Tue 2010-10-12 16:01 EDT

billy blog >> Blog Archive >> Iceland ... another neo-liberal casuality

...For a real world example of the benefits of adopting a floating, sovereign, currency we can look to Argentina....At the time of the 2001 crisis, the government realised it had to adopt a domestically-oriented growth strategy. One of the first policy initiatives taken by newly elected President Kirchner was a massive job creation program that guaranteed employment for poor heads of households. Within four months, the Plan Jefes y Jefas de Hogar (Head of Households Plan) had created jobs for 2 million participants which was around 13 per cent of the labour force. This not only helped to quell social unrest by providing income to Argentina's poorest families, but it also put the economy on the road to recovery. Conservative estimates of the multiplier effect of the increased spending by Jefes workers are that it added a boost of more than 2.5 per cent of GDP. In addition, the program provided needed services and new public infrastructure that encouraged additional private sector spending. Without the flexibility provided by a sovereign, floating, currency, the government would not have been able to promise such a job guarantee. Argentina demonstrated something that the World's financial masters didn't want anyone to know about. That a country with huge foreign debt obligations can default successfully and enjoy renewed fortune based on domestic employment growth strategies and more inclusive welfare policies without an IMF austerity program being needed. And then as growth resumes, renewed FDI floods in...sovereign governments are not necessarily at the hostage of global financial markets. They can steer a strong recovery path based on domestically-orientated policies -- such as the introduction of a Job Guarantee -- which directly benefit the population by insulating the most disadvantaged workers from the devastation that recession brings...

Billy Blog; blogs Archive; Iceland; neo-liberal casuality.

PRAGMATIC CAPITALISM Thu 2010-09-16 16:15 EDT

CREDIT SUISSE: 6 BULLISH FACTS ABOUT HOUSING

TPC

Here's a contrarian view for you. Credit Suisse says the fears about housing are well overdone. In their analysis they cite 6 different bullish factors that should help to bolster house prices in the USA...The government now owns or guarantees about 70% of US mortgage debt...Valuation is extremely cheap on all measures...Delinquency ratios, charge-off and foreclosure rates seem to have peaked...Housing starts are about 1m below trend demand of housing units -- based on household formation and replacement demand... * Distressed sales (short-sales, foreclosures and REO sales) are less than a third of the total, after peaking at almost half in 2009...Housing as a proportion of GDP is now just 2.2%, compared with a long-run average of 4.5%...

6 BULLISH FACTS; Credit Suisse; Housing; PRAGMATIC CAPITALISM.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Thu 2010-08-19 16:25 EDT

Commercial Real Estate Lobby Ask For Taxpayer Aid To Help Recapitalize Banks Saddled With Billions In Underwater CRE Loans

The problem that nobody is talking about, yet everyone continues keeping a close eye on, namely the trillions in commercial real estate under water, is quietly starting to reemerge. In the attached letter from the Commercial Real Estate lobby, it reminds politicians that the hundreds of billions in loans that mature in the next several years won't roll on their own, and we see the first inkling of the lobby asking congress for much more taxpayer aid, in this case in the form of Shelley Berkley's proposed legislation...

billions; Commercial Real Estate Lobby Ask; dropped; Help Recapitalize Banks Saddled; long; survival rate; taxpayer aid; Timeline; Underwater CRE Loans; zero; Zero Hedge.

Thu 2010-08-19 16:04 EDT

The AIG Bailout Scandal

William Greider

The government's $182 billion bailout of insurance giant AIG should be seen as the Rosetta Stone for understanding the financial crisis and its costly aftermath. The story of American International Group explains the larger catastrophe not because this was the biggest corporate bailout in history but because AIG's collapse and subsequent rescue involved nearly all the critical elements, including delusion and deception. These financial dealings are monstrously complicated, but this account focuses on something mere mortals can understand--moral confusion in high places, and the failure of governing institutions to fulfill their obligations to the public. Three governmental investigative bodies have now pored through the AIG wreckage and turned up disturbing facts--the House Committee on Oversight and Reform; the Financial Crisis Inquiry Commission, which will make its report at year's end; and the Congressional Oversight Panel (COP), which issued its report on AIG in June. The five-member COP, chaired by Harvard professor Elizabeth Warren, has produced the most devastating and comprehensive account so far. Unanimously adopted by its bipartisan members, it provides alarming insights that should be fodder for the larger debate many citizens long to hear--why Washington rushed to forgive the very interests that produced this mess, while innocent others were made to suffer the consequences. The Congressional panel's critique helps explain why bankers and their Washington allies do not want Elizabeth Warren to chair the new Consumer Financial Protection Bureau...

