Category Archives: Politics

Walkback on Basel III Confirms Bank Victory on Regulation

The Wall Street Journal reports that a key element of Basel III rules, its provisions on liquidity buffers, are about to be watered down.

Another Schneiderman Con: Proposes Likely-to-go-Nowhere Foreclosure Fraud Legislation

Having sold out the possibility of getting a decent settlement for homeowners for a seat in Michelle Obama’s box at the State of the Union address and a star turn on a Potemkin mortgage fraud task force, Schneiderman appears to be an adept student of the Obama strategy of preferring empty gestures to substance, since they generate good PR and take a lot less effort.

Satyajit Das: The Euro-Zone Debt Crisis – It’s Now ABOUT Germany NOT UP TO Germany!

Yves here. Das’ post has a lot of useful information, but like a lot of finance people, he is hostage to a conventional markets-driven reading of the issues. Governments are not households or businesses. When the private sector delevers, unless a country is running a big surplus (as Germany is) you can’t have government delever at the same time. So Germany’s notion of virtue (that governments and private citizens should wear an austerity hair shirt) works only for Germany.

There are also ways to prevent an Euro train wreck that don’t involve using German’s balance sheet, such as having the ECB issue bonds, or do revenue sharing (say on a per capita basis, as Marshall Auerback suggested in a NC post). Or the ESM could be given a banking licence via the ECB so that it has the ability to deploy unlimited capital to sort out the solvency issue (as France has suggested). Yanis Varoufakis’ “Modest Proposal” is another approach. But if Germany continues to oppose having the ECB take a much more aggressive stance, Das’ concerns are germane.

Wolf Richter: Manna for Bankrupt Cyprus

In Greece’s chaotic wake bobs the listing Republic of Cyprus, soon to be the fifth Eurozone country, out of seventeen, to get a bailout. By June 30. Only last year’s €2.5 billion loan from Russia has kept it afloat. It’s economy is shrinking, unemployment is at a record, and real estate is collapsing after a phenomenal bubble and a nationwide title-deed scandal that has taken down the banks. But Cyprus has something—and it’s huge—that no other troubled Eurozone country has.

The Crisis Shifts to Italy

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.

As we head towards Greece’s weekend election, rumoured to be celebrated by the locals by moving ever larger sums of money elsewhere, the Eurozone appears to be seriously straining under the constant pressure of its ongoing crisis.

Obama Plans to Put Foreign Companies Above the Law

Zach Carter has a must-read new article up at Huffington Post on leaked documents from trade negotiations that have been posted at the website Public Citizen. You should read his entire article, pronto, but here is the money quote:

Dimon Testimony Whopper: CIO’s Gambling on Disaster = “Portfolio Hedging”

Well, there’s nothing like seeing Jamie Dimon swinging for the fences. Dimon has taken his defense and turned it into an offense, in both senses of the word.

Bank Bonds vs German Intransigence

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.

The fallout from the Spanish bank “bailout” continued overnight with Spanish yields moving back up and over their November 2011 euro area highs:

More on the Supposedly Out of Control JP Morgan Chief Investment Office and the “Fortress Balance Sheet”

Whocouddanode? As more and more tidbits leak out about the activities of the JP Morgan Chief Investment Office, it increasingly appears to be a unit that was inadequately supervised. While that revelation is a dent to the reputation of self-styled ubermensch and alleged control freak Jamie Dimon, if he takes a few lumps in the press and otherwise can carry on as before, what difference will it make to him and the industry? Lloyd Blankfein took at least as much heat over a longer period, and he’s still firmly in place.

The CEO “I’m in charge and I know nothing” defense is alive and well because it has proven to be so successful.

Serious Questions for Jamie Dimon in Occupy the SEC/Alternative Banking Senate Letter

As many readers may know, Jamie Dimon is on deck tomorrow before the Senate Banking Committee to explain how a soi disant hedge produced losses that are almost certain to exceed the $2 billion the bank has ‘fessed up to.

Tom Ferguson: How Wall Street Hustles America’s Cities and States Out of Billions

Yves here. While the municipal swaps fiasco may seem like old news, this piece discusses a post-crisis type of swap which is even more appalling. The old scam was to talk local and state authorities who would have been far better served with old-fashioned fixed rate financing into doing floating rate financing and entering into a series of swaps to get a fixed rate deal, with a supposed improvement in funding costs. The problem is that many of those floating rate deals were auction rate securities, and when that market failed in early 2008, the borrowers were doubly hosed. The ARS went to penalty rates. In addition, payments on the swaps often kicked up shortly thereafter (due to the slow-motion failure of monoline guarantors, which was the hidden trigger behind both events. The downgrade of the monolines de facto downgraded the municipality, which led to increased payments on the swaps).

The latest scam is more appalling. Municipal authorities would borrow fixed rate, then enter into a variable rate swap on the side. Earth to base, no responsible manager wants uncertain funding costs on a long-term capital investment. This is tantamount to the owner of a candy store borrowing money at a fixed rate from his bank to finance an expansion of his business, then betting at the racetrack to try to lower his costs. Not surprisingly, many of these swaps have proven to be costly time bombs.

By Tom Ferguson, Professor of Political Science at the University of Massachusetts, Boston. Cross posted from Alternet

Many powerful interests have jumped at the opportunity to use the crisis to eviscerate what’s left of the welfare state.

Philip Pilkington: Budget Hawk Socialism – Why Calls for Balanced Budgets Lay the Path for Socialism

By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil

What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.

– Karl Marx and Friedrich Engels ‘The Communist Manifesto’

Calls for balanced budgets in the present environment have long appeared somewhat confused, of that we have had little doubt for some time now as balanced budgets seem to exacerbate the problems they target rather than solve them and may lead to higher debt-to-GDP levels due to the reduction in real economic growth that they lead to.

Finland Trying to Dictate Terms of Spanish Bank Bailout: “No Funds to Bad Banks”

The Finland effort to dictate terms to the Spanish bank bailout may well turn out to be noise, but it is yet another indicator that despite the general optimism about a rescue, there are a lot of details to be nailed down.

Spanish Bank Rescue: Will the Treatment Make the Patient Worse?

Spain has reversed itself and asked the Eurozone for “up to” €100 billion after not long ago insisting it could go it alone. The proximate cost was the increase in its sovereign debt yields in the wake of the announcement of a bailout of Bankia, which was cobbled together from dud cajas. Even though Spain’s bond auction last week got off better than expected, that was likely in part due to the expectation that the creditor states would indeed ride in to the rescue.

But will the latest, yet to be finalized remedy do anything more than buy a little time?

Objective of US and Israeli Policy is Economic Warfare Against Iran

Right after 9/11, Iran went out of its way to be helpful to the US, to the point where Stratfor regularly wrote about “the coming US-Iran alliance”. This interview with Gareth Porter discussed the current state of play in US relations with Iran, and discusses how the negotiations with Iran over its enrichment program look increasingly like cover for a an economic program designed to weaken Iran.