A lump of coal in their Christmas stocking

Playing nice is vastly overrated.  For the last week my posts have been about past Christmas presents, dogs, icy weather, and other fluff.  But now I feel the need to stir the pot.  (Most of you can go back to sleep. I'll be back tomorrow with more fluff stuff.)

You all know I have a serious hard....umm....problem with the major banks.  Ever since bank deregulation back in the 1990's their focus has increasingly turned to pulling in as many deposits as possible, then "investing" that pot of money to make themselves a hefty profit.  Sure, they still make some loans, but if they have a chance to make trades for their benefit (in hedge funds, packaging/selling derivatives, etc) vs making a loan, well, borrowers are just SOL.

It's sort of like a spoiled rich kid going to Vegas with daddy's credit card.  As long as he's winning, it's "party like there's no tomorrow!"  But if his luck runs out and the "knuckle draggers" come looking for him, then he's back at daddy's door wanting a bailout.

For a decade the banks were on a hot streak, making billions and paying themselves handsomely.  But in '08 it all hit the fan and they came knocking (desperately banging?) at the taxpayer's door, wanting a bailout.  This led to the passage of the Dodd-Frank (banking reforms) Act*.  It's taken 5 years, but it looks like we're finally going to see the bankers get a solid spanking.

The five major financial regulators (FDIC, Federal Reserve, Securities & Exchange Com, Commodities Futures Trading Com, and the Comptroller of the Currency) will tomorrow vote on the "Volcker Rule" which will prohibit banks from trading for their own gain (known as "proprietary trading") and limit their investment in hedge funds.  If the regulators stick to their guns this will curb bank risk-taking and avert future Wall Street taxpayer bailouts.

Bankers of course don't like this at all because it will hurt their bottom line and make a big dent in their HUGE bonuses.  Collectively they have hundreds (thousands?) of lawyers and lobbyists scrambling right now to try and devise ways to fight the Volcker rule, or at least get some loopholes inserted that will allow them to get back to business as usual. 

I'm hoping the regulators won't knuckle under to the special interests who would throw us all under the bus if they could make a buck for themselves in the process.

Heehee....I love watching bankers squirm and squeal.  :)

S

*  Ironically named after Sen. Chris Dodd and Rep. Barney Frank, two of the bankers most proficient enablers during their go-go years.

Same song, second verse

This coming Saturday is the Red Bull Flugtag, the event where amateur teams build humorous "flying machines", then jump off a ramp where they invariably "fly" all of 30 feet....straight down.

  

It sounds like it should be a hoot and a half.  As a cool front is coming through on Friday, and the temps on Saturday are expected to top out in the mid-80's, K and I are seriously considering going.

My only hesitation is the crowd/parking situation.  We tried to go to the Red Bull Soap Box Derby back in the spring, but it was an uphill hike both ways from the parking area 20 blocks to the event site.  We arrived there and my knees took a look around and said, "no thanks". 

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It was exactly 5 years ago that our economy began it's near-fatal meltdown.  Greed ruled over prudence back then, and lenders were making terribly bad loans, then selling them to unwary investors as top-quality thanks to phony bond ratings.

Now, with real estate loans again being packaged by banks and sold to investors, Standard & Poor's has again lowered it's bond rating standards in order to bring in more business.   

Talk about a conflict of interest!  Banks directly pay the rating agencies (the Big Three are S&P, Moody's, and Fitch) for a review of the bonds they are hoping to sell, and they are shopping around to see who will give them the most favorable rating.  "Tell me what I want to hear, I'll pay you lots of money."  Since lowering their standards, S&P's market share has jumped from 18% to 69%.

So what have we learned?  Five years ago banks were "too big to fail".  Today they're bigger.  Five years ago bond ratings were a joke.  Today it looks like they're headed that way again.  So much for "financial reform".  Bank Lobbyists, 1; The Public Interest, 0.

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Here's a thought....maybe we could make that Flugtag jump from 300 feet, and get all the Ivory Tower Bankers to enter themselves as a team.  :)

S