naked capitalism

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

A shorter version of this article in German will run in the Frankfurter Algemeine Zeitung on January 28. 2012

The inherently symbiotic relationship between banks and governments recently has been reversed. In medieval times, wealthy bankers lent to kings and princes as their major customers. But now it is the banks that are needy, relying on governments for funding – capped by the post-2008 bailouts to save them from going bankrupt from their bad private-sector loans and gambles.

Yet the banks now browbeat governments – not by having ready cash but by threatening to go bust and drag the economy down with them if they are not given control of public tax policy, spending and planning. The process has gone furthest in the United States.

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller.

Since the President is now establishing yet another committee to look into the mortgage fraud crisis, I figured it would be useful to look into the history of the Obama and Bush administrations’ approaches to the problem of vast financial fraud.

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller.

em>By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Warren Mosler recently ran a very succinct account of why the Fed/Bank of England’s easy monetary policies – that is, the combination of Quantitative Easing and their Zero Interest Rate Programs – might actually be killing demand in the economy.

Warren Mosler recently ran a very succinct account of why the Fed/Bank of England’s easy monetary policies – that is, the combination of Quantitative Easing and their Zero Interest Rate Programs – might actually be killing demand in the economy.

While a large number of “liberal” groups, ranging from the official Democratic party outlets (the Center for American Progress) to ones that sometimes cross swords with the Administration (MoveOn, the Working Families Party) praised the Tuesday evening announcement of mortgage “investigations” with Schneiderman co-chairing the effort, others who have been watching the mortgage legal fight closely were far more ambivalent about the creation of a new unit in an initiative …which has done pretty much nothing since its creation in 2009 (boldface mine):

One thing NC readers may have become attuned to, either via personal experience or some of the discussions we have had here, is how often a considerable portion of the value of a deal lies in releases (waivers of liability) or other provisions that might not seem all that important to the party signing away its rights.

Bloomberg reports that the state of Arizona has told the court that Bank of American is undermining the state’s investigation of its loan modification practices. The probe comes out of a 2010 lawsuit which alleged that Countrywide misled customers about its loan modification policies. So what did Bank of America do? It apparently gave mortgage mods to some (many?) of the people who had complained to state officials and had them sign an agreement not to say anything about the deal or disparage Bank of America. Per Bloomberg:

he structured credit analytics/research firm R&R Consulting released a bombshell today, and it strongly suggests that prevailing prices on non-GSE (non Freddie and Fannie) residential mortgage backed securities, which are typically referred to as “private label” are considerably overvalued.

Political scientist Tom Ferguson agreed with our dim take of the news reports last night on the formation of a “new” financial fraud commission on mortgage abuses (which is actually just part of an existing fraud commission that has done squat). He also saw the apparent co-optoins of New York’s Eric Schneiderman as an effort to rein in the attorneys general that oppose the mortgage settlement.

If you are concerned and skeptical as I am, PLEASE write or call Schneiderman’s office. While it is unlikely to derail this particular train, it does not hurt Schneiderman know that you recognize this as a likely Faustian bargain.

Reader DS sent this note as an example:

Dear Atty General Schneiderman,

Having admired the integrity with which you have supported the rule of law
related to Wall St shenanigans and the mortgage crisis, I find it deeply distressing to read the following:

http://www.nakedcapitalism.com/2012/01/is-schneiderman-selling-out-signs-up-to-co-chair-committee-designed-to-undermine-defectors-to-mortgage-settlement-deal.html

I hope/trust that you will not ‘sell out’.

You can call Schneiderman’s office at 800-771-7755 or send a message via this page.

To the Ferguson interview:

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2012/01/greece-lines-up-portugal/“>MacroBusiness.

And so we roll on…

One of the things that amazes me about the European “crisis” is how symptoms of the underlying problems of the macro-economic system that is the Eurozone get confused with the actual problem. Let’s take the current situation in Greece for example:

Yves here. Even though both writers are affiliated with the Peterson Institute, this post talks about the need for countercyclical mechanisms in the eurozone, which makes it less austerian than the prevailing line of thinking in the officialdom. But some readers will not be so keen about the worship of Hamilton.

By C Randall Henning, Professor of International Economic Relations, American University and Martin Kessler, Research Analyst, Peterson Institute of International Economics. Cross posted from VoxEU

In the last few months, several Vox columns have drawn parallels between Europe today and an emerging – and even less stable – United States in the eighteenth century. This column stresses that Europe’s leaders in search of a fiscal union need not seek to replicate the US experience but they should at least learn from it.

New York Attorney General Eric Schneiderman has been celebrated as the progressive Great White Hope. But the danger of assuming leadership is that that individual becomes a target both of attacks and of seduction. And while I’d like to think better of Schneiderman, an announcement earlier this evening has strong hallmarks of Schneiderman falling prey to the combined pressures and blandishments of the Administration and its allies.

Only a sketchy bit of news has been released, with the most extensive reporting so far coming in Huffington Post which incorrectly anticipated a State of the Union announcement of the fact that Schneiderman will be co-chairing a Federal committee to investigate mortgage abuses (the story appears to have been confirmed in general terms via an announcement from Schneiderman’s office). Key details from the HuffPo story:

By Lynn Parramore. Cross posted from Alternet.

Representing the twin evils of ruthless capitalism and government corruption, the GOP candidates are bringing core Occupy issues to the fore.