WHAT DID WE EXPECT WITH LEADERS LIKE THIS?
by ilene - September 22nd, 2010 3:51 pm
Brief review of why it’s about time Summers says goodbye. – Ilene
WHAT DID WE EXPECT WITH LEADERS LIKE THIS?
Courtesy of The Pragmatic Capitalist
It’s no secret that the economic recovery in the United States has been meager at best (and that’s assuming you believe this is not just one ongoing recession). While there is plenty of blame to go around for our current plight the buck ultimately stops with the most influential people in this
I’ve been highly critical of Obama’s economic team over the years because many of them were key players in helping cause the financial crisis. Tim Geithner was the head of the NY Fed when the banks were busy turning themselves into casinos. Ben Bernanke (who Obama should have never reconfirmed) failed to even acknowledge the potential existence of problems in the U.S. economy leading up to the financial crisis and then implemented his great monetarist gaffe which has now been proven to be what I called it from the very beginning – a bailout of Wall Street and a slap in the face for Main Street. He receives endless praise for helping to avoid a supposed second Great Depression. This is like the man who sees a fire in his front yard, ignores it, then when it’s finally becoming a widespread danger decides to save his own house from burning (the banks), lets all of the surroundings houses burn to the ground (Main Street) and then receives endless praise for his courage under fire.
But there have been few people in power over the last 25 years that have been more misguided and downright destructive than Larry Summers. This is a man who believes that women are intellectually inferior (I’ll tell you one thing – this economy wouldn’t be such a mess if it wasn’t run primarily by arrogant, narcissistic males) and has done more to help
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FINREG Dead?
by ilene - June 29th, 2010 3:44 am
FINREG Dead?
Courtesy of Karl Denninger at The Market Ticker
"As I have indicated for some time now, my test for the financial regulatory reform bill is whether it will prevent another crisis. The conference committee’s proposal fails that test and for that reason I will not vote to advance it. During debate on the bill, I supported several efforts to break up ‘too big to fail’ Wall Street banks and restore the proven safeguards established after the Great Depression separating Main Street banks from big Wall Street firms, among other issues. Unfortunately, these crucial reforms were rejected. While there are some positive provisions in the final measure, the lack of strong reforms is clear confirmation that Wall Street lobbyists and their allies in Washington continue to wield significant influence on the process.”
Interesting. Note that:
Senator Feingold was one of eight senators to oppose the repeal of Glass-Steagall in 1999. Senator Feingold also opposed the Wall Street bail-out in 2008.
Oh my the balls are still there!
There are times when one Senator with a pair of church-ringers can make a difference. This is one of them.
I have long said that Glass-Steagall, which was all of 37 pages, is more than sufficient to stuff the genie back in the bottle. Indeed, all of Mr. Feingold’s complaints would be addressed by simply reinstating it.
Yes, I know the banks would howl, and claim that "they’d all move to Britain."
Fine. Let ‘em.
If you know someone is playing around with the materials to blow up your economy, do you want them to do so in your country or somewhere else? Clearly, we’d prefer to have that happen "somewhere else", right?
Banking should be a utility function. Those institutions that want to play in the capital markets are free to do so, but they should NOT have access toany sort of support whatsoever – not from The Fed, not from Treasury, not from anyone but themselves. If they fail then they go under and everyone holding their paper takes a haircut (or worse.)
All this arm-waving and 2200 pages of legislation is another attempt…
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More On Yesterday’s Plunge
by ilene - May 7th, 2010 5:38 pm
More On Yesterday’s Plunge
Courtesy of Karl Denninger, The Market Ticker
If you had any doubt about what I have been talking about during this entire ramp job off 666 – that the so-called "bull market" was in fact not much more than a handful of institutions buying shares with free Fed money and passing them between one another hoping to distribute them to you - you should be thoroughly disabused of your skepticism after yesterday.
"Revenge of the algorithms" writ large, basically.
We keep talking about how financial innovation has "helped consumers", "helped businesses" and "made markets more efficient."
