Relevant and even prescient commentary on news, politics and the economy.

There’s a Palpable Fear Amongst Kansans, All Across That State, That the Farm Subsidy Levels They Love, and Cherish, and Honor, Will Be Reduced or that the Program Will Be Eliminated. (Or, in light of their senior senator’s comments earlier this week, there should be.)

Post has been cut-and-paste-typo-corrected. 9/28 at 11:43 a.m.

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There’s a palpable fear amongst Kansans, all across this state, that the America that we love, and cherish, and honor, will not be the same America for our kids and grand kids. And that’s wrong. That’s very wrong.

As a result, unfortunately, people are losing faith in their government. And turn it around: Government is losing faith in our people. That is a bad situation to be in.

And I will tell you that one of the reasons—I’m not [edit: my initial transcript did not include ‘not’ because I misheard Roberts, which makes this even funnier] going to get partisan here—but one of the reasons I’m running is to change that. To change that. There’s an easy way to do it. I’ll let you figure it out. But, at any rate, we have to change course, because our country is headed for national socialism. That’s not right. Changing the culture, changing what we’re all about.

— Kansas Sen. Pat Roberts, Sept. 23

Some political reporters and pundits kinda wondered whether this 78-year-old man, who unlike, say, most thirtysomethings, surely knows that “national socialism” has a very particular meaning—and knows what that particular meaning is—actually meant to invoke that particular meaning.  The Washington Post’s Philip Rucker, however, figured that Roberts really meant to call Obama a socialist rather than a Nazi.  So Rucker asked him yesterday whether he actually thinks Obama is a socialist.  To which Roberts responded, um, yes.*

Or, precisely:

I believe that the direction he is heading the country is more like a European socialistic state, yes. You can’t tell me anything that he has not tried to nationalize.

Actually, you can tell him that there are a few things that Obama has not tried to nationalize.  Farming, however, is not amongst them, since that was nationalized around the same time as low-level retirement benefits were nationalized: The mid-1930s.

Get your government hands off my farm subsidies!

Yes, there probably is a palpable fear amongst Kansas, all across that state, that the America we love, cherish, and honor, will not be the same America for their kids and grandkids.

Some of them may fear a permanent return to the Dust Bowl days–although the ones now enjoying that socialized pension program and the socialized healthcare program for the post-65 crowd enacted when they were in their 20s and 30s may not cherish and honor the Dust Bowl era all that much.

Some of them may fear collapsing infrastructure, and a failure to construct needed additions to existing infrastructure.

Some of them should have feared the repeal of the Depression-era banking-regulation laws, such as the Glass-Steagall act, when it might have mattered, but now would like to see those laws reenacted as a step toward returning America to the one they love, cherish, and honor.

Which, not coincidentally, also was the America that funded its national government through far more progressive taxation than the one that Roberts claims is the America that Kansas love, cherish, and honor.

It also was the America that funded its local governments through means other than outlandishly disproportionate fines and fees, and that had not yet privatized–a comically accurate description, if ever there was one–government functions and services.

And it was the America–not at all coincidentally–whose income and wealth inequality had not yet spiraled completely out of control.

It was, in  fact, a pre-Reagan Revolution America.  An America whose political system was not yet thoroughly in the chokehold of the likes of the Koch brothers—who are Kansans who do have palpable fears, but not necessarily the ones that a majority of Kansans all across that state have. Or even across the Wichita metropolitan area, where the Kochs live.

Maybe sometime before the election, some reporter will ask Roberts whether there should be a palpable fear amongst Kansans, all across that state, that the farm-subsidy levels they love, and cherish, and honor will be reduced or that the program will be eliminated.  And then ask a similar question about Social Security and Medicare.

And then they should ask–clearly, specifically, outright–what exactly it is that Republican politicians promise a return to. And what it is that Americans who want to return to the old days really want America to return to.

There’s a palpable fear amongst progressives that no reporter will ask these questions, though.

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*Paragraph cut-and-paste-typo-corrected (finally). Aaaarrrgghh. 9/28 at 11:43 a.m.

