Mr. Hoenig Goes to Washington

By Simon Johnson

To fix a broken financial system – and to oversee its proper functioning in the future – you need experts.  Finance is complex and the people in charge need to know what they are doing.  One common problem, which is also manifest in the United States today, is that many of the leading experts still believe in some version of business-as-usual.

At the height of the Great Depression, Marriner S. Eccles was summoned to Washington from Utah – where he was a regional banker.  He helped remodel the Federal Reserve through the Banking Act of 1935 and then became its first independent chairman – the Fed board had previously been chaired by the Treasury Secretary.  Eccles was not a fan of big Wall Street firms and their speculative stock market operations; rather he understood and identified with smaller banks that lent to real businesses.  Eccles was the right kind of expert for the moment.  Who has the expertise to play this kind of role in our immediate future?

Tom Hoenig, formerly president of the Kansas City Fed, has long been a strong voice for financial sector reform along sensible lines.  Within the official sector, he has spoken loudest and clearest on the most important defining issue: Too Big To Fail is simply too big.  And last week he took a major step towards a more prominent role, when he was announced as the administration’s nominee to become vice-chair at the Federal Deposit Insurance Corporation (FDIC).

The FDIC is not as powerful as the Fed.  But in our current financial arrangements, it does have a critical role to play.  The Dodd-Frank legislation has its weaknesses, but it gives the FDIC two important powers.  First, with regard to big banks, the FDIC can help force the creation of credible “living wills” – explaining how the bank can be wound-down if necessary.  If such wills are not plausible then, in principle, the FDIC could force simplification or divestiture of some activities.  Second, the FDIC is now in charge of “resolution” for megabanks, i.e., actually closing them down and apportioning losses in the event of failure.

One important concern is whether the FDIC has enough clarity of thought and – most critically – enough political support in order to take the preemptive actions needed to make our biggest banks smaller and safer.  (For more specific suggestions – and some disagreement – on what exactly is required to strengthen financial stability, you can watch two speeches from Friday at a George Washington law school symposium; Sheila Bair, the former FDIC chair, spoke first and I spoke immediately after; my remarks start around the 49 minute mark).

The FDIC senior team is already strong, with a great deal of experience handling the problems of small and mid-size banks.  The current acting chairman, Martin J. Gruenberg, was vice chair under Sheila Bair.  These are not people who are easily intimidated by big banks.  And Mr. Gruenberg is highly regarded on Capitol Hill, where he worked on the Senate Banking Committee for nearly two decades. (Disclosure, I’m on the FDIC’s Systemic Resolution Advisory Committee, which meets in public; I’m not involved in any personnel or policy decisions.)

I have been a strong supporter of Mr. Hoenig in recent years, endorsing his views and arguing in the past that he should become Treasury Secretary.

In the current mix of Washington-based policymakers, Mr. Hoenig would be a great addition.  He spoke out early and often against Too Big To Fail banks.  In early 2009 His paper “Too Big Has Failed” became an instant classic.  It is worth reading again because it contains a number of forward-looking statements that remain important today.  Perhaps the most relevant for his FDIC role,

“[S]ome are now claiming that public authorities do not have the expertise and capacity to take over and run a “too big to fail” institution. They contend that such takeovers would destroy a firm’s inherent value, give talented employees a reason to leave, cause further financial panic and require many years for the restructuring process. We should ask, though, why would anyone assume we are better off leaving an institution under the control of failing managers, dealing with the large volume of “toxic” assets they created and coping with a raft of politically imposed controls that would be placed on their operations?”

This sounds very much like the basis for a sensible strategy of thinking about Bank of America, which is in serious trouble – and where the FDIC should consider a more pro-active intervention.

The European debt situation is also threatening to spiral out of control, with potentially serious consequences for our financial sector.  If you have not yet reviewed the details of Bill Marsh’s graphic from Sunday’s New York Times, I strongly recommend that you do so – but you’ll need a big computer screen or the ability to print out on a very large piece of paper (The picture is literally big, 18×21 inches; there is also a nice interactive version, which lets you look at various scenarios).

We do not know how these or other shocks will hit our financial system.  Nor do we know exactly who will fall into what kind of trouble.

We need experts at the helm with sensible judgment and the right priorities – and with a good understanding of what kind of financial system we really need.  We also need policymakers who have strong support from across the political spectrum, including on Capitol Hill.

Tom Hoenig is exactly the right person for the moment.

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

89 responses to “Mr. Hoenig Goes to Washington

  1. Why should we want the same “experts” that got us into this mess to help get us out?

  2. So I wonder what the new Sheriff will do about BofAs planned odious transfer of Merrill Lynch derivatives to the bank unit that is saturated with insured deposits?

  3. Tom Hoenig is one of the stupidist people on the planet in regard to finance and the economy. He was consistently wrong about policy when he was at the Fed and based on that record of failure, he is now being promoted to the FDIC!!!

    Meanwhile, Christy Romer is ostracized. Incredible!

  4. “We have not overthrown the divine right of kings to fall down for the divine right of experts.”
    — Harold MacMillan

  5. Looking at the financial engineering that is going on in Europe, I will be praying hard for an “expert” to emerge to look at the knock-on or the domino effects that will inevitably happen.

  6. It’s nice that Hoenig is finally seeing TBTF as already failed. Otherwise he’s a much a fool as you are.

    In spring 2006, Hoenig said he did not think there was “much risk of a housing price collapse on a nationwide basis.” Later that year, as housing prices began to fall, Hoenig said the adjustment seemed to be happening in an “orderly way.”

    The future, of course, took a much darker turn. Problems in the housing market swamped the whole economy. By fall 2008, Wall Street faced its biggest crisis since the Great Depression.

    Hoenig did not see the storm coming. In fact, deep into the summer of 2008, he was predicting that the United States would avoid a recession.

  7. Where is all this experience, wisdom, sound judgment, etc, on display NOW at FDIC, with that recent stunt of Bank of America placing trillions worth of potentially worthless derivatives from MLynch into a sub that is federally insured? Did we hear more than a peep?

    Let’s be real: there is such an immense degree of governmental and regulatory CAPTURE by the BANKSTERS (rhymes with GANGSTERS) , who here at Baseline Scenario can ever envision that a big bank, such as Bank of America, would ever be dissolved, liquidated, Chapter 11’d, shuttered, etc., because its’ an Insolvent Zombie with an Attitude, and under various technical-legal provisions, would invite such dissolution?

    People who have solid resumes, experience, insight, and even personal courage, are no match for these jackals. Not only jackals, but a secret army of assassins ready to strike down anyone getting in the way….now, that is a fact.

  8. @ Simon,

    Your shilling for Hoenig rings hollow. He’s been with the Fed since 1981. He started being in senior positions in 1986. He is *supposed* to help regulate banks. So where’s the banking regulatory action from Hoenig all these years?

    Citing a 2009 TBTF study by Hoenig is no example of either his predictive nor regulatory prowess. It is useless as tits on the proverbial bull.

    All of you economists who were clueless about these systemic risks have now become the well-paid commentators on the mess you helped make. ALL of you should be fired.

  9. If we wanted real change we would eliminate the Senate and save 300 billion a year; as it has failed it function in spite of being reformed twice. “No law or resolution can now be passed without the concurrence, first, of a majority of the people, and then, of a majority of the States.” James Madison

    http://www.constitution.org/fed/federa62.htm

    We should elinimate the Federal Reserve for failing it’s function.

    Freedom vs Slavery
    The history of debt based economies from 300 bc to today in a nine minute video.

  10. The penalty for failed banks? Recapitalization by taxpayer money.

    The penalty for failed economists like Johnson, Hoenig, and Bernanke? The well-paid talk show circuit, a post at the FDIC, continued chairmanship at the Fed.

    The penalty for citizens who have to endure the above’s failures? Unemployment, destruction of net worth, increased taxes.

    Simon you should be ashamed of yourself!

  11. I am sorry. The most basic Regulations Banks 101 should have taught the regulators, as a minimum, at least to pass the course with a C, the following:

    Bank crises never ever occur from excessive exposures tho what is ex-ante perceived as “risky” these always result from excessive exposures to what has ex-ante been perceived as “not-risky”.

    Regulators should concern themselves with credit ratings being wrong, not betting our banks on these being correct, and as they did with the capital requirements based on perceived risks.

