It seems the Opinion-ators at the Wall Street Journal Agree. . . .

I suspect posts like mine are being echoed all over the blogosphere, tonight — that certainly seems to be the case, on the opinion pages of the Wall Street Journal – look here:

. . . .When Japan was mired in economic crisis, the U.S. urged it to take decisive action to deal with its ailing banks. Japan didn’t follow the advice and the crisis dragged on for years. Now, it is the U.S. that is mired in crisis and facing the prospect of swallowing the bitter medicine it once proffered. . . .

Indeed. It seems Floyd Norris, over at the New York Times Finance blog, agrees, as well:

. . . .[Lessons:]

1. The capital rules were far too lax, and they still are. They may have made sense if you assumed perfectly liquid and smoothly functioning markets, but that is like saying a roof does not leak when it is sunny and mild.

2. The end of the rules separating commercial banks from investment banks — Gramm Leach Bliley — is one reason the government is much more deeply involved now. Bank of America and J.P. Morgan Chase, the fire-sale buyers of Merrill and Bear, have government guaranteed deposits. That amounts to a subsidy, and when times get tough the subsidized firm has a big advantage over the unsubsidized one. To keep the others going, the Fed now will lend them money secured by almost anything they can find, including common stocks.

3. Those who were complaining, only months ago, that excessive regulation was making American markets uncompetitive, had it exactly wrong. It was a lack of regulation of the shadow financial system and its players that allowed this to happen. The regulators might not have gotten it right if they had tried to put limits on leverage, or assure that it was clear what risks were being taken, in the world of derivatives and securitizations. But deciding not to even try, and assuming that risks traded secretly would somehow end up in the hands of those most able to bear them, reflected ideology, not analysis. . . .

Now, I’ll be back firmly, and solidly, on topic.

About-Half-Off-Topic:” Oh, so THAT’S Why Glass Steagall Existed” — From 1933 to 1999. . . .

So, by the time Monday’s rays of red begin to dawn on Wall Street, what was recently the fourth-largest investment bank will likely have filed for liquidation, under Chapter 11 of the federal bankruptcy statutes (only a few months after the federal government claimed it had to subsidize another weekend emergency bail-out/buy-out, by JP Morgan Chase — of Bear Stearns). . . .

And, after a history-making Sunday two-hour trading session — to net exposures in derivatives trades and positions in which Lehman is/was a counter-party (thus decreasing those counter-parties’ collective exposures to a Chapter 7 liquidation), Wall Street was again rocked by distressed transaction news, late Sunday afternoon — Merrill had apparently agreed to sell itself, at $29 a share, in a hurried (shot-gun?) marriage to B of A — to avert a wider credit crisis. . . .

And THEN — we read that AIG is scrambling to find financing, to avoid a similar fate, on Monday morning. . . yes, these are truly historic (or, notorious?) times — down at Wall and Broad.

So, we have insurance companies looking for liquidity, formerly pure investment banks selling themselves to commercial banks, and commercial banks declining to buy a brokerage in the midst of a liquidity crisis — unless, of course the fed would again agree to backstop some parts of the proposed-deal.

I personally think the above whirlwind of a weekend financial markets nightmare is Exhibit A — for the proposition that perhaps the Glass-Steagall Act may not have been such a bad idea, afterall.

Glass-Steagall — enacted in the years following the market crash of 1929 (and the beginning of the Great Depression) — generally prohibited commercial banks from owning investment banks, and vice-versa (more history on Glass Steagall, from PBS-Frontline, under that link). A later, and similar firewall-type law, the Bank Holding Company Act, kept both kinds of banks out of the business of underwriting insurance. All of these firewalls were effectively eliminated by incremental rule-makings, over the years 1989 to 1998, and then repealed entirely, in 1999.

I think it is time to admit that it was largely wishful thinking — to believe that the investment and commercial banks (and insurers) would self-police sufficiently to avoid another 1929 credit crisis.

To be clear, I do not expect a 1929-style melt-down tomorrow, or any day soon — but I am deeply troubled that the fed “threw in” to solve the Bear Stearns crunch, and was here unable to broker a deal. I was also particularly troubled to read that B of A conditioned its offer for Lehman on federal financial backing of some sort.

It may be time to revisit the idea of hard, enacted firewalls. . . .

About-Half-Off-Topic:" Oh, so THAT’S Why Glass Steagall Existed" — From 1933 to 1999. . . .

So, by the time Monday’s rays of red begin to dawn on Wall Street, what was recently the fourth-largest investment bank will likely have filed for liquidation, under Chapter 11 of the federal bankruptcy statutes (only a few months after the federal government claimed it had to subsidize another weekend emergency bail-out/buy-out, by JP Morgan Chase — of Bear Stearns). . . .

And, after a history-making Sunday two-hour trading session — to net exposures in derivatives trades and positions in which Lehman is/was a counter-party (thus decreasing those counter-parties’ collective exposures to a Chapter 7 liquidation), Wall Street was again rocked by distressed transaction news, late Sunday afternoon — Merrill had apparently agreed to sell itself, at $29 a share, in a hurried (shot-gun?) marriage to B of A — to avert a wider credit crisis. . . .

