Hope

By James Kwak

A number of people have asked me what I think about the financial reform bill that was finally passed by the Senate. I don’t think I have much to add to what I’ve said already, but here’s one more angle.

“We can’t legislate wisdom or passion. We can’t legislate competency. All we can do is create the structures and hope that good people will be appointed who will attract other good people.”

That’s what Christopher Dodd said about the bill, as quoted by The New York Times. It’s become a commonplace observation by now that the reform bill, instead of making structural changes to the financial sector, instead increases regulators’ discretionary powers to constrain — or not constrain — the behavior of the industry.

As a result, the success of reform, in the words of its supposed architect, depends on hoping that presidents will appoint good people and that that will be enough to attract people to being regulators.

Senator Dodd should already know how that works out. After all, he was in the Senate when George W. Bush appointed John Dugan, James Gilleran, and Christopher Cox to head the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Securities and Exchange Commission, respectively. And we already know what the Republicans think of financial regulation, given their overwhelming resistance to reform.

We can expect a little better from the Obama administration, which did appoint Gary Gensler to head the CFTC and still might do the obvious thing and appoint Elizabeth Warren to head the new Consumer Financial Protection Board. But still, hoping for a few good people–and hoping that presidents will find and appoint those good people–isn’t much of a strategy.

The underlying problem is that the bill doesn’t do anything to change the basic balance of power between Wall Street and Washington, which is partly based on the fact that it’s a lot better to be a banker than to be a regulator, and the only reason to be a regulator (if you believe in free-market incentives) is so you can then become a banker. As Bill Gross, king of the bond market and no one’s populist, said to The Wall Street Journal, “Wall Street still owns Washington. Better to have appointed [Former Federal Reserve Chairman Paul] Volcker ‘Dictator-In-Chief’ than to have let the lobbyists dilute what needed to be done.” (Scroll to the bottom and click through the experts in the “Grading the Bill” feature; thanks to Larry Doyle for finding the link.) So we’re left with hope.

Yes, I’m still sticking to my position that the bill is better than nothing. The alternative was sticking with the environment that gave us a bloated, predatory financial system and the financial crisis. But it’s still a missed opportunity.  And over the next couple years, as regulators (lobbyists) write the rules necessary to implement the bill, we’ll find out if anything really has changed.

208 thoughts on “Hope”

  1. Christopher Dodd wrote:

    “We can’t legislate wisdom or passion. We can’t legislate competency. All we can do is create the structures and hope that good people will be appointed who will attract other good people.”

    “Dreams alone aren’t enough to make your belly full.”

    Ikkaku, Hosaka & Kawabata, 2005

    JUL 13 2010 – The Atlantic

    “At the end of May there were 3.2 million job openings, according to a new report from the Bureau of Labor Statistics. In the face of nearly 15 million unemployed, that’s obviously not enough. And if you add in those other Americans not working because they’re discouraged or marginally attached (“U-5″), then that number jumps to almost 17 million.”

    http://tinyurl.com/2do3lfk

  3. “And over the next couple years, as regulators (lobbyists) write the rules necessary to implement the bill, we’ll find out if anything really has changed.”

    Hilarious. :-)

  4. What absolute drivel from Dodd. If that isn’t an outright admission of legislative failure, I don’t know what it.

  6. “The underlying problem is that the bill doesn’t do anything to change the basic balance of power between Wall Street and Washington…[but] [y]es, I’m still sticking to my position that the bill is better than nothing.”

    Say what, again?

  7. My view is a little more cynical: Hope is what the bourgeoisie sells to the under-class.

  8. If this bill gives the people the false impression that the financial system is “fixed” so that Obama can declare victory and the rape and pillage of the American people can continue without public outrage, then this bill is truly worse than nothing.

  9. When the regulations are suppose to be written by the same regulators that have been around for decades, you can bet nothing will change to stop another round of financial collapse & greed to take place. As far as the average American goes (people who still have jobs) we really need Prof Warren on board. This lady knows her stuff & isn’t bought & paid for.

  10. “Regulation” must be selectively enforced by some division of Homeland Security. The Secretary of the Treasury, since Patriot Act 2001, is in charge of selective regulation by Homeland Security.

    They got Martha Stewart, but not Madoff – get it?

    USA citizens, women and children first, were made even more vulnerable to drug cartel “business” when they lost their homes via Wachovia et al…again, selective regulation under Secretary of the Treasury.

    And GOD, truly for all intents and purposes since atheists can only believe in a GOD they “see”, is the Federal Reserve Board. Whose “god’s work” was Blankfein alluding to…?

    RED ALERT!

    NOISE level reached and exceeded on huff’n-puff linked article below thanks to psycho-ops twit-ers engagement

    COIN is in operation for USA 2010 elections…140 words or less is the precise amount of noise that can be delivered at nanosecond speed to eliminate coherent conversation and decisions for course of action.

    Think of twits as a blood thinner – too much you bleed out and die – too easy, ain’t it, to control the internet?

  11. The real meaning of the Pandora’s Box myth was that (false) hope was the worst evil, and it did its dirty work by staying in the box, constantly alluring people to continue in self-destructive delusions.

    Yes, I’m still sticking to my position that the bill is better than nothing. The alternative was sticking with the environment that gave us a bloated, predatory financial system and the financial crisis.

    That was the alternative? And what was chosen instead? Sticking with the environment that gave us a bloated, predatory financial system and the financial crisis.

    And now that system will only become ever more predatory and tyrannical, and the next crash will be vastly worse. In the meantime, we’ll sink into the Second Great Depression. (We need to compile and propagate the real economic numbers, those for the Amercian people, which means excluding corporations and the wealthiest increment, who are stateless parasites. Indeed the numbers must deduct their robberies and vandalism.)

    The longer America delays from achieving critical mass in the realization that this is a terminal kleptocracy which can never be reformed but only destroyed, the worse the agony will be. Indeed, the longer the delay, the less chance the mass will ever be achieved, and the greater the chance we sink into permanent slavery as veritable medieval feudalism is restored.

  12. Absolutely. Just like the anodyne Goldman settlement, if its effect is to reassure people that the casino doesn’t have to be completely destroyed because it’s being “reformed”.

  13. The real meaning of the Pandora’s Box myth was that (false) hope was the worst evil, and it did its dirty work by staying in the box, constantly alluring people to continue in self-destructive delusions.

    “…the vessel is opened. She hastened to close the lid, but the whole contents of the jar had escaped, except for one thing which lay at the bottom, and that was Hope.”

  14. Of course his is an admission of failure. What do these vermin ever have to bring us that isn’t a failure?

    That anyone would still see hope – Dodd or our friend, Quack – in this outrageous legislation leaves one scratching their head. As with “healthcare” so it will be with “financial reform”. And this pattern will go on and on, ad infinitum, until one day a million angry faces confront Dodd and the maggots with whom he’s associated in the United States Senate. That day gets closer with every passing minute.

  16. “Appetite, with an opinion of attaining, is called hope; the same, without such opinion, despair.”

    Thomas Hobbes (1588 – 1679)

  17. “That was the alternative? And what was chosen instead? Sticking with the environment that gave us a bloated, predatory financial system and the financial crisis.”

    :-)

  20. Better to have appointed [Former Federal Reserve Chairman Paul] Volcker ‘Dictator-In-Chief’ than to have let the lobbyists dilute what needed to be done.”

    We’re starting to hear this echoed quietly, more in more in the blagues. We’re at the phase where we’re beginning to yearn for the strong leader(s). Alternative to the horrors of centralized tyranny? Select, educate, and monitor a group of true elders? If so, we’d better start now so we can get this over with in one or two generations, you know, before they blow up the world.

  21. Douglas Elliot got it half right:

    “What’s the biggest likely change? Banking will be somewhat less profitable and a bit costlier for customers, but substantially safer.”

    The “substantially safer” part remains to be seen.

    Let me get this straight. Derivatives remain unregulated. Off-book banking remains unregulated. Some council of wise persons is going to decide if this poses systemic risk.

    The little guy gets a new agency that will listen to the whining.

  22. All the people voting for “the lesser of two evils” are taking us down the same path as if we had chosen “the greater of two evils” – just more slowly.

    Analogies…

    The more a law is refined, the more minor the argument distinquishing one situation from another.

    Continually dividing a number by 1/2. You can do it infinitely, but the significance of the difference diminishes.

  24. There exists a fallacy in your logic from the start. Certainly this bill is better than what exists now, but what exists now is much worse than what has existed in the past (as is detailed in 13 Bankers). Certainly the past allowed for abuse and there will never be a perfect system of regulation that will safeguard us from regulation but that aside, it is as the EFF argues constantly about privacy: You cannot just accept what is being presented to you, you have to work towards the ideal.

    Certainly their argument is presented slightly differently (in the context of us losing our privacy to the government and other internet “regulatory” bodies to the point where we constantly argue that what exists now is better than what is being pressed upon us) but nonetheless we should both work towards a reenactment of Glass-Steagall and then some. The problem, as you so aptly put it, is that there are no individuals who want to be regulators except to later become bankers.

  25. Typical happenings in Washington when it come to anything regarding money. America must decide what type of country it wishes to be, and then conform public and foreign policy to those ends, and not the other way around. Politicians have no right to subjugate the constitutional process of government to any foreign organization.

    Banks are utilities for the rational allocation of capital created by savings, and as utilities deserve special protections. All else is speculation and gambling. In banking, simpler and more stable is better. Low cost rules, as excessive financialisation is a pernicious tax on the real economy.

    Financial speculation, as opposed to entrepreneurial investment, creates little value, serving largely to transfer wealth from the many to the few, often by exploiting the weak, and corrupting the law. It does serve to identify and correct market inefficiencies, but this benefit is vastly overrated, because those are quickly eliminated. As such it should be allowed, but tightly regulated and highly taxed as a form of gambling.

    When the oligarchy’s enablers, hired help is the politer word, and assorted useful idiots ask, “But how then will we do this or that?” ask them back, “How did we do it twenty years ago?” Before the financial revolution and the descent into a bubble economy and a secretive and largely corrupted government with a GDP whose primary product is fraud.

    Economics will not provide any answers in and of itself. Economics without an a priori policy and morality, without a guiding principle like the Constitution, is a heartless monster easily manipulated to say whatever one wishes it to say, if they are willing to pay enough economists to say it. Its reputation as a science is greatly exaggerated.

    Take just about any financial problem, give it to Washington and they will eventually screw it up and always in their favor. Social Security is a perfect example. The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day. The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers. But the trust fund is empty! It contains no real assets. As a result, the government will soon be unable to pay full benefits without a tax increase. Money can be spent or it can be saved. But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything.

    That is how the largest theft in the history of the world was carried out. 300M people worked and saved their whole lives to set aside $2.5Tn into a retirement system that, if it were paying a fair compounding rate of 5% interest over 40 years of labor (assuming an even $62Bn a year was contributed), would be worth $8.4Tn today – enough money to give 100M workers $84,000 each in cash! The looting of FICA hid the massive deficits of the last 30 years in the Unified Budget. Presidents and Congresses were able to reduce taxes on the wealthiest Americans without complaint from the deficit hawks, because they benefited. The money went directly from the pockets of average Americans into the pockets of the rich.

    Now that it is time to repay those special bonds in the Trust Fund, we are inundated in opinion pieces in the leading newspapers and magazines complaining about Social Security and its horrible impact on the budget. Government finances have been trashed by foolish tax cuts, unpaid wars, tax loopholes for corporations and the very wealthy, the failures of economists, the greedy search for greater returns in financial markets and the collapse of moral values in giant businesses, but Social Security is supposed to be the problem that needs fixing…

    Social Security is not “broken“–the money is in the Trust Fund. But the people who manage the finances of the United States don’t want to repay the bonds held by the Trust Fund. They want to default selectively against average people, their fellow citizens, who paid their taxes expecting to be protected in their retirement. Refusing to repay the $2.54 trillion dollars in bonds held by the Social Security Trust makes the US look like Greece, just another nation unable to govern itself coherently. The people who manage US finances come from the financial elites, the best that Wall Street and enormous corporations have to offer. Selective default exposes them as charlatans. The claims of the economics profession to expertise are puffery. Their theories about the benefits of tax cuts are proven false. Their mathematical proofs about free markets collapse in the real world.

    Nothing will change until the people demand it either by vote or revolution and as per the Declaration Of Independence, we have the right to dump the current government and begin anew.

