Depositors Are Not Stockholders

 I think it's true in 2008 many stockholders were wiped out.  I know we owned GM stock and lost it. The same thing applied to some of the financial institutions--like Lehman.  I think some banks did not go bankrupt; they were for pennies on the dollar by another bank. That means where an investor might have had Bank X stock worth $50 in 2007, when it was bought out the investor may have gotten $2.

Am I Destroying Capitalism?

 I was a relatively early investor in Exchange Traded Funds (ETFs) which Annie Lowery in the Atlantic thinks may be dangerous to capitalism (along with index based mutual funds).

If I understand the concerns: in the good old days of individual stock ownership and actively managed mutual funds people, fund managers and investors, were actively concerned about the performance of companies. They bought and sold stock based on that information, resulting in a an efficient sharing of information related to performance  via financial markets.  But with ETFs and index funds dominating the scene these days, many fewer people are tracking performance and incentives for managers to perform are less.

It sounds okay to me.  Although I would point to Billy Hwang's financial distress to observe that financiers can be pretty stupid; they seem to be chasing returns through ingenuity rather than hard work.

Another aspect is the rise of global financial markets.  Back in the days of actively managed funds we had much less  in the way of global financial flows.  Over time I've diversified our investments away from Spdrs and QQQ (the early ETFs tracking the S&P 500 and the Russell index) to include several with foreign investments. While fewer people may be tracking GM  and Ford against each other, the competition between US car manufacturers and foreign manufacturers is being  tracked.

At any rate, I expect the current setup will outlast me; at least I hope so.

Maybe Trump Was Right?

Right about unnecessary government regulations, that is. 

My wife and I had to set up a new account with our bank this week. The number of questions one has to answer has gone up (like are you closely related to any corrupt foreign leader?) and the number of pages of legalese which one has to ignore has expanded.  No doubt this keeps a number of lawyers in full employment, but it seems foolish. It seems as though there should be an easier way.

Having vented my frustration, I realize what we have here is an arms war between competing sets of attorneys--both sets aiming to obtain the most money they can for themselves and their clients, with one set on the side of right and the public interest and the other set on the side of enterprise. 

And no, Trump wasn't right. He represents the extreme of one side of the arms war.

Firefighting

Just finished this book, a 100-page summary of how Geithner, Bernanke, and Paulson (the authors) fought the Great Recession, and what should be done in the future.

Having read the separate books by each of them, nothing in it was particularly new.  And having read Tooze's Crashed, which focuses on the international crisis, I wish they had paid more attention to that area.  But it's a good summary, clear and quickly moving.

It's especially apropos today, because "repos" market seized up yesterday and the NYFed had to put in $53billion.  "repos" is a term familiar from the Great Recession and from Firefighting.  Of course, there's nothing on the top line news today about it. The media and politicians won't pay attention until late, and then we'll discover our politicians have handcuffed the financial institutions.

Beneficial Ownership for All, Not Just Farms

If I correctly understand current payment limitation rules (dubious, at my age it's questionable what I correctly understand) farmers are required to identify the beneficial owners of the legal entities which receive farm program payments.  "Beneficial owner" meaning the live body, as we used to say, who actually gets the money in the end.

That seems to me to be right and proper, so right and proper I come to agree with AEI, not something a good Dem often does, that this should be required for all legal entities.  Without such a requirement the rich and powerful can hide behind a paper veil of dummy corporations, fake partnerships, and trusts.

Rubio and Real Estate

The Times has a story on the Rubio family finances today.

Slate notes that the Rubios were doing what every striving upwardly mobile person was supposed to do in 2005, buy real estate. They were fortunate--they lost money, but didn't have to hit the bankruptcy court.

I'd cut him a break--IMHO learning to deal with money is a multi-generational thing.  I've been reasonably successful by learning from my father's (over conservative) and grandfather's (a sucker) mistakes.

Banks and the Agriculture Committee

Here's a Salon article on how the banking industry loves the Agriculture Committees.  Why?  Because they oversee "derivative trading", which farmers know as "commodity futures".  Hat Tip Wonkblog.

Kevin Drum Goes Gentle on Financiers

In a post about why the financial community is opposed to Obama (a meme from Brad Delong), Kevin opines there are two reasons:

My guess is two things. First — and there's no point in pulling punches here — they're a bunch of spoiled brats.

 Read the whole thing.

Interest Rates and Competition

I shouldn't venture into this subject, but I'm confused.  If I understand, which I probably don't, the Fed continues to make money available to banks at a low cost but the mortgage rate is rising.  How does that happen? Shouldn't the banks be competing to make loans, and therefore keeping rates low?  Or is the home mortgage market subject to frictions and problems which make it not very competitive?

Nationalizing Ratings Agencies

Ezra Klein posts on whether we should nationalize the ratings agencies.  My comment--USDA inspects and rates grains and cotton, why shouldn't the government rate bonds and derivatives.