Josh Rosner’s TV Rant on TBTF
By Barry Ritholtz - October 31st, 2009, 11:30AM
Nice job calling out them weasels and the clowns.
Joshua Rosner, managing director at Graham Fisher & Co., talks with Bloomberg’s Matt Miller and Carol Massar about proposed U.S. financial stability legislation. Banks, hedge funds and other financial firms that hold more than $10 billion in assets would pay to rescue companies whose collapse would shake the financial system under draft legislation crafted by a House panel.
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click for video
Source: Bloomberg
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If the legislation goes through, the Obama administration may end up being just as ruinous, if not more so, than the Bush administration.
October 31st, 2009 at 12:08 pm
The most composed “rant” I’ve ever seen. Nice job indeed.
October 31st, 2009 at 12:08 pm
Careful, BR: you may not get a White House Christmas Card this year (yet again…)
October 31st, 2009 at 12:12 pm
The fact that they don’t require up front money to be payed into a trust fund like the FDIC, is also a disaster and extremely anti-competitive. There should be upfront fees like FDIC and the fees should be a higher % the larger the company gets. It should also be the law that if a bailout is required not only are the shareholders are wiped out immediately; any remaining claims should get a haricut that should be at an increasing % the larger the company is. Can’t these people do even a basic incentive analysis? You want smaller institutions that take less risk, so you have to align the incentives toward a reward of smallness and less risk taking. This is not rocket science are they no smarter than a fifth grader? Costumers and investors have to say “I don’t know if I want to take the risk of doing business with a company that big”.
October 31st, 2009 at 12:29 pm
Josh hits it right on the nail that if bondholders in < $10 billion institutions will take a huge loss (up to 100%), but bondholders in the big institutions are covered; then it will get a lot more expensive to be small. Who would put their money at risk (lend to the small) if they can have it insurred (lend to the big) – unless they get a huge premium on the yield. This proposal is a total disaster, the incentives are the reverse of what they should be.
October 31st, 2009 at 12:33 pm
Require decreased leverage with increased size. If your size is above X your leverage can be no more than 1:9, if it is above 2X it can be no more than 1:8, if it is above 3X no more than 1:7 etc. until the humongous companies simply are not allowed any leverage.
October 31st, 2009 at 12:40 pm
BR,
seriously, how is JR’s presentation a “Rant” ? ‘Howard Beale’ he is, certainly, not, nor, need he be..
actually, despite the low-wattage of his ‘Interviewers’, he came across bright, and articulate.
past that, though, this “Financial Stabilization”-Bill is, yet, more of the same (read: entrenches the same Idiots, that should be BK, at best, in Jail, if for any semblance of *Law)
too reminiscent of a Script, soon to be Movie, layed out, decades ago– http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Atlas+Shrugged
maybe, We should, just, FFwd and see http://www.videonewslive.com/view/368738/trailer__fall_of_the_republic_the_presidency_of_barack_obama
some things fail the “All the News that’s Fit to Print”-metric, we should wonder why..
October 31st, 2009 at 12:56 pm
excellent stuff BR-
that Geithner “rejected” a one trillion dollar limit on what could be done by the executive branch to save large institutions- so that now it is limitless w/ no congressional approval needed- pretty much sums it all up-
Obama has surrounded himself w/ industry insiders- quite the delegator- and the TBTF’s have carved out a guarantee from the USG for their continued existence from now until forever- the question is whether Obama even knows what is going on- or if he does- even worse-
then it means he couldn’t care less
October 31st, 2009 at 2:27 pm
Oddly enough, the press release:
http://www.house.gov/apps/list/press/financialsvcs_dem/presstitleone_102709.shtml
doesn’t sound much like the draft bill as described. I have not read the draft, but for serious insomniacs it is here in all its 250 plus page glory:
http://www.house.gov/apps/list/press/financialsvcs_dem/title_i_discussion_draft_final.pdf
October 31st, 2009 at 2:58 pm
@M: Thanks for the link. What a pile of self-serving say-nothing blather. Kick the can. Only worse.
@BR: Guess you were right not to testify. These people are evil. Knowingly defrauding the American voters to serve the interests of their principal contributors. At least there’s honesty among thieves.
BS Obama continues to add fuel to the flames of his effigy: An arrogant, self-serving empty suit lacking the personal conviction to exercise leadership, and lacking the leadership to even attempt to steer the ship straight.
Community Organizer. Weak one at that. Politics Chicago style.
The arrogance and contempt for the average citizen is mind-boggling.
October 31st, 2009 at 3:01 pm
Sounds like the patriot act of finance.
