Why Can't We Put Volcker In Charge?

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Evidently the powers are be are willing to think and act out of the box.

90% tax passing in the House? Unheard of!

AIG bonus payments? Madness!

Requiring the same WRONG credit rating agencies to rate the Government Bonds for the relief effort? Insane!

So, if you all are willing to consider and do all these off the wall, and destructive things, let me suggest an off the wall, and may I say constructive solution.

Can we put Paul Volcker in charge? No more advice. Put him in an "order giving" capacity. He has more common sense, experience and more focus on the big picture that the entire Fed and the entire Treasury put together. He's already done every thing. He understands Wall Street. He understands the power of the Fed (he was the Chairman of the Fed). Who else can get us out of this mess? Geithner has all Wall Street solutions. Hear the new one? Subsidizing the purchase of toxic assets. From the Wall Street Journal, Tim Geithner's Op Ed: My Plan for Bad Bank Assets. Hello - they are "toxic". More waste of taxpayers funds!

Why can't we put Volcker in charge? I am now so thoroughly disappointed with Bernanke's confidence in the ratings agencies. After all those speeches about regulatory reform. Evidently, they are hollow. You cannot be serious about regulatory reform and have an iota of confidence in the ratings agencies. I am so thoroughly disappointed with Geithner's plan to allow the private sector to set the prices and then get huge subsidies to buy them - all with taxpayer's money.

Can we put Volcker in charge of the Fed and the Treasury at the same time? Where are the constitutional lawyers?

Watch Paul Volcker here - doesn't he give you confidence? He gives me confidence. At least I feel like he's telling the truth. And most importantly after today's testimony, I don't feel like he's being condescending. Roughing up from Congress comes with the territory, and without Congress there is no new law, so I'd really like it if Geithner and Bernanke would nicely answer some simple questions about how taxpayers money is being spent. That is Congress' job after all - the people sent them there and the people can make sure they do not go back.

WORSE Than AIG. Seriously.

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See that crushed up globe. That's the world. See the hand crushing the globe - that's the hand of the credit ratings agencies.

Ok, yes, I was and am outraged about the whole bonus matter at AIG. Can you believe anything can be worse than that? OH YES! We need a new word in the dictionary to describe the credit ratings agencies because "outrage" will not do. Have you read this madness? Ratings Agencies, To Blame For Some Of The Crisis, Could Now Benefit. The article references today's Wall Street Journal Article: Raters See Windfall in Bailout Program

See this outrage:

"The new rescue effort, run by the Federal Reserve, kicked off Thursday with bond deals totaling more than $7 billion. Each bond issue will need to be blessed by at least two of the three big rating firms: Moody's Investors Service, Standard & Poor's Ratings Services and Fitch Ratings."

WHAT? "Blessed"? Who are they to "bless"?

Please revisit my post explaining in detail why they have no "blessing" credibility: Rating The Rating Agencies

Consider: The ratings agencies told AIG all the garbage they were buying was the greatest thing since sliced bread. The ratings agencies branded all the garbage as priceless so the whole world would buy them. Everybody bought all the garbage and now we are in a mess. When AIG was scrambling for funds to meet the contract requirements of the Credit Default Swaps and the whole financial sector was in a free fall, what did the ratings agencies do? They threatened to downgrade. Well, if you are a country or company looking for funds, and the ratings agencies say they are about to downgrade you, no one will give you one cent. Did I say that the ratings agencies were the very reason why AIG bought the garbage in the first place?

Consider: AIG has a financial products problem that is SO huge that it impacts the entire global financial system. It is "too big to fail". On the other hand, the ratings agencies can rate EVERYBODY - so all products, all countries. The rating agencies have had FAR MORE POWER to destroy the ENTIRE global financial system and the ENTIRE global economy. The ratings agencies make AIG and its dramas look like kindergarten stuff. Ratings agencies can literally cause world war. They are "playing" with a lot of people's lives with rating sovereign debt, in particular. When countries are downgraded, they have difficulty accessing funds. When they need to make decisions so people can live - literally - they have to live under the written threats of further downgrades. The decisions that let people live are usually the complete opposite of what the credit agencies threatens the countries that they better not do or else. Seriously, these ratings agencies think they run countries - and quite frankly they are allowed to. Even the IMF has better bedside manners. The ratings agencies care ZERO about development. At least the IMF will talk about poverty. Can you imagine? The ratings agencies make the IMF look generous. An entire economy and society can hinge on a few utterances from these rating agencies. And if they were right, I would say - it's part of the system. But they're wrong. That's the shocking part. And they are unsupervised with no transparency. Utter madness.

