Category Archives: Banking industry

NYT’s Jackie Calmes’ “Grossly Inaccurate” Hit Piece on Neil Barofsky

It isn’t surprising that the knives are out. Former Special Inspector General of the TARP Neil Barofsky’s new book Bailout depicts the Treasury, where his effort was housed, as completely, hopelessly in thrall to the banks. While Hank Paulson at least seemed genuinely to appreciate the need for procedures and checks to protect taxpayers’ interests, Geithner chafed at any interference in catering to every whim of the financial services industry and used every bureaucratic trick at his disposal to undermine Barofsky.

Although Barofsky’s book has generally gotten very positive reviews, including one from the New York Times’ Gretchen Morgenson last weekend, a rearguard action by Friends of the Administration was inevitable. And it has come in the form of a book review by a Washington reporter for the Grey Lady, one Jackie Calmes.

Josh Rosner: Eurozone Crisis – No More Safe Havens

Josh Rosner of Graham Fisher published a report last week urging subscribers to short bunds, beating the Moody’s negative watch for Germany and the Netherlands by a full week.

The article provides a data-rich analysis of how a banking crisis has morphed into a sovereign debt crisis as the authorities have refused to impose losses on investors in banks in the so-called core Eurozone countries. And as Rosner argues, the current path of denial and delay has increased the eventual costs to Germany and the global economy, with the tab to Germany already €500 billion higher than it would otherwise have been.

Satyjit Das: The LIBOR Fix – Part II

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk and Traders Guns and Money. Jointly posted with roubini.com

The scandal surrounding the manipulation of LIBOR sets raises a number of issues. The first part of this two part piece set out the known facts. In the second part, we discuss the broader implications of the episode.

Randy Wray: Why We’re Screwed

By L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City. Cross posted from Economonitor

As the Global Financial Crisis rumbles along in its fifth year, we read the latest revelations of bankster fraud, the LIBOR scandal. This follows the muni bond fixing scam detailed a couple of weeks ago, as well as the J.P. Morgan trading fiasco and the Corzine-MF Global collapse and any number of other scandals in recent months. In every case it was traders run amuck, fixing “markets” to make an easy buck at someone’s expense. In times like these, I always recall Robert Sherrill’s 1990 statement about the S&L crisis that “thievery is what unregulated capitalism is all about.”

EuroCrisis Intensifies as Spain Spirals Downward, Greek Impasse Nigh

It is increasingly difficult to find metaphors adequate to describe the pathological dysfunction among European leaders as their rigidities and biases make a full blown crisis look inevitable.

Satyajit Das: The LIBOR Fix – Part 1

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk (2011)

The scandal surrounding the manipulation of LIBOR sets raises a number of issues. In the first part of the two part piece, the known facts are outlined. In the second part, the broader implications of the episode are discussed.

Europe to Put Interest Rate Fixers in Jail

Prospectively only, it seems. But we see “criminal” and “banking” in the same sentence so rarely in official circles that this is a welcome development.

SIFMA Fires Shot, Excludes Mortgages in Localities that Adopt Condemnation From To-Be-Announced Market

On Monday, the financial services industry association (aka lobbying group) SIFMA said that it would exclude mortgages in localities that had condemned mortgages from the to-be-announced market, which is an important source of liquidity for new Fannie and Freddie loans. The promoters of the program, Mortgage Resolution Partners, issued a wounded-sounding response.

So what does this all mean? The short answer is that on the surface, this looks like a clever bit of banker thuggery.

Why the Obama Administration Will Hate Neil Barofsky’s Book “Bailout”

Having read an advance copy of former Special Inspector General of the TARP Neil Barofsky’s new book, Bailout, I am pretty confident most NC readers would enjoy it. He got to be what I call a designated asshole in his DC incarnation, not that that was the way it had to turn out. For some unfathomable reason, the Bush White House decided it wanted someone who’d take the SIGTARP role seriously in the job. And they chose a Democrat, perhaps figuring that as much as he’d be a thorn in their side, Obama would be hard pressed not to keep him on, and he’d be even more of a problem for them.

Six reasons why the Obama Administration will hate this book:

Spain Slides

By Delusional Economics, a regular blogger at MacroBusiness and a consulting editor at the Macro Investor newsletter. He 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

It was an all round horrible night for Spain, starting with a bond auction that went a little wrong:

Quelle Surprise! New York Times’ “Deal Professor” Ignores Facts and Law to Defend Citi Employee Stoker in SEC Toxic CDO Case Rakoff Highlighted

While the New York Times’ DealBook section generally hews to a financial-services-industry-friendly line, presumably as a Faustian bargain for being a preferred leakee, there’s not even a weak defense for the article by the New York Times’ so called “Deal Professor” Steven Davidoff, “If Little Else, Banker’s Trial May Show Wall St. Foolishness.” It’s yet another brazen effort to diminish the seriousness of rampant fraud by arguing it was just carelessness. But to make his case, Davidoff misrepresents both the facts of the situation as well as the law. Since Davidoff’s lawyer union card is an explicit part of his brand at the Times, this story amounts to another credentialed effort to run the “nothing to see here, it’s too hard to get these guys” line that has become the Administration’s pet excuse for not going after one of its biggest sources of campaign funds.

Yanis Varoufakis: It is Now Official – The Eurozone’s Monetary Transmission System is Broken

By Yanis Varoufakis, Professor of Economics at the University of Athens. Cross posted from his blog

Under normal conditions, the interest rates that you and I must pay on a home loan, a car loan, our credit card, a business loan are pegged onto two crucial rates. One is the rate that banks charge one another in order to borrow from each other. The other is the Central Bank’s overnight rate. Alas, neither of these interest rates matter during this Crisis. While such ‘official’ rates are tending to zero (as Central Banks try to squeeze the costs of borrowing to nothing), the interest rates people and firms pay are much, much higher and track indices of fear and subjective estimates of the Eurozone’s disintegration.

Philip Pilkington: The New Monetarism Part I – The British Experience

By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil

While there are pretty stark dissimilarities between the current quantitative easing (QE) policies of many governments and the old monetarism that prevailed in the late-70s and early-80s, the reason that these both policies were ineffective is because they were based on the same flawed ideas. The key difference between the two is that where monetarism was implemented as a deflationary and contractionary policy, QE is currently being implemented as an inflationary and expansionary policy. As a result, examining the failure of monetarist policies thirty years ago provides important lessons considering QE and its offshoots.

Before looking at the similarities between these two doctrines, we will explore the actual historical trial of monetarism.

Sheila Bair on Bill Moyers: “Libor Always Troubled Me”

Bill Moyers starts with the Libor scandal as a way to get Sheila Bair’s perspective on the failure to get meaningful bank reforms. It’s refreshing to see how direct she is in saying the fixes aren’t hard, the problem is lack of will. She also discusses the death of moderate Republicans, and “free for all markets”.