I’m Speechless About How Much Damage Obama Is Doing When It Comes To The Financial Sector
I was a big fan of Obama and felt he would be very good for the country, but I am one of the few supporters that hasn’t been surprised at his lack of reforms thus far. It was obvious he was going to defend the status quo and attempt to address the country’s problems through the existing political lenses. I have always thought that this would fail and at that point his “real presidency” would start, in which he had to set a new path. However, I must say that I never thought he’d actively make the problems of the status quo worse.
It’s becoming increasingly clear I was wrong. Read this post by Glenn Greenwald.
It’s to the point where prominent economists (some with Nobel prizes and others that have been in charge of cleaning up developing markets) are publicly calling us an oligarchy no better than many banana republics, a fact left out of public discourse. Read Yves Smith’s post on the media’s role in this state of affairs. Fraud experts believe that these events are going to lead to fraud (or at least lack of trust) on such a large scale that it will threaten any economic recovery by itself.
Needless to say, putting an active member of GS as the COO of the oversight board (not to mention the vast majority of SEC, Treasury and Fed officials are prior members of investment banks) will do little to change this dynamic.
There is a lot of movement on the right to take advantage of this (ranging from heartfelt concern to mere political calculation) and to me the question is whether the left will rise up and be able to cooperate in a unified front. Dean Baker issued a call for a mass protest against the large banks…will he and other progressives start standing up against Obama directly?
Update: I feel that I should point out that Congress and the White House are moving towards “regulating” the banks. Look at Larry Summers’ statement that came out today. However, the question is not whether there will be regulations, but whether the regulations will be any good.
A House committee passed legislation that is purportedly to regulate derivatives better, but the people that have been warning about derivatives for years claim that the new regulations are weaker than the status quo! The SEC division mentioned in Greenwald’s post was another example of new oversight that was supposed to address the problem, and look who they put in charge.
I anticipate that that Democrats will move to pass a lot of such regulation and claim they are addressing the problem (while using it against the Republicans as a political cudgel) while in reality there will be little improvement and perhaps worsening.
However, unless there is a concerted effort by the people that have the authority to take on the propaganda, I have little doubt it’ll work. Personally, I am growing weary of reading Nobel prize winners and fraud experts giving their academic assessment of the situation without any political movement behind it.
Update 2: Here is an article about GS’s problems…ones of PR.
I really like this part: “Goldman executives know they have a public opinion problem, and they are trying to figure out what to do about it — as long as it does not involve actually cutting pay.”
In any case, while they are patting themselves on the back for being so shrewd, I thought I’d take the opportunity to point out that a lot of their profits are from the very new practice of High Frequency Trading. This post on Zero Hedge explains that it should be generating about $4 billion a year for them, which is over 30% of their total profit, assuming that they keep up the record of the prior quarter (even more if they can’t). The practice involves holding onto stock for microseconds in an effort to extract money from people that are trading normally, and currently makes up around 70% of all trading volume. While the entire culture is very interesting from an intellectual standpoint (it’s literally led to its own electronic ecosystem where different programs compete with different strategies, attempt to fill niches and evolve based on how well they’re doing) from a practical standpoint they aren’t providing any service and it’s merely a “tax” (or stealing) from the rest of the players.
I do feel like that is a major contributor to their record profits aside from the other issues. It’s also something that more market players are wanting a ban of.Click here for reuse options!
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