Wednesday, January 21, 2009

Hive

The central conceit of Obama's inauguration and the crisis-wracked program he began to lay out is that given our troubled times, we must put aside difference in favor of "unity" and seek common purpose in collective action. Subsumed beneath an overwrought paean to national character and responsibility is the notion that only through centralization can crises of such magnitude be met and bested. This is precisely the wrong lesson to draw. Each of our current crises, whether imperial overreach or economic calamities, are at root problems of scale. If you really wanted more a more flexible, resilient, and self-sustaining economy, you would seek means to increase regional and local enterprise at the expense of State-subsidized national and transnational corporations; you would notice, for instance, that most small banks are doing just fine, and you'd let Citigroup go belly-up.

10 comments:

ts said...

Most small banks invested heavily in commercial real estate, and shipped many of their mortgage loans off to Freddie, Fannie and Citibank as soon as they were made. They also tend not to leverage themselves 100-1, invest in credit default swaps, or take the lowest tranches of securitizations.

So they haven't gotten creamed yet. But their main assets are residential and commercial real estate and C&I loans, the former is a smoking hole in the ground and the latter two are imploding rapidly. Give them some time. Otherwise your post is spot on.

BrianM said...

Excellent post, Ioz! I remember when the push for centralized bank monstrosities began during the 198os. This push occurred despite the example, to borrow a term from the above poster, the smoking ruins of the Japanese banking system which should have warned our Masters of the Universe that such a system may not be the best idea. But, because the only thing that really mattered was the transaction costs of creating megabanks and all the fees that can be extracted from such M&A activity (as well as CEO salaries, of course), we went ahead and allowed it anyways.

Mr.Fundamental said...

Don't run away from this, Dude!
Goddamnit, this affects all of us!

Our basic freedoms!

Montag said...

IOZ, respectfully... what part of "We will not apologize for our way of life nor will we waver in its defense," didn't you understand?

what you are proposing here sounds an awful lot like the radical physical revision of the entire structure of our civilization." and that shit bird just doesn't have wings.

that said, i agree with this post.

NutellaonToast said...

Hasn't Starbucks taught you ANYTHING? Bigger is ALWAYS better.

Anonymous said...

hasn't STARBUCK from moby dick taught you anything? no matter how decent a guy you are, if you march with ahab, that god-whale's gonna fuck you up.

A Different Matt said...

Umm.. I'm reading a lot of Objects. Without. Attributes. here, so I'm not sure how to reply to this post, but since 2007, 30 banks have failed, with only Wamu and maybe Indymac qualifying as transnational corporations?

http://www.fdic.gov/bank/individual/failed/banklist.html

So like ts said above, little banks are particularly susceptible to the big shitpile, as the big shitpile was only profitable to those collecting interest and transaction fees and the local enterprise packaged off their various financial obligations post-haste, with minimal collections, no? The little banks are just left with bad mortgages engineered by the big banks. And if that's the angle you're looking at, that little banks couldn't engineer this crock, well, see Montag above.

So yeah, if things were different they'd be different. If things weren't the way they are, but the way you say they'll be, then... That's Some Change! To Believe In!

Christopher said...

Here's my angle: The Prez has been pledging to put aside political differences and reach out to the "other side of the aisle" for how long now? When was the last time a politician said "I plan to crush my political opponents like the bugs they are"?

What I'm saying is, Congress and the President have, by their own admission, been putting aside their differences to work for the good of the country for over a decade.

So why do people care that a politician plans to work for the good of the nation and not petty partisanship? It's about as meaningful as a politician explaining that they like puppies.

Crusader AXE said...

All I know for sure is I checked this evening on the way home from work, and the world is not yet perfect. The Obama administration is an abject failure. The world is going to end. We are all doomed. Pass the remote...

Anonymous said...

IOZ, the Small Bank Index is off 37.43% from its highs back in 2007. The current outlook remains glum as the B-Stein ratio continues to ocillate between extremes not seen since Larry Kudlow gave up cocaine.

Furthermore, if we didn't have something that was too big to fail we would be hunter gatherers. Like the Friedman Unit said, "suck on that."