Juggling Dynamite

President Obama today introduced former Ohio attorney general Richard Cordray as director of the new Consumer Protection Bureau, in an apparent acknowledgement that the mastermind behind the agency, Elizabeth Warren, couldn’t win Senate confirmation.

The Consumer Financial Protection Bureau was a central feature of the law passed last year to overhaul rules governing the financial sector. The agency is to be a government watchdog over mortgages, credit cards and other forms of lending when it officially begins its work on July 21. Republicans and Financial Institutions have expressed strong opposition to the bureau as well as to Warren and now Cordray who is considered a Warren ally. See Obama appoints Cordray.

Good discussion on relative risks of the US debt ceiling stalemate and likely impact on US Treasuries. The irony of course is that the countries with lower amounts of government debt (like Canada) have relatively lower sovereign risk but also necessarily less bonds available for investment as a result. This leaves large pools of captive capital in the world, short of attractive options which are stable, liquid and deep enough to meet their mandates.

Capitalism requires banks to fail when their executives and directors run them into the ground. This is the only way to have a system of strong institutions and business managers where those who manage risk properly survive and prosper and those who do not fall on their own sword. The ridiculous policy of governments saving bad institutions from themselves has to end. Once we get this basic concept back in our system the true recovery will begin anew.