And THEN — we read that AIG is scrambling to find financing, to avoid a similar fate, on Monday morning. . . yes, these are truly historic (or, notorious?) times — down at Wall and Broad.

So, we have insurance companies looking for liquidity, formerly pure investment banks selling themselves to commercial banks, and commercial banks declining to buy a brokerage in the midst of a liquidity crisis — unless, of course the fed would again agree to backstop some parts of the proposed-deal.

I personally think the above whirlwind of a weekend financial markets nightmare is Exhibit A — for the proposition that perhaps the Glass-Steagall Act may not have been such a bad idea, afterall.

Glass-Steagall — enacted in the years following the market crash of 1929 (and the beginning of the Great Depression) — generally prohibited commercial banks from owning investment banks, and vice-versa (more history on Glass Steagall, from PBS-Frontline, under that link). A later, and similar firewall-type law, the Bank Holding Company Act, kept both kinds of banks out of the business of underwriting insurance. All of these firewalls were effectively eliminated by incremental rule-makings, over the years 1989 to 1998, and then repealed entirely, in 1999.

I think it is time to admit that it was largely wishful thinking — to believe that the investment and commercial banks (and insurers) would self-police sufficiently to avoid another 1929 credit crisis.

To be clear, I do not expect a 1929-style melt-down tomorrow, or any day soon — but I am deeply troubled that the fed “threw in” to solve the Bear Stearns crunch, and was here unable to broker a deal. I was also particularly troubled to read that B of A conditioned its offer for Lehman on federal financial backing of some sort.

It may be time to revisit the idea of hard, enacted firewalls. . . .

First Major Metropolitan Newspaper Editor Labels SEAS-Vytorin Cancer Data a “Link”

Well, it is not the Los Angeles Times, the Boston Globe, the Chicago Tribune or the New York Times, proper, but the editor of the Buffalo (NY) News has called the Vytorin SEAS cancer incidence findings a “tentative link” — do go read it all, but here is the punch-line:

. . . .Meanwhile, over in the heart and cholesterol aisle, the heavily marketed drug Vytorin is under suspicion by some experts as being a big, and potentially harmful, dud. Well, half of it is.

Vytorin is a mix of two medicines, a long-proven cholesterol- fighting statin and a newer medicine called Zetia. But the Zetia part has yet to establish that it actually helps people avoid heart attacks, live longer, healthier lives, or to do anything else but spend a lot more money on the new drug than it did on the old one. And one study in Norway has, very tentatively, linked Zetia to cancer.

In these cases, and many others, the FDA and the public are overly reliant on the good graces of drug companies to properly vet their medications to be as sure as possible that they not only help with disease but also don’t cause any horrible problems along the way.

Such assurances require not only extensive premarket trials but also exhaustive monitoring and follow-up afterward, which is when the drugs are used by enough people over enough time to give a real indication of their benefits and risks. That’s a moral responsibility — but if corporations don’t realize that, it should also be a mandated one. . . .

Indeed — with a HUGE H/T to PM [a fine "cameo blogger", over at Gooznews].

I don’t mean to quibble too-excessively with the editor of the above-paper, but I do believe the spirit, if not the letter of the existing federal law already requires of drug firms what the editor suggests is now only a “moral” responsibility. I may come back to that in a moment [see the comments, for some of that material, and below -- and the summary chart, courtesy of FDA CDER database] or two — but it is now time for some Sunday morning cheese, mushroom and green-pepper omelets. . . .

First Major Metropolitan Newspaper Editor Labels SEAS-Vytorin Cancer Data a "Link"

Well, it is not the Los Angeles Times, the Boston Globe, the Chicago Tribune or the New York Times, proper, but the editor of the Buffalo (NY) News has called the Vytorin SEAS cancer incidence findings a “tentative link” — do go read it all, but here is the punch-line:

. . . .Meanwhile, over in the heart and cholesterol aisle, the heavily marketed drug Vytorin is under suspicion by some experts as being a big, and potentially harmful, dud. Well, half of it is.

Vytorin is a mix of two medicines, a long-proven cholesterol- fighting statin and a newer medicine called Zetia. But the Zetia part has yet to establish that it actually helps people avoid heart attacks, live longer, healthier lives, or to do anything else but spend a lot more money on the new drug than it did on the old one. And one study in Norway has, very tentatively, linked Zetia to cancer.

In these cases, and many others, the FDA and the public are overly reliant on the good graces of drug companies to properly vet their medications to be as sure as possible that they not only help with disease but also don’t cause any horrible problems along the way.

Such assurances require not only extensive premarket trials but also exhaustive monitoring and follow-up afterward, which is when the drugs are used by enough people over enough time to give a real indication of their benefits and risks. That’s a moral responsibility — but if corporations don’t realize that, it should also be a mandated one. . . .

Indeed — with a HUGE H/T to PM [a fine "cameo blogger", over at Gooznews].

I don’t mean to quibble too-excessively with the editor of the above-paper, but I do believe the spirit, if not the letter of the existing federal law already requires of drug firms what the editor suggests is now only a “moral” responsibility. I may come back to that in a moment [see the comments, for some of that material, below -- and the summary chart, courtesy of FDA CDER database] or two — but it is now time for some Sunday morning cheese, mushroom and green-pepper omelets. . . .