Mighty Bloomberg in an unsigned opinion piece finally says: “There’s Something Rotten in Banking” – you think! But they still pulled their punches:
We don’t countenance bank bashing. Nor have we ever called on regulators to bust up big banks. But it’s difficult to defend an industry that defrauds the market with fake interest-rate figures, thereby stealing from other banks and customers.
The U.K. is recognizing it has a real mess. Barclays is finally realizing it has a big mess. At last Robert Diamond is gone after fighting to retain his CEO job despite the disgusting scandal at Barclays over which he presided. And the buzz is the amazement it took a week for the board to finally cut him loose.
The state of world finance is another topic I generally won’t harp on in this blog. It is one of my favorite targets. But there is an ample supply of criticism already, except, of course, in the bought-and-paid-for U.S. Congress and gutless U.S. regulatory authorities. So adding my voice to all this is a waste of time. It’s not that I’m completely unqualified in this case: I actually have a degree, with concentration in finance, from the very “elite” school where many of the “quants” have come. And once upon a time I did exactly that kind of work, albeit only in school, since I realized during job interviews all the jobs were in NYC which was last on my list of places to live (thank you fate that the Bay Area was sufficiently appealing to keep me from being one of the villains).
I’ve read (glutton for punishment) both the Levin Committee report (the whole thing, the one that didn’t do the coverup) and the horrible FCIC (where the Repug minority decided to bury their head in the sand and let “experts” from neocon central (American Enterprise Institute) attempt to spin their lies that the 2008 was all the fault of poor people and the government and the poor Wall Street firms were victims). Of course then we had Dodd-Frank, riddled with loopholes when it was actually passed, ignoring most of the real problems, and now completely gutted by the Repugs in implementation. At least the U.K. is more willing to face the problems (hard to ignore fixing rates) while we’re led by the bankers’ boy, Timmie, as SecTreas.
So since the government was blocked from real investigations, unlike the Pecora Commission of the Great Depression era, which incidentally was launched by the Republicans, back in the era when Republicans had some shred of integrity. And people went to jail for that one. Unfortunately President Obama let Rubin and Rubin’s boy-wonder Larry Summers and the banks Trojan Horse Timmie stop him from doing anything to hold anyone accountable for the largest financial crash in history. Enough books based on enough leaks at least allow us to know some of what happened, but it sure would be nice to have some prosecutions so the real evidence would be revealed (Greenspan spending his last years in jail would at least provide some satisfaction while we all scramble to find something to eat)
Boom-and-bust cycles are absolutely inevitable in finance. A system driven only by greed can never be satisfied. Enough is never enough so they’ll keep running their scams until the crash. There is no soft landing for a bubble. The market only “self-regulates” through crashes when its Ponzi schemes collapse for lack of new suckers. Yet we still retain the fiction, even when we see something like Barclays and JPMorgan’s recent losses, that these guys will somehow, magically, see the invisible hand, and halt their excesses. So call off the regulators and put shills like Chris Cox in the SEC to make sure what laws and regulations there might still be never inconvenience the Wall Street crowd through actual enforcement.
The Tea Baggers started their rant over the bailouts. Of course, most of them are so ignorant they didn’t see the slight of hand that Geithner pulled. TARP was just cover story, the hand that draws the attention, while the other hand is picking your pocket. No, TARP was not the bailout – the willingness of the Fed to take all the toxic paper off the hands of the bankers in exchange for newly printed money (just a few keystrokes in the Fed’s computer, not actual printing presses, since we print so little money it would take centuries to print enough (or a return to $10,000 or $100,000 bills) to bail out the banks. And how is the Fed magically going to pay off the trillions the banks lost. But it didn’t take long for Dick Armey et al (the paid shills) to sucker the Tea Baggers in looking the other way and focusing their racist ire on the black guy at 1600 Pennsylvania instead of the crooks on Wall Street.
Modern “financial engineering” is the worst idea man has developed – it actually deserves the term, oxymoron. It really is the weapon of mass destruction that will sink the world back into the dark ages. Derivatives are insane. They’re not used only for hedges, which itself is a dubious proposition. No, they’re pure speculative bets, deliberately opaque, to extract all the accumulated savings of the entire world (Wall Street has impoverished everyone as Europe is now discovering). And all for the wonderful goal that a mere handful of people should get paid obscene bonuses for losing vast amounts of money (let’s see how much of Diamond’s pay Barclays will clawback). The court of Louis XIV was positively prudent compared to these guys.
And the fraud continues. This minute, somewhere in Washington, some K Street guy is getting yet another regulation turned into mush, some Repug is defunding some enforcement, and Timmie is doing more giveaways. And the horribly run (and impossible to run) TBTF banks keep stealing and stealing as the economy on Main Street falters. Oh yes, the marvels of 21st financial engineering. I’m embarrassed that my university was a key enabler, via impenetrable (and wrong) math, of the sociapaths that inhabit Wall Street. It really is time for the pitchforks, but our politics now couldn’t solve even the most trivial problem since SCOTUS decided unlimited spending by the rich is the ideal way to inform the electorate how to vote.
How will it all end? This is simply a system that has no constraints and therefore it will someday (and I fear soon) fail so spectacularly that governments can’t print enough money to bail them out. It won’t just be the collapse of the U.S., it will be the collapse of the world economy. Even the Chinese aren’t going to be able to duck this one.
So when those who survive are desperately trying to continue to survive in a medieval barter world look back and wonder how it got that way they can blame Sloan School math and the deadliest of human vices, unbounded greed, and the enabling vice of voter stupidity in continuing to elect the people who steal from them with their redirection magic tricks of let’s blame the black guy. Too bad, humanity stands on the brink of amazing accomplishment and simple thievery (dressed up in $10,000 suits and MIT math) brought down the world. Well, I suppose it’s a good thing in the end, because the crash will mean no one can buy fossil fuels and maybe greenhouse gas levels will start to fall so at least we won’t be cooked and drowned.
So, dear reader, I’ll bury my head in the sand to and go back to simpler pursuits with only an occasional diatribe when the news gets simply too absurd.