Sunday Reads: Cleaning up and being taken to the cleaners…Posted: November 6, 2011 Filed under: #Occupy and We are the 99 percent!, Banksters, commercial banking, Cuba, Economy, Environment, financial institutions, Gulf Oil Spill, jobs, Media, morning reads, Stock Market, U.S. Economy, U.S. Politics | Tags: Auto Repo, birds, BP, Macondo Well, sheep, Spiders 29 Comments
Good Sunday Morning!
Well…did you enjoy your extra hour of sleep this morning? I love when we fall behind, springing ahead is just to difficult for night owls like myself.
BP is in the news again…trying to clean up their greasy image, and it looks like they aren’t doing a good job of it. BP’s bid to clean up its act dealt blow by revelations in Russia case | Business | The Observer
BP‘s attempt to rebuild its public image after the worst oil spill in US history has been dealt a blow by court documents showing it was willing to do a major deal with Russian billionaires whom it regarded as “crooks and thugs” to gain access to the country’s vast oil wealth.
The damaging allegations have come to light at a critical time for BP, which faces a criminal investigation by the US justice department while preparing to fight a massive legal case in New Orleans over the Gulf of Mexico oil spill.
North American rival Norex Petroleum is seeking $1bn damages in its case at the New York supreme court as it argues that BP and its Russian business partner, TNK, have benefited from oil assets that were seized in the late 1990s. Russia is important to BP – its joint-venture, TNK-BP, produces a quarter of its oil. At the heart of the dispute is the alleged misappropriation of the Yugraneft oilfield in Siberia, which Norex claims has generated $1bn in oil revenues in the past decade.
BP had a deal with Tyumen Oil (TNK), which was funded by a consortium, Alpha Access Renova (AAR), made up of the four richest businessmen in Russia.
A BP internal briefing, obtained by Norex and published through the New York court procedure, says: “Sources close to TNK believe [that the] local oil industry [has] been infested with criminal elements long before Alfa took over TNK.”
Some kind of organized criminal activity behind all this? Nah…/snark.
When BP formally teamed up with TNK, it asked for a clause to be written into the contract that would remove it from any liability in the event of a successful action by Norex. The Canadian company believes this is a “smoking gun”, as it says it shows BP realised that the Yugraneft field could resurface as an issue. Norex’s chairman, Alex Rotzang, said BP made a “deal with the devil” by striking the TNK deal in 2003.
An official spokesman for AAR declined to comment on the affair, while BP argued that there was “no merit” in the Norex suit and said it had moved to have it dismissed.
“The allegations made by Norex all involve conduct that predates the formation of TNK-BP and had nothing to do with BP,” said a spokesman from the oil company’s London head office. He went on to rubbish the idea of a “smoking gun” and said that the special clause was “to protect itself against exactly the kind of meritless claims Norex is bringing”.
The article ends by discussing the difficult time BP has had in cleaning up its reputation since the Gulf Macondo disaster. (Of course, as Dakinikat has posted time and time again, they haven’t done a good job of cleaning up the spill either.) Even with the Macondo well still leaking in the Gulf, BP has been approved by the Obama Administration for another deep water well in the Gulf of Mexico.
As if the main stream media not reporting the real story on the various Occupy protest throughout the nation was bad enough, now we have yet another rich luxury car running down Occupy protesters. This time in DC: Exclusive Video: #OccupyDC Protesters Hit by Driver…Who Police Let Go | Crooks and Liars
…the Occupiers chanted and “occupied” most exits while some of the attendees were at pre-scheduled free screening of Atlas Shugged. (No joke, inside they have a booth set up where you can literally put on a Reagan mask and have your picture taken. If this isn’t a metaphor for how the Right’s odd relationship with a President who tripled the national debt and yet still raised taxes almost every year he was in office – I don’t know what is.)
The worst thing to happen to the Koch-funded event attendees last night was that they had to get chanted at while walking a block to catch a cab or use the Metro inside the convention center. “If we made some rich guys use the Metro tonight – we won!” I overheard an Occupier say.
The opposite corner from where I was standing – a full block away – a silver Lexus sedan hit three protesters in the street. The reports were that he actually sped up “like he was playing chicken” according to eye witnesses. The video above is when the police let the driver go. Then the crowd became angry at the police. You can hear an Officer Walsh on the tape saying, “They shouldn’t have been in the street.” The Metro Police have said they released the driver because he had a green light. This contradicts the report or tweet from DC Councilman Tommy Wells who claimed the driver was apprehended blocks away and was in custody.
Okay, so there are some discrepancies in the story when it comes to whether the driver was in police custody…but remember, this is the second time a car, and let’s be honest…a luxury car, has run over protesters. The incident in Oakland involved a Mercedes…and that driver was also let go by the police, even when he tried to “drive away” from the scene of the “accident. “As far as the OccupyDC plow down…
The injuries are described by the Washington Post as “non-life threatening” but they were still taken away by ambulances. I’m not familiar with DC laws – but I’ve always been under the impression that when pedestrians are in the street they automatically have the right-of-way. I can understand the frustration of the demonstrators which led to at least two arrests last night.