Consider: The rating agencies caused this mess AND admitted that they were wrong, but they are STILL allowed to rate even through they are STILL wrong. They are driving the nails into the coffins of the entire global financial system and companies and countries. If they make a mess of the global economy, and everyone's prospects dim, how do these ratings agencies be allowed to downgrade them? These ratings agencies have to take responsibility. Whatever they say, people still listen to them. So if you are a sound company, and a ratings agency gets it "wrong", too bad for you and your employees. Many companies would be here now, many jobs would be here today if these ratings agencies were suspended after Lehman collapsed. Congress needs to do that analysis - what companies suffered and jobs were destroyed because ratings agencies were allowed to keep chattering after Lehman collapsed. Try this analogy: If the financial sector was bleeding, the ratings agencies opened the wounds wide and made new ones - and the ratings agencies were the ones that inflicted the wounds in the first place! And if you are the Government, the ratings agencies can shut down your relief effort. Don't believe me? From the WSJ article:

"One of the biggest concerns surrounding TALF is the seemingly arbitrary nature of ratings decisions. Many of the ratings firms, for example, changed their view of one part of the auto-financing sector, deciding that loans made to auto dealers were far riskier than they previously thought.

Their downgrades meant that bonds backed by loans to those dealers would be unlikely to get triple-A ratings, effectively shutting them out of the TALF."

NOW, hear this one, the US government's $7B bond rescue effort REQUIRES rating by these agencies. What is the US Government ON? So they are going to listen to these people who caused the mess, said they are wrong and still make a mess? And I hope you are sitting down because they are actually going to PAY them for this service - with taxpayers funds - YOUR MONEY. No, I ask again - have we collectively lost our minds?

Want to know how much money?

"Rating services typically charge $40,000 to $120,000 for every $100 million in so-called structured-finance securities they rate. For the initial $200 billion portion of TALF, that translates to $80 million to $240 million. If the program is extended to $1 trillion as the government plans, those fees could skyrocket to anywhere between $400 million and $1.2 billion."

You know what. I've been very supportive thus far, and tried to be very understanding. But I think that something is gone really wrong here. Forget too big to fail. Let the whole entire thing collapse and let some other monetary system take its place, and some other financial sector system take its place. Because what is happening now is not only completely illogical and completely counter to any form of recovery, frankly it is extraordinarily insulting to any normal person's intelligence.

Americans, citizens of the global economy, are we really going to take this?

So What Now AIG?

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• Yes, I did hear most of Liddy's testimony, and I did hear the insistence that these were contracts. So, I ask: if AIG was left to go completely bust, what money would have paid the policyholders? Are those not contracts? Or is it because those contracts are with mere mortals they are somehow less important that those of the financial wizards? Because, taxpayers buy into protecting policyholders - that was the point of the bailout, or so we thought because so we were told. Taxpayers do not buy into big salaries, and cannot comprehend "bonuses" in this context.
  

• Yes, I did hear Senator Dodd say he was the one to allow the bonuses because it was a compromise with the Treasury Department. So I ask, who in the Treasury Department? And did that "who" act alone? Specifically, where was Tim Geithner? Don't these meetings have minutes? I hear the Fed knew? Which Fed? Tim Geithner's New York Fed that he was president of at the time?

• Yes, I did hear Congress up in arms. But I ask: Don't you read every line before you vote on it? I imagine given the public outcry surrounded this legislation, and Paulson's attempt to have no review, no oversight and unlimited power in the first draft that it might, just might, have been a good idea to read every word before you voted on it?

• Yes, I did hear the Republican members of Congress try to blame this Administration. So I ask: Which Administration presided over the free for all that created this mess? Wasn't the last President a Republican? Now I agree: please use conditions to try to do what you can. But when the horse is out of the gate, and the Republicans opened the gate and egged on the horse to move as fast as he can, can the Republicans really complain about the gate and the horse now?

• Yes, I did hear President Obama. And without being biased, he's really the one who's the most correct. He didn't sign those contracts, but he takes responsibility. Translation - ok, now that we know, prepare for strict rules and regulations. And then at his Town Hall at Costa Mesa he did a fantastic job of explaining this mess in plain english - you know, the language that us mere mortals speak - and why it has to be fixed. When I find the video, I will be sure to post it.

So where are we?

Well, Liddy has said he has asked for a portion of the bonuses to be returned, and we hear that some people are returning all of the bonus. I commend them for that.

For those who do not want to return any portion of the bonuses, and are really content with Congress taking up time tomorrow for the House to try to tax 90% of these bonuses, and the Senate to try to tax 70% of these bonuses, I humbly submit that you are making matters worse for yourselves, your professional future, and your own profession. Frankly, Congress has lots of work to do to fix the economy that all these exotic products destroyed. It doesn't really have the time to do something it really does not want to do ideologically - and that is impose taxes of this magnitude. Shockingly, neither party wants to do this ideologically. But they will.

Respectfully, you bonus recipients are missing the entire forest for the trees. When the Government gets "tax happy" - watch out!

If this wasn't so important, and so sad, this would be a real soap opera.

Do Yourself A Favour - Get Rid Of The Bonus System

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First, let me make a few things absolutely clear.

• If you are a fully private company, and you deem an employee worth trillions of dollars and are willing to pay that employee trillions of dollars in any shape or form - as long as you and your company are not infringing upon society - then I support the right of PRIVATE COMPANIES to pay their employees as much and in what manner they see fit.

