Cholesky Decomposition: Solving a System of Linear Egos
Posted: May 26, 2010 Filed under: Global Financial Crisis, Team Obama, U.S. Economy Comments Off on Cholesky Decomposition: Solving a System of Linear Egos
Consider a dinner table--a matrix if you will--of elements consisting of the world's prominent Economic Minds
I swore I wasn’t going to read The Promise by Jonathan Alter. Even the title oozes that smarmy assurance of a member of the Oborg fluffing brigade and the faith it takes to join a cult of personality. Then I got caught up in an excerpt with a title that could not be ignored by any practitioner of the dismal science. It’s over at the Slate’s The Big Money and under the siren title of “Why Paul Volcker Was Frozen Out of the Obama Administration”. I have to admit to having been awed by Volcker during my young career when the extremely volatile fed funds rate gave me heartburn and euthanized the very sick Savings & Loan where I was working.
While the title implies it’s mostly about Volcker, it’s actually mostly about the extremely volatile La La Summers and his “abrupt manner” and the dynamics of Obama and his economic advisers. What’s pretty amazing is the article says that Summers had mellowed since his tenure at Harvard. You wouldn’t know it as you read–and if you believe–this narrative. Doesn’t this just sound like the boss that every one prays they never get?
Summers’ friends claimed he had mellowed by the time he entered the Obama White House, and it was true that he had learned to take ribbing. Obama teased Summers for repeatedly falling asleep in meetings, for sweating in winter, and for attaching probabilities to everything. Summers’ habit of finding a cloud around every silver lining led the president to privately dub him “Dr. Kevorkian.”
Inside the White House, David Axelrod was among the few representing the so‑called populist side of the argument, and a joshing debate broke out. Axelrod asked Summers, “So, what does your plutocrat constituency make of this, Larry?”
“It’s good to be hearing what Che thinks,” Summers replied.
There was evidently even some stunning moments between La La and Dr. Christie Romer who is the chair of the Council of Economic Advisers. La La is of course well known for thinking women don’t have what it takes to deal with the really big questions and equations. Take a gander at this exchange.
When Christie Romer was brought in to be the chair of the Council of Economic Advisers, Summers tried to exclude her from important meetings. Romer fought back, even suggesting to Summers that sexism might have played a role in her exclusion, a serious charge given that he was fired as president of Harvard for perceived sexism.
“Don’t you threaten me!” Summers yelled.
“Don’t you bully me!” Romer shouted.
Evidently Rahm Emmanual had to work this one out.
So, remember that dinner at the White House of all those economists where we wondering if some one put something in Paul Krugman’s coffee? It’s outlined there too. It also shows how Obama couldn’t possibly be considered a socialist because both Noble Prize winners Krugman and Joseph Stiglitz were arguing for nationalizing of Citigroup and Bank of America. Oh, and here’s the decription of Valerie Jarret’s boss who is supposedly too intelligent and bored all the time to be bothered with ordinary people. This is a guy sitting with a group of clearly brilliant people. Rather than fully discussing the topic at hand, Obama wants the easy solution and turns off the conversation so that it’s all about where he is in this ordeal.
The dinner had been so hastily arranged that Stiglitz didn’t even get invited until the morning of the event. Over a lettuce salad from the White House garden and roast beef, the group held a spirited two-hour discussion. Obama grew slightly impatient when the conversation grew too technical or backward looking. He wanted to know what the economists would do if they were in his shoes. The answers from Krugman and Stiglitz—which amounted to taking over Citigroup (C) and Bank of America (BAC) for a brief time before breaking them up—hardly made Obama wish that he had hired these economists rather than Summers, who had considered the same idea but seemed more appropriately dispassionate in his analysis of it. If Obama had done what Krugman, Stiglitz (who had earlier said nationalizing the banks was the “only answer”), and plenty of other progressives wanted, it would have cost the government perhaps another trillion dollars and quite possibly caused a disastrous run on those banks.
