As reported earlier, Obama has taken a new populist stance regarding Wall Street. However, as John Carney points out, Big Banks Have Already Figured Out The Loophole In Obama’s New Rules.
Big banks have already begun poking the holes in Obama’s new rules—holes they expect their banks to pass through basically unchanged.
The president promised this morning to work with Congress to ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.
But sources at three banks tell us that they are already finding ways to own, investment in and sponsor hedge funds and private equity funds. Even prop trading seems safe.
Full disclosure, I am a cynic of the highest order when it comes to politics and economics. So, it seems more than prudent to me to question Obama's overnight conversion to "populism", in the wake of the MA Senate upset.
Back to Carney's report,
One insider at a bank pointed to JP Morgan Chase’s ownership of the hedge fund Highbridge Capital. It is thought that under a strict “no hedge funds” rule, Highbridge would have to be sold off. But under the rule proposed by the Obama administration, Highbridge can be retained by JP Morgan because outside clients are permitted to invest in it.
A still more devious way is to have a banks own employees be the customers who are invested in the internal hedge funds. That way trading operations can remain closed to outsiders while the regulatory requirement of relating the trading to customer service is met. Goldman Sachs is rumored to be considering this approach. (Goldman isn't commenting on the regs right now.)
“This thing is about showing the public that Obama is standing up to Wall Street. So the rhetoric is heated. But the implementation will require far less change than people think right now,” a person familiar with the thinking at the upper echelons of one of our largest banks said.
As they say, "the devil is in the details". IMO, we should all strive to remember that we still are governed by a plutarchy, so we should check all the dotted i's and crossed t's, before getting too excited by what appears to be a political tack away from the status quo. The vested interests are very, very powerful, and we underestimate this at our own peril.
ah yes
kind of why I wrote "we have a miracle", all tongue in cheek, although in this case, ya know those lobbyists write loopholes for a living and it's almost like trying to catch cockroaches, so I'll stay a little more positive
I've been listening to "talking heads"
in particular CNBC earlier and honestly, for Obama to get anywhere with this, it really is a war and I think we should give the benefit of the doubt at this moment.
Although derivatives, corporations like Goldman Sachs are much more my concern and I'm not so sure this would touch GS...
but just turn on FAUX or CNBC and it's just astounding the opposition when this move is really common sense and I believe most economists, financial experts have been calling for these very moves for over a year.
They are all PE....
While I don't have my list handy at the moment at my offsite location, Goldman Sachs, Morgan Stanley, (and as mentioned JPM) Citi and BofA all have their very own private equity firms/funds.
So I'm completely filled with skepticism about this maneuver. And, I believe almost everyone of them is running a hedge fund of one sort or another, although I might be slightly off on this.
The Usual Suspects:
Goldman Sachs Private Equity Group
Morgan Stanley Private Equity
JP Morgan Partners, L.L.C.
Citigroup Private Equity
Banc of America Private Investors
I would suggest
That if they are running hedge funds, their access to the Discount Window be curbed. Why should savers be "taxed" (via artificially depressed interest rates) so the bastards can get even richer? Perhaps the Fed could publish a list of banks (I can't really think of Goldman Sachs as a bank that shoould be able to borrow from savers against their interest), and impose a higher discount rate for those runing hedge finds.
Frank T.
Frank T.
Better late than never
I think some scepticism is justified given Obama's track record. Let's hope this is not just another 'fat cats' faux-slap-on-the-wrist and Obama actually crushes the TBTF banks.
Or perhaps whatever bill is proposed will start out good, be morphed into a hideous monster by lobbyists, and then die in burning flames just like the health care bill.
http://jims-blog.com
Cui bono?
Smoke and Mirrors
But why? Dig a little deeper.
Who is one of the largest financiers of the Dem Party?
Bob, I respect you like to look at this from a purely objective econ perspective, but we can't discount the power of financing and political parties.
Put another way, I happen to know someone in the upper echelons of the Wall St. ladder who asked me, "Why are W.S, bankers being so demonized by the media?"
To which I said, "Well, you can certainly see it's not so hard to fathom that Wall St was able to buy the regulations they wanted."
This is Obama's Acid Test
If this is just a swiss cheese mask for 'reform' rather than real reform Obama exposes himself as the biggest con man in US history.
