"CHARLIE?"
"LAST TIME I LOOKED."
"IT'S PETE."
"DEAR LORD, IT'S BEEN A WHILE. WHAT BROUGHT THIS ON?"
"GOT A QUESTION FOR YOU."
"SHOOT."
"I'M A BLOG READER AND I CAME ACROSS THIS ONE CALLED 'MIDWEST MUSINGS.' THAT COULDN'T BE YOU COULD IT."
"WHAT MAKES YOU THINK THAT?"
"BECAUSE IT SOUNDS EXACTLY LIKE YOU."
"THAT TRANSPARENT, EH."
"SURE IS. TO KNOW YOU CHARLIE, IS...TO KNOW YOU."
"OK, OK. WHAT DO YOU THINK."
"OVERALL I LOVE IT, BUT THE LAST FEW WEEKS OR SO I'M WONDERING WHAT HAS GOTTEN THAT OL' TIME RELIGION INTO YOU? IN THE OLD DAYS YOU WERE SCREAMING TO GET RID OF GLASS STEGLE. NOW YOU WANT IT TO RETURN. WHY?"
"AH PETE, YOU CENTRAL BANK GUYS NEVER UNDERSTAND. GLASS STEGLE WAS AN OUTRIGHT PROHIBITION ON US GUYS COMPETING. ALL I WANTED WAS A LEVEL PLAYING FIELD."
"AND NOW YOU DON'T?"
"OF COURSE I DO BUT WHAT IS BEING PROPOSED UNDER THE GUISE OF GETTING RID OF GLASS STEGLE IS GOING TO SCREW EVERYBODY. THESE IDIOTS ARE FIXATED ON SEPARATING THE DEPOSIT TAKING FUNCTION FROM INVESTMENT BANKING BECAUSE THAT IS THE POPULIST THING TO DO. LIKE THATIS GOING TO AFFECT THIS CONCEPT OF SYSTEMIC RISK THAT NOBODY CAN EXPLAIN BECAUSE NOBODY UNDERSTANDS IT. I GET SO GOD-.."
"NOW, NOW CHARLIE, CALM DOWN I KNOW WHERE YOU'RE GOING."
"OF COURSE YOU KNOW WHERE I'M GOING BECAUSE YOU'RE A DAMN REGULATOR...IF YOU HAD DONE WHAT YOU WERE SUPPOSED TO DO NONE OF THIS WOULD HAVE HAPPENED...OK, OK, THAT MIGHT BE AN OVERSTATEMENT."
"WE ARE AS INNOCENT AS THE DRIVEN SNOW."
'YOU WERE INNOCENT WHEN CENTRAL PARK WAS A FLOWER POT. LOOK, WHAT I WANT IS FOR THE FUNCTIONS TO BE SEPARATED NOT BANNED, AND THAT'S EXACTLY WHAT WAS CONTEMPLATED WHEN THIS LEGISLATION THAT BATTLIN' BOBBY RUBIN AND THE BOYS DID BACK IN '99. THAT WHICH ENGAGED IN ALL OF THESE ACTIVITIES WERE SUPPOSED TO BE SEPARATE ENTITIES, SEPARATELY CAPITALIZED, SEPARATELY MANAGED AND SEPARATELY FUNDED."
WERE THEY?"
"WELL, YES, I MEAN...TO A POINT.'
SO THEY WEREN'T."
WELL THEY WERE, BUT THE UMBRELLA OF THE PARENT WAS DEEMED TO BE OVER THEM, AND..."
"AH HA!"
"AH HA CRAP!" YOU GUYS HAD AND HAVE ALL OF THE AUTHORITY THAT DODD AND THOSE OTHER DOPES WANT TO GIVE TO A POLITICAL HACK. YOU DIDN'Y USE IT. WHAT CAN FIX IT IS ALREADY IN PLACE; WHY DON'T YOU TELL THEM THAT?
"A RHETORICAL QUESTION NO DOUBT, OL'BUDDY."
"RHETORICAL TO THE EXTENT THAT I KNOW THAT HAD YOU GUYS INTERFERED TO THE EXTENT THAT YOU COULD, DODD AND HALF THE HILL WOULD HAVE BEEN ALL OVER YOU LIKE STINK ON POO. BUT YOU DIDN'T, AND NOW WE FACE THIS GARBAGE. TELL ME I'M WRONG PETE OL' BUDDY."
"WHY DON'T YOU EXPLAIN THIS IN GREATER DETAIL TO YOUR WORSHIPFUL AUDIENCE?
"I JUST MIGHT. CAN I SAY WE AGREE?
