Saturday, August 20, 2011

Nassim Taleb : The Banks are more powerful today than they were before the crisis

Nassim Taleb : I do not think the bad news would be the recession , the bad news is continuing to commit the same mistake , too much debt, the tumor at the center of the system that has not been removed it is when someone makes money and gets a bonus and when they lose money we pay the price , tax payers future generations , the core of the problem is that asymmetry in pay off , socializing the losses and privatizing the gain and the generator of that inequity is still there , what has happen since the crisis , these people got us here and they are raping the benefits as an industry they have not suffered , you have people in the street unemployed people , you have the federal reserve doing everything to finance these bonuses , I am outraged ....the first time we bailed out the bank was in 1982 - 83 during the Reagan years and they said OK this should never happen again but the fact that bailed out the banks then and in 87 again and keep repeating it gave the banks the feeling that they could hijack society to extract that bonus system that is extremely sneaky , since they know that if they are making mistakes someone else will pay for it but if they make the money they get the benefits , in 2008 when they bailed out the banks once again they should've set the ground to remove that problem they did not , the banks today have hijacked the government , it is like inverse of hat the french did they socialized the banks in 1981 while here it is the banks who took over the government , it is not like the banks should be taking more risk or less risk , the banks should be something others than machines to generate themselves bonuses , the banks should be something more like utility , we are bailing them out because they are a utility otherwise we will let them die like other business like the car industry , we should remove that problem that has not been addressed , today the banks are vastly more centralized than they were before the crisis they are much more powerful than they were before they have incredibly snaky lobbying in Washington and it looks like every monetary policy w have had in the United States for about ten years were there to accommodate them and today more than ever , so we have not solved the problems that got us here...we have wasted three years doing nothing but transferring money to the pockets of the bankers ....

2 comments:

missprism said...

I totally agree. Banks were built into a cartel that depended upon government-furnished mortgage insurance, starting in 1936, with FDR's invention of Fannie. The big banks are not real banks anymore, in the sense of understanding how to lend to real businesses or to structure real businesses. They are volume sales operations only, entirely dependent on scale and on the government's protection against all loss.

The capital markets are also rigged, because the SEC is dysfunctional and does no enforcement against fraudulent cooked books accounting, and companies know they can buy themselves out of any fraud politically. Or they are understaffed, and incompetent, particularly relative to the talent available to private companies. Read David Einhorn's Fooling Some of the People All of the Time, preferably in the paperback edition just released, in which he updates the political perversion of the SEC investigation of the Allied Capital ponzi scheme, in which clearly valueless assets were blatantly and fraudulently carried on Allied's books at grossly inflated value. The CEO of this company was a former SEC enforcement officer herself, and apparently knew every trick in the book to pull, mostly, getting in the face and intimidating anyone who might complain, politically.

The state of affairs is terrifying because the fact is there would seem to be no way to be assured that there is basic integrity in the US capital markets.

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