I’m going to be brief, in part because the CFTC’s probable demonstration of lack of gumption is still in play, while the SEC’s was expected but nevertheless appalling. But the bottom line is that even though we seem some intermittent signs of the officialdom recognizing that big banks remain a menace to the health and well-being to the general public*, the measures to constrain them continue to be inadequate.
As readers may recall, CFTC chairman Gary Gensler was in a position to stare down bank efforts to water down critical provisions of Dodd Frank on derivatives (see here for details of the issues at stake). The short version is that Gensler did not have the votes among his commissioners to support his position since the Administration had managed to appoint a bank stooge as one of the Democrats. However, Gensler controlled the agenda. That meant he had the option of not putting the matter to a vote of his fellow commissioners at all, which meant Dodd Frank would become effective as written (mind you, normally legislation does legitimately require some tweaking since the legislative language may be imprecise or not mesh well with existing rules).
What appears to have forced Gensler to relent was not the CFTC politics, but bank refusal to prepare, which meant they could stamp their feet and say if Gensler did not back down, the markets would blow up and it would all be his fault. From the Financial Times:
It was billed as the mother of regulatory crunches, the day the world’s regulators would part ways on policing derivatives. They would prevent clearing houses handling some US business and force dealers to apply conflicting rules.
In the event, on the eve of a deadline when the US would withdraw exemptions for foreign dealers, a landmark transatlantic accord has been sealed that calls a truce in a turf war that has threatened to disrupt financial markets…
The breakthrough starts putting together a jigsaw sketched out by global regulators, which united after the 2008 financial crisis to impose order on derivatives markets with common principles for clearing, trading and reporting. Through exemptions and accords, it sets a path for the EU and US to recognise rules so there is no need for either authority to enforce them outside their own jurisdiction…
There was palpable relief in the industry. Yet while the most worrying threats of a confrontation have receded, the road to regulatory convergence remains long…
Behind the numbingly complex detail of cross-border derivatives guidance, a bigger issue was at stake: whether Washington could trust Europeans to enforce financial rules designed to protect US taxpayers..
Mr Gensler had previously insisted that any transaction with a US counterparty fell under Dodd-Frank. Now the CFTC has determined that because EU and US rules are “essentially identical”, market participants can “determine their own choice of rules” when transacting privately negotiated swaps..
Swap transactions executed on what CFTC calls “foreign boards of trade” will also be allowed.
Mr Gensler, meanwhile, won a firm commitment to define US-based hedge funds incorporated offshore as American, ensuring their derivatives trading is subject to oversight.
This all sounds ducky, right? Um, the triumphal tone should tell you who won. This terse assessment from George Bailey of Occupy the SEC:
Looks like Gensler lost.
US based branches of foreign banks won’t have to comply with CFTC rules/deadlines.
Hedge funds may be considered US persons but if they deal through London they’ll escape CFTC rules, at least untill Europe finalizes their comparable rules.
Non US swap dealers will not need to comply with CFTC requirements/deadlines from this point.
Now the deal is still not final and the deadline is Friday, but with so much allegedly at stake, I’d expect this to at worst be ironed out by the end of the weekend
As for the SEC, we have the continuing disgrace of the ignominious Jumpstart Obama’s Bucket Shop Act, which has sent investor protection back to the ugly days of the Roaring Twenties. The SEC passed three measures. One was an embarrassingly watered-down version of a Dodd Frank requirement to restrict the involvement fo felons and other bad dudes in Regulation D offerings. Another to make the Reg D forms better (but whether they actually get around to figuring that out is another matter; the SEC has a sorry history of leaving important business like this unfinished).
