The Main Problem with the Office of Financial Stability Is Needing It in the First Place 14 comments
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The Wall Street Journal is reporting Paulson to Meet With U.S. Bank Chief.
Treasury Secretary Henry Paulson has called the top U.S. banking heads to a meeting today in Washington, people familiar with the matter said.
The 3 p.m. ET meeting at Treasury is being called while most of the banking chiefs are in Washington for meetings of the World Bank and the International Monetary Fund. Expected to attend were banking executives including Ken Lewis, CEO of Bank of America (BAC), Jamie Dimon, CEO of JPMorgan Chase (JPM), Lloyd Blankfein, CEO of Goldman Sachs Group (GS); John Mack, CEO of Morgan Stanley (MS); Vikram Pandit, CEO of Citigroup (C); and Robert P. Kelly, CEO of Bank of New York Mellon (BK).
Earlier Monday, Interim Assistant Secretary for Financial Stability Neel Kashkari ... detailed several steps the Treasury had taken to ramp up the so-called Troubled Asset Relief Program in the last 10 days, conveying that it is working with utmost speed on the rescue effort.
"A program as large and complex as this would normally take months -- or even years -- to establish. We don't have months or years," Mr. Kashkari said. "Hence, we are moving to implement the TARP as quickly as possible while working to ensure high quality execution."
Click here to see the
full text of Kashkari speech on the bailout plan
. A few snips follow.
I am here today to provide a comprehensive update on the Treasury Department’s progress in implementing the Troubled Asset Relief Program (TARP).
As you know, our credit markets are frozen and lending has become extremely impaired. In recent months our government has taken strong and decisive actions, but a more systemic approach was needed. Secretary Paulson and Chairman Bernanke asked Congress for extraordinary authorities to address the extraordinary challenges in our financial markets. Every American depends on the flow of money through our financial system. They depend on it for car loans, home loans, student loans and their individual family needs. Congress recognized the threat frozen credit markets posed to Americans and to our economy as a whole. On Friday October 3, Congress passed and President Bush signed into law the bipartisan Emergency Economic Stabilization Act of 2008. ...
Strategy, Implementation, Recruitment, Procurement
The speech continues on to talk about Strategy, Implementation, Recruitment, Procurement, operations, and compliance. But let's step back and ask ourselves why it is we need an office of Secretary for Financial Stability in the first place.
The answer is we have an unsound banking system based on fractional reserve lending, compounded by micromanagement of interest rates by the Fed, and runaway spending in Congress.
To date, I have not heard one single sentence from anyone important enough to matter, about what really went wrong and why. Instead we have yet another governmental body attempting to add "financial stability" while doing nothing to address the root cause of this mess.
The worst part is the Fed and the Treasury have decided the problem is that banks are not lending enough. The reality is that banks have lent too much.
Essence Of The Rescue Plan
To stimulate lending, the bailout plan will attempt to recapitalize banks. The method of recapitalization is best described as robbing Taxpayer Pete to pay Wall Street Paul. In essence, money is taken from the poor (via taxes, printing, and weakening of the dollar) and given to the wealthy so the wealthy supposedly will have enough money to lend back (at interest) to those who have just been robbed.
All this talk about Strategy, Implementation, Recruitment, Procurement, operations, compliance, and other details masks the essence of the plan. And even though "
A program as large and complex as this would normally take months -- or even years -- to establish
", the Secretary for Financial Stability is going to ramrod something through as quickly as possible.
Unfortunately, no matter what seat of the pants strategies they come up with, I can guarantee in advance that the unforeseen consequences of whatever decisions they make, simply will not be any good. Besides, it is axiomatic that plans to rob Peter to pay Paul, can never really work in the first place, regardless of how much time is spent crafting them.
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This article has 14 comments:
Everything happening today is just hardening the debt into the system and allowing the banks to lather more debt onto companies and individuals.
This debt spiral will never ease under the current system of private central banks.
I would like the author to provide a plausible alternative. Clearly allowing the financial to collapse so that the author can fee good about moral harzard is not a very convincing solution.
