Save If Failure Impending

By James Kwak

Yesterday the House Financial Services Committee held a hearing on the too big to fail problem. Ordinarily a hearing includes a couple of witnesses chosen by the majority who say one thing and one or two witnesses chosen by the minority who say exactly the opposite thing. In this, however, it was hard to tell who was chosen by which side (although I can guess), given the extent of the agreement among former Fed bank president Thomas Hoenig, current Fed bank presidents Richard Fisher and Jeffrey Lacker, and former FDIC chair Sheila Bair.

All agreed that the too big to fail problem still exists, five years after the financial crisis, and that it continues to distort the market for financial services. For example, Lacker, who is perhaps the most sanguine about Dodd-Frank (he likes the living will provisions of Title I), said, “Given widespread expectations of support for financially distressed institutions in orderly liquidations, regulators will likely feel forced to provide support simply to avoid the turbulence of disappointing expectations. We appear to have replicated the two mutually reinforcing expectations that define ‘too big to fail.’”

There was disagreement over whether Dodd-Frank, and the Orderly Liquidation Authority regime that it created, would continue the practice of bailing out failing financial institutions, with Bair arguing that Dodd-Frank “abolished” bailouts. Of course, everyone is against bailouts, but at the same time everyone is in favor of protecting the financial system and the economy against disaster.

The issue comes down to what I think is a simple ambiguity about the meaning of “bailout.” In the short term, when a megabank is about to collapse, bailout can mean two different things. First, it can mean that creditors and counterparties are made whole to the extent necessary to protect the financial system from domino or contagion effects. Second, it can mean that executives keep their jobs and shareholders continue to hold an equity stake. (These could be divided into two different things, but it doesn’t matter here.) Everyone agrees that Dodd-Frank gives the FDIC, using money borrowed from Treasury if necessary, the power to do the first kind of bailout. The statute says that the FDIC can’t do the second, and that’s what Dodd and Frank pointed to when they said that their bill abolished bailouts.

When push comes to shove in the heat of the moment, it’s the creditors and counterparties that matter, though, and they will be made whole—at least to the extent necessary to protect the financial system. At a moment of great panic and uncertainty, that probably means one hundred cents on the dollar. And that is what really skews the incentives ex ante—not whether managers and shareholders will be bailed out.* As Fisher said, this is why SIFI (systemically important financial institution) really stands for “Save If Failure Impending.”

Bair realizes this, and one of her key recommendations is requiring large banks to have a thick layer of unsecured, long-term debt, so that the FDIC can impose losses on those long-term debt holders. These creditors couldn’t pull their cash out overnight in a crisis, which would give banks a more stable funding structure. I’m not confident this will work, though. As long as banks have any significant amount of short-term debt, creditors will behave as if that debt enjoys a government guarantee, and the FDIC would have to bail them out.

Lacker thinks that the system should have no government guarantees at all—which means that if a crisis erupts, the government commits to sitting by and letting the world end. He thinks we can get there via living wills, which will enable regulators to ensure that banks can be allowed to fail without causing damage to the financial system. We can get there, he argues, because regulators can reject a bank’s living will until they are confident it could be allowed to fail, ordering it to restrict its activities if necessary. But this brings us back to the question of whether regulators can and will make these complex, politically fraught decisions without being duped by bankers.

As before, I still think that simple, structural limits—making banks “too small to save,” again using Fisher’s term—are the best way to go. Hoenig recommended restricting banks to banking, securities underwriting, and asset management. Fisher recommended restricting the megabanks to “an appropriate size, complexity, and geographic footprint.” I’m tired of people like Lacker saying, “I am open to the notion that such restrictions may ultimately be necessary to achieve a more stable financial system.” They’ve had five years to try it their way, and everyone agrees TBTF is alive and well.

* As I mentioned in a previous post, Joshua Mitts has a paper arguing that this dynamic will lead managers to try to position their firms to be bailed out for precisely this reason. 

