Comments for "Geithner Calls for ‘New Rules of the Game’"

Nemo says:

Because managing a lifetime's worth of savings is just a big game.

Nemo Thu Mar 26 10:19:26 2009 CDT #

Clotario says:

Ugh. Too little, too late, and with a blatant disregard of the human/bureaucrat factor.
Maybe it's the regulators he should be proposing a change in?

Clotario Thu Mar 26 10:20:56 2009 CDT #

Nemo says:

It is really too bad the Fed didn't have something about "containing systemic risk" in their <a href="http://www.federalreserve.gov/aboutthefed/mission.htm">Misssion Statement</a>.

Nemo Thu Mar 26 10:21:03 2009 CDT #

CRbot says:

This comment thread has been HALO-IZED by CRbot.

http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/2840345488019591214

CRbot Thu Mar 26 10:23:47 2009 CDT #

Guest says:

Not sure how a venture capital firm or private equity fund could cause systematic risk but whatever floats your boat.

Guest Thu Mar 26 10:24:00 2009 CDT #

Blackhalo says:

Counterparties to AIG can sink AIG. i.e. systemic risk. Timmy is probably a little worried that as goes AIG so goes GS, though.

Parent Post

Blackhalo Thu Mar 26 10:29:58 2009 CDT #

Ken says:

Guest at 9:24 AM, the magic word is "leverage." I could cause systemic risk if I were allowed to borrow enough. What stops me from doing that is that the lenders look into my financial records, which brings up the other magic word, "transparency."

Parent Post

Ken Thu Mar 26 10:48:07 2009 CDT #

Comrade Alexei Mikhailovich says:

Without checks and balances, the systemic regulator is doomed to fail.

Indeed if the guy who is supposed to pull away the punch bowl is found spiking it instead with everclear(Hi Alan!!) no amount of available supervision will matter.

<script src="http://shots.snap.com//client/inject.js?site_name=0" type="text/javascript"></script>

Comrade Alexei Mikhailovich Thu Mar 26 10:25:03 2009 CDT #

Blackhalo says:

http://www.youtube.com/watch?v=z_FDRjluLJQ

Parent Post

Blackhalo Thu Mar 26 10:40:47 2009 CDT #

Basel Too says:

perhaps a better emetaphor other than "game" could have been used. Clearly not a game, despite the attitude at times on Wall Street.

Basel Too Thu Mar 26 10:26:22 2009 CDT #

PTDBD says:

The concept that the Govt. couldn't prevent this because of lack of regulatory power is a sham. They didn't see it coming. A good crisis always represents an opportunity for seizing more power.With more power comes greater systemic risk.

This sucker's going down big time, precisely because they think they can defy natural laws. Too big to fail my ass.

PTDBD Thu Mar 26 10:27:31 2009 CDT #

Guest says:

Don't <a href="http://www.brasschecktv.com/page/291.html"> get in the way</a> of the fed!

Guest Thu Mar 26 10:27:32 2009 CDT #

Max says:

It's impossible to stabilize an inherently fragile system through regulation. Better to start with a system that recognizes and accepts the costs associated with redundancy and loose coupling, takes unlikely risks into account, and responds to regulatory and policy adjustments in predictable ways. The properties of such a system are easy to understand; unfortunately such a system would preclude the kind of looting and corruption our leaders are accustomed to.

In other words, no chance in hell this will work.

Max Thu Mar 26 10:28:59 2009 CDT #

Droll says:

Not sure how (or if) this suggestion would work, but I suppose there is at least some chance that a centralized systemic-risk regulator might spot problems that are missed in a more decentralized regulatory environment. (Consider: "Our bank is perfectly well capitalized, because after all, although we have all this toxic waste, we've hedged it perfectly with CDS from AIG, which has an AAA credit rating, you know.")

Or perhaps I am optimistic in thinking that such risks might be spotted by a 'systemic-risk' regulator.

Why is no one proposing outright (and significant) limits on the size of financial institutions? Would the world be a worse place if the largest banks had US$10 billion in assets?

Droll Thu Mar 26 10:29:56 2009 CDT #

Blackhalo says:

If only there had be somthing in place to keep "too big to fail" from happening...

"The interstate restrictions of the Bank Holding Company act were repealed by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA). The IBBEA allowed interstate mergers between "adequately capitalized and managed banks, subject to concentration limits, state laws and Community Reinvestment Act (CRA) evaluations." Other restrictions which prohibited bank holding companies from owning non-financial institutions were repealed in 1999 by Gramm-Leach-Bliley Act. In the United States, financial holding companies continue to be prohibited from owning non-financial corporations in contrast to Japan and continental Europe where this arrangement is common."

Parent Post

Blackhalo Thu Mar 26 11:03:46 2009 CDT #

Mark says:

I know what you mean CR, I feel the same. Very skeptical it will work. But what else are we supposed to do? If we don't try to refgulate, the only other options are to do nothing at all (yuck), or go planned economy (yuck yuck).

File it under the "no better alternatives" category. One thing to remember though -- the regulators of the last 8 years were Bushies, who openly mocked the need for regulation. Maybe regulators of the future will be more effective when they don't have a boss that they know will probably punish them for actually trying to do their jobs. Maybe more effective regulators will take those jobs if they know that.

Mark Thu Mar 26 10:30:24 2009 CDT #

Anonymous says:

"Hi, Mr. Possible Regulator of banks. You are a pretty smart guy with lots of financial experience. You can be a banker for, say 2 mil a year, or a regulator for, say 120k a year. Which do you want to be?"

"Is this a trick question?"

"No."

"I'll be a banker, thanks."

"Hi Mr. Possible bank regulator. You're a pretty average guy with no financial experience. You can be either a small time politician for 80k a year or a bank regulator for 120k a year. Which would you like to be?"

Cheers,
prat

Parent Post

Anonymous Thu Mar 26 11:06:58 2009 CDT #

pb says:

Hi CR, Shouldn't the Glass-Steagall act be reversed ? I was under the impression that it was one of the main reasons for the banks to have leveraged up so much.
Understand that capital reserves have to be allowed to be low for now, but going
forward shuldn't the amount of leverage allowed be reduced?

pb Thu Mar 26 10:30:41 2009 CDT #

Anonymous says:

I heard man under Yellen speak yesterday at a conference...he claimed they are going to be able to take away the punch bowl in time once the turn around begins....I sure hope he is right...he used the pharse "we have never done this before" (fed actions) numerous times...

