The British don’t do shrill, but Wolf today is as close as you will ever find on the pages of the Financial Times. And the telling sign that Wolf is borderline unhinged is (aside from mentioning his fury) that his article has less of a clear structure than his comments usually do. But he nevertheless works his way up to an important point at the end of his piece, namely, that if we cannot find a way to make banks less interconnected, so that danger to one can bring the entire system to its knees, then government has to regulate them as utilities.
I also happen to believe in synchronicity, so consider the start of Wolf’s offering, “Big risks for the insurer of last resort“:
The UK government looks increasingly like a python that has swallowed a hippopotamus
I suspect Wolf doesn’t follow lurid US animal stories, but he may know nevertheless that overstuffed snakes come to bad ends:
The alligator has some foreign competition at the top of the Everglades food chain, and the results of the struggle are horror-movie messy.
A 13-foot Burmese python recently burst after it apparently tried to swallow a live, six-foot alligator whole, authorities said.
Eeew.
He then discusses the de facto nationalization of Lloyds and RBS (I remember the days, not so long ago, when RBS was touted as a model of retail banking. Funny, so was WaMu):
Implicitly, the UK government is guaranteeing the liabilities of the swollen UK banks. Explicitly, it seems likely to guarantee at least £600bn of toxic assets of RBS and Lloyds under its “asset protection scheme”. I am no populist. Yet when I think of the sums earned by those responsible for dumping this mess on to the UK taxpayer, even my blood boils…..
My colleague, Willem Buiter, in his magnificent blog states bluntly that: “like its American and Dutch counterparts, this toxic asset insurance scheme is without redeeming social value: it is inefficient, unfair and expensive”. Is he being too harsh? Not much.
Clearly, the biggest attraction of such a scheme, to both politicians and beneficiaries, is that its costs are removed from the public accounts.
Yves here. That’s a point we and others have made about the various US toxic assets schemes. Paulson couldn’t figure out a way (at least in the limited time he had left in office) to hide the large subsidies that would be paid to the banks through this arrangement. So Team Obama comes up with the “public private partnership” concept, which HAS to be more wasteful than propping up banks via paying over-the-market prices because an additional party, the investors, also has to be enriched.
Back to Wolf (boldface mine):
How large might these costs be? I understand that internal calculations of the International Monetary Fund suggest a fiscal cost of all UK bank support of 13 per cent of GDP, or £200bn. I suspect this is too optimistic. Certainly, together with the costs of the economic slump, an increase of well over 50 percentage points in the ratio of public sector debt to GDP is highly likely. Such are the wages of financial mania. They would be similar to the fiscal costs of a war.
Why should not more of the losses fall on creditors, other than the insured depositors? That is the question asked by many economists. It is the approach recommended by proponents of a “good bank” solution.
The big point here is that the losses against which the government is now offering such generous insurance relate strictly to bygones. If we want banks to make new loans, it makes far more sense to guarantee those, rather than bail out all those who financed the mistakes of the past. So, suggest the radicals, toxic assets should have been left with the shareholders and uninsured creditors of the old bank, who would also gain a claim on a clean new bank. Moral hazard would disappear and taxpayers would be left relatively unharmed.
The arguments against this are two: first, the possibility of a default would create a wave of panic worse than the one that followed the bankruptcy of Lehman last September; and, second, for this reason, no individual government could dare to go it alone.
Unlike Professor Buiter, I recognise that these could be valid arguments in the current circumstances. I certainly have no desire to make the slump even worse than it is. But, if so, they have compelling implications.
One is that we must create effective mechanisms for orderly bankruptcy of very large financial institutions. Indeed, this is far and away the most important lesson of the crisis.
Yves here. Wolf does not go far enough. In the US, devising a bankruptcy regime, or at least devising interim measures to make a failure less catastrophic (could certain entities and operations be parsed out?) should have been the number one priority of the Fed and Treasury after the Bear Stearns failure. Bear was the smallest independent investment bank at the time, yet was still too big to fail. Lehman, Morgan Stanley, and by some accounts, UBS and Merrill were next on the list. With so many firms in perilous shape, planning for what to do when the next one went off the rails should have been top priority. Yet amazingly, the powers that be acted as if life would of course return to normal, even though it had failed to despite increasingly aggressive interventions. Back to the article:
Another is that if large institutions are too big and interconnected to fail, precisely because they are bound to get into serious trouble together, then talk of maintaining them as “commercial” operations, as the chancellor of the exchequer does, is a sick joke. Such banks are not commercial operations; they are expensive wards of the state and must be treated as such.
