Drew Horn

Where's the Outrage at the Banks?

Banks are businesses with the objective of making as much money as they legally can. They are not charities, social workers, or community cheerleaders. They are much more than money lenders, they are (via leverage) money creators. And they always have been and will continue to be those things. We should expect them to act in all ways that maximize their profits and doing so isn't bad, it is capitalism.

A lot of people express anger and outrage at bankers when they should be complaining about politicians. Who was it that repealed Glass Steagle, who wrote the laws that created Freddie and Fanny?
Who passed laws that provide incentives to banks to make mortgage loans to people who can't afford to repay them. Who put pressure on the SEC to limit their oversight of financial markets. Who failed to regulate the derivatives market. Who passed laws making large parts of AIG's business untouchable by state insurance commissioners. Who underfunds the IRS and bank regulators, etc, etc.

It is legal and expected that banks will offer contributions (bribes) to those who are supposed to represent us in government. It is also legal to accept the contributions. The reason its legal is that the US Supreme Court says so. Until we have a new court or perhaps a new constitution, I fully expect that bankers will continue to contribute money that is readily accepted and nothing will change. You sir, are complaining about the wrong villains.

Go back to trying to figure out how to make money!

Debt Monetization: He's Heading for That Small Moon

The discussion about the FED and its monetary moves is interesting and appears to be an accurate description of the prospects for our domestic economy. But it nearly overlooks the largest risk. Should other countries decide that the dollar represents too great a risk for future volatility (in either direction) they may simultaneously decide (like a herd of water buffalo) to use another currency as their primary reserve. Too much monetization and confidence in the dollar will evaporate. A historical analysis of prior major changes in reserve currencies ( ex. the English Pound) might be instructive.

The Next Major Crisis Brewing

I hate to demonstrate my ignorance, but if the FED is privately owned, there must be share holders and I wonder who they are?


On Oct 01 12:20 PM Leftfield wrote:

> The Fed is privately owned, so, let them buy up all the toxic assets
> and Treasuries the banks and agencies feed them. Then, let it collapse.
> Won't that take taxpayers off the hook?

Bank of America's Gain Is Taxpayers' Loss

HChang, it seems, is a supporter of President Obama but I get the impression that he isn't an American or isn't fully familiar with our culture.

Since his inauguration last November Obama has been doing a lot of talking but, when his comments are analyzed, it becomes clear that his comments sound good but don't hold up to scrutiny. Like many politicians, he speaks in half truths and feel good slogans. What he says may sound good to other countries but they don't have to pay our debts or taxes. They don't have to live with Obama's mistakes. They don't fully understand that since becoming President Obama has given many Americans the impression that he was trained by a "snake oil salesman" and the medicine he is selling us seems to be expensive, useless in the short term, and in the long run harmful because the problems have not been attended to.

AIG Needs Dissolving

AIG is a large symbol of the main complaint have with the financial industries. It was allowed to become a hybrid casino and a legitimate insurance company. It is the best example of why the "too big to fail" issue needs to be resolved. Selling AIG's assets is the only reason to keep it alive but, as with most financial transactions, timing is everything.

Each part of this conglomerate is different and, as a taxpayer, I hope management has the skill to optimize the selling prices. The greatest danger is that management will try to wait out the dissolution clock and try to keep AIG alive in the long run. From managements view, that makes sense, especially if the CEO, CFO, etc are skimming millions every year it survives(they have no skinny in the game). I suggest that their pay be cut by 50% a year for two years and after that (with a new team), require that those that failed to sell it give back their prior pay at the rate of 33% a year until all assets are sold. That's a real incentive plan!

Rachael Granby Is on Maternity Leave

Congratulations! Even if this isn't your first, if you listen you will learn, if you nurture you will be comforted. But the best part is knowing you have the opportunity to make a difference in another's life.

Wall Street Breakfast: Must-Know News

You are right, but those you complain about all belong to the same club, hire and help each other, play golf and tennis in Greenwich, CT., and they own the only game in town. Like Major league baseball and the NFL, finance is an oligopoly legalized by congress, and licensed by various federal and state political appointees. In short, complaining will do nothing to change the "system". What we need is a good constitutional lawyer to find a way to break up the game so it is no longer "too big to fail". Without a game changer like that, --- play the game, its the only one in town.


On Sep 17 10:25 AM notsosmart wrote:

> i have said it for years & luckily figured it out for myself..wall
> st is a ponzi/casino.it will continue to be that as the crooks &
> scoundrels pay off congress to make sure no strong regs are passed.
> the pres is busy with health.something he should have left alone
> for now.the rating agencies should be ignored by all in hope they
> will go away.made-off is a piker compared to those who should be
> in jail with him.unless you are an insider the best you can hope
> for is a few crumbs from investing(does this word still apply?) or
> gambling.lying ceos,self serving boards,crooked accounting,lack of
> ethics,no transparency insure that all the homework you do could
> be wrong.buy good cos that pay a fair div & join their drip plan.its
> the only way to win a few crumbs.wall st greed is killing capitalism.sad.

Why Economists Messed Up

As long as economists fail to recognize the significance of fundamental elements of the economy, they will continue to have faulty vision. They could easily have seen that savings were negative, house prices were increasing much faster than income, the jobs that provided the income to support the economy were being exported, infrastructure was not being maintained, etc., etc.,etc.

