calls for increased regulation are indeed transfers of power. Of course, the financial guys will game the new regulations much like tax lawyers are gaming the tax regulations. In the latter case, the IRS just makes more complex regulations in response to recapture the tax revenue.
So, what are the unintended consequences to future efforts at entrepreneurship for anyone wanting to sart a new business?
Hillary had expressed her contempt years ago for little companies “operating on a shoestring,” which is how most little businesses start. I have gotten idiot forms from the census bureau for part-time 1099 work that assumed I was an actual business that hired people. I was required to let the Bureau know how many people/races/genders/ethnicities I had hired, and boy, I’d better tell them or they’d fine me and throw me in jail.
The shenanigans of Frank (Elmer Fudd’s illegitimate gay son) and Chris Dodd (who desperately needs and can afford a chin inplant) are anathema to many Democratic voters, from my own informal sampling. If ordinary people of a liberal bent have more economic and financial sense then our reckless, predatory “leaders,” then we’re screwed. Which explains the hundreds of millions of dollars for contraceptives in the bailout: if we’re to be screwed, let us at least be screwed safely.
#57:
“”"We currently use classical eonomics (or for some austrian economics) in our daily lives and bussinesses,”"”
Yes, that corellates with my “survey” of ordinary citizens who are politically liberal in my #59 post.
This begs an intriguing question: How do we get ordinary Democrats to make that leap of logic where they understand that instinctively they themselves are NOT Keynesian in their own financial affairs, so why should the government be different in its?
In the Industry: Great comments. I would add to your book recommendations (at #28) Taleb’s books (“Black Swan” and “Fooled by Randomness”) but especially I would recommend “The Logic of Failure” by Doerner. This is not new (from the 1990s) but it is timeless. Terrifying anatomy of the mental lockup in the Chernobyl control room and many other examples of failure as a consequence of human cognitive limits and psychology, coupled with the dynamics and structure of industrial organizations.
That is the human side of the complexity coin. The other side is the math/physics (which I don’t pretend to know) of how complex systems produce outputs that are not only nonlinear in magnitude, they are outside the envelope of expected output types. Which is a rich area. How you model the economy to assess that, I don’t know. And I think we are seeing today that nobody else knows how either. A certain humility would be useful in Congress these days.
But to the point (of the two sides of the coin): we have a way of getting ourselves into deep trouble. Because complicated systems fail in surprising ways, they may seem very robust right up to the moment of collapse and then they may fail catastrophically (perhaps because they were so robust?). And on the human psych side of the coin, we are driven to build complicated systems (because it’s working fine, let’s add to it; or because the only way to extract more value from it is to push it farther). And we forget (or conceal) how complicated they are, we have limited sensitivity to read early warnings, we have limited bandwidth to assess (internally model in real time) incipient failure, we have limited repertoire of responses and even fewer that are clearly “correct” in a noisy situation of failure with the adrenalin on max and everyone else running for the exit or stuffing their pockets or pointing a finger. Thus we get hosed.
What would help? Grey hair (“seen this one before” or at least “something doesn’t smell right”). Diversification (multiple decision points, spread the load across a network, checks and balances). More what-if modeling and “live fire tests” and aggressive development of earlier-warning diagnostics and firebreaks.
But what are we getting? Less grey hair not more — the problem is being “fixed” by the same people who created it. They will work to conceal, deny or ignore the real lessons because those are too embarrassing to them. Less diversification, not more: there will be a centralized, governmentally-mandated source of decision making. Reminds me of the sad examples of Soviet command economy failure in Thomas Sowell’s “Basic Economics.” And as for the chance of better “live fire” testing? Without competitive pressures and multiple centers of unfettered criticism, this seems doubtful.
Lessons learned? I wish.
“The past was erased, the erasure was forgotten, the lie became the truth.”
The 1 percent President.
Well, That Certainly Didn’t Take Long
“Mr. Obama should have taken a red pencil to the $819 billion stimulus bill and slashed all the provisions that looked like caricatures of Democratic drunken-sailor spending.