The UK government has to make a decision. If it believes that costly bail-out must be piled upon ever more costly bail-out, then the banking system can never be treated as a commercial activity again: it is a regulated utility – end of story. If the government does want it to be a commercial activity, then defaults are necessary, as some now argue. Take your pick. But do not believe you can have both. The UK cannot afford it.
This observation is of fundamental importance. Here in the US we are still dancing around the dirty word nationalization, with the respectable position being that yes, the US might take banks into the government emergency room for a while, but of course, they will be made private again as soon as possible.
But Wolf is correct. If the authorities do not find a way to change the structure of the banking industry, firms will remain tightly networked, and any one can imperil the health of all, requiring a state rescue. That means they should be very highly regulated, in the classic utility model of regulated return on equity. Finance, or at least the kind that uses depositor money and takes a lot of capital, will be put clearly at the service of the public.
Now there are ways to reduce the interdependence. Setting up exchanges is one. Limiting the scope of firm’s activities is another (Glass Steagall, which separated commercial from investment banking, had that effect).
But we see neither type of measure underway, neither an effort to rework the composiiton and operation of the industry, nor to regulate it more strictly if it is to be left more or less as is. Instead, heaven and earth are being moved to prop up a broken system in place.
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That was a really gross metaphor, but thanks!
http://worldrec.info/2008/04/30/6-ft-alligator-veruss-13-ft-python-who-wins
Now if could just feed some banksters to these critters!
Yves,
I have been trying to work out who these bank bondholders are, the ones that the ‘authorities’ are so desperate to protect, yet so unwilling to identify.
I believe it is the insurance companies. The effort is to prevent bond haircuts that would wipe out the public’s life insurance…and what else besides? Could it take down the whole US health care system? Don’t health insurance companies have invested premia too?
I think we are not being told about certain things. Others we know about already of course and they are plenty bad.
But we’re not yet at the point where ordinary Americans cash out their savings and insurance policies and save what they have left.
Unfortunately, the brilliant ideas on these blogs will not be considered as the primary fear is to avoid the Haircut of Doom for bank bondholders. No relief from the Geithner Pap (‘we will continue to strengthen the financial system’) is allowed.
Orderly bankruptcy, proper nationalization, etc. simply don’t keep the wolf from the door. Recognizing the impaired assets is exactly the trigger on the real bomb.
Of course this puts us squarely into the liquidity trap and credit crunch, but with a terrible household finance and macro backdrop.
Welcome to the Lost Generation.
–Jim in MN
Is there really an absolute need to have any bank with a balance sheet larger than, say, about $100B or so? This would seem to me the easiest solution — if they get too big, then they have to split, like an amoeba.
The other obvious giant hole in the system is AIG being being able to write all these bets, but not actually having the money to pay them up. Anyone who has ever done any gambling would tell you this is a path to disaster.
Me likey.
Me thinks Wolf is at his tipping point.
Sorry, but anger is the key, right now.
But, you notice how voices of dissent only gain power as the market tanks further. That is because, at this point, we REQUIRE THE TRAUMA and it will not disappoint. Get ready.
Tales of runaway comestibles have been noted worldwide with pancakes predominating in 19th-century Europe. The Gingerbread Banker Boy as hero is a uniquely American contribution to the tale type. Modern twists on the tale include a gingerbread cowboy in a Wild West setting and a gingerbread girl who outwits the fox, and now wall street bankers, who outwit auditors and accounting firms.
The tale ends with a fox catching and eating the gingerbread banker boy who cries as he’s devoured, “I’m quarter gone…I’m half gone…I’m three-quarters gone…I’m all gone!” – a detail often omitted in subsequent versions.
Also hear: I’m burning up…
Regulating the banks as utilities is a great way to some day hence (maybe even two centuries from now) produce a credit bubble that will make this last one look like child’s play. The consequences of regulatory capture would move from catastrophic and into the realm of Apocalyptic.
Jim: I am doubtful health insurances need investments. Sickness is mostly uncorrelated. If there really is a pandemic outbreak in a country, surely the government will step in.
