Speechification Alert
Posted: September 12, 2009 Filed under: Bailout Blues, Equity Markets, Global Financial Crisis, president teleprompter jesus, The Bonus Class, The Great Recession, The Media SUCKS, U.S. Economy | Tags: Barney Frank, L shaped recession, Stagnant economy, zombie banks Comments Off on Speechification Alert
Who stole the Cookies from the Cookie jar?Great illustration in today's New York Times: Banker's and the taxpayer cookie jar
Well, it’s my turn to listen to a Obama Speech. Those speeches usually have the same dizzying effect on me that tennis matches do. Instead of watching balls go back and forth rhythmically while lulling me to sleep, I get to watch the head of the President. Teleprompter Right, 1,2,3 to Teleprompter left, 2, 3 …
So the speech is on bank reform which is something I’ve been on about for months now. It’s the anniversary of Lehman’s demise. Stories abound on the Grey Lady today including this call by Dr. Tyler Cowen of George Mason University. He’s a little libertarian for my taste on policy–even managing a h/t to Ayn Rand and Atlas Shrugged–but he gets it all in a way that only an economist could.
But we are now injecting politics ever more deeply into the American economy, whether it be in finance or in sectors like health care. Not only have we failed to learn from our mistakes, but also we’re repeating them on an ever-larger scale.
Lately the surviving major banks have reported brisk profits, yet in large part this reflects astute politicking and lobbying rather than commercial skill. Much of the competition was cleaned out by bank failures and consolidation, so giants like Goldman Sachs and JPMorgan had an easier time getting back to profits. The Federal Reserve has been lending to banks at near-zero interest rates while paying higher interest on the reserves the banks hold at the Fed. “Too big to fail” policies mean that the large banks can raise money more cheaply because everyone knows they are safe counterparties.
President Dwight D. Eisenhower warned of the birth of a military-industrial complex. Today we have a financial-regulatory complex, and it has meant a consolidation of power and privilege. We’ve created a class of politically protected “too big to fail” institutions, and the current proposals for regulatory reform further cement this notion. Even more worrying, with so many explicit and implicit financial guarantees, we are courting a bigger financial crisis the next time something major goes wrong.
We should stop using political favors as a means of managing an economic sector. Unfortunately, though, recent experience with health care reform shows we are moving in the opposite direction and not heeding the basic lessons of the financial crisis. Finance and health care are two separate issues, of course, but in both cases we’re making the common mistake of digging in durable political protections for special interest groups.
I have to admit that I’ve written about similar concerns, however, I can tell Cowen and I may differ on how to correct the situation. That’s typically true of most economists. We agree on the root causes because of our grounding in shared theory but argue which policy might be best based on our political bent. I continue to argue for the role of government as rule setter and referee. However, I really do prefer independent bureaucrats in the position of auditor and enforcer. Congress, however, still has to write the law. This action, to date, has been missing.
So, MarketWatch has provided a pre-speechification programme so that we can get our score card ready. The speech is supposed to “rekindle” interest in regulatory restructuring. I’m not sure we need restructuring so much as we need laws that recognize the systematic problems we’ve developed in financial markets since quants have turned asset pricing into a physics exercise, financial innovations have become exotic, and the entire set up is now one big cartel waiting to pounce on the unsuspecting business sector and consumer. We now have a small number of banks capable of funding the really big capital undertakings and who knows what priorities or friends they’ll choose to fund over positive net present value projects? This should be enough to send any capitalist running for government regulation. Also, get ready for lack of services and fees that would make a loan shark blush. This should make any advocate for the little guy scream for the same. Today, I am the jade dakini. It’s happening in Europe but I doubt it will happen here.
So, what is Obama said to be inkling tomorrow that will be undoubtedly be sacrificed to the demons of political expediency down the road?
and the Band Played On
Posted: September 12, 2009 Filed under: Bailout Blues, Equity Markets, Main Stream Media, Surreality, The Bonus Class, U.S. Economy, Voter Ignorance | Tags: bank failure, Banking, banking cartel, banking regulation, FDic Comments Off on and the Band Played On
So the so-called conservatives are having their so-called freedom event with so-called commentators and news anchors from so-called news stations. It’s all a side show to the real problems of the country. It’s easy to misplace anger in an environment where misinformants rule the airwaves.
So, let me show you where the real theft is happening, in case you may have missed it.
First, the FDIC released yet another move towards creating a financial banking cartel. Another one bites the dust.
