Confirms what I suspected about the Federal Reserve...

[KaizenSoze]

A now former regulator started recorded meetings with Goldman-Sachs. It's about as bad you would suspect, the regulation roll right over for the bankers.

Here's the Metafilter thread with several interesting links.
http://www.metafilter.com/143076/Sachs-Tapes

How does this tie into this site? Well, if the investment banks blow the economy up again, one of the results could be serious inflation. Or it could be deflation, like Japan. I make no claim of knowing what, if, or even if things will occur.

Either way it wouldn't be good for most people. Though Mustachians are most prepared.

Mostly this just frustrates me.

[Johnez]

Listening to the "This American Life" program.  So far, none of this shocks me.  I'm glad for people like Carmen Segarra.  People who don't "assume the position" and go with the flow are vital for keeping people on their toes.

That Silva, has the spine of a jellyfish.  We need more of this public.  They need to know, that we know, and that we are watching the regulators.

[ragnathor]

I was glad to see this reported as well. Unfortunately it is nothing new and little has changed. There was a well-done documentary called 'Inside Job' narrated by Matt Damon covering the financial crisis. It will most certainly infuriate you even more!

http://en.m.wikipedia.org/wiki/Inside_Job_(2010_film)

[KaizenSoze]

I was glad to see this reported as well. Unfortunately it is nothing new and little has changed. There was a well-done documentary called 'Inside Job' narrated by Matt Damon covering the financial crisis. It will most certainly infuriate you even more!

http://en.m.wikipedia.org/wiki/Inside_Job_(2010_film)

I had seen that a few years ago. I thought at the time the regulators had just been duped or tricked. Now I know they have been rolling over.

I'm sure it sounded something like this in 2007, "We really sussed them up about those CDO."

[wtjbatman]

I'm not into the doom and gloom that I'm seeing spouted in this thread, but I did enjoy The Big Short by Michael Lewis. Great look into what happened in 2008, including what led up to it.

[golden1]

If you really want to get angry, read Griftopia by Matt Taibbi.   

I think it is not a matter of if the markets will blow up, but when.  Nothing fundamentally changed after 2008, so the bubble economy will keep on trucking.   The boom bust cycle will continue.

In the long, long term, I don't think there will be a giant implosion because too many people are invested in the markets (401Ks) and are keeping it afloat.  I think as the demographic picture changes, and more people pull their money out of the markets during retirement, the economy will slowly unwind and the average standard of living for Americans will decrease, especially as we have to care for all the boomers who will be using vast amounts of resources in medical care and entitlements.

[The Money Monk]

If you really want to get angry, read Griftopia by Matt Taibbi.   

I think it is not a matter of if the markets will blow up, but when.  Nothing fundamentally changed after 2008, so the bubble economy will keep on trucking.   The boom bust cycle will continue.

In the long, long term, I don't think there will be a giant implosion because too many people are invested in the markets (401Ks) and are keeping it afloat.  I think as the demographic picture changes, and more people pull their money out of the markets during retirement, the economy will slowly unwind and the average standard of living for Americans will decrease, especially as we have to care for all the boomers who will be using vast amounts of resources in medical care and entitlements.

Yeah we aren't going to see a Mad-max apocalypse. Walmart, exxon, apple; these companies are all most likely still going to be here in 25 years.

The status quo is going to change dramatically though, and there will likely be a lot of upheaval as all the manipulation shakes out of the system. Could get interesting.

[dodojojo]

We're caught between a rock and a hard place.  We can't just stuff our cash under the mattress due to inflation.  And we also need to work our savings in order to have any type of nest egg for our senior years.  Yet, when I hear stories about how little serious oversight is exercised, I fear investing in the market may not be too different than booking a trip to Vegas.

I understand the risks of a competitive market--when it's on the level.  But how do we handle risk when the market isn't on the level?

[mxt0133]

I used to follow ZeroHedge for a while and still agree on most of things that they point out, but it was getting me nowhere.  The whole Federal Reserve being a private institutions owned by the largest banks, the IMF, World Banks, Unholy Trinity, was eye opening.

However, I did not know how to handle information and it was not actionable other than, buy gold, guns, and beans.  It was basically out of my control, I have now adopted a framework where I try to be as self-sufficient as one can be living in a metropolis and act on things that are withing my 'circle of influence'.

I do have another passport just in case.

[unpolloloco]

I listened to that today - and it's a classic example of how toxic culture can result in a completely ineffective organization.  Silva didn't even point out any glaring incompetence or malice in the recordings she made.  It's all just examples of how human organizations often end up in the status quo when you don't have people pushing for exceptionalism from the top.  People at the bottom who try to shake things up a bit get pushed out.  You could probably have the exact same conversations in a stagnant corporate entity as well.  People just doing their jobs by the book and not thinking for themselves.

