“The banks will not get this country in trouble, I guarantee it,” – Buffett, chairman and chief executive officer of Berkshire Hathaway Inc.
Maybe he knows something we don’t, likely. I guess the hundreds of trillions of derivatives, home equity lines of credit on underwater mortgages and other off-balance sheet assets are just fine. What I decode this message as truly saying that no matter what happens, the U.S Treasury in partnership with the Federal Reserve, will bailout and issue what ever amount of credit is needed so that none of our too big too fail banks,…fail.
Mr. Buffett, sir, our country is already in trouble, even in your own words, everyday we are mortgaging off a little bit of our country every day (Charlie Rose Interview). We are backing bad money and bad debt and according to Gresham’s Law, bad money chases good money out of the market. At the same time we have reduced interest rates to zero so we are burning anyone who has saved their money and instead, forcing them to speculate on riskier assets. Too top it off, we have codified a two-tier legal system for influential people like yourself and everyone else, like myself.
Maybe you are right, banks do not pose any threat to the U.S.
Bloomberg - Warren Buffett, the billionaire investor who oversees stakes in some of the largest U.S. banks, said the nation’s lenders have rebuilt capital to the point where they no longer pose a threat to the economy.
This is interesting. According to the article, with the Dodd-Frank regulation put through in 2010, it looks like the new rules now gives restrictions on U.S. banks that have access to the Federal Reserve discount window, in contrast, foreign banks that have U.S. branches do not get access to the discount window but “can” trade in derivatives.
This creates the issue on banking preference depending on your country of origin. I do agree that banks that take part in derivatives trading, should not have access to u.s backstops reserved for deposit taking commercial banks.
CNBC (Financial Times) – The U.S. Federal Reserve is weighing a plan that would allow big foreign banks to avoid costly regulatory changes that were meant to prevent derivatives trading from being subsidized by U.S. taxpayers.
I don’t know too much about Jack Lew, I know he has been a Washington insider for decades. At least from what has been reported, he is not as much of a Wall Street guy like other names that were floated by the media, example in Jamie Dimon.
He will still need to go through Senate confirmation so who knows, they could block his confirmation and we could still get another Wall Street pedigreed Secretary. He was part of the Clinton administration, and it being touting as playing a pivotal roles in the engineering of the balance budget during that presidency.
I am still not convinced, Obama brought in Paul Volcker in the initial aftermath of our current financial crisis and he was quickly marginalized so this may be another dog & pony show. We need to get serious about our tax code and spending or at some point people will lose confidence in our ability the repay our debts in kind and that will cause a serious dislocation in our market and large cracks in the American foundation.
Politico - President Barack Obama will nominate White House chief of staff Jack Lew for Treasury secretary as soon as Thursday, according to a person briefed on the matter. In doing so, Obama is throwing Lew straight into the middle of an increasingly nasty budget war, the likes of which Washington hasn’t seen since the mid-1990s.
Looks like the Japanese Yen carry-trade will be getting a fresh boost by Japan’s Prime Minister Shinzo Abe. Instead of allowing deflation and defaults happen to get debt levels down to sustainable levels, instead we are going to crank them up to unprecedented levels. In the end this will not work because your debasing your currency and it is a race to the bottom that ends in making a formerly valued currency, valueless. Enter in, a new currency.
Here are a few interesting quotes I wanted to point out:
We think this could be the beginning of a fresh reflation cycle for the global system, combining with the US recovery to mark a turning point in the crisis
It is tremendously important for global growth, and markets are starting to take note
I read the second quote to say, we have to have more credit creation or we will face debt deflation which we want to avoid at all cost. It will not be pretty when the music stops.
The Telegraph – Japan’s incoming leader Shinzo Abe has vowed to ram through full-blown reflation policies to pull his country out of slump and drive down the yen, warning Japan’s central bank not to defy the will of the people.
I really took time to think about what I waited to say. I want to start with that, the rule of law has failed in the United States. With the HSBC settlement we have effective codified “two” sets of laws in America. One with influence & power and another for the common citizen.
This bank the operates on sovereign American soil committed crimes are in defiance of all the major criminal activities we shed so much blood and sweat for, terrorism, drug cartels and trading with the enemy. This wasn’t small sums of money or just a single incident. This was systematic over a decade involving reports of up to $60 TRILLION DOLLARS. Just take a second and let the set in.
The reasoning the Justice Department (what Justice?) gave was that HSBC:
Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system.