With respect to bondholders. I assume that the reason they have to be protected, is that the powers that are want to be able to go back to the old way of doing business. It seems clear that defaulting on the bond holders would burn bridges. Now, converting bonds into equity should be considered “normal”. But somehow it is not done. I think it is American mentality. People believe in implicit understandings as guarantees (as if there is no capitalist societal model!) I still can’t get over the runs on the money market accounts. I mean, there never was any waranty that they wouldn’t break the buck. Still, people started freaking out. – Or what about being able to return anything for any reason back to the store? Why is a purchase not a purchase? Many little assumptions that a rich society was able to afford.
I guess I missed this last year, but seems spot on, in terms of being inside the belly of the whale: US Fed chief Bernanke puts his trust in Canadian bonds
Bernanke, a former Princeton University professor, reported that his two largest assets were annuities: TIAA Traditional and the CREF Stock Large Cap Blend. Each was worth between $500,001 and $1 million, according to Bloomberg.
He also listed Canadian Treasury bonds as an asset. That might lead some of his critics to wonder, tongue in cheek, whether he has an emergency plan to cross the border if things get really bad.
> Very sweet!
Wow, Andrew, sound dramatic.
Now, has that ever happened in the REAL world?
IF,
Appreciate your comments on the strange wanderings of the American mind.
By health insurance investments, I just meant to say where they ‘park the cash’ from premium payments. If that is tied up in bank bonds and thus mortgage and commercial real estate, a bond haircut or other recognition of market value implies there isn’t enough to pay claims. Sure, health insurance isn’t considered a savings or wealth transfer vehicle like life insurance can be, but it’s still a disaster if the money disappears.
So even if getting sick is uncorrelated, it’s best if the health care system can cover the bills. It won’t take a pandemic to crash the insurance system; a simple 20-30% loss on invested premia should do the trick.
Jim,
The US government is completely dependent on the bond markets for sales of its Treasuries so you can see why they are protecting it.
But also, yes, bonds are held mostly by other financial institutions, US banks ($7.9T) and US insurance companies ($3.8T). But also pension funds ($2.4T), mutual funds ($2.4T), households and non-profits ($4.1T) as well as foreign investors ($7.9T).
http://certainruin.blogspot.com/2009/02/who-owes-who-what-and-why.html
If you let the hand grenade blow up in the bond markets it will cause lots of trouble. For example, you might just bring down other banks and then you just have the same problem all over again. That doesn’t mean you should not do it. But there is going to pain, regardless.
It doesn’t really matter anyway. The same people are going to lose: the wealthy savers. Even if you stiff the tax payer, the people that pay most of the taxes are the wealthy. They also own the bonds and own the bank stocks. Either way they are going to lose a lot of their wealth. The middle class has little to lose anyway except their jobs and their homes. Exactly how we solve the banking crisis has less effect on them.
Now, has that ever happened in the REAL world?
What, a financial regulatory structure, enacted in the wake of a financial crisis? One which lulled market participants into a false sense of security, because it failed to be effective when the majority of people were once again swept up in a speculative fervor?
Nah, I can’t think of any examples where that has ever happened.
It’s all about GS,BoA,WFC, Citi,AIG. Follow the money. Everything that has been done to date is to protect the real power. They will not let them fail, even if it means the end of America as we know it. If that’s the case, the only solution, one that has been professed here from day one. Let’s get it over with. The sooner we face the reckoning the sooner we can move on. Sad to see Obama carrying on the same old same old. Sad indeed. Let it go, please let it go.
African villages have evolved strategies to deal with the filoviridae (Ebola, Marburg, etc.) when an outbreak occurs. Each village chops trees over the roads in to the villages and quarantines itself from the outside world, not allowing any foreigners (or even returning villagers) to enter for a cooling off period.
I wonder how this approach could be applied to our banking system, it seems that raising the Libor to incredible levels may isolate banks enough, although any derivative contracts between them are still conduits.
Click “brushes9” above to sing along to Martin Wolf’s, English war trance-dance:
Holy mother of god
Youve got to go faster than that to get to the top.
Dirty old mountain
All covered in smoke, she can turn you to stone
So you better start doing it right
Better start doing it right.
Youre halfway up and youre halfway down
And the pack on your back is turning you around.
Throw it away, you wont need it up there, and remember
You dont look back whatever you do.
Better start doing it right.
On your left and on your right
Crosses are green and crosses are blue
Your friends didnt make it through.
Out of the night and out of the dark
Into the fire and into the fight
Well thats the way the heroes go, ho! ho! ho!