And speaking of Valerie Jarret, guess who was the gatekeeper for Volker?
Volcker could always go through Valerie Jarrett if he needed to see Obama, but he didn’t want to abuse the privilege. After hearing from Obama often during the campaign, Volcker’s phone stopped ringing. He wryly told friends he was nothing more than a “wax figure” for the White House.
So, this is an even more telling excerpt that let’s you know what we’re dealing with in this White House with this set of advisers and this President.
Of the major players, only Volcker (who didn’t consider himself a player because he didn’t hold a government job) thought the whole financial system was conflict-ridden and dangerous. Contrary to much reporting, he did not advocate reinstating the Glass-Steagall Act. But he did favor segregating commercial and investment banking from proprietary trading. Advising clients while trading in one’s own accounts, he felt, was an obvious conflict of interest (the laughable claims of bankers that they had internal “Chinese Walls” notwithstanding) and an inherent source of instability. Why should core banking operations be subjected to such risk? Paul Volcker, principal author of what was once thought of as heartless Reaganomics, was now the most populist of the bunch!
Like I said, I wasn’t going to read Alter’s book, but he has my attention now.
11th Hour Cat Herding
Posted: May 19, 2010 Filed under: Global Financial Crisis | Tags: derivatives regulation, Financial System Overhaul Comments Off on 11th Hour Cat HerdingI’m trying to follow the financial regulation bill as it morphs into something to attract votes. It’s just been announced that Harry Reid
"Too Big to Fail"
will call for a vote because Susan Collins of Maine–and possibly some others– is willing to leave the Just Say No Republican Bloc. Lame Duck Chairman Dodd evidently is playing enough with Blanche Lincoln’s derivative amendment to bring some Naysayers into the fold. The sticking point was derivatives. Lincoln’s amendment sought to ban commercial banks from dealing in derivatives. It was seen as an attempt to bring back some sense of Glass-Stegall to financial institutions. While Blanche was back in her district trying to cast a vote for herself in an election where she now faces a run-off, Dodd was wheeling and dealing on the cornerstone ‘brag’ in her record.
There’s bits and pieces of this story all over the web, but it’s hard to find anything definitive. The best two that I’ve found to date are from Bloomberg and FT. The derivatives amendment is pretty much hated by Republicans who believe that the business will just go elsewhere in the world and make the US banking industry less competitive. There’s also some last minute wrangling to give the states more leeway in terms of their own state banking laws and regulations. This is seen as a compromise because some states could tighten regulations but others could leave them more loose per the federal regulation.
Anyway, I’ll try to highlight some of the articles cited above to see if we can’t get a sense of where this is headed. The first maneuver by Dodd, yesterday, was to keep the Lincoln amendment, but delay implementation for two years, pending a study. This change was dropped earlier today. This maneuver is explained pretty well in this Bloomberg piece.
Dodd filed an amendment yesterday that would delay a measure requiring banks to put their swaps-trading desks in subsidiaries pending a one-year study of its effects by a new council of regulators. The amendment would let the panel eliminate the rule if it was found to “have a material adverse effect on the financial markets and economy.”
The decision against offering the amendment leaves open an issue that has complicated the overhaul debate since Senator Blanche Lincoln proposed her derivatives measure last month. Lincoln, an Arkansas Democrat facing a battle for the party’s nomination as she seeks reelection, has said she will defend efforts to strip the provision.
Dodd’s decision means the Senate legislation is likely to include the rule, which would force banks such as Goldman Sachs Group Inc. and JPMorgan Chase & Co. to move swaps trading to subsidiaries, when it comes up for a final vote as soon as this week.
Republicans definitely don’t like this and are arguing that it will actually bring more uncertainty (and therefore variability and instability) to the market. The FT article believes that this may be overstated because it believes the intent of the ban is slightly different than what is portrayed by the industry. They don’t see it as an outright ban but a partial ban impacting some institutions.
