Category Archives: Banking industry

Corrupt Obama Administration Pressuring New York Attorney General to Support Mortgage Whitewash

It is high time to describe the Obama Administration by its proper name: corrupt.

Admittedly, corruption among our elites generally and in Washington in particular has become so widespread and blatant as to fall into the “dog bites man” category. But the nauseating gap between the Administration’s propaganda and the many and varied ways it sells out average Americans on behalf of its favored backers, in this case the too big to fail banks, has become so noisome that it has become impossible to ignore the fetid smell.

The Administration has now taken to pressuring parties that are not part of the machinery reporting to the President to fall in and do his bidding. We’ve gotten so used to the US attorney general being conveniently missing in action that we have forgotten that regulators and the AG are supposed to be independent. As one correspondent noted by e-mail, “When officials allegiances are to El Supremo rather than the Constitution, you walk the path to fascism.”

Michael Hudson: The State and Local Budget Crisis

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

The cost of the 2011 cutbacks in federal spending will fall most directly on consumers and retirees by scaling back Social Security, Medicare, Medicaid and social spending programs. The population also will suffer indirectly, by lower federal revenue sharing with U.S. states and cities. The following chart from the National Income and Product Accounts (NIPA, Table 3.3) shows how federal financial aid has helped cities shift the tax burden off real estate, although the main shift has been off property taxes onto income – and onto consumption (sales) taxes.

Chinese Banks: “These Things Aren’t Banks”

This is a terrific discussion of Chinese banking by two experts who do not mince words, Carl Walter of JP Morgan and Victor Shih of Northwestern University. Both have a great sense of history and go to some length to portray how economic and monetary arrangements for these “banks” differ from what most of us would assume. The discussion includes periodic crises and the creative means used to rescue banks, the unusually high level of financial assets for an emerging economy, the sustainability of growth, and the role of banks in the political system.

Summer Rerun: Geithner Plan Smackdown Wrap

This post first appeared on February 10, 2009

I cannot recall a major US policy initiative being met with as much immediate revulsion as the so-called Geithner plan. Even the horrific TARP, which showed utter contempt for Congress and the American public was in some ways less troubling. Paulson demanded $700 billion, nearly $200 billion bigger than the Department of Defense, via a three page draft bill, nothing more that a doodle on a napkin, save that it did bother to put the Treasury secretary above the law. But high-handedness was the hallmark of the Bush Administration; it was only the scale and audacity of the TARP that was the stunner.

And the TARP initially did have some supporters (perhaps most important, among the media, who trumpeted the “Something must be done” case). Fans are much harder to find for the latest iteration of the seemingly neverending “let’s throw more money at the banks” saga.

As we, and increasingly others, have said, the Obama economic team is every bit as captive to Wall Street’s interests as the Bushies were. The differences increasingly look stylistic, not substantive.

Michael Hudson: The Case Against the Credit Ratings Agencies

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

In today’s looming confrontation the ratings agencies are playing the political role of “enforcer” as the gatekeepers to credit, to put pressure on Iceland, Greece and even the United States to pursue creditor-oriented policies that lead inevitably to financial crises. These crises in turn force debtor governments to sell off their assets under distress conditions. In pursuing this guard-dog service to the world’s bankers, the ratings agencies are escalating a political strategy they have long been refined over a generation in the corrupt arena of local U.S. politics.

Marshall Auerback: Are We Approaching the Endgame for the Euro?

By Marshall Auerback, a hedge fund manager, portfolio strategist, and Roosevelt Institute fellow. A version of this post appeared at New Economic Perspectives.

Forget about the S&P downgrade, which has had ZERO impact on the global equity markets. The downgrade was supposed to mean that it would be more likely that the US government would not be able to pay its debt than previously assumed. IF the markets took this warning seriously, then they would have attached a higher risk premium to US government bonds. Of course, the opposite occurred. US bonds soared in price. In other words, investors, both here and abroad, voted with money as loudly as possible that they view the US government debt as a very safe haven in a time of financial turmoil

So if it wasn’t the S&P downgrade which caused this downward cascade in the global equity markets, then what was it? By far, the most important factor currently driving the market’s bear trends is Europe or, more specifically, the future of the euro and the European Monetary Union. Systemic risk has migrated across the Atlantic to the euro zone.

Mr. Market Had a Really Bad Day

You know things are not normal when a 4%-5% movement in equity markets looks routine.

I’ve been a bit surprised that it has taken investors this long to get the memo that the prospects for the economy (both domestically and internationally) are lousy. The stunning US GDP revisions of last month should have been a wake-up call, but they seemed to be swamped by the deficit ceiling/S&P downgrade theatrics.

