zero hedge Tue 2010-01-19 12:18 EST

Guest Post: The Banker Bonus Diversion

I am so tired of the absolute nonsensical and foolish approach in regards to Banker Bonuses taken by both the Obama administration as well as the bankers themselves. Here's what is really going on and what should should be going on if we lived in a world that was dependent on telling the truth, prudent financial management, reduction of systemic risk, and if a cure to our banking system malady is genuinely being sought...This is a total and epic failure of the banking regulatory authorities in the U.S...The bankers should have taken every nickel of profit and allocated it to capital accounts to provision for loan losses: past, present, and future. The regulators should force every nickel on to the balance sheet irrespective of the menagerie of FASB FAS 157. The government should not be taking this needed capital from the banking system.

Banker Bonus Diversion; Guest Post; Zero Hedge.

Tue 2010-01-12 23:32 EST

Dr. Edwin Vieira, Jr. on the Failure of the Public Sector, the Coming Military Crackdown and What Can Be Done to Stop It

...The foremost problem-because it is the source of, or contributes significantly to, almost every economic difficulty now plaguing this country-is the inherent and ineradicable instability of the present monetary and banking systems centered around the Federal Reserve System. The second problem derives from the first. It is the ever-accelerating development of a first-class para-militarized police-state apparatus centered around the United States Department of Homeland Security, with its tentacles reaching down into every police force throughout the States and localities. Fundamentally, this apparatus is not, and never was, designed to deal with international "terrorism". If that were its goal, its first task would be absolutely to secure the southern border of the United States, which it has never seriously attempted to do. Rather, it is being set up to deal with what the political-cum-financial Establishment anticipates (and I believe rightly so) will be massive social and political unrest bordering on chaos throughout America when the monetary and banking systems finally implode in the not-so-distant future-surely in hyperinflation, and probably in hyperinflation coupled with a gut-wrenching depression. Of these two problems, the second is actually the more dangerous...

Coming Military Crackdown; Dr. Edwin Vieira; failure; Jr; public sector; stop.

zero hedge Mon 2009-12-28 15:12 EST

Quantitative Easing Has Been A Monetary Failure; Persistent Deflation Means More Fed Intervention Coming Soon

As more and more pundits discuss the spectre of inflation, with gold flying to all time highs which many explain as an inflation hedge, not to mention stock price performance which is extrapolating virtual hyperinflation, the market "truth" as determined by Fed Fund futures and options is, and continues to be, diametrically opposite...Bernanke is very likely about to unleash Quantitative Easing 2: If the $1.7 trillion already thrown at the problem has not fixed it, you can bet that the Chairman will not stop here. Furthermore, as the Fed has the best perspective on the economy, which is certainly far worse than is represented, the Fed has to act fast before things escalate even more out of control. Which is why Zero Hedge is willing to wager that not only will the agency/MBS program not expire in March as it is supposed to, but that a parallel QE process will likely begin very shortly. The end result of all these actions, of course, is that the value of the dollar is about to plummet: when Bernanke announces that not only will he not end QE but that he will launch another version of the program, expect the dollar to take off on its one way path to $2 = €1. And when that happens, look for global trade to cease completely. In its quest to continue bailing out the banking system and rolling the trillions of toxic loans it refuses to accept are worthless (for if it did, equity values in the banking system would go, to zero immediately), the Fed will promptly resume destroying not only the US middle class, but the entire system of global trade built through many years of globalization. Look for America to end up in an insulated liquidity bubble in a few short years, trading exclusively with its vassal master: the People's Republic of China.

Fed Intervention Coming; Monetary Failure; Persistent Deflation Means; Quantitative Easing; Zero Hedge.

zero hedge Thu 2009-11-19 10:36 EST

Bob (Janjuah) Is Back... And He Is Pissed

Near term I think the battle will be between Central Bankers, who deep down, and I think privately at least, FEAR bubbles, FEAR failure and FEAR FORCED abandonment if current policies are persisted with too long and/or added to, vs Fiscal Authorities, who by definition want short-term fixes (there is after all an election cycle in the UK & in the US next yr). This is like a rumble in the jungle between the VOLCKER-ites and the GREENSPAN-ites, with GREENSPAN representing the Fiscal Authorities (he was after all surely the most politicised central banker ever). Are the Volcker-ites up to a fight? I think so. I hope so. Kevin feels and I FEAR however that they aren't/they won't. In which case MORE policy and then, very soon thereafter DISASTER, will follow. In this rumble the inevitable outcome is deflation and multi-yr austerity.

Bob; Janjuah; piss; Zero Hedge.