    Bank regulators have no business concerning themselves with what the credit ratings are indicating, but should concern themselves with how the bankers react to those credit ratings.

    Regulators should define and ask for our approval of the explicit purpose of our banks, before regulating these.

    Since nothing of this was acknowledged and much less done by ANY of the bank regulators during the last two decades, I see no reason to endorsing any regulator, even if admired by Simon Johnson. Much the contrary I feel there is a need to hold them accountable for the crisis they have caused.

  12. So what did our pundit Simon Johnson see and say in 2007 at the cusp the subprime crisis that was about to unfold worldwide. Let’s go back in time and see through the wonders of Google:

    IMF Says Global Economy to Withstand U.S. Slowdown
    April 5 (Bloomberg) — The global economy will probably weather a slowdown in U.S. growth as dependence on exports to America diminishes, the International Monetary Fund said.
    “Most countries should be in a position to `decouple’ from the U.S. economy and sustain strong growth if the U.S. slowdown remains as moderate as expected,” the IMF said in a paper published in its semiannual World Economic Outlook.
    The slump in housing has been “U.S.-specific,” with limited impact abroad, particularly as imports make up a small share of the industry, the Washington-based lender said late yesterday. The U.S. itself is likely to avoid a recession, as the housing weakness is contained, IMF Chief Economist Simon Johnson said in a news conference today.
    Countries including China, Japan and Germany run large trade surpluses with the U.S., suggesting a pullback in American demand might hurt their growth. The IMF concluded, though, that many developing nations are becoming less dependent on the U.S. and noted that observers suggest stronger demand in other industrial nations makes the world’s economy more “resilient.” A falling dollar would also help reduce trade imbalances, the fund said.
    The U.S. economy slowed to an average growth rate of 2.4 percent in the last three quarters of 2006, from an annual pace of 3.2 percent the previous year. The housing-market recession sapped the expansion by the biggest factor in a quarter century in the final half of last year.
    The U.S. economy is still “very healthy” Johnson said today in Washington. “We’re not seeing it spread beyond residential construction,” he said, referring to the economy’s drop in momentum.

    http://www.bloomberg.com/apps/news?pid=20601086&sid=arhhIMIyFPeA&refer=latin_america

    http://mauberly.blogspot.com/

    mauberly April 5, 2007 – 12:36pm

  13. Here’s Simon’s pal Hoenig being interviewed in 2007 on the subprime crisis and the economy in general. Note the absence of the now pet phrases of Simon and Hoenig, i.e. TBTF and “systemic risk.” Economists are nothing more than overpaid pathologists who brilliantly explain what killed the patient — ex post:

    Interview: Thomas Hoenig
    Return to “Kansas City Fed Chief Speaks
    This is the extended version of NBR Anchor Susie Gharib’s September 6, 2007 interview with Thomas Hoenig, President of the Federal Reserve Bank of Kansas City.
    Susie Gharib: How would you describe the health of the US economy right now?
    Thomas Hoenig: Well, I think the economy in the United States right now is continuing to grow. We have moderately good programs going in terms of the economic output. We just finished and released the Beige Book, which everyone talks about. And as you look at that across the country, I think generally we have what’s mostly described as steady moderate growth and I think that describes it well. When you look back a little bit at the data, you look at personal income growth, you look at the business earnings and where we are with government spending and so forth, I think it does bode well for the US economy as far as overall GDP growth in the 3rd quarter. Obviously the housing… especially the sub-prime elements of the housing market are the slowing part of the economy or the slowed part of the economy, but I think that that is one element of the economy, but the rest of the economy continues to do reasonably well.

    Thomas Hoenig
    SG: But Mr. Hoenig… many economists are saying that the odds have increased that the US economy can go into a recession. Have they increased enough to worry you…

    TH: Well, I think the economy overall still continues to show growth and I think we will show growth in the 3rd quarter above 2 percent and I am for the year as a whole above 2 percent. We had a good second quarter… 4 percent GDP growth so I think that is really the story that’s out there and that is moderate continued growth, and are aware of the housing issue. That has not carried over to an immediate effect on the rest of the real economy and that’s what we’ll continue to watch and that’s what we really have to do is just watch the data on a continuing basis.

    SG: Are you saying that right now the problems in the housing sector and these mortgage market problems haven’t yet spread into the broader economy… because some people feel that it already is?

    TH: Well, I don’t see the strong evidence that it has carried over into the broader economy. When you look at the income growth, the level of activity that we are seeing when we survey the country we find that most of the economy is doing reasonably well. We still have good export demand for our goods which is helping our manufacturing and carrying it so I don’t see that it has carried over at this point. And I think our responsibility is to watch that very carefully going forward and that’s what I am very confident that we will do. The future is an unknown… just by definition the future is an unknown… and so that’s why we do have to be diligent and watch these data as they come out over the next several weeks and months.

    SG: The people I talk to on Wall Street believe that the measures that the Fed has taken so far have not worked, whether you are talking about cutting the discount rate or injecting money into the banking system and they believe that a rate cut is justified. What are your thoughts on that?

    TH: Well, I won’t talk about rate cut or anything like that. I will say that what we have done so far is provide liquidity of the central banks in the United States, Europe, and elsewhere have provided liquidity into the market place, which has been very important and I think have been very helpful to address liquidity issues that were in fact out there. So I think it has been useful to do that and I think important that we did that. And that’s part of our mandate and that is to provide liquidity into the market as one element and then to look at the real economy and judge it as far as future policy goes and we won’t know on that until the time comes to make the decision. And we will watch the data going forward.

    SG: As you watch the data, as you monitor the economy… what do you need to see happen in the economy that you would feel comfortable in supporting a rate cut?

    TH: There is nothing… I am not going to point to things in terms of rate action. There’s just no ability on my part to do that, but what I do say is there’s no one thing that you should look at or can look at. If it were that simple, anyone could do it. I think the main thing is to look at the broad economic data that come out… as we go forward the whole string of data. You have to form judgments based upon on a broad base of information and that’s really what we have to do as we go forward. And then, at the time that a decision is called for, make that decision based on the data you have at that time… the accumulation brought forward to that time and then make your decision. So there’s no way to I think have a formula that if such and such happens we would do X or Y.

    SG: Speaking of data… Chairman Bernanke has says the usual monthly economic reports are old news and not as useful in this environment so what is the Fed doing differently? What data are you looking at so you can figure out what’s going on?

    TH: Well, I won’t speak for the Chairman or other members of the Open Market Committee but what I’m… what I think my approach is that when you look backwards right now with… in light of the changes and the turmoils in the financial markets, you want to be mindful of these events in the markets. But therefore what we’re doing, what I’m doing, is following very carefully the new data that are coming out… survey businesses around our region… and more broadly than that to see what in fact they are able to tell us about demand for their product… how they are looking at their decision making so that you have somewhat more of a perspective look on the economy. And in fact doing that I have found that most businesses are continuing to move forward and that to me is an encouraging sign and I think that is reflected importantly in the recent survey and reflected in the so-called Beige Book.

    SG: Everyone I talk to wants to know when this whole financial credit crunch crisis will be over… If the financial crisis were a baseball game what inning are we in?

    TH: That’s a metaphor that I think’s been used before. But I don’t pretend to be able to put a time line. The thing about economics of course is that we know there are laws of supply and demand. We know how markets work in generally but the timing of that is always affected by the psychology of the consumer, the psychology of the business person and that will affect the timing. And so we just have to stay attuned, and alert, and continually watch the markets and data and survey the markets and data to be able to judge our… judge where we are in moving towards the general improvement in the economy… which I think we have right now in place. The economy is still growing as I said modestly…moderately I think over 2 percent on the quarter. We’ll see what the numbers come out to be, but that’s the process of policymaking… gathering data… analyzing it and then making assessment when the time comes…

    SG: All right… Mr. Hoenig thank you so much for talking to Nightly Business Report. We really appreciate your time

    TH: I appreciate yours as well. Thank you.