But the ugly piece de resistance was to allow general solicitations to “accredited investors” of private funds (meaning soi disant hedge funds) and startups. The problem is that “accredited investor” is defined strictly in terms of money, not sophistication: $1 million in net worth OR $200,000 in income. Doctors (think surgeons) are perfect marks. They fancy themselves to be savvy investors because they had advanced degrees and were used to having nurses and patients defer to them. Lawyers and retirees are also prime targets (remember, if you had a semi-decent pension at a mid or upper level corporate job, lived modestly, or happened to land in a decent real estate market, it’s not hard to have a $1 million net worth, and widows who get decent inheritance are prime targets for unscrupulous investment managers). In other words, the people who will be targeted will be the mass affluent, and unlike the really rich, serious losses could wipe them out. SEC Commissioner Luis Aguilar stresses that this population isn’t necessarily all that savvy:
By e-mail, Barbara Roper of the Consumer Federation of America described how the SEC didn’t even bother going through the motions of subjecting the general solicitation proposal to proper study:
One of the (many) things that is troubling about this action is that the Commission finalized this rule based on a proposal that did not even pretend to follow the Commission’s guidelines for economic analysis. That should resolve any questions about whether economic analysis is really a tool to improve regulations or just another way to hand the drafting pen to industry lobbyists. I know, you’re asking whether that was still an open question in anyone’s mind. But this action provides conclusive proof. Two of the key points of evidence:
· The “baseline” discussion which is supposed to describe the state of the market prior to adoption of a rule is eight sentences long. It did not include any information about issuers who raise capital through Reg D offerings, investors who purchase such offerings, evidence of fraud in the market, the state of SEC oversight of the market, the adequacy of the accredited investor definition to identify a pool of investors who are capable of fending for themselves without the protections afforded in the public markets.
· The SEC assiduously avoided any consideration of alternative regulatory approaches, even though its guidelines for economic analysis require it to consider, and put out for comment, all reasonable regulatory alternatives submitted to the Commission. There were a number of such suggestions included in the record before the SEC ever drafted its rule proposal.
This is a textbook example of corruption. The SEC wouldn’t dare skip the economic analysis step if it were to take the out-of-character step of making life difficult for the securities industry; it would need to take these steps to withstand a legal challenge. But the Supreme Court has raised the bar very high for public advocacy groups to obtain standing to oppose these measures. And with weak rules in place, there’s no harm, no foul. For instance, one of the legitimate reasons it’s been hard to sue financial firms for all the toxic CDOs they created was that they (not unlike these JOBS Act offerings) were not registered securities but were private offerings, and so were not subject to the high disclosure standards of public offerings. So the SEC is not only making it easy to commit what by common sense standards is fraud by allowing well off but not necessarily sophisticated people to be hawked risky investments, it’s also making it hard for them to sue if they are misled, not by being lied to but by having important information withheld.
While this mess started on Mary Shapiro’s watch, Mary Jo White owns it. White could told the Republican commissioners that she wasn’t going forward unless there were adequate investor protections. It would have been easy to use their own arguments against them – that the rule proposal was clearly legally deficient, that she had pledged to follow guidelines on economic analysis, and that this proposal was way out of line with those procedures. The result would have been a compromise rather than an abject sellout to the industry. It is now no longer possible to pretend that the SEC is an investor protection industry. It might as well throw out the SEC logo and put the Chamber of Commerce’s on its door. At least we’d have some truth in advertising.
_______
*For the record, some of the latest include the identification of SIFIs, or systemically important financial institutions, which will be subject in some respects to more stringent regulation than other firms, along with Daniel Tarullo of the Fed’s proposals that large banks hold considerably more capital).
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I hate to say I told you so, but I did. No offense. I believe at the time you accused me of “confirmation bias”.
As we’ve come to learn from Obama more than anyone else, actions speak louder and words. I believe it was naïve of any of us to think that a lady who has spent the last decade coddling the corporate establishment for personal gain would be serious about real regulation.
Never underestimate the depravity of man…even if he happens to be wearing a skirt.
LOL! Sorry for the typo. I believe that should have been “louder than words”.
A careful analysis of risks/rewards of the financial system which includes the regulatory agencies would get you to the same place. The system as a system is not set up to reward non-players, i.e., the majority of the American public. So to even think that anything coming out of that system will do anything else is like expecting me to drop the mouse in front of me and expecting it to rise in the air.
Some of us have asserted that there is absolutely no possibility of real reform in any major segment of the political/economic system that doesn’t aid those already at the helm of a such a system. Current rules in the finance system are made on the basis of a series of negotiations between parties who all know each other and wax and wane in power with each other sometimes due to pressure from the public but only to the degree that changes in wind direction affect the thinking of a batter standing at the plate. The main actors are still the players on the field.