  26. I completely agree with the post.

    But I’ve got to say, the way Chris Dodd is spinning this failure is impressive. It seems to be feeding well with a lot of democrats. It actually makes him sound almost like Roosevelt. In some sense it’s even ironic. How admittance of FAILURE turned out this way.

  27. Sorry about that. Why “Lavrenti Beria” – Stalin’s tool – as your moniker? Just curious.

  29. Barbara, “Nothing will change until the people demand it either by vote or revolution and as per the Declaration Of Independence, we have the right to dump the current government and begin anew.”

    Agree with everything. It’s a “Rosa Parks” moment – the refusal to play the game of who sits in the back of the bus…

    Using the first Amendment to establish a money religion was the final straw. And as you noted, there is nothing “real world” in that currency – it’s not symbolic of cattle or capital or labor – it’s not “science”.

    But even more so, considering the QUALITY of the people with this existential power of money-religion – it’s narcotics, weapons, and psychobabble and physical pollution “torture” to inflict poverty, suffering, and disease on as many people as possible.

    Their response to “Surrender Wall Street” was “Surrender Dorothy” :-)

    Before the baseball bats and lightening bolts and all manner of mechanical devices cross the moat – we have to follow the Just War Doctrine rules since we are the civilized “ancients” – so to speak – and make things clear to the Wrecking Crew and the Middle East bowl of crazy

    what OUR government was and IS – a government put in place by a SELF-governing people. Far from perfect, no doubt, but we are ever conscious of our RIGHTS – the POWER of Free Will to choose what is true, beautiful and GOOD.

    NYC minute summation – their way does NOT allow for any GOOD to be chosen. The will KILL you if you choose GOOD. That’s NOT extremely terroristic enough?

    I vote for a peaceful revolution.

    However, lightning bolt in hand, as needed, against the rabid raccoons and the robots (caution, both have assumed human forms and have “jobs”).

    God Bless America :-)

    How about an internet competition for the design of the NEW paper currency – DOI 2010…? Get rid of all that pyramid crapology symbolism…

  32. Oh, now I see. Why Beria? I think you’d readily concede that the use of this nom de plume lends a certain, how shall we say, weightiness or gravity to the posts. Ask yourself if you’d be more drawn to a comment from Little Lord Fauntleroy, for example, than one from the former head of the Soviet security apparatus. And it has the additional virtue of keeping the flies away, of course. I mean how likely would it be that one would be inclined to engage in a contretemps with someone that at any moment might decide to stick your finger in a light plug? :-)

  33. Thanks btraven, it’s enough to make you lose all hope, even if half of those things come to pass – unbelievable. Time will tell.

  34. Gawd, Kwak, stop attacking Republicans, who are only doing what they were apparently born to do–get elected to office so they can destroy the government they openly profess to hate. They are traitors, but it’s an honest treason.

    The Democrats, who mouth support for communitarian goals and good government while hauling in billions of campaign cash from those they claim they’re going to regulate, are SO much worse. And that’s a tragedy for our country.

    Although I read “Hope” above, to tell you the truth, I sometimes skip the blog posts on baselinescenario and just go to the comments, which at least generally have some meat in ’em.

  35. “Wise men talk because they have something to say; fools, because they have to say something.”

    Plato (427 BC – 347 BC)

  36. Now look, Anonymous, don’t start going soft on us. Next time that Plato implies that you’re a fool you start swinging, see.

  37. @ anonymous___another fabulously infamous statement from the biggest two-faced politician this side of the potomac – Quote: “literally all the oxygen was sucked totally out of the room, when Paulson broke the news”. Such flamboyant chivalry for a conspirator in the contemptuous mode? PS. Ms. Warren should question US Senator Chris Dodd for he is responsible for all the consumer laws being run-down or US Rep Richie “Rich” Neal of Massachusetts within bicycle distance to each others home, “Home”?

  38. Hope, yes, probability, no. This bill reminds me of the vaunted health care reform. All it does is somewhat alter the dynamics of the playing field. It is much like the tax code, which, as we know, is highly subject to manipulation. And, not to worry if you are a TBTF institution. There really is little hope of effective regulation. First, because our Wall Street friendly President is highly unlikely to put in place regulators that have a craving to regulate. Second, because the Republicans will take over the Congress this Fall and will not pass a budget which adequately funds the regulators, and may, in fact pass some suppressive measures relating to the strengths of the bill (the few that exist). Will the President appoint Liz Warren to run the CPSC? Maybe, but then it will be housed in the FED, and Bernanke will take issue with any really strong regulatory reining that she attempts. The bill just leaves way to much to go wrong and does little to ensure that anyone benefits but attorneys and consultants who get paid to find legal obfuscations. And then there are the courts…..

  40. Mr. Kwak:

    Your musings evoke US Grant’s comment that “hope is not a strategy.”

    From personal experience, I can tell you that having proposed structural change to segment the deterministic, one-size-fits-all, legacy system into predictable, probable, and uncertain regimes, people are more apt to choose the devil they know by making minor amendments that, in essence, changes a comma into a semi-colon.

    The good news is that absent fundamental repair to correct the trend of larger and more frequent financial crashes, we will get a chance to revisit the issue sooner rather than later (the ad hominem attacks don’t even change).

    If there is complexity, there is uncertainty. It was so in 2004 when I proposed it before SEC and NAASA meetings as it is today. It is highly problematic that deterministic metrics will improve to effectively and efficiently govern uncertain investments.

  42. Saying that the bill is better than nothing is like saying that having 1 penny is better than having nothing.

  43. “We can’t legislate wisdom or passion. We can’t legislate competency. All we can do is create the structures and hope that good people will be appointed who will attract other good people.”

    You can take your hope and stuff it! This is exactly why the smaller the government and the less the government does the better. If the sheeple were not domesticated from birth to believe that the government will protect and provide for them, we might have a culture of individuals who would go through life cautiously, standing on their own, always watching their backs and always looking where they step. Of course this would not eliminate bad decisions, corruption or foolish investments however, what it would do is make those responsible suffer the consequences and minimize the burden on others!

    My question to you is if what Christopher Dodd said is true, how many more times will you allow pilots like him to crash your plane? What will it take for you to give up hoping for a good government pilot and demand that he remains at the boarding gate?

    To say this bill is better than nothing is complete complacent rubbish!

    For Dodd it is much better than nothing and not getting reelected in November. I imagine he won’t have much time to “spend with his family” because he’ll be too busy working in a high paying position in the finance sector laughing all the way to the bank!

    As for the sheeple, as Mr Kwak put it, it is a false dichotomy between the status quo and the bill that passed. There are many other bills that could have passed however, passing this bill is much worse than nothing because it gives the sheeple hope that the government will protect and provide for them.

  45. Sounds like it might be too late to worry about the bill anymore.

    Double-Dip Days

    2010-07-16 – Project Syndicate – Nouriel Roubini – excerpts

    NEW YORK – “The global economy, artificially boosted since the recession of 2008-2009 by massive monetary and fiscal stimulus and financial bailouts, is headed towards a sharp slowdown this year as the effect of these measures wanes. Worse yet, the fundamental excesses that fueled the crisis – too much debt and leverage in the private sector (households, banks and other financial institutions, and even much of the corporate sector) – have not been addressed.

    Private-sector deleveraging has barely begun. Moreover, there is now massive re-leveraging of the public sector in advanced economies, with huge budget deficits and public-debt accumulation driven by automatic stabilizers, counter-cyclical Keynesian fiscal stimulus, and the immense costs of socializing the financial system’s losses.

    At best, we face a protracted period of anemic, below-trend growth in advanced economies as deleveraging by households, financial institutions, and governments starts to feed through to consumption and investment. At the global level, the countries that spent too much – the United States, the United Kingdom, Spain, Greece, and elsewhere – now need to deleverage and are spending, consuming, and importing less.

    The global slowdown – already evident in second-quarter data for 2010 – will accelerate in the second half of the year.

    Whatever letter of the alphabet US economic performance ultimately resembles, what is coming will feel like a recession.

    And any additional shock could tip this unstable global economy back into full-fledged recession.

    And one cannot exclude the possibility of an Israeli military strike on Iran in the next 12 months. If that happens, oil prices could rapidly spike and, as in the summer of 2008, trigger a global recession.

    Finally, policymakers are running out of tools.

    Fasten your seat belts for a very bumpy ride.”

    http://www.project-syndicate.org/commentary/roubini27/English

    Double Dip Discussion

    7/17/2010 by CalculatedRisk

    Paul Krugman writes: De Facto Double Dips

    July 17, 2010

    “Let’s be clear: a recovery that involves growth so slow that unemployment and excess capacity rise, not fall, isn’t really a recovery. If we have only have 1 1/2 percent growth, that will amount to a double dip in all the senses that matter.”

    http://www.calculatedriskblog.com/

  47. And I am sticking to the knowledge that the bill is much worse than nothing… as the Congress lost a golden opportunity to ask what the hell the Basel Committee and the Financial Stability Board are up to.

    Come on, the Congress held hearings with many parties, but never did they ask someone to explain how come one could ask a bank to just hold a minuscule 1.6 percent in capital when lending to someone who has been able to hustle up an AAA rating; while at the same time requiring the banks to hold a full 8 percent in capital when lending to small businesses and entrepreneurs, those most likely to be able to find us the new generation of decent jobs we need.

    The Basel Committee put more hot air than they already had under the wings of the AAAs which caused these to fly off into La-La Land; and they put weights on the BBB who tanked in Real Land taking our jobs with them… and here we all sit now, with this damned triple-A blues.

  48. “…. it is a false dichotomy between the status quo and the bill that passed. ”

    In the parlance of a simpler political dialectic, same shxt – different day.

  50. As much as I like Elizabeth Warren, and feel she is the ONLY candidate for the Head of CFPA, she’s not qualified for Federal Reserve Chairman. That job is much better suited to an Alan Blinder, Tom Hoenig, or even maybe Richard Fisher down in Dallas. But mainly anyone who doesn’t think handing billions over to corrupt European bankers (via ECB and SNB) without even a prerequisite audit of the European bank books is better qualified than TSTTF (Too Systemically Threatening To Fail) lap dog Bernanke.

  51. earle,florida

    Aw. Now I’ve made you sad and its thrown you into a fit of agnative alliteration.

  52. earle,florida

    Aw. Now I’ve made you sad and its thrown you into a fit of agnative alliteration.

  53. This “Hope” is more like true believer syndrome in denial. The current legislation is about as potent a correction as an alcoholic switching to beer only.

  54. As US Grant said “hope is not a strategy.”

    “Without a proportionate increase in investor financial knowledge, regulation merely “dumbs-down” the consumer base at the expense of market efficiency.

    To their chagrin, many Madoff investors now realize that “protection” is a racket. This creates a moral hazard where unsophisticated investors receive a regulatory subsidy to expand the scale, scope, and span of their investment activity.

    Much as driver education students reduce the cost of auto insurance, investors who become financially sophisticated reduce the cost of compliance. Qualifying investor suitability then enables the SEC to become more efficient by substituting intellectual capital for financial capital.”

    Pages 70-71 of We’re All Screwed

  55. “Dreams alone aren’t enough to make your belly full.”

    Or “wish (hope) in one hand and crap in the other and see which one fills up faster.”

    How anyone with any knowledge of history on the matter could think that greater regulator discretion was the answer is beyond me. No regulator, conservative, liberal, or otherwise, is going to (or be allowed to) take away the punchbowl halfway through the party. It just won’t happen. That is why structural reform is the only reform that makes any sense.

  56. ““We can’t legislate wisdom or passion. We can’t legislate competency. All we can do is create the structures and hope that good people will be appointed who will attract other good people.”

    That’s what Christopher Dodd said about the bill, as quoted by The New York Times.”

    I very much disagree. It is the duty of Congress to legislate as much “wisdom” as possible. That its sole purpose for existing alongside the executive and the judiciary.

    “the success of reform, in the words of its supposed architect, depends on hoping that presidents will appoint good people and that that will be enough to attract people to being regulators.

    Senator Dodd should already know how that works out.”

    It seems to me that by handing over the powers of Congress to the executive branch, in which the Treasury Office is lodged– and which in this day and age is clearly nothing more the DC office of private bankers– Senator Dodd has effectively dissolved the representative government of the United States.

    I’m not being hyperbolic.