  14. @Anonymous

    Nice video. One comment:
    Every monetary system ever created is only as good as the Book-of-Accounts that governs money’s fair play. We have no Book-of-Accounts in the tradition of bookkeeping, prior to 1980, when a proper double-entry pattern was followed. The proper double-entry pattern was abandoned by software developers in 1980. Financial commentators today like to use the term ‘bubble’. ‘Bubble’ translated into a proper Book-of-Accounts means ‘Ponzi Scheme’. Any institution that uses a proper double-entry Book-of-Accounts would spot a bubble on the first day it occurred. Such a proof is Bookkeeping 101. Our core problem today is that we do not use the double-entry pattern that was first refined into use, circa 1340 A.D., and documented by Pacioli in 1494, and automated in the 19th century, for the Industrial Revolution. The proper double-entry technology was completely abandoned, circa 1980, when the microprocessor driven software took control of accounting by legislating rules within the software, short of proper accounting rules. Our monetary failure will not abate short of a large segment of financial community members learning and applying the proper ‘double-entry’ Book-of-Accounts.

    QuickBooks owns 94% of the microprocessor ‘bookkeeping’ market. The problem is that QuickBooks, at best, in little more than a check-book reconciliation. It is not a proper Book-of-Accounts. Our ‘economy’ is today flying by the seat of its pants.

  15. Have I been too hard on “Professor” Johnson and his good mate, Hoenig? Nah, don’t think so.

    You would think that “experts” like Hoenig would have figured out TBTF was a systemic risk a long time ago before global financial crisis made it painfully obvious to everyone. So let’s see when it enters Hoenig’s vocabulary.

    We go again to the wonders of Google and see a time graph with the words “thomas hoenig speeches TBTF”

    http://www.google.com/search?q=%22thomas+hoenig%22+bank+regulations&hl=en&num=10&lr=&ft=i&cr=&safe=images&tbs=#sclient=psy-ab&hl=en&lr=&tbs=tl:1&source=hp&q=thomas+hoenig+speeches+tbtf&pbx=1&oq=thomas+hoenig+speeches+tbtf&aq=f&aqi=&aql=1&gs_sm=e&gs_upl=48220l51894l4l52310l14l6l8l0l0l0l246l836l0.3.2l14l0&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=7295237347ebc3b&biw=1652&bih=992

    Note NOTHING appears re TBTF pre-2008 but shoots way up in the graphs during and post financial crises.

    In other fields, we call this “marketing” or more unkindly, “spin.” When a phrase becomes fashionably chic, well by golly, our friends, the omniscient economists will spin it endlessly — after the fact, of course.

  16. Hope this move can bring some real positive change in BofA. History suggests that generally these changes can act as double edged swords. Hope this one turns out to be beneficial!

  17. David - Little Rock

    Simon,

    I have read your site for the last couple years, commenting only rarely, and really enjoyed your informative work, but it seems that the formerly astute observations that attended your entries , (by people like Stats Guy), have given way to junk commentary by the likes of Woop, Title52, Bill Munny, et al.

  18. While Tom is there in D.C. maybe he could speak out about 3 billion a week in some endless war?

    http://americaspeaksink.com/2011/10/the-american-troops-did-die-in-vain/comment-page-1/#comment-10259

  19. @David, Simon:

    This site was started at a time when there was hope that an intelligent solution to the financial crisis would be decided and acted upon by the gov’t and industry leaders cognizant of the mistakes they and the citizens of this country had made and chastened by the harm created. All that was needed was a clearer understanding of the very complex situation and rational discussion to help the country move forward together.

    Unfortunately, this turned out to be impossible, there being no will towards rationality and the common good left in the country. Those who were regularly posting realized posting was a waste of time and left the rest of the visitors to this site to fulminate powerlessly. It’s too bad. I used to learn a lot at this site as well.

  20. I agree with Professor Johnson that Hoenig is a very good choice for a high position at FDIC. Outside of Supreme Court nominations, there are very few nominations made by this administration that have shown good quality thought (especially in the economic realm, see Lawrence Summers). This would be one of the best choices made by President Obama thus far.

    On a separate note: It is often said that certain corporations will pay people a small wage to wander the net endorsing shoddy products, or political groups will pay people to surf online to help assuage fears or turn the political tide another direction. When I see people like “Bill Munny” or “Title 52″ making multiple comments in the same thread and seemingly only talking to themselves it seems to verify that theory. As “Bill Munny” and “Title 52″ make their poor quality arguments against any regulation or policy which would help corral the out of control and systemically threatening bankers, I can’t help but wonder where these 2 banker lapdogs hail from.

  21. How could such divine economists like Hoenig (and Simon) be wrong? Did they have any inkling of systemic risks before the caca hit the fan?

    Well here’s Hoenig again in his 2006 speech wondering if we were going to have a 1980s style banking crisis — and then dismissing it:

    “When our examiners would ask about a loan with questionable characteristics during this period [early ’80s], they too often heard bankers say, “If I don’t make the loan, the banker down the street will.” In many cases, unfortunately, this turned out to be a race to the bottom…

    ***My purpose in reviewing these stories with you today is not that I think a return to a 1980s-style crisis is imminent. Certainly, banking conditions today are good: strong earnings, good asset quality, no bank failures in more than two years. However, those who, in the early 1980s, predicted an endless rise in energy markets and real estate values were as confident in their outlook as we are today. And, certainly, the same rules and lessons continue to apply in banking and finance.***

    Although the world has changed during the last quarter of a century, at least one thing has not – human nature. As I mentioned earlier, greed, pride, arrogance and other human frailties are often at the root of bad banking decisions, and those qualities remain with us today. They still motivate behavior as they have in the past, and, in many cases, these frailties keep us from acting on the lessons we have learned from previous generations. In addition, no matter how sophisticated we think current analytical tools, management information systems and financial instruments are, the most critical element in banking is still individual experience and judgment. In the end, bank employees, and, I would stress to this audience, bank directors, are still making the important decisions. The quality of those decisions will always depend on human characteristics and our ability to learn from the past.

    One banking scholar said, “There is really nothing new in banking and finance, each generation just thinks there is.” So, are we in a different situation than 20 years ago? I would suggest that one way we can ensure a different outcome is if you, in your capacity as bank directors, are willing to be skeptical, willing to ask the difficult questions and unwilling to accept the answer “This time, it’s different.”

    ______________________________

    In other words, Hoenig *never* thought it really necessary to make any regulatory changes to the banking system since things were hunky dory — even though he himself wondered if it really was. After all, maintaining the status quo is simpler, easier and way less work. Change is a bitch to accomplish. But Hoenig gives great speech BTW. He sounds so wise, well, so divine.

    Now of course Hoenig sees, like Simon, systemic risk everywhere. Thanks, Hoenig. Thanks, Simon. I see that your suits and ties are nicer each time you appear on a talk show.

  22. Hey Herzog, can you read? I’m not exactly complimenting bankers, nitwit.

  23. @Anonymous – good 9 minute clip – says it all, thanks for sharing.

    Presenting, out of the blue, The Patriot Act, almost within minutes after 911 happened just proves that there was a gold-digger coup and we are today embroiled in a bona-fide Just War against a vicious, murderous cabal of delusional *religionists*…religion defined as a belief in their own made up crap about *reality*:

    monkey brain + imagination = I am a god

    @DanP – there’s always going to be the dynamic in place for a *black market* (survival). Now that Crime, Inc. rules the day, the black market, so to speak, will be how things get done among NON-criminals (real people from real Western Civilization)

    Who knows, maybe we’ll even re-discover double-entry bookeeping :-)

    There is no way to turn free people back into slaves without it getting very bloody. And it seems *free men* lose some battles, but never the *war*.

    Too *savage* for 2011 and Western culture – their savegery hardens the heart to the point where you view them as rabid raccoons charging for your ankle….

  24. @ Simon,

    Quite frankly, it’s wrongheaded, arrogant, sanctimonious economist/policy makers like you and Hoenig who did nothing while the systemic risks grew and grew. Now, after obvious crises, “systemic risks” have become your mantra.

    And now miraculously you appear as the saintly sage on PBS. That stinks, Simon and you do too.

  25. @Per – Regulation, in the final analysis, is a SIMPLE evolution of civilization. It basically notes for the historical record – “Don’t do this again.” :-)

    The depth to which regulators explore whether there was a proper response to putting up a firewall between any residual consequences of – KABOOM! – impacting the new *method* is why regulation is a role of *government*. But the regulation of which I speak is manufacturing regulation. To the complaints of why there are walls of 3 inch thick binders containing the regulations – well, what is in those binders? On inspection, you’ll find the original “don’t do this again”, and then 10 binders trying to get around the FACT of what happened. So 10 binders that are in no way are concerned with manufacturing a better mouse trap, so to speak. And why the 10 binders? The search for unearned wealth.

