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Paul Volcker Tells Wall Street, “Wake Up, Gentlemen”

Posted by Larry Doyle on December 14, 2009 9:44 AM |

While those on Wall Street and Washington pretend to listen to the needs and concerns of middle America, they have been shown to be ineffective time and time again in developing and implementing sound financial practices and regulations. America is increasingly aware of just how deeply embedded and incestuous the Wall Street-Washington relationship has become. Who within this Wall Street-Washington circle “gets it?” Paul Volcker.

Volcker called out our financial and political operatives a few months back in calling for an effective reinstitution of Glass-Steagall to separate commercial and investment banking activities. I highlighted that call by writing, “Volcker Launches Bombshell on Wall Street and Washington.”

Although Wall Street and Washington may pretend not to hear Volcker’s shots across the bow, they do so at their own peril. Why? America listens and hears Volcker loud and clear.

What is Volcker saying now? Volcker spared nobody in the course of a recent tongue lashing of the financial establishment. Volcker bellowed, “Wake up, gentlemen, ” in a recent Wall Street Journal sponsored financial symposium. The WSJ highlights Volcker’s alarm this morning in writing, Paul Volcker: Think More Boldly:

Does financial innovation contribute to economic growth?

That became a hot debate at the Future of Finance Initiative after former Federal Reserve Board Chairman Paul Volcker chastised the largely private-sector group for the timidity of its proposals, and said the ATM was the only financial innovation he can think of that has improved society.

What about the boards charged with overseeing these financial behemoths? Volcker weighs in:

You want boards of directors to be informed about all of these innovative new products and to understand them, but I do not know what boards of directors you are talking about. I have been on boards of directors, and the chance that they are going to understand these products that you are dishing out, or that you are going to want to explain it to them, quite frankly, is nil.

How about Wall Street leadership and compensation? Volcker pulls no punches in drilling those charged with running our banks. He offers:

If it is really true that financial weaknesses brought us to the brink of a great depression that would have ended your livelihood and destroyed a lot of the global economy, then let me explain.

You concluded with financial-services executives showing cultural sensitivity and responsible leadership. Well, I have been around the financial markets for 60 years, and how many responsible financial leaders have we heard speaking against the huge compensation practices?

America hears Volcker loud and clear. Those in Washington and Wall Street may want to adjust their hearing aids so they too can pick up on Volcker’s warning, appreciate his wisdom, and take real action.

Will they?

LD

  • Randy Bowman

    Their responses will be weak at best and little more than posturing as they work diligently to make end-runs around any new legislation or restrictions before they are even put in place.

    They are far more likely to simply ignore his call to action, much as the Climategate scandal on global warming has been ignored, in hopes that the American people were simply not paying attention and that they can thus keep to their agenda of fleecing the system.

    Meanwhile government shall continue every effort to grow and expand its control further over the populace, while at the same time stealing our wealth and only pretending to institute viable and enforceable financial controls on their Wall St. brethern.

    Volcker’s continued calls to action are likely to get little traction in the national media either. The national media has become near useless owing to their slavish devotion to their corporate advertisers and to the current Administration and they will continue to either bend the truth to favor them or completely ignore reporting the truth altogether, hoping their coverage of Tiger Woods, Sarah Palin and other such petty nonsense will fill the void.

    Unless and until we get corporate lobbyists and big money out of our government, it will all simply proceed downhill from here until the American public has finally had more than a bellyful and takes some spirited action at the polls and elsewhere, demanding an immediate return to acting on behalf of the people and not special interests.

    Great empires are most often conquered not by outsiders but more often by the internal unbridled greed for money and power by those who have gained legislative and monetary control over the populace. I’d venture to say we are a good deal more than half way to our own un-doing at this juncture and the “change” that was promised by this Administration may end up being just those few remaining tinkling coins left in our collective pockets once they are done with us.

  • Larry Doyle

    Randy,

    Your points and delivery are superb. Thanks for addressing these issues so strongly.

    I discussed these points on my radio show last evening with my guest Bruce Judson. Bruce’s major premise in his work is that the death of the middle class in any society portends the decline and death of that society as a whole.

    Are we witnessing that decline in America currently? Plenty of evidence indicates we are.

  • kbdabear

    Take a look at Great Britain, of whom it could once be rightly said “the sun never sets on the British Empire”. They are our canary in the coal mine, and the time gap between the death of the canary and our own is closing fast.

  • kbdabear

    The powerful protect each other. It’s said that imminent death focuses the mind wonderfully, but there is no real fear in Washington or Wall Street. While a congressman or senator may take a power hit by losing re-election, there is a golden parachute awaiting them in the form of appointments, lobbying, consulting, or as an analyst on the cable networks. Money is the mothers milk of politics, and the politicians always know where the milk comes from.