  57. quidditas

    When a progressive author’s name (“Dodd”) first appears as word 1188 of a 1288 word NYT article, what else do you need to know as to what the Times thinks?

  58. My favorite topic? If you read you must see that in Basel is where they are deciding the most important issues in relation to your banks; such as how much they should discriminate against the riskier clients in favor of some supposedly less risky clients… and your Congress does not even refer to them… Has the US outsourced financial regulations completely?

  59. As long as there is a conceptual conflation of risk and uncertainty__YES!

  60. Kurowski,
    I’m afraid I don’t know the answer to your question. Ask the American Bankers Association lobbyists that own the Republican Senators like Mitch McConnell, Dick Shelby, and Bob Corker. Maybe they can tell you how the bankers wrote that law in their Senate offices.

  61. I think Carlos Slim wants to do whatever Carlos Slim wants to do, just like all the other oligarchs.

    And now that (former, in more ways than one) Senator Dodd has dissolved the representative government of the United States, I imagine that’s just what the oligarchs plan to do.

  62. You are the American citizen, so you please explain to me the following: How come that in the final statement of the G20 meeting in Toronto and of which the US is signatory, with respect to financial regulatory reform, the Basel Committee on Banking Supervision is mentioned 11 times, and the Financial Stability Board (FSB) 27 times, but in the 2319 pages of the Financial Regulatory Reform approved by the US Congress those entities are not mentioned once? What is going on?

  63. OK Ted … I was thinking if Bernanke has authority over the office of the CFPA why not just let Warren be the boss. Alan Blinder and Tom Hoenig have had good reviews on Baseline. But why not have a woman head up the Federal Reserve? About time no?

  64. “As a result, the success of reform, in the words of its supposed architect, depends on hoping that presidents will appoint good people and that that will be enough to attract people to being regulators.”

    How, in this case, is a President different from a King? This is bitter. Any legal or regulatory system depends on people willing and able to make it work. But no-one wants to.

  65. Hope.

    I think Americans can be hopeful when it has citizens like James Kwak … who is now on a summer internship defending capital cases.

    With all due respect to the victims and the families of victims …

    In Canada capital punishment was abolished decades ago. One of the most upsetting things I find about American culture is its pro-gun lobby and capital punishment.

    At one time, nobody living in Canadian cities owned a gun. (People living in rural areas do own guns because the shoot moose and deer to freeze for the Winter months.) Now there is a gun problem in Canadian cities, the guns are owned by criminals in the cross-border drug trade. Normal Canadian urban dwellers have no interest in owning guns.

    Half in jest, and to draw attention to the contrast to America, a Canadian newspaper columnist wrote, a defining characteristic of what it means to be Canadian is whether our government can make sure no Canadian ever owns a gun.

    A difference between Canadian and American history is that Canada became a country (decolonized) without a violent revolution. The British having lost the American Revolution were less harsh to its Canadian colony. So our cultural memory is different than the American one.

    The problem with gun crime in Canada is a fraction of that in the United States.

    Canada does not have capital punishment and has lower incarceration rates, lower crime rates, lower cost for the prison system, compared to the United States.

    One under-rated aspect to Criminal Justice is reconciliation. How do the surviving victims heal and move on with their lives?

    One of the most moving stories I’ve heard has to do with a murder that occurred in Whistler, a ski resort in British Columbia.

    A lawyer living in Whistler went over to check out a house party at his neighbour’s house. The parents were away and the teens at home were having a party that was getting out of control. Someone in an alcohol-induced haze at the party hit this man on the head and killed him. For two years, those at the party closed ranks and no one was charged.

    Finally, someone came forward, and a young man was found guilty of manslaughter, and he went to prison for two or three years. The victim’s wife (and she was left with young children) and the killer went through a reconciliation process. They have spoken about it publicly.

    In the end, reconciliation was the best way forward for the young man who had ruined his own life by taking the life of another man (a father and husband) in a drunken moment of violence. Reconciliation was the best way forward for the surviving victims, it helped them heal and move forward with their own lives.

    History and culture is a dynamic process. Nothing is written in stone. So the capacity for change is cause for hope. One might argue democracy is an unfinished project. The quality of our own lives depends on decisions made by citizens as a whole.

  66. Kurowski,
    Again, I’m afraid I don’t know the answer to that question. Ask the American Bankers Association lobbyists that own the Republican Senators like Mitch McConnell, Dick Shelby, and Bob Corker. Maybe they can tell you how the bankers wrote that law in their Senate offices.

    Hate to sound like a broken record.

  67. Did I miss the definition of “uncertainty”?

    From an economist – “Private equity is like — is like buying a house that needs renovation. You improve it. You strengthen it. You make it a better asset. And then you try and turn around and sell it for more money. That is the essence of private equity. If you do the opposite, you lose money.”

    As Barbara noted, and I agree, no matter how many Rube Goldberg complexity machinations you throw in, the basic math formula for PREDATORY PROFIT is the same:

    More misery for others = More money for ME ME ME

    The LAWS OF PHYSICS limit PROFIT. The only way PROFIT can be unlimited in finite time and space – reaching infinity and beyond – is as an abstract mathematical formula concocted by a LIMITED by time/space and the finite imperfections of such a mind – it can exist only as a delusion. We ALL must “live within our means”.

    You bought the house, you trashed it, you didn’t let anyone else have enough money to fix it so it won’t be toxic and fall down on anyone inside or have enough money to buy it, and now you want to PRETEND you are selling it (openly trashed as a “foreclosed”) and owe no taxes on it

    so that you can tell “god” you have the equity money to go find the “god” particle? Or invade Persia?

    Yup, things can remain “uncertain” forever in that theoretical bowl of infinitely, profitable crazy…

    I don’t get the raw, irrational hatred at the thought of letting labor enjoy the fruits of their own labor – what the heck is that all about? It’s not as if the brief time where the Middle Class was in existence was bad for the “elite” – socially, morally, culturally – and go dig up all the patents that were filed in the late 1960s – 1970s – the Middle Class wanted to be free of the circular firing squad activities of the Middle East waaaa-aa-aay back….no?

    Noted – we’ll add Basel to the DOI 2010 :-)

  68. Tippy,

    There’s a difference between drunken manslaughter, crimes of passion, and stone-cold, premeditated, power-hungry, mass-executions (AKA as “war”).

    As you note, Canada benefited from a humbled British Monarchy…

    In a sincere discussion during a time of crisis and war, the “forgiveness” schtick is put aside until the peace is restored.

    Come back later with the lecture.

  69. Stephen A. Boyko wrote:

    As US Grant said “hope is not a strategy.”

    “Without a proportionate increase in investor financial knowledge, regulation merely “dumbs-down” the consumer base at the expense of market efficiency.”

    Ulysses S. Grant also wrote:

    “In every battle there comes a time when both sides consider themselves beaten, then he who continues the attack wins.”

  70. “We can’t legislate wisdom or passion. We can’t legislate competency. All we can do is create the structures and hope that good people will be appointed who will attract other good people.”

    Patriot Act 2001 – Don’t they have the LIST of “good people”? Can’t find them because they don’t have a mailing or forwarding address anymore?

    Learning what was taught to the generations that followed my school-daze…my gang was NEVER taught anything other than the PUBLIC SERVANT gets hauled out by the scruff of the neck if caught STEALING public funds.

    What did the Wrecking Crew offer as rational for writing LAWS that make stealing “legal”…? If we don’t make stealing from YOU legal, the “terrorists” will get you?

    This is stupid – no matter how you slice it – it is all Russian Nihilism with so many words thrown at it to make it seem as if it’s progressive and “not written in stone”.

  71. “Both ancient and modern writers have used the Battle of Thermopylae as an example of the power of a patriotic army of freemen defending native soil.

    The performance of the defenders at the battle of Thermopylae is also used as an example of the advantages of training, equipment, and good use of terrain as force multipliers and has become a symbol of courage against overwhelming odds.

    A Greek force of approximately 7,000 men thus marched north to block the pass in the summer of 480 BC. The Persian army, alleged by the ancient sources to have numbered in the millions, arrived at the pass in late August or early September.

    Aware that his force was being outflanked, Leonidas dismissed the bulk of the Greek army, and remained to guard the rear with 300 Spartans, 700 Thespians, 400 Thebans and perhaps a few hundred others, the vast majority of whom were killed.”

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

  72. @ Beria___Your abstract, or better said recrudesce zeitgeistic thesis is out of sequence – anachronism out-weighted only by your fastidious psyche? Please understand (be advised?) that Mr. James Kwak provides a unique dialogue espousing intellectual discourse – now I bid you good-digging kind sir,…

  73. More Stimulus Despair

    July 18, 2010, 10:46 AM – NY Times – Paul Krugman – excerpts

    “I’ll be frank: the discussion of fiscal stimulus this past year and a half has filled me with despair over the state of the economics profession. If you believe stimulus is a bad idea, fine; but surely the least one could have expected is that opponents would listen, even a bit, to what proponents were saying. In particular, the case for stimulus has always been highly conditional. Fiscal stimulus is what you do only if two conditions are satisfied: high unemployment, so that the proximate risk is deflation, not inflation; and monetary policy constrained by the zero lower bound.

    That doesn’t sound like a hard point to grasp. Yet again and again, critics point to examples of increased government spending under conditions nothing like that, and claim that these examples somehow prove something.

    This passage makes me want to stick a pencil in my eye. Let’s consider the case…

    In short, it’s hard to think of a case less suited to tell us anything at all about fiscal stimulus under the conditions we now face. And the fact that a prominent commentator on current events apparently doesn’t know that, after a year and a half of debating this issue — well, as I said, I’m feeling fairly despairing.”

    http://krugman.blogs.nytimes.com/2010/07/18/more-stimulus-despair/

  74. Before reading the rest of these stimulating comments, I have to say the idea of political appointees in charge of civil agencies is analagous to putting the Vatican in charge of the space program. God, we’ve been there.

  75. @Annie: Did I miss the definition of “uncertainty”?

    I argue it is because financial regulators conflate “risk” and “uncertainty.” In a world of financial innovation and bubbles, it is uncertainty — not risk — that should be the regulatory randomness component of focus.

    Uncertainty is different from, rather than a higher degree of, risk. This distinction was made famous by economist Frank H. Knight in his seminal book, “Risk, Uncertainty, and Profit” (1921). Risk refers to situations in which the outcome of an event is unknown, but the decision maker knows the range of possible outcomes and the probabilities of each. Uncertainty, by contrast, characterizes situations in which the range of possible outcomes, let alone the relevant probabilities, is unknown.

    Annie also said “no matter how many Rube Goldberg complexity machinations you throw in”

    It is not me, but referenced sources Frank Knight and Melanie Mitchell (Complexity)

  77. “We can learn much from wise words, little from wisecracks, and less from wise guys.”

    William Arthur Ward

  78. Re: @ RickK___Why is everyone in denial? This will only play out exactly like the last depression – syncronized to the same parallel trajectory time-delayed frame-by-frame deja`vu sequenced timeline. What “Social Security”…”What FDIC”…”What Unemployment”…”What Entitlement Programs”? Alert: Only the “Military Complex” wins your dollars for butter – let them eat “Liberty’s Courage”,…?

  79. Re: @ Per___Why are you so shocked at what will always be – the only thing on our side is that they can’t start a “Third World War”? (Not until the “Space Stations” are capable of sustaining life for a decade, and robotics to get them back home???)

  80. Bernacke is a Depression expert, right? Oooops, people think he “studied” the Depression to prevent a repeat?!

    Oh my…

  81. “…is analagous to putting the Vatican in charge of the space program.”

    More like putting the Vatican in charge of the alter boys and girls, which I have no problem with, as long as they substitute them with chimps instead.

  82. Fed Nominees Promise They Learned From Crisis

    July 15, 2010 – excerpts

    NEW YORK (CNNMoney.com) — “President Obama’s three picks for seats on the Federal Reserve Board of Governors told lawmakers Thursday that they would implement lessons learned from the financial crisis.

    Yellen, who currently serves as the president of the San Francisco Federal Reserve Bank, also told lawmakers that while the Fed had been monitoring rising housing prices long before the market collapsed, the bank failed to see the crisis coming.