Through a crack in mother earth,
Blazing hot, the molten rock
Spills out over the land.
And the lavas the lover who licks your boots away. hey! hey! hey!
If you dont want to boil as well.
B-b-better start the dance
D-d-do you want to dance with me.
You better start doing it right.
The musics playing, the notes are right
Put your left foot first and move into the light.
The edge of this hill is the edge of the world
And if youre going to cross you better start doing it right
Better start doing it right.
You better start doing it right.
Yves – a very important article indeed. It should be required reading for every economist and government treasury official.
Agreed. Banks have to be able to fail cleanly or regulated into banality. No middle ground anymore.
Yes – it all feels quite surreal.
Yves is correcly focusing on this para:
“The UK government has to make a decision. If it believes that costly bail-out must be piled upon ever more costly bail-out, then the banking system can never be treated as a commercial activity again: it is a regulated utility – end of story. If the government does want it to be a commercial activity, then defaults are necessary, as some now argue. Take your pick. But do not believe you can have both. The UK cannot afford it.”
The UK “insurance” scheme always seemed crazy to me and Buiter explained it well.
I would not be surprised if the UK Government eventually backs down from its colossal commitment because of 1) reality sets it and 2) taxpayers will not take it.
From Wolf: “One is that we must create effective mechanisms for orderly bankruptcy of very large financial institutions…”
Finally someone is saying the obvious. But keeping current behemoth financial institutions on life support by government funds with a hoped-for regulated utility status for them down the road will not work.
The utility status is needed but the steps needed are:
(1)first the actual bankruptcy,
(2)then the division into legally separate commercial banking, insurance, broker-dealer, retail brokerage, and investment banking units which further split into units that are each small enough to fail, and
(3) then a revised, regulated utility business model for the new units with firewalls between them a la Glass-Steagal.
W.r.t. (1), actual Chapter 11/FDIC conservatorship is required for the holding company/commercial banking subsidiary to address the looting issue in your other post. Half measures will merely reinforce the looting behavior later, increase the current cost of life support, and serve at best to forestall the inevitable. Regarding the inevitability, governmental support is now merely leaning against a hurricane force wind toward bankruptcy from the markets themselves. It is analogous to governmental attempts in fixed exchange rate environments to prop up a currency to prevent depreciation–laudable perhaps but foolish since the depreciation occurs any way and the treasury/central bank is stripped of its FX reserves as well.
continuation of prior comment:
W.r.t. (2), an analogy may be pertinent here. Naval vessels could be built with free flow of air between all compartments. This would reduce construction costs and lead to a more efficient allocation of a scarce resource when at sea, viz., fresh, circulating air. They are not thus built. Instead costly bulwarks between compartments are deliberately installed and the resource efficiency sacrificed so that those compartments can be completely sealed off if necessary. This is done to prevent the flooding in one compartment–like a flood of insolvencies in a financial panic through the financial sector–from sinking the entire ship.inuation from my prior comment,
I support Carolyn’s idea about simply imposing asset size limits on banks. Make regulation simple – otherwise it can be too-easily suborned by the regulated industry.
The collateral damage from a bank debtholder cramdown and debt-to-equity conversion would be substantial. It may be the best solution but let’s not imagine for a second that it is not risky.
If the administration is intentionally moving slowly towards this exact solution so as to give the debtholders a way to contain the damage, I give them much credit. But there’s an “if” there.
I highly recommend reading the link David provided above:
http://certainruin.blogspot.com/2009/02/who-owes-who-what-and-why.html
jult52
About the utility model, this is a fundamentally flawed idea. Straight, old-fashioned commercial banking is not some brain-dead activity that relies on easily understood principles. It requires skill and a high level of education. It just doesn’t fit the mold of a utility or the US Postal Service.
jult52
The trouble is people tend to get a kind of tunnel vision and want to generalise. There are a number of banks both in the UK and US which reported profits last year. In the UK there are the building societies many of which did record business last year and could in theory take over a large part of the current role of the major banks. Should these efficiently working and prudent entities be penalised along with the other lenders. I guess Martin is angry having seen the impact on Gilts and Sterling from the UK government’s bailouts and forays into QE.
