If you have any doubt that Bank of America is going down, this development should settle it. I’m late to this important story broken this morning by Bob Ivry of Bloomberg, but both Bill Black (who I interviewed just now) and I see this as a desperate move by Bank of America’s management, a de facto admission that they know the bank is in serious trouble.
Read more...The propagandistic exhortation that we all need to need to learn to love or at least accept the crappy economy known as “the new normal” is starting to wear a bit thin. One of the things that has allowed the punditocracy to pretend that “the new normal” really isn’t all that bad are various myths that they get investors and sometimes the broader public to believe in succession or better yet simultaneously:
Read more...By Zarathustra, who is the founder of Hong Kong blog Also sprach Analyst. He was educated at the London School of Economics and the Chinese University of Hong Kong and was once a Hong Kong-based equity research analyst focusing on Hong Kong real estate (which he did not really like), with a secondary coverage on China real estate sector (which he actually hated). Cross posted from MacroBusiness
Zero interest rate policy and quantitative easing is not working to stimulate the real economy. No country has succeeded. The pioneer of quantitative easing, the Bank of Japan, failed (and Japanese yen is uber-strong). The Federal Reserve has failed, and the Bank of England has failed.
Read more...Daily Kos publicized a story captured on Global Revolution, of perhaps as many as 30 people being arrested for attempting to close their Citibank accounts. Kos originally said 30 people were arrested; an update now says 17, again per Global Revolution.
The Post reports that 24 people were arrested; its characterization is that a “mob stormed” a branch at Laguardia Place. The basis for the arrests appears to be plenty dubious. Later accounts indicate that people trying to close their accounts were locked in the branch and then arrested for illegal trespass. This video (hat tip Mike Stark) appears to support the protestors’ claims. Notice that the people in the branch are not disruptive, and a woman outside the branch, who had documents to show she was a Citibank customer but apparently had been inside the branch, was grabbed by the police and forced into the branch:
Read more...Yves here. Fitch tries to position itself as the “we try harder” ratings agency, taking more aggressive ratings actions relative to Standard and Poor’s and Moody’s. For instance, it started issuing warnings about and then downgrading CMBS before its two larger competitors pre-crisis. The open question here is whether other bond graders will follow its lead.
By David Llewellyn-Smith, the founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Cross posted from MacroBusiness.
There have been times in the last couple of years when the GFC-chastened ratings agencies appeared to be racing one another back to some position of credibility faster than the world could bear. Well, that race is surely over now, with Fitch announcing after US trading the mother of all downgrade watches on, well, everybody.
Read more...Georgetown law professor and securitization expert Adam Levitin has come upon a real doozy in terms of how banking regulators aren’t even bothering to mount a serious pretense that their much-touted efforts to rein in mortgage abuses are anything more than a coverup for the banks. And he is suitable irate.
Read more...Yves here. Note I beg to differ with Das in his comments on government debt levels for countries that control their own currency. As we’ve noted, a country can always repay debts in its own currency, and the funding of federal deficits by borrowing is a political constraint and a holdover from the gold standard era. Moreover, there is a great deal of evidence that the solution implicit in that view, of cutting government spending in the aftermath of a demand-depressing, private balance sheet wrecking global financial crisis only makes matters worse. This is a case where you need to steer into the skid to get the car back on course. But this section is not core to Das’s discussion.
By Satyajit Das, the author of Extreme Money: The Masters of the Universe and the Cult of Risk
Powered flight requires air to flow smoothly over the wing at a certain speed. Erratic or slow air flow can cause a plane to stall. Most modern aircraft are fitted with a “stick shaker” – a mechanical device that rapidly and noisily vibrates the control yoke or “stick” of an aircraft to warn the pilot of an imminent stall.
The global economy too needs air flow -smooth, steady and strong growth. Unfortunately, the global economy’s stick shaker is vibrating violently.
Read more...By Sell on News, a macro equities analyst. Cross posted from MacroBusiness
The global economy is not simply suffering from a European debt crisis. Debt itself is in trouble. This morning on Radio National there was an interview with David Graeber, Reader in Social Anthropology at Goldsmith University London and author of “Debt — the first 5,000 years.” Graeber, who is involved in the Occupy Wall Street movement. He made the point that debt is a promise and then asked the question: ”Why are some promises considered more important than others?” Why is a promise to repay to a bank considered inviolate, while the politicians’ promise to say, eliminate university fees (in the case of the UK) considered something easily broken because “circumstances have changed”.
Read more...Despite the efforts of some liberal pundits and organizers (and by extension, the Democratic party hackocracy) to lay claim to OccupyWallStreet, the nascent movement is having none of it. Participants are critical of the President’s bank-coddling ways and Obama gave a remarkably bald-face confirmation of their dim views.
As Dave Dayen recounts, Obama was cornered into explaining why his Administration has been soft of bank malfeasance. His defense amounted to “They’re savvy businessmen”: “Banks are in the business of making money, and they find loopholes.”