As I recall, Yves was also initially somewhat hopeful for Lew as Treasury Secretary. I wondered if Yves was trying to appeal to their better nature aof these ‘public servants’ and/or trying to not appear to be pre-judging.
But it is clear to many by now that what to expect from Tammany Hall on the Potomac.
[From Wikipedia:] “According to Tweed biographer Kenneth D. Ackerman:
I NEVER HAD A GOOD WORD TO SAY ABOUT LEW.
Wash your mouth out.
I even said he could have us talking nostalgically about Geithner before his term was over. And I was never a Geithner fan.
Yves,
I didn’t say you had a ‘good word’ for him. I just seem to recall that you weren’t as critical at first as some others. Lew was unknown to most when he was nominated.
Yes, I do remember your writing that we might wind up talking nostalgically about Geitner. I didn’t think that was your _initial_ reaction.
OK, I had a chance to look back and reflect upon my recollection.
Firstly, I think “initially…somewhat hopeful” is not accurate. You were wary about Lew from the beginning. (Please accept my apologies.)
How did I come to such a misunderstanding? First, Bill Black seemed to be a more forceful critic. But some things that you wrote may have also also contributed:
* 1/11 Links: Any choice of Obama’s would be bad for ordinary people but Erskin Bowles would’ve been a worse pick and Lew did OK with the Detroit bailout;
* When Geithner left office in late January: “Somehow I think Jack Lew won’t live up to Timmy’s vileness. But perhaps that’s just wishful thinking”; This _did_ turn out to be wishful thinking as you later wrote in May about Lew’s dishonesty and his involvement in creating the Sequester (in a post entitled, “Jack Lew’s Nose is Getting so Long he Needs a Hacksaw”).
* I took issue with your February 26th post entitled “Lew’s Grotesque Citi Employment Deal and the Institutionalization of Corruption” because I thought you failed to recognize the cronyism involved when you wrote: “Lew no doubt believes he was paid according to merit”.
Lastly, I may have conflated some of this with your initial willingness to see the glass half full with the Mary Jo White nomination.
I didn’t bother attacking Lew early on because there was no point. He was a really close buddy of Obama’s with the right credentials. No way he would not get approved. I did publicize his horrid pay deals just to show what a toad he was.
And “not fighting” was not due to name factor. I went hard after Bernanke’s last reappointment, and that was a much more worthy cause (as in the fight did him and the Fed some damage). There was a large vote against Bernanke, I believe the largest ever vs. an appointment to the Fed chair.
Barack Obama may have a law degree but he acts as though he’s King John pre-Magna Carta! Electing a Republican president would have made no difference. Makes you wonder why Americans wasted their time fighting a War of Independence!
I’ve been waiting for a spot for this comment..
“That the Odonian society on Anarres had fallen short of the ideal did not, in his eyes, lessen his responsibility to it; just the contrary. With the myth of the State out of the way, the real mutuality and reciprocity of society and individual became clear. Sacrifice might be demanded of the individual, but never compromise: for though only the society could give security and stability, only the individual, the person, had the power of moral choice – the power of change, the essential function of live. The Odonian society was conceived as a permanent revolution, and revolution begins in the thinking mind.”” (ursula k. le guin ‘The Dispossessed’ 1974)
This book seems to fit in well with the series.. ”Confessions of an Economic Hit Man’, ‘The Washington Consensus’, ‘Shock Doctrine’, ‘Treasure Islands’ and ‘Hot Money: The Politics of Debt’
This part of my economic reading frenzy over the last several years challenges the political ideology behind much western, esp US economic policy..
bit by bit again.
http://www.washingtonsblog.com/2013/07/giant-banks-take-over-real-economy-as-well-as-financial-system-enabling-manipulation-on-a-vast-scale.html#comments
Giant Banks Take Over Real Economy As Well As Financial System … Enabling Manipulation On a Vast Scale
Posted on July 10, 2013 by WashingtonsBlog
Big Banks Move Into Uranium Mining, Petroleum Products, Aluminum, Ownership and Operation Of Airports, Toll Roads, and Ports, and Electricity
Top economists, financial experts and bankers say that the big banks are too large … and their very size is threatening the economy.
