Saturday, July 4, 2009

Yves Smith Skewers "The Plan"

Yves Smith (YS) has a 19 June 2009 post skewering Tim Geithner's financial reform plan at her Naked Capitalism, link:

I have nothing to add to YS's comments. My favorite quotes from her piece, "Those shortcomings are almost certainly features, not bugs. ... While these are legitimate concerns, the contretemps about the Fed masks more serious issues. ... That suggests that there needs to be not just an institution-based view of the financial markets, but probably also a product-based perspective and increased attention to system dynamics".

Now I present the IA financial reform plan:
1. Repeal the Federal Reserve Act.
2. See 1.
3. See 1.
4. Overturn the 1930s "gold clause cases".
5. Make it a felony punishable by up to 10 years in prison to authorize any financial institution holding FDIC insured deposits (FDCI-FI), from holding, trading, issuing shorting, acting as agent for any derivative. Put bank officers in prison? Yes. To hell with the FDIC-FIs.
6. Limit FDIC-FIs from exceeding 1% of total FDIC-FI assets.
7. Make it a felony punishable by up to 10 years in prison, for any FDIC-FI officer from making a loan other than what EC Harwood (ECH) would call a "short-term" self-liquidating loan. ECH wrote about sound bank management in the 1930s! The only blog I know of which follows his work is Sybil's Star, link:
8. Make it a felony punishable by up to 10 years in prison, for an FDIC-FI officer to authorize an FDIC-FI to run an "unmatched book", i.e., have unmatched loan and deposit maturites.
9. Reinstate Glass-Steagall.
10. Separate investment banking from retail brokerage.
11. Require all FDIC-FIs officers, in the case of an FDIC-FI bankruptcy to be personally liable for up to three times each officers last three years' total compensation.
12. Lastly, clone Andrew Jackson, give him two dozen flintlocks and let him loose on Manhatttan Island.

You wanna see Wall Street howl? Here it is.


Anonymous said...

Yes... I endorse the plan... it's the perfect thing to see on Independence Day...

Geithner's plan was written by the banks... it's the "Bank Status Quo Plan"

I'd move 9. Reinstate Glass-Steagall to the second place.

Separate investment banking from retail brokering... yes...

Criminalize derivatives... sure...

No TBTF... no no.

Clone Jackson? More... surgically create a "Terminator" Jackson.

Independent Accountant said...

Lincoln would be appalled. Our Republic is "Of Goldman Sachs, by Goldman Sachs and for Goldman Sachs". For this 406,000 Americans died in WWII?
I wonder if Schwarzenegger is available once he leaves Sacramento?

Anonymous said...

Goldman... I can't get this Matt Taibbi quote out of my mind...

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

--- DEAD ON ---