The $360 Trillion Dart Board

July 20, 2012

Think about the ramifications of the LIBOR scandal, if you can. What does it mean? Simply it is the equivalent of telling us that astronomers gather each day and decide where they would like the North pole to appear on our compasses. In both cases people trust these measures for very important things. We know about navigation and its many purposes, well, LIBOR provides the equivalent to lenders, investors, borrowers, economists, government agencies, and people like you and me.

During my banking career, LIBOR rates became the domestic and international standards  for setting all sorts of  borrowing rates, swap agreements, and indicators of significant changes in the economic health and wellbeing of the system.  I also think of all of the lessons that I taught to the bankers of  emerging economies regarding financial derivatives. Well, this like much made apparent since 2008, our financial system including it regulatory systems have been illusory — just another  huge example of banking folly. The related business article in the July 20, 2012 New York Times  by writers Eavis and Popper provides a picture of the scope of this sham on which the rest of us relied.

As they point out, setting the daily index rates is largely a matter of guess-work and wish — akin to using the dart board for selecting investment opportunities.  My gut tells me that  many who feel cheated by the system will seek redress through the courts. If an index created a negative result (and half the time it would) there was an injured party — be they pension funds, municipalities that hedged against escalating market rates, and many homeowners with adjustable rate mortgages.

Put this together with the recent JP Morgan fiasco, its stand against rational regulation, the continuing saga of banks deemed too big to fail and it is little surprise that confidence is absent in the financial sector of the economy and government  control after the 2008 collapse.


October 30, 2011

Quit $elling America’s Laws

 I don’t care to be associated with either the Tea Party or an Occupy Wall Street mob. In either case the people attracted to them are not always my kind of folks or they are being manipulated for some dubious purposes. The extremists of each who we see carrying the torches are troubling. But, I understand why grassroots movements are taking center stage away from the politicians.

I have a simple definition for my discontent. I focus on K Street, namely the home of the Washington lobby gang. The representatives of special interests, deep pocket, single issue, bloated corrupters are worthy targets.

There was a time when I gave money to the League representing the Savings and Loan Industry. It was fine to a point. It identified with gaining funds for America’s housing related businesses. To the extent that it was in competition with the commercial banking interests it wasn’t bad. Now I see the damage done to America and the rest of the world by furthering the purposes of this group and the extended financial industry.

I have no quarrel with the education mission of groups such as the savings and loan leagues. Most of the complex issues Congress faces require the expertise of knowledgeable parties. That, however, is where I draw the line. Putting money into campaign slush funds is another matter and yet that is what it all boils down to: buying votes. As California’s Jess Unrue once said: “Money is the mother’s milk of politics.” Well that mother better wean those suckers fast while we have any confidence left in our political system. For this, I say, right-on to the discontented.

Perhaps with this evolving ground swell of dissatisfaction with the political system something as fundamental as curtailing the sale of our country to the moneyed interests of all stripes might be achieved. That is worth picketing and demonstrating for. There are worthy people who see this and are willing to pursue its end. I hope to see them on the streets and in the parks.

As one woman’s demonstration sign read: I’m Really Upset


Roger On The Laffer Curve

October 10, 2011

Increased Tax Rates and the Laffer Curve

Here are the arguments I’ve heard from my anti-tax acquaintances:

1. If taxes are raised people will be less inclined to work to gain more money.
2. If they raise taxes too high (ill-defined) the very rich e.g. assumed here to be the really creative people, will leave the country and go elsewhere.

Let’s examine this in illustrative terms.

First I must say that a very small sample of attitudes and reactions is meaningless for judging the reaction and behavior of many, and of course, it is the many that really matter. With this caveat, we can look at “typical” attitudes:

Friend one is a retired executive, but if he was still working and faced a ten percent increase in taxes, I doubt he’d quit work. If he did, rest assured that someone would be waiting to sit at that desk and he wouldn’t be missed; just as there are many qualified people waiting in the wings to fill the top banking jobs for less money.

Friend two, a real estate developer, who like most are twiddling their thumbs because the real estate world ate the seed potatoes a few years ago. However, he still argues that the creative people such as he will just keep twiddling if tax rates are raised. I suggest that if they could obtain bank loans and demand hadn’t been killed by the earlier aggression (greed ?) in their segment they’d be back at it with pick and shovel ready.