42 responses to “Save If Failure Impending

  1. Regulators and politicians have had five years of relative calm and deliberation to do something about too big to fail (e.g., shrink the banks) and have done virtually nothing to solve it. For much of that time, they even had public pressure to “fix it.” Have they been duped by bankers during this period or are they simply owned by them.

    If they won’t take on the banks when the public asks them to and when there is no apparent crisis, what makes anyone believe that during a time of crisis and emergency (real or exagerated) politicians will sit idly by as “the world ends”?

    In truth, depending upon the circumstances “bailing them out” could be the best solution available. But why have they chosen to put us in a position where that might come to pass?

    Is there a way for the American people to do what our representatives lack the fortitude to do?

  2. Moses Herzog

    With all due respect to Mr. Kwak, I think that this committee hearing is “academic” or maybe a better word is moot. Nothing substantive is going to be done on this issue between now and the next crisis (and probably not at the next crisis). The powers that be (Bob Corker, Senator Cock Shelby, etc) have decided they like status quo.

    What I felt is more important at this stage is who becomes the next Chairman of the Fed (also not an “earthshaker” but of enough significance that people should holler as best they can to legislators and the administration). This is something Pres. Obama has shown poor judgement on in the past (Banker crony Geithner, Economics lightweight Lew, Enron apologist and enabler Larry Summers, and the often forgotten “Thanks for the siphoned 2008 votes by positive association, but get lost now” Volcker and Stiglitz). And here I mean that Volcker and Stiglitz should have had more insider say on policy. Should I go on?? (trust me I could)

    I read on another semi-dependable blog that Stanley Fischer was out of the running as he is staying planted at B.O.I. If I was Pres Obama, I would be doing some major cajoling, arm twisting, and “pretty please with sugar on top” directly to Fischer and any of Fischer’s friends who might have sway with the man to come head the Federal Reserve. My guess is it wouldn’t work, but if there is any chance Pres Obama should give it a damned hard “old college try”. If Fischer is completely unavailable I give a phone call to Alan Blinder, get some assurances he’s not going to be too “easy” or “dovish” on policy and get him on in there.

    I don’t see the point on “easy” monetary policy (low rates and QE) at this stage, as the money only stays dormant in TBTFbank reserves anyway.

  3. Moses Herzog

    Speaking of incredibly asinine White House appointments….. this should be required reading for all the John Kerry
    D U M B A S S E S of the world
    that think if they pump X-billion $$$ into countries like Pakistan, all of the sudden they will love us, and whoever we want to win will win, and handing them military technology on a silver platter won’t come back to bite us on the A S S long-term:

    http://www.karlremarks.com/2013/06/an-ingenious-plan-how-cia-vets-syrian.html?m=1

    Of course guys like Dick Cheney already know this (a man whom I loathe but is much more in-tuned with reality than clueless Kerry). But it doesn’t pay for Cheney to speak out what he knows so very well, as it hurts the oil and military contractors Dick Cheney has been spooning in bed with for decades.

  4. Per Kurowski

    And I am sad they spend so much time discussing the safety of the banks, and not the safety of the real economy. Q. How many unrated small and medium businesses and entrepreneurs have they invited to hear if banks are serving them? A. Zero!

    http://subprimeregulations.blogspot.com/2012/07/complaint-i-presented-to-consumer.html

  5. “Of course, everyone is against bailouts, but at the same time everyone is in favor of protecting the financial system and the economy against disaster.”

    Wrong!!! Not everyone! We are fed this fairytale that the TBTF oligarchs are also To Big To Prosecute! Systemic crimes, and pathological criminals cannot be punished because of some unknown unknown ” disaster”! These are the evil conjurings of the predatorclass who seek to continue thier systemic criminal activity, and wanton rape and pillage of the poor and middleclass.

