Author Archives: Yves Smith

Escalating Delinquency Rates Make Student Loans Look Like the New Subprime

ow that student loans are undeniably in bubble territory, the officialdom is starting to wake up and take notice.

Marshall Auerback: Bank of Canada Governor is Wrong on Too Big To Fail and Wrong on Canada’s Banking System

Yves here. It was very telling, and disappointing, to find out that the Governor of the Bank of England in waiting, Mark Carney, has been critical of the ideas of Andrew Haldane, the executive director of financial stability of the Bank. Haldane has the goods on major banks, and has come up with both colorful and insightful critiques as well as creative solutions. It now becomes clear why George Osborne made this surprising pick: Carney sees nothing wrong with large, universal banks, while the departing Governor, Mervyn King, Haldane, and the head of the soon-to-be-disbanded FSA, Adair Turner, were unified in their desire to cut the mega-banks down to size.

By Marshall Auerback, a portfolio strategist, fellow with the Economists for Peace and Security, and a research associate for the Levy Institute. Cross posted from New Economic Perspectives

As a Canadian, perhaps I should feel a surge of patriotic pride now that Mark Carney has been designated the new head of the Bank of England – quite a step up for the current governor of the Bank of Canada. That said, his recent attack on the Bank of England’s Andy Haldane in a Euromoney interview last month, does give one some cause for concern, particularly as it evinces the usual complacency that most Canadians seem to feel about the basic soundness of their own banking system, which essentially upholds the universal banking model as a viable one.

Links 11/27/12

Welcome to the Future of Your Health Insurance. It Sucks.

There have been numerous reports about the shortcomings of Obamacare which its boosters have either ignored or shouted down. And troublingly, the attitude is often “I got mine” as in “My kids are now covered under my policy” without questioning what the narrow and broader issues are.

Well, I’ll tell you I got mine too. My current policy, which on paper is actually quite good, has a lifetime cap. Under the ACA, it is grandfathered and the cap is removed. And I’m still here to tell you that the future sucks. This deal enriches Big Pharma and the health insurers at the expense of the public at large. And the result of that will be a worsening of the already lousy health care system in the US. And I can give you a feel for what your future is likely to look like. It’s not pretty.

The 0.1% Circles the Wagons: Buffett Pumps for Dimon as Treasury Secretary

Well, given that our current Treasury secretary was forgiven for being a tax cheat (Turbo Timmy never did settle up for his underpaid taxes that were beyond the IRS statute of limitations), there is a certain logic in upping the ante with his replacement. Having a Treasury secretary who is a slam-dunk case for criminal Sarbanes-Oxley violations (see here and here) as well as running a bank where the auditors signaled the worst level of accounting failure short of signaling “going concern” worries is par for the course for the ever-risinng level of corruption among what passes for our elites.

Links 11/26/12

Mirabile Dictu! Regulators Using Trading Scandals to Push for Tougher Capital Requirements

Most news reports on financial regulatory reform hew to a few storylines: banks pushing back in private and winning on diluting regulatory reform; banks attributing lousy profits to new regulations (with a notable lack of proof of this convenient blame-shifting); bank regulators demonstrating capture, corruption and incompetence (which even though true to a fair degree is played up by industry incumbents to support the notion that regulation is futile).

So it’s refreshing to see a contrasting storyline….

Marshall Auerback: Even a Deal on the Budget is Bad for the American Economy

Yves here. One of the frustrating aspects of the Great Catfood Debate is that it boils down to not whether, but how much, catfood you get in your future. Marshall Auerback explains why any of the proposed outcomes to the budget negotiations will slow growth and possibly produce a recession.

Hugh Hendry: ‘We’re in the death spiral of mercantilism’

You have to give a fund manager points for admitting to having a “history of contentious posturing.” Hugh You have to give a fund manager points for admitting to having a “history of contentious posturing.” Hugh Hendry’s also a reformed gold bug, which shows an unusual flexibility of thinking (once people join the gold cult, they seldom leave). Even if you don’t necessarily agree, his talk will serve as a useful grist for thought (hat tip Ian Fraser). Hendry discusses the end of an broadly adopted national strategy, mercantilism, and what he sees as the implications.

Links 11/25/12

Tens of Thousands of Egyptians Protest Morsi’s Power Grab

This Real News Network interview with Hamid Dabashi discusses the drivers and ramifications of Mohammed Morsi’s usurpation of democratic checks on the president.

Links 11/24/12

The Greek Resistance

This Aljazeera video seeks to understand how Germans and Greeks view each other in light of the way the Trokia is breaking Greece as an example to other periphery countries (yes, Greece would have had adjustment problems regardless, but they are being made far worse by the measures taken to avoid exposing the insolvency of French and German banks). It covers how the crisis has rekindled lingering hostilities. It also sheds new light on the pre-crisis economic relationship between Germany and Greece, including corrupt deals between the Greek government and German arms-makers. It also treats austerian thinking with more dignity than it deserves, but that is a secondary theme of this show.