I wish they had given you more air time or had a second person who was more critical of the bill. These others guys as well have been on CNBC.
Jus7tme
Good show, liked the part where you said that the issue of CDS needed to be discouraged through regulation.
Do you support the Soros’ view that CDS should only be permitted to be underwritten for someone who has a long interest in the underlying product?
Sundog
Funny that no one engaged Yves on the trans-border thing. Maybe NC could run through again or re-post on that? Links to how Lehman was unwound/loose threads/pending actions?
carping demon
Once again, you seemed to be the one saying something specific, while the men just uttered bromides. I really do think you and Elizabeth Warren would make a great team.
Gerald Muller
There is no doubt, watching this with my European background, that Yves is well above the other bunch, with articulate points and the only one with total command of the subject. Of course, having read ECONNED, one tends to be more knowledgable, but having written it, then you are the Frau Professor there!
Capricorn
Agreed, regulatory arbitrage is a real issue.
However, it is not being ignored, even if it isn’t getting any press coverage in the US.
I thought the other guests were very articulate in their obfuscation: the guy who kept blinking could have used a little help though.
backwardsevolution
Mr. Blinder is blind. Yves, you were very well spoken. I especially liked what you had to say about forensics re getting to the real problems.
Of course, both parties are not stupid; they don’t want forensics. They want to ram this bill through before the public finds out too much and then act as if things are safe again.
This is a bill that should not be rushed!
Nimrod
1. Looking sideways at the camera was cheesy. It made you look nervous.
2. Waiting any longer on this bill to study what actually happened and get a better bill seems naive. The Republicans may take the Senate in the midterms and then we will get nothing.
Bill
I posted this last night after seeing you on the News Hour:
Yves I really enjoyed seeing you on PBS News Hour tonight.
You came across to me as serious, bright and knowledgeable, and very elegant.
Congrats, hopefully you’ll get more MSM exposure, even though it was clear even Gwenn Eifel didn’t know how to access your clearly vast store of knowledge on these topics.
Oh, one other thing, you have great “presence”….even gravitas.
Jerry
I think you did a great job…PBS needs to hire someone to do their interviews on economic issues…journalist just don’t do so well…i.e when they talk about the reforms they seldom as about breaking up the big banks (if they were too big to fail before, why aren’t we being proactive about breaking them up now instead of having a second go around)…the only program that truely address the issues is Bill Moyers and his last show is next week.
Ray Duray
Dear Yves,
Congratulations your appearance on the News Hour. I’ve got my fingers crossed that this will lead to a cameo on real news program like The Daily Show.
[Aside: I’m still reeling from the New Hour coverage the day after two UK-SAS undercover agents in Arab dress were captured by the Iraqi police in Basrah, Iraq acting as agents provocateurs and having target practice on the locals. While honestly reported in the blogosphere, Jim Lehrer chose a different tack. He chose to co-operate with the powers-that-be and bring on not one but two CIA cutouts to obfuscate the situation for New Hour viewers to the point of incomprehensibility. I got just a twinge of that with the Blinder/Glauber/Litan bafflegab last night. Thanks for attempting to cut through Washington’s Consensual fog.]
All the best, Ray
Keenan
Nice job Yves. I thought your grade of 3 or 4 correctly characterizes the bill as less than mediocre. My only nit to pick was a minor mistake of the crash in 1939. No smoke: You had the most insightful remarks – the guys sounded like typical DC bureaucrats and the pols they serve.
Ditto on the congrats. Being a bit of a news junkie I was fortunate enough to see it.
I also agree its regrettable more aren’t focusing on the trans-border nature of these institutions and the implications for meaningful regulation.
And I second the opinion that it would be great to see you more. (I suppose its a bit Chauvinist to say, but it doesn’t hurt that you are not only deep and thoughtful, but gorgeous and elegant as well!)
Sadly, I tend to agree that the News Hour has become largely a presentation platform for establishment defense though it hasn’t completely succumbed yet.
Francois T
I was totally underwhelmed by the other participants on the show. They all seemed to be saying that given the political environment, we have to be satisfied with this bill.
Yves comment about “not enough forensics done” is the kernel of the problem, isn’t it? With every DC drone keeping an anxious eye on November 2010, “something gotta get done” to appease the hoi polloi, instead of sitting down to do their homework and produce real reform for the greater good of the country.
If this is the best shot at reform Congress can muster, we’re truly screwed.
