Wednesday, January 26, 2011
While the Financial Crisis Commission Report Looks Impressive At First Glance, It Doesn't Hit Hard Enough ... and Won't Lead to Any Real Change
The Financial Crisis Inquiry Commission largely blames Greenspan, Bernanke, Geithner, Summers, the rating agencies, SEC and big banks for the economic crisis. (Here's the final report).
Bernanke is still Fed chief, and the government has substantially increased the Fed's power in the last year. See this, this, this, this and this.
Geithner is still Secretary of the Treasury.
Summers just resigned, being replaced by someone with a virtually identical philosophy, background and mindset as Summers.
The rating agencies are unrepentant, and have not been reined in. They are still government-sponsored monopolies which are accept bribes to give high ratings. And see this.
The SEC is still not acting as a real watchdog, and the banks are still speculating wildly with excessive leverage and acting as predators - instead of supporters - of the real (non-financial sector) economy.
Indeed, the banks are growing even larger, instead of being downsized, even though independent financial experts say that the very size of the banks is hurting the economy. The FCIC report doesn't really tackle that issue (the phrase "too big to fail" does not appear in the report itself, only in a very peripheral way in the footnotes).
Nor does the report detail the fact that inequality in the U.S. is higher than it has been since 1917, and that inequality was one of the prime causes of the economic crisis. The FCIC does not even mention the words "inequality" or "oligarchy", and mentions the word "oligopoly" only once (in a footnote) .
And while the FCIC report discusses mortgage fraud, it does not dig deeply enough into fraud by the largest financial players, detail other types of financial fraud, or push hard enough for prosecution, even though fraud was one of the core causes of the financial crisis, and one of the main reasons that the economy has not stabilized.
For example, the report uses the word "fraud" 46 times, compared to 167 mentions of "leverage". The phrases "control fraud", "accounting fraud", "regulatory capture", "systemic fraud", "criminal fraud" and "criminally negligent" do not appear anywhere in the report, nor do the words "looting" or "Ponzi". The word "prosecute" appears only once (and only in a historical context), and the word "prosecution" appears only 6 times (and half of them are buried in footnotes). The word "corrupt" appears only twice (one of them in a footnote).
So - while the FCIC report looks impressive at first glance - it doesn't hit hard enough, and is not going to lead to any real change.
And see this, this and this, and this visual representation by Tyler Durden of the most frequently-used words in the report.
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You know what every member..of every committee...from every party and affiliation is just FOS!
ReplyDeleteFCIC Finds Majority Of Revenues In Goldman's Most Profitable FICC Division Came From Derivatives
Frequent readers know that when it comes to Goldman Sachs, Zero Hedge has consistently claimed two things: i) that in the peak bubble days, the firm regularly commingled flow and prop traders on its trading floor(s), thereby allowing prop traders to either front run the firm's flow accounts, or trade alongside them in real time; and ii) that when it comes to OTC derivative trading, Goldman Sachs is the de facto Wall Street monopoly, a status made even more acute following the annihilation of Bear and Lehman, thereby cementing the firm's undisputed role as primary fixed income/OTC derivative market maker. Whereas yesterday we received indirect confirmation of the former, when we learned that Merrill was slapped on the hand with a token $10 million fine for doing precisely what we alleged, and which we are certain will soon be reconfirmed transpired at all other major banks in the 2003-2007 period, Goldman most certainly, and probably profitably, included, tomorrow it will be made clear that Goldman was an effective monopolist within the derivative space, with a bulk of its revenues in its highest margin, FICC group, coming from derivatives. When tomorrow the FCIC releases its long-awaited 545-page report exposing a tiny fraction of the criminality on Wall Street, we will discover that "Derivatives accounted for 70 percent to 75 percent of revenue in the firm’s commodities business from 2006 to 2009, and “half or more” of revenue from interest rates and currencies, the firm estimated, according to a report by the Financial Crisis Inquiry Commission. From May 2007 to November 2008, about 86 percent of $155 billion in trades made by the firm’s mortgage business involved derivatives, the FCIC said."
In other words, derivatives have long been the driver behind the bulk of the revenue of the firm's most profitable group, in a time when the banking lobby (read Goldman) does everything in its power to prevent the collapse of OTC trading margins, and thus compromise the firm's second to none monopolistic position in the space. We are confident that when the FCIC report is released tomorrow, much more information on Goldman's activities will be gleaned.
No republican on the commission supported the findings.
http://www.zerohedge.com/article/fcic-finds-majority-revenues-goldmans-most-profitable-ficc-division-came-derivatives
Ok. Duh. We need a new system. And no, governments and politicians are not going to give us one. We need solutions. The Revolution is now and no, it does not have to be violent. Frankly, I am tired of hearing about what is wrong with the system because the whole current system is disgusting and I am willing to lose everything to get into a new system. Here is someone else's suggestion and it is a decent start:
ReplyDeletehttp://www.youtube.com/watch?v=4Z9WVZddH9w