Both are adherents of the Laffer Curve that seems to be a groove they’re stuck in since the 1980’s. This simple answer to all issues of taxation offers the obvious that at zero taxation, the government has no revenue, and at the other extreme if all earned money is taxed away, no one would bother to toil for simply the joy of working. In reality there are many variables and the stress point on the curve is very imprecise, and the marginal dollar of after tax earnings is attractive to most people. If it isn’t, one can assume that even people averse to taxes will still work. If not, their shoes will be filled. I don’t think that Bill Gates, Warren Buffett, Steve Jobs, and the like would have lost their drive for success over tax rates. While there is value in striving for success, it is measured differently by everyone.

Friend three has wealthy pals who invest in yachts and he figures they’d just pick up and go to friendlier waters with their cash hoard in the bilge. Wouldn’t that be nice – my first response is bon voyage, oh, and please don’t come back.

Yes we need to balance the budget at some point and it should be a realistic process rather than some game of mirrors. Therefore, increased taxes (not for punitive reasons) and curtailed government spending are essential and would have a stimulative impact on financial markets as well as respect for the dollar.

Thus, the broad generalization that tax rate increases and revenues will neatly follow the Laffer Curve is nonsense. I think there is a lot more room for growth in taxes and in the economy without causing stress.

I have sympathy for the people who are demonstrating over the soft touch applied to the bankers that were bailed out by government. Most of these people are unemployed or living on the edge or young people with diminished expectations. The niceties of the Laffer Curve debate is of no interest to them for obvious reasons.

I don’t wish to pay more in taxes, however, I will gladly if collectively we can put more people back to work, can meet our social and military obligations, and improve the general wellbeing of our citizens and country.

October 6, 2011

Rethinking Basic Business Rules
Chapter Two, of The Lindland Manifesto

Is it possible to save a financial system that has lost its bearings?
The answer, of course, is yes. Remember it has only lost its bearings, but recovery will come. Some of the changes are radical and will require time. Some will also require fundamental correction in law. Improvement will surely come because it is in the nature of economics; the lessons of the slide beginning in the late 1990’s have been painful to all sectors of the economy but have created fertile ground for the better.

Let us not waste this precious time of economic and political correction, and change some basic business thinking. Required will be processes similar to the hearings and congressional outcomes that shed light on failed practices in the banking industry and put in place new legislation during the early months of 2011. Hopefully the leading business schools will also examine the rectitude of their lessons to our future managers and proprietors.

Let me start with my top three thoughts for mind adjustment in the old ways of business:

Old Rule 1. Take care of the short run and the long run will take care of itself
The view is that if management can achieve improving quarterly profits, the future will take care of itself in the long run.

This may seem axiomatic at first, but it is the management equivalent of a perpetual motion machine. It isn’t possible and the pursuit of this as a universal standard for measuring business success has lead to most of the sins of Wall Street. Where did it start and gain its currency in business circles? Probably at the Harvard School of Business. There is no argument that this was a major tenet of modern business philosophy.

This nostrum has probably done more to undermine the competitiveness of American business vis-à-vis China than any other. China operates strategically within a very different set of rules and measures. It will be necessary to have other methods of measuring economic progress beyond the basic accounting principles that provide our standards. Wise investors are already aware of this principle and place their bets accordingly, but Wall Street, pension, and mutual fund managers march to a different beat.

Old Rule 2. Good managers can manage anything
Dissimilar business enterprises (conglomerates) are simply other tools for efficiently redistributing asset values and accommodating business cycles. A corollary is the wish to rush into unfamiliar market areas for geographic diversity.

Of course it depends upon your definition of good management. Banks as well as manufacturing businesses are most guilty of this folly. I have never been involved in a business enterprise that hasn’t fallen into the trap where in the grass is greener philosophy wasn’t more attractive than cleaning ones house, so to speak. Eventually, we find it ends in the breakup and sale of components to managers and raiders who can feather their own nests as allies in leveraged buyout schemes irrespective of the interests of other constituencies such as employees, communities, and valuable institutions.

Old Rule 3. Huge scale is necessary in order to vie efficiently with other enterprises and international competitors.
In banking this has given us the “too big to fail” dictum. It is something akin to the arms race. Buried from view are the inefficiencies and failures that too big has caused for most of the major banks – read here Citicorp, UBS, Bank of America, Lehman Brothers, and yes the bailed out AIG, GM, etc. Eventually enterprises such as Fannie Mae feed on artificial means and government subsidy rather than real value added.

There are, of course, economies of scale as well as the fortunate harvest reaped from good product discoveries that propel growth – Google, Microsoft, Apple, Starbucks, CAT, and the like. These enterprises are either closely focused on single product lines or natural offshoots of the primary business.