If he institutes real reform and starts cleaning out the scumbags from his circle he could still have a huge positive effect on the country's future.
read Yves Smith on Obama's new "get tough" proposal
This is a must read, Proposed Restrictions on Proprietary Trading are a joke.
I think I hit upon the ignoring of derivatives and that's a huge reason for the financial meltdown by Naked Capitalism really spells it out.
I still think Obama's "Volcker Rule" is better than what we have seen because it might very well break up some of these institutions but I completely agree, as usual, Goldman Sachs is left "untouched".
Anyway, read the post, it's a populist rant that is bullet pointed with detail.
Keep turning up the BS meter
Yeah, I read that article this morning and felt the same as you RO. Yves has been getting more and more pointed in her criticism of the O-gang's faux policy "reforms". BTW, did you read any of the comments to her post? The one by commenter "Richard Kline" @ 8:28 am is absolutely right on, IMHO.
NC comment
I agree with that but the problem is we cannot get any meaningful policy even proposed, never mind passed on derivatives, which I see kind of separate from the idea of breaking up the big banks. I mean it's Swiss cheese out of the house and it's clear the Senate bill is just undies blowing in the wind on any derivatives regulation.
Notice Simon Johnson also thinks this is PR, which shows to me how badly Obama has 'blow it' in terms of any credibility.
I'm really wondering if Bernanke will be confirmed. Today there seems to be mass PR blow back that "of course he will"....I'm keeping a vote tally in the Instapopulist sure doesn't look guaranteed to me.
Wall Street Disconnected From Main Street
I love all the media defenders of poor wall street and the poor banks. These corps have absolutely nothing to do with the health of the country. Thats milk toast spoon fed to us.
Walmart stock is up this AM on news that Sams Club is laying off 11,200 employees.
Whats good for Wall Street is BAD for Main Street.
There are plenty of arguments otherwise and each one is another spoonful of milk toast.
Did Oracle stock go down when Ellison gave himself a $570 million dollar payday?
This is nothing new
This has always been the case. Its just that we are more attuned to it because of the bailouts.
RebelCapitalist.com - Financial Information for the Rest of Us.
RebelCapitalist.com - Financial Information for the Rest of Us.
stock price and human suffering
is nothing new. They lay off thousands, the stock price soars.
I think what is new are sites like this one and more and more people becoming aware and educated about what is happening financially and economically.
Same goes for the concept of "free markets"
and neo-liberalism. The economic polices of neo-liberalism give a rat's ass about human suffering. Imagine if neo-liberals had their way we won't have unemployment insurance, social security or medicare. We would not have the meager safety net we have now.
Markets are far from perfect (same can be said of government) since they are create by imperfect humans and imperfect humans operate in them. Contrary to what neo-liberals preach, markets are NOT self-equilibrating as we have found out during this crisis. Much of neo-liberal doctrine has been proven false and until policy makers realize this the lower and middle class families will continue to suffer.
RebelCapitalist.com - Financial Information for the Rest of Us.
RebelCapitalist.com - Financial Information for the Rest of Us.
"Free Markets"
That's just the most incredible spin on Earth. Just like trade, there is nothing which shows the markets are "free" by the theory. Then, by psychology, man's exploitation of their fellow man, without laws, regulations, social justice, structures has been proven, over and over, though out time.
It's got to be one of the most absurd media spins of the last 30 years.
Rebel, midtowng told me he's under the gun, started going back to school so we need more writing on EP. If you are of a mind, or know of exceptional econ writers (not political per say but economics) invite them over to write. If you notice I'm doing almost all of the writing lately and I cannot cover everything as it should. Same with manfrommiddletown, he's in school as well and they are having to put off writing due to coursework.
The Japanese Are Different
Still deep in a 20 year recession they recently peaked unemployment there at something like 6.5% - its a record for them.
The people running companies there have a sense of community that has never and will never exist here.
I believe the U.S. is the worst
in it's treatment and attitude towards employees, workers of the industrialized nations. I could be wrong but finding a labor rights/treatment index, including frequency of layoffs, age discrimination and so forth would be nice.
I actually lived abroad and traveled a lot and I never say anything like the absolute disdain I see every day towards the U.S. worker (and often coming from other workers, never mind employers attitudes).