As Senator Kit Bond, a Republican, put it, there were so many good targets that he felt “like a mosquito in a nudist colony.” He was especially worried about the provision requiring the steel and iron for infrastructure construction to be American-made, and by the time the chastened president talked to Chris Wallace on Fox Tuesday, he agreed that “we can’t send a protectionist message.”
Mr. Obama protested to Brian Williams that the programs denounced as “wasteful” by Republicans “amount to less than 1 percent of the entire package.” All the more reason to cut them and create a lean, clean bill tailored to creating jobs.
The Democratic president has been spending so much time trying — and failing — to win over Republicans that he may not have noticed the disillusionment in his own ranks.
Betrayed by their bankers and leaders, Americans were desperate to trust someone when they made Barack Obama president. His debut has left them skeptical about his willingness to smack down those who would flout his high standards or waste our money.”
– MoDo
Whitehall,
While I have found Normal Accidents descriptive I respect that your experiences are different. I have also found that while increased regulation can mean more complex regulation, it need not be. Simple but flexible is better than complex and technical.
Regarding the zero-sum game, would that it were true. Unfortunately we may have a negative-sum game in which value is destroyed as confidence ebbs. There are game theory situations in which the incentives push towards lose-lose.
oMan,
Thank you for your comments. Agree that experience and diversification are key to the cure. And all of it must be infused with conscience. Such is life.
The financial industry is very much akin to the gambling industry. Both are made up of those who can approximate the risks involved with their wager and those who only wish to reap the rewards without having to master the calculations. The regulatory attempt to level the field only serves to convince the latter that they are the equal of the former.
RWE, You’re right about the derivatives being driven by the various housing programs, which legitimized the unknown risk. I think the reason derivatives are totally grey is they would not exist if the were defined, thus the were kept a finacial “rorsach test” investment deliberatly.
I’m sorry, but I cannot look at Geithner without thinking that “TAX CHEAT” would look marvelous stamped across his ample forehead in bright scarlet letters.
If anybody’s interested in listening to a good podcast about the TARP and the sudden Congressional fascination with all things Keynesian, Univ. of Chicago economist John Cochrane and George Mason’s Russ Roberts talk about it here.
Gaffe Prices:
So what’s that about responsibility?
What we have in Washington DC is the foxes guarding the henhouse.
When a government actively prevents people from defending themselves from criminals, the government turns itself into a guarantor of security, which means that any atrocity committed by a criminal then becomes at least partly the responsibility of the government due to the government’s inability or refusal to live up to its obligations.
Personal freedom has its advantages for a government.
EdGi @ 67:
Agreed totally. It looks like the Dem’s are already playing swimmingly in the financial sector’s “gray zone” (another alias for “black market”). While they’re splashing around giddily in the kiddie pool (and, kid-like, soiling the waters on occasion), the GOP sits it all out.
In soccer, they call that a “forfeited” game: I’m not sure that staying out of the yellow pool accrues to the Grand Old Party, but, in soccer the game goes to the team that shows up. It doesn’t matter how muddy the field is.
I’ll agree that while “Normal Accidents” had some great stories to tell and was entertaining in most parts, the generalizations, conclusions and recommendations were not helpful. It had nothing useful for me as a nuclear engineer.
Both nuclear reactors accidents, TMI and Chernobyl, were at their heart design failures. TMI had some poorly designed status indications – they lied to the operators about real safety valve status, for example. Plus, there were system behavioral surprises. Chernobyl had fundamental physics flaws that made it unstable – losing coolant cause reactor power to increase explosively. Desingers in the West knew about that problem from the ’40s and rejected that design early on. The Russians didn’t have a choice due to their shortcomings in heavy pressure vessel manufacturing. Our problem is that we have had too few accidents and so too few chances to learn from our mistakes and holes in our understanding.
Back to financial regulation. Again, it is like the tax codes – the cheats will always be one step ahead of the law as written. They certainly have incentives. Laws and regulations have to be clear and precise for the protection of the innocent.
