Supernova or Lilliput
March 7, 2012 2 Comments
Various links and quotes
- They “bought” [sic] a million-dollar house. “In five years, they have never made a mortgage payment.” Ladies and gentlemen, my exhibit A for homeowners “hurt” by the crisis. Assholes.
- The Volcker Rule (which my 2.3 readers are utterly sick of me writing about by now) might not be ready before the July deadline, because “regulators are still confounded over how to enforce the ban without stopping legitimate types of trading done by banks to keep the markets flowing smoothly for investors”. Now why on earth would it be difficult to ban the totally-real-thing-that-exists (“prop trading”) without stopping legitimate trading? It’s almost as if there’s no actual concrete definition of this “prop trading” thing they’re trying to ban. Now where have I read that before, like a zillion times, I wonder?
- Relatedly, a quick note on Facebook’s IPO: You may have read that a bunch of banks are participating, and as part of that, they’ve given Facebook billions in credit lines (basically, ‘feel free to take some money from us if you want, we’re sure you’re good for it’). Serious question for Volcker fans: Why isn’t that a “prop trade”? I mean, if all goes well, the lines (if drawn) will be easily paid back, and meanwhile banks will make money (from the IPO). But if something bad happens, and Facebook suddenly draws down billions of dollars from all those banks, and then doesn’t pay it back, won’t the banks lose that money? So hmm, to summarize, banks have put money at risk; if good stuff happens they make money; if bad stuff happens they lose (a LOT). So isn’t that a “bet”? Now you can scoff and say ‘unlikely, Facebook rules’ but is it literally impossible? And based on what objective rule exactly have you discounted that risk? What is your objective risk threshold above which is a “prop trade” but below which is “bread-and-butter banking”? Do you understand what I mean by saying loans are risky yet? The more you try to think about conventional-wisdom claims like ‘banks shouldn’t make bets!’ the more you realize that, if applied consistently, Volcker Rule fans would have to ban – well – banking. Modern banking is a “prop trade”.
- Joe Escalante of the Vandals, for judge! I wish I could put that sign on my lawn. Hitler bad, Vandals good!
- Random Jottings: “Running anything by “detailed regulation” is Industrial Age practice.” Yet detailed regulation is the only direction our ‘technocrat’ Smart People masters wish to move things toward. (Again, the Volcker Rule is exhibit A.) One way to interpret this is that this seeming increase in obsession with ‘detailed regulation’ just represents the death throes of a dying ideology, the technocrat ‘supernova’ before their star flares out. Another way to interpret this, if that’s not the case, is that we’re all doomed, to be tied down and held back like Gulliver by a zillion little petty tinpot bureaucrats. Where are we: Supernova, or Lilliput?