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.

Six Signs Economy Is Turning the Corner

Let me give you a hint, the global financial system is not only not bankrupt, the term doesn't even make sense.


On Jul 19 02:28 PM Did U Think The Ponzi Scheme Would Last? wrote:

> I'm going to let you in on a little secret. The global financial
> system is bankrupt. In addition, when you talk about taxpayers paying
> for this or that bail out you are badly mistaken since our government
> has no money and neither do taxpayers. No, the bailouts are not
> being paid for they are being financed with more debt. This debt
> absolutely ensures that the US is a debt slave going forward and
> thus cannot recover. This is a debt death spiral.
>
> Let me give you another hint. The trend for the markets and the
> economy is still down. This is but a monster sucker's rally within
> the broader meltdown but within 2-3 months the meltdown will resume.
> Elliott wave followers call this rally Primary 2 and they predicted
> it would happen in advance and then called the start of it nearly
> to the day. Folks like Prechter said it would be the biggest rally
> of the meltdown yet and that it would fool many sheeple into believing
> the meltdown was over. In reading your post I guess he was right
> again.
>
> After Primary 2 ends will come Primary 3 - a massive collapse which
> will lead to lower lows. It will occur because the debt that has
> already gone bad and yet has been hidden on bank balance sheets will
> begin to stink so badly that no amount of kitty litter will cover
> it up. Once the stench becomes unmaskable then the truth will come
> out and it will crash the system. Again, the debt is already bad
> its just that accounting tricks have been allowed to cover it up
> and kick the can down the road. But you can't fool all the sheeple
> all the time and sheeple are beginning to awaken.
>
> Just remember back to the crash of 29-32 and all the times that people
> thought it was bottoming and turning around. Each time they were
> wrong.
>
> Welcome to the great depression of 2009.

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.