"CHARLIE, I DON'T EVEN KNOW YOU MUCH LESS AGREE WITH YOU. HOW'S THE BRIDE?"
"COULDN'T BE BETTER. KIDS GRADUATE?"
"THEY EVEN HAVE JOBS!"
"WONDERFUL! WHERE?"
"ON THE STREET, OF COURSE. THE MONEY'S GREAT."
"SCREW YOU! KEEP SAVING THE WORLD, PETE."
"WE TRY CHARLIE, WE REALLY TRY. BYE."
Thursday, November 12, 2009
Wednesday, November 11, 2009
CHANGE OF PLANS
Chris the Crook released his 1100 page bill regarding financial regulation to public scrutiny yesterday. It is pure and simple a political power grab of the first order and at first blush worse than anything that could be imagined. It completely destroys the independence of the Federal Reserve, wipes out the Reserve System as we know it, transfers all oversight to a yet to be determined council or regulators, appears to eliminate all emergency lending powers of the central bank in domestic markets and appears to demand oversight authority on international operations of the central bank such as bank to bank swaps (central banks) and currency procedures. It also sets up a consumer protection agency which will almost certainly result in less consumer credit and foster unsound practices as the the community lending legislation of years past. In short, it may be the stupidest piece of financial regulation ever proposed.
As previously stated, this is a populist rant, put forward by a Senator desperate to retain his seat in the 2010 election in the face of voter anger over clearly conflict of interests which have been revealed over the past 18 months. Dovetailed with the health legislation moving slowly through the congress it is a thinly veiled attempt to control yet another huge portion of the national economy in some sort of big government orgy which those on the political left feel is needed if not wanted by the public. We might as well call it what it is...socialism...and there is absolutely nothing wrong with the concept of socialism. Throughout my career I had a great deal of contact with societies operating under various levels of socialism which had been voted for or imposed. Some worked, many didn't. None had the dynamism, the productive capacity, the flexibility, the drive or the sheer excitement of that which we have created here. But if that's what we want, they are sure prepared to give it to us.
Anyway, what Dodd seems not to understand is that the socialization of the financial sector will probably result in greater, not lesser risk to the American public. This great, unseen terror of systemic risk, lurking behind every corner is not limited to an American zip code but is a compendium of possible risks arising from the globalization of risk at many levels and in many locations. Further, whilst it may well be true that the origin of the last crisis began in the fertile minds of American financiers,
it's development and maturity of the crisis came about as a result of world-wide financing and investment decisions. To think that at a point we will not face another yet-to-be-identified crisis is to be a fool: to think that a hodge-poge of governmental appointed and directed bureaucrats, operating within a highly charged political environment will have the flexibility and authority to deal with it when it comes is to be a monstrous fool. To believe that politicians around the world in democratic societies are to be this stupid is to be...well, Chris Dodd. And yet, unless all of the now-annointed G-20 sign on to this sort of arrangement it will have no chance of acceptance on a global level. Be assured, they will not.
As previously stated, this is a populist rant, put forward by a Senator desperate to retain his seat in the 2010 election in the face of voter anger over clearly conflict of interests which have been revealed over the past 18 months. Dovetailed with the health legislation moving slowly through the congress it is a thinly veiled attempt to control yet another huge portion of the national economy in some sort of big government orgy which those on the political left feel is needed if not wanted by the public. We might as well call it what it is...socialism...and there is absolutely nothing wrong with the concept of socialism. Throughout my career I had a great deal of contact with societies operating under various levels of socialism which had been voted for or imposed. Some worked, many didn't. None had the dynamism, the productive capacity, the flexibility, the drive or the sheer excitement of that which we have created here. But if that's what we want, they are sure prepared to give it to us.
Anyway, what Dodd seems not to understand is that the socialization of the financial sector will probably result in greater, not lesser risk to the American public. This great, unseen terror of systemic risk, lurking behind every corner is not limited to an American zip code but is a compendium of possible risks arising from the globalization of risk at many levels and in many locations. Further, whilst it may well be true that the origin of the last crisis began in the fertile minds of American financiers,
it's development and maturity of the crisis came about as a result of world-wide financing and investment decisions. To think that at a point we will not face another yet-to-be-identified crisis is to be a fool: to think that a hodge-poge of governmental appointed and directed bureaucrats, operating within a highly charged political environment will have the flexibility and authority to deal with it when it comes is to be a monstrous fool. To believe that politicians around the world in democratic societies are to be this stupid is to be...well, Chris Dodd. And yet, unless all of the now-annointed G-20 sign on to this sort of arrangement it will have no chance of acceptance on a global level. Be assured, they will not.
