Posted on 09/24/2009 6:54:41 AM PDT by TigerLikesRooster
/snip
SDIs should:
1. Not be permitted to acquire other firms
2. Not be permitted to grow
3. Be subject to a premium federal corporate income tax rate that increases with asset size
4. Be subject to comprehensive federal and state regulation, including:
a. Annual, full-scope examinations by their primary federal regulator
b. Annual examination by the systemic risk regulator
c. Annual tax audits by the IRS
d. An annual forensic (anti-fraud) audit by a firm chosen by their primary federal regulator
e. An annual audit by a firm chosen by their primary federal regulator
f. SEC review of every securities filing
5. A prohibition on any stock buy-backs
6. Limits on dividends
7. A requirement to follow “best practices” on executive compensation as specified by their primary federal regulator
8. A prohibition against growth and a requirement for phased shrinkage
9. A ban (which becomes effective in 18 months) on having an equity interest in any affiliate that is headquartered in or doing business in any tax haven (designated by the IRS) or engaging in any transaction with an entity located in any tax haven
10. A ban on lobbying any governmental entity
11. Consolidation of all affiliates, including SIVs, so that the SDI could not evade leverage or capital requirements
12. Leverage limits
13. Increased capital requirements
14. A ban on the purchase, sale, or guarantee of any new OTC financial derivative
15. A ban on all new speculative investments
16. A ban on so-called “dynamic hedging”
17. A requirement to file criminal referrals meeting the standards set by the FBI
18. A requirement to establish “hot lines” encouraging whistleblowing
19. The appointment of public interest directors on the BPSR’s board of directors
20. The appointment by the primary federal regulator of an ombudsman as a senior officer of the SDI with the mission to function like an Inspector General
Ping!
Mussolini would see this as a good beginning if enacted.
Heck, I'm still waiting for my Peace Dividend, though by now I'd settle for a big piece of ACORN pie.
Talk about punitive! Who wants to bet that this clown will want an annual piece of the assets in his next brilliant proposal?
Put down the fascist bong, Charlie, and crawl back under your statist rock. Jeez.
Systemically Dangerous Institutions? This applies to the House and Senate - I wonder if the man realizes...
We need to start to work hard to create the awareness of Government itself as the big corporation that it has become. It does everything that a corporation does in the way of exercising control. The only thing it lacks is productivity. If it can be seen as a corporation which should comply to all the rules it expects of the other corporations, then these rules, or many of them, could be applied to the government itself.
I nominate Congress as the first entity to be designated an SDI, and the Executive branch as the second. I especially like the idea of the annual audits, applied to both the entities as a whole and to each Congressman and Senator and to each member of the Executive branch who reports directly to a Cabinet-level official and above. That includes all the Czars - we have more Czars than Russia.
If they start with ACORN and its affiliates then it’s a go.
Yep, it bankrolls its own Internet shills, too.:-)
Instituted properly, deal cops 1) are independent of both management and trading desks, 2) report directly to either the CEO or CFO, 3) have an absolute veto over any proposed investment/trade and over the size of the investment/trade, and 4) has the power to set an absolute maximum level of leverage used in the portfolio.
SemGroup (energy trading and producing firm) failed badly for lack of an effective deal cop, as did Amaranth. So did Merrill and Baring's and Lehman and Bear and LTCM (1998). Contrarily, firms who have a tough deal-cop structure, like JPMorgan and El Paso, have ridden out even the toughest times in good (or well above average) shape.
Put a strict VAR and/or RAROC model in place, then give IT a haircut in the interests of caution, then simply do not allow any trading/investment position that violates the parameters as to either gross potential risk, size, and/or amount of leverage.
This ain't rocket surgery. The trouble comes when management (usually...sometimes traders, too) somehow begins to believe that it is invulnerable to market risk. The excessive sale of credit default swaps (which is effectively the same as selling naked put options), the major proximate cause of numerous firms' recent crashes, is an utterly classic example of such a belief.
Black's numerous (and goofball) points would have exactly one effect over, say, 5 years' time: the greatest capital flight in the history of the world. NO investor would put his/her capital into a bank/investment company that had to operate under Black's constraints.
So barring an ultimate cure, we need preemptive measure. This crisis is far from over, and it will destroy most financial systems of the world, one way or another. They are trying to plug a huge hole which cannot be filled, without risking hyperinflation. After people are through with entire crisis, the list of things here would look tame. In the end, there will be no place for capital to flight to in order to make some gains, if most financial market are more or less broke. Outright deflation or hyperinflation, they will be all in bad shape.
Capitals move out of U.S. to EU, then EU go broke, then to China, and China go broke and massive uprising or war breaks out. I don't think people want to do exciting things for a long time.
I don't think people want to do exciting things with their money for a long time short of bankrolling a war.
So I guess there’ll be no Casino in MA.
Do you see any such accountability mechanism for big financial institutions? No.
Black's list sounds like Directive 10-289 for the financial industry. I'll advocate no part of it.
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