Bad Dog

Volcker's Wake Up Call: Spread the Word

In 1970, the financial sector was responsible for 12% of GDP; now it's over 30%.


On Dec 16 01:10 PM Cambrian Capitalist wrote:

> The premise that financial innovation has not improved global productivity
> or economic growth is wrong.
>
> The simplest example of financial innovation facilitating economic
> growth involves the following: If I was a large corporation that
> wanted to construct a new office building in Manhattan with an initial
> budget of $2 billion, who is going to give me a construction loan?
> When can I transform that loan into a commercial mortgage? What will
> the costs of this financing be? The point is there are only a few
> financial institutions that can comfortably assume the risk of such
> an enterprise on a standalone basis. Because of the specific risk
> of such activity and the lack of potential competition at this level,
> it is highly likely that the financing costs associated with this
> venture will be very high. Without securitization, which allows banks
> to spread the specific risk of these activities around to a broad
> pool of investors, these activities would never get off the ground.
>
>
> Further illustration of this point is when the CEO's of money center
> banks were called in front of Congress. Congressmen would ask them
> why they were pulling back their lending activity to which the CEO's
> would respond that their individual companies had expanded their
> lending activity. They were not lying. The answer to why aggregate
> lending activity had declined was because the securitization markets
> (i.e. mortgage pass-throughs, CDO's, RMBS, CMBS) was frozen and were
> liquidating. At their peak in 2007 the securitization markets were
> almost as large as the aggregate level of conventional credit assets.
> The point is that credit can no longer flow into the economy in the
> absence of functioning securitization markets. These markets are
> essential to the optimal allocation of financial resources in the
> United States and the world. Glass-Steagall is and was irrelevant
> to the hazards involved in the freezing of securitization markets.
> The central issues that drove the credit meltdown were derived from
> agency conflicts, and the improper incentives created by government
> involvement in subsidizing the overproduction of housing stock.<br/>
>
> Recreating Glass-Steagall is tilting at windmills thinking.

Volcker's Wake Up Call: Spread the Word

Right. And it will crash about every 15 years as it did before the 1930's.


On Dec 16 10:46 AM One Eyed Guide wrote:

> The reason Volcker will win in the end is simple:
>
> The current system is unstable and will crash again if there is no
> financial reform.
>
> From the repeal of Glass-Steagall to the crash was less than 10 years.
> The next major crash will be much quicker given how weak the economy
> is. 3 year? 2 years? Next year? The only question is when.

Volcker's Wake Up Call: Spread the Word

How do you know that Volcker has been sidelined? Remember that all that has been accomplished so far is to stop the massive bleeding. Still bleeding, of course, but not a mortal wound. So now that the triage is in place, we need to develop a long-term fix. I note, however, that the very, very mild financial reform bill was completely opposed by every Republican. That tells you something. The Republican Party represents the interests of the super-rich and no others, no matter what kind of window dressing they put up to con ordinary people into voting for them. A full 19% of Americans believe that they are in the top 1% of income earners. Telling.


On Dec 15 09:20 PM woodsey wrote:

> Paul Volcker has been tested as perhaps no other has. He gets my
> vote. But he has been sidelined by Obama. This is one of many questionable
> moves that will cause me to withhold my vote for O.

Outlandish CEO Pay: How to Fix the Problem

Having sex with young teen girls is not as immoral as the government determining wages, huh? Because nothing - NOTHING - is more immoral than that. Murder, arson, grand larceny - none of those are as bad as the government determining wages. Not that I am advocating this, but you are a loon.


On Sep 23 07:07 AM CLH wrote:

> I cant think of anything more immoral than govt. determining wages
> and salary. Both minimum and maximum pay should be determined only
> by the owners of the corporations and not the govt. who know nothing
> about anything.

More Trouble Brewing for Banking Sector?

But they are tolerating huge unemployment and will continue to do so.


On Sep 21 10:14 PM highlarche wrote:

> This government will not tolerate huge unemployment. They will spend
> spend and spend to fight it. I say buy gold and silver.

Wall Street Breakfast: Must-Know News

Uh, dude, he's been President for only 10 days or so. I think you're asking the wrong guy. Bush appointed people like Chris Cox (Mr. What? Me worry?) and Paulson (Mr. Goldaman Sachs), and they did about as good a job as Ol' Brownie after Katrina. Those are the folks you should be mad at, or doesn't your memory go back beyond 2 weeks?


On Jan 30 09:18 AM markg wrote:

> Sure Obama and company can whine belatedly about TARP money going
> for bonuses, but where was the oversight before this happened? What
> can they do now? Same thing they did before, nothing!
>
> The money is gone and it is going to stay gone.

Wall Street Breakfast: Must-Know News

But this idea did not come from the socialists! It came from your friends: the titans of the banking world, the most free-market ideologues one could imagine, and the Wall Street folks like Bernie Madoff. The socialists don't want the capitalists bailed out! So I wouldn't go around blaming the socialists. They are on your side even though you can't seem to work that out!


On Jan 14 08:15 AM PrudentMan, CFA wrote:

> Consumer Confidence? Why would anyone be confident in the economy,
> which is only our fifth worst since the end of WWII, when the, Fed
> Administration, Congress and especially Obama all tell everyone it
> is going to get worse? In the previous recessions the government
> pretty much kept their mouths shut and did their job instead of being
> much too vocal
>
> Why are all the Fed members talking so much. In my fifty years as
> a professional investor I never heard so much said by people who
> proved they know so little. If all these rear-mirror economists,
> who are behind the curve, would spend their time doing some analysis
> instead of brushing up their resumes they may have seen the problem
> with credit years ago. Because the non-discounting stock markets
> kept going up all these people were just Pollyandas.
>
> Whey is Obama and Congress so vocal? These Socialists see and opportunity
> in the false "worse receission since the Great Depression, and I
> lived in that time that was exacerbated to unnecessarily last ten
> years, they can make the greatest theft of taxpayer money in history.
> As we all know, those who have the money have the control.
>
> If the Fed Congress and the Administration would have said that the
> Free Market will work things out so property will revert to their
> rightful owner this recession would be over. The promise of bailing
> out loser at the cost of winners is very far from Free Market Capitalism
> as it is Socialist Capitalism. Are problems started decades ago
> and the Fed and Congress could very easily have reighned it in with
> the laws on the books.
>
> I think this is the best time for rational investors support and
> end encourage Congressional Term Limits.