Pandora's Box - The Repeal of Glass-Steagall

"The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil. Perhaps this is inherent. In a community where the primary concern is making money, one of the necessary rules is to live and let live. To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves. None rebukes them."

John Kenneth Galbraith, The Great Crash of 1929


“As Treasury secretary under Clinton, Rubin was the driving force behind two monstrous deregulatory actions that would be primary causes of last year’s financial crisis: the repeal of the Glass-Steagall Act.. and the deregulation of the derivatives market.”

Matt Taibbi

The crowning achievement of the efficient markets hypothesis, and the culmination of a decades long lobbying effort by the financial sector.   Setting capitalism free to do God's work.

Bubbles, control frauds, financial crises, human misery, and bail outs.

Lest we forget this 'broadly bipartisan effort' to set the predator class free.  And they remain largely unemcumbered, unindicted, and unashamed.

Today I have signed into law S. 900, the Gramm-Leach-Bliley Act of 1999. This historic legislation will modernize our financial services laws, stimulating greater innovation and competition in the financial services industry. America's consumers, communities, and its overall economy should reap the benefits of this Act.

Beginning with introduction of an Administration-sponsored bill in 1997, my Administration has worked vigorously to produce financial services legislation that would not only spur greater competition, but also protect the rights of consumers and guarantee that expanded financial services firms would meet the needs of America's underserved communities. Passage of this legislation by an overwhelming, bipartisan majority of the Congress demonstrates that we have met that goal.

The Gramm-Leach-Bliley Act makes the most important legislative changes to the structure of the U.S. financial system since the 1930s. Financial services firms will be authorized to conduct a wide range of financial activities, allowing them freedom to innovate in the digital age.

The Act succeeds in repealing provisions of the Glass-Steagall Act that, since the Great Depression, have restricted affiliations between banks and securities firms. It also amends the Bank Holding Company Act to remove restrictions on affiliations between banks and insurance companies. Finally, it grants banks significant new authority to conduct most newly 'authorized activities through financial subsidiaries.

Removal of barriers to competition will enhance the stability of our financial services system. Financial services firms will be able to diversify their product offerings and thus their sources of revenue. They will also be better equipped to compete in global financial markets...

William J. Clinton, November 8, 1999

Related: The Long Demise of Glass-Steagall

Gold Daily and Silver Weekly Charts - A Metals Hit For Humphrey-Hawkins

“The real difficulty is with the vast wealth and power in the hands of the few and the unscrupulous who represent or control capital. Hundreds of laws of Congress and the state legislatures are in the interest of these men and against the interests of workingmen. These need to be exposed and repealed...

This is a government of the people, by the people, and for the people no longer. It is a government of corporations, by corporations, and for corporations.”

Rutherford B. Hayes, Diary and Letters of Rutherford Birchard Hayes: Nineteenth President of the United States

Janet Yellen performed her first Humphrey-Hawkins testimony today.  The charade of the moneyed class continues.

Voilà tout.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Yellen Says Alakazam, Wall St Says Alibaba

“The decadent international but individualistic capitalism in the hands of which we found ourselves after the war is not a success. It is not intelligent. It is not beautiful. It is not just. It is not virtuous. And it doesn't deliver the goods.”

John Maynard Keynes


“After the collapse of socialism, capitalism remained without a rival. This unusual situation unleashed its greedy and - above all - its suicidal power. The belief is now that everything, and everyone, is fair game.”

Günter Grass

Speaking of the culture of death, the good news of the day is that Scientists Discover that the Black Death 'Had a Silver Lining'

It also had a positive economic effect, since fewer people were able to enjoy the same amount of goods.

Perhaps we can have another plague, bio-engineered to take out the 47 percent.

What a sick world.

Russell 2000 Small Caps and the Wilshire 5000: In a Stall, Or the Pause That Refreshes the Bull

Bespoke has a recent article pointing out some weakness in the small caps.

It is interesting to see that the broad lower end of the equity market is stalling here, with a negative return year to date. This is what we see in the Russell 2000 small caps index. It has been flirting with this support level for some time, and is testing its 200 DMA once again.

This *could* be distribution, or profit-taking if you will, but absent determined selling on volume, the markets can continue to drift with an upward bias for some time, given the Fed's bubble of liquidity going right to the banks, and thereby to Wall Street.

And we get a broader perspective from the Wilshire 5000, which is effectively flat for the year, and is oscillating round its 50 DMA.

