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 Who was it that repealed Glass Steagle, who wrote the laws that created Freddie and Fanny?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

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

You must admit, the whole thing gets to be more complex and interesting daily. It reminds me of the fellow on a street corner with a pea and walnut shells. He shows you exactly what he is doing, you understand it because what you see reinforces his claims, but ----- do you really see? Do you think you know? Do his actions move faster than your mind can comprehend?

Banks "too big to fail" take billions one day and give them back the next. Insurance companies (too big to fail) sell policies but have little or no reserves to pay claims but continue to sell "insurance". Mortgage borrowers & lenders commit fraud and tip the worlds economy into panic, and are then encouraged to use a future unearned tax credit for a down payment on the next house and mortgage.

The most interesting thing about this street corner game is that the fellow with the shells and pea is the president of the United States. And the people continue to watch and play his game!

Wall Street Breakfast: Must-Know News

You must admit, the whole thing gets to be more complex and interesting daily. It reminds me of the fellow on a street corner with a pea and walnut shells. He shows you exactly what he is doing, you understand it because what you see reinforces his claims, but ----- do you really see? Do you think you know? Do his actions move faster than your mind can comprehend?

Banks "too big to fail" take billions one day and give them back the next. Insurance companies (too big to fail) sell policies but have little or no reserves to pay claims but continue to sell "insurance". Mortgage borrowers & lenders commit fraud and tip the worlds economy into panic, and are then encouraged to use a future unearned tax credit for a down payment on the next house and mortgage.

The most interesting thing about this street corner game is that the fellow with the shells and pea is the president of the United States. And the people continue to watch and play his game!

Wall Street Breakfast: Must-Know News

You must admit, the whole thing gets to be more complex and interesting daily. It reminds me of the fellow on a street corner with a pea and walnut shells. He shows you exactly what he is doing, you understand it because what you see reinforces his claims, but ----- do you really see? Do you think you know? Do his actions move faster than your mind can comprehend?

Banks "too big to fail" take billions one day and give them back the next. Insurance companies (too big to fail) sell policies but have little or no reserves to pay claims but continue to sell "insurance". Mortgage borrowers & lenders commit fraud and tip the worlds economy into panic, and are then encouraged to use a future unearned tax credit for a down payment on the next house and mortgage.

The most interesting thing about this street corner game is that the fellow with the shells and pea is the president of the United States. And the people continue to watch and play his game!

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

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

Surgeon, your idea for a Greenspan dart board is fantastic! Add others for Geithner, Bernanke, etc. and you have a new way to vent frustration.

However, you didn't mention the point scoring system. Perhaps it should be that the outer ring gets us nationalized banks, the inner ring, a rethink and a bulls eye gets a replacement. We can play our own games.With such a great game, who needs a shrink?

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.

Wall Street Breakfast: Must-Know News

The "experts" ( Krugman, Rogoff, etc.) admit that they don't have the "tools" needed to predict the future of this economy. One very important reason is globalization. All prior economic downturns were in economies wherin economic activity was primarily domestic. Globalization has made things worse and unpredictable. Countries that have less global economic activity will fare better.

If we provide liquidity to GMAC and people buy cars on credit, the resulting economic activity will benefit people in other countries more than us. If those loans default, only Americans will pay the bill. In effect, USA tax money used to pump retail sales (70% of the economy) will benefit global others more than us.

Geithner, et al, are using US money to stimulate a world economy. Unfortunately, we don't have enough money to effectively do so and printing more will cause such high inflation that it will make our current problems seem trivial. It is probable that we will have to create a new economic paradigm.

The real problem is that our "leaders" are unwilling to see or admit that we cant go back to 2007 and they are not prepared to lead us into the future.

Wall Street Breakfast: Must-Know News

The most important reform is prevention of " too big to fail". AIG, Citi, GM, Ford, Lehman, etc. etc. were allowed to increase in size. The only (superficial) control was an weak attempt to prevent monopoies.

There is an assumption that large size leads to efficiency but there is no evidence that this is true.The current crisis is evidence that large size is too risky. Aside from making it a bit less work to make an investment, the large size of companies no public benefit.

In the new investment paradigm, size should be limited so risk is dipersed.