Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Logical Limits To Bubbles

by afew Thu Oct 16th, 2008 at 07:13:14 AM EST

The Washington Post has a noteworthy piece of history up: an episode in the saga of the Anglo Disease. It's the story of how, during Clinton's second mandate, "Bubbles" Greenspan, aided and abetted by then US Treasury Secretary Robert E. Rubin and Securities and Exchange Commission Chairman Arthur Levitt, stood in the way of a determined effort at regulation of credit-default swaps by the Commodity Futures Trading Commission.

The Fed, (then chaired by Greenspan), Treasury, the SEC, and the CFTC, are the four bodies charged with regulatory functions concerning American financial markets. In this case, one of them stuck out like a sore thumb by actually wanting to regulate. But the three others, especially "Bubbles of the Fed", got on the CFTC's case and resolutely fought off the danger.

Brooksley E. Born, from a Washington legal background, was head of the CFTC, and she had become known for expecting regulation to be applied. The CFTC's brief concerns futures markets, but Born was pressing the case for regulation of certain derivatives other than futures:

What Went Wrong

Unlike the commodity futures regulated by Born's agency, many newer derivatives weren't traded on an exchange, constituting what some traders call the "dark markets." There were now millions of such private contracts, involving many of Wall Street's top firms. But there was no clearinghouse holding collateral to settle a deal gone bad, no transparent records of who was trading what.

Born wanted to shine a light into the dark. She had offered no specific oversight plan, but after months of making noise about the dangers that this enormous market posed to the financial system, she now wanted to open a formal discussion about whether to regulate them -- and if so, how.


Greenspan, Rubin, and Levitt were determined to get in Born's way, and of course they succeeded, but not without a pitched battle described in detail in the Wapo article, centring first on a President's Working Group on Financial Markets meeting in April, 1998, then:

Born didn't back off on derivatives, either. On May 7, 1998, two weeks after her April showdown at Treasury, the commission issued a "concept release" soliciting public comment on derivatives and their risk.

The response was swift and blistering. Within hours, Greenspan, Rubin and Levitt cited their "grave concerns" in an unusual joint statement. Deputy Treasury Secretary Lawrence Summers decried it before Congress as "casting a shadow of regulatory uncertainty over an otherwise thriving market."

Wall Street howled. "The government had a legitimate interest in preserving the enforceability of the billions of dollars worth of swap contracts that were threatened by the concept release," said Mark Brickell, a managing director at what was then J.P. Morgan Securities and former chairman of the International Swaps and Derivatives Association.

Of course, this was a blockbuster argument of the "too big to fail" variety: regulation "would cast doubt over the legality of trillions of dollars in existing contracts and create uncertainty over how to operate in the market."

There were other arguments, notably from "Bubbles":

Greenspan also argued a free-market view. Self-regulation, he asserted, would work better than the heavy hand of government: Investors had a natural desire to avoid self-destruction, and that served as the logical and best limit to excessive risk.

They fought so well that they finally obtained from Congress a six-month moratorium on the CFTC's activity regarding derivatives. And, in 1999, Born left the CFTC.

In November, Greenspan, Rubin, Levitt and Born's replacement, William Rainer, submitted a Working Group report on derivatives. They recommended no CFTC regulation, saying that it "would otherwise perpetuate legal uncertainty or impose unnecessary regulatory burdens and constraints upon the development of these markets in the United States."

However:

The future that Born envisioned turned out to be even riskier than she imagined. The real estate boom and easy credit of the past decade gave birth to more complex securities and derivatives, this time linked to the inflated value of millions of homes bought by Americans ultimately unable to afford them. That created a new chain of risk, starting with the heavily indebted homebuyers and ending in a vast, unregulated web of contracts worldwide.

By appearing to provide a safety net, derivatives had the unintended effect of encouraging more risk-taking. Investors loaded up on the mortgage-based investments, then bought "credit-default swaps" to protect themselves against losses rather than putting aside large cash reserves. If the mortgages went belly up, the investors had a cushion; the sellers of the swaps, who collected substantial fees for sharing in the investors' risk, were betting that the mortgages would stay healthy.

The global derivatives market topped $530 trillion as of June 30 this year, including $55 trillion in the suddenly popular credit-default swaps; that $530 trillion represents all contracts outstanding. The total dollars at risk is much smaller, but still a hefty $2.7 trillion, according to an estimate by the International Swaps and Derivatives Association.