Sins of huge enterprises are gladly accepted by industrialists and financiers who find fault in government grown too big for practical purposes. The same rules and thinking need to apply to all economic entities. “Big” needs to be constantly justified in terms of real rewards to society and not personal aggrandizement – read as Citibank and Bank of America, as well as regulatory agencies.

The Volunteer Military – Its future?

October 5, 2011

Why Are Young People Willing to Sacrifice Their Lives and Limbs for Ours?

Enlistments in the Army, Marines, and combat units of the Navy are sufficient to meet the levels required for military service in the years since September 11, 2001.

The order and degree of importance varies with individuals, but the obvious reasons are:
1. A sense of patriotism – the initial response to the destruction of the World Trade Center drove many to wish to help protect our shores and values
2. The opportunity to gain experience that might benefit them in civilian life along with GI Bill education benefits
3. A spirit of adventure coupled with a belief that they would survive unharmed – or at least enjoy safety in numbers
4. Since 2008, a dwindling number of good job opportunities for the untrained, lesser schooled, and even college graduates
5. Early on, reservists and National Guard participants who enjoyed playing soldier liked the extra pay for training duties and little inconvenience. Later the reality of actual combat or long periods of separation from family shed new light for some on these motivations.
6. Family history of military service and its traditions, in many cases chosen careers with numerous benefits that were seen to outweigh inconveniences

Patriotism – what is its impact and sustainability?
Each of the above are important factors that lend themselves to evaluation, however, the first is the main subject of my thoughts. Consider the diverse body of American youth from whom the combatants are drawn. They are a fair cross-section of our children aged between 18 years of age through the twenties. As the urgencies of military involvement grew it became necessary to broaden the enlistment pool to those up through their late thirties, along with overlooking some aspects of suitability.

As in other recent conflicts there is minimal interest on the part of the economically advantaged and best educated in the aforementioned motivations – with few exceptions including those such as Pat Tillman the Arizona Cardinal football player in the initial desire to get even for lives and property lost within our own boundaries.

What are the American values that reflexively motivate our changing ethnic and economically diverse population?

1. Families and neighborhoods that are our life experiences – generally rendering positive attitudes
2. Pride in our associations and memberships that run the gamut and in which we identify our basic freedoms
3. The inculcation of historic traditions through education and daily reminders.
4. Success in previous wars and pride in the military institutions
5. A general sense that our political institutions, while not being perfect, are demonstrably valid and correctable.
6. Traditions of team play and adherence to rules

Does it Matter?
Yes, there are significant cross currents that bear on the sustainability of our military capacity.
1. The wars, occupations, belligerent exposures, and terrorism in general will require that we continue to have a dedicated group of combatants.
2. The monitory cost of sustaining a presence in foreign territories implies that we will bear the burdens of a high level of trained, equipped, and motivated participants
3. The intangibles that motivate those who will carry the physical burden must be unshakable and dedicated to the national will. Are we willing to look them in the eye and tell them that we believe in what they are doing and are willing to pay the price that they expect as a quid pro quo?
4. The benefit programs as well as health maintenance implications are very large long-term obligations. Any wavering on the home front will transmit itself quickly overseas. Morale is a vague commodity. We haven’t tested our durability, or rather, we are beginning to test ours. Much like the Wall Street demonstrations that are gaining momentum there is real dissatisfaction with issues of fairness and competence that can shake and shape our future. The “Tea Party” movement is one manifestation; its trajectory while uncertain is being felt. Once these horses are hitched to a dedicated wagon, there is no telling where it will travel.

Our Revolutionary and Civil Wars were the products of large issues that were mismanaged by politicians. These things can happen. In more immediate terms, the undoing of the Soviet colossus while largely peaceful, the underlying forces at work were massive and based on deep dissatisfaction by the populace – and the military was an important element as it usually is in cases of severe disruption.

There is one parallel with our current malaise and that of the Russian, a failing economy translates itself most immediately into broader social turmoil. We aren’t there yet, but the unthinkable has happened.

1. We must shore up our financial/economic structure to broadly sustain our country. More on this later.
2. We must pick our battles much more carefully and avoid depleting our treasury for every international ill. America must come first. It is going to take great skill on the part of our primary leader to guide us forward. Do we have that kind of voice?
3. Stand by our troops and not waffle on commitments. A voluntary military is one that is dependent upon a strong contractual and implied bond. Why else would the answer to my first question be affirmative? People do not throw their lives and limbs away without good reason – or at least, not forever. Lessons are learned.