Francois T
Forgot to say:
Great performance Yves. Came across as knowledgeable, with a good presence. It was obvious to the viewer that, given the chance, you would have many more interesting information to share.
Where is Tom Keane of Bloomberg for an in-depth interview when we need one? :-D
alain maronani
Humble….I am not so shure…..Interesting yes.
jbmoore61
It appeared that the NewsHour had two people who were for and two people who were against. Both of the people who were against were from Harvard and thought that the Dodd reform bill were rushed and deeply flawed. Everyone did a fine job in presenting their views considering the questions that were put to them. What was curious was that the Brown Kaufman Amendment was not discussed. Only one person brought up the fact that the Republicans are not cooperating and have been stonewalling. Also, no one brought up the fact that if regulators do not enforce the laws crafted in the bill, that they will be worthless. The bill does not create a viable CFPA pr fix the SEC to make it more robust in a crisis or more adversarial to the banking and nonbanking financial sectors. The assumption is that the Executive Branch will enforce the laws that Congress passes, but we’ve seen the opposite in the last crisis. Both Yves and the other gentleman would have liked more thought put into the bill to address the shortcomings. But with this Congress, we’ll be lucky to get anything of substance.
Well done, Yves. So hard to pierce the ideological fog laid down by the Blinders of the world. Keep up the good work.
Btw, was on a panel with Jeff Madrick at the New School last week. You should be in touch with him.
Brett
I agree totally with the need for more forensics, and mentioned this in another blog just yesterday.
When asked whether Climate legislation or Immigration reform should be attempted next after finreg:
“Climate or Immigration…either works for me. As long as it’s not financial reform. What’s in the two bills (Frank’s and Dodd’s), and its merits, are unknown to most so far, and more dirt will emerge from the Wall Street cesspool.
Nobody is even talking about one vital component of financial reform – international regulatory arbitrage. I’ve already read it claimed that if firms like GS don’t like the regulatory climate in the US, they’ll move to Bahrain – or somewhere.
Is “good riddance” actually a viable option? I’m beginning to think it is.”
That being said, I still don’t know any way of insulating the US economy from foreign exposure to market upheaval, while still taking positions overseas. Apart from lost jobs, nobody seems to mention just how vulnerable we are (Asian crisis, anyone?) to what goes on outside US jurisdiction.
Congratyoulations. I can’t agree more with some of the other posters that you were head and shoulders (no dandruff) above the other commentators.
And whereas I would never have been so presumptuous as to suggest you change your look, I think that your hair pulled back like that was a big plus for you, and using your hands to animate your thoughts really works for you and makes you more than just a drab talking head (Blinder is aptly named, n’est-ce pas?: “The mapping from good information to good legislation is very fuzzy and often doesn’t work”, yeah; so just put blinders on to the real problem and shoot in the dark).
AK
Humble? I guess humble person would not ban me from this site so I have to post through proxies.
Bill
AK, if you’ve misbehaved why should the Mistress not punish you…… :>) ???
AK
I do not mind. I only object to word humble.
Yves SmithPost author
AK,
You have violated comments policy repeatedly. And you are insisting on posting when you know you have violated the rules here.
I very rarely block commentors and you have been out of line. This is not a matter of “humility”, this is about YOUR behavior.
Yves, you belong in front of the camera because you have so much of vital substance to contribute. You were the only one of the 4 commentators to offer remarks that were not stock points of view. You lead us open our eyes and start to think.
anon
Excellent job, Yves. You were more substantive than the other commentators. Given the format and lack of time, you did as well as you could have IMO.
It’s hard to give a good, spontaneous answer when presented with a ratings scale. Asking someone to comment in public and in a group to an overall ratings scale is one of the best ways to get high ratings. (A vague “rate X’s overall performance” is one of the worst type of scales if you want an accurate rating.) All those things tend to bias ratings in a positive direction, especially when the person who preceded you answered so positively (with the latter by itself tending to lead to the recency effect as well as social conformity bias a la Asch as well as anchoring as you mention). You were fighting a lot social and cognitive biases to give your “3 or 4” rating.
homerlovesbeer
Mmm – sleek look, Yves! Thanks for your insights.
Too many voices in the piece, and the set up was a bit sober, a bit earnest. I laughed when the presenter turned to the next guest and asked, “So it’s a problem of size, is that what we’re talking about?”
Mary
Yves,
Yes, fab. I was so proud to see a woman do the job. You were articulate and put forward some of the best substance I’ve seen so far. Have you had any calls from the SEC, Senators or White House? You should be advising! Keep going.
