This is a terrific and very accessible interview with Boston College professor Ed Kane, who is a long-standing critic of the failure to rein in financial firms that feed at the taxpayer trough. At one point in the talk, Kane and his interviewer Marshall Auerback discuss how casinos are well aware of the fact that the house can lose and they monitor gamblers intensively to make sure that no one is engaging is sleight of hand. Thus if we treated our banking system like the financial casino that it has become, we’d be much better off than we are now.
I hope you’ll send this video to people who wonder what if anything happened with financial regulatory reform. They’ll get some answers, even if they are ones they might not have wanted to hear.
Kane describes how little regulation has changed things: banks are still in the business of dumping tail risk on the public, and the changes in some rules and procedures haven’t changed their basic incentives. Provocatively, Kane calls for prosecuting a bank holding company as a way to force a dismemberment/downsizing, as well as pour décourager les autres. He also discusses how regulatory changes will shift activity to London, but the US will still wind up bailing out the messes that result.
…’casinos are well aware of the fact that the house can lose and they monitor gamblers intensively to make sure that no one is engaging is sleight of hand.’
That’s not a proper comparison with what happens at banks. Banks are not worried of theft from customers, its the banks that are stealing.
True, casinos could rig their games such that customers lose their money faster, but this is both counterproductive and unnecessary. Customers at casinos eventually lose all their money, anyway…
I think it is more a case of the overall economy being compared to a casino, and the banks are the gamblers doing card counting and similar to beat the house (public).
…the Las Vegas casinos monitor for gambling “shysters” because the table game odds can be disrupted by smart or scheming players; the one-arm bandits, not so much. Casinos, like banks, don’t like losses and do everything possible to make you feel good while you’re losing (just like banks). But casinos don’t need banks; they build those giant Fantasy Islands with cash (the day’s winnings).
You clearly didn’t watch the video. I’d suggest you do that before casting aspersions.
Auerback and Kane were saying the regulators needed to monitor banks the way casinos oversee gamblers.
Yeah, but the mob oversees the casinos, while congress oversees the regulators.
You would have a tough row to hoe to convince me that congress is more honorable than the mob….
“He also said that “credulous” people believed bankers were responsible for the financial meltdown.”
Just to remind dear readers this guy (big farmer) is a notorious Redmondite who once again asks people to fling themselves at machine gun nests for something or other.
The function of the modern economy is to serve bankers credit and the machines they produce en masse for no end use whatsoever.
The economies function is therefore not to service human demand period.
It seems the Guild navigators merely want to live in their bubble and much like Garbo they simply vant to be alone.
Ha! If only people were as thorough in their distrust of corrupt financiers as our ancestors were in their distrust of alleged witches! I haven’t read about any bankers who’ve been burned at the stake, or drowned or crushed to death during interrogation. Perhaps we need a new edition of the Malleus Maleficarum that focuses on bankers rather than on witches.
The conversation above is essentially between 2 bankers ( lets call them the nice bankers)
They essentially want to create more laws , codes and boxes.
But the essential problem is how purchasing power is spent under the current trade system – until this is changed finding increasinly complex methods to stop the pigeon will of course not work – it can never work.
CH Douglas speaking in 1942.
Exchange or Distribution
Question.—Is the correct object of the monetary system to facilitate the interchange of goods and
Answer.—The modern productive system does not primarily involve interchange of goods and
services. The fundamental factor in production is power-driven machinery, and you cannot
exchange services between power-driven machinery. That is why it is incorrect to say that money
is, primarily, a medium of exchange. Money is primarily a demand system, so that the individual
can demand from the productive system those things which he does himself contribute to it.
The Object of Industry
Question.—Would Social Credit increase employment at first?
Answer.—Yes—although of course, it is not our objective to provide employment—I think that
for a short time probably there would be increased employment.