    In the context of the collective wisdom aspect of *regulations* – what is the *classification* of The Patriot Act? What kind of document is that??!! Giving the Secretary of the Treasury UNLIMITED access to the financial records of USA citizens in case any of them are a *terrorist*? Schessh, we weren’t terrorists back then….

    And the more you compare Switzerland with USA, the more clear it is that we’re on two different Planets as far as daily maintenance goes, but, unfortunately, we have to share the same limited (sustainable means there is a LIMIT to a yearly harvest cycle of profit) planetary resources (man to land ratio). Swiss do whatever the hell they want with *science* – they did some kind of financial calculations in the 1970s that convinced them that organ transplants would be a profit-rich global enterprise….’nuff said about letting them *rule* the financial world with *regulation*…

  26. Thanks for the great post and for all of the other articles you’ve written on the blog. Suffice to say that of all the economic blogs out there, this is perhaps the most comprehensive, one stop shop for news on the financial crisis.

    One topic that still baffles me in the sovereign bond market. It’s at the center of every story coming out of the EU, and all of the bailout plans in Brussels, but its complexity is mind boggling. Would be curious to see a post about the bond markets in Europe, one that breaks down its complexity into something that is a bit more manageable. Specifically, how can the EU set up a bond exchange transaction to write down Greece’s debt? (http://www.economist.com/node/21534851)

  27. “Specifically, how can the EU set up a bond exchange transaction to write down Greece’s debt?”

    It is simple the governments (citizens of each country) buy the original worthless private bonds for 50% more than their worth. Think of it in terms of insurance the citizens are paying for the financial institutions. Much like here in good old USA we not only paid the premiums (bail out/ tarp) we also lower the interest rates to further recapitalize the financial institutions at the expense of citizen savings accounts.

  28. Nice article Simon. I happen to agree with your Tom Hoenig comments. Sadly, in the present political and fiscal environment, it is very hard to find folks that you feel are trustworthy. I would not raise Mr. Hoenig to the level of William Black, but feel that he is a strong voice of sanity and reason at a time when the usefulness of those qualities is unquestioned. This appointment need to take place very soon. With Europe essentially on the brink — I don’t happen to be in the least optimistic regarding the deal presently in the offing — we are under severe threat at a time where this country is finding any real balance more than problematic.

  29. The banksters (rhymes with GANGSTERS) don’t feel the system is broken, now, do they…..record profits, record bonus payments, operating banks that are technically broke, no worry about going to the KLINK for years for massive, criminal frauds….life is good. I can envision this acting on the pleasure centers of the brain during sex, and making it better.

    The only SANE way to fix this mess: 1. nationalize the federal reserve, and put an end to debt-based facsimile “*money*”; 2. aggressive, unrelenting criminal prosecutions, convictions, and long sentences; 3. settling accounts with all the millions of Americans who have been fleeced…and this is just for starters.

    None of this will happen, of course, absent bloody revolution, which is where this is probably going.

    Sorry if this offends prissy people who read this board but rarely take the time and effort to put something out, apart from complaining and whining.

    And, Simon, appointing people with delicate and refined financial sensibilities won’t matter, either……this is Chinatown, and no one on the good side, comprehends what’s really going down, least of whom academics bound not to upset the academy to any great degree.

  30. @Waterbury, “…..but feel that he is a strong voice of sanity and reason at a time when the usefulness of those qualities is unquestioned….”

    Yes, but if he is the ONLY person on the planet left with sanity and reason, it won’t help to have those qualities.

  31. @woop – it doesn’t have to get to the bloody revolution stage. That’s all I’m saying, “….it takes men of good will…”.

    Waste of life and limb to take down banksters with a bloody revolution – they’re such a classic low-life feature of Western Civilization – doing the same crap over and over again – stealing – that the real issue, and what everyone really wants much more than a bloody revolution – is to throw them into an *institution*. They love them *institutions* :-) and think tanks. Put a big wall around it and a moat and let them belive they are masters of the universe.

    Labor has the power. Why even entertain them by having a conversation about how labor does not have the power. That’s joining them in the looney bin :-)

  32. Throwing them in an institution ain’t happening, Annie.

    They own the police.

    They own the courts.

    They own the media.

    They own the intelligence services.

    They own all three branches of the tripartite government.

    They own the printing press.

    They own the mercenaries.

    They think nothing of using lethal force against an Iraq war veteran to disrupt and to defeat OWS in Oakland.

    Labor has the power?

    HA!

    What a sick joke.

  33. From http://en.wikipedia.org/wiki/Derivatives_market

    According to Bank for International Settlements, derivatives = “$516 trillion at the end of June 2007″

    Positions in the OTC derivatives market have increased at a rapid pace since the last triennial survey was undertaken in 2004. Notional amounts outstanding of such instruments totalled $516 trillion at the end of June 2007, 135% higher than the level recorded in the 2004 survey (Graph 4). This corresponds to an annualised compound rate of growth of 33%, which is higher than the approximatively 25% average annual rate of increase since positions in OTC derivatives were first surveyed by the BIS in 1995. Notional amounts outstanding provide useful information on the structure of the OTC derivatives market but should not be interpreted as a measure of the riskiness of these positions. Gross market values, which represent the cost of replacing all open contracts at the prevailing market prices, have increased by 74% since 2004, to $11 trillion at the end of June 2007.

    It would seem nominal value in 2007 was 46.909091 times more than gross market value. If applied to BofA 75 trillion in derivatives, it would indicate its gross market value is 1.6 trillion dollars.

    According to Dave Brillig, the “FDIC website says they insure only deposits, they do not insure securities etc.” While 1.6 trillion dollars is nothing to sneeze at, having the $75 trillion figure to start with, the market value gave me a sigh of relief.

    But Simon’s post says the FDIC would be responsible for the market value of the derivatives. So which is correct – the FDIC website, or Simon?

  34. For those that liked the film implanted above, I have a Brooklyn Bridge I’d like to sell you. Making the Fed a part of the government is not a bad idea, but it isn’t the salient cause of our problems. The authors of our constitution created a document to serve the wealthy. They disguised it well using the best political science of the time, but it was written by rich people to serve rich people. Amendments may have mitigated some of their control over time, but political science quickly lessened the impact of those amendments. As long as the wealthy fund the politicians campaigns, can broadcast deceptive or literally false information, overrun congress with lobbyists selling their message, buy legislative and regulatory outcomes with lucrative jobs for when the regulators and congress people leave government employment, gerrymander districts and in other ways slant the voting process, and control the counting of our votes, we will not have control of our government.

  35. @JS: “As long as the wealthy fund the politicians campaigns, can broadcast deceptive or literally false information, overrun congress with lobbyists selling their message, buy legislative and regulatory outcomes with lucrative jobs for when the regulators and congress people leave government employment, gerrymander districts and in other ways slant the voting process, and control the counting of our votes, we will not have control of our government.”

    A protest group sympathetic to Occupy Wall Street has been meeting in my town. A number of signs read “We are the 99%.”

    Since we live in a democracy, if the sign is even near correct, we have the enemy beat 99-1. So why are the good tunes still going to the 1%? In my experience,studying the 670 year history of double-entry bookkeeping, there is no conspiracy here. The problem is being generated by governing rules that have been legislated by software programs that are in the best interest of those who paid to have the software written: “There way!” Not even the programmers understand how this came about, or how to reverse the process. Sad to say that we have become a seriously dumbed-down society of cultures, relative to the problem and its solution. The problem’s solution is in software code that nobody in power understands. It is going to be fixed when the local communities — the biggest losers in the lopsided coding issue — get off our butts and get to work fixing the excesses at a local level, and then working our way up.

    There is no chance of fixing the problem at the State or Federal level of government. The damage is to deeply entrenched.

  36. @woop – Qantas is shut down today – a strike.

    No one survives in tact when Nihilism rules the day – that’s the point. We want them and their puerile blathering game boyz software to get off the stage. If they won’t release the levers of power, heck, even 50% can chop off that hand (figuratively speaking, of course).

    No one has any power over you unless you give it to them. Only CRIMINALS lie steal and murder to amass insane amounts of paper $$$ and then use that as an excuse to bring down the INFRASTRUCTURE of the USA…

    Betcha if you look into Solyndra, you’ll unearth a gaggle of ex-enronistas. There is a ridiculous amount of LIARS pulling scams 24/7 in USA assisting this Nihilistic orgy launched by Zionists and other religious cult NeoCons – sociopathy is a REQUIREMENT on the resume! They’ll tell you that they can do brain surgery and pick up a scaple to go ahead and do it – and I am NOT being dramatic about the depth of their delusional depravity.