    “We failed completely to understand the complexity of what the impact of a national decline in housing prices would be in the financial system. We saw a number of things and we failed to connect the dots,” she said.”

    http://money.cnn.com/2010/07/15/news/economy/yellen_nomination/

  83. The amount of negative-charged mirth that the theatrics of sociopathic chlopi provide when presenting philosophical views of humanity was maxed out today with the finger in a socket cartoon…

    From Wiki – “As news of the experiment and its particulars spread, others attempted to replicate it. However, experiments involving lightning are always risky and frequently fatal. One of the most well-known deaths during the spate of Franklin imitators was that of Professor George Richmann of Saint Petersburg, Russia. He created a set-up similar to Franklin’s, and was attending a meeting of the Academy of Sciences when he heard thunder. He ran home with his engraver to capture the event for posterity. According to reports, while the experiment was under way, ball lightning appeared and collided with Richmann’s head, killing him.

  84. “All the people voting for “the lesser of two evils” are taking us down the same path as if we had chosen “the greater of two evils” – just more slowly.”

    There has always been a pernicious tendency among the credulous on the left to accept half a loaf which, when examined closely, amounts to no loaf at all. Although defining themselves as “progressive”, these timorous little mice are more fundamentally anchored in the status quo, too pucilanimous to embrace out-of-the-box concepts that would bring real solutions. I see these people less as allies than obstacles, almost as kulaks in one sense. Suspect you’d feel similarly.

  86. “Hypocrisy can afford to be magnificent in its promises; for never intending to go beyond promises; it costs nothing.”

    Edmund Burke (1729 – 1797)

  88. Annie, we are talking apples and oranges here. I’m not suggesting “forgiveness” is a solution to the current crisis and war.

  89. There is the difference between a drunken murder, crimes of passion, and ice-cold, premeditated, power-hungry, media executions (AKA, a “war”).

    As you note, Canada has benefited humbled the British monarchy …

    In frank discussions during times of crisis and war, “forgiveness” feature postponed until peace was restored.

    Come back later with a lecture.

  90. Last but not least, was a discussion of risk v uncertainty from an excerpt that included You, btraven, hermanas, and Kurowski from the recent blog entitled “Why Agencies Get Things Terribly Wrong.”

    Of interest is btraven’s response to the question that I had earlier posed to you.

    An oil spill was once considered a SURE THING – it WILL HAPPEN – everyone agreed!
    So the SURE THING is what was going to be regulated so that it could be avoided. In the case of deep ocean drilling, had the SURE THING been accepted, it would have never been approved. Ridiculous, even ludicrous, to BELIEVE that that much titan-god machinery and technology could not produce another way to harness “energy” for mass consumption.
    It’s all about regulating the SURE THING – both positive and negative. Giving subsidies to farmers to NOT grow food – SURE THING in biology, plant reproduction – is NOT the point of “regulation”.
    Manipulation? Yes. Regulation? Hardly!
    Cut off subsidies to PROMOTE doing the SURE THING that is NOT sustainable
    and cut off subsidies to PROMOTE NOT doing what is sustainable.

    Annie July 11, 2010 at 4:06 pm

     As I see it, BOTH forces have been and continue to be at play. Sociopathic banksters and bigCorps will devise con games, and regulators will continue to create incentives and accelerants. It’s both a symbiotic and synergistic relationship – and the debate at this point seems close to asking which came first, the chicken or the egg. IMHO the bankster greed came first and once there was enough concentration of influence & wealth – the regulators were captured.

    btraven July 12, 2010 at 5:32 pm

     @ btraven

    You have to determine whether capital market either needs reform as Congress proposes by amending the deterministic, one-size-fits-all, legacy system, or is it broken requiring fundamental repair.
    If the latter, then adding regulation to existing legacy system eventually makes the system more toxic as evidenced by more frequent and larger economic crashes.

    The fundamental change which I advocate is segmenting the capital market into predictable (money market instruments for which a separate regime already exists), probabilistic, and uncertain regimes.
    Uncertain regime is needed to be consistent with underlying economic environment to limit non-correlative information that leads to category errors.

    Stephen A. Boyko July 12, 2010 at 7:02 pm

     @ Stephen A. Boyko – Clearly the system (economy, finance & government) is broken and requires “fundamental repair.”

    As for your remedy, based on your description:”me no comprehend.” However, if it helps create the following results, I’m all for it – otherwise, not:
    * a separation of wealth and political influence
    * prosecutions of financial and political fraud and deceptions
    * the end of our debt-as-money monetary system
    * more decentralization of power
    * claw backs of the wealth pillaged from “the small people”
    * the end of TBTFs
    * competition in our markets
    * the end of the “phantom economy” and a return to a “real economy”

    btraven July 12, 2010 at 11:23 pm

     @ btraven

    To achieve “competition in our markets” the focus should be “ranmdomness” (uncertainty, probability, and predicatability)not scale. Taleb’s books Black Swan and Fooled by Randomness provide great references.

    It is TRTR (Too random ro regulate)as in the expansion of CDSs, that I believe should be the focus.
    What is new or innovative in Dodd Frank? It is just more or less of the same. Reshuffling and renaming, while activity, is not reform.

    As soon as TBTF became the goal, the deterministic legacy system prevailed letting the financial suits set the terms of the engagement. Jamie Diamon et.al. are very smart people who can game the existing system better than Dodd and Frank, and even better than Messrs. Johnson and Kwak.

    So if you want change, advocate “REAL” change. That is why “We’re All Screwed” was written.

    Stephen A. Boyko July 13, 2010 at 7:58 am

     @ Stephen A. Boyko

    I do not concur in the reference to a Black Swan, since that refers to “high-impact, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology”.

    The current supposed Black Swan we have standing in front of us was totally manmade and predictable… stamped “Made in Basel”

    The regulators just adore Nassim Nicholas Taleb, since his Black Swan saves them from much embarrassment when their children ask them “Daddy were you not a financial regulator?”

    Per Kurowski July 13, 2010 at 9:17 am

     @Per Kurowski:

    Per, you are proving my point. “Stamped “Made in Basel” is a one-size-fits-all, deterministic approach that is antithetical to what I advocate.

    Think of randomness as H2O. It has to be managed differently in its solid state of ice, liquid state of water, and gaseous state of steam.

    Financially this is represented as predictable money market instruments, probabilistic positive cash flow instrument, and negative cash flow (e.g. Liar and NINJA loans). There already exist governance regimes for predictable Treasuries. What needs to happen is to segment conflated (probabilistic and uncertain) investments.

    “Change” is defined as the relationship between risk and uncertainty.

    The dictionary defines “risk” as the chance of loss. Risk is probabilistic and thus presents foreseeable consequences, unlike “uncertainty” which is indeterminate and characterized by unforeseeable consequences.

    “Uncertainty” is not a linear extension of a “riskier form of risk,” but a separate and distinct concept. One-size-fits-all advocates argue an EMH extension, but have difficulty reconciling crashes where the market opens down 20 percent.

    When uncertainty becomes risk, that’s learning or innovation—you have greater control over your underlying economic environment. On the other hand, when risk becomes uncertainty there is either confusion, too much information, or ambiguity, too little information. Should the uncertainty become unstable as in New Orleans when the levies broke, you have chaos.

    Unless we segment governance regimes the trend of larger and more frequent crashes will continue.

    Stephen A. Boyko July 13, 2010 at 10:02 am

     @ Stephen A. Boyko – Thanks for the clarification. I get your point.

    btraven July 14, 2010 at 12:14 am

     @btraven

    Then perhaps you can help me.

    Please explain to me why many bloggers invoke a “moral imperative” demanding that the oligarchs (aka “banksters”) act against their self-interest?

    Further confusing, is having impugned the morals of the oligarchs, these well-intentioned but misguided (my term, but supportive of Mr. Kwak’s description of agency Federalis) individuals proceed to engage the oligarchs on their terms—one-size-fits-all, deterministic governance?

    The legacy system for capital market governance has evolved into a flawed construct producing larger and more frequent crashes (to be elaborated on in a forthcoming blog). Repeatedly doing more of the same as Al Einstein said …

    Stephen A. Boyko July 14, 2010 at 7:55 am

     @ Stephen A. Boyko – second @ btraven

    “Thanks for the clarification..”
    And the use of the dictionary, and attention to details.

    hermanas

    July 14, 2010 at 10:46 am

     @ Stephen A. Boyko –

    “Please explain to me why many bloggers invoke a “moral imperative” demanding that the oligarchs (aka “banksters”) act against their self-interest?”

    1. Naivety

    2. Perhaps they think banksters will someday balance their short term interests with some long term interests (e.g. avoiding the pitchforks)?

    Btraven July 14, 2010 at 4:44 pm

     @ btraven

    To quote US Grant__”hope” is not a strategy.
    For real “change” to take place Dodd-Frank must advocate something that is truly different, not more or less of the legacy governance system.

    If there is complexity, there is uncertainty. How does DF govern the underlying economic condition of uncertainty becomes the key issue.

    Thanks for your feedback, it is helpful to the work that I do.

    Stephen A. Boyko July 14, 2010 at 9:20 pm

  91. So is hope for genuine financial reform equal to hope for those (wrongfully or rightly) convicted of capital crimes in the United States? A dark say indeed. But still there is an ever so small a sliver of hope.

  92. I’ve completed my most recent Baseline Fable Divine Comedy.

    So the ground-breaking innovation created by free-market ideology is that lying, cheating, stealing, dissembling, self-dealing and avarice followed by the evasion of accountability are requisites for material gain.

    Actually, I am not sure this is anything new or innovative. Dante’s Divine Comedy comes to mind. …

  94. Hi Tippy,

    Even going back to THE Depression in the early 20th century-from-hell…

    First WWI, then Depression, then WWII….

    War is ALWAYS about the rabble getting the rubles, so to speak. Got nothing to do with my ism is better than your ism…

    Of course banks are emptied out by the war lords after a war. Then the bubble/pattern/cycle repeats – lather rinse repeat…

    WWII actually went “genetic” in hopes of a PERMANENT elite.

    You and I and some others have a completely ALIEN perspective on the point of $$$.

    To the others, they’re just trying to fix a software programming flaw – sucked it up so fast that it imploded.

    It’s simple. Their $$$ is no longer available to 90% of physics, basically, as currency. Back to where I was 2 years ago – there is a sustainable global “economy” and it DESERVES to have it’s own currency.

    That’s it. Simple. Lunatic asylum/Dante’s Inferno currency is off the market.

    What part don’t people understand about the need to DISCONNECT from that currency?

    VOTE for a PEACEFUL EVOLUTION. VOTE for a currency designed specifically for micro-markets – the sustainable global economy.

  95. You don’t bet on hope.

    From my limited experience in poker, if you’re hoping some card will fall to win your bet, you might as well just give the chips away. You need to make the wise decision and the chips will fall where they may. If your bet will require some hope, hang on to those chips and wait for a better hand.

  97. “recrudesce zeitgeistic thesis is out of sequence”.

    earle, florida: you really lost me on that one. What are you talking about? I am sure you have something interesting to say, but could you do it in words of 3 syllables or less? Forgive my slowness…, I’m one of the 50% percent who graduated in the bottom half of my class…

  98. Beria: “I see these people less as allies than obstacles, almost as kulaks in one sense. Suspect you’d feel similarly.” Yes, to a large degree that is accurate.

  99. “America must decide what type of country it wishes to be, and then conform public and foreign policy to those ends, and not the other way around.”

    Agree – 100%.

    This is a critical point that seems to be overlooked by many.

  102. “Economics without an a priori policy and morality, without a guiding principle like the Constitution, is a heartless monster easily manipulated to say whatever one wishes it to say”

    And that goes precisely for the financial regulations where there currently is no guiding principle at all in terms of what it is that we want out of the financial system that is being regulated… because, obviously, just the goal that banks won’t fail can’t be enough of a guiding principle… if so the guiding principle for any health reform should also be that people must not die no matter what.

  103. Christopher Dodd wrote: “We can’t legislate wisdom or passion. We can’t legislate competency. All we can do is create the structures and hope that good people will be appointed who will attract other good people.”

    They should though be able to legislate wisely… but what they are doing (though not making it explicit) is maintaining the use of the Basel Committee for setting the capital requirements for the banks… and that structure, that of a mutual admiration club, has evidently and abundantly proved itself, not being able to attract or appoint good people.

  104. Why don’t we just hope that we end up with bank CEO’s that are more risk-averse, can actually calculate risk, and are in-general, just more compentent?

    I’m not sure if it would be solved with less Prez-dependent positions. Greenspan was in a supposed non-partisan role, but his ideology definitely affected his actions.