The problem was that larger banks had considerable business advantage, so that any globally smaller bank that wanted to expand beyond its niche needed to be aggressive and very competitive in undercutting its rivals to grow. The main reason why RBS got into big trouble was through trying to expand and buying up what was really an American sub prime lender masquerading as part of a European bank. The reason why HBOS got into trouble was through risky aggressive lending to business and that’s why the price for insuring the loans is going to be high for them. Basically they did all sorts of crap loans to increase their market share in a world where if you were not as big as Citibank then you would struggle to compete.
The reasons why full nationalisation may not be the best idea are as follows. You would cause a credit event which may cause further write downs at other banks (not a problem if they are all nationalised, but what about the prudent lenders). Some of the equity and bondholders are banks and insurers and this would cause further write downs at banks ( Again not a problem if nationalisation is universal). The real reason I think why full nationalisation is being avoided is because pension funds are equity and bond holders. While the government may not be worried about destroying our pensions it would baulk at increasing the pension liabilities of firms. GM for instance would change from a may not be viable firm to an absolute disaster if the pension liabilities doubled.
Ideally I would like to see banks split into a good bank and bad bank with the bad bank put into run off or into chapter 11. Equity and bond holders take the hit on the bad bank but also get a share in the upside of the good bank. The reason why it will not happen is of course those with risky loans will not be able to roll over the debts to the new good banks. The downturn will be stretched out for years as they fumble with semi nationalisation, don’t look at fundamental imbalances and fail to restructure the financial arena. It is just another case where fairness goes out of the window, and barely registers on the economically somnambulant population.
“If you let the hand grenade blow up in the bond markets it will cause lots of trouble. For example, you might just bring down other banks and then you just have the same problem all over again. That doesn’t mean you should not do it. But there is going to pain, regardless.”
That is good. The more bondholders we haircut, the more investors will have an incentive to do actual credit analysis. Funds and banks have severely underfunded this task.
Banks want a bailout so they can continue to raise money from bondholders that will ask few questions, on the assumption that the US taxpayer will backstop the bank. Fuck that.
And finally -there will be no governments. Swallowed up by finance trickery and 0-worth dollars, nothing but anarchy and blood in the streets.
One of the problems with nationalization and all these other schemes is that Congress will approve no more money for bank bailout/nationalization or whatever. All these grand nationalization schemes would essentially require that the government lose it’s $250 billion investment in the big banks. What administration can do that and then go back to congress and ask for another trillion to recapitalize the banking system? Won’t happen.
I’m not a financial person, but my simple, “big picture” view of all this is that promises were made that can’t be kept. There are all kinds of examples of this:
– people bought houses they couldn’t afford and can’t make the payments
– banks sold mortgages with the promise they would return a certain percentage in interest, but because of bankruptcies, they won’t return this interest
– insurance companies sold annnuities promising that in exchange for a hunk of cash upfront, they would return a minimum guaranteed interest
– insurance companies sold insurance against debt defaults without sufficient reserves to actually pay out when the time comes
– the FDIC, and ultimately the US, is guaranteeing trillions of dollars of bank deposits and other assets, with a very small, insufficient “rainy day” fund
This is nothing more than gambling, and like gambling – a total waste of money – all of these activities should be illegal. Protection of this kind only encourages excessive risk-taking and lax due-diligence.
The reality is setting in that these promises can’t be kept: insurance companies cannot give an annuity purchaser 6% for the next 15 years, because they will likely be out of business within 5 years if they try, because they no longer have a way to make more than 6%, and they’ve squandered their capital so that even if they did have a way to do it, they don’t have a capital base.
So to me there are 2 solutions:
a) the insurance company declares bankruptcy and a judge sells their assets. Everybody doing business with the insurance companies loses something, but they all lose it in some reasonable proportion to what they put in.
b) we increase inflation to the point where, yeah, the insurance company can pay you what it said it would, but your purchasing power is greatly decreased
I wish we would take option a), to rid ourselves of these stupid companies that made stupid promises they can’t keep. But the less disruptive option is likely b), so the dumbasses running our country (and I include Democrats AND Republicans in that group) will probably do that.
America has lost its way…
But Wolf is correct. If the authorities do not find a way to change the structure of the banking industry, firms will remain tightly networked, and any one can imperil the health of all, requiring a state rescue. That means they should be very highly regulated…
The anger is warranted. But then, I think there is a practical, efficient way to accomplish this. (Whenever any present Big Zombies are put to rest for good, which is uncertain, and if the authorities are willing to implement it, which seems likely according with the last meeting of european leaders for the next G20 meeting).
