Tuesday, September 8, 2009

Peter J. Wallison: The Fed Can’t Monitor ‘Systemic Risk’

The stuff that five years ago was only coming from conspiracy theorists is now fit to print in Wall Street Journal:
Peter J. Wallison: The Fed Can’t Monitor ‘Systemic Risk’
"Using the financial crisis as a pretext, the Obama administration is determined to enact massive financial regulatory reforms this year. But the centerpiece of its proposal—putting the Fed in charge of regulating or monitoring systemic risk—is a serious error.

The problem is the Fed itself can create systemic risk. Many scholars, for example, have argued that by keeping interest rates too low for too long the Fed created the housing bubble that gave us the current mortgage meltdown, financial crisis and recession."
Not to mention stuff that sounds like the Gemstone file (Google it yourself):
"It is one thing to set a thief to catch a thief—as President Franklin Delano Roosevelt is said to have done when he put Joe Kennedy in charge of the newly created Securities and Exchange Commission in the 1930s. But to set a thief to catch himself is quite a different matter."
P.S. - I double-checked Wikipedia - the public knowledge website does not side with the illicit substance trade allegations in the Gemstone file, but it does include an account of Joseph Kennedy's stock market ventures which isn't actually much better.
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Sunday, September 6, 2009

The Firestorm Ahead (USO)

The Firestorm Ahead | Immanuel Wallerstein:
"The general commanding the U.S. forces, Ray Odierno, is obviously extremely unhappy and is patently scheming to find excuses to reestablish a direct U.S. role. Recently, he met with Prime Minister Nouri al-Maliki of Iraq and President Masoud Barzani of the Kurdish Regional Government. Odierno sought to persuade them to permit tripartite (Iraqi/Kurdish/American) joint patrols in Mosul and other areas of northern Iraq, in order to prevent or minimize violence. They politely agreed to consider his proposal. Unfortunately for Odierno, his plan would require a formal revision of the SOFA agreement.

Originally, there was supposed to be a referendum in the beginning of July on popular approval of the SOFA agreement. The United States was afraid of losing the vote, which would have meant that all U.S. forces would have had to be out of Iraq by Dec. 31, 2010, one full year earlier than the theoretical date in the SOFA agreement.

The United States thought it was very clever in persuading al-Maliki to postpone this referendum to January 2010. Now it will be held in conjunction with the national elections. In the national elections, everyone will be seeking to obtain votes. No one is going to be campaigning in favor of a “yes” vote on the referendum. Lest this be in any doubt, al-Maliki is submitting a project to the Iraqi parliament that will permit a simple majority of “no” votes to annul the agreement. There will be a majority of “no” votes. There may even be an overwhelming majority of “no” votes. Odierno should be packing his bags now. I’ll bet he still has the illusion that he can avoid the onset of the firestorm. He can’t."

WSJ rethinking stocks

Should long-term investors load up on equities? Some pros say no - WSJ.com:

"For at least a generation, financial professionals have urged mutual-fund investors to put more money in stocks than in bonds. The logic: Stocks power a portfolio, while bonds provide some protection.

Now some pros are questioning that conventional wisdom. After last year's stock crash, and ahead of a potentially weak economic recovery, they're arguing that bonds and alternative asset classes such as commodities deserve more weight."

Better late than never.