Thursday, March 25, 2010

Glass-Steagall Again

So, I'm watching this buffoon of a senator. He's got an MBA from Wharton and teaches a class on something about this stuff at Duke Law and the case for reinstating Glass-Steagall still doesn't make any sense.

At one point he says, back when I was in grad school, a million years ago, separating commercial and investment banks was an article of faith. Well, that's relevant to today how exactly? The financial and technological world has changed dramatically. Moreover, there are tons of universal banks in this world. Been around a long time too.

Then we get this:
The top 5 American banks are engaged in over 80% of all over-the-counter derivatives trades. "We never designed commercial banks to be involved in anything like OTC derivatives," he says. "We should get them out of that business."

Of course the big banks engaged in 80% of the derivatives trades. They're sophisticated enough to do it and they are market makers.

On the commercial banks in the derivatives business, that's not neccesarily a bad thing. It allows them to offload currency and interest rate risk. However, in fairness, perhaps OTC derivatives, which are private contracts negotiated between two parties, may present more difficulty to bank regulators in analyzing them than a standardized derivative traded on an exchange.

It worries me a great deal that these morons are the ones dealing with this regulation. And even more worrying is that this guy has just the type of bio that I'd want a lawmaker designing this type of regulation to have and he still doesn't seem to get it.

The politicians who are worried about this stuff seem to think, this stuff is complicated and it makes my head hurt so let's just go back to what things used to be like. But you can't go back you fucking idiots. And even if we could I'm not entirely sure that it would be a good idea. I know that and I'm just some asshole in my underwear in front of a computer screen.

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