Here's something you might be interested in.
After hearing some of the May 6, 2010 testimony before Phil Angelides' Financial Crisis Inquiry Commission, I am convinced that the surviving corporations or other artificial persons who created, promoted and profited from exotic financial products that are implicated in the Crash of 2008 have no interest in protecting their customers in future transactions whenever there is an advantage to be had for corporate profitability at customer expense.
To paraphrase Vice Chair Bill Thomas' comments, there was a severe lack of transparency in the creation and marketing of mortgage-based derivatives, under-capitalized credit default instruments, and other exotic commercial paper. According to Thomas, the lack of transparency in the absence of an open market for those exotics created a situation where it was impossible for those buying those exotics to figure out how much those exotics were worth and “come to a conclusion” about that worth. Thomas referred to investors not knowing what is in “[the] brown bag on the table.... At some point, the concept of markets is a collective wisdom, but how can you have wisdom about what's in a brown bag when you can't look in the brown bag to make the decision?” There were “a lot of people who thought they were smarter than they were, dealing with products they had no idea what they were, created by folks... who didn't fully understand what they were doing except that this was something that was very useful for their particular purposes....”
On hearing those comments, one witness offered that there should have been an outside systemic risk oversight agency that could “put two and two together.” Thomas responded, “But why do you need somebody above the fray? Why don't you just get it out of the brown bag and set it there and say what it's worth? If you can't look at it and examine it -- to me, it's the failure of transparency and the ability to communicate in a market that prices it based upon what other people think it's worth. That's been my biggest problem: How in the world could people figure out what they had when they didn't know what it was?”
My personal feeling is that there are some rather large “brown bags” out there where the real information about what's inside is actually available for us to see, except that the contents are hiding in plain sight.
Part of the problem here is that we are served by journalists and other market watchers who are no more competent at looking at this information hiding in plain sight than the people Thomas referred to who didn't fully understand what they were doing with exotics except that those financial instruments happened to be very useful for one's particular purposes in the short run.
A more significant part of this problem is that there simply are not enough of us who actually give a damn about the direction of the economy as it relates to public safety. On any given day, there are millions of Americans on Twitter and Facebook, mostly trading idle comments about totally mundane and generally self-centered topics. At the same time, less than 2000 of us are paying attention to the public utility documents filed with the California Public Utilities Commission, documents that end up having a direct impact on our electricity bills, cable fees, cell phone charges, and access to all other public utilities all across a state with 30 million inhabitants.
There are local consequences to our lack of attentiveness. The fact that PG&E's Proposition 16 made it onto the ballot without any popular motivation for it to exist only highlights our collective ignorance regarding investor owned power utilities and their motivation to preserve market share to the everlasting financial benefit of their holding companies.
Sempra Energy, the holding company of San Diego Gas and Electric Company (SDG&E), stands to benefit from Proposition 16 once SDG&E is allowed to pass on all of its uninsured wildfire legal expenses to customers. Without Proposition 16's constitutional super-majority requirement, it only takes a simple majority of San Diegans to dump SDG&E in favor of a municipal utility with the responsibility of reducing our wildfire risk. Under the protection of Proposition 16, SDG&E will freely continue to delay the undergrounding of overhead power lines to support high dividend payouts to Sempra Energy investors and institutional speculators.
For myself, I remain highly interested in off-grid residential solar panels (locally available on sale from Harbor Freight and from other sources) as a means of reducing exposure to both power grid failures and increasing customer liability to SDG&E wildfire legal costs. Without having any personal non-polluting power generation capability, we are held hostage to a power gird of less than optimal reliability and certain to provide us with future wildfires. Without off-grid solar panels, all we have left are gas-powered emergency generators, leaving us hostage to oil importers as an alternative to SDG&E, or lots of personal windmills.
As for the markets, I have no direct investments in any equities. The Goldman Sachs testimony convinces me that any investment offering from any firm is subject to the interests of the broker's stockholders, regardless of what happens to me.
