There is a great post by Bethany McLean at Reuters debunking a major “what caused the crisis” urban legend. Many, including Joe Stiglitz and Alan Blinder, have claimed that an SEC 2004 rule change regarding the leverage of securities firm holding companies allowed the leverage of major investment banks to skyrocket, helping to trigger the crisis. McLean’s article demolishes this idea.
Read more...As Winston Churchill pointed out, history is written by the victors. The big end of finance, having won decisively in the global financial crisis, is in the process of rewriting history to suit its liking. The cover story in the current Atlantic by Roger Lowenstein on Ben Bernanke, titled simply, “The Hero,” is a classic example of this type of revisionist history.
Read more...Do you remember the brouhaha before the mortgage settlement was announced about the release? Recall, sports fans, as we stressed often, that this was a cash for release deal. The only motivating factor for the banks was the scope of the release. The Administration and attorneys general kept claiming the release was narrow, even as both the messaging (unintentionally) and snippets of disclosure suggested otherwise.
Read more...Yves here. As much as the odds still favor clueless or complicit board members bearing no consequences of their misdeeds, the authorities in England are moving forward on the HBOS failure far more seriously than anything we’ve seen in the US. That is no small measure due to the fact that leadership of both the Bank of England and the FSA recognize that banks need to be curbed and have proposed and pushed hard for some serious remedies, such as a version of Glass Steagall (their more aggressive version was beaten back thanks to concerted lobbying by the banks and the Treasury).
By Ian Fraser, a financial journalist who blogs at his web site and at qfinance. His Twitter is @ian_fraser.
Last Friday was an extraordinary day in the world of banking.
Read more...By Chris Cook, former compliance and market supervision director of the International Petroleum Exchange
Cui Bono from High Prices?
If there is one thing that the history of commodity markets tells us it is that if producers can support and manipulate prices in their favour, then they will.
Read more...As you might know, since I gave a wee plug, I was on a panel at The Atlantic’s Economy Summit on Wednesday. Even though NC readers know much Rubinite/Hamilton Project thinking dominates the Democratic party, it was a bit surreal to see how many of its core assumptions were pretty much unquestioned, such as the belief that Bernanke did a great job in the crisis (more on that in later posts) or that regulation needed to be done judiciously if it was to be done at all (note I was on the panel that had the most people urging bolder action, but the day was dominated by “pragmatists”.)
Read more...I know I owe readers some comments on the mortgage settlement, but that will have to wait a few days, since I need to pack to go to DC later this AM. But that will give me more time to digest the voluminous filings, and at least as important, the onslaught of spin.
For a good overview, read The Subprime Shakeout (hat tip Deontos), with one major caveat: he is far too positive about the servicing reforms. Servicers have not only never met these standards, they cannot meet these standards. The sorry history has been that servicers lose boatloads of money servicing highly delinquent portfolios, make a hash of it and cheat to recoup the losses.
But I couldn’t let this bit of propaganda go without comment. From the settlement FAQ:
Read more...I bet JP Morgan wishes it never hired Linda Almonte.
American Banker has released the first in what will be a series of stories on debt collection abuses by the New York bank. It confirms critics’ worst accusations against the financial services and belies Jamie Dimon’s tiresome assertions that JP Morgan is better than its peers. Dimon may still be right if you think excelling in abusing and extorting customers is commendable.
Read more...We were more than a little surprised to read a Bloomberg story on March 10, which reported that the Federal Reserve was giving banks a hard time over its latest stress tests, particularly on the possible losses on consumer debt if the economy were to take a dive. The story indicated that if the Fed held tough, major banks would be restricted in making dividends and buying stock. This seemed to be quite a volte face from the Fed’s previous “give banks everything they ask for and then some” posture. But some Fed defenders argued, no really, once the banks were out of confidence crisis land, the regulators always planned to get tougher with them about building up their capital bases.
If today’s Bloomberg story is accurate, whatever resolve the central bank had was awfully short lived:
Read more...One in a while, you can discern a linchpin lie on which other important lies hinge. We can point to quite a few in America: the notion of a permanent war on terror, which somehow justifies vitiating not just the Constitution, but even the Magna Carta, or the idea of an imperial executive branch.
Now the apparently-to-be-filed-in-court-today Federal/state attorneys general mortgage settlement is less consequential than matters of life and limb. But it still show the lengths to which the officialdom is willing to go to vitiate the law in order to get its way.
Read more...We’ve been focusing on the bigger picture scams in mortgage land, and realized it might be helpful to also provide occasional examples of what is happening on the ground level.
Despite the fact that the Treasury-sponsored mortgage modification program known as HAMP has been roundly decried as a disaster. Not only were too few mods done but banks also lied about program features, including that many borrowers were assured foreclosure efforts were not moving ahead when they were, with the result that quite a few program participants wound up losing their homes.
Given the program’s sorry history, struggling borrowers have good reason to be wary. Lisa Epstein of Foreclosure Hamlet, points out a new wrinkle that she worries may be a harbinger of bad things to come, namely, that HAMP trial mod offers, which once described in some detail what the permanent mod would look like if the borrower made all the trial mod payments and was approved, have suddenly gone silent on the back end terms.
Read more...I hate beating up on Gillian Tett, because even a writer is clever as she is is ultimately no better than her sources, and she seems to be spending too much time with the wrong sort of technocrats.
Read more...Naoto Matsumura is the only person living inside the exclusion zone and he has no electricity or running water. Reader Martha R recommended running this video as a way to commemorate the anniversary of the disaster.
Read more...By Matt Stoller, former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at@matthewstoller
The Government Accountability Office continues its subtle war on the talking point used by Treasury that “TARP made money”.
Read more...By Chris Cook, former compliance and market supervision director of the International Petroleum Exchange
I outlined in my recent post my view that the oil market price has been inflated by passive investors whose attempts to ‘hedge inflation’ actually ended up causing it, and have allowed oil producers to manipulate and support the oil market price with fund money to the detriment of oil consumers.
But there has always been a missing link – precisely how has this manipulation been achieved?
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