To make sense of those figures, compare them to the value of the New York Stock Exchange: $30 trillion at the end of 2007, before the recent crash. When the housing bubble burst and mortgages went south, the consequences seeped through the entire web. Some of those holding credit swaps wanted their money; some who owed didn't have enough money in reserve to pay.

Instead of dispersing risk, derivatives had amplified it.

Europe: The article, in pursuing the history of derivatives and especially CDSs, mentions the pressure put on the US by European regulatory authorities alarmed by the size of the market and its opacity. But the US stood firm.

What They Said:

Annette Nazareth, SEC's head of market regulation in 1998-9: "It was an absolute siege on regulation."

Phil Gramm chairing a 2000 Senate Banking Committee hearing, pleading for "regulatory relief": I think we would do well to remember the Lincoln adage that to ask a society to live under old and outmoded laws -- and I think you could say the same about regulation -- is like asking a man to wear the same clothes he wore when he was a boy."

Arthur Levitt, with hindsight: "In fairness, while Summers and Rubin and I certainly gave in to this, we were not in the same camp as the Fed... The Fed was really adamantly opposed to any form of regulation whatsoever."

So it was all really "Bubbles"?

Alan Greenspan: "Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary... Regulation that serves no useful purpose hinders the efficiency of markets to enlarge standards of living."

Go on, read the whole article.

Display:
I'm struck again by the naive reductionism of the marketista view of humanity.

Investors had a natural desire to avoid self-destruction, and that served as the logical and best limit to excessive risk

"Natural" man, again. Leave things to "nature", and all will be well.

Dr "Bubbles" Pangloss.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Oct 16th, 2008 at 07:19:05 AM EST
Leave things to "nature", and all will be well.

Well, they're right, if you believe that concentrating wealth in the hands of the luckiest is a good thing.

by Colman (colman at eurotrib.com) on Thu Oct 16th, 2008 at 07:55:04 AM EST
[ Parent ]
Is THAT how this system works!  DAMN!  I wish I knew that years ago.

Let me get this straight.  Analogy Time.

Somebody breaks into your house, steals all your goodies, and is LUCKY enough that you aren't home, or you don't have a pack of fierce dogs protecting your place, or you don't have a modern security system, or ... on and on.

And you are LUCKY enough to live in a society which allows you to get away with this shit, especially if you are REALLY WEALTHY/REALLY CONNECTED because then, regardless of how many people your actions destroy, you get off.

LUCK!  DAMN IT!  Now I find out, after all these years.  Just the roll of those damn cosmic dice.

(Sorry Colman.  Haven't gone for my morning walk yet.  I get cranky.)

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Thu Oct 16th, 2008 at 08:21:25 AM EST
[ Parent ]
Even in a world of moral paragons a free market system will end up concentrating wealth in the hands of the lucky.

Even the real world, being an evil shit is not enough to get wealthy. You have to be lucky.

by Colman (colman at eurotrib.com) on Thu Oct 16th, 2008 at 08:57:45 AM EST
[ Parent ]
Has someone already tested your model in a computer or by some dice rolling scheme?  I'd like to see the data on this one.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Thu Oct 16th, 2008 at 09:02:36 AM EST
[ Parent ]
Anecdotal evidence: I've been an evil shit all my life, and look where it's got me.

Signed: Unlucky Jim

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Oct 16th, 2008 at 09:05:42 AM EST
[ Parent ]
Morning/afternoon afew.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Thu Oct 16th, 2008 at 09:07:32 AM EST
[ Parent ]
There was some work done I read about, but I lost the reference after I saw it and have never been able to find it.
by Colman (colman at eurotrib.com) on Thu Oct 16th, 2008 at 09:12:25 AM EST
[ Parent ]
Maybe we should try to recreate your scenario here at ET.  Might be doable.  What do you think?  Generate our own data.  See what it looks like.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Thu Oct 16th, 2008 at 09:22:23 AM EST
[ Parent ]
<paging Migeru> Where's the previous thread on this? Any ideas?

Actually, I wouldn't mind modelling that.

by Colman (colman at eurotrib.com) on Thu Oct 16th, 2008 at 09:25:34 AM EST
[ Parent ]
Far fucking out!  Let's do it!

