This week, the Obama Administration and Wall Street successfully negotiated exactly how much it will cost to restore a warm and fuzzy feeling to the domestic economy: $75 billion. (That includes the cost to ship a rainbow-colored unicorn to every American household!)
The stress tests were a nice exercise meant to make everyone — especially in Treasury and bank executive offices — feel good about themselves. I can only say, “bullshit, ” so I will augment with Krugman’s summary:
I won’t weigh in on the debate over the quality of the stress tests themselves, except to repeat what many observers have noted: the regulators didn’t have the resources to make a really careful assessment of the banks’ assets, and in any case they allowed the banks to bargain over what the results would say. A rigorous audit it wasn’t.
As usual, I strongly recommend reading Krugman’s column today. He’s honest: Maybe the economy will recover with the administration’s tepid response to the banking industry’s woes. Of course, if it doesn’t …
What is most interesting about the piece, though, is what Krugman mentions at the end:
Does anyone remember the case of H. Rodgin Cohen, a prominent New York lawyer whom The Times has described as a “Wall Street éminence grise”? He briefly made the news in March when he reportedly withdrew his name after being considered a top pick for deputy Treasury secretary.
Well, earlier this week, Mr. Cohen told an audience that the future of Wall Street won’t be very different from its recent past, declaring, “I am far from convinced there was something inherently wrong with the system.”
I remember learning about Cohen from Andrew Leonard (his link):
H. Rodgin Cohen, a prominent banking industry lawyer, has “withdrawn from consideration” for the post of Deputy Treasury Secretary.
Cohen isn’t just a prominent banking lawyer — he is the banking lawyer, the chairman of Sullivan & Cromwell, a law firm entangled with every major player on Wall Street. As a Wall Street Journal profile noted last October, “Over the past five weeks alone, Mr. Cohen and his team have advised Fannie Mae, Lehman Brothers Holdings Inc., Wachovia, Barclays PLC, American International Group Inc., J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. in a blitz of mergers, rescues and cash infusions.”
Not only does he know the landscape, he helped create the landscape.
The people boasting the most familiarity with the complexities of the financial system are also the most implicated in its excesses and failures. A person like H. Rodgin Cohen might be both the first person we need and the last.
How nice that someone like Cohen believes the market is as sound and as involatile and as self-correcting as it ever was.
The event at which Cohen was speaking was sponsored by Bloomberg. Cohen was joined by Carlyle Group cofounder, David Rubenstein (Remember when Carlyle’s hedge fund collapsed?) and Gary Parr (Lazard, LTD. Deputy Chairman) who said:
There’s a good chance there are five to seven or eight global institutions, of which three or four will be clear winners and then some others will be good, doing full-service banking and securities business sort of as we knew it five years ago. … with a lot lower return on equity and a lot lower risk profile.
Commenting on the effect repealing Glass-Steagall might have had on the crisis, Parr added:
Some people say, did all of this arise due to the elimination of Glass-Steagall and we should put Glass-Steagall back into place … I’ve observed that that had little or nothing to do with this crisis.
Well, alrighty, then.
The problem is, and this goes wayyyyy beyond my singling out Goldman Sachs at the top of the heap, with the half-billion dollars the financial sector is willing to pump into Washington during a presidential election cycle (and the quarter-billion during mid-terms), Cohen and Parr are likely right on the money.
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O.K., bbs, this is the only new post for today. ACG and I are each on special, top-secret missions; though, ACG’s is decidely much more specialer and top-secreter.
If you are short on entertainment, might I recommend visiting ACG’s March post on crazy Orly Taitz’s birther saga. This week some vigilant voices from that end of the spectrum resurrected the comment thread, and it is worth a few laughs. (Happily, too, there are a few rays of blessed sanity from terrific commenters. To them, we say, THANKS!)