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.

naked capitalism Fri 2010-03-19 16:02 EDT

Calibrating differences between China and Japan's bubble blow-off top

Edward Harrison

...Is China experiencing a massive bubble or not? If so, will the bubble's inevitable pop spill over into the real economy in a nasty way as it has done in the U.S. and elsewhere?...My own point of reference has been the 1920s and the 1930s more than the 1980s and 1990s. In the 1920s, Great Britain played the role now played by the United States: military power, declining economic power, anchor global currency, and largest debtor nation. The United States played the role now played by China: rising economic and military power and `alpha creditor,' a phrase our Yves Smith coined. (The key difference is that the U.S. was more advanced relative to Great Britain than China relative to the U.S.)...China is effectively doing what France did by accumulating reserves despite fears of currency depreciation. I think this reserve policy is significant because this is what is behind all of the talk of protectionism and currency pegging. The Chinese are afraid that the U.S. are actively looking to devalue the currency while the U.S. are fed up with the peg and the resultant imbalances...

Calibrating differences; China; Japan's bubble blow; naked capitalism; Top.

Fri 2010-03-12 08:51 EST

AlterNet: The Business Roundtable: The Most Powerful Corporate Business Club Most Americans Have Never Heard of

David DeGraw, Amped Status

...At the center of this group is the Business Roundtable, an organization representing Fortune 500 CEOs that is also interlocked with several lead elite organizations. Most Americans have never heard of the Business Roundtable. However, in my analysis, it is the most influential and powerful Economic Elite organization...The Business Roundtable is the most powerful activist organization in the United States. Their leaders regularly lobby members of Congress behind closed doors and often meet privately with the President and his administration. Any legislation that affects Roundtable members has almost zero possibility of passing without their support...look at healthcare and financial reform, along with the military budget. The healthcare reform bill devolved into what amounts to an insurance industry bailout and was drastically altered by Roundtable lobbyists...Almost every aspect of financial reform has been D.O.A. thanks to Roundtable lobbyists...The drastic rise in military spending is also a result of Roundtable lobbyists pushing the interests of large military companies...the Business Roundtable, Chamber of Commerce and the American Bankers Association - along with the Federal Reserve, a secretive quasi-government private institution, form the center of the Economic Elite's power structure...The Economic Elite dominate US intelligence and military operations. Other than the obvious geo-strategic reasons, the never-ending and ever-expanding War on Terror's objective is to drain the US population of more resources and further rob US taxpayers, while using our tax money to create a private military that is more powerful than the US military...

AlterNet; American; Business Roundtable; Heard; Powerful Corporate Business Club.

naked capitalism Sun 2010-02-28 13:08 EST

Martin Wolf is Very Gloomy, and With Good Reason

Martin Wolf, the Financial Times' highly respected chief economics editor, weighs in with a pretty pessimistic piece tonight. This makes for a companion to Peter Boone and Simon Johnson's Doomsday cycle post from yesterday...With the private sector debt overhang as great as it is, I doubt there is a way out of our mess that does not involve a period of debt restructuring and writeoffs. That process, no matter how adeptly handled, results in dislocation and has a chilling effect on bystanders...Swedish Lex interestingly sees another possible brake that may become operative prior to another bubble/bust cycle. He believes that the EU has much less tolerance for underwriting zombie banks than the US. The EuroBanks have written off less in the way of losses than their US peers, are also exposed to any EU sovereign debt defaults, and yet the biggest are still crucial parts of the international capital markets infrastructure (and therefore still tightly coupled to the very biggest US/UK firms). While any EU sovereign debt defaults could morph into a full blown crisis, the EU responses to the joint sovereign/bank debt overhang could lead to more radical changes in EU banking rules and practices that could blow back to the very biggest US banks in unexpected ways.

gloomy; good reason; Martin Wolf; naked capitalism.