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Thu Oct 16th, 2008 at 09:31:21 AM EST
[ Parent ]
Look at the Bak/Sneppen model.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Oct 16th, 2008 at 09:36:56 AM EST
[ Parent ]
when you talk DIRTY!  MORE!  MORE!  :)

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Thu Oct 16th, 2008 at 09:40:09 AM EST
[ Parent ]
Why?
by Colman (colman at eurotrib.com) on Thu Oct 16th, 2008 at 09:40:14 AM EST
[ Parent ]
What exactly is it we're trying to model?

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Oct 16th, 2008 at 09:43:58 AM EST
[ Parent ]
Just one thing.  Let's make sure we're not reinventing the wheel.  Someone should do a library search to see what's already been done in this area.  Doesn't mean we won't do our bit.  It's always good to learn from others' mistakes.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Thu Oct 16th, 2008 at 09:34:31 AM EST
[ Parent ]
You're the weirdest scoutmaster I ever came across ;-)

You can't be me, I'm taken
by Sven Triloqvist on Fri Oct 17th, 2008 at 04:13:15 PM EST
[ Parent ]
Define "free market system".

All you need really is a game of chance in which the more you have to play with the more profitable bets you have access to. And I think that's a feature of any fair game of chance because it has more to do with things like gambler's ruin than it has to do with the specifics of the game being played.

In probability theory, the term sometimes refers to the fact that a gambler will almost certainly go broke in the long run against an opponent with much more money, even if the opponent's advantage on each turn is small or zero.


A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Oct 16th, 2008 at 09:48:41 AM EST
[ Parent ]
Back in a couple hours.  Let me know if you and Colman want to continue.

I'm IN!

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Thu Oct 16th, 2008 at 09:53:43 AM EST
[ Parent ]
Assume a collection of agents taking actions with uncertain payoffs.

Assume the average payoff is 103% (allowing for economic growth) and that the payoff distribution extends down to 0% (ruin).

Assume the agents can place more distinct bets the more money they have. (Assuming a nonzero smallest bet size suffices)

Then the wealthier players can diversify their variance away and capture the 103%. The less wealthy players cannot and are more likely to go bust.

If the average payoff is less than 100% so the game is a loss to players, and you must play, it is known that diversification doesn't work because you want to have sufficient variance to be able to have payoffs about 100% some of the time.

Is that it? The proofs are left as an exercise for the (bored) reader.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Oct 16th, 2008 at 10:15:07 AM EST
[ Parent ]
Nope.  I have other ideas.  Will explain later but this is looking like the germ for a computerized game for kids/adults.  Are there such things already on the market?

More later.  Have to hit the sack, rest my back (I'm a budding poet).

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Thu Oct 16th, 2008 at 12:17:12 PM EST
[ Parent ]
Sometime in mid to late '70s Psychology Today had an article by an aspiring business psychologist on the attitudes towards the role that luck had played in the success of executives and managers in Fortune 500 businesses.  All I recall is the conclusion: out of all those surveyed not one attributed any significant role in their success to luck .  They all credited merit and hard work!  What this demonstrated was that there was a powerful consensus that was very successfully conveyed to all newcomers that, in corporate America, success was due to ability and hard work and that the role of luck was to be vigorously denied if one were to "fit in."  The problem with studies on such matters is one of obtaining access to a representative sample of that population while retaining sufficient independence to provide any integrity to the survey.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Oct 16th, 2008 at 10:24:43 AM EST
[ Parent ]
Luck undermines their right to keep all the winnings to themselves.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Oct 16th, 2008 at 03:43:27 PM EST
[ Parent ]
I remember that article- I may be able to find the original research.
Anecdotally, I grew up in a community of "self-made men", and I remember not one among them -the parents of my friends, the advisers and parents of my scouting buddies, associates of my father (a history teacher) who ever admitted that luck played any role in their worldly success. Yet the plain fact that inherited status and money played a huge role was powerfully apparent.

I did it. So "they" can too. If "they" weren't lazy/stupid/black/catholic/jewish/-------

Poor = defective, for these rich men from Upper Arlington, Ohio.  

Capitalism searches out the darkest corners of human potential, and mainlines them.

by geezer in Paris (risico at wanadoo(flypoop)fr) on Thu Oct 16th, 2008 at 11:53:38 PM EST
[ Parent ]
'Most rapacious, greedy, shortsighted and amoral', surely?

What bothers me is that we're still not seeing enough of a pushback on this. So far all we have is a promise to think about minimising bonus culture.

