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The bankers have written the most integral rule that would reform their business practices and President Obama is showing his support.
Obama has released a written statement supporting the new Volcker Rule that will make “sure big banks can’t make risky bets with their customer’s deposits.”
Obama said: “Our financial system will be safer and the American people are more secure because we fought to include this protection in the law.”
Speaking about the crash of 2008, Obama admonished the banks for “fueling a punishing recession on Main Street that ultimately cost millions of jobs and hurt families across the country.”
As part of the economic repair of our country, the president said that financial “rules that reward sound financial practices allow honest innovation and strengthen the financial system’s ability to support job creation and durable economic growth.”
Obama said that the Volcker Rule will make “it illegal for firms to use government-insured money to make speculative bets that threaten the entire financial system, and demand a new era of accountability from CEOs who must sign off on their firm’s practices.”
This new rule will ensure that ‘our financial system will be safer.”
Experts say that the new Volcker Rule glosses over the fact that it was “trading mishaps” that were the “root cause of the financial crisis.”
Because of this, “the rule doesn’t go far enough . . . prohibition [will] draw a line, making it clear that banks’ business is about lending not investing.”
The Volcker Rule, within the Dodd-Frank law, is now being used by the president as a public relations ploy to give Americans a semblance ofgovernment oversight and the reining in of “risk taking after the financial crisis.”
The new Volcker Rule was created by the banks and is “the rule that the banks wanted.”
The 2011 draft of the Volcker Rule was leaked by the American Banker Association (ABA).
Rob Tooney, associate general counsel at the Financial Securities Industry and Financial Markets Association (FSIFMA) said : “Our concern is that whatever the final rule is that it doesn’t harm the markets’ overall liquidity. The short answer is we don’t know yet.”
The new rule was reported “far more restrictive than previously expected” and now that the banks have taken over the writing of the document, they feel more comfortable in supporting its passage.
Ben Bernanke, chairman of the Federal Reserve Bank (FRB) said at a central bank meeting this week: “Getting to this vote has taken longer than we would have liked, but five agencies have had to work together to grapple with a large number of difficult issues and respond to extensive public comments.”
In 2010, Alan Blinder, economist of Princeton stated of the burgeoning Dodd-Frank law in an op-ed piece : “It is devilishly difficult to draw bright lines between proprietary trading and trading, hedging, and market-making on behalf of clients.”
Paul Volcker said he was “disappointed with how the rule was turning out” and that he “didn’t expect the proposal to be diluted so much, said a person with knowledge of his views. He’s content with language that bans banks from trading with their own capital, the person said.”
The Dodd-Frank Law was signed that same year.
Volcker contended that the rule should have “clear concise definitions, firmly worded prohibitions, and specificity in describing the permissible activities will be of prime importance for the regulators as they implement and enforce this law.”
In 2011, Senator Carl Levin co-sponsored the Volcker Rule and spoke toCongress about the importance of the regulation: “The Volcker Rule is essential to protect taxpayers from banks’ excessive financial risk-taking, conflicts of interest, and from the resulting billion-dollar bailouts. I look forward to reviewing the proposed rule and hope the regulators reject efforts to weaken the law.”
In early 2012, Jamie Dimon, chief executive of JP Morgan Chase & Co, brazenly told media : “If you want to be trading, you have to have a lawyer and a psychiatrist sitting next to you determining what was your intent every time you did something.”
In another interview, Dimon said of Volcker: “Paul Volcker, by his own admission, has said he doesn’t understand capital markets. Honestly, he has proven that to me.”
Lawrence Fink, chief executive of BlackRock commented : “We are not in support of it. We sent the letter as a firm. It’s very hard for me to understand how to navigate the Volcker Rule. What is proprietary trading? What is flow trading? It’s going to be very definitional.”
Volcker responded to critics, saying: “A lot of the criticism is over the complexity of the thing and, essentially it’s down to a lot of details. But the basic rule, of course, is incorporated in the law. And I think when you get all finished with this Sturm und Drang in the Congress now, I think you’re going to have a reasonable interpretation of a law and an interpretation that can be reasonably followed by the banks and enforced by the regulators.”
This past summer, Jacob Lew, secretary of the US Treasury, warned of a year’s end deadline on the Volcker Rule.
Lew said: “I want to mention that the Volcker Rule is particularly important, and I will continue to push for swift completion of a rule that keeps faith with the intent of the statute and the president’s vision.”