Harry Markopolos:
They’re [SEC] too young, too slow, and undereducated.
The in-fighting among district offices makes them incompetent (paraphrase)
Now if we could just get Markopolos to look at Medicaid administration, which makes SEC look like high-wired, high-flying digital-productive service sector of the future.
There’s incompetence and then there’s Incompetence.
It’s just a matter of degree.
Unfortunately, I am not kidding.
If there are two people who should have nothing at all to do with our financial system, they are Frank and Dodd. If we were to increase the list, all of Congress should be on it.
Harry Markopolos today was the freshest breath of air i’ve enjoyed since Sarah Palin made that first speech as a VP candidate.
BTW Palin oddly made a big deal of supporting Rick Perry for relection as Gov of Texas. Odd links forming between two perimeter states with oil. DC better get its shit together STAT or it’s gonna ruin the Stars and Stripes. Yes, rats the world over hauling ass down the hawser ropes. Nobody’s fault but DC’s. Frank and Dodd still making policy, after what they did. it’s almost just too much to swallow. and that’s just for starters.
- The End of the Financial World as We Know It -
MICHAEL LEWIS
“Consider the strange story of Harry Markopolos. Mr. Markopolos is the former investment officer with Rampart Investment Management in Boston who, for nine years, tried to explain to the Securities and Exchange Commission that Bernard L. Madoff couldn’t be anything other than a fraud. Mr. Madoff’s investment performance, given his stated strategy, was not merely improbable but mathematically impossible. And so, Mr. Markopolos reasoned, Bernard Madoff must be doing something other than what he said he was doing.
In his devastatingly persuasive 17-page letter to the S.E.C., Mr. Markopolos saw two possible scenarios. In the “Unlikely” scenario: Mr. Madoff, who acted as a broker as well as an investor, was “front-running” his brokerage customers. A customer might submit an order to Madoff Securities to buy shares in I.B.M. at a certain price, for example, and Madoff Securities instantly would buy I.B.M. shares for its own portfolio ahead of the customer order. If I.B.M.’s shares rose, Mr. Madoff kept them; if they fell he fobbed them off onto the poor customer.
In the “Highly Likely” scenario, wrote Mr. Markopolos, “Madoff Securities is the world’s largest Ponzi Scheme.” Which, as we now know, it was.
Harry Markopolos sent his report to the S.E.C. on Nov. 7, 2005 — more than three years before Mr. Madoff was finally exposed — but he had been trying to explain the fraud to them since 1999. He had no direct financial interest in exposing Mr. Madoff — he wasn’t an unhappy investor or a disgruntled employee.“
Starling said…
“It is a shame really, that someone couldn’t or didn’t investigate this guy sooner.
That said, I really wonder what was the extent of his chicanery and when it began.
After all, a moneky throwing darts at list of stocks could have made money in the late 1990s. Was he on the take even then? And then there was the bull-market of 2003-07. Did his con-game give better profits than the average returns during those periods?
I guess I am wondering if he was just an incompetent stock picker or just greedy?
Probably a combination of both.“
Markopolos Testimony
ht – Deuce
Whitehall,
All the best to you. Sometimes in giving a task to someone, we say it’s not nuclear engineering. But your profession is. Kudos.
Anyone who has ever had to interact or conduct business of any kind with a government entity knows that you either pay them off, find a private sector option, or shoot yourself rather than die slowly from neglect, abuse, arrogance, incompetence, and random acts of capriciousness, all worn like a royal badge of honor.
Harry Marcopolos observed that in the near-decade he badgered SEC, a single phone call to the CBOE (Chicago Board Options Exchange), where Madoff’s ‘story’ placed his ‘winning strategy’ options trading, and a single question “Is Bernie Madoff trading over there?” is all SEC would have needed to do, to see the scam. Further, he said, SEC at any time could’ve picked up a newspaper, and compared Madoff’s reports with CBOE reports [updated daily in the WSJ] to see that Madoff was reporting specific trades in specific issues that exceeded the actual numbers of trades and contracts that happened. IOW, had he been the only trader on the planet, a glance at the WSJ in one hand and a Madoff report in the other, would’ve STILL exposed him.