Yeah, interesting…pedestrians vs. two tons of metallic 1% on wheels…guess we see just what percent matters to the cops.
Let’s move on to a new Wall Street investing trend that may be a mini follow-up to all those crappy bundled mortgages that hit the fan back in 2008. ‘Buy Here Pay Here’ Auto Companies Assault Working Poor; Setting Up Another Economic Crisis | Crooks and Liars
Okay, here is the story, a reader sent an email to Kenneth Quinnell, one of the writers at C&L, describing a horrible experience with a vehicle repossession…that never should have happened in the first place. You can read the letter at that link above. Then Quinnell did some digging and found out the old “Buy Here Pay Here” car lots are getting lots of new investors…we are talking big banks, Toronto Dominion big…Check it out:
The details are even more disturbing. The wife’s illness included a brain tumor and the purpose of the extension was to deal with the illness, not out of any irresponsibility. On top of that, the account was not in default and the repo man was belligerent and entered locked and gated property without permission. Luckily — and no thanks to Chrysler — the reader’s wife is still alive and still fighting her illness
Others report similar experiences with cars financed through Chrysler Financial. Chrysler Financial was a recipient of a $1.5 billion bailout via the Troubled Asset Relief Program in 2009. In 2010, Chrysler Financial was bought out and their name was changed to TD Auto Finance. It isn’t clear if Chrysler Financial/TD Auto Finance is what is known as a “Buy Here Pay Here” company, but their repossession practices are in line with that emerging industry.
He goes on to cite a series of articles at the LA Times that are looking into the fast growing scheme. (Scheme is my word for this crap.)
Wall Street is investing heavily in the profitable industry:
Investor money is pouring into the industry from several sources, helping Buy Here Pay Here dealers expand their reach and raise their profile.
In addition to private equity firms such as Altamont, several payday lending chains are moving into Buy Here Pay Here and have acquired dealerships.
Stock investors are snatching up shares in Buy Here Pay Here chains and other publicly traded companies in the business. Two of the biggest, America’s Car-Mart Inc. and Credit Acceptance Corp., have seen big gains in their share prices this year, outpacing the market.
Buy Here Pay Here is also being boosted by one of the sophisticated financial strategies that drove the nation’s recent housing boom and bust: securitization.
Loans on decade-old clunkers are being bundled into securities, just as subprime mortgages were a few years ago. In the last two years, investors have bought more than $15 billion in subprime auto securities.
Although they’re backed mainly by installment contracts signed by people who can’t even qualify for a credit card, most of these bonds have been rated investment grade. Many have received the highest rating: AAA.
That’s because rating firms believe that with tens of thousands of loans lumped together, the securities are safe even if some of the loans prove worthless.
Some analysts worry that the rush to securitization could lead to careless lending by dealers eager to sell more loans, as happened with many mortgage-backed bonds.
“We think that investing in such companies is a ticking time bomb,” said Joe Keefe, chief executive of Pax World Management, which steers its investments into businesses it deems socially and environmentally responsible. “It has ethical as well as systemic risk implications.”
Wow, you know, Toronto Dominion, or TDBank is the largest bank in Canada… TD Auto Finance is one of their many companies, or divisions. My husband used to work for TDWaterhouse before it became TDAmeritrade…they seem to have their fingers in all sorts of pies.
I just find it interesting that when it comes to the greedy Banksters, taking people’s homes illegally just wasn’t enough for them.
Yet another reason for the Occupy movement to press on and fight for the 99%.
Just a few more links for you all this morning, Cuba is now prepared to Allow Buying and Selling of Property (Uh…with a few restrictions.)
Cuba announced a new property law Thursday that promises to allow citizens and permanent residents to buy and sell real estate — the most significant market-oriented change yet approved by the government of Raúl Castro, and one that will probably reshape Cuba’s cities and conceptions of class.
The new rules go into effect on Nov. 10, according to Cuba’s state-run newspaper, and while some of the fine print is still being written, the law published on Thursday amounts to a major break from decades of socialist housing. For the first time since the early days of the revolution, buyers and sellers will be allowed to set home prices and move when they want. Transactions of various kinds, including sales, trades and gifts to relatives by Cubans who are emigrating, will no longer be subject to government approval, the new law says.
“To say that it’s huge is an understatement,” said Pedro Freyre, an expert in Cuban-American legal relations who teaches at Columbia Law School. “This is the foundation, this is how you build capitalism, by allowing the free trade of property.”
Cuban officials would disagree; they argue that they are carefully protecting socialism as they move toward economic reform, and the new law includes some provisions that seem aimed at controlling both speculation and the concentration of wealth. Owners will be limited to two homes (a residence and a vacation property) and financing must go through Cuba’s Central Bank, which will charge fees, which have not been determined. And a tax of 8 percent will be split by the buyer and seller.
