Friday, May 21, 2010

Financial Overhaul Bill Passes Senate

 The U.S. Senate passes the financial overhaul bill 59-39.

Some four decades ago, one of my worst chores working summers for my dad (he owned  the company ) was getting sent to the bank with a bunch of paperwork.  Lines, stamps, signatures... endless time wasted.  In my school-boy estimation, bankers were amongst the most boring people imaginable - only the head of our accounting department topped them for yawns.  But then again, he was a veritable caricature:  he wore black satin sleeve protectors and green eye-shades, and his papery-white fingers were always smeared in ink. And he smoked a pipe.

Far better to work down at the factory floor, even though it produced a teenage social disaster;  at the end of the day I couldn't get the smell of grease off my hands no matter how hard I scrubbed.  Try that with a date. And to top it all off, the pay sucked big time because - according to Dad - the owner's son obviously had to work for free.  I even had to work Saturdays. He called it building character, I called it slavery.

But, I digress.

The point I wish to make is that banking was boring, bankers were boring and anyone who wanted to be a banker was bonkers.  And that was a good thing.

By contrast, today's bankers and financiers (still) think of themselves as the swashbucklers of the world, moving billions at the press of a button or with a quip of "mine" over a direct phone line. They rarely, if ever, pause to ponder what it is that they actually provide to the real economy, what it is that they produce or even facilitate.  The most senior of them may mumble some stock phrase from the Chicago School prayer book, but deep down they know damn well that all they accomplish is to increase total systemic risk for the real economy.

  • Financial engineering, coupled with lax regulation and unquenchable thirst for ever more yield pickup, made it possible to slice and dice obviously crappy loans into tranches and then into bonds and derivatives that were transmuted into AAA assets.  And those were further leveraged, both by outright margining them  within portfolios and/or by turning them into even more esoteric, higher-order structured products (structural leverage).  No wonder the professionals who slapped these products together referred to them as "shitty deals".  It didn't matter that some ludicrous math priced them at stunningly low 30 basis points (0.30%) over  risk-free Treasuries. When the shitty (deal) hit the fan - as it always does- it was not the bankers who got whacked, but the homeowners, the construction workers, the factory workers, the realtors, the insurance brokers. Most outrageously, the bankers got bailed out and got record bonuses.  God's work, my ass.
I could go on, pointing out the complete absence of real economic benefit  or merit in activities like: high-frequency/bot trading in shares, 200-1 leveraged FX trading for individuals (also known as bucketshops), financial spread betting (also, also known as bucketshops), index tracker/reverse index tracker ETFs, etc. etc.

But it's Friday once again and I have better things to do.  And my hands no longer smell of grease (well, maybe a bit of bicycle grease..).


  1. Wrong way round.

    It was when the home owners didn't pay, that the bankers got into the shit.


  2. As a banker... I can tell you that 99% of my industry are not the "bankers" hell is referring to. (myself included)

    He nailed the boring thing. As a management level pawn, I speak for the 99% of my underpaid brethren, that the 1% of the "bankers" that get the bonus's + the huge salary, give us all such a bad name! Actually, the crew I work with now are pretty nice people, that seem to value health over wealth. (so I really can't complain)

    9 years of stagnent wages. Thank god my wife's an "earner"! ...and hell, I so often wish I had grease on my hands.

    Woe is me.


    p.s. Deb, my wife and kids will be going to England next month. We were planning on doing a 2 day romp through Paris. I've never been to Europe. Any suggestions for "must do's"

    Food recomendations are VERY welcome as well as sights. (Eifel, Louvre, Arch...) Anything non-touristy that is awesome? If someone came to NY, I'd say, sure, go to Times Square.. but don't eat there! Go to Tricecca, SoHo, etc...

  3. Ahhh yes, the good old days....

    Nostalgia is a revisitation of novelty....

