In comments yesterday I mused on what the new financial regulations proposed by President Obama would bring.
As important as the Supreme Court decision was it is almost overshadowed by the President Obama’s proposals to get banks out of the private equity business, the main idea being to bar the banks from playing in riskier markets. The main obvious difficulty with this proposal is that unless other national environments go synchronize their move then US banks may be at a competitive disadvantage. So noises are being made about settling it within the framework of an international deal.
Obama’s initiative will garner a the support of those who believe that some return to Glass-Steagal, abolished by Clinton in 1999, is desirable. It will also play to the popular resentment of the financial industry. To some extent, this will be government trying to destroy its own monster, at least one it helped in part create.
AdvertisementThe two problems facing the monster slayers are that it may in the short term affect the amount of credit and capital available. More importantly, it may have no effect. Given the mobility of money pathways are likely to evolve in which deposit money is effectively staked on high risk ventures. Government itself did this by encouraging the bundling of subprime mortgages and when that bombed the effects rang through the whole system.
In short, the President wants to firewall off different parts of the financial system by rebuilding some of the walls which had been torn down in the past. In order to successfully achieve this, he has to do it right. Doing it wrong will be fraught with danger. It is a gigantic task, requiring international cooperation, timing and attention to detail. And unless done correctly it may result in an expensive disaster.
Can Obama do it? Can the political system do it? My guess is that he’ll have a hard time for two reasons. First, it is a bait and switch again. He is rounding on Wall Street, which is not a bad thing in itself, but to do that he will need to enlist the help of political forces he’s already betrayed. One of the subtexts is that Wall Street may have thought they had an understanding, and now maybe they don’t. Rightly or wrongly, that the double-cross factor. Second, he will have to craft the financial regulatory overhaul carefully. It can blow up in his face. But given the cast of characters he has at Treasury it is certain some of them will be conflicted, some probably thinking past the time when the Obama administration will be over and their professional lives not yet. Obama needs a political parachute to save his plumetting Presidency, and this initiative has many positives going for it; but his capacity to execute is may be severely impaired.
My prediction? Anything can happen. It may be a big victory for Obama, an impending disaster or anything in between. But it will severely challenge the Republican response. I think more details will emerge in the days ahead and when the nuts and bolts shine through the rust, it will be clearer whether the administration’s proposal reduces risk without unduly throttling credit. Most important, we’ll see whether the risk reduction is roughly symmetrical over all actors, or whether some will be more restricted than others.
Some of those conjectured results are showing up. Now Treasury Secretary Timothy Geithner is apparently signalling that he is not completely onboard, an extraordinary action for a cabinet member supposedly spearheading the effort. In other words, he’s hedging. Reuters reports:
U.S. Treasury Secretary Timothy Geithner has expressed some skepticism behind closed doors about the broad bank limits proposed on Thursday by his boss, President Barack Obama, according to financial industry sources.
The sources, speaking anonymously because Geithner has not spoken publicly about his reservations, said the Treasury chief is concerned the proposed limits on big banks’ trading and size could impact U.S. firms’ global competitiveness.
This complaint about competitiveness was going to come up early and was one of the obvious objections. Another Reuters story said that European governments welcomed Obama’s initiative but had no plans to follow suit as yet. “Major European economies offered support on Friday for U.S. President Barack Obama’s plan to limit banks’ size and trading activities but indicated they had no plans to follow suit. … ‘The U.S. finds itself a little behind us on this. The Obama plan is not fit for the purpose in the EU.’” It’s like Alphonse and Gaston entering the dragon’s lair. You first, Obama.
Unless European banks are held to the same restrictions then they could probably offer deals under one roof that US banks would need external partners to match. But if the US banks did that then in the course of events they might circumvent the very prohibitions against using depositor money in high-risk situation the reform was designed to prevent. A level international playing field would probably help ameliorate the incentives for finding loopholes.
The Reuters article quotes an unnamed source as implying Geithner said that Obama’s banking reforms might be missing the real point.
He also has concerns that limits on proprietary trading do not necessarily get at the root of the problems and excesses that fueled the recent financial meltdown, the sources said….
The White House official said Obama’s economic team considered the concern that proprietary trading was not at the heart of the problems that fueled the financial crisis.
But it concluded that reform needed to be about more than just fighting the last war, it needed to address sources of future risk as well, the official said.
Well, what is the real point? What are the true sources of future risk? That’s the $64 trillion question which the Reuters article doesn’t answer: what the greatest sources of unmanaged risk are. The use of depositor funds in high risk markets is one element, but there are others. The housing bubble, excessive financial complexity, lack of information, the incorrect pricing of risk through CDOs all played their part. Unless these sources of risk are systematically managed — including those factors caused by government — then the financial reform effort will be incomplete. Worse, it will give rise to the opportunity of a kind of arbitrage based on the changes in the regulatory environment. As opportunities for a fast buck close down in one sphere, they can open up in others. As Rahm Emmanuel said, there are people who will never let a crisis go to waste. And that’s always the danger.
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This is VDH’s scale of at least 8.5.
http://market-ticker.denninger.net/
covers many of these topics. Check him out.
Not mentioned in this article but mentioned in other articles on Volker is his arguments that the riskier instruments have not yielded greater earnings/growth. Only more volatility.
Paul Volcker towers over the new Glass-Steagall
I’m more pissed, and perhaps more involved, than average with some of these issues. I don’t care if it’s a half-step lurch in the right direction, the current system is putrid, and 90% of the blame lands directly on the senior management of the big banks and Wall Street firms.
The only valid fear is that the house of cards is still so huge and fragile, that a bad step will collapse it before it fixes anything.
It’s bad, folks. On the right we like to ventilate about Cloward-Piven, but this is pure Marx, that the capitalists will bring destruction on themselves.
I go all Krugman on this issue – come ON Obama, EARN some of those socialist stripes you like to strut, you could not have a greater opportunity.
I don’t trust anything Obama says or does. This is just a temper tantrum because his healthcare idea is tanking/has tanked. How bout 10% tax cuts for every American? That would do a lot more for the economy. And of course the EU banks aren’t going to go for it, they’re saying “slit your own throat if you want but don’t expect us to join in your suicide pact”.
uh, I see there the same effort that sarkozy shows each morning in raising a new tax, as the state debt isn’t vanishing soon, but still growing, so, their fear is how they could manage to keep their state standing of living, without going bankrupted like the soviet countries did in the nineties, meaning that the state salaries would not be paid anymore within a few months.
Now, taxing the money moves, it’s all right for me, cuz, up to now, the enterprises are the ones that pay most of the taxes, becuz they are those who need to hire employees, while some get millions and billions by just in clicking on a keyboard with others money labor
#2 Tolonaro is quite right. Denninger covers many of these topics intelligently and rationally. He should be paid attention to.
My vote is for the “expensive disaster”. This seems to be how things are done in DC now. Too many compromises to be made and you can’t bite the hand that feeds you unless they are disaffected blue collar workers.
Given what we’ve seen so far from Obama, I’m surprised anyone is taking his latest scapegoating measure seriously, or at face value. He wings it, speaks before thinking, and this latest direction is no doubt just as ill-conceived and floridly incompetent as everything else that spews forth from his mouth.
Somewhere I heard that the only two agenda items Obama fulfilled in his first year as POTUS are the (1) the family dog, and (2) date nights with Michelle. Priorities. LOL.
But his “style” of “leading”, which is neither stylish nor executive, and far worse than juvenile, amounts to congenital misreadings of the issues, followed by sonorous lofty sounding vacuities and demagoguery, followed by grandiose schemes, followed by blaming and scapegoating, followed by the worn-out verbal ticks like: “people are understandably angry” , “some people may say… but I…”, “let me be perfectly clear…”, and “make no mistake”, followed by congenital misreadings of the issues, and… You get the picture.
His nakedness laid bare (heh), he now fully owns the revulsion of the electorate. No more “we inherited an unprecedented mess”. For the sake of our nation and at the first actionable trangression this already worst president in US histoy must be impeached.
So, Denninger and CNBC says Bernanke bye-bye?
That will roil the markets, bigtime.
And the problem remains, who do you get instead?
And, what policies to you get instead?
Would YOU take the job?
I think President Obama is grappling with a very important, possibly fundamental issue here. The financial industry, like the MSM was one of the informal branches of government. One of the pillars on which the whole system worked. If you had to document the actual operating system, including extra-constitutional elements, the financial industry would be part of the core system.
The problem President Obama is facing is that anything he does which is likely to fundamentally fix the bug will require some kind of reboot. The whole premise of the banking bailout is that the financial threads had to be kept going at all costs. Now the narrative has subtly changed. Some threads can be stopped and restarted, but he wants to avoid the reboot.
The issues are real. The core has dysfunctional code. But Obama is going to have to be very careful or the system can writhe and react in ways that are complex indeed. Who are his programmers? Volcker? Ok. But don’t forget Geithner and Summers and there’s your problem right there. The client-agent issues here are likely to be huge. And then there’s the global financial system. Large parts of the OS core are literally beyond Obama’s control.
Whoever the President was, reforming the financial system would be a top priority. Maybe the priority. Not this BS cap and trade or even a healthcare “reform” package that may in fact unleash subprime insurance risks on the whole health care system. The priority was and is the financial system.
The crisis in the financial system is in many respects a crisis of information. It is the lack of information which is at the heart of unmanaged risk. Simplifying the system and creating check code over every path in the algorithm (regulation) will be necessary if the code is going to run with 99.9% uptime, which is probably what we would be content with (a crisis every thousand years). Now who thinks Obama is going to be able to do this? And why?
I think he ought to do it in principle, that is, reform the financial system. But he needs to approach with a deep commitment, not as an angle to win temporary political respite. And I hope he is approaching it in that spirit. But the problem goes deeper. Look at his coalition? Pelosi, Reid, Geithner, the unions. Who in that crew will support deep financial reform? He’ll have to build a real popular coalition to achieve this, because it is going to be a rough ride. In fact, he might even cause a reboot without meaning to. Anyhow it’s a tough job and can’t be approached as a gimmick.
Wheels within wheels. Perhaps Obama’s inner circle had already picked Geithner as the fall guy and crafted this without getting him onboard and delivered it in a way calculated to elicit his rejection. Somebody has to go to the wall. Why not Tim? If Geithner goes that might give a 5% bounce in the market. Dodd is already heading out the door, call that good for another 5%. If Barney Franks decides that the tea leaves from Tuesday, when his own district went Republican, make this a good time to take an extended tour of equatorial fleshpots then that might produce a seismic bounce of say 10%. If the Fannie and Freddie crowd get tossed under the bus then Obama may tell himself that he can gain enough momentum to survive.
None of that may be true or it may be true only in the sense that Obama and the inner circle may think that way. As I said before, it is possible that this was announced to distract from the profit reports issued by his friends at Goldman Sachs. On paper they would be severely impacted by this but seriously does anybody think that anything will be designed that is not in their interest?
The problems the US financial industry faces are, incompetent and sclerotic regulation, opacity and dishonesty, high taxation, and increased foreign competition. Those same problems were the reason for the repeal of Glass-Steagall in the first place. The hope was that somplicity and clarity and increased domestic competition would drive down costs and benefit consumers as well as produce more jobs. To a considerable extent it worked. The problems we have were largely generated by the same crowd who are now in charge and blaming the system they established and then milked. If Obama and Co. succeed then I predict a much shrunken financial services industry with a favored few, such as Goldman Sachs, presiding over a desert tax farm. The chief beneficiaries will be in Shanghai and Frankfurt.
Would Bernanke leaving help or hurt? Who is really going to still have a chair in the inner circle when the music stops?
MHOR, Moral Hazard Of the Regulators, bodes evil bad outcome of his proposals. ObiWon’s proposal is like closing the supermarkets and convenience 7/11s because they got robbed by druggies who got their drugs and guns from the very cops shutting down the stores. Dimwitted socialist naive child don’t even know who did the crime. Look at his campaign contributors, all wall street, all with him because they got their guns and drugs from HIS socialist cops, and who expected HIS corrupt socialist cops to keep on keeping on, supplying them. MHOR will bankrupt us all under ObiWon, the childish dolt.
Oh, come on, Wretchard. Less competitive? When Glass Steagal was in place, we were a net creditor nation… obviously our banks were doing okay then.
The two things that Glass Steagal and other associated legislation prevented was banks pooling mortgage assets across all 50 states (banks could only do consumer banking in one state), and putting investment and commercial banking under the same roof (thereby preventing the investment bankers from raiding the pool of mortgage assets). Both of which are good things as we have seen. The Euros have other mechanisms to achieve the same effect (like requiring bonds to be covered and tight restrictions on who can actually invest in equities, which would be highly unpopular here).
The crisis in the financial system is in many respects a crisis of information. It is the lack of information which is at the heart of unmanaged risk.
When someone jumps blind, there is certainly a lack of information involved, but when they do so only in the hope of outsized gain and in the face of death, I’m not sure information is the critical issue.
EdGi @ 13 puts a finger on it: moral hazard. All of our financial “leaders” engaged in it, bigtime, not just government backing of blind risk, but risking depositors, employees, and stockholders interests as well. I can think of NO excuse for it.
OK, I can so think of an excuse for it. Greed overcoming all rational considerations.
So, what’s a government to do?
I don’t know.
All I can say is, any countermove on the same scale as the risk and crimes, will be a world-shaker.
#10 Josh. Paul Volcker has been mentioned and he seems to have given indications that he would accapt the job.
I am no fan of either Geithner or Bernanke, and think that repealing Glass-Steagal was a mistake.
Nevertheless, this is a terrible time to start fiddling with the financial system. the 500+ point drop in the DJIA over the last 3 days shows how this will be taken by the markets. If Obama persists in this course in order to burnish his populist street cred, I think we will retest the lows of last March (DJIA 6500) since nothing has actually been economically solved since then. When that happens, the last shreds of public confidence will be destroyed and we will nose dive into the second dip of the W shaped recession so many have been predicting.
Not to mention that this would put us right on track with the 1929 – 1930 – 1931 timeline. 1929 was the crash in the fall, continued into the spring of 1930, followed by a fantastic 6 month or so rally which recovered 50% of the losses and convinced everyone that the Great Crash was merely a temporary blip.
Early in 1931 everything headed back down resuling in an eventual 90% loss in the markets and 25% unemployment.
I fear that Obama is all set to reenact the events of 1931, beginning this week.
I’m not against Glass Steagal. In fact I think the key to fixing the information problem is modularizing the parts so we can more easily see what each component does. But I’m not sure you could revert so easily to the old code now that other parts of the system have moved on.
What needs to happen is a return to the principle of subsidiarity and simplification consistent with the existing situation. The good ideas in Glass Steagal need to return in an appropriate form.
It is easy to overact by characterizing your adversaries as wholly wrong but those shades of wrong are usually more subtle. Look at the Guantanamo Bay debacle. It might have been enough to say that you were against water boarding and the suspension of Habeas Corpus. Instead we get Illinois penitentiaries and a KSM trial in New York. Doctor, do no harm, please! What would be wrong with tightening up housing credit (do we need a Fannie May or a Freddie Mac?) and scoring CDO’s based on the ratios of embedded risk involved. Transparent reporting solves most problems and the adults can sink or swim on their own from there.
It seems to me that risk is exactly what capitalism is all about. Rich people get richer because they risk more. The average Joe does not have the margin to experiment with risk. What terrifies me is when the government itself is a risk taker. This is not fair, government is not a business. Here in California Orange County put most of its general fund in a risky money market account. The market went south and the county went bankrupt. This happened because, I believe, there was an impetus to make government more efficient and accountable like business. It was just a small leap from “like business” to become “a business”. Wealth does not find its origins in government and any attempt to make it so is a precursor to disaster.
“The government is best which governs least.”
— Thomas Jefferson
This is a simplistic analogy, but Obama’s intent reminds me of what helped precipitate the Panic of 1837. Poor Martin Van Buren came after Andrew Jackson, who was hell-bent on reducing the size and power of America’s banks of the time. Jackson suceeded. His means of doing so were a clumsy populist muddle which helped precipitated the fincancial crisis of Van Buren’s first year in office.
This was a long time ago, and the mechanics and specific issues were different than now, but for one thing: both Jackson and Obama painted the banks as institutions to be brought down a peg, and they both did so for populist reasons. Obama may have some rational and compelling reasons for being concerned about how banks do their business, but I think he’s walking blindfolded into a minefield. Also, he’s doing this as a quick fix to his fading popularity first and foremost, and for sound reasons of national policy dead last.
Wretchard: “I think he ought to do it in principle, that is, reform the financial system… it’s a tough job and can’t be approached as a gimmick.”
Just watch, as exactly that now happens.
I’m reminded of the one thing Bush is said to have remarked about Obama, after meeting him: “Trust me, this kid has no clue.”
The markets are obviously worried that it might be real, and I’m sure he’d like it to be, but has Obama done anything to indicate that this even meets the criteria to be called a ‘proposal’, as opposed to a populist temper tantrum?
The markets are obviously worried that it might be real, and I’m sure he’d like it to be, but has Obama done anything to indicate that this even meets the criteria to be called a ‘proposal’, as opposed to a populist temper tantrum?
I don’t we’ll know the depth of Obama’s commitment until more details are available. It’s a great political move, which if he can carry off a modest near term success must win grudging praise from everyone. But the devil is in the details, in the fine print.
He’s got the 82-year old Volcker on his side. Some news stories report Volcker as being worried that after the consolidation of the financial industry, some firms, bloated with government cash may think they are “too big to fail” and this is a memento mori. Another news article complains that if Obama were serious, the downsizing should apply retroactively to Goldman Sachs. Otherwise it’s just keep the weeds down so the favored plants can grow.
