naked capitalism Fri 2010-04-23 20:44 EDT

The Greek Crisis Has Me Thinking About 1931

The news about Greece's bailout has me thinking a lot about Creditanstalt, the Austrian bank which collapsed in 1931. This account bears remembering because we should see the 1929-1933 descent as a two-part episode, with the second part starting in the Spring of 1931 with Creditanstalt. It should be noted that there were a lot of positive economic signs before the Creditanstalt ruined this. The key difference to today is the monetary liquidity and fiscal stimulus, which has buoyed both asset markets and the real economy. But, the situation in Greece makes me think a lot about Creditanstalt...

1931; Greek crisis; naked capitalism; Think.

zero hedge Fri 2010-04-23 20:02 EDT

How Lehman, With The Fed's Complicity, Created Another Illegal Precedent In Abusing The Primary Dealer Credit Facility

Five months ago, Zero Hedge observed the nuances of the Federal Reserve's Primary Dealer Credit Facility (PDCF) and concluded that this artificial liquidity boosting construct was nothing more than yet another scam to allow banks to extract ever more money from taxpayers, with the complicit blessing of the Federal Reserve Board Of New York (as the original piece also provided an in-depth discussion of the triparty repo market which is now a parallel to the buzzword of the day in the form of Lehman's "Repo 105" off balance sheet contraption, it should serve as a useful refresher course to anyone who wishes to understand why while Repo 105 with its $50 billion in liability contingency may have been an issue, the true Repo market, with over $3 trillion of likely just as toxic assets, is where the real pain in the future will come from). The PDCF would allow assets of declining and even inexistent value to be pledged as collateral, thus making sure that taxpayer cash was funneled into sham institutions holding predominantly toxic assets, and whose viability was and is limited, yet still is backed by the Fed, which to this day continues to pour our money into them. Today, with a tip from the NYT's Eric Dash, we demonstrate just how grossly negligent the Federal Reserve was when it came to Lehman's abuse of the PDCF, and how the trail of slime of Lehman's increasingly obvious manipulation of its books goes to the very top of the Federal Reserve Bank of New York, and its then governor - a very much complicit Tim Geithner...

abuse; created; Fed's Complicity; Illegal Precedent; Lehman; Primary Dealers Credit Facility; Zero Hedge.

Tue 2010-04-20 10:05 EDT

The Search for a Reserve Currency

Gregory R. Copley

...good governance as an essential component of currency value and the trust in that currency can transform overnight, just as we witnessed the post-World War II collapse of sterling, and, now, the shakiness of trust in the US dollar (despite the reality that, at $14.2-trillion in value in 2008, is the world's largest). The age of the US dollar as the global reserve currency isn't yet over, but it's threatened, and the trend toward a flight from the dollar (despite occasional returns to it) is evident. At present, however, the dollar is shored up because in many respects there's nothing of its stature ready to replace it...major trade will gradually become more bilateral in nature, based on very real mutual trust in each other's currencies or goods. This will be a significant limiting factor in trade, and will make bilateral balances of greater interest than in the past when trade balances of a bilateral nature ``washed out'' in the great mixing bowl of the global banking system...

reserve currency; search.

Sat 2010-04-17 14:12 EDT

Truthdig - Journalism's Parasites

David Sirota

... New York Times financial reporter Stephen Labaton] just announced he is taking a job with Goldman Sachs--a move that makes you wonder if Labaton watered down his Times coverage in order to get his new gig...Labaton knew Goldman probably wouldn't hire a muckraker who had been aggressively exposing bank transgressions. Then again, maybe Labaton did nothing wrong...

Journalism's Parasites; Truthdig.

naked capitalism Wed 2010-04-07 19:38 EDT

Have Bloggers ``Won''? And Is That a Bad Thing?

