Yearly Archives: 2011

Links 6/3/11

Michael Hudson: Replacing Economic Democracy with Financial Oligarchy

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. Cross posted from CounterPunch.

Soon after the Socialist Party won Greece’s national elections in autumn 2009, it became apparent that the government’s finances were in a shambles. In May 2010, French President Nicolas Sarkozy took the lead in rounding up €120bn ($180 billion) from European governments to subsidize Greece’s unprogressive tax system that had led its government into debt – which Wall Street banks had helped conceal with Enron-style accounting.

The tax system operated as a siphon collecting revenue to pay the German and French banks that were buying government bonds (at rising interest risk premiums). The bankers are now moving to make this role formal, an official condition for rolling over Greek bonds as they come due, and extend maturities on the short-term financial string that Greece is now operating under. Existing bondholders are to reap a windfall if this plan succeeds. Moody’s lowered Greece’s credit rating to junk status on June 1 (to Caa1, down from B1, which was already pretty low), estimating a 50/50 likelihood of default. The downgrade serves to tighten the screws yet further on the Greek government. Regardless of what European officials do, Moody’s noted, “The increased likelihood that Greece’s supporters (the IMF, ECB and the EU Commission, together known as the “Troika”) will, at some point in the future, require the participation of private creditors in a debt restructuring as a precondition for funding support.”

The conditionality for the new “reformed” loan package is that Greece must initiate a class war by raising its taxes, lowering its social spending – and even private-sector pensions – and sell off public land, tourist sites, islands, ports, water and sewer facilities. This will raise the cost of living and doing business, eroding the nation’s already limited export competitiveness. The bankers sanctimoniously depict this as a “rescue” of Greek finances.

Guest Post: Congressional Research Service Confirms Big Banks Borrowed Cash For Next To Nothing, Then Lent It Back to the Federal Government at Much Higher Rates

No wonder Bill Gross, Nouriel Roubini, Laurence Kotlikoff, Steve Keen, Michel Chossudovsky, the Wall Street Journal and Bernie Madoff all say that the U.S. economy is a giant Ponzi scheme.

Guest Post: Even BP-Funded Scientists Find that the Use of Corexit Dispersant in the Gulf Made Things Worse … but BP Still Tries to Blame Others for Destruction

BP tries to blame shrimpers for all of the turtle deaths, to deflect attention from it’s grossly negligent acts and omissions.

Goldman Subpoenaed Over Levin Committee Hearing Findings

On the one hand, this is just a subpoena of Goldman from the Manhattan DA’s office, but on the other, after all the crisis investigations, we finally have a prosecutor somewhere deciding to take some abuses during the crisis seriously enough to see if they add up to a legal case. (Yes, the SEC did file a suit against Goldman on one synthetic CDO, one transaction out of 25 in its Abacus program, which Goldman settled for $550 million, but this was litigation on one deal, not on broader patterns of misconduct).

And it came not out of the splashy but designed not to accomplish much FCIC, but the quieter and more tenacious Senate’s Permanent Subcommittee on Investigations. I hardly ever do media briefings, but I was on the blogger call for both reports, and the contrast was night and day. The FCIC briefing was softball PR, with Phil Angelides and Brooksley Born (who by definition had not done the work and therefore were not big on detail) leading the call. The Senate call was led by staffers who demonstrated impressive command of the products and industry economics and transmitted information at a very high bit rate.

Not surprisingly, the information request comes from a local prosecutor. The DoJ continues to be missing in action.

Links 6/2/11

Banker Derangement Syndrome I: Lawyers Offer to Get Rid of Their Profession to Save the TARP Banks

We’ve decided to publicize the rapid rise of a dangerous ailment, Banker Derangement Syndrome, which has become so widespread that the media is publicizing examples on virtually a daily basis.