Tuesday, November 10, 2009
DOWN THe RABBIT HOLE
A couple of journeys are underway that probably should have a GPS attached before they go any further.
Bernie Sanders, Senator of Vermont, an avowed socialist and therefore a man to be recognized for at least being honest, has proposed a two page bill giving someone--forgive me, I'm not quite sure who--the proposed authority to close down or break up a financial institution deemed too big to fail (TBTF). The great thing about Bernie is he is right up front; no nonsense, no hidden agendas, no subterfuge. Bernie wants financial institutions either nationalized or tightly controlled by the government to the extent of de facto nationalization...the big ones that is. Bernie's argument is that his idea gets rid of the TBTF risk. Sure would. Bernie is the Mad Hatter in our little adventure, understanding little but expressing much. Sort of sets all notions of corporate governance and regulatory affairs back a notch, eh? Some clown wakes up one morning and says, "Think I'll shut down Goldman Sachs today, wonder how that might affect their debtors and creditors?" Counterparty risk? Don't give it a thought. Continuing obligations? Who cares. Shareholders? Win some, lose some. To guys like Bernie, the chance to play God is really appealing.
The other road down the hole is presently being explored by our good buddies, the Euros. Their immediate solution to things they don't like is to tax them--hopefully, out of existence. They are proposing that certainly banking activities they don't like be taxed. Quite remarkably, The Suit has expressed his displeasure. Could it be, unlike the Euros, The Suit hasn't realized that his boss desperately needs every source of revenue under the sun and here's another way to get some more from the bad guys in our little tea party? The Euros figured out this approach a long time ago. Of course if the business is worth doing it will get done; a tax only raises the cost of the doing and that of course is ultimately paid by the client. But perhaps I am too harsh. Perhaps The Suit recognizes that this really isn't such a good idea.
Anyway, as madness goes to the fore, the name and looming presence of Paul Volker has reappeared. The Leader has figured out that if he were to put all the credibility attached to his band of merry men in a basket, it wouldn't amount to a bucket of spit next to that of Volker. Re-enter Paul after being badly used by this mob at the start of the year. I hope the grand old man has learned his lesson but then again, no one is more correct in the approach to TBTF than he and if what comes out of this is a return to the future through a re-examination of the merits of Glass-Stegle considerable good will have been done. However, I am completely distrustful of this administration and I fear that he is back only once more to be used as a frontace to their designs. Then again, I've been wrong before...at least once.
There is a common theme emerging throughout all this and that is one of complete and total control of all things this bunch touches. It is still a bit too soon to see how this works out and much has yet to occur. I think I might wait and see but in the mean time I'm going to wax a bit philosophical over the next few days with some more random thoughts. A friend has asked for a couple of ideas as to what is on the horizon and I think I may just do that here. I'm beginning to like this God-like role. Maybe there's more commonality between Bernie and me than I realize. Scary, eh?
Bernie Sanders, Senator of Vermont, an avowed socialist and therefore a man to be recognized for at least being honest, has proposed a two page bill giving someone--forgive me, I'm not quite sure who--the proposed authority to close down or break up a financial institution deemed too big to fail (TBTF). The great thing about Bernie is he is right up front; no nonsense, no hidden agendas, no subterfuge. Bernie wants financial institutions either nationalized or tightly controlled by the government to the extent of de facto nationalization...the big ones that is. Bernie's argument is that his idea gets rid of the TBTF risk. Sure would. Bernie is the Mad Hatter in our little adventure, understanding little but expressing much. Sort of sets all notions of corporate governance and regulatory affairs back a notch, eh? Some clown wakes up one morning and says, "Think I'll shut down Goldman Sachs today, wonder how that might affect their debtors and creditors?" Counterparty risk? Don't give it a thought. Continuing obligations? Who cares. Shareholders? Win some, lose some. To guys like Bernie, the chance to play God is really appealing.
The other road down the hole is presently being explored by our good buddies, the Euros. Their immediate solution to things they don't like is to tax them--hopefully, out of existence. They are proposing that certainly banking activities they don't like be taxed. Quite remarkably, The Suit has expressed his displeasure. Could it be, unlike the Euros, The Suit hasn't realized that his boss desperately needs every source of revenue under the sun and here's another way to get some more from the bad guys in our little tea party? The Euros figured out this approach a long time ago. Of course if the business is worth doing it will get done; a tax only raises the cost of the doing and that of course is ultimately paid by the client. But perhaps I am too harsh. Perhaps The Suit recognizes that this really isn't such a good idea.