    Totalitarian systems crumble fast when everyone stops using the system. They are off-balance and unsustainable and do nothing but manufacture poverty because CRIMINALS (psychos and sociopaths) use brute force to keep up that erection (totalitarian system – what did you think I meant?)

    I think you are all afraid of the success of “Solidarity” – but they’re getting the idea everywhere else where Western Peoples are pushing back on the *alien software* :-))

    Labor MUST step up to rule.

  37. @ JS, the corruption-funding crisis, you correctly argue, is functionally and politically and operationally tied to the central banking cartel…..

    “Money” $$$ controls the system entirely, and as now delivered, to channel John Dean of WATERGATE infamy, is way beyond a growing cancer, it’s taken over, and is killing the host….that is, USA.

  38. rock and roll ain’t religious music :-))

    Every human being has the right to make their lives less miserable through honest work. It’s a war when you try to take away what free men built for themselves!

    The CLASSIC definition of a war against humanity.

  39. Labor must STEP UP, oh…I couldn’t agree with you any stronger, my friend.

    Did LABOR STEP UP in the Verizon strike? The WORKERS stood up: I would take my lunch to Dewey Square, watching these workers sing old Woody Guthrie songs, chanting in unison while walking the picket-lines, and I felt an up-swelling of unison, righteous cause, and human beings saying no to avarice.

    I asked one day, one of the strikers, what the issues were…..he replied…..”outsourcing good paying” USA jobs to a foreign-slave-sweatshop location, at a time the company was recognizing massively huge profits.

    GREED, it says a lot about what sunk the ship.

    These workers did take a stand, as my dad did before them, when GE tried pulling odious shenanigans against the people responsible for MAKING the product.

    I think the cops even understood they could be next..not much in the way of discernible tension on any faces.

    However, the PRESIDENT of the UNION…union *leadership*…obtained NOTHING in the way of concessions from management, but a silly promise that negotiations would re-commence in “earnest”?

    Thus, the STRIKE ended: all the efforts, all the weeks of organizing, all the sweating in the sun, were wasted and to no avail.

    Do I personally think their union “leaders” were corrupted? Well, yes, it wouldn’t surprise me in the LEAST.

    Incidentally, union worker here, 26 years next month.

  40. JP Morgan gonna have to up the overtime rates, or it’s back to off-duty bouncing at strip clubs and teen drug raves. I mean, it takes all the fun out of it for the JP Morgan police department if they can’t rough up the very same citizens who pay their salaries, eh??? Mobile phone video is such a bummer for age 25+ boys who never grew up past the school yard fight with the small kid on the playground. Or better yet, the ever popular “30 on 1″

  41. @ Simon,

    Your beginning paragraph should be rewritten as:

    To fix a broken financial system – and to oversee its proper functioning in the future – you need experts. Finance is complex and the people in charge need to know what they are doing. One common problem, which is also manifest in the United States today, is that many of the leading experts still believe in some version of business-as-usual or *helped maintain, abet and further business-as-usual until it was blindingly obvious.*

    Sort of like yourself and Hoenig, Simon.

    Why not shill for John Corzine? Apparently he’ll be need of employment as well.

  42. We all rail about the banksters and their storied malfeasance and bonuses, but what about criminal economist policy makers?

    They fall into a few categories:

    1) Criminally complicit in derailing derivatives regulation: Greenspan, Summers and Geithner

    2) Criminally negligent in regulating Wall Street banks: Geithner

    3) Criminally negligent in not regulating systemic risk: Simon Johnson, Hoenig, Bernanke

    The difference is only how the American public treats these banksters and criminal economist policy makers. Banksters still get their huge bonuses quietly while criminal economists get invited on talk shows and become bankster consultants.

  43. Bruce E. Woych

    “You are a den of vipers. I intend to route you out and by the eternal God I will rout you out. If the people only understood the rank injustice of our money and banking systems, there would be a revolution before the morning.”

    Andrew Jackson, – 7th President of the United States of America (1829 – 1837)

  44. Bruce E. Woych

    In searching for some appropriate historic quotes, one source gives Henry Ford the credit for the second half of the above statement. (One was heads and the other tails of the same coin?).

    Whatever the case on perfect origin, one other gem is credited to our 7th President and his era of Banking Perplexity and monetary derivatives:

    “Mischief springs from the power which the monied interest derives from a paper currency which they are able to control, and from the multitude of corporations with exclusive privileges…which are employed for their benefit.”

    –Andrew Jackson

    True then…and even more true today!

  45. @ Bruce: Yes, all that FIAT paper *money* transmogrified ostensible human beings into deranged, conniving, psychos….without even a vestigial trace of moral conscience.

    It is nothing other than One Big inter-connected MAFIA we are dealing in, that is, a bunch of low-life scumbags who should be in jail, without any doubt.

    Fraud, wire fraud, theft, money laundering, murder, you name it…..IT DOES IT.

  46. Bruce E. Woych

    http://rwer.wordpress.com/2011/10/18/dodd-frank-brings-transparency-to-financial-industry/

    Dodd-Frank brings transparency to financial industry
    October 18, 2011 deanbaker1
    from Dean Baker

  47. Bruce E. Woych

    @Anonymous: It would seem that absolute power does indeed corrupt absolutely; and if we don’t wake up and shake off the false dreaming…well, we inherited a democracy and I for one intend to give one to my children and future grandchildren! The version of the narrative created by the class based social Darwinist (…sorry Darwin! Technically it was Lamarck and Spencer that pushed the “survival of the fittest” notion that served class interests and a zero sum political tool of monopoly capitalism ) have been destroying the country with tools/weapons/strategies from the cold war that have co-opted power in this country since the murder of J.F. Kennedy. The Industrial war machine is on full throttle and financing is at every turn of its looting history right up to the present.
    (see:
    http://en.wikipedia.org/wiki/NSC-68 for example and you will find the pretext for Milton Friedman and the corruption of the Economics Department at Chicago University …a bastion of social Darwinism tradition by the way …and just scratch the surface on its funding…etc; mobster politics rationalizing the globe:etc., etc.)

    Meanwhile, in our immediate future present
    October 31, 2011 deanbaker1 (2 comments)
    from Dean Baker

    “If anyone still questioned who owns Washington, the congressional supercommittee charged with reducing projected deficits by $1.2 trillion seems determined to end any doubts. According to press accounts, both the Republicans and Democrats on the committee support a plan to reduce average Social Security benefits by 3 percent.

    While whacking our parents and grandparents with a big cut in Social Security benefits apparently draws bipartisan support, the supercommittee will not even score a plan to tax Wall Street financial speculation. Read more…”

  48. Bruce E. Woych

    Link for the Social Security theft in progress article:

    http://rwer.wordpress.com/author/deanbaker1/

  49. @Bruce E Woych – It seems to me that we have already had a cut in Social Security. Over the last few years, we have had some inflation, but the Social Security recipients were not give a cost of living increase. This will also affect future Social Security recipients.

  50. http://www.foxnews.com/politics/2011/11/01/firm-run-by-former-gov-corzine-files-for-bankruptcy-protection/

    Corzine was sold as the financial wizard governor of NJ during the Bush cabal years when EVERYONE in *government* was doing nothing other than pawing through the personal financial records of the *middle class* thanks to the Patriot Act!

    NJ – a state unwilling to make any effort to deliver reliable electricity anymore – I canvassed my peeps – no one remembers ANY power outages in NJ until after the year 2000….?