• If you - as an individual - are some kind of specialist, I support your being worth more than mere mortals like me. So, for example, if you are an oncologist who has never lost one single cancer patient, I say you deserve the world. Not being sarcastic, you do deserve the world. Not to equate a human life with money, but if you are a specialist in the financial sector - like say a derivatives trader - and you make lots of money for the system so we can all have more money, then sure you deserve to make lots of money. But all professions have sanctions. Doctors lose their licenses because of malpractice, accountants lose their licenses because of irregularities, lawyers get disbarred over ethical issues, etc. And mere mortals like us, lose our jobs. NOW: Who makes more money and get "bonuses' when they destroy their own company, their own industry and the entire global financial system and the entire global economy? People in the financial sector, that's who! Is there something not radically wrong with that?
  

I am insulted to hear anyone say that this matter of bonuses is a "perception" problem and immaterial in the scheme of things. Oh no - I beg to differ. It is the very HEART of the problem.

• Make tons of money, please do. But if you make a mess, you have to pay for it. The rest of society is structured that way.
  

• Make lots of money in a private company, please do. But when taxpayers funds are involved, the rules are different. Taxpayers need healthcare, roads, education etc. There is not enough money for the things taxpayers funds are supposed to do. There is record deficit and record debt. So where is the money to reward people who made a mess? Sorry, that is not on!

Now, I've heard some things today that warrant comment:

• "The only people can fix this mess are the ones who made it, so you can't afford to lose the talent". Rubbish. This is a perverse incentive. You want someone to fix something, you pay them on the basis of how long they take to fix it. The longer they take, the less they make. And they definitely don't make a "bonus"

• "A bonus is just the way it is". Wrong again. A bonus is defined - as in the dictionary - as extra, something earned. The very first synonym listed is "reward". You cannot make a mess and be "rewarded" for that. Have we all lost our minds?

• "These are contracts". Now I am a stickler for the law. If these are contracts, and they are so airtight that they cannot be broken, then these lawyers are the most valuable legal minds in the world. They should be the ones who sue the AIG recipients for a share of the "bonuses" because this legal work requires real talent. If these contracts were entered into after bailout funds were provided, then someone has done something really wrong - they have broken the public trust. And that should be exposed. Even if the "bonuses" are lost. Regardless, no more money for anybody without conditionalities - are the government lawyers sleeping?
  

Please, financial engineering is critical for a functional market. But if those who financially engineer don't try to meet us mere mortals - who cannot comprehend your value system - halfway, then the people and the Government are going to force a solution. And that means restrictions and over-regulation. And then everyone will lose. But at least, we, the mere mortals, won't be insulted, offended and outraged.

What Are They Thinking? AIG Is A Disaster.

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Ok, I don't need to post a link to an article. The WHOLE WORLD knows about this one. There has actually been a debate for days- yes days - over this AIG bonus matter.

I need to know what "they" are thinking. But the key question is who are the "they"

First, at the risk of being controversial, who are the "they" that agreed to these contracts in the first place. It has been raised that these contracts were actually entered into after - yes, after - AIG received the first set of bailout funds. Please tell me that it is not so. Because this would mean that after that public outcry, someone actually developed and signed these contracts knowing taxpayers money would be paying for this. Do these "they" have no conscience?

Second, if the taxpayers own 80% of AIG, is that not partial nationalization? I have already spoken and written several times about why partial nationalization is such a disaster. This is exactly why. Case in point. Those in charge get to spend taxpayers money as they like. Fully nationalize and cut out this nonsense.

Third, excuse me, but these are contracts. And if they are contracts, then evidently there are obligations. The American way of capitalism is all about honoring contracts, so I get that. So where were the "they" to make these contracts null and void if government assistance is provided? That is called a "conditionality" - quite another popular feature of the American way of capitalism. Ben Bernanke, please add this to your list for regulatory reform.

Fourth, and here's where I must be missing something. Am I really to understand that derivatives traders - the same "they" who caused this massive mess not just to the AAA rated AIG, but to the entire global financial system - are the "they" who MUST get bonuses, and that these "they" actually want them? Do they live in society with the rest of us? You know, I said that Wall Street was in desperate need of PR. Strike that. All these companies need an entire machinery to explain this NEED for this type of compensation system when 1) people do not perform and 2) when people make a mess of the entire world. I am sorry but us mere mortals do not get it. Because in our world, if we mess up we get no bonus or we get fired. And in our world when those "they" make a mess of the world, we in the rest of the world lose our jobs because of those "they" and we wonder how we are going to literally survive this period. Earth to AIG: The majority of the world wonders where their next meal comes from. Where are the sanctions for making a mess? Ben Bernanke, you need this one on your list too.

AIG and its employees need to get a grip. Nothing lasts forever. We all live in this world. If your customers, clients, target market, regulators and all the people you do business with absolutely abhor you and your practices, not only will the company not last, but all your employees will become unemployable. Respectfully, these "they" are not team players.

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• Bailed-out AIG doles out $165 million in bonuses. (thinkprogress.org)