Tuesday, October 27, 2009

Princeton's Propagandists

"Clearly, the nation's attention is focused squarely on a question few presidents want to answer just nine months into their term: What has your administration accomplished? ... The president's critics complain that his only real accomplishment is the $787 billion stimulus bill--which they deride, somewhat contradictorily, as either budget-busting, ineffective of both. But is that all there is? I think not. ... The administration's chief accomplishment to date surely is devising and executing--with huge assists from the [Fed]-- a comprehensive program is pull us back from the abyss. The stimulus was just one component. ... When the Treasury secretary finally did release his plan, in stages, he wisely resisted the siren songs soming from both the left ('nationalize the banks') and the right ('let 'em fail), opting instead for the high-risk 'stress tests' of 19 big financial institutions. Today, all 19 are alive and breathing. ... And many big banks have repaid their money from the [TARP], earnings taxpayers a profit", Alan Blinder (AB) at the NYT, 18 October 2009, link: http://www.nytimes.com/2009/10/18/business/economy/18view.html.

AB is proud the 19 TBTF's are "alive and breathing". Why? I say kill them. Profit? AB must not read Yves Smith's Naked Capitalism, my 15 September 2009 post: http://skepticaltexascpa.blogspot.com/2009/09/uncle-sam-speculator.html. Nor her jabs at the "stress tests", my 21 May 2009 post: http://skepticaltexascpa.blogspot.com/2009/05/casablanca-and-stress-tests.html. What big accomplishment is getting Zimbabwe Ben to print money? He likes doing that. It's as big an accomplishment as getting a seven-year-old to eat an ice cream cone. Apparently AB would call me a "rightist". I say and have said, kill the banks. I last poked Princeton in the eye on 6 July 2009, link: http://skepticaltexascpa.blogspot.com/2009/07/princeton-circles-wagons.html.


Anonymous said...

Dear Alan Blinder:

I'll keep it succinct ... I know how busy you are... two versions.

Short version -- two words of advice.


Long version ---

History repeats alot and we can learn about the danger of allowing commercial and investment banking to live together in enormous bloated institutions... then saving them through central banking efforts by looking back at a little British bank...

During the 1880s, daring efforts in underwriting (the bank often purchased stock outright to sell later at a premium) got the firm into serious trouble through overexposure to Argentine and Uruguayan debt, and the bank had to be rescued by a consortium organized by the governor of the Bank of England, William Lidderdale, in the Panic of 1890. Although recovery from the incident was swift, the bank lost its dominant position and a limited company - Baring Brothers & Co., Limited - was formed to which the business of the old partnership was transferred. The liquidity problems of the old house were settled by a loan from the Bank of England...

About 100 years later Barings BLOWS up again (you remember Nic Leeson punting around in Japanese futures?early derivatives explosion... kaboom... the guys in London were just soooo unaware of the risk... but you're sure that managements of the big banks are more aware now... sure...)

We'll it won't be a 100 years in our case if you and your colleagues keep everything as is...

Hot money flows much more quickly between the global money center banks now and they are much more concentrated and complicated things than old Barings Bank... Barings was playing in the global macro games in slo mo... (contrast it to the speed of BarCap)

Keep Citi alive and dominating currency and bond global flows and it will collapse again.

Now Alan... do you want to be remembered in history as one of the guys that enabled the collapse of Western civilization?

Do you really?

Because your name is all over that strategy and that is where you're heading with your defense of the status quo, the Federal Reserve and the big banks.

The Blinder path ... Barings redux.

Independent Accountant said...

Citigroup almost collapsed in the early 1980s. Walter Wriston used to say something to the effect: "Countries don't go bankrupt". Wriston did not know what he was talking about. I'll refer you to one of my previous posts.


Independent Accountant said...

30 October 2008, "Book Review: Walter Wriston's Bits, Bytes and


Anonymous said...

Wriston was a "commercial" banker eh?

An "investment" banker would say "countries go bankrupt regularly it's a process of repackaging the debt"...

Just ask Nicholas Brady...