After I posted the piece I wrote yesterday, I printed a hard copy and sent it to President Obama. I know he will never read what I write, and I doubt whether anyone in The White House will read it either. But, I feel this way, what the hell, it is only 42 cents and a little time. I have lots of time.
I am disappointed that we have not heard more about the new regulations for the banking, mortgage banking, investment banking and most importantly the credit rating agencies. The issue of salaries for these top bank executives to me is a bull shit issue. Here is why I feel that way. The big money is made in underwriting structured finance bond issues. This is where the growth in the credit rating agencies business was coming from. Without more regulatory oversight of the credit rating agencies, the financial crisis which we are now paying for will be repeated almost for certain.
I seriously doubt whether President Obama is being advised by his Wall Street plants to take the responsibility for the credit rating business and place it within the Federal Reserve Bank. My argument that credit ratings are to finance what weights and measures are to commerce has, I would bet, never seen the light of day in The White House. Wall Street knows where the golden eggs are and they are not on The White House lawn.
Too few people understand the role of a central bank to a nation’s banking system. Even fewer people understand monetary theory or monetary policy. The man that I thought we would be hearing from, who knows and understands monetary theory and policy, Paul Volcker, has remained silent. I guess Volcker did not get a speaking part in his latest role. This bothers me because, while I do not know Volcker personally, I have a great deal of respect for his ability and integrity. A silent Paul Volcker in a production that has sound is disturbing to me. Where is Paul Volcker and why have we not heard a word out of him? This is a red flag as far as I am concerned.
I write about money, but more importantly I write about credit. Credit is money in the 21st century. Take a look around you and see all the things that you have bought using some form of credit. Then multiply that by the number of households in the United States. Now you have a number that will give you a grasp as to how big the credit business is in this country. If you were at the head of a money making business that was involved in providing credit, would you want the Federal Government telling you how to run your business? If you had a sizable war chest to lobby Congress not to change the game, and add better regulation, oversight and transparency, would you not use it? Taking more zebras off the field will reduce the number of red flags thrown, that idea is simple to understand. But, what happens to the long term quality of the game?
Change you can believe in? Like I told a reporter from The Toledo Blade a few years ago that was asking me about the Coin Funds at the Ohio Bureau of Workers’ Compensation, the only thing I know about coins are the ones I put in the parking meters. I am beginning to think the only thing I know about change is the kind I put in the parking meters too. And, guess what? The meter is running for all of us.
Stay tuned.
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6 comments:
Volcker is getting up there in the years. Might be harder for him to make waves. I hate to sound discriminatory against older people, but that might be a factor.
Yes, I leaned, mostly from your blog, about the role of the credit rating agencies. My guess is, it's a very good point that tends to be overlooked. I'm not an expert in finance, but it makes sense to me.
I heard an interesting thing on Diane Rehm's NPR radio show. Someone said that the rating agencies didn't know how to rate so many of the new investment instruments that came onto the market in recent years. They didn't know how to go about rating a lot of these things. Like deers caught in the headlights.
Ultimately, greed seems to be the root of so much trouble. House values and costs, especially here on the coast, going too high. Creating too much overhead for an economy threatened with environmental issues. In some ways, the economy needs to slow down to deal with things like global warming. Also implement new technologies so it doesn't have to slow down so far. A slower, economy makes it harder to afford the high fixed costs of housing, health care and other things we don't do very efficiently in this society.
We need a lot of structural change so we can have a more sustainable economy in light of environmental limitations. New technology for new wealth, of course, but also learning how to slow down gracefully.
Robert, lots of good comments. Thanks. I agree with you on much of what you wrote. But don't believe the rating agencies or anyone else that says they didn't know how to go about rating the structured finance bond issues that were brought to them by the investment bankers doing the underwritings. There were mathematical models available for them to use. I know this for a fact. I have an old friend I went to school with 7th thur 16th grades that has a company in California that tried to sell their math models to the rating agencies and were refused. This was the rating agencies' biggest growth area of their bond rating business and the CEOs knew it. No excuses for what they did. In a word, it was FRAUD!!!
The word out on the street is that if everyone is aware of it, it's not considered fraud any longer. Man, where has our society gone???
Just recently heard defenders of torture say it is ok in some instances (of course, who has the power to declare these instances)
Take me back to ole Virgini!!!!!
Remember how much common sense Sheriff Andy Taylor had....well...the Barney Fife's are running the show now.
Yes, excuses can be found for everything. I wouldn't be surprised if much of the credit rating is fraud and many of the people involved are basically criminals.
Well Robert, I agree with you. Let's see, maybe we can have a march on Washington, D.C. this summer. We could maybe get five or six of us to march. We maybe could get Butch, Lou, Winslow, you Robert and me. Wow! Five guys marching in front of The White House asking for the credit ratings to be the responsibility of the Fed. Do you think we could make the evening news? Perhaps we could all wear colorful outfit and carry signs?
Maybe we'd make the news, but also likely to be just more needles in the haystack.
I'm surprised more people aren't talking about the role of the credit rating agencies. Even though I'm not an expert in financial matters, it makes sense to me. The economy is kind of like an engine with a faulty governor.
That is at least a part of the problem.
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