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Streetwise Professor

October 28, 2011

Gillian Tett: Frankendodd Increased Complexity. Who Knew?

Filed under: Clearing,Derivatives,Economics,Financial crisis,Politics,Regulation — The Professor @ 2:30 pm

Gillian Tett of the Financial Times is shocked! shocked! to learn that Frankendodd: (a) has dramatically increased the complexity of financial markets; (b) creates myriad opportunities for regulatory arbitrage; and (c) gives advantages to big, sophisticated, politically juiced players that can decode, game, and influence the regulatory process most effectively.

Yeah.  I can sympathize.  It’s not like anybody could have seen that coming.  Nosiree.

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15 Comments »

  1. the Euros never cease to amaze, but every once in a while they can be insightful: check out the cover of this week’s Economist – The Euro politicians abandoning their sinking ship in a colander.

    Comment by Sotos — October 28, 2011 @ 7:47 pm

  2. Some really smart folks need to figure out a legit workout for Greece and other Club Med profligates. That would remove a lot of the “?” in these plans.

    Instead of bailing out Greece, kick them out of the EU and the euro-based economy. After they default, convert their euro-denominated sovereign debt to drachma-denominated sovereign debt. This would look a lot like a debt-for-equity swap in a workout of a bankruptcy event in the private sector. The second step would be to prohibit all two-way euro currency transactions with bankrupt Greek sovereign agencies — they could only pay euro from current holdings; they would be credited drachma to their bank accounts in return on all transactions with non-Greek private and public counterparties.

    This would set a great precedent for other actual and thinking-about-it profligates, and remove the failed sovereigns from the euro economy.

    Comment by markets.aurelius — October 29, 2011 @ 3:40 pm

  3. @markets.aurelius. Back in the summer I wrote some posts that said that Europe had a stark choice: amputation or gangrene. You and I agree that amputation is necessary, but they seem bound and determined to die slowly of gangrene.

    The ProfessorComment by The Professor — October 29, 2011 @ 4:09 pm

  4. Where was Sen. Hatch’s concern about respect for U.S. IP ten years ago when China was allowed into the WTO?

    Oh wait, I forgot, the shelves at Wal-Mart aren’t stocked with cheap crap from Russia, and it’s China that’s busily buying the EU’s leadership after years of hysterical Ed Lucas Economist rants warning us about the Kremlins doing that. Great job anti-Russia lobby! You guys really saw that one coming!

    Comment by Mr. X — October 30, 2011 @ 2:48 am

  5. http://old.news.yahoo.com/s/nm/20111029/ts_nm/us_usa_russia_trade

    Comment by Mr. X — October 30, 2011 @ 2:48 am

  6. > the shelves at Wal-Mart aren’t stocked with cheap crap from Russia

    The shelves anywhere aren’t stocked with cheap crap from Russia, since there is no such thing. That’s because there is nothing anyone can do about that anti-Russia lobby in the Kremlin, least of all poor Russians.

    Comment by Ivan — October 30, 2011 @ 3:47 am

  7. What is really beyond all sense of reality is watching Dick the Dick Durbin decry the banks movements to restore their profitability. He actually encouraged BofA customers to start a run on the bank.

    This is the same guy that supported Fannie and Freddie, was all behind TARP, probably the worst legislation in the last 60 years, helped push Frankendodd, and then is dismayed that, you know, the companies actually react and try not to get pinned down by legislation.

    These guys are almost uniquely unqualified to be federal politicians, and certainly if we were choosing anyone to write financial regulation, virtually anyone from the phone book would be better.

    Comment by Jim — October 30, 2011 @ 10:46 am

  8. Of course Durbin supports F&F and TARP – those are things he can influence, use to help fund his campaign, etc. Banks returned to profitability mean banks that are not so easily controlled. This is the knee jerk reaction from someone who sees his power threatened. Of course he will frame it from the point of view of outraged virtue, but this is about power.

    Yannopoulos’ Third Law states that self interest and virtue are usually perfectly correlated.

    Comment by Sotos — October 30, 2011 @ 11:59 am

  9. @Jim, @Sotos–Dick Durbin is at the bottom of the barrel in the Senate, and that’s saying something.

    The ProfessorComment by The Professor — October 30, 2011 @ 4:06 pm

  10. Actually the bottom of that barrel is a pretty crowded place – I would like to think that each is horrible in his or her own way, but that isn’t true. Most are so full of themselves that it is a miracle they haven’t exploded.

    We do have to come up with a new expression. Maybe the wood shavings from the bottom stave? My favorite is to say that when you think someone or something has hit rock bottom, you find that it is just another ledge on the way down. New motto for our political elites: “Depths yet to plumb”

    Comment by Sotos — October 30, 2011 @ 5:39 pm

  11. @Sotos–oh, I know the competition is intense, but DICK Durbin is in a league of his own. Re new expression. Yes, it is needed. Everything low I can think of (snake belly, whale crap) doesn’t seem to do it justice.

    The ProfessorComment by The Professor — October 30, 2011 @ 6:35 pm

  12. Suggestion – “Pre Cambrian Slime”. Not pithy, but accurate.

    Comment by Sotos — November 1, 2011 @ 9:06 am

  13. http://seekingalpha.com/article/303687-the-weak-sisters-should-leave-the-eurozone-and-default-here-s-how?ifp=0&source=email_macro_view

    one smart guy thinking things thru …

    Comment by markets.aurelius — November 1, 2011 @ 10:25 am

  14. @sotos. I think pre-Cambrian slime would be offended by that comparison!

    The ProfessorComment by The Professor — November 1, 2011 @ 11:57 am

  15. @sotos. And Lord knows, we’re all about not giving offense here at SWP! :)

    The ProfessorComment by The Professor — November 1, 2011 @ 12:00 pm

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