Banking Under the Dodd-Frank Act

By Simon Johnson

President Obama’s signing of the financial reform bill yesterday does not end our intense debates over banking – rather it just moves them to a new sphere.  Instead of arguing about legislation, the next arena is the action (and perhaps inaction) of regulators.

Those pushing for more effective regulation of the financial system are looking for progress along three potential dimensions.  The first two – raising capital standards and appointing new regulators – are the most discussed, but powerful interests are blocking real change.  The third – tougher and smarter congressional oversight – holds great promise.

First, on key issues – such as capital standards – there could theoretically be a breakthrough in the so-called Basel Process of international negotiations, e.g., in the run-up to the November G20 summit in Seoul.  Some senior US administration officials continue to make bullish off-the-record remarks, but Sheila Bair is sounding a much more cautionary note.  And European participants continue to emphasize that Germany does not want a significant increase in capital for its banks. 

The baseline view here must be that the “lowest common denominator” approach will prevail.  This was the consensus at last week’s Future of Finance meeting in London – not at all encouraging.

Second, the easiest way to signal commitment to real reform would be for the Obama administration to appoint strong new regulators, with the head of the just-created Consumer Financial Protection Bureau representing the most important symbol of any new reality.

The front-runner for this job has long been Elizabeth Warren – distinguished Harvard law professor, chair of the congressional oversight panel for TARP (the Troubled Assets Relief Program), and thorn in the side of financial companies with abusive practices.  In fact, there are many people who supported the banking reforms under the assumption that Professor Warren would get this job – and start the new agency down the right road.

Unfortunately, in remarks earlier this week, Senator Dodd – the outgoing but still powerful chair of the Senate Banking Committee – appeared to rule out Warren.  His wording was indirect – implying that she could not be confirmed – but his meaning was clear.

The statement was all the more striking because Warren enjoys a good relationship with leading Republicans, in part because they like her toughness in the TARP oversight role.  For example, Senators Bennett and Corker – both members of the Senate Banking Committee – praised her work last September, and Senators Snowe and Grassley have also been supportive in the past.   The initiative to block Warren appears to be coming largely from figures on the Democratic side.

All of this suggests it would be excessively optimistic to presume that more effective people brought in to run regulatory agencies any time soon.

The final way in which regulation could actually make progress would be through continued congressional pressure.  It is slightly too early to discern the exact contours of what may be possible, but early discussion suggest we will see established a series of revealing oversight hearings in both the House and the Senate.

Just as the chairman of the Federal Reserve Board appears at regular intervals to explain and elaborate on monetary policy, the chair of the Systemic Risk Council (i.e., the Treasury Secretary) may soon be appearing to discuss the level and determinants of risk in the global financial system.  This is a central concept for the Kanjorski Amendment, the radical language within the Dodd-Frank Wall Street Reform and Consumer Protection Act that gives regulators the right and the responsibility to break up big banks when they pose a “grave risk” to the financial system.

Such congressional hearings could become a vague or meaningless discussion, of course.  But the early indications are that there is likely to also be a great deal of substance, e.g., about new methodologies, global developments (such as in China), and even incidents when major firms with “state-of-the-art” risk management systems manage to lose a great deal of money (e.g., as with Goldman Sachs’ equity trading in the last quarter).

For a foreshadowing of the discussions to come, take a look at the hearing this week of the Subcommittee on Investigations and Oversight for the House Committee on Science and Technology.  The focus was on macro models (e.g., start with Robert Solow’s remarks; he is always clear and to the point), but you can see where this is going.

Smart members of Congress will do very well for their constituents – and for themselves – if they pursue these analytical issues hard.  No one is happy to just “leave it to the experts” in the Fed or the Treasury – let along the private sector, particularly big banks. 

The most cherished notion of Alan Greenspan was probably that the private financial sector will figure things out, and should be left alone as much as possible.  It is hard to find anyone today who takes this view seriously. 

The issue now is to find legitimate and effective means of congressional oversight, pushing regulators hard to do the right thing: Question Everything.

An edited version of this post appeared this morning on the NYT’s Economix; it is used here with permission.  If you would like to reproduce the entire piece, please contact the New York Times.

169 responses to “Banking Under the Dodd-Frank Act

  1. Everything? Not a problem.

  2. See http://www.rollingstone.com/politics/matt-taibbi/blogs/TaibbiData_May2010/96727/83512 for a nice explanation of how the senate ‘works’:
    “The reason very few real reforms ever get passed is simple. If a particularly dangerous amendment with real teeth (like, for instance, the Levin-Merkley amendment partially restoring the Glass-Steagall act) looks like it has a chance to get 60 votes and override objections, the leadership can kill it simply by not allowing it to get to a vote.”
    “On the other hand, if senators like Ohio’s Sherrod Brown and Delaware’s Ted Kaufman bring the leadership an honest and promising reform like their Brown-Kaufman amendment mandating the breakup of too-big-to-fail companies, the leadership can do an informal head count, determine that the votes aren’t there to get the thing passed, and let it go to the floor to get beat (which it did, 61-31, with 27 Dems voting against). Thus you get the appearance of a democratic process — but reality is that if Brown-Kaufman had the votes to pass, it probably wouldn’t have gotten to the floor in the first place. The whole show is a kind of political kabuki theater.”

  3. Chris & Barney were part of the problem with Fannie & Freddie. So how could they be the ones to fix it?

    http://americaspeaksink.com/2010/07/naacp-the-angry-black-man/

  4. All eyes are watching…if Elizabeth Warren is not picked to head up the Consumer Financial Protection Bureau we will need no further evidence that neither this administration nor congress is serious about financial reform. This woman was born to head up this bureau and she is so much the obvious choice.

  5. Ms Warren will NOT be picked. Obama is not going to alienate a pillar of his administration by sticking his neck out to curry favor with a weakly organized voice. Consumer protection versus big business is a no-brainer for him. You need this ‘showdown’ to tell you where this president’s head is at?? He staffed his administration’s top posts with Wall Street and establishment insiders. The only change we got from this poseur is stylistic. Sorry for our mutual disappointment.

  6. Since they refuse even to make an issue of it, I must presume that both Simon Johnson and James Kwak feel it is perfectly ok that those companies with good credit ratings and that because of that are already benefitting from paying much lower interests rates, should be furthered benefitted by allowing the banks lower capital requirements when lending to them, while the small businesses and entrepreneurs who already pay higher interest rates because they are perceived as risky should be further punished in relative terms by requiring the banks to hold higher capital requirements when lending to them. I hold that to be utterly wrong.

    And all that even though through history cannot find one single bank crisis that was caused by the excessive lending to clients perceived as risky… even the Dutch tulips in their days would have rated AAA.

    For the umpteenth time, more than the general level of capital requirements, it was the “risk” discriminating capital requirements that caused the crisis… as the regulator increased disproportionately the incentives for the banks to go AAA hunting.

    The best way to stop the too-big-to-fail is to require the banks to hold the same percentage of capital for any type of assets and then let the market do the risk clearing instead. That would allow the smaller community type banks to compete.

    But then again on capital requirements the debate then goes back to the Basel Committee and these might be the old chaps of at least Simon Johnson… and who does not seem the least surprised that Congress has outsourced to Basel the overall important issue of capital requirements.

  7. Better, intriguing article: http://www.washingtonpost.com/wp-dyn/content/article/2010/07/16/AR2010071603732.html?hpid=topnews

    Elizabeth Warren “would be one of the great candidates” [to lead the consumer agency] says Lawrence Summers; be careful what you wish for, says Treasury Secretary Geithner. No data at the moment to support double-dip recession imminent, says leading economists.

  8. I wish I could be as confident as Simon in believing this bill will make for a significant change of direction, but to borrow a term from a great television commercial, not matter how much lipstick is placed on this pig, change will be metered in minute steps at best while still leaving the tax payer as the ultimate lender of last resort while banks that should be allowed to fail will not.

    It’s a new world, America, and you’d better get used to it – we were sold down the river on a slow boat to China long ago and we’re only just beginning to feel the first effects of waves that wash back to our own shores. The people who own the media don’t want CHANGE. Things are going exactly according to plan and the old money crowd is playing a long, patient game and they already have most of the chips – the last thing they want is people questioning the system. As many would say, the more things change, the more they stay the same.

  9. Lavrenti Beria

    “The third – tougher and smarter congressional oversight – holds great promise.”

    Let me ask you a question, Simon. Do you think that “congressional oversight” when it comes to banking will be any more efficacious than it has been to blunt the power of The Lobby in the matter of trying to provoke war with Iran? The legislature of the Peoples Republic of Bulgaria in 1948 had about the same level of “tougher” and “smarter” oversight of things in that nation then as our does now. Why would there be any hope of oversight when you are dealing the same kind of lice, the same type of criminal in both cases? Congress, as things stand now, is more an infestation that an institution, and it will continue to be so. Participation in elections has become devoid of meaning. Only massive public demonstrations and the general stike have any promise of working the peoples’ will.

  10. The belief that regulators are going to do anything useful for anyone other than the uber-rich and their political and business allies is totally preposterous.

    The regulators were captured a while ago, and they remain that way today.

  11. It feels like a shark feeding frenzy and the Dems want to get out of the pool.

  12. Pretty much in agreement.

  13. Lavrenti Beria

    “You need this ‘showdown’ to tell you where this president’s head is at??”

    And she’ll probably vote for him next time out. :-)

    The excitement over Warren, while feverishly elevated among the non-profit and academic brie and Chardonnasy set, is utterly stupifying to me. She left the hearings a pitiful, quivering mass and, despite all of the posturing on PBS, caved and agreed to the compromise that eviscerated the agency she so obviously seeks to run. Warren is a wuss and is a sop to the types that run the League of Women Voters. Already, Obama, through leaks and the statements of others, has pistol whipped this little mouse. The agency she covets will have all the power of an opposition party in the former German Democratic Republic no matter who runs it.

  14. We should thank our lucky stars for Matt Taibbi.

    Let’s get real. A body composed of an equal number of members from Alaska and New York, Montana and California, … is not all that equitable after all. Yet the Senate carries the bulk of the weight in Congress in comparison to the House of Representatives. They’ve got the influence and they get the (lobbying) dollars because of the arcane rules that allow individuals to manipulate the process. That’s obvious and Taibbi fills in the details for us.

    It’s safe to say that we won’t be reworking the Constitution anytime soon. Societies have this thing where they harden over time, giving near religious status to their institutions. We’re there.

