Yet another roadblock in the BC Rail affair: Justice Bauman of the BC Supreme Court has ruled that the Auditor General does not have a right to view all the documents relating to the $6 M settlement of Basi and Virk’s legal fees because it would breach solicitor/client provisions. These clowns have taken a plea, done light duty and escaped with their assets pretty much intact, it seems, while the citizens of BC look to have been bamboozled and robbed by the people who were supposed to look out for their interests. Everything about the whole process, the resulting raids and the ensuing judicial dance carries a whiff of barnyard mixed with brimstone, and at some point, having excused the accused from further prosecution, it seems like time to shine an array of lights under this rock. If there is nothing slimy there, we can put the rock back in place and leave it there, but there can be no accountability (a word so dear to Campbell and company) and no trust in the government or the political process as long as affairs are conducted behind multiple screens of secrecy by people who seem on the face of things to be as untrustworthy as a group could be. It will be interesting to see if a change of government in May produces a couple of results:

1) a complete reversal of the narrative of openness and transparency. Don’t say it, do it.

2) a complete reckoning with all and sundry involved in the privatization of common resources needed to keep the citizens of BC engaged in reasonable participation in their economy. Note that Liberals can’t even whimper about anything that any other government does, given their record of stonewalling.

Failure to follow up on these items will ensure that people will dissociate themselves from being part of the governance of their province, a short-term boon to those looking to profit from indifference and corruption, but a powder keg of discontent in the longer term.

The headlines read that Moody’s, one of the three major ratings agencies along with Standard &  Poors and Fitch’s, have downgraded the ratings of six Canadian financial institutions, the Bank of Montreal, National Bank, Bank of Nova Scotia, CIBC, TD Bank, and Caisse Desjardins. The action is due to the concerns that the agency has about exposure to household and consumer debt and the possibility that Canadians might nor be able to repay all of the money that they’ve borrowed for mortgages or the vast sums that consumers have posted on their credit cards and through home equity loans. This is particularly interesting in the wake of finishing Michael Lewis’ tome The Big Short, in the latter stages of which the role of ratings agencies in the the meltdown of the last five or six years becomes very clear. In effect, all the big Wall Street investment houses were able to convince the ratings agencies that many of the CDS and CDO instruments that they were floating around were worthy of a triple-A rating, even though they were essentially bundles of sliced and diced sub prime loans made to people known not to qualify for traditional financing. Without spoiling the story, it seems clear enough, if you believe Lewis, that the ratings agencies failed to research the instruments, or, because of the fees they collected, were willing to overlook the essentially inherent risk built into the underlying loans that was bound to affect the worthiness of the derivatives. I just fins it mildly ironic that anyone still believes any of what these people say.

However, this does not mean that we should have limitless faith in the above institutions, or any other such group, as likely, Moody’s is covering it’s posterior and the risk factors may be far greater than the ratings agency is willing to admit. Mark Carney, governor of the Bank of Canada, has touched none too delicately on this point on several occasions over the last couple of years, which is rather a no-brainer as real estate prices have continued to climb until recently while incomes have remained fairly static, and while the push has continued for the consumer to carry the weight for growth in the economy, particularly during the months leading up to the annual Christmas spending binge. Canadians are supposed to continue consuming, to buy increasingly pricey housing, and to contribute to RRSP, TFSA, and RESP accounts in a zero-sum income situation. Something doesn’t compute, but, then, most of what comes out of our current political régimes makes little sense.

Of course, as in the sub prime maelstrom, the current round of consumer and student debt might produce a round of defaults which, in turn might jeopardize the liquidity of the banking institutions to the point where we could have massive bankruptcy. But the banks seem not to worry: the Bank of Canada will step in, the taxpayers will pick up the tab and we can go back to rebuilding a bubble. Notice that no one, in the wake of the investment fraud that brought on the crisis of 2007-08 (and ongoing), went to prison, that the TARP funds and subsequent tranches of quantitive easing have largely served to prop up the same institutions that caused the mess in the first place, meaning that Goldman Sachs, Bank of America and Morgan Stanley have largely managed to substitute the real money derived from what people produce for the thin-air funds they created out of sub-prime loans. You have to marvel at the ingeniousness of the scheme and at the dullard taxpayers who put up with this sort of result. Letting the banks fail may not be an option when the real economy is still tied up in the ability of the banking world to extend credit and where governments and pension funds are dependent on the financial community to fulfill their obligations, but surely there needs to be some personal and corporate liability for the incompetence and malfeasance that produces such disastrous outcomes, and where the public who pay to bail out the bankers get control over the assets that should have been forfeit once to extent of the bungling and fraud was clear.

I just couldn’t wait to finish the book I’m reading to write about it: The Big Short, by Michael Lewis details a perspective on what brought us to the financial crisis that started in 2007 and which continues to plague us to this day. Lewis knows of what he writes, both through personal experience and through thorough research; what he has to say is devastating, detailing the reckless and risky behaviour of the big players on Wall Street and the total lack of oversight by any form of government. The book details the deviousness of the ploys used by players to create masses of credit default swaps, sub-prime mortgage bonds and CDOs to first hide, then slough off DOA investments on investors, institutions, and, eventually, on the general citizenry. The breadth and depth of the scheme is frightening, and the fact that none of these people has ever had to justify any of it in a court of law speaks to the penetration of corruption in high places. For all that the subject matter is depressing, at times esoteric, and rage-provoking doesn’t keep it from being terribly interesting, engaging, and even humorous at times:

“The argument stopper was Lippmann’s one-man quantitative support team. His name was Eugene Xu, but to those who’d heard Lippman’s pitch, he was generally spoklen of as ‘Lippman’s Chinese quant’. Xu was an analyst employed by Deutshce Bank, but Lipmann gave everyone the idea he kept him tied up to his Bloomberg terminal like a pet. A real Chinese guy–not even a Chinese-American–who apparently spoke no English, just numbers. China had this national math competition, Lippmann told people, in which Eugene had finished second. In all of China. Eugene Xu was responsible for every peice of hard data in Lippmann’s presentation. Once Eugene was introduced into the equation, no one bothered Lippmann about his math or his data. As Lippmann put it:’How can a guy who can’t speak English lie?’ ”

Lewis sis also responsible for Liar’s Poker, Moneyball, and The Blind Side, all fine books and worthy of a read.