Comments on: Don’t give the Fed a new job Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 By: Sergey Wed, 22 Jul 2009 20:42:25 +0000 Hello Mark,
I like your statement:

MTW: “In a capitalistic system it is important to allow market forces to work so that risk taking is adequately rewarded and excessive risk taking is penalized.”

Between us big CAPITALISTS, who was penalized for “excessive risk taking” in case of Lehman brothers or AIG?

Executives? Yep, they suffered. With economy goes south they lost jobs and now have to count every million on their private accounts.

Lehman? Yep, as a bank it paid ultimate price, but after all it was a legal entity not a live creature that suffers pain of death.

Shareholders? They suffered most. Te whole investment was wiped out. But with broken corporate governance all across US they had very little control over events. In every big corporation executives are shielded by hand picked boards.

Tax payers. Why they have to suffer and pay 168 BIL to bail out AIG and etc? It sound like communism to me – everybody gets as much as he/she needs.
Banks and even insurers became vehicles to extract profit at any cost without thoughts beyond next bonus.

Capitalism failed there. Society cannot allowed bad guys to fall.

In your abbreviation SROB the key letter ‘I’ stays for ‘independent’ and it is absent.

Don’t forget every bank including Lehman had/has Risk controllers. They all failed badly. So the body must be independent.

FED doesn’t have infrastructure and expertise in measuring risk. But the truth is that nobody has.

By: Lafayette Fri, 17 Jul 2009 07:29:24 +0000 MTW: This sound proposal comes at a time when Treasury Secretary Geithner would like to give his former employer, the Fed, additional regulatory duties even if they have failed to earn this right. The report also is critical of previous light-touch regulation.

Fine, Mr. Williams, but who polices the police.

Systemic failure occured because across the board regulatory powers were lax under and administration blindly wedded to the stupidity that “the markets always get it right”.

The charter writ for the Fed is perhaps insufficient. No Fed chairman interpreted the charter to investigate the nature of Structured Investment Vehicles and the nature of their creditworthiness, that caused the Great SubPrime Mess of 2008. When we want to point the finger of blame in that matter, we point where? Some other agency that was supposedly responsible the Truth In Lending Act?

The Fed oversees much of the range of financial transactions, including banking and excluding securities. But, if a Greenspan wants to apply Regulation-Lite, what is a poor Fed examiner to do? Bolt?

No, s/he shuts up and does the job they are told to do.

By: B.Free Thu, 16 Jul 2009 20:02:39 +0000 Who funds the board?

Who can disband the board?

In other words, who can influence the Board!

Is this going to be like the FDA where drug industry insiders run the agency?

It is not that the FED can’t do it. They FED was doing what it was told. When greed infuses every office from the President to the Congressmen to the Banker and that Good ole Boy CEO System remains in place you will never have control of the markets. Bubbles will come, people get rich, bubbles burst and other people get poor. With unemployment climbing and mortgage and credit card defaults soaring out of sight who pays? Who gets stuck with the crap, the working class of the US. We will have to pay this back or pay for it with climbing interest rates. People lied, people defrauded, people ordered regulators not to investigate and where are these people now? Well folks they aren’t in jail where they belong.

Basically what I am saying regarding the suggestion in this piece is that is does not matter. Today’s criminals are not gun slinging thugs. The real criminals in this country are educated politicians, bankers, insurers and CEOs who get away with bringing a nation to its knees. No economic system can work if those within that system have no integerty.

By: Lafayette Thu, 16 Jul 2009 14:49:08 +0000 MTW: “A new oversight board would provide a fresh approach to preventing banks and other financial firms like insurance companies from engaging in risky and financially harmful practices.”

The above more or less parrots the central conclusions that many have come to; that is, regulatory powers were applied far too laxly.

But, let us remember, it was the head of state (the PotUS) that sets the level of exigency regarding regulatory powers. The President makes the sun shine and the rain fall on market regulation by selecting the heads of regulatory control bodies.

I maintain that the key problem with Wall Street was not regulatory, but simple cupidity. For which, the sole solution is the establishment, beyond a certain level of compensation, of confiscatory marginal taxation. I suggest 5 megabucks a year as the threshold.

Wall Street financial prima-donnas will have to content themselves with ONLY five million dollars in total annual compensation. Not billions of them, but less than five million dollars. (And, I certainly would not want one of them living on my street.)

Otherwise, I am willing to bet my bottom (entirely) that this crisis will be destined to recur. There is too much greed afoot on Wall Street, whilst Main Street pays the piper for their immorality. It is a sad testimony to the lamentable state of American morality today.

Anything for a buck. Anything.