We will be visiting WSOP a couple times next month as part of a post on power politics but in the meantime this looks intriguing. From Wall Street on Parade, January 17:
Anat Admati, Professor of Finance and Economics at Stanford Graduate School of Business, and German economist Martin Hellwig, have performed a public service to all Americans with their newly released, updated and expanded book The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It. It puts the interlocking web of corruption that is mistakenly referred to as the U.S. banking system into a pristinely documented and highly readable book.
Let us first explain those men without pants on the book jacket. That provocative graphic comes from the storyline in the Hans Christian Andersen tale “The Emperor’s New Clothes.” Tailors offer to make the emperor magical clothes that will be visible only to smart people and invisible to the stupid and unfit. When the emperor’s ministers go to inspect the clothes, they see nothing, but they are fearful of being called stupid if they admit this. The emperor, also fearful of being regarded as intellectually lacking, says nothing and tours the capitol in his nonexistent garments. Only a child is brave enough to shout out in the capitol “The emperor has no clothes,” thus breaking the conspiracy of silence.
The authors explain in example after example how corruption has taken over the banking system today but the guardians of our democracy have bought into the “pervasive myth that banks and banking are special and different,” so they have allowed themselves to be socialized to silence out of fear of being “declared incompetent to participate in the discussion.”
As I read that insightful analogy, the image of 60 Minutes’ Lesley Stahl treating JPMorgan Chase’s crime boss, Jamie Dimon, like a revered financial wizard in a televised interview in 2019 flashed through my mind. (Less than a year after that program aired, JPMorgan Chase admitted to another two felony counts brought by the U.S. Department of Justice, bringing its total to an unprecedented five felony counts in the span of six years.)
A key area on which Admati and Hellwig shine much needed sunshine is the accounting gimmickry that allows U.S. banks to hide billions of dollars in losses on bonds by simply labeling them “held to maturity” securities. (For background, see here and here.) The authors write that “Accounting rules should be changed so that banks must apply fair-value accounting to all assets regardless of how long they intend to hold them.”....
....MUCH MORE
At the last Berkshire Hathaway annual meeting Warren and Charlie mocked the accounting treatment used by the banks
—via the Australian Financial Review, Buffett’s million dollar message on US banks, May 7, 2023