October 31st, 2009 at 4:02 pm
Where on earth do people get the idea that breaking up these banks is “anti-capitalism”? The market has spoken, and they would all(except a few?) be bankrupt. Breaking them up is what pure capitalism would have done already. If the government stepped in to cushion the process, so that they could be “bankrupted” in a socially orderly way – sans riots – that’s not anti-capitalism or anti-market. This is only, what, the fifth time Citi’s gone bust in it’s history? Breaking them up is agreeing with the markets verdict. TBTF is an abomination.
October 31st, 2009 at 5:23 pm
@M; Thanks for the links. I will admit to my inability to read and understand the 250 page draft bill itself. I just hope that it is a lot more like what they say in the press release and less like what Josh is describing. What I don’t understand is that if they are not covering the @ss of the unsecured debt holders how would they prevent “systemic risk”. As I understand the concept of “systemic risk” from a year ago, the saying was that if these big companies did not cover their unsecured creditors, those creditors would also fall and so on through the system until all the dominoes had fallen.
Its hard to see anything that would work, short of breaking up any company that is TBTF, or demanding that TBTF institution do not use any leverage. If you insure the TBTF creditors they have a competitive advantage and everybody else will either die or have to merge to become TBTF. If you don’t insure them you have systemic risk (and a need for bailout of the economy via feeding the bonus babies next time they make a mess). You may be able to reduce the risk by oversight and regulation, but its not going to be reduced to zero – and Bush/Greenspan proved that even the best of regulation/oversight does not work under bad leadership. We have to create a competitive disadvantage to being TBTF if need be by punitive taxes/fees (wouldn’t that be nice to smack those bastards with some fees).
October 31st, 2009 at 5:49 pm
No matter what, doing the right thing would be just as bad as doing the wrong thing over the short term.
Deleveraging would suck.
October 31st, 2009 at 6:07 pm
Yes its all Bush’s fault. LOL.
Yes the Messiah can do no wrong. Funny thing about this Messiah, he’s connected to the same people who called for and finally implemented the end of Glass/Seagall starting all the way back in 1995. Robert Rubin and his apostles, Summers and Geithner. http://www.allbusiness.com/government/business-regulations/500983-1.html
This from http://jessescrossroadscafe.blogspot.com/2009/10/brilliant-warning-on-robert-rubins.html
……….”In December 1996, with the support of Chairman Alan Greenspan, the Federal Reserve Board issues a precedent-shattering decision permitting bank holding companies to own investment bank affiliates with up to 25 percent of their business in securities underwriting (up from 10 percent).
This expansion of the loophole created by the Fed’s 1987 reinterpretation of Section 20 of Glass-Steagall effectively renders Glass-Steagall obsolete. Virtually any bank holding company wanting to engage in securities business would be able to stay under the 25 percent limit on revenue. However, the law remains on the books, and along with the Bank Holding Company Act, does impose other restrictions on banks, such as prohibiting them from owning insurance-underwriting companies.
In August 1997, the Fed eliminates many restrictions imposed on “Section 20 subsidiaries” by the 1987 and 1989 orders. The Board states that the risks of underwriting had proven to be “manageable,” and says banks would have the right to acquire securities firms outright…
As the push for new legislation heats up, lobbyists quip that raising the issue of financial modernization really signals the start of a fresh round of political fund-raising. Indeed, in the 1997-98 election cycle, the finance, insurance, and real estate industries (known as the FIRE sector), spends more than $200 million on lobbying and makes more than $150 million in political donations. Campaign contributions are targeted to members of Congressional banking committees and other committees with direct jurisdiction over financial services legislation.
PBS Frontline: The Long Demise of Glass-Steagall
http://www.nytimes.com/2008/11/24/us/politics/24rubin.html?_r=1
…….”The president-elect’s choices for his top economic advisers — Timothy F. Geithner as Treasury secretary, Lawrence H. Summers as senior White House economics adviser and Peter R. Orszag as budget director — are past protégés of Mr. Rubin, who held two of those jobs under President Bill Clinton. Even the headhunters for Mr. Obama have Rubin ties: Michael Froman, Mr. Rubin’s chief of staff in the Treasury Department who followed him to Citigroup, and James S. Rubin, Mr. Rubin’s son.
Clinton was part one and now we are getting part III. Part II were the trillions this crew, with hoorays from the usual suspects, gave to their old friends and supposedly will continue to give for the next ten years.
October 31st, 2009 at 11:02 pm
You wouldn’t have seen this on CNBC…either the fast money smirkers, jumping jim cramer, or the kneale dim bulbs would have interrupted him endlessly so that we wouldn’t have gotten any of the message.