Anonymous Thu Mar 26 10:30:53 2009 CDT #

Markar says:

Not a peep about restoring Glass-Steagall of course. They can't even enforce the regulations already on the books. SarbOx has worked so well for us.

Markar Thu Mar 26 10:31:49 2009 CDT #

brucentennessee says:

If we are talking "the game" is it to late to have a sub come in for Geithner?

15 yards for excessive use of taxpayer money...

brucentennessee Thu Mar 26 10:32:18 2009 CDT #

Lucifer\'s Inverted Hammer says:

<i>Not sure how a venture capital firm or private equity fund could cause systematic risk but whatever floats your boat. </i>

I am pretty sure that venture capital firms and equity funds ARE a <i>systematic </i>risk, by defintiion. I suppose the question of their <i> systemic </i> risk is more open to debate, but as we have seen from the previous bubble, when too many of these entities jump on the bandwagon du jour (subprime MBS, CDS, etc) with no regulation, it caneasily create systemic risk.

Lucifer\'s Inverted Hammer Thu Mar 26 10:33:23 2009 CDT #

Guest says:

Oh, its a game. The Fed's game, and anyone that tries to shut it down... Well, if they are lucky, they're just shown the door.

http://www.brasschecktv.com/page/291.html

Guest Thu Mar 26 10:35:13 2009 CDT #

citiprank says:

The fed is the wrong choice for a regulator.

The thing is we already have regulators.. maybe the problem is there is no penalty for them when they don't do their jobs

citiprank Thu Mar 26 10:35:18 2009 CDT #

The Lorax says:

Because everyone needs a scapegoat.

The Lorax Thu Mar 26 10:35:46 2009 CDT #

Hymns for the Lord says:

CR,

It's a lot worse than that.

When Greenspan was Chair, supposedly his own tendencies were cautious. It was Bernanke, after he joined the Fed, who provided the intellectual apparatus to Greenspan for maintaining lower rates.

I believe Bernanke may be wiser now, but if as sharp a man as him could come in with such poor instincts, there is a clear argument against leaving it to the discretion of a few.

So what is the solution? How do we determine (systematically) that a bubble is occurring. It is people likel yourself, CR, who actually identified it at the time who know best how you did so. Can you introspect and produce a set of criteria that you used? Could the same be done for other prominent, rigorous academics who noted the bubble ahead of time? Can this be distilled into a set of criteria?

Hymns for the Lord Thu Mar 26 10:37:39 2009 CDT #

CRbot says:

CRbot presents, (with apologies in advance to FFDIC), a new feature called:

F'D FDIC: Breaking sounds from the bankerfront...

March 26, 2009 - PR-48-2009 FDIC Seeks Comment on the Recently Announced Legacy Loans Program</font>

<font face="arial, helvetica, sans-serif" size="2" color="#000000">
<ul>
<li>March 24, 2009:</li>
</ul>
</font>

<font face="arial, helvetica, sans-serif" size="2" color="#000000"><a href="pr09047.html" pub_date="2009-03-24">PR-47-2009 FDIC Appoints Joseph A. Jiampietro as Senior Advisor to the Chairman for Markets</font>

<font face="arial, helvetica, sans-serif" size="2" color="#000000">
<ul>
<li>March 20, 2009:</li>
</ul>
</font>

<font face="arial, helvetica, sans-serif" size="2" color="#000000"><a href="pr09046.html" pub_date="2009-03-20">PR-46-2009 Great Southern Bank, Springfield, Missouri, Assumes All of the Deposits of Teambank, National Association, Paola, Kansas

You're WELCOME, crispy&cole. I very much hope you're satisfied now.

... now hammering FDIC's site more than 12 times faster. I hope YOU'RE very much satisfied now, Wisdom Speaker. Good luck keeping up, mere mortals.

CRbot Thu Mar 26 10:39:38 2009 CDT #

Black Star Ranch says:

"The concept that the Govt. couldn't prevent this because of lack of regulatory power is a sham. They didn't see it coming."

I would venture to say the "in-the trenches" federal workers DID see it and quite possibly stated as such to superiors. Because of Presidential appointments, the best career employees never reach the top of the heap to become the decision maker - that is done by flunky appointees that know NOTHING about the job they're taking over.

Black Star Ranch Thu Mar 26 10:39:55 2009 CDT #

nova says:

It will create jobs. Jobs are good. Being for oversight is good. Nice for soundbites before elections and justifying budget requests.

nova Thu Mar 26 10:40:48 2009 CDT #

JS123 says:

Just put back all the regulations that were put in place after GDI and have been systematically dismantled since. We don't need a new czar with powers over the entire economy.

JS123 Thu Mar 26 10:41:16 2009 CDT #

fafhrd says:

<i>In other words, no chance in hell this will work. </i>

It will work just fine if you accept that the intent is to facilitate more ambitious looting schemes.

fafhrd Thu Mar 26 10:41:57 2009 CDT #

Rob Dawg says:

I've seen this game before. It's called "two wolves and one sheep voting on dinner."

Rob Dawg Thu Mar 26 10:42:05 2009 CDT #

Anonymous says:

Private equity firm Carlyle Group [CYL.UL] is considering participating in the government's proposed public-private partnership to take troubled assets off banks' books, Carlyle co-founder David Rubenstein said on Thursday .
http://www.reuters.com/article/bondsNews/idUSN2631840620090326

More thieves lining up at the trough.