AIG bailout scandal.

Phil's Favorites - By Ilene Thu 2010-08-19 15:58 EDT

Time for a New, New Deal?

Phil of Phil's Stock World

...The Big Lie being told by the right is that we can solve our problems by cutting spending and (ROFL) lowering taxes...Of course, let's keep in mind that the $1.5Tn the government spends directly employs 2.7M people and millions more indirectly so, for every person you cut, make sure you add back $20,000 a year for unemployment benefits and administration (or are we going to throw them all on the street?)...the real glove-across-your-face insult to your intelligence comes when they try to tell you that giving tax breaks to the rich and to corporations will help...US Corporations only paid a grand total of $138Bn in taxes in 2009 (6.5% of all taxes collected)...US Corporations have done nothing but outsource America's future for decades and it is time for the bottom 99% of the income earners (those earning less than $250,000 a year) to wake up and smell the class warfare that is being waged against them. How can we even begin to entertain the idea of cutting government and cutting government spending when the sum total contribution of Big Business America represents a rounding error in our national budget?...When private business fails to expand, when the budgets cannot be balanced because 25% of the population is unable to make income tax contributions due to loss of jobs and homes -- then a wise man knows when it is time to step in and let the Government fill the void. Not with more bailouts to the rich who, like Reagan's deficit ``are big enough to care for themselves'' but with bold programs that invest in the future of this country and utilize the skills and labor of this country and make America strong and independent...

Ilene; new; new deal; Phil's Favorites; Time.

Mon 2010-08-16 12:56 EDT

Help:How to research U.S. corporations - SourceWatch

This Guide, consisting of this main article and three more in-depth sub-articles, is designed to help researchers and activists gather essential information on any type of U.S.-based company, whether small or large, privately held or publicly traded. The resources listed here are all, in one way or another, part of the public record. The first part covers leading sources of basic information on companies of all kinds. The second part focuses on information sources relating to the key relationships every company must have in order to function. The final part shows you how to gather information about a company's "social responsibility" record. Together, these sections will help you find all the basic information needed to support efforts to get companies to do the right thing. Happy hunting!...

help; research U.S. corporations; SourceWatch.

Credit Writedowns Fri 2010-07-30 15:30 EDT

Subversive Economists

The economic research staff at the Federal Reserve Bank of New York has been busy. Last week we wrote about the New York Fed's Staff Report No. 458 , which discussed the shadow banking system in the United States. Today we refer to two other new reports: Staff Report No. 457 , entitled ``Resolving Troubled Systemically Important Cross-Border Financial Institutions: Is a New Corporate Organizational Form Required?'', and Staff Report No. 463 , ``The Central-Bank Balance Sheet as an Instrument of Monetary Policy.'' After reviewing them, we are left to conclude that these three papers demonstrate that the research staff at the New York Fed is perhaps the most subversive group of working economists currently on the government payroll....The combination of these three papers seems to suggest that the Federal Reserve is conducting a serious re-evaluation of its traditional role in the new financial landscape. No. 458 acknowledges that the shadow banking system is huge, but largely beyond the regulatory reach--and backstopping help--of the Fed. No. 457 suggests that the complexity of a large, modern financial institution is not only a challenge for managers, but is also a challenge for regulators. It is a cri de coeur for simplicity. And No. 463 breaks new ground by explicitly including central bank balance sheet management as a part of the monetary policy model...

credit writedowns; Subversive Economists.

naked capitalism Sat 2010-07-24 16:34 EDT

Summer Rerun: ``Unwinding the Fraud for Bubbles''

