« A Second Porsche Won't Fill That Hole | Main | Keep Them Doggies Movin' »

October 20, 2010

Comments

Well worth the read, and the comments were high quality (see Maynard #7)....they must have been regulated.

I would agree, though as penetrating as it is, I highly doubt that the people who need to grasp it even know who Hegel is, let along Adam Smith.

So, what are we left with post-TARP? Would it really have been better to have let the banks die the deaths that, given the tenor of the article, they so miserably deserved? Would a depression have been a preferable outcome rather than the interminable recession we're stuck with, given that it would've led to real reform with teeth instead of the toothless watchdog we now have?

I am not eager to live through a depression, nor am I eager to see anyone else do so. But given the irresponsibility of the Republicans, the pusillanimity of the Democrats, and the utter unwillingness of Congress as a whole to do its real job, is it just possible that a depression - if the collapse of the banking system was unavoidable without TARP - would've put so many of us in the same boat that even Tea Partiers would have screamed for the Feds to bail us out?

Given the consequences, I don't want to know. But as it stands, given the tepid reforms, we still don't know.

What market regulations should prohibit are practices in which profit-taking can routinely occur without wealth creation

True, but inadequate. Regulations should also prohibit practices that do create wealth but impose excessive risk on the general society, rather than on the profit-takers.

You can't do this completely, nor would you want to - any business failure has some broader effects - but you can go a long way towards stopping the kinds of abuses we see in the whole too-big-to-fail department.

I highly doubt that the people who need to grasp it even know who Hegel is

Isn't he the guy that invented that exercise?

But given the irresponsibility of the Republicans, the pusillanimity of the Democrats, and the utter unwillingness of Congress as a whole to do its real job

I think you and I are in basic agreement, sekaijin, but I would frame things differently:

1) The Republicans are not being "irresponsible." They are paid to protect the interests of the plutocracy, and that's exactly what they are doing.

2) The Democrats are not being "pusillanimous." This suggests that they would like to be tougher on the banks, but merely lack the spine. Outside of the progressive fringe, which is effectively marginalized, I don't think this is the case. Obama very explicitly told the bankers that it was his job to stand between them and the people with the pitchforks.

3) Congress is not failing to do its job. As long as we accept the principle of one-dollar-one-vote, Congress' "job" is whatever the people with the most money deem it to be.

This is not a failure of the system. This is the system.

Isn't he the guy that invented that exercise?

*rimshot*

This is not a failure of the system. This is the system.

That is the conclusion I'm coming to as well.

Well, guess I live in a pie-in-the-sky world...

In principle, Kvetch, I know this too. The problem is, "this is the system" easily becomes a cop-out for not doing anything. It's the "too big to fail" argument transposed, to something like "too f%#ked up to reform." I'm not accusing you of taking this stance, because I believe we are on the same side; it's just that when we start diagnosing the problem in these terms, we start believing that it's a built-in feature rather than something that can be fixed.

There. I said it. I believe these things can be fixed. Now I'll try to eat a slice of that pie...

This is not a failure of the system. This is the system.

The article could have been written with our political system as a whole as the subject rather than just the financial system. Short-term political self-interest, which tends to translate to economic self-interest, leads to actions that will doom the entire system in the long run.

I'd like to see the same basic discussion within the domain of game theory in addition to that of philosophy, just to compare the results and see the parallels. I tend to think of market failures as some sort of aggregation of many sub-optimal strategies, like thousands of prisoners in thousands of dilemmas ratting on each other. Then again, too many individuals cash out without sufferring the consequences of their sub-optimal decisions, so, for them, they made the right choice, and didn't have to serve a sentence.

I guess that brings me full-circle, back to:

This is not a failure of the system. This is the system.

i'm not aware of too many things. i know what i know - if you know what i mean. and all that philosophy was a walk on some slippery rocks. so, the best part of the article, for me, was the comment with an Al Gore quote:

"It’s virtually impossible for participants in the current political system to enact any significant change without first seeking and gaining permission from the largest commercial interests who are most affected by the proposed change."

this is 100%, completely, literally true.

our governments are captured, top to bottom, local to Federal, by monied interests. citizens are lucky to be considered at all, except as ugly bags of mostly water who hold the cash the interests want to harvest.

"I highly doubt that the people who need to grasp it even know who Hegel is."

True.