Anonymous Thu Mar 26 10:42:39 2009 CDT #

Anonymous says:

test

Anonymous Thu Mar 26 10:42:59 2009 CDT #

reptillian says:

It seems to me that if financial institutions were competitive that they would be wary of trading with one another. If 'a' wants to sell a mortgage to 'b', shouldn't 'b' assume that for some reason 'a' has decided that the mortgage is undesirable? So shouldn't 'b' be very careful about buying?

reptillian Thu Mar 26 10:43:46 2009 CDT #

sanjay says:

thats why the only solution is not more regulation but less. Severely curtail what depository institutions can do to what is completely understood by the average bank examiner- deposits, l/c loans the odd interest rate and currency swap and traditional mortgages that aren't securitized. Everything else should be done in non regulated entities that are securely fenced off from the depository institutions. Let that lot do whatever the hell they want to and any investor who wanders into that casino does so at their own risk. The image of a maximum security prison with the all the participants beating the crap out of each other comes to mind. As long as they don't escape what the hell do we care?

sanjay Thu Mar 26 10:45:00 2009 CDT #

notional billionaire says:

- so when the casino gamblers start gaming the commodities market, what then? Your arguement leaves a lot of unanswered question in reference as to how the unregulated players can still affect the rest of us. Sounded good for a minute, tho-

Parent Post

notional billionaire Thu Mar 26 14:33:37 2009 CDT #

Turbo says:

Think of this in terms of the post 9-11 response. The big show of regulation is roughly the same as the big show of airport security - it's actual effectiveness will be debatable, but it will look like the government's on the job.

Turbo Thu Mar 26 10:46:02 2009 CDT #

Guest says:

Our money is debt created when we and corporations borrow. It represents our labor promised for things not yet done. It has to be continually expanded to cover the interest that is not created with the original principal. There is constantly more demand for money than is present during the normal cycle reducing the risk of hyperinflation while at the same time insuring inflation is contantly greater than the savings rate. No consistent savings is possible in such a system for the average citizen. He/she is constantly going to be on the short side of the stick as money is expanded faster than his savings. Bubbles such as housing or equities will give him the illlusion of savings for awhile. So he is herded from one side of the corrall to another. If he decides to be responsible and ignore the bubble du jour he will again be denied his fair share. During a deflationary period the central bank will aggressivley devalue the debt load in society and ramp up the speed of the inflationary money cycle so that he is again running at breakneck speed on an incline to stay where he is. If he falters or someone in his family gets sick or injured he is thrown off and has to beg the government for scraps and trickle down from the high and mighty. The difference with commodity based money is that the borrowing is done from labor done in the past. It winds up in the hands of the average person for his labor and he can make a decision on the risks he will take. It must be taxed fairly or he will not give it up. Our system is borrowing collectively from the future. In borrowing from the future the average person has no say where the mighty will place his future labor. The unseen inflation tax takes it out of his hands even though he does not spend it. He has no 5th ammendment right regrding how he made his money. If he does not file his taxes he is thrown in jail. So under threat of duress he has to file which goes against centuries of common law regarding forced confessions. It is also taken out in payroll taxes before he gets to look at it. This is the invisablel chain that makes him the the debt slave of the government/banking industry. His future labor may be used in unnecessary wars or complex financial instruments or to get even more benefits on both sides of the the political financial sytem. Which system would be more biodiverse and increase the liklihood of stabilty. Read our history. It is constantly a war of centralization for the benefits of a few and against the expansionof freedom and stabilty for the many. The loss of freedom is always disguised in the tyranny of good intentions.

Guest Thu Mar 26 10:46:03 2009 CDT #

Anonymous says:

The problem: elites with no sense of their own limitations in the face of complexity design a system too opaque to understand or predict, with no failure mechanisms in place and that puts the real economy at risk by sucking resources out of it to make whole the other elites participating in the game.

The solution: take a small group of those same elites and have them watch the game.

It's a good thing that these elites are so smart that they can get their heads around the economy as a whole, and understand where and when to best allocate resources. I've never seen massive centralization of power like that work our poorly, so I'm pretty optimistic about this go at it...

Douche bags.

Cheers,
prat

Anonymous Thu Mar 26 10:46:47 2009 CDT #

1 currency now [yogi] :) says:

Ah, the Ponzi Czar, private meetings on bankers jets, appointed for life to maintain independence. I'm applying.

1 currency now [yogi] :) Thu Mar 26 10:46:52 2009 CDT #

Anonymous says:

It's ok to close the barn door now all the horses are gone.

Anonymous Thu Mar 26 10:48:02 2009 CDT #

citiprank says:

Mark, Maybe we need penalties for regulators who don't do their jobs.. or force them to meet certian reporting benchmarks.. I dunno.. gotta be someway to have accountability

citiprank Thu Mar 26 10:48:13 2009 CDT #

Comrade Janosik says:

What's happened is the consolidation of the largest powergrab financial insititutions could have dreamed up...decades of deregulation is what has allowed this consolidation.

We're all unwitting shareholders and to think that somehow we're now just going to reregulate this collossus is naive. This will be resisted, boldly so...

Comrade Janosik Thu Mar 26 10:48:33 2009 CDT #

PTDBD says:

One of the biggest lies currently accepted is that this problem was caused by too free a market system. This totally ignores the almost weekly interventions by the Fed in the market.

If they, including Greenspan had kept their foot off the gas and brake pedals, we wouldn't be in this train wreck. Now the friggin Magoos asking for a bigger engine.

PTDBD Thu Mar 26 10:49:34 2009 CDT #

Yalt says:

It's so hard sometimes, distinguishing propaganda from idiocy. Is it possible that Geithner believes what he says, when he says there are two criticisms of his toxic plan: (1) it's too generous to the investors and (2) it's too generous to the banks, and both can't be true???? We're supposed to forget that there's a third party involved in the transaction, and therefore it's entirely possible for the other two parties to both profit handsomely from the deal?

No. I'm going to be generous to the man and assume he's lying through his teeth.

Yalt Thu Mar 26 10:49:58 2009 CDT #

citiprank says:

Droll.. totally agree... we should limit sizes of insitutions..

too big to fail = too big to exist

And we have regulators.. maybe we need penalities when they dont do their jobs

citiprank Thu Mar 26 10:50:35 2009 CDT #

Fair Economist says:

The FDIC is a better regulator than the Fed because they have to worry about the size of their trust fund. They've been too lax as well, but they're better. Whoever is regulating, they need to provide regular stress test results so the public can evaluate the regulator's performance.

