As for the banks….

I was Googling for a quotation by H.L.Mencken about how to deal with failing banks, and lo and behold, I found this, which it seems I wrote for Forbes in November 2oo8. The link in full is below. Here’s the money quote. I still believe that “perp walks” (or worse) are a more effective deterrent to dishonest, reckless or foolish management on Wall Street than all the regulations ever legislated.

“(One approach) is that, when a bank suspends payment, it would simplify matters to hang (or, in any case, to jail) all its officers and directors at once, whether its suspension be due to its roguery, to their stupidity, or only to their bad luck.”

http://www.forbes.com/2008/11/25/citigroup-bailout-mencken-oped-cx_mmt_1125thomas.html

Actually, Mencken is much needed at this moment. Here’s a useful compendium of his acerbic wisdom:

https://en.wikiquote.org/wiki/H._L._Mencken

Speaking of Mencken, one of the books that I consider indispensable to serious consideration of what it means to be a proper citizen of this great republic is James Fenimore Cooper’s The American Democrat. It is little known. It was published in 1838, midway between the pub dates of Tocqueville’s Democracy in America, and I consider it to be, if not an antidote to the Frenchman’s great work, at least a useful vitamin supplement. After the book’s initial appearance, it wasn’t republished until 1936, with the Wall Street-induced Great Depression in full uproar. The new edition was put out by Knopf, with a curious, somewhat ambivalent introduction by Mencken, of all people. I say ambivalent because Mencken expresses a kind of pity for Cooper and the fruitlessness of his mission – a mission whose core values when it comes to a thinking man’s last best hopes for this country aren’t all that dissimilar.

And here I stand…

I will not vote for Trump. He is an ignorant cretin, and he is a bully, which I truly can’t stand. He has raised some issues that are important, but it is impossible to imagine anyone less equipped, in any way that can be cited, to solve them, or even to cause them to be discussed halfway reasonably. That said, I don’t much like HRC either. Too much baggage, too many due bills streaming behind her like the tails of a kite. Moreover, as a New York voter, given this state’s skewed voter registration, so heavily weighted on the Democrat side, I have the luxury of not pulling the lever for her, knowing that she’ll carry New York come what may and hardly needs my vote. Still, when the moment arrives, I imagine I’ll hold my nose and vote for HRC. This may upset friends who are Trump adherents, either vocal or (mostly) clandestine, people who should know better but are thinking with their wallets (and might be in for a big nasty surprise involving pitchforks should Trump prevail), but I think the elements shrieking for Trump truly are  – yes – deplorable, especially given the fragile emotional state of the country, and it’s against them, as much as against Trump himself, that I’ll be voting. So be it.

Just asking…

Everywhere one turns these days, one hears an outcry against the purported evils of “cultural appropriation.” This got me thinking: what about “Hamilton”? Couldn’t the show be described as an example of “cultural appropriation” –  albeit differently triangulated subculturally and infinitely more lucrative for the appropriators than the usual suspects? Just asking…

Casino Banking…

It strikes me that what’s going on in banking parallels the way Las Vegas evolved. Initially, the big Las Vegas casino-hotel operators threw in the rooms and lounge acts to lure gamblers. The technical terms was “comping.” The money was in the slots and craps and roulette tables. Gradually, however, the “comping” elements took on a profit life of their own. Today, tourism, and the many, many ways it throws off revenues, has become the straw that stirs the drink. Relatively speaking, gambling has been eclipsed. But the amount of money being spent on newer, fancier hooks with which to catch the tourist trade, everything from Mom and Pop on a 3-day weekend package to conventions of people who on’t drink anything that costs less than $1000/bottle, is squeezing profits, and so the focus is on brining back the high rollers.

