I do not have a good feeling about which way the political winds are blowing. Yesterday, I mentioned two newspaper articles about what is taking place both in the economy and politically in Washington between Paul Volcker and the Obama administration. Volcker is the gold standard for a public servant. Make no mistake, this man, in my book and I am sure several others, walks on water when it comes to his heart and mind being in the right place for this country. Even though he blew me off once at an annual private equity meeting in Washington several years ago, I lived through his tenure at the Fed as its chairman while managing several fixed income portfolios and I followed his leadership on a daily basis. He saved this country's economy and the US dollar with his work as the Chairman of the Fed to wring the inflation out of the economy. Reagan replaced him because he was running the central bank the way it ought to have been run, not like Greenspan ran it.
Volcker's position on the idea of commercial banks and investment banks not being allowed to exist as a combined corporate entity is correct. As someone who was brought up in a hardware store, I learned that the right tool for the job was a big factor in the job being done correctly, or not butchered. Glass-Steagall needs to be brought back. The repeal of the Glass-Steagall Act in 1999 was a big mistake and lead to the financial crisis of 2007-2008. While there are many other factors that played a part, the end of Glass-Steagall is an important factor. People in Washington and the Obama administration need to listen to Paul Volcker. He is the gold standard when it comes to how to run a central banking system and why commercial banks need not to be involved with underwriting securities. The investment bankers should go back to partnerships and not be using commercial bank equity money to leverage their deals. Too big to fail can be dealt with, you just need to take them down a few notches. What is wrong with smaller investment banking partnerships? They can still get together and form syndicates to underwrite the biggest of new issues. So they wont be able to do big deals by themselves, too bad. The country does not have to be the bailout for these geniuses' mistakes.
Stay tuned.
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2 comments:
moneythoughts, it seems to me that the United States just likes to talk a big game, but we are very short on progress. (Talk but no action should be our new motto)
Lots of talk on the debt level, not much being done. Lots of talk about financial reform, but not many major changes. Lots of talk (and evidence) about the educational level, not much has been accomplished over the years. Lots of talk of waging war but we can't seem to win one.
Not much has been done about the pollution levels in this country. Not much has been done about weaning off foriegn oil, sure has been alot of talk, though.
Heard today the growth rate in China was 8%. Can you imagine a growth rate in the US of 8%...jobs galore, people flocking to school to improve and move to higher paying jobs (jobs that are waiting to get filled). We think a growth rate of 4% would be nirvana.
I hear you, but things are a little more complicated than your description of things. That does not mean we don't have a lot of work in the areas you mentioned to be done.
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