However, Mr Dodd’s proposal appears to ban dealing in derivatives only if it does not comply with the Volcker Rule, the proposal elsewhere in the bill that prevents banks from trading for their own account, owning hedge funds and private equity firms.
It also gives discretion to regulators to call off the ban after a study of the consequences to be delivered within a year.
Those regulators have come out strongly against a proposed ban on banks from dealing in swaps, one area of the derivatives market, which is in the existing bill and which Mr Dodd’s language is designed to replace.
Republicans blocked a vote on the Merkley-Levin amendment on Wednesday night which would have increased the scope of the Volcker Rule and which is opposed by most of the banks.
So, this brings us back to the Volcker Rule that we’ve discussed here before. This is a rule that seeks to establish a Glass-Stegall lite that replaces the wall of separation that used to exist between financial intermediary functions (that would be bank deposit/lending activities) and investment banking (that would be market making and financial innovation). Under Glass-Stegall, financial institutions could do one or the other. The could not have units that did both. Again, the FT talks about the amendment that places state and federal banking laws at odds. Notice that Tom Carper(d) from Delaware is doing the heavy lifting for big banks here.
In a partial victory for the banks, senators approved by a vote of 80-18 an amendment from Tom Carper, a Democratic senator from Delaware, to restrict the rights of individual states to apply consumer protection rules to banks. Large banks that operate across state lines had argued that they should be subject to only one standard.
The American Bankers Association said that without it “consumers and their banks could have been subject to potentially hundreds of different and confusing state and local laws covering their loans, checking accounts, credit and debit cards, or ATM usage”.
State attorneys-general will retain a role in protecting consumers but they could not bring class action law suits against national banks and the Office of Comptroller of the Currency could supersede their action under the amendment. Amid other changes and compromises in the final hectic hours of considering the bill, senators were also trying to reach a compromise over language in the bill that places a “fiduciary” duty on banks to look after its clients’ interests. Banks and some regulators say it is unworkable and ignores the realities of market making .
The NYT–in an article this morning–does a pretty good job at dissecting the Republican discontent. Republicans have traditionally been the workhorses for the American Banker’s Association and they’re playing that role here. However, the watering-down process seems due more to Democrats like Carper even though Reid has been trying to find some Republican support for a super majority vote. I’m not sure how far Mitch McConnell can get with this type of rhetoric in this political atmosphere. I believe that he will soften since the Murtha seat in PA 12 was retained by the Democrats and the Rand Paul victory in his home state of Kentucky. The results of the elections last night didn’t say anything positive for candidates supported by either party’s titular heads within the beltway.
The remarks by Republican leaders on Tuesday suggested they saw no benefit in joining with the Democrats even to impose tougher rules on Wall Street. At a news conference, the Senate Republican leader, Mitch McConnell of Kentucky, blamed the White House.
“The marching orders are coming from downtown: push the bill as far to the political left as possible,” he said. “Look at the last 15 months. They’re running banks, insurance companies, car companies, taking over the student loan business, taking over health care, now, apparently doing to the financial services industry what they did to the health care industry.”
“This is a massive government overreach,” Mr. McConnell said, adding that Republicans were confident about their political prospects. “The American people are saying, ‘enough’ and I think that’s why everyone is anticipating a major midcourse correction this November.”
Again, Reid will schedule the vote and is planning on support from some Republicans. Politico is reporting that Susan Collins of Maine has bucked the Republican wall of no.
There is still a significant amount of work to be done — and arguments to be had on the Senate floor — before Reid’s 2 p.m. deadline, and it is still not entirely clear that the majority leader has enough votes to clear his 60-vote cloture hurdle.
But one Republican, Sen. Susan Collins of Maine, will vote yes on cutting off debate, her spokesman told POLITICO Wednesday morning. That makes her the first GOP senator to publicly break with her party on the crucial vote.