Cuban Economist are hoping this new property law will jumpstart the island’s economy. Spurring renovations and in turn…jobs. Many Cubans are leery about the new law, and are worried it may leave them homeless.
Yet on the other hand, there are also significant social concerns. Mario Coyula, Havana’s director of urbanism and architecture in the 1970s and ’80s, said that wide-scale buying and selling would lead to a “huge rearrangement” in Havana and other cities as the wealthy move to better areas. He and others said it would inevitably exacerbate class conflict.
And because the island has a shortage of housing — with many families and even divorced couples continuing to live together for lack of a better option — critics say that any displacement could raise the prospect of homelessness. For example, if two families are sharing a home and one holds what currently amounts to Cuban title with limited rights, the new law says that the titleholder can sell and the tenant family will eventually have to move.
There are a lot of unknowns that come with property ownership in Cuba, it is going to be something to watch as the laws take hold. I’ll keep you posted on this.
From Minx’s Missing Link File: Many of you know that I am a fiber artist, being a weaver and a spinner gives me a “connection” to a group of insects that also spin and weave…the spider. Here is one little spider that spins up a huge web, it is so cool: Tiny Spider Spins World’s Largest Spider Web | Geekosystem
While it may not be the biggest spider in the forests of Madagascar, the Darwin’s bark spider — so named as it was described 150 years after the publication of The Origins of Species — has a pretty big claim to fame. According to researchers, the 18mm spiders not only have the toughest thread, but use it to spin webs some 75 feet wide. This quite easily makes them the creators of the largest spider webs in the world. The process by which the tiny weavers go about their work is surprisingly straightforward.
The spider finds itself a river, and then a branch or a bush on the river’s bank. From there, it lets out a line of thread that is blown in the wind — hopefully across the river. Once it lands an anchor on the opposite bank, the spider reinforces this lengthy line of thread and begins spinning an orb web over the river itself.
Though scientists have now cracked how the webs are built, they still aren’t sure why the webs are built. During their observations, scientists wondered if perhaps the massive webs were for the catching of massive prey. But when nothing larger than a beetle or dragonfly materialized in the web, they decided to employ some experimental biology and simply threw larger prey at the web to see what would happen. Despite their highly scientific chucking, frogs and larger insects escaped the web unscathed.
I keep telling myself that my next tattoo is going to be a spider, spinning up a little nest of eggs…a mama spider.
Okay, I’m getting a bit loopy, let’s take a look at the last two links for you today.
Easy Like Sunday Morning Link of the Week: If anyone has ever watched wild birds hunt or work together to get food, you know that these birds are really clever creatures. BBC Nature – Clever Eurasian jays plan for the future
Experiments with Eurasian jays have shown that the birds store food that they will want in the future – “planning” for their impending needs.
The study revealed that birds would stash more of the foods that they knew would be unavailable to them on forthcoming foraging trips.
Jays are not the first birds to show that they might have the capacity for what is known as “mental time travel”.
But previous claims that birds “plan” in this way have been controversial.
The findings are published in the journal Biology Letters.
To find out if the jays thought about the future, the scientists exploited the birds’ habit of hiding or “caching” food for later.
The article details the studies results, fascinating.
Lastly, this article from the NY Times. I love this story about the sheep…check it out.
Sheep Lawn Mowers, and Other Go-Getters – NYTimes.com
Randy Harris for The New York Times
So Miller ties his sheep up in someone’s yard and they eat the grass and weeds.
IN this verdant lawn-filled college town, most people keep their lawn mowers tuned up by oiling the motor and sharpening the blades. Eddie Miller keeps his in shape with salt licks and shearing scissors.
Mr. Miller, 23, is the founder of Heritage Lawn Mowing, a company that rents out sheep — yes, sheep — as a landscaping aid. For a small fee, Mr. Miller, whose official job title is “shepherd,” brings his ovine squad to the yards of area homeowners, where the sheep spend anywhere from three hours to several days grazing on grass, weeds and dandelions.
The results, he said, are a win-win: the sheep eat free, saving him hundreds of dollars a month in food costs, and his clients get a freshly cut lawn, with none of the carbon emissions of a conventional gas-powered mower. (There are, of course, other emissions, which Mr. Miller said make for “all-natural fertilizer.”)
That just makes me smile…gotta love the sheep!
Well, I hope you enjoyed the reads this morning. For the next two weeks the SDB Evening News Reads will be posted between 6:30pm and 7:30pm EST. I’ll be busy painting and getting our new hovel in shape during the day, so its easier to post later in the day.
What are you all doing today? Catch ya later in the comments.
The Beginning Is NearPosted: November 3, 2011 Filed under: #Occupy and We are the 99 percent!, American Jobs Act, Baby Boomers, Bailout Blues, Banksters, Black Agenda Report, commercial banking, Economy, income inequality, investment banking, jobs, unemployment 27 Comments
Maybe it’s my age [and no, I’m not telling] but I find great promise is those four words scrawled on a makeshift sign.