    What we can do is get the damned rules changed. There are attempts at just that, such as eliminating secret hold which is pure crap. That’s a start only.

  15. Willian C.Black’s take on FinReg is worth a read:
    Why the financial reform bill won’t prevent another crisis
    http://money.cnn.com/2010/07/18/news/economy/finreg_law_incentives_bill-black.fortune/index.htm

  16. Simon’s remarks here and James’s on the previous post display a scarily ill-founded optimism. This is a terminal disease that America is busily exporting to the rest of the world, see the following Barbara Ehrenreich video (stay with it – it packs a punch)

    http://vimeo.com/10454695

    Let’s see if it will embed

    Barbara Ehrenreich – On Optimism from The School of Life on Vimeo.

  17. Yes, this society has become fossilized.

    That’s why nothing, including the Senate, can be “reformed”. It’s simply impossible within this system, which is a terminal kleptocracy.

    There will never be another significant worthwhile action out of the Congress under this system; indeed most actions will be reactionary assaults like the health racket bailout.

    That’s why gridlock is probably our best bet, while we try to start a real anti-system movement completely outside the system.

  18. The reality of any legislation – especially one this weighty, over 2,300 pages! – is that the laws and regulations themselves won’t stop wrongdoing, but rather the fear of the law will hopefully change the culture inside financial institutions to start acting in a different and better way. Sarbannes-Oxley had that effect.

    The Dodd-Frank Act will help prevent another financial Armageddon. But it cannot prevent future recessions. That’s part of the deal with a free market.

  19. I have to agree with your harsh but accurate assessment. You remind me Kliment, another astute observer who occasionally posts here. I came across an interesting assessment of where the U.S. economy stands today at Jesse’s cafe [http://jessescrossroadscafe.blogspot.com/]. The excerpt relevant to this thread follows:

    “…on one point that gives me much room for thought, and that is the enigmatic president, Barack Obama. His appointments have often seemed eccentric, especially for someone who was elected on a wave of reform sentiment. He largely threw his mandate away in the first year on the very controversial health care reform bill that pleased almost nobody, and was obtuse in its requirement for individuals to purchase private health insurance from monopolistic health management corporations.

    But his seeming obsession with trying to teach the seasoned politicians (whoremasters all) of Washington how to act in a bipartisan and selfless manner, as if they would take the least guidance from such a relatively inexperienced upstart, seems designed to fail. It is becoming increasingly difficult to take Obama seriously in matters of reform.

    The sad part is that as bad and ineffective Obama and his cronies may be, the same and more can be said of the opposition Republican party. Some people are retreating into mere partisanship these days because they cannot deal with the uncertainty of the situation, but the sad truth is that America is lacking in leadership capable of uniting the people except through greed and fear, a dangerous cocktail in troubled times.

    The US has a range of serious problems, but the greatest of these is political reform, and the return to Constitutional, rather than corporate, governance.”

    http://jessescrossroadscafe.blogspot.com/

  20. Lavrenti Beria

    Why yes, you must mean Kliment Voroshilov, an very old friend, who shares much of my point of view. Thanks for you kind words, Tabasco, and for the interesting entry at Jesse’s Crossroads Cafe to which you point. Very best regards.

  21. Oh Simon, you’re such a card:
    “Second, the easiest way to signal commitment to real reform would be for the Obama administration to appoint strong new regulators….”
    and then:
    “The final way in which regulation could actually make progress would be through continued congressional pressure.”
    Stop it – you’re killin’ me!

  22. John Bogle, a very wise man, had this to say:

    http://www.huffingtonpost.com/john-c-bogle/financial-reform-will-it_b_656043.html

    Or, as Pogo said, “We have me the enemy, and he is us.

  23. That’s a very dismal review of the FinReg. Unfortunately, Black is usually right on the money. I need a drink…or several.

  24. Lavrenti Beria

    Russ,

    I think it was Wendell Phillips who said, “Revolutions are not made; they come.” I fully suspect that when the peoples’ moment arrives it will come quite unexpectly, spontaneously, as if out of a whirlwind. And what it will bring will have no resemblance to Tea Parties, or Elizabeth Warrens, or anything else in place at the present time. There will be a cleansing with arrests and public trials for today’s criminals and enablers. And there will be new structures made impervious to the corruption of the past. Things will be built from the bottom up, not the top down. And there will be no more aggressive war on behalf of foreign interests. There’s much promise here.

  25. Simon J Needs an Internship

    Please, Please Please, don’t let the debate stop!! I need my book to sell more copies!! Ha Ha. Are you serious?

  26. Will someone please open the cage and let the American people rise-up, already. Somebody captured them and robbed them of their human rights.

  27. “Banking Under the Dodd-Frank Act”: Lucrative. For the bankers. Just like before the Dodd-Frank Act.

  28. Jeff Simpson

    I would remind those especially steeped in cynicism that Glass-Steagall took four years to pass, so based on that timeline we should withold judgement on the inaction of Congress. At least the midterm election will change the character of Congress and, with an influx of outside-the-beltway Washington outsiders (Tea Partiers and others, hopefully less dogmatic), we may see the additional strengthening of appropriate legislative efforts.

    And if that fails, there is always the Second Amendment on which we can rely. The prevalence of gun ownership may well serve as a powerful catalyst for change when debt peonage gets to the tipping point and the insanely sane finally can’t take it anymore.

  29. ” there will be new structures made impervious to the corruption of the past.”

    This means educating and monitoring a new class of administrators. True transparent lives, conducted in the public eye. Unfortunately or not this also probably means a transnational government to prevent legal arbitrage.

  30. Jeff Simpson

    Sorry, Glass-Steagall of 1933 took four years from the 1929 crash (I don’t want to imply it was debated in Congress for four years).

  31. 4 years from 1929.

    How long after Roosevelt was sworn in?

  32. Anonymous, too

    Let’s see….signed into law on June 16, 1933, FDR came into office first week of March, 1933 (under the old transition calendar), so that would be, say, three months?

    Or we can just say 13 Weeks to make James and Simon happy.

  33. Bayard Waterbury

    On the theory that half a loaf is better than none, many are touting the success in BHO’s signing of the 2300 pages of financial plutocratic toxic waste. What we got is a quarter loaf of stale, moldy, inedible bread, with lots of half-baked solutions to fully baked scams. Nah, EW, much to my chagrin, in all probability will not be nominated to chair the CFPB. In all likelihood, the Systemic Risk Council will carry a big stick and walk the other way in the face of damning evidence. In all likelihood the plutocracy will continue to filch Americans disgracefully ad infinitum. Kabuki is what it all is. A few nice press moments, and on with the show, largely behind the curtains, with a small group of elites ready to provide cheering and standing ovations to the mega-rich plutocrats. Ultimately, as this fine and beautiful country falls away to a wasteland of no opportunity, great poverty and ill health, I will just watch with jaw dropped as once again the plutocrats place our fingers on the trigger and point our weapons at our own feet. This is truly the unveiling of the Great American Tragedy, when we are more interested in the latest news craze (poor Miss Shirley) and rightfully putting a hurt on BP for its own role in this stage of our disasterous fall from greatness.

    I love Simon and James, but you guys, who have blogged so tirelessly for optimal financial solutions, need to now face facts. You failed, but then, from the beginning, you had no chance. Thanks for trying, it means so much to those of us who care about real outcomes more than economic arguments.

  34. “The Mouse That Roared” is a 1960s movie.

    It’s a whimsical treatment of the absurdity of man’s attempt at omnipotent power over “little people” through the destructive forces of fear, hatred, greed, and revenge and the products those forces manufacture for “commerce”.

    Just a different way to view “consumer protection”.

  35. Yes, that’s how it usually happens, spontaneously (after a long buildup of pressure) and at a moment no one’s expecting it.

  36. ‘“The Mouse That Roared” is a 1960s movie.’

    Strictly speaking, a wonderfully wacky 1955 novel with a 1959 movie adaptation that distorted the original intent but had its own admirers.

  37. “tougher and smarter congressional oversight” !! Sure, building on their already established track record – a la Frank and Dodd!! Actually, such oversight might involve one or both houses of Congress with Republican majorities. Given the lack of Republican support to the legislation, such oversight would be interesting. But keep up the good fight, Don Quijote de la Mancha!

  38. saving jobs the old-fashioned way :-)

  39. I suggested “The Mouse That Roared” years ago in a Wash.Post. comment about the rational for Afghanistan, a broke county needing cash. They’ve got a ton since.

  40. @Del…(Don Quijote de la Mancha!).
    You’ve got to admit this blog is fun.

  41. Jeff Simpson

    Ok, so maybe the point is that Obama isn’t the guy who’s going to get it done. Perhaps in the next presidential election the Republicans win back the White House, and then things will likely go further south, at which point, in 2016 or so (with a 2017 inauguration), meaningful reform may be implemented.

    So it’s only about 6.5 years away. Can we all tread water for that long?

  42. Indeed, hermanas, 6000% increase in drug production since 2001 – giddyup Wells Fargo – we’re feeling no pain

  43. TonyForesta

    “The most cherished notion of Alan Greenspan was probably that the private financial sector will figure things out, and should be left alone as much as possible. It is hard to find anyone today who takes this view seriously.” Let’s hope so, Mr Johnson. What I see is “a den of vipers and thieve’s”, sociopaths, criminals, supremists, and fascists; vicious packs of predators delirious with insatiable greed, perverted dominance pathologies, and control of imponderable wealth. This structure and toxic tentacled squid, is a direct threat, and dire danger to the wellbeing of the poor and middleclass. The predatorclass is the arch enemy of the people, and a destroyer and devourer of the peoples resources and best interests. We sheepishly tolerate the brutal savaging of our hopes, and the ruthless robbing and pillaging of our resources, our incomes, our homes, our standard of living, our education and healthcare systems, our dreams of higher education, – and the predatorclass exclusively and unrestrained exalts in their sordid triumphs and various heists and systemic criminal activity, control of imponderable wealth, and so governments.

    We go like moths to the flame…Or not

    “When they come knockin on your door, – how you gonna come? With your hands on your head, – or on the trigger of a gun?” The Clash

  44. Simon Johnson “The most cherished notion of Alan Greenspan was probably that the private financial sector will figure things out, and should be left alone as much as possible.”

