Archive for October, 2010

Fixing the financial system

Saturday, October 30th, 2010

We are in trouble, the entire west is in trouble, in substantial part because the financial system has been leaking a lot of money.  So has every other part of the governing apparatus, but the financial system is the biggest hole in the bucket.

Now a lot of people are saying that this is a revolutionary election, it is about fundamental change.  Thomas Sowell, a man I enormously respect, tells us this is a crossroads election.  But is not.  The Democrats are driving the bus towards the precipice in top gear with the pedal flat to the metal, the Republicans propose to proceed with the pedal not quite flat to the metal.  Some of the unelectably extreme elements of the Tea Party are suggesting a lower gear.  In Britain, they applied supposedly radical cuts – which “cuts” some how result in a substantial increase in government spending.  Before the “cuts”, an ordinary Briton had to be crazy if he planned to work, marry, have kids, and support his own kids.  After the “cuts”, he still had to be crazy if he planned to work, marry, have kids, and support his own kids.

But let us focus on the biggest single money leak:  The financial system, for all the other problems resemble that.  If we had the will to fix the financial system, we would have the will to fix all the other problems.

The Market Ticker proposes a general audit of the banks:  Shut down the insolvent banks, and remove their management permanently from the banking industry.  This seemingly addresses the problem of crooked financiers.  If we cannot jail them, we can at least fire them.   Unfortunately, it does not ask why we are overrun with crooked bankers.

In America, the problem was the CRA and affirmative action lending.  The regulators required a banker to make loans to certain voting blocks that there was no way could legitimately be made – so only crooked bankers survived.  If a banker is still in business, he is a criminal.  But world wide, we saw a similar outbreak of crooked lending, often with very different beneficiaries.

The common factor in all this crooked lending was Basel:  Basel means that regulators are the ultimate decision makers as to what is a risky loan and what is a safe loan – which means that politically correct loans are necessarily supposedly safe, and politically incorrect loans are necessarily supposedly unsafe – which means that a banker has to be corrupt.

So to fix the banking system, have to undo Basel.  This sounds easy.  The left claims that Basel is deregulation, therefore extremely bad and the big cause of our financial troubles;  The right claims that Basel is regulation, an explosive expansion of regulation, therefore extremely bad and the big cause of our financial troubles – except however that only one minor candidate, widely viewed as ludicrously extreme, proposes to undo Basel.

Every candidate claims to hate the banksters twice as much as every other other candidate – but again only one candidate proposes to purge the banking system of zombie banks and crooked bankers.

You will notice the the fix for the financial system is the wholesale rollback of thirty years of financial regulation (or, as the left call it, deregulation), the mass firing of the good and the great, the powerful, the important and the influential, a large portion of the most eminent graduates of our most eminent universities, and the imprisonment of a significant fraction of them.  Simply apply a similar fix to every part of our society, and the problem is solved.

We have a society that believes that children should not be spanked, that thieves should not be flogged, that women should not suffer adverse consequences for bearing children by men other than their husbands – and that graduates for the most eminent universities should not lose their jobs for corruption or incompetence.

hyperinflation of the US$

Friday, October 29th, 2010

A great storm first manifest as clouds on the horizon. The Republicans are going to wish they had not won the 2010 November elections.

Supposedly US inflation is near zero, yet food, fuel, and heating oil has risen substantially.

Gonzalo points out

Grains as a class have risen over 33% year-over-year. Refined oil products have risen just shy of 13%, with home heating oil rising 18% year-over-year. In other words: Food, gasoline and heating oil have risen by double digits since 2009. And the 2010-‘11 winter in the northern hemisphere is approaching.

Supposedly, food in the supermarket is not rising, or not rising yet, yet bulk prices of the commodities you need to live on have risen by thirty to fifty percent.

If this has not shown up in the supermarkets yet, it is going to show up mighty soon.