What certainly would happen quickly would be a complete difference of emphasis on what is
produced. Without going into technicalities, I want to stress this point. We are often told that it is
obviously absurd to say that the financial system does not distribute sufficient purchasing power
to buy the goods that are for sale. We never said it! What we do say is that, under the present
monetary system, in order to have sufficient purchasing power to distribute goods for
consumption, it is necessary to make a disproportionate amount of capital goods and goods for
Sweden is held up as a wonderful example of how well the monetary system can work. Sweden
is producing about three times as much as she is actually consuming, but owing to vagaries of
exchange she is able to export the remaining two-thirds. She has to take three times as much
trouble as is really necessary in order to make the monetary system work
Bankers stopping the pigeon…………and getting a cut on the side.
Muttley is a bad bad dog / banker but is not responsible for building the system.
Those bankers reside at the very top of the command system.
The best remark of the interview came from MA. “With 10% unemployment you get Dodd-Frank, with 25% unemployment you get Glass- Steagall.” That explains it perfectly.
“With 10% unemployment you get Dodd-Frank, with 25% unemployment you get Glass- Steagall.”
And with lies, you get 10% unemployment. Real unemployment was and still is much higher, as even a few economists have pointed out.
Maybe banks need to be given a choice: stop playing games or become nationalized.
>“Maybe banks need to be given a choice: stop playing games or become nationalized.”
You didn’t know that they are making “expropriation” as they call it, and any other regulation- anything else of that nature, forever impossible now? They are 10 years ahead of you.
The US (or any other country) is giving away the power to do that forever, in free trade agreements like TiSA, TPP, TTIP, etc.
After each of the existing, and/or pending FTAs has been, or will be signed, countries, including our own, lose more rights in more situations. Because of the way they work, the taxpayers in nations now have to pay huge compensation if we attempt to regulate multinationals in any way that adversely effects their profits. The free trade agreements are changing everything, forever. (corporations need stability, they say)
The banks will be on top, not the countries. They are just pretending, for appearances sake.
As long as they follow the agreements. Of course, any sovereign nation can throw them out – but as Argentina is learning, they have to make sure they don’t have funds in New York.
What if the US is the nation that throws out the agreements? No one can say them nay.
They are indeed going for all the marbles – however, they are destabilizing the sovereign suite of institutional structures that still produce the range and depth of citizens required to make the whole thing run, without providing any functioning alternative. It would be interesting to see a detailed poll or survey of the 100 most powerful financial/corporate people on the planet to see how many of them know they’ve opened Pandora’s Box by so aggressively pursuing corporate globalization’s flight from any form of responsibility or accountability.
“The best remark of the interview came from MA. “With 10% unemployment you get Dodd-Frank, with 25% unemployment you get Glass- Steagall.”
“And with lies, you get 10% unemployment. Real unemployment was and still is much higher, as even a few economists have pointed out.”
Sounds like we’d have better social and economic reform if only we didn’t have those generous welfare benefits that keep the underclasses compliant. ;) Just playing devils advocate
Avoiding social and economic reform is the whole idea. As Richard Nixon figured out decades ago, welfare is cheaper.
If welfare benefits were actually generous, and universal (guaranteed basic income), that would BE social and economic reform. Expanded and improved Medicare for All would BE social and economic reform. Social security indexed to inflation would BE social and economic reform.
These things cannot possibly be impeding social and economic reform because we DO NOT HAVE THEM. Sheesh!
I was thinking of welfare in terms of providing benefits to people who for various reasons can’t participate in the regular economy. Reform would be eliminating the reasons (poverty, poor education, lack of jobs) that make it so many people can’t participate in the regular economy. Things that happen as part of the normal course of life (child rearing, retirement, illness) should also be (as you say) handled as part of the regular economy, which I would not consider “welfare”. But changing the regular economy is a lot more difficult (and expensive for the wealthy) than just sending people checks.
That, “banking is theft,” has been known for thousands of years. The great crime of this era is how all the administrators/regulators stand by and allow this to take place, unable even to sacrifice a tiny bit in order to help out their children, or theirs.
The lack of moral leadership among the professional class in this country is simply appalling. What cowards ply the freeways in their large German luxury sedans, with tinted windows barely masking faces full of malfeasance, guilt, and utter impotence to quell the drive to take what is not theirs to satisfy the unending void that is success at any price.