I’m sure–in fact, I know–there are others of my generation [Boomers] who look at the Occupy Wall St. [OWS] Movement, read the signs and scratch their heads. Or more likely they criticize the primarily young protesters as naïve, idealistic, disorganized, wanting something for nothing. Why don’t they just get a job? many say.
These reactions miss the point, as far as I’m concerned. These youngsters want something all right. They want their futures. They want to control their own destinies with a measure of integrity, a sense of possibility rather than bending to the yoke of a failing system, one that only works for those on the top of the heap. The statistics are there for everyone to read. No mystery! Wages of ordinary Americans have been stagnant, while the rich have become richer than Midas. Jobs have been sent willy-nilly beyond our shores but the trade-off [we’ve been told numerous times] are cheap consumer goods, the more the better.
He who has the most stuff wins. Many people bought into that. For a while.
Throw in 9/11, multiple wars, massive unemployment, rising health care costs, climate-related weather events, the negligence in the Gulf of Mexico, etc. and the shine has definitely come off the latest gadgets and toys. As an electorate, we’ve had a slap upside the head.
What I find astounding is people blaming this particular group—the OWS protesters, primarily the Millennials–for what is clearly our responsibility, a product of our refusal to hold our politicians accountable and demand justice–a return to the Rule of Law–instead of foisting the unpleasant, annoying task on our children [or grandchildren, as the case may be]. We’re the ones who bought into the Big Lie. Or worse, pretended it didn’t exist. These young students and 20-somethings had no hand in what we watched and allowed to develop.
The kids are making us look bad. They’ve endured dismissal, ridicule, concrete beds and lousy weather. And they’re called the slackers?
Nor should we forget that Boomers are running things right now. Our generation sits in the halls of Congress and refuses to pass legislation to put the country back to work. Boomers sit in the offices of the White House and pretend to hold a populist agenda, while doing the bidding of their monied benefactors. They sit on the Supreme Court and try to convince us that corporations = personhood. And they certainly populate Corporate America and Wall St., where repeated decisions and deals have been made to maximize profits at the expense of ordinary citizens. Not all Boomers, of course. But our generation is well represented in the lever pushing–the Make Love Not War crowd. Time to own it.
But even if we’re far, far removed from the corridors of power, just living our lives, I would suggest quiet acquiescence of the status quo isn’t working either. Hello, Boomers. The confidence fairy that has been running [ruining] our financial system will not be coming to spread pixie dust over the wreckage and make things right.
Not going to happen. And the young? They see right through it.
For over thirty years, corporate greed has grown, metastasized to the point that nothing is sacred—not the health or education of our people, not the environment [on which we depend to exist], not our principles of equal opportunity, not even our insistence that The Rule of Law is imperative for our Democratic Republic to survive.
And what was the trade? Constant debates that American health care is the best in the world without adding the qualification: only if you can afford it. The refusal to admit that the decreasing quality of our primary and secondary educational systems condemns many of our citizens to poverty and the staggering increase in university tuition costs and subsequent debt saddles our college graduates to years of unmanageable debt. The reckless and short-sighted risk-to-wreckage of our environment be it through fracking or drilling or proposed tar sand pipelines, while we turn up our noses to promoting and supporting green technology. The cruel pretense that all our citizens start off on a ‘level-playing’ field, while the evidence of privilege and influence-driven access to favors are as acute now as during the Gilded Age. The unwillingness to investigate and prosecute those involved in the biggest heist in history, the very same financiers and corporate bigwigs, who continue to exert control over our political system.
Two years ago, Dick Durbin stood before Congress and said: The banks own the joint.
We should have listened or turned up our hearing aides. Because sadly, the man spoke the truth. See no evil, hear no evil, speak no evil is not a strategy for the future. It’s unsustainable.
So, when I look at the live streams of the cross-country demonstrations, read the twitter feeds, I don’t think slackers. I think of a generation who has said what we, the grownups, should have said quite some time ago: Enough is enough. Or as Bill Moyers said recently: “People are occupying Wall St. because Wall St has occupied the country.”
Yesterday, between 7 to 10,000 people took part in a general strike in Oakland. They shut down the port of Oakland, a major access for Chinese goods, the 5th busiest port in the country. Local businesses shut down in support of the effort. To its credit, the protest has remained remarkably peaceful although early morning reports indicate that violence did break out before sunrise. Unfortunately, the authorities in Oakland nearly cost the life last week of a young Marine vet, Scott Olsen. Discontent can have consequences.
But attitudes are shifting and changing. Voices are being heard.
Last April with little fanfare, Joseph Stiglitz stated in a Vanity Fair article:
“The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live.”
Since the Occupy Movement started, this sentiment has been echoed, magnified:
On October 22, Noam Chomsky gave a speech on Dewey Square in Boston and said:
“I’ve never seen anything quite like the Occupy movement in scale and character, here and worldwide. The Occupy outposts are trying to create cooperative communities that just might be the basis for the kinds of lasting organizations necessary to overcome the barriers ahead and the backlash that’s already coming.”
