Banking Law

Economist Nouriel Roubini has achieved an almost (or perhaps, actual) cult-like status because he was one of the very few talking heads who consistently called the "Great Recession" before it was apparent to the rest of us mere mortals. He's also got that whole "Vlad-The-Impaler-In-A-Tux" look and funky "Somewhere-Between-Tashkent-And-Turin" accent going for him, and as everyone knows from the latest pop culture fads, chicks dig vampires.Thus, when "Nouri" speaks, people listen. Well, some people don't, but they're not "rad" like "Nouri," so who cares?

A few days ago on CNBC, Roubini laughed in the face of the Congressional folly that is evident in the half-a-loaf financial "reform" legislation that's winding its way through the sausage-making machine commonly referred to as "the U.S. Senate." 

?We need more radical reforms," he added. "The idea that we?ll be able to close down an institution like Goldman (Sachs) in an orderly way?a business that operates in nearly a hundred countries?is absurd.?

So, if it's "absurd" to try to close down a Goldman Sachs in an orderly way, should we just take a lesson from The Joker in the movie "The Dark Knight"?

I'm not sure, because the article that discusses his appearance on CNBC doesn't provide much detail as to what his "more radical reforms" might be. Nevertheless, I think that based upon what was reported, his preferred reforms would be to reinstate the wall between banking and commerce and to break down the "too big to fail" banks into smaller, more manageable pieces. If that's the case, his thinking would be in line with many within the current administration and Congress, although out-of-step with legislators who like big Wall Street banks and the campaign contributions they so generously provide.

On the other hand, I might be wrong. Maybe Nouri wants us to just "do things." I know that very often, that's all I yearn to do. Like score a date with Catherine Zeta-Jones, to pick one random "thing" out of thin air.

Roubini is even gloomier about the heavy weight of sovereign debt.

?There is a risk of ending up in another crisis, as the world found itself in the Depression in 1933.?

The main problem is the huge amount of government debt in many countries around the world. ?Debt ratios haven?t fallen yet," he said. "They?re just stabilizing at very high levels.?

He insisted that these deficits were indispensable, however.

?We were on the verge of a great depression," he said. "We needed the stimulus, or the outcome would have been ugly. Some countries can monetize fiscal deficits, others can?t.?

The world is now faced with a choice between default or inflation, according to Roubini.

?If the debt of governments becomes unsustainable, they won?t have the ability to prevent a deeper recession,? he said.

[...]

A fiscal train wreck lies ahead whether governments remove deficits or maintain them, leaving a situation where policymakers are ?damned if you do, damned if you don?t,? Roubini said.

 In other words, as I said last week, "we're screwed."

Thanks, Dr. Doom, but many of us have already figured that out. Next time you bloviate on cable television, please give us something useful, like how to dig ourselves out of this hole, or, even better, Catherine Zeta-Jones' private cell phone number.