Corus Bank, National Association, Chicago, Illinois, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with MB Financial Bank, National Association, Chicago, Illinois, to assume all of the deposits of Corus Bank, N.A.
But you know there’s really nothing to see here at the NY Times: A Year After a Cataclysm, Little Change on Wall St. Much more important to focus on creeping socialism and taking our government back from imagined enemies.
One year after the collapse of Lehman Brothers, the surprise is not how much has changed in the financial industry, but how little.
Backstopped by huge federal guarantees, the biggest banks have restructured only around the edges. Employment in the industry has fallen just 8 percent since last September. Only a handful of big hedge funds have closed. Pay is already returning to precrash levels, topped by the 30,000 employees of Goldman Sachs, who are on track to earn an average of $700,000 this year. Nor are major pay cuts likely, according to a report last week from J.P. Morgan Securities. Executives at most big banks have kept their jobs. Financial stocks have soared since their winter lows.
No nothing to see here. Wait, a minute. Maybe we should listen to people with some expertise instead of Glenn Beck or Rush Limbaugh who couldn’t even get one college degree or a freshman’s worth of credits between them . Maybe we shouldn’t focus on sycophants like Chris Matthews or Keith Olbermann who just want to hear themselves talk and hump each others legs until they tingle.
In fact, though, regulators and lawmakers have spent most of the last year trying to save the financial industry, rather than transform it. In the short run, their efforts have succeeded. Citigroup and other wounded banks have avoided bankruptcy, and the economy has sidestepped a depression. But the same investors and economists who predicted, and in some cases profited from, the collapse last fall say the rescue has come at an extraordinary cost. They warn that if the industry’s systemic risks are not addressed, they could cause an even bigger crisis — in years, not decades. Next time, they say, the credit of the United States government may be at risk.
Yup, what have we been talking about here for month after month after month, while we get named called every imaginable insult from one end of the political spectrum to another. I must defy definition if one day I can be called a racist republican ratfucker then be called a greenie and a leftie the next.
Oh, meanwhile …
And you wonder why we can’t have a Public Option
Posted: September 11, 2009 Filed under: Health care reform, Surreality, The Bonus Class, Voter Ignorance | Tags: K Street, Nancy Pelosi, UHC Fundraiser Comments Off on And you wonder why we can’t have a Public Option
H/T David Sirota and Open Left
I just got this link via David on Facebook. I’m speechless but not surprised.
House Speaker Nancy Pelosi for the first time yesterday suggested she may be backing off her support of the public option. According to CNN, Pelosi and Senate Majority Leader Harry Reid “said they would support any provision that increases competition and accessibility for health insurance – whether or not it is the public option favored by most Democrats.”
This announcement came just hours before Steve Elmendorf, a registered UnitedHealth lobbyist and the head of UnitedHealth’s lobbying firm Elmendorf Strategies, blasted this email invitation throughout Washington, D.C. I just happened to get my hands on a copy of the invitation from a source – check it out:
From: Steve Elmendorf [mailto:steve@elmendorfstrategies.com]
Sent: Friday, September 11, 2009 8:31 AM
Subject: event with Speaker Pelosi at my homeYou are cordially invited to a reception withSpeaker of the House
Nancy PelosiThursday, September 24, 2009
6:30pm ~ 8:00pmAt the home of
Steve Elmendorf
2301 Connecticut Avenue, NW
Apt. 7B
Washington, D.C.$5,000 PAC
$2,400 IndividualTo RSVP or for additional information please contact
Carmela Clendening at(202) 485-3508 or clendening@dccc.orgSteve Elmendorf
ELMENDORF STRATEGIES
GOVERNMENT AFFAIRS SOLUTIONS
900 7th Street NW Suite 750 Washington DC 20001Again, Elmendorf is a registered lobbyist for UnitedHealth, and his firm’s website brags about its work for
UnitedHealth on its website.
Paging Law Enforcement: Can we try using RICO ?
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The Blame Game
Posted: September 7, 2009 Filed under: Bailout Blues, Equity Markets, Global Financial Crisis, The Bonus Class, The DNC, The Great Recession, The Media SUCKS, U.S. Economy, Voter Ignorance | Tags: Congressman Alan Grayson, Fannie Mae, Franklin Reins, Freddie Mac Comments Off on The Blame Game
It’s amazing to me that so many people can get so worked up about one mid level bureaucrat in the White House who is a repentant communist and says he accidentally signed a 9-11 truther petition thinking it was just a request for more information on what the White House knew prior to those terrorist attacks. Meanwhile, we have a Secretary Treasury whose taken gifts from banks, underpaid his taxes by more money than I personally see in years, and seems completely captured by Wall Street and unable to draft decent regulation containing their gambling addiction. Then, there is the fact that I continually write about the same people in Wall Street and the Investment Banking community cooking up death derivatives and going about their merry way, subsidized, unpunished, and totally unrepentant over causing the worst financial crisis since 1929.
