I woke today to read a scathing blog entry from London Banker on The Unitary Federal Reserve - Crisis Choreography. His feeling of hopelessness and hands thrown up in the air are undoubtedly mirrored around the world. (Emphasis added)
Just as we here in the rest of the world hoped we might breathe easy with the end of the Bush administration in sight, and several creditable candidates for president coming forward, the lawless unitary executive has expanded to embrace the Treasury and the Federal Reserve, debasing and contaminating the financial markets globally with its spread to our own central banks and market authorities and destabilizing our banks and investment markets. Once again in the name of crisis and expediency the laws are ignored, decisions are taken in secret, extra-judicial reapportionment of property and contract is mandated by executive fiat, and legislative review and judicial intervention are impossible. Over the past year every financial crisis has been met with lawless and Enron-esque innovation by the Federal Reserve and Treasury, and this week was arguably more extreme.
After this week’s secret and unaccountable and extra-legal moves by the US financial authorities, I will not be holding any assets in the United States. I do not understand the rules. I doubt any rules will be applied fairly to all the players. I cannot be sure who the umpire works for, or what principles the umpire thinks they should uphold. I will not play the game.*
[snip]
* For those cynics out there, let me remind you I gave up trading in January this year. I had a small amount of cash in a US dollar account. That account is now closed.
London Banker ends his blog falling on the side of increased bank “regulation in the public interest”, but that is beside the point. I think we can agree that even playing by any rule book would be an improvement at this point. Until the industry is forced to write down and mark to market their bad loans, and as long as the Federal Reserve and Treasury continue inventing new bailouts, investors will sit out of the market and liquidity will evaporate as no one in their right mind would consider lending money in this environment. We can print money all we want to stop the economy from seizing up, but what will it be worth when all is said and done? How likely will investors like London Banker return to our market (or even their own) given what they’ve been subjected to?
UPDATE: EU Says Bailout not Right for Europe
MAD, Spain, Sept. 19 (UPI) — European Union finance minister Joaquin Almunia said Europe should not employ the same bailout plan under consideration in the United States.The plan under consideration in Washington, while lacking details, would authorize the government to purchase failing securities from financial firms.
Commissioner Almunia, a member Spain’s Socialist Workers Party, called the bailout “financial socialism,” the EU Observer reported Friday.
Attending a conference in Madrid, Almunia told reporters, “socialists like me, we are against financial socialism,” the Observer said.
Almunia said Europe needed “more coordinated action by supervisors than currently exists.”
He also said some intervention might be necessary. “We must move forward faster. We cannot wait until a financial institution operating in seven or 10 countries of the European Union has problems such as those of Lehman Brothers (NYSE:LEH) or Bear Sterns.”
What is “irony” for $200, Alex?
