As Lambert says, get a cup of coffee, or maybe two. This is a long piece, but that is in part because it includes many damning vignettes from the Eurocrisis, so this is the antithesis of a dry read.
Read more...Yves here. Readers will notice how closely the US banking model hews to the UK version (or more accurately, original), particularly in its predatory practices.
Read more...I thought readers would have fun taking apart a reply by the Thomas Curry, the Comptroller of the Currency, to some written questions posed by Elizabeth Warren after a July 11 Senate Banking Committee hearing on systemic risk.
Read more...Yves here. I enjoyed this piece by Bill Black because 1. Anyone who tries to pretend the Administration is serious about prosecuting bank-related fraud needs to be named and shamed and 2. I like the device of using a single sentence as the basis for a post.
Read more...Nothing like watching a captured regulator like the Fed use a public hue and cry to execute a big bait and switch. Here the ploy is to change rules to further disadvantage the parties making complaints. But it takes finesse to make the finger in the eye look plausible and reasonable, so that when the well-understood bad effects show up later, the perp can pretend to be mystified.
Read more...Congressmen Alan Grayson and John Conyers have published a well-thought-out proposal on bank equity, with the objective of assuring that when banks do stupid things (which they do with great regularity, even before the era of casino banking, they’d embrace some new fad and run off the cliff together, like lemmings), they have enough capital to absorb losses. And that means a lot more capital than regulators are demanding they have now.
So I urge you to co-sign their letter (full text below) at http://nobankwelfare.com/.
Read more...Don’t get too excited.
Read more...Nothing like having a credulous, leak-dependent media to carry your messages.
Read more...Just because a taboo has been broken does not necessarily mean that more radical action is in the offing. But the flip side is that, while we’ve been busy following debt ceiling and budget hijinx in the US, there are some surprising developments on the other side of the pond. One is that, as anti-Euro candidate Marine Le Pen is leading in polls in France, respected members of its ruling bureaucracy are deeming the Euro as a failed experiment and presenting detailed plans as to how an breakup could be executed.
Mind you, the Eurozone has been limping from crisis to crisis for so long that it’s hard to take new signs of trouble seriously.
Read more...One of the big news stories of the weekend is that JP Morgan and the Department of Justice, brokering a settlement of liability across multiple Federal agencies, have reached a tentative $13 billion settlement on the bank’s mortgage-related conduct in the run-up to the crisis. But the size is not necessarily a metric of accomplishment.
Read more...Yves here. I have to confess that I love this title. It serves as a reminder that the meme that lenders in the crisis were somehow victimized by borrowers is a lame defense of rank incompetence or worse. The basic rule of lending is that all you have is downside from a credit perspective. The borrower is never going to perform better than the terms of the agreement, and he may well do worse. Any competent lender knows that borrowers can be overly optimistic, naive, unlucky, or downright crooked. Lenders therefore need to take prudent measures to protect themselves from these well-known borrower foibles, the most important being not lending to obvious bad risks, and adding enough margin to your cost of borrowing to cover debtor bad luck and your own miscalculation. So to have a huge explosion of borrower defaults, including a meaningful swathe of subprime borrowers defaulting in the first 90 days, is proof not of massive borrower chicanery, but massive lender incompetence or corruption (as in presuming they could dump the dodgy loan on the next fool in the securitization pipeline).
Read more...On Thursday, a former bank examiner at the Federal Reserve Bank of New York, Carmen Segarra, filed a suit (embedded at the end of this post) against the New York Fed and several of its employees alleging, among other things, improper termination. The complaint is a doozy and some of the additional details supplied by Segarra to ProPublica make an already ugly picture look even worse.
Read more...Most of the news accounts of Obama’s nomination of Janet Yellen as the next Federal Reserve Chairman focused either on what type of monetary stance she was likely to take or on biographical details.
But some writers have used the upcoming changing of the guard at the Fed to look at the bigger question of the Fed’s role, particularly now that it has continues to intervene in financial markets to an unprecedented degree, a full four years after the worst of the financial crisis had passed.
Read more...Last week I saw a headline in the Daily Telegraph that got me thinking. It encapsulates a lot of what poses as philosophy in our world today, as a valid way of thinking and a relevant approach to all the crises we live through simultaneously at the moment. One which, when you look longer and closer, appears at least at first glance to lack all philosophical value – since it doesn’t actually weigh any pros and cons -, and turns out to be a rehash of a hodge-podge of the very failed old theories that have led us into our crises.
Read more...Yves here. A couple of days ago, we linked to a Financial Times story that featured hedge fund investor John Paulson talking up his investments in the two large Greek banks, Alpha Bank and Piraeus Bank. As a savvy investor buddy once remarked, “When some is talking up something they own, be on the watch that they are actually selling.” In this case, as Varoufakis describes, what Paulson is actually pushing for is for the Troika to change the pricing of warrants on his Greek bank investments because they aren’t providing the big payoff he wanted. So he is indeed “selling” in that he wants his payday now but needs to get official bodies to give him even more subsidies to get there.
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