Paul Volcker on Charlie Rose
Fascinating, long form discussion between Charlie Rose and Paul Volcker. Yet another example of using television to elucidiate ideas, rather than yelling and bumper sticker foolishness.
Hat tip Paul
Source:
Paul Volcker on Charlie Rose
October 9, 2008 2008
http://www.charlierose.com/guests/paul-volcker
Paul A. Volcker is an American economist, government official, and banker. After working as an under secretary in the Treasury Department (1969-74) and as president of the New York Federal Reserve Bank (1975-79), he was appointed the chairman of the Board of Governors of the Federal Reserve System in 1979. He pursued a restrictive monetary policy to combat inflation but was forced by a stagnant economy and high unemployment to support increased monetary growth during the mid-1980s. Volcker was succeeded as Federal Reserve Board chairman by Alan Greenspan in 1987. He subsequently was successful as an investment banker, retiring in 1996.
In 1999 an official panel he headed that investigated Swiss banks' handling of the accounts of Holocaust victims issued a report that was critical of the banks but did not recommend any changes in a settlement reached in 1998 (see Holocaust). Volcker became chairman of the International Accounting Standards Committee Foundation in 2000 and, in the wake of the Enron bankruptcy, headed (2002) an independent oversight board at Arthur Andersen, the accounting firm that was responsible for auditing Enron. He also chaired (2004-5) the UN's investigation into wrongdoing in the UN oil-for-food program for Iraq. Volcker is the author, with Toyoo Gyohten, of Changing Fortunes: The World's Money and the Threat to American Leadership (1992).
See biography by J. B. Treaster (2004); study by W. Greider (1988).
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Volker believes raising FDIC limits is a "positive" development? Please explain that to me.
By having to raise it now means there is a problem.
Posted by: DontTouchMyChickenSelects | Oct 12, 2008 3:43:47 PM
raising FDIC limits...
you wanna see lines at banks of people wanting to withdraw cash the banks don't have? because we were about one day away from that
Posted by: Bob A | Oct 12, 2008 3:51:38 PM
More chart porn:
US Electoral Maps before and after Great Depression
Posted by: Gary | Oct 12, 2008 3:51:53 PM
I hate when people make this a political/party issue (fault is on BOTH sides) and if you cant see that then you are part of the problem.
Bottom line... politics wont make this problem go away... and raising FDIC limits only highlights the problem. Shame on DC, shame on Volcker for thinking this is a good development.
Posted by: DontTouchMyChickenSelects | Oct 12, 2008 4:00:26 PM
CNN Election tracker
http://www.cnn.com/ELECTION/2008/map/polling/
Add CO, MN, OH, MO and perhaps even NC and you get a blowout win by Obama over McSame.
Posted by: km4 | Oct 12, 2008 4:00:28 PM
If you can't compare today's charts to depression charts and say the market should fall to 33% of it's peak.
Sure there has been unmeasured inflation but we didn't have the stock markets triple over 1 year.
So I think there's a good enough chance that the almost 50% fall to date is enough.
Also, the gov't are going to work hard to f with whomever decides to bet against the market.
Posted by: John Borchers | Oct 12, 2008 4:05:19 PM
@DontTouchMyChickenSelects | Oct 12, 2008 4:00:26 PM
Raising the FDIC limit is a RESPONSE to the problem. It is this response that Volcker views as positive. This is not the same as saying that the problem itself is a positive development. The problem is seen to exist, it is highlighted, a response is made. What are you decrying about this perfectly logical process?
I agree with you that it is silly to cast this mess in terms of partisan politics. But then, partisan politics have seemed pretty silly to me for a long, long time.
Posted by: babycondor | Oct 12, 2008 4:23:46 PM
Screw Volcker, let's get another suckers' rally started: http://cnbcsucks.wordpress.com/2008/10/10/screw-you-volcker-we-got-a-suckas-rally-going-yeehah/
Maybe if we can reflate the stock market temporarily again, we can pretend our economic system works really well and we don't have to elect a black guy President. Yeehah!
Posted by: CNBC Sucks | Oct 12, 2008 4:25:56 PM
"Yet another example of using television to elucidiate ideas, rather than yelling and bumper sticker foolishness."--BR
"another example of using television to elucidiate ideas"
Where art thou BRIPTV ?
The flickering box is one of the most powerful mind control mediums Man has ever conceived. Though, with that, it, too, is like the proverbial Sword.
Just b/c it can be Mass Media, doesn't mean it needs to spell Mass Delusion.