    If so what a curious way of “leaving someone as much alone as possible” telling the banks that their capital requirements depended on the opinions of some credit rating agencies and the discriminating risk weights that were arbitrarily set by some of Simon Johnson’s pals in the Basel Committee.

    Can’t you hear the Joker speaking to you?

    “The mob has plans, the cops have plans, Basel regulator’s got plans. You know, they’re schemers. Schemers trying to control their worlds. I’m not a schemer. I try to show the schemers how, pathetic, their attempts to control things really are.

    It’s the schemers that put you where you are. You were a schemer, you had plans, credit rating agencies and risk weights, and uh, look where that got you. I just did what I do best. I took your plan and I turned it on itself.

    Look what I did, to this city with a few triple-A ratings.”

  45. It’s just a heat wave. Drill baby drill …

  46. Re: @ Tabasco____”The estranged world in which we all live in by virtual default – the Polythesistic Syndrome?” Raising Past Capital & Appointing New Regulators – all Predicated on Tougher/Smarter Congressional Standards! Ref:http://worldfocus.org/2010/02/12/week-in-review-debt-crisis-in-greece-and-irans-nukes/9681/____#3 post,…PS. Eight (8) Years or “BUST”? (no holds barred, period)

  47. google @ Week in Review:Debt crisis in Greece and Iran’s nukes

  48. Lavrenti Beria

    Uncle Billy,

    “This means educating and monitoring a new class of administrators”

    The new structures will develop from the bottom up. They will not have the character that the present ones do what with policy originating at the top and requiring administrators. Haven’t we had quite enough of that?

  49. Simon, would it be possible to outline over a few postings the time lines of effective regulation? Agencies need to be set up. Staff needs to be expanded or hired. Those mandated studies must be done. Each regulatory segment needs to formulate regulatory policy to be used in drafting regulations. The regulations need to be formally proposed. The proposed regulations will have a commentary period. The Commentary must be digested. Any changes in proposed reulations must be announced. At last, the Regulations will be promulgated. Then, the staff can start selecting what parts and parties the regulations will be enforced against first. Those under the thumb can litigate.

    What kinds of time lines willo emerge here as well as policy interpretations of the statute?

  50. Re: @ TonyForesta___”Blinded by the Right` – dressed up as the Left` for the Citizens Delight` – feasting on the Hind` is what I’m doing tonight”

  51. Wibberly also wrote “The Mouse on Wall Street” (1969, William Morrow), a sequel to “The Mouse that Roared” – might be interesting to check out.

  52. The U.S. will do whatever it takes to keep the dollar from sinking. Continuing to subvert the Euro and another military adventure are definitely on the horizon.

    http://tarpley.net/2010/07/22/obama-preparing-to-bomb-iran/

  53. OMG! I’ve discovered a most interesting candidate to replace Chris Dodd in the Connecticut senate race. A self-described Tea Party Democrat his name is Warren Mosler. He gets respect from Ritholz, Bill Black, James Galbraith … and even Fox Business New (?)

    http://www.ritholtz.com/blog/2009/10/payroll-tax-holiday/
    http://moslerforsenate.com/?page_id=133
    http://moslereconomics.com/2010/06/23/fox-video/

    Now I need to figure out what MMT is. Fascinating.

  54. “Warren is one of the rare individuals that understands money and finance and how the Treasury and the Fed really work … He is fiercely independent in thought and deed.” — William K. Black Associate Professor of Economics and Law, University of Missouri-Kansas City

    On Warren Mosler’s three proposals to fix the U.S. economy, Barry Ritholtz writes: “These are … fundamental, proven, bottom up solutions that reward that vast majority of Americans that work for a living and struggling to make ends meet.”

  55. Exclusive: How is it that the “Basel Committee” is so powerful, and influential regarding “Monetary Policy” in what we percieve as a “Flattened Globe”? Could you please ellaborate if possible on this uniquely (?) quasi-apotheosis. PS. Thanks Simon, and James for the “13 Bankers” – please “Never Stop the Good-Digging for America’s Sake” Mr. Earle.

  56. I’m not a moth, nor a mouse :-)

    From the most censored book on the planet, “Mechanists – humanists – tend to drift with the material currents.”

    Everyone needs to stop freaking out.

    All we need to melt the predator class’s psychobabble “power” like the water evaporated the Wicked Witch

    is to get that Declaration of Independence 2010 in place and issue new currency.

    Money still remains symbolic of other “stuff”. It’s only in your imagination that is an omnipotent power created by creatures with hair on their backs claiming “god” told them to “rule”! LOL

    Of what USE, and more importantly, of what VALUE,

    is it to YOUR life – money as a symbolic currency of all other “stuff” on the planet (food water shelter medicine)

    besides OIL

    (and if you’re hooked on OIL – how about olive :-))

    if war lords and drug lords (sociopaths, criminals, supremists, fascists, predators, etc. etc. etc.) are using “money” – stolen and made-up – to conduct “commerce” ONLY in certain ways – weapons, narcotics, oil?

    C’mon. Currency is needed for “micro-economies”.

    YOU want to kiss the a– of the freekin’ psychos for what they DON’T have – a PLAN for living? They just have the “cash” and will NEVER part with that “power”. They are HAPPY to watch suffering. They are NUTS. Get it?

    LET’S MOVE ON.

    And, yes, we are not going to get “justice”. Currently there is no institution of government that is capable of either KNOWING what justice is, much less capable of protecting it and delivering it on behalf of “victims”. We are TOTALLY on our own there – ala “Murder on the Orient Express”…of course, the Patriot Act expects their high tech secret shenanigans to protect the carcasses of the predators from “populists”….so far it’s working…but OBVIOUS now that they have openly declared the Declaration of Independence null and void as an “organizing” ideal for the new world order that is

    privatizing tyranny

    and socializing nihilism

    just like the “economy”…no?

    Where are the Klingons when you need them :-)?

    We need to water the micro-economy instead of deconstructing into ever smalled micro cults of “politics”.

    Mono cause extremists hurt everyone. The FED fits into that category…

  57. The bill is a joke without “clawbacks”…

  58. Lavrenti Beria

    Hi Bill!

    Yeah, The Lobby has really been at it lately with its usual warmongering and its intimidation and smearing of those that oppose them. This week its everyone from Stephen Walt to Glenn Greenwald that’s being tarred with the tired but no less scurilous charge of anti-Semitism:

    http://walt.foreignpolicy.com/posts/2010/07/21/the_problem_with_judging_a_blog_by_its_commenters

    These are the tactics of brownshirts. No less so,
    these are the foreign policy objectives of brownshirts. But they own the Congress and to a degree even greater than that enjoyed by the banks and pharmaceutical companies. They’ll have us in a war with Iran and soon, trust me. One day the people will have these vermin in lock-up ready for public trial. They’ve had enough of having their foreign policy orchestrated by people with dual loyalties, that use bribe money, threats and smears.

  59. I read that Germany that has the strongest euro value also has local currencies http://news.bbc.co.uk/2/hi/6333063.stm, can we do this?

  60. Re: @ Annie___We’ll said as usual – and here’s a tune that “Rings of Certain Timely Officialism` Fashion?”____google@ Pink Floyd (Utube) “Brain Damage Eclipse” /mrfloyd93 :-))

  61. Goldman reveals where bailout cash went

    3h 30m ago – USA Today – excerpts

    “Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.

    Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

    Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”

    He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

    Grassley said he was reserving judgment on the appropriateness of U.S. taxpayer money ending up overseas until he learns more about the 32 entities.

    Goldman had not disclosed the names of the counterparties it paid in late 2008 until Friday, despite repeated requests from Elizabeth Warren, chairwoman of the Congressional Oversight Panel.”

    http://www.usatoday.com/money/industries/banking/2010-07-24-goldman-bailout-cash_N.htm

  62. Can they still steal? :-)

    It’s illegal, according to the DOI and Constitution and the Amendments to use our military to protect foreign nations with USA citizen’s taxes and to build other nations with USA taxpayer money.

    The way they get around it is with Puff the Magic FED – by sticking USA taxpayers with the interest on the loans (would YOU take out a loan from a war lord or drug lord?) that they took out to protect and build other “little” countries and by dismantling and shipping whole industries to “big” countries with slave labor – global commerce.

    “Local currency” is how the “strong” people behind the Iron Curtain survived the JOKE that was the theoretical “communism” economy. One cannot be surprised that people do NOT want to give up the only “currency” that they know will kept them alive. Note that infrastructure is still shabby because it is privately owned (slum lords) and euro-only funded. No global “profit” in private infrastructure so it will never be fully funded, much less advanced, like when “religion” and government funded centuries-long projects like the Louvre Museum…

    When is the FED moving to where they shipped everything from the USA out to – factories, crates of cash, computers, etc.? (And all we got in return was CRAP at WalMart – who sold USA for trinkets?!)

    A couple billion Chinese and Hindi should be more effective than a bunch of fat and stupid Americans were in getting tossed into the circular firing squad of the Middle East…how stubborn is “God” to want his castle in Jerusalem? Scheesh, with galaxies galore as real estate :-) – indeed the “lord” works in mysterious ways…but then again, maybe he’s got THE LOBBY…?

  63. The idea of a society becoming fossilized is interesting. Historically, we look for the grand defect, the overwheming moral, economic, or other fatal flaw that destroys a society.

    But perhaps it simply a process of underwhelming fossilization …. the loss of vibrancy and energy that dissipates the vital life force, until the whole thing slowly passes into irrelevancy, overtaken and overwhelmed by more vibrant systems.

  64. ” Somebody captured them and robbed them of their human rights.”

    Yes….Xtreme Fighting, Dancincing With The Stars, Fox Network, etc.
    But once they surrendered, they’ve remained content and docile.

  65. OK, but how do you feel about Bankers?

  66. I’m really very interested in obtaining a job in the new Regulatory Agency.

    I’ve submitted my name for consideration to Goldman.

  67. Kliment Voroshilov

    “The idea of a society becoming fossilized is interesting.”

    All of which makes the notion of mass demonstrations and strikes more compelling. To use a phrase of Adolph Hitler’s, albeit in an entirely different context than he’d used it, “one need only kick in the door and the whole rotten structure will come tumbling down”. This is the hope, acually, that present structures will have become so ossified that they will be unable to respond imaginatively to an authentic peoples’ initiative, that they will collapse of their own weight. And its not that there isn’t recent precedent for such a development.

