Host 1: Welcome to another exciting episode of “Bankers Gone Wild”. Today we are going to follow the wild hijinks of J.P. and her two banking buddies Morgan and Jamie as they party in the exotic Derivative Islands.
Host 2: Yes, the Derivatives are a dangerous, yet exciting, place for wild bankers to frolic. There are shark infested waters and many places for naughty financiers to get into trouble.
Host 1: Looks like the girls are getting very drunk on a combination of cheap money and greed.
Host 2: Wow, that’s a lot of loose cash. I just hope they are able to control it!
Host 1: Oh no! They’ve started buying! Whoa, look at them buy. It’s like they are just buying anything. Buy, Buy, Buy!
Host 2: Those girls are really moving that cash! They are awesome! They are totally out of control!
Host 1: Oh no! They have started to really lose it.
Host 2: Yeah, they are really wasted. Isn’t it great?
Host 1: No, I mean the cash. They are losing it. They are wasting it big time. This often happens when investing in the Derivatives.
Host 2: Wow, they are losing every time! Lose, lose, lose. Those loses are really racking up!
Host 1: They’ve just blown through a billion dollars! Maybe we should say something.
Host 2: Girls, you’ve lost a lot. Maybe you should slow down a bit.
Host 1: Oh no! They don’t care. Now their flashing us their assets!
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Host 2: Hey, they’re right back at it.
Host 1: Look at all that cash. It’s flowing right down that rat hole! Lucky rats!
Host 2: Here we go again. Lose, lose, lose!
Host 1: These bankers have gone super wild!
Host 2: Look, they just blew through their second billion and now they are lying exhausted on the beach.
Host 1: Hey, girls. You just lost two billion dollars in the Derivatives. Aren’t you even a little embarrassed? What do you have to say for yourselves?
Host 2: What’s that? You say it doesn’t matter because you still have plenty of cash. Oh great, here we go again. Now they are flashing us their balance sheets! Look at that bottom line! Look at those TIPS! (Treasury Inflation-Protected Securities)
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The simple solution is to revert back to how the banks were structured in the past. Banking operations were separate from investment firms. This set-up worked fine until it was changed and it has not worked well ever since.
Making this change would:
1. Reduce the size of the major banks in a logical, non-disruptive, way. To reduce the size of the banks in other ways would require wise government choices and that of course is an oxymoron.
2. Really eliminate “too big to fail”. First, the banks would naturally be much smaller. Second, and more importantly, the banks would not be able to make the risky investments that could cause them to fail. The banks would again be safer and depositors could be confident that their banks would not take major risks with their money.
3. Allow the investment firms to invest in whatever risky investments they choose with the money they are able to receive from investors (their customers). Investors would be well aware of the risks. If the firms make bad investments, they lose all their money and go bankrupt. No government bailouts, no congressional meetings, no hand wringing, just turn out the lights and close up shop. This is the way it is supposed to work.
This would be so simple but the Democrats don’t understand the financial markets so they are intent in punishing the banks. And the Republicans understand the financial markets too well and want to write the rules with enough loopholes so that nothing really changes.
The French Connection
Those stupid Frenchmen. They are in the middle of an economic crisis and they just elected a socialist to lead them out of it! Who do they think they are, California? Ha Ha Ha Ha Ha! That is just totally ridiculous. A socialist! How dumb. The only thing worse than electing a socialist in that situation, would be to reelect a socialist during a time of economic calamity. That would be insanely idiotic. Bwahaha, Bwahaha, Bwahaha, hey wait a minute …..