...The Suit, in a major address in Atlanta yesterday. It seems our Sec. of the Treasury has gotten it into his head that it might not be a bad idea to have global regulatory agreement, especially on derivatives, lest the business depart for those jurisdictions who take the most relaxed view about these things. Now readers of this space might be excused if their reaction to this front page sruff is, "Well, DUH," but in grave stenorus tones, The Suit has now warned us all and, as this is being written, he is winging his way to Europe to make certain that the Euros and the Brits see things his way.
It doesn't seem to bother The Suit that nobody has the slightest idea how the regulations required by the Dodd/Frank bill are to work because they have yet to be written despite the fact that the bill comes into effect in about a month--a fact which insures that in the rush to get it done the results will be garbage. Nor does he seem to mind that the biggest pot of money aside from the U.S is not Europe but Asia and those guys have financial institutions as well. Nor does he realize that the conflicts inherent in Dodd/Frank will probably make it impossible for him to fulfill his end of any grand bargain which will certainly result in our global financial relationships, presently in the crapper, get flushed right down the gurgle tube. I guess I have to keep repeating the litany:
1. It is not more regulation that is needed but better governance.
2. Banks get sick on the asset side of the balance sheet; they die on the liability side.
3. Institutions must be allowed to fail. If intervention is required then the management (as defined) of the intervened institution loses everything by contract.
It is rare that one ever witnesses an administration so devoid of rational thought in the economic and fiscal realm as is this one. But there I go, getting political again, over to Greece...
Well, it seems that France is now making noises about a restructuring and--bless them--making it very clear that it must be done in a way so that French banks take no loses. By loses they mean the loss of capital through immediate write-offs which the government will have to replace and that is neither politically possible as the voters would revolt or fiscally impossible because France doesn't have the money. Ah non, mes amis, what we have here is an accounting issue, whereby maturities are extended at favorable terms but no write-down is recorded. Wait for someone to say, "What we wish to do is to give Greece the time to right itself so it can return to the voluntary markets." That is translated from the French, German or whatever language one wishes into, "What we need is time for our stupid banks to write this crap off year-by-year so down the road we can write off a big slug and send the Greeks--damn them--on their way!" Trust me, the accountants will find a way to bless whatever is decided to reach this result and the rating agencies--Moody's is the latest to make a fool out of themselves--will not say boo. Plus ca change...can anyone say Mexico, 1983?
Finally, I want everyone out there to appreciate the dedication I show to sticking to the subject of banking and finance with the doggedness of the truly committed. With the entire world writing about the weiner waver in the Congress of the United States do all of you realize how hard that is? Saint-like. See you tomorrow.
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