  68. Do you know what you are saying? By “educating…” where in the world do you think all these “manipulators of derivatives” come from, from a far away galaxy? Check it out they’re coming from our beloved universities. You have a lot of curriculum to cleanup at these universities, LOL! Just leave Physics, Chemistry, Astrophysics, Engineering and NASA alone…puleese. Dump the rest we need to start anew in the other fields. Unless of course you all are just doing “lip service”.

  69. Melvin
    How about picking Ralph Nader…? He has always been a good advocate for consumers…. Heh heh heh too chicken, huh LOL

  70. Ah, Wilbur me thinks you’ve seen past the “American Myth” and you find yourself surrounded by “texting cabbage heads who have no idea who or what David Thoreau said and wrote…LOL

  71. TonyForesta, a little to violent for my thinking, how about next April 16 40 million Americans don’t pay their taxes and tell the IRS to come and collected. And by the way don’t pay and go to jail…LOL what a bloody nose for Congress…”Civil Disobedience…D.T.”

  72. As real estate appraisal professionals, we applaud the passage of a bill that has the chance to effect reform in the appraisal industry that has been so devastated by the HVCC in the last 14 months.

  73. We have a country and a globe to run and I don’t see these structures emerging with the capacity to manage life adequately. Describe them? Without the ability to educate and guide and vet and monitor upcoming leaders (and humans do need and gravitate naturally towards leaders) we’re dooming ourselves to allowing neverending, complete capture. I think you’re talking about grassroots somehow leading to an anarcho-syndicalist or similar world. They might let this happen to an extent just for the purpose of letting society self-organize and ripen itself for domination. But with a near total lock on “educated” minds through media both mass and seemingly independent, they can produce pretty much any outcome they desire. I think the outcome they’re shooting for currently is the one that results from bringing the world’s economies to their knees, generating widespread fear, letting socialist movements organize masses of people and then manipulating the leaders of these movements towards whatever the big endgame might be. That’s why it’s critical that we begin now to agree on basic principles, and then educate, vet, and monitor a group that will be tasked with upholding those principles. If we do this, we can cut out the dirtbags who seek to profit from our current mess. We can build our own new infrastructure. Put a high floor on poverty, put a reasonable ceiling on wealth and income, prevent power from snowballing to the point where it can buy the law. I don’t see these things happening organically.

  74. You can try the straight code with vimeo.

    It’s been my experience Mr. Kwak is very liberal with allowing commenters to put video up here on the site. That’s one of the reasons this site is so much fun. You know some bloggers get snobbish about multiple comments, but “baseline” really gives commenters freedom here, as long as you stay within the confines of decency and civilized behavior.

  75. A “tea bag candidate” with support from Bill Black and Ritholtz!?!?!?!?!?! I try to keep an open mind, but I smell a rat here somewhere. Gonna check this out later when I don’t have the lazybones. I supported the Hebrew Attorney General guy until he was claiming he served in Vietnam. Slimeball scum.

  76. Curious what you will make of Mosler.

  77. Here’s the link to Mosler’s platform. His health care proposal strikes me as very sensible :) He’s an original thinker. He owns a racing car company and part of his solution to the energy crisis is to reduce the speed limit to 30 mph. All very interesting.

  78. markets.aurelius

    “The issue now is to find legitimate and effective means of congressional oversight, pushing regulators hard to do the right thing: Question Everything.”

    http://www.gallup.com/poll/141512/Congress-Ranks-Last-Confidence-Institutions.aspx

  79. Dear Uncle Billy,
    This is why I believe we’ll see the J.P.Morgan solution; “hire half to kill the other half”. The per capita numbers will look a lot better.

  80. Exactly what they “feel” for me – nothing.

    And when I peer down my nose at them, my brain immediately starts to spew out thousands of words proscribing how “inferior” they are, thus protecting me and my ideas with a cloud of “perception is reality” – quantum consciousness.

    :-)

    Next up, a documentary and a statue to my greatness.

  81. @Annie,
    “A couple billion Chinese and Hindi should be more effective than a bunch of fat and stupid Americans…” Reminds me of a Mad Magazine cartoon in the 60′s where skinny orientals were running after and bayoneting fat Americans in motorized wheelchairs; like you see at Wal-mart today.

  82. Walking by a TV in a public space tuned in to a “news” channel has all the charm of walking the streets of Moscow or Baghdad or Houston :-) when one “ism” ruled all minds.

    A statue of the “Leader” everywhere you look.

    And no flowers :-(

  83. I stopped watching “Dancing With The Stars” until Tom Delay was voted off…one close up of his wiggling behind did more psychic damage than all those years of him as “leader” of Scum Bags Inc in D.C.

    so you’re right, Tom, control the visuals you let into your brain

  84. markets.aurelius quoted:

    “Question Everything”

    Prudent advice from a student of history with a sense of humor.

    http://en.wikipedia.org/wiki/Marcus_Aurelius

  85. Correct. That is why we need to start by questioning the regulators… who are exactly the same who got us into this crisis and who have not uttered a word about changing anything fundamental in their incredibly faulty regulatory paradigm.

  86. Re: @ Annie___An iconic company by the (hypothetically speaking?) name, “America’s (presuming there are thousands) Corporation” says it will cost them $5.0bn to build a new “State-of-the-Arts” plant in United States. The ironic and over-simplified answer from the US Gov’t would/should/could be…what can we do too help…simple, you’d think. Unfortunately however…ours (United States) is archaically calcified – solutions from the 19th century being postulated into the 21st century governments “IRS”, and tax laws via a turbid nostrumism system! Thus the alternative would be a “No-Brainer” (American Business’s are supposed to make money,period!) – because of lower taxes overseas I/We can build the same plant for $3.8bn (saving $1.2bn) which option would you choose? Lastly…all/most of the labor cost comparisons (comp’s) are 90%-75% cheaper in emerging markets which also give huge tax breaks on top of the other already gratuitous benefits (Note: labor is robotically automated throughout high-tech plants), a “Win-Win” for Amerca’s (poor) Business Owners, and a “Lose-Lose” for America’s (rich) labor force. The ultimate answers are quite easy/simple too rectify. President Obama said “Change”…that is change the static past into a fluid ,and dynamic current/future business (overhaul the entire piece of junk) situation – only…and I mean only, if the small business man is willingly able to sit down at the same table with the Big Corp’s (Cappo’s) for some meaningful,tangible, and constructive dialogue. We’ve got to stop shooting ourselves in the foot, period! :-))

  87. FT.com and redistribute by email or post to the web.
    @ Annie “Can they still steal? :-)”

    Just because of the discriminating capital requirements concocted by the bank regulators in the Basel Committee, the small businesses and entrepreneurs, on top of the higher rate they would anyhow have to pay, need to pay an approximately additional two percent interest rates in order to access banks credit when compared to the AAA rated favorites.

    If that is not robbing from the poor and giving to the rich what is?

  88. Lavrenti Beria

    Uncle Billy,

    All of what I have described above has presupposed the collapse of the present order. The “they” to whom you refer above “letting this happen” will already have been arrested by some peoples’ instumentality or other and will be facing public trial. Simultaneously, workers councils will have arisen with new structures based on them developing at several levels. You asked me to describe these structures. Here’s a Wiki piece that speaks to the essentials:

    “A workers’ council is the phenomenon where a single place of work, such as a factory, school, or farm, is controlled collectively by the workers of that workplace, through the core principle of temporary and instantly revocable delegates.

    “In a system with temporary and instantly revocable delegates, workers deliberate on what is their agenda and what are their needs, and mandate a temporary delegate to divulge and pursue them. The temporary delegates are elected among the workers themselves, can be instantly revoked if they betray their mandate, and are supposed to change frequently. There are no managers and all the decision power and the organization is based on the delegates system.

    “On a larger scale, a group of delegates may in turn elect a higher delegate to pursue their mandate, and so on till the top delegates running the industrial system of a state. In such a system decision power raises bottom-up from the agendas of the workers themselves, and there is not a decision imposition from the top, as it would happen in the case of a power seizure by a supposedly revolutionary party.”

    Note here, if you will, the specific rejection of a reliance on some vanguard political party; neither will the councils be simply extensions of labor unions. To the contrary, these new structures will be the direct consequence of popular will determined spontaneously and democratically and will be local in character. In the new environment, any idea of the pestilential lobby or of lobbying per se, so organic to present parliamentary practice, is obviated.

  89. Lavrenti Beria

    Uncle Billy,

    All of what I have described above has presupposed the collapse of the present order. The “they” to whom you refer above “letting this happen” will already have been arrested by some peoples’ instumentality or other and will be facing public trial. Simultaneously, workers councils will have arisen with new structures based on them developing at several levels. You asked me to describe these structures. Here’s a Wiki piece that speaks to the essentials:

    “A workers’ council is the phenomenon where a single place of work, such as a factory, school, or farm, is controlled collectively by the workers of that workplace, through the core principle of temporary and instantly revocable delegates.

    “In a system with temporary and instantly revocable delegates, workers deliberate on what is their agenda and what are their needs, and mandate a temporary delegate to divulge and pursue them. The temporary delegates are elected among the workers themselves, can be instantly revoked if they betray their mandate, and are supposed to change frequently. There are no managers and all the decision power and the organization is based on the delegates system.

    “On a larger scale, a group of delegates may in turn elect a higher delegate to pursue their mandate, and so on till the top delegates running the industrial system of a state. In such a system decision power raises bottom-up from the agendas of the workers themselves, and there is not a decision imposition from the top, as it would happen in the case of a power seizure by a supposedly revolutionary party.”

    Note here, if you will, the specific rejection of a reliance on some vanguard political party; neither will the councils be simply extensions of labor unions. To the contrary, these new structures will be the direct consequence of popular will determined spontaneously and democratically and will be local in character. In the new environment, any idea of the pestilential lobby or of lobbying per se, so organic to present parliamentary practice, is obviated.

  90. Lavrenti Beria

    Yes. The other day, I was in the waiting room of a doctor who is a department head at one of the nation’s best known and regarded clinics. There, blaring incessantly, was a large screened monitor tuned to one of the two major cable news outlets. One watches with a certain disgust the rapt attention so many give to these quasi “telescreens” almost expecting them to leap up and down at any moment applauding Oceaniana’s defeat of Eurasia and the imminent capture of Goldstein.

  91. TonyForesta

    It is encouraging that many individuals are offering solutions to this unholy financial nightmare. It is exceedingly discouraging that none of them seem to have the ear of anyone in leadership, and worse, – that said leadership is bent on NOTCHANGE, – pathologically refusing to redress or change any of the core structural system problems that seem so glaringly obvious.

