Oh Those Burdensome Rules

Here come the Banksters. It was not enough that so called financial reform is Swiss Cheese legislation, full of loopholes. What regulation is left, the banks are going after and seemingly with help from the Government.

Who is their biggest cheerleader? Why, Federal Reserve Chair, Ben Bernanke. From a regulation speech in Chicago:

No one’s interests are served by the imposition of ineffective or burdensome rules that lead to excessive increases in costs or unnecessary restrictions in the supply of credit. Regulators must aim to avoid stifling reasonable risk-taking and innovation in financial markets, as these factors play an important role in fostering broader productivity gains, economic growth, and job creation.

According to Reuters, Goldman Sachs is having a freak out over the Swiss Cheese Financial Reform bill.

Goldman Sachs Group Inc (GS.N) has just a few more months to put its stamp on the Volcker rule, and it is not wasting any time.

The rule, designed to limit banks from speculating with their own money, will cost Goldman at least $3.7 billion in annual revenue, by one estimate. And billions more could be at stake if regulations now being drawn up are extra-tough.

The Volcker rule was one of the main topics on the agenda when Chief Executive Lloyd Blankfein met recently with U.S. Securities and Exchange Commission Chairman Mary Schapiro.

Here's the money quote, brought to you by Reuters:

"They're totally freaked out about Volcker," said a Goldman lobbyist who declined to speak on the record for fear of losing the contract. "People are working on that a lot, with agency staff, with lawmakers, you name it."

Under the cover of Friday 5pm press releases, Treasury Secretary Tim Geithner exempted a $30 trillion derivatives market, FX swaps and forwards, from oversight and regulation.

Today the Federal Reserve is unsure what information to release on bank stress tests:

"We haven't yet come to an internal view" on how much information to disclose, Bernanke told a banking conference at the Chicago Fed.

The Fed must balance the "legitimate" business interests and privacy concerns of banks against the legal mandate to give the public a better view into bank safety and soundness.

This is that scrutiny the Fed is supposed to administer on institutions with assets greater than $50 billion.

We have meager attempts at stopping this train wreck in the form of civil lawsuits. Today, AIG, Goldman Sachs and Deutsche Bank were sued for bail out loans, yet the Federal Reserve, who bailed AIG out, is not listed in the lawsuit.

A.I.G. and two large banks engaged in a variety of fraudulent and speculative transactions, running up losses well into the billions of dollars. Then the three institutions persuaded the Federal Reserve Bank of New York to bail them out by giving A.I.G. two rescue loans, which were used to unwind hundreds of failed trades.

Naked Capitalism asks if anything will come about from the AIG lawsuit and notes the bail out circle jerk system.

The various disclosures of how the Fed lent against pretty much anything the banks could round up, including defaulted securities, is troubling. Defenders of the central bank argue no harm was done since the securities have recovered from crisis lows (well save the ones that went to zero). The problem is that the logic is circular. In many cases, the value of the securities now depends on the fact that the Fed is willing to lend at super low interest rates. So the “market” values are fictive and dependent upon Fed intervention, which is coming at the expense of savers. The interdependence between the Fed’s rescue facilities and its continued interventions is given a free pass, but those of us who are not at the top of the food chain are continuing to pay the cost.

The Fed also mentioned international finance systems and reforms, but there are no real specifics. It appears our Banksters and Lobbyists were not satisfied with the little actual reform we got. They are bound and determined to enact the same old derivatives gambling hall which got us in crisis in the first place.


Oh yeah, the financial sector, banks which were bailed out, are now even bigger, which means systemic risk just turned into Godzilla.



No Regulation = No Bailout

I'd be willing to let them off the hook if they'd be willing to leave me and the rest of the America who's not rich off the hook for their future blunders.

Fool me once

Fool me once, shame on you. Fool me twice, shame on me. First, "they" need to let us and future generations off the hook for their past and current blunders.