October 31st, 2009 at 11:05 pm
And Barry, I do hope Obama runs again in 2012 so you can vote for him. I think I will vote for Ron Paul if he chooses to run again. Hopefully people on both sides have had enough.
October 31st, 2009 at 11:11 pm
There is no need for anything but bankruptcy. I’m stupefied we are even discussing this.
October 31st, 2009 at 11:36 pm
i don’t get the worship of Ron Paul. i get the Fed bashing, but do you share all of his other kooky views. he’s the right wing, Libertarian Kucinich without the hot wife. Ron Paul has no shot.
damn (not danm), deleveraging does suck. two choices, slowly or quickly. reflate, reflate, reflate.
this is via WS Xing, “Reinhart cited Robert Schiller to the effect that house prices rose more from 2000 to 2006 than in the previous 100 years put together.” what housing bubble huh Ben, Elmer? http://bit.ly/1mNZCo
October 31st, 2009 at 11:45 pm
here is a Ron Paul beauty: order was only restored in L.A. when it came time for blacks to pickup their welfare checks after three days of rioting http://bit.ly/1Agfng
so when the markets blow up after queasing runs its course, we will usher out the first black (half white) president and install Ron Paul. that’s chains became believe in.
November 1st, 2009 at 12:14 am
@PatrickNeid
You’re absolutely correct. Plenty of blame to go around for this mess of economy, but I think you have to start with Bob Rubin, Sandy Weill, and their enabler in chief, Bill Clinton. Call it the revenge of Rubinomics. Payback is a bitch.
November 1st, 2009 at 8:37 am
It is clear that both parties are so entrenched into their financial greed religion that the crux of their debate is now centered on “how many Angels can fit on the head of a pin” when what is needed is a new religion.
November 1st, 2009 at 9:05 am
@Patrick Neid; yes I know they are all blaming Clinton for the repeal of Glass-Steagall when in reality the Fed and Greenspan had made it so full of holes it really only existed on paper. The formal removal of Glass-Steagall made no difference, nor would this mess have been avoided if it had NOT been formally removed. We need Glass-Steagall back, including some real serious interpretations so the Fed cannot change it or its enforcement.
PS; just like Kevin Bacon can be connected with every other actor in no more than 5 links, I am sure Rubin can be connected with every other economist (including every Chicago school fool on earth) in no more than 5 links. The real issue is ideas not some stupid game of connect the dots.
November 1st, 2009 at 9:11 am
Hopefully Josh and others will continue to press forward with unbiased, apolitical, non-partisan analysis.
This mess goes way beyond party affiliation, it transcends that level of discussion. Each party believed they were getting what they wanted, each party is now beholden to the colossus that emerged by design. This is not a black swan or some unintended consequence. The unintended consequence is the realization that is was all so wrong.
All one needs to do is understand what Greenspan said to congress. His confession ‘ in a state of shocked disbelief’ is the essence of where the establishment is, unfortunately many are still in the state or can’t completely come clean due to where they currently stand.
November 1st, 2009 at 9:12 am
The reasons why TPTB can get away with this are many:
1. Most of the population is broke and spending all its times running after its tail to make ends meet.
2. Most of the population has no clue how money is created, never mind how the financial system works.
3. Those who are in the know but not lucky enough to belong to TPTB keep on nitpicking, diffusing the real problem. For example, they’ll argue about whether Goldman Sachs is doing illegal things or not. No one seems to see that it’s a total farce as those with the money, throughout history have always been able to get the laws they need so they don’t have to act illegaly. In the meantime GS is pilloring the country right under everybody’s nose.
I think too many people lack pragmatism. We are not going to see any right decisions being taken until TPTB have done everything they could to position themselves to benefit form the popular changes that will have to be done. You are not going to get any cleanup (i.e mass bankruptcies, changes in rules,etc) until they have had time to position themselves. What do you think TPTB have been doing in the last year? Do you really think their 1st goal was to cleanup?
They couldn’t give two hoot about the “little” people.
November 1st, 2009 at 9:31 am
And the fact that they have not started to clean up demonstrates just how difficult it has been for them to position themselves for the “new world”. They’re stuck.
IMO the system could go down before they do any semblance of a cleanup. I just don’t think they can wiggle themsleves out of this wet paper bag. And I truly beleive that many if not most of TPTB will get caught in the crossfire.
November 1st, 2009 at 9:35 am
Stipulated that this mess involves Clinton and Bush. Who gives a shit? A mess is a mess.
