Wednesday, September 15, 2010

Quote Of The Day

Yves Smith making the seemingly obvious observation about our banking system:

[T]he reality is that banks can no longer meaningfully be called private enterprises, yet no one in the media will challenge this fiction. And pointing out in a more direct manner that banks should not be considered capitalist ventures would also penetrate the dubious defenses of their need for lavish pay. Why should government-backed businesses run hedge funds or engage in high risk trading, or for that matter, be permitted to offer lucrative products that are valuable because they allow customers to engage in questionable activities, like regulatory arbitrage? The sort of markets that serve a public purpose should be reasonably efficient and transparent, which implies low margins for intermediaries.

Why Do We Keep Indulging the Fiction That Banks Are Private Enterprises?

Actually, it's not just the press, near as I can tell. They're certainly not willing to discuss the obvious conclusion that an industry that has to be propped up by the government so it doesn't take down the economy when it does something as fabulously stupid as it's done the last couple of decades isn't an industry subject to market forces in any meaningful way. You can add Serious Politicians (and Pundits), Famous Economists, and pretty much anyone else you're likely to see on a TV screen to that list. This is another bit of analysis we seem to be leaving to the Jon Stewarts of the world.

Our major banks are private enterprises to about the same degree that I'm a rabid St. Bernard - as in that's what I call myself, because it's better than some of the alternatives.

Frankly, the best thing we could do with this industry right now is nationalize it, at least in the short term. Either break it up and then let it run as a real market, or make it a government service. Either would be way better than the current system.

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