Jorge Nascimento Rodrigues is the Executive Editor of the Portuguese and Brazilian Management Review. Since 1983, he has been a contributor to the Economic section of EXPRESSO weekly newspaper in Lisbon, Portugal, writing about Economics, Geopolitics and Technology. His most recent book is Pioneers of Globalization:
The following interview with our Chief Political Economist, Dr David Caploe, will appear next week, at which time we will give you a link to the site on which it can be found.
1 Do you think the Volcker Plan is appropriate to reform the financial system and the financialization risky trend from the 1970s and the 1980s?
While I don't think the Volcker Plan is particularly bad from an economic point of view --
all it does is re-instate the division between commercial banking, which is relatively safe and boring and can legitimately receive deposit banking insurance from the Federal government ...
and investment banking, which is much more speculative, and should NOT receive insurance from the government --
it's yet another example of, as we say in the US, "closing the barn door after the horse has already run out":
that is, it is simply not adequate to the issues the US and global financial systems currently confront.
And from a political point of view, it's, as we also say, DOA -- dead on arrival. No one in Congress is taking it very seriously.
2 Isn’t it too late? Or it’s the right time now to enforce limitations to the fat cats?
As my previous answer indicated, Jorge, it's WAY too late.
There certainly needs to be both regulatory reform and -- just as importantly -- actual enforcement of regulations that already, and may soon, exist.
But the Volcker Plan is just not relevant to either the immediate problems -- above all, absolute transparency for ALL derivatives transactions, although, again, it's also way too late for that as well --
or the overarching ideological and ethical breakdown that began in the Reagan era and reached its unfortunate apotheosis during the nightmare years of Cheney / Bush.
3 It seems Volcker wants to return to some of the discipline rules of the Glass-Stegall Act of FDR times that were revised in the 1990s giving full speed to the financial innovations in leverage, high speed trading, derivatives, etc. This shift in legislation, if passed in the Senate and Congress, will bring a soundfinancial system in the US?
It's precisely the return of Glass-Stegall, which the Democrats stupidly revoked when Clinton was in charge, under the direction of the "destructor-
former head of Goldman Sachs, then head of Citigroup, where he did such an excellent job of helping run it into the ground --
and his loyal henchman, Larry Summers -- now head of the National Economic Council -- and HIS henchman, now Treasury Secretary, Tim Geithner.
But as you note, it does nothing to deal with the serious issues that were raised by the "under cover of night" revocation of any sort of regulation of derivatives in the waning days of the Clinton administration,
which are the real problems today, and which Volcker simply doesn't deal with in any way.
4 Financial people react saying that this movement from the Administration will provoke a double dip in the stock markets and probably an economic double dip. Seems possible? Or it’s a pure political forcing from the financialization ecosystem?
Not to speak too broadly, but financial people almost always argue that ANY kind of regulation is going to "shake investor confidence" and create problems in the markets, and, hence the real economy.
How they have the nerve to say things like this after the absolute mess they created in the US -- and, because the US is the center of the world political economy, global -- economies is absolutely beyond me.
The "lending freeze" is a conscious effort of the Too Big To Fail banks and insurance companies to hold the political system hostage via blackmail and extortion:
until you assure us that you, the government / taxpayers, are going to cover ALL our losses --
and remember, those from both derivatives AND unsecured credit cards have yet to explode, although the Greek crisis is giving us a small taste of the former --
while we retain the profits, we're not going to lend anybody anything, no matter how low the interest rate may be.
5 Is there a risk of a overlap of this financial reform impacts with a fiscal deficit or a sovereign debt crisis in the US, as the deficit hawks argue?
To read the rest of this interview, visit us at EconomyWatch.com:
http://www.economywatch.com/
