Notes From Underground: G-20 is waste of time and energy; finreg is just a waste

Germany added liquidity but it was all directed at the British goalie David James–nothing austere about their World Cup peformance. The news from the G-20 was as expected: Nothing short of a waste of time and the resulting communique will be the paradigm of vacuousness. The Chinese took center stage in that they spoke up for the developing nations, stating they wanted input in the discussions about global problems. We agree with the Chinese that the G-8 is an atavistic appendage of a past colonial world and is merely the delusional forum for those wishing to hold onto a past that left the arena long ago. Yes, we are sure that Russia, Brazil and the others that make up the most robust members of the emerging world want to advise the likes of Italy, Spain and France who have certainly failed to get their own economic houses in order.

The Obama administration is certainly on the correct path by giving the G-20 far more credibility than the G8, but they have failed to live up to their own rhetoric. Obama may want to include the BRICs et al at the BIG TABLE but then the question has to be asked: Why have they failed to reach trade agreements with the South Koreans and Colombians and why they have yet to remove the tariffs on Brazilian Ethanol? The answer to the Obama flim/flam, of course–domestic politics prevailing–but if that is always the case, why play this ridiculous game twice a year with these global conventions? The extravagance for a mere photo-op is preposterous.

On to the next game of three card monty called FINREG. We have certainly not read the 2,000-plus pages of rhetoric that passes for constructive policy and we bet that this legislation will be the most discussed and least read tome since Karl Marx published the three volumes of Das Kapital. The reulting legislation could have been done in a very tidy way by dealing with leverage, transparency, capital requirements and fiduciary responsibility. The fact that it got bogged down in consumer protection and other nonsense was merely the effective strategy of obfuscation.

Nothing makes the point of absurdity of emptiness more poignant then the New York Democratic Legislative delegation threatening to vote against the legislation in the wee hours of the morning. We vehemently believe that all New York legislators were going to vote against FINREG if, in fact, there was going to be any real harm to Wall Street–they kept quiet until the final minutes to not show their hand but you have to believe that the lobbying by Mayor Bloomberg and the governor’s office has to be very effective.

Members of the Obama administration went to the G-20 believing that their FINREG “success” would provide a foundation for the enactment of a similar type global banking regulatory framework. This is more nonsense for their MACRO PRUDENTIAL regulator already exists at the BIS. Interestingly, we learned Thursday night that the recently discussed BASEL III accord has been watered down as it was deemed too constrictive for the huge global banks in the current credit-stressed environment.

We remember when the esteemed BILL WHITE, the previous chief economist at the BIS, issued warning after warning in regards to the credit orgy that was enticing the world. Mr.White warned that it was of paramount importance for central banks to “lean” against asset bubbles and act in a counter-cyclical fashion. These warnings began in 2006 and we know that they went unheeded for as Chuck Prince said, “the music kept playing so we had to keep dancing.” We say that all this jawboning about global standards is just more blather from those who pretend to craft global policy. There will be no unification of standards and no Macro Prudential overseer anything like the FINREG. The music is playing and it loudly says, “You can go your own way,” because we certainly won’t be thinking about tomorrow.


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8 Responses to “Notes From Underground: G-20 is waste of time and energy; finreg is just a waste”

  1. Arthur Global Practice Says:

    So, you agree with Ian Bremmer (Eurasia Group´s CEO), right?: “Building consensus within the G-7 was like herding cats. Getting to yes within the G-20 is like herding cats together with animals that really don’t like cats. It’s a grouping that better reflects today’s true balance of political and economic power. But it’s also a forum that brings together officials with wildly divergent views on the proper role of government in an economy.”

    Best wishes

  2. yra Says:

    Arthur GP—i don’t know the writer you cite but his point is well taken.The problem is not only that they promise much and deliver so little–and then the G8 goes on to applaud the continuing move to bilateral agreements—it is mind numbing in its inconsistency–the need for self importance amongst these leaders knows no bounds and yet the world actually listens or at least the sycophants of the media–the other rediculous venture is davos

  3. Dinosaur Says:

    I thought one of the most ironic things about the finreg bill was giving the government the right to sieze banks that had too many “risky” assets on their books. Back in 2004 to 2007 what regulator would have suggested that anything having to do with mortgages was a risky asset. If someone (Greenspan perhaps) would have figured it out, we might not be in as bad a shape as we are today.

  4. yra Says:

    Greenspan was too busy on his victory tour and didn’t want to face the crisis that he had created–remember his tauting adjustable rate mortgages and applauding people using their homes as piggy banks

  5. DMAN Says:

    Does this mean that the US and west are Frigged? Great.

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  7. jeff Says:

    I agree about Fin Reg. It is a total waste of time. Doesn’t correct the root problems in the market, or the structure.

    Kanjorski was on CNBC yesterday and said that correcting Fannie and Freddie wasn’t the purpose of this bill. Said the market would be down 1000 points if they DIDN’T pass it.

    Almost peed my pants laughing at him.

  8. Ray McKenzie Says:

    If you see my reflection in the snow covered hills, maybe the landslide will bring it down….

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