The Fed's putting pressure on various exchanges to set up a clearinghouse for credit default swaps. That's the "news" this morning. News is in quotes because, first, the exchanges all want to do this, and they have wanted it for months. They need the revenue. Second, we want more than one exchange so there is competition in pricing and we don't want a sweetheart deal by a government so prone to sweetheart deals that I want to vomit every day I come to work. Third, this is a regulatory issue and it should be done by some superbody - but please not the easily lobbied-Commodity Futures Trading Commission, which will make you put no margin down because then the fees will be huge from trading. And please not the Securities and Exchange Commission, which doesn't understand markets and has blessed a world where these are under deep cover.
Frankly, as much as I want a clearinghouse on this stuff, I don't think it is possible with these sets of regulators to get a fair one. They are just too easily lobbied by the bad guys to do the wrong thing.
And who would be the worst at this? Tim Geithner and his merry band of "everything we do is right" Federal Reserve folks. I was listening to the TV Thursday and some host was asking some guest how she thought Federal Reserve Chairman Ben Bernanke was doing. She said "he's done a great job." And I found myself thinking, you have to be kidding, you can't possibly believe that, how could anyone think this guy has done a great job?
Anyway, he and Tim "Mr. Let-Me- Call-the-Media-and-Get-a-Good-Story- About-us-Because-I am-Savvy-and-I- Know-How-They-Care-About-the-Call- Back-and-Will-Praise-US" Geithner" (long and deserving hyphenated nickname) would be without a doubt the worst two to be involved in this credit default swap market because they don't play dirty and don't know how the game works. One of the reasons we are in such a jam is that SEC Chairman Christopher Cox has huge faith in the market and Bernanke has huge faith in the power of debate with people like Dick Fisher, the totally discredited Texas Fed man who was saying that inflation is the issue and it is out of control as the greatest wave of deflation overwhelms us since 1932. Fisher's an arrogant and erudite one-man wrecking crew of this economy.
If the Fed is pressuring for these exchanges then we are really in trouble.
I wonder if they even realize that Oct, 21, the day of the Lehman reckoning when we give the Wall Street gangsters their pay off on their hit jobs on Lehman, will cause the federally owned AIG (NYSE:AIG) write gigantic checks and will also reveal who guaranteed this stuff. It will most likely be lots of institutions the Fed doesn't understand or doesn't know.
Look, here's what should happen: IntercontinentalExchange (NYSE: ICE), NYSE Euronext (NYSE:NYX) and CME Group (NYSE: CME) should compete. The margin rates should go up huge for anyone who wants to buy this stuff and there should be no more written and the market should be shut down and the SEC should only allow insurance when there is an economic interest. It should be regulated by some untainted organization, a national regulator of financial insurance that has powers to recommend criminal cases to Justice because it should be a crime to take insurance on something you have no economic interest in.
The exchanges should only be used temporarily to get rid of the $60 trillion that's out there and retire it all.
Of course, the government won't do this because it is too interventionist. So we may have to wait until these clowns get booted in November.
They simply aren't sophisticated enough to understand how the Wall Street gangsters work so they are always being bamboozled by them.
Fact of life.
Look, you need a mind from the hedge fund industry to run the SEC, someone who has seen it all and knows how the bad guys work.
Without it, all we will be doing is setting up a clearinghouse for hedge funds to vocally take down the next set of banks and brokers. It is too easy to do, the Kesselschlacht plan lives!
At the time of publication, Cramer had no positions in the stocks mentioned.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.
RELATED LINKS:
Preventing the Great Depression II
http://www.thestreet.com/story/10440798/1/cramer-preventing-great-depression-ii.html?puc=aoljjc
The CME Steps Up
http://www.thestreet.com/video/10441212/the-cme-steps-up.html?puc=aoljjc
The exchanges should only be used temporarily to get rid of the $60 trillion that's out there and retire it all.
Of course, the government won't do this because it is too interventionist. So we may have to wait until these clowns get booted in November.
They simply aren't sophisticated enough to understand how the Wall Street gangsters work so they are always being bamboozled by them.
Fact of life.
Look, you need a mind from the hedge fund industry to run the SEC, someone who has seen it all and knows how the bad guys work.
Without it, all we will be doing is setting up a clearinghouse for hedge funds to vocally take down the next set of banks and brokers. It is too easy to do, the Kesselschlacht plan lives!
At the time of publication, Cramer had no positions in the stocks mentioned.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.
RELATED LINKS:
Preventing the Great Depression II
http://www.thestreet.com/story/10440798/1/cramer-preventing-great-depression-ii.html?puc=aoljjc
The CME Steps Up
http://www.thestreet.com/video/10441212/the-cme-steps-up.html?puc=aoljjc
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Reader Comments (Page 1 of 1)
10-17-2008 @ 12:05PM
beachpaul said...
Well, you finally got religion. The truth sets every one free, we, your readers especially.
10-17-2008 @ 5:55PM
RE broker said...
Fair?? Unfortunately the free market capitalists have given up their right to determine what is fair. Their unbridled greed and reckless disregard for the well being of the overall markets have opened the door for the "regulators" to determine what is fair. From one extreme to the other.
10-18-2008 @ 10:40AM
Diane said...
This story is complicated and very hard for the typical investor to understand. I think I understand credit default swaps; they are like insurance policies on risky investments, but they are unregulated (thanks to legislation sponsored by Phil Gramm), and therefore they don't have to have the funds to pay if an investment goes bad. They are a big reason we are in this mess. I think, going forward, they should be made illegal. I think that's what Jim Cramer is saying, but I don't understand who owns these CDS and what will happen when they are bought or sold in a clearinghouse. Can anyone explain this in a way that an average investor can understand?
10-21-2008 @ 4:12PM
sbg42 said...
Nothing much will happen. They will take care of their own. No one wants to admit they either were apart of the problem, or knew there would be one. Just look how quiet Mr can't do no wrong Alan Greenspan has been!!
10-26-2008 @ 7:34PM
EconGuy said...
I agree with Diane that these are very complicated issues that few of us will ever fully grasp. But, the beauty of our Republican Democracy is that we don't need to understand everything as individuals as long as we are able to put our faith in others with specific experience and knowledge in these areas. Of course the big challenge is knowing who to trust and when.
I hope that in the years to come as Americans we can figure out who to trust. Now more than ever we must look the wise leaders with years of experience in the global economy. One example of this kind of person is Steve Forbes. He recently wrote a very informative article that analyzes the causes of our current economic situation and points to the solutions that we must implement.
Read it here:
http://www.forbes.com/hcome/forbes/2008/1110/018.html
11-10-2008 @ 3:55PM
CherAz said...
I understand greed on Wall street & on Main street. I had to laugh at my daughters rental lady back when the housing market was on the cusp of bursting, this hispanic lady had purchased three local homes and used them as rentals. My daughter lived in one in an upscale subdivision and her rent was high dollar. One year later this lady was totally freaking when my daughter told her that she had to move, that rent was "too high" and she could no longer keep up. The woman "cussed her" threatened her, and then begged her to "buy it" All in one telephone conversation! Priceless ~ the hatchet was falling down across the land.