FOLLOW UP

...to Fridays piece of course. Before this Dodd/Frank nonsense was foisted upon an unsuspecting public and Tall paul felt he had to dip his oar in for one last time, we had a pretty good set of rules and regs that were unfortunately not enforced by the regulators to the extent that they might have been. For example, did you know that activity which has become know as prop trading was allowed but needed to be housed in a seperately capitalized subsidiary? You didn't? Well, you can be certain the regulators did. Had they wished to have been really sticky about it all of the side-show capitalization methods which while technically allowable could have been stopped in their tracks by something not much more than a Queen Victoria moment; a "We are not amused" remark from the powers that be. Didn't happen, so now we ban the entire thing altogether. Of course, the problem with that is should an institution choose to independently capitalize a subsidiary to trade every financial instrument known to modern man in, say, Pago Pago, there's not a damn thing anybody can do about it and what we now have is a trillion bucks being traded with the stern, watchful eyes of the Pago Pago Monetary Authority monitoring what's going on. Yes sir, I will sure feel that the internationally monetary system is safer. Thank you Chris the Crook; thank you Barney-baby. Let's see if that happens because without a robust trading business, no way Goldie makes the money it has been making and no way it can pay the bonuses it has been paying and if we have learned one thing it is that Goldie partners like a pay day...a big pay day.

It appears that concern regarding the muni market has take on a strange twist with dueling opinions on the op ed page of the WSJ over the past week as to the rational for a backruptcy statute for the states. Today E.J McMahon argued forcefully and well that not only is a new statute not needed but that it is a bad idea to boot. This is not going to be decided today or anywhere in the near term, but what is being missed, I think, is a point that could be learned from a careful review of various restructuring, bail-outs, refinancing and reschedulings in the international arena.

I'm not taking sides on the issue of a backrupcy proceedure but if one looks at our international body of knowledge one finds that by the time politicians realize that there is a problem, there is A HELL OF A PROBLEM and one that is going to raise the blood pressure of the voters when somebody tries to solve it due to the pain the solution will cause. At this point internationally, enter the IMF, not because it is inherently useful (it is not) or that it is smarter than other institution (it certainly is not) but simply because it has money (lots) and it can be blamed for the pain it demands as a result of dolling out cash. Politicians love blaming the IMF so that they themselves are not blamed. It will be interesting to see in the coming months which pols' survival instincts come first to the fore in an attempt to deflect the blame for what must be done...and whether it is the bankruptcy court that becomes our version of the IMF. Or something else. Trust me; aint no pol out there gonna take the fall for what's coming.