Wolf 10
Yves, your observation regarding the international dimension of the problems with financial regulation was ignored.
I have the impression that Europeans have a more progressive understanding of the proper relationship between public and private good and that this understanding is expressed by melding elements of both capitalism and socialism with a greater emphasis on the latter than is found in the U.S.
That the EU might function as an international ally in financial reform may be indicated by Jean-Claude Trichet’s recent remark:
“Financial innovation is part of scientific progress. It is an engine of growth and prosperity. Yet, the key question…is to what extent financial innovation serves the real economy and to what extent it only serves itself. At some point in our recent past, finance lost contact with its raison d’être. It ceased to be a source of services for the real economy and developed a life of its own. Finance became self-referential.” http://www.ecb.int/press/key/date/2010/html/sp100312.en.html
On the other hand, just as some market players have cheerfully forecast the decoupling of the stock market from the U.S. economy, might decisions made in Washington on this matter be rendered largely irrelevant by other powerful state and private players?
Welcome back and sorry about your aches and pains. The greatest thing about getting older? The alternative is temporarily forestalled.
chicago mike
Yves,
Please say/write more about your criticism of centrally-cleared CDS.
Is it your view that CDS prices can change so dramatically so quickly (like being overwhelmed by a tsunami?) that their trading should be severely limited or even prohibited?
The format of the show didn’t lend itself to a proper explanation.
The issue is that jump to default means that the margin posted against a position suddenly falls well short of what is needed.
You might say, “Aha, just make counterparties post even more margin.” Unfortunately, enough margin to cover jump to default risk makes CDS uneconomical.
That means putting CDS on exchanges or clearing them centrally merely makes the clearinghouse a concentrated point of failure.
From another woman, your hair looks great pulled back like that!
Ray Duray
Yves,
In addition to the Daily Show, I’ll recommend that you have your booking agent arrange a date on the Charlie Rose Show. Last night Rose interviewed Christine Lagarde, the French Economics Minister. http://www.charlierose.com/ It was a much better format than the crosstalk nonsense on the News Hour.
Have you been on book tour? I’d love to see you on Book TV. The C-SPAN schedulers would probably delighted to cooperate. Try “Politics & Prose” in D.C. for a venue. For a comparable, you might enjoy this Afterwords segment featuring Nomi Prins: http://tinyurl.com/ygqjkuc
With regard to Charlie Rose, I would suggest that there are limits to how far he’ll stretch himself when a guest exists beyond the bounds of the Washington Consensus. Recently, Arundhati Roy was featured on a Book TV presentation, http://tinyurl.com/2v2okuj at which she discussed her attempt to be interviewed by Charlie Rose. To paraphrase, Rose asked Ms. Roy what her opinion was on stopping the Iranians from developing a nuclear bomb. To which Ms. Roy replied that she felt it would be wonderful if Iran had no bomb and it would also be equally to be sought after that India and the U.S.A. be disarmed. Rose attempted to steer Roy back to the notion of how evil Iran was. Ms. Roy was buying none of it. The interview, planned for months, was abruptly ended after about 10 minutes at Mr. Rose’s request. The segment has not been nor it will be seen. There is the hidden danger of being too honest and forthright on the Charlie Rose Show.
Yves SmithPost author
Ray,
Thanks for these suggestions, but frankly, my publicist has tried with no success. Having readers write in urging the Charlie Roses of the world to have me on might help. My agent, who has every reason to push any avenue that will produce more sales, tells me that book tours do not sell books unless you are at the Sarah Palin/Tom Friedman level.
Rex
Gag! Please don’t ever get anywhere close to the Sarah Palin level. :-)
I have emailed Rachel Maddow a couple of times mentioning Econned, and that you would make a great guest.
Corvetto
Preaching to the choir. I’m not surprised at the Palin swipe given Yves’ surprising penchant for trashing Palin. Two points: first, Palin supporters are in need of precisely the kind of real straight talk that Yves offers as a staple. Second, the Tea Party is packed with fiscal conservatives of above average income and education. Many of these individuals ‘learned’ what they know from libertarians. They are not immune to fact.
Without the support of both Palin supporters and the Tea Party there is very little chance of rectifying some of the more egregious practices of the unhappy present.
Finally, this group is profoundly disaffected with the status quo and are already in the streets demonstrating. Palin supporters and the Tea Party are exactly the audience Yves should be addressing, in addition to her valuable work in other venues.
These two groups, far more than any others I can think of, are ready and willing to listen to ideas they really, really, really don’t want to hear.