Anyway, as madness goes to the fore, the name and looming presence of Paul Volker has reappeared. The Leader has figured out that if he were to put all the credibility attached to his band of merry men in a basket, it wouldn't amount to a bucket of spit next to that of Volker. Re-enter Paul after being badly used by this mob at the start of the year. I hope the grand old man has learned his lesson but then again, no one is more correct in the approach to TBTF than he and if what comes out of this is a return to the future through a re-examination of the merits of Glass-Stegle considerable good will have been done. However, I am completely distrustful of this administration and I fear that he is back only once more to be used as a frontace to their designs. Then again, I've been wrong before...at least once.
There is a common theme emerging throughout all this and that is one of complete and total control of all things this bunch touches. It is still a bit too soon to see how this works out and much has yet to occur. I think I might wait and see but in the mean time I'm going to wax a bit philosophical over the next few days with some more random thoughts. A friend has asked for a couple of ideas as to what is on the horizon and I think I may just do that here. I'm beginning to like this God-like role. Maybe there's more commonality between Bernie and me than I realize. Scary, eh?
Monday, November 9, 2009
WHA' HOPPONED?
No idea. I'm awaiting a report from the big meeting over in Basel over the weekend. God the excitement! And in Basel no less, flesh-pot of Europe. If I were a central banker I would demand combat pay for having to spend a weekend in Basel. We simply don't appreciate what these, brave, selfless civil servants do for us. Don't understand much of it either. Reports should be flowing in by tomorrow. I'll be back.
Thursday, November 5, 2009
...THE LARK'S ON THE WING..
...the snail's on the thorn, the Yankees have won it, all's right with the world...Well, not exactly. It seems that Chris Dodd (hereinafter refereed to as, "Chris the Crook"), is about to go beyond the mind-boggling power grab attempt of his House colleague, Barney Frank in dealing with the financial industry. Chris the Crook is reported to be putting the final touches on his plan that will essentially place the entire financial system of the United States under the command of a newly-created, executive branch appointed, board of over-seers while at the same time destroying the Federal Reserve System as we know it. A brand new regulatory agency will be created to oversee all aspects of financial regulation while the Fed would be restricted to it's traditional (?) monetary role.
The chance of all this occurring is, I suspect, nil, but given all that we have been through as a nation and industry over the past year make this self-centered, obviously politically motivated action appear even more despicable. Clearly in political trouble and facing a loss in next year's election, Dodd has chosen to present himself in the most crass populist manner caring not a whit for his position of responsibility and his duty to correct some of the very real oversights of regulatory responsibility that have become all too apparent.
Chris the Crook isn't a fool; indeed, he is not only intelligent but knowledgeable in the field. As a result, I suspect he will be able to gather about him considerable support in his efforts which makes them all the more dangerous not only from the standpoint of the ridiculousness of their logic but also from the standpoint of delaying the final product through constant political in-fighting and grandstanding to the least rational and, by definition, the least informed players of influence. Not to be forgotten is the effect something like this has on the willingness of the international community to take anything we do seriously as it will be seen as purely a internal American political game and not as a serious attempt to gain international agreement or reform. They will of course be correct. Not even God in His heaven could make sense of this. More next week as more is revealed.
The chance of all this occurring is, I suspect, nil, but given all that we have been through as a nation and industry over the past year make this self-centered, obviously politically motivated action appear even more despicable. Clearly in political trouble and facing a loss in next year's election, Dodd has chosen to present himself in the most crass populist manner caring not a whit for his position of responsibility and his duty to correct some of the very real oversights of regulatory responsibility that have become all too apparent.
Chris the Crook isn't a fool; indeed, he is not only intelligent but knowledgeable in the field. As a result, I suspect he will be able to gather about him considerable support in his efforts which makes them all the more dangerous not only from the standpoint of the ridiculousness of their logic but also from the standpoint of delaying the final product through constant political in-fighting and grandstanding to the least rational and, by definition, the least informed players of influence. Not to be forgotten is the effect something like this has on the willingness of the international community to take anything we do seriously as it will be seen as purely a internal American political game and not as a serious attempt to gain international agreement or reform. They will of course be correct. Not even God in His heaven could make sense of this. More next week as more is revealed.
Wednesday, November 4, 2009
ARE YOU KIDDING ME
My property tax bill arrived today. It seems that the county assessor is being influenced by the thinking in Washington. The appraisal is 48% higher than last year which was based on an appraisal of two years ago. It has taken me all day to try to get this thing back to sanity. I'll try again tomorrow to write something.
Tuesday, November 3, 2009
SAD WEEKEND
Just got back from Illinois where we had to attend a funeral. Sad. A good man only 57 years old. Makes one think
Back tomorrow.
Back tomorrow.
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