Charlie Gasparino, MSNBC’s long-time serious & credible and very non-sensationalist ace financial reporter, has been digging into it from the get-go the SHTF, said on air yesterday in extemporaneous and expressively revealing response to a query from Larry Kudlow, that he, Gasparino, was finding it (tight paraphrase here) ‘very very hard to believe that SEC did not know what Madoff was doing’.
Jaw dropping doesn’t even begin. Also leaking is reports of dealings with “Russian Mafia and South American drug gangs”. The ‘Russian Mafia’ is what we call ‘The Kremlin” when we are doing diplo-speak, and don’t EVEN get me started on the thin, thin, tissue of Pelosi’s excuse for ditching the Colombia Free Trade Agreement.
Madoff is a big donor to the Dems natch –and one waits for a Soros orthopedic shoe to drop.
First, if Putin and Chavez got the 50 billion, what did Madoff get?
“Cramer pleaded to SEC Chairwoman Mary Schapiro to ban UltraShort Financial ProShares (SKF), which he calls a sham of an ETF, saying it doesn’t work and is hazardous to its users and the market as a whole.
Cramer said the SEC needs to act like the FDA, which has the power to pull any food or drug that it finds to be hazardous to its patients. He said the SEC also has the power and should exercise it to save the market from SKF.
SKF, said Cramer, is designed to be a hedge against the bank stocks. As banks decline, the fund should skyrocket, with every $1 invested in the fund yielding $2 of shorting power. Today SDK, which once traded at $262 a share in December, trades just $128 a share during what should be the best time imaginable for the fund.
Cramer questioned the purpose of the fund, if it loses half of its value at a time when its supposed to capitalize the most. He called the product simply irresponsible and said it only makes the health of the financials worse in the process. He urged the SEC to just ban it. ”
http://www.thestreet.com/story/10461996/2/cramers-mad-money-recap-feb-4.html
Outrage of the Day: Cramer sounded off at new Attorney General Eric Holder, for his comments today that there will be no “witch hunts” on Wall Street. “Witch hunts are exactly what we need,” said Cramer. He said the only way to restore confidence on Wall Street is to prosecute the guilty. He again advocated creating a special prosecutor to focus on Wall Street and indict those responsible for the many bank and insurance failures. “The people are demanding justice,” he said, “who are we to deny them?”
Cramer, Kudlow, and Gasparino have been a refreshing trifecta of probing sanity since last September when I realized it was too late to get out. (Rick Santelli and Mark Haynes too – voices of clarity and skepticism)
I agree –and right behind are Fox’s Stuart Varney, Neil Cavuto, Dagan McDowell, and Brian Sullivan.
Doug’s link –a must read, every word all the way dowwwwwn ttooooo tthhheeee boooooooottommmmmmm
Not to mention Steve Leisman, Joe Kernen (witty and unusual), and the Squawk on the Street crew (Jeff Macke with his two investment positions – treasuries and fetal), some of whom were, interestingly enough, not too excited about their sudden transformation into political economists. At any rate, the financial reporting during the recent crisis struck me as being several cuts above news reporting in general. If the SEC expose gets legs … well I’m reminded of the old Adam and Eve joke courtesy most recently of Buddy.
Markopolos just earned himself a big footnote in history.
Adam and Eve joke:
1) Chu –new boss of Energy Dep’t –yesterday, “climate disaster! No-food future! Cities will die!” and introducing Obama speech at Energy today “Climate change unfolding disaster catastrophe, etcetera” followed by Obama, saying “hurry hurry hurry –pass it passit passit –all our problems are due to “the other side, which is against the bill, who ruined the economy” –lies after lies, trying to stampede the people?
2) All economists and analysts agree, housing prices have to stop falling –to get people unscared, so they’ll spend, so biz will run out inventory and need a replacement cycle, which is the only thing that’ll turn around the unemployment trend.