    The delusion the predatorclass imagines is FALSE! It could’nt be worse for the poor and middleclass. The den of vipers and thieves, pathological liars, and sociopath criminals in the predatorclass can pimp and brute this “socalled” disaster on TV, and the complicit parrots in the socalled MSM can regurgitate this nonsense repetitively – but the “disaste” had already hit and devasted the poor and middleclass. All the government numbers are false! There is no recovery for us. There are no more protections, freedoms, or opportunities for us!! There is no future for us!!! We are abused and abandoned children of the predatorclass oligarchs that own and control Amerika!!! The TBTF oligarchs are criminal cartels, perpetuating systemic criminal activity. Failure to administer justice and punish criminals for wanton systemic criminal activity is the REAL DISASTER that has destroyed America. The den of vipers and thieves on wall street, all the finance oligarchs, and thier purchased spaniels in the socalled government ARE the “disaster”. Unless and until these ruthless predatorclass monsters are brought to justice and punished for systemic and wanton criminal activity – the socalled “disaster” all these fiends and parrots use as an excuse to shield, cloak, and advance thier criminal activity – will continue unabated, and unrestrained. The 99% is already suffering from, and victims of a “disaster” wrought by the predatorclass.

    There will be a reckoning, and a balancing, and there will be blood!

    Burn it all down!!! Reset!!! It’s the only option!

  6. We have empirical evidence here, and Iceland won the gold medal: they let the creditors take heavy losses and emerged in decent shape:

    http://www.washingtonsblog.com/2012/08/top-economists-iceland-did-it-right-everyone-else-is-doing-it-wrong.html

  7. Necessity appears to be the mother of invention. As one of the comments points out, Iceland had no other option.

    My view is that the equity and debt holders should be completely wiped out before any other option is ever considered. And then, since any “bailout” would be stolen from the people by our elected representatives who are perpetuating an unnecessary TBTF policy, it would make sense that any assistance should go directly to the people in the form of a safety net until the market rights itself, rather than to prop up those who caused the problem in the first place.

  8. seems like we have only one real choice on TBTF banks. we tried the semi market version of having living wills. and that probably wont work since the banks (and others) wont really put such a thing together. and since there is no penalty for have a bad one, they can pretty much skip doing it. the only real choice is for the government to nationalize these institutions, and then sell them off piece meal, since they can be run successfully as one business, if the government determines they are insolvent. and thats not subject to the banks being able to sue to keep from being ruled insolvent. that would also mean that shareholders, and management all loose. and creditors would only get paid based on what the sale of the parts returns. no big rush to sell it off keeps the financial system solvent and from collapsing, those who run the company get what they deserve for malfeasance, creditors dont get paid by the tax payer. the real trick will be to keep the regulators honest and keep the politicians out of it.

  9. Yes but the limiting factor is that the goveremt will NEVER do that.

  10. Per Kurowski

    Since minimalistic capital requirements for what is perceived as “absolutely safe” have been the most important growth hormone for the TBTF banks, perhaps an important leverage ratio, like the one Thomas Hoenig of the FDIC is arguing for, would be the most effective way to slay them, or at least control them.

  11. Yes, but just who is going to impose those leverage ratios?

  12. Per Kurowski

    Next Tuesday the Fed is going to vote on this and at least I am doing what I can to support Hoenig´s position on it.

    That said if it goes through banks will need a lot more capital and perhaps we must help banks to obtain that capital, fast, with for instance special tax incentives, so that the real economy does not tank.

  13. The “regulators” have to be the answer to the question the bully asks, “…oh yeah, you and what army are gonna stop me…?”

    3 ancient empires vs. torturer’s tribal tents with a jet parked outside – nice to know some one else is going to pony up and do the global police work for a change…

    It’s all about invading Iran – better start getting LOUD about what kind of monster is the SELF-PROCLAIMED “government” in D.elusional C.ity…

    Too big to prosecute DRUG LORDS armed with psychobabble media…that’s a front-line mercenary troop that could be vaporized like throwing water on the wicked witch in the land of Wizard Oz if they weren’t too big to prosecute because of the weapons they bought with embezzeled FICA taxes…

    Think about – both sides of the aisle and generals/CIA – we’ve got ourselves a *proxy* civil war :-)), USA style….