The storm, inflation rates that are quite obviously disruptive and unacceptable, will likely be raging vigorously some time in 2012. There may well be continued reluctance to admit what is happening. I will not be much surprised if official statistics and the New York Times announce that everything is coming up roses even in 2012

Officially, all is roses today, yet Case Research reports

commodity prices

War on masculinity

Thursday, October 28th, 2010

Roissy has a couple of great posts about the war on masculinity  “Belittle League” and “The medicalization of maleness

The supposedly unelectable Sarah Palin

Tuesday, October 26th, 2010

The Democrats assure Republicans that Sarah Palin is unelectable, and that for her to be nominated for president in 2012 is their wet dream, because it  would assure Obama of a second term, that if Republican nominate Sarah Palin, Democrats will be celebrating.

At the same time, the Democrats are quietly pushing the supposedly much more electable Michael Rubens Bloomberg as Republican presidential candidate in 2012, creating opportunities for him to receive favorable publicity, giving him lots of respect in Democrat controlled publications.  If he is so much more electable, why are the Democrats pushing him and mobilizing to prevent Sarah Palin from getting the nomination?

Never accept advice from your enemies.

The White House misses no opportunity to get the supposedly highly electable Michael Rubens Bloomberg some favorable publicity – Obama golfs with him, floats his name as treasury secretary, conspicuously sends prominent members of his government to conspicuously seek Bloomberg’s supposedly wise advice.  If I ask someone’s advice, I do not announce it with a fanfare.

This is mighty odd behavior for a White house that supposedly would  celebrating if the supposedly hopelessly unelectable Sarah Barracuda gets the nomination, rather than the supposedly terrifyingly electable Michael Rubens Bloomberg.  As they miss no opportunity to tell us they hope for Sarah Palin’s nomination, they also miss no opportunity to tell us they are terrified of Bloomberg’s nomination – and miss no opportunity to make Bloomberg’s nomination happen.

Sarah Palin proposes an insignificantly tiny reform

Friday, October 22nd, 2010

Sarah Palin observes that National Public Radio has purged one of its commentators for mentioning the unmentionable, and suggests that National Public Radio be defunded for silencing debate and attempting to promote ignorance. Several other prominent Republicans have said the same thing, or endorsed Sarah Palin saying it, Sarah Palin being merely the most famous and influential of more republicans than I can shake a stick at.

This is a tiny, tiny, step towards defunding the left. To actually defund the left, need to abolish the illegal and unconstitutional departments of Education and energy, the National Endowment for the arts, and the environmental Protection Agency.

Of course if we cannot roll back Basel, despite the fact that under Basel’s regime of politicized lending the entire banking system of the west has been leaking vast amounts of money and continues to do so, we cannot roll back funding for the left.

Numerous blogs are thrilled because a noted political leader has proposed we actually move slightly right, rather than merely proposing we move left slightly slower, and promptly been supported by lot more:  x, x, x, x, x, x, x, x, x, x, x, x, x, and more blogs than I can shake a stick at.

The thrilled response to Sarah Palin’s suggestion shows how rare such suggestions are.

Who fortold the financial crisis?

Wednesday, October 20th, 2010

Howard Husock did in 2000

Winning will be another Republican disaster

Wednesday, October 20th, 2010

Everyone on the Republican side is sucking up to the anti capitalist left – including Sarah Palin and Christine O’Donnel.  None have the will to reverse the policies that are ruining the economy, making the middle class poor and insecure.

So, when elected, will get the blame for the consequences of these policies.  Since the supposedly hard core capitalism of the Republicans will not work, obviously the solution must be more socialism.

Sarbanes–Oxley, the regulatory door revolving, and Basel, have installed in power a permanent business elite that cannot lose power no matter how incompetently they screw up, and cannot be prosecuted no matter what criminal deeds they commit – foreclosuregate, the ratings agencies, and the leadership of the too-big-to-fail banks being examples of this problem.

The regulatory apparatus that locks this elite in place and protects them against market forces has to be removed – a program that is unthinkably and unimaginably radical, far more extreme than the most extreme of the supposedly extreme tea party candidates.

The problem is not the dramatic expansion of government spending.  The problem is the vastly more dramatic explosion of the regulatory state such as, for example Sarbanes–Oxley, which has largely criminalized the great engine of jobs creation, ended the formation of new small businesses, and Basel, which gives the state, and such private enterprises as the state chooses to privilege, the task of assessing financial risk.

