Today’s Water Cooler: ECB QE, Sheldon Silver and state capture in NY, Clinton beats the Mittster like a gong, King Abdullah a piece of work
Thursday, January 29, 2015
There’s no end in sight to Odgers’ inept duplicity: she can’t even tell the truth about her resignation from Pacific Fiduciaries
Lawyers as Crime Enablers: Maine Bar Counsel Punts on Sanctioning Foreclosure Attorneys for Bogus Affidavits
Robosigners and the foreclosure mill attorneys who worked with them filed millions of bogus affidavits. So where are the disbarments?
Posted by Yves Smith at 6:58 am |
As we’ve been examining private equity abuses, readers have been incredulous that investors have put up with one-sided, deliberately vague, complex, and/or obfuscatory contracts, unreasonable demands for secrecy, and lack of access to critically important information, such as the financial statements of the portfolio companies that they own. This failure of investors to protect their own interest is particularly troubling given that so many are fiduciaries.
We have another example of this sort of conduct that comes out of an important story in the Wall Street Journal yesterday. Private equity kingpin KKR made what amounted to an admission of guilt by rebating fees that the SEC had found were improperly charged, meaning stolen from the limited partners. We’ve obtained the document that was the foundation of the story and are embedding it at the end of this post. It’s a remarkable example of how cronyistic the relationships are between hapless, captured investors and the general partners who led them by the nose.
We are about to do some document forensic work, so put on your gumshoes!
As we and others have discussed at some length, the concern over Social Security funding is vastly overhyped. As Nicole Woo discusses in this Real News Network interview, one simple fix, that of eliminating the cap on who is subject to the tax, would solve most of the gap that is anticipated in long-term projections. That’s before we get to the MMT issue that “taxing” to fund any government activity is a political mechanism that is a holdover from the gold standard days, and not how government functions are funded operationally.
In fact, with more and more promised pensions being slashed, and investment returns flagging thanks to QE and ZIRP, the notion that ordinary people can save enough for their retirement is a chimera. Thus preserving and strengthening Social Security is more important than ever.
Yves here. This is a terrific piece on the thinking, such as it is, that has come to dominate the Beltway, and how these preoccupations keep the US lurching forward in a costly, destructive policy trajectory.
Today’s Water Cooler: QE ECB, SOTU skepticism, Sanders heads for Iowa, healthcare.gov shares personal health data with private companies
Poroshenko Makes Battle of Donetsk Airport Precondition for New $50 Billion Bailout – Ukrainians Repelled in the Battle of Davos
The machinations over the next round of funding in Ukraine are wild. No one, particularly the US, wants to fund Ukraine and debt default looks likely, yet Ukrainian President Petro Poroshenko is demanding a huge amount of additional funds. Soros is trying to end run the IMF, albeit with not much success so far.
Posted by Yves Smith at 6:55 am |
KKR made what amounted to an admission of guilt to the blistering charges that the SEC laid at the doorstep of the private equity industry last May. Then, Andrew Bowden described in unusually specific detail the widespread, serious abuses it was finding in its initial private equity examinations, including what amounted to embezzlement.
Mark Maremont of the Wall Street Journal, based on a document obtained by FOIA from the Washington State Investment Board, learned that KKR had disgorged some ill-gotten fees.
The most that officialdom seems willing to do to deal with the crisis is messaging that it is over. Most people can tell how well that is working.
The ECB is set to announce the details of its QE program tomorrow. Many analysts and investors have been trying to puzzle out how its operations might work, since those details will make a difference in what impact if any it has.
Frankly, we are hugely skeptical of this initiative. The US version, which is bizarrely touted as a success, further zombified the economy. It goosed asset prices, which widened wealth and income inequality. Now respectable economists are decrying the widening gap between rich and poor and the lack of class mobility as a brake on growth, yet they also refused to endorse debt restructuring and much more aggressive fiscal spending. And some experts contend that the reason the Fed decided to end QE last summer was that it came to recognize the costs outweighed what if anything it produced in the way of benefits. Of course, they can never admit that publicly or even privately if true.
In Europe, there is even more reason to be expect QE to be at best ineffective. Unlike the US, where as a matter of policy, a lot of financing takes place through the capital markets (for instance, credit card debt, subprime auto loans, home loans are all securitized to a large degree), in Europe, far more credit is on bank balance sheets, and small to medium sized corporate lending is far more important than in the US. Thus, while as we have repeatedly explained, putting money on sale is unlikely to result in more borrowing unless the cost of money is the biggest cost of running your business (ie, you are a bank or a speculator), in Europe you have the added layer that reducing investment yields is unlikely to change how credit officers view lending to small/medium sized enterprises (assuming they even want to borrow) in a weak, deflationary economy.
This Bruegel post describes the major options that the ECB has in designing its QE program, which will help readers benchmark tomorrow’s announcement. One might politely describe the choices as bad and less bad.
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Posted by Yves Smith at 3:45 pm |
Today’s Water Cooler: The greatest SOTU EVAH, Davos, TPP/TTIP, bacteria that eat and excrete pure electrons, and AirPnP.