Tuesday afternoon Reid had said that “a number” of Republican senators told him they would vote to cut off debate, and Republican aides said they felt Democrats would be able to swing enough votes to move to the next procedural phase of the bill.
Yet aside from Collins, very few GOP senators have stated publicly their support for cloture, and even several Democrats — including Byron Dorgan of North Dakota and Ben Nelson of Nebraska — are still on the fence.
Even as the Senate moves ahead on some amendments, Sen. Blanche Lincoln’s proposal forcing banks to spin off their derivatives operations remains safe — for now.
Senate Banking Chairman Chris Dodd (D-Conn.) has decided not offer an amendment gutting the provision by delaying implementation for two years while a study is completed., said his spokeswoman Kirstin Brost.
The banking industry pushed back hard against the Dodd compromise, saying it might be worse than Lincoln’s proposal. Learning of the proposal while fighting for the Democratic nomination in Arkansas, Lincoln issued a statement vowing to fight the measure.
One of the notable amendments included in the agreement is to be offered by Sens. Maria Cantwell (D-Wash.) and John McCain (R-Ariz.) on reviving the Depression Era Glass-Steagall rules designed to control speculation and impose stricter limitations on banks. Cantwell reportedly was holding out a “yes” vote on cloture unless her amendment was considered.
P.S. You can add other things to this thread. I won’t mind at all.
The Greece Card
Posted: May 12, 2010 Filed under: Global Financial Crisis Comments Off on The Greece CardIt’s a simple enough question. Are the problems in Greece being hyped in this country so that politicians can either reduce benefits or 
privatize parts or all of social security and medicare? I’m thinking that’s a yes.
David Leonhardt, writing at NYT, seems to find some parallels between Greek and US sovereign debt that belay the underlying differences in the two nation’s economies. The first argument is the size of the debt in relation to the size of GDP. Some of his arguments are based on projecting GDP 20 years out which is a specious activity in and of itself. This is something Paul Krugman talked about today on his blog.
Um, that’s comparing a (highly uncertain) projection of debt 20 years from now — a projection that’s based on the assumption of unchanged policy — with actual debt now. Actual US federal debt is only about half that high now. And it’s worth pointing out that Greek debt is projected to rise to 149 percent of GDP over the next few years — and that’s with the austerity measures agreed with the IMF.
While we’re not experiencing a robust recovery that is creating jobs within the usual expectation of Okun’s law, it will certainly be consistently better than the economic growth rate of Greece. Both our growth rates and unemployment rates have historically been better than Greece for a variety of reasons. This was even true during the post WW2 when our debt was a huge multiple of our GDP. Economic Growth compounds and there are a lot of factors that go into a good economy. Good laws, protection of private property,education, technology, and innovation are just among a few that can accelerate a country’s growth rate. Greece is not well known for any of these things.
When I hear many right-wingers’ arguments right now–that it’s the Greek welfare state that is at the heart of Greece’s problem–I cringe. When I know we currently have an administration that buys a weaker form of their viewpoints, I can’t help but think we’re going to revisit privatization of Social Security and benefits cuts in all these kinds of programs. We’re already hearing them referred to as entitlement programs when they are a paid-for benefit program. The difference is that the demographics between the time they were developed and now is quite different along with the expansion of key benefits. The original social security wasn’t really set up with COLA clauses in mind or survivor and disability benefits. The funding mechanism does need to be revisited, however,this doesn’t necessarily mean we have to completely revamp the system.
Leonhardt does eventually get around to elucidating the spending/funding gap which is going to be a problem. My issue is that by playing in to the just like Greece wail of the right wingers, he’s opening us to blaming ‘entitlement programs’ completely with no serious recognition of the burden placed on the country by the excessive Bush tax cuts and two wars. By comparing us to Greece whose problems were triggered by a lot of things–including an Olympics they couldn’t afford–Leonhardt plays into the the current meme about ‘welfare’ states.