Read more...One of the things that has been intriguing about the handwringing among European policy-makers has been the general refusal to consider the idea that one of the countries being wrung dry by doomed-to-fail austerity programs might just pack up and quit the Eurozone. The assumptions have been three fold. One is a knee-jerk assumption that the costs of exiting are prohibitive (this argument comes from Serious Economists in Europe, but they never compare it to the hard costs of austerity and the less readily measured but no less real cost of loss of sovereignity). Second is that an exit would come via a country being expelled, since the Eurozone treaties prohibit unilateral departure. Third is that it would be too much of an operational mess to revive a defunct currency.
A very good piece by Floyd Norris in the New York Times fills this gap by describing that Greece has the motivation and the means to leave.
Read more...We were far from alone in criticizing the servicer consent orders issued earlier this year. They were yet another whitewash masquerading as regulatory action, orchestrated by the banking industry toady, the OCC. As we wrote:
Read more...The current end run is apparently led by the Ministry of Bank Boosterism more generally known as the OCC and comes via consent decrees that were issued Wednesday (we’ve made that inference given the fact that John Walsh of the OCC presented the findings of the so-called Foreclosure Task Force, an 8 week son-of-stress-test exercise designed to give the banks a pretty clean bill of health, as well as media reports that the OCC was not participating in the joint state-Federal settlement effort).
This initiative is regulatory theater, a new variant of the ongoing coddle the banks strategy. It has become a bit more difficult for the officialdom to finesse that, given the extent and visibility of bank abuses. Accordingly, the final consent decrees are more sternly worded and more detailed than the drafts we saw last week, and also talk about imposing fines. But reading them reveals that there is much less here than meets the eye.
By Gal Noir, an undercover investigator of hijacked economic truths and an occasional blogger at New Economic Perspectives
In his Congressional testimony on October 4th, Federal Reserve Chairman Bernanke uncharacteristically praised the benefits of fiscal policy, calling it “of critical importance” and conveying concerns with the looming deficit reductions. He cautioned: “an important objective is to avoid fiscal actions that could impede the ongoing economic recovery.”
Many economists expressed worry that such advocacy of fiscal policy will erode America’s (already) wavering confidence in the Fed and will further weaken their support for austerity measures. More troubling still, the economists said, was the possibility that the public may follow suit and start demanding from Congress bolder government action on the jobs front.
A few dissenting scholars thought that it was high time for Bernanke to put his money where his mouth was, so to speak.
Read more...Yves here. Stuart Zechman is a keen observer of how corporatist policies are peddled through various Rubinite/Hamilton Project organizations and other mouthpieces and skillfully messaged so as to snooker or co-opt bona fide progressives who ought to know better.
His article mentions Third Way. For benefit of those who have been so fortune as to have limited contact with the netherworld inside the Beltway, here is a brief description from an earlier post:
Read more...And make no mistake about the role of Third Way. Third Way runs the policy apparatus of the Democratic Party. In Congress, staffers attend regular Third Way policy briefings, where the group hands out pre-packaged legislative amendments in legal form, generic press releases, polling around those policy ideas, and talking points. It’s a soup-to-nuts policy apparatus. Most of these ideas are harmless – like increased volunteerism – but some are not, like various tax proposals.
The group has enormous juice.
By Marshall Auerback, a portfolio strategist and hedge fund manager, and Warren Mosler, an investment manager and creator of the mortgage swap and the current Eurofutures swap contract. Cross posted from New Economic Perspectives
The refusal to countenance a Greek default is now said to be dragging the euro zone toward even greater crisis. Implicit in this view, of course, is the idea that the current “bailout” proposals are operationally unsustainable and will lead to a broader contagion which will ultimately afflict the pristine credit ratings of core countries such as Germany and France.
Well, we see a very different view emerging: The “solution” currently on offer – i.e. the talk surrounding the European Financial Stability Fund (EFSF) now includes suggestions of ECB backing. This makes eminent sense. Let’s be honest: the EFSF is a political fig-leaf. If 440 billion euros proves insufficient, as many now contend, the fund would have to be expanded and the money ultimately has to come from the ECB — the only entity that can create new net financial euro denominated assets — which means that Germany need no longer fret about being asked for ongoing lump sums to fund the EFSF in a way that would ultimately damage its triple AAA credit rating.
Despite public protestations to the contrary, it is beginning to look like the elders of the euro zone have begun to embrace the reality that, when push comes to shove, it is the ECB that must write the check, and that it can continue to do so indefinitely.
Read more...It’s becoming increasingly obvious to Mr. Market that the officialdom in Europe is not on a path to resolving its burgeoning sovereign/bank crisis. It is insisting on imposing austerity on debt burdened countries, which will only shrink their GDPs, making their debt hangovers even worse.
And Germany wants to have its cake and eat it too
Read more...