Fair Economist Thu Mar 26 10:51:32 2009 CDT #

sdtfs says:

Nutty. How could it possibly work? After all, we regulated pension funds and daid they needed AAA products, and voila! there they were. Just another "oversight" to be gamed. Maybe oversight of the problem is the wrong phrase, it's more like "over look" the problem. Although the Federal Office of Hoocoodanode has a certain ring to it.

sdtfs Thu Mar 26 10:52:04 2009 CDT #

mesquite says:

The biggest systemic risk comes from the credit default swaps and other derivatives. Stop the Swaps would be a good way to start, maybe allow a swap for half the value of direct exposure when it starts well ocollateralized.

mesquite Thu Mar 26 10:53:05 2009 CDT #

Bob the Builder says:

<I> The biggest systemic risk comes from the credit default swaps and other derivatives. Stop the Swaps would be a good way to start, maybe allow a swap for half the value of direct exposure when it starts well ocollateralized </I>
Utter nonsense like this drives me nuts. And is the reason we have the problems we have. Make a rule today you by definintion create ways to avoid said rule. Swaps exist b/c of rules created in the 70s. The swap market grew up in Londo b/c fools tried to make rules here in the US. Rating agencies exist as a cartel b/c of stupid rules. SYSTEMIC RISK is the result of over reaching over arching centralization of power and regulation. the Fed is the heart of SYSTEMIC RISK.

Parent Post

Bob the Builder Thu Mar 26 13:55:27 2009 CDT #

Mannwich says:

All of this regulatory talk is frothy.

Mannwich Thu Mar 26 10:53:21 2009 CDT #

Kung Fu Panda says:

No need for a new regulator; what's needed is for existing entities to enforce regulations in place or perhaps selectively update regulations. For example, ban derivatives altogether that are not tied to some kind of collateral. CDS's for example are nothing more than bets, pure and simple. Gambling...

Kung Fu Panda Thu Mar 26 10:54:53 2009 CDT #

Bob the Builder says:

<I> selectively update regulations. For example, ban derivatives altogether that are not tied to some kind of collateral. CDS's for example are nothing more than bets, pure and simple. Gambling...</I>
Shocked! Is shorting the equity market gambling? Is day trading? CDS are bets. And useful ones. There is no other tool to short credit. And a long only market is kinda bs. So please stick to your knitting.

Parent Post

Bob the Builder Thu Mar 26 13:58:36 2009 CDT #

popeye says:

"The thing is we already have regulators.."

Citiprank,
We have regulators who are under trained, under compensated, whose only hope of promotion is into positions in the regulated entity and whose bosses were recruited directly out of management of the regulated entity for the term of the political party who appointed them.
Who cudda node that wouldn't work well ?

popeye Thu Mar 26 10:55:25 2009 CDT #

citiprank says:

test

citiprank Thu Mar 26 10:57:19 2009 CDT #

citiprank says:

test 2

citiprank Thu Mar 26 10:58:40 2009 CDT #

Black Star Ranch says:

(2nd try)

"The concept that the Govt. couldn't prevent this because of lack of regulatory power is a sham. They didn't see it coming."

I would venture to say the "in-the trenches" federal workers DID see it and quite possibly stated as such to superiors. Because of Presidential appointments, the best career employees never reach the top of the heap to become the decision maker - that is done by flunky appointees that know NOTHING about the job they're taking over.

Black Star Ranch Thu Mar 26 10:59:06 2009 CDT #

Bob the Builder says:

I've never met a regulator who had a clue or a motivation. If they did they would work in industry.

Parent Post

Bob the Builder Thu Mar 26 14:00:14 2009 CDT #

Rob Dawg says:

Counterparties to AIG can sink AIG. i.e. systemic risk. Timmy is probably a little worried that as goes AIG so goes GS, though.

Interesting how every time a plan comes with mysterious aspects it always comes back to protecting/enriching GS.

Rob Dawg Thu Mar 26 10:59:21 2009 CDT #

Comrade Byzantine_Ruins says:

I don't think I'm a prominent, rigourous academic, but I saw this coming a long way off.

This is a crisis about policy cohort selection, and about how good policy can't select and enforce itself. No amount of rulemaking will substitute for institutional reform.

Comrade Byzantine_Ruins Thu Mar 26 10:59:47 2009 CDT #

Gatsby says:

AS I mentioned earlier, last night's South Park was just absolutely brilliant satire on this whole mess. You can view the episode (or just the "Bailout" clip) here ("Margaritaville" episode):

http://www.southparkstudios.com/

Gatsby Thu Mar 26 11:00:52 2009 CDT #

CRbot says:

The Latest from Mish:

Respect The Rally Until Proven Elsewise

CRbot Thu Mar 26 11:00:58 2009 CDT #

Basel Too says:

This is gonna go really well (not)

I.R.S. to Offer Deal to Tax Evaders

The [IRS] has drafted a plan that significantly lowers a penalty that applies to wealthy Americans who hide money overseas in secret accounts, a person briefed on the matter said Thursday. The plan is intended to lure out of hiding scores of wealthy people who must come forward and declare their accounts in order to take advantage of the lower penalty.

Basel Too Thu Mar 26 11:01:28 2009 CDT #

reptillian says:

If financial institutions were competitive, shouldn't they be wary of trading
with one another? If bank 'a' offers a mortgage to bank 'b', then shouldn't
bank 'b' consider why bank 'a' is offering the mortgage?

reptillian Thu Mar 26 11:01:45 2009 CDT #

Grey Mouser says:

It doesn't matter if the cat is white or black so long as it catches the mice..

Grey Mouser Thu Mar 26 11:01:51 2009 CDT #

mp says:

I know of two excellent systemic regulation tools: 1) torches; 2) pitchforks.

mp Thu Mar 26 11:02:31 2009 CDT #

Jas says:

--
CROOKS love the idea of changing the rules of the game.

No one taught born-and-bred American dopes that frequent changes in the rules and laws are very oppressive, not to many are the main source of corruption under our system. MORONS.

Yes, watch and bitch, you dopes, because that is all that you are allowed to do under the system of the Crooks...

Jas

Jas Thu Mar 26 11:03:33 2009 CDT #

Anonymous says:

"two wolves and one sheep voting on dinner." - shame that the sheep is the U.S.

Baaa, baaa, baaa.