They say we need to break up the big banks to stabilize the economy.
They say that too much interconnectedness leads to financial instability.
They also say that the big financial players are able to manipulate virtually every market in the world.
And that the government has given the banks huge subsidies … which they are using for speculation and other things which don’t help the economy.
But the big banks have only gotten bigger – and more interconnected – than before the phony financial “reform” legislation was passed a couple of years ago.
As if that wasn’t bad enough, four congressmen point out that the big banks are not taking over the tangible economy as well … which allows them to control and manipulate the markets.
Specifically, Congressman Grayson wrote – and Congressmen Conyers, Ellison and Grijalva co-signed – a letter to the Federal Reserve which, in the words of a congressional aide:
Ask[ed] why large banks are engaged in a host of commercial activities, including power production, management of ports, oil drilling and distribution, and uranium mining. These activities have nothing to do with the business of banking and it’s unclear how the Fed or other bank regulators can actually regulate them. There’s useful and somewhat crazy information in the 10Ks of the banks about what they are currently doing. You can find that in the footnotes of the letter.
Here is their letter:
June 27, 2013
The Honorable Ben Bernanke
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue N.W.
Washington, D.C. 20551
Dear Chairman Bernanke,
We write in regards to the expansion of large banks into what had traditionally been non-financial commercial spheres. Specifically, we are concerned about how large banks have recently expanded their businesses into such fields as electric power production, oil refining and distribution, owning and operating of public assets such as ports and airports, and even uranium mining. [Isn’t that a national security issue?]
Here are a few examples. Morgan Stanley imported 4 million barrels of oil and petroleum products into the United States in June, 2012.[i] Goldman Sachs stores aluminum in vast warehouses in Detroit as well as serving as a commodities derivatives dealer.[ii] This “bank” is also expanding into the ownership and operation of airports, toll roads, and ports.[iii] JP Morgan markets electricity in California.
In other words, Goldman Sachs, JP Morgan, and Morgan Stanley are no longer just banks – they have effectively become oil companies, port and airport operators, commodities dealers, and electric utilities as well. This is causing unforeseen problems for the industrial sector of the economy. For example, Coca Cola has filed a complaint with the London Metal Exchange that Goldman Sachs was hoarding aluminum. JP Morgan is currently being probed by regulators for manipulating power prices in California, where the “bank” was marketing electricity from power plants it controlled. We don’t know what other price manipulation could be occurring due to potential informational advantages accruing to derivatives dealers who also market and sell commodities. The long shadow of Enron could loom in these activities.
According to legal scholar Saule Omarova, over the past five years, there has been a “quiet transformation of U.S. financial holding companies.” These financial services companies have become global merchants that seek to extract rent from any commercial or financial business activity within their reach.[iv] They have used legal authority in Graham-Leach-Bliley to subvert the “foundational principle of separation of banking from commerce”. This shift has many consequences for our economy, and for bank regulators. We wonder how the Federal Reserve is responding to this shift.
It seems like there is a significant macro-economic risk in having a massive entity like, say JP Morgan, both issuing credit cards and mortgages, managing municipal bond offerings, selling gasoline and electric power, running large oil tankers, trading derivatives, and owning and operating airports, in multiple countries. Such a dramatic intertwining of the industrial economy and supply chain with the financial system creates systemic risk, since there is effectively no regulatory entity that can oversee what is happening within these sprawling global entities.
Our questions are as follows:
1) What is the Federal Reserve’s current position with respect to allowing Goldman Sachs and Morgan Stanley to continue trading in physical commodities and holding commodity-related assets after the expiration of the statutory grace period during which they, as newly registered bank holding companies, must conform all of their activities to the Bank Holding Company Act of 1956? What is the legal justification for this position?
2) Has the Federal Reserve been investigating the full range of risks, costs, and benefits – to the national economy and broader society – of allowing these institutions (and, possibly, other large financial holding companies) to engage in trade intermediation and commercial activities that go far beyond pure financial services? If so, please share the results of your investigation. If not, why not?
3) What types of data do you collect about the regulated financial holding companies’ non-financial activities? How does the Federal Reserve interact with non-bank regulators who are in charge of overseeing the areas and markets in which banking institutions conduct their non-financial activities?