    When I was a young sprat, I worked at a brokerage house after school, Merrill, Lynch, Pierce, Fenner and Ziggy.... I was the copy boy and I used to go in and tear the research reports off of the teletype machines, (does anyone remember the sounds of a brokerage office?) talk about nostalgia. Ah, and the smell of the solvent for the mimeograph machine, Mmmmm... The sharp tony looking brokers sitting in their cubicles, their pretty wives and girlfriends, their late model convertibles, coups, sedans and station wagons. The customers sitting at the peanut gallery watching the ticker.... The sound of the telephones ringing... Living the American Dream.....

    Have a Great Weekend,


  4. Rich:

    Not much you will be able to see in Paris in two days!

    It will take you one full day just to see one wing of the Louvre. Notre Dame is also close by, if I recall correctly.

    Watch out for the Gypsy kids and "little old lady" pickpockets who are "begging" at the Eiffel Tower (well, that was my experience in 1993) who will try to steal your change when you are paying at the window or waiting in line. My advice: wear a fanny pack inside your shirt. They will spot you as an American immediately.

    I'm just sayin'....

    Pretty much all of the sights are within walking distance.

  5. SACRE BLEU! Deux jours pour visiter Paris? Incroyable.

    Vraiment, vous ete un Americain!

    Yo, buddy don't feel bad. I saw the entire Louvre in ONE morning and the rest of Paris (Notre Dame, Eiffel, Sacre Coeur, Montmarte, Champs Elysee, Invalides, Les Deux Magots, Fauburg St. Honore, L'Arc de Triomphe, Avenue Foch,Opera, et ceteraaa, et ceteraa) in TWO days.

    Saturday and Sunday.

    It can be done. Walk a LOT, eat street crepes for lunch and pray for sunny weather.

    Now, Rome... Florence.. Siena..

    That's another story altogether.

  6. Start at the Arc de Triomphe. Walk straight down the Champs Elysee to the Louvre. Cross a bridge to Musee d'Orsay. Walk a little further down river to the Ile de France (the island in the middle of the river that Notre Dame is on). On the Champs Elysee there's a visitor center where you can buy a museum pass that will get you into all the museums.

    We were going to the Musee de Moyen Age, but it turned out it was closed that day. So we wondered around trying to figure out what to do instead. We stumbled onto the Jardin du Luxembourg. Then it rained so we went into a random cafe that had an incredible cheese plate (this last paragraph is just to illustrate that you can't really go wrong; Paris is delightful).

  7. Au sujet de cette déclaration Hellasious:

    SACRE BLEU! Deux jours pour visiter Paris? Incroyable.

    Vraiment, vous ete un Americain!

    Let this be a lesson to you Europeans: Americans typically don't get much (if any) vacation time. Personally, I have never in my working life ever worked for a company that provided any at all. The only time I ever got any "vacation" was when I was on unemployment.

    Looking for employment that provides health insurance and a 401K (retirement savings plan) is always a challenge in and of itself.

    Just like national healthcare, the United States is the only Western democratic market economy country in the world to not guarantee vacation time by law.

  8. Dear Lord Blagger,

    The bankers were responsible to their depositors to lend the money on good security to people who would repay. Onesies and twosies not paying is a misfortune. Thousands and thousands begins to look like carelessness.

    AND conspiracy to defraud.

  9. Consider taking a stroll through Parc Monceau, visit Montmarte. I still have a menu from a restaurant at either The Gare De Lyon or The Eiffel Tower restaurants where dick filet and lamp shop were on the menu.

    Bon Appetit!

  10. Really nice piece Hell

    I think I can say "thanks" from everyone in doing such a good job explaining to the rest of us how absolutely worthless your career choice has been. I only hope the rest of us can return a similar honor some day. ;-)

    PS- I completely agree that the grease is way more fun.

    @Lord Blagger (what kind of name is that anyway?) re: "It was when the home owners didn't pay, that the bankers got into the shit."

    I think everyone here of every political persuasions would agree with this statement. It is simply the details that comes after where a few protestations might arise. ;-)


    Where in the UK will you be going? I recommend you go on and quickly purchase every Bill Bryson book ever written.

