Disingenuity

Not Sure There Isn't a Little Politics Going On...

Too Big to Fail = Too Big to Keep

Convict Them
and
Cut Them Up or Close Them Down
 

Apparently there's a significant caveat to the old English proverb, "You can't have your cake and eat it too."  A financial glutton need only gobble up other companies until it becomes Too Big To Fail.  This may be old news, but:

1)      ANOTHER malfeasance of Big Bank-sized proportions just came through

2)      The meager Dodd-Frank regulations are just coming out now and being furiously fought and whittled down by the industry's lobbyists

3)      These guys are just going to hose us again someday unless something is done

Sure, you can trust us...we've been reformed

As to the first point, in the wake of the real estate derivatives debacle, LIBOR manipulation, sanctions violations, Jabba-sized banks have been flagrantly coordinating to artificially influence foreign currency values while siphoning money off everybody else's losses.  Evidence shows they were pursuing this for a decade or so, and as late as a year AFTER the LIBOR scandal came to light.  We don't even have to say "allegedly." 

Per the Wall Street Journal:

“Citigroup Inc. and J.P. Morgan Chase & Co. agreed to pay more than $1 billion each to resolve allegations that they tried for years to manipulate the foreign-currencymarket, the biggest fines wrung from a group of six banks by regulators in the U.S., U.K. and Switzerland.”

“The pacts, totaling about $4.3 billion, indicate that the banks were engaged in activities designed to boost their profits by moving one of the world’s largest and most interconnected markets, sometimes at the expense of clients. Some bank employees blew the whistle on the behavior years ago, but the misconduct persisted until 2013, after banks were punished for trying to manipulate other financial benchmarks.”

It seems one has to cause a worldwide recession with elaborate swindles, cheat clients, brag about it in financial chatrooms, AND scam everyone else by screwing with a few more of the sacrosanct financial numbers before officials will raise their eyebrows.

Some notable quotables from the actual colluding traders include:

• Calling themselves, "the A-Team," "the cooperative," or "the players"
• Sharing private info on clients but cautioning: "Don't want other numpty's in market to know"
• Pulling together orders to enter just before the 1:15pm fix, "Tell you what, let's double team it.  how much you got"?
• And hundreds more along these lines

"The banks didn't dispute the regulators' findings."

The case was a little too cut and dried for even the corporate lawyers to drag it out for decades, but no individual convictions or even cases were announced, although they are "leaving the door open."


CONVICT THEM

Fines won't cut it - they can never be proportional to the damage or big enough to dissuade them because they are negotiated - you wouldn't want to cause TBTF banks to fail.  Nor will low level convictions - it's not the occasional "bad apple" trader that consistently breeds this corrupt culture.  The main player in the LIBOR rigging, former Citigroup and UBS trader Tom Hayes told the Wall Street Journal, "this goes much, much higher than me."  Heads have to roll at the top or there's no fear; fines and lower level losses are just a cost of doing business.
 

Now that it's finally here, financial reform could use a little bite...

CUT THEM UP or CLOSE THEM DOWN

I am not advocating increased regulation.  In fact, I would have preferred, had we been able to, to treat ALL the banks equally back in 2008 and let them each fail according to their transgressions.  Hell, the federal government stood by as over 365 small banks and some large number of thrifts ceased operations - wouldn't it have been just if the same could have happened to the nice TBTF boys who brought us the Great Recession?** 

So, forget about regulating them.  Since we couldn't close them then, we should break them up now, before they do any more harm.


Almost seven years after the Great Recession, generally, it can be said:

• No "Big Bank" paid for their colossal miscalculations and outright deceit
• Nobody went to jail
• And everybody still got their bonuses

Financial reform in the guise of Dodd-Frank regulations has been slow in coming/activation (six years?) with much of it still unwritten, and most of it backwards-looking.  It was originally watered down by Congress, primarily Republicans and those representatives with big TBTF constituencies like NYC and Charlotte, and now the lawyers are busy de-toothing it.  As a measure of this, just the world's largest banks still have up to an $870B shortfall in a pretend crisis of our own test design. 

Frankly, it's going to be too complicated and retrospective to be effective.  The Savings and Loan crisis of the 1980's wasn't followed by another S&L issue 30 years later, but by the much costlier Sub-prime Mortgage fiasco.  The successor will likely be a whole new and more complex creation from the charlatans that brought you collateralized mortgage obligations.   

Consider an analogy:  The brilliant minds at TSA are now all secure against shoe-bombers and underwear explosives AFTER we caught Richard the Arab Brit and his 'nadless buddy trying multiple times to light their clothes on fire while on board full airliners.  That's not the time to learn the terrorists have come up with something new.  Other measures are necessary.

In the end we don't know how the world's next financial crisis will occur, but it's a strong short position that it will derive from an unexpected source and be prohibitively more expensive.  Cracking apart Too Big To Fail financial institutions until they are Marginally Uncomfortable To Fail gets us past the unknown price tag. 