November 4, 2010

The Passing of My Dear Friend Barry Newman

On October 2, 2010 Barry Newman died along with my reason for keeping this Blog alive. Early this year Barry and I talked about ways that our conversations concerning the plight of the U. S. economy might be saved and how the banking industry could be reformed in the future to avoid the disastrous mistakes of the past ten years. Barry had been enduring the impairment of  a stroke that he incurred in the Autumn of 2009. His physical progression was not very promising and yet his powers of reasoning and verbal communication remained excellent.  Therefore, I assumed the role of scribe for our joint ideas and entries.

In the beginning Barry was able to contribute most of the cogent ideas as well as the tone of our comments. I would search the Web and papers for the topics and suggest how we might frame our thoughts. He suggested that we track the notions and comments of Paul Volcker as a framework for our direction because we both held him in high regard —  as a regulator and as an economist. Volcker needs no introduction here. During the 1980’s I had the privilege of serving on a select committee of the Federal Reserve in the aftermath of a small, but similar set of bank lending irregularities and near system collapse. This served as my alert on how the domino tilting of the interlocking bank credit systems can bring financial markets to a stand still.  Enough about the Newlind’s Blog — as Barry phrased it, “Wingtips on the Ground” — soldiers for Paul Volcker’s wisdom.

I first came to know Barry when within a short-time of each other we joined Great American Bank in San Diego in 1982, he as the chief and executive vice president of credit and lending and I as the head of a bank development subsidiary, later financial chief, and then bank president. Barry and I worked closely together and I always had the highest regard for his wisdom and integrity. Barry was a consummate business man and his thinking processes were exceptional. He carried with him many years of credit and banking experience along with an excellent legal mind and training. The San Diego Union obituary gives a fine recitation of his exceptional experience and commitment to serving the public interest as a board member and judge pro tem that carried his career forward after we ended our banking duties in 1990.

I had the privilege of sharing a professional office with Barry during the 1990’s and joint client assignments, some of which involved consultancy services to banks in Russia, the World Bank, USAID  furthered by related assignments in San Diego. My continued exposure to Barry’s thinking processes and critiques were invaluable as I continued my work in the former Soviet Union over a ten-year period, always within the cognizance of Barry’s interested and watchful eye.

During Barry’s hospitalization we used the Newlind’s Blog (Newman-Lindland) as the nexus for our wide-ranging conversations. Nearing the end, I was so very pleased every time he would prove to me that he wasn’t asleep by inserting a cogent word or thought to our text.  That is what I will alway remember of this powerful, concerned, and brilliant man — a mind that knew no limits. As one might expect, Barry devoured books with many new ones arriving throughout the year. His focus was mostly on literary, legal, and economic analysis along with the consequences of history and historic persons.

Barry, since this will find its way into the atmosphere surrounding our planet, perhaps you will reach out and learn of my lasting devotion as your friend. Jean and Suzanne, thank you for sharing this wonderful man with me as a colleague and friend.


Banking Reform Revisited

August 10, 2010


What if:

Sophisticated investment managers performed just enough due diligence to find that the values of mortgage securities were based on sham underwriting procedures, worthless documentation and no-equity loans?  The money wouldn’t have been there.

Moody’s and S&P didn’t rubber stamp their approval on the same damaged goods and rated them as junk rather than AAA?  The market size would have been much, much lower.

Fannie and Freddie held to their original mortgage underwriting standards and didn’t blind Congress and the public with slick advertising about homeownership for everyone while using the U.S. Government’s good faith endorsements of trillions of dollars in securities and insurance?  Significantly less junk would have found its way to market.

The two chairmen of the Federal Reserve who succeeded Paul Volcker didn’t believe that the market would take care of itself and policing was necessary? The regulatory apparatus would have worked and Congress wouldn’t have gained comfort parsed in Greenspanish.

 Wall Street’s underwriting staffs and directors were held accountable for long-term results and product performance rather than earning bonuses based on volume? We would now have confidence in public offerings.

Banking regulators and the SEC used their offices as intended to police the businesses they were accountable for keeping from dangerous practices? Warnings of unsafe and unsound would have been plastered on their front doors and bank directors would have known they were being pushed or driven like sheep.

We could even ask what might managers of banks, mortgage firms, realtors, and the sundry associated businesses have done to avoid excess development and building in their communities, and assured that home buyers were qualified? It is almost too much to be asked of people universally driven by the quick profit motive.