Mon 2010-02-08 17:08 EST

The Bernanke Disaster: The Road to Debt Peonage

Michael Hudson

...On the political front, his reappointment is being cited as yet another proof that the Democrats care more for bankers than for American families and employees. As a result, it will do what seemed unfathomable a year ago: enable GOP candidates to strike the pose of FDR-type saviors of the embattled middle class. No doubt another decade of abject GOP economic failure would simply make the corporate Democrats appear once again to be the alternative. And so it goes... For Bernanke, the current financial system (or more to the point, the debt overhead) is to be saved so that the redistribution of wealth upward will continue...Meanwhile, the government is permitting corporate tollbooth to be erected across our economy -- and un-taxing this revenue so that it can be capitalized into financialized wealth paying only a 15 per cent tax rate on capital gains...Financial and fiscal policy thus reinforce each other in a way that polarizes the economy between the financial sector and the ``real'' economy.

Bernanke Disaster; DEBT peonage; Road.

Jesse's Café Américain Wed 2010-02-03 16:09 EST

On Monetary Inflation and M3

Jesse

...Within a relatively pure fiat currency system the conditions of inflation and deflation, and the broad range in between, are largely the result policy and fiscal decisions, constrained for the most part only by the acceptability of the bond and the dollar and the tolerance of the people...The acceptability of the dollar and the bond by the world is the limiting factor on the ability of the Fed and Treasury to create money, managing its supply, by whatever means direct and indirect, by action or allowance, in a fiat currency.

Jesse's Café Américain; M3; monetary inflation.

Culture of Life News Sun 2010-01-31 11:46 EST

US Dollar No Longer Main FOREX Currency

Elaine Supkis

A meteorite came crashing through the stratosphere on Tuesday. A reminder about what real danger is all about. The US dollar is breaking apart in the stratosphere, too. The FOREX holdings of all our major trade rivals is rapidly changing from sucking in US dollars to sucking in yen and euros. Both Japan and the EU hate this but can't stop it. As I predicted in July, 2007, the final result of the US, EU and Japan demanding China strengthen the yuan while not demanding Japan strengthen the yen, has led to this global shift in dollar holdings.

Culture; Dollar; Life News; Longer Main FOREX Currency.

Jesse's Café Américain Fri 2010-01-29 16:27 EST

Morgan Paying Out 62% of Revenues in Bonuses and Pay While Average Families Face 'Years of Pain'

Jesse

One has to wonder how much of that 'revenue' is merely the result of artificial mark to market accounting and prop desk speculation, and not real cash flow from commercial banking operations.That is not the pay method for a bank. That's a hedge fund. And that would be all very well and good if they were a hedge fund and responsible for their own failures and successes, but they are obtaining the discount window and federal guarantees and subsidies from the taxpayers as though they were a commercial bank...if the bankers keep taking 50+% of all the cash that touches their hands from the public subsidy, then what trickles down to the people won't accomplish anything. Years of zombie-like stagflation look to be the prognosis...The economic hitmen and the corrupt politicians are taking their pay, and the people and their children and most likely grandchildren will be stuck with unpayable debts. Just like a third world nation, which is what the US will look like when they get done cutting health, infrastructure, education, and basic services to pay for this.

62; Average Families Face; bonus; Jesse's Café Américain; Morgan pay; pain; pay; Revenues; years.

Thu 2010-01-07 20:04 EST

Hard times at the Washington Post

Dean Baker

The Washington Post is a newspaper with a proud legacy. It has done much important reporting over the years, most famously its coverage of the Watergate scandal that resulted in the resignation of Richard Nixon. Unfortunately, it seems to have abandoned its journalistic standards. In its last issue of the decade, it published as a news piece an article by the Peter Peterson Foundation-funded Fiscal Times. This compromised the Post's journalistic integrity to the extent that readers can no longer take it seriously.

hard times; Washington Post.

Credit Writedowns Tue 2010-01-05 19:27 EST

The collapse of commercial real estate

The long-coming commercial real estate bust has arrived in the U.S. and elsewhere, a result of sky-high prices met by a severe downturn. Prices could only work in a best-case economic scenario and large busts are now coming (see my posts on Stuyvesant Town and Capmark Financial).

Collapse; commercial real estate; credit writedowns.

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.

