We remarked last week that the FDIC had put forward a proposal for fixing the securitization market. To be a bit more precise, it was the FDIC’s plan, put forward for public comment, of the rules it wanted to have in place for banks to get “safe harbor”, meaning off balance sheet treatment, for their securitizations.

There is a huge front page article in the NYT discussing what we already know — that AIG extracted billions from AIG before ($5.9B) and after ($12.9B)their collapse.We know that Goldie got paid 100 cents on the dollar post-bailout.But what insured party gets to set their own valuation of losses? According to the article, GS nabbed closer to 300 cents on the dollar pre-collapse of losses.

Notwithstanding all the riveting talk about political motivations, President Obama has finally decided to wrest control of financial reform efforts from his somewhat tone-deaf minions and the “too-hard-to-tackle” crowd in Congress. Better late than never. But in belatedly joining forces with Paul Volcker, the man who will ultimately go down in history as the wisest regulator of his generation (sorry, Maestro Greenspan), Mr. Obama has waded into an immeasurably complicated debate that is enormously difficult for the general public to comprehend.

One of the impediments to getting to the bottom of the financial crisis is some of the most destructive behavior involved complex instruments like collateralized debt obligations and credit default swaps. It isn’t simply that these “innovations” had terms and features that differ from familiar investments like stocks and bonds, but the way those instruments were used, both the trading/investment strategies and transaction mechanics, also differs from those of more traditional instruments.

Despite all the wrangling in Washington, Davos, and elsewhere about regulatory overhaul, one holy grail remains: U.S. housing policy. Some maintain that while mortgages were present, they were benign without securitization and leverage, so that those latter elements are more the culprit than mortgage policy, per se. Others argue that mortgages could only have been benign in isolation from Federal housing policy, which consciously sought to push home ownership rates to historic highs.

We’ve argued that the “Volcker Rule,” which would limit “proprietary trading” by banks, is in theory a very good idea, but the proposal put forward by Volcker/Team Obama goes wide of the mark by defining any customer trade as not being part of proprietary trading. That’s a spurious distinction; large-scale position-taking well beyond what was needed for market-making dates back to the 1980s, long before firms had separate proprietary trading desks or in-house hedge funds. As a result, they looked likely to have little impact. As we noted:

Amidst otherwise strong coverage of the growing debate around the nature of finance and the power of big banks, a surprisingly high number of journalists continue to misuse the word “populism”.