Financial Crisis Inquiry Commission Hearing

The Financial Crisis commission has started hearings. The Huffington Post has a blow by blow (with video clips).

You maybe wondering why we have not amplified these hearings. Today at least, as expected, one heard a whole lot of generalities with a lot of rambling justifications from CEOs and not a lot of substance.

So, in my view this commission will be for show. A lot of Populist rage, possibly some great sound bytes and youtubes, but in terms of really nailing any corporation or any issue, I doubt it.

Here's some confirmation on what we already know. The large banks know the U.S. government will save them.

f there was any doubt that Wall Street thinks the government will step in to save "too big to fail" firms, Goldman Sachs CEO Lloyd Blankfein dispelled it on Wednesday morning.

In response to a question about whether the federal government would prevent one of his three counterparts at today's hearing -- Bank of America, JPMorgan Chase and Morgan Stanley -- from failing, Blankfein essentially said that the government would in fact step in.

"I think tomorrow in the context of this environment, at some level the government would intervene." "Because of the fragility of the system," Blankfein said, the government would be forced to step in.

In other words, 'too big to fail' is real. And Wall Street knows it.

I beg to differ on the reason why. These financial institutions know the government will save them because they are in essence, the government, bought and paid for.

Other sites reviewing the hearing:

Drill Baby Drill from Baseline Scenario.

William Black, Elliot Spitzer and Frank Partnoy give a list of questions to ask the commission

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And that is why they are returning to their old ways. They don't care how it looks publicly - they feel invincible. Their downside is protected.

Break them up! - Financial Information for the Rest of Us.

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Here is a good summary of 2nd half

FCIC Hearings: Round 2

Check this quote from the summary:

The committee ended with two interesting observations. The first was what problems were still out there? Mayo pointed out “4 d’s”: “deleveraging”, especially as all the bad assets haven’t been found yet. “De-risking”, as both consumers and the government are going to have to roll over debt with higher risk, “deposit insurance”, which is how are we going to pay for all the bank failures to come, and “deposit overdraft”, which is the ways consumers are getting hit by their banks. They also clarified that unregulated over-the-counter derivatives was the single greatest threat facing the economy right now.

The last was an observation by Peter Solomon: rather than getting closer to the end of this crisis, he mentioned he felt like he was in the movie Groundhog Day, where it’s just the same crisis with the same banks each and every day he wakes up. As a concerned citizen, I know all too well how he feels.

Groundhog Day. Wow. - Financial Information for the Rest of Us.

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Groundhog day redux

Great quote. But how can they not know what problems are still out there? Economists are screaming them from the rooftops as are economics bloggers and even the MSM, finance people?

We know that the mathematical models of synthetic CDOs are bad, we also know one cannot monitor or validating pricing....

yet we have no banning or regulation of these.

We know we had GS sell these things and bet against regulation on that.

We know these institutions are too big to fail and need to be broken up. WE also know separating out investment from commercial banking was a very wise move once again...

Why is it they are acting like we don't know all of this?

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