Kicking the can down the road in the direction away from where we want to go ... that will never work when the problem is that the vehicle is broken and needs major repairs.

Regulation is neither good nor bad, just because it's regulation. The devil is in the details.

The only alternative to effective and rational regulation of the global capital system is the collapse of that system. Collapse may sound good now, but in practice, systemic collapse is always extremely painful in terms of happiness of the people. The first victim of systemic collapse is always the environment.

Agree 100%

It's criminally stupid not to stop all this baloney in its tracks.

I just don't see any reason to allow this dangerous nonsense to go on. If it will eventually cost us more in tax dollars than we take in on these monkeyshines, then what is the point?

In effect we're saying we're willing to allow people to pay $1 in tax that will eventually cost us $3 in bailouts and interest. Although of course my figures are entirely made up: who knows, maybe it's $10 in bailouts and interest for every $1 paid in taxes on high risk investments.

the top profit corporations received bail outs

The top corporations in profits received bail outs. They are offshore outsourcing jobs, now lobbying intensively for more offshore outsourcing, bringing in guest workers
and they are not creating jobs in the United States.

This is the ultimate insult. If they do not provide jobs to Americans, what is the point of even having them here or allowing them to exist? For the benefit of a few mega investors?

Especially when it is those fired Americans, who now need a job, it's their tax dollars which bailed them out in the first place.

Atlanta Fed macroblog

I see a link to the GOV pages just to the right here. Pretty good blog from Dave Altig there!

Atlanta Reserve macroblog

Commenting on the ever-longer recovery time for the recent Great Recession (my terminology, not Atlanta Reserve's), Dave Altig (senior vice president and research director at the Atlanta Fed):

Explanations abound, but one popular belief is that the answer hides somewhere within the somewhat ambiguous phenomenon labeled "globalization."

Altig goes on to present the relevant data (1999-2008). Then he concludes:

We certainly don't present this information as a definitive answer to the question about the role of offshoring in the slow U.S. jobs recovery. But if you forced us to choose between global or domestic factors as the place to look for solutions as we struggle with persistent underperformance in U.S. labor markets, we'd choose the latter.

What gets me is what appears to be a form of censorship against any questioning of the 'globalist' agenda or recognition that our problems could be in any way a consequence of a failed U.S. approach to international trade - or that the people should expect to be consulted on any trade issues. What little there is in the way of such questioning, it's confined to the issue of China's currency policies (and nothing about why that form of protectionism was ever exempted from the sacred rules of 'free' trade according to the WTO or about that maybe those rules should be overhauled in their entirety).

There is almost no questioning in the Congress or in the media of the premise that we (the working people of America) are out of line to expect any reform or major overhaul in the continuation and enlargement of the globalist agenda as we have and are experiencing it. 'Free' trade continues to get a free pass, without really being subject to media scrutiny, even though everyone knows that protectionism is finding ever greater support throughout the country.

Globalism issues are treated like a sacred cow.

Similarly, there is very little scrutiny of the issues of corruption. Each case that comes forward is examined as though it were an exception rather than the rule.

And the two issues - corruption and 'globalism' are intertwined, as pointed out back in 2006 by economist Joseph Stiglitz -

Corrupting the Fight Against Corruption

Alt. Fed blog post

This is why I will not blanket blast the Fed. There seriously, esp. at the regional Fed sites, some really good economists and tools.

THANK you, that's quite a post! I have some BEA research as well that is starting to recognize offshore outsourcing as a problem, a data skew as well...

so I will try to gather all of these research results and write them up in one big blog post.

Damn I put these great blogs in the columns and miss them anyway!

Alt. Fed Blog post

These people, it's pretty ridiculous, there is other research, extensive, which clearly shows major exodus of U.S. jobs through offshore outsourcing.

It's like they have denial agendas. Of course nothing is pure in terms of total jobs losses and the implosion of the real estate market has had a huge effect...

but to me, this must go against their religion to try to deny this is a major factor in U.S. jobs, wages.