RSchult43

Greenspan Tries to Blow More Bubbles

Greenspan, the most omniscient, impotent, unaccountable FRB Chairman in my lifetime. Oh, I did not mention arrogant. What is ominous is Mr. Bernanke was at his side for the latter part of his FRB Chairmanship. What happened to the "independance" of the FRB? It seemed to disappear after Mr. Wm. M. Martin. The present Administration proposes to significantly expand the role of the FRB. They should reflect on Mr. Greenspan's comments when asked about regulating commercial banks where in effect he says someone else of lesser stature handles such mundane activities. That is, the former Chairman had little or no interest in regulation. He was a big picture guy interested in FOMC activities and accomodating every excess fiscal action of the Congress and Administration. It seems strange in all of the discussion on financial reform there is seemingly little or no discussion of the highest levels of fiscal and monetary reform. The fiscal and monetary excess in the U.S. provided an environment where any regulatory capability would be challenged to the extreme, let alone by the disinterested likes of Mr. Greenspan, the immasculated SEC, politically controlled OCC, et al. I suspect there isn't any amount of regulation that can control progressively unsound fiscal and monetary policy/activities. The regulators will hide behind their lack of interest in regulation saying they did not have the required regulatory authority to address unsound activities. Only here does Greenspan show his true impotence in saying the Congress would not like what was required; therefore, he in his all knowing manner just went along with their desires. What else could he do? Maybe he could do his job. Oh, but he quickly excuses any responsibility by attributing the causes of the excesses to "human nature" and thus defying anyone to have any affect on such a basic element and then in all of his superior prescience he predicates it will happen again.

Bernanke's Fall from Grace

BerkeleyBob has a grasp of the essence of Greenspan; however, fiscal excesses and the "Something for Nothing" attitude in the U.S.deserve comment. Greenspan in his retorts to the Committee commented that what he did "you guys" wanted. Where is Wm. McChesney Martin or Paul Volcker and an independent FRB when we need them. Greenspan also said he did what he was required to do not what he wanted to do, an incredible statement but entirely characteristic of Greenspan who I have come to describe as one of the more omniscient and impotent individuals in recent public life. Greenspan also absolves himself of responsibility because forecasting is difficult. Greenspan for all of his age lacks maturity in the sense he accepts no accountability for his performance. The borrow and spend character of the U.S. versus saving and investing and the extreme imbalance of the two in U.S. Economic Policy is useful in examining the current economic stress and particularly the efforts of Bernanke and Paulson. However necessary their current efforts are relative to financial system collapse, longer term a sustainable balance of borrow/spend versus saving/investing within the U.S. will have to be achieved. For all of the "Free Market" idealogues, I believe the business cycle includes a downturn in order to correct the fiscal and monetary excesses of at least the last 10 years and in terms of the latter (monetary) the last 20 years -- Greenspan 1988-2006 + Bernanke. Barney Frank doesn't get it. The goal isn't more lending; rather, an orderly course to less lending. Those who listen to candidates who say they won't tax them believe fiscal deficits into the trillions of $ do not matter. That is, they believe in something for nothing. Inflation ought to be acknowledged as a primary plank for both candidates. Certainly, inflation can't be considered as a substitute for taxation, can it? On the subject of competition,even the overly simplistic overly applied and misapplied concept of free competition, in 40 years of commercial banking,I do not recall a business person who actively promotes competition for themself in whatever competitive position they reside e.g. monopoly, oligopoly, pure competition.

Mark-to-Market Accounting: Kill It Before It Eats Us Alive

The hand says that levin70 is correct about the rules but he says that a bank must mark its loan portfolio to market. I am a banker and we do not mark our loan portfolio to market. We never have and I would be at a loss as to how to proceed to that end. There is no active/liquid market for the loans we make. Banks (commercial banks) suffer from an activity that is analogous to mark to market and that is the requirement to re-appraise real estate over the life of a loan. In the real estate down cycle we are experiencing most appraisals come in lower each time. The new appraisal requires the loan to value be brought into line with policy and or regulations FDICIA. The internal options are to make a specific loan loss allowance reserve or a write down of the loan. The downward spiral is painful and may or may not represent the market or the lack of a market. Appraisers frequently say there aren't any comparable sales; nevertheless, the appraisals come in lower and the required debits and credits increase expense. Thank someone we do not have to mark to market. I believe mark to market is a tool that is heavily used by investment banks and they have gotten themselves caught up in the lending world and have created for themselves a monster not a useful discipline. As the British economist Fredrich Schumacher said, I believe investment banks are experiencing a conflict in principles(loans vs. securities) where their choice was to prevail as opposed to understanding and adapting.