Fri 2010-09-17 19:26 EDT

Memo to Obama: time to break the refinance strike by the big banks

Christopher Whalen

...The Obama Administration and the Fed have taken the position that the crisis affecting the U.S. economy and the financial sector is slowly ending. In fact, the largest banks remain profoundly troubled by bad assets on their books as well as claims against these same banks for assets sold to investors. By allowing banks to ``muddle along'' and heal these wounds using low interest rates provided by the Fed, the Obama Administration is embracing a policy of deflation that has horrible consequences for U.S. workers and households...the Obama Administration has been providing political cover for the Fed to conduct a massive, reverse Robin Hood scheme, moving trillions of dollars in resources from savers and consumers to the big banks and their share and bond holders...the Obama Administration should use the power provided in the Dodd-Frank legislation to force an accelerated cleanup of bad assets and to mandate refinancing and principal reductions for performing loans with viable borrowers...President Obama also needs to focus on the growing competitive problem in the U.S. mortgage sector...now dominated by a cozy oligopoly of Too Big To Fail banks (TBTF)...Why is there no antitrust investigation of the top banks by the Department of Justice?...

big banks; break; memo; Obama; refinance strike; Time.

RollingStone.com: Matt Taibbi | Taibblog Sat 2010-08-07 21:06 EDT

Are We In a Recession or Not? [Summers versus Romer]

Matt Taibbi

...Obama's economic team...has seen two fairly major resignations...[Council of Economic Advisers chairwoman Christina Romer] and budget director Pete Orszag...neither of them got along with Larry Summers...Most of the DC chatter class seems to have interpreted the dual resignations as a sign of the ascendant power of the Summers-Geithner axis within the Obama White House...Romer was the Obama administration official who was loudest in her advocacy of a much bigger stimulus, with the idea that the administration's economic strategy should have been based around creating jobs and shaving unemployment as quickly as possible...she was really the only person close to Obama's economic inner circle who isn't a former Clintonite or Rubinite and isn't either a former Wall Street banker or, like Geithner, a public-sector tool of Wall Street...Not that Christina Romer was a savior...but she was at least not completely a Wall Street pod job -- she was pretty much the last inner-circle adviser who wasn't, and now she's gone...

com; Matt Taibbi; Recession; rollingstone; Summers versus Romer; Taibblog.

naked capitalism Fri 2010-08-06 19:34 EDT

Auerback: The Real Reason Banks Aren't Lending

Marshall Auerback

...there is a widespread belief that government fiscal stimulus has run up against its ``limits'' on the grounds of ``fiscal sustainability'' and the need to retain ``the confidence of the markets''. Consequently, goes this line of reasoning, as private credit conditions improve the private sector must pick up the baton of growth where the public sector leaves off. If this proves insufficient, there is room for an expansion of monetary policy via ``quantitative easing``...The premise is that the central bank floods the banking system with excess reserves, which will then theoretically encourage the banks to lend more aggressively in order to chase a higher rate of return. Not only is the theory plain wrong, but the Fed's fixation on credit growth is curiously perverse, given the high prevailing levels of private debt...credit growth follows creditworthiness, which can only be achieved through sustaining job growth and incomes. That means embracing stimulatory fiscal policy, not ``credit-enhancing'' measures per se, such as quantitative easing, which will not work. QE is based on the erroneous belief that the banks need reserves before they can lend and that this process provides those reserves. But as Professor Scott Fullwiler has pointed out on numerous occasions, that is a major misrepresentation of the way the banking system actually operates...We would like to see the Obama Administration at least begin to make the case that fiscal stimulus, whether via tax cuts or direct public investment, is still required to generate more demand and employment...deficit cutting per se, devoid of any economic context, is not a legitimate goal of public policy for a sovereign nation. Deficits are (mostly) endogenously determined by the performance of the economy. They add to private sector income and to net financial wealth. They will come down as a matter of course when the economy begins to recover and as the automatic stabilizers work in reverse...

Auerback; Lends; naked capitalism; real reason Bank.

New Deal 2.0 Sun 2010-07-25 16:20 EDT

Will Criminals Exploit Cap and Trade?

Marshall Auerback

...the carbon trading proposals embodied in the Obama Administration's cap and trade proposals are misguided. Money laundering is very easy when you have an opaque pricing structure with little in the way of regulatory protections. It's the environmental equivalent of credit default swaps. Worse, the cap and trade system doesn't work...Carbon Trading Schemes amount to nothing more than a privatization of the atmosphere...the criminals can have a field day...

0; Criminals Exploit Cap; new dealing 2; trading.