At Black Agenda Report, Glen Ford recently wrote:
“There comes a time of awakening. We are now in that time – although some Black folks are not yet awake. Our job is to wake our people up, so that we don’t sleep through this moment.
The young people that began this Occupation Movement less than two months ago are not “us,” but they have done all of us a great service. They have shouted out the name and address of the enemy – the enemy of all humanity. The enemy’s name is Finance Capital, and the address is Wall Street, and that is the truth.”
Chris Hedges recently stated on Truthdig radio:
“But this is a widespread movement; it’s decentralized; it takes on its own coloring and characteristics, depending on the city that it’s in; and so there will be, you know—as you point out, I mean, movements are by their very nature messy and make steps forward and steps back. But I think that there is a resiliency to this movement because it articulates a fundamental truth of inequality that hits the majority of American citizens.”
Even House Speaker John Boehner remarked in a recent speech at the University of Louisville:
“I understand people’s frustrations,” he said. “The economy is not producing jobs like they want and there’s lot of erosion of confidence in our government and frankly, under the First Amendment, people have the right to speak out … but that doesn’t mean they have the permission to violate the law.”
Hey, it’s a start. Certainly better than designating OWS as ‘The Mob.’
People are rousing from their long, restless slumber. The conversations have begun and are different from what we’ve heard or read before. The protesters persist. They march, they endure.
The Beginning is Near.
The Little Engine That CouldPosted: November 1, 2011 Filed under: #Occupy and We are the 99 percent!, Banksters, commercial banking, Corporate Crime, Global Financial Crisis, income inequality, U.S. Economy 10 Comments
There’s a fascinating story that’s been brewing right under the radar that is beginning to sprout legs. And I hope continues and receives a larger audience. It’s the battle between Goldman Sachs [and by association the other TBTF’s] and the Lower East Side People’s Credit Union in NYC. Why? Because it’s the perfect metaphor for what’s been going on in the US since deregulation turned our financial system into an iron-fisted bully.
Occupy Wall St. [OWS] as everyone recalls was ignored at first, ridiculed and dismissed, and now has become a fixture and swirl point of political discussion. Conversations are changing. People are beginning to pay attention in both positive and negative ways. OWS started to receive donations from across the country because many Americans are simply fed up with what they see as the gross corruption of money and power on our political system.
And so the Movement that was doomed at the start, who railed against the Big Banks suddenly found itself [by some accounts] with over $300,000. What to do? They needed a bank. And where did they go? To the Lower East Side People’s Credit Union, servicing the City’s low income citizens, primarily Latinos. The People’s Credit Union decided to hold an honorary benefit for their generous depositor, the Occupy group.
And then . . . Boom!
Goldman Sachs had a near hissy fit. Why? Because Goldman had given People’s Credit $5000. This was not a gift, not a donation of goodwill but a drop of cash they are required under the TARP agreement to give through the Community Reinvestment Act [CRA]. They are legally required to give this money out to the community under the original deal. But Goldman in their infinite wisdom and with hackles up over any mention of OWS has decided to use this required reinvestment as a hammer to exert their will. Goldman Sachs has demanded their $5000 back. And also, I would suggest, they wish to set an example: You play it our way or you don’t play at all. It’s been reported the heat has been turned up with a nasty message to People’s:
“You will never get a dime from another bank again.”
Democracy Now has been following this story. A reporter by the name of Greg Palast has done the investigative work from the start and has tried to get Goldman Sachs to give their side of the story. Quelle surprise! No response. I encourage you to watch the clip from Democracy Now. If it doesn’t get your blood boiling then I want to know what mega-tranquilizers you’re on.
This is what Occupy is all about. This is what must change.
Newsflash folks: This isn’t Market Capitalism, it’s MonopolyPosted: October 15, 2011 Filed under: #Occupy and We are the 99 percent!, commercial banking, Economy, financial institutions | Tags: banking laws, Banksters, Bernie Madoff, Financial Panic of 1792, Glass Steagall Act, Global Financial Crisis, monetary control act of 1980, Raj Rajaratnam, The Riegle Neal Interstate Banking and Branching Efficiency Act of 1994, William Duer 23 Comments
I entered the world of commercial banking the same year that the Monetary Control Act of 1980 (MCA) got passed and signed by Jimmy Carter. President Jimmy Carter was responsible for the first onslaught of deregulation of all kinds of industries which is important to think about. It was a Democratic President that pulled the first card from the laws that were put into place to stop the banking crises that had plagued our country in the early years of capitalism. I should also remind you that the country was founded on a system of economics called mercantilism. Capitalism didn’t come into being until the early-to-mid-19th-century. (Note to Rick Perry: The US Revolutionary war was not in the 16th or 17th century.) We had series of financial crises in the 1840s and then in 1870s . The first one was in 1792 and a politician/financier caused it.