The SP 500 is the locus of market support, some might say propping, and if there is weakness it may first appear in sector specific areas and the broader markets.

But not so yet, even though we are seeing weakness, and the volumes are thin, especially if one discounts HFT antics. 

The market is vulnerable to an exogenous shock, lacking firm underpinnings from the real economy, but absent a shock the vicious cycle of wealth extraction through the printing of money and paper asset inflation seems to be operating quite efficiently for the gangster class.

"We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both."

Louis D. Brandeis

And this aggregation of power and wealth will likely continue until the next financial crisis.  Wealth and power are being steadily transferred, as a matter of de facto policy, from the many to a select few in the rise of a new, transnational oligarchy.

This is the Anglo-American way, which has been widely adopted both at home and abroad, through manipulation, intrusion, intimidation, and intervention.

Gold Daily and Silver Weekly Chart - The Vicious Cycle of Fraud and Corruption

A virtuous cycle and a vicious cycle (also referred to as virtuous circle and vicious circle) are economic terms. They refer to a complex chain of events that reinforces itself through a feedback loop. A virtuous circle has favorable results, while a vicious circle has detrimental results.

Both circles are complexes of events with no tendency towards equilibrium, at least in the short run. Both systems of events have feedback loops in which each iteration of the cycle reinforces the previous one.

These cycles will continue in the direction of their momentum until an external factor intervenes and breaks the cycle.

Rather than a virtuous cycle, which is what was being touted as the new thing on financial TV today, after six long years of stagnation after the financial crisis, I think we are in a vicious cycle. Or perhaps, given the times, a malignant cycle. 

This is because of, and one of the reasons for, the lack of reform in the political and financial systems. The corruption is propagating itself. I am not sure the ruling elite understand what they are doing, or even care. 

The Fed is giving boatloads of low cost money to their well-heeled cronies, who are using it to buy up assets, continue to fund their control frauds, and raise prices on select necessities like housing, medicine, energy and food.

The one percent are having a good time, and live relatively insular lives.  Careerism and the credibility trap keep them and their servants silent on the things that matter.

As confidence fades, force will increase, until something eventually changes.

And the love of many will grow cold.

Have a pleasant evening.

Related: We Are Seeing An All-Out Defense of the Status Quo

"The great danger in today’s world, pervaded as it is by consumerism, is the desolation and anguish born of a complacent yet covetous heart, the feverish pursuit of frivolous pleasures, and a blunted conscience. Whenever our interior life becomes caught up in its own interests and concerns, there is no longer room for others, no place for the poor. God’s voice is no longer heard, the quiet joy of his love is no longer felt, and the desire to do good fades.

This is a very real danger for believers too. Many fall prey to it, and end up resentful, angry and listless. That is no way to live a dignified and fulfilled life; it is not God’s will for us, nor is it the life in the Spirit which has its source in the heart of the risen Christ.

There are Christians whose lives seem like Lent without Easter. I realize of course that joy is not expressed the same way at all times in life, especially at moments of great difficulty. Joy adapts and changes, but it always endures, even as a flicker of light born of our personal certainty that, when everything is said and done, we are infinitely loved.

I understand the grief of people who have to endure great suffering, yet slowly but surely we all have to let the joy of faith slowly revive as a quiet yet firm trust, even amid the greatest distress: “My soul is bereft of peace; I have forgotten what happiness is… But this I call to mind, and therefore I have hope: the steadfast love of the Lord never ceases, his mercies never come to an end; they are new every morning. Great is your faithfulness… It is good that one should wait quietly for the salvation of the Lord.”

Jorge Mario Bergoglio, Francis I, Evangelli Gaudium

SP 500 and NDX Futures Daily Charts - Not Such a Terrific Tuesday - Hello Alibaba

“Our lives begin to end the day we become silent about things that matter.”

Martin Luther King

The usual 'Terrific Tuesday' equity pattern for 2014 did not work out today, as stocks sold off on widespread weakness.

David Einhorn provided some of the more insightful and intelligent comments on the markets today that I have heard from Wall Street in some time. 

The big tickle after hours is the news that the Alibaba IPO is ready to be shoved out the door.  This ought to provide plenty of incentive for the underwriters to prop up the markets, and make hay while the sun shines.   The lipstick is being applied, and the sales pads are open.

The US financial system is a house built on sand. 

Have a pleasant evening.