Mish's Global Economic Trend Analysis Mon 2009-12-21 19:32 EST

Fictional Reserve Lending And The Myth Of Excess Reserves

Michael Shedlock

...The chart shows an unprecedented amount of excess reserves, almost $1.2 trillion. According to Money Multiplier Theory (MMT) and Fractional Reserve Lending, this amount may be lent out as much as 10 times over and when it does, massive inflation will result. The above hypotheses regarding "Excess Reserves" are wrong for five reasons. 1) Lending comes first and what little reserves there are (if any) come later. 2) There really are no excess reserves. 3) Not only are there no excess reserves, there are essentially no reserves to speak of at all. Indeed, bank reserves are completely "fictional". 4) Banks are capital constrained not reserve constrained. 5) Banks aren't lending because there are few credit worthy borrowers worth the risk.

excess reserves; Fictional Reserve Lending; Mish's Global Economic Trend Analysis; myth.

Jesse's Café Américain Thu 2009-12-17 10:11 EST

Is the Price of World Silver the Result of Legitimate Market Discovery?

Jesse

Ted Butler: ...the concentrated short position in COMEX silver futures is so extreme, that it is hard to imagine how it can be resolved in an orderly manner. The most recent data from the CFTC indicate that one US bank, JPMorgan, now holds 200 million ounces net short in COMEX silver futures, fully 40% of the entire net short position on the COMEX (minus spreads). As I have previously written, JPMorgan accounted for 100% of all new short selling in COMEX silver futures for September and October, some 50 million additional ounces...So extreme is JPMorgan's silver short position that it cannot be closed out in an orderly fashion...As extreme as JPMorgan's position is, there is a total true net short position of 500 million ounces (100,000 contracts) in COMEX silver futures. Try to put that 500 million ounce short position in perspective. It equals 75% of world annual mine production, much higher than seen in any other commodity.

Jesse's Café Américain; Legitimate Market Discovery; Price; resulting; World Silver.

Wed 2009-12-16 15:37 EST

How would today's SuperInflation compare with the 1970s? - Debtor's prison -

we are staunch believers that Uncle Benny and Co's wild monetary adventures will result in massive inflation down the line...at the moment, regulators, the media and some portion of the public are more concerned about the prospects of deflation...The purpose of this post is, instead, to hypothesize about what would happen if SuperInflation does indeed come to pass, as we expect it will.

1970s; Debtor s Prison; s SuperInflation compare.

zero hedge Wed 2009-11-25 11:52 EST

Albert Edwards Calls For The Next Black Swan: Expect Yuan Devaluation Following Deep 2010 Downturn

With everyone and their grandmother screeching that it is about time for China to inflate the renminbi, despite that such an action would be economic and social suicide for the world's most populous country, SocGen's Albert Edwards once again stalks out the Black Swan in left field and posits the contrarian view de jour: China will aggressively devalue the yuan following a deep 2010 downturn coupled with escalating trade wars. As Edwards says: "I think the next 18 months will see major ructions in the financial markets. The consequences of a double-dip back into recession next year require some lateral thinking. If the carry trade unwind results in a turbo-charged dollar, any collapse in the China economic bubble will be doubly destructive to commodity prices.

Albert Edwards Calls; Black Swan; Deep 2010 downturn; Expect Yuan Devaluation; Zero Hedge.

Calculated Risk Wed 2009-11-25 11:38 EST

Fannie Mae: $18.9 Billion Loss, Requests Another $15 Billion

CalculatedRisk

Press Release: Fannie Mae Reports Third-Quarter 2009 Results Fannie Mae (FNM/NYSE) reported a net loss of $18.9 billion in the third quarter of 2009, compared with a loss of $14.8 billion in the second quarter of 2009. ... Third-quarter results were largely due to $22.0 billion of credit related expenses, reflecting the continued build of the company's combined loss reserves and fair value losses associated with the increasing number of loans that were acquired from mortgage backed securities trusts in order to pursue loan modifications. ... As a result, on November 4, 2009, the Acting Director of the Federal Housing Finance Agency (FHFA) submitted a request for $15.0 billion from Treasury on the company's behalf.

15; 18; 9; Calculated Risk; Fannie Mae; losses; requesting.