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The bankers seem to manage to be at the forefront of virtually every misuse
of leverage imaginable. Just when the regulators think they've got the
bankers nailed down on international lending, the bankers manage to screw up
in the real estate sector, and about the time the real estate sector gets
nailed down, the bankers are into derivatives and hedge funds. As I
remember, none of these banking messes were cleaned up in a few weeks, or
even a few months, and I very much doubt this one will be either.
Neither were they cleaned up without the use of substantial public funds and
I expect a repeat. While Mr. Greenspan is lauded for his management of the
economy, few seem to realize that millions of savers were raped of billions
in investment income when Mr. Greenspan lowered interest rates to
recapitalize (read subsidize) the banking system which was about to go
under. This, of course, was far more palatable to voters than taking money
out through the government's front door to save the banking system.
Few seem to take issue with dismantling the barriers between banking and
securities which were erected after the 29 crash - Mssrs Greenspan and Rubin
are champions of this effort along with our PAC-fed politicians. We seem to
have a cycle in banking regulation where regulation and oversight is
greatest at the bottom of economic cycles when it is least needed, and
oversight is too casual at the top of economic cycles when most needed.
So we can sleep well knowing that our leaders will be able to identify those
institutions which are "too big to fail" and that the financial system,
along with at least some of the financiers, will always be saved with public
money.
Earl
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