...[MSM difficulties] Richard Kline: ...Most of the MSM is owned by large corporations which abhor any serious questioning of the status quo. Most of the MSM decided a generation ago to pitch their product at the soft middle of the demographic curve; that's `dumb down' to those ow you who need a scorecard. Most of the MSM went to recent journalism school and bought into the idea of false `balancing' which has castrated their editorial opinion in favor of whoever is driving debate by telling the latest Big Lie. Then there is the problem of self-interested 'sources,' hardly new, and manageable when journalists were allowed to have an opinion themselves, but deleterious when they are supposed to be `neutral,' i.e. readily maniplulatible. Then there is the issue that too many journalists have decided to become propagandists for the status quo of the moment, making their reportage the worst kind of bandwagon swillage. Then too, MSM has responded, or rather _not_ responded to the emergence of new kinds of media spreading current information reportage: just when the MSM needs established `quality brand' to fall back on they find that they gutted the brand to fellate large shareholders and the interests of the same.

bad things; bloggers; naked capitalism; won.

Jesse's Café Américain Wed 2010-04-07 19:06 EDT

Banks Come Back For Another Bailout in Ireland While the US 'Manages Perceptions'

Jesse

The whole notion of bank bailouts is a tremendous injustice when not accompanied by personal bankruptcy and civil and criminal prosecution for those banks managers who created them and are found guilty of fraud. In addition, the owners of the banks, whether through debt or shares, should be wiped out and the bank placed in a proper receivership while its books are sorted out. The US is an accounting mirage. The notion that it will make money from its stake in Citi is a sleight of hand. The enormous subsidies to the banks both in terms of direct payments, indirect payments through entities like AIG, and subsidies such as the erosion of the currency and the deterioration of the real economy, will never be repaid. ...the facts seem to indicate that the US is still pursuing a policy of managed perceptions, accounting deceptions, and old fashioned insider dealing and other forms of corruption that always accompany government, but reach a feverish pitch in times of crisis. It is the establishment's form of looting.

Bailout; banking comes; Ireland; Jesse's Café Américain; managing perception.

zero hedge Wed 2010-04-07 18:31 EDT

Quantitative Easing And Its Effect On Inflation And The Economy

Sancho Ponzi

The Fed's response to the financial meltdown was twofold: Interest rates were effectively set at zero, and the monetary base was increased 140%. While it is not known exactly what formula the Fed used to arrive at the 140% increase of the monetary base, the expansion from roughly 800 billion to 2.2 trillion roughly correlates with the asset backed securities since purchased by the Fed...Rather than an attempt to spur bank lending, Bernanke, like Paulson before him, employed QE strictly to offload toxic assets from bank balance sheets in an attempt to make banks and other financial institutions whole, with the effect of preserving historically inflated asset valuations for residential real estate. As a result, massive increases in federal spending have been required to offset the erosion of private sector GDP...

economy; effect; Inflation; Quantitative Easing; Zero Hedge.

Satyajit Das's Blog - Fear & Loathing in Financial Products Mon 2010-04-05 15:01 EDT

Mark-to-Make Believe: Living on a Prayer

Satyajit Das

...Recent research indicates that MtM accounting may, in fact, distort the price of assets...The research highlights that MtM accounting is pro-cyclical and creates volatility of asset values through complex positive and negative feedback loops. Under normal market conditions where asset markets are liquid, MtM accounting works benignly. In volatile markets, where behaviour becomes linked by a common factor such as disclosure required by MtM accounting, co-ordinated actions of market participants can easily lead to sharp movements in asset prices. The process distorts market prices and ultimately the firm's financial position and value.

fears; financial products; lively; loath; Make-Believe; marked; prayers; Satyajit Das's Blog.

naked capitalism Sat 2010-04-03 09:55 EDT

Guest Post: Top Analyst Says ``Developed Market Governments Are Insolvent By Any Reasonable Definition''

