TENAC, The Election & Current Crisis
TENAC, THE ELECTION & CURRENT ECONOMIC CRISIS
WALL STREET CONSIDERS SENSIBLE REFORM AS "WAR"
Written by Jim McGrath Monday, 28 December 2009 17:32
In a recent Bloomberg article, it seems much of Wall Street sees sensible reform, like reinstatement of the Glass-Steagall Act (which separated commercial and investment banking) as "war on Wall Street." But Glass-Steagall helped eliminate fraud and conflict of interest, making it illegal for banks to act as their own investment arms' subsidiary ratings agency. So empowered, they could approve any type of loan and fund poor and risky investments, regardless of long-term consequences, all for a quick profit in fees and other earnings (a la subprime securities). It was the fox guarding the hen house, funding the devouring of its tenants.
However, we must ask, hasn't Wall Street waged its own war, albeit quietly, on the taxpayer, economy, and average investor, by building a house of cards for a quick buck, on all these risky financial instruments, which are turning sour?
We think regulating the banks and businesses with the unlaissez-faire notion resulting in top execs earning $5 or $10 million a year without bringing down the system, instead of $50 to $100 million and ruining everyone else, is better.
We are relieved that some financial giants, like Volker and others, agree. I say let's really regulate the financial system and ban the practices that defy good sense (and even longterm profitable investment practices). We hope sense will reign, instead of co-opting it with the weapon that has the potential of fomenting further financial ruin by preventing meaningful reform: business industry lobbyists.
The Bloomberg article, "War on Wall Street as Congress Sees Returning to Glass-Steagall" at:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aeQNTmo2vHpo&pos=10#
SOME WALL STREETERS WITH SANITY (OR IS IT SENSE OR ETHICS?) CRY: REGULATE US!
Written by Jim McGrath Tuesday, 29 December 2009 15:06
Many top business execs realize regulation is to their benefit. It's the same old story, honesty is the best policy, as in "Fraudulent or Foolish Business Practices = Failure" and "Self-Policing = Fox Guarding the Henhouse."
Take the head of Morgan Stanley, Johnny Mack. In a Business Insider article, Mack reveals that he loves regulation, because it keeps his employess honest, keeps them in line with good investment practices and is beneficial for business. An attitude, it would seem, of an older era on Wall Street where the current set of young Turks (and older schiesters which seem to have taken over) would prefer free rein to do whatever they want with your money, just as long as it yields them short-term profit.
We think Mack and others like him have a business attitude with sense!
Reason by analogy: a homeowner in a neighborhood infested with dope dealers and buyers (think of a firm infested with investors who love junk and trash for short term gain, er, I mean, present day investors and brokers). The boss (er, I mean homeowner) will want a cop on every corner near his house, and even one or two in between, to guard against the drug plague that threatens his property values (like the company exec who is afraid that sheister investing that will ruin his company's profits, in the long run that is).
Now if the boss of the firm is a sheister, only out for short term profit, damn the consequences, a la subprime, CDOs, default swaps, derivatives, (er, I mean if the homeowner's home is where they manufacture the drugs) then they won't want to be guarded by a police presence (er, I mean, regulators' buzzing around).
One must ask then, is it a tendency for those who shun regulation to be less honest, i.e., may have a lot to hide, while those who welcome it are practitioners of good, solid business sense and ethical investing?
View the Businsess Insider article at: http://www.businessinsider.com/john-mack-i-love-regulation-2009-11
CLOSE THE FLOODGATE TO FRAUD: RESTORE REGULATION
Written by Jim McGrath Tuesday, 29 December 2009 19:15
Some writers are decrying the introduction of legislation by Sens. McCain and Cantwell as a sequel to Glass-Steagall, arguing it was of limited effect.
(On the contrary, I don't see what is so difficult or inappropriate in making banks unable to fraudulently approve loans for securities they underwrite.
The writer to the referenced article said the effects of Glass-Steagall were debatable. Where did she ever draw that conclusion? No economic genius is she, obviously. Did she conclude that from the overall experience of 1933 to 1999 when we had no depression, only recessions, comparing it to the experience of 2000 to the present when it was bubble city and its aftermath, yet to be played out? What history book does she read? Phil Gramm's, which prooftexts everything so it comes out with the same conclusion: if it goes up, we need more free rein market and if it goes down we do, too.
It's basic conflict of interest. Banks are tempted to use their approval of loans to do investment banking, in order to make a quick, solid short-term profit and then not give a damn about what happens down the road long-term.
Think about it: it's also basic morality. ALL behavior is "regulated"; all behavior is governed by laws made for the common good to help protect the citizenry from murder, adulterating the food supply, making cars and other machinery safe and yes, from fraud and dishonesty -- of which these formerly regulated financial transactions are really a type. Admit it.
It's simply outlawing the temptation to fraud, or the gates that open the flood to massive fraud as occurred in the past 10 years. For example, making it illegal for credit agencies like Moody's to favorably rate securities as AAA when they are junk quality. The commercial banks are in essence doing this, only going a step further by then giving them the money to invest in trash, knowingly. WHAT IS WRONG WITH OUTLAWING FRAUD OR A MAIN IMPETUS TO IT? WALL STREET, YOU HAVE LOST ALL SENSE, AND NOW YOU SEE WHY YOU ARE EXPERIENCING THE PROBLEMS YOU ARE NOW AND HAVE YET TOO, ON A SECOND LEG DOWN OR BEYOND.
In another part of the article, we read the lament "it's 1933 again". -- But you must ask why. Because it was the roaring 20s and 1929 again! Will you never learn?
For the summary and link to the article itself, see the Business Insider, at
http://www.businessinsider.com/here-comes-glass-steagall-the-sequel-2009-12
WHERE ARE OUR BONUSES?
Written by Jim McGrath Tuesday, 29 December 2009 19:35
A funny thing happened on the way to the ownership society, investment capitalism for everyone, privatization of social security, Morning in America, and the securitization of everything: when the magic of the marketplace failed, government stepped in like European politicians or Chairman Mao and socialized big bankers' losses, while privatizing their gain, allowing them to pocket it all, in the words of Nouriel Roubini. Heads I win, tails you lose: if we fail, the government supports us, if we succeed, we private industry, get the money. Then, a step further: like the $29 billion Goldman Sachs has set aside for bonuses for this past year -- not only are their losses socialized, but their salaries and bonuses, too, come based on government largesse, even as great reward for their failure and fraud. Again it is only RED SOCIALISM when it happens for the little guy, like increases in housing programs or financial support through difficult times, but when done for the big boys, it's capitalism. WHERE IS OUR BONUS, COMRADE GEITHNER AND PAULSON?
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