Posts Tagged ‘credit default swaps’

Hilary, Liz and Dodd-Frank

February 21, 2017

Violin

Oh, there was a time, when I was a young man, when I would fiddle around, and that was nice enough for a while.

Then life came and went.

Nowadays, I find myself content to merely listen while life slips by.

In ages past, a maestro such as Felix Mendelssohn could  imagine something incredible; he could then summon up in his own mind and hands– an exquisite composition, an intricate stream of vibrations–as sublime as any that could ever be coaxed from a mere box constructed of wood and wire. He could then write the composition. Then, 170 years later Hilary could set bow to instrument and, with help from the orchestra, make it all happen so perfectly.

https://www.youtube.com/watch?v=o1dBg__wsuo

There’s a reason why my fiddle has been set aside all these years. Why bother? There’s somebody who can do it better. There’s somebody out there who can, in fact, do it perfectly.

Just listen. But I get to thinking. . .

Years go by. We pay attention, try to figure things out. There’s always somebody out there who can do things better than we can. Leave the complicated stuff to experts. And listen. Listen and learn. Maybe you’ll learn a thing or two.

Just daydreaming now; I think of Sally Field in Forrest Gump when she was playing his mother and she said life is like a box of chocolates; you never know what you’re gonna get.

Think about 2008. Everybody just lollygaggin’ along. . .then whoosh! well, you remember what happened. Everybody’s shell-shocked. Uncle Hank stammering on the Tube. They had to twist Congress’ arm two or three times before they’d come up with the money to fix the mess, at least temporarily.

Then the experts get trotted out to analyze, to testify, to figure what the hell happened in stock markets that made the thing come crashin’ down–something about market manipulations of MBS’s, unforeseen incredibilities of CDO’s, the incredulous defaulting of credit default swaps blah blah blah

As the thing unwinds, along come the explanations, the excuses, the wagging fingers, the committees, the commissions, the oversight agencies get rolled out, cranked up. Republicans in shock because Obama’s in. Democrats trying to figure out what went wrong and how to fix it. Democrats got to fix everything, so what do they do. . .

Let’s fix everything up, they say.

Ok. Obamacare and Dodd-Frank.

Years go by. Big shock when Trump comes blasting’ into 1600 Pennsylvania Ave after those 8 years of Mr. Smooth.

Now this morning we hear Amy and Juan on the radio, and here’s Senator Liz whining about how the new Republican whirlwind wants to wind down Dodd-Frank, which was supposed to be the big fix, the big Democratic fix.  I mean, she’s a little bit crazy, like all Democrats, but there’s one thing about Liz, she can play the rhetoric like Hilary plays the violin. It’s no wonder Mitch had to cut her off last week. Anyway,  Liz is saying:

“Commercial and consumer lending is robust. Bank profits are at record levels. And our banks are blowing away their global competitors. So, why go after banking regulations? The president and the team of Goldman Sachs bankers that he has put in charge of the economy want to scrap the rules so they can go back to the good old days, when bankers could take huge risks and get huge bonuses if they got lucky, knowing that they could get taxpayer bailouts if their bets didn’t pay off. We did this kind of regulation before, and it resulted in the worst financial crisis since the Great Depression. We cannot afford to go down this road again.”

I mean, Liz might have a point there. If things are so ROBUST, why do we still get this feeling about the 20,000+ Dow? Is it deja vu, or deja due, or prescience, maybe too much twitter or not enough facebook, or a rerun of common sense or what? Maybe it’s all just a bunch of hot air blowin’ around and we keep wonderin’ about the whole house of cards but we can’t really put our finger on what’s wrong cuz you know the answer my friend is blowin’ in the wind and life is like a box of chocolates anyway, a mere lala land where we think we got it figured out but really we don’t.

Although I do have to remind you, Liz, since I am a registered Republican: we can’t fix everything. If we could, and if we did, why, how boring would that be?

So my advice to you is we’d best leave the fiddlin’ to the experts. Sooner or later we’ll all have to face the music anyway.

Glass half-Full

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Bankers, Banksters, Bernanke, Black and Beethoven

November 8, 2015

How’s a fellow to make sense of it all? Who you gonna call? Who you gonna believe? What’s the world coming to? What’s it to ya? and Who’s in charge here?

I’ve been trying to figure out a few things about our financial system.