Corvetto
The Charlie Rose interview is excellent, btw. Interesting how minister Lagarde resolutely insisted that Greece could not possibly default.
Event Horizon
Thank you, Yves. What a sad world we live in. People like you have to write a blog, while Cramer, Liesman and other dim bulbs get to run their mouths backed by unethical empty heads on a daily basis. Can we ever get this house in order, or was George Carlin right when he said this country is finished?
mario
Please do not use the word “humble”. You are wise and attractive. Thanks for the valuable content.
Rex
Speaking of PBS.
Tonight I saw the NOVA program “Mind Over Money”. It seemed like a distillation of the theme of Yves’ book Econned.
Maybe the best thing I’ve seen on TV explaining what happened but without the gory financial details.
Several Chicago economists on it explaining free markets good; accepting no possibility that their theories could be a modern flat-earth model of reality. In their system, all the money flows around fresh water.
Corvetto
Kudos, Yves. I read most of the posts here before watching and was reminded immediately why I spend so little time in front of a television.
Here’s my short take. You rightly point out that it is extremely difficult to dismantle global entities or compel them to comply with US or any other local law. The most striking aspect of this crisis is that it continues even as individual governments pedal not quite fast enough to catch up to the speeding train.
A week ago the Greece crisis looked merely bad, not catastrophic. However, the urgency of the crisis seems lost to everyone on the panel except you, although I freely admit to pro-Yves bias. The point is there will never be a better time to impose rule of law on the financial institutions still unwilling to voluntarily step away from the trough. Imagine what real diplomats or real adults, even, might do with this sort of crisis.
It’s hard to see how the momentum of a modest global recovery can be maintained if the Euro goes under. Your fellow panelists appeared to be promoting the interests of their financial and political masters.
Keep up the good work, please.
Chicbee
It was exciting to see you on PBS News Hour. Everyone with me saw your depth and breadth of knowledge. by the way, I had been reading the copy of ECONNED that I purchased earlier in the day at the Starbucks in my local Tucson Barnes & Noble. Thank you for writing it!!
I think it is likely that a bill will pass because the Republicans cannot be seen as being pro Wall Street thieves. It will happen quickly because the Democrats have been burned and educated by the Republican delay and vilify tactics on healthcare reform.
As a practical matter, the best that can be hoped for is that knowledgeable people such as Yves Smith, Brooksley Born, Elizabeth Warren, and perhaps certain States Attorneys General, draft and submit amendments to ensure implementation of effective oversight, regulation, and controls. Amendments to the bill should include administrative oversight guidelines for the relevant agencies.
The difficulty you raised of controlling international corporations is not insurmountable. Foreign governments will likely not comply with US requirements. However that is not a show stopper. An amendment can stipulate that what the bank does in its foreign operations must be in conformity with this bill, and must be transparent. Required reports on the activities of foreign branches or divisions to US agencies in the bill and the amendments should be no less frequent than quarterly. Potential penalties of losing their license for US operations is a big stick. Penalties involving the raising of reserve requirements in the US depending on foreign risk, as assessed by our oversight committees, is another big stick.
All off the books entities should be forbidden and called out as a prima facia proof of fraud and of the intent to defraud. Their mere existence should carry penalties that do not depend on proving any resulting fraud actually took place.
A sine qua non amendment repealing Senator Phil Gramm’s infamous Repeal of the Glass-Seagall Act of 1933 should be inserted at the last minute.
As you said, exhaustive forensics would be very valuable and should continue long after a bill is passed. An amendment stating the intent of the bill that administrative agencies shall update their procedures and penalties as a result of ongoing Forensic investigation. It should provide a certain sum to fund this work for ten years, and should mandate which agencies must continue a level of forensic effort .
I agree with you that the use of CDOs should be limited. Their real value is in situations where the risk is stochastic, and not deterministic. In the case of adjustable rate, no documentation, subprime mortgages, involving the lack of documentation requirement, the use of ARMs, and the fact that these mortgagors were the last possible buyers at the extant prices, lead to an obvious, totally deterministic, easily modeled mechanism for any such mortgage failing to perform in 39 months of issue. Also, credit default swaps with entities holding similar mortgages in different regions were completely and predictably useless since all regions were using the same faulty application and review methods.
