The Republicans are not wasting any time in their ongoing campaign to make sure nothing stands in the way of Wall Street’s rapacious quest for more profits.
Read more...There is an excellent indicator that Senator Warren’s successful effort to block the appointment of Antonio Weiss, an Obama Wall Street bundler, to a senior Treasury position while merely a skirmish was an important accomplishment. The financial media that pander most slavishly to the Wall Street and the City of London’s CEOs is enraged at Warren’s success. The headline in the UK’s Business Insider reveals their angst “Elizabeth Warren Wins, The Treasury Loses.” The article doesn’t try very hard to support that headline with facts because there is no real case to support the claim.
“A number of former Treasury officials thought Warren was way out of line, and that Weiss’ experience was perfect for the position he was being nominated for.
The White House stood by its nominee throughout, stating last month, “This is somebody who has very good knowledge of the way that the financial markets work, and that is critically important.”
No argument on that here.”
Let’s begin with logic. There’s no logical way to declare that “Treasury lost” without knowing who else is willing to take the position of Under Secretary for Domestic Finance. No one thinks President Obama selected Weiss on the merits. He was selected because he bundled Wall Street campaign contributions for Obama’s campaigns. Treasury does not “win” when we appoint such people – Wall Street wins. We have no way of knowing whether Obama will select someone for the position who is better or worse than Weiss. The Undersecretary position is prestigious enough that we know that Obama has the ability to appoint hundreds of people who would like to take the position and are better qualified than Weiss. As a matter of logic, therefore, the authors could not support their claim.
The authors also don’t seem to have felt they could even try to make a case for their claim. They simply quote authority rather than reasoning. Their effort unintentionally made Warren’s opponents look bad. Consider the extraordinary arrogance of the statement “A number of former Treasury officials thought Warren was way out of line.” A U.S. Senator who is a member of Treasury’s oversight committee is completely “in line” to oppose nominees. Warren obviously did not oppose Weiss for partisan reasons. She opposed him on the merits. Weiss does not have a strong background for the skill sets required for the Undersecretary position. Again, no one can claim with a straight face that Obama selected Weiss on the merits. Of course, the same thing was true of many of the Treasury officials who think it is “way out of line” for Senators not to rubberstamp political reward-style appointments of Wall Street bundlers.
The best that the White House could come up with was that Weiss “has very good knowledge of the way that the financial markets work.” That description fits about one million Americans.
Conclusion
Warren has given Obama a golden opportunity – a “do over.” Obama can appoint someone who has a “very good knowledge of the way that the financial markets work” – and a passion for changing how they work in order to end the Wall Street culture of corruption and create radically improved markets based on integrity and service to investors with radically reduced profits. Obama could pick someone good for America, not “Treasury” and its Wall Street overseers. It is “critically important” that the financial markets be restored to a condition in which they aid Main Street and small investors rather than acting as parasites and predators.
At this juncture, the White House is signaling its continued opposition to serious reform.
“‘We continue to believe that Mr. Weiss is an extremely well-qualified individual, who is committed to the policy goals of this Administration and firmly supports the Administration’s policies on fostering economic growth and supporting our middle class. We are pleased that he has accepted the role of counselor to the Treasury secretary.’”
The administration continues its policy of never missing an opportunity to miss an opportunity to openly side with the American people (all of them, not simply “our middle class”) and demand the end of the corrupt culture of Wall Street. Warren has given Obama a priceless opportunity for a “do over.” No one expects Obama to do the right thing on the appointment, but Warren is doing the right thing by giving Obama a new the chance to do the right thing.
Read more...Yves here. MMT, or Modern Monetary Theory, is in the process of becoming vastly more visible by virtue of leading MMT advocate, Stephanie Kelton, becoming Chief Economist on the Senate Budget Committee on behalf of ranking member Bernie Sanders. And that means, as this post demonstrates, that MMT has gone through the “first they ignore you, then they ridicule you” stages and is now in the “then then fight you” phase. And one of the chief strategies of MMT opponents is to misrepresent it.
Read more...How the Fed refuses to come clean about what it means by “dual mandate” and why that matters.
Read more...As readers may recall, Elizabeth Warren blasted the Administration’s nomination of a Lazard executive and senior mergers & acquisitions banker Antonio Weiss to the number three Treasury psot, assistant secretary for domestic finance. Warren’s grounds for objecting to Weiss were straightforward: his experience was no fit for the requirements of his proposed Treasury role. On top of that, he had been involved in and therefore profited from acquisitions called inversions that Treasury opposes because they reduce the taxes paid by the acquirer, which uses the acquired company to move its headquarters to a lower-tax jurisdiction.
Today Weiss withdrew as a candidate for the Treasury position.
