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[BANKS] Is that the sound of Wall Street shitting it's pants?
Robman
Registered User regular
Registered User regular
Yes, yes it is.
But Robman, finne gentlemanne and scholarly fellow thatte you surely arre, haven't there been a bunch of announcements of investigation followed up by [strike]pay-offs[/strike] settlements? My answer to you would be yes, yes there have been. But this one is different.
For one thing, this investigation comes after a brilliant, bipartisan senate investigation. For another, Goldman Sachs et al. have been suspected of running the fraud that let Greece into the EU (and engineering its fiscal collapse for more money), and now there's a growing feeling among economists that G+S have engineered the bubble in China to get rich on the sell-off when it inevitably pops.
It's fun to entertain the notion that these bastards will face justice, but is Shneiderman clean or is there some dirt that can be used to derail the investigation?
But Robman, finne gentlemanne and scholarly fellow thatte you surely arre, haven't there been a bunch of announcements of investigation followed up by [strike]pay-offs[/strike] settlements? My answer to you would be yes, yes there have been. But this one is different.
For one thing, this investigation comes after a brilliant, bipartisan senate investigation. For another, Goldman Sachs et al. have been suspected of running the fraud that let Greece into the EU (and engineering its fiscal collapse for more money), and now there's a growing feeling among economists that G+S have engineered the bubble in China to get rich on the sell-off when it inevitably pops.
It's fun to entertain the notion that these bastards will face justice, but is Shneiderman clean or is there some dirt that can be used to derail the investigation?
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Sexy.
But I will remain skeptically optimistic.
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I mean, yeah, they acted like scumbags but they did exactly what US monetary and fiscal authorities wanted them to do -- find any and every way possible to get people to leverage, leverage, leverage, to keep the money supply expanding enough to keep growth steady.
As long as our monetary model is "maintain an insufficient monetary base and count on commercial banks to build massive leveraging bubbles to fuel growth until a confidence crisis brings it all crashing down" then no amount of legal oversight will stop this from happening again.
Wouldn't criminalizing those very practices be a way of changing that model?
I disagree.
If what the articles say is true, then the banks might not be entirely (100%) at fault, but the lions share rests with them. If nothing else, because they made a big song and dance for the government years ago to loosen the leashes that were in place, citing their own vested interest in keeping the place(economy) nice and clean and healthy and then a few years later they started taking absolutely earth shaking monster shits all over the place.
The Rolling Stone article in particular is raising my blood pressure again. Don't show this all to Jon Stewart at once, he'll pop something and we need him on his A game for the pending hilarity that could (but probably won't, count me as skeptically optimistic as well) ensue.
Then new loopholes will simply be created or regulation will be decreased -- as when the Treasury changed the leveraging rules for banks under Paulson.
The point is that, if you prevent the sort of things that happened this time, then they'll simply find new ways to do the same thing next time -- and those ways might very well be perfectly legal.
I have no love for the financial industry -- I'm with Keynes on the financial markets being casinos -- but I think it's important to remember who set the incentives that got them to behave this way. Because people will behave the way they are incented to behave, and as long as the fundamental structure remains the same, it'll just happen again.
That's generally what Taibbi goes for.
. . . and I'll believe it when those people put into prison are brutally violated by MS13 gangbangers.
No doubt.
But is it (he/the article) incorrect?
EDIT: Of course, realistically, this would require campaign finance reform.
And while we're at the practice of changing shit up, let's stop allowing parties not involved in the business cycle to openly invest in commodities and futures.
I'm tired of oil (or whatever) going up because, "oh, well, we needed to redirect investments after the housing bubble burst (or whatever)."
Banks should be allowed to generate value through investment, that is a far cry from lying that their shit is suddenly roses and walking away like nothing happened.
Eh I won't pass any judgment on that, as I haven't had time to read through the thing.
I just dislike his writing style.
Except you are ignoring that these people influenced the government to set the incentives that way.
The truth is people and organizations like this are out for money and power, often at the expense of everyone else. And they use that money and power to influence the government to change the rules so they can get more money and power.
Tons of shit that happened in the big meltdown was people deliberately fucking the system up to make a buck now. (there was a This American Life on a company called Magnataur or something like that, who basically came in right at the tail end and deliberately pumped the bubble up just a little more so they could profit off it more when it popped) Stories like this are all over the place.
This is true, but I just don't see people out there pushing a viable alternative.
I mean, like it or not, we needed the housing bubble to generate growth. Otherwise the money supply would not have expanded fast enough.
The problem is that even the academic orthodoxy is so scared shitless of inflation (who the fuck knows why) that I have trouble imagining who could be found to run Fed and Treasury from the economic mainstream who would fix the fundamental problem.
No one is going to start expanding the monetary base in substantial ways. Even the more aggressive monetarists (like Sumner) are basically just arguing over how much the Fed should be incentivizing banks to expand the commercial money supply through lending -- no one is really pushing for a government expansion of monetary base except for Post-Keynesians or (indirectly) those pushing for bigger stimulus spending (which is .... basically no one in the political or economic mainstream right now).
I mean, if you can find a way to break the grip of privileged elites on the politics, academia, media, and business then yeah, that would be great. It's also impossible.
Shit, even Bernanke is fairly obviously (imo) not worried about inflation, he's just afraid of the people who are worried about inflation.
Secondly, when you have a hard problem, the answer is not (as you keep suggesting) to just throw up your hands and say it can't be solved.
As well, given the stagflation that wages outside of the elites have experienced, I think it's very much the case that intelligent, informed consumers will strongly assert their preference for a stable rate rather then inflation or deflation.
The banks stand to make huge volumes of money either way - inflation will only increase their earnings on people who exist in virtual loan-slavery; and stable rates will keep the highly profitable status quo in effect.