Category Archives: Politics

Cyprus Bailout: Stupidity, Short-Sightedness, Something Else?

A quick run-down on the impressively stupid handling of the “Cyprus bailout” by the EU.

Gaming the Cyprus Negotiations (Updated)

The state of play in Cyprus is that negotiations in Parliament are underway, with the hope of a yes vote on a “Plan B” today. The Cypriot officialdom has allowed for slippage in this timetable, with the bank holiday in effect till Thursday. The latest events were largely a nothingburger, aside from the big news of the failure to approve the president’s plan yesterday: European ministers confirmed that they’ll approve an agreement so long as Cyrpus obtains €5.8 billion from depositors. Monday night, President Nicos Anastasiades gave his version of the Hank Paulson armageddon speech on national TV, laying out the fact that no deal means an immediate collapse of “one bank” (presumably Liaki), and a possible exit from the Eurozone.

The widespread assumption is that the Cypriots will fall into line, since the alternative really does look even uglier. But the runway is pretty short.

When You Weren’t Looking, Democrat Bank Stooges Launch Bills to Permit Bailouts, Deregulate Derivatives

One of the big lessons of the fraught negotiations over bailing out (or more accurately, in) Cyprus’s banks is that deregulating institutions with an implicit or explicit state guarantee is a bad idea. You’ve just given them a license to gamble with the public’s money, and you can rest assured that they will eventually avail themselves of it. A bit more than a week ago, Jim Himes (an ex Goldman officer) and Randy Hultgren introduced bills that not only aim perpetuate this situation but will make it worse.

Bill Black: O’Donnell Thinks Krugman is “A Lonely Voice Opposing Austerity” Because he Listens to MSNBC

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly posted with New Economic Perspectives

MSNBC persists in running a pro-austerity line by falsely presenting Paul Krugman as a isolated opponent of economic malpractice.

Will Cyprus Become Creditanstalt 2.0?

The cheery view that Europe had moves past its crisis now looks to have been a tad premature.

Cyprus: The Next Blunder

Yves here. Our post today on Cyprus provides some broad background, including the political dynamics and the not-terribly-defensible reasons the Eurozone went that route, and a short discussion of the large risk that this inept move precipitates a wider crisis. This article by Charles Wyplosz serves as a companion, since it discusses the “tax,” um, expropriation option versus other alternatives. Even more important, it sketches out why this scheme, even if it manages not to kick off a crisis, is still inadequate to rescue Cyprus. It is thus a toxic variant of the Eurozone “kick the can down the road” strategy.

James Steele: America’s Point Man in Fomenting Sectarian Violence and Torture in Iraq

The Guardian has released a documentary on American operative in Iraq, James Steele, which appeared on BBC. From the related news story in the Guardian:

The Pentagon sent a US veteran of the “dirty wars” in Central America to oversee sectarian police commando units in Iraq that set up secret detention and torture centres to get information from insurgents. These units conducted some of the worst acts of torture during the US occupation and accelerated the country’s descent into full-scale civil war.

Jeff Madrick: CBO’s Lack of Independence Means We Need a Shadow CBO

Yves here. The Congressional Budget Office is widely depicted in the media as “nonpartisan” and therefore above reproach. It’s time to treat that view as outdated. Like the Fed, the CBO continues to profess its independence but is in fact an aggressive promoter of neoliberal policies. We discussed at some length how Fed economists savaged its health care cost model, which is the driver of budget hysteria.

Jeff Madrick describes even more problems with CBO forecasts, and how they have become so significant that the public needs a shadow CBO to challenge the often-flawed official projections.

Live Blogging JP Morgan Senate Hearing – a Rogue Institution on the Hot Seat

Yves here. I wasn’t planning on liveblogging this hearing, but listing to the introductory remarks, the knives are really out for JPM. In all the post-crisis hearings I’ve watched, I’ve never seen such unanimity between the Democrats and the Republicans on the severity of the problem and the need for more regulation.

Senate “Whale” Report Reveals JP Morgan as a Lying, Scheming Rogue Trader (Quelle Surprise!)

There is so much grist in the just-released Senate Permanent Subcommittee report on the JP Morgan London Whale trades that the initial reports are merely high level summaries, which is understandable. Even with the admirable job done by the committee in documenting its findings and recommendations, it will take some doing to pull out the critical observations and convey them to the public. Plus the hearings tomorrow should provide good theater and further hooks for commentary.

But some critical findings emerge, quickly. We here at NC were particularly harsh critics of JP Morgan’s conduct, and disappointed in the media’s failure to understand that the information JP Morgan presented as it bobbed and weaved showed glaring deficiencies in risk controls. Yet the failings described in the report are even worse than we imagined.

David Dayen: The Gradual Privatization of Medicaid

Over the past week, both houses of the Florida legislature have rejected the Medicaid expansion program endorsed by Governor Rick Scott. You may recall the huzzahs from the progressive world when Scott, a self-possessed anti-Obamacare warrior, decided to accept the Medicaid expansion. What didn’t get reported as much is that Scott’s announcement coincided with the go-ahead from the Administration for Florida to fully privatize their Medicaid system.

So what was up with the Legislature’s rejection? Tea Party politics? Some unlikely show of principle against crony capitalism and corporate welfare?

No. They just want a different kind of privatization.

Wolf Richter: Is The End Of The ‘Coercive Euro Association’ Taking Shape In Germany?

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

Anti-euro movements were pushed aside or squashed by political establishments across the Eurozone. There is, for example, Marine Le Pen, of the right-wing FN in France—“Let the euro die a natural death,” is her mantra. Though she finished third in the presidential election, her party has next to zero influence in parliament. Austria has Frank Stronach, who is trying to get an anti-euro party off the ground, without much effect. Germany has the Free Voters, an anti-bailout party that has been successful in Bavaria but not on the national scene.

Wolf Richter: A “Politically Explosive” Secret – Italians Are Over Twice As Wealthy As Germans

Yves here. The comparatively low wealth of Germans should come as no surprise. It’s a direct result of German policies to suppress domestic wages, known as the Hartz reforms (see this post for more detail). But as Wolf indicates, that’s not how it will be seen in Germany.

Treasury and Fed Officials Prevaricate Before Elizabeth Warren About Whether They Will Ever Get Tough With Banks

It’s a good thing Elizabeth Warren seems to regard contending with uncooperative, evasive and obviously misleading witnesses as a form of sport. I’d want to punch them.