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I assume that no Blue State readers ever watch Fox Business News, and, therefore, as a public service to them, I'm posting an embedded video of a recent interview of Sheila Bair on that cable channel in which she makes some sense about why tearing derivatives trading desks out of banks would be a bad idea. Among other cogent points, she makes the following:
- Derivatives aren't all evil.
- Banks need them to hedge interest rate risk, for themselves and other financial institutions.
- Legislators who say stupid things like "AIG shouldn't be able to use insured deposits" should sit down, shut up, and let the adults talk.
She finishes up by confusing the poor interviewer on the issue of "dressing up the balance sheet" at the end of each calendar quarter. That didn't appear to be an extremely difficult task for her to accomplish, since I assume he was probably day-dreaming about either Angelina Jolie or an ice-cold Bud Light (or both) rather than the calculation of risk-based capital ratios based on average assets.
Enjoy!