  • TeakWoodKite

    America is stuggling under the wieght of her own collective apathy. Until the citizens of this country understand plainly that a POTUS that talks of “Fat Cats” while not acknowledging that it was they who brought ’em to this party, does nothing to further “corporate responsibility”. (remember GW’s speech on that? Phewy!) I can not agree more with Randy’s insightful comment.

    I have always been fasinated how it is that “corporations” have equal standing in our laws as a person, yet are shielded for “personal” acts of the individuals representing the “concern”.
    How can any integerity or honesty be nurtured without a sense of responsibilty.
    Papa was a rolling stone and so is this economic reality I am in.

  • Mike

    Insightful article and comments.

    I always stood by the notion that change will occur once the mass public starts caring, and that won’t happen until they start understanding exactly what is happening to them. When I must decide between CNN, Fox News or MSNBC it’s basically like picking my own poison… all riddled with misinformation, irrelevance, corporate biases and evasion of the topics which will limit their revenues. Thank goodness for the internet.

    My biggest fear is that there will not be enough public involvement and interest of regulatory change until it is too late.. like in the middle of a hyper-inflationary environment where a movie ticket costs $120. It’s a shame that people like Volcker who attempt to expose some truth on the system’s fallacies are shoved aside. I hope I get to see the day when those in power are loyal to the welfare of it’s people rather than the almighty dollar, but has that ever been so?

  • Randy Bowman

    Mike.. you hit upon what is IMHO an extremely key point for the near future in your mention of the Internet and I would like to take a minute or two to address that as I feel it is paramount to every discussion had here on this site as well as others.

    The Internet, personal computers and cellphones have created national and international communication networks that are slowly but surely giving potential power back to the people instead of the government. It is giving us the ability to unite all across this land and to be heard as one very loud and very concerned voice.

    The government and its big corporate brethern already have control of the national airwaves and publishing entities..and they won’t long stand for such power being disseminated back to the people through the Internet and mobile communication devices unless we, the people, begin doing something to demand legal protections to prohibit the government from restricting access and/or filtering content.

    I am neither an Orwellian fanatic nor a conspiracy theorist. But, I am a realist who sees a government out of control and continuing to grow as it chews up both current and future tax dollars at an ever escalating rate.

    I assure you that the powers that be shall spare no expense in using our own tax dollars against us in steadily working toward stemming the tide of that transfer of power to the people. It is not only in their best interest to move against the Internet in some form or fashion, it is absolutely essential to the longer term survival of the present governmental status quo of corruption and business as usual.

    It will all start, as usual, in the name of protecting the American public and our children from Internet crimes and child pornography on the Internet (I mean who wouldn’t vote to accept protections against those?) and will later evolve into areas we never envisioned, eventually restricting the only access we have left to unite as one, to speak out across this land with one voice and to inform enough average Americans to what is really going on, so that we can make a meaningful difference.

    Those of us who still have a particular fondness for the freedoms we think are afforded us by our Constitution might well ask “Come on stop the fear mongering, how could such a thing ever happen here in the U.S.?” Well, lest we forget, the Constitution is constantly being “re-interpreted” by our government and the courts every time they feel a need to do so. Is it really such a stretch to believe the process to control and filter the Internet is already underway? You might note that there is even an Internet article today regarding the Australian government’s intention to begin filtering Internet content.

    If, on the other hand, you don’t feel our freedoms are slowly but surely being frittered away and that the gigantic and growing morass of debt we are under won’t slowly but steadily unravel our economic futures, then feel free to dismiss my comments as little more than the feeble ramblings of some old codger who spent almost 25 years as a banker and is thus probably too jaded to give proper thanks to the government and the big corporate lobbies and special interests for the wonderful life-enhancing positives headed our way in the near future from all their efforts on our behalf.

    Perhaps I have it all wrong and just need to hear better informed opinions to get me out of this funk.

    What sayest thou?

    • Mike

      Wouldn’t be surprised at all.

      It seems that the formula is essentially:
      1. Create fear (Often using “our children” as a lead emotion driver.)
      2. Over exaggerate the possibilities of no action
      3. Create proper legislation which fills goals of government agenda.

      Whether it’s getting us into war, creating Patriot Acts, criminalizing marijuana, Cap + Trade, ridiculous tax expenditures, bailing out banks, Health care reform, limiting the internet.. We’ll stop at nothing until the pockets of all but the top 1% have been thoroughly raped and pillaged. I think China already filters their internet content.

      I’d like to describe myself as a realist as well, but a tad more paranoid than most.






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