Wednesday, December 8, 2010
I’m Saddened By What The Government Did
DECEMBER 8, 2010 BY GEORGE LOVATO JR
I Guess The Government Dodged That Bullet
Well the cat’s out of the bag…the Federal Reserve loaned money to foreign banks. This is not new news. The long and the short of it is that these are different times than in ’08. This was a full blown crisis of epic proportions. As you all know I am a real fan of Chairman Ben Bernanke. I think he is always the smartest guy in the room. If you all recall the United States was being blamed for creating risky junk investments to which we conned the European banks to invest in. I know that is an exaggeration but that was the tone and tenor at the time. Politically I am sure the Chairman was under a mountain of pressure. Well most of the money has been repaid. Whew! I guess the government dodged that bullet.
Carte Blanche Lending to the Loudest Banks?
However I think it would be wise and prudent to analyze history and the events of years past. My first question is how much true analysis went into who, how much, for what reason and the potential of payback of the potential borrowers. Was this carte blanche lending to the loudest banks? I hope not. But the question needs to be asked. What was the criteria? Who made the calls on who got what? We need to know. Now insofar as frequency goes that is another story. Morgan Stanley borrowed over 200 times. You mean to tell me a bank could not project its actual liquidity needs? Jamie…shame on you.
The Golden Pen
Then there is the issue of hedge funds getting assistance. What? Since when did they qualify? I would like to have been the fly on the wall when that decision was made. I feel that was a huge mistake. They are in the risk business. They should have never received the golden pen from the Federal Reserve. I am disappointed in that decision. As you all know I think the automotive industry should have never received the golden pen either. I am on record that it should have been survival of the fittest. We broke a rule of commerce on that one. I am appalled about lending to a British bank that buys the very same assets from a failed American institution we allowed to fail to begin with. We should have saved Lehman! There is the proof in the pudding.
We Must Stay Within Our Own Boundaries
I hope we learn from history. We are bankers and we have to follow our own rules. We must be prudent but forward thinking. We must be aggressive but controlled in order to stimulate and complement the needs of small business. We must be disciplined for all concerned and conduct the business we are educated and trained to conduct. In other words stay within our own boundaries. We must look to the past and learn. We must use those lessons for the benefit of commerce.
I Am Saddened By What The Government Did
The cat is out of the bag and the cat is laughing. I am saddened about what I know now about what our government did. I wish they had not done some of the things they did. I am disappointed in some of the behavior of some of my fellow bankers. In the end we need to follow our own rules of commerce and capitalism and never allow our government to use the golden pen like that again. Are we better off for what was done? We will never know. We can only speculate.