Monday, July 14, 2008

London Banker's Casino

London Banker (LB) has a fine 11 July 2008 post at RGE Monitor, about the proposed single central counterparty (CCP) to clear OTC derivatives, which is so skeptical I would like to have written it. The link: Read, enjoy, join the Mogambu Guru and SCREAM! Some gems, "As in any casino, a team of sharks working together only has to shift the odds from 51-49 favoring the house to 51-49 favoring the sharks to win big money consistently. ... If they co-opt the casino commission, hey baby, no worries. What happens in Vegas, stays in Vegas. ... To put in mildly, one might have some concerns about the independence of CCP governance and oversight. With the New York Fed as the principal cheerleader and proposed regulator for the CCP, it begins to look more CCCP than CCP. If you trust [Tim] Geithner and his chosen seventeen banks to act in the best interests of all the millions of global economic and financial actors of the world who are affected by and deal in the global derivatives markets, go ahead and back the CCP".

"If they co-opt"? LB mentioned a "commission". Does LB mean the Fed hosted meetings for these 17 banks which are today's answer to 1957's Little Apalachin (LA) meeting which led to 63 arrests? LA gave rise to US v. Bufalino, 285 F2d 408 (1960). LA could never happen today. Why? Today's "commission" influences the: Fed, SEC, FBI, DOJ and CFTC. You can't beat it. A "commission" member wants to buy Bear Stearns, no problem. Drop $29 billion on the Fed and you're golden. Could Meyer Lansky (ML) have done that? Imagine if ML could have gotten say, $2 billion from the Fed in 1947 to build Vegas. Where would "the commission" be today?

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