I sometimes think that it is a mistake to train economists in universities. Academics constantly try to impress each other with a newer and more complex mathematical model or a combination of irrelevant data they claim has great importance. Their primary motivation is to publish enough to get tenure. Their jobs are not dependent on teaching students how to truly understand the world around them. Students are not taught to make a reality check by getting out of the office, actually seeing exactly what is happening on our streets. The are not taught to question data, only to massage it.

Frankly, we should take what economists say, put it through the sieve of common sense, and ignore all that does not pass that test.

Economy and Equities Still Vulnerable: It's a Matter of Credit

Good analysis, thanks. However, you neglect the potential pull of the remaining stimulus funds.

The major change in consumer behavior, savings from -.05% to +5%, is probably corelated with, but more influential than, the trend toward paying off debt. It's my impression that the future or the equities market in the US can be predcited based on how consumers will behave over the next two years. Now all we need is a PHd in consumer psychology.

Major Banks Now Much Too Big to Fail

Interesting collection of comments. Everything from -- get government off my back to, -- put the biggest bandit banks out of business. The reality is that government,for better or worse, is here to stay and the question should be -- how can we get them to regulate in ways that are best for all of us in our economy, and not just those who bribe them with "campaign contributions". As some have noted, changing / loosening the regulations that resulted from the Depression enabled the big banks to get beyond regulation and be "too big to fail". Some of you should have noticed that the people running the Treasury, SEC, FDIC, etc are all "insiders" who probably look forward to their next job at CITI or BA.

In our political system where the US supreme court said that "free political speech" can be how much you can pay lobbyists who, in turn, pay politicians, there is little hope that the big banks will be reigned in. I can't think or any politicians who want to give up campaign money. I can recall any bureaucrat who pledged never to work for a big bank.

I will probably buy shares of investment banks simply because I cant think of a way they can loose the game.

Wall Street Breakfast: Must-Know News

Yeah, "culture of corruption" my left foot! Judges who make sentencing decision's based on "culture" probably got their jobs as a result of a "culture of political corruption". This precedent probably means that Representative Jefferson who was caught with $90 K in cash in his freezer (you cant call that hot money :-) should be sentenced to two weeks in Disney Land.

Financial flim flam artists will continue to ply their trade until some are sentenced to their rightful occupations -- cleaning our sewers or redesigning / reform of bank regulations, both subject they are very familiar with.

CBO on the New Kennedy Health Care Reform Bill

The CBO analysis and, as a result Don's comments, are preliminary, but they are non the less instructive. It is clear that congress is so divided that they are incapable of contemplating a simple, easily understood and administered health care system. The current proposal is shaping up to have characteristics similar to the US tax code. That is, so complex it creates employment for a lot of lawyers and lobbyists and costs a lot more than necessary.

The key to the puzzle seems to be ignored. That is health care costs much more than is necessary. One long term way to dramatically lower cost is to increase the supply of doctors and nurses by making their educaton paid by government and free to students. It would be a modest investment and benefit all.

A usual, there are no clear leaders and if a bill is passed it will be so loaded with pork that we will be better off without it. My hope is that Congress decides to appoint a (neutral?) commission to take the time to hash out both the principals and the details then come back with a specific proposal that, hopefully, is transparent and we can understand.

Obama may be in a hurry to establish a legislative record but he might wind up with one that isn't very flattering.

The Shadow Banking System Will Not Die

Let the shadow banks and the rest of those who offer high risk investments go ahead and do their best to make money. The fundamental change that is needed is to find a way to separate the unregulated investments from the regulated part of the investment community. A regulated "bank" should not be allowed to offer unregulated investments. Regulated brokers should not be allowed to offer unregulated MM funds. The purpose here is to simply prevent those who make investments in higher risk vehicles from too easily assuming they are putting their money in a regulated and a "safe" place to invest. Banks should only participate in regulated investments. Companies that are hybrids can easily prey on those who don't understand the differences.

AIG Dumps Two Toxic Assets on the Fed

The fundamental issue is the FED has no "accountability" to congress, the president, voters, banks, investors, or anyone else. They can print as much money as they so decide and by so doing, threaten the worlds economies. There isn't a mechanism to change or override their actions. The FED's first purpose was to be a national bank, much like the Bank of England but they have morphed into an uncontrolled, unaccountable influence on all of us and they are about to get a lot more regulatory power (without demonstrated skills or wisdom to use it).

The reason the FED continues to have too much power is that our politicians are unable to act logically and responsibly in matters of financial management. Thus, it is hoped, the FED will act as a counter influence on the excesses of elected government. But the result has been that the FED is also acting irrationally and the result has been that both fiscal and monetary policies are threats to capitalism.

Does anyone have a good solution to the problem?

Wall Street Breakfast: Must-Know News

I agree, the Swiss approach is useful but it will never be imposed on the US financial industry for two reasons: 1) the banks and insurance industry "own" congress and 2) Geithner, Sommers, ET AL know they have temporary jobs and may already be maneuvering for a financial CEO job even before Obama' leaves office.

The real "systemic risk" is that the political system is responsive only to money which has proven to be fully capable of buying almost any election result. Eisenhower warned about the military / industrial complex. There should be a new warning about the Madison Ave / Washington Lobbyists complex. So long as the first amendment is held to mean that money = free speech, government and our economy will be in the hands of the banks.