Tanta at Calculated Risk

This post first appeared on March 27, 2007. ...Telling the difference between the victims and the victimizers, the predators and the prey, and the fraudulent and the defrauded, is getting a lot harder when you have borrowers not required to make down payments able to lie about their incomes in order to buy a home the seller is overpricing in order to take an illegal kickback. The lender is getting defrauded, but the lender is the one who offered the zero-down stated-income program, delegated the drawing up of the legal documents and the final disbursement of funds to a fee-for-service settlement agent, and didn't do enough due diligence on the appraisal to see the inflation of the value. Legally, of course, there's a difference between lender as co-conspirator and lender as mark, utterly failing to exercise reasonable caution, but it's small comfort when the losses rack up. With tongue only partially in cheek, I'm about to suggest a third category of fraud: Fraud for Bubbles...My theory of the Fraud for Bubbles is, in a nutshell, that it isn't that lenders forgot that there are risks. It is that the miserable dynamic of unsound lending puffing up unsustainable real estate prices, which in turn kept supporting even more unsound lending, simply masked fraud problems sufficiently, and delayed the eventual ``feedback'' mechanisms sufficiently, that rampant fraud came to seem ``affordable.'' So many of the business practices that help fraud succeed--thinning backoffice staff, hiring untrained temps to replace retiring (and pricey) veterans, speeding up review processes, cutting back on due diligence sampling, accepting more and more copies, faxes, and phone calls instead of original ink-signed documents--threw off so much money that no one wanted to believe that the eventual cost of the fraud would eat it all up, and possibly more...

bubble; fraud; naked capitalism; summer reruns; unwinds.

Sat 2010-07-24 16:05 EDT

CynicusEconomicus: Reforming Money - Fixed Fiat Currency

I have long promised a discussion of a system of fixed fiat currency, and the discussion that follows is my first attempt at this. It is a very long discussion, and I hope that you will have the patience to plough through such volume (I guess that many will not). However, I do hope that it will prove to be an interesting potential system that might help prevent a repeat of the current economic crisis...The article is sparsely referenced, but includes ideas such as the value of labour which is rooted in the work of Karl Marx, critiques of fiat money which owe a debt to the many articles on the von Mises Institute website, and the overall theory and work of Adam Smith in the Wealth of Nations is an important overall inspiration...The only way that a system of money might offer both stability and fairness is to instigate a system of money that represents each individual's actual input of value of labour into the wider economy that is utilising the money. The only way to do this is to fix the currency against the actual value of labour in the economy...

cynicuseconomicus; Fixed Fiat Currency; reform money.

Fri 2010-07-16 18:30 EDT

On Pelosi's Duplicity and Apparent Sandbagging of Elizabeth Warren <<; naked capitalism

Yves Smith

Despite her longevity as a California pol, house speaker Nancy Pelosi is looking like every bit as much of a dyed-in-the-wool financial services industry backer as the Congressmen on the New York-Boston corridor...So why are we pointing a finger at Pelosi in particular? The next chapter is her appointment of one Richard Nieman to the Congressional Oversight Panel...Nieman is the New York Superintendant of Banks. He helped Goldman set up its bank holding company...Nieman fell out with the other Democrats and wrote a joint opinion with John Sununu...to anyone with a passing acquaintance with the facts, the dissenting views are absurd...I can't imagine that Nieman would have fallen in with the Republicans without at least as a courtesy informing Pelosi in advance...So Pelosi is at a minimum sitting this one out (which I deem unlikely) or on board with the program to undermine Warren. And let us not kid ourselves, the knives are coming out...[2009-04-26]

Apparent Sandbagging; Elizabeth Warren; naked capitalism; Pelosi's Duplicity.

billy blog Mon 2010-06-14 18:13 EDT

The OECDs perverted view of fiscal policy

...the big neo-liberal economic organisations like the IMF and the OECD are trying to re-assert their intellectual authority on the policy debate again after being unable to provide any meaningful insights into the cause of the global crisis or its immediate remedies. They were relatively quiet in the early days of the crisis and the IMF even issued an apology, albeit a conditional one. It is clear that the policies the OECD and the IMF have promoted over the last decades have not helped those in poorer nations solve poverty and have also maintained persistently high levels of labour underutilisation across most advanced economies. It is also clear that the economic policies these agencies have been promoting for years were instrumental in creating the conditions that ultimately led to the collapse in 2007. Now they are emerging, unashamed, and touting even more destructive policy frameworks...

Billy Blog; fiscal policies; OECDs perverted view.