Posted by: Mark E Hoffer | Oct 12, 2008 4:29:45 PM
As you say BR a pleasure to get away from the bumper sticker ranting. Volcker is probably the best fed chairman ever and a voice of sanity in all this. I see the Europeans have announced a joint version of what is essentially the plan the Inglese came up with namely recapitalize, guarantee interbank lending to the end of 2009, provide funds to purchase iffy paper. I'll be surprised if we don't hear the same plan over here by the end of the day with MS being first in line for a capital injection. Who knows what's happening but my experience of the Japanese is they aren't very likely to have to decided to acquire MS over the weekend and there needs to be a solution before markets open tomorrow.
Posted by: John(2) | Oct 12, 2008 4:32:42 PM
chicken,
"I hate when people make this a political/party issue (fault is on BOTH sides)..."
I hate when the American RightWing makes a giant mess, and then they want to say it's "both sides", and people fall for it.
.
Posted by: VJ | Oct 12, 2008 4:38:31 PM
Great exchange from ABC's THIS WEEK, with Will arguing a modified hangout version of Phil Grammism and Krugman actually in touch with reality:
George Will: I come back to the fact that this is psycho-therapy. They're trying to change the world's mood to get the money that's out there ... off the sidelines and back into the game.
Paul Krugman: It's not just psychological. We had a housing bubble, and the end of the housing bubble is eliminating something like $7 trillion or $8 trillion of wealth. That leaves the financial system badly undercapitalized. You don't want to deal with a financial institution where the assets don't clearly exceed the value of the liabilities. These institutions don't have that position. It's not just if we all 'feel better', it's much more than psycho-therapy, they have to have more actual cash, they need more capital..
Posted by: VJ | Oct 12, 2008 4:42:50 PM
Just wondering if anybody can explain this. On Friday when the market was down close to 700 B of A and other banks took a sudden violent turn for positive. At one point, I believe B of A was down 5% and the next thing I knew it was up close to 12 or even 14, that's close to a 20% move. Was that the capital injection that Paulson is talking about? Was the government buying common shares or futures? If that's what it was and if that's the future, it obviously didn't work. But I'm still a bit confused about this new capital injection.
Also, if they're buying shares, that seems to me an extremely risky move. If it doesn't work, they will need to keep buying on the way down, and that is how people go bankrupt.
Posted by: Fenner | Oct 12, 2008 4:59:30 PM
Thank you Barry for posting this video, as you say it is nice to see TV being used for serious informed discussion instead of the typical uneducated and uninformed nonsense being spewed by so many TV talking heads on CNBC such as Charlie Gasparino and Dennis Kneale.
Posted by: JD | Oct 12, 2008 5:06:48 PM
I don't know 'why' for sure. But I do know the VWAP turned positive late in the day.
Posted by: Jay | Oct 12, 2008 5:08:13 PM
VJ | Oct 12, 2008 4:42:50 PM
Does it surprise anyone that the current Joe Alsop of the WAPO, or at least that's what he fancies himself as, is a little distant from reality. I've been reading him for years and he's a talented writer but that's all that's left. In the late 80's and early 90's, his heyday when he was romancing the owner of the WAPO, he had some insightful things to say but over the past eight years he's become progressively more and more detached from reality. I put it down to the need to defend positions that were basically indefensible but that he had to produce some sort of intellectual rationale for. This was necessary so that he and his old lady could continue to receive invites to the White House and other Republican high tables. Once you do this it's a slippery slope and now he's off in Neverland. Krugman as usual stated the reality, even if you don't agree with his politics he gets the magnitude of what's happening.
Posted by: John(2) | Oct 12, 2008 5:17:47 PM
Message for Paul Volker:
Throughout the country, homeless advocacy groups are reporting the most visible rise in homeless encampments in a generation. "The economy is in chaos, we're in an unofficial recession and Americans are worried, from the homeless to the middle class, about their future," Michael Stoops, acting executive director of the CFTH, said in a statement.
The New York City government may soon be forced to resort to the emergency measure taken by authorities in Reno, Nevada, where a tent city has been erected to house those who have tumbled through the widening economic cracks.
Hello Paul. The cracks are getting wider, Paul. No Paul, we haven't forgotten the savings and loan disaster or the South American loan bailout disasters on your watch. We remember the 23% rate on credit cards in 1982. Yeah, we know; you were just trying to help. We'll you didn't. You made it worse. Fiscal sanity isn't protecting business; Fiscal sanity is protecting people. Then people will buy and businesses will prosper. Talk, talk, talk all you want. People like you don't care about increasing poverty. Don't pretend you do.