Harper's Magazine Thu 2009-11-19 10:20 EST

An Object Lesson in Governmental Failure: Derivatives reform

KEN SILVERSTEIN

If you want to understand why Congress seems completely incapable of checking the power of Wall Street, look back to a hearing on the Hill last October 7, and the subsequent events surrounding it...he House Financial Services Committee hosted a panel on reform of the market for derivatives,...the committee, headed by Congressman Barney Frank (D-Wall Street), invited a panel of eight guests who were distinguished by their uniformly pro-industry positions...In response to complaints from Americans for Financial Reform, which represents hundreds of consumer groups and labor unions, the committee issued an invitation--the night before the hearing was held -- to Rob Johnson of the Roosevelt Institute. For the committee, the last minute inclusion of Johnson -- a former managing director at Bankers Trust Company and former economist at the Senate Banking Committee and Senate Budget Committee -- apparently constituted sufficient balance...About five days later Johnson submitted his full testimony to the committee, to be included on its website along with the statements of the other eight panelists...the committee's general counsel would not allow posting of the testimony because Johnson had not submitted it during the hearing. (Of course, since Johnson had been invited at the last minute it was impossible for him to fulfill this pointless requirement.)

Derivatives reform; Governmental Failure; Harper's Magazine; object lessons.

Jesse's Café Américain Tue 2009-11-03 20:12 EST

Nine More Banks Fail with CIT on Deck for a Packaged Bankruptcy While Gold Shines

Jesse

...The current state of economics is most remarkable for its arrogant complacency in the face of two failed bubbles, a near systemic failure, a pseudo-scientific perversion of mathematics exposed, and an incredible capacity for spin and self-delusion. The people wish to believe, and Wall Street and the government economists are all too willing to tell them whatever they wish to hear, for a variety of motives. And there is an army of salesmen and lobbyists and econo-whores touting this fraud around the clock...There are good reasons for this failure of American "monetary capitalism," and it has to do with an oversized financial sector and a surplus of white collar crime that both distort and drain the productive economy. The current approach is to pump money into a failed system without attempting to reform it, to fix its fundamental flaws, to make an honest accounting of the results. The result are serial bubbles and the foundation for long duration zombie economy with a grinding stagflation that may morph into a currency crisis and the fall and reissuance of the dollar, as we saw with the Russian rouble. It will stretch the political fabric of the US to the breaking point. This is how oligarchies and their empires fall.

banks failed; CIT; deck; gold shines; Jesse's Café Américain; packaged bankruptcies.

Jesse's Café Américain Tue 2009-11-03 19:36 EST

Obama's Economic Policy Has Doomed the US to Stagnation - Or Worse

Jesse

This was the very moment of Obama's failure, when he allowed Summers, Geithner and Bernanke to establish the principle of "Too Big To Fail" and set up a financial oligarchy at the expense of taxpayers. We would have expected this out of the Treasury under Hank Paulson, but to see this kind of policy error favoring Wall Street over the US taxpayers from a government elected on the promise of reform is inexcusable, a disgrace. ...(Bloomberg) Nobel Prize-winning economist Joseph Stiglitz said the world's biggest economy is suffering because of the U.S. government's failure to nationalize banks during the financial crisis.

doomed; Jesse's Café Américain; Obama s economic policy; stagnated; worse.

Tue 2009-10-27 13:06 EDT

Courthouse News Service

Bank of America and Countrywide Home Loans destroyed mortgage documents, and "recreate" them by "insert(ing) data as they see fit," to cover up their own failure to keep records - or their fraud - according to a federal RICO class action. "To cover up the servicing mistakes and fraud and misrepresentation in the servicing of a consumer escrow, Defendants 'recreate' letters, insert data as they see fit, and fail to produce the entire HUD complaint form. This way, a consumer is left in the dark about the fraud that occurred to them," the complaint states. Lead plaintiff Kim Gorham says that when she sent a letter seeking information about her escrow account, she was informed that it had been "destroyed by a letter opener."

Courthouse News Service.

Jesse's Café Américain Thu 2009-10-15 16:38 EDT

Sumitomo Forecasts Dollar to 50 Yen, End of Dollar as Reserve Currency

Jesse

"We can no longer stop the big wave of dollar weakness," said Daisuke Uno at Sumitomo. ...The market is taking the dollar where it should be, where it needs to go. If only countries with obvious pegs and ongoing manipulation to support export mercantilism were also to allow their currencies to float more freely. It is going to kill off global trade. It is the great failure of the WTO and US trade policy to have allowed pegs and overt currency manipulation policies which are de facto tariffs and subsidies on trade.

50 yen; Dollar; ending; Jesse's Café Américain; reserve currency; Sumitomo Forecasts Dollar.

Wed 2009-10-14 12:36 EDT

Gore Vidal's United States of fury - Americas, World - The Independent

Johann Hari

...Yet now, he says, it is clear the American experiment has been "a failure". It was all for nothing. Soon the country will be ranked "somewhere between Brazil and Argentina, where it belongs." The Empire will collapse militarily in Afghanistan; the nation will collapse internally when Obama is broken "by the madhouse" and the Chinese call in the country's debts. A ruined United States will then be "the Yellow Man's Burden", and "they'll have us running the coolie cars, or whatever it is they have in the way of transport".

America; fury; Gore Vidal's United States; Independent; world.

