Tuesday, November 1, 2011

Banking & Gambling

See, it’s not so hard . . . MF Global has entered that hell called bankruptcy. And we the people are going to just let it be.  No bailouts. No rush to stabilize the firm.  Just let it go the way of all things. They were gamblers who gambled and lost. That’s the way the cookie crumbles.

Now, it we can only let the others go as well.
Assume for a start that any “trading firm” is akin to the Las Vegas gambling organizations . . . sort of like the Mafia, but not as skilled.  Force them to label themselves as gamblers—you know, like Morgan Stanley Gamblers, Inc. Then the public will know what they are doing when sending them money to “invest”.
Then establish rating agencies that rate the investment vehicles these firms try routinely to flog.  If the investment portfolios are too complex to rate, the rating agencies have to declare,  We cannot untangle the mess they are trying to sell to the public, so  this investment portfolio belongs in the category called “Caveat Emptor”. “ The rating agencies and all auditing firms would be financed by contracts with the government, paid for by fees charged by the government to the firms being rated/audited. Both the rating agencies and the audit firms would have to be changed every, say, three years to avoid becoming corrupted by the gambling firms. It might also be a good idea to make it mandatory that the broker-gamblers (those trying to flog their deals to the public) would have to buy into these same portfolios.
Then take all “banks” out of the gambling business. We would, of course, have to define what is meant by “gambling”. Loaning money to a couple who wish to buy a first home would not be “gambling”, strictly speaking.  Also, loaning money to someone who wishes to start a business would not be classified as “gambling”.  I assume that smart people (people not working in the banking industry) could define the difference between gambling and investing.
Looking at the Eurozone mess that finally crashed MF Global, it might be smart to take private banks out of the business of financing other governments.  Maybe it should be the case that loans to foreign governments would be the province of governments. If Greece wants a loan of $50 billion, maybe that should be debated in Congress and then the US Treasury would be the lender of last resort. MF-Global Gamblers, Inc. should probably not be in that business.
Then finally, there’s the issue of banks “too big to fail.” We need to define that term carefully, Then we should divide the world of banking into two categories—“banks too big to fail” and “all other banks.” All banks in the first category should be “restructured”, i.e., broken up into, say, tenths. Then we wouldn’t have to worry about them failing—if they fail, well, they had a good run. Get me a beer hon . . .
And on exoplanet-Cain, we see that the current front runner must have been studying the Clarence Thomas hearings carefully.  And we know how well that has turned out for America.
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