Daily Financial Crisis CAPSULE: Senator Dodd Under Pressure To Change Financial Reform Bill
March 28th, 2010 - by: danny
DOVER, Del. – Washington Mutual Inc. filed a Chapter 11 reorganization plan, two weeks after resolving a $4 billion dispute with JPMorgan Chase & Co. and the Federal Deposit Insurance Corp.
BEHIND JPM MORGAN’S WAMU DEAL
History Lesson”
“To trace something unknown back to something known is alleviating, soothing, gratifying and gives moreover a feeling of power. Danger, disquiet, anxiety attend the unknown — the first instinct is to eliminate these distressing states. First principle: any explanation is better than none… The cause-creating drive is thus conditioned and excited by the feeling of fear…
“Friedrich Nietzsche
Flashback: MORE On the Dismantling of Glass Steagall
Political SLEAZE has a much longer history
Baseline Scenario.com Dodd Under Pressure
Senator Chris Dodd has good political antennae. He knows that his financial reform bill will come under severe pressure because it has a weak heart — the provisions that deal with “too big to fail” are simply “too weak to make any sense.”
Stung by the hard-hitting critique of Senator Ted Kaufman earlier on Friday and unsure exactly where an increasingly combative White House is heading on the broader strategy vis-à-vis banks, Mr. Dodd took to the Senate floor yesterday afternoon — actually immediately after Senator Kaufman — in an attempt to sustain the momentum behind his approach to “reform”.
Note the prominent and rather defensive mention of Delaware, Senator Kaufman’s state, in what Senator Dodd said (the wording here is from the verbatim recording, not the official transcript):
“A business, as I say respectfully, in Connecticut or Delaware or Colorado, a homeowner in those states shouldn’t have to pay the price because a handful of financial institutions got too greedy, too risky, they were unwilling to examine what they were doing or did, recognizing that the federal government would bail them out if they made a bad choice, which they did.”
TheBaselineScenario.com: What happened to the global economy and what we can do about it — Who Will Tell The President? Paul Volcker — Simon Johnson
Against all the odds, a glimmer of hope for real financial reform begins to shine through. It’s not that anything definite has happened — in fact most of the recent Senate details are not encouraging – but rather that the broader political calculus has shifted in the right direction.
Instead of seeing the big banks as inviolable, top people in Obama administration are beginning to see the advantage of taking them on — at least on the issue of consumer protection. Even Tim Geithner derided the banks recently as,
“those who told us all they were the masters of noble financial innovation and sophisticated risk management.”
In part, this is window dressing. But, in part, it recognizes political opportunity — the big banks are unpopular because they remain completely unreformed and unrepentant. And in part it responds to a very real danger — Senator Dodd’s bill is so obviously weak on “too big to fail” issues that it will be hard to paint its opponents as friends of big banks. [More here →]
NPR: As Congress considers new financial regulations, Simon Johnson has some advice that will surely not be taken. But Johnson’s advice does possess at least one virtue – you can sum it up in just a few words: If they’re too big to fail, make them smaller.
Johnson and James Kwak are the co-authors of a new book, called 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. The book opens on March 27, 2009, in the White House, where President Obama is meeting with the CEOs of some of the largest financial institutions in America. All 13 of these institutions played a role in the financial crisis. Looking back one year later, Johnson says that six of these banks – “The usual suspects; they’re the megabanks” – are not just too big to fail; they’re too big for the good of the American market. [Excerpt: '13 Bankers' here →]
“13 Bankers”: National Public Radio Interview
‘Once-In-A-Century’ Event • Taleb Says Any Pilot Who Doesn’t Know About Storms Shouldn’t Be In the Cockpit
→ Washington’s Blog (see blog for embedded videos — I can’t figure out how to embed here).
Greenspan’s big defense is that the financial crisis was caused by a “once-in-a-century” event.
Forget about the fact that the “once-in-a-century event” couldn’t have happened if Greenspan’s Fed hadn’t:
Turned its cheek and allowed massive fraud
Acted as cheerleader in chief for unregulated use of derivatives at least as far back as 1999 (see this and this)
And for subprime loans
Allowed the giant banks to grow into mega-banks. For example, Citigroup’s former chief executive says that when Citigroup was formed in 1998 out of the merger of banking and insurance giants, Greenspan told him, “I have nothing against size. It doesn’t bother me at all”
Argued that economists had conquered the business cycle, and that modern, technologically advanced financial markets are best left to police themselves
Preached that a new bubble be blown every time the last one bursts
Kept interest rates too low
And did alot of other hinky things
More importantly, as Nassim Taleb repeatedly points out, financial experts who don’t plan for rare events are like pilots who don’t know about storms.
There are storms out there, Taleb says, and any pilot who doesn’t know how to deal with storms shouldn’t be flying. Similarly, no one should be in a position of financial leadership if they don’t know about — and plan for — the infrequent event:
BUBBLE FORMING IN BRAZIL
March 26 (Bloomberg) — Brazil’s stock market is forming a “bubble” and may suffer a “correction” next year as valuations soar, according to Gerard Cremoux, co-head of Latin America investment banking at UBS AG.
The increase in companies issuing shares shows that Brazil’s stock market is becoming overvalued, Cremoux said. OSX Brasil SA delayed and cut an initial public offering last week that was originally planned to be the biggest in the world this year. Petroleo Brasileiro SA may raise $15 billion to $25 billion in a planned share sale, Chief Executive Officer Jose Sergio Gabrielli said this week. The share sale may climb to $35 billion, Cremoux said
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About Danny Schechter
Danny Schechter is an Emmy award winning journalist, television producer and independent filmmaker who also writes, blogs and speaks about media issues.
His latest film is PLUNDER The Crime Of Our Time.
Mr. Schechter is NOT the Godfather of Soul.
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