•Wall Street Cries `Feed Me' or World Will End

-"I, for one, am willing to take my chances. Bring it on with your threats to force plain-vanilla investments on consumers. Wall Street, if you really want to frighten us, you need to do better than that."

http://www.bloomberg.com/apps/news?pid=20601039&sid=afCVGLt3daN8

Wall Street Cries ‘Feed Me’ or World Will End: Susan Antilla
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Commentary by Susan Antilla

Nov. 3 (Bloomberg) -- In the musical comedy “Little Shop of Horrors,” a dangerous and gluttonous plant dubbed “Audrey II” signals its insatiable appetite for human blood with a baritone demand, “feed me.”

In the real-life Shop of Horrors, the evil plant is gone. In its place is our voracious financial industry, which has been partaking in menacing feedings while stirring up fear of the havoc to come if it doesn’t keep getting what it wants.

A year after the world’s banking system almost collapsed, you might think financial bosses would be agonizing over how they would be depicted in history books, and anyone with a job would be offering to stick around and clean up the mess for a pittance.

You’d be both silly and wrong, as we all know by now. Finance’s version of Audrey II is thrashing about with threats that, crisis or not, they’d better get their extravagant pay and light-touch regulation. Anything less and -- real horrors -- financial innovation will decline and the world as we know it will end.

We’ll get to that financial innovation silliness in a minute.

A poll of Bloomberg customers released last week revealed that 21 percent of traders, analysts and fund managers polled in the U.S. expect their 2009 bonuses to be bigger than last year. Another 24 percent expect their bonuses to be about the same, which is pretty good when you consider the employment woes of the rest of the nation. Frustrated taxpayers wonder how they got into a mess where $700 billion of their money went to bailing out people who today are poised to pocket record amounts in some cases (9 percent in the Bloomberg survey).

Argument Trumped

In the financial industry, though, the attitude of entitlement trumps any argument that there would be no job, no employer and no paycheck without the bailouts.

In fact, those Bloomberg customers said any limits on pay will boomerang. Asked “Do you think limits on executive compensation in the financial industry will do more to control excessive risk-taking or more to discourage useful innovation?” 65 percent of the ones working in the U.S. said limits on pay would choke innovation.

Knowing what we do about innovation in finance, we wouldn’t want that to happen.

Are there actually credible people worried that capitalism will be brought to its knees if restrictions on pay, and related reforms in regulation, are imposed on Wall Street?

Easing the Rules

NYSE Euronext Chief Executive Officer Duncan Niederauer, who is either tone deaf to the public’s disgust or secure in the belief that the public’s anger doesn’t matter, told the Wall Street Journal last week that he’s worried that regulatory changes in the works in Washington will determine whether New York City can compete in the world. I’m having a déjà vu moment. Didn’t we try, and fail, at the idea of ratcheting down our rules to the levels of competing countries?

The high standards of the Sarbanes-Oxley Act give “the perception of heavy regulation” on the NYSE, he said, and a proposed tax on securities transactions (intended in one bill to be used to refill the coffers Wall Street depleted) could have “disastrous consequences” for entrepreneurs trying to tap into the U.S. equity markets.

I’m glad Niederauer brought that up, because the notion of a smart person having a great idea and building a business to the point where it goes public is just what I think of when I hear the word “innovation.”

Talk of Innovation

I’m perplexed, though, when I ponder what Wall Street means when talking about innovation. That’s not for any lack of examples, but for an understanding of what Wall Street adds to the goal of smart allocation of capital when it does its innovating.

I get it when the tech geek huddles in a garage for three years with a couple of pals and comes up with a blockbuster idea that brings pleasure to consumers or profits to companies, and then takes the company public. But why am I supposed to be losing sleep that new rules might impede the creation of the new, new thing in tax evasion? Or high-frequency trading? Maybe a new flavor of collateralized-debt obligation bearing a delusional AAA rating?

If you sift through position papers of financial trade groups, there’s a lot of noise about the need for regulation. But read far enough and you hit that paragraph that explains why the writer’s constituents don’t need to be overseen with serious diligence.

And then, inevitably, you will meet with that foreboding warning that regulation will threaten innovation. In a “Dear Senator” letter published by the Financial Services Roundtable on July 8, politicians were warned that a proposed agency to protect consumers would “jeopardize the safety and soundness of many firms and stifle innovation by requiring firms to offer ‘plain vanilla’ products.”

I, for one, am willing to take my chances. Bring it on with your threats to force plain-vanilla investments on consumers. Wall Street, if you really want to frighten us, you need to do better than that.

 

You know, I said this over a year ago with the crisis in full swing.

Wallstreet are financial terrorists.

They sell uninsurable interest.

Why can't you or I buy an insurance policy on YOUR neighbors house?

Because it leverages debt in the event of payout and destroys the underwriter, in the process. Now the homevalue has to get paid out 3, 4 or 5 times in the event of catastrophe, instead of just once!

Plus, its fraud.

Well, that's what most derivatives are. Especially, credit default swaps.

For every CDS buyer who owned the actual underlying corporate bond, 9 other CDS buyers never owned the actual bond!

Making the total theoretical payout 9 times the outstanding value of corporate debt, in the event of insolvency.

Hedging and netting pared-down that 800% figure significantly to about double, if i'm not mistaken.

That's the gun Wallstreet had to our head.

Everyone goes bankrupt in a cascading chain-reaction of domino's, or, give us your money.

The other side argues it was all a credit freeze. Weak counterparty banks unwilling to extend short-term credit to their weak(er) competitors. The crappiest banks go under, a few more stable banks get burned, and reduce interbank credit even more, and the purging cycle continues until all the highly leveraged banks with the crappiest debt go bankrupt. The argument here is the liquidation process would drive asset values even lower which would hurt even the most healthy of borrowers, their ability to make payments, and thus, the banks who extended them credit.

The problem with that argument is the total value of all sub-prime mortgage-backed paper was 1 Trillion Dollars. Anyone that disputes that number prove me wrong.

The total amount the FED and Treasury minted, gave out and loaned, was ~7 Trillion dollars.

A number far, far greater than a measly 1 Trillion that could have easily been nationalized (but wasn't), by the FED.

No, the cancer was left on the books to fester, so more money could be demanded from the Treasury.

Those toxic assets are really GOLD to the Banks.

Look how much free money it got them.

 

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Everything he says is correct. Everything.

 

I don't see people put pitchfork in banker's ass soon, or put their head on a pike in my lifetime.

 

Yep. The entire Country is getting raped by Wallstreet and Bankers.

Government is just a willing accomplice. The point-man on the corner playing look-out.

Or is it the guy holding us down, telling us to "Shut up" and assuaging, "it'll all be over soon"....??

 

Keiser called for a "fatwa" against Hank Paulson on Al Jazeera in response to the Troubled Asset Relief Program (TARP).

 

lol

The guy is jokes. But he's right.

 

Ha! I love the guy's passion as a GS-hater.

I have to agree with him. There is no end to what people will do for money. It just pissed me off more watching that clip.