The lesson: If the key players on even one of the steps up this ladder had done their jobs we would not be suffering a long-term economic collapse.  Instead they and Congress dug a hole that will make Japan’s economic malaise of the 1990’s look like a success story. After the S&L debacle of the 1980’s and much chest beating heard from Washington, the lessons weren’t learned and a bigger fiasco awaited because, after all, commercial and Wall Street bankers were wiser and understood how to manage risk!

Where to from here?

We now have new statutes that were compromises made with the same key players who brought the problem to our doorstep. The ball is in the hands of regulators to make what ever they will with this inadequate legislation while they use the “expertise” from the Wall Street, lawyers, consultants, academics, and accountants (many former legislators and their lobbyists) whose careers will continue to be paved by riding this gravy train.

In our succeeding Newlind entries, we will see how much can be sifted  from the scramble and obfuscation surely to be generated in all of these quarters.              RL/BN

Retribution or Crash Prevention, Which Is It?

June 22, 2010

 Let us examine the motivation for bank reform. Are we trying to satisfy a desire to penalize the bad behavior of various leaders during the last few years? Or, are we aiming to build a system that will avoid similar catastrophes in the future? If it is the latter, it is important to not overplay the desire to tie-up the industry from performing its vital functions to satisfy a desire for retribution. That can only be done in the courts.

There are several important reasons to worry about the changes being suggested at the last minute for the Congressional reform negotiations. If the work comes up short of achieving meaningful reform, a great opportunity is missed. If the motivation is to make the culprits pay it is unlikely that existing laws will do any more than penalize the most blatant, however we could also be saddled with rules that inhibit much of what aims our system at meeting the economic needs of a modern society.

How the system failed

First, examine the underlying causes:

  1. Rampant greed at all levels of the mortgage banking process,
  2. Unqualified buyers,
  3. Loan brokers and others who gamed the system,
  4. Regulators blinded by the silly notion that markets cure all problems,
  5. Wall Street firms that bankrolled and created unsustainable leverage,
  6. Co-conspirators such as Moody’s and Standard & Poors, accountants and lawyers – in other words just about everyone who had anything to do with the unregulated mortgage business.


Second and very important, Congress and their money feeders encouraged Fannie Mae and Freddy Mac to abandon sane underwriting rules while growing beyond any reasonable scope.  The misdirected belief that by feeding the “American Dream” of homeownership it would be possible to keep themselves in office and sustain an endless euphoria from a pseudo economy rather one that produced goods that would put America back into the worldwide competition for products and services.

Understanding the Volcker Rule

Now lets look at the changes that would essentially dilute the “Volcker Rule”. In simple terms his recommendations put banks out of the business of speculating in financial markets for their own account as well as from operating hedge funds and private equity firms. The overall goal is to have commercial banks stick to their knitting, namely attracting deposit accounts and making business loans along with associated consumer banking services and sources of reasonable fees. For this, the charter would continue to have access to FDIC insurance and to the Fed’s discount window. 

His goal is to clearly distinguish between the kinds of financial services offered by commercial banks versus investment banks and insurance companies. It would not place a restriction on size of the enterprises, but along with expanded risk based capital accounts would put the banks on a more solid footing.  Unfortunately, the dynamic of finance has shifted the game away from purely conventional banking services. The “shadow” banks have made inroads into the preserve of commercial banking over the last twenty-five years to the point where the banks have had to hold their commercial customer base by moving into other businesses. Well, maybe banking isn’t the go-go business that it became. Our early training in the business was one that taught the good lessons of credit and in gaining balanced liquidity. Investment banking on the other hand is encouraged to find creative solution to financial needs, but at their own risk and those who seek to play their games. Remove their commercial bank charters and any warranties and services that imply access to the system and preserve of real (commercial) banks.

Span of control and scope of knowledge

Is it so bad to have banks own subsidiary businesses that do not create added direct risk to the parent? In the case of a Citibank we’d say that its diversity and span of activity created an unmanageable entity. Even truly smart people such as Robert Rubin could not get a grip on its diversity. This is often the case as management capabilities are stretched beyond anyone’s comprehension and particularly that of governing boards of directors. Further, the failure of one arm of the business can often mean a shadow cast upon all other parts – failed money funds that “broke the buck” for example. 

Where from here?

There are some good signs of real reform, however, we hope that the final product of the legislation will restore the reliability of good business practices and control in the banking industry. In our work during the 1990’s throughout the former Soviet Union as we taught banking and helped to establish systems modeled after the U.S., we were proud to represent our industry. However, we now can look back with some shame for how in just ten years ours became a colossal failure as all of the good rules were buried by a breed of regulators and vicious money schemes that sold out the ideals of most Americans.