Shorn of politics, what I think is true is that the risk beast hasn’t been tamed. If the news reports are true then Volcker for one, is afraid of yet another source of risk from all those bailout fattened mutant firms. So they manage the unintended consequences with yet another patch. But it had better be a good patch or the thing will wind up as spaghetti code that nobody will be able to disentangle. With the political paralysis and polarization in Washington, it’s possible the risks may simply accumulate unnoticed in the distraction of partisan politics. It’s happened before.
Watching the market will probably provide the most objective clues as to how this is perceived.
Volcker is one of the rational voices out there, but I really don’t want to see an 82 year old put into that position. I hope he would not accept.
I just saw this on German TV text news: The government calls the plans a helful suggestion or stimulation (Anregung). The Bankers’ Association is critical.
The real risk is not in Western Markets. It is in China, the head of the BRIC class, which is like Dubai, only bigger, and far more volatile.
China is applying the lending brakes, which means they are worried. They have no transparency and rely on crony-companies to keep people employed. Systemic risk and moral hazard are 500X greater in China than in the US. With more money at risk too.
Heck RUSAL could not even get listed anywhere else but HK, and there it was off-limits to individual investors. There’s your risk right there. And Obama can’t do anything about it.
“Now Treasury Secretary Timothy Geithner is apparently signalling that he is not completely onboard, an extraordinary action for a cabinet member supposedly spearheading the effort. In other words, he’s hedging.”
Turbo-Tax Timmy is first and last a Goldman Sachs man.
Was it Putin who said there are no ex-KGB men.
Instapundit links to a short piece that characterizes Obama as “the anti-John Adams”…
…that is, that he sees us “as a nation of men, not of laws.”
http://preview.tinyurl.com/yc47eow
Jamie Irons
Wretchard (11), oh my no. If you were to say, “in principle it should be done”, that would be one thing. But this crew, Obama himself along with the moral midgets you cite (Pelosi, Reid, Geithner, the unions) are so manifestly unqualified to undertake the task. Just coasting on inertia is going to be way better than anything they manage to cobble together.
w@11: The crisis in the financial system is in many respects a crisis of information. It is the lack of information which is at the heart of unmanaged risk.
I would take this thought one step further and say that the magnitude – depth, breadth, and duration – of this recession would have been average to mild (25% drop DJIA) were it not for a single factor – the (convenient) opacity of securitized products. The CRA, F/F, policy pressures, corruption in mortgage lending and underwriting standards, Fed easy money policy, and the rest – all of these factors would have self-corrected (well) before bringing the world economy to a brink, had investors KNOWN what was in the fancy new products.
One could also reasonably say, “had investors bothered to inquire” (and some did, just not enough, and not the ones who should have known better vis a vis the bonus argument), but for the sake of keeping it simple to make a simple point, transparency in the securitized instruments would have mitigated the extent of the collapse.
If that is true, even only 70% true, that means that the markets can be stabilized by opening up securities and other forms of derivatives. This is a purely technical issue. In a policy sense it’s not complicated. The directive is straight forward. Regulate securitization and other forms of derivative products. Give it to the technicians and let them work out the details. Transparency is a “systemic” fix that improves overall market functioning no matter the onslaught of whatever new stuff can be thrown into the mix.
Do that first and nothing else.
Unfortunately, the Glass Steagall issue will get center stage because the banks have flaunted *moral hazard* by investing zero-interest money for high investment returns, which translate into “obscene” bonus packages. This is rightly making the AA (Average American) absolutely livid. The practice is not simply offensive, but weakens the vitality and strength of a market economy that grows through productive labor as opposed to the paper growth of financial services. Part two is therefore some sort of reform to isolate investment from commercial banking.
Sure, dedicated money will find a way, but the path will be harder and longer. And stop with the argument that the investment community won’t be able to compete under such onerous burdens. That is identical – on the wink-wink, nod and blink scale – with the argument that banking staff are so special they cannot be replaced. There aren’t enough turnip trucks on the planet to create people stupid enough to believe either of those arguments.
Third item would be to have a serious conversation with the regulatory agencies, but that’s down the road and requires a longer term effort of restructuring and restaffing and rejiggering the mission statement.
I think it’s fairly straight forward, but the sturm and drang, sound and fury, clatter and chatter will be something to watch – or not. One has to wonder how the investment banking community could possibly think that there would be no retributive repercussions for 2008. I guess they think we ARE that stupid.
I feel sorry for Bernanke. I really do. He’s like a hick magnet for all the intellectual rednecks heat-seeking the nearest target.
W
The crisis in the financial system is in many respects a crisis of information. It is the lack of information which is at the heart of unmanaged risk.
I’m not so sure that the lack of information is the problem.
My experience is that there is a lack of a conceptual framework to make sense out of the data.
In an operating system context, the message is not being formulated or transmitted by the hardware. This leaves the total state of the system sparodically in and out of control.
It is a rewrite, but we’ll need a Turing first.
ADE
Certainly the financial question far exceed our ability to answer them , at this time, if ever.
There comes, as history shows, a point at which there is nothing the government can do of a positive nature to remedy a totally dysfunctional system, financial included. It is easily apparent that the FED in league with Goldman Sachs is only going to make matters worse.
From the very beginning of this nation the question of the establishment of a national bank has been a hot debate. Finally, in total secrecy the FED was formed as a private closed corporation. Finally on the night of November 22, 1910 Jekyll Island .Ga., became the meeting place for the hole-in-the –wall-gang and it nefarious plotting.
The delegation had left in a sealed railway car, with blinds drawn, for . Jekyll Island. They were led by Senator Nelson Aldrich, head of the National Monetary Commission. President Theodore Roosevelt had signed into law the bill creating the National Monetary Commission in 1908, after the tragic Panic of 1907 had resulted in a public outcry that the nation’s monetary system be stabilized. Aldrich had led the members of the Commission on a two-year tour of Europe, spending some three hundred thousand dollars of public money. He had not yet made a report on the results of this trip, nor had he offered any plan for banking reform.
Read for yourself the fascinating tale of how US finances fell into the hands of a very few international bankers. I warn do not believe this account, it having been rewritten by “the interested parties many times over. Think of them as the George Soros’s of their time…..then read other accounts and judge for yourself…..
I for one believe that any attempted fix at this time will create a bigger (if possible ) disaster than we already have . The reason is in the demographics of what is becoming known as the Winter Population Bomb, a crisis that will take us and most of the world out of any freedom we may think we have. We have mismanaged our way into an insolvable problem and it will cost millions of lives.
Pay particular attention to who owns the FED;
Examination of the charts and text in the House Banking Committee Staff Report of August, 1976 and the current stockholders list of the 12 regional Federal Reserve Banks shows this same family control.
N.M. Rothschild , London – Bank of England
______________________________________
| |
| J. Henry Schroder
| Banking Corp.
| |
Brown, Shipley – Morgan Grenfell – Lazard – |
& Company & Company Brothers |
| | | |
——————–| ——-| | |
| | | | | |
Alex Brown – Brown Bros. – Lord Mantagu – Morgan et Cie — Lazard —|
& Son | Harriman Norman | Paris Bros |
| | / | N.Y. |
| | | | | |
| Governor, Bank | J.P. Morgan Co — Lazard —|
| of England / N.Y. Morgan Freres |
| 1924-1938 / Guaranty Co. Paris |
| / Morgan Stanley Co. | /
| / | \Schroder Bank
| / | Hamburg/Berlin
| / Drexel & Company /
| / Philadelphia /
| / /
| / Lord Airlie
| / /
| / M. M. Warburg Chmn J. Henry Schroder
| | Hamburg ——— marr. Virginia F. Ryan
| | | grand-daughter of Otto
| | | Kahn of Kuhn Loeb Co.
| | |
| | |
Lehman Brothers N.Y ————– Kuhn Loeb Co. N. Y.
| | ————————–
| | | |
|
| | | |
Lehman Brothers – Mont. Alabama Solomon Loeb Abraham Kuhn
| | __|______________________|_________
Lehman-Stern, New Orleans Jacob Schiff/Theresa Loeb Nina Loeb/Paul Warburg
————————- | | |
| | Mortimer Schiff James Paul Warburg
_____________|_______________/ |
| | | | |
Mayer Lehman | Emmanuel Lehman \
| | | \
Herbert Lehman Irving Lehman \
| | | \
Arthur Lehman \ Phillip Lehman John Schiff/Edith Brevoort Baker
/ | Present Chairman Lehman Bros
/ Robert Owen Lehman Kuhn Loeb – Granddaughter of
/ | | George F. Baker
| / |
| / |
| / Lehman Bros Kuhn Loeb (1980)
| / |
| / Thomas Fortune Ryan
| | |
| | |
Federal Reserve Bank Of New York |
|||||||| |
______National City Bank N. Y. |
| | |
| National Bank of Commerce N.Y —|
| | \
| Hanover National Bank N.Y. \
| | \
| Chase National Bank N.Y. \
| |
| |
Shareholders – National City Bank – N.Y. |
—————————————– |
|
James Stillman
Elsie m. William Rockefeller Isabel m. Percy Rockefeller
William Rockefeller Shareholders – National Bank of Commerce N. Y.
J. P. Morgan ———————————————–
M.T. Pyne Equitable Life – J.P. Morgan
Percy Pyne Mutual Life – J.P. Morgan
J.W. Sterling H.P. Davison – J. P. Morgan
NY Trust/NY Edison Mary W. Harriman
Shearman & Sterling A.D. Jiullard – North British Merc. Insurance
| Jacob Schiff
| Thomas F. Ryan
| Paul Warburg
| Levi P. Morton – Guaranty Trust – J. P. Morgan
|
|
Shareholders – First National Bank of N.Y.
——————————————-
J.P. Morgan
George F. Baker
George F. Baker Jr.
Edith Brevoort Baker
US Congress – 1946-64
|
|
|
|
|
Shareholders – Hanover National Bank N.Y.
——————————————
James Stillman
William Rockefeller
|
|
|
|
|
Shareholders – Chase National Bank N.Y.
—————————————
George F. Baker
You will have to pull up the article anscroll down to find th chart…it will astonish you.
http://www.barefootsworld.net/fedsecrets_00.html
All praise is due to Allah (swt), the Compassionate, the Merciful.
The solution to all these problems is obvious: Sharia Finance.
Renounce your false religions and governmental and financial systems. Embrace Islam now and live in peace in submission to the will of Almighty Allah (swt).
Your grandchildren will be Muslim.
Allahu akbar!
There comes, as history shows a point at which there is nothing the government can do of a positive nature to remedy a totally dysfunctional system, financial included. It is easily apparent that the FED in league with Goldman Sachs is only going to make matters worse.
From the very beginning of this nation the question of the establishment of a national bank has been a hot debate. Finally, in total secrecy the FED was formed as a private closed corporation. Finally on the night of November 22, 1910 Jekyll Island .Ga., became the meeting place for the hole-in-the –wall-gang and it nefarious plotting.
The delegation had left in a sealed railway car, with blinds drawn, for . Jekyll Island. They were led by Senator Nelson Aldrich, head of the National Monetary Commission. President Theodore Roosevelt had signed into law the bill creating the National Monetary Commission in 1908, after the tragic Panic of 1907 had resulted in a public outcry that the nation’s monetary system be stabilized. Aldrich had led the members of the Commission on a two-year tour of Europe, spending some three hundred thousand dollars of public money. He had not yet made a report on the results of this trip, nor had he offered any plan for banking reform.
Read for yourself the fascinating tale of how US finances fell into the hands of a very few international bankers. I warn do not believe this account, it having been rewritten by “the interested parties many times over. Think of them as the George Soros’s of their time…..then read other accounts and judge for yourself…..
I for one believe that any attempted fix at this time will create a bigger (if possible ) disaster than we already have . The reason is in the demographics of what is becoming known as the Winter Population Bomb, a crisis that will take us and most of the world out of any freedom we may think we have. We have mismanaged our way into an insolvable problem and it will cost millions of lives.
Pay particular attention to who owns the FED;
Examination of the charts and text in the House Banking Committee Staff Report of August, 1976 and the current stockholders list of the 12 regional Federal Reserve Banks shows this same family control.
N.M. Rothschild , London – Bank of England
______________________________________
| |
| J. Henry Schroder
| Banking Corp.
| |
Brown, Shipley – Morgan Grenfell – Lazard – |
& Company & Company Brothers |
| | | |
——————–| ——-| | |
| | | | | |
Alex Brown – Brown Bros. – Lord Mantagu – Morgan et Cie — Lazard —|
& Son | Harriman Norman | Paris Bros |
| | / | N.Y. |
| | | | | |
| Governor, Bank | J.P. Morgan Co — Lazard —|
| of England / N.Y. Morgan Freres |
| 1924-1938 / Guaranty Co. Paris |
| / Morgan Stanley Co. | /
| / | \Schroder Bank
| / | Hamburg/Berlin
| / Drexel & Company /
| / Philadelphia /
| / /
| / Lord Airlie
| / /
| / M. M. Warburg Chmn J. Henry Schroder
| | Hamburg ——— marr. Virginia F. Ryan
| | | grand-daughter of Otto
| | | Kahn of Kuhn Loeb Co.
| | |
| | |
Lehman Brothers N.Y ————– Kuhn Loeb Co. N. Y.
| | ————————–
| | | |
|
| | | |
Lehman Brothers – Mont. Alabama Solomon Loeb Abraham Kuhn
| | __|______________________|_________
Lehman-Stern, New Orleans Jacob Schiff/Theresa Loeb Nina Loeb/Paul Warburg
————————- | | |
| | Mortimer Schiff James Paul Warburg
_____________|_______________/ |
| | | | |
Mayer Lehman | Emmanuel Lehman \
| | | \
Herbert Lehman Irving Lehman \
| | | \
Arthur Lehman \ Phillip Lehman John Schiff/Edith Brevoort Baker
/ | Present Chairman Lehman Bros
/ Robert Owen Lehman Kuhn Loeb – Granddaughter of
/ | | George F. Baker
| / |
| / |
| / Lehman Bros Kuhn Loeb (1980)
| / |
| / Thomas Fortune Ryan
| | |
| | |
Federal Reserve Bank Of New York |
|||||||| |
______National City Bank N. Y. |
| | |
| National Bank of Commerce N.Y —|
| | \
| Hanover National Bank N.Y. \
| | \
| Chase National Bank N.Y. \
| |
| |
Shareholders – National City Bank – N.Y. |
—————————————– |
|
James Stillman
Elsie m. William Rockefeller Isabel m. Percy Rockefeller
William Rockefeller Shareholders – National Bank of Commerce N. Y.
J. P. Morgan ———————————————–
M.T. Pyne Equitable Life – J.P. Morgan
Percy Pyne Mutual Life – J.P. Morgan
J.W. Sterling H.P. Davison – J. P. Morgan
NY Trust/NY Edison Mary W. Harriman
Shearman & Sterling A.D. Jiullard – North British Merc. Insurance
| Jacob Schiff
| Thomas F. Ryan
| Paul Warburg
| Levi P. Morton – Guaranty Trust – J. P. Morgan
|
|
Shareholders – First National Bank of N.Y.
——————————————-
J.P. Morgan
George F. Baker
George F. Baker Jr.
Edith Brevoort Baker
US Congress – 1946-64
|
|
|
|
|
Shareholders – Hanover National Bank N.Y.
——————————————
James Stillman
William Rockefeller
|
|
|
|
|
Shareholders – Chase National Bank N.Y.
—————————————
George F. Baker
http://www.barefootsworld.net/fedsecrets_00.html
I very much doubt that Volcker would ever be appointed Fed Chairman again for the simple reason that Democrats have never forgiven him for the last time. I have already seen on left leaning websites the reminder that Volcker ruined Jimmy Carter’s presidency and he’ll ruin Obama’s, too. It doesn’t matter that this isn’t really true; if Obama’s advisor’s believe it (and you know they do) then as far as he’s concerned it’s true.
If Bernanke is let go Democrats are going to look for another G. William Miller, someone who will take orders from the White House only. Sure, Miller was a disaster and left the office in disgrace – doesn’t matter. That’s what they want.
oh Reza Pahlavi, you’re such a card!
let me know if that peacock throne thing ever works out.
29. Jamie Irons:
A side note:
Yes indeed, Obama has a government of men. Misfortune lies there in. A staff of men who have shown little competence in even basic economics. Bringing in one competent man will be of little use when there is such a grievous shortage of people who can do things besides talk about things they know little about.
The parrot is dead, not asleep and pining for his native fyords.
Ashen: I don’t trust anything Obama says or does. This is just a temper tantrum because his healthcare idea is tanking/has tanked.
This is a wag-the-dog move by Obama in the wake of a very bad week for him (good week for us). Clinton used to send sub-launched TLAM-C’s after aspirin factories to change the front page headlines. Obama just resorts to populist tax-the-fat-cat moves, thinking that these same fat-cats will forgive him and the Donks come election time and cut checks again.
I said do not believe this report…errata…I DO believe this report as opposed to the many other “histories ” written by the moneyed interests in their efforts to discredit the word given in my offering.
Each of us will have to judge for ourselves. I will tell you this is not the only report I have read, my personal number exceeds six or seven.
I place this in the category of believable along with unfavorable books and reports such as None Dare Call It Treason Why? Because I love my country and am fearful of all governments….they all end in corruption of the tenets that established them. That is why we, the people, have guns and hopefully, if needed, guts.
Shut down …tomorrow is another day.