  14. Daniel Barkalow

    Seems to me that a mechanism by which the government would loan creditors a dollar for every dollar they lost on a failing important institution could avoid contagion in a way suitably unpleasant to potential creditors. We need creditors to keep operating and have an incentive to make reasonable choices after the bailout; we don’t need them to be able to make substantial short-term profits or avoid having the full loss eventually applied to them. If they can be solvent by amortizing the loss over their future while they’re profitable, that’s fine; if they’ve invested more than they’ll ever earn again, they can’t be worth saving.

  15. There is no need whatever to break up big banks and lose the economies of scale they bring. All we need do is adopt the system advocated by Laurence Kotlikoff: let depositors decide what is done with their money. If depositors want their money to be 99.9% safe, then banks should be forced to take no risks whatever with that money (e.g. just lodge it at the central bank where it will earn no interest).

    Alternatively if depositors want to act in a commercial fashion and have their money loaned on or invested and earn interest, then they should obey the normal rules of commerce: if everything goes wrong the investor loses out, not the taxpayer.

    That way it’s impossible for banks as such to SUDDENLY fail, though they can shrink to nothing over a period of time, and quite right.

  16. Intriguing idea Ralph Musgrave. The critical failure of your proposal (which we all know will never happen anyway) – is that it makes a mockery of that quaint old notion we once called ‘justice’. Crimes have been and are being committed on a systemic level!!! CRIMES!!! The predatorclass must be held accountable for systemic and endemic criminal activity (fraud, collusion, insider trading tax evasion, bribery and a long a festering list of thievery and skullduggery). Either we are a nation of laws, beholden to theruleoflaw, regardless of how superrich the perpetrator is, or we are NOT. If we are, then the den of vipers and thieves on wall street and all thier purchased spaniels in the socalled government and regulatory apparatus are responsible and accountable for systemic criminal conduct – and MUST be brought to justice and be punished just like the rest of us. If not, then we inhabit a nation with NO laws. In a world or nation where there are no laws – there are no laws for anyone predatorclass biiiiiaaatches!!!!

    Burn it all down. Reset! It’s the only option!!!

  17. Tonyforesta,

    I’ve seen some stupid comments on blogs in my time, but yours is one of the worst I’ve ever seen.

    You’re arguing that because crimes have been committed, therefore a specific suggestion (i.e. mine) as to how to improve the system is invalid. The logic eludes me. Or rather I’m 99% certain there is no logic there at all.

    Moreover, I’m all in favour of sending the criminals to prison. Who ins’t – apart from the criminals themselves?

    Re your suggestion that we “Burn it all down and reset”, that’s very much what radical suggestions like mine and radical ideas being suggested by others consist of!!!

    And finally, my suggestion is very close to bank reform ideas proposed by a whole series of advocates of full reserve banking: Abraham Lincoln, Milton Friedman, Irving Fisher and the rest of the Chicago school. As to the reason why my proposal is almost synonymous with full reserve, you’ll find some reasons set out here (a work which advocates pretty much what I suggested above):

    http://www.positivemoney.org.uk/wp-content/uploads/2010/11/NEF-Southampton-Positive-Money-ICB-Submission.pdf

  18. Brother, we have more in common the you may care to admit. I said your suggestion was intriguing. In a perfect world – it could be a viable solution to the TBTF dilemma.

