Thursday, September 25, 2014


That is the question posed in one of the most famous conflict of laws cases the title of which I, of course, cannot remember.  It was back in 1840or there abouts and even I wasn't born yet but the principal is well-asked today as we go fumbling around trying to make believe that if we bark, all others will jump.

Dodd/Frank is once again highlighted as how not to write legislation in what could be an important and dangerous disagreement between the U.S and the Euros concerning swaps and derivatives--you know, those things that no one understands and everyone hates.  Granted, it might not have been a good idea to have these contracts floating about without any real idea of the value of individual positions and the requirement that they now be traded through a clearinghouse might be a good one (more on that later), but when you realize that this business is not solely an American one and therefore if you try to pass legislation that attempts to govern the entire world, somebody might get upset.  The requirement that anybody doing business in the U.S.--not just being physically present mind you, but trading into and out of as well--be bound by the the rules of the U.S. clearing house and thereby subject to all U.S. laws pertaining to the same as Dodd/Frank so states, did in fact get the Euros upset and we are now at a stalemate as to how to proceed.

It is all so silly, really.  Like the Queen of Hearts, Congress has produced a verdict before the trial and run around screaming "off with their heads" in response not to market requirement but, like the rest of that garbage law, to political pandering.  Unfortunately, this is not a simple as throwing a bunch of lawyers together in a room and demanding language on which both sides can agree.  Oh no.  Now we are talking about the right of nations and sovereign egos and that is a very different thing indeed.  And then of course is the substance of the thing which the pols will claim was fully discussed and which I can assure you was never fully understood.  The clearinghouses themselves.

You see, the concern was that in the crisis, no one knew what exposures were where, or to put it another way, who was on the other side with Lehman and for how much.  Now a clearinghouse takes that concern away, or at least it appears to, as the clearinghouse guarantees the fulfillment of obligations traded through it.  There is one small problem, however.  Who spies on the spies or who guarantees the clearinghouse?  No one loses sleep over facing Third-Fifth National, but if it is DeutscheBank?  As the former manager of Man United used to say, "Squeaky bum time, lads."  And so we go into the future with not exactly the lame leading the blind, but certainly with the creation of problems that could have been avoided if some people had paid a bit more of attention to the business in hand rather that to howling of the Crazy Lizzys of the world who now, unfortunately, find themselves with even more power to expand the rubbish heap which they produced.

Eric Holder, the Attorney General of the United States, announced his intention to resign today.  Holder is a race-baiting, lying, malfeasant, extorting thug.  Aside from that, I don't like him very much.

No comments:

Post a Comment