I wish someone would do a “Where are they now?” study on the banking meltdown. Where are the people at the Boston Fed who said that the old rules on lending polices did not apply? Where are the people at Bear Sterns who said that banks were foolish to reserve money for mortgage failures because failure weren’t never going to happen? Where are the ones at the other firms who packaged and sold those time bombs?
We know where Barney Frank is and where Geithner and Summers are, but that is about all. Those three are doing very well indeed. But one would hope all the rest are either fighting over which one gets the nicest refrigerator box to live in or else saying “Do you want fries with that?” But I doubt that.
When the S&L Meltdown happened in the 80’s I said then that we should make a list with everyone involved and make sure the closest they ever got to another financial decision was accepting bus tokens. We need that again, even worse.
The curmudgeon Paul Volcker whipped inflation in the 1980s with serious blood-letting in the streets. This has his signature all over it. He is the Freudian father coming to give Wall Street a whallop on their collective backside. I recall the effusive praise that Wall Street poured on his credit squeezes. Now that it their turn on the block, they are naturally unhappy about it. Obama will have to ride this for all it is worth to shed his image as a shill for Goldman Sachs. The great majority of Americans are behind him for a change.
There are dozens of ways of approaching the problem, but Obama likes this one because it casts the shadow of blame on those dern capitalists and it looks like a new idea, an idea he’s developed. My guess is resurrecting some of the old banking regulations would do just as well.
Are they going to erase the ACORN prompted legislation that required loans to folks who are bad risks? Better get rid of it or it’ll continue to distort and corrupt.
where are the people at Bear Sterns who said that banks were foolish to reserve money for mortgage failures because failure weren’t never going to happen? Where are the ones at the other firms who packaged and sold those time bombs?
Here’s a blast from the past from Rolling Stone:
So the question is whether any of that is going to stop with these new reforms? How can you connect the dots when all the dots are moving around like you just got hit by a truck? This is an information problem at its heart. And the only way to fix it is to modularize things and provide automatic dumps so all the dots can be connected. A price is an estimate based on information. Bad info, bad price. Now Volcker is saying in the news that he always knew Obama would see the light. And now Goolsbee is back, as the chief liaison man of Volcker. So he saw the light after all, but before the President saw it clearly, maybe he had his road to Damascus moment. That blinding moment when he was struck down from the saddle. Now how long will the light stay on?
Wretchard, there is no “bug” to fix, and Wall St. is not some “Core
‘branch’ of Government”. What a thing to say/
There are really only two issues: The funny money (i.e.: derivatives) used to finance the redistributionist schemes of dems through vehicles like CRA, Freddie and Fanny; and the Democrat insiders running institutions like Goldman Sachs and Citi.
The solution is simple: Get rid of things like the CRA, Freddie and Fannie, and put executives from those troubling institutions under congressional scrutiny and, if possible, in jail, and do it on the basis of real corruption in the sense of bribing politicians for a cut of the take and not some bogus notion of “corruption” defined as just over-paid executives making bad decisions. Perhaps we could consider placing severe restrictions on derivatives as well.
You are putting the cart before the horse. It is the liberal political class that is at fault, not “bankers” per se. If Wall St. is a “branch” of anything it is a “branch” of the Democrat Party, but even then only part of Wall St. fit the bill here. Let us remember that almost all large pension funds in the country were in on it, and really any large holder of stock involved in any sort of securities lending as well. These sort of trading maneuvers, arbitrages, etc., involve almost every large sector and the entire international financial world.
It is specious to blame it on some amorphous notion of “Wall St. Bankers”. It is also right out some KGB/Comintern agitprop playbook of the 1930′s, and risibly so.
It is also ludicrous to say, as you do, that Obama is trying to “solve a serious problem” here, at least a problem that affects the nation at large. What he is doing is 1) attacking Capitalism and liberty, 2) deflecting blame, and 3) stealing some loot in the process. It is wholly shameful, and I am rather surprised that you find one atom of it worthwhile or reasonable.
What we should be worried about are things like the theft of GM from the real investors and this notion Obama has that the Federal Government give the citizenry an “allowance”. In fact, the government has no right to dictate the earning of anyone. It is one of their business how much anyone in the country makes so long as no laws are broken. In fact, it is none of our business either.
They may put criminals in jail and seize what they stole, but this is a completely different matter.
Here, for once, both your diagnosis and your prognosis are quite wrong. I find it puzzling.
We must abandon the notion that most of the Wall St. crowd did anythng other than what the political clases forced them to do, which was spread the risk from people who should not have mortgages to a “risk pool” of derivatives and facilitate trade in them. It is the “40 acres and a mule” money pump, hidden redistribution of the taxpayers dollars (and money of some of the shareholders of some banks) which caused this, not some sort of “corruption” in general on Wall St. Perhaps tarp was a bad idea, but the original vision of it was quite distorted by the current administration.
What he is doing is highly destructive to America. It is something that a Chavez. a Castro or a Stalin should do. There is nothing in the least laudable about it.
We have enough issues already, we do not want to lose primacy in financial markets.
We merely need to redirect it to its primary purpose of directing capital to fruitful enterpize. This Wall St. has done exceedingly well for many a decade. It is only the acretion of laws that has allowed this to be so perverted. What we need to do is lift a great many of the regluations, starting with Sarbanes–Oxley, stop insuring failures and bad decision making, and in general get over this idea that it is the Federal Governement’s resposiblity to protect investors from their own fatuousness, greed or stupitidy.
All of the heaving around in markets is the legacy of the New Dealers and always too the same ends. It is total nonsense. Inevitably, regulation leads to this sort of thing.
If you want to get money out of government, then get government out of money.
It has no business regulating finacial markets.
Josh: 90% is the fault of the “bankers”? Hogwash. About 99% is the fault of the liberal political establishment and their RINO water carriers.
You do not seem to understand what has happened on Wall St. over this “crisis”.
It is almost wholly manufactured by our political classes. This is what is putrid.
The big problem with reinstating Glass-Steagall or something like it, is that it will be a very complex maneuver separating assets and activities after the fact, and Buraq and his boyhood family friend Turbo Tax Timmy are not the team for the job. Karl Denninger has posted serious claims that Timmy directed AIG to to lie when he was New York Fed Pres. And we know how honest and forthright our Dear Leader can be.
We definitely need to get back to sound banking practices, which have been almost totally abandoned on Wall Street. Bringing back the separation of Banking and Finance might be a good start under someone else. Also prosecuting the fraud ,too.
Buraq was in real desperate need of a good bogeyman to change the subject fast and he has found one in the Big Banks. With the media behind him, the Big Banks are an easy target. Never mind TARP, the huge campaign donations, and the 1.1 Trillion swap of bad Mortgage backed securities for T-bills Timmy and Helicopter Ben arranged. With the media lies, the public will likely never get the whole truth. The subject is a complex one and easy to for Buraq to demagogue for a good while.
The Pubs best be careful. The big banks had become smooth sophisticated Crony Capitalist con men extraordinaire, who were grossly abusing their extraordinary powers granted under Clinton and Bush and should not be defended as exemplars of the free market, which they were clearly not. But
still the free market as it was known with historically sound banking practices needs to be defended, and not stymied and hogtied by new socialist regulatory edicts that hamper the prudent flow of capital.
I don’t we’ll know the depth of Obama’s commitment until more details are available. It’s a great political move, which if he can carry off a modest near term success must win grudging praise from everyone. But the devil is in the details, in the fine print.
I do not get this at all. Only the hard left wants to “punish the bankers”.
The rest of the country knows that hurting Wall St. hurts us all. They want American to lead the financial sector. It is not smart politics at all. It is exceedingly stupid politics. He needs to Left to pipe down, not to goad them into more displays. Beside, as Wall St. has recently been a rather deep pocketed source of cash for the Democrats, it is strategically an absolutely idiotic thing to do, and I will venture, along these lines, that Brown’s win had more than a little to do with PO’ing the financial professional classes in MA, especially the hedgies, which had been a big source of support for Obamaland.
I must say, i find your whole stance in this thread quite odd. Have you visited Cambridge lately or something?
You appear to be coming down with a bad case of liberalism.
Unsuk. The GOP beware? The New York Dem machine is livid about this.
Buffet is out dissing The One. Who is next?
The GOP be careful? The Democrats better be careful. They are going to PO one of their major sources of money. Bloomberg is ripping the O a big one. Hillie or Chucky are not going to last very long out there baiting Wall St. Nor is any Dem in CT, RI, NJ or NY.
This thread is bizarre to me–it seems really disconnected from reality to me.
If the rest of the nation hates “Wall St. bankers”, it is because they are liberal elitists, a fact that the GOP can well point out.
I mean, what does te GOP need to do, stand up for the management of Citi and Goldman?
If it were not for the harm it would do the country, the GOP should just let the Democrat devour each other and point it out while it is happening.
The Wall St. crowd never really understood that Obama and crew really were hard core Bolsheviks. Now that they know, well, things are going to start rattling around in the Democrat Party.
How will this effect the pay-day loan place where I get my financing?
I was in an actual bank the other day and noticed a sign that said the amount of insured deposits had been raised to $250,000 dollars until 2013. I believe it was past practice of the FDIC to cover all deposits regardless of amount. I briefly wondered if the FDIC had both raised (from $100,000 to $250,000) the amount covered and lowered it (by no longer covering amounts above the $250,000 limit).
It seems we have a moral hazard problem here. A bank can lose a depositors money, then the FDIC makes him whole, and then the bank can lose it again. Perhaps a different approach would be to lessen the amount of the insurance and have major depositors take a more active interest in the lending practices of the banks by leaving their money at risk. The insured deposits would earn a lower return and the “at risk” deposits a higher one.
In my mind the real problem comes from the fact that modern currencies are the product of pretense. When we quit pretending the system all falls down. The emperor has no clothes.
Perhaps we should go back to “hard currency.” No, not that backed up by silver or gold, but by energy, without which a modern economy cannot run. A dollar should be set as exchangeable as so many kilo-calories of energy, and when demanded the government should have to produce it in tangible form, such as pounds of coal or barrels of oil.
As as far as financial institutions go, I think they would be stable if we required that the people running them were financially liable if the institution goes down the tubes, and such liability should not be discharged by bankruptcy. You just might be more careful with Other Peoples’ Money if it means screwing up with it means spending the rest of your life living in a cardboard box eating Ramen noodles.
HDGreene: Yes, it was the FDIC’s unofficial policy to cover all deposits, but that was never required. The raise from $100,000 to $250,000 guarantee was made about the same time that TARP was created.
Apparently the law was passed with a sunset provision that expires at the end of 2013, but it’s unthinkable that they will ever go back to the old $100,000 guarantee.
I also agree that it is a great myth that the Republicans are somehow tied to Wall Street – and this myth is about to bite Obama’s Democrats hard. Here’s why: Wall Street is in truth always heavily in bed with whoever holds power, that’s how they survive. They will always provide vast amounts of money and support to those who run the business of government. (which is why Goldman Sachs alumni virtually run Treasury)
Here’s why it will bite Obama – when he attacks them, he isn’t hurting Republicans. Being out of power, they don’t even have a horse in this race unless they choose to. To put it in military terms, Obama is going to be attacking his own supply lines while the Republicans sit back and watch him destroy himself and the country’s economy in the process. What’s more, the worse it gets the *more* support Obama loses from the big players and the more the opposition gains, and they don’t have to do anything at all to gain but be sympathetic.
Of course like all of us no one wants to see this country damaged by Obama’s foolishness; but the more he attacks the financial sector, the worse the stock market and after that the economy is going to do in the short run. (Long run is a different matter, but if you don’t survive the short run there’s no point worrying about the long run)
So all the Republicans have to do is sit back and let him spend this spring and summer destroying the financial sector, and they’re virtually assured of retaking control of the House in the fall. Then they can support some recovery policies and take the credit when things improve even marginally.
I know that sounds cynical, but quite seriously this is the reason I think we are in for a major economic crash this year. It is now in the favor of quite a few people with power to see that this economy is ruined rather than repaired, and I think Obama will be stupid enough to walk right into the trap with his eyes wide shut.
No-one is talking about Obama’s failed health insurance reform anymore. The attack on Big Banking has been a complete success — from Obama’s point of view. As a British Prime Minister once said – A week in politics is a long time.
Unfortunately, there are real problems out there. The kind that take more than a week to fix. The unintended consequence of Obama’s diversionary move is that it makes the US an even more uncertain place in which to invest. So the investments will go elsewhere, hurting the economic growth necessary to provide the tax revenues to meet all those US government debt obligations and unfunded obligations.
Obama has made it through this particular cold night by burning the furniture. But there is a long winter still ahead. This will not end well.
50. Mongoose:
This thread is bizarre to me–it seems really disconnected from reality to me.
…………
I don’t know whether volker is right or not. I don’t know whether you are right. But I do believe your passion.
That to the extent there is a problem– O & company are not the ones to solve it. That they will only do more harm than good. That even if they were doing the right thing–they are going about it in the wrong way at the wrong time. And that’s only if they were doing the right thing–which is unknown. And this is a toxic brew when no on trusts O to do the right thing.
That said, Kindly explain why Karl Denninger is wrong when he says–the solution to the problem is.
1#
We can take our medicine. This means splitting up the commercial banking and investment functions into physically and legally separate firms so that never again will the investment activities of a firm be able to trash the depository function and thus expose the taxpayer to systemic collapse. We can prosecute prior fraud and make clear that any future fraud will also draw an immediate and vigorous criminal and civil fraud statute response. Yes, this will mean the equity market will adjust to actual, not falsely-inflated value on a forward basis and yes, this means we will trade lower – perhaps a lot lower. But it also means the market will be STABLE with prices based on actual earnings and profits, not fraudulent ponzi-style games.
http://market-ticker.denninger.net/archives/1883-Mish-Misses-The-Mark-Glass-Steagall.html
The Wall St. crowd never really understood that Obama and crew really were hard core Bolsheviks. Now that they know, well, things are going to start rattling around in the Democrat Party.”
Mongoose, truer words are rare. Thank you
#35 Habu
from your link:
http://www.barefootsworld.net/fs_m_ch_07.html
I find some similarities with:
In 2007, les Éditions Jean-Cyrille Godefroy edited “Pétrole Une guerre d’un siècle” by William Engdahl.
“”En 1931, Norman et la Banque d’Angleterre avaient catégoriquement refusé d’avancer le moindre pfenning à l’Allemagne, précipitant la crise bancaire et le chômage. Dans cette situation désespérée, la prise de pouvoir d’Hitler devint une option envisageable pour les milieux dirigeants de l’Allemagne. Dès le début de 1933, quand Hitler eut consolidé son pouvoir le même Montagnu Norman manœuvra avec une hâte indécente pour récompenser le gouvernement hitlérien en lui accordant le crédit de la Banque d’Angleterre dont il avait besoin.”
“”Zbigniew Brzezinski : « les trois impératifs de la géostratégie impériale consistent à empêcher la collusion, à maintenir la dépendance sécuritaire parmi les vassaux, afin de les garder tributaires, conciliants et protégés, et à empêcher les barbares de s’unir.”
and:
“Trading with the Enemy”
The Nazi – American Money Plot 1933-1949
by Charles Higham
Delacorte Press, 1983
Seems that these Bankers of the international finance started to plot more than a century ago, and are at the origin of most the conflicts and money depressions
So it’s time to think about really cutting off these “new” aristocrats heads
And with that, at 17 wws said: “Not to mention that this would put us right on track with the 1929 – 1930 – 1931 timeline. 1929 was the crash in the fall, continued into the spring of 1930, followed by a fantastic 6 month or so rally which recovered 50% of the losses and convinced everyone that the Great Crash was merely a temporary blip.
Early in 1931 everything headed back down resuling in an eventual 90% loss in the markets and 25% unemployment.
I fear that Obama is all set to reenact the events of 1931, beginning this week.”
Prepare for hyper-inflation and financial collapse. Start storing water, food and ammo. I can’t believe the Pass that Wretchard himself gives this lying, destructive African Big Man currently in charge of the U.S. government. Financial collapse and much worse will be upon us this year.
Mongoose…
Hmmm. Now I understand.
The question is Obama willing to destroy his financial base in wall st. Is he willing to alienate his democratic support in the north east?
O’s banking moves hit his own party first.
Does he have the courage/stupidity/tin ear to eviscerate a substantial part of his backing?
Hmmm. No.
I think this thing will just go away for reasons as ephemeral as those that brought it on.
I would love to see J.D. Hayworth bump McCain out in the primaries. (McCain has already has Palin and Brown campaigning for him.)
Former Ariz. congressman plans run against McCain
Good Lord! Even Wretch is getting sucked into Obama’s BS quagmire believing this banking gambit is legit. 24 hours after his healthcare debacle, all the suckers are already lining up for more snake oil, and our Wretchard is at the front of the pack.
C’mon Wretchard! You’re better than that!
The risky stuff came from regular mortgage banking activity, owing to government incentives and threats, namely insane mortages.
That in turn infected the rest of the financial system, which did its best to convert it to the safe assets that there was a demand for.
The legal complexity of any bankruptcy untangling of the mess is what required a bailout instead. It was to bypass the legal system, which would have kept the world’s capital in escrow for fifty years while obligations were untangled.
So the mistake went the other direction, and started with “cost-free” government incentives to housing.
Habu
Antony C Sutton (video)
http://www.kewego.fr/video/iLyROoaft65W.html
Wretchard,
As the Aussies say, good on you for reading Rolling Stone for your finance news rather than The Atlantic. The former is more able to piss off the New Establishment (what Joel Kotkin talked about in his latest article on Obama’s core supporters -
http://www.joelkotkin.com/content/00122-obamas-elite-power-base
Richard Florida’s Creative Class or the oligarchic Cognitive Elite predicted way back in The Bell Curve).
http://meganmcardle.theatlantic.com/archives/2009/07/matt_taibbi_gets_his_sarah_pal.php#comment-223819
“God, is [Megan McArdle] just the biggest defender of the Status Quo or merely the world’s biggest Nihilist.”
