Saturday, December 20, 2014

The Fed's Christmas Gift

If you think that securities laws were just for the little guy, then you're not alone, so does the Federal Reserve.
 The Federal Reserve granted the delay yesterday after banks said selling the stakes quickly might force them to accept discount prices. Goldman Sachs Group Inc. has $11.4 billion in private-equity funds,hedge funds and similar investments, while Morgan Stanley has $5 billion, securities filings show. “This is a great holiday present by the Fed,” said Ernest Patrikis, a former Federal Reserve Bank ofNew York general counsel who is now a partner at White & Case LLP. 

Yea, merry Christmas, and Happy New Years as well, at least until 2017.
Extending the Volcker deadline until July 2017 will let banks get out of their investments “in an orderly manner,” the Fed said in an order. It will “reduce the potential disruptive effects that significant divestitures of covered funds could have on markets,” the central bank said.
 Are you kidding me, 2017?

The one thing you can be sure of is that this Christmas gift to world’s wealthiest has nothing to do with reducing potential disruptive effects on the markets, it is only concerned with preventing certain disruptive effects bad investments would have on the balance sheet. Any oversight body concerned with protecting the markets would have let these self-acknowledged brightest of the bright fail long ago and cease in their ability to roil markets at all. Letting the bad banks fail and leaving the strong banks alone is the only sensible policy. Instead this Fed continues to give away to the weak members who own it, until the weak have destroyed the strong leaving only the bad banks to survived, and the only business plans with the K Street with lobbyist. So, former Chairman, cheerleader, and good cop Paul Volcker to feigns disbelief.
 “It is striking, that the world’s leading investment bankers, noted for their cleverness and agility in advising clients on how to restructure companies and even industries however complicated, apparently can’t manage the orderly reorganization of their own activities in more than five years,” Paul Volcker said in an e-mailed statement.

What is more striking is the fact that the Fed is empowered to do anything. It says that the entire 2010 Dodd-Frank financial regulation was nothing more than lipstick on a pig, Wall Street's congressional laps dogs providing the appearance of regulation on Wall Street's casino.

The Fed has in fact given the most criminal culprits Goldman Sachs, Citigroup ©, and Morgan Stanley (MS) three years of chips on the house. If they know they will get bailed out of losing trades, they have incentive to make more and riskier ones. Heads we win, tails you lose again and again.

 And while there is fear that the is an effort to repeal Dodd-Frank,

There’s a growing idea that the banking industry’s success in repealing Section 716 of Dodd-Frank represented a Pyrrhic victory, that it has now put such a target on banks’ backs that it won’t be able to get anything else done. But maybe it was just a victory, which will lead to more victories, like the one this week at the Fed. Wall Street knows how to fight on all fronts, working the implementation lever when the Congressional lever is blocked, and vice-versa. The result is a financial sector that looks quite a bit like it did before the financial crisis. 

the reality is that it was never regulation at all. It should have been as obvious then as it is now.

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