    Regulators (should) work for the people, not the oligarchs and the predatorclass. If regulators work for the oligarchs and the predatorclass, than they are no longer regulators, regulating, – but enablers, cloaking and shielding crimes, criminals, abuses, and abusers.

  92. Yes, I am all in favor of repealing the 17th amendment and returning the Senate to it original being as a creature of the states. The 17th amendment has turned the states into slaves and serfs of the federal government. The Health care bill is a case in point. The Senate pushed a lot of costs onto the states in the form of new Medicaid requirements to cover the uninsured. It the Senators required reappointment by the state legislatures, I doubt you could have gotten 10 votes for the health care monstrosity.

  93. TonyForesta wrote:

    “It is encouraging that many individuals are offering solutions to this unholy financial nightmare. It is exceedingly discouraging that none of them seem to have the ear of anyone in leadership, and worse, – that said leadership is bent on NOTCHANGE,”

    It is important to note that we may have reached a point where individual response is more important the response of “leadership”.
    Translation: keep your powder dry for the next 18-months.

  94. Goldman Sachs May Face Huge Audit By Financial Crisis Inquiry Commission

    July 25, 2010 at 7:47 pm

    “Financial Crisis Inquiry Commission, unhappy about the efforts by Goldman Sachs Group (GS) to give it comprehensive data on its derivatives trading group, may face an audit that will seek information Goldman may be withholding.

    “We have a deep level of questioning about whether we’re getting the straight scoop here and whether Goldman is working with us on information that they surely have,” Phil Angelide, chairman of the US Congress-appointed commission told the FT.”

    http://tinyurl.com/3ao4kun

  95. Stephen A. Boyko

    Think of Chris and Barney as WW I French Generals who gave you a financial Maginot Line (and provided the basis for George Patton’s comment that fixed fortification are a monument to man’s stupidity). The same can be said for determinisitc, one-size-fits-all capital market governance.

  96. Stephen A. Boyko

    Once a product attains a critical level of demand, regulation does not prevent whether a transaction takes place as much as it determines where it takes place and how much it costs.

  97. Kliment Voroshilov

    To attach hope to any candidate running for government office in the United States, Warren Mosler or anyone else, is, sadly, forlorn. One sees the result of such an attitude all too readily in the current presidency. The time has come to end participation in the predictibly rigged American electoral system and focus one’s hope on an eventual “peoples’ moment” which will come inevitably. Sanity is to be found in the acceptance of the irremediability of the present system. We are in a sewer together with such morally virulent bacteria that only demonstrations and the general strike can promise anything better. Stay away from these temptations, my friend. They, like the politicians they involve, are toxic.

  98. Private Investment?

    7/25/2010 – by CalculatedRisk

    “The WSJ is quoting Treasury Secretary Timothy Geithner as saying it is time for private investment to take over from government stimulus:

    “We need to make that transition now to a recovery led by private investment,” Mr. Geithner said Sunday on NBC’s “Meet the Press.”

    “I think the most likely thing is you’ll see an economy that gradually strengthens over the next year or two, you’ll see job growth start to come back, investments expanding … but we’ve got a long way to go still,” Mr. Geithner said.

    I discussed this last week – in most sectors of the economy there is over capacity or too much supply (housing), so there is no reason for significant new private investment.”

    http://www.calculatedriskblog.com/

  99. And how is that supposed to happen… when the capital requirements for banks lending to entrepreneurs and small businesses is 8 percent while the capital requirements for banks when lending to the government is ZERO%

  100. LB: What you are describing looks a lot like the Kibbutz system, which is pretty much dead at this point, and what’s left of it is shot through with corruption and greed and elitism even at the lowest levels. They only lasted as long as they did because they were heavily subsidized. The ones that remain are successful due to having nurtured a profitable factory, again, often with the help of heavy government subsidy. The members tend to turn a blind eye to the corruption, but only because they have a very high floor for their standard of living. Frequently what happens is that the managers will sell the kibbutz out from under the members, give themselves sweetheart deals, and throw the rest of the members to the dogs when the kibbutz breaks up. We need mechanisms to enforce fairness, and this, I think, has to be directed and regulated from the top, under the watchful eye of the bottom.

  101. Lavrenti Beria

    Uncle Billy,

    Any similarity that may exist between workers’ councils and Kibbutzim is purely coincidental. They are not what I had in mind. There would be no “managers”. More germaine perhaps would be the temporary historical examples in Russia (1905 & 1917); Italy (1919-20); Spain (1936), Germany (1945), and Hungary (1956) although even in many of these instances workers lacked full control and all were eventual crushed by external forces. Don’t think that an authentic system of workers’ councils has ever managed to endure more than a very short time. But I do think that they would provide a very considerable measure of insulation from the kind of corruption a top-down system such as ours has produced.

  102. Stephen A. Boyko

    @Per Kurowski
    @Anonymous

    Dodd-Frank will make SOX look like a walk in the park. In a background of higher taxes, higher regulation (also fewer professional services available for SMEs and entrepreneurs)and capital constraints it is hard imagining anyone making such a comment and is laughable given the source. This is a great illustration as to how regulation does not foster cometition but oligopolies.

    Excerpt from: 22. “Small is Beautiful”, The National Interest, No. 77 – Fall 2004.

    http://www.findarticles.com/p/articles/mi_m2751/is_77/ai_n6353167/print

    Regulatory proposals designed for top-tier market, risk-management regimes are disproportionate when applied to the micro-cap market. This top-tier perspective was recently illustrated by Paul Volcker and Arthur Levitt who defended the added cost of Sarbanes-Oxley by stating, “$5 million down and $1.5 million a year is not too much to pay for a multibillion-dollar international company compared to how much investors have lost.” But what about the SMEs that cannot afford such added costs. Do we continue to treat SMEs as if they were large corporations? This is very much a case of mixing apples and oranges.

    Reference:

    The fate of the Ziegler Companies, Inc., a 100-year-old company became one of the highest profile casualties of the economic effects of Sarbanes-Oxley on small companies, as it applied to voluntarily de-list from the American Stock Exchange. And it was not that the company was not doing well. It reported 3Q revenues of $19.9 million compared to $17.3 million in 2002. This did not go unnoticed at the 2003 U.S. Securities and Exchange Commission Small Business Forum. Representatives worked to secure a plank in the Forum’s report that addressed the heavy economic burden imposed by Sarbanes-Oxley. Many of the executives of small companies stated that the “one size fits all” aspects of Sarbanes-Oxley should be reviewed.

  103. Stephen A. Boyko

    So much for transparency and full disclosure. It is a material fact of this blog that Messrs. Johnson and Kwak are the authors of 13 Bankers. They are in the public record for the contents of the book which I believe should be disclosed. It colors their context and some believe that context is reality.

    Fine line between marketing and disclosure when when acting in the capacity of principle … ask Goldman.

    “We’re All Screwed: How Toxic Regulation Will Crush the Free Market System” by Stephen A. Boyko (2009), http://www.traderspress.com/detail.php?PKey=671

  104. Ref: Dan Kennedy @ Google___The Flight of the Money : Where Has It Gone? (7/17/10)

  105. Exactly – they just keep tossing quadrillions back and forth to each other – how else do you describe 0% ?

    Star Trek served for a while as a great storytelling venue for how to get to the “future”. There was an episode where a computer started to malfunction and the current generation living on the planet did not know that their “Caretaker” was a computer – so when it fizzled out, they were back to dealing with taking care of themselves…

    Robots that build one model of car, for instance, cannot be re-tooled to build a completely different type of car without an “entrepreneurial” cost that would exceed the cost of HUMAN LABOR making a transition to a new product in a shorter time frame through a more efficient use of the “technology” at their disposal.

    So in my own way :-), I am agreeing with you on many levels – the wrong kind of “regulation” of PROFIT infects all human enterprise – dooming the most important aspect of the survival of any LIVING system – EVOLUTION.

    LIFE is accessing “currency” – not robots over-specialized to maintain “calcifiedism”.

    So again, LOGIC dictates the need for a “currency” that is NOT dependent on recycling toxic assets – the mess of TBTF…we need to leap-frog over that deep doodoo…especially because the human cults that are making everyone swallow the lie that they are bazillionairs via game-boy schticks on computer terminals

    have completely stripped “money” of its CIVILIZED agreed-to-role as a SYMBOLIC means with which to conduct commerce (keep LIFE flowing).

    Eastern Europeans, not all, but some, used the “regulatory” structure enforcing a TOTALITARIAN economy

    (the first clue that an “economy” brought about by the wanton destruction of the MIDDLE CLASS – ie WWII was going to FAIL was it’s INORGANIC enforcement – revolution, not evolution – like duh)

    in their own way – like a Hollywood set – the wild west town was just a facade…

    We’ll save the Star Trek Prime Directive mistakes made by global economists for another day :-) – suffice it to say that now that it is dawning on everyone that the MIDDLE CLASS in USA is undergoing Stalinistic measures (complete with a Patriot Act), the bits and pieces of the global machine employing third world “labor” in third world countries are about to “expire” as “profit” sooner rather than later…

    No illusions about “who cares as long as I get mine now” from the intelligentsia of so-big-I-failed-but-it-don’t-matter…

  106. Re: @ Stephen A. Boyko___Where does one expect all these new (army) regulators to justify their employment. Beating up on the widows, and orphans is so much easier a task than scaling the King’s Gate. PS. “keeping one’s ear to the ground, voices only despair, whereas a willowed whisper on a ballot gives vision for hope” :^)

  107. Re: @ Annie___”America at War” – interminable, thus forever, blatantly speaks too the commoner, “Goodbye to`Habeas Corpus” – welcoming the neo-paradigm of “Democratic Fascism”? Orwell would be flabbergasted by this reversed-engineering genre – this psychosis fieful travesty now symbiotically imbedded in our defunct constitution!

  108. Stephen A. Boyko

    @earle,florida

    Sorry for the length of this response from pages 82-83 of “We’re All Screwed: How Toxic Regulation Will Crush the Free Market System”

    http://www.traderspress.com/detail.php?PKey=671

    “Consumer protection is directly correlated with consumer knowledge. Until consumers have skin-in-the-game in the form of either intellectual and/or financial capital, investor protection is a racket. Whether it is said by Don Corleone or Don Columbia Law School, protection is a racket. When is the last time an aggrieved customer got a check from a regulator? Customer confidence begins with insuring, ensuring, and assuring that there is a sufficient capital cushion to clear all trades.