Besides dissing Taibbi for using swear words and not being so precise in all his financial terms, McArdle could not really rebut his charges, as she admitted to her commenters. Her comparison of Taibbi with Palin even though the two have nothing in common only proved what a hate figure Palin has a become in D.C., even though these libs could shut up about her and deny her publicity but can’t help themselves.
McArdle also managed to put in a good word for the U.S. credit scoring system, instead of asking the very basic question of why a country of 300 million has an oligopoly of just three big rating agencies. Maybe because they’re so, um, useful to the government like Google, as a way of gathering so much information about citizens legally? A nice quasi-private data mining operation. That is dismissed as conspiracy theory but it’s a fair question, just like the questions about how Goldman came out smelling like a rose while its supposedly dumber competitors Bear Stearns and Lehman died.
http://meganmcardle.theatlantic.com/archives/2009/07/matt_taibbi_gets_his_sarah_pal.php#comment-233624
“What’s hard for bankers to understand is that when their ‘normal’ everyday operations are explained to non-bankers, they begin to sound a lot like fraud. Most Americans can explain what they do for a living to someone in another field without simultaneously explaining why it shouldn’t be illegal.”
I have reached the point of cynicism where I think only if you already have tenure like Roubini or a kryshe like the Pete J. Peterson Institute with a repentant Master of the Universe writing your paychecks, as in the case of MIT’s Simon Johnson, can you get away with crossing Government Sachs and co.
Johnson published an article that somehow slipped through The Atlantic‘s establishment tendencies titled “Is the U.S. Becoming Russia?” in May 2009. He did not mean the Russia of the 2010s but rather the Russia of the 1990s when four or five oligarchs divied up the national wealth, including those brave advocates for democracy like Berezovsky who was given asylum in London despite the prodigous body count among his associates, including his late employee Alexander Litvinenko.
Of course, I’m not saying Goldman will put out a contract on Matt Tabbi like the Russian oligarchs did on investigative journalists in the Nineties. But if his gig dries up with Rolling Stone, let’s just say I’ll be shocked if he gets picked up by Vanity Fair or Time, and he’ll end up sharing slots with Alex Jones (who is making more sense every day, God help us all) and not making any money unless his book becomes a bestseller.
Thanks to Wretchard for hammering away on the basic theme that Obama cannot cross the people who helped him get elected and save his political skin without them turning on him. Unlike Putin, Obama does not have the strength to overcome his erstwhile oligarch supporters.
As the Asia Times Spengler said, Putin for President. He looks better compared to Bush, Obama, Blair and Brown every day.
It strikes me that the biggest problem in breaking the big banks into separate commercial banks and into investment banks is deciding how to allocate the “off-the-books” losses that all of the big banks still have. If all of the big banks immediately recognized the true value of their assets (if they marked to true market), they would all be BANKRUPT. So, which “new entity” wants to take this loss? It’s not all that easy to unscramble eggs.
I don’t think Obama is now focusing on “financial reform” for any purpose other than to try and regain his position on the populist wave. Look at his comments about Brown’s victory – something to the effect that the people are still “angry.” How better to harness that anger than to “stick it to the Wall Street Fat Cats?” Its a rather simplistic view of things but perhaps that’s all there is in Obama. With the last President, there was a lot of “misunderestimating,” and with this one perhaps we have all been “misoverestimating.”
Obama’s now aiming to be a modern day Huey Long, but I think his read of the public is wrong. What he doesn’t realize is that the current mood is broadly anti-establishment, we’re pissed at Washington DC, not just Wall Street. There is alot of anger against the notion that we can just continue to spend money we don’t have.
WWS #53:
“Wall Street is in truth always heavily in bed with whoever holds power, that’s how they survive.”
Yes, indeed, that was my observation when I was in DC, and not just the banking industry, either. CEOs of large corporations always seem to be much more in tune with the political class than they are with their own industries. That is why when some pol comes up with a crackpot idea on government acquisition policies or other issues there are always plenty of CEOs who praise it to the skies. I think that sometimes they think they can outsmart the pols and game the system, but whether it is simply seeking advantage or really embracing the philosophy, they always get in line.
Mongoose:
While it is true that the basic policies pushed by the Left caused the meltdown, I think that the bankers can be accused of pursuing those ends with rather too much enthusiasm. Handed a bunch of lemons by the pols, they made lemonade – and spiked it with the old antifreeze they drained from their limos – and sold it as a healthy new energy drink. As a CEO you may not be responsible for the government policy to gas the Jews but you don’t have to wholeheartedly work to develop new and more effective poison gases and produce them at lower cost
Note that John Q. Public did the same thing. Already paying for a decent house, but presented with the opportunity to buy half a dozen more without providing any evidence of ability to pay, he signed right up. And the firms who built them, Mercedes and Pulte and their ilk, built and sold without thought to the consequences.
The politicians were enablers, but the people who implemented and took advantage of the policies are culpable as well.
Rhhardin #62: Well put! But they let themselves be infected. Name the banker who was saying in 1999 or 2004 “This is Madhouse! A Madhouse! Damned apes!”
But for Obama to blame it all on the bankers is like the bankers blaming it all on the home builders and real estate agents.
Morton Doodslag: Good Lord! Even Wretch is getting sucked into Obama’s BS quagmire believing this banking gambit is legit. 24 hours after his healthcare debacle, all the suckers are already lining up for more snake oil, and our Wretchard is at the front of the pack.
Even most of the topics on RealClearPolitics have to do with this financial Wag The Dog, proving that Obama retains the ability to change the subject, even if he is powerless to get what he wants, from the Olympics to Copenhagen to Virginia to Massachusetts. After the Democrats are thoroughly trounced in November, Obama will go on Meet The Depressed and announced that the message he received from the American people was loud and clear, there’s nothing wrong with his agenda to centralize and bureaucratize the US economy, but people are upset that it’s not moving fast enough.
Did you ever hear of the Independent Treasury Act of 1920? No, you say…. Hmm….?
The Independent Treasury Act of 1920 suspended the de jure (meaning “by right of legal establishment”) Treasury Department of the United States government. Our Congress turned the treasury department over to a private corporation, which when seen in its true light, is a fascist monopolistic cartel, the Federal Reserve and their agents. The bulk of the ownership of the Federal Reserve System, a very well kept secret from the American Citizen, is held by these banking interests, and NONE is held by the United States Treasury:
Rothschild Bank of London
Rothschild Bank of Berlin
Warburg Bank of Hamburg
Warburg Bank of Amsterdam
Lazard Brothers of Paris
Israel Moses Seif Banks of Italy
Chase Manhattan Bank of New York
Goldman, Sachs of New York
Lehman Brothers of New York
Kuhn Loeb Bank of New York
The Federal Reserve is at the root of most of our present statutory regulations, “laws”, in the control and regulation of virtually all aspects of human activity in the United States, through successively socialistic constructions laid upon the Commerce clause of the Constitution. Basically, the Federal Reserve is the “STATE” of the United States.
I also recommend :re “Our Enemy, The STATE” by Albert J. Nock – 1935, his Classic Critique Distinguishing “Government” from the “STATE.”
Excerpted from “Secrets of the federal Reserve which the US Government tried mightily to surpress.
Congressional Exposé
“Mr. Volcker’s politics is something of an enigma.” — New York Times
Since 1933 when Eugene Meyer resigned from the Federal Reserve Board of Governors, no member of the international banking families has personally served on the Board of Governors. They have chosen to work from behind the scenes through carefully selected presidents of the Federal Reserve Bank of New York and other employees.
The present chairman of the Federal Reserve Board of Governors is Paul Volcker. His appointment was greeted by one well-known economist with the following prediction, “Volcker’s selection has been by far the worst. Carter has put Dracula in charge of the blood bank. To us, it means a crash and depression in the 80s is more certain than ever.”
Col. E.C. Harwood’s Research Report, August 6, 1979, gave much the same view. “Paul Volcker is from the same mold as the unsound money men who have misguided the monetary actions of this nation for the past five decades. The outcome probably will be equally disastrous for the dollar and the U.S. economy.”
Despite these gloomy views, the report from The New York Times on the selection of Volcker was positively ecstatic. On July 26, 1979, The Times commented that Volcker learned “the business” from Robert Roosa, now partner of Brown Brothers Harriman, and that Volcker had been part of the Roosa Brain Trust at the Federal Reserve Bank of New York, and, later, at the Treasury in the Kennedy administration. “David Rockefeller, the chairman of Chase, and Mr. Roosa were strong influences in the Mr. Carter decision to name Mr. Volcker for the Reserve Board chairmanship.” The New York Times did not point out that David Rockefeller and Robert Roosa had previously chosen Mr. Carter, a member of the Trilateral Commission, as the presidential candidate of the Democratic Party, or that Mr. Carter would hardly refuse to appoint their choice of Paul Volcker as the new Chairman of the Federal Reserve Board. Nor is it straining the point to be reminded that this manner of selection of the Chairman of the Board of Governors is directly in the line of royal prerogative going back to George Peabody’s initial agreement with N.M. Rothschild, to the Jekyll Island meeting, and to the enactment of the Federal Reserve Act.
The Times noted that “Volcker’s choice was approved by European banks in Bonn, Frankfurt and Zurich.” William Simon, former Secretary of Treasury, was quoted as saying “a marvelous choice.” The Times further noted that the Dow market rose on Volcker’s nomination, registering the best gains in three weeks for a rise of 9.73 points, and that the dollar rose sharply on foreign exchange@ at home and abroad.
Who was Volcker, that his appointment could have such an effect on the stock market and the value of the dollar in foreign exchange? He represented the most powerful house of “the London Connection,” Brown Brothers Harriman, and the London houses which directed the Rockefeller empire. On July 29, 1979, The Times had said of Volcker, “New Man Will Chart His Own Course”.
Volcker’s background shows that this was nonsense. His course has always been charted for him by his masters in London. He attended Princeton, obtained an M.A. at Harvard, and went to the London School of Economics 1951-52, the banker’s graduate school. He then came to the Federal Reserve Bank of New York as an economist from 1952-57, economist at Chase Manhattan Bank, 1957-61, with Treasury Department 1961-65, as deputy under secretary for monetary affairs, 1963-65, and under secretary for monetary affairs, 1969-74. He then became President of the Federal Reserve Bank of New York from 1975-79, when Carter, at the behest of Robert Roosa and David Rockefeller, appointed him Chairman of the Federal Reserve Board of Governors. He was succeeded as President of Federal Reserve Bank of New York by Anthony Solomon, a Harvard Ph.D. who was with the OPA 1941-42 and with the government financial mission to Iran 1942-46. He operated a canned food company in Mexico from 1951-61, was president of International Investment Corp. for Yugoslavia 1969-72 (a communist country), under secretary for monetary affairs at Treasury 1977-80. In short, Solomon’s background was much the same as Paul Volcker’s.
The New York Times stated on December 2, 1981, “For years the Federal Reserve was the second or third most secret institution in town. The Sunshine Act of 1976 penetrated the curtain a trifle. The board now holds a public meeting once a week on Wednesday at 10 a.m., but not to discuss Monetary policy, which is still regarded as top secret and not to be discussed in public.” The Times mentioned that when Open Market Committee meetings are held, Solomon and Volcker sit together at the head of the table and relay the instructions which they have received from abroad.
Behind Volcker and Solomon stands Robert Roosa, Secretary of the Treasury in Carter’s shadow cabinet, and representing Brown Brothers Harriman, the Trilateral Commission, the Council on Foreign Relations, the Bilderbergers, and the Royal Economic Institute. He is a trustee of the Rockefeller Foundation *, and a director of Texaco and American Express companies. Dr. Martin Larson points out that “The international consortium of financiers known as the Bilderbergers, who meet annually in profound secrecy to determine the destiny of the western world, is a creature of the Rockefeller-Rothschild alliance, and that it held its third meeting on St. Simons Island, only a short distance from Jekyll Island.” Larson also states that “The Rockefeller interests work in close alliance with the Rothschilds and other central banks.” **
On June 18, 1983, President Ronald Reagan ended months of speculation by announcing that he was reappointing Paul Volcker as Chairman of the Federal Reserve Board of Governors for another four year term, although Volcker’s term was not up until August 6, 1983. Reagan’s reappointment of a Carter appointee puzzled some political observers, but apparently he had succumbed to considerable pressure, as indicated by a lead editorial in The Washington Post, June 10, 1983, “There is no one who matches Mr. Volcker in both political standing and grasp of the intricate networks that make up the world’s financial system.” The anonymous writer gave no documentation for his elevation of Volcker to the standing of the world’s greatest financier, and as for his political standing, The New York Times commented on June 19, 1983, “Mr. Volcker’s politics is something of an enigma.” His “non-political” stance conforms with the Washington tradition of “the political independence of the Fed” which has been maintained for many years. However, the problem of its dependence on “the London connection” has never been discussed in Washington.
In reality, Volcker is more of a politician than an economist. After attending the London School of Economics, and finding out who issues the orders of the international financial community, Volcker has ever since played the game. Not once has he failed to carry out the orders of the “London Connection”.
Can it really be possible that “The London Connection” exists, and that men like Volcker and Solomon receive their instructions, in however devious or indirect a manner, from foreign bankers? Let us look at the evidence, circumstantial, to be sure, but circumstantial evidence of the quality which has often sent men to the penitentiary or to the electric chair. John Moody pointed out in 1911 that seven men of the Morgan group, allied with the Standard Oil-Kuhn, Loeb group, ruled the United States. Where do these groups stand in the financial picture today?
U.S. News published on April 11, 1983, a list of the largest bank holding companies in the United States by assets as of December 31, 1982. Number 1 is Citicorp, New York, with assets of $130 billion. This is Baker and
——————————————————————————–
[Footnotes]
* See Chart V
** See Chart I
——————————————————————————–
Morgan’s First National Bank of New York, merged with National City Bank in 1955, two of the largest purchasers of Federal Reserve Bank of New York stock in 1914. Number 3, is Chase Manhattan, New York, with assets of $80.9 billion. This is Chase and Bank of Manhattan merged, the Rockefeller and Kuhn Loeb group, also purchasers of Federal Reserve Bank of New York stock in 1914. Number 4 is Manufacturers Hanover of New York $64 billion, also purchaser of Federal Reserve Bank of New York stock in 1914. Number 5 is J.P. Morgan Company of New York, $58.6 billion in assets and holder of considerable Federal Reserve Bank stock. Number 6 is Chemical Bank of New York, $48.3 billion also purchaser of Federal Reserve stock in 1914. And Number 11, First Chicago Corporation, the First National Bank of Chicago which was principal correspondent of the Morgan-Baker bank in New York, and which furnished the first two presidents of the Federal Advisory Council.
The direct line which leads from the participants in the Jekyll Island Conference of 1910 to the present day is illustrated by a passage from “A Primer on Money”, Committee on Banking and Currency, U.S. House of Representatives, 88th Congress, 2d session, August 5, 1964, p. 75:
“The practical effect of requiring all purchases to be made through the open market is to take money from the taxpayer and give it to the dealers. It forces the Government to pay a toll for borrowing money. There are six ‘bank’ dealers: First National City Bank of New York; Chemical Crop. Exchange Bank, New York, Morgan Guaranty Trust Co., New York, Bankers Trust of New York, First National Bank of Chicago, and Continental Illinois Bank of Chicago.”
Thus the banks which receive a “toll” on all money borrowed by the Government of the United States are the same banks which planned the Federal Reserve Act of 1913. There is ample evidence demonstrating the present preeminence of the same banks which set up the Federal Reserve System in 1914. For instance, Warren Brookes writes on the editorial page of The Washington Post, June 6, 1983:
“Citicorp (National City Bank and First National Bank of New York, merged in 1955) just recorded an 18.6% return on equity, J.P. Morgan, 17%, Chemical Bank and Bankers Trust, nearly 16%, an exceptional rate of return.”
These are the banks which bought the first issue of Federal Reserve Bank stock in 1914, and which owned the controlling interest in the Federal Reserve Bank of New York, which sets the interest rate and is the bank for all open market operations.
These banks also profit steadily from the otherwise inexplicable fluctuations in monetary growth and interest rates. Brookes further comments on “actual monetary growth rates alternately gyrating from 0 to 17% in successive six month periods for three recession-wracked years. The two measures of money growth most admired by Milton Friedman M2 and M3, have actually shown little change on a year to year basis in the 1972-82 period.”
Thus we have money growth rates gyrating from 0 to 17% but no actual year to year changes, which raises the question of why we cannot have stability of monetary growth throughout the year. The answer is that the big profits are made by these gyrations, and the next question is, who sets in motion these gyrations? The answer is “the London Connection”.
To draw attention from the continued control of the bankers and their heirs, who obtained the government monopoly of the nation’s money and credit in 1913, the paid propagandists of the controlled media monopoly and academia are constantly trotting forth new and more exotic theories of economics. Thus James Burnham, one of the National Review propagandists, won fame with a ridiculous theory of “the managers”. He postulated that the old arbiters of wealth, the J.P. Morgans, the Warburgs and the Rothschilds had, by 1950, disappeared from the scene, being replaced by a new class of “managers”. This theory, which had no foundation in fact, served to obscure the fact that the same people still controlled the monetary system of the world. The “managers” were just that, executives like Volcker who were front men, paid employees who would continue to receive their paychecks only as long as they carried out their employers’ instructions. Burnham remains a well-paid propagandist at the National Review, which many prominent leaders, including President Reagan, believe to be a “conservative” publication.
