The Gold Standard  

Check out Simon Johnson’s questions to the New York Fed.

George Washington’s guest post at Naked Capitalism says that the failure to break up banks now is due to the same logic that prevailed in the 1980s: that the banks are insolvent.

Yves Smith of Naked Capitalism reviews the remarks of Joseph Ackermann of Deutsche Bank on prospective bank regulation.

Paul Volcker raised pretty much the same questions in his testimony to the Congress recently blogged here by Yours Truly.

There are no easy answers. As the late M. G. Ramachandran (former Chief Minister of the State of Tamil Nadu and legendary film hero) sang in a movie that unless the thief reformed himself, there would be no end to theft or robbery, there are no easy answers to banking regulation. That is what one understands in this ‘Economist’ round-table discussion sourced through Simon Johnson.

In some sense, Satyajit Das’ two latest posts serve as the backdrop to the ‘Economist’ Round-table or are they postscripts to the round-table? But, they are good. You can view both here and here. Some gems from both:

The Masters of the Universe that survived the carnage are back to their old tricks. The ‘fight for talent’ means that bonuses and remuneration guarantees for new employees are all back in vogue.

Government attempts to deal with the problems of the financial system, especially in the U.S.A., Great Britain and other countries, illustrate Mancur Olson’s thesis – small distributional coalitions tend to form over time in developed nations and influence policies in their favor through intensive, well funded lobbying. The resulting policies benefit the coalitions and its members but large costs borne by the rest of population.

The “finance government complex” (dubbed “Government Sachs” by its critics) and financiers have proved exquisite masters of the game of privatisation of profits and socialisation of losses. Many countries now practice Chinese socialism with Western characteristics.

A year after the collapse of Lehman, the near collapse of AIG and the grande mal seizure in financial markets, the Masters of the Universe are still firmly in charge. As Giuseppe di Lampedusa, author of The Leopard knew: “everything must change so that everything can stay the same.” [More here]

The industry will argue for self-regulation, which bears the same relationship to regulation that self importance does to importance….

Warren Buffet once described bankers in the following terms: “Wall Street never voluntarily abandons a highly profitable field. Years ago… a fellow down on Wall Street…was talking about the evils of drugs…he ranted on for 15 or 20 minutes to a small crowd…then…he said: “Do you have any questions?” One bright investment banking type said to him: “yeah, who makes the needles?

Derivatives and debt are the needles of finance and bankers will continue to supply them to all the Dr. Jekyll’s and Mr. Hyde’s alike for the foreseeable future as long as there is a buck to be made in the trade. [More here]