January 28 NYC Event — Whalen on Zombie Banks and The Real Economy: Are the Two Compatible?

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It is a little sad reading today’s comment from Marla about SAC putting the kabosh on the inside trading story by Thompson-Reuters, but not surprising.  Remember that when Clinton Gilbert published The Mirrors of Wall Street in 1933, he did so annonymously. Even with Putnam as the publisher and banksters hanging from lamp posts.

In today’s deflationary environment, with corporate and tax revenues still in a free fall, don’t expect great courage from the fourth estate.  Just look at how the New York Times, WSJ and other media leaders are falling all over themselves not to antagonize large advertisers and especially the large banks.  The age of newspapers as being “special” is going the way of the free subway ride for NYC school children.  Thus Zero Hedge and The IRA.

The sad thing about the rising regulatory scrutiny on
smaller firms like SAC and other hedge funds is that they are merely a
response to bad policy in Washington, from the Congress and the Fed
alike. The large dealers engage in the same type of insider trading
activities every day, yet some how the SEC does not investigate and the Big Media does not report it. 

More, the chronic deficit spending by the
Congress and the monetary policy that enables these deficits actually
increases market volatility.  Buy and hold investors are doomed in our
fiat money system.  This is how I put it to Jim Sterngold from
Bloomberg earlier today when he asked me about re-instituting
Glass-Steagall era restrictions on bank activities:

Some
say take the casino out of the bank, but that is not the answer.  The
Maginot Line along France’s eastern boarder was not effective against
the German blitzkrieg through Belgium to the north.  Instability in the
financial markets stems from runaway fiscal deficits in Washington and
Fed monetary emissions to accommodate same.  Limiting bank activities
is treating the symptom, not the cause.  Hedge funds and OTC
derivatives are the correct business model response by investors to
irresponsible monetary and fiscal policies.  The Fed and the Congress,
and their growing emission of fiat paper dollars, are the cause of
financial markets instability, not any lack of activity limits on banks
or dealers.

So we prosecute Steve Cohen at SAC or Raj
Rajaratnam of Galleon for insider trading, but meanwhile we name Fed
Chairman Ben Bernanke “Man of the Year,” even though he and other
officials of the central bank are stealing billions from the pockets of
every American this year in terms of inflation.  Since the founding of
the Fed, the dollar has lost 95% of its value in terms of consumer
purchasing power.  Think about that as you look into the faces of your
children this holiday season. 

In the name of expanding the public debate, I am giving a talk on the conflict between the Zombie Banks and the Real Economy on January 28th in NYC.  The event is sponsored by NYU and Columbia and will be held in midtown Manhattan.  Below is the abstract for the discussion:

Do banks serve the real economy or does the real economy serve the financial services industry?  In the past, the answer to this question might have been the former and obviously so.  In 2010, the answer is far less clear.  Bank analyst Christopher Whalen will argue that the largest banks, a spendthrift national Congress and a compliant central bank have come together in an “alliance of convenience” that seemingly is willing to sacrifice the real economy to heretofore unthinkable levels of debt and inflation — all this in the name of short-run stability.  Are the rescue of AIG in 2008 and $2 trillion in Fed asset purchases during 2009 indicia of central bank independence or evidence of a completely politicized central bank that is now run amok?  Have the worst fears of Thomas Jefferson, Andrew Jackson, Carter Glass and the other American opponents of a central bank been proven correct?

Information about the event is found here:

http://www.cfe.columbia.edu/seminars/NY_Quantitative_Finance/2009_2010/spring/Christopher_Richard_Jan_28_10/seminar.html

You may RSVP for the event by clicking here:

http://www.cfe.columbia.edu/misc-pages/RSVP-NYQF.html

And be safe and well in 2010.

Best,

Chris

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