Finally, I doubt the author has done any serious leg work to assess who ultimately pays for the government's capital infusions.
You have a delicious sense of humor!
In the "good" times, it is everybody for himself and especially, pull yourself up by your bootstraps propaganda.
For the solution to the financial crisis from a true free market approach see below:
mises.org/story/3131
And for a solution to a system without the slavery of the fractional reserve monetary system here and in the most of the world see below:
video.google.com/video...
Finally, ask yourself why our present system gravitates from one end of civilization crisis to another? Ask ask ask, don't settle for the mass media propaganda.
Here's the facts, no one knows to this second how to price risk. Bailout after bailout is nothing but rubber crutches in a polio ward.
Watch all the upcoming earnings and jobs, and one will be right back at these lows again... and beyond.
I hope the SOLDIERS have something to come home to.
Not the answer. Deleverage by *massive* spending cuts, accompanied by *massive* tax cuts. They claim this is not the answer...but that's because lending is how banks make money -- and the goal here is not to make banks money, but to get Americans out of debt so they can begin spending money that is free-and-clear...truly discretionary...rather than spending borrowed money!! Then and only then, have we bottomed!!
The root of the problem is that we ever got into credit-based living to begin with: the banking industry is much bigger than it ever should have been, because we should not have ever *needed* to be borrowing...at least anywhere near the extent that we do. Why do we just take for granted that in order to own a home, we will need a mortgage?? My grandparents were poor: lower-middle class at best, but they worked and saved and bought their (very small) house outright. It is hardly possible to do so any longer. I blame the humongous growth of taxation and the bloated, corpulent behemoth that we call the federal government. And now they want to do us one better, and have the wise among us who didn't buy what we couldn't afford help pay the difference in the mortgages of those facing foreclosure!!
Enough. End the bailout. Kill the Fed. Cut the government to the core. They clearly don't know how to manage an economy. Just give us *OUR* money back -- I'm willing to bet we know what to do with it!!
B.S.!! There are liberals with capital and without it; likewise for the conservatives. The difference is that liberals without capital believe that the rich owe them something; conservatives without capital get off their butts and go work to get it.
You might want to think extra hard about this heading into the election. Obama claims he will tax only the top 5%. Many economists doubt he can keep this promise, given the conflict with all the spending he proposes. More importantly, though, there is a philosophical problem -- the same that has always been with socialist redistribution of wealth: it is not only unjust, but you remove incentive to excel. That was the downfall of the Soviet Union. And it will be the downfall of the U.S. as well.
We see the welfare queens in our town driving Caddies while the county assists (i.e. pays the bulk of) their housing! They have no incentive to up the ante and change their lives...they love the system as is. Obama will not only perpetuate that, but enhance it for them. Look at his promised tax credit -- the bottom 30%, who don't even pay any Federal income tax, will receive the $3000+ check! That's not a tax *rebate*...it's a frickin' vote buy!! Oughta be illegal!
Meanwhile, you have those who are entrepreneurs, and they will get *KILLED* by the Obama plan -- 80% of jobs in the U.S. are created by small business (which is defined as 500 or fewer employees). Many of those businesses are over Obama's 250K limit!! Their taxes are going to go up. So much for job creation! But...keep in mind, it is NOT ABOUT JOB CREATION for him -- it's about payouts, even without jobs, to HIS UNDERCLASS, in return for voting him into power. His plan would also remove the ceiling on the Social Security taxes -- another hindrance to job creation. Just the type of change we DON'T need!!
This is about as concise a description of the problem as I've read:
"we have an unsound banking system based on fractional reserve lending, compounded by micromanagement of interest rates by the Fed, and runaway spending in Congress." Thank You.
Basically monetary and fiscal irresponsibility at the highest levels.
And you are correct, everyone is so worried how to band aid the problem to keep the economy from seizing up, no one is considering the root causes. If the economy did seize up, it would force the issue.
I hurriedly expalined it to my son "in brief" who is excellent at maths.
I say again thankyou!! yours.........Michael Collato chief researcher and developer of the worlds first Hybrid showering system