Friday, August 8, 2014


There is that wonderful scene in Part I when Don Vito says to his son, Michael;

"I didn't want this for you.  I wanted something better…I lawyer, maybe.  Yeah, a lawyer.  A lawyer with a briefcase can steal more money than the entire organization."

Don Vito never met today's Capo di Tutti Capi, Don Eric Holder and the underbosses he has running rampant through the financial system of the United States, but he would have been impressed.  Holder and his mob are running the biggest extortion racket ever seen with the  latest target being the Bank of America being hit  up for $16 or $17 billion or whatever the number is primarily for the actions of Countrywide and Merrill Lynch prior to their acquisition by B of A.  I'm not going to get into the arguments pro and con, or who got conned and who didn't (poor Ken Lewis was never the sharpest knife in the drawer whilst Thaine was) and Mazillo was as close to be a crook as one could find but a very well politically connected one.  Lewis didn't have the stones to say "no" when the Feds were all over him to bail them out, but of course the only people who get hut in this official corruption are once again the present shareholders who sure as hell had nothing to do with anything.  To say once again that Eric Holder is a disgrace is to repeat myself but he is a disgrace.  He belongs in a really special ring that perhaps his paisan, Dante, can build for him.  Accidente!

Meanwhile, the substantially more honest but probably considerably dumber mob that looks after the well-being of our nation's financial service industry at the Fed and FDIC, announced this week that they were not at all satisfied with the submissions of "living will" from the systemically important banks as required by Dodd/Frank.  Holy mackerel, Andy, who would have thunk it.  It's been said so many times but it bears repeating; this is an exercise in futility and stupidity perpetuated by a lack of understanding of what happens in a "systemic" event.

Let's start once again with banking 101 that despite constant review, no one still seems to understand.  Banks  get  sick  on   the  asset   side  of  their  balance  sheet;   they  die  on  the  liability   side.    Got it?  OK, now try to understand that a will--any will--is designed to set out a series of events that will facilitate the difficulties involving a death, be it of an individual or of a corporation such as a bank.  One has a will to insure that the heirs don't fight over the estate and to insure the prompt and orderly wind-down of businesses.  A will allow all involved parties to remain calm and rest assured that their claims on the assets of the estate will be properly decided.  It is therefore a plan, but as that great American financier and philosopher, Mike Tyson, once stated: "Everybody's got a plan until you get hit in the mouth."

If an institution the size of, say, Goldman Sachs gets in trouble it is because the market loses--for whatever reason--confidence in its ability to service its obligations, the first of which is its deposits…  if that occurs, YOU HAVE NO TIME because the liquidity is gone in an instant and when that happens the first question EVERYBODY asks is "will I have a chair when the music stops" not "let's see, how are we going to wind up poor ol' Goldie?"  And that sportsfans, is systemic risk and no "living will" solves that.  What solves it is central banks stepping in  and saying, "you're covered," and quite frankly that is the one, serious reason for having central banks in the first place. If we all told the truth and if everyone understood this we would be far better off.  Or sure, we need regulators and rule makers and market watchers but we sure as hell don't need legions trying to solve the unsolvable; far better we work harder at stopping the event before it occurs and that is the strongest argument for and independent central bank as opposed to the hodge-poge of political reaction entities floating about today.

Well, nothing in the world got better today.  Hamas started lobbing rockets again so it's game on in Gaza.  Putin is keeping everyone guessing and The Leader, recognizing some moral responsibility--although that is tough to figure out as he is becoming more and more non-understandable--dropped a few bombs on ISIS.  European economies look weaker and weaker and today Super Mario made it very clear that his policy is bugger thy neighbor by driving the Euro down against the world.  The Bund is at 1.06% and the 10 year at @ 2.43% with the Bund keeping it there.  The world remains awash in dollars so what should one expect?  Why, for the DOW to close UP 200 points!  I mean it could be worse.

No comments:

Post a Comment