Chicbee
I should add that the tools apparently used by banks to assess risk deal only with the stochastic parts of risk, and seem to leave out totally the non-stochastic parts. An example of that can be seen in my assessment quite a while ago of the risk of the share value of Citigroup declining below the $40 price when I did my totally deterministic evaluations. Simply stated, given readily available data, it was easy to see that the model being used by banks and insurers was completely wrong. http://seekingalpha.com/article/60093-estimating-the-risk-in-citigroup-stock-and-bonds
Hot!
I wish they had given you more air time or had a second person who was more critical of the bill. These others guys as well have been on CNBC.
Good show, liked the part where you said that the issue of CDS needed to be discouraged through regulation.
Do you support the Soros’ view that CDS should only be permitted to be underwritten for someone who has a long interest in the underlying product?
Funny that no one engaged Yves on the trans-border thing. Maybe NC could run through again or re-post on that? Links to how Lehman was unwound/loose threads/pending actions?
Once again, you seemed to be the one saying something specific, while the men just uttered bromides. I really do think you and Elizabeth Warren would make a great team.
There is no doubt, watching this with my European background, that Yves is well above the other bunch, with articulate points and the only one with total command of the subject. Of course, having read ECONNED, one tends to be more knowledgable, but having written it, then you are the Frau Professor there!
Agreed, regulatory arbitrage is a real issue.
However, it is not being ignored, even if it isn’t getting any press coverage in the US.
See, for example,: US prepares to push for global capital rules
http://www.ft.com/cms/s/0/28959166-5082-11df-bc86-00144feab49a.html
I thought the other guests were very articulate in their obfuscation: the guy who kept blinking could have used a little help though.
Mr. Blinder is blind. Yves, you were very well spoken. I especially liked what you had to say about forensics re getting to the real problems.
Of course, both parties are not stupid; they don’t want forensics. They want to ram this bill through before the public finds out too much and then act as if things are safe again.
This is a bill that should not be rushed!
1. Looking sideways at the camera was cheesy. It made you look nervous.
2. Waiting any longer on this bill to study what actually happened and get a better bill seems naive. The Republicans may take the Senate in the midterms and then we will get nothing.
I posted this last night after seeing you on the News Hour:
Yves I really enjoyed seeing you on PBS News Hour tonight.
You came across to me as serious, bright and knowledgeable, and very elegant.
Congrats, hopefully you’ll get more MSM exposure, even though it was clear even Gwenn Eifel didn’t know how to access your clearly vast store of knowledge on these topics.
Oh, one other thing, you have great “presence”….even gravitas.
I think you did a great job…PBS needs to hire someone to do their interviews on economic issues…journalist just don’t do so well…i.e when they talk about the reforms they seldom as about breaking up the big banks (if they were too big to fail before, why aren’t we being proactive about breaking them up now instead of having a second go around)…the only program that truely address the issues is Bill Moyers and his last show is next week.
Dear Yves,
Congratulations your appearance on the News Hour. I’ve got my fingers crossed that this will lead to a cameo on real news program like The Daily Show.
[Aside: I’m still reeling from the New Hour coverage the day after two UK-SAS undercover agents in Arab dress were captured by the Iraqi police in Basrah, Iraq acting as agents provocateurs and having target practice on the locals. While honestly reported in the blogosphere, Jim Lehrer chose a different tack. He chose to co-operate with the powers-that-be and bring on not one but two CIA cutouts to obfuscate the situation for New Hour viewers to the point of incomprehensibility. I got just a twinge of that with the Blinder/Glauber/Litan bafflegab last night. Thanks for attempting to cut through Washington’s Consensual fog.]
All the best, Ray
Nice job Yves. I thought your grade of 3 or 4 correctly characterizes the bill as less than mediocre. My only nit to pick was a minor mistake of the crash in 1939. No smoke: You had the most insightful remarks – the guys sounded like typical DC bureaucrats and the pols they serve.
Ditto on the congrats. Being a bit of a news junkie I was fortunate enough to see it.
I also agree its regrettable more aren’t focusing on the trans-border nature of these institutions and the implications for meaningful regulation.
And I second the opinion that it would be great to see you more. (I suppose its a bit Chauvinist to say, but it doesn’t hurt that you are not only deep and thoughtful, but gorgeous and elegant as well!)
Sadly, I tend to agree that the News Hour has become largely a presentation platform for establishment defense though it hasn’t completely succumbed yet.
I was totally underwhelmed by the other participants on the show. They all seemed to be saying that given the political environment, we have to be satisfied with this bill.
Yves comment about “not enough forensics done” is the kernel of the problem, isn’t it? With every DC drone keeping an anxious eye on November 2010, “something gotta get done” to appease the hoi polloi, instead of sitting down to do their homework and produce real reform for the greater good of the country.