  105. That’s not precise, given the premise. If the kulak is in principle the enemy, then when he acts like the enemy he’s only doing what he’s supposed to do.

    On the other hand, the corporate liberal is, out of cowardice and/or malevolence, a traitor.

    (According to the most recent information, the Tea Party tracks the kulak pretty well: the wealthier group among the petty bourgeoisie.)

  106. Would this council of risk supervisors done anything in 2006? 2007? What would they have done that would have credibly stemmed the rise in home prices and deterioration in loan quality?

    What if we had a 1% transaction tax. So when you sold a mortgage to a MBS bundler -1%. MBS sold to CDO bundler, andother 1%. Would that be enough? It would definitely reduce the churn.

  107. A 30 years $300.000 mortgage given to a subprime client at 11 percent would be resold for $510.000 if a triple-A rating was obtained for it and which would justified that a return of 6 percent for the investor would be more than satisfactory…

    A 1% tax would: a) reduce the $210.000 immediate profit on the intermediation to only $207.000, b) be a cost also paid by all other unobjectionable debtors and c) make government a participant in the scheme.

  108. I think that I am starting to understand you Annie.

    In regards to, e.g. the Divine Comedy, how many more words needs need to be written. It’s all there. It’s for ever going on, it never stops. It’s eternal.

    This time there is not much time left… if at all.

    Beyond good and evil. WTF?

  109. In support of Kurowski. We will change roles as I will provide tactical support for the above strategy.

    Reflexive Regulation

    Capital market governance is a reflexive process involving commands and incentives. Regulators create governance regimes by choosing appropriate commands for the incentives available in the economy. Commands and incentives are different sides of a governance equation for a given level of economic activity. They are self-referential; one cannot be discussed in the absence of the other. Command costs attendant to shareholder rights, enforcement activities, and efforts to limit rent-seeking schemes correspond with incentives derived from shareholder responsibilities (to be good financial shoppers as to price discovery and sales practices) and opportunities for free-riding. This reflexive process evolves market realities.

    The command side of the governance equation is comprised of shareholder rights, enforcement activities, and rent seeking components. Shareholder rights are a composite of principles and rules. Principles are prospective societal policies that define industry effectiveness in terms of the right things to do. They are represented by the FLITE Model of Fairness, Liquidity, Integration, Transparency, and Efficiency. Principles are defined in terms of “mass” indicating the number of people affected by the command and “materiality” indicating the relative importance of the command.

    Rules, on the other hand, are the retrospective codification of best-practice procedures that define operational efficiency in terms of doing things right. They are industry proscriptions that explicitly delineate organizational limits in terms of gravitas and granularity. Gravitas is the seriousness of a violation as measured by the amount of a fine or punishment. Granularity is the degree of precision required for compliance.

    To illustrate, “liquidity” exists when there are sufficient buyers and sellers to consummate transactions at prices that are reasonably related to quoted-market prices. It is a function of time, volatility, depth, breadth, and resiliency of the market place. The Net Capital Rule is based on a liquidation concept requirement that broker-dealers have sufficient capital as determined by asset type, aggregate level of reserves, and the ratio of liabilities to assets to meet continuously all outstanding liabilities.

    For further amplification see:

    Fit Regulation to Market Reality
    http://www.sfomag.com/article.aspx?ID=1324&issueID=c

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

    Click to access saboyko060904.pdf

    Click to access OP-1189_1_1.pdf

  110. Think I have missed your point btr.
    Dividing by 1/2 results in a doubled product. What diminishing difference do you reference?

    Do you mean halving a number?

  112. Russ,

    “If the kulak is in principle the enemy, then when he acts like the enemy he’s only doing what he’s supposed to do.”

    An interesting objection you raise, but from the point of view of the key players in the historical context being referenced, the kulak made himself an enemy, it was never supposed that he was one from the outset. Like the fabled “wreckers”, that’s why he was considered treacherous. In the early 1930s, the Comintern used the term “social fascist” similarly of reformist Social Democrats in Germany. Since both terms were employed to voice the same sense of betrayal, I could have used either safely, I suppose. But you, on the other hand, might find yourself happier with “social fascist”.

  113. Why The Financial Reform Bill Won’t Prevent Another Crisis

    July 19, 2010: 11:10 AM ET – excerpts

    FORTUNE — “Financial regulators, white-collar criminologists, and economists all agree that perverse incentive structures cause crises and they agree that the finance industry’s incentive structures have long been perverse.

    The Obama administration asserts that the financial reform bill the President will sign into law this week will prevent future crises. In fact, it will fail to do so because it does not effectively address those perverse incentives. Indeed, it increases the likelihood of the accounting scams that are the very reason why perverse incentives pay.

    Without honest valuations, markets do not clear and the economic recovery will continue to be weak and fragile. It is vital that this cover-up ends immediately. The reform bill, however, permits greater accounting abuses to encourage a cover up.”

    http://tinyurl.com/live-n-hope-never-die-n-despar

  114. Re: @ pairochucks____”breaking out (latent/dormant) after being inactive and waking to the avant`garde (trend of thoughts) of the times being defended in a atmosphere of heighten discourse (a one sided argument?) is grossly out of the order in which one occurs” PS I hope this helps,…note: I was thrown out of HS and never went back…best thing that ever happened to me, cheers!

  115. You are wrong about “evil” being “eternal”, my friend.

    How about this – a fushia colored “currency” that is for girls only – the “real” economy :-)

    And then, wha’ever color the boyz want, “currency” for their video game economy.

    We have to separate the two – just like real and unreal economies were separated after the other Depression.

    So if by “eternal” you mean the process of evolution which weeds out the idiots who make the same “hell-bent” choices, I can agree.

    But to start believing that beauty truth and goodness will be crowded out of eternity by Homeland Insecurity, let’s say the data has been cherry-picked, de-constructed, and “not seen the light of day”, so I can’t judge the judgers other than to KNOW, with certainty, that nasty McCarthyites would be stampeding to jobs where you can take every piece of “reality” – ooh, look, she bought humus on sale, – and put together FICTION to ruin her. ECONOMIC CERTAINTY.

    Wait until all the “little people” that LOVE their family, neighborhood, city, state and COUNTRY find out that WE the PEOPLE aren’t good enough to provide “homeland security” by the way we live – the choices we make to be GOOD, Truthful and beautiful in spirit…

    I knew it was a big bowl of crazy we were going to keep looking at to figure out what is “eternal”…

    If you really think about it – the BEST way to WIN the game and all the $$$ is to create exactly what has been created – a big bowl of crazy.

    I want fushia colored “currency” for a sustainable micro economy…one the grandparents in the old country had perfected – and the only one that can truly be improved upon with “science”

    ENVIRONMENTAL POLLUTION is not considered “terrorist” activity…does that make sense?

  116. @ earle,florida

    “I was thrown out of HS and never went back…best thing that ever happened to me”

    There a great comment from the book “Change Makers” as to what the 100 most influential people in the US had in common as a basis for their success.

    Hug your parents but don’t listen to them; and, get out of school as quickly as possible.

  118. Conflating risk and uncertainty in a one-size-fits-all governance metrics results in a dysfunctional price discovery mechanism.

    Soros said the Soviet Union fell because it treated capital as a cost-free byproduct of a political process.

    Any surprise that that the financial reform bill does not mention GSEs FNM and FRE?

  119. @Rickk

    Conflating risk and uncertainty in a one-size-fits-all governance metrics results in a dysfunctional price discovery mechanism.

    Soros said the Soviet Union fell because it treated capital as a cost-free byproduct of a political process.

    Any surprise that that the financial reform bill does not mention GSEs FNM and FRE?

  123. Video excerpt:

    Question: “From your experience is it possible for someone who is not a DC insider and not a Wall Street Insider to really help catalyse change?

    Elizabeth Warren: “I don’t know… anything except to try…. many people have told me it’s not possible…I just refuse to give up.”

  125. “Social fascist” it will be! How close one can get to mind reading without realizing it! :-)

    A couple of poignant blog posts, Russ. Is that your blog or someone else’s.

  127. @ Russ & Beria – Thanks for the exchange. Note: When I said, “Yes, to a large degree that is accurate,” I was referencing that I “hold” dyed-in-the-wool and reformist Dems more as obstacles than allies. Commenting on the kulak analogy was more than I wanted to address.

    And Russ, thanks for the links. Will be sharing those.

  128. Real change, is an arduous process. That which was, must die, and real change, or something new is born. This dynamic applies to individuals, societies, nations, industry, and institutions. When real change is demanded or calledfor, – as is obviously the case in the socalled global financial system today, – only, intelligent, courageous, and honorable leadership will face the enemies of change and defeat them.

    Hope is dim. Since the world and particularly Amerika today is commandeered by a sociopathic predatorclass and oligarchs. Our leaders, while intelligent are woefully lacking in courage and honor, and instead are pathologically bent on advancing wanton greed, obscene wealth, and supremist ideologies.

    Imagining that the cold darks hearts of the predatorclass will one day warm and shine to reforming the toxic, abusive, and criminal financial system, or redirect predatorclass funds and flows to policies advancing the best interests of the people is – well – a pipedream.

    Lacking the Jeffersonian or Jacksonian leadership willing to confront the criminal cabals and oligarchs on Wall Street, – Amerika is doomed to more punishing crisis, and more unsustainable bailouts, and greater deprivation and a lower standard of for the poor and middleclass, and a rapidly expanding divide between thehaves, and thehavenots.

    I’m taking the Predatoclass and under, looking to gold, guns, and ammo.

  129. Scenario 4:

    “Although third party candidates rarely actually win elections, they can have an effect on them.

    If they do well, they are often accused of having a spoiler effect. Sometimes they have won votes in the electoral college, as in the 1832 Presidential election. They can draw attention to issues that may be ignored by the majority parties. If such an issue finds acceptance with the voters, one or more of the major parties may adopt the issue into its own party platform.

    Also, a third party may be used by the voter to cast a protest vote as a form of referendum on an important issue.”

    http://en.wikipedia.org/wiki/Third_party_(United_States)

  130. Like I said, Elizabeth Warren is not qualified (for Fed Chair). If you really are insistent on a female, Janet Yellen might be a good choice. Laura D’Andrea Tyson, Alice Rivlin are another two. I think Rivlin is the only one I feel of those 3 suited for the job, but you could definitely make a good argument for the other two women for the job.

    But I 100% support Elizabeth Warren for the CFPA job, and in fact I feel she is the only credible choice for CFPA.

  131. Uh, you do know that Jackson created the banking plutrocracy that created the late 19th century panics, you do know that?

    Jackson was a liar and party of the conspiracy. He even outright admitted it on his deadbed.

  132. The Rage wrote:

    “Uh, you do know that Jackson created the banking plutrocracy that created the late 19th century panics, you do know that? Jackson was a liar and party of the conspiracy. He even outright admitted it on his deadbed.”

    I did not know that.

    “However, the attacks on Jackson generally failed, in spite of heavy funding by the bank, as Jackson convinced the ordinary population that he was defending them against a privileged elite.”

    http://en.wikipedia.org/wiki/United_States_presidential_election,_1832

  134. Hope?

    This is just Dodd putting lipstick on a pig.

    Better than nothing?

    No, it’s not better than nothing. That’s like erasing random lines in a blue print and telling the architect build it anyway, it’s better than nothing.

    No. Stand for something or fall for anything.

  135. Jennifer, that reminds me when I was a builder showing an owner some eng/arch. discrepancy, he says,”Make it like the picture!”

  136. The question that progressives have to ask themselves is how the Dodd-Frank Wall Street Reform and Consumer Protection Act went from lofty legislative intentions at the conception of the Financial Crisis Commission that first met on July 15, 2009 when Senator Dodd stated that it was his

    “hope that this commission will provide valuable insights that will help us to continue our efforts to ensure economic security for American families”

    to: “We can’t legislate wisdom or passion. We can’t legislate competency.”

    When a progressive Senator’s name (“Dodd”) first appears in the last 200 words of a 1275 word New York Times article announcing his financial reform, what else do you need to know as to what the Times thinks Senator Dodd’s legislation?

  137. Thanks again Steve,”hope that this commission will provide valuable insights…”. It sure did , but not the intended ones. Is there a reason “Faith, Hope and Charity” are sisters? Hermanas.