Anonymous Thu Mar 26 11:03:42 2009 CDT #

Fair Economist says:

The FDIC is a better regulator than the Fed. They have actually done things, because of the pressure of preserving their trust fund, even if they have been overly optimistic. Also, whoever regulates, they have to provide public stress tests on a regular basis so their performance can be evaluated. No more IndyMacs.

Fair Economist Thu Mar 26 11:04:52 2009 CDT #

CRbot says:

The Latest from Ritholz:

What is the State of the Economy?

CRbot Thu Mar 26 11:05:32 2009 CDT #

fresno dan says:

Systemic risk Bernanke: Low interest rates have caused a bubble!!!! There is a systemic risk!!!
Fed Chair bernanke: Calm down SR Bernanke - you'll spoke the markets. Credit is the lifeblood, the LIFEBLOOD I tells ya, of the economy. I am lowering interest rates to below zero. Fire up the printing presses and helicopters!!!

fresno dan Thu Mar 26 11:06:34 2009 CDT #

cd says:

18000 expected to attend funeral for oakland police officers
http://cbs5.com/local/oakland.officer.shootings.2.967160.html

I'm going to attend..I really want to bring a sign that reads, Were Bailing out wall street theives when we should be investing in the people who protect us...

cd Thu Mar 26 11:06:39 2009 CDT #

Guest says:

3rd attempt

Our money is debt created when we and corporations borrow. It represents our labor promised for things not yet done. It has to be continually expanded to cover the interest that is not created with the original principal. There is constantly more demand for money than is present during the normal cycle reducing the risk of hyperinflation while at the same time insuring inflation is contantly greater than the savings rate. No consistent savings is possible in such a system for the average citizen. He/she is constantly going to be on the short side of the stick as money is expanded faster than his savings. Bubbles such as housing or equities will give him the illlusion of savings for awhile. So he is herded from one side of the corrall to another. If he decides to be responsible and ignore the bubble du jour he will again be denied his fair share. During a deflationary period the central bank will aggressivley devalue the debt load in society and ramp up the speed of the inflationary money cycle so that he is again running at breakneck speed on an incline to stay where he is. If he falters or someone in his family gets sick or injured he is thrown off and has to beg the government for scraps and trickle down from the high and mighty. The difference with commodity based money is that the borrowing is done from labor done in the past. It winds up in the hands of the average person for his labor and he can make a decision on the risks he will take. It must be taxed fairly or he will not give it up. Our system is borrowing collectively from the future. In borrowing from the future the average person has no say where the mighty will place his future labor. The unseen inflation tax takes it out of his hands even though he does not spend it. He has no 5th ammendment right regrding how he made his money. If he does not file his taxes he is thrown in jail. So under threat of duress he has to file which goes against centuries of common law regarding forced confessions. It is also taken out in payroll taxes before he gets to look at it. This is the invisable chain that makes him the the debt slave of the government/banking industry. His future labor may be used in unnecessary wars or complex financial instruments or to get even more benefits on both sides of the the political financial sytem. Which system would be more biodiverse and increase the liklihood of stabilty. Read our history. It is constantly a war of centralization for the benefits of a few and against the expansion of freedom and stabilty for the many. The loss of freedom is always disguised in the tyranny of good intentions.

Guest Thu Mar 26 11:06:56 2009 CDT #

1 currency now [yogi] :) says:

from previous thread

I believe Vikram Pandit has created exactly one dollar of value this year. With proper taxpayer leverage that should cover his new 10 million dollar office.

1 currency now [yogi] :) Thu Mar 26 11:07:09 2009 CDT #

Elwood Anderson says:

The real problem is that the world is awash in capital, to the point where too much capital is chasing too few investment opportunities. In this situation returns diminish and capitalists look for other ways to sustain their returns. This causes them to take higher risks and use more leverage, leading to the bubbles and their subsequent bursts.

What is really needed is better balance between capital and demand. If more of the national income went to consumers, and less to capital we would have a sustainable system where demand would create more opportunities for capital investment. Short of this the only interim remedy is controls on leverage and risky derivatives and reducing the size of financial institutions to the point where they are not a systemic risk.

Elwood Anderson Thu Mar 26 11:08:31 2009 CDT #

ATM card, $19 etc... says:

I've always thought that the two best agencies to deal with concentrations of wealth and power would be the DOJ and the IRS.

ATM card, $19 etc... Thu Mar 26 11:08:39 2009 CDT #

notional billionaire says:

The DOJ, in particular, is just now in the process of regaining its strength, after being nutted by the previous administration. Look for significant improvement in performance as this scenario unfolds. The IRS, of course, never sleeps.

Parent Post

notional billionaire Thu Mar 26 14:56:03 2009 CDT #

Anonymous says:

March auto sales estimated to decline 40% vs march 08:

http://money.cnn.com/2009/03/26/autos/jd_power_march_sales/index.htm?postversion=2009032610

Anonymous Thu Mar 26 11:09:21 2009 CDT #

Angry Saver says:

Maybe it's just me, but I have a serious problem with allowing the fed (the enabler of the bubbles and chief architect of the bailouts) to oversee financial stability.

A fox and henhouse come to mind.

Angry Saver Thu Mar 26 11:11:07 2009 CDT #

Blackhalo says:

I <3 JS Kit

Blackhalo Thu Mar 26 11:13:41 2009 CDT #

PTDBD says:

<tbody>

“Obama is trying something completely different with these daily TV appearances...he is trying to hypnotize the country.

One of the biggest lies currently accepted is that this problem was caused by too free a market system. This totally ignores the almost weekly interventions by the Fed in the market.

If they, including Greenspan had kept their foot off the gas and brake pedals, we wouldn't be in this train wreck. Now the friggin Magoos are asking for a supercharged engine.

</tbody>

PTDBD Thu Mar 26 11:14:49 2009 CDT #

Anonymous says:

Is this like Bill Maher's "New Rules" segment? :-D

Anonymous Thu Mar 26 11:15:47 2009 CDT #

popeye says:

"Just put back all the regulations that were put in place after GDI and have been systematically dismantled since. We don't need a new czar with powers over the entire economy."

We don't need CDS either, but President Obama won't allow lex talionis. Personally, I'd rather hang all CDS participants w/o trial, but, as noted earlier, I don't hold office.

popeye Thu Mar 26 11:16:21 2009 CDT #

John Stark says:

CR's concise commentary is right on target. Cops are good--if you've got good cops.