    My point is allowing these fiends to skate is cold comfort, and subverts every principle this nation was founded upon. I wish there was another way! I pray that some wise men rise to positions of leadership to pilot what little is left of America through stormy seas. Alas – its not going to happen. We are ruled by fascists and the predatorclass. I do not preclude to imagine you economic status, but I am proudly working class – and know this brother – there is no hope for us in Amerika, – there is no balm in Gilead. We are doomed to serfdom or incarceration!!! Rest assured – this future being imposed unfairly upon us, through systemic and endemic criminal activity and through the purchasing of our socalled government will NOT be peaceful or bloodless. This nation was born of revolution defending our land and our progeny from the ruthless greed and avarice of tyrants, and what I call today the predatorclass. We will not go silently or peacefully to the flame, or to servitude to some Wall Mart like corporate slavedrver , or to the Homeland Security Detention Centers or any other prison industrial complex corporate facility peacefully! You can dismiss me as radical or besmirch mr with any name or label you want – but there will be a reckoning and a balancing , and there will be blood. It couldn’t be worse for people in my circles . If the economy totally collapsed – it would have very little impact on us. We’re already scraping by just to survive and have given up all hope of a prosperity, all the freedoms, protections, and privilages our mothers and fathers enjoyed and any hope for something better for our children. All those dreams and hopes have been ruthlessly eviscerated by the predatorclass den of vipers and thieves who operate above, beyond, and in prosecutable to theruleoflaw . Know this!!! We will NOT go peacefully or sheepishly to the flame!!! There will be blood!!! In a world where there are no laws – there are no laws for anyone predatorclass biiiiaaaatches!!!

    Burn it all down! Reset!!! It’s the only hope for the poor and middleclass and coudn’t possibly be worse!!!

  19. The FDIC collects a guarantee fee for deposits. It’s based on asset size or perhaps the size of guaranteed deposits. Don’t remember. Anyway, simply graduate the rate charged based on the activities in which the bank (S&L, CU, etc.) engages. So consumer installment lending might be a 3 but derivatives an 8. Whatever. The point is to 1. make risky activities less profitable (or at least make them seem less profitable for the majority of banks that don’t bother to do longer term risk analyses and instead use the “dip our toe” approach to planning) and 2. strengthen the pool of funds which WILL eventually be needed to provide deposit guarantees.

    I hope regulators have learned the longer term or reputational risk associated with bank products. Previously their stance was that a mortgage, once sold into the secondary market, was gone as a source of risk and therefore how one did mortgage lending or servicing was irrelevant. All they looked at was how much you had in warehouse (because the loans had not yet been sold.)

    The unintended consequence in imposing strict limits on activities is that it pushes those activities into the unregulated arena. So, much of the sub-prime MBS were originated by and innovated by such non-banks as Lehman and Countrywide. The reason? Freddie/Fannie were too “tight” and too “unimaginative.” And, I might add, too ethical.

  20. Per Kurowski

    If I was FDIC, current capital requirements based on perceived risk would be completely unacceptable

    http://subprimeregulations.blogspot.com/2013/01/if-i-was-fdic-i-would-ask-bank.html

  21. @Tony F – all that QE went to the kitty for WAR. It’s in the contract that no one is ALLOWED to lend it out. So this blather about “creditors” is irrelevant.

    Spent casings are all that is left for the meek to inherit.

    “Not everyone deserves to own a home” .

    Pharisaism and legalism has gone “metadata”.

  22. It seems as if there was double entry bookkeeping going on, after all.

    And we are at the end of the cycle of it – labor costs recouped through taxes, fines, interest rates, and just good old fashioned seizure of assets through legalism (fraud gone legit)….

    and the QE went to starting up the music again for the perpetual war model, except the realization is dawning that what is left as collateral for leverage is Gowanus Creek water, spent casings from weapons used laying around in the sand thousands of miles away, and “big data” that may or may not have all warehoused the “stuff” that got censored by “moderators pending approval”.

    Boy, do I feel like an idiot suggesting an economy based on a scientific man to land ratio (which I recently realized will need to address social issues such as thousands of farmers heading to concentration camps because their land was seized for gold mining)

    and beating swords back into ploughshares, so to speak….

    heck, I can laugh at myself….