Posted by: AGG | Oct 12, 2008 5:24:32 PM
In any discussion of a solution, Adam Smith's subclass of dealer must be ruled out of the equation - and Paulson, being a representative force for the dealers, should have no place in the negotiations. He showed his true intent by first considering agent bailout/relief of poor-performing assets - he should be replaced immediately with one who holds the public good above the private.
In the interview with Moyers, George Soros summarized the inherent problem of the credit bubble that is now unwinding.
GEORGE SOROS: "The idea was that by distributing risk, you actually reduce risk. But by separating the principal from the agent, you actually greatly increase the risk."
That, in the proverbial nutshell, tells the entire tale. Risk seperated by agent/dealer from principal. And even the great Adam Smith warned of the self-interest conflict of the subclass of dealers.
The eventual and necessary banks recapitalizations must then penalize shareholders for ignoring risk, and it must not subject public funds to the risk seperation identified by Soros. Any use of public funds must be utilized as a longterm public investment in the individual banks, but that investment risk needs to be hedged by regulatory reform that reconstructs the necessary constraining role played by risk/pricipal.
The goal must be for societal good rather than individual gain, which, no matter how much Ayn Rand is quoted, does not equate to one and the same thing.
Posted by: Winston Munn | Oct 12, 2008 5:39:02 PM
Fenner,
Yes, yes and yes to all your suppositions. As to being bankrupt, it depends on how you define bankrupt. If I have a monopoly of force over you and I owe you money, how exactly are you going to collect? No, our government won't go bankrupt. You might go bankrupt though if you don't get as ar away from this market as you can. What I mean is that the whole crowd in DC is going to get flushed. EVERYTHING they are doing to the market will be reversed in 2009. So the markets will fall even farther. And as to shorts and puts and futures; when nobody is forced to pay you, how are you going to collect?
Posted by: AGG | Oct 12, 2008 5:42:08 PM
An Economy On Thin Ice
By Paul A. Volcker
Sunday, April 10, 2005
Washington Post
...
Yet, under the placid surface, there are disturbing trends: huge imbalances, disequilibria, risks -- call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it.
...
I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change.
Posted by: touche | Oct 12, 2008 6:01:04 PM
A little Irrational Exuberance for Sunday... My vote for next Fed chairman? Ed Asner.. (Or the 'real' Dave Thomas RIP..)
Posted by: Dr. Kenneth Noisewater | Oct 12, 2008 6:21:20 PM
If management and boards of directors had performed their fiduciary duties, we wouldn't be talking about lax regulation.
It's disgraceful the boards allowed their organizations to lever up to 30:1 holding what are essentially unanalyzable securities. That put the entire organization at risk and is a clear breech of fiduciary duty.
Public discourse seems to put so much blame on lax regulation when, IMO, the real culprit is the outrageously lax corporate governance exercised by everyone up and down the chain: borrower, lender and investor.
Posted by: Groty | Oct 12, 2008 6:29:26 PM
@ Fenner: As the close approaches on Friday, everyone who is short starts to worry that shorting will be banned again in our free markets(!), so you have a sharp covering rally. Other traders jump in on the long side and a mini-squeeze develops, then ends abruptly as the day traders take their profits and exit the most profitable yet scary trading market ever seen by man. Nobody wants to be long or short into the weekend. Nothing more complicated than that.
Posted by: leftback | Oct 12, 2008 6:29:57 PM
FYI, I wanted to mention this to warn people: Steve Barry had some data on severe and ongoing problems in the muni market on Friday. Very recently there has been a spate of advisors on TV (Jack Ablin of Harris Private Bank was one) suggesting that people invest in muni and corporate bonds because of "attractive rates".
This is clearly idiocy as we enter an era of rising defaults, state and local budget shortfalls and corporate bankruptcies. The only possible result of this will be rising rates and additional bond issues at higher rates, leading to a serious deterioration of values and dilution of muni bondholders.
Posted by: leftback | Oct 12, 2008 6:41:40 PM
Futures up big as of right now. With the fed saying they will do whatever is necessary, does some of selling(shorting) slow or stop? I went long at the close on Friday, but to be honest, I'm not feeling too safe. What are your opinions on the market action tomorrow?
Posted by: Knapp | Oct 12, 2008 6:59:36 PM