4) How do your examiners review, monitor, and evaluate banking organizations’ management of potential conflicts of interest between their physical commodity businesses and their derivatives trading?
5) If such an entity were to become insolvent, what complications are likely to arise in resolving a company with such a range of activities? Please share your analysis on the implications of resolution authority on the commercial activities of systemically important financial institutions. Please describe how these banks approach this issue in their resolution plans (or “living wills”).
6) When your examiners work within these large institutions, what framework do they use to, say, consider the possibility that a bank run could ensue from a massive public oil spill by a Goldman Sachs-owned oil tanker or a nuclear accident at a plant owned by a bank?
7) Does this relatively new corporate structure contribute to the likelihood of industrial supply shocks?
Thank you for your attention to this matter.
Sincerely,
Alan Grayson
Raul Grijalva
John Conyers
Keith Ellison
more
………………..
As forcast by:
http://moneyaswealth.blogspot.com/2009/04/bankruptcies-no-end-in-sight.html
Bankruptcies – No End In Sight.
Don’t you wonder what happens to the money that was borrowed and then spent into the economy, when a person goes bankrupt?
The money is now “out” in the economy, right? It did not get paid back to the bank, right?
That is the money, that the rest of the “customers” of this scam the banking system is running on the world, use to pay their interest. As you know, there is no mechanism in the system, to create money to pay interest, the way it is set up now.
We should change that so that we have a system that works without requiring bankruptcies, fraud and money laundering – just to function.
…………..
http://moneyaswealth.blogspot.com/2011/12/cowboy-poker-banking-you-hint-youre.html
COWBOY POKER, BANKING & YOU. Hint: You’re a Cowboy.
snip
The banker worked with no cattle, branded no bulls, shod no horses, did not sleep on the open plains, did not ride in the rain, did not help birth a calf, was not away from his family; he did no work. No, he only conjured up a scam, worthy of a carnival midway and tricked otherwise hard working cowboys to VOLUNTARILY give up their wealth by engaging in that scam. If the cowboys ever figured it out, would they be angry? Is this type of scam a fair medium of exchange for the cowboys and their families? The above example has very little to do with poker playing and everything to do with the banker’s scam.
You are the cowboy. You are being scammed. Look at the headlines. The entire planet is being scammed by these criminal bankers. They create no wealth – yet the own everything! Why? It’s not because they have the money to lend you – they do not. They simply make it up, each and every time they make a loan. They own everything because you are not paying attention and are not willing to stop listening to the “professional” peddlers of misinformation. For goodness sake, think about it: when a bank makes a $10 loan it creates the $10 in new money but where does the $1 to pay interest come from? They never create that. Answer? It comes from record bankruptcies; people losing everything so that the scam can continue. In addition, counterfeiting and money laundering prop up the economy by becoming money that enters the system but does not get paid back to the bankers because it is not a loan; it therefore becomes available for someone to capture in commerce and pay their interest.
It’s the simplest of math: before the first card is dealt, in the above example, their is more debt than chips to pay. Likewise, as we use debt for money, borrowing every dollar into existence (not a function of our economy, but a function of banking), allowing banks to create unlimited loan principal but never any interest due, THERE IS ALWAYS MORE DEBT THAN OUR ABILITY TO PAY. This FORCES us to borrow to pay interest.
……………
And, that is the way that banks who start out with nothing end up with everything.
Goldman Sachs is also a purveyer of early childhood education (so-called “social impact bonds”) and has toll roads in Puerto Rico and Mexico.
Correction: Pardon my delay in quoting a commenter at washingtonsblog who corrected the following statement from above article
http://www.washingtonsblog.com/2013/07/giant-banks-take-over-real-economy-as-well-as-financial-system-enabling-manipulation-on-a-vast-scale.html#comments
Giant Banks Take Over Real Economy As Well As Financial System … Enabling Manipulation On a Vast Scale
Quote:
As if that wasn’t bad enough, four congressmen point out that the big banks are not taking over the tangible economy
Correction:
the big banks are NOW taking over the tangible economy
That’s their definition of an accredited investor???? Good lord, that really is an invitation for fraud.