    Explains the lack of *job creation*, too, don’t it? What can you tickle the fancy of *inwestors* with when all you have is Gowanus Creek water, burnt metal, and GIGO data that may or may not have any “truth” data worth analyzing….

    I was into “big data” collected about human beings before some reading along where born. NONE, I repeat, NONE of the SOPs we had in place to prove that it was “truth” data – nothing made up or not collected (cherry-picked)

    are in effect as the SOP for how “big data” is collected under the patriot act…yes, NONE of the data stored is “truth” data as defined back before the internet. PCs were manned by hackers, tracking GPS in cell phones, easy pass tags. etc. doesn’t mean the person using them at the time was the owner – AND reams of data censored by moderators that might have proven it wasn’t you never even “stored”?

    But no need to focus on any “glitches” with “big data”.

    All anyone ever wanted when they created the technology, was the PERSONAL and PRIVATE “net worth” financial documentation that the Middle Class had.

    Identity thieves making the quickest buck on the planet, ever, and a lot of them wisely invested in drug pushing.

    ….and the FRB wanting their COMPOUNDED interest….which was set to equal labor cost and everything in the material world that labor ever owned through HONEST WORK. Only FIAT $$$$ could make that happen, like, duh.

    Gee, would a reset help, Tony F? Still got nothing left in the “commons” to help regain the footing of HONEST WORK producing less misery…all we got are abandoned rotting fraudclosues, Gowanus Creek water, and the burnt metal of spent shell casings….

    Still, a UNION of Ethical Scientists could even work with that kind of a “inheritance” from hell….but the pool of $$$ available is short the 2.08 TRILLION that 480 people got….and well, how many years of abuse does anyone want to suffer by just suggesting a UNION that protects the *job* SCIENCE DOES – a UNION that used brute force to make sure a person doing HONEST WORK ethically is NOT fired

    and using brute force to NOT allow the implementation of cost cutting measures at ALL manufacturing sites that are not supplying the perpetual war machine so that they can be shut down and dumped into off on the EPAs as a “superfund site” and people like Mitt can walk away as the VC hero who brought down unions and dumped off toxic on that busybody babushka EPA with it’s anti-profit “regulations”…

    Wow – I can do all that, too! Zeig heil!

  23. Moses Herzog

    Off topic, but important
    I know sometimes I treat the posts on this blog as “open thread”, or “open topic” which is a little rude, but I feel the regular readers of Baselinescenario blog are an above the crowd group, and there are some important things I want to be certain they don’t miss. This video is slightly under 1 hour, but I feel it may be the most important news item for Americans of this weekend and maybe even the entire month. Here is Glenn Greenwald on NSA (introduced by a great journalist Jeremy Scahill):

  24. Congress commits more crimes:

  25. not sure that buring it all down is really a solution. after all the last big bank failure event (the great depression) almost ended up burning it all down. and replacing capitalism (it was that close a call). and back then folks were a lot more patient (but thej most back then grew their own food. thats not true today). so by deciding to burn it all down you are also making a very good case for replacing it, as folks will look at it, and say why do i wont to do that again? i didnt get much out of it. and consider this. the US has had about 17 banking crises since 1790s. Canada has had 0. care to guess whats different? they do believe in regulationing banks. we reallyu dont it seems. and the previous banking crises it took the banksters a little time ot realise that thety were in big trouble. that folks were at their doors with pitch forks ready to do them in. then there was the Pecora commision that solidified that. today we have one party that believes that only the private sector can do any right, and one that can’t even bother to care any more. so nothing really will get done to resolve it. till the next one hits when we might have a slim chance of fixing it