As a rough estimate, the government will need to find spending cuts and tax increases equal to 7 to 10 percent of G.D.P. The longer we wait, the bigger the cuts will need to be (because of the accumulating interest costs).
Seven percent of G.D.P. is about $1 trillion today. In concrete terms, Medicare’s entire budget is about $450 billion. The combined budgets of the Education, Energy, Homeland Security, Justice, Labor, State, Transportation and Veterans Affairs Departments are less than $600 billion.
This is why fixing the budget through spending cuts alone, as Congressional Republicans say they favor, would be so hard. Representative Paul Ryan of Wisconsin has a plan for doing so, and it includes big cuts to Social Security and the end of Medicare for anyone now under 55 years old. Other Republicans have generally refused to endorse the Ryan plan. Until that changes or until the party becomes open to new taxes, its deficit strategy will remain unclear.
Democrats have more of a strategy — raising taxes on the rich and using health reform to reduce the growth of Medicare spending — but it is not nearly sufficient.
What would be? A plan that included a little bit of everything, and then some: say, raising the retirement age; reducing the huge deductions for mortgage interest and health insurance; closing corporate tax loopholes; cutting pensions of some public workers, as Republican governors favor; scrapping wasteful military and space projects; doing more to hold down Medicare spending growth.
Another consideration is that Greece–as part of the EZ–has less flexibility with monetary and fiscal policy than the United States. It is also obviously a smaller economy with far fewer resources. If you take a trip over to Brad DeLong’s page, he has six different factors that he talks about that are germane to this comparison. This is one that I think is worth mentioning here.
As long as unemployment is unduly elevated–above 7.5%, say–our major economic ill connected with big deficits is not excessive deficits forecast for the 2020s and beyond but excessive unemployment and idle capacity now
So, I’m wondering why are we getting so much discussion about the US becoming Greece these days when so clearly the underlying structures of our US economy are so different? The only thing I can come up with is that folks want to point to Greece’s social programs. They are a huge part of the Greek budget, but, this is a country that also doesn’t build and maintain a huge, world inhabiting, technologically advanced military. As such, they are bound to have a larger portion of their expenditures in butter instead of guns.
I can only figure that this is buttering us up for the inevitable discussion of what to do with Social Security.
Of Marx and Smith and Mice and Maddoffs
Posted: April 3, 2010 Filed under: Equity Markets, Global Financial Crisis, Team Obama, U.S. Economy Comments Off on Of Marx and Smith and Mice and MaddoffsIf we lived in a perfect world of either perfect market capitalism or perfect government planning, there’s a lot of things that wouldn’t 
exist. There would be no corruption, no hidden information, no excesses or shortages, and absolutely no need for banks, insurance companies, and stock, real estate, or insurance brokers. That’s right. The entire FIRE lobby wouldn’t exist. Not only would we not need lobbyists, but we wouldn’t need the industries they represent. The Financial Markets exist because we don’t have any perfectly beneficent centrally planned governments or any form of real capitalism with perfect markets. They can’t exist. They are theoretical models period.
We have blended economies. They’re mishmashes of government intervention and mess-ups and failing markets and limping-along-as-best-they-can-markets. Nearly every economic transaction in the real world is fraught with some kind of chance for a misfire. You hire a real estate broker who you hope you can trust to guide you through the treacherous process of buying and selling the biggest asset most folks will ever have. You don’t know what’s a fair price, you don’t know where the buyers or sellers are and if either are honest or hiding The Money Pit from you, and you certainly don’t know who is a good or bad mortgage loan lender and lawyer to help ensure that you get a loan and a title free of bad encumbrances. That process is the same when you have a baby and you need a doctor and a hospital and you trust your insurance company to get a good deal for you. It’s the same when you look to save up for your pension or your kid’s college. The entire FIRE industry is there to help you navigate a bunch of imperfect markets with a lot of imperfect information. They’re supposed to be the experts who will help you navigate moral hazard and hidden information for you.
Except when they don’t.