The question we really have to ask ourselves is:  Will it even be financial firms that the taxpayer has to prop up again, or some brand new institution currently in the making?


**Instead, we gave billions from the emergency TARP fund to the banks directly, folded seven more major institutions that were failing into these banks, christened struggling investment firms Goldman Sachs and Morgan Stanley as banks, and shoveled $184 billion through the totally screwed up AIG to divvy up amongst the biggest offenders.  There was a statement about using TARP to help actual people struggling with mortgages, but that was conveniently forgotten after it was approved by Congress.   

Real Politics (2016 Presidential Race) - Part II

Can the Republicans Overcome Their "Righteousness"

Long Enough to Nominate an Electable Candidate?

The furor of the far right base primary voter must be appeased enough to secure a quorum, while maintaining the appeal to independents that will be so critical in the 2016 general election.  Prior to the 2008 primaries, the Republican path forced John McCain to pay homage to the Falwell forces at Liberty University and support Bush tax cuts.  Mitt Romney had to disavow the Massachusetts medical care program that preceded the ACA, and perform a self-lobotomy on the pro-choice portion of his brain in preparation for the 2012 run.  Will the next Republican candidate be forced to run this damaging gauntlet before entreating the more moderate national voters? 

Without a strong challenge from the left, Hillary will be able to court the centrists from the beginning of her campaign and never have to make leftist primary pledges that would hurt her down the road.  Perhaps the past eight years and the spectre of another Democrat in the presidency will inform the Republican base's heart vs head choice. 

Will it be someone like Chris Christie, who has railed for some Tea Party issues in the past, and can be given a pass for his gushing praise of the Democratic president post-Sandy?

Perhaps the dual dynasties will meet in a clash of the titans if, the admittedly moderate, Jeb Bush makes it through the conservative wickets?   Or will they simply nominate someone like Ted Cruz and shoot themselves in the foot (over and over)?

Ted, is that a gun in your pocket?  I really hope so...

As with the opposing party, the Republicans have a field of some 27 candidates, fringe and otherwise, with unknowns still to come forth to round it out.  Without further adieu, the starting line-up and those on deck.

Rand Paul, Outspoken Fly in the Republican Soup

Senator, ophthalmologist and general outspoken Libertarian about town, Rand Paul serves as the heckler of the mainstream.  Rand is the new and improved version of his father Ron Paul, the perennial presidential candidate.  Despite his Tea Party heritage, his views are spun well and relate to the average voter across the spectrum.  Unfortunately for him, there are just a few issues where he is so "out there" from where one would expect a responsible president to be, that his run is likely to be more agitation and entertainment. I suspect there is something about baseball that he doesn't approve of.

I think I can turn this election upside down

Paul Ryan, P-90X Energizer Candidate
Having paid his dues as the loyal running mate, Senator Ryan follows the typical Republican path to nomination.  He's smart, telegenic and has abs of steel.  Maybe just a bit too wonky, white and male to swing the nation's excitement factor into high gear, he still has a first rate shot at the title.  Ski, track, basketball, soccer athlete in Janesville - he's likely just a Packers fan, like everyone else in Wisconsin.

Jeb Bush, the Heir Apparent II
Jeb, John Ellis to his lawyers, comes from both the Bush family and THE swing state of Florida where he served as governor.  A Republican with somewhat moderate views, he is flowing to the left of the party zeitgeist but closer to the American mainstream.  Jeb is well-positioned to accomplish the Bush Trifecta, which is probably his greatest weakness.  Marlins, Rangers, Red Sox - he probably likes them all.

Rob Portman, Who?
Senator from the great swing state of Ohio, this mild mannered politician could squeeze through as the compromise between Christie and Bush supporters.  Senator Portman has been around the world, worked in the White House as the Director of OMB and he owns a restaurant/inn with his brother and sister, so he's literally served the people.  Reds fan through and through.

Marco Rubio, the Keep-Water-On-Hand Candidate
Conservative appeal with a streak of independence on the immigration subject, the youthful Senator Rubio could be a surprise nomination in 2016.  Unlike with the Democrats, his relative inexperience and lack of a prior national candidacy together usually doesn't pass muster with the Republican hierarchy, although he could be a primo VP choice this time around.  Marlins fan, when convenient.

Scott Walker, Election Every Year Survivor
Governor Walker has made it through five local elections, the Wisconsin gubernatorial, a recall vote and efforts at impeachment, much of which was followed closely on the national stage.  He put into place conservative fiscal policies that struck straight at the heart of Democratic organized labor forces and created a more merit based system in education.  So far, he's batting 1000 (in another swing state) and both parties like candidates that succeed despite the odds.  He's hung around Milwaukee far too long not to like the Brewers. 