We didn’t call them recessions bank then. We called them Panics and they were sourced in banking and nascent financial markets. They were the result of excessive speculation and/or some Bernie-Madoff-like figure and scheme. In 1792, the panic was set off by William Duer who used his appointment to the US Treasury by Alexander Hamilton to use insider information in a similar way to Hedge Fund Manager Raj Rajaratnam who was just sentenced to 11 years in jail yesterday. This is a very old story and really dates back to the birth of capitalism as we know it.
Hamilton was pretty appalled by Duer’s speculative activities. He wrote this at the time.
“Tis time, there must be a line of separation between honest Men & knaves, between respectable Stockholders and dealers in the funds, and mere unprincipled Gamblers.”
If you start typing Financial Panic into Google, you’ll start seeing a huge number of dates pop up. From 1792 down to the present time, most of these panics have been clearly rooted in that same problem: speculative bubbles and banking malfeasance.
There’s a clear difference between the good old fashioned community banking that gave me my first job out of my masters program and what we have today. Much of it is due to that first card pulled from the bottom of the financial market card house by Jimmy Carter in 1980. You can read about the law at FRB Boston. There were a lot of responsibilities placed on the FED for oversight at the time but the banks got a lot of benefits including increased access to borrowing money from the FED. When I was working in Nebraska, a bank was allowed one branch and a main office. There were restrictions on how far away the branch could be. I worked for a small bank with a branch across the street at a big shopping center. That local law was pulled down shortly thereafter because the banks wanted to branch every where into communities they did not know. There are very few community banks left in the country where your banker knows if you’ll be good for your loan or not based on years of knowing you.
Most small and regional banks have been gobbled up by the top 4 or 5 financial institutions. The majority of financial assets sit in a handful of institutions. That’s called monopoly, folks. Monopolies require regulation, not free reign. That’s basic classical economic theory and has nothing to do with Keynes and politics. Any microeconomics 101 students should be able to explain why. They are incredibly inefficient. We say they are not Pareto Efficient, which means some very specific things. They overprice their products. They restrict access to these products. They earn profits above and beyond what they should because the revenue far exceeds the productivity of the factors used to produce the service. They create a deadweight loss which is bad for every corner of the economy except for the monopolist.
We have gone from a system where lending risk is personalized and spread around a number of institutions to a situation where it’s all concentrated and automated in the hands of a few big banks. They also can invest in a lot of specious assets. The banks continued to seek complete interstate banking and eventually got it. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 gave them exactly what they wanted. It also allowed bank holding companies to do things that they had previously been disallowed like hold subsidiaries that offered speculative investments. Interestingly enough, it is much easier to become a bank holding company than it is to become a bank. Many investment banks became bank holding companies to access borrowing through the Fed Window in 2008 when they had gambled away a good deal of their own capital.
This law was signed by Democratic President Bill Clinton. That’s only the commercial banking side. The so-called shadow banking industry got freed to speculate at will and be closely aligned with banks and their guaranteed deposit when the Gramm-Leach-Bliley Act (GLBA) was signed by President William Clinton in 1999. It repealed huge sections of the Glass Steagall Act that were put into place during the Great Depression to deal with all those financial panics that finally led up to the 1929 Bank Run. If you’re unemployed and you’ve seen your housing equity and your retirement funds depleted, I’d suggest going to Phil Gramm’s house with placards and rotten eggs. He’s the one mover and shaker that brought all this on to our heads and a symbolic tar and feathering would make me feel good, frankly. (Here’s an academic site with some brief notes on a Mishkin textbook on the history of the repeal of important banking laws for your reference.)
So, it goes with out saying that the minute these things were put into play from 1980 forward, it was only a matter of time before we started to repeating panics and would eventually get another Great Depression. The panics started in the 1980s. I’d moved out of commercial banking and into the S&L business right before our first panic came. When S&L’s started giving market rates of interest on their liabilities, they had to start giving new mortgage loans out at exorbitant prices. My first one–in 1982–was for around 17%. I got the banker discount which brought it down to 12%. The problem was that all the liabilities were repricing to market and all the assets (loans) were still stuck at those 1950-1960 home loan interest rates of about 5%. My dad was barely paying 4% because the bank he used also was funding his floor plan (that’s the cars he had on his inventory sheet as a new car dealer). His floor plan interest was through the roof in those days because the usury laws had been suspended. It was in the 20% levels just like credit card debt was at the time. The commercial banks were seeing incredibly high prime rates of interest and the Savings and Loans were hemorrhaging money. This is a problem of term mismatch when you rely on arbitrage profits, but I’ll avoid the lecture on that one! The S&L crisis should’ve been the first cautionary tale from that Monetary Control Act. I have some pretty wild stories from those days including the Treasurer that I worked for using GNMA futures to day trade to try to up our cash balances. Illegal yes! That’s if you’re caught! However, we were the least of the FSLIC’s problems at the time and he got away with it!