[Malaysia41]

It makes me nervous when business and government are too cozy.  Bad things happen when they jump in bed together.  Thank goodness for investigative journalism.  Sunlight truly is the best disinfectant.

I often wonder if gov't is so cozy with business because the public thinks they should be.  After all, a significant portion of the constituent base believes that business, by virtue of its incentive system, is trust-worthy and government, by virtue of its bureaucracy, is evil.  E.g. the fundamental ideals of objectivism. 

Sorry, not to get off track into political philosophy.  Personally, I like to take lessons from many political philosophies and not get my panties in a bundle screaming that one is better than others.  I think this story is a good example of why government - especially tough as nails regulators - are needed as a counter-balance to unfettered business. 

[Johnez]

I used to follow ZeroHedge for a while and still agree on most of things that they point out, but it was getting me nowhere.  The whole Federal Reserve being a private institutions owned by the largest banks, the IMF, World Banks, Unholy Trinity, was eye opening.

However, I did not know how to handle information and it was not actionable other than, buy gold, guns, and beans.  It was basically out of my control, I have now adopted a framework where I try to be as self-sufficient as one can be living in a metropolis and act on things that are withing my 'circle of influence'.

I do have another passport just in case.

Same here. I read for years, their info on metals market manipulation was fascinating to follow. There really is nothing to do except becoming self sufficient enough to ride through a SHTF scenario. Being prepared for the tipping point let's me worry about today's problems and things I can act on. Gold is utterly useless though. Find a hundred people in any disaster offering that, they'll laugh. I prefer whiskey.

[scottish]

I vaguely remember back in the late 80's similar problems with "savings and loans" banks in the states.   Somebody (Ronald Reagan?) decided to deregulate them and they got up to all kinds of shenanigans with mortgages.    But back then the federal government would take over a failing bank and fire the management instead of giving them money.   I think they even talked Warren Buffet into running one of these banks for a while.    (IIRC he called it "my year in prison")

It's almost like everyone has forgotten the lessons learned the first time!    Just think how strong the American economy would be if this stuff was regulated in a meaningful way. 

I don't get it.   Are the regulators being bribed to let the bankers do whatever they want?    Do they think it's actually the right thing to do?    Is it a "go along to get along" scenario?

[chasesfish]

I want to point out that "banks" always get lumped together, Goldman + the big 4 (BofA, JPM, Wells, and Citi).  70% of the banking market is controlled by the other 8,000 banks, who are generally rational players in the economy.   The regulators are actively shrinking the big banks currently.

One of the other big issues with financial regulators is they're paid pretty lousy.  Lots of them ultimately get drawn to higher paying private sector jobs.  The lack if parity in compensation either leads regulators to work for the financial institutions and leaves the regulatory agencies with less talent.

It's an interesting delimma. 


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[Malaysia41]

I just listened to the whole thing. 

The Fed management seems defensive and doesn't seem to appreciate the difference between these two top down policies:

1. 'employees are encouraged to voice dissent'
2. 'employees are duty-bound to voice dissent when _fill in criteria here_'

The first places the responsibility for compliance on middle managers, who may not like dissent, or may have zero training in how to encourage constructive dissent in conversation. It also makes voicing dissent seem optional.

The second sets unequivocal expectations.  Voicing dissent is compulsory.

Fed management, judging by their responses to ProPublica questions, seem to think that by continuing with the same policy of, 'encouraging dissent', they're going to get different results. 

Also, you don't just hire new people and think that solves the problem - you TRAIN your workforce to change behavior and comply with new policy.

One of the things that annoyed me in my job was seeing management take single-dimension action and think they'd solved a problem.  In my head I imagined them patting each other on the back and moving on to other business as if they were done.  In the Fed's case, they just brought in new blood.  That was an effective course of action, sure, but it would have been more effective if they'd trained management, trained employees, set clear objectives, and set clear policy.

It was uncomfortable listening to the recordings.  I imagine Elizabeth Warren will have something to say about this piece.

[Duredhel]

My understanding is that it tends to be a revolving door employment culture between the big banks and regulators, so the assigned regulators endeavour to please the financial institutions which they wish to be hired by later (often times in far more lucrative and prestigious compliance/ legal roles). So it is totally conceivable, in a warped and unethical sense, that these regulators would behave this way when the stepping stone that they have taken pains to set up is being threatened.