Tue 2010-06-01 17:29 EDT

billy blog >> Blog Archive >> In the spirt of debate ... my reply

Bill Mitchell

...Steve Keen and I agreed to foster a debate about where modern monetary theory sits with his work on debt-deflation. So yesterday his blog carried the following post, which included a 1000-odd word precis written by me describing what I see as the essential characteristics of modern monetary theory. The discussion is on-going on that site and I invite you to follow it if you are interested. Rather than comment on all the comments over on Steve's site, I decided to collate them here (in part) and help develop the understanding that way. That is what follows today... We distinguish the horizontal dimension (which entails all transactions between entities in the non-government sector) from the vertical dimension (which entails all transactions between the government and non-government sector)...A properly specified model will show you emphatically that the horizontal transactions between household, firms, banks and foreigners (which is the domain of circuit theory) have to net to zero even if asset portfolios are changing in composition. For every asset created there will be a corresponding liability created at the same time...you will make errors if there is not an explicit understanding that in an accounting (stock-flow) consistent sense all these transaction will net to zero. In adopting this understanding you might abstract from analysing the vertical transactions that introduced the high-powered money in the first place, but never deny its importance in setting the scene for the horizontal transactions to occur. I think the differences between Steve's models and modern monetary theory are two-fold. First, I do not think that Steve's model is stock-flow consistent across all sectors. By leaving out the government sector (even implicitly) essential insights are lost that would avoid conclusions that do not obey basic and accepted national accounting (and financial accounting) rules. This extends to how we define money. Second, I think Steve uses accounting in a different way to that which is broadly accepted. It might be that for mathematical nicety or otherwise this is the chosen strategy but you cannot then claim that your models are ground in the operational reality of the fiat monetary system we live in. I have no problem with abstract modelling. But modern monetary theory is firmly ground in the operational reality and is totally stock-flow consistent across all sectors. If we used the same definitions and rendered Steve's model stock-flow consistent in the same way as modern monetary theory then Steve's endogenous money circuits would come up with exactly the same results as the horizontal dimensions in modern monetary theory. His results might look a bit different in accounting terms but most of the message he wishes to portray about the dangers of Ponzi stages in the private debt accumulation process would still hold.

Billy Blog; blogs Archive; Debate; reply; spirt.

Sat 2010-05-22 21:13 EDT

EconPapers: An Alternative View of Finance, Saving, Deficits, and Liquidity

L. Randall Wray

This paper contrasts the orthodox approach with an alternative view on finance, saving, deficits, and liquidity. The conventional view on the cause of the current global financial crisis points first to excessive United States trade deficits that are supposed to have "soaked up" global savings. Worse, this policy was ultimately unsustainable because it was inevitable that lenders would stop the flow of dollars. Problems were compounded by the Federal Reserve's pursuit of a low-interest-rate policy, which involved pumping liquidity into the markets and thereby fueling a real estate boom. Finally, with the world awash in dollars, a run on the dollar caused it to collapse. The Fed (and then the Treasury) had to come to the rescue of U.S. banks, firms, and households. When asset prices plummeted, the financial crisis spread to much of the rest of the world. According to the conventional view, China, as the residual supplier of dollars, now holds the fate of the United States, and possibly the entire world, in its hands. Thus, it's necessary for the United States to begin living within its means, by balancing its current account and (eventually) eliminating its budget deficit. I challenge every aspect of this interpretation. Our nation operates with a sovereign currency, one that is issued by a sovereign government that operates with a flexible exchange rate. As such, the government does not really borrow, nor can foreigners be the source of dollars. Rather, it is the U.S. current account deficit that supplies the net dollar saving to the rest of the world, and the federal government budget deficit that supplies the net dollar saving to the nongovernment sector. Further, saving is never a source of finance; rather, private lending creates bank deposits to finance spending that generates income. Some of this income can be saved, so the second part of the saving decision concerns the form in which savings might be held--as liquid or illiquid assets. U.S. current account deficits and federal budget deficits are sustainable, so the United States does not need to adopt austerity, nor does it need to look to the rest of the world for salvation. Rather, it needs to look to domestic fiscal stimulus strategies to resolve the crisis, and to a larger future role for government in helping to stabilize the economy. [MMT]

alternative view; Deficit; EconPapers; finance; liquidity; save.

zero hedge Sun 2010-05-09 09:21 EDT

Guest Post: Is Your Senator A Bankster

Dylan Ratigan

The one main benefit to the financial reform effort so far is that it helps further do away with the false paradigms of "left" or "right" and "Democrat" or "Republican" - fewer and fewer people are falling for those lies anymore...What we have now is a group of politicians with shifting alliances on a case-by-case basis to the special interests who fund them. And currently, the most damaging one to our nation is the rise of the Bankster Party. Thankfully, we can now better identify its members...there is a special place for those who have the audacity to do something as incredibly un-American as voting to provide unencumbered welfare for rich bankers and then subsequently do absolutely nothing to fix the problem. And that special place (for now) is in what we should call from this point forward the "Bankster Party". Allow me to present to you its current members...Frank R. Lautenberg...Robert Menendez...