3) the extreme scare talk out of WH is to pass a bill that sits at or very near where any informed personone would put the cross of the two lines [a] the most Dollar dilution that [b] can be passed.
4) benchmark 10 yr treasury yield jumped 50% in the last couple weeks –still low enough no one is noticing the 2nd derivative. Mortgage rates –pegged to the 10 yr –are moving up fast, the 30 yr fixed up a full half point over last few weeks, mostly in the last week, 2nd derivative scaring money again.
5) “So, President Slade, why, when something as psychological as inducing potential buyers to actually buy is arguably a US President’s (on February 5 2009) single most critical hortatory task, are you and your minions doing all you can, almost to the point of parody, to frighten people and deepen the national gloom, in order to more quickly achieve the very Dollar dilution that is scaring the very people who buy the Treasury debt (you will need to sell in order to fund the bill) into demanding lower prices/higher returns which you can readily see is ALREADY rapidly raising the very mortgage rates that instantly decrease house values and drive down the prices that are creating the unemployment that you are using to justify that stimulus bill?”
“Are the ‘people who sent you’ trying to cash out of the US system in the nick of time, before they crash the Dollar and create the national emergency that can be exploited to “Take America in a Nude Erection?”
“If not, why the extreme rhetoric and the full court press to hurry hurry hurry pass it passit passit, when actually, as tomorrow’s new employment figures, and Bank America’s and Walmart’s earnings, and overall bank credit, and business inventories, and even areas of house prices, as well as the financial markets, are all stabilizing in a declining rate of decline which equates to a now Bullish 2nd derivative, presaging a bottom likely to come with the always-rejuvenating Spring, you could slack off the rhetorical overkill, which is making a fool of your entire party tho hardly making you and it less dangerous to the beloved (by half of us anyway) two and a half century old pre-nude-erection America, and let the people sleep on it awhile?
christ –tv just said, Reid is gonna try to pass it TODAY! Call your senators now –see instapundit for phone numbers. Call now –stop the madness, Dems are about to blunder into a freaking revolt.
…er, for anyone not disposed to ‘hear’ written words, “nude erection” = “new direction” –the Pelosian Battle Cry.
(202) 224-3121 is the nat’l number. Insta reports emails saying “all circuits busy” –well keep ‘em busy –and also, Insta suggests, try your local numbers.
http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4GGLL_en&q=local+phone+numbers+for+congress
Under reported –market rally today despite all –lit up when some senator –only overheard part of the report so still looking for name –said “we may have to give ‘mark-to-market’ a rest for awhile”.
best click to contact your house and senate reps
Word is that spector, snow and collins are going to cave tonight, and maybe MCCain.
with something like 300 amendments only 27 or so have even been debated.
A very real socialist coup. Not one shot fired.
Costa Rica? Belize? Siberia?
I for one am encouraged after reading this thread that there is still the collective wisdom in our society to navigate through this mess. The problem is the wisdom resides with people who “will not seek, nor will they accept” a nomination to public service. I can’t blame anyone for not wanting to play that game, but where will it leave us when we keep electing people who never had an original thought?
Re#96: Agree. Yeats said it well: the best lack all conviction, while the worst are filled with a passionate intensity. We seem to have let the monkeys alone to drive the bus. Not sure how we reverse it.
I like Cramer’s style.
If the SEC wanted to act like the FDA, one “food” they might want to put a “Poison” label on is GE.
Looks like Thomas P. Barnett’s favorite multinational firm may be about to lose its AAA credit rating. Further, if you look under its skirts, GE is a lot like GM in that it has become a ward of the Democratic party: it’s marketing and financing plans rely on false media crises, like AGW and “Worst Economy Since Herbert Hoover,” to derive the tax=payer subsidies that the company needs to stay afloat.
(Sounds kinda like the D-party itself, in that respect.)