TheFed

About a week ago I loaded Ben Bernanke’s book, Courage to Act, and have been reading what the former Chairman of the Federal Reserve has to say about those events of 2007-8 that brought this country to its money-grubbing knees.

http://www.amazon.com/The-Courage-Act-Memoir-Aftermath-ebook/dp/B00TIZFP0I

Now about a quarter of the way through Bernanke’s explanation of things, I must say I like the guy. He has a personal mission to bring more transparency to that enigmatic institution known to us as the Federal Reserve. I think he really wants regular folks to understand our financial system and the function of the central bank which, having been founded by Congress in 1913, tries to keep a rein on the nation’s banking system so it doesn’t become a runaway horse.

Nevertheless, the System did morph into a kind of bucking bronco back in the fall of 2008. The crash and crisis of that time may have seemed quite sudden to many of us, but in fact the collapse of Wall Street et al during September-October of that year was the culmination of a bunch of misadventures and misdeeds that had begun a year or two or more before it all came crashing down.

I vividly remember, during that time seven years ago, sitting in my car in a parking lot, a few minutes before 8 am when I would enter my day-job, and hearing on the car-radio with dread or fascination about the demise of such formerly venerable institutions as Lehman Brothers, Washington Mutual, Bank of America, Wachovia, Countrywide, Golden West,  AIG, Fannie, Freddie, even General Motors, and then about how Hank Paulson and Wall Street and the Fed, Bernanke and the President and Congress would deal with the degenerating situation by instituting TARP which was rejected by our Representatives and Senators before it was passed and implemented a week later after Hank and Larry and Tim put the fear of god in the legislators’ minds or whatever it was they told them to convince them that they should loan the distressed banks $767 billion so the whole dam bailiwick wouldn’t fall apart and drag us into another Depression, or so they said.

The world was changing. Have you ever watched the world changing? It is an awesome thing, to see history being made.

What a time a time oh what a time it was. . . a time of innocence (lost), a time of confidences (lost forever), as Paul Simon once sang. Oh what a time it was. Eventually the dust settled and the country lapsed back into normalcy or something like it but not really.

Things were different after that. You know what I’m talking about. . . the Great Recession, everybody and their brother deleveraging, budgets tightening, layoffs and downsizing, fading into perpetual “jobless recovery” with wage deflation, rising unemployment, then descending unemployment but with more part-timing and less money. . . stock-crunchers and media fixated on monthly numbers from the Fed, the gov, BLS, etc, a languid economy generating fewer jobs, then a few more jobs, then leveling out and stabilizing and lapsing into destagulation and blah blah blah. . .

And it was about that time, or actually a year of three later by n’ by, that the Occupy Wall Street crowd came along.

My wife and I visited our son in Seattle during fall or early winter of 2011. I woke up one morning and strolled down Pike Street. I stopped at the Westlake Center and entered a Starbucks where I settled in for a while. I was observing through the large glass storefront, the Occupiers who had gathered across the street in Westlake Park.

After a while I noticed among all those protesters, many of whom were carrying signs (mostly say hooray for our side) . .here comes an especially noticeable fellow with a sign. He was tall, scruffy, with a long beard. He looked like the classic cartoon image of the street-corner doomsday prophet, and his sign said:

“Jail for Banksters”

Well that’s interesting.

Now, yesterday, November 7 2015, I recalled having seen that fellow and his sign, and I was thinking about what his sign said.

I had been reading Uncle Ben’s very informative book–his plainly-written, quite “transparent” explanation of what had happened back in ’08, when the low quality of vast numbers of subprime mortgage loans catapulted those same home-loans into default, and subsequently cast a ubiquitous monkey wrench into the vastly complex financial machinery of sliced/diced tranches of mortgage-backed-securities and collateralized debt obligations and credit default swaps, etc etc  and then wall street came crashing down and all the Fed’s horses and all the Treasury’s men couldn’t put humpty dumpty together again (not for a while anyway) and the world changed forever, or so it seemed at the time and for quite a long time after that, even until now.

Yesterday, I had made note of this sentence from Ben Bernanke’s book:

“As the chain from borrower to broker to originator to securitizer to investor grew longer , accountability for the quality of the underlying mortgages became more and more diffused.”

And I was wondering, if the accountability had become more and more diffused, then who was responsible for this mess?

