Comments on: Who Nationalized Whom?

By: Tom

Tom — Tue, 21 Jul 2009 23:46:44 +0000

Walt, one way to bring pressure on the big institutions might be to follow Catherine Austin Fitts’ suggestion (from who’s site, Solari.com, I found this link). She proposes pulling our money out of the big banks and investing it in smaller community banks that sevre teh communities that you live in. Her calculation is that, due to the leverage that these banks maintain, that even pulling out less than 1% would cause them great pain.

Look into her site and this article and see if it’s something worth promoting. I think it is.

http://solari.com/campaign/july4th.htm

By: Per Kurowski

Per Kurowski — Sun, 19 Jul 2009 19:22:51 +0000

The main problem is that you keep on seeing it only as a local problem without wanting to face that so much of what went wrong had to do with the regulations concocted in Basel.

If a crisis detonated by investments in safe assets, mortgages and houses; in a safe country, the USA; and in safe instruments, rated AAA is said to be caused by excessive risk-taking, and not an excessively misguided risk-aversion then I guess you will never be able to get it… and getting it is the beginning of any solution.

Now on a local level I also do not understand how a society allows so much of their financial markets to be influenced by non-transparent credit scores and which are used as an excuse to open markets for lending to those you should not lend to… and to such an extent that I have even seen US parents more worried about their children credit scores than their school-grades.

Why look for shadow-banking in the shadows when it so much of it bathes in the sunlight of your own backyards.

By: anne

anne — Sun, 19 Jul 2009 18:52:29 +0000

Then the nation is doomed. Shadow banks cannot continue to suck astronomical sums out of the economy without terrible consequences for the other economy out there – the one responsible for employing most Americans.

Unemployed people cannot engage in commerce. Consumer spending is supposedly 70 percent of our economy. That’s a much simpler equation than the ones the Harvard MBAs were using to justify over-leveraging their businesses.

I suppose the wealthy one percent can keep dancing on our grave but in the end, they’ll fall into it too….

By: CBS from the West

CBS from the West — Sun, 19 Jul 2009 15:42:33 +0000

Yes, but. Your final paragraph suggests that you believe that the reason we don’t see any real change is because the outrages are not quite big enough yet, that there is some threshold that we have not yet exceeded but well might in the near future.

I hope you’re right, but I fear you are not. I think the level of corruption that is endemic and systemic in our political system is so high that no level of outrage will move it to do the right thing(s). The richer the financial industry gets, the more influential it will be with its government cronies. Yes, the Congressmen will all grandstand–but behind the scenes they will still enact only the legislation their masters allow them to. Maybe a cosmetic reform, if that.

By: anne

anne — Sun, 19 Jul 2009 14:39:28 +0000

HERE HERE STATS GUY!

You say it well….

By: Steve

Steve — Sun, 19 Jul 2009 04:48:33 +0000

Because when someone has a 10% to 15% market share it is hard to argue they are a monopoly…..

By: Steve

Steve — Sun, 19 Jul 2009 04:45:18 +0000

I am sorry, but you don’t get to dismiss the most important point with a parenthetical…”Of course, they can still argue that banking is a global industry with many competitors (some of which are even bigger, with more state assistance, promising much craziness in the years ahead).”

This is a huge issue. Finance, whether you like it or not, is a global industry, and one in which we had a significant competitive advantage. Compare todays league tables to those of a few years ago – just replace citibank with GM and CSFB with toyota and you get the idea. Those who advocate breaking up these firms are channeling the management of GM in the 1070′s.

By: StatsGuy

StatsGuy — Sun, 19 Jul 2009 01:29:26 +0000

I don’t know that many people on this website blame Paulson for pulling out the stops to keep the world financial system intact.

I think the real anger comes from the fact that for decades here is an individual that aggressively strives for deregulation, and defends the tremendous profits in the financial sector as proof of the efficiency of the free market system. Famously, he stated that 20% of people contribute 80% of “value” in most firms… Implying that the distributional inequities are driven by the fact that most people are simply less valuable than the small handful of high earners…

In other words, the financial system earns amazingly high compensation because it DESERVES it – that it really is contributing some amazing factor to national productivity.

Yet when the market finally unveils the financial windfall for what it is – a very sophisticated ponzi scheme that is taking extraordinary risks on leveraged money – the government absorbs the downside, thus discrediting the entire argument.

Those who earned their millions, or billions, in finance over the last 20 years simply did not deserve it. Period. They earned it not by virtue of contributing to national efficiency by allocating capital so well. They did not even earn it through extraordinary skill at seeking (unproductive) rents in an unbiased free market.