  138. As someone who knows “Kulacs” to someone who knows “Plantation Owner” help me with the difference.

  139. WP – “The newspaper’s Top Secret America database includes 1,931 companies that perform work at the top-secret level. More than a quarter of them – 533 – came into being after 2001, and others that already existed have expanded greatly. Most are thriving even as the rest of the United States struggles with bankruptcies, unemployment and foreclosures.”

    How can anyone NOT be able to connect the dots about the UNNATURAL shedding of 7 million jobs and the massive transfer of wealth to “god”?

    Back in the early 1990s, before the internet “matured” enough to became a weapon of choice for the predator class, I was visiting with a neighbor, complaining about a verbal tussle I had in front of my building in Morris County, NJ around 2 AM (plane delayed) – a well dressed man with an expensive cigar in hand was gingerly picking through the paperwork in the garbage. Ah the nostalgia for the stone age days of “hands on” labor, eh? Get this, when I asked him “what are you doing?”, he told me, “none of your business”. I guess it was a secret :-) Not going to “share” how I handled the situation because some of the tactics can be effectively deployed even now against the “LEGAL” e-version…he walked away and kept walking.

    Well, this coffe-klatch moment with my neighbor made an interesting turn. She brought out a scanner that allowed her to eavesdrop on people’s phone conversations in the ‘hood and a notepad filled with the information she got from listening to the neighbors. I mentioned that what she was doing was “illegal”. She begged to differ and went back to the “gossip”. I was stunned at the whole thing. She had no desire to be friends with the neighbors she was spying on, she took pleasure in their pain and troubles, and she had a addict-like attachment to the entertainment quality of her spying.

    Point – everyone in that weird generation, with their alarming % of psychological maladjustments, who found succor and comfort in one form of philosophical nihilism or another, are going to use their “computer skills” for one purpose only – financial advantage against the neighbor they can now LEGALLY spy upon, protected by the Patriot Act.

    Thing is, the garbage picker had no DELUSIONS about what he was doing and when confronted with an equal and opposing force of physics (me :-)) – he backed off.

    My Green Bay Wisconsin native female neighbor from the 1990s in NJ who told me it was NOT illegal to use the scanner to spy on her neighbor? Well, she was bragging the other day about her close “friendship” with some family member of a Senator in the new state where she is living now…the odd thing was that after not hearing from her in YEARS, she called me to tell me about her connection after a back and forth I was having with that Senator about water in the desert…coincidence?

    I have a bridge for sale in Brooklyn…wait, maybe it really IS for sale to a drug lord so he can secure his route…?!

    Here’s the thing…it doesn’t matter how many people are jumping off the proverbial cliff into Dante’s Inferno, does it?

    We The People still have the FREEDOM to not jump. And yes, it’s gonna be a BIG “fight” to keep that freedom.

    I guess I’ve been a “spy”, also. I’ve invested time and money into amateur astronomy my whole life :-)

    Where is Jupiter tonight? Let me get out those 20 by 80 binocs…the computer power we dreamed about having back in the 1970s to do “science”…?

    Used against me by “patriots” from 1999-2009…Make no mistake about how PERSONAL it is. We should be all over this “secret america” – the PROOF is there – “deconstructed” – but it’s there – there was NO WAY we could be in this economic situation – AS A SOVEREIGN COUNTRY – without that f-cking “Patriot Act”…

    1999 is when most of the “contractors” eventuated into existence – full blown from the head of Medusa…?

  140. Russ,

    As it turns out, I was wrong to say:

    “An interesting objection you raise, but from the point of view of the key players in the historical context being referenced, the kulak made himself an enemy, it was never supposed that he was one from the outset.”

    The kulak was, in fact, viewed as an enemy from the outset which makes your objection above even more weighty. While I suppose that the “reformers” we’re discussing still could be considered kulaks at least in one sense, I now think “social fascist” would have been a better, not merely an equally valid, choice.

  141. hermanas,

    Kulaks were wealthy, land owning peasants. Plantation owners were and are, well, plantation owners, hardly peasants in any sense.

  143. Hey Christopher, I forgot to “thank you” for tipping us off your lack of spine on this issue today. If you had stood up for principle on this issue (by giving unequivocal support for Elizabeth Warren, the best person for the job) we might have mistaken you for some Senator with integrity like Carl Albert. Now we know you are the real Christopher Dodd, and not some Senator Dodd look alike invading Senate corridors.

  144. Hey Christopher one last thing, the curiosity is just killing me. I mean it’s really killing me…. Has it ever occurred to you that part of a Senator’s job is to tip the scales of opinion and not just lick his sorry-ass damned finger and stick it in the wind to see which way it’s going??? Or just to placate Senator Shelby and the American Bankers Association???? I mean really I just want to know…. just an honest answer.

  145. “A learned blockhead is a greater blockhead than an ignorant one.”

    Benjamin Franklin

  147. Ahem.

    “THE MAN” in the room is often a WOMAN.

    I prefer COWARD – it’s classic and timeless.

    Dodd was in on the mortgage mess from before it began…remember?

  148. Sounds like the programming behind some kind of game-boy, joy stick “thinking”…but in the end:

    More misery for others = More money for ME ME ME

    And the dead-eye response from the sociopaths is always, “What’s wrong with that formula?”

    More misery for others = More money for ME ME ME

  149. I’m not insisting a woman head the Fed. Talent and integrity first. But it would not be difficult to do a tad better than Greenspan for sure. It might be time to integrate the Fed. Why so male dominated given such a dismal record in past decades? When you think about it Brooksley Born, Elizabeth Warren and a few others have really distinguished themselves in the fall out from the 2008 financial crisis.

  151. Deflation: Making Sure “It” Doesn’t Happen Here

    Before the National Economists Club, Washington, D.C.

    2002

    Ben S. Bernanke – excerpts

    “So, is deflation a threat to the economic health of the United States? Not to leave you in suspense, I believe that the chance of significant deflation in the United States in the foreseeable future is extremely small, for two principal reasons. The first is the resilience and structural stability of the U.S. economy itself.

    The second bulwark against deflation in the United States, and the one that will be the focus of my remarks today is… take whatever means necessary to prevent significant deflation in the United States …

    A healthy, well capitalized banking system and smoothly functioning capital markets are an important line of defense against deflationary shocks. The Fed should and does use its regulatory and supervisory powers to ensure that the financial system will remain resilient if financial conditions change rapidly.”

    “If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

    http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm#fn8

  153. @ Ted K
    @ Annie

    Unlike Senator Dodd, both of you argue with “passion” against things that you do not like. What specifically would you propose to “to tip the scales of opinion” to recommendations that you would like to see

  154. Stop subsidizing unsustainable “industry”.

    Stop subsidizing “industry” that IS sustainable from producing!

    Repeal Bush tax cuts. Repeal Patriot Act.

    And if by slamming the middle class until after November is someone’s idea of how to win elections – just politics – well, then I guess they’re going to have to be taught a lesson.

    It’s “hardball” in the USA. Next time you hear someone tell you that we are “too civilized” to go the Gangs of New York route again – remind them that we don’t seem to be civilized enough to have been able to prevent this MASSIVE THEFT of taxpayer money.

    Timely play – “Murder On The Orient Express”. When justice is denied, people find another way to make sure it’s done. THAT’s “civilized”.

  155. Stop subsidizing unsustainable “industry”

    OK, what specific industries?

    Housing?

    Finance?

    Medicine?

    Farming?

    Auto?

    Oil?

    And what specific actions?

    I am certainly in favor of removing subsidies. See excerpt from “Winds of Change” (Sept. 26, 2005)

    “Subsidies may be the single largest worldwide barrier to energy market efficiency. To quote International Energy Agency’s (“IEA”) Looking at Energy Subsidies, “Energy price subsidies that encourage energy consumption by keeping prices below cost impose heavy burdens on economic efficiency, environmental quality, and government budgets.” Contrary to popular belief in Washington, there is little wrong with energy markets that supply and demand could not remedy. However, the same-heavy-handed congressional planners that sponsored flood insurance to enable the citizens of New Orleans to live in a “Fools Paradise,” believe that politicians are better able to allocate resources than investors or consumers, and that politically rigged energy markets work better than free ones.”

    I believe you will soon find most of the older industries are subsidized to protect them from “Schumpeterian Uncertainty.” But be careful what you wish, for 25 years GM was a pension plan in search of a job.

    Would love to see your road map to drill-down the specific reforms a specific industry.

  156. @ notabanker – Yes, halving a number. I haven’t articulated it well. Take any number and divide in half. Take the result and divide in half. The “half” becomes smaller and smaller.

    100/2 = 50
    50/2 = 25
    25/2 = 12.5
    12.5/2 = 6.25
    6.25/2 = 3.125

    Our two party political system reminds me of this. The evolution of the system has led to choices between two parties that are more similar than not – the differences are small.

  157. Mr. B.S. Bernanke also wrote:

    Bernanke: Outlook Unusually Uncertain’

    July 21, 2010 – 2:24pm – CNN – excerpt

    “In all likelihood, a significant amount of time will be required to restore the nearly 8.5 million jobs that were lost over 2008 and 2009,” he said. And he emphasizes the “exceptional near-term hardships” on workers and their families, as well as the potential erosion of skills and possible long lasting effects on employment and earnings prospects.”

    http://money.cnn.com/2010/07/21/news/economy/bernanke_testimony/index.htm

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

  159. If housing, medicine and farming are NOT sustainable industries, then I’m going to have to seek help today from alien cosmologists to make sure I did not fall into a worm hole and am now on a different planet and then get back to you :-)

    What % of profit has been recycled into R & D from the current “older” energy sectors to innovate (“efficiency”)? And you’re going to have to invent some kind of new magic word (grrrrr woof woof training) for the kind of “business model” that CHOOSES not to innovate and progress – because it’s something new – calcifiedism?

    Should have elected Boone Pickens President for this point in time….leadership, focus, can get something REAL in the REAL material world that operates by the laws of REAL physics done without the yaddayadda of quantum consciousness theoretical existential politics (QCTEP) :-)

  160. In the REAL “amerika”, someone would have had a video game out by now based on this delightful “list” of the new technocrat gangs of new york – right?

    A physicist programmed all the math formulas that cosmologists BELIEVE is how everything in infinity and beyond operates, ran the program, and noted that the cosmos based on those formulas was not anywhere remotely close to what actually exists :-)

    Ditto for the game-boy gangs of new york – not the reality that actually exists.

  161. @Annie:

    “If housing, medicine and farming are NOT sustainable industries”

    But they are all heavily subsidized to the point where you have to question there sustainability.

    “Should have elected Boone Pickens President for this point in time”

    Great if he would take it. There would certainly be less “tele” and more “prompter”

  162. “Oh, there’s twenty-thousand grandmas
    Wave their hankies in the air.
    All burning up their pensions
    And shouting, “It’s not fair!”
    There’s a regiment of soldiers
    Standing, looking on
    And the Queen is bravely shouting
    “What the hell is going on?”
    Rolling Stones, Jigsaw Puzzle

    “Let’s drink to the wavering millions
    Who need leaders but get gamblers instead
    Spare a thought for the stay at home voter
    His empty eyes gaze at stange beauty shows
    And a parade of the gray suited grafters…”
    Rolling Stones, Salt of the Earth
    Both on Beggar’s Banquet Album

  164. “Please allow me to introduce myself
    I’m a man of wealth and taste
    I’ve been around for a long, long year
    Stole many a man’s soul and faith …

    Just call me Lucifer
    ‘Cause I’m in need of some restraint…”

    Sympathy for the devil (M. Jagger/K. Richards)

  166. “Ms. Warren should question US Senator Chris Dodd for he is responsible for all the consumer laws being run-down”

    There are NO innocents in the housing bubble. What about Raines and Mudd at FNM? I’ll give odds on any clawbacks. Barney Frank knows how the game is played and has their backside.

    From a regulatory policy perspective the above is just tabloid sensationalism. Dodd identified the true compliance problem as a lack of transparency (you can price anything if transparent). Moreover, the effectiveness of his TTTT (too-timid-to-tout) analysis is highly suspect.

  167. Does Obama Have The Guts To Make Bank Reform Work?

    WEDNESDAY, JUL 21, 2010 12:48 ET

    HOW THE WORLD WORKS – Salon.com

    “The president got his bill passed. But it remains to be seen if the White House can really stand up to Wall Street.”

    http://tinyurl.com/22n2hgk

  168. “But they are all heavily subsidized to the point where you have to question there sustainability.”