Back in the day, to get in below ground floor in advance of an IPO, you had to be a “qualifed investor”, which usually meant annual income north of $1.25mn and liquid assets north of $25mn (I’m doing this from memory and may be off here, but the ballpark should be correct: we’re talking about people who can afford to lose their entire investment of, say, $1mn and walk away from it without having their partners go postal on them for having ruined their lives forever). There were limits on levels of investment based on how much money you actually had: if you had the $25mn, then you could pre-IPO buy shares directly from the IPO folks to be vested for $1mn. You usually had a deal that you’d wait before divesting so that the IPO could be guaranteed to not go belly-up: sometimes they did and those folks who had bought in held something worthless (except as a tax write-off, perhaps). But generally speaking you could get a good 20%-30% return within a 90 day period, which was adequate for the risk involved.
But this is something entirely different: they’re looking to scam the upper middle class/lower upper class and skim off a few hundred thousand here and there, rather than fleecing the institutional investors, who, if they are still around, are doing their due diligence and raising their collective eyebrows.
Ye gods.
Cant’ resist commenting on the “institutional investors” who’s previous due diligance consisted of following the adivce of Wall Street owned consultants and investing in anything the ratings agencies stamped AAA.
Many of them are out of the market, and their current consultants will be selling them IPOs designed to rescue the hedge funds who’s investment in single-family rentals has just proved unworkable.
Le plus change…
And you’d be foolish not to realize that Gensler was never interested in regulation (Goldman guy) – he just wanted to appear as if he was doing his ‘job’!
Since 1967 (when I started paying attention) the SEC has not done a single thing to facilitate legitimate business financing. All this bs about accredited investors, all this hand wringing about poor dumb surgeons and lawyers, betrays complete ignorance of what securities regulation is really about. The idea is to push every business into the jaws of the investment banking industry, which hires a herd of lawyers to turn out mountains of fine print disclosure absurdities that nobody bothers to read and few could understand if they did manage somehow to plow through them. Disclosure is simply an endless litany of imaginary horribles written without regard to the business in question. Meanwhile, utterly no attention is given to the promoters of individual deals, who are free to gloss over just about everything in their past except felony convictions and sex offenses.
Less disclosure just might make people more careful with their own money, and it is high time we stopped paying bureaucratic snoozers to worry over prospectus gibberish before rubber stamping public offerings. If these clowns don’t have a serious enforcement function they should be compelled to have a real job. We just cannot continue to afford them.
Gensler and Chilton could have let the deadline pass but it would have been like defending the Alamo: they’d soon be slaughtered by a larger, better armed (paid) force.
I’d be inclined to give Gensler the benefit of the doubt on this as well. If the destruction of his career is suddenly put on hold and he winds up safely entrenched in a cushy position somewhere and never makes any more waves then I’ll admit I was wrong. But he was not exactly operating from a position of strength in this case. He did not have the support of the administration, the industry or even his own organization. His one bit of leverage was a procedural point. And there is every chance that the banks would have succeeded in blowing up the economy once more and coming out of it with another fat packet of taxpayer money while everybody else paid the price.
Here’s hoping he joins the resistance movement and becomes a guest commenter on NC.
The American taxpayer just got set up for a good soaking. Forget hapless investors. Investing you do by your own decision. Bailing out the big felons is done with your money whether you agree or not. Dodd Frank has no teeth – it will never prevent bail outs. People should just quit investing altogether, save their money and buy treasuries. That won’t save us from the London connection that brings down the next Lehman, but it will conserve personal wealth. Real estate isn’t looking so bad these days.
I met Barb Roper years ago, when a bunch of us were in DC lobbying against the stupid parts of Medicare part D. She’s a great person, one of my heroines. I’m glad to see she’s still fighting the good fight at CFA.
The failure by the SEC to even conduct an economic analysis seems to me to be a violation of Executive Order 12866,which Obama reaffirmed right before the election.
EO 12866 reads:
What did the SEC do to satisfy these requirements? Can someone sue to enforce an exec. order?
IIRC the answer is yes. An action under the Administrative Procedures Act for failing to comply with the cost-benefit review reg. You’d have to figure out a proper plaintiff to overcome the anti-democratic standing requirements currently in effect.