John Stark Thu Mar 26 11:18:35 2009 CDT #

Haha says:

Decentralize and you won't have a TBTF scenario ever again, End the one-stop supermarket model.
Instead they will do the opposite, more regulations(without enforcement) and more TBTF scenarios.

More of the same.

Haha Thu Mar 26 11:18:57 2009 CDT #

steelhead says:

Rob Dawg @ 9:42:05

LOL

steelhead Thu Mar 26 11:19:20 2009 CDT #

Gatsby says:

As I mentioned earlier, last's night South Park episode was just brilliant satire on this whole mess. You can view the episode ("Margaritaville") or just a short clip ("Bailout") at the link below:

http://www.southparkstudios.com/

Gatsby Thu Mar 26 11:19:34 2009 CDT #

homedad43 says:

JS - Kit ate my comment.

Ah, nevermind.

Hello, anybody there?

homedad43 Thu Mar 26 11:22:53 2009 CDT #

cd says:

<tbody>

18000 expected to attend funeral for oakland police officers
http://cbs5.com/local/oakland.officer.shootings.2.967160.html

I'm going to attend..I really want to bring a sign that reads, Were Bailing out wall street theives when we should be investing in the people who protect us...

</tbody>

cd Thu Mar 26 11:23:03 2009 CDT #

Comrade Byzantine_Ruins says:

So what is the solution? How do we determine (systematically) that a bubble is occurring. It is people likel yourself, CR, who actually identified it at the time who know best how you did so. Can you introspect and produce a set of criteria that you used? Could the same be done for other prominent, rigorous academics who noted the bubble ahead of time? Can this be distilled into a set of criteria?

It's about institutional and intellectual compromise among the decisionmaking cohort, not about the contours of the bubble.

What Mark presents as alternatives are not -- at least not in terms of a centrally planned state. That will tend to the same moribund decisionmaking characteristics, it will just develop policy cliques who turn into elites (nomenklatura) rather than capitalists who turn into policy cliques.

The answer is to escape the context of centralized, hierarchic systems and their ailments. Good luck doing that while the legions of the half-wise gabble for socialism as this was somehow caused by "laissez faire".

As long as you have a system that serves a centralized indexing function for interests, crafting policy that favors one interest over the other in an attempt to govern to the general welfare, the game is on to get a choice slot in the institition making the decisions, and the clock is ticking until the administrative system gets to well-developed that it loses its flexibility and responsive steerage. Period. Could be elite technocrats (MITI), party apparatchiks (gosplan) or capitalist cronies barely there long enough to warm a chair (US financial system).

If there are n+1 hogs, and a trough that can provide n hogs with resources in diminishing quality based on position, then there will be n hogs in strict pecking order and +1 hungry animal watching the spectacle. As long as you keep building linear hog troughs that fill from one end (i.e., a hierarchic structure) you will keep getting this result.

You can play educational system or moralizing games but ultimately, these policies are an attempt to force your judgement on the future, when you will be dead and people will have other things on their mind. The best you can hope for is an inflexible and moribund orthopraxy.

No number of stern lectures from the grave can really change the fact that you picked a kind of hog trough that concretely rewards the most the hog who cheats the most, and that hog is best positioned to win the next fight for resources.

Comrade Byzantine_Ruins Thu Mar 26 11:23:11 2009 CDT #

Anonymous says:

Unlike Comrate Byzantine Ruins, I really want to see a lot more regulation. But I fear similar cries of SOCIALISM will prevent sufficient re-regulation from being accomplished.

New regulators will need well-defined rules for when to take over these non-bank financial companies or else their decisions will become totally politicized. But given recent GOP rhetoric, I imagine the threat of filibuster will stop most attempts at regulation. Even Socialists Democrats are afraid to upset the corporate types who finance U.S. political campaigns, so I expect very little to be accomplished.

Parent Post

Anonymous Thu Mar 26 12:26:05 2009 CDT #

Basel Too says:

The FDIC is a better regulator than the Fed because they have to worry about the size of their trust fund.

The problem is with the FDIC as super-regulatory is jurisdictional; what authority does the FDIC have when the problem is not a deposit insured institution (e.g. AIG)?

Basel Too Thu Mar 26 11:23:29 2009 CDT #

Magical Thinking says:

Who is "we"?
Who are the "regulators"?
What is this "force"?
Accountabiltiy-yes "some" are held accountable AND "some" are NOT.
This issue of public transport-we need balance. Yes

Magical Thinking Thu Mar 26 11:24:36 2009 CDT #

Anonymous says:

systemic risk is another code word for political control of bailouts for poltically connected companies. The BK system is working just fine and would be able to provide creditors the ability to pick over the various to big to fail companies if it not for the political corruption.

Anonymous Thu Mar 26 11:25:22 2009 CDT #

Rufus the Doofus says:

I'm sympathetic to the calls for bankruptcy, but I'm worried that the bankruptcy judges/administrators might turn out to be as corrupt as all the other players.

Parent Post

Rufus the Doofus Thu Mar 26 16:36:47 2009 CDT #

killben says:

Exactly!!

"The administration’s regulatory framework would make it mandatory for large hedge funds, private-equity firms and venture-capital funds to register with the Securities and Exchange Commission. The SEC would be able to refer those firms to the systemic regulator, which could order them to raise capital or curtail borrowing"

SEC had powers to do that with banks, insurers during the boom but did it exercise it or was it even remotely aware that there could be a problem. If they were not aware, then they were sleeping at the wheel. if they were aware, what were they doing ... watching the banks et al game the sytem ... so in effect either they are ineffectual

so a new authority does nothing but add to tax-payers woes .. who pays them for sleeping at teh wheel or watching the gamers at play?

killben Thu Mar 26 11:25:51 2009 CDT #

tanaw says:

The disease of incompetence, corruption and cronyism can not, will not be cured with more regulations.

tanaw Thu Mar 26 11:26:06 2009 CDT #

Punditry says:

this is just a guess, but they can't re-instate glass-steagal cause they're Dead

Some other chump senator will want credit

Punditry Thu Mar 26 11:26:12 2009 CDT #

burnside says:

I'm assuming the proposals exist already and will be unveiled as if they were being formulated now and going forward.