    No longer can a fail-safe governance system be provided that is based only on financial capacity like the accredited investor concept. We need to qualify investor capabilities. When speaking about this concept, critics say that you can’t qualify everyone; it is a monumental task. My response is that you have a driver’s license but not an 18-wheeler or cab license. We qualify people every day. Substituting “too dumb to succeed” for “too big to fail” is not a commercially viable strategy. Ask GM!

    The same concept holds for financial responsibility. Everybody talks about shareholder rights. You cannot have shareholder rights that are disproportionate to shareholder responsibilities; otherwise, you create subsidies. It is either rent seeking on the part of the public sector or free riding on the part of the private sector.

    Disproportionate governance creates subsidies. It is similar to price support subsidies for dairy farmers. With controls, you get black markets and/or supply shortages. Conversely with subsidies, you get oversupply and excess capacity of products. It is not a market solution. Absent proportionality, your regulatory services are priced with an average cost model as a function of an unappropriated surplus in the name of investor protection.

    I am for regulation, provided that it is codified best-practices. But so much of regulation these days are legalistic rule-writing that does not provide a net benefit.

  109. Looking at how they try to control for risk by appointing credit rating agencies as risk-surveyors and then concocting some risk-weights to determine the capital requirements, it should be clear that we have fallen into the hands of a first generation of Nintendo-Gameboy-players’ type of regulators who believe life, risk and who knows perhaps even love can be controlled by just pushing some buttons.

    When is the world going to speak out and say that it has had enough of this infantile approach to bank regulation? If we don´t speak out we´re doomed.

  110. Stephen A. Boyko

    @Kurowski

    Tomorrow I am posting an article on Brenda Jubin’s blog “Reading The Markets” comparing Dodd-Frank to the Maginot Line tactical fallacy for fighting the last war.

  111. The Maginot Line was at least a real line and this was more like a Potemkin Maginot Line

  112. Re: @ Stephen A. Boyko___We’ll said…but – “Absent proportionality, your regulatory services are priced with an average cost model as a function of an unappropriated surplus in the name of investor protection”. Please ellaborate on my example: North & South Carolina,and even Virginia have stopped growing tobacco – once a huge “Cash Cow” (revenue) for the above mentioned (need I mention the US Gov’t.) states…now gone? Currently being subsidized by the US. Gov’t. Agricultural Dept.($$$ yours,mine, and the US Taxpayers) and now ironically importing the product from S. America, and elsewhere. Why is that? This is just one of a myriad of lop-sided (beer,ie…special hops, grains, etc.,etc,…) examples of “Excess Capacity”! My point being that subsidizing industry is anti-capitalism, similarly to sensoring free speech via creativity – all fall into the realm of socialism/communism, period!

  113. I don’t know Manny…seems to me Uncle Billy and Brother Beria are from a far away galaxy, or they are 10 years old and with an understanding of “history” that goes back only to the dot.com bubble…10,000 years of “worker’s councils” surviving barbarian raids and re-establishing civilization after slaughtering the barbarians can hardly be considered “enduring more than a very short time…”

    Bugs Bunny says, “…he don’t know me (us) very well, do he…?”

    Brother Beria to Uncle Billy,

    “Any similarity that may exist between workers’ councils and Kibbutzim is purely coincidental. They are not what I had in mind. There would be no “managers”. More germaine perhaps would be the temporary historical examples in Russia (1905 & 1917); Italy (1919-20); Spain (1936), Germany (1945), and Hungary (1956) although even in many of these instances workers lacked full control and all were eventual crushed by external forces. Don’t think that an authentic system of workers’ councils has ever managed to endure more than a very short time. But I do think that they would provide a very considerable measure of insulation from the kind of corruption a top-down system such as ours has produced.”

  114. Love is controlled by pushing some drugs…just sayin’…

    :-)

    I am not the world but I have had more than enough of the “terrible 2′s” running around yelling “NO!” at everybody and grabbing everything yelling “ME!” and “MINE!”.

    “Regulation” is not how the necessary stage of development of self-awareness – the terrible 2′s – EVOLVES into “human potential”. Going back to infantile from terrible 2′s is how autism is diagnosed.

  115. So why are they going after Social Security instead of subsidies to buy more bullets for the circular firing squad?

  116. @Anonymous, I’m with you. Where do we start drawing the line between, “Starving the Beast” and treason?

  117. Thanks for the link Steve, I’ll be following up.

  118. Stephen A. Boyko

    @earle

    “My point being that subsidizing industry is anti-capitalism, similarly to censoring free speech via creativity.”

    Total agreement.

    Regulation is commercial censorship that determines where and how much it costs to acquire a product, not whether the product can be acquired (prostitution, drugs etc. and now tobacco). Then explain to me why so many seemingly intelligent commentators on this blog advocate regulating your way to prosperity?

    The government does not create economic opportunities; it transfers them. Before the government can do something “for” someone, it must first do something “to” someone. For every societal subsidy, there exists a corresponding tax levied on the financial and/or human capital of the citizenry.

    The Soviet Union did not fail. It merely went bankrupt trying to achieve full employment. Only government can put everybody to work. The question remains whether government employment is profitable over the long term (look at NJ).

    Those who passionately argue for “sustainability” take the absolute worst way to achieve it. The oligarchs who looted the cash were enabled by regulation that blocked competitive markets.

    Tomorrow I am posting an article on Brenda Jubin’s blog “Reading The Markets” comparing Dodd-Frank to the Maginot Line tactical fallacy for fighting the last war.

  119. Stephen A. Boyko

    @earle

    Point of amplification re: tobacco.

    The PC sustainability crowd gave the dreaded insurance companies a free pass by allowing them to price “smokers” with impugnity.

    Moreover, like the minimum wage, those least able to help themselves (3-packers/day) were the most exploited.

    The politicos enabled the insurance companies to move tobacco next to unicorn protection. As I said above, its a racket!

  120. Wow, all the comments since Anonymous
    (July 25, 2010 at 11:56 pm) make me feel like a surfer catching a great wave.

  121. Stephen A. Boyko

    Who are “they” ?

  122. Stephen A. Boyko

    “Absent proportionality, your regulatory services are priced with an average cost model as a function of an unappropriated surplus in the name of investor protection”

    Proportionality is the basis for the GAAMA Model. See:

    Think before you regulate: Choose a better model, SFO Magazine, May 2009, Stephen A. Boyko,

    http://www.sfomag.com/article.aspx?ID=1338&issueID=c

    and

    Comments on Release No. 34-49695, File No. S7-22-04 (June 9, 2004)

    http://sec.gov/rules/policy/s72204/saboyko060904.pdf
    http://www.federalreserve.gov/SECRS/2004/June/20040610/OP-1189/OP-1189_1_1.pdf

  123. Neel Kashkari et al – the TARP gurus

    And after 8000 replies to the article today – 85% of the little people said – “…fine, as long as you give me all I paid in so far plus 10% interest…”

  124. Mention “clawback”

    YIKES!

    and you get a hysterical media blitz

    PUSH of “former” experts making the case for invading Iran…I’m just sayin’…

  125. Re: @ Stephen A. Boyko___My hats off to you sir. Well said. Thanks

  126. You folks are erudite, philosphical, brilliant in the abstract theoretics. I am a scientist- so I fully understand: one seemingly obtuse finding may well lead to an eventual application that is practical in our every day lives. But this takes- oh, say, decades (and lots of grants).

    We don’t have decades. Our economic fabric- so intertwined with politics- is coming unraveled. Would you (very intelligent people), PLEASE redirect your wonderful “little grey cells” to analysis + assessment + PRACTICAL application of proposed action to our most despicable current situation.
    Please.

  127. Black’s take on the financial industry is that it’s filled with criminal behavior, what he calls control fraud. That fraud, by those who control companies, can be very hard to overcome without action by government. It doesn’t cure itself since it occurs at the very highest level of a corporation. Someone has to call them on it and if they have the accountants in their hip pocket and they’ve bribed the politicians, it isn’t going to happen.

    He’s been a favorite of Bill Moyers over the years, and he’s very matter-of-fact in his accusations:

    http://www.google.com/url?sa=t&source=web&cd=3&ved=0CBsQtwIwAg&url=http%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DUhO–P_tVBQ&ei=S2JOTKfgNIXEsAOvwLwS&usg=AFQjCNEwxvvBR7PB4JZQCkbQBIjB5CqYhQ

  128. You might want to hit the link tied to my name, then download the referenced paper. At the very least we need a few early warning systems in place, along with some machinery we could kick into gear quickly. The alternative, in my view, is to take the largest banks apart since they really have no idea what they’re doing. The smartest guys in the room simply aren’t but no ones called them on it.

    My background is as a scientist. The ecology of the financial crisis is what I wrote about.

  129. Stephen A. Boyko

    Agreed

    Excerpt from We’re All Screwed

    The U.S. capital market regulatory structure is a hierarchical command-and-control process similar to the Soviet Union’s Gosplan. It lacked the information system to restructure and, therefore, was unable to address effectively complexities required by the Information Age. U.S. regulators find themselves in a similar situation given greater demand for resources required by global mass markets and greater complexity required by innovative products. The SEC can no longer effectively govern with a deterministic, one-size-fits-all regulatory regime. Robust markets create an exponential demand for compliance in comparison to the SEC’s linear ability to supply regulatory resources. This creates a no-win choice for the SEC either to constrain market dynamics (errors of omission, i.e. offshore AIM market) or fall behind the compliance curve (errors of commission, i.e. Madoff).

  130. Stephen A. Boyko

    The following link is to Brenda Jubin’s Blog Reading the Markets

    http://readingthemarkets.blogspot.com/

    She is an independent trader and investor with an academic and business background. She taught philosophy at Yale and was dean of Morse College, one of Yale’s twelve undergraduate residential colleges. She then founded Brevis Press, a company specializing in academic press book production.

    As Brenda says, although we are not cut from the same political cloth and aren’t impassioned by the same issues, we share an interest in analyzing the weaknesses of standard risk models. I look at these weaknesses at the regulatory level; she goes at them from the perspective of the trader.

