Show Us the Money
What you don’t know may hurt you.
Rep. Katie Porter doesn’t know a thing about ‘high finance.’
Neither do I.
Neither, if you are reading this, do you.
And why is that?
Consider ‘high finance,’ aka financial intelligence, is obscured, until we are asked to bailout banks.
And then we learn more than we want.
Funny how this process repeats itself. It’s as if we are financial beauty queen contestants, summoned to a beauty pageant and largely ignored otherwise.
Recall the time you fell in love with a house and luckily learned BEFORE closing that there were basement water issues which the owners had not shared? Know the feeling? Frustration mixed with anger mixed with disgust.
See ‘high finance’ at work. It’s about intelligence and cornering certainty. Rothschild used gold and carrier pigeons. (1) The “House of Morgan” stuffed Boardrooms. (2)
It’s about timing manifesting as control, conspiracy masquerading as partnering, and exclusion masquerading as risk.
It’s about channeling the ‘enterprise’ to consolidate capital; conspiring to control outcomes; allocating risk to sustain inequality. The government is a player. “Experts” contain the message. Elites govern the narrative.
One of the pithier takeaways by financial columnist Matt Klein from the Silicon Valley Bank (SVB) failure and subsequent bailout was reported in an opinion piece by Ezra Klein (3):
“This was a ‘bank-run by idiots, rather than a ‘bank run by idiots.’”
Witty is the financial denouement summary.
In the movie, Wall Street, the financial denouement is the reveal of a wire taped to the protagonist’s stomach. In Its a Wonderful Life the denouement is the handing out of dollars from one to the other — a symbolic collectivization. An Angel helped.
In the latter scene an uplifting moment; in the former, the redemption of manipulation.
But we are not in the movies. The SVB and Signature bank failures reveal — pardon the ‘dumb-down’ — a failure to predict, on the one hand and on the other, a failure to respect the predictions which quickly became conditionals: for example, if you don’t respond to inflation quickly and convincingly bad things can happen.
In the world of digital-laced ‘high finance,’ the rapid pace of change makes fools of us all. (4)
What is a bank bailout?
Consider that a bank bailout is a redistribution of ‘wealth.’ Unleashing funds in the interest of maintaining the ‘greater good.’
It’s tempting to fix on ‘wealth’ as something that one consolidates, hence collects and protects from risk of loss or damage. But ‘wealth’ is also transferable, capable of changing hands, accruing to where gain outweighs loss, where relative certainty outweighs relative uncertainty.
In a bank bailout, institutions which are holding our assets, consolidate them temporarily and loan them to other institutions to redeploy. Of course, such transfer presumes that the borrower is capable of redeploying the asset, otherwise the transaction is aborted by the lender and the institution fails. There ensues an intelligence tug of war between the purveyors of risk and the ‘you’s and me’s — the ‘fools’ and their money.
Never are assets entirely removed from risk of loss or damage. There is always risk. Hence, assets are protected, presumably, a major purpose of banking. And of bank regulation… on a sunny day.
Max Klein writes, March 13 in The Overshoot:
“Banks are speculative investment funds grafted on top of critical infrastructure. This structure is designed to extract subsidies from the rest of society by threatening civilians with crises if the banks’ bets are ever allowed to fail. The U. S. government’s response to the collapses of Silicon Valley Bank and Signature Bank — effectively removing the $250,000 cap on deposit insurance while letting lenders borrow relatively cheaply against fictitious asset values — is a reminder that those threats usually work.”
Consider how can we collectively share our assets in this manner? Who is watching over the hen house?
Consider three mitigating factors.
Trust. It’s a common word, etched in stone on building facades with heavy doors and as one friend observed, “lots of brass.”
Resources. Another word/concept, hard to couple with balance and stability. Nevertheless, shoring up resources is critical to moving wealth.
People. Another word etched in stone on building facades with heavy doors.
‘Bailout’ then is a curious term, designed to avert the sensibility to what is really going on: someone, in our name, is moving our money.
Consider what is ‘bank regulation?’
In the presence of ‘everyone needs a hen house guardian,’ institutions have designed and maintained regulations to mitigate uncertainty and preserve the movement of wealth. Intelligence favors the side of the ‘elite servicers’ who manage where the money is. (5)
But who is watching the steady erosion of regulations for ‘predictability’ sake? As a doctor once remarked to me, ‘every medication has a side effect.’ Or consider the inventor/spokeswoman for Lume Body Deodorant who coyly whispers, “Why didn’t someone think of this sooner?”
‘Regulation,’ then is a curious term.
What or whom is being regulated?
It has been said that to ‘understand,’ one is required to suspend the conviction of “present day reality and facts.” (6) Consider this suspension, ‘goal-setting.’ Troubling then, is the lack of goal-setting in the wealth distribution/regulation world.
Line up all the purported “what we now know” provisos to prevent “another SVB failure.” Are we not kidding ourselves that we can rest with this level of control? While the very uncertainty of which we are so focused on removing is being ‘managed’ by the very players who set the terms?’
Cognitively, are we not “fighting the last battle?”
Ezra Klein summarizes:
“Banking is a critical form of public infrastructure that we pretend is a private act of risk management. The concept of systemic risk was meant to cordon off the quasi-public banks — the ones we would save — from the truly private banks that can be mostly left alone to manage their liabilities. But the lesson of the past 15 years is that there are no truly private banks, or at least we do not know, in advance, which those are.” (7)
One thing is certain: collectively speaking, America ‘needs to have’ a discussion about wealth. But then, what do I know about ‘high finance?’
March 25
Notes
2-Ron Chernow, The House of Morgan: an American Banking Dynasty and the Rise of Modern Finance, (1990)
3-Matt Klein, “Thoughts on the Bank Bailouts,” The Overshoot, March 13
4-”Here’s a more generous interpretation: ‘Change makes fools of us all, and we are living through an era of change. These changes, in particular , are worth thinking about right now… ‘low interest rates came to an end… the dangers of vial finance made an appearance… financial regulators turned out to be fighting the last war…” Ezra Klein, “Can We Slow This All Down, Please?” Opinion, New York Times, March 18
5-I am reminded of the Bernie Madoff scheme in a recent opinion by financial columnist, Peter Coy- ‘bad things happen when investor and custodian are one and the same.’ Madoff convinced his ‘marks’ that their money was ‘safe’ with his firm. Peter Coy, “Seven ideas to prevent the next bank crisis,” Opinion, New York Times, March 22.
Comment: It is curious that ‘conservative’ columnists like Kein and Coy are calling for more government intervention, not less, to prevent future banking crises.
6-Heinz Von Foerster et.al, “Self-Organizing Systems”
7-Ezra Kein, op. cit.
