Thought of the Day

This morning, my dad sent me the Thought of the Day from Sydney Willams with Monness, Crespi, Hardt & Co., Inc.

Take thirty seconds and read it below:

Thought of the Day

October 29, 2009

I repeat myself – a privilege of age – but I continue to be astounded that, following the worst financial crisis in seventy years, the new Administration came in with guns blazing… to focus on healthcare and cap-and-trade. Granted, a stimulus package was passed early in President Obama’s term, but only a small percent of the funds have thus far been spent. To leave unregulated a derivative market, the notional value of which is more than thirty times the size of the U. S. economy (and five times the world’s GDP) and to provide banks billions in aid without a concurrent requirement to reduce leverage and shut down off balance sheet funds, is beyond comprehension!

Last evening Tom Keene and Tom Pruitt of Bloomberg interviewed Niall Ferguson and Ken Rogoff, both Harvard professors. This morning I listened to a few snippets of their conversation. They are in agreement that to conclude that the crisis is over is a mistake. Crises such as we experienced a year ago tend to go on for some time. There is little question that last fall we approached the edge of the precipice, peered over, and were yanked to safety. But, to prevent such an event from happening again should be the principal focus of the Administration. Exchanges are needed on which to trade derivatives. Sunlight must be allowed to shine into the dark corners of trading firms. Leverage at banks needs to be reduced. If banks are too big to fail, they are too big.

Professor Ferguson pointed out that at the epicenter of the crisis were Fannie Mae and Freddie Mac, government sponsored enterprises (GSEs) overseen by Congress, “the worse qualified people in the country” according to Professor Ferguson. Having the Chris Dodd’s and the Barney Frank’s write banking legislation is akin to letting the unrepentant fox, responsible for the death of so many chickens, devise a security system for a new coop.

A focus on financial regulation was hijacked, in my opinion, by members of the Administration like Rahm Emanuel – a chief of staff who increasingly resembles H. R. “Bob” Haldeman who once described himself as Nixon’s “son of a bitch” – and his statement that one should never let a crisis go to waste – that this would be a great time to alter the face of American democracy.

The health bill, meandering through Congress, looks to be coming to some sort of a conclusion – likely a mish-mash, understood by few, yet affecting all. That may free up time to focus on financial regulation, but it comes after banks were provided free money, allowing them to invest in risk-free Treasuries, while not requiring the moneys be used to fund the thousands of small businesses that start up every day – the life blood of job growth.

It is hard to have confidence in an Administration, which seems to have its priorities so misplaced.