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 Who was it that repealed Glass Steagle, who wrote the laws that created Freddie and Fanny?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!

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.

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.

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

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.

Wall Street Breakfast: Must-Know News

The Obama crowd have adroitly skipped over the "too big to fail" issue. As long as capital reserve accounting standards remain the same and it is up to the banks to determine asset value, they will overvalue them to increase their real return on investment.

The old trick of moving auditors around till they are too confused to think straight has morphed into creating organizations that are so complex auditors/ regulators have no chance of truly understanding the firms they examine. The proposed changes in regulation are half measures designed to look like they are tough but allow the firms that are "too big to fail" to get bigger. If anything, the proposed change sets up the business cycle for greater peaks and valleys and eventual collapse.

Too bad, this is a missed opportunity to bring honesty and discipline to financial markets. But on the plus side, people like Paulson & Geithner, et al, have made a lot of Wall St friends and have the prospect of great jobs when they leave us with the mess they created.

Wall Street Breakfast: Must-Know News

The most troubling part of today's Must Know News is the description of how government continues to enable Americans to borrow money many of them will not be able to repay. This isn't new. Its a continuation of US government policies that have, and will again, result in taxpayers paying mortgages of others who don't earn enough to own a home. Its being done at the same time we are paying for the mortgage abuses that contributed to the current recession. It seems that the United States Government is out of control and each branch simply reacts to the lobby with a special interest agenda and the biggest political contribution. This is one more example of why our country is in trouble.

Wall Street Breakfast: Must-Know News

The Taylor rule seems to be that we have to bribe people to borrow and spend money they don't have and are unlikely to be able to repay. This seems to have a familiar ring to it, a bit like the hedonistic attitude that brought us this "crisis".

I wonder if the Fed will be getting legislative powers. If so, they may try to repeal the "business cycle" and institute a new policy --- eliminate capitalism.

Wall Street Breakfast: Must-Know News

Longing for clarity and focus, hoping for common sense, it seems there is no consensus and a leadership vacuum . Obama wants to dump the next two generations of Americas resources into the stew-pot, the EU only wants to stir the stew, the World Bank and IMF seem irrelevant, Japan seems impotent, China may be holding on to assets to tide it over until the next up cycle.

All eyes will be on the G20 meeting and most will assume that the USA will continue to bail out the world. "After you Alfonse"!

Wall Street Breakfast: Must-Know News

Shaggieman, thanks for the positive comment.

Looking at the history of the US, we started exploiting natural resources followed by efficient manufacturing + building the potential of average people ( free libraries, land grant colleges, etc.) to contribute. In the last 70 years we developed computers that give us the potential to solve problems previously insoluble. Its time to move beyond the concepts that started in the 19Th century (automobiles) by using our technical skills and our ability to manage risks (government seed money + venture capital).

If we believe our own rhetoric, there is no other useful option!


On Mar 26 12:43 PM Shaggieman wrote:

> Drew you hit on something there. I think if the government fibers-up
> every house in America (where it makes sense to do) then a lot of
> trips become unnecessary. I believe the new Obama package has some
> money in there for that purpose.

Wall Street Breakfast: Must-Know News

Trying to "fix" car companies isn't likely to solve the basic problems of the transportation industry and will only put a temporary prop under companies that have long lost the sense of imagination and creativity that was their foundation. We would be better served if tax resources were given to a consortium of creative thinkers (Stanford, MIT, RPI and the like) with the assignment of fundamentally changing the basic approach to moving from place to place. Helping GM without addressing the failings of our current transportation paradigm is like putting money into newspapers. We all know they will and must change but the direction isn't clear. GM & Chrysler operate the equivalent of obsolete printing presses. We need to focus on the "Internet" of transportation!

Wall Street Breakfast: Must-Know News

It will be interesting to watch congress as it reacts to Obama's house bail out proposal. There are few details at this time but the standards for honesty in applications will be minimal, and the speculators who gamed the system in the past will do so again. It is a gift to the scam artists from conservative US savers.

The house bail-out will serve to continue the price bubble thus making owners feel a little better about their own balance sheets. But the down direction of world economics will continue for at least two years and low future consumer confidence and spending (per capita)may not rebound any time soon.

The hard to predict variable is the influence of "technology". If a confluence of a drive to more efficiency in our lives, environmental pollution control, and longer term investment amortization happens, a new renaissance might be in the foreseeable future.

Wall Street Breakfast: Must-Know News

1) Its time for AIG to sell divisions. Breaking them up is the right answer to the problem of being "too big to fail" and will give them some cash as well.
2)Have them go into chapter 11 and abrogate all their credit default swaps. AIG is a global insurer yet the US is being asked to bail out all their global business. US taxpayers should not be asked to support Swiss, English and other international interests.
3) If they want cash, I will loan them mine but not @ 3%.

Give Bank Regulators a Chance

Bank examination is, as has been amply demonstrated, very important. A lot of the tarp liquidity and other subsidies being thrown at banks will probably disappear when a combination of the deflation of bank assets and excessive leverage are fully known. It appears to be too late to "rescue" the big banks and our focus should switch to rebuilding and redefining the financial services sector. These are the principals the future should incorporate:

1) All banks should be limited in size so that they are never so influential that they are "too big to fail".
2) Capital reserves should be much more conservative. A 20% reserve used to be required and should be again.
3) Corporations that participate in banking should not be allowed to be brokers, hedge funds, or act speculatively in any other respect. A bank should be a bank and not a speculator.
4) Bank regulators should, at any point in time, fully understand all the activities of the bank they regulate and periodically publish a report describing its key statistics and an opinion of its "health".
5) Regulators should be rewarded (promoted) for discovering and publishing unjustified bank risks.

Hedge funds, private banks, venture capitalists, etc, that have as their purpose making higher risk investments should be encourage to do so but never be part of, or funded by, a bank. It is a good thing for investors to take risks. It isn't a good thing to call firms that take high risks "banks".

Why Is Everyone Blaming the CEOs? It's the Government's Fault

Tom, right on!

It is the job of business to maximize profits. In the movie, Wall Street, Gordon Geko said something like "greed is good" and explained that greed is only satisfied when something of value is delivered and we all benefit from that value.

It is the job of government to regulate business in a way that ensures that greed does not hurt us. I see the current mess as a result of governments failure to look, see, and understand what was happening. Politicians (Barney and Chris) also interfered by requiring lenders to make loans to people to poor to repay them.

Tom, if and when businesses are expected to regulate themselves, I will find another place to live. Business self regulation is illogical, cant work and if its tried, I will vote with my feet and move to another country.