    Am I using the wrong word? What is the money called that farmers get to NOT grow crops?

  169. Pink Floyd’s “On The Turning Away”…

    The 17 year old in the crowd had only one thing to say to the adults in the room after about an hour of listening to our “politics”

    “Some things are so broken that they can’t be fixed.”

    Being kind and generous in spirit is FREE. Every “institution” has been compromised by the predatory class and is openly PUNISHING acts of kindness and generosity.

    I do not want to have to pull my “currency” for life maintenance, happiness, health, and adventures triggered by a love of learning and exploration

    from the broken cesspool of “currency” that war lords and drug lords lie, cheat, steal and murder to USE for their “investment” – hell on earth.

    I should not even have to LOOK at them freely roaming the streets, much less be beholden to them for $$$.

    And that’s the bottom line. I do not NEED them to live and live better than I am now.

    Declaration of Independence 2010 is a MUST. We need a separate “currency”. It’s SURVIVAL time.

  170. The Fedfail Index

    July 21, 2010, 6:37 PM – NY Time – Paul Krugman – excerpts

    “Ben Bernanke’s testimony today, as expected, lacked all sense of urgency. Hey, the economy’s a bit disappointing, and maybe someday we might think about doing something about it …

    What this little exercise conveys is that the situation is deteriorating, not improving: unemployment is down slightly, but we’re drifting closer to deflation.

    Bernanke’s answer to all this seems to be that the Fed is doing a lot. But it’s obviously not enough — the central bank is supposed to deliver results, not get an A for effort. And those results aren’t coming.”

    http://krugman.blogs.nytimes.com/2010/07/21/the-fedfail-index/

  171. Poor man wannna be rich,
    Rich man wanna be king,
    And a king ain’t satisfied, ’til he rules everything….

    —Badlands
    B. Springsteen (of course)

  172. “There must be some kind of way out of here”
    Said the joker to the thief
    “There’s too much confusion
    I can’t get no relief
    Businessmen they drink my wine
    Plowmen dig my earth
    None of them along the line
    Know what any of it is worth”

    “No reason to get excited”
    The thief, he kindly spoke
    “There are many here among us
    Who feel that life is but a joke
    But you and I, we’ve been through that
    And this is not our fate
    So let us not talk falsely now
    The hour is getting late”

    Bob Dylan, All Along the Watchtower

  173. THE PIK PROGRAM

    The PIK program provides for payments in commodities to farmers who divert acreage over and above that required by the acreage reduction program and paid acreage diversion program. The stated purpose of PIK is to reduce production through a further cutback in planting; this would decrease surplus stocks, bring supply more in line with demand, and strengthen farm income in future years. The PIK program is held to be a means of achieving these purposes while avoiding increases in price support outlays.

    Not withstanding our land acreage that grew produce, we were never in the farm business. We were in the real estate business. PIK just forestalled that inevitability.Stalin was to the Kulaks what the PIK was to NJ farmers.

    All such government activity messes with market transparency of price discovery that is essential for competitive markets. That is why I argue for segmenting markets to limit non-correlative information (farm vs. real estate) to correct category errors. What you have now is the worst of all worlds__regulatory scale that serves as a barrier to entry for TBTF institutions and category errors for TSTS (too-small-to-settle).

    On an equally ineffective note, are those posting to this blog who try to “reform” the capital market by taking the Dodd approach to amend one-size-fits-all, deterministic governance. I do not believe that good intentions will change the terms of engagement as presently proposed.

  174. Bernanke To Congress: The Economy Needs You To Keep Spending

    07-21-10 07:20 PM – Huff Post – excerpts

    Federal Reserve Chairman Ben Bernanke reiterated Wednesday his belief that Congress should continue to prop up the sputtering economy, casting aside concerns that the federal budget deficit should trump the economy’s need for additional stimulus.

    In other words, Congress should spend now and worry about deficits later….

    Bernanke warned Wednesday that if policymakers don’t get serious about reducing the annual budget deficit, they’d risk a “loss of confidence.”

    It’s “very important to demonstrate as best we can we are serious about addressing long-term issues,” Bernanke said in response to a question by Alabama Senator Richard Shelby, the Banking Committee’s top Republican. The nation’s fiscal path is “unsustainable,” Bernanke warned, and that view is “widely shared.”

    http://www.huffingtonpost.com/2010/07/21/bernanke-to-congress-the_n_654678.html

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

  176. FRANK AND DODD
    (Frank and Diane, Mellencamp)
    WilliamBanzai7

    Little ditty about Barney Frank and Chris Dodd
    Two American Congressmen on the take in Bankstaland
    Frankies gonna be a hedge fund star
    Dodd debutante backseat of a Banksta car

    Suckin on chilli dogs outside the NYSE
    Dodd sittin on Frankies lap
    Hes got his hands between his knees
    Frankie say, hey Dodd lets run off
    Behind a corrupt Wall Street tree
    Nibble off those lobbyist branches
    Let me do what I please
    And Frankie say a

    Chorus:
    Oh yeah the Banksta con goes on
    Long after the thrill of legislating is gone
    Oh yeah the Banksta con goes on
    Long after the thrill is gone Wall Street just keeps on

    Frankie sits back reflects his thoughts for a moment
    Scratches his pin head and does his best james dean
    Well you know Dodd we oughtta run of the city
    Dodd says, Barn you aint miss no-thing
    Frankie  say a

    Chorus:
    Oh yeah the con goes on
    Long after the thrill of legislating is gone
    Oh yeah the Banksta con goes on
    Long after the thrill is gone Wall Street just keeps on

    Gonna let it rock
    Let it roll
    Let Obankstas Beltway army come down
    And save my financial soul
    Hold on to your cash as long as you can
    Changes comin round real soon
    Make us subprime weaklings borrowers again

    Little ditty about Frank and Dodd
    Two american congressman on the take in Bankstaland
     

  179. Thank you for the continuing conversation about sustainable activity :-) Perhaps we can reach agreement on conversation being “sustainable”?

    In general, the term “ancient one” applies to both the approach to solving, step by step, eternal human problems with life-maintenance.

    Political and economic REVOLUTIONS have failed because of their disregard for placing HUMAN LIFE-MAINTENANCE needs (LAWS OF PHYSICS)

    at the core of all their mechanistic attempts to control both the Human and the Human’s fruits of labor for the “few” tyrants.

    Counter-revolutions ultimately prevail because “reality” contributes to the success of getting “grounded”, again, in what is necessary, then what is possible, and on to what might have been considered impossible.

    When I speak of sustainable, I speak from the perspective of sustainable as defined by the laws of physics, so to speak.

    Two simple examples – Sun rises in the East – you can depend on “solar energy”. Planting seeds in the proper soil, with sunlight and water, and those seeds produce fruit.

    When I make a list of what I NEED to live like a human being with, as yet, an undefined potential of intelligence beyond the constraints of reactionary fear and the, so called, 7 deadly sins,

    I find that I, and everyone else of NORMAL mind, do not NEED personality cult figures like Stalin, Bernanke, The Big Giant Head, or Mickey Mouse to LIVE.

    The elite NEED “the people” to suck dry.

    The People do not NEED the elite.

    Physics, my friend.

    If you have any interest in discussing problems with an “ancient one” regarding the importance of “living within our means” as a species, HUMAN, let me know.

    I’ve moved on from a too broken to fix contraption, made a sound suggestion for the need to do a Declaration of Independence update, and get on with restoring the circuit board of LIFE by creating “jobs” that won’t get “stolen”. All that POSITIVE, SANE activity depends on re-establishing a “currency” that is disconnected from the “cash” and the sadistic whims of drug lords and war lords.

    President Obama spoke a double truth when he stated that “…never again will the taxpayers be asked to bail out the banks…” He meant that the job was completed, no tax payer money left to steal.

    But it also meant that he did not hear us say “No” to being robbed, nor did he show any mercy to the victims, at least there is no mercy in evidence in that “law” he signed. So there’s the other interpretation to the truth of the political rhetoric.

    Two reasons why it’ll never happen again :-)

  181. My scope is much narrower than yours. I am not out to save humanity, only how humanity organizes itself to transact commerce. My entire life from being a kid on the farm taking vegetables to a produce market, to NASDAQ, to the Ukraine has been involved with solving market problems. Larger issues are beyond my intellect’s ability to comprehend. With markets, I can see the spin on the curve ball.

  182. Boyko, “My scope is much narrower than yours. I am not out to save humanity, only how humanity organizes itself to transact commerce. My entire life from being a kid on the farm taking vegetables to a produce market, to NASDAQ, to the Ukraine has been involved with solving market problems. Larger issues are beyond my intellect’s ability to comprehend. With markets, I can see the spin on the curve ball.”

    You call what’s going on “commerce”?!

  183. You need to answer the question that earlier was posed to you as to whether the capital market needed reform as Dodd-Frank proposes by amending the deterministic, one-size-fits-all, legacy system, or whether it was broken requiring fundamental structural repair such as market segmentation. If the former, what is new or innovative in the 2,000-plus pages of Dodd-Frank? If the latter, you need to segment the market into predictable, probabilistic, and uncertain regulatory regimes.

    “Innovation” is planned change to fix the “commerce that you question. It is the process by which uncertainty becomes risk—where indeterminate, unforeseeable activity becomes probabilistic, foreseeable activity. Incentives for creating change are the search for a policy that either mitigates or solves a problem. Conversely, “chaos” or unplanned change results from a misdiagnosis of an initial condition owing to incomplete, confusing, and/or conflicting information. A problem requiring attention that is either ignored because it is believed that it will self-correct, or is believed capable being managed in its present state (Dodd-Frank and one-size-fits-all), could render a probabilistic environment indeterminate when a critical event triggers the tipping point.

    Otherwise, you are caught in a recursive loop, where the smart, logically consistent Jamie Diamons of the world prevail because they benefit from the status quo of Dodd-Frank.

  184. Why Obama Will Nominate Warren

    JUL 23, 2010 11:16 EDT- Felix Salmon – Reuters – excerpts

    “The nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau seems to be a foregone conclusion at this point. Warren and the large team of Warren enthusiasts have been pushing her nomination aggressively, to the point at which no one in the Obama administration is going to want to face the political firestorm associated with not nominating her.

    This is no horserace: Warren’s running only against a vague conception of not-Warren, rather than against a flesh-and-blood Michael Barr or anybody else…

    Warren is known to have powerful friends in the White House, which means that there’s really only one possible obstacle to her getting nominated: Tim Geithner. Dan Froomkin, for instance, reckons that “the only way Warren will get the job is if Geithner is overruled”. But if you look at the tone of Geithner’s comments to Rose, he hardly seems dead-set against her. And no Treasury secretary, least of all Geithner, likes going against the wishes of the White House. Geithner is at heart a technocrat, rather than a fighter or an ideologue, and he’s certainly no master of the dark political arts. If he was ever trying to prevent Warren’s nomination — and I’m not convinced that he was — then he has at this point been convincingly outmaneuvered.

    The game’s over; her nomination is a done deal.”

    http://blogs.reuters.com/felix-salmon/

  185. Question: “From your experience is it possible for someone who is not a DC insider and not a Wall Street Insider to really help catalyse change?

    Elizabeth Warren: “I don’t know… anything except to try…. many people have told me it’s not possible…I just refuse to give up.”

  186. I’ll assume you missed the other two times I said that it was broken.

    Here’s the third time – it’s broken.

    It’s so broken, as a matter of fact, that I propose a re-stating of the Declaration of Independence – a 2010 version – and an immediate creation of a new “currency”.

    The level of criminality and corruption in “commerce” enriched a war lord and drug lord “cash” plutocracy. I can’t live with that, frankly. I don’t NEED them to LIVE. Worse, they don’t want me to LIVE beyond my ability to grow fruit for their taking.

    But let’s get amoral and logical – look at it this way, and please note how your mind and logic might get stuck with the numbers I use – let’s say “labor” in the USA gets $40 an hour. Management gets 3 times as much – $120 an hour.

    There is nothing that stops the $120 an hour group to compete with each other to get $200 an hour, or wha’ever, because they have their own bank and their own rules of the game.

    And vice versa – the $40 a hour labor pool must cooperate with each other in ALL aspects of infrastructure maintenance (clean water, roads, etc.) and protection of family unit (education, health, etc.). Their $$$ is in their community banks.