Then, their government regulators are there to protect you and them from the bad eggs in the business. No one should be protected from their own stupidity, but these markets are so fraught with hazards and problems, that anything can happen. Bernie Maddoffs happen despite everything. So, do Goldman Sachs’ untoward influence in the NY Fed and the Treasury and financial panics. The key to these markets is middle-path economics. Yes, I’m a Buddhist and a Financial economist so I have to use the don’t tune the string too tight or it breaks, or tune the string to loose or it won’t play metaphor. It’s a balancing act. The financial markets play a unique role in a mixed market economy. The way we treat them must be unique also.
I got drug back from the bliss of the first few days of spring break where the last thing I should be thinking about is the financial markets (not teaching) but the only thing I should be thinking about is the financial markets (researching) by an email by the petulant clown. Did I want to handle or look at the discussion here? It’s a thread at FDL started out with a nod to the WAPO editorial here by Simon Johnson and James Kwak then a retort at the NYT by Paul Krugman here. The central question is financial reform. The specific question is should we break up big banks? Johnson and Kwak join ex-Fed Chair Volcker and say yes. Krugman says no, just toughen their regulation. My bottom line is all of the above. Break them up AND toughen the regulation.
Not that kind of Protection
Posted: March 11, 2010 Filed under: Equity Markets, Global Financial Crisis, Team Obama | Tags: CDS, EU, financial regulation Comments Off on Not that kind of Protection
The European Union appears to be serious about stopping the hedge fund casino where you get to bet on the failure of countries to meet their sovereign debt obligations with other folks’ money. It also wants to increase regulation that provides more transparency which should–theoretically–lead to increased protection from moral hazard and insiders with inside information acting against the best interests of other investors. Would you consider this action to be protectionist? (i.e. against free trade agreements?) Once again, I’m turning to the UK’s Financial Times for more information.
Evidently, Timothy Geithner our Secretary of Treasury Goldman’s Sachs Financial Interests is arguing just that.
Tim Geithner, US Treasury secretary, has delivered a blunt warning to the European Commission that its plans to regulate the hedge fund and private equity industries could cause a transatlantic rift by discriminating against US groups.
A letter sent by Mr Geithner this month to Michel Barnier, Europe’s internal market commissioner, makes it clear that the European Union is heading for a clash with Washington if it pushes ahead with what the US – and Britain – fear could be a protectionist law.
As we see the continual watering-down of financial regulation met to rein in the worst of credit abuses in the country, we now see our government arguing against reining-in the casino-style side bets of the hedge funds. The UK is raging against the reform machine too.
The draft EU directive would impose tighter restrictions on hedge funds, private equity and other alternative investment funds. It has caused alarm in the City of London, where some in the industry say it is a thinly veiled attempt by France and Germany to undermine the UK’s dominance of financial services.
Okay, so this is my question. How is this going to undermine the dominance of the UK and US investment houses? How does this stop them from competing for business? The answer is in one clause that may or may not be the real issue here.
Mr Geithner warns that US hedge funds, private equity groups and banks could be discriminated against if proposals to restrict the access of EU investors to funds based outside the 27-country bloc are included in the final law.
So-called “third country” elements of the directive would force non-EU funds to comply with the new rules if they wish to market themselves at all within the EU. The directive could also force EU-based private equity and hedge funds to use only locally based banks as custodians and depositaries.
Contentious areas also include rules on remuneration, limits on borrowing, the disclosure of sensitive information and the regime for depositaries.
Paul Myners, UK financial services minister, told a meeting of private equity executives on Wednesday that he would fight “line by line and minute by minute” to defend the free movement of capital. But he also warned that “nobody in this room is going to get the directive they want”.
One senior private equity executive said the UK needed to take a stand before others would rally behind it.