The second cautionary tale came with a Long Term Capital Management that lost tons of money after the Russian Financial Crisis in 1998. That didn’t stop the GLBA at all however. There was an earlier canary too. That was Franklin Savings and Loan. There’s actually a more recent example of the same. That would be Granite Funds. LTCM made convergence trades that required huge sums of money and enormous leverage to be profitable. They were eventually bailed out and wound down at a huge cost. There is absolutely something wrong when we repeatedly have huge organizations collapse because of margin calls. I point back up to the quote from Alexander Hamilton who got it the first time out. We still haven’t learned the lessons from any of this because we’re ready and primed for the next financial crisis with European Sovereign Debt too. The speculators are pulling the same tricks and we’re suffering from the same results.
So, the deal is that after about 100 years of horrible problems, we put a box around the speculators called Glass Steagall. There is a new box proposed called the Volcker Rule. The banks are kicking and screaming about even the smallest regulations to stick them back into their boxes. We cannot afford to repeatedly coddle an industry that systematically creates huge social and economic costs on a regular basis when set free to do as it will. The Volcker Rule–in its current form–is pretty mild. It’s no where near what ex Fed Chairman Paul Volcker originally offered but it’s a step in the right direction. That’s why it’s first on my list of demands for OCCUPY activists.
Fitch Ratings on Friday said it sees potential for a delay in the adoption of a newly proposed rule barring banks from trading for their own profits, due to industry opposition that could lead to a political fight.
Banks’ opposition “will likely fuel a lengthy debate in Washington regarding the ultimate scope and precise implementation” of the Volcker Rule, Fitch said in a report released four days after federal banking regulators proposed the rules.
“There is a real possibility that controversy surrounding the proposal could delay the precise definition of restricted trading, particularly in a presidential election year when partisan debate over financial regulation will be intense,” Fitch said.
The rule, named after former Federal Reserve Chairman Paul Volcker, was required under the financial overhaul that became law last year. The rule would bar banks from trading for their own profit instead of on their clients’ behalf. Banks must hold investments for more than 60 days, and bank managers must make sure employees comply with restrictions.
The day after banking regulators and the Federal Reserve backed the rule, the Securities and Exchange Commission voted 4-0 to send the proposal out for public comment. The public has until Jan. 13 to comment on a rule that’s expected to take effect by July after a final vote by all the regulators. Banks would have until July 2014 to comply.
The industry has said that the proposal would put them at a disadvantage to banks in other countries.
Let me reiterate something I’ve said earlier. The Scandinavian countries learned from their last disastrous banking crisis in the early 1990s and put their banks back into the box. This was roughly the same time of our own S&L crisis and came from speculative bubbles. They all come from speculative bubbles, excess risk taking, and extremely immoral behavior on the part of many bankers/brokers because the extraordinary profits that can be extracted on the ride up are incredible. The Canadians never let them out so they’ve basically been sitting pretty well during this last crisis. None of these countries had the problems that we and other countries have had since then. The Volcker Rule is the least we could do to start down the path to sanity.
I want to end this post by pointing out a new voice in the blogging community called Reformed Broker. His real name is Joshua Brown. He has written a Dear Wall Street letter that’s worth a read. He now feels like I felt after living through the S&L crisis and then watching the insanity repeat with LTCM and the others in the late 1990s. All this fol de rol tanked my 403(B) retirement account as badly as this last bit of craziness has tanked it again. Only this time I am 10 years closer to retirement. Oh, and this time they got my home equity in the process and my job. The S&L crisis got my job and killed my ability to sell my house. It also caused incredible damage to my father’s small business. He sold it at a huge loss just to get out from under the stress that was killing him. I’ve just about had it now with this nonsense, the bankers, and the politicians that enable them. As I’ve said it’s been going on for some time and they need to be put back into the box.
I’m going way beyond fair use here, Josh but I wanted your voice to be read by our readers. Please take this as a compliment and not a copy right violation!
In 2008, the American people were told that if they didn’t bail out the banks, there way of life would never be the same. In no uncertain terms, our leaders told us anything short of saving these insolvent banks would result in a depression to the American public. We had to do it!
At our darkest hour we gave these banks every single thing they asked for. We allowed investment banks to borrow money at zero percent interest rate, directly from the Fed. We gave them taxpayer cash right onto their balance sheets. We allowed them to suspend account rules and pretend that the toxic sludge they were carrying was worth 100 cents on the dollar. Anything to stave off insolvency. We left thousands of executives in place at these firms. Nobody went to jail, not a single perp walk. I can’t even think of a single example of someone being fired. People resigned with full benefits and pensions, as though it were a job well done.
The American taxpayer kicked in over a trillion dollars to help make all of this happen. But the banks didn’t hold up their end of the bargain. The banks didn’t seize this opportunity, this second chance to re-enter society as a constructive agent of commerce. Instead, they went back to business as usual. With $20 billion in bonuses paid during 2009. Another $20 billion in bonuses paid in 2010. And they did this with the profits they earned from zero percent interest rates that actually acted as a tax on the rest of the economy.