But I suspect Beck University would have offered a primer on the subject with numerous blackboards of arrows pointing every which way from numerous theses, around the horn to the Marxist antitheses, and all arrows converging on ......

http://www.newsandletters.org/Issues/2001/Aug-Sept/fta_8-01.htm

...... the black Muslim Commie synthesis in the White House.

Vassar Bushmills, leader of wordy anti-American vermin at Redfick, would have penned a disquisition nearly as dense and lengthy as The Phenomenology of the Spirit to explain the same.

sekaijin:

For morbid reasons, having to do with wanting to witness various stupidities played out to truly and deservedly dreadful ends, I wish TARP would not have been enacted either -- and the entire financial system permitted to implode.

But to do so, we need to have a picture in our minds of "It's A Wonderful Life" morphing about half way through into "28 Days Later".

As Bedford Falls deteriorates into ZombiePottersville and the likes of Violet Bick, Ernie the cab driver, Uncle Billy, George Bailey's dear mother and good cop Bert are infected with a truly horrendous case of the rage virus and stagger through the countryside spewing bloody Tea Party hate venom all over their victims before administering the fatal bites ... but in this case we learn that Mr. Potter is astro-turfing the entire zombie infection ....

........ Zuzu hides in a basement, coming out only at night to seek contact with the uninfected and perhaps call in a nuclear strike.

President Roosevelt has long since been murdered by his enemies.

As it is, of course, we're lucky to have the current situation of execrable bankers, ignorant Death Palins, and fascist Angle/Miller/Erickson working our fine Democratic system to murder the old, the sick, and the poor through the proper channels.

I like my movie better.

ignorant Death Palins

the phrase brings confirmation.

Slarti: "I highly doubt that the people who need to grasp it even know who Hegel is

Isn't he the guy that invented that exercise?"

That's Kegel. You're thinking of the iconic Australian poultry brand.

Nothing but fierce and smart government regulation can head off another American economic crisis in the future.

Not sure what he means by "fierce." Maybe we add an "ARRRRGHHHHHH!" at the end of the bill. I DO agree with "smart." And what has been passed so far is not smart.

What market regulations should prohibit are practices in which profit-taking can routinely occur without wealth creation

This seems obvious. Unfortunately, the latest regulations appear to destroy some wealth creation opportunities, like angel investing (I think that stayed in the final bill).

This whole "knight" "pillager" dichotomy is somewhat apt. IMHO, regulations should define and protect what we generally consider the market. In a very general sense, the regulations should REQUIRE a basically o.k. knight. Maybe no saint, but certainly no devil. Within that framework, we WANT self-interest to run rampant. But within the framework.

Regulations should prohibit wealth stealing, prohibit false and misleading information from producing a sale, encourage an actual market (explain to me again why Microsoft wasn't broken up?), and require full disclosure. And guess what? They already do.

We have regulations that address the profit taking without wealth creation in many situations, like fraud. And other provisions to preserve a market like anti-trust. I'm not convinced that the whole mortgage loan to securitization to foreclosure isn't subject to many attacks under existing securities laws. It's just like Enron: find some cute way to draft a legal document that gives the patina of legitimacy to something YOU KNOW is fraught with problems. And I'd get everyone, including the attorneys that no doubt drafted gray letters of opinion, etc.

While I'm no securities law expert, it seems to me that the regulators were pretty silent as this all went down even with existing regulations in place. The new law seems to give more discretion. Discretion to do what, exactly? Sit on your rear? With the regulators going straight to regulated like clockwork and campaign funds coming back at those that govern, it doesn't seem very promising. Enforcing existing laws would be a start.

bc, you seem to be saying that 'regulation' means 'laws on the books'. I think fierce regulation, in this context, is what you hope for, which is a willingness to enforce all the laws as they are written and 'regulation' is not advocating more laws (though many of the rollbacks to regulation may need to be put back in place), just, as you say, getting everyone who should be dealt with. Hence the uncountable noun.

Would it be cruel and unusual, if stockholders could decide to burn the CEOs of their companies on the piles of devalued stocks?

This seems obvious.

When you say "This seems obvious", do you mean, "Let's go out and do it right away!", or do you mean, "Of course, that's the way it is now!".

Because it's thoroughly unclear to me that our current regulatory scheme prevents, or even intends to prevent, profit-taking without wealth creation.

Maybe I'm missing something.

