10 May 2012

Max Keiser Interviews Chris Whalen on the Banks, And Accounting at Wells Fargo

This is an interesting discussion.  I have enormous respect for Chris Whalen, bearing in mind that he is very much a member of the banking community and this must by its very nature affect his priorities if but a little.

And of course, Max is always Max, and always interesting.  When he shifts his schtick into low gear (pun intended) he is an excellent interviewer. I wonder if Comedy Central could handle his style. He burned out the BBC fairly quickly when he called for bankers to be sent to the guillotine.    Hunter Thompson drives the Shark to Wall Street.  Or perhaps more like Lenny Bruce, for those who remember him, the older crowd like me.

Although I think most of what he says is quite to the point, I don't necessarily agree with Chris when he complains that on one hand that the Fed has not done enough to reform the banks, but on the other hand he suggests the Fed raise rates so that the unreformed banks can make more money on their interest rate carry trades, even if it harms the real economy.

I think a strong enough reform of the banks, the real banks, would help reduce their need for outsized returns, and take them off the Fed feedbag. And Chris alludes to that glancingly later on when he talks about JPM. Max hits that point hard, but Chris just doesn't seem to get it quite yet.  And Chris defers somewhat to Jamie D. but unleashes on Jon Corzine. Corzine won't be buying any rating services anytime soon. 

The Fed interest rate policy is a blunt instrument, and it does definitely penalize savers. But there are other ways to deal with that than by simply raising rates overall to help subsidize the banks, given the extraordinarily weak recovery in the real economy, which at the end of the day is what public policy should be all about.  And of course Chris makes no reference to the intense bank lobbying that helped to weaken Dodd-Frank and the Volcker Rule and make them more complex and less effective.   I seem to recall Yves Smith taking him to task on that, and she was right.

But overall it is good. His opinions on Wells Fargo are rather blunt and could be an eye opener to some.  The American banking system is still a snakepit, and it makes we grind my teeth a bit when the triumphalists on Bloomberg television compare the US 'success' in financial recovery to other nations.

Here is the original source for this excerpt titled provocatively "I Steal Therefore I Am."

Again I apologize for having to direct viewers to Russia Today to obtain this information about the US financial system, but there is a decided lack of frank discussion like this in the American media, except perhaps on Comedy Central and a few isolated outposts on PBS.