Let me put this in nice, large letters for you:
That claim is one big fat LIE.
If you need anything more after yesterday to understand that all these "algos" have done is create systemic risk and permit a handful of very large institutions to siphon off more and more of your money into their pockets like an insane hoover vacuum cleaner on steroids, you need a lobotomy.
The crooners are of course out in force this morning, among them Jeff Immelt:
“This is a point in time when the world needs the U.S. to be a beacon of stability, a beacon of reliability,” Immelt said during an interview at the 92nd Street Y in New York with Norman Pearlstine, chairman of Bloomberg Businessweek. “The world doesn’t need the U.S. in a food fight right now, with everything that’s going on in Europe. We should be the safe harbor.”
But what’s his definition of this? Why, to make sure GE can continue to siphon off more and more money from the productive economy via GE Capital!
“Financial services is a very important industry in this country,” Immelt said. “Goldman Sachs has been a partner to GE for a long time. We trust them, they’ve done great work for us.”
Yep – hinky derivatives deals are great for Goldman, and might be great for GE as well. For the rest of the world that actually produces something? Not so much.
“This point about damning Wall Street isn’t good for the American economy,” Immelt said.
“Some theoreticians that convinced themselves that you can have a great, productive country
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Cut the Partisan Crap … BOTH the Private Sector AND the Government are to Blame for the Financial Crisis
by ilene - May 1st, 2010 11:26 pm
Cut the Partisan Crap … BOTH the Private Sector AND the Government are to Blame for the Financial Crisis
Courtesy of Washington’s Blog
Partisan GOP hacks say the financial crisis was caused by too much regulation, and government interference in the markets.
But Glass-Steagall was repealed, derivatives were left unregulated, and the regulators were watching porn instead of preventing fraud. Giant banks, hedge funds and other fat cat private players knowingly gamed the market and committed fraud in more ways than can be listed in a single post.
And remember, even the "father of economics" – Adam Smith – didn’t believe in completely unfettered free markets.
On the other hand, partisan Democratic party hacks say that bad corporations caused the crisis, and that if more power is given to Summers, Bernanke, Geithner and the other governmental honchos, they’ll fix everything.
But Summers, Bernanke, Geithner and the other meatheads largely caused the crisis through their actions. And as Simon Johnson points out, the government created the mega-giants, and they are not the product of free market competition.
As I pointed out in February 2009, government fraud is pervasive:
In case you believe that there are only "a couple of bad apples" in the United States, here is an off-the-top-of-my-head list of corruption by leading pillars of American society:
- Senior military officials stole approximately $125 billion dollars out of Iraq reconstruction funds, dwarfing Madoff’s $50 billion Ponzi scheme (in turn, the looting which is now occurring under the bailout/stimulus programs will far surpass $150 billion)
- Texas billionaire Robert Stanford ran a multi-billion dollar fraud scheme of his own
- Senior judges in Pennsylvania have pleaded guilty to falsely convicting and imprisoning hundreds of youths (they got kickbacks from the prisons).
- The government-endorsed ratings agencies which were supposed to accurately rate the credit-worthiness of companies and nations committed massive fraud
There are hundreds of similar stories of corruption which have come out recently.
But surely government employees would have done something to stop such corruption if had known about it, right?
Well, actually:
- Whistleblowers alerted the government about the looting of Iraq reconstruction funds, but nothing was done
- A whistleblower "gift-wrapped and delivered" the Madoff scandal to the SEC, but they refused
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Break Up The Banks
by ilene - April 6th, 2010 2:22 am
Break Up The Banks
Courtesy of Robert Reich
A fight is brewing in Washington – or, at the least, it ought to be brewing – over whether to put limits on the size of financial entities in order that none becomes “too big to fail” in a future financial crisis.
Some background: The big banks that got federal bailouts, as well as their supporters in the Administration and on the Hill, repeatedly say much of the cost of the giant taxpayer-funded bailout has already been repaid to the federal government by the banks that were bailed out. Hence, the actual cost of the bailout, they argue, is a small fraction of the $700 billion Congress appropriated.