My own personal answer to that question is: Human nature, collectively. Shit happens.

Not everyone sees it that way, though. Some folks feel the need to investigate, litigate, prosecute, execute, and. . . as the protester’s sign said, send the “banksters” to jail.

So here I was yesterday, having taken a break from reading Uncle Ben’s book, and I was fiddling around online when I landed upon an interview that Chris Martenson did with Bill Black.

http://www.peakprosperity.com/podcast/95125/bill-black-why-banksters-winning

Now Bill is well-informed fellow; he’s an academic like Ben Bernanke, but from a totally different perspective than Ben’s. Bill is a regulator, investigator, earth-shaker, litigator who is crowing that Eric Holder,  former Attorney General and head of the U.S. Department of Justice, should have prosecuted the banksters for their corruptive abuse of the system. In his interview with Chris that I listened to yesterday, Bill Black said:

“Every dollar by which you inflate an asset inflates capital by a dollar and creates an additional dollar you can steal. . . they lied and they lied to the extent of trillions of dollars. They lied and made stuff that was really in the trade, right. So the bankers are actually calling these things toxic in their internal memorandum. And they are simultaneously rated Triple A, which is supposed to mean that they are equivalent to United States Treasury and are “risk free” by which they mean credit risk.”

Furthermore, whistle-blowing Bill Black says that culpability for the crash also includes the Fed’s complicity, when Bill says:

“You say Bank of America has got 50 billion of these things. They sell them to Fannie/Freddie.

Next thing we know, Black Rock is in there with the Federal Reserve helping the Federal Reserve decide which tranches of MBS to go out and buy. And the Federal Reserve vacuums up 1.25 trillion or thereabouts of these mortgage backed security pieces of paper. Here is the question. What is the chance that the Fed preferentially or accidentally (but I am going to think preferentially) went out and vacuumed up some of the worst of these things so that they could die quietly on its balance sheet rather than do damage to bank balance sheets?

So Black is implying that Bernanke shares some of the blame for the Crash of ’08.

But in my reading of Uncle Ben’s version, I see a very smart man, an honest man, who was trying to do his job–that job to which he had been appointed by the President and approved by the Congress of the United States. He was striving, as best he could, trying to stop the nation’s calamitous slide into financial oblivion. Ben writes:

 “Just as the bank runs of the panic of 1907 amplified losses suffered by a handful of stock speculators into a national credit crisis and recession, the panic in the short-term funding markets that began in August 2007 would ultimately transform a ‘correction’ in the sublime mortgage market into a much greater crisis in the global financial system and global economy.”

From Chairman Ben Bernanke’s perspective, he was doing his job– using every tool in his Reserve tool-chest  to arrest to the “panic” that would eventually impose a “much greater crisis” in the global financial system and global economy.

You can’t blame a fellow for trying to do his job. And that’s how I make sense of it all. I try to do my job, while I see everyone else doing theirs, and that’s what makes the productive world go around.

Although, every now and then shit does happen. Then, as Schumpeter said. . . it is creative destruction, and somebody’s got to clean up the mess. Jobs for everybody, cleaning up the mess from places high and low. And then reconstructing it all, a vicious (or inevitable) cycle. It’s been going on for 10,000 years. But now with hi-tech, everything goes faster and faster, until it grinds again to a screeching halt and. . . can you hear it? The music of the ages.

https://www.youtube.com/watch?v=TEbyBINYBfo

Glass half-Full

Tappin’ the laptop rap

July 28, 2012

While we nodded, nearly napping, suddenly

There came a tapping, rapping on my laptop door:

 

Let us build a free nation, they said in 1776,

Let us mortar it with liberty; we’ll use this vast continent for bricks.

So then came our great exploration, on horses, on wagons, then on rails,

in a century of expansion, steeped in sweat, and debt, with bundles of tall tales.

‘T’was an age of corn and wheat, a time of tobacco and great toil,

boiling in a cauldron of soil and coal and oil.

On farms and orchards swelled our sweet fruits of sweat labor;

in pastures and ranches our blooms of prosperity’s favor.

Iron horse came a roaring over trestle and prairie

through a land ripe with harvest, rich with mineral and dairy.

 

We were milking the dream, skimming the cream,

moving on muscles and running on steam,

Across the tracks and over the roads, here rode the passengers, there the heavy loads;

extracting the mother lodes, knocking up white picket abodes.