And guess what? They already do.

Do you mean, on paper, or in real life?

I'm reading what you're writing, and I'm looking around at what's going on, and I'm experiencing some serious cognitive dissonance.

Help me out, bc.

"Within that framework, we WANT self-interest to run rampant. But within the framework.

Regulations should prohibit wealth stealing, prohibit false and misleading information from producing a sale, encourage an actual market (explain to me again why Microsoft wasn't broken up?), and require full disclosure. And guess what? They already do."

A polite bleh!

In Michael Lewis' "The Big Short", which tells the story of the mortgage mess, the obscure investors who began to catch wind of the total fraud (top to bottom, from the highest echelons of the investment banking industry to the clerks who falsified the info on the mortgage applications) had their breath taken away by the complete lack of disclosure about what was inside those mortgage pools sold to .... everyone.

The investment banks refused, refused refused to provide the facts about the mortgages to the ratings agencies (Moody's, S&P.

The SEC, under the Bush Administration, was clueless.

These small investors, as shark-like, rampantly self-interested, and free-market oriented as any of the big fish concluded that the fraud was so massive that it could bring down society and government with it.

There was no information. There was no framework.

I'm reading the emerging meme here with interest, and here is what seems to be the picture coming into focus:

1. We have laws on the books concerning regulation, and they're being ignored with impunity.

2. We have laws on the books concerning regulation, and they've been so watered-down they don't mean anything.

I don't knock those who take one stance, or the other. But my way to grasp this, re Russell's cognitive dissonance: I think (cheap, late-nite armchair Hegelian synthesis brewing here) is that parallel to the government-is-the-problem theme of the last 30 years or so, another one has emerged that might bring together the real story of #1 and #2 into a law-can-be-run-around idea:

3. Whether some laws have teeth or whether some others don't, the banking industry sees law as a series of technicalities that can be run around, so it doesn't matter.

I'm no lawyer, but it seems to me that when law is thought of this way, it becomes decoupled from an ethical locus (McKinney Tex - as a lawyer, any observations on this?), and so long as a for-profit entity knows what those technicalities are, it can damn well pretty much do as it pleases.

So re Countme: the information was whatever the entities in question said it was, and if the SEC was clueless, it was because that's what it was told to be.

In spite of it all, the fact that there have been laws with teeth that are still around is evidence to me that the means to fix this mess are there. The problem is political will - as I've pointed out before, we have too many people in government who don't believe in government as anything other than an exercise of power. Until we have people who do (fat chance this time around), we're not going to have any action that is palliative.

some serious cognitive dissonance.

russell: I wasn't clear. I'm frustrated that existing laws and regulations weren't used to stop what was happening. Like I said, I'm no securities expert, but it would take some convincing for me to believe most of the excesses couldn't have been dealt with and shouldn't have been dealt with using existing laws and regs. Why the weren't, well, I think that is likely due to the too cozy relationship between Washington and Wall Street.

complete lack of disclosure

countme?: which, I would think, is actionable. The prospecti are out there. If it's not in there, put the hammer on them.

Sekaijin: Here's the thing: from what I've read, the SEC is doing more than what it's done in the past and is somewhat using that as an excuse. Sure, they've given bigger fines and made wrongdoers disgorge more profit. But the crises went beyond "more." I think most of us want something closer to an equal and opposite reaction.

Frex, I think Gary Crittenden of Citi was fined $100,000 for the "it's 13 Billion in subprime" public statements when Citi knew full well it's exposure was closer to $40B. And I think he got to keep his tens of millions in comp. Unless Holder is planning on teeing off, what gives? Going back to my initial comment on fierce regulation, to me it's FIERCELY enforcing what we already have. I'm not seeing that happen.

J. M. Bernstein (russell's link):

[...] What market regulations should prohibit are practices in which profit-taking can routinely occur without wealth creation; wealth creation is the world-interest that makes bankers’ self-interest possible.
This is an interesting proposition to at least consider as a thought experiment.

Reading the article for context would go a long way towards increasing my own interest in any response.

bc:

Here's a footnote on page 204 of "The Big Short"

"*Just about everyone involved in the financial crisis stands to lose money if he is caught talking about what he saw and did. Obviously those still employed at the the big Wall Street firms, but even those who have moved on, as they have typically signed some nondisclosure agreement. Morgan Stanley's former employees are not quite as spooked as those who worked at Goldman Sachs, but they're close."