Rosner’s money quote here is that we are faced with the “stasis of the middle.”
Write or call your representatives in Congress, people. Make some noise. Get loud. Make sure this monster doesn’t become law.
November 1st, 2009 at 12:14 pm
“yes I know they are all blaming Clinton for the repeal of Glass-Steagall when in reality the Fed and Greenspan had made it so full of holes it really only existed on paper. “…..DeDude
Oh really? Who is “they are all blaming Clinton”. The all you are talking about is virtually no one. The Bush admin is the fall guy for all things Obama. Everyday in every area, including this site and countless others they are to blame. Normally I wouldn’t give a shit but when it piles so high I speak up as some one who has traded the markets professionally for more than 35 years and have benefited and suffered from the mindless intervening that poses as sophisticated economic insight.
It is very important at this time to point the finger at Rubin and company because they are the same folks who are raping and pillaging in the Obama admin. These are the people that folks, perhaps such as yourself, are looking to for answers in our current mess. Led by partisan Keynesian political hacks like Krugman, Franks, et al and supported by countless web sites clamoring for interventions in the marketplace, we are spiralling the drain. Trillions no longer matter.
Just as some folks write books pointing fingers, I do mine as a trader/infrequent commentator. I find it very interesting that when the fingers get pointed at Rubinomics and its aftermath, folks start saying we should not point fingers. Never ever forget that the Messiah chose these people. It was not by accident.
November 1st, 2009 at 12:51 pm
Patrick, the Messiah is like any politician ( Clinton, Bush) smart politically, but clueless about the markets. pols rely on their allies on Wall Street. and those allies play on both sides of the aisle. who do we trust? Volker who is in his 80s. where do we find the next Volker?
McCain, who said the economy is fine last fall, relied on Gramm, mr. America is a nation of whiners.
all that is left and natural is finger pointing. Bushies blame Bubba, Obama blames Bush. next admin will blame Obama. when Clinton first got into office, he found people from the Carter admin. what should Obama do, go back to Johnson advisers?
ok, i’m done. gotta get off the web, or i’ll be here all day. it finally stopped raining in Atlantis.
November 1st, 2009 at 1:37 pm
I get it, Obama is a great disappointment. Coopted by banksters (or whatever you want to label ‘em). Some of us voted for him because Volker (and a few others) were on his team.
The implied argument is that we’d be better off with McCain (and Phil Gramm). Someone make that argument, please. Seriously…
November 1st, 2009 at 1:40 pm
And if/when it happens you will have to live with the fact that you passed up an invite to DC to DO SOMETHING. You passed.
Sorry man….but I think that was a mistake you are going to regret for a long long time.
November 1st, 2009 at 2:23 pm
@ Patrick Neid:
“Yes its all Bush’s fault. LOL.
Yes the Messiah can do no wrong.”
Nobody in this thread said anything of the sort, so I don’t follow whom you’re whining at.
“I find it very interesting that when the fingers get pointed at Rubinomics and its aftermath, folks start saying we should not point fingers.”
Bullcrap. This site’s come down on Rubin’s idiocy like a ton of bricks. Do some reading:
http://www.ritholtz.com/blog/?domains=http%3A%2F%2Fwww.ritholtz.com%2F&sitesearch=http%3A%2F%2Fwww.ritholtz.com%2F&cx=015905226837203657063%3Ax1cwdcykvvw&ie=UTF-8&oe=UTF-8&cof=FORID%3A11&s=Search&q=rubin&sa.x=0&sa.y=0#1030
November 1st, 2009 at 5:04 pm
Whining at?
Have you even read this thread or watched the video?
The folks that are writing this bill at the White House, Treasury and Frank’s committee are the same folks that were/are part of Rubinomics. They were chosen by Obama.
The Bush stream is ever present here and at other countless sites and even gets mentioned in the video, as in “more of the same Bush years without the bill?”. My point remains that the systemic problems that caused the bubble of the 90’s and the crash of 08 have never been interrupted. The headwaters of this problem were formalized by Rubin in the links I provided earlier. Rubin, Greenspan and Summers personally engineered the overthrow of Glass Seagall later formalized in 2000 with the help of Repub and Dem Congressman. These same people are now writing the legislation to supposedly resolve the problem. These are not just retreads from previous Dem admins as mentioned above. They were specifically chosen to do what they are doing now. Obama has hand picked these folks using Volker as a thin veneer.
Not until Obama supporters realize this will there be any fundamental reforms. They will simply say as they have for ten months that these steps are all necessary because of Bush. Independents, Libertarians and Repubs can effect no real change as it appears to be partisan harping or whining as you put it.