I can see how portions could restrict the movement of capital from one country to another if investors are forced to use local banks. However, asking the UK and US hedge funds to comply with the EU rules doesn’t seem any different than asking FORD or GM to comply with the tougher MPG or emissions standards by the EU or for that matter asking US food companies to restrict certain ingredients either. Most other U.S. industries comply with EU rules daily. One major example is the use of the metric system. So, why can’t Goldman Sachs and JP Morgan just shut up and comply?
Here’s what is more likely at the heart of the argument.
One regulation they do not want is one that bans speculative trading on naked CDS.
The momentum for a ban on naked CDS is getting stronger. Germany and France on Wednesday called on the European Union to consider banning speculative trading in credit default swaps and set up a compulsory register of derivatives trading, the FT reports. Angela Merkel and Francois Fillon sent a letter to Jose Barroso yesterday, asking for an immediate investigation of the role and effect of speculative trading in CDSs in the sovereign bonds of European Union member states. Fillon assured after talks in Berlin, that both governments are “very much in agreement in tackling extreme speculation”.
Earlier this week, Mario Draghi indicated that tighter regulation of CDS could become a G20 issue when he confirmed that the subject will be on the agenda of the Financial Stability Board (FSB), Reuters reports.
An inquiry must be opened into the role and impact of speculation linked to credit default swaps trading in EU government bonds as soon as possible to determine any market abuse, the heads of four countries said.
The move stops short of repeating recent calls for an immediate ban on selling CDS contracts to ‘naked’ buyers who have no interest in the underlying asset — thereby making it easier to find broad backing from the bloc’s finance ministers who will discuss CDS markets next Tuesday.
In a joint letter to European Commission President Jose Manuel Barroso and Spanish Prime Minister Jose Luis Rodriguez Zapatero, dated March 10, Germany, Luxembourg, France and Greece also called for more transparency on derivative markets.
The moves would be aimed at preventing undue speculation, enhancing transparency and improving the safety of derivative transactions, according to the letter, which was released by the office of French President Nicolas Sarkozy on Thursday.
So is Geithner complaining about the provision to restrict business in certain countries to local banks or the restrictions on some of the more exotic and toxic financial innovations? That would include the ones that have troubled both Greece and Iceland.
Meanwhile, Bloomberg reports that Senator Future Lobbyist of America member Chris Dodd is about ready to unveil his version of Financial Reform. This reflects his compromise with Republican committee member Bob Corker. Have I mentioned recently that nothing particularly good ever comes from compromising with a right wing nut? Oh, yes, that would be yesterday’s post where we talked about Corker’s goal of exempting payday lenders from regulation meant to stop lending abuse. Still, let’s go to Bloomberg for the latest controversy in OUR financial industry reform.
The new Dodd bill will include some elements negotiated with Corker. For example, it won’t propose the stand-alone agency, which Corker opposed, and will probably put the consumer unit in the Federal Reserve with an independent budget, a director appointed by the president and some enforcement powers, according to a person with direct knowledge of the plan.
“It has always been my goal to produce a consensus package,” Dodd said in the statement. “And we have reached a point where bringing the bill to the full committee is the best course of action to achieve that end.”
Notice the difference in the content between the EU talks and the US version. The EU is talking about serious regulation and the US is creating another level of bureaucracy within the FED with “some enforcement powers”. This is like trying to protect some one from AIDS by handing them a virginity pledge to sign when they ain’t no virgin.
It has to be the power of the FIRE lobby. All you have to do is read any of the academic literature on the financial industry to know that standardization of process and translucency, along with making investors have skin in their game creates stronger and deeper financial markets. While we are shuffling decks on the Titanic, the Europeans are looking at the engines. I just wish I had more control over my pension plan (which unfortunately has to be a selection of professionally ‘managed’ screwed up funds rather than letting me have my own money to invest as I see fit.
Who is going to stop Wall Street before they kill again?
peej
Carissa
bostonboomer
dakinikat
ecocatwoman
mablue2
Mama Lopez
peggysue22
quixote
skydancingguestblogger
Mona (aka Wonk the Vote)
Sky Dancing 
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