From 1914 to 1982, a period in which many thousands of American banks went bankrupt, the original purchasers of Federal Reserve Bank stock have not only survived but they have consolidated their power. And what of “the London Connection”? Does it still exist, and is it still dictating the economic destiny of the United States? The Washington Post, May 19, 1983, carried a story datelined Nairobi, Kenya, noting the meeting of the African Development Bank. “The British merchant bank, Morgan Grenfell and a syndicate of the United States, Kuhn Loeb, Lehman Brothers International, the French Lazard Freres and Britain’s Warburg are discreetly acting as financial advisors to about ten debt-plagued African states.”
There are the same names we encountered in 1914, still managing the finances of the world, with profits for themselves but with disastrous results for everyone else. Perhaps we can look for relief to the present Administration of President Reagan. Unfortunately, before reaching him we have to run the gamut of the long list of his principal staff, composed of men from J. Henry Schroder, Brown Brothers Harriman, and other leading components of “The London Connection”.
Lopez Portillo, President of Mexico, in addressing the Mexican National Congress of Mexico in September, 1982, called the world credit boom of the past decade a financial pestilence akin to the Black Death which swept Europe in the fourteenth century. “As in mediaeval times, it flattens country after country. It is transmitted by rats and it yields unemployment and misery, industrial bankruptcy and enrichment by speculation. The remedy prescribed by faith healers is forced inactivity and depriving the patient of food.”
Forbes Magazine stated October 11, 1982, “The world gasps for liquidity, not because the supply of money has contracted but because too much of it now goes to pay off old debts rather than fund new productive investments.”
The policy of high interest rates and tight money has been disastrous for the United States. In early 1983, a slight easing of money and credit promises some relief, but as long as the Federal Reserve system and its unseen manipulators continue their control of the money supply, we can expect more problems. The Nation on December 11, 1982, in commenting on economic problems, stated, “The blame for all this lies at the door of the Federal Reserve System working as usual on behalf of the international banking system.”
The evidence of how the Federal Reserve System works on behalf of the international banking system is graphically illustrated by a series of charts drawn up by the staff of the Committee on Banking, Currency and Housing of the House of Representatives, 94th Congress, 2d session, August, 1976, “FEDERAL RESERVE DIRECTORS: A STUDY OF CORPORATE AND BANKING INFLUENCE”. * We present as our Chart V page 49 of this study, showing the interlocking directorates of David Rockefeller. As our Chart VI we reproduce page 55 of this study, showing the interlocking directorates of Frank R. Milliken, one of the Class C Directors ** of the Federal Reserve Bank of New York. In this chart are all the main personages in our story of the Jekyll Island conference: Citibank, J.P. Morgan and Company, Kuhn Loeb and Company, and many related firms. As Chart VII we reproduce page 53 of this study, showing the interlocking directorates of another Class C Director of the Federal Reserve Bank of New York, Alan Pifer. As President of the Carnegie Corporation of New York, he interlocks with J. Henry Schroder Trust Company, J. Henry Schroder Banking Corporation, Rockefeller Center, Inc., Federal Reserve Bank of Boston, Equitable Life Assurance Society (J.P. Morgan), and others. Thus an August, 1976 study from the House Committee on Banking, Currency and Housing, brings before us all of our main cast of personages, functioning today just as they did in 1914.
——————————————————————————–
[Footnotes]
* Due to space limitations, only five of the seventy-five charts in the study, all of which show the connections between prominent, powerful individuals with control in the Federal Reserve System have been selected to illustrate the connections between officers and directors of the twelve Federal Reserve Banks in 1976 and the firms listed in this book.
** “The three Class C Directors are appointed by the Board of Governors as representatives of the public interest as a whole.” p. 34, Congressional Study, 1976.
——————————————————————————–
This 120 page Congressional study details public policy functions of the Federal Reserve District Banks, how directors are selected, who is selected, the public relations lobbying factor, bank domination and bank examination, and corporate interlocks with Reserve banks. Charts were used to illustrate Class A, Class B, and Class C directorships of each district bank. For each branch bank a chart was designed giving information regarding bank appointed directors and those appointed by the Board of Governors of the Federal Reserve System.
In his Foreword to the study, Chairman Henry S. Reuss, (D-Wis) wrote:
“This Committee has observed for many years the influence of private interests over the essentially public responsibilities of the Federal Reserve System.
As the study makes clear, it is difficult to imagine a more narrowly based board of directors for a public agency than has been gathered together for the twelve banks of the Federal Reserve System.
Only two segments of American society–banking and big business–have any substantial representation on the boards, and often even these become merged through interlocking directorates . . . . Small farmers are absent. Small business is barely visible. No women appear on the district boards and only six among the branches. Systemwide–including district and branch boards–only thirteen members from minority groups appear.
The study raises a substantial question about the Federal Reserve’s oft-repeated claim of “independence”. One might ask, independent from what? Surely not banking or big business, if we are to judge from the massive interlocks revealed by this analysis of the district boards.
The big business and banking dominance of the Federal Reserve System cited in this report can be traced, in part, to the original Federal Reserve Act, which gave member commercial banks the right to select two-thirds of the directors of each district bank. But the Board of Governors in Washington must share the responsibility for this imbalance. They appoint the so-called “public” members of the boards of each district bank, appointments which have largely reflected the same narrow interests of the bank-elected members . . . . Until we have basic reforms, the Federal Reserve System will be handicapped in carrying out its public responsibilities as an economic stabilization and bank regulatory agency. The System’s mandate is too essential to the nation’s welfare to leave so much of the machinery under the control of narrow private interests.
Concentration of economic and financial power in the United States has gone too far.”
In a section of the text entitled “The Club System”, the Committee noted:
“This ‘club’ approach leads the Federal Reserve to consistently dip into the same pools–the same companies, the same universities, the same bank holding companies–to fill directorships.”
This Congressional study concludes as follows:
“Many of the companies on these tables, as mentioned earlier, have multiple interlocks to the Federal Reserve System. First Bank Systems; Southeast Banking Corporation; Federated Department Stores; Westinghouse Electric Corporation; Proctor and Gamble; Alcoa; Honeywell, Inc.; Kennecott Copper; Owens-Corning Fiberglass; all have two or more director ties to district or branch banks.
In Summary, the Federal Reserve directors are apparently representatives of a small elite group which dominates much of the economic life of this nation.”
END OF CONGRESSIONAL REPORT
Chapter 14 Secrets of the Federal Reserve …
People we’re engaged with a cartel whose workings we finds out very much ex post facto and receive zero input from out elected representatives.
Forbes Magazine stated October 11, 1982, “The world gasps for liquidity, not because the supply of money has contracted but because too much of it now goes to pay off old debts rather than fund new productive investments .” Forbes could simply reprint that statement today with the additin that the FED REFUSES to tell our elected government where the money went and we are talking TRILLIONS of taxpayer dollars. If you like that arrangement jump up and shout , Hurray, hurray we have a secret entity running and runining our financial system, most of whom aren’t even Americans.
Charles # 55 brought up Denninger’s solution and wondered why it wouldn’t work.
In the long run, it *will* work, and in fact is probably the policy we have to pursue. The problem is, as always, the short run: the quote you provide details what will go wrong if Obama tries this:
“Yes, this will mean the equity market will adjust to actual, not falsely-inflated value on a forward basis and yes, this means we will trade lower – perhaps a lot lower.”
Think of that realistically – think about how Obama and the Dems will react if this summer, just as we are getting geared up for the all-important midterm elections which may determine congressional control for a generation, if during that campaign the DJIA drops below 6500 and keeps on dropping. What kind of screaming hysterical panic do you think we will see then? Do you think Obama will just sit on the news and say “well, it’s the best for the country in the long term so live with it, people.” (ie, pull a Hoover) You know that won’t happen.
So even if this is a good policy, the short term consequences will destroy whoever is in power, and because of that I don’t think they will have the nerve to follow through. Maybe a strong leader could, but a weak, vacillating poseur like Obama? No way.
The great irony is that every vacillation will only make the problems worse.
The Financial Times takes a decidedly cynical view in what is currently Drudge’s top story (White House nightmare persists):
We do not need more laws.
We need fewer laws.
Why do we need a central bank? That entity was specifically warned against by the founders (ok – Hamilton wanted one).
The problems above are all caused by too much fiat money.
When money may be made out of thin air virtue dies (when behavior is separated from consequence moral action ceases).
Since 1913 the value of our “money” has declined 95%, We will soon see it go to 0.
Laws will not protect you.
Gold, silver and lead may.
In re short-term vs long-term solutions.
Hard to argue with the proposition that election concerns influence policy decisions.
That is precisely why I suggested above that the first step should be to fix the major technical dysfunction – lack of transparency in the derivatives markets. No policy involved. Separate piece of legislation. If Congress could clean up that single item, the markets would stabilize, providing a time frame to deal with step two.
Which is (re)introducing what wretchard calls “modularity” into the banking architecture, a more difficult effort. “Unscrambling the egg” (ref Hangtown Bob) is a technical problem, which means, not that it isn’t an issue but one that can be fixed with a technical solution. (We’ve already seen approaches like involving the government in private-public partnerships to “reverse auction” the toxic assets, a plan that interested a quite a number of private investors, etc etc – point is, it can be done.) The hard part will be dispersing the current power clusters within banking and financial services.
Which brings up the subject of the Federal reserve. The minute we move away from technical accounting problems and solutions, we stumble on the Federal reserve, central banking, and the Bilderbergs. This is toxic territory from a purely problem-solving POV. Structural “modularity” can be incrementally restored without dismembering the Fed. In fact, if one insists on including the Federal Reserve debate then any proposed Glass-Steagall type repair is “well and truly f^cked” from the problem-solving POV.
If Congress can cobble together (1) a technical fix for derivatives trading and (2) some form of G-S “modularity”, then we can talk about the Fed. If the Fed becomes the issue, as it has with the looming Bernanke debacle, then I agree with others that this could be another devastating year for investment portfolios.
What Lincoln menat by his ‘house divided’ comment was not that the house must fall, but that the division would cease. Globalism and communicatiomns have made the world the house, and it appears that it must go all socialism or all capitalism.
RWE: Will all respect, be concise please. So far as I can see, you are drinking the Kool-aid. Please be specific about what these “evil bankers” did down on “Wall St.” in what is one of the most heavily regulated sectors of our economy–indeed, of the world economy. If I understand you correctly, I see no truth at all to you assertions. Sounds like the ususal lefty agitprop, class warfare and fear-mongering to me, though i imagine that in your case this is inadvertent..
And also explain to me why those “Evil Wall St. Bankers” have this higher moral obligation than the rest of us to stand above it all and go broke, lose their jobs and careers, and get dragged in front of congress, the media and maybe even the courts in order to point out to the rest of us dangerous government policies, the implementations of which happen to be completely legal, in fact in some cases mandated, and the workings of which is checked by veritable battalions of government officials every hour of every day all over the world. Also explain to me why the folks at CalPERS, Freddie and Fannie, any large corporate, academic, union government asset management division and any hedge fund or brokerage , not to mention any politician in the country, are exempt from this same moral requirement. It is like blaming a highway construction general contractor for speeding, or accusing the entire software industry of being responsible for identity theft. You are pulling a moral obligation and standard out of thin air, and one that you would balk at were it placed on you.
With all due respect, and I do very much respect you, your whole construction is based on the Lefty narrative. You may not realize this is so, but it is so. You should not drink that Koolaid. It is built on generations of carefully organized propaganda.
Seem to me a lot of people here do not really grasp what this “crisis” is/was about and how Wall St. and international financial markets actually work.
It they did, they would certainly not want Obama mucking around in it.
We are verging on Climate Change levels of deception and lunacy here in this matter.
“Germany to host G20 conference to tighten leash on financial markets
Germany is to host a conference on regulating the financial markets ahead of the next G20 summit, Finance Minister Wolfgang Schäuble said in an interview to be published Sunday.”
http://www.thelocal.de/national/20100123-24777.html?utm_source=twitterfeed&utm_medium=twitter
Mongoose @ 47: Josh: 90% is the fault of the “bankers”? Hogwash. About 99% is the fault of the liberal political establishment and their RINO water carriers.
No. Just, no.
Plenty of people on the right like to pretend that’s the problem. Sure, it contributed. It was the Federal government putting in their oar, towards going over the waterfall. But at the very least, all the big institutions had to go along with this, and each and every one was committing suicide by doing so. Aiding and abetting.
And it was the financials who are SUPPOSED TO KNOW BETTER. But no, they took their pieces of silver and went along.
But the CRA loans are NOT THE WHOLE PROBLEM. Even good loans are now underwater. It was a structural problem – Alan Greenpan keeping real rates below inflation. Which Berrnanke is STILL doing. ALL THE REST IS COMMENTARY.
Except that, there are also the SIVs by Citibank and others, there is NO excuse for those, they have NO link to the CRA loans. They put the institution and the fed in the role of backing ridiculous risks, with no reserves. WRONG. And there is the CDS insurance by AIG, the first thing to go south, again, with no reserves – a multi-trillion dollar ponzi scheme, that is still going. They want to regulate it – regulate a ponzi scheme!
Forget Bawney Fwank, he’s barely a cocktail wiener at this buffet of crap. Fannie and Freddie together, are maybe 5% of the entire mess. That’s what you need to wake up to, this is a MUCH bigger mess than you seem to realize. I’m not making any excuses for the CRA stuff, it’s just a token of much larger problems. Cheery thought, right?
Josh
Yes, Just, Yes.
CRA IS THE VERY ROOT OF IT, and please spare me the sniffling condescension about “some conservatives” being on some sort of hobby horse about CRA. It is you that ride the hobby horse here. Get beyond the posturings, cliches and bromides, if you please, and focus.
You are completely wrong so far as this crisis goes in implicating all of “Wall St.” or casting about for other causes that the instruments surround CRA in order to find some other cause. They were THE PUMP for arbitrage, program trading, etc. after the Tech crash. What else was there?
You are also contradictory. First you was to dismiss the CRA, and then you want to decry the CDS “ponzi scheme”. You cannot have it both ways. How could they does this? why did they do it? because it was “backed” by the US government implicitly and explicitly (in some cases).
Get a grip on the facts and some rationality, will you. this is just ranting.
Yce, certainly Citi and GS have actively corrupted government and the regulatory process, and they should go to jail for it, but this is not the whole industry and a wholly different matter in the first place, just ask the former employees of Bear Sterns or Lehman who felt their tender mercies (BTW, on the Street, BS and Lehman where known for being more connected to the GOP than the Dems).
As for other “good” loans going bad, well of course they have a link, it is call “fanancial markets”. It is a strange assertion you make, particularly since you claim to know something about the industry. Even at a most abstract level, when a bank fails that does not mean that it does not have good loans on the books. As for AIG, well we have to ask what precipitated this bizarre run on assets in the first place, and what caused what appear to be pointed attacks on certain institutions. Had those not happened, then it is unclear what would have happened.
Beyond this, nobody on the Democrats side wanted any regulation at all of these instruments in any meaningful sense. It was these instruments that kept the CRA money train flowing to freddie and fannie. i cannot make any sense at all of what you are talking about. You are, I suggest, just buying into the narrative. It is a weird phenomena on this thread, I must say. I am a bit appalled by it. Buddy, where are you? help me out here.
Franks, is not a “wiener”, he is one of the main architects here. You make a ridiculous assertion. This is caused by g0overnment, it was not hatched by wall street, they were following law for heaven’s sake.
You need to brush up on the facts a little more, you are being wildy inaccruate.
Just blogged on Obama’s sinking poll numbers under the title “Meltdown.”
http://tinyurl.com/yefueb9
My prediction is a long hot Summer with race riots.
Mongoose,
On this one I agree with you. Populist attacks on the financial sector are a Socialist paradigm and often mask anti-Semitism. The real problem is the corruption and abuse and lowering of standards by people associated with the Democratic Party.
RWE@67:
In my somewhat schizo career(s), I was a banker (not one of my more successful ventures, I assure you, as would the bank I worked for).
I agree with you. The real estate fiasco was a perfect storm of liberal “help the poor and downtrodden own their homes” and conservative (read banker) opportunistic capitalism (“Hot darn, if we gotta do this, then, by all means, let’s make money at it.”). The system went into oscillatory mode as a result of the two wildly enthusiastic signals being impressed onto the basic carrier and eventually shook the foundations of the “building” to pieces.
However, take my observations with a grain of salt, for I am, after all, just a programmer.
M@75: Globalism and communications have made the world the house, and it appears that it must go all socialism or all capitalism.
The working theory is that resource scarcity will constraint shipping to the extent that local economies will replace the global economy. It’s a pretty compelling argument but has gained little traction because the numbers are (a) disputed, (b) hard to believe (effective within months rather than decades), (c) politically toxic to various “agendas”, and (d) don’t consider the stuff being done at Los Alamos which I am betting will break hard and fast.
[h/t Rufus @ EB with energy links too numerous to duplicate here. The next decade will be wild or tough depending on one's tolerance for surprise.]
Mongoose/76; –here’s some of that nuts-and-bolts you speak of, and some light on Mr X’s Taibbi refs:
(snip, emphasis mine)
Taibbi, as many people know, is the star reporter who published a major expose about naked short selling in the (‘then’ -ed) most recent issue of Rolling Stone magazine. In addition, he has published a few blogs providing more evidence to support his claim that illegal naked short selling is a big deal and it’s pretty “hilarious,” as he puts it, that the government hasn’t prosecuted the people who might have helped crash the financial system.
