Welcome Back ...

Obama, as a reader of this blog. He had stopped reading this blog quite awhile ago as he moved to the Statist camp with his foolish and fiendishly complex ObamaCare plan. But now, duly chastened by the Scott Brown win in Massachusetts, he's adopting some of my long propounded policies regarding banks and hedge funds.

In its essence, proprietary trading in a bank or securities firm is trading against their own customers. Every single $ of that profit comes at the expense of their own customers. Obviously, no financial institution with the privileged position of serving the public markets should be permitted to do that.

And that is precisely what destroyed Bear Stearns and Lehman Brothers and almost Merrill Lynch until Bank of American ate that road kill. Their balance sheets were swollen with illiquid, unmarketable proprietary trades and their cousin, unsold chunks of underwritings.

Not all failed banks failed from proprietary trading: Wachovia and Washington Mutual died from bad loans. BUT some did.

Why should a bank with access to the Fed be able to speculate with that money ? They should be prohibited from doing so.

And who hasn't been harmed by the giant banks gobbling up fine small banks ? The big boys raise fees and gouge customers. There is no economy of scale in community banking; the big banks buy them and then suck the community's money to "invest" in securities. This trend has been going on for years and it is not good.

Economies of scale ? Nope. Most bank fees much less at small banks that at the big ones ? And service is better at the small banks, too. Banks can and do contract out a lot of their computer services now anyway.

Of course SECURITIES firms do have some economies of scale. But the level of scale that provides those efficiencies has long been passed. Size is necessary for underwriting large bond issues. That critical size is way below the size of the big Wall Street Banks. And the reality is, they bank should pre-sell most of an issue anyway. If a bank gets stuck with anything, they miss-priced it.

One the the reason Citibank was in so much trouble is the leveraged loans it made (to get a big fee) and did not re-sell. That is simply bad business.

That whole industry needs a heavy dose of rationality and POPULISM.

Welcome back, Obama, as a reader. Keep reading this blog and adopt more of my populist libertarian ideas.

Word of the Day

"Orotund" - adjective [$10]
Orotund means 1. (of the voice or phrasing) full, round, imposing; 2. (of writing, style, expression) pompous, pretentious.
Sentence: Obama used his orotund rhetorical skills to propose some well-need reforms on bloated banks that have strayed so far from their mission they seem to no longer understand why their privileged positions exist.