    Like it takes financial geniuses to figure out that without steady income (a JOB besides theft and fraud and all sorts of black market gun, drug, slaves, human organ selling activity or *enron* virtual companies)

    a *bank* can take it ALL from the citizens – savings, home, possessions…

    Read the history timeline – everything is going better than before in Western Civilization – and then the BANKS pretend $$$ comes first, then life and then the man made disaster appears – instant *tang* poverty

    We need to prosecute them for crimes against humanity – a conniving cabal that throws out protective laws separating commercial and investment banking committed a CRIME against humanity – what other proof is needed for their CRIMES other than the current unemployment count and the poverty/homeless count? The only numbers that keep going UP – the pump and dump gyrations of the stock market depend on soylent green feeds – LIVES…

  51. I think Mr. Corzine would fall under the term “financial expert”. He needs a job now, so maybe he and Mr. Hoenig could work together to completely bankrupt the US financial system. Doing the same thing over and over and over……

  52. @David, oregano, Simon, Statsguy and others from a few years ago. Back then, there was serious discussion on this blog trying to deal with difficult questions that DID NOT and DO NOT have obvious answers. Now the comments are filled with people that know they have the answers. I still enjoy the postings by Simon and James and really enjoyed watching Simon’s graduate lectures and class response in action back in the early days of this blog, but the comments have become pretty silly. Not as bad as those on Yahoo, but getting there.

    The issues presented on this blog cover very difficult problems that need to be seriously discussed, listened to and thought about by all sides. If anyone knows of an Econ Blog that still offers that opportunity, please post it.
    Hiram

  53. Here you go Hiram:

    http://blog.heritage.org/

    Typical liberal, when you are losing the argument you claim the other side isn’t smart enough to have a conversation with you.

    My comments are no more or less rambling than this Simon and James’ posts. Simon wanting me to accept his idea that a former Fed President would be a great “expert” to fix the financial mess in Washington. That is what Senators and Congressmen are elected to do.

    Thank you very much, but Mr Hoenig is part of the problem.

  54. @ Hiram, try Brad Delong….for the loads of academic horsechit you yearn for.

  55. @Simon Johnson: “To fix a broken financial system – and to oversee its proper functioning in the future – you need experts. Finance is complex and the people in charge need to know what they are doing.”

    Does anyone here believe that someone allowing the banks to leverage their capital OVER 60 TIMES , when investing in securities backed with mortgages just because these have a triple-A rating, or when lending to the politicians of Greece, Italy or in fact, to any sovereign should be labeled as an expert?

    While at the same time those same “experts” only allowed the banks to leverage 12 times when lending to their own local small businesses and entrepreneurs and who have never ever caused a bank crisis?

    What we urgently need is some good old fashioned common sense. For instance I bet that none of those experts’ mothers, would have come close to doing something so crazy.

  56. Bruce E. Woych

    Full Report: ‘Analysis of Financial Terrorism in America’

    http://ampedstatus.org/download-free-pdf-kindle-word-doc-of-full-report-analysis-of-financial-terrorism-in-america/

    AmpedStatus Report )))
    Download Free PDF, Kindle, Word Doc of Full Report: ‘Analysis of Financial Terrorism in America’

    PDF version:

    http://ampedstatus.org/Analysis-of-Financial-Terrorism-in-America.pdf

    Full Report: ‘Analysis of Financial Terrorism in America’

  57. Bruce E. Woych

    Constitutional Amendment to overturn Citizens United introduced in US Senate
    Submitted by oskebuckley on Tue, 11/01/2011 – 13:42

    U.S. Senators Tom Udall and Michael Bennet introduced a constitutional amendment to overturn the Citizens United decision. The amendment calls on Congress to correct the Citizens United v. FEC Supreme Court ruling on campaign finance allowing virtually unlimited corporate and special interest spending in elections. Joining Udall and Bennet as original cosponsors of the legislation are Sens. Tom Harkin, Dick Durbin, Chuck Schumer, Sheldon Whitehouse and Jeff Merkley.

    The constitutional amendment would authorize Congress to regulate the raising and spending of money for federal political campaigns, including independent expenditures, and allow states to regulate such spending at their level. It would also provide for implementation and enforcement of the amendment through legislation.

    For the text of the proposed amendment visit, http://scr.bi/s1z0I2.

  58. Dan Palanza the past 50 years has been an effort by the Federal Reserve to remove any regulation that required record keeping. It was Paul Volcker Carter’s Federal Reserve Chairman that made the avalanche of deregulation under Reagan which continued through Clinton. This destroyed what was put in place from Teddy Roosevelt to FDR that held speculation of the financial markets in check.

  59. Markets..aurelus “Friedman’s spot on.

    Since the adoption of Friedman’s policies of freed trade and the market knows best in 1972 the USA has went from the greats creditor nation to the greatest debtor nation.

  60. Other People’s Money, and How the Bankers Use It by Louis Brandeis

    http://www.law.louisville.edu/library/collections/brandeis/node/191

    “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”
    Louis D. Brandeis

  61. @anonymous: “It was Paul Volcker Carter’s Federal Reserve Chairman that made the avalanche of deregulation under Reagan which continued through Clinton. This destroyed what was put in place from Teddy Roosevelt to FDR that held speculation of the financial markets in check.”

    My argument is that regulation, officially put into place by law, has been meaningless relative to half-baked software programs that are successfully ignoring — or should I say ‘obfuscating’ — regulation for the past 30 years.

  62. Dan we agree. The regulations of the past 50 years purpose by the Federal Reserve were to rewrite what had been effective in almost eliminating boom and bust cycles for 40 years caused by debt, speculation and free trade.

  63. Bruce E. Woych

    Let the 40 year perspective speak for itself but the University of Rhode Island has provided a timeline on financial markets that goes back to the acceptance of default and bad banking as a “business cycle” and that has fed into the idea that somehow this is all market self-regulation under boom and bust stupidity.

    Here’s the history: (courtesy of the University of Rhode Island)

    http://brennermail.com/URIHI141/Timeline/Jacksoniantimeline.html

    HISTORY 2111
    The Business Cycle in American History
    There have been many economic depressions in American History; so many that economists created the term “business cycle” to describe how the economy seemed to collapse approximately every twenty years under unregulated capitalism. Before the term “depression” came into vogue, however, such economic downturns were referred to as Bank Panics. Three such national depressions occurred during the antebellum period. The three antebellum depressions (in 1819, 1837 and 1857) all show two basic causes.

    The sudden collapse of an important agricultural commodity price
    In 1819 and 1837, the market for cotton collapsed
    In 1857, increased demand for wheat in Europe, caused by the Crimean War, came to a sudden end when the war ended and an excess harvest occured worldwide.
    An Unstable Banking System
    In 1819, runs on banks occur because of collapse of land price, because of risky speculation by unregulated state banks, and because of an embezzlement case at the Baltimore Branch of the Bank of the US.
    In 1837, “Wild Cat Banks” collapsed at the same time that specualtion on internal improvements destroyed the credit of many state governments.
    In 1857, an Ohio insurance company went bankrupt which set off a panic primarily in the North.

    The 1857 Panic brought another factor into the mix: Overproduction of manufactured goods. When inventory stocks of manufactured goods exceeded the demand for those goods because of the financial market, the depression deepened in the North as thousands of workers were laid off during the financial downturn. This become a factor in every depression afterwards.
    Panics continued approximately every twenty years after the Civil War up to the Great Depression. Panics occured in:
    1819-1821
    1837-1845
    1857-1859
    1873-1875
    1893-1896
    1908
    1919
    1929-1941
    With the economic regulations put in place during the New Deal of Franklin Roosevelt, financial downturns became less severe and became know as recessions. Recessions occured in:
    1946
    1974-1975
    1982-1983
    1992
    2001-2002
    The Reagan Administration dismantled most of Roosevelt’s regulations.

  64. Bruce E. Woych would you mind checking the 1873 date as I thought it was referred too as the depression of 1871? I’m not a scholar but have a reference on the date as 1871 and may need to correct it.

    Thanks for the detailed history line on depressions/business cycles, put in my archives,

    You may enjoy this video on financial reforms from our political leaders.

    http://www.thedailyshow.com/watch/thu-july-28-2011/dodd-frank-update

  65. Bruce E. Woych

    @ Anonymous:
    I want to be careful not to take credit at all for the time line, that was a generous courtesy to the public from the University of Rhode Island placed on-line.
    Nevertheless it is an interesting question, and here is what I (briefly) can relate (lots more of interest on this time period now referred to as the “long depression”
    From:

    http://en.wikipedia.org/wiki/Panic_of_1873

    (Quoted)
    Germany and Austria
    A similar process of over-expansion was going on in Germany and Austria, where the period from German unification in 1870/71 to the crash in 1873 came to be called the Gründerjahre or “founders’ years”. A liberalized incorporation law in Germany led to the founding of new enterprises, such as the Deutsche Bank, as well as the incorporation of established ones. Euphoria over the military victory against France in 1871, combined with the influx of capital from the payment by France of war reparations, encouraged stock market speculation in railways, factories, docks, steamships – in short, the same areas of over-expansion as in the United States.[17] It was in the immediate aftermath of Otto von Bismarck’s victory against France that he began the process of silver demonetization. The process began on 23 November 1871 and culminated in the introduction of the gold mark on 9 July 1873 as the currency for the new united Reich to replace the silver coins of all the constituent parts. Germany was now on the gold standard.[2] Demonetization of silver was therefore a common element in the crises on both sides of the Atlantic Ocean.
    (End of Quoted material)

    Note that the American side of this is still referred to as the “Panic of 1873″ but the impact appears to have had a duration globally that may well be said to have started earlier and lasted at least until 1879 from what I read in several articles.