With Rubin whispering in Obama's ear, I'm not convinced we're going to get more than that.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Oct 16th, 2008 at 08:51:54 AM EST
[ Parent ]
From the Wapo article:

Rubin said, in the recent interview, that he had his own qualms about derivatives, going back to his days as a managing partner at Goldman Sachs. He later wrote in a 2003 book that "derivatives, with leverage limits that vary from little to none at all, should be subject to comprehensive and higher margin requirements," forcing dealers to put up more capital to back the swaps. "But that will almost surely not happen, absent a crisis."

Asked why he didn't suggest stricter capital requirements as an alternative in 1998, Rubin said, "There was no political reality of getting it done. We were so caught up with other issues that were so pressing. . . . the Asian financial crisis, the Brazilian financial crisis. We had a lot going on."

So, ya see, if there's no crisis, there's not a hope of getting done what needs to be done; but when there is one, there are so many other things to do, sigh...

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Oct 16th, 2008 at 09:03:05 AM EST
[ Parent ]
Yeah, Rubin belongs right up there with Greenspan as an advocate for self serving willful blindness.  He convinced Clinton to buy into it in return for low bond rates and an "expanding economy."  While there were many who instinctively felt that this policy was fraught with peril, they could be easily marginalized.  Consider Clinton's dilemma.  Peace with Wall Street and economic expansion that seemed to benefit all or war with Wall Street and a certain recession which would likely turn him into a one term president.  Would the US and the world have been better off with Dole in '96?  Or Kemp? Or Forbes?

This is all part of the knock-on effects of the US and Britain's manipulations in Iran in the "50s.  Rescuing and propping up the Shah was a brilliant success right up until it wasn't.  The collateral damage from the Iranian Revolution was the humiliation of Carter and the victory of Reagan.  I seriously doubt that Reagan could have won in '80 without the Iranian Hostage Crisis.  Reagan had been a pitchman since the '50s and given the chance he was perfectly suited to pitch neo-classical economics to the public.  Uncle Milty and his acolytes got places of influence again under Reagan.  The post-Watergate reforms had not really yet been consolidated and proved easily subverted.  One of the lasting contributions of Jimmy Carter, a practicing and believing Christian who strove to embody the moral and ethical values of Jesus in his personal and professional conduct, was to validate the legitimacy of the entry of the fundamentalist charlatans into US politics in a big way.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Oct 16th, 2008 at 10:54:45 AM EST
[ Parent ]
Taking stupid ideas and inverting them does not make them good ideas. So taking the dumb idea that being wealthy implies morality and inverting it to say that being wealthy implies immorality does not produce a truth.

There are lots of rapacious, greedy, shortsighted and amoral poor people and not all rich people are nasty.

by Colman (colman at eurotrib.com) on Thu Oct 16th, 2008 at 09:24:44 AM EST
[ Parent ]
It's not the inversion, it's a century and a half of empirical evidence that Wall St culture has no intrinsic morality except the so-called morality of wealth.

Also, charities might provide you with some interesting data points about the relative generosity of the very wealthy and the not so wealthy.

It's a cultural and evangelical problem, not an individual one. The poor may or may not be rapacious, but Wall St's culture unarguably has been, to everyone's long term detriment - qv. Anglo Disease, etc.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Oct 16th, 2008 at 10:54:58 AM EST
[ Parent ]
Rather excellent DemocracyNow! broadcast this morning. It constructs a debate between Obama, McCain (clips), McKinney, and Nader (live). Cynthia's like, We need to "nationalize" the FRB. AHAHAHA.

MP3 will be posted later today.

Diversity is the key to economic and political evolution.

by Cat on Thu Oct 16th, 2008 at 09:40:23 AM EST
[ Parent ]
Nationalizing the FRB is pretty funny, however, insuring that it acts in some believable construct of the "national interest" that extends beyond the current business cycle is a worthy goal.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Oct 16th, 2008 at 11:00:38 AM EST
[ Parent ]
See, that idea there, "national interest," is 'xactly the nub 'round which I'm twisting the Treasury article I promised you ;) I'm collecting my thoughts and links, yo, in order to spare the casual reader my incoherence.

Aren't too many 'Mericans (and others) with practical business experience outside corporate training: The "is,is" of capital structure and strategy. Ha.

As for "business cycle": May I recommend James Hamilton, "What is real about the business cycle." (St Louie Fed, 2005) I lost the link, sorry, but it's brief and is nicely illustrated with polynomial functions, graphed. His conclusion cracks me up every time.

"If an accurate statistical description of the dynamic behavior of key economic magnitudes is a time-invariant linear model such as equation (4), the the correct answer is,there is no such thing as a business cycle."

