Bill Daley, won't you please go home?
MIT's Simon Johnson exhibits the blindness and moral bankruptcy of our "technical" cadres in classic form:
Until this week, Bill Daley was on the top operating committee at JP Morgan Chase. .... These banks have captured the hearts and minds of top regulators and most of the political class (across the spectrum), most recently with completely specious arguments about why banks cannot be compelled to operate more safely....
Today’s most dangerous government sponsored enterprises are the largest six bank holding companies: JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. They are undoubtedly too big to fail – if they were on the brink of failure, they would be rescued by the government, in the sense that their creditors would be protected 100 percent. The market knows this and, as a result, these large institutions can borrow more cheaply than their smaller competitors. This lets them stay big and – amazingly – get bigger.
What's "amazing" about it? Versailles always doubles down on FAIL. Mission accomplished!
In the latest available data (Q3 of 2010), the big 6 had assets worth 64 percent of GDP. This is up from before the crisis – assets in the big six at the end of 2006 were only about 55 percent of GDP. ....
No one can show significant social benefits from the increase in bank size, leverage, and overall riskiness over the past 15 years. The social costs of these banks – and their complete capture of the regulatory apparatus – are apparent in the worst recession and slowest recovery since the 1930s.
Paul Volcker gets it; no wonder he has resigned. Mervyn King, governor of the Bank of England, gets it. Tom Hoenig, president of the Kansas City Fed, gets it. Elizabeth Warren, the tireless champion of consumer rights, gets it. Gene Fama, father of the efficient financial markets view, gets it better than anyone<[For some definition of "better"]
I discussed the issue in public for two hours at the American Financial Association (AFA) meetings in Denver on Friday with two presidents of the AFA (Raghu Rajan and John Cochrane) and a Nobel Prize winner (Myron Scholes). This is not a left-wing or marginal group – there must have been at least 500 people in the audience (video will be available). The top minds in academic finance understand the problem vividly and are articulate about it – there is no rebuttal to the points being made by Anat Admati and her distinguished colleagues.
This is not a left-right issue – again, look at the list of people who co-signed Professor Admati’s recent letter to the Financial Times. This is a question of technical competence. Do the people running the country – including both the executive branch and the legislature – understand economics and finance or not?
If the country’s most distinguished nuclear scientists told you, clearly and very publicly, that they now realize a leading reactor design is very dangerous, would you and your politicians stop to listen? Yet our political leadership brush aside concerns about the way big banks operate. Why?
Let me help Professor Johnson out, here, because the answer really is simple:
Because our "political leadership" are fraudsters and thieves who have arranged to share the take, and they hope to get away clean to their mountaintop gated communities before the reckoning. It’s that simple.
It's not a "technical" problem!
Let’s be honest. With the appointment of Bill Daley, the big banks have won completely this round of boom-bust-bailout. The risk inherent to our financial system is now higher than it was in the early/mid-2000s. We are set up for another illusory financial expansion and another debilitating crisis.
Bill Daley will get it done.
This from a guy who wrote a brilliant article on how the United States has become a banana republic run by banksters. What, did Johnson think that was rhetorical excess?
And people think I'm crazy when I saw that learning to grow your own food is going to be very useful.
NOTE FWIW, I think Versailles has managed to pump enough blood into the zombie, in anticipation of 2012, where they really to prefer Obama to Palin ("She's not like us"), so that, as long as the global elites don't panic and turn on each other, 2011 should avoid collapse. That's what I'm banking on... But no matter how much blood you pump into a zombie, it's still a zombie. So put all your time and energy into efforts that are sustainable and resilient, and get rid of any rent suck you have...