Instead of coming back and working with this economy to get back on its feet, they hired lobbyists by the dozen to fight tooth and nail against any efforts whatsoever to bring common sense regulation to the financial industry. Instead of coming back and working with the people, they hired an army of robosigners to process millions of foreclosures. In many cases, without even having the proper paperwork to evict the homeowners. Instead, the banks announced layoffs in the tens of thousands, so that executives at the top of the pile could maintain their outrageous levels of compensation.
We bailed out Wall Street to avoid Depression, but three years later, millions of Americans are in a living hell. This is why they’re enraged, this why they’re assembling, this is why they hate you. Why for the first time in 50 years, the people are coming out in the streets and they’re saying, “Enough.”
And one more time, let’s hear from Alexander Hamilton because it bears repeating!!!
“‘Tis time, there must be a line of separation between honest Men & knaves, between respectable Stockholders and dealers in the funds, and mere unprincipled Gamblers.”
I’ve added a link to Josh’s blog so you can go sample his writing any time you want. He’s also on twitter as @ReformedBroker. Okay, this is a little long, and a little like one of my lectures for financial institutions, but I thought you might appreciate how this thing came down and what needs to be done. Like I said, we need to put them back into a box. If they are to be free from the chance of bankruptcy, able to access US tax dollars at zero cost, and are still able to create Financial Panics by bad lending and investment practices we have no other chance. This will repeat ad infinitum and will cost us our personal and national treasures.
Tuesday Late Afternoon…News ReadsPosted: October 11, 2011 Filed under: #Occupy and We are the 99 percent!, commercial banking, fundamentalist Christians, just because, Politics as Usual, Regulation, Republican politics, Republican presidential politics, SDB Evening News Reads | Tags: Cary Grant, Eric Cantor 18 Comments
Good Evening…its going to be a short post tonight. I think worrying about my earache gave me a migraine. So just be sure to add some items you are reading about below in the comments.
Aside from the Alien Autopsy that is making the news today, we have a few other stories that are walking back some items we wrote about yesterday.
As if the banks aren’t getting more than their fair share:
Banks fume over ‘Volcker rule’ – Tim Mak – POLITICO.com
Federal regulators unveiled new details Tuesday on restrictions that would bar banks from trading for their own profit – another blow to an industry already suffering from growing and widespread public discontent.
Banks fear that the new Obama administration regulations could negatively affect their bottom line. One analyst told the Wall Street Journal that “at a minimum” the new rules would cost the banks $2 billion annually.
Cantor is taking a different course in his commentary on the Occupy protesters. (Like Michael Bloomberg…I don’t trust any of these people who are changing their tune, it seems like a set up.)
Cantor shifts tone on Occupy Wall Street protestors – CNN Political Ticker – CNN.com Blogs
House Majority Leader Eric Cantor Tuesday attempted to walk back comments he made last week when he referred to those participating in the Occupy Wall Street demonstrations as “the growing mobs.”
In his weekly session with reporters on Capitol Hill, Cantor said he understands why people are out on the streets protesting.
“People are upset and they’re justifiably frustrated. They’re out of work. The economy is not moving,” Cantor said. “Their sense of security for the future is not clear at all. People are afraid and I get it.”
He then continues the usual attacks on the Democrats in Congress…same old thing. But this next comment made me think ah…perhaps Cantor is just dialing it back so that he can get the VP nomination…
Cantor: Keep Religion Out of Presidential Race – Susan Davis – NationalJournal.com
Majority Leader Eric Cantor, R-Va., weighed in on the discussion sparked by comments by a Texas minister about the role of religious faith in picking a presidential candidate.
Cantor, the highest-ranking Republican in Congress who is Jewish, said on Tuesday that a candidate’s faith should not determine fitness for office.
“I don’t even know what to say to that, other than if people view that as their driving factor, then this country is one that affords all of us to practice our faith,” said Cantor when asked to respond to a weekend controversy over comments by Baptist minister Robert Jeffress at the conservative Values Voter Summit.
“Obviously, I don’t think that one’s religion is demonstrative of anything other than, that is their faith, and you look to see their record and how they’re affected by their moral values and if those moral values come from their faith,” Cantor said.
Yeah, there is something motivating these statements.
Lastly, Dyan Cannon has come out with a tell all book on Cary Grant. Now, I absolutely loved Grant, some of his movies are my favorites…so honestly I read through this excerpt rather quick because I did not want to tarnish my opinion of him. Check it out…Archibald Leech was a bit LSD addict, who wasn’t in Hollywood? Perhaps I should change that to who isn’t…
Cary Grant force-fed me LSD, nearly killing me, says Dyan Cannon | Mail Online
I don’t want to read about a crazed Cary Grant who seems more like an aging Tom Cruise…the similarities about his controlling behavior, the constant criticising…pushing this LSD on Cannon like some sort of religion. I expect him to jump up and down on a couch, professing his love for LSD and its enlightening benefits.
That is it for me…what are you thinking about tonight?