Busted: Bankers and The Global Economy

January 8, 2009

How Will Obama Create a Wall Street Miracle?

obama-discusses-stimulus-2009Throughout America’s history, there have been some years that simply rolled into the next without much notice or fanfare. Then there are the years that come along once in a generation – the kind that mark a clean break from a troubled past, and set a new course for our nation. So started Barack Obama’s “stimulus speech” today. Perhaps Obama’s opening statement is somewhat understated, but certainly well placed in the realm of psychology.

The emphasis of his speech was largely inspirational in nature, but held a few small pearls where ideas are concerned. One area is of special concern:

“…it means reforming a weak and outdated regulatory system so that we can better withstand financial shocks and better protect consumers, investors, and businesses from the reckless greed and risk-taking that must never endanger our prosperity again. No longer can we allow Wall Street wrongdoers to slip through regulatory cracks. No longer can we allow special interests to put their thumbs on the economic scales. No longer can we allow the unscrupulous lending and borrowing that leads only to destructive cycles of bubble and bust.”

obama-big-brotherSafety in America is rarely a hard sell for a people obsessed with their own security. How is President Obama going to accomplish this miracle of financial national health that not a single man in existence has dared to attempt to act on? How will America create the miracle of coveted and elusive financial transparency without creating a “big brother” situation in the realm of business, privacy and the American Dream? How can a system be created that doesn’t limit freedom while making runaway theft and abuse a topic of the past on Wall Street and in financial circles. Much like Bush’s “war on terror” seemed like a good idea when the twin towers fell, a dramatic change in course including an invasion of privacy where Corporate America and Wall Street are concerned could be a slippery slope.

Unfortunately, the U.S. Federal Government is not a bastion of transparency in any regard, which leaves many Americans pausing to consider: “What will I have to give up to keep America safe from reckless greed and risk-taking that must never endanger prosperity again.” Is America preparing itself for another “war on terror” in the name of financial literacy? What new technology and control system will we use to create this mandated financial transparency or is this a resolution that will fall neatly into the hands of global finance ministers?

Nancy Pelosi and the elected lawmakers are about to make more bailout history in the hope of abating the tide of recession with the intention of avoiding economic depression. There will be no Congressional vacation without a legislative solution for bettering the economy. So far, throwing money and liquidity a la Milton Friedman has done little to help the situation. In desperation, the Feds are looking to avoid the specter of an 25% American unemployment rate and the resulting unpopularity, misery and perhaps rebellion against established authority as millions bite the economic dust in a nation ill equipped to deal with any blight. What America has now is nothing less than political panic.

July 26, 2008

EU Wants Tighter Controls on Securitized Loans

The European Union has looked long and hard at the mortgage debacle in the United States and is planning to take regulatory action at home. Bankers have proved that they cannot be entirely trusted where profits and internal banking instruments are concerned. The European Commission is on top of the matter to avoid a management crisis by EU banking bodies. Naturally, bankers are concerned with their profit margins more than safety or the possibility of fraud.

The EU wants to allow banks to buy so-called securitized loans, loans repackaged as securities, if the selling institution holds back 10 percent in reserves, says a European Union Commission draft for new banking rules. The intent is to implement the rules in the autumn. EU governments and the European Parliament have not approved the plan.

The plan has alarmed the financial industry. The industry claims that the ruling could restrict lending in Europe by driving up the price of loans for companies, home buyers and consumers. Banks think that Europe’s banking and financial market is at risk of becoming overregulated. Clearly, the EU knows that commercial bankers have their brains in their wallets.

Banks are also worried about EU plans to limit the size of loans for interbank lending. The draft plan requires banks to commit no more than a quarter of equity capital for interbank loans. Bankers fear that such a move would lead to new liquidity shortages in interbank dealings.

April 8, 2008

The Fed: A New Mood Stabilizer

U.S. Treasury Secretary Henry M. Paulson Jr. proposes to overhaul the U.S. financial system by transforming the Federal Reserve into a “market stability regulator” instead of the nation’s banking and money source. Mr. Paulson feels secure putting the International Society of Bankers in direct control of the U.S. economy.

Behind the scenes, a strong possibility exists that because the United States faces a 10 trillion dollar national debt soon, giving the global banking system economic control of this country is required to keep full monetary support. Deep dark rumors say that the International Bankers are tired of American excess and have been considering pulling the plug unless they get a bigger piece of the pie and more control. The price of greedy bankers and governmental unwillingness to use restraint in promoting raw profiteering has effectively put the United States economy up for sale. The new plans of the U.S. Treasury Department play right (more…)

March 11, 2008

Feds Risk Management Advice

Filed under: banking, credit, investment, money — Tags: , , , , , , , , , , — digitaleconomy @ 11:40 am

At his speech at the American Bankers Association Summit, Fed Governor Randall Kroszner spoke about the importance of risk management. “As banks have extended their range of activities and involvement in new markets, they must be particularly mindful of potential for concentrations of risk to arise for a number of reasons. First, any new activity will be less familiar and involve less data and experience for evaluating risk compared with long-standing activities or markets. Second, risk concentrations can be hidden during normal times and may only manifest themselves during times of stress when activities or instruments that might in normal times have little or negative correlation suddenly become correlated, such as with a market-wide increase in the demand for liquidity as we have seen recently.”

Kroszner is repeating the new mantra of careful risk-management after the bankers have literally destroyed the economy from their latest money-making adventures. He points out that one of the major downfalls in banking has been the separation of senior management from risk managers, resulting in lack a attention to the most important aspect of safety in banking. He also points out that incentives for “good behavior” is a good idea. He stumbled around on this idea, with little to say of any importance other than more control and limits were needed. He emphasized rechecking “stress testing” of banking instruments. However, he didn’t suggest using different standards, but simply using the same old means that brought banking into trouble to begin with. He indicated that diligence was needed, but did not indicate any correction or indication of flaws within the system other than user motivation. He emphasized more care regarding bank liquidity. Essentially, Mr. Krozsner is suggesting the return of bankers to the good old-fashioned ideals of prudence and caution. Are the bankers listening or still in profit-making mode?

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