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Banks on Jello

Does anyone else get the sense that the financial system is so royally screwed up that it’s one butterfly’s wing flap away from collapsing?

Wall Street shut down this morning because of a number of unusual high volume trades, the LIBOR scandal keeps building, the former CEO of Citigroup says merging with Travellers was probably not such a good idea, while Steve Rattner says don’t break up the banks, write a better Dodd-Frank.  Here’s the money quote from Rattner’s piece today:

Because of pressure from Sheila C. Bair, then the chairwoman of the Federal Deposit Insurance Corporation, the primary responsibility for winding down failing institutions was given to the F.D.I.C., an agency woefully ill equipped to deal with complex global entities. The Federal Reserve Board would have been a far superior choice.

In April 2011, the F.D.I.C. published a hypothetical plan suggesting that it could wind down a global octopus like Lehman in a manner similar to the way in which it routinely takes over small community banks. The report was widely derided.

We need a Dodd-Frank do-over to create the right oversight apparatus for huge banks. Regulators will always be outnumbered by bankers, and they will never find every problem. But, like prison guards, regulators are essential, even if they are outnumbered. In a world of behemoth banks, it is wrong to think we can shrink ours to a size that eliminates the “too big to fail” problem without emasculating one of our most successful industries.

You know who else didn’t like the idea of Sheila Bair taking over the banks?  Tim Geithner.  But he pressured Bair to back them anyway, guaranteeing shareholders a lot of money Bair didn’t think they deserved.  She would have made shareholders take substantial haircuts.  I’m betting that Rattner and his friends wouldn’t have liked that very much which is why it was off the table almost from the beginning.

I’m not sure I like Rattner’s tone.  Is he saying that the FDIC, which has something like 80 years of experience taking over failing banks is incapable of dismantling these behemoths or is he just dissing Sheila Bair?  Maybe it was just bad timing to have a woman as head of the FDIC when a man would have been able to do his job without meddling and disrespect.  Or maybe the world of the political elite should be held accountable for the fact that its ingrained sexism appears to be behind some phenomenally bad decisions in the past 13 years.  There’s more than one account of Bair being called “hard to work with” and “not a team player”.  Those are code words, baby, for we don’t want to listen to her and we’re going to pull out the old sexist staples to knock her status down.  Well, it worked so well against Bair and Brooksley Born, Elizabeth Warren, Christina Roemer and Hillary Clinton.  The pattern is obvious.  They don’t even pretend to hide it anymore.

I don’t know but I’m getting really pissed that so many sensible women are ignored and trampled so that the big boys can keep playing their games uninterrupted.  That shit’s gotta stop or why bother appointing women at all??  Again, this is Obama’s responsibility.  He hired these guys. And it’s not like his female White House staff didn’t warn him about the disrespect shown them.  What has Obama done about it?

Then there’s Rattner’s statement that even if we regulate the banks, they’ll just find a way around the regulations.  I’m not sure what point he is trying to make here.  If he’s trying to put us at ease, it’s not working.  It’s probably time to stop treating banks as a blessed industry while everyone else is getting damned.

And then there are the uber wealthy who are starting to worry that the Sans Culottes are going to turn the country into some dystopian state.  Maybe we shouldn’t have taken so much, they muse while they take in the scenery from their mansions.

Yeah, maybe.  Only time will tell.

And then there is Tim Geithner.  It looks like we were right about him.  He knew all about the LIBOR interest rate fix.  According to Taibbi, it was a well known secret on Wall Street.  Everybody knew it but the American people, who put their faith in Obama and his treasury secretary.

All I can think about is the stress tests and the way that Geithner assured everyone that the banks were solvent.  Who knows what the truth is but all of the Obama administration’s policies were built around the fiction of the condition of the banking industry.  Maybe the regular American citizen didn’t know about the LIBOR interest rate fixes but it’s hard for me to believe that Obama didn’t know.  You have to ask yourself what Obama was thinking when the stimulus turned out to be too small, bankers’ asses were saved and not homeowners, and he treated every bank crisis with an ad hoc solution instead of regulation.  Without regulation, it could happen again.

It’s all very, very shaky.

16 Responses

  1. I just hope they can hang on ‘tll October! I mean, what good is a crisis if it doesn’t have a decent last minute affect on a national election?

  2. I’ve been saying for a long time: the banks never had the money to pay back all they stole, and they still don’t. All that is going on now – and has been going on for a long time – is forestalling the inevitable collapse while the 1% take everything that isn’t bolted down.

    It’s just like the bogus mortgage modifications: the idea was clearly to wring a few thousand more out of hundreds of thousands of practically destitute “homeowners” before throwing them out of their homes. That’s a lot of moolah.