    The UK is soooo much fun. What age will your little ones be while there? We took my 4 boys two years ago (they were 7, 11, 11 and 12 at the time) so depending on your kids ages I'm sure we all have a few recommendations.

    It will most decidedly NOT be a zero-sum trip. ;-)

  11. More reading relevant to this thread:

    The Road To Economic Serfdom

    By Peter Boone and Simon Johnson

  12. the bankers ruined the lives of the working class, c'mon, that is a gross mispresentation.
    without being an advocate of investment banks and rating agencies, we have to put the blame where it lies exactly: the investment 'professionals' that work under the guise of pension plan managers, university endowments, financial analyst, all those that put the money into this game. what is a CDO worth when no one is bidding for it? about what it is worth right now.

    so let's state the obvious: there are plenty grossly incompetent people that manage our government forced savings and they do just one thing: funnel it to investment banks (directly or via hedge funds) so they can tear of an arm and a leg and make sure we never retire.

  13. Really?

    If you are in the US, how do you account for the federal debt? That's not investment banks. It's government. Now add on social security debts.

    Now, compare that figure with the bank bailout.

    Now ask yourself, were the banks bailed out to keep the flow of money from treasuries going? ie. Not because they were banks, but because they channeled the funds to the black hole of government spending.

  14. Now, Hell, that's what I call REAL aristocracy.. the owner's son had to work for free. Builds character. Yep. That's why.. YOU are where YOU are now, and...(some, not all of) the investment bankers are where THEY are now.
    And Lord Blagger... WHERE are YOU ? (and I'm not talking about the U.K....)
    Rich, since everybody rushed in, you've got lots of advice without my even having to lift a pencil.
    I would NOT advise the Louvre, however, but that is personal prejudice. Unless you want to file in right behind two busloads of Japanese tourists and spend two minutes in front of what WE call "La Joconde". (You call it the Mona Lisa). Two minutes before you get hurried away by an official looking person. (I'm exaggerating as usual, it's what I do best...)
    Walking around Paris is the part I like the best. The gardens, Luxembourg, yeah, they're great. Pray for nice weather.
    I'll get my neurons together, and think more. For some out of the way spots with a little character.

  15. Well, it seems the serfs aren't getting much value for the money they do spend.

    But a 75% increase from 0 is still 0. ;-)

    ... Or perhaps if we just let Norwegians do our regulating for us?

    ... Or maybe if we let Deb's aristocracy do our regulating for us instead?

    PS- Okie, I finally finished Michael Lewis' Big Short. I think I understand a little better what you saw in the bankruptcy world that so disgusted you.

    Hell, you really do work with some real sleaze balls as I guess Rich alluded. Yuck.

    Personally I think we should trade the whole bunch for some Norwegians,or maybe these guys?

    ... Though this might worsen health care costs.

    What to do? What to do?

  16. @Eco

    I'm not sure you noticed but there is a new Ridley book out and guess what?

    It's about my very favorite topic: cooperation (well the benefits of specialization that come from cooperation in a kind of positive feedback loop... though I guess he should add a few lines about the systemic risks that come from increased specialization as well? Perhaps that might be another book?)

    Anyway, I thought you might be interested.

    Be well

  17. PS- Okie, I finally finished Michael Lewis' Big Short. I think I understand a little better what you saw in the bankruptcy world that so disgusted you.

    I'm glad that you are finally admitted that I am right. Apology accepted. (Was there ever really any doubt?) ;^)

    Although I do wish you would elaborate (just so you can burn it into everyone's minds how right I was). 8^D

    It's about my very favorite topic: cooperation (well the benefits of specialization that come from cooperation in a kind of positive feedback loop...

    I always thought fractals was your favorite topic. I'm confused again (as usual).

  18. Okie, bottom line: in a zero-sum fractal universe, there is nothing but cooperation. Everything else is chaos.

    Be well

  19. Thai:

    I'll pick up Ridley's book as soon as I can.... However, I don;t know when I'll have the time to read it... Been pretty busy these last few day's and from the looks of it, I'm going to be pretty busy tomorrow....

