naked capitalism Mon 2010-09-20 09:24 EDT

Theoclassical Law and Economics Makes the Law an Ass

William Black

...The Supreme Court's Citizens United decision allows businesses to make unlimited political contributions to judges and politicians. When judges are elected, the need for these contributions inherently turns judges into politicians. Sympathetic judges are corrupt businesses' most valuable allies. Corporations and their senior officials can commit civil or criminal wrongs with impunity if their case is assigned to a friendly judge...Yves noted that the Chamber of Commerce was leading the effort to elect CEO-friendly judges...The Chamber distributed a plan for a hostile takeover of university departments of economics and finance (and the courts and the media) proposed by Lewis Powell (the soon to be Supreme Court Justice). Extremely conservative ``law and economics'' proved to be central to this effort. The law and economics movement began as a non-ideological approach to explaining and aiding judicial decision-making. The scholars leading the movement had diverse views. The Olin Foundation transformed law and economics into an ultra ideological field dominated almost exclusively by passionate opponents of government ``interference'' in ``free enterprise.'' Olin specialized in creating well-funded positions in academia for scholars that had an ``Austrian'' approach to economics...Law and economics has, for over two decades, been dominated by theoclassical economic dogmas that have proved false...There are now tens of thousands of law and economics graduates that have taken a class in theoclassical law and economics. They were taught that theoclassical economic assertions (often falsified decades ago) were objective facts devoid of ideological content. They have been taught that economics has proven that regulation is unnecessary, hopeless, and harmful...

ass; economics make; Law; naked capitalism; Theoclassical Law.

New Deal 2.0 Sat 2010-07-24 15:59 EDT

The Trouble with Tim's Treasury

Marshall Auerback

...The Washington Post has reported that one of the major impacts of the FinReg bill passed last week by Congress is the accretion of new power to Obama's Treasury Secretary. According to the Post, Tim Geithner stands to inherit vast power to shape bank regulations, oversee financial markets and create a consumer protection agency...``The bill not only hews closely to the initial draft he released last summer but also anoints him -- as long as he remains Treasury secretary -- as the chief of a new council of senior regulators.'' ...

0; new dealing 2; Tim's Treasury; Troubles.

Sat 2010-05-22 21:16 EDT

CFEPS Research - L. Randall Wray

L. Randall Wray is a Professor of Economics at the University of Missouri-Kansas City, a Senior Research Associate at the Center for Full Employment and Price Stability [CFEPS]...A student of Hyman P. Minsky while at Washington University in St. Louis where he earned his Ph.D. in economics (1988)...Professor Wray has focused on monetary theory and policy, macroeconomics, and employment policy. He is currently writing on modern money, the monetary theory of production, social security, and rising incarceration rates (Penal Keynesianism). He is developing policies to promote true full employment, focusing on Hyman P. Minsky's "employer of last resort" proposal as a way to bring low-skilled, prime-age males back into the labor force. Wray"s research has appeared in numerous books and journals...

CFEPS Research; L. Randall Wray.

Jesse's Café Américain Wed 2010-05-05 16:22 EDT

Market Manipulation, Systemic Risk and Fraud, Pure and Simple, And It Continues Today

Jesse

This article by the Financial Times should remove any doubt in anyone's mind that Goldman Sachs was willfully selling fraudulent financial instruments. It appears that they were working in conjunction with Ratings Agencies, Mortgage Origination Firms, and Hedge Funds to cheat investors...Tom Montag, then a senior Goldman executive and now head of corporate and investment banking at Bank of America, was quoted as describing the deal in an e-mail as follows: ``Boy that timeberwof (sic) was one shi**y (sic) deal,'' according to the Senate subcommittee...Within five months of issuance, Timberwolf lost 80 per cent of its value...

continued; fraud; Jesse's Café Américain; Market Manipulation; Pure; simple; systemic risk.

Mish's Global Economic Trend Analysis Wed 2010-04-21 12:11 EDT

Geithner and the NY Fed Accused of Willfully Ignoring Fraud and Covering Up Lehman's Bad Assets by Senior Regulator During the S&L Crisis

Michael Shedlock

Inquiring minds are digging into a 27 page statement made by William Black before the Financial Services committee. Black is an Associate Professor of Economics and Law, at the University of Missouri...[According to Black,] Lehman's underlying problem that doomed it was that it was insolvent because it made so many bad loans and investments. It hid its insolvency through the traditional means -- it refused to recognize its losses honestly...The FRBNY knew that Lehman was engaged in fraud designed to overstate its liquidity and, therefore, was unwilling to loan as much money to Lehman. The FRBNY did not, however, inform the SEC, the public, or the OTS (which regulated an S&L that Lehman owned) of the fraud...The relevant issue was never: can Lehman be saved? The relevant issue, one that the SEC and the Fed appear never to have even asked, was: how can we stop Lehman from serving as a vector spreading the epidemic of liar's loans? They should have asked themselves that question -- and acted -- no later than 2001.

Cover; Geithner; L Crisis; Lehman's Bad Assets; Mish's Global Economic Trend Analysis; NY Fed Accused; s; senior regulators; Willfully Ignoring Fraud.