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Elizabeth Warren and Glass Steagall

Via Truthout 21st centurty Glass Steagall Act

You need to know this. Senator Elizabeth Warren wants to make banking boring again. Yesterday, the freshman senator introduced the 21st Century Glass Steagall Act, which would break up the big banks, and rebuild the wall between traditional banking and Wall Street gambling. In a statement, Senator Warren said, “Despite the progress we’ve made since 2008, the biggest banks continue to threaten the economy.” Senators John McCain and Maria Cantwell, the pair who attempted a similar bill back in 2009, joined Senator Warren as she introduced her new legislation. Of course, taking on the “too-big-to-fail” banks won’t be an easy challenge. Previous attempts to reign in bank size and power were met with huge resistance from the banksters, who railed against proposals to break up the banks.

PDF is here.

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Jamie Dimon May Come Out Swinging Tomorrow, But His Fast Ball Isn’t What It Was

“Which Jamie Dimon will appear before the Senate Banking Committee in Washington on Wednesday?” asks Reuters BreakingViews columnist Rob Cox in a Slate piece.  “The self-effacing JPMorgan boss offering apologies for his bank losing at least $2 billion on bum trades?,” he asks? “Or the combative JPMorgan leader who just a year ago publicly challenged the chairman of the Federal Reserve over regulation?”

Cox recommends the latter, which is why the piece is titled “Jamie Dimon Should Come Out Swinging in the Senate.”  He worries that “a mealy submission from Dimon may help effectively nationalize the American banking industry for good.”  He asks us to “[c]onsider the implicit message the senators who called Dimon before them are sending: that banks must answer to the nation for any losses they incur – and that watchdogs and regulations should somehow be able to prevent them.”

I did. This required me to consider his claim that a mealy submission from Dimon may help effectively nationalize the American banking industry for good (meaning “permanently,” not “beneficially”).  He’s saying that the reinstatement of the Glass-Steagall statute or a meaningful implementation of the Volker Rule—separating investment banking from retail banking and barring federally-insured banks from speculating with depositors’ money (which is what JPMorgan did)—would amount to nationalization of the American banking industry.  And he’s saying that a law capping the size of federally-insured banks would do that. 

After all, the reason for the Senate Banking Committee hearing tomorrow is that Congress is considering enacting laws that would do those very things—laws that would return the banking industry to some semblance of what it was for the period between 1933 and the 1990s, before bank-merger mania and the repeal of the relevant parts of the Glass-Steagall Act so changed the nature of the American banking industry.  You know, to the way banks were during that long postwar period of economic stagnation caused by the nationalized banking system we had back then, until de-nationalization returned the industry to the free-enterprise system.  In recognition of the fall of Communism, I guess.

I also considered the horrors of a return to that Commie banking system of the postwar era, when watchdogs and regulations somehow were, in fact, able to prevent most large banks from failing and their depositors from needing that FDIC insurance.  I shuttered.  No, sir!  Wouldn’t want to see that!

An effective Volcker Rule and the reenactment of Glass-Steagall might,of course, cause banks to start using those deposits to lend money to businesses, since credit-default-swap speculation no longer would be an option for them.  But we wouldn’t want banks to start acting like banks rather than hedge funds again, would we?

Dimon may come out swinging, but I expect that it will be the Democratic senators who will hit it out of the park. Dimon’s fast ball isn’t what it was.

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Elizabeth Warren campaigns in MA

Elizabeth Warren is running for the US Senate in Mass. and came by Casey’s Diner Monday at lunchtime, a stop among many.   Eventually the campaign will heat up as a lot of money is being raised, and the summer ends.

Ezra Klein of the Washington Post interviewed Elizabeth Warren this Monday as well. Here is part of the transcript with questions and answers regarding JP Morgan and Jamie Dimon from the wonky economic policy and regulatory angle:

EK: That gets us to the Volcker rule, which is what would keep banks that get that guarantee from gambling with customer money and a federal backstop. But at this point, I don’t think very many people — even people who follow this stuff quite closely — have a very specific sense of what the difference between a good and bad Volcker rule is. So how do you think about that?

EW: I’m going to reframe it slightly: Who profits from the complexity of the Volcker rule? It’s the largest financial institutions. No financial institutions want a simple Volcker rule. They want layers and layers of complexity because it’s in complexity that there are loopholes. That’s where it’s possible to back up regulators who are not quite certain about the ground they stand on. And it’s a larger problem with our regulatory structure: Complexity favors those who can hire armies of lobbyists and lawyers. The big push I made at the Consumer Financial Protection Bureau was simple rules. Simple mortgage documents. Simple credit card agreements. Because complexity creates too many opportunities for an army of lawyers to turn the rules upside down.

