Monday, April 26, 2010

Of entities, instruments and leverage - for whose direct benefit? Banks - made simple(r) - just go back to banking or don't call it banking ok?

Banks chronology and SOCIAL purpose was historically 1) handled check clearing / payments, 2) accepted deposits, 3) made loans, 4) underwrote securities, 5) made markets in securities, 6) provided brokerage execution and investment advice to customers, 7) acted as trustee or custodian for customers accounts, 8) provided merger and acquisition advice, and to a much greater degree more recently 9) created, sold and traded UNREGISTERED securities and derivatives upon same and leveraged balance sheets based upon their own proprietary valuation models 10) used creative but seemingly legal ways to shift some assets off balance sheet at quarter's end, 11) hid true "indicative levels" for as long as they could (for reference see Mr Zuckerman on John Paulson's "The Greatest Trade Ever" book page 161, 7 lines from the bottom for feelings held at the time / color on certain Merrill Lynch traders mysteriously maintaining marks on Subprime mortgage backed securities.

Somewhere it seems to me along the tattered trail of banks, entities (Citigroup, for example, amassed it's believed over 2,000 separate on and OFF balance sheet special purpose entities), and alphabet soup of instruments; RMBS, CDOs, CDS, CPDO's and other assorted ABS Asset backed -securities; all generally fancy securitizations a few steps removed from what's been known for generations as "factoring" accounts receivable and leverage - for PROPRIETARY purposes ONLY.

There you have it - all laid out - like a fillet - NOW Congress - DO THE RIGHT THING - for and on behalf of the US taxpayers.

Calling a spade a shovel because that's what it is.
Cleave OFF the proprietary SPECULATIVE trading aspect from "banking", require central clearing provided by an INDEPENDENT, well funded 3rd party, posting of contracts for price discovery - to spread a little sunshine, eliminate confusion and let's all know who's who and who's investing for what aims and purposes.

But as the headline suggests - please don't continue insulting the intelligence of fellow Amerkans - don't call it "banking" when it's LEVERAGED PROPRIETARY SECURITIES / DERIVATIVES SPECULATION ON OR OFF BALANCE SHEET ON OR OFF SHORE OR OFF PLANET (trust me - I'm sure someone has been trying to figure out how to craft this craft.)

Ending the siesta on the US Taxpayers dime one little blog at a time.

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