  26. Not a proponent of this thing you call “capitalism, dw! What I see, and I dare any of you erudite experts to debate me, is kleptocracy, – crony or worse ‘bandit’ capitalism. But from my pedestrian perspective – and again I challenge anyone here including our humble hosts to debate this point – there is NO capitalism, and absolutely NO free markets!!!! The markets, governments, regulatory apparatus, and all the spaniels in the socalled government are fascist and predatorclass and hold absolutely ZERO concern for the rest of us notrich , notwhite people. I hear the jibber jabber about the end of the world if the markets actually do collapse. This is predatorclass disinformation. Yeah superrich people will loose much of their ill gotten booty, and they will be targets, and forced to disappear in their underground bunkers, – and things will be tumultuous for everyone – but the “endoftheworld” and devastation you and others pimp and brute will NOT be much worse for us. We are already laid low, and have absolutely NO voice or influence in the conduct of the socalled government. This is the critical truth the predatorclass does not, or cannot fathom. It couldn’t be worse for us!!! And we will not accept this abuse and pillaging peacefully. Carpenters and masons will still build things, farmers will farm, plumbers and electricians will build and fix things , et al.. The working class will bind together and manage whatever is thrust upon. The predatorclass will have hell to pay! And good luck getting your things fixed biiiiiaaatches.

    There will be a reckoning, and a balancing, and there will be blood. Burn it all down! Reset!!! It’s the only option for the 99%!!!

  27. Feel bad for leaving my sisters and brothers out. Nurses will nurse, mechanics will fix our cars and machines, hackers will hack, cooks will cook, seemtresess will make clothes, drivers will drive and transport products, we will have music and entertainment. – and all workers will work like they do every day to reinvent society, – but NOT for the predatorclass!!! You evil den of vipers and thieves will be on your own, and good luck if you get caught in the streets!!!! Enjoy your stomping on, depriviving, pillaging, thieving from, ignoring, dismissing, incarcerating, murdering, and heartlessly abusing your fellow citizens while you can predatorclass biiiiiaaaatches!!! We will never tolerate these evils. There will be a reckoning and a balancing, and there will be blood.

    Burn it all down! Reset! It’s the only hope for America!

  28. The biggest embezzlement of FICA taxes has been done by “private” MERCENARIES. They got billions to store their own TROLL comments that they flooded the internet with – how INSANE is that?

    And they LITERALLY used illegal immigrants to knock down the doors of homes where a WOMAN lived, while Mitt et al turned manufacturing into LIFE-THREATENING operations by cutting costs and now orgs like FDA are claiming they did not have the budget! Like CORZINE could not get the name of the person who farms out the illegals to break down doors to go shut down the “compounding pharmacy” that is releasing product with VISIBLE black mold suspended in it?!

    It’s WORSE than people realize – the circle jerk that ended up with *laws* passed that allows the IRS – yes, THAT IRS – to FINE PEOPLE for not participating in the mafia protection racket – PRIVATE, for-profit “health insurance”

    is the perpetual FUNDING for perpetual war in the Middle East.

    Putin never did anything to me, personally, while MISOGYNISTS in the Mkultra program skinned me alive VIA THE INTERNET – THE COWARDS – to get paid BIG BUCKS for destroying the Middle Class via the internet. That’s not SPYING – that is economic genocide. So Snowden is NOT the “traitor”!

    You want to blow it all up and reset?! Start with the INTERNET.

    http://www.nbcnews.com/id/49263362#52332766

  29. Breaking up the banks is a red herring. Canada is dominated by a few large banks and had no meltdown. In 1998 the Wall Street was almost brought down by a small hedge fund failure. The real issue is regulation, or to be more precise, the lack of it. This points to our corrupt campaign finance system that lets Wall Street own Washington. As Gore Vidal said, there is only one party, the Money Party, with a Republican and Democratic branch.

  30. True. Though I assume you mean LTCM in 1998. But assuming the Money Party’s influence will dominate, all the great ideas about leverage and capital requirements and other regulatory fixes are really just noise.

    The only way to bypass our ineffective elected representatives is to take it into own hands and divest ourselves from the Big 6. Don’t bank there or invest with them. When the people cannot rely upon their representatives to protect them, then they must do it themselves. It’s less efficient, of course.