 EK: I agree that complexity is where lobbyists and lawyers work their dark magic. But when I talk to people in the industry about this, they say that simple rules sound great, but they’re not really possible. It’s hard to distinguish a hedge from a bet, or a speculative trade from a legitimate one. The world is complex, and that’s why regulators and politicians who don’t like Wall Street and don’t like being browbeaten by lobbyists end up allowing complex rules, too.

EW: Here’s another way to look at what you just described: That’s the strongest argument for a modern Glass-Steagall. Glass-Steagall said in effect that hedge funds should be separated from commercial banking. If a big institution wants to go out and play in the market, that’s fine. But it doesn’t get the backup of the federal government. If it’s too complicated to implement the Volcker rule, do you say we give up and let the largest financial institutions do what they want? Or do you say maybe that’s the reason we need a modern Glass-Steagall?

EK: What about breaking up the big banks?

EW: You’re approaching risk from two different directions. One is the risk of the activity. That’s the Volcker rule. The other direction is to say risk is an assumption of size. Community banks shouldn’t have to deal with complex regulatory oversight, but the largest institutions should be subject to far more aggressive oversight and have to pay more for the protections they receive from the American taxpayer. Then shareholders may decide to invest in institutions that are not so large.

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Interview of Mr. John Reed regarding banking fixing the game

In case you are not aware, Bill Moyers is back and he doing his best work to date concentrating on our the changing of the rules regarding the economy. This episode where he interviews John Reed, former Citi Bank CEO and current MIT chair is most telling as it relates to the issue of why we as a nation need to do what is required by law: investigate and prosecute as the investigations dictate.

First, let me just say, you need to watch the interview. What is most telling for me is the denial that still exists in Mr. Reed. Sure, he acknowledges that it all went wrong, but it is done in the temperance of “mistake”: 

1. an error in action, calculation, opinion, or judgment caused by poor reasoning, carelessness, insufficient knowledge, etc.
2. a misunderstanding or misconception.

Here, in the interview is what puts the delusion of self preservation in applying the word “mistake” to the decisions that lead to what we have today, and I’m not just talking recession:

Setting up the question to Mr. Reed by showing a video clip, SENATOR BYRON DORGAN: (Speaking on Senate Floor) What does it mean if we have all this concentration and merger activity? Well, the bigger they are, the less likely this government can allow them to fail.
BILL MOYERS: Were you aware of the few senators who raised real concerns about removing Glass-Steagall, about what would happen?
JOHN REED: No one that I’m aware of it saw it clearly. You point out to some Senators and Congressmen who did, but somehow we described them peripheral. And I simply said, “They’re wrong.” Turned out they weren’t.
SENATOR BYRON DORGAN: (Speaking on Senate Floor) I think we will in ten years’ time look back and say, “We should not have done that, because we forgot the lessons of the past.”

The issue of calling it a “mistake” becomes even clearer when you watch the interview of Senator Dorgan which follows Mr. Reed. This is why you need to watch it. Mr Reed knows what happened. He knows why it happened. I am certain he knows where the culpability lays. But, as they say in our neck of the woods: He wouldn’t say “shit” even if he had a mouthful.

What happened and what these people did was not a benign experience as the word “mistake” implies and as Mr. Reed is using it. It was intentional and wanton action taken on behalf of money. (See below: Where their heads were at)

Explaining Glass Steagall’s importance beyond not letting commercial banking marry investment banking.

JOHN REED: Well, that and even more importantly, or equally importantly, since the FDIC came into existence at approximately a similar time where the government was guaranteeing deposits so that people didn’t lose if a bank got into trouble.

But not only did they want to keep the banks from the business for reasons of not risking the money. They didn’t want them to use the guarantee that the government provided for those deposits to leverage their position. Because, you know, if you have a deposit base that’s guaranteed by the government, it sure puts you at a great advantage in terms of going into the market and playing around.
Regarding the take down of Glass Steagall