MERS Case Filed With Supreme Court

Before readers get worried by virtue of the headline that the Supreme Court will use its magic legal wand to make the dubious MERS mortgage registry system viable, consider the following:

Quelle Surprise! Standard & Poor’s Execs Diddled in Mortgage Bond Ratings (Updated)

Louise Story at the New York Times reports that the SEC is looking into whether it has grounds to file suit against the ratings agency Standard & Poor’s for publishing higher ratings on bonds than the analysts had recommended. The article reports that the agency has found instances where executives overrode analyst judgement to award higher ratings on mortgage bonds that were later downgraded and produced investor losses. The piece indicates that the SEC has found instances of this sort of misconduct; the question seems to be whether it took place often enough to make a case.

From the Obama administration’s standpoint, it must seems rather unfortunate that the SEC has decided to go after S&P just as Matt Taibbi has called attention to the fact that the agency has organized its affairs so as to help it avoid seeing all but the most egregious misconduct. Readers will point out that any case would be politically motivated, but those who live by the sword should be prepared to die by the sword.

Taibbi on SEC’s Records Destruction Reveals How Deeply Entrenched Official Corrpution Is

Matt Taibbi has published yet another serious expose, and this one is appalling in that it shows how long standing and deeply institutionalized the “nothing to see here” practices are engrained at the SEC.

This is the guts of the article:

For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation’s worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG.

Matt Stoller: Memo to Reporters – How to Cover the 50 State Attorney General Foreclosure Settlement Talks

By Matt Stoller, a fellow at the Roosevelt Institute. He is the former Senior Policy Advisor to Rep. Alan Grayson. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller

everyone I know is working on some type of RMBS litigation. investors suing issuers, issuers suing originators, insurers suing issuers. wild – A tweet from a NYC corporate lawyer, 8/17/2011

Doesn’t it seems like we’ve been on the verge of a 50 state Attorney General settlement with the banks over robo-signing and mortgage securitization liability for nine months? It does, doesn’t it? Why is that? Maybe it’s because… that’s what journalists keep writing.

The Sucking Sound of Liquidity Draining From the Eurobank Market

As much as the dot com era conditioned US individual investors to focus on stock market movements, credit markets are where the real action lies. Deterioration in the bond markets almost without exception precedes stock market declines (although debt instruments can also send out false positives). In the stone ages of my youth, the rule of thumb was a four-month lag. In 2007, that guide was not at all bad. The bond market turn began in June 2007 (yours truly took note of it then, see here for the critical development, but was not convinced it was the Big One until corroborating data came in in July). The stock market obligingly peaked in October 2007.

Now given the extraordinary degree of government interventions, turns are not as obvious, market upheavals have repeatedly been beaten back, and relationships between stock and bond market price movements are likely to be less reliable than in the past. But one thing that is a clear danger signal is liquidity leaving the banking system. It’s like the preternatural calm when the water leaves the beach, revealing much more shore than usual, before the tsunami rolls in.

Bank of America Death Watch: Unloading “Non-Core” Assets Aggressively

Bank of America’s actions continue to betray its words. CEO Brian Moynihan bravely maintained in an investor conference call last week that the beleaguered bank would be around for the next 230 years and did not need more new capital. He nixed selling equity at its current price levels, because it would be highly dilutive.

Yet we and others have raised the issue that the bank is in a corner in dealing with its not so hot balance sheet.

Satyajit Das: The Real Debt Crisis is in Europe- Part 2 – “Europe’s Long, Long Goodbye”

By Satyajit Das, the author of Extreme Money: The Masters of the Universe and the Cult of Risk (published in August/ September 2011)

In the Long Term We’re All Dead

The European Union’s attempts to resolve the continent’s sovereign debt problems do not deal with issues of growth, intra-European financial imbalances and competitiveness. The only “initiative” was the vague plan for a massive public investment program, although no details of how it is to be financed were provided.

The call for greater public investment was accompanied by a familiar but contradictory insistence that all Euro-zone states adhere to agreed fiscal targets. Euro-zone countries except Greece, Ireland and Portugal must bring their budget deficit down to less than 3% of GDP by 2013. The need for many European countries to improve public finances is clear. But how greater belt-tightening and austerity would restore growth is not.

Video: The Bankers as the Enemy of Humanity

This video is stunning, in that it is a very articulate and well done rant that will resonate with many readers. The fact that it appeared on Karl Denninger’s site (hat tip reader Scott, Denninger’s been very critical of the TBTF banks) is an indication that the level of frustration with the major banks’ refusal to take responsibility for wrecking the global economy and their efforts to preserve their ability to loot is moving to a new level.