Washington's Blog

Dylan Grice, a top analyst for European financial giant Société Générale, writes: Developed market governments are insolvent by any reasonable definition. Who could have known? Everyone, actually...Grice also says: Eventually, there will be a crisis of such magnitude that the political winds change direction, and become blustering gales forcing us onto the course of fiscal sustainability. Until it does, the temptation to inflate will remain, as will economists with spurious mathematical rationalisations as to why such inflation will make everything OK . Until it does, the outlook will remain favorable for gold. But eventually, majority opinion will accept the painful contractionary medicine because it will have to. That will be the time to sell gold.

developed market governments; Guest Post; insolvent; naked capitalism; reasonable definition; Top Analyst Says.

naked capitalism Fri 2010-03-19 19:57 EDT

NY Fed Under Geithner Implicated in Lehman Accounting Fraud Allegation

Quite a few observers, including this blogger, have been stunned and frustrated at the refusal to investigate what was almost certain accounting fraud at Lehman. Despite the bankruptcy administrator's effort to blame the gaping hole in Lehman's balance sheet on its disorderly collapse, the idea that the firm, which was by its own accounts solvent, would suddenly spring a roughly $130+ billion hole in its $660 balance sheet, is simply implausible on its face. Indeed, it was such common knowledge in the Lehman flailing about period that Lehman's accounts were sus that Hank Paulson's recent book mentions repeatedly that Lehman's valuations were phony as if it were no big deal. Well, it is folks, as a newly-released examiner's report by Anton Valukas in connection with the Lehman bankruptcy makes clear. The unraveling isn't merely implicating Fuld and his recent succession of CFOs, or its accounting firm, Ernst & Young, as might be expected. It also emerges that the NY Fed, and thus Timothy Geithner, were at a minimum massively derelict in the performance of their duties, and may well be culpable in aiding and abetting Lehman in accounting fraud and Sarbox violations...

Geithner Implicated; Lehman Accounting Fraud Allegation; naked capitalism; NY Fed.

naked capitalism Fri 2010-03-19 16:10 EDT

Lehman: Regulators Chose to Deny, Extend and Pretend

The Lehman Examiner's report gives an unintentionally damning portrayal, both of the the structure of financial regulation in the US and how regulators failed to use the powers they had effectively...the authorities recognized Lehman had a large negative net worth. Yet rather than move decisively towards an unwind, they proceeded inertially. They urged Lehman CEO Dick Fuld to find a rescuer (who would invest in that garbage barge, particularly when Andrew Ross Sorkin's account makes clear that Fuld's moves were so obviously desperate and clumsy as to be certain to fail) and also promoted the notion of an LTCM-style ``share the pain'' resolution. Yet with the rest of the industry weak, and the magnitude of hole in Lehman's balance sheet a mystery, these courses of action had low odds of success from the outset (indeed, the ``Lehman weekend'' in which the authorities almost bulldozed through a deal, seemed designed to avoid sober analysis of how bad things were at the failing investment bank)...As much as the SEC did not cover itself with glory in this exercise, its lapses are somewhat comprehensible. By contrast, the Fed's are much harder to explain or excuse. And guess who is about to be given more oversight authority?

denied; extends; Lehman; naked capitalism; Pretends; Regulators Chose.

naked capitalism Fri 2010-03-19 15:02 EDT

SEC, Fed Alerted By Merrill of Lehman Balance Sheet Games in March 2008

...The Valukas report shows both regulators were monitoring Lehman on a day-to-day basis shortly after Bear's failure. They recognized that it has a massive hole in its balance sheet, yet took an inertial course of action. They pressured a clearly in denial Fuld to raise capital (and Andrew Ross Sorkin's accounts of those efforts make it clear they were likely to fail) and did not take steps towards any other remedy until the firm was on the brink of collapse (the effort to force a private sector bailout as part of a good bank/bad bank resolution)...Merrill warned both the SEC and the Fed in March 2008 that Lehman was engaging in balance sheet window dressing of a serious enough nature for it to put pressure on Merrill (as in it was making Merrill look worse relative to the obviously impaired Lehman)...