Banksters; Guest Post; Senators; Zero Hedge.

naked capitalism Thu 2010-04-22 18:21 EDT

Guest Post: Are Interest Rate Derivatives a Ticking Time Bomb?

Washington&apos;s Blog

...Most economists and financial institutions assume that interest rate derivatives help to stabilize the economy. But cumulatively, they can actually increase risky behavior, just as portfolio insurance previously did. As Nassim Taleb has shown, behavior which appears to decrease risk can actually mask long-term risks and lead to huge blow ups. Moreover, there is a real danger of too many people using the same strategy at once... Given that the market for interest rate derivatives is orders of magnitude larger than credit default swap market -- let alone portfolio insurance -- the risks of a ``black swan'' event based on interest rate derivatives should be taken seriously...

Guest Post; Interest Rate Derivatives; naked capitalism; ticking time bomb.

Wed 2010-04-21 12:27 EDT

Goldman Sachs taps ex-White House counsel - Eamon Javers and Mike Allen - POLITICO.com

Eamon Javers and Mike Allen

Goldman Sachs is launching an aggressive response to its political and legal challenges with an unlikely ally at its side -- President Barack Obama's former White House counsel, Gregory Craig. The beleaguered Wall Street bank hired Craig -- now in private practice at Skadden, Arps, Slate, Meagher & Flom -- in recent weeks to help in navigate the halls of power in Washington, a source familiar with the firm told POLITICO...

com; Eamon Javers; Goldman Sachs taps ex-White House counsel; Mike Allen; Politicos.

naked capitalism Tue 2010-04-20 09:43 EDT

Satyajit Das: New & Old Greek Lessons

...Like many of the economically weaker EU members, Greece fudged the numbers to meet the qualifications for entry into the Euro. One example of this is the use of derivative transactions with Goldman Sachs to disguise the level of its real borrowing. Membership of the Euro also reduced the ability of Greece to manage its economy. It lost the ability to use its currency, via devaluations, to improve competitiveness and stimulate exports. It also lost the ability to set interest rates (now set by the European Central Bank (''ECB'')). It also cannot print its own currency to fund sovereign borrowing. Greece also has low levels of domestic saving...Greece's problems are probably incapable of solution and terminal. Temporary emergency funding may help meet immediate liquidity needs but do not solve fundamental problems of excessive debt and a weak economy...the optimal course of action for Greece may be to withdraw from the Euro, default on its debt (by re-denominating it in a re-introduced Drachma) and then undertake a program of necessary structural reform...The current debate misses the fact that the ``bailouts'' are mainly about rescuing foreign investors...

naked capitalism; new; Old Greek Lessons; Satyajit Das.

THE PRAGMATIC CAPITALIST Wed 2010-04-07 18:22 EDT

THE ENRON BANKING SYSTEM

TPC

``Panics do not destroy capital -- they merely reveal the extent to which it has previously been destroyed by its betrayal in hopelessly unproductive works'' -- John Mills ...We should draw a distinct line in the sand between banks and diverse risk taking firms. There are always going to be Enron's in the economy, but why should we allow our entire banking sector to mirror Enron? Taking a 30,000 foot risk management view I say something must be done to ensure these banks can never do this again. Turn banks into true banks. Hedging and exotic business models are fine. Just don't commingle them under the same umbrella as a deposit taking ``bank''. With that, a few ideas come to mind: * Our banking system should be aligned with the goals of the nation to help ``grease'' the wheels of the economic growth engine of the United States. Banks should be more like utilities and less like hedge funds. Otherwise, banking becomes counter-productive and potentially destructive. * Banks should not be allowed to exact onerous fees on the public or enact a business model which is inherently dependent on driving their customers deeper and deeper into debt. This undermines the entire goal of productive economic growth. * ``Banks'' should be true lending institutions. Non-traditional banking operations and products such as CDS, ``off balance sheet'' finance, derivatives as collateral and such would be deemed illegal unless performed only by non banking/lending institutions (such as hedge funds) so as to insulate the public and true lending institutions from the risk taking, ``hedging'', and ``financial innovation'' of firms such as Lehman Brothers.

ENRON BANKING SYSTEM; pragmatic capitalists.