If this is the best shot at reform Congress can muster, we’re truly screwed.
Forgot to say:
Great performance Yves. Came across as knowledgeable, with a good presence. It was obvious to the viewer that, given the chance, you would have many more interesting information to share.
Where is Tom Keane of Bloomberg for an in-depth interview when we need one? :-D
Humble….I am not so shure…..Interesting yes.
It appeared that the NewsHour had two people who were for and two people who were against. Both of the people who were against were from Harvard and thought that the Dodd reform bill were rushed and deeply flawed. Everyone did a fine job in presenting their views considering the questions that were put to them. What was curious was that the Brown Kaufman Amendment was not discussed. Only one person brought up the fact that the Republicans are not cooperating and have been stonewalling. Also, no one brought up the fact that if regulators do not enforce the laws crafted in the bill, that they will be worthless. The bill does not create a viable CFPA pr fix the SEC to make it more robust in a crisis or more adversarial to the banking and nonbanking financial sectors. The assumption is that the Executive Branch will enforce the laws that Congress passes, but we’ve seen the opposite in the last crisis. Both Yves and the other gentleman would have liked more thought put into the bill to address the shortcomings. But with this Congress, we’ll be lucky to get anything of substance.
Well done, Yves. So hard to pierce the ideological fog laid down by the Blinders of the world. Keep up the good work.
Btw, was on a panel with Jeff Madrick at the New School last week. You should be in touch with him.
I agree totally with the need for more forensics, and mentioned this in another blog just yesterday.
When asked whether Climate legislation or Immigration reform should be attempted next after finreg:
That being said, I still don’t know any way of insulating the US economy from foreign exposure to market upheaval, while still taking positions overseas. Apart from lost jobs, nobody seems to mention just how vulnerable we are (Asian crisis, anyone?) to what goes on outside US jurisdiction.
Yves,You looked and WERE fabulous!
Congratyoulations. I can’t agree more with some of the other posters that you were head and shoulders (no dandruff) above the other commentators.
And whereas I would never have been so presumptuous as to suggest you change your look, I think that your hair pulled back like that was a big plus for you, and using your hands to animate your thoughts really works for you and makes you more than just a drab talking head (Blinder is aptly named, n’est-ce pas?: “The mapping from good information to good legislation is very fuzzy and often doesn’t work”, yeah; so just put blinders on to the real problem and shoot in the dark).
Humble? I guess humble person would not ban me from this site so I have to post through proxies.
AK, if you’ve misbehaved why should the Mistress not punish you…… :>) ???
I do not mind. I only object to word humble.
AK,
You have violated comments policy repeatedly. And you are insisting on posting when you know you have violated the rules here.
I very rarely block commentors and you have been out of line. This is not a matter of “humility”, this is about YOUR behavior.
Good job Yves. Keep up the fight!
Yves, you belong in front of the camera because you have so much of vital substance to contribute. You were the only one of the 4 commentators to offer remarks that were not stock points of view. You lead us open our eyes and start to think.
Excellent job, Yves. You were more substantive than the other commentators. Given the format and lack of time, you did as well as you could have IMO.
It’s hard to give a good, spontaneous answer when presented with a ratings scale. Asking someone to comment in public and in a group to an overall ratings scale is one of the best ways to get high ratings. (A vague “rate X’s overall performance” is one of the worst type of scales if you want an accurate rating.) All those things tend to bias ratings in a positive direction, especially when the person who preceded you answered so positively (with the latter by itself tending to lead to the recency effect as well as social conformity bias a la Asch as well as anchoring as you mention). You were fighting a lot social and cognitive biases to give your “3 or 4” rating.
Mmm – sleek look, Yves! Thanks for your insights.
Too many voices in the piece, and the set up was a bit sober, a bit earnest. I laughed when the presenter turned to the next guest and asked, “So it’s a problem of size, is that what we’re talking about?”
Yves,
Yes, fab. I was so proud to see a woman do the job. You were articulate and put forward some of the best substance I’ve seen so far. Have you had any calls from the SEC, Senators or White House? You should be advising! Keep going.
Yves, your observation regarding the international dimension of the problems with financial regulation was ignored.
I have the impression that Europeans have a more progressive understanding of the proper relationship between public and private good and that this understanding is expressed by melding elements of both capitalism and socialism with a greater emphasis on the latter than is found in the U.S.