    The stuff really hit the fan tonight in Asia.... It looks like somebody snuck some Exlax into the Kool Aid again.... The S&P mini is down about 18 pts. Things are really getting out of hand....

    Authorities should close all the markets down for a few days and just say "F&%c IT....! Everybody take the rest of the week off" A week long Global Holiday in honor of our humanity, all businesses are closed.... That's it...

    Best regards,


    Tell them... you DON'T KNOW HOW TO PLAY, so... your sandbox gets closed.
    (For at least a generation...)
    Anyways, at this rate there are soon going to be no brightly colored beads to play with any more.
    Aristocracy is available to EVERYONE under my ideology.
    Aristocracy is not a question of money, it is a question of ATTITUDE.
    One of the most aristocratic people I know... lives in the streets.
    Aristocracy means... not bowing down to filthy lucre. Not indexing EVERYTHING on it.
    Not whining about it, not having one's eyes go all bright whenever the possibility of making a buck emerges.
    Not running your HOSPITALS for profit...
    (Hey, by the way, I checked, and our blood banks are not buying blood.)
    It is a BIG mistake to confuse aristocracy with material wealth, or even temporal power. A mistake that lots of people make, granted.
    Okie, you must have missed out on my comment about American vacation time way back there.
    Or you don't listen to me at all, cause I talk about it A LOT.
    As I used to tell my mom when she was shocked that I didn't have a spin dryer 20 years ago... yeah, but we have 5 weeks paid vacation in the summer...
    (used to, until the Protestant work ethic started gaining ground here, thanks to you know who...)
    Those... priorities.

  21. Lots I agree about in that link, Thai, but SOME STUFF I don't agree with either.
    Like... the template for going in in Waco, Texas, for example... where does THAT one figure in ?
    And I try NOT to stick labels on people.
    It was a deontology issue for me when I was working as a shrink. Labels... close your mind to what and who you're listening to.
    Thanks for that great site, Okie, on the workings of revolution. The Road to Economic Serfdom looks like a comic strip in comparison.
    Only trouble with that great site is ALL THOSE COMMENTS... you could spend the day on the computuer, couldn't you ?

  22. "....I make it my modest rule to be satisfied with whatever flowers, fruit, or even leaves I gather, as long as they're from my own garden. Then if I should happen to gain some small success I'm not obliged to render any of it unto Caesar...."

    Edmond Rostand

  23. Hmmm... under Edmond's philosophy, the economy collapses...

  24. Debra:

    Under Edmond's philosophy, The return per current (constant) market conditions of one once of approval in exchange for one ton of flattery is not worth it...

    He would offer the Cardinal a mutually fair deal and the Cardinal would not take it... That's the privilege of the Cardinal...

    May he burn in Hell.... ;-)

  25. OT:

    Another good one from the Onion…. Funny…!

    “… White House Jester Beheaded For Making Fun Of Soaring National Debt
    MAY 25, 2010 | ISSUE 46•21….”

    “….Tensions rose when a happily beaming Obama demanded to be riddled. After a string of well-received topical posers, Motley asked the following:

    A pocket-hole that grew so large,

    A giant couldn’t eat it.

    A cache of gold that never was,

    But nonetheless depleted.

    When the President confessed to being stumped, Motley revealed the answer to be “the National Debt, of course.”

    Witnesses said Obama’s mood immediately darkened and, pounding on the arm of the Presidential Throne, he demanded new jesting. After nervously clearing his throat, Motley was heard to ask, “Wherefore is the National Debt like a sprouting leaf of spinach?” When a glowering Obama demanded the answer, Motley stated, “For it shall rapidly grow into something our children cannot bear.” …..”

    Best regards,


    Here’s the link……,17495/

    “…. At this, Obama reportedly dropped the large turkey leg in his hand ….”


  26. Eco, some people think that i am obscure, but on this one, I have to bow down to you for obscurity.
    But then, I'm not really an economist anyway.

  27. Debra:

    "Glory is fleeting, obscurity is eternal..."