That's not the funny part. The funny part, to me, is NBER assignments of "recession" to periods 1857-1912.

Diversity is the key to economic and political evolution.

by Cat on Thu Oct 16th, 2008 at 12:21:35 PM EST
[ Parent ]
Aren't too many 'Mericans (and others) with practical business experience outside corporate training: The "is,is" of capital structure and strategy. Ha.
Too true, sadly.  It seems as though ET is a refuge for Capitalism's discontents.  Those who enter the field with degrees in business, especially MBAs, often have large college loans to pay off and need the kinds of salaries that are mostly confined to large corporations in order to pay off their loans.  I would imagine it is a lot easier to survive in that world if one is a true believer.  If you have doubts, best keep them to yourself.

I for one greatly appreciate your contributions, even though I struggle to understand your posts.  I suspect that much of what you convey requires the context from which you abstract to be fully comprehendable.  I lack the direct experience required.  

The rap on me has always been that if you ask me what time it is I will tell you how the watch works prior to telling you the time.  This is because part of my education is technical.  I don't expect non-technical people to understand much of what I want to convey.  I try to resolve this by providing deft, (to me!) sketches of background information as a preface.  If one wants to learn something complex, intricate and technical, one should not expect it to be easy.  Best if one is not too concerned about appearing ignorant or foolish when asking questions as well.  My philosophy is that we are all fools.  Part of the human condition.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Oct 16th, 2008 at 03:00:27 PM EST
[ Parent ]
The rap on me has always been that if you ask me what time it is I will tell you how the watch works prior to telling you the time.

LOL. I second that. I have half of "formal" education, informed by 20 years hard knocks, and a personal prediliction to be cryptic! Good Lord, my child is exasperated by my long, windy digressions.

Fools though we may be, the willing find the way.

Diversity is the key to economic and political evolution.

by Cat on Thu Oct 16th, 2008 at 04:39:46 PM EST
[ Parent ]
For James Hamilton, the St Louis Fed article you reference is here (pdf).

Hamilton blogs on Econbrowser.

Strangely, Gogol was incapable of returning the article reference (yet your title is exact). It found only one ref on the Web, your comment here.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Oct 17th, 2008 at 02:07:14 AM EST
[ Parent ]
LOL. "Gogol". Now that is some good poetry!

Diversity is the key to economic and political evolution.
by Cat on Fri Oct 17th, 2008 at 04:05:01 PM EST
[ Parent ]
This is the gogol I know

You can't be me, I'm taken
by Sven Triloqvist on Fri Oct 17th, 2008 at 04:10:05 PM EST
[ Parent ]
DOOD!!! Nicolai. LOL. I was forced to read this and Pushkin <reckless eyeballing> in highschool!!!

You know Pushkin was a "black" man, right? LOL.

Diversity is the key to economic and political evolution.

by Cat on Fri Oct 17th, 2008 at 04:16:34 PM EST
[ Parent ]
The Tale of how Ivan Ivanovich Quarrelled with Ivan Nikiforovich is the funniest thing ever written in the history of everything ever written.  

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.
by poemless on Fri Oct 17th, 2008 at 04:33:23 PM EST
[ Parent ]
I know you read poetry. You can't play me.

Diversity is the key to economic and political evolution.
by Cat on Fri Oct 17th, 2008 at 05:34:59 PM EST
[ Parent ]
It's not poetry.


"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.
by poemless on Fri Oct 17th, 2008 at 05:43:20 PM EST
[ Parent ]
Yes, it is. All "fiction" is poetry.

Diversity is the key to economic and political evolution.
by Cat on Fri Oct 17th, 2008 at 06:10:56 PM EST
[ Parent ]
Futhermore, mathematics is poetry. The definition of poetry is intepretation of language.

Diversity is the key to economic and political evolution.
by Cat on Fri Oct 17th, 2008 at 06:14:11 PM EST
[ Parent ]
and FTP. Inquiries welcomed.

Your GOOG mining reminded me of some reconn I did a few months ago on the topic "participatory realism," i.e. "magical thinking." I used to quote Piaget extensively from books that I own. I found that my comment here ranks in top ten.

Inquiries welcomed.