The way is to develop and implement simultaneously (a) generalized anti-cyclical provisioning and (b) specific systemic anti-cyclical provisionings.
About the first measure, it was developed in Spain by the former Governor of Bank of Spain Luis Angel Rojo. You can read about it here. Of course, Spain is not unaffected by the recession. But the point is that with the epic real state bubble in Spain, is nothing short that a miracle that Spain is not more or less as Iceland yet. Only that it is not a miracle. It’s just intelligent prudential regulation (anti-ciclyc provisioning, SIVs disincentived, etc). Prudential regulation does not necessarily need to be always bigger, nor always toughter, but now for sure it desesperately needs to be smarter than it has been.
About the second measure, systemic anti-cyclical provisioning, I regard it in a way as a natural develop from the former one. It is a proposal from Pedersen and Roubini – to ask big financial institutions for systemic risk provisioning. To this I would add an anti-cyclic component. The key idea is “Do you want to grow bigger and bigger? Ok, no problem. Please, increase your provisioning. Because if you go systemic and you -and your peers- make some reckless mistake, you put all of us in the hook” (as is now sadly the case).
Among the benefits of this, I see (a)in case of credit/economic downturn, financials -and thus everyone- are more protected, and (b)if any financial institution, even with that provisioning, went so reckless as to become insolvent, even so it would be easier to put the zombi to rest (c) that provisioning works an -efficient- incentive to prevent bank firms to become dinosaurs just for the shake of their CEOs, but you don’t need to forbide specific sizes and all that.
That is the way I see. Saludos.
Well, the essentials of dynamic anti-cyclic provisioning can be traced even to the Old Testament (Joseph). But in modern times, to the UK (Brian Quinn), Hogg “Deal a debt dynamo”, The Banker, febrero 1997. Also E. Davis “Bank Credit Risk”, Bank of England, Working Paper Series nº 8, 1993, and Bank of England “The Cyclical nature of bank profitability and provisioning policy”, Banking Act Report, 1994/95. and they have been also implemented in Canada. But as far as I understand, full implementation has developed so far only in Spain since 2000.
See i.e. Market Pipeline Feb 17, 2009.
In Europa they seem to be willing to go with it. The problem remains about big dinosaurs and systemic risk provisioning. That, I only know of Pedersen and Roubini talking about it.
In their attempt to take over the world, the banks have failed miserably. So now they are settling on just taking over the governments, which seems to be working out much better.
Vinny GOLDberg
Anon 10:18 said: And finally -there will be no governments. Swallowed up by finance trickery and 0-worth dollars, nothing but anarchy and blood in the streets.
Which is precisely why, at the risk of sounding like a broken record, the Wiz Kid recommends the following diversified portfolio:
1. Small herd of goats for fresh milk for your children
2. About 20 chickens for fresh eggs
3. Numerous guns
4. Lots and lots of ammo
5. Canned food
6. Piles and piles of physical gold
7. Mucho cold, hard cash in hand
8. Daily fervent prayer
Regarding point (7) above, the Wiz Kid recommends you pull your cash out of the banks now, not when everybody and his mother get in line to do it.
Truly yours,
Vinny GOLDberg, (Wiz Kid and Maverick supremo of all kinds of economic research, theory, and practice, some of which used to be legal in Zimbabwe :-)
Three suggestions on this:
1. Reinstate separation of investment bank from commerical bank;
2. Allow commercial and investment banks and hedge funds to have variable leverage based on size. Small entities can go up to 30x; big ones look like Canadian banks. This removes one incentive to become really big.
3. Require real settlement clearing of derivatives and CDS with some percentage of them backed by posted cash/Treasuries collateral.
Small entities, especially private ones, should be able to take a fair amount of risk – it is their money after all. As you move up the “too big to fail” ladder, the public has a stake, even if unobvious at the time, as we have found out over the past 6 months. As a result, regulation and risk management are necessities.
We wouldn’t run a city without having basic laws and a police force/courts to enforce them. Why should the financial markets be any different? The people running many of the firms are just as larcenous at heart as the thugs on the street.
Andrew could have chosen to post an actual example rather than a sarcastic rejoinder, but of course, had he done that, we would have torn the example apart and made his first post look as foolish as it is.
Anonymous, Glass-Steagall and FDIC themselves are what I was hinting at, but you’re too enamored with the Depression era’s attempts to outlaw another Great Depression to recognize that that was what I was getting at.