Ben Bernanke: More Execs Should Have Gone to Jail for Causing Great Recession

Bernanke has been interested in the Great Depression since his grandmother told him stories about it from her front porch in Charlotte, N.C., during quiet summer evenings. Her family had been living in Norwich, Conn., where some children went to school in worn-out shoes or even barefoot because their fathers lost their jobs when the shoe factories closed. That meant their families didn’t have enough money to buy shoes — which presumably would have kept the factories in business and their fathers employed.

I agree for the most part with the following, but how do you distinguish between human actions and a process, the securitization to name it, that once pushed to its limits and at a fragile moment gives birth to monsters all around?

And didn’t Bernanke knew about the unprecedent levels and untested territories of loan originations that were about to be pooled into CDOs ?

I doubt he was unaware.

He would have favored more individual accountability. “While you want to do everything you can to fix corporations that have bad cultures and encourage bad behavior — and the Fed was very much engaged in doing that — obviously illegal acts ultimately are done by individuals, not by legal fictions.”

→ USA Today

Agressive HFT And Institutional Trading Activity – Who Leads Market Crashes ?

Hallelujah, high-frequency traders didn’t short the market that much :

Our analysis of trading on August 24, 2015, shows that while there were bursts of aggressive HFT activity during the sell-off, it was the institutional activity, not the HFT activity that led and dominated the sell-off. Specifically, the events have appeared to unfold as follows: institutions would sell particular securities, creating acute selling pressure in the markets. Aggressive HFTs would then step in and sell the market further, but only for a relatively short period of time.

→ Traders Magazine

Seven Reasons Volkswagen Is Worse Than Enron

The comparison is fair, Europe signed a blank cheque to an industry they rely on so heavily. 

Though, I diverge from what is a rather alarming picture : VW will never be allowed to go down, at any cost for the German government. 

The real issue may be that other car manufacturers are part of this scheme — among them the Daimler Group, which would add up quite a bit to the bill as it is another major German champion. 

Second, led by Volkswagen, Europe’s car manufacturers lobbied hard for governments to promote the adoption of diesel engines as a way to reduce carbon emissions. Whereas diesel engines power fewer than 5 per cent of passenger cars in the US, where regulators uncovered the fraud, they constitute more than 50 per cent of the market in Europe thanks in large part to generous government incentives.

It was bad enough that Enron’s chief executive urged employees to buy the company’s stock. This, however, is the equivalent of the US government offering tax breaks at Enron’s behest to get half of US households to buy stock propped up by fraudulent accounting.

→ The Financial Times

Capitalism Must Throw The Book At Its Culprits

For capitalism to retain public faith we need a system where the rich can get poorer as well as the poor richer. There need to be snakes as well as ladders in the boardroom board game.

Individual accountability for sins is the big omission in too much of contemporary capitalism. To use an analogy that the bosses of VW might understand: we need the corporate equivalent of a sharp spike in the middle of a car’s steering wheel. If the consequences of dangerous driving were greater we might have safer roads. The same is true of corporate stewardship. If there are no downsides in excessive risk-taking, only upsides, then shareholders should not be surprised if CEOs lead their companies to catastrophe.

→ The Times