  131. Stephen A. Boyko

    @ earle

    The following link is to Brenda Jubin’s Blog Reading the Markets

    http://readingthemarkets.blogspot.com/

    She is an independent trader and investor with an academic and business background. She taught philosophy at Yale and was dean of Morse College, one of Yale’s twelve undergraduate residential colleges. She then founded Brevis Press, a company specializing in academic press book production.

  132. Stephen A. Boyko

    @ Annie “Neel Kashkari et al – the TARP gurus”

    They are doing what Federalis do best, appropriate unappropriated surpluses. They understand that President Franklin D. Roosevelt was the political Max Bialystock of his day and are trying to copy him __ imitation is the highest form of flattery.

    The TARP gurus know that fungibility is a prerequisite for financial knavery. There is no Social Security account containing your money. But more importantly, the Supreme Court has ruled on two occasions that Americans have no legal right to Social Security payments.

    Large numbers and distant horizons are fertile ground for political demagoguery.

  133. markets.aurelius

    @ the laughing dude and Boyko: The markets already have been crushed by the very souls still lip-synching capitalism. What fantasy world do you folks inhabit wherein the firms you champion survive only because of government intervention, and sustain themselves only by virtue of the FACT the world knows the U.S. won’t let the market deliver the coup de grâce they so obviously deserve? Once the trading units are hived off the banks, who’s going to take their credit risk? What happens when liquidity puts are exercised and the toxic waste they created starts flowing back to its source? Will the lip-synching sycophants still be laughing?

  134. Stephen A. Boyko

    @markets.aurelius

    “wherein the firms you champion survive only because of government intervention”

    Please provide reference as to specific firm(s) for whom I advocate capital cronyism.

  135. One headline today is that the Pentagon “lost” 9 billion dollars. That’s just ridiculous.

    How come they made a LIST of names and numbers of CITIZENS to “unemploy” and ROB of their houses and life savings? Maybe that’s where the 9 billion went – to the salaries of FOREIGN people given “permission” to access INDIVIDUAL USA citizen’s “data”? Rob from Peter to pay Paul…

  136. Boyko, “But more importantly, the Supreme Court has ruled on two occasions that Americans have no legal right to Social Security payments.”

    So then that is another too broke to fix piece of the “economy”…I thought I was up on “law” – can you respect the intelligence of the readers here and provide references (yes, delightfully old fashioned) to those two SC cases?

  137. “…we share an interest in analyzing the weaknesses of standard risk models. I look at these weaknesses at the regulatory level; she goes at them from the perspective of the trader.”
    But the question is the intent of the analysis. I’m disturbed at the assumption that the analysis is done by rational players of sound character.

  138. Same thought here.

  139. Stephen A. Boyko

    It is a valid concern. It is why the first step in financial analysis is to read the auditor’s attestation as to the soundness of the financial statement. Othewise, not to analyze begets chaos.

  140. Stephen A. Boyko

    @Annie
    @hermanas

    “Fleming v. Nestor: Bulgarian immigrant Ephram Nestor was deported in 1956 for being a Communist in the 1930s. After Congress prohibited Social Security benefits for deportees in 1954, Nestor sued. He claimed title to his FICA tax payments between 1936 and 1955. The Supreme Court disagreed. As it ruled, “To engraft upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands.”

    The other case involved a person named “Hodory” but I can’t put my hands on the specific cite that has similar language to the above.

    Cato has done a lot of work on this subject if you wish to further pursue.

  141. Mr. Cimon, if you would ever like to expound on this or other finance issues, in a semi-formal way, as a semi-long blog post or an academic paper type form, please leave a short note here at “Baselinescenario”. Although the traffic on my blog is sparse, I would like to extend an open invitation to you to write one post of your choosing there if the spirit ever moved you.

    I would especially be curious your thoughts related to FINRA, the SEC, regulatory enforcement and your ideas on how to improve those things. BUt as long as it relates in some form to finance, the sub-topic would be totally at your discretion.

  142. July 27, 2010

    “For me a double-dip is another recession before we’ve healed from this recession … The probability of that kind of double-dip is more than 50 percent.

    I actually expect it.”

    Professor Robert Shiller, (via Reuters: Chance of Double-Dip US Recession is High: Shiller)

    http://www.calculatedriskblog.com/

  143. @ cedar

  144. The U.S. is bankrupt and whatever name you use to describe this economy can’t be strong enough to reflect that reality. Decades of political corruption have led us to this precipice, and anyone who thinks that the fed can apply a canned fix to this is foolish. All the government manipulation on the planet will not forestall the day of reckoning. Yet the vast majority of Americans still refuse to acknowledge their condition by preparing for the unthinkable.

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7909432/The-Death-of-Paper-Money.html

  145. the danger of frivolous lawsuits – and one-liners taken out of context

  146. All those billions of $$$ that poured into Iraq and Afghanistan put such projects off for a couple of centuries, at the very least.

  147. Stephen A. Boyko

    OK let’s add some context. Please provide a reference where an individual was able to recoup voluntarily their social security contributions.

  148. Ken Feinberg defended his position on Morning Joe for not releasing the names of the 17 banksters that made off with billions in bonuses – the “bailout”.

    Feinberg’s rationale was flawed because he did not even consider the FACT that those 17 banksters had access to the BANK records of everyone in USA and that’s how they managed the transfer of wealth to themselves.

  149. How many times are you going to ask for the same information, Boyko? You have already scored high enough on the Mini-Mental exam that assesses early signs of dementia to qualify for a prescription, but I’m assuming you are just playing politics and stalling.

    Here’s the BOTTOM LINE from one greater than I – Barbara – and I checked her numbers and her facts:

    Typical happenings in Washington when it come to anything regarding money. America must decide what type of country it wishes to be, and then conform public and foreign policy to those ends, and not the other way around. Politicians have no right to subjugate the constitutional process of government to any foreign organization.
    Banks are utilities for the rational allocation of capital created by savings, and as utilities deserve special protections. All else is speculation and gambling. In banking, simpler and more stable is better. Low cost rules, as excessive financialisation is a pernicious tax on the real economy.
    Financial speculation, as opposed to entrepreneurial investment, creates little value, serving largely to transfer wealth from the many to the few, often by exploiting the weak, and corrupting the law. It does serve to identify and correct market inefficiencies, but this benefit is vastly overrated, because those are quickly eliminated. As such it should be allowed, but tightly regulated and highly taxed as a form of gambling.
    When the oligarchy’s enablers, hired help is the politer word, and assorted useful idiots ask, “But how then will we do this or that?” ask them back, “How did we do it twenty years ago?” Before the financial revolution and the descent into a bubble economy and a secretive and largely corrupted government with a GDP whose primary product is fraud.
    Economics will not provide any answers in and of itself. Economics without an a priori policy and morality, without a guiding principle like the Constitution, is a heartless monster easily manipulated to say whatever one wishes it to say, if they are willing to pay enough economists to say it. Its reputation as a science is greatly exaggerated.
    Take just about any financial problem, give it to Washington and they will eventually screw it up and always in their favor.

    Social Security is a perfect example. The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day. The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers. But the trust fund is empty! It contains no real assets. As a result, the government will soon be unable to pay full benefits without a tax increase. Money can be spent or it can be saved. But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything.
    That is how the largest theft in the history of the world was carried out. 300M people worked and saved their whole lives to set aside $2.5Tn into a retirement system that, if it were paying a fair compounding rate of 5% interest over 40 years of labor (assuming an even $62Bn a year was contributed), would be worth $8.4Tn today – enough money to give 100M workers $84,000 each in cash! The looting of FICA hid the massive deficits of the last 30 years in the Unified Budget. Presidents and Congresses were able to reduce taxes on the wealthiest Americans without complaint from the deficit hawks, because they benefited. The money went directly from the pockets of average Americans into the pockets of the rich.
    Now that it is time to repay those special bonds in the Trust Fund, we are inundated in opinion pieces in the leading newspapers and magazines complaining about Social Security and its horrible impact on the budget. Government finances have been trashed by foolish tax cuts, unpaid wars, tax loopholes for corporations and the very wealthy, the failures of economists, the greedy search for greater returns in financial markets and the collapse of moral values in giant businesses, but Social Security is supposed to be the problem that needs fixing…
    Social Security is not “broken“–the money is in the Trust Fund. But the people who manage the finances of the United States don’t want to repay the bonds held by the Trust Fund. They want to default selectively against average people, their fellow citizens, who paid their taxes expecting to be protected in their retirement. Refusing to repay the $2.54 trillion dollars in bonds held by the Social Security Trust makes the US look like Greece, just another nation unable to govern itself coherently. The people who manage US finances come from the financial elites, the best that Wall Street and enormous corporations have to offer. Selective default exposes them as charlatans. The claims of the economics profession to expertise are puffery. Their theories about the benefits of tax cuts are proven false. Their mathematical proofs about free markets collapse in the real world.
    Nothing will change until the people demand it either by vote or revolution and as per the Declaration Of Independence, we have the right to dump the current government and begin anew.
    Barbara
    July 17, 2010 at 4:40 pm

  150. TonyForesta

    Nice post Annie, and thanks for the link Vic. Amerika is indeed on the precipice. In 1920 Germany “… public patience snapped abruptly once people lost trust and began to “smell a government rat”.” “Rat” is too kind a word for the virulent monster that is the US Government. The peoples trust that snapped in 1922 for the Reichstag government, is already torn and tattered here in the land Oz in 2010. No can predict what will be the cause of the inevitable snapping of the American peoples trust, and the cataclysm that will certainly ensue, but everyone can look to Germany in the 20s’, and what followed, and other haunting moments throughout history for a chilling reminder of the horrorshow that always results whenever oligarchs, tyrants, and predatorclass ruthlessly rob, pillage, and abuse themany, to feed, advance, and cloak thefew. The end is always tumultuous, bloody upheaval. Amerika is hurling recklessly on this lethal trajectory today. While we can all admire and pray for the peaceful hopes of the “The Venus Project and The Zeitgeist Movement”, (thanks rene, for those links) – history paints a much darker image of humanities ultimate reaction to wanton abuses and crimes by a ruthless predatorclass run amock, capturing the socalled government, and forcing the people, themany into lives despair, desolation, and desperation. There will be blood.

    Viva la revolucion!!!

  151. You are either terribly right or terribly wrong, I fear we shall learn terribly soon.

    The Death of Paper Money

    25 Jul 2010 – Ambrose Evans-Pritchard

    “As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974.

    “Federal Reserve chairman Ben Bernanke, himself a scholar of the Great Depression, has indicated he would consider extra stimulus for the economy.