True, but the apologists for the bailout leave out one gargantuan cost — the damage to the economy, which we’re still living with (witness the latest unemployment figures). Leave it to the Brits to calculate this. Andrew Haldane, Bank of England’s Financial Stability Director, figures the financial crisis brought on by irresponsible bankers and regulators has cost the world economy about $4 trillion so far.
So while the bailout itself is gradually being repaid (don’t hold your breath until AIG and GM repay, by the way), the cost of the failures that made the bailout necessary totals vast multiples of that.
Needless to say, the danger of an even bigger cost in coming years continues to grow because we still don’t have a new law to prevent what happened from happening again. In fact, now that they know for sure they’ll be bailed out, Wall Street banks – and those who lend to them or invest in them – have every incentive to take even bigger risks. In effect, taxpayers are implicitly subsidizing them to do so. (Haldane figures the value of that implicit subsidy to be about $60 billion a year for each big bank.)
Congress and the White House tell us not to worry because financial reform legislation will contain what’s called a “resolution” mechanism allowing regulators to wind down any big bank that gets into trouble. (Think bankruptcy with more safeguards against runs by bank by creditors wanting to get their money out right away.) By virtue of this resolution authority, they say, future bank creditors will have to price in the possibility of the bank being allowed to fail. Hence, the implicit subsidy for…
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Reich Levels Broadside at Greenspan, Rubin, and Summers, and Phony Financial Reform
by ilene - April 4th, 2010 8:43 pm
I posted this article earlier, but now Jesse writes a great intro. – Ilene
Reich Levels Broadside at Greenspan, Rubin, and Summers, and Phony Financial Reform
Courtesy of JESSE’S CAFÉ AMÉRICAIN
Robert Reich is exactly correct. Back in 1999 I started questioning what Robert Rubin might have said to Alan Greenspan in a private meeting in 1997 to reverse his policy bias after his famous "irrational exuberance" speech and embrace the monetary easing that led to the tech bubble, and to join the fight against regulation, resulting in the repeal of Glass-Steagall in which the Fed was absolutely instrumental.
PBS Frontline – The Warning: The Roots of the Financial Crisis
This was no accident, in my opinion. This was no misplaced belief in ‘the efficient market hypothesis.’ This was not the culmination of the neo-liberal fascination with a mythology of human nature that would make Rousseau blush in its unthinking naiveté. And for Greenspan to say now, I am sorry, I guess I was mistaken, is more prevarication from the master dissembler.
There were plenty of enablers to this financial fraud. There always are many more people who do not act out of principle, or inside involvement and knowledge, but out of their own selfish bias and greed or craven fear that compels them to ‘go with the flow.’
And there is little better example of this than the many people who are even now turning a willful eye away from the blatant government manipulation of the stock and commodity markets, in particular the silver market. They do not wish to believe it, so they ignore it, and even ridicule it depending on how deeply it affects their personal interests. But the overall body of evidence is compelling enough to provoke further investigation, and the refusal to allow audits and independent investigation starts to become an overwhelming sign of a coverup. I am not saying that it is correct, or that I know something, but I am saying to not investigate it thoroughly and to air all the details, is highly suspicious and not in the interests of the truth. I did not know, for example, that Madoff was conducting a Ponzi scheme, but the indications were all there and a simple investigation and disclosure would have revealed the truth, one way or the other.
"Fiat justitia ruat caelum." Let justice be done though the heaven’s fall. This is the principle…
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The OTHER Reason that the U.S. is Not Regulating Wall Street
by ilene - February 7th, 2010 5:08 pm
The OTHER Reason that the U.S. is Not Regulating Wall Street
Courtesy of Washington’s Blog
Sure, American politicians have been bought and paid for by the Wall Street giants. See this, this and this.
And everyone knows that the White House and Congress – while talking about cracking down on Wall Street with strict regulation – have actually watered down some of the most important protections that were in place.