I can agree that the lack of moral and professional integrity is at an all-time low. But it infects everyone, in different ways. It infected Jay Bybee and David Barron (lawyers?) that were rewarded for their lack of integrity with LIFETIME federal judgeships. (Ignoring, of course, John Yoo.) It infects the secret FISA court judges. It infects Army psychiatrists (doctors?) as they abet torture. It infects our police, politicians, and priests. And you can bet in an American culture that despises the “other”, it infects your neighbor.
Only the future will see the arc of our choices; and I doubt it will be grand.
The banksters were cast out of the kingdom back in the days of Christ. One would think the masses would have learned something.
The wide embrace of globalization. It once was that you went into a casino and played 21 with only one deck of cards. It has long since been different. When I was 21 I had a good memory and thought I could win a little every month at the 21 table. But I soon realized I was in over my head when at least 4 players sat at the table with me and we all had to remember cards from a stack of 3 decks. That’s a lot of permutations. 12 aces in 42 combinations. Sounds a lot like derivatives to me. And who’s to blame when chance is the only regulator?
Thank you for the very enlightening video interview of Edward Kane. Although such measures as large civil settlements and the Fed’s response to the banks’ most recent stress test reports are helpful, I agree with Edward Kane that they are in themselves insufficient as a deterrent to criminal behavior. Regardless of whether bank executives who engage in criminal fraud or other reckless or criminal behavior continue to be legally untouchable, I support Edward Kane’s suggestion that the Roberts Supreme Court’s position regarding corporate personhood be used as an avenue to prosecute large financial institutions for criminal behavior by their employees and to dismantle them as convicted felons. In this regard I was struck by the number of subsidiaries and off-balance-sheet entities at one of the nation’s largest banks cited by Senator Warren during Fed Chair Yellen’s recent testimony to the Senate Finance Committee.
I would also appreciate more input regarding systemic risks presented by the shadow banking system, including:
Large insurance companies,
Large corporations, especially those with finance subsidiaries,
Large hedge funds,
Large Private Equity firms,
Mutual Funds and ETFs,
Other systemically important swap/derivatives counter-parties
Many firms and entities in the above categories received either taxpayer subsidies under TARP or have benefitted from indirect subsidies from the Fed.
“Although such measures as large civil settlements and the Fed’s response to the banks’ most recent stress test reports are helpful, I agree with Edward Kane that they are in themselves insufficient as a deterrent to criminal behavior.”
Actually, I thought Edward Kane called the above measures “counterfeit” responses, and as such, not helpful at all.
“Regardless of whether bank executives who engage in criminal fraud or other reckless or criminal behavior continue to be legally untouchable, I support Edward Kane’s suggestion that the Roberts Supreme Court’s position regarding corporate personhood be used as an avenue to prosecute large financial institutions for criminal behavior by their employees and to dismantle them as convicted felons.”
I concur re: corporate personhood, although there is no reason that both avenues should not be followed: prosecute individual criminal scum-bags AND corporate scum-bag persons. Why think small?
The great tragedy of the Levy Institute/MMT/Boston College intellectual network is that the institutionalization of a new regulatory management regime is no longer a solution to our collective problems.
That Auerback and Kane are reduced to hoping that the next great financial crisis might allow for the fulfillment of better regulations for Big Finance– when the reality appears to be that Big State and Big Capital will only continue to shelter rather than regulate.
To me, this means that this network must rally its considerable brain-power to develop strategies for political leverage in an emerging police-state.
The days of gentlemen’s agreements are over because the gentlemen of Big Capital, Big Bank and Big State are coming after us.
First time I’ve seen Auerback rather than read him, and find him an engaging interviewer, and this a good interview so far as it goes. Aside from being unable to abide by the notion that the Fed has been trying to do good anytime this century, I agree with Jim and a couple others that the scale of this crisis is a mismatch for the corrupt and degraded political process and revolving-door senior bureaucracy, including the Judiciary, within which it is somehow to be addressed. I also wonder whether the ‘person’ idea, if taken so far as proposed by good intent could not by bad be turned into a justification for the ‘defendant’ to kill in ‘self-defense’.