    My compliments to you Anonymous!

  66. Bruce E. Woych appreciate the help,
    Thought as you like quotes you might like these on the subject here.

    “I see in the near future a crisis approaching that unnerves me and causes me to
    tremble for the safety of my country; corporations have been enthroned, an era of
    corruption in High Places will follow, and the Money Power of the Country will
    endeavor to prolong its reign by working upon the prejudices of the People, until
    the wealth is aggregated in a few hands, and the Republic is destroyed.”
    Abraham Lincoln

    “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
    Thomas Jefferson

  67. Bruce E. Woych

    @Anonymous: thank You for these; and here is a partial of one dear to my heart:

    “We dare not forget today that we are the heirs of that first revolution. Let the word go forth from this time and place, to friend and foe alike, that the torch has been passed to a new generation of Americans–born in this century, tempered by war, disciplined by a hard and bitter peace, proud of our ancient heritage–and unwilling to witness of permit the slow undoing of those human rights to which this nation has always been committed, and to which we are committed today at home and around the world.
    Let every nation know, whether it wishes us well or ill, that we will pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and success of liberty.”

    “Now the trumpet summons us again–not as a call to bear arms, though arms we need–not as a call to battle, though embattled we are–but a call to bear the burded of a long twilight struggle year in and year out, “rejoicing in hope, patient in tribulation” –a struggle against the common enemies of man: Tyranny, poverty, disease and war itself.”

    […and while many Americans know one quote by heart from this text; which incidently originated from a paraphrase of Cicero,…not many have EVER heard the second portion of this challenge…]:

    “My fellow citizens of the world: ask not what America will do for you, but what together we can do for the freedom of man.”

    And these words, my good friend Anonymous, are the excerpted words from the 1961 Inaugural Address of President John F. Kennedy

    …and I dare wonder what he might say today….

  68. Bruce E. Woych perhaps JFK would say its time we took this advice of Lincoln; our goal is not to destroy the constitution but to save it from those who would prevert its intent.

    “We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution.”
    A. Lincoln

  69. Bruce & Anonymous: “We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution.”
    A. Lincoln

    Keep in mind that Our Constitution is being undermined by our Monetary system. Wall Street is today a gambling casino that bets dollars in place of ‘house-chips’. Casino games are programmed to loose, not to win. The house hires gamblers to beat itself and to split the take. This unlimited Ponzi Scheme is working because The Casino has no requirement to keep a proper Book-of-Accounts. Fungible dollars have become bits and bytes in a computer memory field that, using today’s accounting standard, is impossible to audit.
    Every dollar that The Wall Street gambler wins is a dollar that The Constitution of The United States loses. The problem is easy to fix. Bankers, brokers, economists, and politicians have got it wrong. We The People, covering The Wall Street tab, must admit to our own bookkeeping oversight, and return The Constitution of The United States of America to the 670 year old pattern language that holds its users accountable, before our fast shrinking window opportunity closes.
    Here’s a point that I don’t know how to verify but: I believe that every signer of The Declaration of Independence understood and used the control language called “Double-entry Bookkeeping.” That 670 year old gem is today a lost language. No person, including Geithner and Bernanke, understands how a double-entry Book-of-Accounts exposes a Ponzi Scheme on its first day of operations. And I challenge any person writing or commenting on this blog to demonstrate in words, telling that they understand the double-entry pattern that proves the existence of a Ponzi Scheme.
    Simply stated: If We The People want to live in a Constitutionally Governed State then we are going to have to learn how double-entry bookkeeping enables that luxury.

  70. Bruce E. Woych

    The spider is a great predator and lays silent at the edge of the web it spun to stall its’ prey in a futile struggle against the trap. The “network” of duplicity, capture, control fraud and political finance has taken advantage of a political market advantage and capital intensive barriers to entry for both public office and now the higher education system. Time and the conduit of power in monopolizing the money supply is only the tip of the iceberg. Communication right now is the only information flow and we must all admit that the process has forced many of us to self-educate and share this material; but it is easily distracted by a consolidated (neocon-syndicate) media and the progressively incremental attempts to close the free flow of information, or drive it into a systemic tool for intervention and demographic manipulations. The Supreme Court is an historic sham being installed over time to serve the “spider-web”, and subsequently having reinforced the corrupt capture of the electoral process in the passed decade. The final cap to this political collusion came with the corporate persona being recognized as an entity and that money influence peddling for power and future capture were somehow an attribute of free speech. Need I say more…the elaborations are profoundly devious…but we are talking about controlling the most powerful forces in human history and control fraud at magnitudes that defy comprehension…let alone citizen intervention.

    Here is where the current line is drawn, even while our fellow citizens are standing their cold ground and the legitimation of power abuse is looking for ways to justify police state levels of opposition (which undoubtedly will ultimately result in new “security” legislation for the apparatus. This is not the KGB brutally exercising power over its people…this is more insidious and sophisticated…afterall…this is America not some backwards tyranny. The prize is the greatest country on the face of the earth, and the submission of its domestic economy to private ruthless hands. What would you expect from the people who looted the treasury and got away with it?

    See this:

    http://www.citizenvox.org/2011/11/03/advocates-seek-new-avenues-for-corporate-accountability-citizens-united-fec-sec/

    CitizenVox Logo

    Standing Up to Corporate Power

    November3
    Advocates seek new avenues for corporate accountability

    By: Lisa Gilbert

    Today the Federal Election Commission (FEC) is being called in to a hearing in the Elections subcommittee of the House Administration committee.

    “A photograph of Lisa GilbertAnyone attending will hear the commissioners speak to their performance. However, it is hard to imagine how their statements can be anything but a whitewash. The agency is currently falling desperately short in its mission (PDF) to enforce the campaign finance laws on the books, and has been unable to promulgate new rules to react to the landmark case Citizens United vs. FEC. For years, a sharply partisan split between the commissioners has largely prevented the agency from fulfilling its directive.

    With a gaping hole left by a deadlocked FEC, advocates are now looking to other remedies for dealing with the pervasive problem of secretive outside and corporate spending, highlighted in the 2010 cycle (which is sure to continue in 2012).”

    read the entire article (it contains links that may not light here) and;
    Take Action: Urge Congress to support the solutions to Citizens United v. FEC.

    (Lisa Gilbert is the Deputy Director of Public Citizen’s Congress Watch Division)

    Regards to all:
    Bruce

  71. Bruce E. Woych

    Bill Black: Jobs Now, Stop the Foreclosures, Jail the Banksters
    Bill Black: Here are three things the “Occupy Movement” could focus on
    Go to story

    http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=7542

    November 3, 2011
    Voices from Occupy Wall Street

  72. Bruce E. Woych

    http://thinkprogress.org/justice/2011/11/02/358694/senators-introduce-citizens-united-amendment/

    Senators Introduce Constitutional Amendment To Overturn Citizens United

    By Zaid Jilani on Nov 2, 2011 at 9:50 am

    “…Six Democratic senators — Tom Udall (NM), Michael Bennett (CO), Tom Harkin (IA), Dick Durbin (IL), Chuck Schumer (NY), Sheldon Whitehouse (RI), and Jeff Merkely (OR) — introduced a constitutional amendment that would effectively overturn the Citizens United case and restore the ability of Congress to properly regulate the campaign finance system.”