Other possibilities:


Ben Carson, If It Did Take a Brain Surgeon...
No experience whatsoever, he could be the perfect outside candidate.  His laudable work as a pediatric neurologist and the recent popular wave of Carson Common Sense might be enough to get him a place on the stage.  A quiet candidate like the good doctor, who rarely ruffles feathers despite his conservative views, is a good combination but it's unlikely he'd choose to weather the media scrutiny and hate of 45% or more of the population.  Hasn't had time to watch baseball.

Running for President?  It's like banging your head against the wall.

Mitch Daniels, the You'd Have to Kidnap Me Candidate
Former Governor of Indiana, now Purdue President, Mitch Daniels successfully led the state during the Great Recession from marked debt to notable surplus in a region replete with higher than average unemployment and general woefulness.  He had a couple terms of White House experience including as Director of the OMB (I feel a pattern developing...), as well as senior leadership positions in business.  A no-nonsense straight talker, he would be a great domestic agenda president, but he appears too bright to put himself through that wringer.  I bet he still likes the Pirates.

I know all four branches of government.

Of course, if all else fails, there's always James Richard Perry, intellectual clone of the Texas governor who forgot his way through the 2012 race.

Ok, That's Over...Time to Start Talking Real Politics

Candidates, Take the Field!

I bet you just can't wait for the 2016 presidential race.

Quick review of the present field along with some of my totally premature predictions (or SWAG's) so we can see how we progress to the final candidates from here.

First, the DEMOCRATS

Although it may seem like there's only one Democratic presidential candidate, she hasn't even announced, and there are 30 possibles mentioned in Wikipedia. 

Hillary Clinton, the Prohibitive Favorite 

She's been in the White House, been a Senator, served as Secretary of State, done the book tour, became a grandma, and probably has a pinstripe pantsuit to wear for occasions such as this.  Her main problem is that her winning the Democratic nomination is considered inevitable, and we saw how that went in 2008.... Hillary has separated herself from the Obama policies that didn't fare so well this Tuesday, and she is already running fast to the middle which should frighten her potential Republican opponent.  She has the necessary equipment to appeal to the women's vote, and even has the most popular Democratic campaigner in her bedroom (well, most nights anyways).  Hillary would like to delay the formal start of the primary campaign for as long as possible to shorten the window for lesser known candidates who deign to challenge her, thereby limiting intra-party damage and keeping her monetary powder dry.  At heart, a Chicago Cubs supporter despite her craven shift to NY teams.

Joe Biden, the Foot-in-Mouth Candidate

The Vice President is obviously well prepared per his CV.  He just has that not-so-presidential habit of either speaking his mind, or speaking without it.  The VP has drawn upon his senatorial background to work out some critical compromises (taxes and the "fiscal cliff") with Mitch McConnell in the past, and may be called upon to do so again.  He is getting up there in years and campaign miles; the American public knows what he has to offer and hasn't taken him up on it so far.  Probably won't run, or will drop out early.  I gather he roots for the Nationals since Delaware is too small to fit a full-sized stadium (it's the parking...).

Elizabeth Warren, the Base Candidate

Senator Warren is way out there in left field on the Democratic side.  She is perhaps THE national leader on financial reform with bonafides in most of the "protect the little guy" traditional causes of the base.  She also was welcomed by far more candidates than the president and campaigned hard for them.  I wish she'd run, she says she's not - I don't think she will.  She is, or soon will be, a Red Sox fan, after they climb out of the cellar where they've been hiding.

Jim Webb, Responsible Leader Type

Webb has the background, political views and intangibles to carve out a strong candidacy although it would be better if he had served as governor.  A former Marine Vietnam veteran, he served as Secretary of the Navy, Senator from Virginia and can actually slide in to the left of Hillary to deliver a primary challenge, should he choose to leave the private sector.  I think he sees the writing on the wall and will pass.  Doesn't seem like the baseball type; hard to even find a picture of him without a tie.

???????????????, Mystery Candidate

The Democrats could use one or two challengers to the Clinton Dynasty.  Partly just to maintain interest (people and media), and some might think it appropriate that a person without the name Clinton or Bush be out there representing.  Also, the primary debates would be less of a monologue, and the prey candidates would sharpen Hillary's campaign skills for the general election.  A few potentials:

  Senator Claire McCaskill - Too similar in qualifications and she does not excite.

  Governor Deval Patrick - Possible, but does he have a Massachusetts Miracle to run on?

  We had Mike, we had Mitt, need someone not so MA.

  Governor Jay Nixon from Missouri - Would be a good one:  skilled campaigner winning

  twice in a challenging state.  He has shown leadership and the ability to compromise.  

  May not get the full base support to rival Hillary just because he is a moderate.

  Governor Andrew Cuomo - Two-termer with name recognition.  Could generate some 

  appeal, but I'd hazard a guess that he'll only come in if Hillary falters out of the gate.

Honorable" Mention - Vermin Supreme

Performance artist, he announced his candidacy for 2016 while he was running in 2012 (I guess he lacked confidence in his chances that year).