Fed Alerted; Lehman Balance Sheet Games; March 2008; Merrill; naked capitalism; SEC.

Jesse's Café Américain Tue 2010-03-09 17:42 EST

Are Traders Demanding US Credit Default Swaps Payable in Gold?

Jesse

...I have a great deal of respect and admiration for Janet Tavakoli and her knowledge in this area. If she is seeing a new demand for Credit Default Swaps on the US payable in gold I would credit it since this is her area of expertise and industry connections...if the existence of CDS on the default or downgrade of US sovereign debt payable in gold bullion be true, who would be in a position to stand behind these Credit Default Swaps with any reliability, and what buyer would be in a position to make such a demand of a credible source?

Credit Default Swaps Payable; gold; Jesse's Café Américain; Traders Demand.

New Deal 2.0 Tue 2010-03-09 17:23 EST

Wall Street's War Against Consumers and Labor Heats Up

Michael Hudson

...Throughout the world, scaling back the 20th century's legacy of progressive taxation and untaxing real estate and finance has led to a public debt crisis. Property income hitherto paid to governments is now paid to the banks. And although Wall Street has extracted $13 trillion in bailouts just since October 2008, the thought of raising taxes on wealth to pay just $1 trillion over an entire decade for Social Security or health insurance is deemed a crisis that would lead Wall Street to shut down the economy. It is telling governments to shift to a regressive tax system to make up the fiscal shortfall by raising taxes on labor and cutting back public spending on the economy at large. This is what is plunging economies from California to Greece and the Baltics into fiscal and financial crisis. Wall Street's solution - to balance the budget by cutting back the government's social contract and deregulating finance all the more - will shrink the economy and make the budget deficits even more severe. Financial speculators no doubt will clean up on the turmoil.

0; consumer; labor heats; new dealing 2; Wall Street's War.

Mon 2010-03-08 09:41 EST

Truthdig - Calling All Rebels

Chris Hedges

There are no constraints left to halt America's slide into a totalitarian capitalism. Electoral politics are a sham. The media have been debased and defanged by corporate owners. The working class has been impoverished and is now being plunged into profound despair. The legal system has been corrupted to serve corporate interests. Popular institutions, from labor unions to political parties, have been destroyed or emasculated by corporate power. And any form of protest, no matter how tepid, is blocked by an internal security apparatus that is starting to rival that of the East German secret police. The mounting anger and hatred, coursing through the bloodstream of the body politic, make violence and counter-violence inevitable. Brace yourself. The American empire is over. And the descent is going to be horrifying...

called; rebel; Truthdig.

Mon 2010-03-01 09:20 EST

AlterNet: Hey, America: It's Time to Redefine the "Good Life"; excerpted from the The Spirit Level: Why Greater Equality Makes Societies Stronger

Richard Wilkinson and Kate Pickett

...We are social epidemiologists; people who usually spend their time trying to understand how social factors affect population health. Our work has focused on different aspects of wellbeing in rich market democracies. Rather than looking at subjective measures, such as happiness, we have looked at objective measures, such as life expectancy, homicide rates, drug abuse, child well-being, levels of trust, involvement in community life, mental illness, teenage birth rates, children's math and literacy scores, and the proportion of the population in prison. Instead of finding that each society does well on some of these outcomes and badly on others, we found that countries tend to be consistently good or bad performers, across the board. If a country has high life expectancy, it also tends to have stronger community life, a smaller proportion of its population behind bars, better mental health, fewer drug problems and children doing better in school. The differences in the performance of more and less equal countries are very large. Rather than things being just a bit worse in more unequal countries, they are very much worse. More unequal countries have three times the rates of violence, of infant mortality and of mental illness. Their teenage birth rates are six times as high, and rates of imprisonment are eight times higher...

AlterNet; America; excerpts; good life; Greater Equality Makes Societies Stronger; redefines; Spirit Level; Time.