Category Archives: Politics

Crowdsourcing Questions for the First Press Conference by a Fed Chairman Tomorrow

Readers may know that tomorrow at 2:30 PM, Ben Bernanke is hosting the first press conference ever held by a Federal Reserve chairman ever. It’s remarkable that an official widely described as “the second most powerful person in America” has managed to sidestep basic measures of accountability to the public and transparency like this for so long.

We are participating in an effort spearheaded by the Dylan Ratigan show to crowdsource questions for reporters tomorrow.

On Economics of Contempt’s Reliance on His Own Brand Fumes

Economics of Contempt is aptly named. While his stand alone pieces on various aspects of regulation are informative, if too often skewed towards officialdom cheerleading (he too often comes off as an unpaid PR service for Geithner), his manner of engaging with third parties leaves a lot be desired. He often resorts to the blogosphere version of a withering look rather than dealing with an argument in a fair minded manner. This then puts the target in a funny position: do you deal with these drive-by shootings which have either not engaged or misrepresented your argument, by cherry picking and selective omission? If you do, you can look overly zealous or argumentative. But if you do nothing, particularly if it’s in an important area of regulatory debate, you’ve let disinformation, at the expense of your reputation, stand.

OCC Makes Patently False Claim That Slap-on-the-Wrist Servicing Penalties Could Hurt Banks

It’s time we come up with a new handle for the Office of the Controller of the Currency. It is difficult to convey how shameless this regulatory-agency-turned-slut for the banking industry has become. It’s the Stage 4 disease version of where our government is heading at a rapid clip: officials masquerading as serving the public interest when they are uber lobbyists for the pet whims of their supposed charges.

So what do we call the OCC? The Office of Capital Corruption? The Office of Criminal Capitulation? I have no doubt readers will have even better ideas (and don’t be constrained by the acronym).

At Least One Country With Big Banks is Not Afraid of Them

This development, which was cited in last week’s Eurointelligence, has not gotten the attention it warrants:

The Swiss government wants to impose capital requirements on their two internationally active big banks UBS and Credit Suisse that by far exceed what European or American regulators intend to ask their banks to do, Frankfurter Allgemeine Zeitung reports.

Your Humble Blogger Asked Larry Summers a Question He Did Not Like

A funny thing happened at the INET conference. First, I got to ask Larry Summers a question because Martin Wolf, who was moderating the session, is a good sport. Normally, at this sort of event, only At Least Semi Big Names get to interact with Big Names. Yours truly is a minimum of a rank or two below At Least Semi Big Names.

You will find our question at 55:40.

Mirabile Dictu! Economists Agree All the Fed Has Done is Goose Financial Markets!

You heard it first in the blogopshere. From the New York Times:

The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates.

But most Americans are not feeling the difference, in part because those benefits have been surprisingly small….

Sheila Bair as Head of CFPB?

Economics of Contempt and I are typically at loggerheads on financial services industry policy matters (he’s far too positive about the bank reform measures for my taste, even though his technical explanations are always instructive). But he had an inspired idea today:

I think Obama should seriously consider Sheila Bair for the CFPB job….

Matt Taibbi Follows the Money in Iowa AG Tom Miller’s Faux Tough Posture in 50 State Mortgage Settlement Negotiations

We’ve taken aim repeatedly at Tom Miller’s obvious soft touch toward banks in his role as lead negotiator in the 50 state attorney generals negotiation over foreclosure abuses. Some of his questionable actions:

Promising to put people in jail, then quickly reversing himself

Working closely with the bank-friendly Treasury Department when the state and Federal legal issues are very different, rendering the rationale for cooperation suspect…..

S&P Negative Watch for US Flagged Financial Sector as Major Risk

Yes, I know I dissed the S&P report as fundamentally wrongheaded, but as we will discuss shortly, it contained some interesting commentary on the US financial sector that has gotten perilously little notice.

But I’d first like to address the way the media and some blogosphere commentators have hopelessly muddied the issues on the downgrade scaremongering. One is the “we depend on foreigners to fund our budget deficit” hogwash. As Michael Pettis pointed out, the idea that the US is funding its federal deficit from foreigners is a widespread misconstruction.

S&P Negative Watch Smackdown Wrap

One of the few upsides of the patently silly negative watch announcement for US Treasury bonds was that it elicited colorful and instructive commentary (see our view, along with Mark Thoma’s and Barry Ritholtz’s at the New York Times’ Room for Debate). Some sightings:

The FDIC’s Rosy, Theoretical, Misleading Lehman Resolution Counterfactual (or Why TBTF is Still TBTF)

The FDIC has released a document that purports to show how it could have successfully resolved Lehman Brothers using its new Title II resolution authority granted under Dodd Frank.

All I can say is that this is an interesting piece of creative writing. The Lehman counterfactual rests on a series of assumptions, which as I will discuss shortly, look pretty questionable. The most charitable assessment one can make comes from a famous exchange between two technologists. Trygve Reenskaug says: “In theory, practice is simple.” Alexandre Boily asks: “But, is it simple to practice theory?”.

But some longstanding Administration cheerleaders have jumped on the bandwagon, arguing that “pundits” have asserted “without evidence or analysis” that the resolution authority can’t work. That’s pretty amusing, given that Shiela Bair herself concedes, per the Financial Times, that the resolution authority will not work on a major international bank with retail and investment banking operations: