I’m shocked, shocked. There is gambling going on in banks.
Let us be clear. What UBS trader Kweku Adoboli did with the bank’s money was gambling. What central bankers are doing with our money these days – well that is gambling too. As the Economist reported, Adoboli “allegedly adopted an approach known in the gambling world as “martingale system”: a gambler doubles his bet after each loss and continues to do so until he eventually wins—or runs out of money. Starting in 2008 Mr Adoboli hid his actions and losses through the creation of false accounts and clients.”
Bloomberg has reported: “UBS AG fixed a loophole that former trader Kweku Adoboli allegedly used to conceal unauthorized transactions by giving them long-term settlement dates, the bank’s risk officer said at a London criminal trial.”
Central bankers admittedly had a rough summer. The European Central Bank’s Mario Draghi couldn’t even tear himself away to attend the August conclave in Jackson Hole. For regular bankers, it was a bad summer and not just because of rogue traders. The fall hasn’t been much better.
JPMorgan Chase had a little $6 billion problem. Barclays' revelations about Libor manipulations set off a firestorm. HSBC admitted it wasn't properly handling money laundering. Wells Fargo had to settle charges that it had discriminated in mortgages. The purchase of RBS branches by Santander fell through. And of course, the German Reichstag had to hold its nose and vote to approve the bailout of Spain's problem banks.
Then there is Citibank, whose top two operating executives recently resigned. Sanford Weill created a monster when he merged Citibank and Travellers – one so big that it was eventually broken apart. But give Weill credit. He knows what a monster looks like.
As Bloomberg Business Week reported several weeks back: “On Wednesday morning, the 79-year-old Weill, one of the 20th century’s most acquisitive bankers, stepped up to the mic to endorse … breaking up the banks. “What we should probably do is go split up investment banking from banking, have banks be deposit-takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail,” he remarked on CNBC.”
You don’t have to accept Weill’s analysis to know that there are problems. Bloomberg’s Roben Farzad wrote: “Chopping these banking conglomerates into smaller, more focused, less systemically hazardous shops is a laudable goal. Thank you, Mr. Weill, for your courageous declaration. Why couldn’t you have made it a decade ago?”
The Russians have a saying “If you want a two-hump camel, you must order a three-hump camel. The system will shave off the extra hump." There have been a lot of three-hump camels in the banking system lately.
George Gilder, whose new book publishes today, is one of the original pillars of Supply Side economics. As stated by Discovery Institute, which he co-founded, “Mr. Gilder pioneered the formulation of supply-side economics when he served as Chairman of the Lehrman Institute’s Economic Roundtable, as Program Director for the Manhattan Institute….”
He was the living writer most quoted by President Reagan. And he is back with his most brilliant work yet — one of potentially explosive importance if taken to heart by our political and policy thought leaders. It is a radical guide, with surprising insights on almost every page, to the creation of a new era of vibrant prosperity.
As reviewer Paul Brodsky, a professional investor in New York City, perceptively notes,
"Lewis Lehrman is one of a very small group of contemporary gold advocates able to successfully bridge the gap separating practical conservative intellectualism from fleeting, half-baked idealism. His CV lists great success across many fields including education (degrees and teaching fellowships from Yale and Harvard); industry (past president of Rite Aid); politics (narrow loser to Mario Cuomo in the 1982 New York governor’s race); finance, (past Morgan Stanley managing director); private sector entrepreneur (founder, L. E. Lehrman & Company); public sector advocate (founder, Lehrman Institute); historian (author, Lincoln at Peoria: The Turning Point); and recognized philanthropist (awarded the National Humanities Medal by George W. Bush in an Oval Office ceremony). ... Only someone erudite and elegant in demeanor could hope to pull it off . In an irreconcilably over-leveraged world where irritated bond vigilantes question economic sustainability and angry Tea Partiers protest the immorality of it all, Lehrman’s views are considered and his convictions carry weight. He brings gravitas to his cause, and he does so from within as a member of the club."
Before the Fed: JP Morgan Summons the Bank Presidents
"Finally, on the night of Sunday, November 2, Morgan summoned the presidents of the major New York banks to his new library, at the corner of Madison Avenue and Thirty-sixth Street, an Italian Renaissance-style palace he had built next door to his house to showcase his collection of rare books, manuscripts, and other artwork. Its marble floors, frescoed ceilings, walls lined with tapestries and triple-tiered bookcases of Circasian walnut, crammed full of rare Bibles and illuminated medieval manuscripts, made it an incongruous setting for a meeting of the banking establishment. Once the moneymen had gathered, Morgan had the great ornamental bronze doors to the library locked and refused to let anyone leave until all had collectively agreed to commit a further $25 million to the rescue fund."
— Liaquat Ahamed, Lords of Finance (Penguin Books, 2009, p. 54)
Lately we have been engulfed by headlines reporting financial turmoil on every continent, in almost every nation, large and small. The commissars of central planning who so marred the history of the 20th century have been replaced by central banks in the 21st. In Cyprus, the new leadership now dares to confiscate citizens’ wealth with a one-time tax of up to 60 percent on bank deposits above 100,000 euros. Self-interested prime ministers blame continental monetary policies for instigating the currency wars that they themselves surreptitiously carry on.
America recently celebrated — well, maybe we didn’t celebrate – the 80th anniversary of Franklin Roosevelt’s action to end to the gold standard. But America is also celebrating – well, maybe not everyone is celebrating – the 100th anniversary of the legislation creating the Federal Reserve System.
As Lewis E. Lehrman...
Constitution.org provides an extensive and thoughtful Memorandum of Law by Larry Becraft, Esq., of Huntsville, Alabama, on Article I, Section 10, clause 1 of the US Constitution.
Sir William Blackstone courtesy of Wikipedia
One of many interesting matters the Memorandum treats is Blackstone's Commentaries, a book that was a fixture in the...