    So where do the 2 groups meet in “commerce” transactions when they have two separate pools of money in two separated banking systems?

    The ABSOLUTE rule is $40 an hour for labor, $120 for “management” – which would be inventors, engineers, architects, surgeons, etc. – people who actually did something with their math skills besides issue paper that stole everything, via a game boy programming stunt, from the $40 an hour group.

    The $120 an hour group needs to figure out how to do something besides form a circular firing squad.

  187. July 23, 2010 – ABC News – transcript

    LEAMY: “On the one hand, big business is adamantly opposed.
    So everybody wants to know, will you nominate Elizabeth Warren to head this agency that she thought of?

    OBAMA: Well, fir — first of all, it’s important to note that I’ve known Elizabeth Warren for a long time because I was a student at Harvard when she was a professor there.

    During the campaign, I actually brought in Elizabeth Warren to help design proposals for consumer protection. She is, I think, a wonderful voice making a very simple point, which is, if you’ve got a set of rules and standards in place to make sure your toaster doesn’t blow up in your face, you should have some rules and regulations to make sure your credit card or mortgage doesn’t blow up in your face.

    And so I have the highest regard for Elizabeth. We have not made a decision about who we’re going to appoint yet, but here’s my guarantee, is that Elizabeth is going to be working with me, working with Tim Geithner, the Treasury secretary, to help in thinking about how do we make this consumer agency as effective as possible looking out for consumers. She is going to be actively involved in that process.”

    http://tinyurl.com/27l2ye3

  188. “it’s broken.”

    Agreed! and yes I did miss it previously, sorry.

    In undertaking a complex reform, sequence and timing are critical.

    I am talking “effectiveness” issues __ structural change relative to market segmentation as a precondition to change.

    You (Kurowski and others) are talking “efficiency” issues relative to time, cost, and effort for commercial exchange. Most importantly Dodd-Frank is basically the renaming and reshuffling of efficiency issues. Unless you first effect structural change, the status quo will prevail (Jamie Diamon et. al.)

    Nothing incorrect with many of the “efficiency” comments, they are just out of sequence for effective change.

    When the definition of “change” was TBTF, Jamie Diamon set the terms of engagement.

    That is why I argue for “randomness” to be the driver of change. It is not TBTF but TRTR (too-random-to regulate)!

  189. @ Stephen A. Boyko

    Please, I certainly might be for effectiveness, at least in the sense of first defining a purpose for those bank activities we want to regulate… but that those not mean that I have little respect for randomness, much the contrary. In 2002, and later recounted in my book Voice and Noise I wrote the following while arguing the need for new bank regulations.

    “In Against the Gods Peter L. Bernstein (John Wiley & Sons, 1996) writes that the boundary between the modern times and the past is the mastery of risk, since for those who believe that everything was in God’s hands, risk management, probability, and statistics, must have seemed quite irrelevant. Today, when seeing so much risk managing, I cannot but speculate on whether we are not leaving out God’s hand, just a little bit too much.

    If the path to development is littered with bankruptcies, losses, tears, and tragedies, all framed within the human seesaw of one little step forward, and 0.99 steps back, why do we insist so much on excluding banking systems from capitalizing on the Darwinian benefits to be expected?

    There is a thesis that holds that the old agricultural traditions of burning a little each year, thereby getting rid of some of the combustible materials, was much wiser than today’s no burning at all, that only allows for the buildup of more incendiary materials, thereby guaranteeing disaster and scorched earth, when fire finally breaks out, as it does, sooner or later.

    Therefore a regulation that regulates less, but is more active and trigger-happy, and treats a bank failure as something normal, as it should be, could be a much more effective regulation. The avoidance of a crisis, by any means, might strangely lead us to the one and only bank, therefore setting us up for the mother of all moral hazards—just to proceed later to the mother of all bank crises.”

  190. Lost your train of though, sorry…

    If you are “undertaking a complex reform”

    with “sequence and timing”

    when/how does it become “change”

    that is being driven by “randomness”?

    Can you supply a math formula? :-) I can read those, too, and it would be refreshing to see something other than:

    More misery for others = More money for ME ME ME

    All the “money” in the world under the control of war lords and drug lords to fuel their cosmic insanity

    LOGICALLY leads to one conclusion – we have to have different “money” for LIFE. There’s reform and change all in one wallet.

    It’s time.

    Roll the printing press (sequence) and print my girl money first :-)

    Like random? Think of all the ways one can spread manure around on THAWED ground. Per and I can be delightfully efficient :-)

  192. It is not monstrous that our largest banks are directly involved in laundering drug money on a daily basis, and no-one notices or bats an eye, or seems to care at all. The issue with regulation is moot, if we allow criminal enterprises to flourish that enrich the predatorclass alone, while causing significant harm to the rest of society.

  193. Banks Financing Mexico Gangs Admitted in Wells Fargo Deal

    Jun 29, 2010 – Bloomberg News – excerpts

    Just before sunset on April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 miles east of Mexico City. As soldiers on the ground approached the plane, the crew tried to shoo them away, saying there was a dangerous oil leak. So the troops grew suspicious and searched the jet.

    They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million.

    The smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.: Wachovia Corp. and Bank of America Corp., Bloomberg Markets magazine reports in its August 2010 issue.

    “Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” says Jeffrey Sloman, the federal prosecutor who handled the case.

    In May, President Barack Obama said he’d send 1,200 National Guard troops, adding to the 17,400 agents on the U.S. side of the border to help stem drug traffic and illegal immigration.”

    http://tinyurl.com/2925wus

  194. Any questions about WHY Nevada and Arizona are 1 and 2 in foreclosures and bankruptcy?

    Derivatives – whole states are “derivatives” – and thanks to Patriot Act, they got a LIST of names and numbers and total net worth that they transfered from “we the people” to them. BANKS got the list FOR THE PREDATORS using the chaos of the devious “transition” time between the old “law” and the new “law”…

    I am p-ssed beyond belief that BANKS made it possible for the FILTH and SCUM of the universe to worm into the savings and HONEST wealth of the “little” people – that’s what has been going on in Mexico all this time that’s chased the little people into USA hoping for relief from the Mexico psycho class – and instead they found themselves in the spider’s web of OUR psycho class…

    Derivatives and hedgehogs….protected by the Patriot Act.

    How DARE anyone, much less BANKS, empower the PREDATOR class – and WORSE! – do it by disarming the MIDDLE CLASS. That’s what everyone is so p-ssed off about, you retarded social engineers reading along.

    How DARE you paint a BULLS-EYE on our LIVES? Game boy this (finger up)

    GET IT why “they” are “clinging to their guns and religion”…?

    Indeed, “races” prove to have their own ways of dealing with their own. Other “races” should take note of how ugly it got during WWII. THAT was nothing compared to what awaits the next round of “native” vs non-native in the “americas”…

    all that grandiosity in claiming superiority of “religion” while being a PREDATOR with the brains of cro-magnum…that’s some human resource departments at the banks….

    No way, Jose, will it work out FOR YOU…

  195. @Annie
    @ Per Kurowski

    “undertaking a complex reform with sequence and timing”

    Consider the economic reform of the Former Soviet Union. What is your independent variable (firm or market)from which to begin reform?

    Dr. Sachs at Kennedy School of Government proposed markets as a one-size-fits-all solution. I argue otherwise in Odom’s Russia, The National Interest, Spring, 2002.

    http://findarticles.com/p/articles/mi_m2751/is_2002_Spring/ai_85132096/pg_4/?tag=content;col1

    Then when do you integrate dependent variables in futherance of economic development.

    I think many of your current complaints stem from the US market undergoing disproportionate firm / oligarch influence.In We’re All Screwed, I argue that this trend is regulatory aided.

    This is compatible with much of Kurowski. I come at it from the top-down with principles, whereas Per comes from the bottom up rules (Basel III).

  196. Grandpa and his fellow refugee buddies from WWII – British Royal Air Force – Polish Contingent – had an ongoing bet with each other about when the Soviet Union would collapse. Grandpa won for three reasons:

    1. He was the “banker” in charge of the bet money.
    2. Half of the gang passed away within 5 years of making the bet.
    3. He outlived everybody AND was around when it actually happened.

    He promptly gave the money over to Grandma (she’s the Russian) to spend it as she liked – which she did on the grandkids.

    Everything that needs to be said about “regulation” was said by the fictional Doctor Zhivago, “All is swamped by Pharisaism. To live life to the end is not a childish task.”

  198. Annie wrote:

    “.– that’s what has been going on in Mexico all this time that’s chased the little people into USA hoping for relief from the Mexico psycho class – and instead they found themselves in the spider’s web of OUR psycho class…..all that grandiosity in claiming superiority of “religion” while being a PREDATOR with the brains of cro-magnum…that’s some human resource departments at the banks….

    Annie, time to bring out the vaporizer and chocolate. . :-)

  199. A BULLS-EYE was put on the MIDDLE CLASS.

    Without the MIDDLE CLASS, USA will rip apart, already happening but you might not have noticed – being so busy spinning out derivatives, shorts, and tarps…

    Physics will set in – when in history did a sordid and inane “elite” not get roasted for dinner by the “poor”?

  200. Boyko, “I will listen for the balalaika”

    Putin is a piece of work, ain’t he? He played it for you – the unofficial KGB song – while welcoming “spies” back home to Mother Russia.

    In order to fine tune the “too broke to fix” conversation, two big missing pieces in ALL totalitarian economies – entrepreneurship and sustainable infrastructure.

    More misery for others = More money for ME ME ME

    is a rock-solid math formula that remains indisputable in its simplistic charm.

  201. FinReg is better than nothing only in the sense that when CEO Alan Schwartz appeared on CNBC waxing optimistic about his firm’s prospects (Bear Stearns) two days before it collapsed, no great harm in the grand scheme of things was done.

  202. Now doesn’t that sound like a wishy-washy politician trying to have it both ways? He’s suggesting that whether EW gets the post or NOT, she will have a critical role. Isn’t that insulting hot air akin to voting ‘PRESENT’?? Will this guy ever stop campaigning?? With Bush we got hard-nosed conservative appointments, with Obama we get whatever works.

  203. Sorry, Anonymous, I forgot to write my name. Btw, thanks for all your great posts!!

  204. Excellent point, Tony. It’s rather like paying lip service to transparency under the American business model. How utterly absurd.

  205. Great postings, Annie.

    http://theburningplatform.com/blog/2010/07/29/the-ruling-elite-called/

    Excerpt:

    “So, we now find ourselves at the edge of the abyss again. The ruling elite have a great plan. It involves more debt, more stimulus, more printing, more accounting fraud, more pain for the masses, and of course more bonuses for Wall Street. If you, the little people, will just follow this 10 step plan, the ruling elite will be just fine…”

  206. This is the problem with our political system today, no guts, and apparently no concern for how thier policies affect the nation. The whole entire premise of the reform bill depends on who appoints the people responsible for regulatory oversight. Hello, have we forgotten about George Bush! And let’s be clear, Obama nor Clinton are much better than the Republicans and Bush. They all depend on industry insders with current ties to the industry to perform the regulatory functions. And even if they have no current ties, they understand their post-government depends on the industry the regulate. So, in essence, we Americans are screwed!

  207. @ Donald S

    We’ll said. In one these blogograms, I asked a participant if the reform bill were named Shelby-Whomever instead of Dodd-Frank would there be a different conversation?

    In “We’re All Screwed: How Toxic Regulation Will Crush the Free Market System”
    http://www.traderspress.com/detail.php?PKey=671 , I argue that it is “uncertainty” and not “risk” that should be the randomness component of focus.

    Uncertainty is different from, rather than a higher degree of, risk. In brief, “risk” is present when future events occur with measurable probability while “uncertainty is present when the likelihood of future events is indefinite or incalculable.

    As long as your driver is “risk” you are dealing with a deterministic state that more than likely will be governed by one-size-fits-all approach that becomes hostage of a single scale bright-line differentiator. Sooner or later a critical mass learns how to acquire the current “hot” resource with no money down and begin marching herd-like in the same direction. The Broughton Bridge effect creates a “Minsky” moment from excess credit (the result of no-money down). The moment TBTF became the-cause-celeb, the status quo prevailed.

  208. “Our task is to ferry wounded souls across the River of Dread till they see the dim light of hope, at which point we stop, push them into the water and tell them to swim.”

    – Up In The Air

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