That the EU might function as an international ally in financial reform may be indicated by Jean-Claude Trichet’s recent remark:
“Financial innovation is part of scientific progress. It is an engine of growth and prosperity. Yet, the key question…is to what extent financial innovation serves the real economy and to what extent it only serves itself. At some point in our recent past, finance lost contact with its raison d’être. It ceased to be a source of services for the real economy and developed a life of its own. Finance became self-referential.”
http://www.ecb.int/press/key/date/2010/html/sp100312.en.html
On the other hand, just as some market players have cheerfully forecast the decoupling of the stock market from the U.S. economy, might decisions made in Washington on this matter be rendered largely irrelevant by other powerful state and private players?
Welcome back and sorry about your aches and pains. The greatest thing about getting older? The alternative is temporarily forestalled.
Yves,
Please say/write more about your criticism of centrally-cleared CDS.
Is it your view that CDS prices can change so dramatically so quickly (like being overwhelmed by a tsunami?) that their trading should be severely limited or even prohibited?
Your musings remind me of Tom Petterffy’s:
http://www.bloomberg.com/apps/news?pid=20601110&sid=a2pK9HrK58_Y
Are your views similar to his?
The format of the show didn’t lend itself to a proper explanation.
The issue is that jump to default means that the margin posted against a position suddenly falls well short of what is needed.
You might say, “Aha, just make counterparties post even more margin.” Unfortunately, enough margin to cover jump to default risk makes CDS uneconomical.
That means putting CDS on exchanges or clearing them centrally merely makes the clearinghouse a concentrated point of failure.
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From another woman, your hair looks great pulled back like that!
Yves,
In addition to the Daily Show, I’ll recommend that you have your booking agent arrange a date on the Charlie Rose Show. Last night Rose interviewed Christine Lagarde, the French Economics Minister. http://www.charlierose.com/ It was a much better format than the crosstalk nonsense on the News Hour.
Have you been on book tour? I’d love to see you on Book TV. The C-SPAN schedulers would probably delighted to cooperate. Try “Politics & Prose” in D.C. for a venue. For a comparable, you might enjoy this Afterwords segment featuring Nomi Prins: http://tinyurl.com/ygqjkuc
With regard to Charlie Rose, I would suggest that there are limits to how far he’ll stretch himself when a guest exists beyond the bounds of the Washington Consensus. Recently, Arundhati Roy was featured on a Book TV presentation, http://tinyurl.com/2v2okuj at which she discussed her attempt to be interviewed by Charlie Rose. To paraphrase, Rose asked Ms. Roy what her opinion was on stopping the Iranians from developing a nuclear bomb. To which Ms. Roy replied that she felt it would be wonderful if Iran had no bomb and it would also be equally to be sought after that India and the U.S.A. be disarmed. Rose attempted to steer Roy back to the notion of how evil Iran was. Ms. Roy was buying none of it. The interview, planned for months, was abruptly ended after about 10 minutes at Mr. Rose’s request. The segment has not been nor it will be seen. There is the hidden danger of being too honest and forthright on the Charlie Rose Show.
Ray,
Thanks for these suggestions, but frankly, my publicist has tried with no success. Having readers write in urging the Charlie Roses of the world to have me on might help. My agent, who has every reason to push any avenue that will produce more sales, tells me that book tours do not sell books unless you are at the Sarah Palin/Tom Friedman level.
Gag! Please don’t ever get anywhere close to the Sarah Palin level. :-)
I have emailed Rachel Maddow a couple of times mentioning Econned, and that you would make a great guest.
Preaching to the choir. I’m not surprised at the Palin swipe given Yves’ surprising penchant for trashing Palin. Two points: first, Palin supporters are in need of precisely the kind of real straight talk that Yves offers as a staple. Second, the Tea Party is packed with fiscal conservatives of above average income and education. Many of these individuals ‘learned’ what they know from libertarians. They are not immune to fact.
Without the support of both Palin supporters and the Tea Party there is very little chance of rectifying some of the more egregious practices of the unhappy present.
Finally, this group is profoundly disaffected with the status quo and are already in the streets demonstrating. Palin supporters and the Tea Party are exactly the audience Yves should be addressing, in addition to her valuable work in other venues.
These two groups, far more than any others I can think of, are ready and willing to listen to ideas they really, really, really don’t want to hear.
The Charlie Rose interview is excellent, btw. Interesting how minister Lagarde resolutely insisted that Greece could not possibly default.