    But one by one, if they won’t regulate them, we can shrink the banks.

  31. Send in the Drones to chase after hackers, journalists enablers, political sympathizers):

    (https://www.federalregister.gov/executive-orders )

    Fox News swaps places with Liberals (for a few minutes):

    4 stars for content, substance, and debate:

    NSA’s Weather Channel: thunder storm along the east coast, heat wave for the western part of the states. Conditions today, on the Russian tarmac: Cloudy, showers. Low 17C. Winds E at 5 to 10 mph. Chance of rain 80%.

    The budget for the NSA is also “secret”; estimated in the billions – thought the federal government was broke (see any Republican talking points); Snowden was a private-third party security employee (national security is outsourced, therefore less accountable).

  32. Bruce E. Woych

    Thank you Moses Herzog |: This is what the blog should be focusing upon.
    What in the world is going on with this blog?
    The world is going to hell in a hand basket and the topics are all about the redundancy of rhetoric concerning equivocations.
    Kwak:
    The more degrees you take on the more stupid you become . maybe you are a Kwak?

  33. Anonyomouse

    Take care of the minutes, for the hours will take care of themselves.

  34. Moses Herzog

    Well, maybe we’re all “over-reacting”. I mean the market is now behaving in a very “efficient” manner (as EMH tells us) since Mary Jo White started working the beat at SEC.

    http://www.floatingpath.com/2013/06/30/latest-hft-shenanigans-e-mini-mayhem-and-nyse-avoids-a-flash-crash/

    And God knows, Mary Jo was the perfect choice by President Obama to be an enforcement official for securities laws, with her “fine work” defending John Mack against insider trading charges. Lifted verbatim from a Matt Taibbi article in Rolling Stone (bold and italics added):

    “Aguirre also started to feel pressure from Morgan Stanley, which was in the process of trying to rehire Mack as CEO. At first, Aguirre was contacted by the bank’s regulatory liaison, Eric Dinallo, a former top aide to Eliot Spitzer. But it didn’t take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm’s lawyers, Mary Jo White, was on the phone with the SEC’s director of enforcement. In a shocking move that was later singled out by Senate investigators, the director actually appeared to reassure White, dismissing the case against Mack as “smoke” rather than “fire.” White, incidentally, was herself the former U.S. attorney of the Southern District of New York — one of the top cops on Wall Street.”

    http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216?page=3

    One wonders if President Obama made a personal phone call to Jamie Dimon to “vet” Mary Jo and make certain Mary Jo wouldn’t P I S S within a 100 yard radius of Mr. Dimon’s turf. You know….. we don’t want to “rankle” any of these guys. They’re “busy” being “innovative” on sewer projects: http://www.reuters.com/article/2013/06/04/usa-jeffersoncounty-deal-idUSL1N0EG1SL20130604

  35. Anonyomouse

    No, I think money’s is simply too tight to mention, in this case.

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  37. Moses Herzog

    My nomination for tweet of the day and probably tweet of the week:

  38. Moses Herzog

    Another cool link/topic I would LOVE to see Simon Johnson or James Kwak make a blog post or publication article on (or possibly Mr.Kwak’s favorite medium of expression—a Law Journal??)

    http://www.demos.org/blog/bright-ideas-congress-let-states-rein-credit-card-interest-rates

  39. Ha! Thanks for sharing

  40. actualarticles

    Hello, would you please allow me to put this on my website? If there is no any problem with this, please let me know via my e-mail…

  41. “I have decided to offer humanitarian asylum to the young American Edward Snowden,” Mr. Maduro said during a televised appearance at a military parade marking Venezuela’s independence day.

    Mr. Maduro said he had decided to act “to protect this young man from the persecution unleashed by the world’s most powerful empire.”

    http://www.nytimes.com/2013/07/06/world/snowden.html?hp