New stories about the latest proposal being mulled over within the chambers of the White House pop up every day. Here’s some of the proposals being thrown around:

• Securitization: A proposal to limit the number of tranches allowed in mortgage-securitization transactions as well as for originators to keep skin in the game by keeping more of the securities on their books.
• Privatization of GSEs: The House Financial Services Committee plans to hold hearings to discuss privatization of Fannie and Freddie, which is a step towards taxpayers not having to be liable for funding government bailouts of too big to fail institutions.
• Bank tax: Obama has proposed a 10-year tax on the country’s largest banks to cover a projected $117 billion shortfall in the fund set aside for government bailouts.
• Bonus caps: As many of the banks that received TARP money pay back the loans and become free of federal compensation regulations, the Obama administration would like to see a more permanent, consistent way of regulation compensation.
• Other grandiose promises: forming one streamlined committee that would oversee and monitor system risk in the banking industry and have executive power over myriad government-financial agencies, like the SEC, the Fed, the Treasury, etc.

And only a few weeks ago, there was some commotion over Obama’s potential ban on proprietary trading at investment banks. Whatever came of that? …Whether prop trading will really be banned or not still remains to be seen, depending on how successfully the proposal passes through Congress.

Basically, whatever comes of ANY of these proposals depends on how successfully they get through Congress. And given the track record of financial reform proposals, it doesn’t look like many of them will. Only the other week, Senator Chris Dodd, head of the Senate Banking Committee, complained of the “army of lobbyists” being sent to Washington from Wall Street firms “whose only mission is to kill the common-sense financial reforms”. With the likes of banks like Goldman Sachs protesting every governmental effort to regulate the Street, like they did with the prop trading ban, Congress remains in deadlock. We won’t even mention Congress’s long-time incestuous relationship with Wall Street (Every election cycle, financial institutions pour loads of campaign money into politician’s coffers). Maybe, just maybe, that could serve to illuminate why financial reform simply hasn’t happened.

Senate Banking Committee head Chris Dodd (R) blames Congress's financial reform failures on the Street's refusal to cooperate

During the New Deal, when FDR created a new regime to regulate the banking system, the FDIC renewed confidence in the banking system, the formation of the SEC gave protection to public investors, and the Glass-Steagall Act separated federally insured commercial banks from the investment banks. His sweeping reforms may very well have saved capitalism, let alone the nation itself. Right now, I’m not seeing the same kinds of drastic changes that need to be made in order to protect the integrity of the national/global financial system. I’m only seeing a deadlocked Congress, and a lot of rosy reform proposals that don’t go anywhere. Until our good ol’ cronies on Pennsylvania Avenue stop bickering amongst each other and figure out a way to wiggle free from the clutches of Wall Street, I’m going to take all these proposals with a grain of salt.

Since the founding of the British arm’s firm (appropriately N M Rothschild & Sons) in 1811, the family’s influence in London and the surrounding European nations has grown considerably. The family firm is about to make a change and it’s related to its historical nepotistic policies, in which only family members hold leadership positions. For the first time ever, to modernize its operations, the firms CEO will not hold the last name of de Rothschild, but Higgins. Nigel Higgins, has been with the firm for 27 years, and yet it should come as a shock, considering the power that this family, with it’s five original branches held over the world of finance. They even financed the Suez Canal . . .

What I’m getting at is that times are changing. People’s careers are being made, while others are falling apart. Pay attention to what is going on around you, because here you have an extraordinarily powerful and intelligent group of individuals admitting that they need leadership to conquer the current financial minefield.

http://www.ft.com/cms/s/0/92795dda-15e3-11df-b65b-00144feab49a.html

Let’s take a look at this in a more objective manner. Here are a few my thoughts on the fact

- Greece is indeed in a bad fiscal situation, but what has happened is far from unique

- Greece accounts for a mere 3% of the Eurozone GDP

- The last time I checked, the beautiful state of California is in a similar situation with a budget gap of $22.2 billion

- Remember, CA is the world’s 8th largest economy (the size of France!) while Greece ranks #33

- How come no one is talking about the CA crisis???

- There is simply no way the EU will allow Greece to exit the Euro, a bailout of some sort will be in order

- Most likely, help will come in the form of a debt guarantee through the ECB after demanding a pound of flesh from the Greek government in terms of fiscal reform

- The market is NOT hyperventilating about the actual dollar amount or what actually occurred in Greece but the larger implications of such a bailout

- A bailout for Greece will spur requests for aid from other struggling Eurozone countries

- For years the EU has allowed the PIIGS (Portugal, Italy, Ireland, Greece, Spain) lots of leeway in terms of fiscal policy despite their prior commitment to contain deficit to 3% of GDP upon joining the Eurozone. The PIIGS routinely ran double digit deficits.

- Investors are concerned about the grand experiment that the Euro essentially is: can a group of countries with independent fiscal policies but a common monetary policy form a common currency??

It’ll be interesting to see how this plays out.

For the rest of the world though, is banking losing its shining luster? Will NYU Stern’s golden reputation mean nothing as the “dream careers” cycle back to law and medicine? The economic power of the banking industry is nothing but marvelous, but will it shrink? What will happen to these massive “too-big-to-fail” firms? For instance, I recently read that Goldman Sachs should go private again to get out of the spotlight and have control over employee pay again. These questions we all want answers to, the same way we want to know where we’ll all be in ten years, and I want to know one thing: will banking be the right career choice for me?

In other economics news, John Sexton apparently moderated at Davos, Felis Rohatyn, André Meyer’s (as in Meyer Hall) controversial successor at Lazard Frères, and the G-d of M&A has returned as an advisor, and the City budget was presented in the Blue Room today!

• A main support for the rally was increasing risk appetite evident in a falling USD. Uncle Buck has been on a tear recently against EUR
• Decent corporate earnings have already been MORE than priced in. Case in point, check out Goldman’s record earnings, only to see its stock aggressively sold off
• China – the much talked about global engine for growth – is now on a tightening cycle. The People’s Bank of China is concerned about the country’s economy from overheating and has aggressively clamped down on credit expansion (much more effective than raising interest rates).
• Bullish investor sentiments are approaching levels last seen in 2007 – before the onset of the credit crisis
• Unemployment still getting worse with no speedy recovery in sight
• Team Obama-Volcker spells trouble for investment banks’ future profitability
• Uncle Ben’s reappointment is facing increasing uncertainty in Congress

From a technical analysis standpoint, pundits are talking about the major support for the S&P at 1078. In this view, the coming week will then be a do or die week for the US market. However in truth, these resistance and support lines are more of an art than science. Take it with a grain of salt and let’s see what happens.

A Republican victory tonight would remove the 60-seat, bulletproof  – or rather filibuster-proof – Democratic majority in the Senate and potentially put the Obama administration’s health care and social agenda in significant jeopardy. Let’s see what happens.

Proposals of financial reform are floating around Congress. Mr. Bernanke advocates that the Fed is in the best position to regulate the financial markets. What says ye? How should we proceed forward? The forum is open.

And on that bombshell, have a wonderful Thanksgiving everyone!!

What is this you ask?? Take a wild guess. The answer after the jump.

This is a chart of the Zimbabwe stock market in 2001. Stocks goes parabolic indeed when the underlying currency goes down the toilet. In many ways this is analogous in a lesser degree (at least for now) to the US stock market for the better part of the past 8 months. Something for the bulls and Mr. Bernanke to think about.