JOHN REED: When Sandy approached me on the merger [Travelers/Citi] I knew that it was right on the forefront of the legal thing. … And what we basically were told was, “If you all want to do this within the two years we’ll get the law changed.”
BILL MOYERS: But you got the blessing in this two-year period of President Clinton, of the Fed, of–
JOHN REED: We had that blessing prior to.
JOHN REED: Yes. In other words, I went with Sandy to call on Chairman Greenspan. We told him we were contemplating this merger. But that it would required that the Fed would be prepared to grant us permission. And we were assured that they would.
We went and saw the Chairman of the House Banking Committee, the Chairman of the Senate Banking Committee. And we said we’re talking about this merger but it could not take place if we were not assured that it would be approved at the Congressional level. We talked to the Secretary of the Treasury, I don’t recall–
BILL MOYERS: Robert Rubin? He was the Secretary of the Treasury at the time.
JOHN REED: Yeah, we would’ve spoken to him, I’m sure. And had Bob Rubin said, “No, the Treasury feels this is wrong,” we would’ve been careful. Because obviously, the Treasury recommends to the President on an issue of this sort. And there was no argument. No one said, “We’ll have to think about it.” And so a consensus built up. I don’t think it started in the Fed. I would guess it started in the industry, it certainly got into the Congress.

Regarding where their heads were at

JOHN REED: Which happened, yeah. I mean if you had asked me under oath, what probability I would have given that you would have gotten the whole group of Wall Street participants to get it wrong so to speak, I would have said zero.
BILL MOYERS: What do you think they saw that Wall Street didn’t see?
JOHN REED: They simply didn’t participate in the exuberance.
But I do think that, you know, this setting up the deck of cards so that we could produce what we currently are trying to withdraw from. Turns out to have been something that the word disaster is maybe not strong enough. (“Criminal” is the word we all know he is resisting.)
JOHN REED: We were carried away by the enthusiasm. And like everything else, you know, once you start you probably go a little further than you should have.
JOHN REED: Sandy Weil. I mean, his whole life was to accumulate money. And he said, “John, we could be so rich.” Being rich never crossed my mind as an objective value. I almost was embarrassed that somebody would say out loud. It might be happening but you wouldn’t want to say it.
JOHN REED: Yeah, Sandy Weil. And I sort of say, “Sandy, you know, we didn’t do very well.” And he’s not comfortable with that conversation at all. I think he would still defend that it was a good merger, it just went off the tracks afterwards. I —

Regarding the economics of it

JOHN REED:No, no. It’s not something you’d like to end your career with. That is for sure. No, look. We got carried away.It wasn’t any small group, it was a consensus that reached the press, it reached the political world. It certainly had reached the intellectual world. I’m now, as you know, at MIT,and I say to some of my academic friends that the intellectual underpinnings of this was created at MIT and places like that, I mean—
BILL MOYERS: With the technology of the computers?
JOHN REED: Well, no. It’s all of this mathematics of finance and the presumption in much of this mathematics that you can capture risk by looking at historical volatility and so forth and so on.
BILL MOYERS: Are you saying, suggesting that — the chairman of the board of MIT’s suggesting –that human intelligence no longer runs our financial system?
JOHN REED: Well, it’s a little wisdom balance that judgment wouldn’t hurt.

The Criminality of it (at least as I see it): See: Regarding the take down of Glass Steagall above

Showing an historical video clip, Mr. Reed speaking with Sandy Wiel

JOHN REED: Sandy called his friend the President last night and invited me to join in on the conversation and we had a good talk. So the President was in fact told last evening about what was going to happen.

JOHN REED: Well, they originated and sold into the marketplace things that should never have been originated.
BILL MOYERS: Derivatives, unregulated derivatives?
JOHN REED: Well, it was the excess mortgages, the no-doc, low-doc mortgages. And then the derivatives were a byproduct. Once you had those, then you could chop ’em up and so forth. And of course they had changed their mindset. They were in the business to make money, period.

The psyche that is protecting the conscience: Note his choice of words

JOHN REED: You’re– I mean, a consensusdeveloped. The fact that we took it [regulation, Glass Steagall] out was a byproduct of this mistaken beliefin this modern financial system that was, quote, “more efficient,” was very lucrative for the United States and the U.S. economy in global terms.
And which was supposed to handle risk better. In fact, it handled risk worse. I mean, this is what the facts are because there was a much greater concentration of risk created. And so we got it wrong.
But the restraint of the government and it’s agencies disappeared in the enthusiasm. (Yeah, just a “byproduct”)
And so it was this combination of the participants getting carried away, the normal checks and balances that should exist against participants.
And the thing that is astounding, frankly, and there’s a lesson here that we probably haven’t yet learned, is that the system can get it so wrong. It wasn’t–
BILL MOYERS: So wrong?
JOHN REED: It wasn’t that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did. And then the whole system came down. You know, it became illiquid, the government stepped in. Had the government not stepped in, it really would have come to an end.

