Wall Street Reform

Rick Perry Was Right (Sort of)

by Ross Kaplan on April 28, 2012

Seceding Separating From Wall Street

Texas Governor Rick Perry was a bust in the Republican Presidential primaries, but I credit him — sort of — for coming up with the best (and possibly last) solution to this country’s “Wall Street problem.”

Namely, what to do about an out-of-control, parasitic, havoc-wreaking, corrupt (and corrupting) segment of the economy and – dare I say — broader culture.  (Yes, I know, but what do I REALLY think about them??).

It was Perry, of course, who threatened a Texas secession in response to out-of-control, “Socialist” policies emanating from Washington.

Not really viable, but he was definitely on to something.

With real financial reform off the table; no accountability whatsoever for egregious lawbreaking; and a political and regulatory system that can only be called thoroughly “captured” by said Wall Street interests . . . what’s left to be done?

Take a page from Perry’s playbook (no more “P’s” . . . promise :-) ).

Namely . . . figure out a way to separate the rest of the country from Wall Street.

Hey, Google!

Hey, Apple, Facebook, Amazon.com, Twitter, IBM, Intel, Microsoft, and Costco (yes, Costco).

I bet there’s some money in it if you figure out how.

See also  “A Financial Gettysburg Address“; and “Boycott Goldman Sachs?  How??”

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Firing Wall Street

by Ross Kaplan on October 8, 2011

The “RoboCop Solution” to the Financial Crisis

When it comes to holding the citizenry hostage, owners of pro baseball and football franchises have nothing on Wall Street.

The former, of course, have refined to an art form the practice of extorting tax dollars from cities and counties to build ever more expensive (and grandiose) sports palaces.

The pitch?

“Give us what we want or we’ll move the team someplace that will.”

Ironically, thanks to the Wall Street-engineered financial bust, that threat doesn’t pack the same punch today.

That’s because broke cities and counties are much less inclined to get into bidding wars attracting other cities’ pro sports teams.

“Bail Us Out — Or Else”

What’s any of this got to do with Wall Street?

Just this:

When the too-big-to-fail banks face an existential crisis like they did in 2008, they can go to the government — the people, in a democracy — and credibly say, “if you don’t give us what we want, we’ll crash and take the financial system down with us. 

Your savings will disappear, your checks won’t clear, and your retirement accounts will wither.

“Oh, and you’re likely to lose your job, too, because the company you work for won’t be able to get short-term financing and will fail.”

That’s a mighty potent — and scary — threat.

Defusing Wall Street’s “Or Else”

So, what’s the best way to transform such a threat into a hollow bluff?

Take away Wall Street’s control of the financial system.

In other words:  fire it.

In the 1987 movie RoboCop, the title character — a futuristic half-man/half machine – is powerless to apprehend the corrupt police chief because his software programming forbades his acting against a superior.

In the movie’s climactic showdown, the Mayor turns to the police chief and removes that impediment with this, three word instruction:  ‘Dick, you’re fired.”

In the next instant, RoboCop blasts the police chief through the high-rise boardroom’s wall of windows (and into kingdom come) with a hail of bullets.

How . . . gratifying.

Steps #2 and #3

Once Wall Street’s grip on the financial system has been released, step #2 is undertaking genuine, systemic reform aimed at reducing the very real risk of financial contagion.

That means making the too-big-to-fail banks smaller; reinstating Glass-Steagall and its firewall between investment and commercial banking; and regulating (or better yet, banning) credit derivatives (Warren Buffett’s “financial weapons of mass destruction”).

Step #3?

Throw the 100 Wall Street executives most responsible for the crash in jail, along with their enabling boards of directors.

P.S.:  The foregoing a little too graphic?

Consider this post instead:  ‘A Financial Gettysburg Address,’ from almost two years ago.

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Anti-Wall Street Guest Rant

by Ross Kaplan on August 22, 2011

Opting for Swedish over Japanese

Tired of my rants against Wall Street?

Consider this “guest” rant instead, which IMHO is pitch-perfect (minus a few #!%#!, perhaps):

After 40 years of pain avoidance, can we just rip off the f**kin’ band-aid already?  Enough with the asset price protection, it is the root cause of everything bad about the economy right now.  Had we saved the banking system and said f**k the banks themselves, we’d be two thirds of the way out of this by now.  Had we gone Swedish instead of Japanese and said the banks are now “Wards of the State” until cleaned up, then yes, we probably would have seen Dow 5000…but so what?  Was stopping at Dow 6500 so much better?  We would have had an unencumbered financial system at this point, one healthy enough to cope with a new leg down in housing, rather than the debt-ridden George Romero zombie film we find ourselves re-watching every quarter.

Pain avoidance and shortcuts is what we got instead.  Nobody gets fired and nobody upsets the banking-government nexus too much.  There are campaigns to be financed after all.

