Category Archives: Banking industry

Obama to Try Better Smoke and Mirrors to Address Housing Market Woes

If I had Onion-level parody skills, I’d treat the latest story in The Hill on Team Obama’s latest housing headfake masquerading as an initiative by riffing on one of its planned new program. Call it HUMP, Homeowners Upward Mobility Program. In true Ministry of Truth style, mortgage borrowers facing foreclosure would be moved, discreetly, into tent cities that would do Potemkin proud, with names like “Country Club Lane” and “Lake Shore Drive” and painted facades in front of their tents and shanties. Local merchants would praise the new subdivision and the inhabitants would say how nice it was to now be living in a McMansion, even if it was only really a couple of inches deep.

But instead you get my normal shtick.

Greece Poised to Default

By Delusional Economics, who 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. Cross posted from MacroBusiness.

Another melee won by the ECB overnight with the LTRO once again pushing sub 3 year sovereign auctions into a “happy place”.

#Occupy the SEC Submits Letter on Volcker Rule to House Financial Services Committee Hearing (#OWS)

For those who are fond of depicting Occupy Wall Street as a bunch of hippies with no point of view, counterevidence comes in the letter submitted by the Occupy the SEC subcommittee for a joint subcommittee hearing tomorrow, January 18, of the House Financial Services Committee on the Volcker Rule. The title of the hearing broadcasts that financial professionals are ganging up against the provision: “Examining the Impact of the Volcker Rule on Markets, Businesses, Investors and Job Creation.” The supposed “business” representatives are firm defenders of the financial services uber alles orthodoxy, and there is a noteworthy absence of economists or independent commentators on the broader economic effects. The one non-regulator opponent to the effort to curb the Volcker Rule is Walter Turbeville of Americans for Financial Reform. However, they made the fatal mistake of accepting the banksters’ framing about financial markets liquidity and merely disputed the data submitted.

The letter is well documented and well argued. It goes directly after the financial services industry claim that implementation of a ban on proprietary trading will cause damage by hurting vaunted and mystical “liquidity.” An illustrative extract:

Matt Stoller: Quelle Surprise! The Federal Reserve Knew About the Housing Bubble in 2004

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller. Cross posted from New Deal 2.0

The data — both anecdotal and otherwise — was out there, and the Fed even discussed it internally. Let’s not let it off the hook.

Satyajit Das: Europe’s The Road to Nowhere, Part II – Roadblocks Ahead

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

Over the next few months, the Euro-Zone faces a number of challenges including: the implementation of the new arrangements, possible further downgrading of a number of nations, refinancing maturing debt and meeting required economic targets. There will also be complex political and social pressures.

Implementation of the new fiscal compact may not be a fait accompli.

S&P Downgrades Europe Rescue Fund

This site and many others deemed the European rescue fund, the European Financial Stability Fund, to be unworkable (among other things, the device of having troubled countries on the hook to finance their own rescues seemed absurd). But it’s one thing to have informed critics view this contraption with skepticism, quite another for a ratings agency to ding it formally.

US investors can still treat the EFSF as AAA based on Moody’s and Fitch AAA ratings. But who with an operating brain cell would buy bonds that are so clearly exposed to downgrade risk?

Adam Davidson, the 1%’s Lord Haw-Haw, Fellates Wall Street

Although I endeavor to treat high dudgeon as an art form, it is difficult to find words adequate to convey the level of ridicule and opprobrium that Adam Davidson’s latest New York Times piece, “What Does Wall Street Do for You?” deserves. I had the vast misfortune to come across it late last week, and have gotten an unusually large volume of incredulous reader e-mails about it. Ms. G’s e-mail headline “NYT – Not a Parody” was typical:

This one is so bad, even for NYT, I’m wondering if the paper wasn’t secretly sold to Murdoch, Bloomberg & the Fed Reserve sometime in the past few days.

Matt Stoller: Fed Transcripts – Why Was Congress in the Dark During the Crafting of Dodd-Frank?

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller. Cross posted from New Deal 2.0

Records of the Fed’s meetings at the height of the housing bubble provide more evidence that our central bankers need to be held accountable.

Wolf Richter: Greece – Disagreement Everywhere, Rift in the Troika

Austerity measures are taking their daily toll on Greece. Suicides and attempted suicides have jumped by 22.5%. Unemployment rose to 18.2%. Pharmacies are having difficulties obtaining medications. More cuts are coming. If there is no agreement with the bailout Troika, Greece will default in March. But now, even the Troika is in disarray.

Big Defection in Attorney General Mortgage Settlement: 12 States Having Parallel Talks

At least when Penelope was resisting her suitors, it was clear what her objectives were. She was holding out on her belief that her husband Odysseus would return. And the suitors come off like real boors, so maybe she had also decided the single life was a better option than marrying any of them.

By contrast, it seems as if the Obama administration has completely lost the plot in what was formerly called the 50 state attorney general negotiations, and that appears to have fed directly into the news today of meetings of a breakaway group interested in concrete results.

Bank of America Prepares Emergency Plans at Fed Behest, May Need to Amputate on Geographic Basis

As we’ve said repeatedly, despite bank executives braying about the need to be bigger to compete or to gain efficiencies, the evidence runs completely the other way. Every study on bank efficiency in the US has found that once banks hit a certain size level (the most commonly found one seems to be ~$5 billion in assets) banks exhibit a slightly positive cost curve, which means they are more, not less, costly to run. Any economies of scale are probably offset by diseconomies of scope.

So why do bank executives sell and act on a patently phony story? Aside from the fact that doing deals is much more fun than managing a business, the BIG reason is CEO pay is highly correlated with the size of the bank, measured in total assets.

So no one should cry at the prospect that Bank of America might have to shrink to if it continues to be in financial and litigation hot water.

#Occupy Wall Street Returns to Zuccotti Park (#OWS)

I don’t know how many of you had been to lower Manhattan since the police cleared Zuccotti Park last fall, but it was about as open to the public as a demilitarized zone: barricades covering more than half the area, heavy police presence. It was so inhospitable that entering the park had the vibe of getting your name on an official Enemies of the State list, and apparently if you lingered at all, the police would shoo you away.

But we had thought the city’s efforts to change the rules for a privately owned but nevertheless public park were awfully heavy-handed, since these spaces were quid pro quos for zoning variances and are a long standing feature of New York. And the court agreed.

Philip Pilkington: Fear and Loathing in the Financial Markets – What Happens to the Economy When the Oil Bubble Bursts?

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

In 2008 profits in the US economy crashed out. But they soon bounced back. This bounce was largely due to the profits being reaped in the financial sector – which sickened many given that 2008 was in large measure caused by the financial sector. This always struck me as odd – not to mention unsustainable. If the ‘real’ economy is in the doldrums you can be sure that, in the medium to long run, the business class will go down with it.

In what follows I will draw on Chris Cook’s post on this site the other day to argue that, if he is correct (and I think he may be), judgment day is just around the corner for the profiteers.