New Deal 2.0 Thu 2010-07-22 15:54 EDT

The Summer(s) of Our Discontent

Marshall Auerback

Virtually every profile on Larry Summers tells us that he is one of the most brilliant economists of his generation...Only Robert Rubin and Alan Greenspan played a more important role than Summers in promoting the deregulation and lax oversight that laid the foundations for the current crisis...the latest FT defense reflects Summers's fundamental lack of understanding of modern money. Contrary to his view, the late 90s surpluses was not the reason for that period's prosperity. The surpluses are what ended the prosperity. And until the public understands this, we should expect no fundamental improvement in economic policymaking from the Obama Administration...he violates one of Abba Lerner's key laws of functional finance: a government's spending and borrowing should be conducted ``with an eye only to the results of these actions on the economy, and not to any established traditional doctrine about what is sound and what is unsound.'' In other words, Lerner believed that the very idea of what good fiscal policy means boils down to what results you can get -- not some arbitrary notion of ``fiscal sustainability''...The government budget surplus meant by identity that the private sector was running a deficit. Households and firms were going ever farther into debt, and they were losing their net wealth of government bonds. Growth was a product of a private debt bubble, which in turn fuelled a stock market and real estate bubble, the collapse of which has created the foundations for today's troubles...

0; discontent; new dealing 2; s; summer.

New Economic Perspectives Fri 2010-07-16 14:28 EDT

Goldman Vampire Squid Gets Bitch Slapped: JP Morgan Bitch Slaps the Dow; and Geithner Tries to Bitch Slap Elizabeth Warren

L. Randall Wray

Ok here were three pieces of news today. First, Goldman Sachs was fined $550 Million for duping customers...For Goldman it was a tiny slap on the wrist--it still controls the Obama administration, with its moles, Timmy Geithner and Larry Summers still in charge of fiscal policy, thus prepared to funnel whatever money is necessary to prop up their firm--and the fine amounts to just 14 days of Goldman's earnings...The other remaining investment bank, JP Morgan announced that its profits rose by 76%. Funny thing is that in all banking categories, JP Morgan's results were horrendous...the profits supposedly came from ``trading''. In reality they mostly came from reducing ``loan loss reserves''...Our favorite Timmy has weighed in on Elizabeth Warren...Timmy Geithner (let me repeat that: Timmy! Geithner!) the most incompetent and conflicted public official since ``heck-uv-a-job'' Brownie has dared to oppose Ms. Warren to lead the new Consumer Financial Protection Bureau...Actually I agree with Timmy. Elizabeth Warren ought to be gunning for Timmy's job. Fire Geithner. Now. Elizabeth Warren for Treasury Secretary! And in 2012, Warren for President...Time for a new face in the White House. Elizabeth is our man, or woman.

Bitch Slap Elizabeth Warren; bitch slaps; Dow; Geithner trying; Goldman Vampire squid; JP Morgan Bitch Slaps; New Economic Perspectives.

naked capitalism Wed 2010-04-07 19:53 EDT

Throwing in the towel on policy makers

Edward Harrison

...Early on in this crisis, I had advocated a number of policy paths which I think would have been infinitely superior to the ones actually chosen by the Bush and Obama Administrations, especially in regards to limiting the socialization of losses. I am talking about massive fiscal stimulus, big bank pre-privatization, a move away from the asset-based economy and the accumulation of debt, and a reallocation of resources. Quite frankly, none of these suggestions have been taken on...

naked capitalism; policy makers; throws; Towel.

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.

Jesse's Café Américain Tue 2010-01-05 19:05 EST

Is the US Goverment Preparing the Lifeboats for the Next Financial Disaster?

Jesse

The fraud and mispricing of risk in the US financial system has become pervasive and epidemic, such that a good stiff headwind could have taken it all down, and because of a lack of serious reform, still can. Rather than fixing potential causes of the next disaster, the Obama Administration seems content to block the escape routes and issue priority passes to the big Wall Street banks and a favored few...The only constraint on the Fed's printing money is the acceptability (marginal value) of the Bond and the dollar, which is the bond of zero duration. And the people making the decisions about printing and distributing those dollars are more unworthy of holding such power than you might imagine, even in your lowest expectations.

financial disaster; Goverment Preparing; Jesse's Café Américain; lifeboat.

naked capitalism Mon 2009-12-28 17:34 EST

Has Obama been a success despite suspicions of crony capitalism?

Edward Harrison

...There is a rather large body of evidence demonstrating that the Bush and Obama Administrations have favored large banks in an unseemly way. The same is true for the Congress and other big business insiders like Big Pharma, the Defense Industry and Health Insurance companies...we have witnessed an orchestrated campaign by the Bush and Obama Administrations to recapitalize too big to fail institutions by hook or by crook, bypassing Congressional approval if necessary. And when it comes to healthcare, both Congress and the White House have bent over backwards to keep the lobbyists onside. As I see it, our government has favored special interests in the past year of Obama's tenure to our detriment. Personally, I don't buy the line that Obama is a liberal. I consider him more a corporatist (i.e someone who coddles big business). But, from a political perspective, it's not really relevant, is it? What difference does it make whether President Obama is a liberal sellout as Matt Taibbi claims or a pragmatic corporatist, if the outcome for the electorate is largely the same? Forget about intent. Focus on actions.

Crony Capitalism; naked capitalism; Obama; Success; suspicion.

