Alan Schwartz Goes to Washington ~ The Risk Averse Alert

Sunday, July 18, 2010

Alan Schwartz Goes to Washington

An LPAC article published yesterday, titled, "Frank-Dudd Bill Will Increase the Derivatives Cancer—As Intended" offers insight into why FinReg is better thought an "Alan Schwartz Goes to Washington" affair — an exercise in denying reality of pending financial doom, just like the former CEO of Bear Stearns performed on CNBC two days before his firm was taken down.

Most stunning is just how blind everyone is to this reality!

"The real-world result of the Frank-Dudd bill passed by the Senate Thursday will be to open the floodgates for the bankrupt banks to further increase their cancerous derivatives bubble."

Or so it might appear! That's what the bill allows, but what will be securitized and leveraged? We're plumb out of tulips, babe!

So, written into FinReg is power to leverage empty space in a vacuum. But, hey, we can do that, so therefore we're not bankrupt! Right, Mr. Schwartz?

The psychology agreeable to participating in new securities schemes has been destroyed.

Still, the busy beavers don't get it...

"Major banks such as JP Morgan and Goldman Sachs have been preparing for the new bill and retooling for months. JP Morgan has 90 project teams that meet daily to review the rules, the New York Times reported July 15, and they and others are 'building up their derivatives brokerage operations.'"

Dream until your dreams come true! Again, what revenue streams can be leveraged? Fee-based infrastructure developed via public-private partnerships may be in the cross hairs, but enough to sustain (let alone grow) the current mountain of existing liabilities? Not very likely.

Besides, there's too much power to be grabbed and consolidated amidst coming chaos.

"Brokers cheered the bill in the financial district pubs," Germany's Handelsblatt reported, while the Financial Times smugly noted that the "financial services sector...should now feel mightily relieved."

That's thick marmalade right there! We're good now, says Mr. Schwartz! Well, as you know, I don't buy it. Likewise, I am not alone in reaching this conclusion, as there is overwhelming technical evidence revealing strong hands in truth don't buy it either. Shares continue being distributed for good reason.

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