In one of his blogs (which you can read here), Taibbi posts a video that seems to show a day trader conducting a short sale of stock in an unnamed big bank through a brokerage called Penson Financial…the video seems to show Penson Financial confirming that it had “located” many billions of the unnamed big bank’s shares – altogether, five times as many shares as were then in circulation. In other words, it seems that if this trader had had the inclination and the funds, Penson would have accepted a massive naked short sale, helping the trader flood the market with billions upon billions of shares that simply did not exist.
This is rather important, because Deep Capture has reviewed evidence showing that little Penson Financial and one other relatively unknown firm were by far the biggest traders in financial stocks in the first nine months of 2008, handling more than 80 percent of volume. To repeat, Penson Financial, a little firm in Dallas, Texas, and one other relatively small firm handled by far the biggest volume of trading in the stock of all those big banks that collapsed last year, leading to the worst financial crisis since the Great Depression. When it came to clearing trades in financial stocks, Penson was bigger than Goldman, bigger than Merrill, bigger than every major brokerage on Wall Street.
We do not know for certain that the trading through Penson was naked short selling. We know only that naked short selling accounted for much of the overall trading last fall in companies like Lehman Brothers. And we know that a preponderance of the overall trading went through Penson. Perhaps Penson carefully weeded out the naked short sellers, in which case it handled almost all of the trading in financial stocks except for naked short selling. But if Taibbi’s video is any indication, Penson was certainly willing to locate stock that did not exist.
If I have anything to add to Taibbi’s terrific reporting, it is this: Penson Financial’s vice president in charge of stock clearing (that is, the head of the division that appears to have located stock that did not exist) is a man named Christopher Sandel. From 1985 to 1995, Sandel was a top executive at Adler Coleman, best known for being the clearing firm to the Genovese Mafia family.
Adler Coleman famously went bust when its top customer, the Genovese-controlled brokerage Hanover Sterling, self-imploded in one of the greatest naked short selling scandals of all time. Several traders tied to the Gambino crime family were charged with naked short selling companies that were underwritten by Hanover. That the Genovese Mafia brokers at Hanover were not charged in this case seems odd, because the most likely scenario is that the Genovese underwrote hapless companies, pumped their stock prices, and then called in the Gambinos to vaporize the companies, with everybody profiting on the way down.
Anyway, when some of America’s biggest financial companies collapsed under a barrage of short selling last fall, an enormous chunk of that trading was being cleared by a fellow who used to work for a company that seemed to specialize in clearing trades for the Mafia. Should this concern us? Might the Mafia have played some role in the collapse of the financial system? If I were more heavily armed, I would venture an opinion.
(close quote)
Genoveses, of course, in addition to having employed Speaker Pelosi’s father Tommy Del Assandro, are the one ”rat-free” in the five big mob families, being as lucky on one side of the taxed system as Goldman Sachs is on the other, as well as of course, the power in the ‘Chicago Syndicate’, AKA ‘The Outfit’. The scheme with the Gambinos is a variant of good cop/bad cop, insofar as distraction/diversion –the same way one might say, hide a relationship by making angry speeches about the other side of it.
There’s something else in that article, seems that Taibbi in addition to being dissed by Megan McArdle, is also dissed by the new website clusterstock. I love the Kudlow and Cramer shows –both on CNBC –and have noted how they have promoted effusively and bring in on camera the clusterstock blog guys and McArdle both for face time on camera (FoxBiz otoh, seems to like Taibbi –Imus Show really does anyway). Now we hear that Kudlow may challenge Schumer for his NY Senate seat! This gets squirrely –the CNBC people are the MSM –which backs the Schumer side of the divide –or has for the longest anyway. Is some MSM solidarity beginning to crack? Note Tea Party hero is ”ice breaker” Rick Santelli –also on CNBC –tho was talking WAY out of school the morning of his famous rant. Lastly, the clusterstock blog, and the deepcapture blog (of the author of the link), do not seem to trust or like each other –and seem to represent two much larger factions centered on –Journalism ??? The ‘right’ to write the history of all this ???
***
So, what happened to the phantom shares used to explode the banks and transfer a goodly chunk into the Fedgov? The answer is known by a Fed-owned company called the DTCC –and monetizing the nonexistant shares –or something –may well be the source of the notorious (see Elizabeth Warren) TARP secrecy. IOW, is TARP ”fixing” the naked short-selling mess?
Mongoose: “The GOP be careful? The Democrats better be careful. They are going to PO one of their major sources of money. ”
On the surface you are correct. However, remember the Dems and Wall St. have had a major back scratching arrangement for decades. Most of the major Dem financial advisors have ties to Goldman Sachs: Robert Rubin, Hank Paulsen, Turbo Tax, and a host of minor players at the Treasury and Fed. Habu ‘s long post should give anyone pause.
The question is Obama really going to hurt his pals? Like the Chicago Pol he is, me thinks not. There will likely be some backroom deal that gives his banker backers an advantage. In many of the recent illicit arrangements between Wall Street and the Dems/Rinos, it is really hard to discern who seduced who.
As far as the GOP, recently I have heard Sean Hannity and Mark Levin, guys I respect, defend Wall Street Bankers as the ‘Free Market” actos, without a caveat about their most recent fraudulent conduct, and the their bailouts. Conservatives need to point out fraudulent behavior and not defend crooks, while at the same time educate the public as to what is appropriate free market behavior.
You asked about what bad things has Wall Street done? To name just a few, how bout eliminating the banking reserve requirements, forgetting bout 20% down and prudent payment to income ratios, pushing fraudulent derivatives to investors at the same time selling those investments short, frontrunning stock, naked short selling and other stock/bond manipulations, pushing incredibly risky investments because the TBTF policy protected them
( remember capitalize the profits – socialize the losses) and finally pushing their huge cozy bailout and favorable interest rate loan/scams. The massive scale of their fraud is truly breathtaking. Read Denninger, Shedlock, Zero Hedge, Deep Capture and even Cianfrocca at REDSTATE; all question the behavior of the big banks.
Mongoose @ 79: Josh
Yes, Just, Yes.
CRA IS THE VERY ROOT OF IT, and please spare me the sniffling condescension about “some conservatives” being on some sort of hobby horse about CRA.
Mongoose, that just isn’t the case. The mortgage problems are in the spotlight, they collapsed first, but they are merely one card in a big tower. It is a political blindness to focus entirely on them.
Excuse my language, when I said “people on the right”, that includes me. I am not attacking the banks as an institution, I am attacking greedheads at the heads of most of them WHO KNOW BETTER, or certainly should. A lot of intentional blindness going on there. It’s apolitical.
You could clean up every mortgage problem on the planet, and 95% of the problem would remain. And the CRA stuff is, heck, I dunno even how to estimate it, maybe 1/3 of the total mortgage problem. Countrywide was making loans to thousands of people, who never made the first payment on a loan! It was wild speculation, by individuals and companies and groups, because the money was below the rate of inflation. It was a bubble. If Bawney Fwank never existed, THE SAME BUBBLE would have occurred and burst, it might have been slightly smaller and slightly later, and that’s about it.
And *this* bubble is about 5% of the total bubble still floating around, waiting for the needle. Bernanke and Geithner have printed three trillion dollars in the last year, to keep it from popping. Maybe that’s wise. Maybe not. I don’t even know what other central banks have been doing to keep things floating, probably similar stuff.
There is still a solid chance that sometime in the next five years we will wake up with massive bank failures and hyperinflation, all those numbers on your bank and brokerage statements meaningless, and $500 for a loaf of bread. It is the fear of THAT, and not a few stinky mortgages, that got the bailout and stimulus bills passed.
WHY did all the so-called smart guys go along with this? Because they had a theory, practiced for twenty-plus years now, that they could form derivatives out of nothing, and that IT WORKED. Well, it didn’t. It doesn’t. The BASIC THEORY IS WRONG, in my ever so humble opinion. The BIG bubble is the idea that they can manipulate risk separately from principle, without the originators “keeping some skin in the game”, as the cliche is circulating.
And, per wretchard’s theme, what enables this crackpot theory is the idea that you can separate the finance from the INFORMATION about the ultimate holders. And that you can sell derivatives of derivatives of indexes of derivatives, with or without information. You cannot ultimately invest in information anyway, you must invest on something with value, collateral, reality. And this is not present in tens or hundrds of trillions of dollars of instruments, not related to mortgages at all.
Good luck to us all, that this is recognized and unwound, without much bigger bubbles popping than yet seen.
http://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_Corporation
(the DTCC)
http://www.deepcapture.com/sec-oig-investigating-sec-complicity-in-naked-short-selling/
(where was the SEC ?)
Mongoose:
I fully agree that the forcing function was the CRA and more importantly, the whole philosophy it implies, that of “Design Margin is Infinite.” And I agree that the bankers reacted to that, the same way that everyone does when the Feds shove something down your throat. I think I may start keeping a list of Federal laws and regulations I knowingly violate, just for fun, if nothing else.
And the most absurd and troubling aspect of all of these fixes is that the FORCING FUNCTION IS NOT BEING REMOVED. Rather, they propose to expand it further.
It’s like this. You have a bent wheel on your car. It vibrates terribly at above 15 MPH. Obama proposes to bend the other three wheels in such a way, so that theoretically at least, at one speed the vibrations will damp out. And worst of all, he is doing this to prevent admitting that the problem wheel is bent.
Now what? The edit widget won’t let me edit my own post, when I click save, it says I don’t have permission. Maybe I exceeded the size? Wanted to add this to my own #85:
And the kicker to this all? Guess who is the leader of the free world, in this environment? A dogmatic leftist, with no actual experience with anything, who shows not the faintest idea of how banks or mathematics actually works, who would seem to dogmatically be all in favor of cracking down on big banks and punishing individuals with or without cause – and yet is not doing so, but instead hires the very perpetrators to help run the government!
Suddenly I’m with Barbara Boxer, against confirming Bernanke to a new term. I’m not sure anyone could have done better, but I’m all for cleaning house anyway. Though – in favor of whom? Who do they get instead?
You aren’t seeing more than a few pixels of this picture. I wonder if anyone is.
RWE/87; ”bent wheel” –yes –it’s fighting hyperinflation with hyperdeflation and hoping that the heavier the two ends of the balance pole are, the better we can walk the tightrope over the grand canyon. and the theory is true –so long as the thing doesn’t get too heavy to carry. this admin is putting thumbs on it everywhere it can do so with any deniability. why?
mongo, appreciate your posts on naked short selling, just one more card in the tower, SEC completely blind and toothless, the biggest financial players aware of this and doing nothing, probably playing the game themselves.
And we still have no knowledge of yet ANOTHER travesty in the market, the Plunge Protection Possee, which certainly exists in some form or other, completely out of the public spotlight, and making me more paranoid than any other aspect of this ongoing debacle.
–
RWE, like your “bent wheel” metaphor, too.
The main thing to recognize is that there is risk. Every choice has its pros and cons. Everybody’s trying to run around minimizing risks, and it’s just distorting the playing field.
You place a bet, you win- great. You lose- no consolation prize. Period, end of story.
Once you lose it tends to sharpen the senses and only those willing to risk losing again venture forth again. The problem is that with all these hedges and government backups everybody bellies up to the table again and again. The taxpayer is footing the bill.
I don’t believe in taxing wall street, just let them lose.
Josh, mongoose, y’all need to introduce into your debate the fact that CRA, by mandating a segment of money-losing loans in a mkt where bank’s stocks compete for investment dollars, created a felt need for some way to distribute the losses from the few balance sheets to the many. the securitization bundling was that, and the lost yield or lost ROI was the genesis of trying to recoup upon leverage and fee and ‘float efficiency’. remember the basic divide between the fixed income and equity markets –both compete fro the same investment-available dollars, and bank stocks needed to return more yield than bonds, risk-adjusted. So, needed to squeeze more out of every dollar, and at the same time hide the elevated risk. How does this work into the theory of a designed damaging of the system? that question hinges on whether or not you believe that the Harvard/Goldman/Govt geniuses who designed CRA and put the emblems of its damage out of sight on the OTC mkt, were aware –going in –of the implications.
I don’t think there’s any question. Gary Gensler, one of the main players, is now trying to pass new rules that make what he and the whole inside crew did, no longer ever doable anymore by anyone in the future.
I think they set it off with 1998-2000 acts such as the takeovers that made Citi the first ‘too big to fail’ (very important to unleash a big pile of bubble-stimulating credit money from ‘consequences’), the repeal of Glass/Steagall, the loading of F&F with execs such as Raines & Gorelick who may as well have been sent to plunder, & the financial legislation of yr 2000 (for starters), and did it thinking that would put a stop to the conservative wave of private property creation –and the concomitant pressure to privatize the Dem party’s reason to exist, that is, social security and govt ponzi in general.
I think the plan was to blow up the system maybe about a quarter as badly as they did, in order to insure victory and a crisis to work, and a GOP to blame it on –a perfect set up –but it did not account for a capital strike –and unemployment result –on the part of a middle class managerial and entrepreneurial class only fractionally as dumb as they had believed it was.
And now –esp re massachusetts (Massachusettttees, i luvya baby!) –they realize they screwed it up –and may have to go with the backup plan, which is probably murky enough to end up involving Mao jackets and little red books and probably Kamps and corpse bulldozers. We can stop them –maybe –but it won’t be a walk in the park.
Interesting factoid: The average per capita income in the EU is about the same as that of the state of Mississippi. One of the poorest American states. Keep that in mind when some leftist earnestly declares “We should be more like them!”
teresita’s “aspirin” factory had some peculiar methylphosphonate residues, not necessarily used for making “aspirin”.
My understanding is that all the TARP money was paid back with interest by the banks except for about 40 billion owed by AIG and GM; The Fed made about 50 billion on the deal which they paid over to the treasury. so let’s figure. they netted 10 billion on the deal.
Is this incorrect?
If not then why work over the banks? The TARP program was a smashing success.
(Especially when the second great question of the age is who was it On Thursday Sept 15, 2008 at roughly 11 AM withdrew $550 Billion dollars in a matter of an hour or so. The first question of the age is what’s on Obama’s long form birth certificate)
The debts that the US has encored are unsupportable.
http://www.321gold.com/editorials/dougherty/dougherty012210.html
The system will default through inflation or debt reputation or some combination of both.
Arguing about how to change the law to fix this is an intellectual exercise akin to deciding how to rearrange the deck chairs on the Titanic so that the fewest lives will be lost.
Those who created the problem have no interest in saving the people. Only prolonging the fraud a little longer.
The last act of any government is to loot the treasury.
Protect yourselves and your loved ones.
“The last act of any government is to loot the treasury. ”
And the first of a new government is to hunt down the looters.
This is the fun part, where you’ll be glad you got than new Mod1 SPR and the case of MK262 ammo!
Spread the fun around!
akin to deciding how to rearrange the deck chairs on the Titanic
That’s more or less everyday working life.
Most systems operate in failure mode most of the time.
Charles, the problem with TARP is that for the first time the exec has a huge slush fund standing by to bail out any entity that it deems ”too big to fail”. The implications are enormous –for starters, if the King likes you, you can take risks that your competitors cannot take –realizing the fatter returns on higher risk, and getting bailed out if it goes wrong. Distortions of the marketplace radiate outwards to the last hot dog cart in Sticksville, and on all sides of the transaction of economic activity. Investing is an early loser –who wants to buy in to either one, a favored investment dependent on political whim, or an unfavored competitor of same? They both suddenly suck, as soon as there’s ”too big to fail” hanging out there ready to use in any way the royal court of the sun king might deem good for him or who the hell ever.
Citi became ‘too big to fail’ in 1998 with the Traveler’s merger, and since then has been bailed out four different times.
8000 banks, and 70% of the reserves are in 1/1000th of them, up from a 20% ‘mega’ concentration only 20 years ago. Dr. Elizabeth Warren’s Congressional Oversight Panel’s December report said “the implicit guarantee of future bailouts is preventing real reform of the financial system of this country.’ Note the use of the qualifier ”real”.
We’re being ripped to pieces by concentrated nodes of financial/political power that are able to secretly cooperate to custom design self-dealing market events. This was never possible at lower levels of financial concentration. We’ve created the conditions for Dr. No and Goldfinger and The Joker to leap out at us in the raw and real from the comix and our nightmares.
Denninger (Market Ticker) makes the point that the five decades of economic “growth” since 1960 are in fact a statistical anomaly. The alleged growth, as measured by GDP, derived not from production, but from borrowing.
From Denninger:
What we are facing down today is a fifty year Ponzi scheme. Drill that into your head folks – for fifty years we have created false output gains, with the last 40 of those years having between 15-20% of each year’s supposed “GDP” not created by the work of people, but by BORROWING MORE MONEY which will have to be repaid with interest.
This is why we hit the wall in 2007.
Denninger summarizes the debt problem:
To come back into equilibrium, assuming we do not decrease debt in the system at all, we would have to shrink GDP by about 20%. But shrinking GDP means that money available to pay down debt would also decrease which would generate even more defaults.
This is how deflationary depressions happen – years, even decades of playing Ponzi by layering debt upon debt. Bernanke and Geithner, along with President Obama, are well-aware of these facts which is why they are all pounding the table demanding that banks “loan more.”
The problem with such a prescription is that the wise person won’t borrow, for he knows what’s coming. The unwise has no collateral to pledge, and thus can’t borrow.
If the government forces (either by persuasion or legislation) lending to those who can’t pay they only extend the Ponzi and in doing so make the inevitable collapse WORSE.