The rock is reality. The squishy place is the illusion that pervasive racketeering is an okay replacement for an economy. The essence of racketeering is the use of dishonest schemes to get money, often (but not always) employing coercion to make it work. Some rackets can function on the sheer cluelessness of the victim(s).
Is it fair to suppose that money management is at the heart of the sort of advanced, complex economy that developed early in the 20th century? I think so. Money is the lifeblood of trade and of investment in productive activities that support trade. Of course, in order for money to have meaning, to function in such transactional relations, the people must be convinced that it legitimately represents its face value. Otherwise, money must be labeled “money” — that is, a medium of exchange suspected of false value. An economy that uses “money” — especially an economy of rackets — is an economy in a lot of trouble, and that is where ours is in December 2013.
The trouble reached escape velocity in the fall of 2008 when a particular brand of racket among the Wall Street kit-bag of rackets got badly out-of-hand, namely the business of selling securitized bundled mortgages and their “innovative” derivative “products” to dupes unaware that they were booby-trapped for failure which would, perversely, hugely reward the seller of such trash paper. These were, in the immortal words of Senator Carl Levin (D-Mich), the “really shitty deal[s]” propagated by the likes of the Goldman Sachs crypto-bank — so-called collateralized debt obligations — pawned off on credulous pension fund managers and other “marks” around the world greedy for “yield.”
It turned out that all the large banks trafficking in such booby-trapped contracts ended up choking on them when “the music stopped” — that is, when the derivative “swaps” payoffs at the heart of this particular racket began to fail, sending up a general alarm that all such “products” were primed to blow up the entire “banking” system. By the way, the quotation marks I so liberally resort to are necessary to denote that in such a matrix of rackets things are not what they appear to be but only what they pretend to be.
The failure of Bear Stearns followed by the implosion of Lehman Brothers and the near-death experience of AIG alerted “civilians” outside Wall Street that the banks were linked in a web of fraud and insolvency and had to be “rescued” in order for the rest of America to keep its “way of life” going. The rescue remedy proved to be several new layers of fraud that have now matured into institutionalized rackets. The best known are the Siamese twins of “Quantitative Easing” and zero interest rate policy (ZIRP). The lesser-known racket was the 2009 rule change by the Financial Accounting Standards Board that allowed banks to make up whatever numbers they felt like in reporting the value of their holdings (“assets”).
Hence, these dishonest, regularized operations can be labeled a hostage racket with coercion at their core. The coercion comes in the form of the threat that any let-up in the stream of QE “money” enjoyed by the banks in the form of carry-trade “loans” and “primary dealer” premium cream-offs will send the economy back to the stone age. Overlooked in this equation is the ongoing destruction of ordinary citizens (a.k.a. the “middle class”) who have already lost their grip on the emblematic “way of life” Wall Street is working so tirelessly to defend. Politicians are, of course, deeply implicated and indeed directly involved in all these rackets, since these hired handmaidens make and execute the laws protecting Wall Street’s looting operations.
The catch to all this, lately, lies in the cognitive dissonance between the symptomatic euphoria of record stock market indexes versus the conviction of a few hardcore skeptical observers that the rackets are now so reckless and impudent as to be beyond any hope of control and on a trajectory to bring about hardships orders of magnitude above anything imagined in 2008.
So-called “health care” is also a hostage racket, since sick people are hardly in a position to bargain for anything, but it is only a sub-system of the larger matrix of rackets that have made this such an unusually dishonest society. My guess is that ObamaCare is sure to make it worse, and pretty quickly too, since the rules for ObamaCare were written by the hireling lobbyists of the industries that benefit from the racketeering.
The big mystery in all this remains: where are the people with some institutional power who might stand up and denounce all this perfidy? What has made us such a culture of cowards and cravens that the best we can do is produce a couple of comedians who speak truth to power in the form of jokes. Most of this is not that funny.
By the way, one reason for the vulgar orgy of “consumerism” that, in recent years, has turned the Thanksgiving holiday into a sort of grotesque sporting event, is to mount a crude demonstration that our “money” is a viable medium of exchange. The dumbest people in the land are induced to swarm through the merchandise warehouse stores and fight to exchange their “money” for hard goods offered at false “bargains.” I wonder how much of it is a dress rehearsal for what happens in a hyper-inflation?