Category Archives: Finance Industry
Daniel Indiviglio is a former investment banker and consultant who now writes about that industry for The Atlantic. His recent article explains how the lobbyists influenced, or as I call it, wrote the financial reform bill that Dodd and Frank pushed like crack dealers. From his writeup:
There are easily dozens of sections where their persuasion can be felt, but here are several striking examples.
Auto Dealer Exclusion
Perhaps one of the most egregious lobbyist influences was a key exclusion from the Consumer Financial Protection Bureau. When you think about consumer credit, a few products immediately come to mind: mortgages, car loans, and credit cards. But wait! Car loans — one of the most prevalent types of consumer loan — are excluded entirely from the Bureau’s reach. While it isn’t likely that auto loans will ever cause a financial crisis, neither will credit cards. Yet there are certainly auto loan shops that could use dastardly tactics worthy of as much attention as the regulator pays to credit card companies.
Derivative Spin-Off Provision
To see a truly strange legislative effort, check out how one of the more controversial derivatives provisions in the bill turned out. Initially, all banks would be forced to put their derivatives business in a separately capitalized subsidiary. That is, until lobbyists got their hands on it. Now, banks can create certain sorts of derivatives, but not other sorts. Foreign exchange and interest rate swaps, for example, are okay. But commodities and energy swaps aren’t. Is corn riskier than the euro? Probably not. So what’s the explanation? One industry source I spoke with theorized that futures exchanges may have pushed for the ban on commodity and energy derivatives created by banks. The over-the-counter derivatives (a market run by banks) market ate away at exchanges’ market share once banks started getting into the business. Now banks are out of the picture regarding these products.
Another extraordinarily watered-down provision compared to the original conception is the so-called “Volcker Rule,” meant to limit proprietary trading by banks. The final bill limits the amount of money dedicated to this function to 3% of a bank’s Tier 1 Capital. That should allow all but a few banks to proprietary trade in the same way they have in the past. Moreover, the rule inexplicitly limits the amount of a private equity venture or hedge fund that a bank can own to 3%. This ultimately benefits banks, because they need less skin in the game to convince outside investors to participate in a venture or fund.
It’s a good read, so I suggest you click the link and read his entire piece. He talks about ‘too big to fail’ and Frannie and Freddie as well. For a nitwit like myself, it’s well written and easy for me to comprehend. This…cough…bill…is weaker than my bladder after an evening of boozing it up.
Look, I will admit upfront that I can not find my ass w/both hands when it comes to the world of finance, stocks and derivatives..not to mention hedge funds.
Say what you will about the bluedog Blanche Lincoln, hell I take her name in vain a LOT. She is a c#nt on healthcare and many other social issues..but the bitch (I mean that in a good way) gets it on Financial Reform.
On the other hand, Barney Frank is rolling over. I can’t friggin believe it. He wants to weaken the FR bill even more…wtf dude????
Dylan Ratigan has some great guests on daily that are specialists on derivatives, stocks, investors and the whole ball of wax when it comes to fixing our banking system.
The bill and various amendments are being debated now. The fuckers are pulling the rug out from under Financial Reform. It’s downright fucking pathetic m’dear reader.
I just got home after a week w/my father. I poured a stiff drink (it was after noon) and turned on my favorite political show lately, Dylan Ratigan. All it did was stress me out…and I just spent a week stressed out with my father who keeps having major senior moments. Sigh…heavy sigh.
Video is out.
Not like Superman of course, more like Bush43. Oh, and Benny Bernanke wants them too! From the NYT article on the subject:
The Federal Reserve Chairman, Ben S. Bernanke, agreed with Mr. Geithner that Congress should grant the Treasury Department and Federal Reserve new powers. Mr. Bernanke told members of the House Financial Services Committee that if the government had had such authority in September, when the depth of A.I.G.’s troubles became obvious, the company could have been put into receivership or conservatorship and regulators would have been able to “unwind it slowly, protect policyholders” and take other prudent measures.
We have foxes in charge of the financial hen house now…why would we want to give them more power?
The Glass-Steagall act and the 1956 Bank Holding Company Act were rolled back by greedy Phil Gramm and his cohorts when they created the Financial Services Modernization Act, which was signed into law by Bill Clinton. We need to re-institute them and make them stronger. We don’t need a Financial Czar like Bernanke or Geithner.
Absolute power corrupts.
He is now one of their biggest foes. His newest book entitled: Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, lays out how America’s manufacturing plants have died off and been replaced by….wait for it…
The Mall. Yes, the Shopping Mall where we the people spend our money, and if we don’t have any..we use our credit cards to buy things we don’t need but we covet. Mr. Phillips isn’t the only human being to see the writing on the wall. Danny Schecter has made a movie about it which he calls; In Debt We Trust. Mr. Schecter’s take on our society’s credit addiction:
Over the past 25 years, America has moved from a society based on production to a nation driven by consumption; from a country that once shared its resources with the world to one deeply in debt to foreign banks and countries-to the tune of trillions of dollars. As the growing number of bankruptcies and foreclosures testifies, our national debt is mirrored by a skyrocketing consumer debt, with an increasing number of individuals and families unable to cope.
Back to Kevin Phillips’ book. The Financial Industry now makes up roughly 21% of the U.S. GDP(Gross Domestic Product) — the largest sector of the private economy. Does this bother you? It should. Manufacturing has shrunk to only 12% of the GDP. Read that again, only twelve percent of our GDP is now Manufacturing. To put it very succinctly..that is a massive timebomb that is waiting to blow. Individuals that adore the American capitalist system will undoubtedly say Phillips is full of bat guano, but I am not one of those. From the book, via a NYT review:
By 2007 total indebtedness was three times the size of the gross domestic product, a ratio that surpassed the record set in the years of the Great Depression. From 2001 to 2007 alone, domestic financial debt grew to $14.5 trillion from $8.5 trillion, and home mortgage debt ballooned to almost $10 trillion from $4.9 trillion, an increase of 102 percent. A crisis in the mortgage market in August 2007 brought the party to an end. Since then we have been living in a twilight zone of what a security analyst quoted in the book calls “one of the slowest-moving train wrecks we’ve seen.”
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