until he does these things:
All "BS games" in both Washington and Wall Street must end immediately. Not in six months, not in a year, not in two. On January 21st. By executive order if necessary, you simply must force the truth to be told by every firm up and down Wall Street and every department in Washington DC. We do not have an economic crisis - we have a trust crisis - there is effectively none anywhere in either our Capital Markets or Washington. The bleeding in our markets will not stop until this problem is resolved.
This is on your back, like it or not, and your first 100 days in office will define whether trust begins to be restored or is totally destroyed. Thus far your cabinet appointments are all being seen as "more of the same" by those on both Wall Street and internationally. You must prove that this is not going to be the case and do so quickly or the meltdown that we will experience shortly thereafter will make this last September and October look like a Girl Scout picnic.
Specifically, the following has to happen:
* Immediately investigate Hank Paulson, focusing on his 2000 and 2004 "requests" to remove leverage limits and his firm shorting the bonds they were selling to investors. Conflict of interest or something even more evil? The fact is that every firm that has collapsed has had more than double the former leverage limit that was imposed on investment banks. All of them.
* Immediately investigate the OTS (and OCC) to determine how it is that people involved in the S&L scandal remained employed rather than being indicted and jailed. We need answers on that issue given the IndyMac mess and revelations in this regard.
* Each and every individual and firm involved in the blatant, rampant fraud that allowed the housing and mortgage bubble to occur needs to be prosecuted. No exceptions. Since this will involve locking up tens of thousands of people, including mortgage brokers, realtors, appraisers and bankers, and we seem to be a bit short on jail space, I recommend commuting the sentences of and releasing all non-violent "consensual adult" drug offenders. That should create plenty of room for the new inmates.
* Appoint a cadre of special prosecutors with power to subpoena every hedge fund and broker-dealer on Wall Street to ferret out the other Madoff's out there - jail them all. There is never only one cockroach. Never. Oh, and while we're at it we need to guarantee that everyone involved in the Madoff mess goes to prison, including people in the SEC who were complicit in this scam. Nobody pulls something like this for 20 years, at this magnitude, on their own. That's impossible, and by the way, lying to the FBI to conceal a conspiracy is its own felony and should get Madoff a Racketeering indictment on top of the rest (along with his other co-conspirators.)
* Force changes in the bond ratings agency game. No more "pay to play", otherwise known as "issuer pays" - at all. Further, bar by statute the "opinion" exemption; you want what amounts to near-monopoly access to publish these opinions, protected by law, you should be held responsible for gross errors. While one AAA bond that defaults isn't a gross error, when 75% of the bonds you issue an "AAA" on in a given asset class wind up non-investment-grade within five years you've not made an "honest mistake"; you're either grossly negligent or crooked.
* Tell the truth about debt in this country and how we got here. You can't fix an alcoholic's booze problem with a bottle of whiskey; making him drunk again to stop the DTs eventually will kill him. Such it is with debt. We must force the excess, unpayable debt to default, no matter how painful it is, to clear the market.
* Stop trying to support home prices. The solution to the housing mess is in fact found in the exact opposite policy - correction to affordable levels nationally. That's no more than 2.5-3x incomes, on average. Yes, it will suck. We get that - it already sucks. At the same time we need to stop building new houses until the existing inventory clears. There's no need to mandate this - just refuse to provide any sort of artificial support or help for the builders; some of them need to go bust, and they will if we quit screwing around. Capacity must come down.
* Force The Fed to disclose every asset it has purchased, and disclose every action Treasury has taken. One Executive Order takes care of both. This is our money, not theirs. Act like the Oath of Office and Constitution mean something.
* Revoke the EESA/TARP. You can send a bill up to The House to revoke it. Do so. If we have insolvent big banks then instead use the remaining $350 billion to charter 10 new banks and immediately IPO them off to the public. This would support three and one half trillion dollars in lending, present nearly zero risk to taxpayers, might earn them a profit, and would provide support for the system as opposed to providing support to the fraudsters and ripoff artists who caused this mess. Mandate that every transaction that these new banks engage in is 100% public - complete, open book - until the entirety of that seed capital is replaced. Trust me - it will be, and fast, considering that these institutions will begin with zero debt and zero crap on their balance sheets.
* Send up a bill to re-institute Glass-Steagall in its entirety. All the "investment banks" are now bank holding companies. Good. This will force them to spin off their commercial bank holding companies and spit out their "investment banking" and "broker/dealer" operations into separate firms immediately. Glass-Steagall was the right medicine and we need it once again.
* Enforce by executive order, immediately, 12:1 leverage limits via the SEC. You control the SEC now. Make it happen on January 21st.
* Send up a bill to make the use of off-balance-sheet games a federal offense punishable by forfeiture of the entirety of any asset so concealed. That will end that. We should have learned from ENRON, and the lesson should not be "how to screw the public and government."
* Send up yet another bill to mandate that any public firm that uses any modeling for asset values must expose the full details of all ingested data and all algorithms to the public. Any firm that wants to claim a "mark to model", in short, must allow any interested party to replicate how they arrived at that valuation. No exceptions.
If - and only if - you, President-Elect Obama, are interested in the recovery of our capital markets and restoring trust in them, you will do all of the above.
If you do not then you will have demonstrated that you have zero interest in restoring trust in our capital markets and the market will in fact not clear and recover.
We are at an inflection point - and an extremely dangerous place for America.
If we fail to deal with the underlying issues that have destroyed trust in our markets we will see capital flee to those places where the rule of law matters, where fair dealing counts for something, and where people cannot run $50 billion dollar scams for more than 20 years with the open and blatant complicity of members of the government.
Your move Mr. Obama, and you should be aware that there are plenty of people in the mainstream media, especially outside the US, calling for exactly the same thing.
The gig is up on our culture of fraud and both the Treasury market and dollar hang in the balance.
http://market-ticker.org/archives/701-To-Obama-Your-First-100-Days.html
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