I’m sorry that this is long, but there’s a lot of new information in the world of Wall Street to bring. Sigh.
A few days ago I posted a comment on a Lambert Strether post about Capital at Naked Capitalism. Commenter Pete wrote:
“@ Wendy “Only a massive transformative shift in consciousness that allows people to discover what is sacred, and how cooperative efforts are born from a realization of the common good,..”
Yes! I highly recommend “Sacred Economics” by Charles Eisenstein. Once we rid ourselves of usury and the subsequent artificial scarcity, a whole new world will open up.
This is the video embedded at the site; I think he neglects to mention how much of our economy is measured by the financial markets, which is laden with banks making money out of…money, creating nothing but global risk, but so much of it good to consider in the way forward.
In stark contrast, a piece at Bloomberg yesterday said again that the Too Big to Fail Banks are even bigger than five years ago, when their aggregate assets accounted for 43% of the US economy. Figures say they are 30% bigger than the day Dodd-Frank was passed. Today that number is 56%. The Big Five are, of course: JPMorgan Chase, Bank of America Corp, Citigroup Inc., Wells Fargo, and Goldman Sachs. Twice as large as they were a decade ago, concerns have been sparked (duh) that if one gets ‘in trouble’, as the author puts it, it would rock the entire system; he quotes a number of current and former Fed Chairmen who see incredible risk, and have gone public with it.
Much of the article’s use is muddied by industry apology about the 2008 history of Hank Paulson forcing mergers and ‘acquisitions’ of other ‘troubled’ banks, as well as the contention that Obama really and truly had meant to unwind any at risk and/or prevent abuse taxpayers would be on the hook for. “Never again”, I think he said when he signed the crap Dodd-Frank bill into law.
And yet we hear statements like this, and absolutely know we’re screwed:
“Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.
This is a letter (via boilingfrogs) from Richard W. Fisher, President and CEO of the Federal Reserve Bank of Dallas with a synopsis of the report from the Dallas Fed Chair Harvey Wasserman: “Why We Must End Too Big to Fail – Now”. Time after time we find that investors sincerely believe that all the casino risks will be backstopped by the federal government, one way or the other.
You’ll likely remember that when Dodd-Frank (or: “The most sweeping financial reform since the Great Depression”: gah!) was brought to the floors of Congress, there was language in it promising (“Honest to Gawd!”) that regulators would write Tough Rules for financial derivatives in which most would be put for trade in transparent clearing houses, yada, yada…)…and the Crap Dodd-Frank passed with promises of language to be written in the future. Within the bill was Obama’s only nod to his campaign promises of ending bailouts, unwinding TBTF banks protecting taxpayers from Lemon Socialism: The Volker Amendment. This political cynicism, long Volker had said the year before that he’d been so marginalized by Obama’s financial team…that he’d begun staying home and working from his office there.
And what of the rules concerning derivatives and swaps? Well…it seems that the rules haven’t quite gelled even yet; the folks at the Commodity Futures Trading Association are concerning the final rules. CFTA Chairman Gary Gensler promises that all meetings will be completely transparent. And yes, since his days selling out Brooksley Born, Gensler’s done some about faces, but…which face is he showing now? Haven’t a clue.
Some econ writers have their doubts that the Final Rulez will cover deals like JP Morgan’s Bruno Iskil’s deals (The London Whale), whose division within JP Morgan Chase has amassed an enormous position in credit default swaps, i.e., betting on them to fail (companies not named). Peter Eavis explains why not here.
And how many toxic derivatives are now roaming the planet like musical chair drones with time-bombs aboard? I can’t find more current figures, but I’ll go with Keith Fitz-Gerald’s at Morning Money in October of 2011; the numbers will be even worse by now, as derivative sales have actually increased over the past year:
“Do you want to know the real reason banks aren’t lending and the PIIGS have control of the barnyard in Europe?
It’s because risk in the $600 trillion derivatives market isn’t evening out. To the contrary, it’s growing increasingly concentrated among a select few banks, especially here in the United States. [snip]
The four banks in question: JPMorgan Chase & Co,. Citigroup Inc,. Bank of America Corp. and Goldman Sachs Group Inc.
Derivatives played a crucial role in bringing down the global economy, so you would think that the world’s top policymakers would have reined these things in by now – but they haven’t.
Instead of attacking the problem, regulators have let it spiral out of control, and the result is a $600 trillion time bomb called the derivatives market”.
In his most recent column, William Black can’t contain his disgust that Mitt Romney has chosen Greg Mankiw as his chief economic advisor in a continuation of the trend of Presidents and might-be-Presidents) choosing the authors of disastrous economic policies.
“Bill Clinton chose Robert Rubin, George W. Bush chose Gregory Mankiw, Obama chose Lawrence Summers, and Mitt Romney chose Mankiw. Rubin and Summers led the Clinton administration’s efforts to gut financial regulation. Mankiw led the efforts under Bush. Collectively, these efforts created the criminogenic environment that produced endemic financial fraud (“green slime”).
He quotes Mankiw on being criticized in a 1993 paper by Akerlof and Romer, “Looting: the Economic Underworld of Bankruptcy for Profit”. Mankiw was apparently at the venue of the paper’s presentation:
“Mankiw was unconcerned about looting. It was my first introduction to Mankiw morality: “it would be irrational for savings and loans [CEOs] not to loot.” I was appalled, but my outrage at Mankiw paled when I observed that the members of the audience, professional economists, were not even made visibly uncomfortable by such a depraved response to elite fraud. CEOs owe fiduciary duties to the shareholders. Mankiw’s response to the findings that CEOs were looting their shareholders was to praise the rationality of the fraudulent CEOs (if you don’t loot you aren’t moral – you’re insane). One cannot compete with theoclassical economists’ unintentional self-parody.
And last but certainly not least in the corrupt and amoral finance section (“It might not be moral, but it is legal”), is this piece showcasing the quaint revolving door of Fed Board of Governors members, who cycle back and forth between the Fed and Fed branches and the private sector. It would be so helpful in finance to have the inside scoops and privileged information, wouldn’t it? Ryan Grimm and Ariel Edwards-Levy treat us to some of their amazing success stories here.
“We humans have a brief window of opportunity to navigate the passage from a 5,000 year Era of Empire characterized by violent domination to an Era of Earth Community characterized peaceful partnership. This passage to a new level of species maturity promises a more secure and fulfilling life for all. It is ours to choose.”
A couple things before the video: in what turned out to be part I of my Tipping Points to Civil Unrest and revolutio, I cited a recent study on tipping points claiming that when a 10% minority of a population holds an unshakeable belief, it quickly is adopted by a majority of the society. So I urge you to spread these videos and website to promote the notions of sweeping rethinking of a healthy economic future of partnership, cooperation, and awareness of the gifts of the Universe.
And this link is to the New Economy Working Group (how to liberate America from Wall Street rule), for any of you interested; this link will take you to David Korten’s ‘Capitalism’s Threat to Democracy’ video.