A revision of the warning label on GE is required, SEC – get on with the regulatin’ why doncha.
steveaz, GE just took a 139 bbl loan from gov’t –dunno which program –and promptly donated a few million to ACORN. jeffery Immelt, CEO, draws 20mm/yr salary –did i hear that right? The stock is down 80% since he took over. GE owns NBC, MSNBC and CNBC, plus Universal –the cables and the NBC are just incredibly, almost to point of caricature, hyperpartisn left and are a big wedge of what is supposed to be “reporting the news” –do we really think this won’t seep into the news coverage even more now that target Bush is out and Comrade O is in?
With Immelt on O’s new Economic Recovery Advisory Board?
a board of directors is elected by shareholders, and the board’s only real job is to watch the CEO. Dunno who’s on GE board but jeez, don’t they carre?
I saw a creepy PSA on tv the other day, a teenager in all red, looking into the camera saying I Am Fierce! –onscreen was cityyear.org –i took a look in search, and there they are, sponsored by six or eight business roundtable sized companies (one wonders, is this type of mousollini-developed corpo/politico/government crossconnection doing any layoffs to help drive the panic to pass the stimulus bill?). The Robin Hood Foundation is associated, and there’s old Immelt, on board with the hedge fund managers (hmmm, which side were they on in the November bank runs?) –including a Kravis of leveraged-buyout inventors KKR –in an NGO called the Robin Hood Foundation.
I guess Robin Hood pretty much explains what’s going on with GE stock. the website –or maybe it was Immelt’s wiki, says “robin hood is the tradition of the rich giving to the poor”.
Uh, robin hood, at the point of a sword, ROBBED the rich and gave to the poor. not that there’s anything wrong with that, but how wrong can a copywriter be? and, what is the message in a group of our richest elite adopting that name?
OReilly pointed out not long ago GE sells heavy industry to Iran. hey, thanks!
anyhoo, re cityyear.org, re these young *uniformed* clients of rich folk NGOs, can the old feudalist private army be far behind, as our culture is being driven backwards into nazi shamanism?
I dunno –in addition to not spell checking Mussolini, i forgot to add that he DID make the trains run on time, and had he stayed out of war, well, whats wrong with a little organization and direction, esp for the young. But –what’s with the Hugo-red tees & berets?
It’s called Creative Capitalism by Bill Gates (google for the website since wordpress only allows this blogger one link). The academics have been debating the concept since 1930′s. This is a good summary article that explains where the Robin Hood Foundation fits in.
From the article:
[T]he old concept that the owner of a business had a right to use his property as he pleased to maximize profits, has evolved into the belief that ownership carries certain binding social obligations. Today’s manager serves as trustee not only for the owners but for the workers and indeed for our entire society… Corporations have developed a sensitive awareness of their responsibility for maintaining an equitable balance among the claims of stockholders, employees, customers, and the public at large. – David Rockefeller (1962)
well, the theme is certainly laudable. could do with the bequeathals of TARP money to “Che!” groups and election-stealing schemes, but i aguess i’m just clinging to the past.
What is alarming and confusing – a fear in search of a new paradigm/narrative if you will – is the tidy way Creative Capitalism dovetails with the Bilderberg/Rockefeller/one-world conspiracies of not long ago, as per Dan’s post upthread. A ruse by any other name.
The more I know, the more clueless I feel. But I don’t warm to the concept.
trust is draining out about as fast as your coffee if you were sitting at your kitchen table taking a sip when a bullet flew in the window and shattered the cup
No risk can be managed if it isn’t first measured. Geithner’s comments are consistent with a correct view that financial innovation has outstripped regulatory capacity to measure risks across the market spectrum. In the Fed, SEC, FDIC, and OCC, paper and pen are the common tools of the trade. At the NYSE and NASDAQ alone computers process 2 billion transactions per day.
Our current regulatory infrastructure is simply outpaced by the scale and speed of financial processing, and in that gap greed, fraud, and incremental errors and omissions will creep until the system overloads and we witness an enormous crash.
The meltdown isn’t a symptom of the failure of capitalism or dark forces at the fringe. It is simply a normal consequence of human self-interest unmonitored and unchecked.
Read my blog for some ideas on how we in IBM are proposing to prevent this from happening again.