In other words, the way I read it, and if Denninger’s analysis is fundamentally correct, there is no magic bullet, certainly not within range of patronage politics.
My own view is that the numbers don’t provide the entire picture. (I have thought for some time that new metrics are required but that’s another story.) It is obvious to me that my quality of life is better than it was 50 years ago. My microwave and laptop and cell phone are not figments of a “borrowed” reality.
Having said that, I wish I could be as long-term optimistic as some posters here, but all I see is an ugly mess with few palatable solutions.
Which is why I consistently argue for simple, prioritized, common-sense solutions to discrete problems. As a species, as a culture, as a collection of post-modern demographics, we are neither prepared nor particularly well equipped to identify, let alone agree upon and implement, Big Solutions to Big Questions.
Other than Viva la Revolution.
http://market-ticker.denninger.net/archives/2009/12.html
Charles @ 95: My understanding is that all the TARP money was paid back with interest by the banks except for about 40 billion owed by AIG and GM;
Charles, I am ashamed to say I’ve lost track of the money – when just about a year ago, it was quite possible that I would have been on a team to officially track it. I wonder if that team ever got formed at all? Anyway, yes, the big players have paid back the big amounts of direct loans, though I believe we’re still into AIG for a lot more than $40b.
But I believe the fed and/or treasury still owns beaucoup equity shares of Citi and I’m not sure who else, and that this in large part has boosted the Dow by a thousand point or more.
And even LARGER amounts have been quietly spent buying up good and bad bonds and whatever other instruments, I’m guessing (!) there is still more then TWO TRILLION dollars of federal money spent in the last year elevating all the financial markets.
If I understand correctly, the fed printed a trillion or two, completely above and beyond anything Congress ever voted on.
Not to MENTION the fed keeping short rates at zero and paying four percent on long bonds, and letting the banks hold onto billions of that for the last two years now, the primal sin of loaning money below the inflation rate.
It is a miracle, and not well understood, why we have not already launched into strong inflation, if not hyperinflation. Geithner many times announced that was his goal, because it monetizes all loans, good and bad. Except that it does so only by also boosting variable rates. So, that’s his plan – hold rates down by printing money, while the economy inflates, and hope not to spill your martini in the hurricane. Only, inflation hasn’t accelerated.
Weird, huh.
–
Mongo, the total of ALL mortgages, not just the sub-primes, are still just a fraction of the overall problem.
But what the heck, don’t ask questions, it won’t help you sleep.
Deep Capture has been recommended to me by more than one Street watcher. But it’s a project funded by one businessman out in Utah who also happens to largely fund that state’s Republican Party – Patrick Byrne. My view is that Byrne and now Taibbi are on to something, and lazy reporters or perhaps journalists who fear they will lose their jobs if they step too far off the reservation – here I am thinking of Holman Jenkins and Megan McArdle – dismiss it all as conspiracy theory hooey.
Neither McArdle nor Jenkins were not sitting in a brokerage offices in 2008 listening to their bosses cheer the various interventions that were supposed to save Bear Stearns and ruin whoever was shorting the hell out of it at that time. I heard a seasoned broker say it was naked short sellers doing the deed. And if the brokers believe that naked short selling was going on, why do the financial media types at best humor Byrne and take it all with heavy doses of salt and at worse deny it at all costs?
In McArdle’s defense, I think the world is getting too scary probably for her to think about, since if there are indeed folks powerful enough to get away with such things, then think of what they can do about one measly reporter…
Josh is fundamentally correct that while Fannie and Freddie may be the most egregious example of cronyism and ties between the Northeast Democrats and Wall Street, we can certainly no longer say the Crisis is just about subprime or even alt-A mortgages. There are plenty of people, perhaps soon to number in the low millions, who had sterling credit before this crisis, who did not live beyond their means other than buy a mortgage they were told was typical for their income, and are now facing homelessness if their unemployment runs out. Printing money out of thin air and setting interest rates below inflation is the root of this whole problem. And Volcker shock therapy raising interest rates to 20% IS IMPOSSIBLE without doubling the interest on the national debt (since that 2 trillion lent out or otherwise used to buy assets had to come from short term borrowing at artificially low rates) practically overnight from 25% of the U.S. federal budget to 50%. I don’t even want to ask what it would do to the UK or Greece. I know in America it would mean if you want to keep that $600 billion defense budget and barely hold Social Security steady, deep cuts to Medicare, Medicaid and everything else would have to happen. Otherwise hyperinflation.
Unsuk,
1) It is the entire Wall St. community that has backed Obama, most particulry the hedge funds, who are the real players here and who have escaped attention thus far in this thread.
Obama cannot ot just preserve 1 or w institutions and go after the rest. This is just a bizarre notion completely detached from how the real world world. He cannot destoy the whole system and expect his one or two bankers to carry the day. Think about what you are saying. You lso really do not understand much Wall St. has changed since the 1980′s. There really are not that many non-democrats in most o fthe key seat in most of the key NYC large financial institutions. It is not at all like it was during Reagans time.
2) It is the Government that sets reverse standard NOT Wall St. How can you even say something like that?
Let us figure out how Wall St. works before we start criticizing it.
Really, this thread is troubling to me. A lot of people here do not seem to know much how finanace works, and are buying into the Communist narrative. Perhaps some are more brainwashed than they realize.
Langely: Gold bugs always use su apociliptical rhetoric. They want you to buygold.
And it is preposterous to imagine that the last sity years was not a growth in productivity.
We are typing away on computer over the interent, for Pete’s sake.
Seriously, people ned to get a grip and stop letting the various rhrtorics of insiders, traitors and hustlers control their minds.
It is verging on hysteria.
The extra money is going in a circle, transporting bad securities onto the Fed’s balance sheet and good securities onto the banks’ balance sheets.
Josh, for Pete’s sake. It is not the sum of the mortgages that is the issue. it is the huge sum of the derivatives and assoicated instruments like the CDS paper AND all the various arbitrage scemes around them which in volve stocks, FX and even commodities in their hedge structure. These dwarf the aggregate of all the mortages.
It was howeer, the forced money pump of all of this that kept the whole thing going, and it was here that the weak link was to be found. That is the whole point.
And Yes, someone is siphoning money away, but they are doing it with government collusion, or, and what I suspect is the case, they are government actors themselves.
Either way it works aganst your “case”, not for it.
You really are not making a rational case at all. What is you case. Wall street is complicated? You do not understand program trading so one aspect of it cannot be the key cause of it? Just what do you mean?
You seem to not grasp what i or buddy am saying to you. You are just repeating media misdirection. Don’t.
Mongoose,
” It is the entire Wall St. community that has backed Obama, most particulry the hedge funds, who are the real players here and who have escaped attention thus far in this thread.
Obama cannot ot just preserve 1 or w institutions and go after the rest.”
Mongoose, I largely agree with that. Obama is a mystery. We can only guess if or who controls him. Obama may be throwing many of his financial backers under the bus. That would fit with his revolutionary marxist side. Only time will tell. He has a past history of unseemly deals to help supporters, though.
The larger point is that Wall Street needs to be thoroughly reformed. America’s financial system has been corrupted and is not facilitating the appropriate flow of capital to the industries that need it. America likely will not recover from this depression/recession with that reform. Lending to many important sectors of the economy will not resume in earnest without it. The problem is that Obama and friends are not the guys to do it.
I have to admit that 90 % of this thread is way, way over my head. But I can tell you and you can take it to the bank (pun intended) that in my gut I know that there have been and still are terrible things being done and not only by greedy people but by evil people who would like nothing better than to rob America blind and then watch every American beg the rest of the world for salvation.
Salvation in the form of slavery is all we would get.
But there will be millions of us who won’t be begging but looking for those responsible and Heaven help them if we ever find them.
Papa Ray
OH..here is a link to go with what Habu was telling us.
“Secrets of the Federal Reserve”
Like many other readers at Belmont Club, I go to Karl Denninger and Zero Hedge for my economic news. It is my impression that Karl Denninger gets much of his information from Zero Hedge.
I am now going to put on my tin foil hat and say where I think we are going. I think the sucker’s rally that started in March 2009 was almost entirely due to stock market manipulation by Goldman Sachs, JP Morgan and other large financial institutions. I believe these market manipulations were done with the advice and consent of the US Treasury and the US Federal Reserve. I believe this illegal activity was an attempt to give the federal government enough breathing room for implementing a Keynesian economic recovery through TARP, bailouts, etc. Unfortunately, that attempt at economic recovery through Keynesian economic theory has failed.
The TBTF banks and financial institutions have raked in massive profits (at taxpayer expense) due to the sucker’s rally and were about to reward their top executives huge bonuses as a consequence. Obama recognized that this would represent a major embarrassment for him.
Obama entered his presidency with the intention of recasting the United States into a European style socialist state. He was to achieve that objective through Obamacare and a Carbon Tax based upon AGW concerns. That specific strategy has effectively failed and Obama is now shifting to “Plan-B”, i.e. old fashion populism by attacking Goldman Sachs alias “the vampire squid”.
With my tin foil hat shining brightly, I believe the recent stock market corrections, US dollar valuation and huge changes in the gold market are a consequence of a power play between Obama and the major financial institutions. A few days ago, Obama basically said: “Obamacare has failed so to keep my popularity up, I’m going after the vampire squid”. The vampire squid replied: “No you’re not!” and dropped the stock market a couple hundred points. Obama then responded, “I really am going after the squid!” but the squid replied by dropping the stock market another hundred points.
What we are observing is a game of chicken.
Will Obama actually take down Goldman Sachs and the other oligarchs or will their economic manipulation so cow Obama that he is forced to back off?
My guess is that Obama will lose because he is not as smart or as powerful as the vampire squid. However in trying to take down the squid, he may end up hosing the world’s economy.
jeez, eggplant –now i’m an aphid in a mason jar between a tarantula and a scorpion
***
Mr X, what do you think, would the Russians and Chinese want title to the some or all of the 50 real estate parcels, or are they merely after a 50% US military stand-down, and the world made safe for thirdzies?
***
and America, what’ll it be, medicare, or our allies ?
Ep@108: the sucker’s rally that started in March 2009
I was deeply suspicious of the last leg of the market drop – from 9500 to 6500 plus or minus. Given the causation – an asset (mortgage) backed bubble – the DJIA should have stabilized at around 10,000, a significant 30% drop, rather than the additional 20% drop that was tacked on to the end, resulting in a nice round 50% loss.
I felt in my bones that that final movement was nothing more than an opportunity for the limber players to recover some losses.
Pure and simple.
The raw anger at these machinations should not be underestimated.
Wage earners shoot straight.
That’s not a threat. It’s a psychological observation.
Ep@108: My guess is that Obama will lose because he is not as smart or as powerful as the vampire squid.
“Obama will lose”** because the power centers of the post-modern world will not be f^cked with.
This is another way of saying that the focus – the spotlight – the center of intellectual gravity – is NOT Obama. It is his institutional and intellectual opponents.
**I did not vote for Obama. I voted for McCain. And the difference is?
Mongo Buddy: “Josh, mongoose, y’all need to introduce into your debate the fact that CRA, by mandating a segment of money-losing loans in a mkt where bank’s stocks compete for investment dollars, created a felt need for some way to distribute the losses from the few balance sheets to the many. the securitization bundling was that, and the lost yield or lost ROI was the genesis of trying to recoup upon leverage and fee and ‘float efficiency’. remember the basic divide between the fixed income and equity markets –both compete fro the same investment-available dollars, and bank stocks needed to return more yield than bonds, risk-adjusted.”
That is just brilliant. I have never seen that thought speculated anywhere before.
As I understand what you’re saying, the gang behind CRA understood from the very beginning with the consent of the Big Banks that the Big Banks would need extra powers and opportunities (like the repeal of Glass Steagall, the relaxed reserve requirements, the MBS derivatives etc,) to generate extra huge profits to offset the expected huge losses from CRA mandated loser loans. It was thought to be a win -win for both the liberal left and the banks. Only the rest of us were left holding the bag. Bigtime.
There are two issues being debated here:
1) Whether or not there really is a need for banking reform,
and
2) What is Obama’s purpose in bringing it up now?
#2 is what people ought to be focusing on, in my presumptuous opinion. That there may be a need for banking reform is beside the point if Obama is leading the way. Granted he is the President, but he is a calculating and feral ideologue who’s just trying to rally citizens back to his side. He couldn’t care less whether any “reforms” he proposes are good or ruinous. Also keep in mind that Obama wants to levy a new tax on banks, and wants an accellerated schedule for repayment of TARP money from them; this is totally arbitrary and capricious. Weren’t a number of the banks trying to pay back the TARP loans in full months ago, and weren’t they turned down by the Administration?
This is a two-three front War on Banks disguised as “reform.”
Mongoose- Go boy, you are the only one who seems to understand that it is the government/politicians fault drive by liberial redistribution politics that caused the whole mess. The government sets the rules and the bankers simply play within the box.
pr@107: I have to admit that 90 % of this thread is way, way over my head.
Don’t worry about it. My best guess is that buddy’s explanations ** derive from an intellect that the Dems can only salivate about in their wildest planning sessions. IOW, they wish they had thought of that. I expect part of the past ten years had some overt direction, but part was pure serendipity.
**The#92 post about Gary Gensler being recruited to repair the damage from progressive efforts to obstruct private property initiatives strikes me as pure speculation, but that only emphasizes the enormous gap between low level peons like me and the “people who run this world.” Accepting that level of intentional planning is very difficult, but I read and keep the thoughts in the back of my mind. You never know.
Bottom line in re 2008, I remain “deeply suspicious” that “banking” performance was dominated by criminal transactions (the known facts argue for a great deal more than “suspicion”) which means I’m going to give the Obama admin some room to maneuver. We’ll see what happens, if anything.
Remembering of course that nobody, ever, is adequate to the challenge. Certainly JFK was not. Anymore than George Bush. Let’s see what Obama does.
Eggplant, that’s a very good analysis in my opinion. I agree that Obama will lose – but the collateral damage to our economy of this conflict may be extreme.
Depressing reading over at the link left for DeepCapture.com but just enforces what I already believed about the money/stock/whatever market. Which was that if you are going to put your money in it- only invest in large, giant companies like IBM. I would have said GM years ago, but as it turns out, I would have been wrong then. But I didn’t think GM made good cars years ago so I didn’t invest. I made the mistake of letting others invest my money. And of course I lost 90 % of it over the last three years.
One of the guys in my group subscribes to This Website and is always bringing stuff to coffee to show us or discuss. It has made all of very wary of believing almost anything that has to do with financials.
I always knew that “Money makes the world go around” and that “Money talks and Bullshit Walks” but I never suspected that the world was mostly being run on credit and bad credit at that and by crooks that make Al Capone look like a simple pickpocket.
Papa Ray
X@102: Deep Capture has been recommended to me by more than one Street watcher.
I would be curious to know the buzz on Denninger. Especially so since he is notable for being a Big Zero on the media board. Matt Taibbi is better known than Karl Denninger.
For those who didn’t know:
Left hook: Two Democratic senators facing re-election—Barbara Boxer of California and Russ Feingold of Wisconsin—were among those announcing their opposition to Bernanke. [CNBC]
Right hook: [Richard] Bernstein [former investment strategist with Merrill Lynch], meanwhile, said he opposes Bernanke’s reappointment—and the Fed’s prolonged low interest rate policy. “I’m not a Bernanke fan. One of my arguments is we’ve done nothing to correct the structural issues with the economy. Mr. Bernanke is going to be reappointed and continue Greenspan/Bernanke monetary policy, which clearly has not worked. Wall Street loves it because they provided free money,” he said.
Bernanke is clearly caught in the cross hairs.
Bernstein also said: he would favor reinstating rules that separate investment banking businesses from commercial banking. “It is not in the best interest of the financial sector, and it may not be in the best interest of my own business, but it is in the best interest of the whole country to make sure depositors are the number one priority right now because we need our savings rate to go up.”
Mongoose, you’re the one being mislead by media focus on the mortgage issue. CDS is only loosely connected to the MBS/CDO/mortgage world. CRA stuff is political and fun, but it’s not the source, it’s just a symptom. The underlying reasons, Greenspan’s vanities and Goldman Sach’s complicity, are what mislead even Bawney Fwank into thinking CRA was in some part rational.
I haven’t even tried to be exhaustive of all the bad mojo out there. Hedge funds and all, too. It’s too depressing.
It will all become clear to you in time, never fear. Of course, it will be just too late then, for us all.
Speaking of which, that deepcapture site made me even more depressed. FWIW, I don’t take Denninger as an oracle, he seems to say some good stuff, and then go off in random directions. In normal times the naked shorts issue would be a huge scandal. Today, pffffft.
Isn’t it remarkable that the MSM seems almost totally oblivious to this all? Give us more Octomom, and maybe a little Bernie Madoff, a flea on a rogue elephant.
Oh yes and blame it all on Bush.
Assume they re-regulate banks and limit risk-taking by investors. How much of our banking and investment business will move offshore?
Interesting that neither Canada or Australia (or Germany for that matter where they didn’t borrow and spend to support failing businesses) has had the sub-prime meltdown we had. What differentiates their banks from ours? No non-recourse mortgages? Lots of money down or hefty mortgage insurance? Higher margin requirements on the banks? No GSE’s like FannyMae and FreddyMac? No regulations or pressure groups requiring banks to make loans to those clearly unable to repay?
Wonder how much emigration of our best-and-brightest this type of foolishness will drive? (Stay in the U.S., have your salary capped irrespective of how productive you are, etc.)