Read more...A new story by Gretchen Morgenson of the New York Times highlights how the Federal Reserve and the Republicans* are on a full bore campaign to render Dodd Frank a dead letter, with the latest chapter an effort to pass HR 37, a bill that would chip away at key parts of Dodd Frank. But the bigger implications of this campaign is how these efforts serve to limit the Fed’s freedom in implementing monetary policy. In other words, Fed general counsel Scott Alvarez is undermining the authority of his boss, Janet Yellen.
Read more...So why did Elizabeth Warren lose her battle last month to stop banks from continuing to park $7 trillion notional value of risky derivatives like the credit defaults swaps in taxpayer-backstopped depositaries?
One of the less well-recognized reasons is that the CBO’s dubious analysis said it would not cost taxpayers a dime.
Read more...The Republicans have been quick and shameless in using their control of both houses to try to crank up the financial services pork machine into overtime operation. The Democrats at least try to meter out their give-aways over time.
Their plan, as outlined in an important post by Simon Johnson, is to take apart Dodd Frank by dismantling key parts of it under the rubric of “clarifications” or “improvements” and to focus on technical issues that they believe to be over the general public’s head and therefore unlikely to attract interest, much the less ire. However, as Elizabeth Warren demonstrated in the fight last month over the so-called swaps pushout rule, it is possible to reduce many of these issues to their essential element, which is that Wall Street is getting yet another subsidy or back-door bailout.
Today’s example is HR 37, with the Orwellian label “Promoting Job Creation and Reducing Small Business Burdens Act”.
Read more...On the Senate’s last day in session in December, it approved the government’s $1.1 trillion budget for coming fiscal year.
Few people realize how radical the new U.S. budget law was. Budget laws are supposed to decide simply what to fund and what to cut. A budget is not supposed to make new law, or to rewrite the law. But that is what happened, and it was radical.
Read more...As I like to say, I started out on Wall Street when it was criminal only at the margin. The unseemly coziness between Goldman and keygovernment agencies in critical episodes during the crisis illustrates how much standards of conduct have deteriorated.
Read more...Mortgages are hard to get, and inventories of homes for sale are low: Those have been the dominant reasons cited by the industry to rationalize the crummy home sales that have disappointed pundits for over a year. But now those memes have been debunked by homebuyers themselves.
Read more...Economists seldom take note of the fact that the degradation of skills at major banks has had serious macroeconomic effects. One example is the abandonment of loan officer training and branch manager autonomy at big banks.
Read more...While the Fed appears to be getting nervous about increasing (and long overdue) criticism for its undue coziness with banks, it has for the most part ignored opponents of its aggressive monetary policies. And for good reason. Most of them have been fixated on the risk of inflation, which is not in the cards as long as labor bargaining power remains weak. There are other, more substantial grounds for taking issue with the central bank’s policies. For instance, gooding asset prices widens income and wealth inequality, which in the long term is a damper on growth. Moreover, one can argue that the sustained super-accommodative policy gave the impression that Something Was Being Done, which took the heat off the Administration to push for more spending. Indeed, the IMF recently found that infrastructure spending pays for itself, with each dollar of spending in an economy with high unemployment generating nearly $3 in GDP growth. And a lot of people are uncomfortable for aesthetic or pragmatic reasons. Aesthetically, a lot of investors, even ones that have done well, are deeply uncomfortable with a central bank meddling so much. And many investors and savers are frustrated by their inability to invest at a positive real yield without being forced to take on a lot of risk.
Stephen Roach, former chief economist of Morgan Stanley and later its chairman for Asia, offers a straightforward, sharply-worded critique: just as in the runup to the crisis of 2007-2008, the Fed’s failure to raise rates is leading to an underpricing of financial market risk, or in layspeak, to the blowing of bubbles. He argues that has to end badly.
Read more...The coming choice between an “ever greater union” and the troika’s financial regime.
Read more...New York State Superintendent of Financial Services Benjamin Lawsky has forced the resignation of the chairman and CEO of a mortgage servicer, Ocwen over a range of borrower abuses in violation of a previous settlement agreement, including wrongful foreclosures, excessive fees, robosigning, sending out back-dated letters, and maintaining inaccurate records. Lawsky slapped the servicer with other penalties, including $150 million of payments to homeowners and homeowner-assistance program, being subject to extensive oversight by a monitor, changes to the board, and being required to give past and present borrowers access to loan files for free. The latter will prove to be fertile ground for private lawsuits. In addition, the ex-chairman William Erbey, was ordered to quit his chairman post at four related companies over conflicts of interest.
The Ocwen consent order shows Lawksy yet again making good use of his office while other financial services industry regulators are too captured or craven to enforce the law. Unlike other bank settlements, investors saw the Ocwen consent order as serious punishment. Ocwen’s stock price had already fallen by over 60% this year as a result of this probe and unfavorable findings by the national mortgage settlement monitor, Joseph Smith. Ocwen’s shares closed down another 27% on Monday. And that hurts Erbey. From the Wall Street Journal:
Read more...