Fri 2010-04-02 17:25 EDT

Looting Main Street: How the nation's biggest banks are ripping off American cities with the same predatory deals that brought down Greece

MATT TAIBBI : Rolling Stone

...In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 -- but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase. The result was a monstrous pile of borrowed money that the county used to build, in essence, the world's grandest toilet -- "the Taj Mahal of sewer-treatment plants" is how one county worker put it. What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human shit into billions of dollars of profit for Wall Street -- and misery for people...And once the giant shit machine was built and the note on all that fancy construction started to come due, Wall Street came back to the local politicians and doubled down on the scam. They showed up in droves to help the poor, broke citizens of Jefferson County cut their toilet finance charges using a blizzard of incomprehensible swaps and refinance schemes -- schemes that only served to postpone the repayment date a year or two while sinking the county deeper into debt. In the end, every time Jefferson County so much as breathed near one of the banks, it got charged millions in fees. There was so much money to be made bilking these dizzy Southerners that banks like JP Morgan spent millions paying middlemen who bribed -- yes, that's right, bribed, criminally bribed -- the county commissioners and their buddies just to keep their business...

American cities; brought; Greece; Looting Main Street; nation's biggest bank; predatory deals; RIP.

Fri 2010-02-12 21:32 EST

Priceless: How The Federal Reserve Bought The Economics Profession

Ryan Grim

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found. This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too...

economics profession; Federal Reserve bought; priceless.

zero hedge Sun 2010-01-31 23:09 EST

Scandal: Albert Edwards Alleges Central Banks Were Complicit In Robbing The Middle Classes

Did the US and UK central banks collude with the politicians to `steal' their nations' income growth from the middle classes and hand it to the very rich?... the US and UK central banks were actively complicit in an aggressive re-distributive policy benefiting the very rich. Indeed, it has been amazing how little political backlash there has been against the stagnation of ordinary people?s earnings in the US and UK. Did central banks, in creating housing bubbles, help distract middle class attention from this re-distributive policy by allowing them to keep consuming via equity extraction? The emergence of extreme inequality might never otherwise have been tolerated by the electorate...

Albert Edwards Alleges Central Banks; complicit; middle class; Rob; scandal; Zero Hedge.

Jesse's Café Américain Mon 2009-12-28 18:59 EST

The US Bull Market in Smoke, Mirrors and Gullible Investors

Jesse

We have given quite a bit of coverage to the somewhat 'thin' veneer of recovery being spun by misleading government econmic statistics in the US. And we have certainly noted the almost blatant manipulation in many US markets, including stocks and commodities where the banks and hedge funds have been pushing prices around, sometimes with the help of the government, in a disgraceful repudiation of any notion of reform. Thanks to the Tylers at ZeroHedge we have two very nice charts to present the case that the recent continuation of the US stock market rally is attributable to price manipulation largely in the after hours markets when trading is thin.

Bull Markets; gullible investors; Jesse's Café Américain; mirror; Smoke.

New Deal 2.0 Mon 2009-11-30 13:44 EST

Geithner's Disgrace

Eliot Spitzer

he issue has been festering for months: Why were AIG's counterparties -- including Goldman Sachs, JPMorgan Chase, and UBS -- paid 100 cents on the dollar when the feds rescued the insurance giant, helping raising the cost of the bailout to nearly $200 billion? A new report issued by Special Inspector General Neil Barofsky now reveals that government officials, notably then -- New York Fed President and current Treasury Secretary Timothy Geithner, grievously damaged the nation and capitulated to the very banks they should have been supervising.

0; Geithner's Disgrace; new dealing 2.

The Guardian World News Wed 2009-11-25 10:31 EST

What was really behind the crash?

John Cassidy

In an exclusive extract from his new book, John Cassidy explains why the huge salaries of Wall Street bosses created a culture that helped trigger the financial crisis...In the wake of last year's crash, even some top bankers have conceded that Wall Street remuneration schemes lead to excessive risk-taking...But without direct government involvement, the effort to reform Wall Street compensation won't survive the next market upturn. For although the financial sector as a whole has an interest in controlling rampant short-termism and irresponsible risk-taking, individual firms have an incentive to hire away star traders from any rivals that have introduced pay limits. Compensation reforms, therefore, are bound to break down. In this case, as in many others, the only way to reach a socially desirable outcome is to enforce compliance. And the only body that can do that is the government.

Crash; Guardian World News; really.