Look at banks. When I was on Wall Street in the 1960s-70s, banking was supposed to be boring. Banks took deposits, made loans, originated mortgages that they sold to insurance companies and operated trust departments that took care of their wealthier customers. Plain white bread, you might say. Then along came Walter Wriston at Citibank with his eloquent focus on EPS growth and go-go “petrodollar recycling”, and then Ira Harris and his colleagues at Salomon invented mortgage-backed securities, credit cards became popular, and then electronic payments of all sorts, and after that a series of hops, skips and jumps, and what evolved into bread and circuses now was 5% bread and 95% circuses, with the ace performers working without a net, doing riskier and riskier stunts . But of course all that blew up and in this morning’s Bloomberg we read that the banks are now facing a profitability crisis. In 2008 it was a solvency crisis – or, if you prefer, a liquidity crisis. The inference, of course, is that the banks have lent all this Fed-directed free money to the wrong borrowers at too low rates and thus financed their principal competitors, the shadow banking industry.

So back to the drawing board all go. Saner heads will have to prevail in the banking industry. Today’s banking news is all about the resignation of the unhappy John Stumpf at Wells-Fargo, until recently the country’s best-regarded bank along with JP Morgan Chase. Frankly, I wonder if in Stumpf’s defenestration one doesn’t sense the fine Venetian hand of St. Warren of Omaha, the beleaguered bank’s largest stockholder. In all particulars, save the degree  of visibility, the situation at Wells-Fargo parallels what took place at Salomon, another dominant house of finance where Buffett was also the largest shareholder, and where he engineered the departure of the late John Gutfreund, who was  Salomon to many people, when that fine firm was engulfed by a wholly unnecessary scandal engendered by pure greed.

And technology has a hand in all this. As one old Wall Street hand remarks in my novel FIXERS, “the trouble with computers is that they enable people to trade obscenely small fractions of money.” As someone once remarked, or should have: “watch the pence, and the pounds will take care of themselves.” To which might be added: if they don’t take care of you first.

10/12/16 The Regulatory Conundrum

In a nice piece in Vanity Fair my friend Bill Cohan properly deplores the strangulatory over-regulation that has ensued in the wake of the financial crisis. But that points up an interesting paradox. As the regulatory and fiscal authorities seem unable – largely I suspect thanks to a corrupt Congress and the corrupt majority on the Supreme Court prior to the death of Justice Scalia –  to bring criminal prosecutions of the big shots and big “bonusees” responsible for the crisis (take a bow, former Deputy Attorney General Breuer) all they can fall back on is an attempt to weave a net of regulation that vainly attempts to proscribe every sin that turned up in the wake of 2008. Thus does the cure become as counterproductive as the disease. It’s like one of those trawlers whose net, being dragged up from the depths, ensnares not only the cod or herring that are the point of the exercise, but all sorts of other useful sea creatures, and thus upsets the essential balance of nature. The sensible solution would be to bring back the stocks of mediaeval and Puritan times. Set them up, say, at Ground Zero, and put the Stumpfs and Mozillos of this world in them – to be pelted with eggs and offal by passers-by.

Dept. of Agree and Disagree…..

From NY Mag:  

http://nymag.com/daily/intelligencer/2016/10/if-trump-werent-a-monster-clintons-speeches-would-matter.html

I think is generally right. HRC must have known she intended to run, yet went ahead with these speaking engagements. Probably playing on her mind was the reflection that in 2008, Obama had somehow outflanked her on the Street (for how that happened, read my novel FIXERS).

I’m fond of declaring…

that the principal problem with the Internet is that it’s given millions of people with nothing to say a place to say it. But it also brings us people (present company most definitively excluded) with much to say who can say it well. One is James Howard Kunstler. Here’s a recent post of his that Naked Capitalism, the website/blog that I consider indispensable, has deemed the best all-around case for voting for Clinton:

Sizing Up the Endgame

Pin these on the blackboard….

http://www.salon.com/2016/10/04/election-blindness-its-the-end-of-the-world-economy-as-we-know-it-and-we-feel-fine/

https://www.bloomberg.com/view/articles/2016-10-06/designing-a-tax-that-doesn-t-reward-failure

https://www.theguardian.com/technology/2016/oct/11/crash-how-computers-are-setting-us-up-disaster

http://www.bloomberg.com/news/articles/2016-10-12/get-out

http://www.nakedcapitalism.com/2016/10/earth-to-regulators-if-youre-going-to-ding-john-stumpf-how-did-you-miss-henry-kravis-leon-black-et-al.html