 

BILL MOYERS: But they left in place the very people who had driven the ship into the iceberg.
JOHN REED: I’m quite surprised at that. It clearly has not been a clean sweep. In other words, those of us who made mistakes, and so forth and so on, are still floating around the system. And–
BILL MOYERS: Floating it? You’re running it.
JOHN REED: Well, I am not, but —
BILL MOYERS: You’re not running it, they’re running it.
JOHN REED: But there are many who are. I wasn’t involved, obviously. I had retired in the year 2000. We’re now talking 2008. So I was a knowledgeable spectator, but certainly not a participant. I was quite surprised because, frankly, the worst thing that can happen to a businessman is to go bankrupt. (Shades of Greenspan confessions?) That’s the sign of ultimate failure. You ran a business and it was unable to succeed under the terms and conditions of private capital. Namely, you went bankrupt.
It’s not a crime. But it certainly is a mistake. And these companies, even though they didn’t have to file for bankruptcy, de facto went bankrupt. And so the managements and the boards and the regulators should have, in my mind stepped aside.
BILL MOYERS: Sounds to me like you’re calling the Glass-Steagall Act back from the grave.
JOHN REED: I think I am. (At this point, he still could not say it “shit”.)

There is more in the interview. You need to see and hear it to understand. I think Mr. Reed is struggling with his conscience and wanting to clear it versus what I believe he feels is a real risk of getting tied up with the Justice Department. It has to be working on him. Though I interpret an air of feeling protected in Mr Reed do to his own wealth. As much as he knows wrong and not a mistake was done, he has no experience of the anxiety as what those in the labor economy are experiencing. He is still in denial to an extent which stops him from using his position to truly work to correct this wrong. Or maybe he just is not of the character to participate on the just side of the fight.
Mr. Reed does get one thing correct:

BILL MOYERS But when the financial community can buy the rules they want —
JOHN REED: Then you’ve got an unstable situation. That’s an intolerable situation. I mean, obviously.

He knows.  He knows that regulation is a necessity. As the head of MIT, he could be doing so much more.
Come-on Mr. Reed, destiny is calling you.

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The Blog Post to End All Blog Posts: 1 of 2

On this Armistice Veteran’s Day, let’s try to do a counterfactual and Make Brad DeLong Happy.*

Let’s assume that the Gramm-Leach-Bliley—commonly referred to, incorrectly, as “the repeal of Glass_Steagall”—is A Good Thing. Well, I won’t go that far. An Inevitable Thing. [Many sentences about Larry Summers omitted here.] After all, anyone who was paying attention knew that Glass-Steagall had already been shivved several times by 1999, and that letting Citi buy Travelers banks buy insurance companies (and vice versa) was only a matter of time.

(If you tell me that’s a good thing, I’m going to point out that the risks of banks and the risks of insurance companies are the same, that combining them in no way makes the financial system safer or improves risk management, and that, therefore, you’re an idiot. But pointing something so fundamental out to a Summers or a Bob Rubin would be like telling your two-year-old not to pull the cat’s tail; the only question is who ends up getting stitches.)

Let’s assume that commercial banks, investment banks, and insurance companies are essentially fungible entities. What will we see?:

  1. Commercial banks will be able to outcompete investment banks, due to Gresham’s Law. They have more money, and can afford to make mistakes.
  2. As a result of this, investment banks, with less capital and therefore less room for mistakes, will become more likely to fail as independent entities. (You would have to be stupid, or McMegan, to assume the brunt of the damage would go the other way.)
    Results:
    1. Morgan Stanley Dean Witter, which occurred two years earlier, will serve as a warning sign that will be ignored by the banks, which “know” that the acquisition was backwards
    2. J.P. Morgan will be acquired by Manny HannyChase,
    3. Goldman Sachs has to go public to acquire capital; Jon Corzine is forced out because he realizes (having seen Bear and Merrill and Morgan Stanley do it before) that it will fundamentally destroy the incentive structure and culture of the firm.
    4. Investors working on the Greater Fool Theory will decide that Investment Banks might win the battle, and will bid up the BSCs and LEHs of the world, figuring that either (a) they will be acquired (JPM) or (b) they will grow on their own (GS, MS). This will be temporarily self-fulfilling, until it isn’t.