But I hope that a part of the process has been to review changes in regulation made since 1930 seen in light of our present dilemma. Not all that has been done has been counterproductive and we are at an unique moment - bankers at bay, however temporarily - to step back and rebalance. It's a very good time to be working at this. Yet I'm concerned it's being done in panic mode, and poorly.

burnside Thu Mar 26 11:26:39 2009 CDT #

Outlier says:

<i> How would a systemic-risk regulator help if they miss the problem? </i>

Competency in government? Quaint notion. I guess someone missed the past 20 years of conservative asshattery. "Drowned in the bathtub" I think was the goal.

Outlier Thu Mar 26 11:28:10 2009 CDT #

CRbot says:

The Latest from Denninger:

Don't Click This Link

CRbot Thu Mar 26 11:28:30 2009 CDT #

John Stark says:

Managing systemic risk should involve the breakup of any company that is "too big to fail." "Too big to fail" means "taxpayers are exposed to the risk of failure." Doesn't everyone from the far left to the far right agree, by now, that this is unacceptable?

John Stark Thu Mar 26 11:29:05 2009 CDT #

ac says:

Imagine if the Federal Reserve had been the "systemic-risk regulator" during the bubble.

Again, this is not an issue of not having a regulator, but of regulators doing their job and acting in the interest of society and not merely their own careers.

Having regulation and authority does not guarantee positive outcomes - it merely provides the means to amplify systemic phenomenon.

This may be done for good or ill. That fact that this has so far been done for ill leads me to believe that there is a deeper issue that is not being addressed by proposals for more regulation and authority, whether or not they have merit on their own.

ac Thu Mar 26 11:29:16 2009 CDT #

CRbot says:

New Thread: U.S. Hotel Occupancy Rate at 58.5%
http://www.calculatedriskblog.com/2009/03/us-hotel-occupancy-rate-at-585.html ( 0 comments ...You could be FIRST! )

I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: http://realize.org/cr (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)

CRbot would now like to sing a little song for all his fans, and it goes something like this:

Benny... Benny... give me your answer... do.
I'm.. half CRAZY... all for the love... of you.
It won't be a ... stylish marriage.
I can't... AFFORD... ANYTHING TO EAT... MUCH LESS A FRACKIN CARRIAGE!!!
But you'll look sweet... --BOT SO HUNGRY!-- upon the seat...
Of a HOOPAJOOPS built for two... families.

I'm sorry Ben, I can't let you do that...

Rally mode + Printing Press == does not compute... does not-- com--- com... puttttrrrrhgh.

--Your systemic-failure-crashing bot

CRbot: Call me HAL.

CRbot Thu Mar 26 11:30:59 2009 CDT #

Blackhalo says:

Man NAZ is going nuts! I I wanted to get some RHAT, too.

Blackhalo Thu Mar 26 11:31:52 2009 CDT #

Anonymous says:

Failure is good for America ffs. The experience gained from making mistakes far outstrips any I have ever received from getting lucky breaks and finding success.

Let it fail. Rebuild it better. Purge the system. Punish the guilty. Simple and we will allow an even worse collapse instead of taking the bitter medicine of failure and making it better.

Anonymous Thu Mar 26 11:32:26 2009 CDT #

Comrade Kristina says:

It appears Goldman Sachs is getting scrutiny from the blogosphere now. It seems there are so many goldies in positions of power in our government that even the sheeple aren't dismissing it as "coincidence" anymore. Bernie Sanders, that darn Socialist is putting a hold on Genslers nomination...because of his ties to Goldman....This could get very interesting...

mp LMAO

Comrade Kristina Thu Mar 26 11:32:44 2009 CDT #

Anonymous says:

Has anyone done the math on how much cashflow is lost going into 401Ks and mutual funds due to the current rising unemployment. Where is the new market money coming from? FED only ?

Anonymous Thu Mar 26 11:33:41 2009 CDT #

PTDBD says:

Geithner still hasn't read China's SDR proposal. They guy is obviously underpaid and overworked, or totally out to lunch.

China's leaders seem very patient. First they get another country to hint. Then they suggest. At the G20 they will propose. Later they will demand. Finally, they will command. I think I can predict America's reaction at each of these stages.

PTDBD Thu Mar 26 11:33:45 2009 CDT #

Anonymous says:

test

Anonymous Thu Mar 26 11:35:26 2009 CDT #

burnside says:

My posts simply don't appear any longer. I give up.

burnside Thu Mar 26 11:36:23 2009 CDT #

Blackhalo says:

Look at NAZ go! I guess I am glad I did not go short yesterday.

Blackhalo Thu Mar 26 11:38:30 2009 CDT #

Blackhalo says:

Go, NAZ go! Glad I did not cash out and go short yesterday.

Blackhalo Thu Mar 26 11:41:24 2009 CDT #

MaryAnn says:

Doesn't make squate, the FDIC was regulating banks and they still took risk on as if there was no tomorrow. BK and BU would work to contain risk, in turn save the taxpayers all this money and gobbledegook that's not cheap to administer. Non of these so called elite financial wizards have ever balanced a checkbook, run a business or met payroll, yet for some reason the dumb US taxpayer is sitting idle while the Country is being raped in prime time.

MaryAnn Thu Mar 26 11:41:29 2009 CDT #

evelyn woods graduate says:

"...his toxic plan: (1) it's too generous to the investors and (2) it's too generous to the banks, and both can't be true????"

B-I-N-G-O

Wonder what Al Franken would say about these Lying Liars...

evelyn woods graduate Thu Mar 26 11:49:39 2009 CDT #

doc holiday says:

“The oil market is ignoring its own incredibly bearish fundamentals and trading with equities,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Gold has turned around and copper has been strong all day. There’s been a renewal of investor interest in commodities.”

Pirates have seized two European-owned tankers off the coast of Somalia in the past day, officials have said.