Bottom line: All this new regulation/ re-regulation/ etc. etc. etc. (including the bellyaching about the fed and other “secret” gnomes) replicates the essential elements of Smoot-Hawley-Hall just like CRA and CDS replicated 10% margin and creative accounting in the Special Miscellaneous Account.
We are seeing another repudiation of “progressive history”.
Once again an illusion of eternal cash flow collapses and the powers that be try to combat it by choking off actual cash flow.
Another reason I say deflation ahead.
Mongo, old Buddy, why don’t you ‘splain 10% margin and creative special miscellaneous account and Smoot-Hawley-Hall to the congregation. I goota go pick up the wife.
If your making a list and taking names read this article. It also explains a few things I had heard but had not seen.
Beware the Goldman Sachs populist
It’s all in the smoke and mirrors, except that the mirrors are all about to shattered.
Papa Ray
Peter Grynch:
but the US had not to absorb central America and southern America states like we had to absord broken eastern states, and indigent !Greece, southern Italy, Spain and Portugal.
If you take the 10 states of the early EU, then our average GDP is higher
I don’t understand much of anything on this thread but am trying to learn the names of the various players.
Where do George Soros and his evil buddy Maurice Strong fit into the financial picture?
mongo said:
“now i’m an aphid in a mason jar between a tarantula and a scorpion”
I’m hoping the scorpion first stings the tarantula before being eaten then the tarantula succumbs to the scorpion’s poison (the aphid survives). More likely, the tarantula simply eats the scorpion and then calmly munches on the aphid as an after-dinner treat.
Ari Tai
if you believe that Germany wasn’t hit by the crisis, it’s still the legend that Germans are serious people that impressed you. At the beginning, Angela Merkel thought so too, until one of her biggest banks needed to bailed out, and by escalade, a few others.
Though our continental banks generally don’t gamble on money for the sake of money, but on investments in enterprises.
At the moment, Germany is still the 2nd world exporter behind China.
And Merkel was the one (with Sarkozy)that ask for “regulations” in the money business at the last G20, but were laughing at by the other participants, among them China, UK, US
So, in the link that I brought above, it is said that the topic of “regulations” is back in the actualities after that Obama manifested his wih to undertake them too
Habu, et al:
The Federal Reserve may well be all that you say, but it would be even worse if the government took it over. The government can’t do anything well, except maybe for the military. And even the military has huge problems with bureaucracy. When you think of reforming the Fed, remember, “things are never so bad that they can’t get worse!”
i just had this dream, i was dreaming a movie, a Western, the Old West, it was nightime in the town square, and there’s an angry crowd, a couple hundred cowboys & farmers & townfolk have these three fellers surrounded –appears to be the banker, the sheriff, and the judge surrounded.
Nearby the folks are tearing open feather pillows and stoking the fire under a big bubbling kettle of tar. The three fellers, looking a little roughed up and disheveled, are talking fast and furious. They seem to be arguing with each other, but a little too theatrically, as if playing not to each other but to the crowd. “REGULATE that tar!” the sheriff is hollering. The banker is screaming “DEREGULATE them feathers!” while the judge is shouting “I ORDER you both to GO HOME!” Nobody’s listening so the three of ‘em keep screaming louder and faster.
In the dream now i’m floating away from the town square and somehow floating above it all. Looking down, in the dark the countryside seems to be moving. Something out in the countryside is moving into the outskirts of town. From all around the town from all directions, shapes and shadows in the dark are coming into town at a trot, heading toward the town square.
Then i woke up.
Gerry P: There will never be a satisfactory answer as to who shall be the Bank of Issue.
And have the powers that are inherent in that role.
As Paul Johnson noted, what America has is not bad. The Fed is split into rather autonomous regions and sooner or later gets around to
corrective actions.
I remember when the Fed talked about combating inflation while Milton Friedman kept pointing out that it was escalating same.
But finally the Volcker-Greenspan era saw the needed changes as to how new money was created and when and things smoothed out nicely. The secret: instead of creating money and then seeing who would borrow it, the taking out of the loan is what created the new money. As nobody borrowed unless what they wanted to buy was already there, balance between goods and services and the real money supply was restored.
What has gone wrong now is that governmental—-not Federal Reserve—- interventions led to debts that could not be paid. Resultant defaults vigorously shrunk the money supply and we are getting deflation with a Capital D.
What can the Fed do about this? Nothing. Well, nothing short of massive currency debasement. Since none of us want to go Weimar, the Fed had better continue to march and content itself with insuring adequate liquidity in the banking system.
As they are doing just that, naturally there are calls to take over the Fed and run it for the benefit of “the peepul”. Barbara Boxer and Bernie Sanders lead the way. We shall see who is idiot enough to follow their dictates.
Soon as we get the overall debt structure down to appropriate levels, we will get out of this mess. We must be on the right track. If we were note, we would hear no strident calls for reform.
Buddy, then happened a climate catastrophe, and the good people forgot their pillows, urgencies made them rush into their prime moral duty: how to get themselves and their fellows safer
Dave/131; We must be on the right track. If we were not, we would hear no strident calls for reform
–but the negative signifier is not always reliable. Witness the principle in action in the movie “Little Big Man”:
(Custer & staff have arrived on the rim above the valley of the Little Bighorn, and are discussing whether or not to ride down into the valley. Standing by among a group of Crow scouts is a white man known to his Cheyenne adopted tribe as “Little Big man”, whom Custer has hired as mule skinner, figuring he would try to lead Custer not toward but away from the camps of the Cheyenne & Sioux)
***
(Custer) What do YOU think, mule skinner?
>>(Mule skinner) General…you go down there.
You’re saying, go into the valley?
>>Yes, sir.
There are no Indians there, I suppose?
>>I didn’t say that…you go down there…if you got the nerve.
Still trying to outsmart me, aren’t you, mule skinner? You want me to think that
you don’t want me to go down there, but the subtle truth is you really
DON’T want me to go down there!
(to aide) Well, are you reassured now, Major?
Men of the Seventh! We’ve caught them napping! Sound the Charge!
***
MC/132; we hope & pray!
so the deal is saying nothing is better as words don’t mean what they mean, but like a clever Indian observe the prints, they’ll drive you to the gang cache
That’s true too, MC –but i meant this: When your enemy says ‘no’, he may want you to think ‘yes’ because he wants to mislead you. But you know he’s the enemy so you think ‘no’. But he knows you know he’s the enemy so he says ‘yes’. He thinks you will second guess his second guess and think ‘no’. But since you know he knows you know he knows you know he knows, you think ‘yes’. See?
Buddy, but he you have the 6th sense, you feel if your enemi is a liar too
Here’s an interesting book review. The meltdown described here looks similar to the one in 1987. The only thing that’s changed are the programs used by the traders and the motives. But the cascade and the way the programs feed off each other remains the same.
The Minds Behind the Meltdown
How a swashbuckling breed of mathematicians and computer scientists nearly destroyed Wall Street
Part of the answer to the question of how to get back some of the design margin–is to collapse US dependence on foreign oil.
If the US can cage obama, that is, keep him from doing harm, the next problem in world financial markets will be in europe…or japan because, hard as it is to believe –they are more overleveraged than the USA.
The Tightening by the central bank in china has caused the oil markets to start to fall in anticipation of lessening demand from china.
the combination of weaker japanese & european economies relative to the USA will mean that the US dollar rises relative to these countries. further the weakening chinese economy weakening demand for oil at a time when US demand for oil is plummeting — means that the price of oil over the next year or two will be cut in half.
That means there will be little inflationary pressure and little need for the fed to raise interest rates for the next year or two.
(Volker raised interest rates to kill demand –to kill inflation —back in the early 80′s because inflation was roaring along at 10-20%.)
wws@53.
“…but it’s unthinkable that they will ever go back to the old $100,000 guarantee.”
I’d guess that’s wildly optomistic. I can only hope $100K in script has meaning, then. I’d settle for $0.10 on the $1, should honoring that guarantee become widely necessary. Printing money doesn’t solve whichever problem triggers the run(s).
Government and union employment are the last bastions of “lifetime jobs.” Private sector was forced to get over that 20-30 years ago. Law and regulation accelerating outsourcing, till there is no core business not dependent on foreign sources. Sounded good, if one disregards the national interest we don’t talk about.
Merely the “cadillac” and forever benefit obligations in the underfunded gov’t/union workers’ retirement contracts may be the catalyst. Maintaining the pretense that the taxpayer is going to honor those contracts breeds delusion.
Of course , dismissing 20 million gov’t workers into the current employment environment, and then telling those remaining (totaling nearly half the population) that their retirements have evaporated is gonna be hard. Harder this second time; but the other half this time.
Isn’t that like the first act of “reset” for the 2012 Congress? Starting the legislation January 2011? Find out who’se in charge.
MC/136; i knew you would say something about 6th sense!
(no –une raconte des blagues!)
Buddy, then you have that 6th sense
Charles, interesting article, hmm wall Street is like CIA, they rely too much on machines while men 6th sense is what’s making the difference
Yah, MC, but not the other 5, alas!
too bad for you then, in Whiskey’s criterium you wouldn’t have a chance to survive, but you may talk like little bighorn
LOL –you win, MC –
I spend a month or so a year in Europe – last year roughly six weeks in the EU in September/October, with a couple weeks in northern Germany, Hamburg, Frankfurt, Koln, Aachen. Aachen was in the worst shape as the downturn was impacting sales and exports and the ability of the manufacturing industry to support the local schools, hire their graduates.
My read is Ms. Merkel won the battle with her central banker where he wanted to copy the U.S. and have Germany (continue to) pay the bills in the EU rather than continue her earlier successful effort (starting in 2005) to get the German (States) out of guaranteeing bank deposits, etc. Which is why she initially put the responsibility on the banks more than the government for rescuing their equiv of Lehman Brothers – HRE (Hypo Real Estate, not a bank, but woefully exposed to U.S. hedge guarantees when it picked up the Irish firm Depfa, besides living at the edge with their underwriting of commercial real-estate). She ended up making a larger liquidity guarantee with German Federal assets than she wanted (in conjunction with the state banks) but didn’t fall for the equivalent of a Paulson maneuver (i.e. didn’t bite on an EU wide stimulus package, largely paid for by Germany and German debt). Granted, the later AIG bail-out was mostly paying off AIG counter-party guarantees (to European banks) which helped Germany avoid dealing with the nightmare scenario – that of rescuing the Euro and the EU on the back of their citizens – who have largely paid the EC bills, forever (granted, that comes with influence if not control over much of the EU). Back in 2008 there was speculation that German citizens would say “enough already” – but given their form of government they can’t do anything quickly (like leave the EU).
For those who haven’t lived in Germany, it is a true federal system (more so than the U.S.). The states are where the power and money is. Like China, there’s little distance between academia and business (and banks and government). Building a home is most often a family affair (they usually contain multiple generations and siblings), mortgages of 99 years are common, and they think our homes are made of twigs compared to their construction. If your retired parents fall on hard times and the state ends up taking care of them the state will send you the bill (encouraging families to take care of their own aged). And if you don’t pay your yearly tithe (10% or so, depending on wealth) to your church, you’ll pay it at death (to be buried). And so on. An interesting place and people, both north and south of the sausage line.
It appears those countries that didn’t follow the U.S. lead (beyond providing liquidity) of rescuing failing and corrupt companies and agencies are recovering or have recovered already. Eventually the U.S. will have to pay the piper. Government intervention in markets, overriding citizens voting with their wallet, just winds up a spring that when it eventually snaps will do even worse damage.
Historically after every long run of rapid and real economic expansion, we’re hit with excess liquidity. We’ve made too much money with too few new places to invest it. Too many cash cows and too few opportunities to recycle the cash. That means cash has to chase financial returns which soon evaporate because of too much supply. This is so repetitive that it is predictable. Ultimately, finance SERVES the productive economy, not the other way around.
My political instinct based on recent history tells me that when Obama threatens to sic the dogs on someone or some institution, what he is really doing is giving them a handout and a piece of the action.
He cut a backroom deal with Big Pharma and Big Insurance then made them the target of his public “anger.” Haven’t we seen other examples?
Yes, the forcing functions for financial disaster continue in the housing market. It seems that the Feds anticipate inflation to restore reserves and evaporate bonded debt in real terms. It has an interesting effect of busting the Chinese. Maybe they’ll take the hint next time we ask them to un-fix the Yuen against the dollar.
21. Don Rodrigo:
Jackson went after the Bank of the US because it was too tight. Westerners wanted loosy-goosy state banks to issue fiat money to use to buy land from the US government. Without the Bank of the US to constrain money supply formation, Van Buren did see a huge recession that lasted almost a decade.
At least that’s the way I remember it.
However,
Doesn’t anyone here have a vague recollection of McCain being derided for admitting he wasn’t an expert in economics? Since Obama was left untouched, we must conclude that he is indeed an expert on the subject, and that the country is truly in the best of hands. Courage, Citizens!
Let’s see actions that Obama has taken that have helped the US economy since he took office……………..(sound of crickets)……………
“Once an accident, twice misfortune, three times that’s enemy action.
Mr. President, here’s how to boom the markets 1000 points tommorrow, and start business hiring again: Issue two directives tonight, aimed at tuning both ends of the flat, off-key, discordant American accordion:
Presidential Directive I
First thing in the morning, replace Axelrod and Emanuel with Cheney and Rove.
Presidential Directive II
First thing in the morning, shut down the Dep’t of Education, pension off the qualified employees, and start spending the same money on cash prizes for student achievers –in the hard sciences only. Explain to the other disciplines that the discrimination is a matter of national security, and so, they “should stop doing all that talking and grab a mop”.
Make the prize $25k, $50k, & $100K for level I, II, & III achievement and keep everything out of the selection except numbers.
Payable at HS graduation. Set the spend –and thus the qualifying achievement levels –at the (erstwhile) Dep’t of Education budget level.
(Federalism for individual students at the grass roots, bypassing the various soviets –unions, teachers, school boards, even parents)
Sunset it –if test levels haven’t risen significantly by year 5 (or 7, or 9), kill the program and henceforth leave the cash in the Treasury.
But, so all is not lost, wait another five years before re-starting the cabinet dep’t, and do so only if K-12 results are worse than they were when the dep’t was shut down.
http://www.wired.com/dangerroom/2010/01/darpa-us-geek-shortage-is-a-national-security-risk/
Folks, these are the people who compile mortgage data for the gov’t & industry. Take a look at the subhead:
http://finance.yahoo.com/news/Lender-Processing-Services-prnews-277104290.html?x=0&.v=1
“5.01 Percent of Loans Rolled to More Delinquent Status vs. 1.52 Percent That Improved”
This is the December Report so-called “deterioration ratio” used to determine the trend in the ‘distressed pool’ which is given as “1 in 7.5″ of the 40 million mortgages LPS monitors. So, that’s 13.3% of all mortgages, and the negative ratio is 3 to 1.
the distressed pool of US mortgages is not improving –it’s breaking down more. The trend has not been turned in the distressed pool. That’s why the Christmas Eve congressional removal of the cap on F&F.
The action is to move the losses from the Fed to the Treasury. for some reason, admin-friendly lenders such as GE Capital are not even contacting their arrears in several parts of thge country — i hear this anecdotally from finance industry people. Large commercial buildings in California that are not paying GE Capital and not even hearing a word from them. I guess the idea is to massage the LPS data until the sluice gate between the Fed balance sheet and the TARP is snuck open. I’m really getting sick –this could’ve all been avoided –a one year payroll tax holiday (money immediately in consumer hands) would’ve cost the same 800 billion as the utterly destructive Stimulus –which is going to Dem districts pretty much only –but instead we have this relentless perverse water-torture dissolve of the equity in the middle class finance system.
Example of the water-torture:
http://online.wsj.com/article/SB10001424052748704509704575019162391608940.html?mod=WSJ_hpp_sections_realestate
John Milton, Paradise Lost
(Book II, line 907)
Chaos umpire sits,
And by decision more embroils the fray
By which he reigns
***
(BTW, Subotai, this LATimes story of Chinese/Americans and the Frisco Earthquake might interest you –it’s up high on Google Spotlight right now)
#154 Mongo
Thanks. My dad was a “paper son” who came in via New York and not SF and our branch of the family does not have their real names; but it is even more complex. Chinese names for males are Family Name-Generation Name-Given Name. Much depends on the person from INS who first wrote down your name. When my dad became a citizen after WW II due to service in the Army [ETO, highly decorated, one of the first non-white squad leaders in the Infantry] they put the surname in the right place, but put an ‘R’ on the end of the name because they could not understand Chinese tones. Other branches of the family do not have the ‘R’, some have an ‘H’added. And my father’s brother had his given name written down as his family name. Given all the complications, there are 8 family names for our family. We just go with it.
We are here in Gum Shan [Mountain of Gold in our dialect of Cantonese, or Mei Kuo Beautiful Country in Mandarin. We are free. We are legal. And we know who we are. Our children become less and less Chinese with each generation. But that is all right. Because from my generation on, we are born Americans first and foremost.
Some day, I will fullfill a promise to my kids and write a family history.
Subotai Bahadur
Subotai, i hear ya –my own family hits the end of genealogy search a couple generations back with a norwegian/dane sailor who jumped ship in the port of Houston and went to rice farming west of town. He changed his said-to-be (what little we know) unpronounceable and alphabetically only semi-latin scandinavian name to one that Americans could say, spell, and remember –and then later his papers were lost in a fire. since he evidently never talked much, none of us now have any idea who what where we came from, along that patri line –our name is the one he picked out of the air. oh well –less baggage. suggest tape your story for the kids off the top of your head, and worry about the refinement to the page later. So many stories are awaiting the writing when out of the blue Gabriel up and blows his horn –