Thursday, March 24, 2016


I was going to close out the week yesterday but two items came up just as everything was shutting down in typical Washington fashion.  If you have something going that you suspect some folks might not like, make it public when few are sure to be watching.  Ever see Hilliary Clinton's E-mails released on Monday morning?  Never.  On a Friday after business hours hopefully before a three day weekend?  Always.  We had two incidences yesterday which will bear continuous monitoring.

It appears that the "claw-back" demands contained in Dodd/Frank, many of which have been implemented by the largest financials institutions in various ways have not passed muster with the regulators.  They have therefore let it be known that they will compel their "clients" to undertake far more harsh rules regarding executive compensation AND expand the categories of those who fall under these rules.

I'll wait to see what is proposed but little by little, we are getting closer and closer to the nationalization of the financial industry...which by the by, one candidate running for the Democratic nomination  for President has proposed...which in other jurisdictions has been proven to be not a particularly good thing.  Aside from that, the best and the brightest tend to go where there is more not less, so it gives me some difficulty in trying to figure out why regulators would wish to limit the attraction of talented people to those institution they regulate.  Or to put in simpler terms, to quote a former colleague, "You pay peanuts, you get monkeys."  There are massive difficulties in attempting to implement such a program as opposed to the one notion in its favor:  big compensation encourages bad behavior thru the taking of inordinate risk.  Somewhere along the line this became the fashionable reason for the crash of 2008 and the even-more fashionable reason for avoiding responsibility on the part of those who clearly shared the responsibility.  Which brings me to our second incident.

If there was ever responsibility to be taken for the mortgage crisis, a lot of it could be laid at the front doors of Fanny and Freddy and the politicians who allowed them free rein throughout our financial marketplace.  Remember the attempt to reform both in 2006, killed stone cold dead by the refusal of Barnie Frank to deal with the issue memorialized in his wondrous lisping and saliva spitting decision of "I tink I'll roll da dise on tis one?"  Came up craps didn't it Barney, but you skated.

These two disasters waiting to happen were at the time publically owned corporation but they benefited from the "implied" guarantee of the U.S. Government.  Some implied.  There are now in "conservorship" (what ever that means) with a pile of crap on their books and forced to pay over to the government all of their profits.  This does two things: it allows the government to say "Look at all the money we are making!" and it delays the day of reckoning for the accounting of portfolio losses until all the capital runs out.  What to do?

In the middle of Holy Week, comes the announcement that a number of D.C. whizzes--all Democrats by the by and all connected to Ms. Clinton--have come up with a solution to what at some point will become a monumental embarrassment.  A Brand New Corporation!  This one will take up the rolls of BOTH Freddy and Fanny going forward, absorb much of it's predecessor's portfolios and......ready for this.......WITH THE EXPLICIT GUARANTEE OF THE U.S. OF A.  Don't need no damn "implicit" stuff for this baby! In short, this will repeat all the stupidity of the past with the added bonus that with the government ownership, the political allocation of credit is a sure thing accomplished by a bunch of political hacks to whom risk will be no object.  God!  you just have to love the sheer audacity of it.  Know what?  It just might pass through Congress because of the number of asses this will cover and the political favors available to those who get on the band wagon.  In the dead of night.

May you have a lovely Easter Weekend.

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