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The Telegraph notes:

The former US Federal Reserve chairman told an audience that included some of the world's most senior financiers that their industry's "single most important" contribution in the last 25 years has been automatic telling machines, which he said had at least proved "useful".

Echoing FSA chairman Lord Turner's comments that banks are "socially useless", Mr Volcker told delegates who had been discussing how to rebuild the financial system to "wake up". He said credit default swaps and collateralised debt obligations had taken the economy "right to the brink of disaster" and added that the economy had grown at "greater rates of speed" during the 1960s without such products.

When one stunned audience member suggested that Mr Volcker did not really mean bond markets and securitisations had contributed "nothing at all", he replied: "You can innovate as much as you like, but do it within a structure that doesn't put the whole economy at risk."

He said he agreed with George Soros, the billionaire investor, who said investment banks must stick to serving clients and "proprietary trading should be pushed out of investment banks and to hedge funds where they belong."

It is not just George Soros.

Nassim Nicholas Taleb has repeatedly said that speculation should be limited to hedge funds, and that banks should solely engage in traditional depository functions, and - because of their power to create credit - be treated as public utilities.

Many other top economists and financial experts have said that financial innovation is harmful, and have called for reimposing Glass-Steagall and for separating traditional banking from investment banking.

As I wrote in June:

Geithner said we need [credit default swaps] for financial "creativity" and "innovation"...

Is Geithner right that financial "creativity" and "innovation" are good things?

No.

The Canadian banking system is the world's most stable banking system precisely because it is boring instead of innovative.

Paul Krugman writes that banking has to be made boring again, to prevent the kinds of results which came from high -flying finance in the 1920's (the Great Depression) and late 1990s early 2000s (the current melt down). Krugman also notes:

Part of the problem is that boring banking would mean poorer bankers, and the financial industry still has a lot of friends in high places. But it’s also a matter of ideology: Despite everything that has happened, most people in positions of power still associate fancy finance with economic progress.

Source: Volcker: Financial Innovation Is Worthless