No wonder Obama put Volcker on ice as soon as he Dracula-sucked the Street Cred right out of his neck.  Volcker was probably telling him to fire everyone, take over the systemic banks, prosecute the asshole executives and piss off everyone in the short-term for the good of us all in the future.  Obama’s too eager to please to go down a road like that.

–Joshua M. Brown, The Reformed Broker

As I’ve written previously, it’s hardly the case that “no one knows what to do.”

In fact, at least away from Wall Street and Washington, there’s surprising consensus across a wide group of commentators on the step(s) needed to get out of our current financial mess.

So, thanks, Mr. Brown, you saved me the trouble.

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Time for a “Do-Over” on The Crash of ’08

by Ross Kaplan on August 4, 2011

Prescription:  ‘Take 2 4 Aspirin’

Seeing as how the current approach doesn’t seem to be working out so well, I hereby propose a “do-over” in dealing with the aftermath of The Crash of ’08.

Exactly what do I have in mind?

Instead of:

-Rewarding the perpetrators with bailouts;

–Punishing savers with the double-barreled whammy of zero percent interest rates and currency devaluation; and

–Continuing to turn a blind eye towards what Warren Buffett called “financial weapons of mass destruction” (credit derivatives);

How about the following . . .

Plan B

One.  Shrink the Too-Big-To-Fail financial institutions.

George Shultz, former Treasury Secretary and long-time member of Ronald Reagan’s inner circle, said —  back in the ’80′s, for God’s sakes —  ’if they’re too big to fail . . . make ‘em smaller.”

No, it’s not possible to “unbake a cake.”

But if you cut it into slices . . . it’s a lot easier to dispose of.

Two.  Reinstate Glass-Steagall. 

There was a reason Depression-era financial reformers made the citizenry’s savings off-limits to Wall Street:  they tend to blow it.

Or steal it.

Or leverage it to the Heavens, steal a chunk of it — and then really blow it.

(Sorry folks, but I call it as I see it). 

Three. Throw everyone with Wall Street connections out of government for a decade — preferably longer.  

The argument for letting Wall Street-types decide financial policy — if there ever was one — was that it was too complicated for mere mortals.

Well, guess what?

In the wake of the biggest financial chain reaction crack-up in a century, 55 mph speed limits are appropriate for awhile.

And so is simplicity.

Peter Lynch, of Fidelity Magellan fame, recommended investing in a business that “any idiot can run — because sooner or later, any idiot probably is going to run it.”

That’s the principle that should guide the (yet to be undertaken) redesign of the U.S. financial system (vs. the vulgarity known as “Dodd-Frank”).

Kindling and Tinder

“All of the foregoing is well and good,” I can hear some say.

“But in a financial emergency, immediate action must be taken.  What do you do first?”

So that’s why . . .

Four.  Financial authorities should summarily shut down the $600 trillion credit derivatives markets.  See, “Number of the Week:  $600 T-R-I-L-L-I-O-N.”

In a financial conflagration where the risk of contagion is so high, the first order of business should be to get rid of the tinder and kindling.

No, that doesn’t contain the fire.

But it deprives it of fuel to become even bigger.

Which just begs the question:

Are those four steps enough?

Certainly not.

But they’re a start.

Only once they’ve been undertaken will a second, deeper policy (and societal) response be possible.

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21st Century Feudalism: A Glimpse

August 1, 2011

“Nice . . . uh, Gig?!?” In 1998, I was gleaning the want ads and found a position for a Private Chef for a family…. I am presently one of 9 employees who work at their house. The place is huge and it is just the 2 of them. I cook dinner only 6 days [...]

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Fixing Wall Street: "So, What Do You Do NOW?"

December 1, 2010

Looking for the New Volcker’s Regular readers of this blog know that I could hardly be a harsher critic of modern-day Wall Street: its practices; its obscene pay for little or no economic contribution (“Wall Street is Worthless“); and its corrupting influence on our government and society generally. And I’ve got plenty of company. As [...]

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Attacking Wall Street’s Attackers

September 17, 2010

“But isn’t that . . . ‘Socialism’??” He who frames the question wins the debate. I’ve been struck in recent months, talking to various people about the economy, by two things: One. The generally limited vocabulary people have when it comes to understanding all things financial — even people who are otherwise very sophisticated, well-educated, [...]

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Obama, Lincoln, & Financial Reform

June 11, 2010

George McClellan Redux? Politicos will recall that much was made of Barack Obama’s admiration of Abraham Lincoln during and just after the 2008 Presidential campaign. In particular, Obama was said to have been influenced by Doris Kearns Goodwin’s book, “Team of Rivals,” which studied Lincoln’s management style. Clearly, in picking former adversaries like Hillary Clinton [...]

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