    Proposing an amendment to the Constitution of the United States relating to contributions and expenditures intended to affect elections.
    IN THE SENATE OF THE UNITED STATES
    ( http://www.scribd.com/doc/71154073/A-Constitutional-Amendment-to-Reform-Campaign-Finance)
    JOINT RESOLUTION
    Proposing an amendment to the Constitution of the UnitedStates relating to contributions and expenditures in-tended to affect elections.
    Resolved by the Senate and House of Representatives
    1
    of the United States of America in Congress assembled,
    2
    That the following article is proposed as an amendment
    3
    to the Constitution of the United States, which shall be
    4
    valid to all intents and purposes as part of the Constitu-
    5
    tion when ratified by the legislatures of three-fourths of
    6
    the several States within seven years after the date of its
    7
    submission by the Congress:
    8
    MCG11359 S.L.C.
    ‘‘ARTICLE

    1
    ‘‘SECTION
    1. Congress shall have power to regulate
    2
    the raising and spending of money and in kind equivalents
    3
    with respect to Federal elections, including through set-
    4
    ting limits on—
    5
    ‘‘(1) the amount of contributions to candidates
    6
    for nomination for election to, or for election to,
    7
    Federal office; and
    8
    ‘‘(2) the amount of expenditures that may be
    9
    made by, in support of, or in opposition to such can-
    10
    didates.
    11
    ‘‘SECTION
    2. A State shall have power to regulate the
    12
    raising and spending of money and in kind equivalents
    13
    with respect to State elections, including through setting
    14
    limits on—
    15
    ‘‘(1) the amount of contributions to candidates
    16
    for nomination for election to, or for election to,
    17
    State office; and
    18
    ‘‘(2) the amount of expenditures that may be
    19
    made by, in support of, or in opposition to such can-
    20
    didates.
    21
    ‘‘S
    ECTION
    3. Congress shall have power to implement
    22
    and enforce this article by appropriate legislation.’’

  73. Bruce E. Woych

    I would take any one of those 6 Democratic Senators for President…

    …over Obama !!!

    Why do we not have any Democratic Option? Why are we facing a failure of the Democrats to respond?
    Why is there no one to hold Obama accountable and to bring him to task?

    Why do we not have a single Democratic Challenger for the Presidency of the USA and a real platform of
    reform that would not just back these Republican bull dogs off, but shut down their machine?

    Is this historical Chicago style politics in Washington…or something much more sinister?

  74. Bruce E. Woych

    http://www.stlyrics.com/lyrics/easyrider/somethingintheair.htm

    Thunderclap Newman
    Something In The Air Lyrics
    Thunderclap Newman “Something in the air” 1969
    BobbyColePopMusic

  75. Bruce E. Woych

    Thunderclap Newman
    Something In The Air Lyrics

    http://www.stlyrics.com/lyrics/easyrider/somethingintheair.htm

    Call out the instigators
    Because there’s something in the air
    We’ve got to get together sooner or later
    Because the revolution’s here, and you know it’s right
    And you know that it’s right

    We have got to get it together
    We have got to get it together now

    Lock up the streets and houses
    Because there’s something in the air
    We’ve got to get together sooner or later
    Because the revolution’s here, and you know it’s right
    And you know that it’s right

    We have got to get it together
    We have got to get it together now

    Hand out the arms and ammo
    We’re going to blast our way through here
    We’ve got to get together sooner or later
    Because the revolution’s here, and you know it’s right
    And you know that it’s right

    We have got to get it together
    We have got to get it together

  76. Bruce E. Woych

    http://owsnews.org/bill-black-dylan-ratigan-david-degraw-prosecute-the-banksters-get-money-out-of-politics/

    Bill Black, Dylan Ratigan & David DeGraw: Prosecute the Banksters, Get Money Out of Politics

    November 2, 2011 in Break up banks, Campaign Finance, Demands, Federal Reserve, Jailing Banksters, Liberty Park, Lobbying, Politics & Government, Video
    (and more…)

    This is “the” site you have been waiting for…and I am 99% sure of it!

  77. Bruce E. Woych

    http://owsnews.org/

    A Small link….with a big compiled set of materials and video coverage: great stuff!

  78. Bruce E. Woych these are a great list of videos and urls and I thank you for them. But education of us is important; we need a solution. Since neither side of the political theater will engage in more than partisan BS ; because they like us fear loss of their job not from citizens but from corporations which will fund opposition too their reelection.
    This is not new problem of getting the government to do it job. Perhaps we have a real commission that has subpoena powers and to investigate and refer prosecution to the FBI would create the cover the politicians need.

  79. Bruce E. Woych

    It has taken years of succession plotting and planning to get us here to this present crossroad of history. It will take a continuous learning process and active voices in a participatory democracy to climb back out; and that will also take several years to secure.

    The problems and crisis is not new in history. What is new is the scale and scope of its global dimensions in all respects from corrupt power domination to sacrificing “other” people, to environmental hazards and rapidly accelerated global ecological damages. We no longer have the luxury of time. But we can’t afford the luxury of ignorance either.
    Every generation appears to naturally get besieged with greed and this lust for power. But every generation also appears to have to learn the lesson all over again each time. We can now see with historic accuracy that this spectrum and civilized “disease” has been upon us over again in time and has been well documented for at least some 200 years in America. Still, when all this started to really explode after 2007 at global proportions (one can argue that it had been leap frogging from continent fo continent outside of the States prior to that for some time…) the best we could do is talk about 40 years and the New Deal. Even with that the “supply siders” and other gangster style capitalists were working and gaming the political system to make the laws that would “break” the laws.
    There isn’t much you can do against a loaded deck except expose it and get the victims to understand that the people they trusted are the ones responsible…and show them blatantly and clearly that they have been had! That is where the growing information flow is so important. If we can convince a guy with integrity like Simon Johnson that his intuition is more correct than his conditioned view on scientific economics…, well; his gut feelings have one foot at MIT with the best American minds and one foot in Washington with …well….with the best american minds on the political band wagon anyway…

    I hope that is not an evasive response to your question raised. I actually thought about it for a full 24 hours after reading it and thought I had many “slick” answers. But in the end all I can say is please Brother…please be true to yourself and be true to your neighbor…and let’s make sure America doesn’t have a price tag on freedom!

  80. I think title 52 is pretty good. I think Anonymous is even better. I think Danny boy has it right on!

  81. Hope this one turns out to be beneficial!

  82. Bruce E. Woych

    http://www.uta.edu/huma/agger/fastcapitalism/2_2/fisher.html

    “Upgrading” Market Legitimation: Revisiting Habermas’s ‘Technology as Ideology’ in Neoliberal Times

    Eran Fisher

    U. without Borders / The U. in Exile.

  83. http://www.amazon.com/David-C.-Korten/e/B001JP3MR8/ref=ntt_dp_epwbk_0 (LIST OF WORKS PAGE)
    BY
    David C. Korten

    David C. Korton writes on community economics and a sustainable pragmatic agenda is presented in his latest book.
    His critiques of corporate driven market economy is also worth noting, and the link above will lead you to his line of works over the past years…check it out. Here’s the latest two that bridge his frameworks most completely:
    Agenda for a New Economy: From Phantom Wealth to Real Wealth
    and
    When Corporations Rule the World

  84. Wonder how big the crowd would be if everyone who was at that inaugural address in person and has since lost their job and/or *primary residence* showed up again – en masse – so that the *experts* like Mr. Hoenig could count the head of cattle, so to speak…

    That’s really something – to make a speech to so many – knowing *what* ahead of time? – “never gonna happen”….

  85. Bruce E. Woych

    http://www.truth-out.org/occupy-colleges-now-students-new-public-intellectuals/1321891418

    Published on Truthout (http://www.truth-out.org)

    Occupy Colleges Now: Students as the New Public Intellectuals
    Monday 21 November 2011
    by: Henry A. Giroux, Truthout | News Analysis
    (excerpt)
    “The police violence that has taken place at the University of California campuses at Berkeley and Davis does more than border on pure thuggery; it also reveals a display of force that is as unnecessary as it is brutal, and it is impossible to justify. These young people are being beaten on their campuses for simply displaying the courage to protest a system that has robbed them of both a quality education and a viable future.

    Finding our way to a more humane future demands a new politics, a new set of values, and a renewed sense of the fragile nature of democracy. In part, this means educating a new generation of intellectuals who not only defend higher education as a democratic public sphere, but also frame their own agency as intellectuals willing to connect their research, teaching, knowledge, and service with broader democratic concerns over equality, justice, and an alternative vision of what the university might be and what society could become.”
    (Read it ALL)

    http://www.truth-out.org/occupy-colleges-now-students-new-public-intellectuals/1321891418

    Published on Truthout (http://www.truth-out.org)