    But now it’s over. And they know it. There is no regulation that can fix this mess. There is no money. They gambled it away, like the sick addicts they are. We’ve paid their gambling debts and more (including their bonuses). It’s never enough. Why do we need banks anyway? We don’t. Give them nothing.

    I can’t seem to muster an ounce of interest in this election. I didn’t vote in the primaries (the first time in 50 years), and I may not bother in November either. Don’t tell me to care about Romney being extremely rich and a true 1%-er (Obama being just a wannabe). Of course it’s true, but who cares? Is that a reason to vote for Obama? I think not. No one’s doing shit for me or mine – or the causes I care about. Man, if I’m an indicator, the 1%-ers should be quaking. Goddam addicts.

    Sorry for the rant. This country is so over. That makes me very angry.

    • You and I share the same sentiment about the election so far. I don’t really care. Neither candidate is going to fix a damn thing.
      But that doesn’t mean I’m not going to vote. There are other parties on the ticket.
      And there’s always a chance that the Democrats will shake things up before the convention is over. I never rule it out.

      • Oh, I’m going to vote. For some candidate viewed as “left” — to not vote registers nothing. The only good protest is one that makes a mark.

      • Don’t hold yer breath on dat.

        They are too stupid or too afraid to ask Obama to sit this one out. Even if they did, who do they got for a reliever?

        Hillary don’t want it.

        We are so boned.

      • You’re younger than I. This year I vote no. As to how I cast that vote, I see no need to decide until November. Whatever I feel at the time will say “Eff you” the loudest. Right now, I’m boycotting the whole damn charade.

        IMO, there is no chance that anything will change. I avoid hope.

  3. A butterly’s wing, a cat’s whisker, an eyelash. The financial system is just as shaky now as it was four years ago. Maybe more so. THis is because nothing was done to fundamentally restructure the financial system after it nearly seized up in 2008. Through bailouts, direct and indirect, and suspension of mark to market accounting rules and other accounting fictions, the biggest banks have been allowed to carry on as if they are healthy. But they are not. Keep a close on developments in Europe. US BAnks have absurd amounts of derivative expoasurethere. ANy principal awrite downs will cascade through the system, collapsing banks like JP morgan and Citigroup. Katiebird’s time horizon of October is not at all far fetched.

    • I don’t know what a collapse would look like. Or how it would affect the election. Which. Is. Not. A. Game….. So, how would it affect us?

      • Honestly, I have no idea how it would play out. Possible bank holiday…we avoided it in 2008, I doubt we would avoid it now.

        • I wish we would have had it. It would have been the better outcome.
          Depositors of the Big Insolvent Banks could have been refunded up to their FDIC limits and then the banks themselves could have been exterminated and the profitable wreckage sold off to non-insolvent banks. Also, they could all have been re-Glass Steagallized at that time. It would have been the better outcome.

  4. ANd by the way, I think we need more women in positions of authority. Species survival requires it, and I’m not joking.

  5. I think

  6. I feel the same as you mjames; I’m not voting this year. Like you said, it’s a charade. The only way the dems could shake anything up is if they found pixs of Mitt with rosey cheeked boys.

  7. Too big to fail is too big to permit. The logical response would be to repeal all the laws which repealed Glass-Steagall and simply restore Glass-Steagall to its former force of law status. Then drag all the relevant banks to the edge of the Glass Steagall cliff and throw them over so they break up on the sharp Glass Steagall rocks far below. And those pieces which did not bleed out and die could be permitted to remain alive.

    What was Obama thinking? He was thinking about all the money he’ll get after leaving office. Millions and millions of dollars. Millyuns.
    Maybe he’ll get a seat on the board of JP Morgan. Maybe a position with Goldman-Sachs. (He won’t be given a partnership in the Carlyle Group, though. Just a feeling.).

    If The System collapses, does it crush kill destroy everyone and everything under it? Or does The System delaminate into a number of subsystems, some of which keep separately spinning? Perhaps those people who can . . . should seek out and enter into their friendly neighborhood subsystems. Put their money if they have any in a regionalocal mini bank or micro bank or credit union. AFter paying down all their debts to Debt Zero, including fanatical prepayment of the principal on their mortgages . . . if they have clear title to the house they think they “own”, and if there is no MERS pollution or other legal contamination of that title. If there is . . . then I don’t know what to say.

    People might also get clear on the difference between “money” and
    “wealth”. People might begin to act on their knowledge of what that difference is. Here’s a hint: after all the frauds and swindles, I notice that not a single sardine has been sucked out through the side of a single one of my cans of sardines. There is a lesson in that somewhere.

    • No way that’s gonna happen, it takes too much cash to run a campaign for a pol to depend on donations from a mostly disinterested citizenry.

      • Do you believe a system crash will destroy every subsystem within the system? Or do you believe that some subsystems will continue independently semi-existing?

        Are you making Survivalist preparations to Survivalise among the wreckage of a collapsed system?

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