Thank you, Yves. What a sad world we live in. People like you have to write a blog, while Cramer, Liesman and other dim bulbs get to run their mouths backed by unethical empty heads on a daily basis. Can we ever get this house in order, or was George Carlin right when he said this country is finished?
Please do not use the word “humble”. You are wise and attractive. Thanks for the valuable content.
Speaking of PBS.
Tonight I saw the NOVA program “Mind Over Money”. It seemed like a distillation of the theme of Yves’ book Econned.
Maybe the best thing I’ve seen on TV explaining what happened but without the gory financial details.
Several Chicago economists on it explaining free markets good; accepting no possibility that their theories could be a modern flat-earth model of reality. In their system, all the money flows around fresh water.
Kudos, Yves. I read most of the posts here before watching and was reminded immediately why I spend so little time in front of a television.
Here’s my short take. You rightly point out that it is extremely difficult to dismantle global entities or compel them to comply with US or any other local law. The most striking aspect of this crisis is that it continues even as individual governments pedal not quite fast enough to catch up to the speeding train.
A week ago the Greece crisis looked merely bad, not catastrophic. However, the urgency of the crisis seems lost to everyone on the panel except you, although I freely admit to pro-Yves bias. The point is there will never be a better time to impose rule of law on the financial institutions still unwilling to voluntarily step away from the trough. Imagine what real diplomats or real adults, even, might do with this sort of crisis.
It’s hard to see how the momentum of a modest global recovery can be maintained if the Euro goes under. Your fellow panelists appeared to be promoting the interests of their financial and political masters.
Keep up the good work, please.
It was exciting to see you on PBS News Hour. Everyone with me saw your depth and breadth of knowledge. by the way, I had been reading the copy of ECONNED that I purchased earlier in the day at the Starbucks in my local Tucson Barnes & Noble. Thank you for writing it!!
I think it is likely that a bill will pass because the Republicans cannot be seen as being pro Wall Street thieves. It will happen quickly because the Democrats have been burned and educated by the Republican delay and vilify tactics on healthcare reform.
As a practical matter, the best that can be hoped for is that knowledgeable people such as Yves Smith, Brooksley Born, Elizabeth Warren, and perhaps certain States Attorneys General, draft and submit amendments to ensure implementation of effective oversight, regulation, and controls. Amendments to the bill should include administrative oversight guidelines for the relevant agencies.
The difficulty you raised of controlling international corporations is not insurmountable. Foreign governments will likely not comply with US requirements. However that is not a show stopper. An amendment can stipulate that what the bank does in its foreign operations must be in conformity with this bill, and must be transparent. Required reports on the activities of foreign branches or divisions to US agencies in the bill and the amendments should be no less frequent than quarterly. Potential penalties of losing their license for US operations is a big stick. Penalties involving the raising of reserve requirements in the US depending on foreign risk, as assessed by our oversight committees, is another big stick.
All off the books entities should be forbidden and called out as a prima facia proof of fraud and of the intent to defraud. Their mere existence should carry penalties that do not depend on proving any resulting fraud actually took place.
A sine qua non amendment repealing Senator Phil Gramm’s infamous Repeal of the Glass-Seagall Act of 1933 should be inserted at the last minute.
As you said, exhaustive forensics would be very valuable and should continue long after a bill is passed. An amendment stating the intent of the bill that administrative agencies shall update their procedures and penalties as a result of ongoing Forensic investigation. It should provide a certain sum to fund this work for ten years, and should mandate which agencies must continue a level of forensic effort .
I agree with you that the use of CDOs should be limited. Their real value is in situations where the risk is stochastic, and not deterministic. In the case of adjustable rate, no documentation, subprime mortgages, involving the lack of documentation requirement, the use of ARMs, and the fact that these mortgagors were the last possible buyers at the extant prices, lead to an obvious, totally deterministic, easily modeled mechanism for any such mortgage failing to perform in 39 months of issue. Also, credit default swaps with entities holding similar mortgages in different regions were completely and predictably useless since all regions were using the same faulty application and review methods.
I should add that the tools apparently used by banks to assess risk deal only with the stochastic parts of risk, and seem to leave out totally the non-stochastic parts. An example of that can be seen in my assessment quite a while ago of the risk of the share value of Citigroup declining below the $40 price when I did my totally deterministic evaluations. Simply stated, given readily available data, it was easy to see that the model being used by banks and insurers was completely wrong.
http://seekingalpha.com/article/60093-estimating-the-risk-in-citigroup-stock-and-bonds
http://topdownandbottomup.blogspot.com/