Maybe Occupy the SEC?
Maybe they’re listening…
It’s strange, I always despised CBA, since it’s usually used to brush off non-economic concerns, but in this instance I actually wish they’d do one. Strange times…
Most of the western governments including the U.S.A. are nothing more then puppet shows. Produced and directed by the financial elite and the big banks, and shown on the corporate controlled MSM. To these entities, the health and well being of the general public are inconveniences to be ignored along with rule of law and justice. If you own the script, the puppets, and the theater. The show plays on exactly as you direct. As for the general public, “let them eat cake.”
I don’t think regulation is the name of the game – we just wish it were so. Yves keeps telling us a US regulator might show a bit of spunk. I always sense in my reaction that I pre-select disbelief much as I used to interrogating psychopaths – even the odd one of them was telling the truth. They are manipulating our soft-spots in regard of giving a sucker an even break.
Banks across Europe (UK included) are getting past losses credited as capital because the losses can be claimed against tax on future profits – Spanish banks even want their losses converted to tax credits ahead of Basel III as deferred tax allowances mostly won’t be allowable as capital.
The deep question has long seemed to be how any of our banks are going to return to business as usual profits given these were mostly from fraud, money laundering, Minski-Ponzi and issuing insurance designed not to pay out. We quite naturally have hoped for regulation to make banks honest, but in an honest world they just can’t make money from money. So the strategy is to pretend new regulation. This is a default position of the powerful in history.
The banks are hiding big losses. We could get at this with a statistical investigation based on reality (which would mean no reliance on official figures and a police investigation) – and without this no regulator can regulate or have any genuine intent to do so.
The banks want a future in which their losses are the capital figures on which they can lend, trade and rip-off. They want the bubbles back because many of their assets are over-valued.
The energy in their perpetual motion machine has to come from the outside and that means us. They want to get back to sizing the portions. We need something radical and are kidding ourselves if we think this can come without collapsing the captured democracy and money system.
I’m worried about the direction our country is heading in… it seems like we’re tumbling downhill and picking up speed :-/
Think of all this creeping corporate governance like the Borg on Star Trek- you will be assimilated! In my mind the US government is nothing but a puppet for moneyed (largely corporate)interests. We are witnessing in present time the merging of corporate and government power in a subtle way. Some call that fascism but this has a more corporate flavor to it. This reminds me, for some reason, seeing a quote from former internet wunderkind Marc Andreessen on how he voted for Romney because he was an excellent CEO. All hail the corporation!!
“We are witnessing in present time the merging of corporate and government power in a subtle way.”
LOL! Nothing subtle about it.
Yes not subtle to those who read this blog but subtle to the general public was the intent of that statement
another example of Robert Rubin’s stamp on Obama’s economic policy?
I still can’t believe banks pulled off such a level of economy hostage taking, that Gary Gensler not only caved, but that banks will now have months in which to bribe and obsfucate their way through to keeping their weapons of mass destruction, while the news media defaults to blessing looting, by restricting news to a few scattered, cover-their-ass op-eds, not really informing voters.
The SEC’s approval of fleecing the public with non-public offerings makes this a doubly fraudulent Friday, further thinning the vote veneer over our not very democratic institutions.
I never comment, because it has taken years of reading Krugman, DeLong, Thoma, etc., to even begin to follow this blog, which several of them have recommended as invaluable.
But I thought that on this disappointing day in the USA, I could at least thank you, ‘yves smith’ and your guests and commentators (bev and many others) for being often the first and most ethical explainers, of what’s happening to beseige our economy.
I’m sure others and historians will benefit from this blog more than me, but even regular voters like me, after following enough ethical blogs long enough, benefit. Even if not yet at a level to contribute directly to your conversations. Just yesterday, I read Economix pushing Stephen B King (When The Money Runs Out) for the austerians reading the NYT, and knew enough to check your blog, so I could see it was just another attempt to push TINA, to slash safety nets. You whack-a-mole enough to keep me sane.
Thanks for explaining the incomprehensible, being ethical, and for the people commenting, who help, too. It helps that knowledgeable people are as amazed as I, at what neoliberals, disaster capitalists, and interlocking parasitic plutos and shills, are wreaking.