November 1st, 2009 at 5:37 pm
how’s that “Hope and Change ” treating you ?????????
November 1st, 2009 at 6:19 pm
“Whining at?
Have you even read this thread or watched the video?”
Yes. Apparently you haven’t, though.
“The Bush stream is ever present here and at other countless sites and even gets mentioned in the video, as in ‘more of the same Bush years without the bill?’.”
I just watched the video again, and they never said those words.
You’re just fabricating crap to make Bush seem persecuted. The video didn’t bash him, and neither did this thread.
I’m no fan of Rubin, either. But your claim that people here absolve Clinton and bash Bush, while placing blind faith in Obama’s appointments and proposals, is very much unfounded.
Again:
“Yes its all Bush’s fault. LOL.”
This quip only applies to fictional people.
November 1st, 2009 at 6:26 pm
so Rubin is the evil genius, and not Greenspan. that Goldman, they rule the world. even the Bushies were helpless to stop Rubin while he’s at Citi. i remember how angry Independents, Libertarians and Repubs were during the Bush years about the building bubble.
November 1st, 2009 at 7:35 pm
Just read the last few posts and you’ll realize that TPTB, the establishment, has everyone where they want them to be.
Man the banksters must be having fun. Printing all that money, paying themselves bonuses while everyone else is expecting them to fix the problems or just plain arguing about who’s most ot blame.
November 1st, 2009 at 7:37 pm
Red herrings galore.
November 2nd, 2009 at 6:24 am
The exact quote at the 3:18 mark was “the admin doesn’t want change after eight years of George Bush?”
My point stands. The cause of our current dilemmna started in the 90’s with Rubin, Summers and Greenspan by the technical changes they instituted. These same people or their understudies were chosen by Obama to run his economic team and model. It was not an accident. Cheering loudly in the background are the likes of Krugman and Frank for whom no government or spending is too large. They make the dreadful spending of the Bush years look good.
Furthermore to make the claim that this fact is not glossed over by countless popular econ sites, the MSM etc, especially in the comment section by people such as yourself is absurb. The foxes are in the hen house.
November 2nd, 2009 at 7:21 am
“The exact quote at the 3:18 mark was ‘the admin doesn’t want change after eight years of George Bush?’”
And it’s a very valid question. The Bush administration was one that had no problem privatizing the banks’ profits and socializing their losses. Bush/Greenspan was a bad combo for the economy; to pretend otherwise is nonsense.
Besides, this quote is jabbing at Obama at least as much as Bush. Here we have a guy who ran on “change”, yet he shows too much willingness to preserve the old ways.
Finally, saying that Krugman is cheering loudly for Rubin’s proteges and methods is moronic. He seems as peeved as anybody that this administration has so many Clinton rehashes:
http://krugman.blogs.nytimes.com/2009/07/19/morning-joe/
And the commenters there are even more negative on Rubin than he is. So your whining that “those people” on progressive websites overlook Rubin’s transgressions is hogwash.
November 2nd, 2009 at 7:27 am
@ danm:
“Man the banksters must be having fun. Printing all that money, paying themselves bonuses while everyone else is expecting them to fix the problems or just plain arguing about who’s most ot blame.”
I haven’t argued over who’s to blame. I just expressed surprise that Mr. Neid thinks the tone of this very evenhanded website is, “Yes its all Bush’s fault. LOL”. He’s got a persecution complex.
I’ve lurked here for a number of months, and single-party blame is neither the gist I’ve gotten from this blog, nor from summaries of Barry Ritholtz’s book. TBP is an equal-opportunity castigator.
November 2nd, 2009 at 8:00 am
Assassin:
You’ve just proved my point. All this talk about politicans is a red herring. I don’t care who’s right or wrong, the fact is that the country is being looted while everyone is correcting everyone else. Looters love this type of environment.
It seems that most people here keep on arguing without doing anything. They’re all expecting everyone else to do the dirty job so they can just invest their money they’ve saved up and live happily ever after.
What is it with people who think laws are to be blindly respected? Don’t they realize that the US broke the law and the rules of the game when it declared its own independance? The irony is that most Americans actually think the laws were made for them, when they are usually designed to protect the rights of the rich! It’s probably because most Americans still think they are rich as they look at assets without netting out the debt.
Life is a battle with periods of lull. Anyone oblivious to this is doomed to suffer.
November 2nd, 2009 at 8:20 am
do you mean that the US broke the rules of the game by declaring independence from England? one man law is another man’s manifest destiny. momma, what’s my destiny?
what can be done about the looting, danm?