Bankster Blogging

Here is a very interesting post by Felix Salmon. Just when I think I have somewhat of a handle on this stuff, it just gets more complicated. I may have to read Yves Smith's book Econned. Her website is Naked Capitalism.

Although Blanche Lincoln's derivatives bill has gotten typified as suprising tough on derivatives, the Times editorial today argues that it does not go far enough and has too many loopholes. And Simon likes the Brown-Kaufman bill which would limit the size of banks. We actually had rule like that in 1994 but the banks have managed to get around it. He also reports that a study has shown that there is no international advantage to a bank over 100 billion dollars.

These sorts of bills are going to be strongly opposed by the big banks. They make a lot of money structuring derivatives. It will be interesting to see how the politics plays out. Nobody wants to cross the populist anger at the bankers.

The complexity of this stuff also makes one realize that we cannot hope that regulators will figure this stuff out. The SEC couldn't even catch the Madoff and Stanford ponzi schemes. When their attorneys routinely move into the banking sector and make millions, it is hard to see even why they will continue to be motivated (although I've heard stuff about the new guy...can't remember his name--Kussomething). Expecting the Fed to regulate the mortgage industry is another pipe dream.