Jesse's Café Américain Tue 2009-10-13 20:19 EDT

Stiglitz: The Banks Must Be Restrained, The Financial System Must Be Reformed

Jesse

Stiglitz characterizes the reforms being put forward by the US Congress as completely wrong, and harmful...compare what Joe Stiglitz is saying with the ponderous mendacity of Larry Summers, and you may better understand why Obama's policies are doomed to failure.

bank; Financial System; Jesse's Café Américain; reform; Restrain; Stiglitz.

zero hedge Mon 2009-10-12 10:10 EDT

Albert Edwards Warns Of Western Authorities' Positioning For Dismal Failure, As US Becomes Japan Redux

Albert Edwards continues doling out common sense; everyone, and the market in particular, continues ignoring it...The post-bubble whiplash in the economic and profits cycle is exactly a replay of Japan?'s experience. They too had seen an extended period of strong and steady growth going into the peak of the bubble. It took many years, repeated painful lapses back into recession, and sharp declines in equity markets before investors fully de-rated valuations low enough to reflect a new new paradigm...To gauge whether the world economy can surprise and escape this balance sheet recession, keep a very close eye on the bank lending numbers.

Albert Edwards Warns; Becomes Japan Redux; dismal failure; positive; Western authorities; Zero Hedge.

Sun 2009-10-11 18:07 EDT

Cassandra Does Tokyo: Mourning Rally

...it is most curious that I should find myself experiencing very visceral negative reactions to the upward movements in the gold price...the rallying Gold price signifies more monumental failures at multiple levels for society, in politics, for nations, for our individual and collective ability to measure our wants and desires with our means. So despite my skeptical exoskeleton about most things (financial innovation perhaps first and foremost), the aforementioned bothers me intensely, for I am, at heart, both an idealist, and a closet optimist about humanity...So when I see Gold rally, my visceral reaction is the result of my incredulous beliefs confronting contrary evidence, and the mourning for said failures (both real and imagined) that it represents.

Cassandra; Mourning Rally; Tokyo.

Tue 2009-09-29 11:33 EDT

How Bad Will It Get?

Mike Whitney, CounterPunch

In the two years since the crisis began, neither the Fed nor policymakers at the Treasury have taken steps to remove toxic assets from banks balance sheets. The main arteries for credit still remain clogged despite the fact that the Bernanke has added nearly $900 billion in excess reserves to the banking system. Consumers continue to reduce their borrowing despite historically low interest rates and the banks are still hoarding capital to pay off losses from non performing loans and bad assets. Changes in the Financial Accounting Standards Board (FASB) rules for mark-to-market accounting of assets have made it easier for underwater banks to hide their red ink, but, eventually, the losses have to be reported. The wave of banks failures is just now beginning to accelerate. It should persist into 2011. The system is gravely under-capitalized and at risk...The economy cannot recover without a strong consumer. But consumers and households have suffered massive losses and are deeply in debt. Credit lines have been reduced and, for many, the only source of revenue is the weekly paycheck...The current recession has exposed the fault-lines dividing the classes in the US. Neither party represents working people. Both the Democrats and the Republicans are supportive of "social engineering for the rich"; regressive taxation and economic policies which shift a greater portion of the wealth to the richest Americans. The question of inequality, which has grown to levels not seen since the Gilded Age, will dominate the national conversation as the recession deepens and more people slip from the ranks of the middle class...After Obama's stimulus runs out, consumer spending will again sputter and the economy will slide back into recession.

bad.

Jesse's Café Américain Tue 2009-09-22 09:15 EDT

Confessions of a 'Flationary Agnostic

Jesse

I have no particular allegiance to either the hyperinflation or the deflationary camps. Both outcomes are possible, but not yet probable. Rather than being a benefit, occupying the middle ground too often just puts one in the middle, being able to see the merits in both arguments and possibilities, and being unwilling to ignore the flaws in each argument...The growth rate of dollars is slowing at the same time that the 'demand' for dollars, the velocity of money and the creation of new commercial credit, is slowing. GDP is negative, and the growth rate of money supply is still positive, and rather healthy. This is not a monetary deflation, but rather the signs of an emerging stagflation fueled by slow real economic activity and monetization, or hot money, from the Fed. The monetary authority is trying to lead the economic recovery through unusual monetary growth. All they are doing is creating more malinvestment, risk addiction, and asset bubbles...Using money as a 'tool' to stimulate or retard economic activity is a dangerous game indeed, fraught with unintended consequences and unexpected bubbles and imbalances, with a spiral of increasingly destabilizing crises and busts. The Obama Administration bears a heavy responsibility for this because of their failure to reform the system and restore balance to the economy in any meaningful way.

confessed; Flationary Agnostic; Jesse's Café Américain.

Tue 2009-09-22 08:18 EDT

Guest post: Regulation in Defense of Capitalism

Rick Bookstaber

Will regulation hobble capitalism? I think the opposite is true. Properly done, government regulation of the financial industry will move the industry closer to the capitalist ideal. By capitalism, I mean where those who take the risks and put up the money get the fruits of their labor. And, importantly, where those who take the risks and put up the money actually do take the risks, bearing the full costs of failure as well as success.

capitalism; defense; Guest Post; Regulators.