The Economic Populist - Speak Your Mind 2 Cents at a Time Sun 2009-12-13 09:08 EST

RUBIN'S RUBES: Matt Taibbi's slapdown of the Obama Administration

In the December issue of Rolling Stone the journalist Matt Taibbi hits yet another grand slam exposing the murky world of Wall Street and Washington politics ("Obama's Big Sellout"). Taibbi provides a detailed and thoughtful analysis on the myriad connections between numerous Obama appointees and Robert Rubin, the Obama presidential campaign's economic advisor, and former Clinton Treasury Secretary who led the charge for the passage of the Gramm-Leach-Bliley Act of 1999, to create the megamerger that was to become Citigroup.

economic populist; Matt Taibbi's slapdown; Mind 2 Cents; Obama administration; RUBIN'S RUBES; speaking; Time.

naked capitalism Sun 2009-11-29 12:53 EST

Obama: Debt could cause a double dip recession

Edward Harrison of Credit Writedowns

Barack Obama has now come clean about his thinking on why his administration has decided to focus first on reducing the deficit and next on jobs. He fears a double-dip recession will occur if foreigners lose confidence in the U.S. dollar, causing interest rates to spike. This is nonsense and it demonstrates how much at odds Obama's economic thinking is with reality. This is the clearest indication that the Obama Administration doesn't understand how modern money works. In fact, by focusing on deficit reduction, he has increased the chances of a double dip instead of decreasing them.

caused; debt; double-dip recession; naked capitalism; Obama.

naked capitalism Wed 2009-11-25 10:14 EST

Ivy Zelman: ``Home prices are going back down''

Edward Harrison of Credit Writedowns

This is a post I wrote overnight about rising delinquencies and shadow housing inventory. I am not convinced house prices in the U.S. are headed higher permanently...The Mortgage Bankers Association is reporting that nearly one in ten households with mortgages are at least one payment behind. That is a record, my friends...Look, the fake recovery is now in full swing. But I expect the recovery to hit a brick wall by 2011, if not earlier. While the proximate cause of my concern is the likelihood of increased taxes and/or reduced spending by the Obama Administration, it is jobs that concern me. See Calculated Risk's post showing the correlation between unemployment and mortgage delinquency and you see the connection. The fact is we have a record number of foreclosures and that is a direct result of rising unemployment. Unemployed people don't have any money, so they don't pay mortgages.

Go; home prices; Ivy Zelman; naked capitalism.

naked capitalism Wed 2009-10-14 12:03 EDT

New York Times: Missing in Action on Health Insurance Lobby Duplicity

...the dubious reporting object lesson is the New York Times, on what is supposedly its most prized beat: Washington DC political reporting. The Times ran two articles that verged on sycophantic in its coverage of the health insurance industry as it moved its chess pieces on the health care reform game board. The Times acted as close to a PR outlet...The Financial Times reports tonight that the health insurance industry, after its great show of making nice to the Obama administration, backstabbed it on the eve of a key vote. Do we see any coverage of this duplicity in the US media, much less the New York Times? [excellent commentary by kevin de bruxelles ``Washington General'' and DownSouth ``political theater, perfect dictatorship, and junkyard dogs'']

action; Health Insurance Lobby Duplicity; missing; naked capitalism; New York time.

Blog entry Tue 2009-10-13 20:30 EDT

Movement To Block Bernanke Gathers Steam

Isaiah J. Poole

The renomination of Ben Bernanke as chairman of the Federal Reserve should not be rubber-stamped by the Senate until Bernanke and the Fed are more transparent and accountable to the public, says a growing coalition of activists roused by Reps. Alan Grayson and Ron Paul, who have asked the Senate to put a hold on Bernanke's nomination...all it takes is for one member of the Senate to object to moving Bernanke's nomination to the floor of the Senate. The tactic of placing a hold on a Senate nomination has been frequently used by Republicans against Obama administration appointees for for less consequential reasons than what is happening with trillions of taxpayer dollars in the name of staving off the next Great Depression. What's unclear is whether a member of Congress will be bold enough to stand up to Wall Street and to what William Greider calls "the temple."

Block Bernanke Gathers Steam; blog entry; movement.

Willem Buiter's Maverecon Sat 2009-10-10 14:00 EDT

Expect little and you may yet be disappointed

Willem Buiter

...the most disappointing development this year was the performance of president Barack Obama and his administration - and my expectations were modest to begin with...On the fiscal side, Barack Obama is presiding over the biggest peace-time government deficits and public debt build-up ever. According to my back-of-the-envelope calculations there is about a 10 percent of GDP gap between the medium and longer-term spending plans of the Obama administration and the taxes the Congress is willing and able to impose. The reality that you cannot run a West-European welfare state (with decent quality health care, decent pre-school, primary and secondary school education for all), rebuild America's crumbling infrastructure, invest in the environment and fulfill your post-imperial global strategic ambitions while raising 33 percent of GDP in taxes, has not yet dawned on the Obama administration or on the American people at large...Clearly, the qualities one needs to get elected to high office in western democracies are not qualities that are likely to be helpful once you have achieved high office and are expected to govern and lead. To survive the selection process to become president you have to be able to stitch together a coalition of special interests that can provide sufficient financial and sweat equity resources to win this grueling race to the top. Once you get there, you should shed the unfortunate baggage you accumulated on your way up and govern in the interest of all the people. Few can do that. Apparently Obama is not one of them.

disappointment; expectations; Willem Buiter's Maverecon.