In two weeks we have an election in which the very people who ratf#cked the country and paid themselves bonuses out of TARP are bankrolling anti-TARP Republican candidates who will, if elected, and they will be, defund the new financial regulation bill, cut or eliminate regulatory agencies of all sorts, but certainly the SEC enforcement will be included, and do Wall Street's bidding.

Many of these same Republican vermin candidates funded by astro-turfing Republican vermin in the financial and business world are threatening violent revolution (in other words, they threaten to kill as many liberals as they can) if they are not elected to r#tfuck this country again.

The Wall Street/Tea Party axis of anti-American filth has the country and the government by the balls.

We're never going to find out who destroyed our financial system.

Once again, happy weekend.

Many of these same Republican vermin candidates funded by astro-turfing Republican vermin in the financial and business world are threatening violent revolution (in other words, they threaten to kill as many liberals as they can) if they are not elected to r#tfuck this country again.

To be honest, I don't think there are enough people that talk this talk who will really walk the walk when the chips are down.

So I kind of ignore them.

If it really, really comes to it, the people they're threatening either know how to defend themselves already, or they'll learn, and that quite quickly.

And that will likely put an end to it. Bullies are flimsy people.

That's my take, anyway.

[...] What market regulations should prohibit are practices in which profit-taking can routinely occur without wealth creation; wealth creation is the world-interest that makes bankers’ self-interest possible.
The obvious occurs to me that a weaker, but still interesting, or even more interesting, version of this would simply tax at a greatly higher level practices in which profit-taking can routinely occur without wealth creation.

Russell:

Good morning.

Of course, you're right about bullies of all sorts. Bullies are cowards.

I suspect it's the quiet guys you've got to watch. Still, I refer you to George Carlin regarding the "quiet guys".

But I tend to operate on the Nixon Doctrine which, roughly speaking, lets lunatics on one side know there are a few lunatics on the other side as well, which of course is worth less than a small bucket of warm spit.

But there is a progression here -- from spittle-flecked rants by talk-radio bulletheads spewing the hate to more than a few Republican candidates for the U.S. Congress espousing violence .... with impunity and a jump in the Rasmussen polling.

I find the actions by one Joe Miller in Alaska, wherein active duty military are called in to assault and handcuff a reporter at a political event to be another inflection point in this progression from foghorn rhetoric to actual fascist action by a guy who is going to be thinking he can govern me.

I suspect Timothy McVeigh would have taken that security job until he could accumulate enough fertilizer.

There's a point at which someone walks into the Ministry of Funny Walks and demonstrates the latest funny walk and it looks just like John Cleese's funny walk but bureaucrat Cleese, having turned away the funny walker, goes home, turns on the telly and notices the funny walker and his friends have just funny walked into Poland, but there is no laugh track.

You know, I kind of wish Condi Rice had shoved that intelligence memo under Bush's nose a few more times in the summer of 2001 warning that bullies were pronouncing the future.

For those arguing more regulation, or less regulation, or let's enforce the regulations on the books, or whatever ..

... this is how it's done by the professionals:

http://motherjones.com/kevin-drum/2010/10/how-gut-regulations-old-fashioned-way

Thank God we'll have the professionals in control again after November 2nd.

I find the actions by one Joe Miller in Alaska, wherein active duty military are called in to assault and handcuff a reporter at a political event to be another inflection point in this progression from foghorn rhetoric to actual fascist action by a guy who is going to be thinking he can govern me.

Actually, you're making a good point there.

And I believe a couple of those guys were active duty, which I'm not sure is legal.

And Miller is still on the ballot, which I find pretty disturbing. Is there any provision for striking candidates from the ballot if they engage in illegal or just plain wrong activities while campaigning?

If there is, doesn't handcuffing journalists qualify as either "illegal" or "just plain wrong"?

So yeah, J Random Guy with a Gadsden flag and a tri-corner hat yammering about his "2nd Amendment option" doesn't keep me up nights.

Guys policing campaign events with active duty military and/or biker gangs, different story.

It deserves our attention.

Eric Cantor believes he's going to govern me too.

http://www.dailykos.com/story/2010/10/27/913992/-Democrat-Manhandled,-Arrested-at-Cantor-Public-Event-%28UPDATED-5x%29

The comments to this entry are closed.

Blog powered by Typepad