I just have to scream: WTF is wrong with you people? Why are we punishing some one for his venture into social activism while completely ignoring people that are making off with our national treasure and the lifeblood of our mixed market economy? These are folks that drove your house prices down, ruined your pension plans and your 401k, and are taking bailouts by the billions. Where’s the sense of balance? How does this resemble justice?
Here’s a REALLY good example from today’s NY Times. Written by Gretchen Morgensen, it’s called “Fair Game-They Left Fannie Mae, but we got the Legal Bills.” It’s all about the government having to bail out Fannie Mae because of the extremely bad management practices, and yes, illegal accounting practices that stuck us with a huge mess and an even bigger bill. Morgensen interviews Representative Alan Grayson, a Florida Democrat, who is one congress critter doing his oversight responsibility while others wallow in the political contributions from their regulatees.
With all the turmoil of the financial crisis, you may have forgotten about the book-cooking that went on at Fannie Mae. Government inquiries found that between 1998 and 2004, senior executives at Fannie manipulated its results to hit earnings targets and generate $115 million in bonus compensation. Fannie had to restate its financial results by $6.3 billion.
Almost two years later, in 2006, Fannie’s regulator concluded an investigation of the accounting with a scathing report. “The conduct of Mr. Raines, chief financial officer J. Timothy Howard, and other members of the inner circle of senior executives at Fannie Mae was inconsistent with the values of responsibility, accountability, and integrity,” it said.
That year, the government sued Mr. Raines, Mr. Howard and Leanne Spencer, Fannie’s former controller, seeking $100 million in fines and $115 million in restitution from bonuses the government contended were not earned. Without admitting wrongdoing, Mr. Raines, Mr. Howard and Ms. Spencer paid $31.4 million in 2008 to settle the litigation.
When these top executives left Fannie, the company was obligated to cover the legal costs associated with shareholder suits brought against them in the wake of the accounting scandal.
Now those costs are ours. Between Sept. 6, 2008, and July 21, we taxpayers spent $2.43 million to defend Mr. Raines, $1.35 million for Mr. Howard, and $2.52 million to defend Ms. Spencer.
“I cannot see the justification of people who led these organizations into insolvency getting a free ride,” Mr. Grayson said. “It goes right to the heart of what people find most disturbing in this situation — the absolute lack of justice.”
What’s the difference between getting justice and getting retribution? Well, in terms of missing it by light years, compare the treatment between social activist Van Jones and practitioners of accounting malpractice like Raines, Howard and Spencer (or tax dodgers who get gifts from Wall Street Bankers like our SOT). It’s the difference between a slap on the wrist and a slap across the face.
And Next Up, A Good Game of RISK
Posted: September 6, 2009 Filed under: Bailout Blues, Equity Markets, Global Financial Crisis, Surreality, The Bonus Class | Tags: death derivatives, life insurance policies, securitization Comments Off on And Next Up, A Good Game of RISK
If you still need motivation to get on my bandwagon for new bank regulation, go read “Back to Business: Wall Street Pursues Profit in Bundles of Life Insurance.” While the nation is having a good scream over communists in the White House and Bolshevik health care reform, the bankers are playing Risk with your tax dollars.
After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.The bankers plan to buy “life settlements,” policies for life insurance for elderly parents which allow the ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.
Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.
The idea is still in the planning stages. But already “our phones have been ringing off the hook with inquiries,” says Kathleen Tillwitz, a senior vice president at DBRS, which gives risk ratings to investments and is reviewing nine proposals for life-insurance securitizations from private investors and financial firms, including Credit Suisse.
“We’re hoping to get a herd stampeding after the first offering,” said one investment banker not authorized to speak to the news media.
Oh, that’s just great! The same folks left unregulated and un-rebuked from the mortgage meltdown (and rewarded with subsidies) get to misprice yet another set of iffy securities. If this isn’t a more “exotic” investment than credit default swaps and harder to price, I’ll turn in all my Phd class credits (including the one specifically geared to Risk Theory) for an electrician’s license. Investment bankers seem to be on hyperdrive to find the next big thing before congress even realizes the horses are back out of the barn again.
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