Diversity is the key to economic and political evolution.

by Cat on Fri Oct 17th, 2008 at 04:12:39 PM EST
[ Parent ]
I think I saw ThatBritGuy use it. Also my eight-year-old granddaughter who picked up the name from overheard conversations (in French, where Google may be pronounced closer to Gogol), and turned it into her favourite insult. In her language, it applies to anyone who is pushing her around or being generally annoying, so, quite often, her elder sister, who gets called espèce de Gogol!

Nikolai is a great story-teller.

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Oct 18th, 2008 at 02:59:35 AM EST
[ Parent ]
Wait a minute: I forgot to mention that his series dat SKIPS, IGNORES, DOES NOT COMPUTE, DOES NOT MODEL, the period 1913-1947.

AHAHAHA.

Diversity is the key to economic and political evolution.

by Cat on Thu Oct 16th, 2008 at 12:33:57 PM EST
[ Parent ]
Breaking the Sound Barrier: Third-Party Candidates Ralph Nader & Cynthia McKinney Respond to Final McCain-Obama Debate

MP3 podcast | rush transcript

Diversity is the key to economic and political evolution.

by Cat on Fri Oct 17th, 2008 at 04:02:09 PM EST
[ Parent ]
<blockqoute>With Rubin whispering in Obama's ear, I'm not convinced we're going to get more than that.</blockqoute>

I agree.  And after the events of the past eight years, I can't decide whether it's comedy or tragedy that the best hope for real change in my country was denied because the message of change was coopted by people who want anything but.

I'm more than a little irritated about what's gone on here, and I can't help but think that in a few years the gig will be up, and the people like me who called this dog and pony show for what it is will be vindicated.

But we may all be in the soup line by the time that happens....

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Thu Oct 16th, 2008 at 01:14:47 PM EST
[ Parent ]

Taking Hard New Look at a Greenspan Legacy

Still, over a long stretch of time, some did pose questions. In 1992, Edward J. Markey, a Democrat from Massachusetts who led the House subcommittee on telecommunications and finance, asked what was then the General Accounting Office to study derivatives risks.

Two years later, the office released its report, identifying "significant gaps and weaknesses" in the regulatory oversight of derivatives.

"The sudden failure or abrupt withdrawal from trading of any of these large U.S. dealers could cause liquidity problems in the markets and could also pose risks to others, including federally insured banks and the financial system as a whole," Charles A. Bowsher, head of the accounting office, said when he testified before Mr. Markey's committee in 1994. "In some cases intervention has and could result in a financial bailout paid for or guaranteed by taxpayers."

(...)

Ms. Born was concerned that unfettered, opaque trading could "threaten our regulated markets or, indeed, our economy without any federal agency knowing about it," she said in Congressional testimony. She called for greater disclosure of trades and reserves to cushion against losses.

Ms. Born's views incited fierce opposition from Mr. Greenspan and Robert E. Rubin, the Treasury secretary then. Treasury lawyers concluded that merely discussing new rules threatened the derivatives market. Mr. Greenspan warned that too many rules would damage Wall Street, prompting traders to take their business overseas.

"Greenspan told Brooksley that she essentially didn't know what she was doing and she'd cause a financial crisis," said Michael Greenberger, who was a senior director at the commission. "Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street."

No, nobody could have predicted. Grrrr. This makes me so angry.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Oct 16th, 2008 at 09:28:23 AM EST
Comments from detlef and DoDo in the in DoDo's Shifting Frame thread give us the German Version.  Reading from the weissgarnix blog, Merkel asked Schröder's gubmint when they would take the restrictions off derivatives.  The answer was that it was a priority.

More evidence that Anglo Disease infects everywhere.

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Thu Oct 16th, 2008 at 10:04:56 AM EST
[ Parent ]
Seen and Noted | DeFazio | 29 Sep 2008

um ...

Oh, to hell with that! | Treasury SSFIP | 14 Oct 2008

Programs for Systemically Significant Failing Institutions
The Treasury Department is currently developing a third program to potentially provide direct assistance to certain failing firms on terms negotiated on a case-by-case basis. Treasury is issuing guidance for the executive compensation standards that will apply to the firms participating in such programs and their senior executives (Treasury Notice 2008-PSSFI). These standards are similar in all respects to the Capital Purchase Programs executive compensation standards described above, with one significant difference. In situations where Treasury provides assistance under the systemically significant failing institutions programs, golden parachutes will be defined more strictly to prohibit any payments to departing senior executives.


Diversity is the key to economic and political evolution.
by Cat on Thu Oct 16th, 2008 at 10:16:03 AM EST
[ Parent ]


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]

Top Diaries