Bernanke said the Recession is Over

Did I hear it right? Mr Bernanke telling us the Recession is over. Judging by the stock market and confidence indicators everyone is agreeing with him. It’s party time again.

It’s not the Recession that matters – it’s what happens now that counts.

It is conveniently forgotten that most of the financial world is in hock to their governments for billions of dollars of your money.

It’s also forgotten that the bad banks are now much bigger than they were even if the capitalisation is much lower due to their stock price.

The people are still the same – nothing has changed. I don’t see or hear of anyone going to prison, I don’t read about boards being thrown out, CEO’s and executives being shown the door or claw-backs of the billions paid for short term paper profits. There is a whisper about Bank of America being in some sort of trouble.

But in the main it’s a big fat zero.

Oh yes, there is some work being done on re-regulation. And there seems to be some sort of commission into the causes of the crash. But in my view governments have dragged their feet on fixing the regulations, and charging those who caused the crash and breaking up these huge malfunctioning organisations.

It’s back to business as usual. I hear tell the Europeans are keen to regulate the financial industry for their own ends but the US appear to want to leave things as they are. Fear of losing their “gifted” financiers may be the real reason.

After any major financial crash those with the cash get to capitalise on the aftermath. Who has the cash? Not you. The people with the cash are the bankers and financial many of whom were responsible for the credit crisis in the first place. Your government gave it to them. Plus they still have your retirement funds to play with.

What an opportunity! Many Bankers might have been on their window-ledges ready to jump when Uncle Sam and the G20 called them up to give them billions in tax payers money. If only they’d waited for a few months 😉 For the good of the world they said.

Hmm! Well I can always jump tomorrow many of them might have said to themselves as they got down off the ledge and grabbed your money. Then they hid under their desk and wouldn’t share the money for a while.

At first fear prevailed but when they raised their heads from under their executive desks they were not shot off. Suddenly they found a new strength and humbly dedicated themselves to rebuilding their shattered financial organisations with your money, for the good of the country and working hand-in-hand with government.

They soon realised their government wasn’t going to cart them all off to jail but was going to keep throwing your tax money and some of Bernanke’s FED printed helicopter money at them so they would not fail.

Okay they knew they could not jump straight back into the lucrative CDO business, at least not for a few months until things quieted down. So the next best thing was the stock market but with high speed algorithmic trading that didn’t leave the money in the market long enough for them to lose billions due to volatility. They’re smart, they knew the dangers of “buy and hold” in this market.

Instead they hired quantitative analysts and algorithmic mathematicians and installed their super fast servers right on the floors of the exchanges so their orders would be filled a thousandth of a second faster than the public – you.

Stock market exchanges seem to be helping them. “Flash” trading basically let them see other peoples orders for a small fee. It’s only right that we should help them get back on their feet, isn’t it? What is Flash Trading

“Here is how it works in practical terms. An exchange, NASDAQ will take orders through its Routable Flash Order system and will first check its own order book. If the order is not filled it will “flash” the order to its participants for 300 – 500 milliseconds. Doesn’t sound like a long time but remember computers are used to execute these trades. Lastly, if the orders are not filled during the “flash” the trade is then routed to the public.”

Using their power they gamed the markets on high volatility and low volume and took billions out in profits in just a few months. They are probably making more money now that they have done for years. They are still doing it.

Mr Geithner was on cable the other day saying he wants to ensure the financial crisis never happens again. Mr Geithner wants to regulate everything he can, but I think he will not get his way and he should not. But neither should things stay as they are. The regulations need cleaning up and the laws enforced now.

“Among the problems that crop up with the innumerable proposals for reregulating the banks on the blogosphere and in the MSM is that they too often ignore the political realities that have to be factored into any workable plan. Not that many don’t have merit, just that they are practically impossible.”

History shows if government and big financial institutions are in bed together, there will be a financial crisis at some point and the tax payers will pay for the damage. Regulations won’t fix that.

The revolving doors between treasury, the FED, the regulators and Wall Street needs to be stopped.

Only laws that ban government passing laws that interfere with the financial markets will do that. It will stop the lobbying and the corruption that must go one.

Mr Geithner apparently has filled only 11 positions out of 33 in Treasury. Why may you ask? Well it is my contention that anyone wanting a financial career would want to stay well clear of Mr Geithner in case he gets his way and becomes the Financial Gestapo.

If your financial career begins with interrogating any future bosses you know your future will be with Treasury for life.

That puts an end to you doing a few years at Treasury and then joining a big financial corporation on a big fat salary so you can tell them how to dodge the very regulations you helped write.

Mr Geithner will be neutered within a few months and some watered down regulations will appear that is agreeable to both the government and Wall Street. Governments just cannot stop meddling in the financial world and will never impose tough regulations on them. Wall Street needs to know the governments will back them if things go wrong. Why Wall Street Reforms Have Stalled.

“One year ago next week, Lehman Brothers went bankrupt, Merrill Lynch was sold and A.I.G. was rescued by a huge federal bailout. In the wake of the global financial crisis, Congress and regulators vowed to end Wall Street’s profligate risk-taking and the compensation structures that rewarded that behavior. Yet looking back, experts say not a lot has changed in that culture, and efforts to control risk and reform executive pay have stalled.”

Governments realise they need the financial wizards of Wall Street to speculate as they did to create the wealth effect that allowed them to buy their voters by pushing their social agendas. Its an unwritten agreement.

The US government also knows the best and the brightest (unfortunately not always the most ethically and morally responsible) can generate huge profits using the financial money machines. Those financial wizards can do it anywhere on the globe right now. Dubai beckons, maybe even Shanghai. Both will lay out the red carpet for smart money men without a second thought for their scruples, and probably tax free to boot.

The speed of this “recovery” is mind-boggling. With the G20 committed to do whatever it takes, the wizards of Wall Street have been dealt a winning hand. They cannot lose.

If they make huge profits on taxpayer money they get paid huge bonuses. It they make huge losses on tax payer money the G20 will give them more. Japan has been doing this since the early 1980’s and look where it got them.

One thing I though ironic was I read that both Harvard and Yale lost 30% of their endowment money in the financial crisis. (Hark I hear a bailout coming their way ). You’d have thought they would have known what to do to avoid the disaster since they have been the teachers to the world’s financiers.

Just look at the risk they were taking on before the crisis,

Harvard also said the school now aims to hold 2% of its assets in cash. Previously, it targeted a negative-5% cash position, reflecting its use of borrowed money to expand its investments. Ms. Mendillo said endowment managers had learned to better reflect “the risk tolerance of the university.”

By any other measure that’s called Greed – Greed is Good, Greed is Good….

Worse though, it makes you wonder what the hell we are in for now, with all the graduates now working as bankers or financial executives on Wall Street, with not one of them being found guilty of any wrong-doing in a court of law.

I believe that ethics is going to be emphasised as part of the curriculum now. The MBA Oath. Something to read and think about over the weekend perhaps.

I’ve got some “oaths” myself but it is inappropriate for me to say them here!

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