Banker Derangement Syndrome occurs when someone who might once have been sensible is acting as a mindless mouthpiecs of particularly rancid banking industry propaganda. Note that financial services industry employees by definition do not qualify; they are simply engaging in the time-honored industry practice known as “talking your book” when they say something that is patently ridiculous and self serving. No, Banker Derangement Syndrome occurs when an independent party say something so blatantly and embarrassingly wrong in support of the banking industry, whether to curry favor or via having taken an overdose of its Kool Aid, so as to do severe damage to their credibility. In other words, if the questionable behavior could be explained as an over-zealous effort to win points with our new financial overlords, it backfired big time.

Banker Derangement Syndrome II: William Cohan Can Give No Reason for Not Appointing Warren, Except Some People Don’t Like Her

As we indicated, this is the second post in a series on Banker Derangement Syndrome, in which people who might once have been sensible are acting as mindless mouthpieces of particularly rancid banking industry propaganda. We suspect it has to do with being too long in close proximity of zombie banks; they probably need to suck grey matter out of the living to keep functioning.

William Cohan wrote a particularly wretched piece for Bloomberg on why Elizabeth Warren should do everyone a favor and put herself on the next train out of DC. There is a decent case to be made against having Warren head the CFPB, but that’s not what Cohan provided. He instead made a weak argument (if you can even call it that) and got screechy to cover for it.

Affordable Housing Groups Once Again Acting As Human Shields For Banksters

I’m not going to quote George Santayana tonight, as much as his famous saying verging on cliche fits. But will some people never learn?

Another useful cliche is that politics makes for odd bedfellows. But that notion is misapplied in a New York Times article tonight, which tries to convince readers that affordable housing advocates and mortgage financiers playing on the same team is a new development. Huh? Per the Times:

The weight of the mortgage crisis fell heavily on lower-income and minority communities…..That left consumer advocates and civil rights groups frequently at odds with bankers, mortgage lenders and their lobbyists during the debate over the financial regulation act last year, which aims to rein in the subprime mortgage excesses that inflated the housing bubble.

Now, as banking regulators are rewriting the rules for the mortgage market, unusual alliances have sprung up in opposition to tighter lending standards. Advocacy groups like the N.A.A.C.P. and the National Council of La Raza, a Latino civil rights organization, on the one hand, and the American Bankers Association on the other, are joining together to fight rules they say could make home loans less affordable for minority and working-class Americans…

Guest Post: Yastrow: “We Are on the Verge of a Great, Great Depression”

Peter Yastrow says we’re on the brink … but this shouldn’t be news to anyone who has been paying attention.

Will China’s bad debt problem affect employment?

The major talking point this morning has been the Chinese bad debt cleanup. Following Yves’ post on China, this post is the second of three on China from Credit Writedowns this morning. Read Michael Pettis’ take and my take on that action here. This post is going to be more about where China and the […]

VOICE Demands Immelt, GE, Bank of America, JP Morgan Address Foreclosure Crisis

Daniel Pennell, a systems expert who has testified before the Virginia House of Representatives on MERS, sent this video compilation from VOICE, a large interfaith group here in the state of Virginia that works for the betterment of local communities. He asks:

Although these stories are from Manassas, they could be from any of hundreds or thousands of communities across the United States. If you find it as disturbing and powerful as I did then please share it broadly.

Links 6/1/11

Bill Black: Bad Cop; Crazed Cop – the IMF and the ECB

By Bill Black, an Associate Professor of Economics and Law at the University of Missouri-Kansas City. He is a white-collar criminologist, a former senior financial regulator, and the author of The Best Way to Rob a Bank is to Own One. Cross posted from http://neweconomicperspectives.blogspot.com/2011/05/in-praise-of-sorkins-praise-of.html“>New Economic Perspectives

Greetings again from Ireland. One of the many mysteries about the current crisis is why anyone listens to the IMF or anyone that supported its anti-regulatory policies. Prior to the crisis, even the IMF had begun to confess that its austerity programs made poor nations’ financial crises worse. In the lead up to the crisis the IMF was blind to the developing crises. It even praised nations like Ireland during the run up to the crisis, missing the largest bubble (relative to GDP) of any nation, an epidemic of banking control fraud, and the destruction of any pretense to effective Irish banking regulation.

Crises reveal many deficiencies and one of the most glaring was the European Central Bank (ECB).