For example, Senator Cantwell says that the new derivatives legislation is weaker than the old regulation. And leading credit default swap expert Satyajit Das says that the new credit default swap regulations not only won’t help stabilize the economy, they might actually help to destabilize it.
But the U.S. is not being sold out in a vacuum.
On March 1, 1999, countries accounting for more than 90 per cent of the global financial services market signed onto the World Trade Organization’s Financial Services Agreement (FSA). By signing the FSA, they committed to deregulate their financial markets.
For example, by signing the FSA, the U.S. agreed not to break up too big to fails. The U.S. also promised to repeal Glass-Steagall, and did so 8 months after signing the FSA.
Indeed, in signing the FSA and other WTO agreements, the U.S. has legally bound itself as follows:
• No new regulation: The United States agreed to a “standstill provision” that requires that we not create new regulations (or reverse liberalization) for the list of financial services bound to comply with WTO rules. Given that the United States has made broad WTO financial services commitments – and thus is forbidden by this provision from imposing new regulations in these many areas – this provision seriously limits the policy [options] available to address the current crisis.
• Removal of regulation: The United States even agreed to try to even eliminate domestic financial service regulatory policies that meet GATS [i.e. General Agreement on Trade in Services] rules, but that may still “adversely affect the ability of financial service suppliers of any other (WTO) Member to operate, compete, or enter” the market.
• No bans on new financial service “products”: The United States is also bound to ensure that foreign financial
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Did The President FINALLY Wake Up?
by ilene - January 21st, 2010 1:55 pm
Did The President FINALLY Wake Up?
Courtesy of Karl Denninger at The Market Ticker
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THREE THINGS I THINK I THINK
by ilene - January 21st, 2010 1:13 pm
Pragcap turns more bearish in the face of proposed rules for reforming Wall Street. My highlights. – Ilene
THREE THINGS I THINK I THINK
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Courtesy of The Pragmatic Capitalist
- President Obama isn’t taking the Scott Brown victory lightly. He has just announced some stunning measures to curb bank risk taking. The news is taking Wall Street (myself included) by surprise as stocks tank on the news. The measures appear to be an early move back towards the Glass-Steagall Act. Specifically, Obama said no banks will own hedge funds or private equity funds. The details are few at this time, but that is stunning, must sell stock news. We continue to believe the secular bear market is with us, and such policy action creates a sense of uncertainty that is simply staggering. I would use strength in the coming days and weeks of earnings season to reduce risk until some of these clouds clear. Stocks cannot and will not rise substantially when the government appears to be on the attack against Wall Street and that appears to be the only response from the White House after the Brown win. While this is likely a very positive measure in the long-run, it has the potential to cause a great deal of near-term volatility. The combination of uncertainty in the Eurozone, China’s liquidity restraints, and this new policy reform in the United States creates a three pronged reason to avoid owning stocks in the near-term. While I hate to sell into downturns it’s best to take the meager gains since the beginning of the year and look for a better entry point. Uncertainty is a markets worst friend and there is a growing abundance.
- Earnings continue to come in quite robust. Goldman Sachs crushed analysts estimates and Ebay reported a solid quarter last night. Unlike previous quarters, investors are largely ignoring the earnings
season as the above three macro themes dominate the headlines. A continuing concern is a lack of strong revenue growth. Corporations are still largely relying on cost cuts to generate their better than expected earnings growth.
- This morning’s data is compounding matters. Jobless claims spiked to 482K vs expectations of 440K and the Philly Fed surprised to the downside. A Labor Department analyst
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The Volcker Rule is Born
by ilene - January 21st, 2010 12:35 pm
The Volcker Rule is Born
Courtesy of Joshua M Brown, The Reformed Broker
Obama has just introduced what we’re calling the Volcker Rule. This will prohibit banks from owning hedge funds, engaging in most prop trading and generally stop bank affiliates from taking on risk involving FDIC-backed deposits. It sounds tres Glass-Steagally to me.
The stocks of GS, JPM, BAC etc are all getting prison-raped on the news.
This is developing so I’ll need to come back with more details later today…stay tuned.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site