Busted: Bankers and The Global Economy

February 16, 2008

The House of Half-Truths

bushwackedinternet.jpgListen closely and you often hear a difference between what people say and what they actually mean. Listen to Ben Bernanke speak. If you understand what is being said and weigh the words used, you begin to see his truth presented against the real evidence of truth. You can’t effectively deny the psychology of insecurity. The subtext is present in almost every line spoken and presented in human life. What is going on behind the scenes and in the mind of any person speaking reflects in what is said. Faking confidence is often what life is about and no less so in the world of finance right now. Sometimes, there comes a time when you can no longer fake that confidence.

Enter the bond hysteria: the roller coaster of fear that concerns the assigning of risk for just about any financial transaction. As the world standard, insuring bonds is about as boring as you can get. The bottom line is getting and keeping a great score, which keeps the fortunes pouring in, the bean counters employed and the powers-that-be fat and happy in their security. Think of your personal credit rating and you get the idea. Regulators and government officials are almost out of their minds with fear as they examine the writing on the wall. Whether their fear is “biblical” remains to be seen. By channeling fear of the unknown into hysteria, they seek to take the pressure off of themselves. Are they trying to hide from their lack of attention in the past? Projecting this fantasy protects them from doing their job now and focuses the issue elsewhere, as if they really are doing their job.

The bond insurers maintain that they are well-capitalized to meet obligations even though they have scrambled behind-the-scenes to cover their latest enormous losses. That is no surprise. Business is about covering losses when they happen. Some of the hysterical say that the U.S. government is prepared to back the insurers in the event of failure. In theory, taxpayers are going to cover the loss and certainly the Fed will. Yet, insurers seek to relieve the pressure as well. Insurers say that stable and predictable credit ratings by risk evaluation agencies are needed to restore confidence in the industry. Whose confidence? Aren’t the ratings agencies always right? How do credit agencies size you up? Credit evaluators are always right. The law and their perfect math back them up to the end. Morals don’t enter into the equation. Risk assessment is a cold tool that the world lives by. An agency won’t pass blame unless they face a mind-numbing lawsuit. It’s all about confidence.

Lawmakers and regulators are concerned about a collapse because bonds tie into funding hospitals, schools, public works, cities, college loans and taxes including taxes that you pay on your variable-rate subprime mortgage loan. Bonds secure just about everything in public life or at least that is the perception. Bonds are measured as the life blood of society. The world of banking and finance has been discovered. The result is playing out before the eyes of America and the world. The crux of the question is simply this: Is everyone really doing their job with integrity or simply looking creatively after the bottom line? The answer to this question will determine the extent of the ride. Could it be that the entire system is subprime, based on the same house of cards? The entire world of money could be in bondage to itself due to the lack of integrity. The possibility of change is in the air. Is anyone willing to change? “It ain’t over till it’s over.” Enjoy the ride.

Elvis Manning

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