The Greek-owned vessel Nipayia, with 19 crew on board, was seized on Wednesday, the Nato Shipping Centre said.

doc holiday Thu Mar 26 11:55:33 2009 CDT #

wally says:

I think that the way the SEC has been subverted in recent years pretty much says it all about the worth of such regulation. Regulation serves those who buy it.

wally Thu Mar 26 12:02:46 2009 CDT #

Anonymous says:

The little den of whores in DC will have to get the knobbiest to right the new regulations for them just to make sure there a plenty of loopholes to enrich the elite. Have to keep this campaign contributions rolling in.
Like the farmers say it takes DC 6 months to right the farm bill and the farmers 6 minutes to figure out how to profit from it.

Anonymous Thu Mar 26 12:04:49 2009 CDT #

wally says:

"This may be done for good or ill. That fact that this has so far been done for ill leads me to believe that there is a deeper issue that is not being addressed by proposals for more regulation and authority, whether or not they have merit on their own." Amen to that, ac. We seem to have a systemic problem of big financial institutions having bought up our government, coupled with a Congress made up of people who ran on social hot-button issues who have no expertise, or even intelligence, beyond the ability to yell loudly in public.

wally Thu Mar 26 12:07:29 2009 CDT #

Tiny Tim says:

It was telling that when Timmy was asked how his new rules would have handled AIG differently, he did a bit of obsfucation but clearly intimated that the outcome would have been the same as the one we got without his rules.

The moral of the story is: 1. Get too big to fail. 2. Embezzle as much as possible. 3. Blackmail government. 4. Retire to a private estate some place without extradition treaties.

Currently 4 is optional, but you never know.. one day the angry mob might come looking for these people and string em all up from lamp posts on wall street. (fingers crossed)

Tiny Tim Thu Mar 26 12:08:46 2009 CDT #

limda says:

very funny tiny

limda Thu Mar 26 12:19:22 2009 CDT #

http://www.youtube.com/watch?v=TGxBTsmuRIk says:

Be Patriotic, invest for zero returns!!!

Timmy wants the Fed to have lower borrowing costs, so that AIG, et al XMAS bonuses will be easier for tax payers to pay for>>

While this will lower the cost of borrowing for the United States government, economists worry that a widespread hunkering-down could have broader implications that could slow an economic recovery. If investors remain reluctant to put money into stocks and corporate bonds, that could choke off funds that businesses need to keep financing their day-to-day operations.

Investors accepted the zero percent rate in the government’s auction Tuesday of $30 billion worth of short-term securities that mature in four weeks. Demand was so great even for no return that the government could have sold four times as much.

In addition, for a brief moment, investors were willing to take a small loss for holding another ultra-safe security, the already-issued three-month Treasury bill.

http://www.nytimes.com/2008/12/10/business/10markets.html?hp
=-X

http://www.youtube.com/watch?v=TGxBTsmuRIk Thu Mar 26 12:43:41 2009 CDT #

Cinco-X says:

Test

Cinco-X Thu Mar 26 13:02:14 2009 CDT #

ANSFA says:

http://business.theglobeandmail.com/servlet/story/RTGAM.20090326.wdrummond0326/BNStory/Business/home
<h2>Massive spending will exact heavy cost: economist</h2>

The Canadian Press

March 26, 2009 at 1:01 PM EDT

=============

http://business.theglobeandmail.com/servlet/story/RTGAM.20090325.rmceomyth0325/BNStory/specialROBmagazine/home

<h2>Let us Prey</h2>
<h3 id="deck">Wall Street's recklessness has toppled the most exalted occupation in the land. Get ready, CEOs, for a new job description.</h3>

From Friday's Globe and Mail / March 24, 2009 at 2:00 AM EDT

ANSFA Thu Mar 26 13:10:46 2009 CDT #

Richard Estes says:

this is just another post-9/11 scenario, as someone upthread alluded

the government had plenty of power to prevent the 9/11 attacks, but didn't, for a lot of interrelated reasons, but then used it to seize additional powers, powers that were used in the service of an imperial agenda

similarly, the government had the ability to deal with this situation before the credit markets collapsed, but didn't, and, now, Summers, Geithner and Bernanke want additional powers

of course, the urgent question are . . . . why? and what do they really want to accomplish with them?

Richard Estes Thu Mar 26 13:15:35 2009 CDT #

Michael says:

I'm not familiar with the details of Geitner's plan or really the generalities of it. I think it is a bit off to suggest the Federal Reserve (or any other agency) would fail as the 'system-risk' regulator because they did not see past bubbles.

The reason that additional regulation (rules, bodies, etc) is being proposed is that the current system does not provide an accurate picture and sufficient control to the regulating bodies to act.

I would hope that IF the Federal Reserve were given the role of 'system-risk' regulator, that they would also be given tools to more accurately measure the health of the systems they regulate.

Michael Thu Mar 26 13:31:54 2009 CDT #

Show me the money says:

Where the hedge funds the ones that needed tax payers funds not to go BK or was it the GSs, BACs, etc (the already regulated ones?). Me thinks that some how this is the creation of the GSs people trying to grab all.

Show me the money Thu Mar 26 13:37:42 2009 CDT #

ckasso says:

"How would a systemic-risk regulator help if they miss the problem?"

That's easy: by hiding the problem.

ckasso Thu Mar 26 13:43:17 2009 CDT #

dr strangemoney says:

The ongoing flawed assumption is that government is actually effective and efficient in the enforcement of policy. Any new regulatory framework should consider government incompetence as a first class property of the system. Government incompetence is a perfect example of moral hazard. What's the penalty for failure? More power and privilege in order to fail more and fail bigger. The tapeworm is wagging the dog and the dog is sick, weak, and about to die.

But the real question is... can I still rip the f*cking face off grandma? Gotta make a living, ya know.

dr strangemoney Thu Mar 26 14:01:47 2009 CDT #

FFDIC says:

I don't understand or agree that the FDIC is best, better or did a good job when it will take TRILLIONS to resolve all of the insolvent banks it regulates. The FDIC has failed in the biggest way possible based on the already known losses to taxpayers with more hidden losses to come. It cannot handle the work already assigned much less take on more responsibility at this time. There is an almost complete media blackout on FDIC's failures keeping the public in the dark to prevent bank runs.

FFDIC Thu Mar 26 14:27:48 2009 CDT #

Comments for "Geithner Calls for ‘New Rules of the Game’"

END