However disappointed we are in the performance of many bankers and trusted money managers, we do not want to saddle the banking industry with punitive restrictions to simply satisfy a desire for retribution. It is important to restore a clear distinction between commercial banking and investment banking like that which existed during the time of the Glass-Steagall domain.  The Volcker Rule is paramount to thoughtfully achieving this end.


June 3, 2010


A Time For Soul Searching –Warren Buffett, Moody’s, and the FCIC

 A Time for Soul Searching – Warren Buffett, Moody’s and the FCIC

In watching Warren Buffett being grilled by Phil Angelides yesterday at the Financial Crisis Inquiry Commission, I pictured what might be going through the mind of the world’s wealthiest and most admired investor. He showed his light-hearted side in answering the barbs, but there was also a sad if not pathetic tone to his replies. “I missed it too,” said he when talking about the collapse of the housing market as though it was a sufficient answer to why Moody’s abjectly failed in its job of protecting investors through its rating system. I am sure that Buffett was concerned for his public image as well as not opening Berkshire Hathaway to litigation, however, in his inner self he must have pondered how he could have played a big part in reining in the rampant abuse of public trust, after all Berkshire was Moody’s largest shareholder.

When the financial leaders of failed or bailed out institutions are in their quiet moments they must have the same thoughts. Yes, even the leaders of Goldman Sachs and Morgan Stanley may lament their lost opportunities to control the rampant abuse while piling up profits from the drek foisted off as AAA investments. They can’t admit this publicly because it would suggest culpability. Instead, however they, Buffett and Moody’s CEO Raymond Daniels took refuge in pointing at others whose sins were nearly equal.

I appreciated Angelides retort to Buffett’s response to a cover article in The Economist depicting a falling brick and the caption “The Danger of a Global House-Price Collapse”. Buffett said, yes but they didn’t have an article that pointed this out before the collapse. Angelides corrected him by simply saying: “ The article appeared in June, 2005,”  – and it was months before Moody’s took official note though its downgrades.

Angelides, as at other hearings, showed his erudition and dignity. He and Senator Carl Levin are to be congratulated for their determination in digging out the truth as well as asking the questions that we would wish to pose. The purpose of the Commission’s work is to gain an understanding of why the problems occurred. Gaining the insights of Buffett is valuable in a broader sense than his governance responsibility for Moody’s, even though he appeared by summons having earlier refused an invitation.   

Thanks to C-Span for providing marvelous access to these dramatic events as they are playing out before the world. It makes the job of a far away blogger that much easier and more cogent.


It Ain’t Necessarily So

June 2, 2010

As the old song goes, “It Ain’t Necessarily So”. The process of obfuscation takes many shapes. Recently I have seen at least three dopey (large font, multicolored) Internet screeds about the tax money spent on the Energy Department over the years with little to show, and now we have the gulf oil mess. Blame the Energy Department for its failure to anticipate the results of deep-sea drilling, but put the greater blame where it really belongs, namely on the toothless rules and management of the Interior Department. It is all part of the same thing, the oil oligarchy has controlled the process by either placing their own people in jobs they can shape and influence or use their billions to buy the government they want – worldwide.

And the song goes on. Breaking up the large (too big to fail) banks would jeopardize America’s ability to compete in world financial markets or, heaven forbid, send the manipulators to the softer regulatory climes – to where – off shore island republics? We don’t think so. As we have said before, it isn’t just a matter of being too big to fail, it is just too big, period! Well, breaking up is hard to do.

When Fannie and Freddie couldn’t be reigned in prior to 2007, it was then in the country’s interest to make cheap money available for housing – the American Dream has turned into a nightmare, simply to honor a slogan and reward politicians with some of the greatest lobbying budgets known to Washington. It wasn’t such cheap money after all. The band played on while the inventory of foreclosed or soon to be forecloses properties numbered in the thousands.

One of my favorite clichés has been, when it comes to giving away whatever any special interest group wants, is to say: “After all, certainly the richest country in the world can afford…… “ – fill in the blank check. Big unions, big welfare advocates, needy nations, arms dealers, and who knows whatever open hand is reaching into our pockets makes its case. It reminds me of the wonderful cartoon of the late 1980’s that depicted Uncle Sam as he looked in the door of a poor Eastern European family and their emerging democracy and said: “ Too bad you didn’t know me when I was rich.”

Now we can say this and mean it. It is necessarily so! Tea anyone?