After watching the online video interview with Douglas Elliot @
Brookings Podcast: Financial Regulation in Congress, I find several interesting and disturbing statements. The hypothesis in this video is that we need more regulation in order to rein in the problems (crooks) in banking. This is an interesting if not sad discussion. I will attempt to use humor to make a sad situation better and easier to follow. The two variables I have found are the independent variable (Sizeable Loss may significantly IMpair their net worth) SLIMe for short. And the dependent variable (CAvalcade of losses at other counterparties …significantly cut back total Credit Available) CACA, which is what the people, us, get with all this new regulation.
According to Elliot the people want regulation — but they are too dumb to know what regulation they want. The democrats want a new Independent agency — yes more government, while the republicans say such an agency will only make the risk too easy to give bailouts, when the risk goes bad. The republicrats are not against more regulation and bigger government. They just want to make it slightly different. I find it very interesting that the two biggest causes to the financial meltdown are naming the new regulation. (Elliot) “Dodd-Frank designated all commercial banking groups with $50 billion or more in assets as SIFIs,” science fiction. So basically the more SLIMe created by SIFI the more CACA the people get.
A Russian not too long ago predicted the great depression of the 30s and now this one. Professor Nikolai Dmyitriyevich Kondratyev was a Russian economist of the early 1900′s and a pioneer of dynamic economic theory. He used not only the normal business cycle, but also the normal political cycle as models. When they coincide correctly we get depression. I am not trying to say there is nothing we can do, but I am saying that the current major cause of our meltdown is in charge of the creating the SIFI that is giving us the CACA. Kondratyev was killed by Stalin in 1938, because he did not say what Stalin wanted to hear.
The democrats, beginning with Clinton, pressed the banks hard to give loans to people that could not afford them. As Fannie and Freddie were purchasing these substandard loans, Bush sounded the alarm in 2003. Frank and Dodd both said there was no problem and Bush was just blowing smoke. We now know that either, they were too misinformed and just did not understand banking, or they were setting up a money making scheme for their friends. If it is the former, then they need to be sanctioned by their respective legislative bodies, and if the latter then they need to spend time in prison along with their friends.
Elliott, Douglas J. and Litan, Robert E. Identifying and Regulating Systemically Important Financial Institutions: The Risks of Under and Over Identification and Regulation Brookings Institute. http://www.brookings.edu/~/media/Files/rc/papers/2011/0116_regulating_sifis_elliott_litan/0116_regulating_sifis_elliott_litan.pdf