After hearing some of the May 6, 2010 testimony before Phil Angelides' Financial Crisis Inquiry Commission, I am convinced that the surviving corporations or other artificial persons who created, promoted and profited from exotic financial products that are implicated in the Crash of 2008 have no interest in protecting their customers in future transactions whenever there is an advantage to be had for corporate profitability at customer expense.
To paraphrase Vice Chair Bill Thomas' comments, there was a severe lack of transparency in the creation and marketing of mortgage-based derivatives, under-capitalized credit default instruments, and other exotic commercial paper. According to Thomas, the lack of transparency in the absence of an open market for those exotics created a situation where it was impossible for those buying those exotics to figure out how much those exotics were worth and “come to a conclusion” about that worth. Thomas referred to investors not knowing what is in “[the] brown bag on the table.... At some point, the concept of markets is a collective wisdom, but how can you have wisdom about what's in a brown bag when you can't look in the brown bag to make the decision?” There were “a lot of people who thought they were smarter than they were, dealing with products they had no idea what they were, created by folks... who didn't fully understand what they were doing except that this was something that was very useful for their particular purposes....”
On hearing those comments, one witness offered that there should have been an outside systemic risk oversight agency that could “put two and two together.” Thomas responded, “But why do you need somebody above the fray? Why don't you just get it out of the brown bag and set it there and say what it's worth? If you can't look at it and examine it -- to me, it's the failure of transparency and the ability to communicate in a market that prices it based upon what other people think it's worth. That's been my biggest problem: How in the world could people figure out what they had when they didn't know what it was?”
My personal feeling is that there are some rather large “brown bags” out there where the real information about what's inside is actually available for us to see, except that the contents are hiding in plain sight.
Part of the problem here is that we are served by journalists and other market watchers who are no more competent at looking at this information hiding in plain sight than the people Thomas referred to who didn't fully understand what they were doing with exotics except that those financial instruments happened to be very useful for one's particular purposes in the short run.
A more significant part of this problem is that there simply are not enough of us who actually give a damn about the direction of the economy as it relates to public safety. On any given day, there are millions of Americans on Twitter and Facebook, mostly trading idle comments about totally mundane and generally self-centered topics. At the same time, less than 2000 of us are paying attention to the public utility documents filed with the California Public Utilities Commission, documents that end up having a direct impact on our electricity bills, cable fees, cell phone charges, and access to all other public utilities all across a state with 30 million inhabitants.
There are local consequences to our lack of attentiveness. The fact that PG&E's Proposition 16 made it onto the ballot without any popular motivation for it to exist only highlights our collective ignorance regarding investor owned power utilities and their motivation to preserve market share to the everlasting financial benefit of their holding companies.
Sempra Energy, the holding company of San Diego Gas and Electric Company (SDG&E), stands to benefit from Proposition 16 once SDG&E is allowed to pass on all of its uninsured wildfire legal expenses to customers. Without Proposition 16's constitutional super-majority requirement, it only takes a simple majority of San Diegans to dump SDG&E in favor of a municipal utility with the responsibility of reducing our wildfire risk. Under the protection of Proposition 16, SDG&E will freely continue to delay the undergrounding of overhead power lines to support high dividend payouts to Sempra Energy investors and institutional speculators.
For myself, I remain highly interested in off-grid residential solar panels (locally available on sale from Harbor Freight and from other sources) as a means of reducing exposure to both power grid failures and increasing customer liability to SDG&E wildfire legal costs. Without having any personal non-polluting power generation capability, we are held hostage to a power gird of less than optimal reliability and certain to provide us with future wildfires. Without off-grid solar panels, all we have left are gas-powered emergency generators, leaving us hostage to oil importers as an alternative to SDG&E, or lots of personal windmills.
As for the markets, I have no direct investments in any equities. The Goldman Sachs testimony convinces me that any investment offering from any firm is subject to the interests of the broker's stockholders, regardless of what happens to me.