Sodbustin’, soon with internal combustion, we rode, driving cattle and pigs with our pokes,

we volks and them blokes, all manner of folks with their yokes, ever now ‘n then tellin jokes,

we came casting off troubles, heaving the rubbles, and wielding our worn steel shovels,

we went building our houses, our stations and shacks, and nailing up mansions and hovels.

we’re blazin’ trails with ole Dan’l and Davy, eatin’ biscuits and gravy, ‘bibing a wee nip o’ liquor,

through sagebrush the saga and ragtime the raga with bustin’ raw rigor and unlimited vigor.

 

Let us build a rich nation! Let us form companies;

Let us develop, and envelope, opportunities.

We’ll raise capital, and stock it and sell it, until all the shares are sold.

Let us hammer out a Great Northern Railway, on tracks of steel, burning Appalachian coal;

We’ll wrangle our way to the West, dear partner; we’ll wildcat our wells while we roll.

Out of raw earth we summon a Standard Oil, a USSteel, and a B&O;

Across the wide prairies we’ll fence ranches and dairies, with windmills and farms, high and low.

Let’s sign up the hires and string up the wires, tapping Morse signals all the while as we go,

Till we’ve rolled and we’ve tolled and we’ve bought and we’ve sold all the long way to San Francisco.

~~~

Mr. Edison says let’s turn on the light; Mr. Bell says oh yes, and hello

Mr. Morgan proffers finance and wealth, while Mr. Ford cranks up our engines to go.

Summon the lawyers for incorporation, in big divisions, with a company town.

Call Wilbur; tell Orville: let’s drum up some capital, and get this great work off the ground!

Pack me a sack of groceries, will ya, from the corner at the A&P,

and buy us some trinkets and widgets and blinkets from the dime store, or the big new Kresge.

Here in our houses with spouses, in our homes with our loans, we’ll make and we’ll do and we’ll prosper;

now we’ve adorned Lady Liberty with a fashion outfit, and fed her and bled her, and yet we’ve not lost her.

And ‘though the folks in the old country drag us into their wars,

we’ll not lose sight of our stripes, nor dim our bright stars.

 

Let us run our great machines on American dreams!

Drive our Chevys to the levees for beer and ice creams.

Punch us an IBM card and we’ll flip out the bucks, at Kmart and Walmart and Radio Shack.

Bring in this Microsoft, this Apple, this modem and fax. Hey, buy me some Windows and Cracker Jacks.

Truck in the autos; pump in the gas; toss me a loan and float me a boat.

Fling wide the fridge!  Bring me some chips; hook me up with the tube. Where’s the remote?

Sign me up for a card; don’t make it too hard.

Just give me some credit; you won’t need to vet it. Approve my home loan; I’m ready to get it.

You know it don’t matter I’m makin’ half what I used to; I’m presently performing some credit jujitsu.

 

But our great yankee contraption having now been built,

and the boomer consumers all leveraged to the hilt,

the guys down on WallStreet were feeling the pinch.

With fewer and fewer equity opps, they’re no longer a cinch.

Traders squinting for spreads, on margins and bets,

our great growth machine slows, then it sputters and spets.

So let us whip up some synthetic collateralized debt obligations! they said

We’ll bundle those low-grade mortgages in convoluted configurations, and we’ll follow the Fed.

Let’s slice em and dice and twice em and thrice em

to pump up a million, trade up a billion, swap up a trillion, maybe gazillion.

Slap me some MBS, shoot me some CDOs and credit default swaps;

those sub primes are hot, triple-A, so S&P say, too complicated for regulatin’ by SEC cops.

 

So our great American ranches morphed to securitized tranches.

Maybe we shouldn’t have let the big players get in with bank branches.

Was this dot.com trouble– that real estate bubble, our last great Kapital hoorah?

Is this all we got left–this bubblin’ Booyah?

Have we bought for too long on the troughs, have we sold out too short on the peaks?

Are we so severely crippled by our insider leaks?

Have we reached the end of this long leveraging line? With our great capitalist expansion now running out of time?

Has our American Dream Machine run out of steam? Has it sputtered in the gutter  of avaricial schemes?

Say it aint so, entrepreneurial Joe!

Quoth the Trader, “Nevermo.”

 

Now that’s a rap,  on my laptop tap.

Glass Chimera