  3. Insurance companies will move more into banking services (as their subsidiaries have for years) in search of more cash to search for more yield and more long-term investments and short-term arbitrage. Since they do much of this now, the only additional risk will be if there is a flurry of mergers. Or a rogue insurance company. And that would never happen in insurance, just as it would never happen in energy.
  4. There will be very little demand from banks to buy insurance companies outright, since (a) there are very few Sandy Weill’s in the market and (b) even Citigroup used to be able to admit mistakes.

So what do we have, post-Gramm, Leach, Bliley? A marginal-at-best difference from 1997. The high likelihood that investment banks will lose the battle they’ve been fighting to less capable but better capitalized entities. A growing encroachment of insurance companies into the banking industry, while bankers go for the easy prey (IBs). The same consolidation and move toward plutocracy-pandering that was the rule.

Short version: there isn’t a fundamental change in the management, financing, or control of anything that arises from Gramm-Leach-Bliley or its predecessor. There is, as Ben Bernanke noted, “a failure of economic engineering and economic management,” but it’s marginal, and there’s a strong possibility that the system can recover.

But there are two later pieces of legislation that do cause a fundamental shift.

Next rock: 2000 and 2005; Summers and Biden pillage while Geithner fiddles.

*The more I think about this, the more I expect to fail, for reasons stated elsewhere. But it is NaNoWriMo, so this is at worst part of my 50,000 words.

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Limit Banks’ Proprietary Trading? Links Worth Noting on Possible Reprise of Glass Steagall Maybe

by Linda Beale

Limit Banks’ Proprietary Trading? Links Worth Noting on Possible Reprise of Glass Steagall Maybe

Obama takes on America’s banks with new Glass-Steagall act, Guardian.co.uk, Jan. 21, 2010

President Obama came out in support of the “Volcker rule” intended to stop depositary banks from running hedge funds and using their money to bet on the markets. I particularly like the part that recognizes that allowing banks to merge into bigger and bigger consolidated enterprises is not likely to be in the public interest. (I’ve actually proposed we severely restrict tax-free reorganizations generally.) About time that Obama stood for something stronger than “oh, let’s limit leverage a little bit” on the big banks. It will take a significant package with significant changes to make a difference to the amount of risk in the financial system, but looks like Congress has already decided it doesn’t want to touch the Volker rule with a ten-foot pole. Or at least, the people in Congress that need to move something through.

US Senator Dodd: Strongly Supports ‘Volcker Rule’, Boles, dow jones (Feb. 3, 2010)

Then there’s Chris Dodd, about whom there have been on-again, off again indications of his support, nonsupport for the Volcker rule. Dodd now says he’s supportive, but worries about his compromise negotiations on banking reform. I’m worried about those too–that they will be far from the bold steps that need to be taken to get this issue under control. Breaking up big banks–not just protecting deposit banks–is probably a step that needs to be taken.

Towards a 21st Century Glass-Steagall, new deal 2.0 (Jan 21 2010) (new site for me, discovered courtesy of my Angry Bear colleagues) (interesting take on problems of proprietary trading)

“What we don’t want is internal hedge funds to be leveraging up and gambling using money that comes with a safety net for preventing devastating bank runs that is provided by taxpayers….putting up ‘walls’ to silo off these idfferent functions within one company won’t help us–we actually need to spin these functions out.”

Yves Smith, naked capitalism, Goldman, Morgan Stanley Can Escape Volcker Rule (Feb. 2, 2010)

Yves isn’t very supportive of the Volcker Rule, because it fails to acknowledge that it is the systemic risk in the capital markets, more than worries about bank runs, that led the Fed to support Goldman, AIG and other Big Banks, forcing mergers of Bear Sterns and Merrill, letting Lehman fail and nearly causing a collapse. The credit default swaps and repo markets were the center of the problem. And while I tend to think there are nonetheless quite a few good reasons to reinstate some boundaries for banking and size-control mechanisms in addition to the puny leverage control mechanisms that were under discussion, she’s absolutely correct that it’s that federal guarantee, now extended to support investment bankings’ casino gambling in the capital markets, that is the knot we have to unwind if there is any hope to avoid future taxpayer bailouts of investment bank profits.

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cross posted with

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