    Ebay is offering a well-thumbed volume of “Dying of Money: Lessons of the Great German and American Inflations” at a starting bid of $699 (shipping free.. thanks a lot).

    There is a clear temptation for the West to extricate itself from the errors of the Greenspan asset bubble, the Brown credit bubble, and the EMU sovereign bubble by stealth default through inflation. But that is a danger for later years.

    First we have the deflation shock of lives.

    Then — and only then — will central banks go to far and risk losing control over their printing experiment as velocity takes off. One problem at a time please.”

    http://tinyurl.com/2cc9kcf

  152. The Next BP Blow Up: A $9.9 Billion Tax Credit

    JULY 27, 2010, 1:19 PM ET – excerpt

    “So, the clean-up of BP’s Gulf oil spill may cost U.S. taxpayers after all.

    President Obama has insisted BP would bear the entire cost of cleaning up the spill and making the injured business and wildlife whole again. And yet BP said today it plans to claim $9.9 billion in U.S. tax credits based on the $32.2 billion charge it reported related to costs for the Gulf oil spill. That means that $9.9 billion that might have been going into the federal government’s general fund will be used to cut BP’s spill costs by a third.

    Goldman Sachs Group agreed not to claim a $187 million tax break on the $550 million fine as part of its settlement with the SEC over the agency’s Abacus mortgage lawsuit.

    BP hasn’t been fined for the spill, yet, so the issue is based on losses, not a penalty. But there is another difference between Wall Street’s dropped credits and BP.

    For those companies, the tax credits were arguably gravy. For BP, the roughly $10 billion deduction is part of its strategy to keep the company’s cash flowing.”

    http://tinyurl.com/28zdxer

  153. What I think is especially worth highlighting from the Evans-Pritchard piece:

    “…we should be careful of embracing the opposite and overly-reassuring assumption that this is a mild replay of Japan’s Lost Decade, that is to say a slow and largely benign slide into deflation as debt deleveraging exerts its discipline.”

    Excerpt from “The Death of Paper Money,”
    By Ambrose Evans-Pritchard
    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7909432/The-Death-of-Paper-Money.html

  154. Stephen A. Boyko

    @Annie: How many times are you going to ask for the same information, Boyko?

    To Annie: Just stay on message and show me where the following is a duplicative request.

    Please provide a reference where an individual was able to recoup voluntarily their social security contributions.

  155. Kamikaze2Go

    Excerpt from: “Obama signs a bill that lets banks have US over a barrel once more”
    By Liam Halligan 26 Jul 2010

    http://www.telegraph.co.uk/finance/comment/liamhalligan/7908516/Obama-signs-a-bill-that-lets-banks-have-US-over-a-barrel-once-more.html

    “The inherent feebleness of this door-stopping bundle of statute and its lack of desperately needed substance, was brilliantly captured by Laurence Kotlikoff, a highly-respected professor of economics at Boston University. “This law is like being invited to dinner and served pictures of food,” Kotlikoff remarked.

    It would be tempting to smile at such a wry observation if the situation it described wasn’t so depressing. For what the US political establishment’s non-response to the credit crunch illustrates is this: such is the lobbying power of the big Wall Street institutions that they not only caused a global economic crisis and then forced the US government to pay for a massive bail-out, but then used a slice of that bail-out cash to bribe politicians with campaign donations in order to block rule changes that might prevent a repeat performance.

    That leaves the politicians and high-flying bankers happy, of course, while regular citizens – and their children and grandchildren – foot the multi-billion dollar bill. ”

    Excerpt from: “Obama signs a bill that lets banks have US over a barrel once more”
    By Liam Halligan 26 Jul 2010

    http://www.telegraph.co.uk/finance/comment/liamhalligan/7908516/Obama-signs-a-bill-that-lets-banks-have-US-over-a-barrel-once-more.html

  156. I guess it’s true, asking the right question is the only way to find a solution to the problem. The IRS does not make it VOLUNTARY to contribute, so how can a person VOLUNTARILY recoup their involuntary contribution???!!!

    Word games are incendiary at this point in the discussion of a grave situation. Please stop.

    THIS IS THE REALITY OF SOCIAL SECURITY:

    “Social Security is a perfect example. The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day. The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers. But the trust fund is empty! It contains no real assets. As a result, the government will soon be unable to pay full benefits without a tax increase. Money can be spent or it can be saved. But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything.
    That is how the largest theft in the history of the world was carried out. 300M people worked and saved their whole lives to set aside $2.5Tn into a retirement system that, if it were paying a fair compounding rate of 5% interest over 40 years of labor (assuming an even $62Bn a year was contributed), would be worth $8.4Tn today – enough money to give 100M workers $84,000 each in cash! The looting of FICA hid the massive deficits of the last 30 years in the Unified Budget. Presidents and Congresses were able to reduce taxes on the wealthiest Americans without complaint from the deficit hawks, because they benefited. The money went directly from the pockets of average Americans into the pockets of the rich.”

    So you want the names of the deficit hawks?

  157. KeepTheChange

    “Ex-Regulators Get Set to Lobby on New Financial Rules” By ERIC LICHTBLAU

    http://www.nytimes.com/2010/07/28/business/28lobby.html?_r=2&src=busln

    Excerpt:

    “…the regulatory agencies that will create hundreds of new rules for the nation’s banks will face a lobbying blitz from companies intent on softening the blow. And many of the lobbyists the regulators hear from will be their former colleagues.”

  158. chocolate…?

    :-)

    What do you allow your personal friends to get away with in the way of bad behaviour towards the “other” class/race

    and their grandiose ideas about doing “god’s” work?

    I vote for gameboying – design a “clawback” obstacle course and insert it as part of the relational database game…at least the traders on the floor are STANDING, so they will live longer than those sitting…

    :-)

    Hope everyone noticed what the dogs do when they hear the magic word “clawbacks”….no warning growl or bark, they just leap at the throat…

    The easiest way to end the war in Afghanistan and put the money back where it belongs is to re-issue the Declaration of Independence.

    We have a military that is under the authority of the CITIZENS of USA and that means we can call them home anytime we want without needing to even say WHY.

    If the uber-rich war lords and drug lords on the planet want an army of mercenaries – hire ‘em.

    The military of the USA is NOT at the disposal of the psycho with the most stolen cash.

  159. Stephen A. Boyko

    @Annie:

    “Word games are incendiary at this point in the discussion of a grave situation. Please stop.”

    THIS IS NOT A WORD GAME BUT FUNDAMENTAL FINANCE STATISTICS – YOU SAID YOU LIKED MATH

    “Difficulties arise when risk is conflated with uncertainty under deterministic, one-size-fits-all governance metrics that frustrate the market’s price discovery function. We can insure (put options) and hedge (Ford and Exxon) risk. We can insure (natural disaster insurance) uncertainty, but we cannot hedge (Ford and pork bellies) uncertainty. If we cannot hedge, we cannot regulate risk and uncertainty in a one-size-fits-all regime due to non-correlative information. It is similar to having a single thermostat regulate temperature for H2O conditions of ice, water, and steam.

    Investments that lack cash flow and are valued on a mark-to-model basis are uncertain. Credit default swaps (CDSs) are uncertain derivatives that required constant hedging by dealers. This activity resulted in cost with very little benefit. Absent randomness segmentation, indeterminate information cannot be processed effectively and efficiently by determinate metrics.”

    above an excerpt from “Dodd-Frank: A fine alphabet soup appetizer, but where’s the beef?”

    http://readingthemarkets.blogspot.com/

  160. Boyko, “We can insure (natural disaster insurance) uncertainty, but we cannot hedge (Ford and pork bellies) uncertainty. If we cannot hedge, we cannot regulate risk and uncertainty in a one-size-fits-all regime due to non-correlative information.”

    That was a quick right turn from SS (rubbing the whiplashed neck)

    I agree with the one-size-fits-all regime being mathematically impossible.

    Which means it wasn’t math or physics that wrought it, but GREED and LOVE of POWER over others…a bulls-eye painted on the Middle Class.

    “Math” killed the goose who produced the golden eggs and deconstructed it into goose jerky – in other words, calcified it. Sprinkling curry or chinese five spice on calcified goose jerky ain’t doing much for the taste – and won’t extend the expiration date. Package it in “armaggedon” proof plastic, and then maybe you’ve got a creative marketing schtick :-)

    I gotta run – got a date for dinner :-)

  161. Sorry, but we’ve got two decent Senators here in Oregon: Jeff Merkley and Ron Wyden. They’re not perfect and, like everyone else in politics, they spend a lot of time fundrasing when they could be doing more of our business. That said, they’re honest types who really do have the public interest at heart.

  162. Look at the 30bn as one giant stimuli provided by a private company BP, but where the tax law ensures that the government will sponsor a third of it. Very much the same way that the government sponsors a third when you donate money to your favourite museum or orchestra.

    I do not know much about US tax law. If you allow the company to take the deduction the year they make a provision for the cost, instead of taking the deduction in income when they actually spend the money on cleaning up the mess, no wonder you have a deficit in your budget

  163. Problem one, is excising, or excoriating criminal elements from the financial system. Which is worse, the 21 year old pot dealer, or the predatorclass finance titan? The first gets years in jail for meeting the socalled markets needs, the second 14 Trillion dollars in government largess for conjuring PONZI schemes that hurl the entire globe into economic and financial turmoil.

    A crime is a crime and a criminal is a criminal. It is only a matter of enforcement. We allow the den of vipers and thieves on Wall Street to rape and pillage our societies, and ruthlessly punish the children of hard working taxpaying, though maybe not legal parents.

    The predatorclass is the people arch enemy, and a dire threat to our children’s collective future. It’s kill or be killed. Why are these few, allowed to skirt and mangle the law, while themany are subjected to the laws most brutal ends?

    There are no freemarkets!
    There is no judicial system!
    Since the law only applies to “certain elements” of society, but somehow majikally cloaks or excuses the wanton abuses and crimes of the predator class, – in practical reality – there is NO LAW. In a world where there are no laws, – there are no laws for anyone predatorclass biiiiaaaatches!!!

  164. Thanks for the offer and I’ll keep it in mind. I have a range of interests outside finance, but the debacle when money-lending all but collapsed helped focus my attention dramatically, as I’m sure it did for others. It led me to think through and write-up something that had been on my mind for a while: the inordinate amount of computing power we can now bring to bear on business processes, and how little we understand the implications.