They earned it by seeking rents through political power in a rigged game.

I’m sure most people would agree that:

- Paulson did a pretty bad job

- Paulson _could_ have done an even worse job, so maybe we should be “thankful” he didn’t

- Paulson is a hypocrite and an extraordinary crook

On the issue of big-banks, a lot of people wanted to see them go down because they _deserved_ it. We swallowed out pride, but now what do we get from Goldman?

A swift kick in the teeth…

I really, trully, sincerely hope that Goldman continues to blow the roof off of compensation at least through this December. I hope they do even better next quarter. So that when the legislation gets written after the Congressional Recess, every committee member gets their chance to grandstand. Maybe we’ll get some financial regulation with teeth.

By: Carol

Carol — Sat, 18 Jul 2009 21:55:09 +0000

“We put up with a lot from our banking elite in this country, but historically we draw the line at financial power so concentrated it can confront the power of the President.”

We may have drawn a line historically, but not anymore. A President who empowers Geithner, Summers and Emmanuel is not in confrontation with financial power, but is instead its facilitator.

By: Paul Handover

Paul Handover — Sat, 18 Jul 2009 19:40:46 +0000

Simon, your response?

By: some-gut

some-gut — Sat, 18 Jul 2009 19:40:40 +0000

social networking sites is the only way to organize efforts, talking to elected officials in ineffective against entities with deep pockets and vast political/media influence. start a facebook campaign (must have simple and catchy name) directed at e.g. goldman sucks. start expanding people numbers. all efforts mirrored to other sites: hi5, myspace, bebo, orkut and twitter. prepare simplified distribution material: publications, posters, video clips, songs and every possible medium of information. brainstorming will produce hundreds of smart ideas. once the awareness phase is mature enough then starts the “lobbying” in the streets

By: anne

anne — Sat, 18 Jul 2009 19:27:06 +0000

Personally, I think we need to rid the world of “shadow banking.” If we are investing other people’s money, there needs to be regulatory controls over it.

It was also my understanding that we loosened controls on banking, setting up the crisis of today, when we said good-by to Glass-Steagall. Not sure why this was done during the Clinton Adminstration, but if the effect was to establish unregulated banking, perhaps we need to consider implementing a new millennial form of this.

Profit is fine – what I most object to with this crisis is that profit was made taking unreasonable risks with other people’s money. When the risk didn’t pan out, the government stepped in with the TARP to save the day.

No consequences for those who engage in the risk. But plenty of consequences for those of us outside of the shadow.

By: Per Kurowski

Per Kurowski — Sat, 18 Jul 2009 19:04:42 +0000

The root of our current problems lies in that the financial regulators decided they could arbitrarily meddle with the risk-allocation mechanisms of the markets. The regulators tax with large but still acceptable capital requirements anything that in the eyes of the credit rating agencies could be deemed as risky, and subsidize with extremely small capital requirements that the credit rating agencies hold carries low risk. For instance, when lending to AAA borrowers, the banks are authorized to leverage their capital 62.5 to 1.

How do we fix it? Clearly by ordering the financial regulators not to intervene in this way. And also by starting to think about what the real purpose of the banks should be. That has not been on the agenda for decades.

And no you do not have to apologize I do criticize Simon Johnson for focusing on the bad bankers and refusing to take up the issue of the regulators being wrong (and again not because they sold their souls to bankers).

By: Paul Handover

Paul Handover — Sat, 18 Jul 2009 18:45:37 +0000

Per, how great to have someone of your stature contributing.
Many of us who comment here must feel, as I do, that our in-depth knowledge is woefully deficient but, instinctively, we know that something is badly wrong.
But let’s not criticise the spirit of what SJ/JK are doing (that’s how I read you, apologies if wrong).
You, clearly, have an important insight. What are your recommendations?

By: EmilianoZ

EmilianoZ — Sat, 18 Jul 2009 18:26:41 +0000

Taibbi’s piece about Goldman Sachs might be “sensationalist”, but I wouldn’t dismiss it altogether just for that. The article is replete with facts, true accurate facts that can be checked. All those facts obviously do not amount to to Taibbi’s provocative claim that GS is the source of all evil, but those facts deserve a good hard look. Nobody’s really objective, you need to separate the facts from the rhetoric.

Taibbi’s article can be found here:

part1:
http://contreinfo.info/article.php3?id_article=2774

part2:
http://contreinfo.info/article.php3?id_article=2775