Whiskey Costs Money

By James Kwak

A few days ago I wrote a post that began with New York Fed President William Dudley talking tough about banks: “There is evidence of deep-seated cultural and ethical failures at many large financial institutions.” The thrust of that post was that I’m not very encouraged when regulators talk about culture and the “trust issue” but don’t indicate how they are going to actually affect industry behavior.

As they say, talk is cheap, whiskey costs money. What’s more important than what regulators say is what they do—and don’t talk about. Peter Eavis (who wrote the earlier story about bank regulators that my previous post was responding to) wrote a new article detailing how that same William Dudley has delayed the finalization of the supplementary leverage ratio: the backup capital standard that requires banks to maintain capital based on their total assets, not using risk weighting.

Dudley has said, “I do not feel that I in any way hold any allegiance or loyalty to the financial industry whatsoever.” That may be true; he certainly made enough at Goldman that he has no real financial incentive to continue to make nice with Wall Street.* Yet at the same time he appears to be parroting concerns raised by some of the big banks, raising a concern about the leverage rule that Felix Salmon calls “very silly” and that, according to Eavis, the Federal Reserve mother ship in Washington didn’t consider significant.

In the grand scheme of banks and their allies weakening and slowing down new regulation, this is probably not a particularly momentous battle. But it does put things in perspective.

* Of course, we know that among some people (many of whom live in New York and work in finance), no amount of money is ever enough.

3 thoughts on “Whiskey Costs Money

  1. Because there was so much “biology” involved in the development of extractive algorithms where the timing is completely arbitrary as for when your bank account had to go to 0.00,

    Banks were, basically, infiltrated exactly in the same way that crabs infiltrate pubic hair: http://en.wikipedia.org/wiki/Crab_louse

    You have to evaluate the expenditure of billions into developing the “internet” economy and what was the first thing that the technology was used for “personally”.

    To realize that the discussion is STILL about how people need to learn to live with crabs (damn that Snowden), the new normal, well, that’s a scarier level of mass delusion than the fact that you have to live with the duress of hanging on to a job by signing off on bad lab results for the peanut butter batch because there are 1000 people that want your job and would have no problem signing off because they are not even doing that level of “regulation” anymore – “….I don’t need to see the slide with the bacteria on it….”

    Maybe the “mob” needs to set up their own “Think Tank” to judge which “software” deserves further investment. People aren’t going to live with crabs in their pubis. So, yeah, you can’t “regulate” the crabs….no other options on the table besides “…we don’t need no stinking regulations…”


  2. Whenever I think of banking “stress tests”, I think of how Europe did the same and making the claim all is well.

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