Elections do not matter.

Monday, October 18th, 2010

The most extreme of the “right wing” candidates are proposing measures far too feeble to make a difference. Consider for example, the mortgage scandal. Where is the candidate that suggests that to fix our financial system, the bums (the entire financial sector of wall street and the regulators to which they are connected by a revolving door) need to be fired for incompetence and imprisoned for fraud?

A lot of people are proposing “solutions” for the mortgage crisis – but all these “solutions” propose that the people in charge of the too-big-to-fail banks and their regulators will remain powerful, important, and out of jail, despite demonstrated criminality and gross incompetence.

The ruling elite has lost the capacity to discipline itself.  Power is slipping out of their feeble hands, falling into the street.

Our society has reached that awkward state, too late for reform, too soon to shoot the bums, but that stage is usually irreversible.  It will eventually reach the time to shoot the bums stage.

Illegality by our elite is provoking illegality by ordinary middle class people.

As Market Ticker tells us:

This is where lawlessness leads us – to more lawlessness.  Once you commit a lawless act against someone and are not punished for it you have invited them to retaliate with complete disregard for the law in their response. You are only required to deal ethically and morally with an ethical and moral entity across the table – one who ignores the law loses their right to demand that respect in return.

This mess begins with the securitization and sale of these mortgages in the first instance.  It begins with whether or not the original banks actually transferred the notes at all (there’s plenty of evidence they did not) and whether the representations and warranties were complied with when these securities were sold to investors (we know in many cases – if not all – they were not, from FCIC sworn testimony.)

We have turned a blind eye to these lawless acts for the better part of a decade – not one indictment has issued for securities fraud over these matters.  And it’s not just mortgages – we know banks were involved in ripping off communities such as Jefferson County, we know they are alleged to have been involved in rigging municipal debt offerings (which raised the cost of living for everyone through higher taxes) and yet not one bank officer or bank itself has been placed under indictment for any of it.  Further, the FBI warned in 2004 of an “epidemic” (their words) of mortgage fraud, and instead of it being prosecuted the agents were pulled and reassigned.

We have had two sequential administrations – Bush and now Obama – that have intentionally refused to prosecute any of this lawless behavior.  This refusal continues to this very day with admissions in depositions under oath of the commission of literal tens of thousands of felonies per month (each instance of falsely swearing before a court is a separate count of fraud upon the court and, in the case of “robosigning”, forgery – affixing a notary’s signature by other than the actual notary.)  Yet despite this having been confirmed in multiple depositions going back several months not one indictment has issued thus far and Attorneys General talk about not wanting to “upset” the banks or the “economy.”

The whitewash proceeds

Saturday, October 16th, 2010

One of the bigger criminals in the mortgage scam was Former Countrywide CEO Mozilo.  The SEC has made a symbolic settlement with him and a couple of his accomplices for seventy two million dollars, not a dime of which he has to pay personally, and which would be peanuts even if he had to pay it personally.  As a part of the agreement, all potentially embarrassing details associated with his crimes are sealed from nosy outsiders.

What little money will be paid, will be paid from an escrow fund the company set up to cover shareholder litigation – and since Countrywide was taken over by the FDIC, this means that the government is paying the money to itself.

The enormous mortgage-bond scandal

Friday, October 15th, 2010

Felix Salmon has found an interesting document in the financial crisis inquiry hearings.

It seems the banks not only knew that the loans they were selling to investors generally failed to meet underwriting standards, they were so careless as to have documents lying around saying so in plain English.

Seems like they were a bank of morons.  When I was involved in criminal conspiracies, none of us would write in plain English, and we would very rarely speak in plain English.

But if you are a regular visitor to his blog, that we are ruled by dim witted criminals is unlikely to surprise you. What has, however, surprised me, is that the political branch of the conspiracy failed to swiftly throw the bankster branch to the wolves and blame them for everything. If I was in Obama’s shoes, in 2009 I would have been preparing federal prosecutions to generate interesting headlines just before the 2010 mid term elections, but instead both political parties continue in cover up mode.

The ruling elite is too soft on each other to hold on to power for very much longer. As soon as we get a really big crisis, are likely to fall.