Banking Reform and Insanity

I’ve just finished reading the proposed and dubiously dubbed Wall Street Reform Act which, if enacted, I am confident has absolutely no hope of addressing the systemic risks or features responsible for the environmental components key to the systems financial melt-down.

What the “Bill” does of course is to illustrate how routinely uninformed and easily manipulated Senators, for example, Mr. Dodd, D-Conn, Mr. Grassley, R-Iowa, Ms. Sens. Amy Klobuchar, D-Minn, and Jeff Merkley, D-Ore , to name but a few, actually are.

More over, grievous errors in practice such as this proposition represent are the very type of miss-adventure the public should be closely watching and strongly object.

Here are just a few of the most conspicuous failures this Bill proposes to enact:

  • Creates a Consumer Protection Authority. Particularly interesting when we consider that the pandemic of greed and avarice that is a key component of the mess did not occur on the consumer-side of the equation.
  • Creates an Advance Warning Council whose purpose is to identify and address operational risks within the Financial System. Another “panel” of industry experts sensitive to the “system” and charged with the duty of addressing risk. Two thoughts come to mind: (1.) Chickens, Foxes and Coops. And, (2.) Isn’t fraud, misrepresentation and thievery an existing and actionable transgressions under existing law?
  • Charges the Federal Reserve Bank with supervision and oversight. Interesting that, second only to the U.S. Government itself, a privately held entity, cloaked in its own form of double-speak and near indefinable authority, should be charged with providing and insuring “transparency”.
  • Creates an Executive Compensation and Corporate Governance protocol where by shareholders are entitled to vote on executive compensation packages. Whether or not the government should be involved in the matter at all is cause for objection however, the major problem with this particular proposal is this: the vote is “non-binding”.
  • Creates a Systemic Failure Liquidation Fund in theory to overcome the Too Big to Fail allegory of $50 Billion which, again in theory, will build up over time. A token gesture at best considering that the total cost to date, including undisclosed “bailouts” directly by the Fed, is nearing $4.5 Trillion – it would seem quite comedic if it weren’t so blatantly disingenuous.
  • Formalizes, as a systemic market component, Derivative Trading as a legitimate “…contract that protects businesses from risks.” This is a patently false statement and on its own magnifies the exponentially endemic fraud of the financial markets as practiced and a direct and specific indication of the Senators lack of understanding as to the practices and risks of contemporary Financial Markets.
  • Allows a “one time” audit of the Federal Reserve. On the surface this sound promising however the Bill statutorily prohibits future audits and specifically excludes a review of the Fed’s interest rate policy and their “discount window lending” facility; these two components alone are the most active and obscure “ops” of the Feds monetary policy mechanisms.

Here are a few items indicative of what the “Bill” does not do:

  • It does not specifically confine the business of Banking to the Business of Banking but instead entirely redefines its traditional role.
  • It does not address the practices of Derivative Trading by confining it exclusively to the domain of “Asset Secure” Investors and to a specific Market
    Environment which is separate and distinct form Private, Public and/or Institutional Investment Portfolios.
  • It does not address the Mortgage Security trading practices nor does it prohibit derivative or hedge-based trading practices with respect to these instruments.
  • It does not address liquidity or reserve protocols for Financial Institutions.
  • It does not prohibit Cross-Trading or Market “Short” practices by Institutions managing existing proprietary portfolios.
  • It does not refine or otherwise define punitive enforcement practices for even the most basic malfeasance.

To understand the nature of the problem is to consider how dysfunctional the U.S. Financial and Monetary structure has become.  The U.S. economy has long ago abandoned faithful economic stewardship and has opted strictly for risk-based economic leveraging.

An entire economic system that is built on the practice of risk-based capital flow which is nothing more than hedge-based reward harvested solely on market movement.  Creating profits based solely on the adverse or inverse movement of various markets and not on the creating of wealth through productive output but merely on the hedging (the bet) that any “thing” can have market movement and where there is market movement, there is profit.

This is why you have a Bill, as in this case, which has no hope of addressing the problem however it willingly assures one that it will occur again and again.  This event is nothing more than yet a nother Legislated Failure.

There’s no correcting of a past mistake in judgment by promising that the error will occur again!

And thus we have the merging of two distinct anomalies: Banking Reform and Insanity!

Curtis C. Greco, Founder

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