Tue 2010-03-09 18:09 EST

Fed Audit Bitterly Opposed By Treasury

Ryan Grim

The Treasury Department is vigorously opposed to a House-passed measure that would open the Federal Reserve to an audit by the Government Accountability Office (GAO), a senior Treasury official said Monday... "It's interesting that the Fed regards the simple fact that people find out what it does as somehow being unduly restrictive. We are a government of laws, not of men," [said Representative Alan Grayson]. "It's certainly no surprise that banking insiders at Treasury don't want transparency at the Fed," said Jesse Benton, a spokesman for Rep. Paul. "They are wrapped up in the central bank shenanagins too, and do not want their wheelings and dealings out in the open any more than Alan Greenspan or Ben Bernanke,"

Fed Audit Bitterly Opposed; Treasury.

New Deal 2.0 Sat 2010-02-27 22:55 EST

GSE Losses As Shadow Bailout

Roosevelt Institute Fellow Mike Konczal

...As the private sector started to dump housing and housing bonds quickly in 2007 and 2008, government officials made sure that the GSEs would be capable of absorbing these bad loans...This constitutes one part of many ``shadow bailouts'' according to Roosevelt Institute senior fellows Rob Johnson and Tom Ferguson; this argument, and the graph above, is from their Too Big to Bail: The `Paulson Put,' Presidential Politics, and the Global Financial Meltdown Part II paper. (In Part I, they argue that the Federal Home Loan Bank System was also used in a similar manner.) Astute readers will notice that the action of government officials using public funding sources to provide makeshift backstops for losses of the banking sector to clear the balance sheets of toxic assets to ``unlock the frozen credit market'', without having to go to Congress for funding, was also a central feature of Geithner's PPIP plan, with FDIC stepping up to the plate once the GSEs went bust...

0; GSE losses; new dealing 2; Shadow Bailout.

Fri 2009-11-20 10:30 EST

Curious Meeting at Treasury Department >> naked capitalism

Yves Smith

The Treasury invited a small group of bloggers for a ``discussion'' with senior officials on Monday...we bloggers and the government officials kept talking past each other, in that one of us would ask a question, the reply would leave the questioner or someone in the audience unsatisfied, there might be a follow up question (either same person or someone interested), get another responsive-sounding but not really answer, and then another person would get the floor...the people we met are very cognitively captured, assuming one can take their remarks at face value. Although they kept stressing all the things that had changed or they were planning to change, the polite pushback from pretty all the attendees was that what Treasury thought of as major progress was insufficient...It was also striking to see that the Treasury officials did not articulate vision for a banking system for the 21st century that was materially different that the one we have now...

Curious Meeting; naked capitalism; Treasury Department.

Fri 2009-11-20 09:59 EST

Interfluidity :: Sympathy for the Treasury

On Monday, I was among a group of eight bloggers who attended a discussion with "senior Treasury officials" in Washington...Although the format of our meeting did not lend itself to forging deep relationships, I was flattered and grateful for the meeting and left with more sympathy for the people I spoke to than I came in with. In other words, I have been corrupted, a little...The most interesting aspect of the meeting was anthropological, getting a look at how senior Treasury officials behaved, how they interacted with us and what kind of a thing this was to them. It was a two hour meeting, but different groups of officials came at us in shifts, and stayed with us for 20 to 40 minutes. The tone of the meeting was open, earnest, and informal. But somehow, it never felt like we connected, like there was a lot of actual communication occurring.

Interfluidity; sympathy; Treasury.

The Guardian World News Fri 2009-11-20 09:45 EST

US pressure distorted oil figures, says whistleblower

Terry Macalister

Exclusive: Watchdog's estimates of reserves inflated says top official The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying. The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves. The allegations raise serious questions about the accuracy of the organisation's latest World Energy Outlook on oil demand and supply to be published tomorrow -- which is used by the British and many other governments to help guide their wider energy and climate change policies.

Guardian World News; pressure distorted oil figures; says whistleblowers.

New Deal 2.0 Tue 2009-11-03 20:07 EST

Roosevelt Institute Director and Senior Fellow Rob Johnson will lead Soros' $50 Million Effort

Rob Johnson, Director of the Economic Policy Initiative of the Roosevelt Institute, has been pegged to lead financier George Soros' $50 million effort to create an ``Institute for New Economic Thinking'', which will fund research, convene symposiums, and establish a journal -- all in the name of promoting free market skeptics and creating a new economic paradigm. To this end Soros is gathering market-skeptics this week, including Roosevelt Institute Braintruster and Nobel Prize-winner Joseph Stiglitz, George Akerlof, Michael Spence, and Sir James Mirrlees to start the conversation. ``Economics has failed not only to predict and explain what happened but has also failed to protect society,'' said Johnson in an article in Newsweek. ``That's what the crisis revealed. The paradigm has failed. There is no guidance.''

0; 50; effort; lead Soros; new dealing 2; Roosevelt Institute Director; Senior Fellow Rob Johnson.

Calculated Risk Tue 2009-10-27 11:17 EDT

SF Fed: Recent Developments in Mortgage Finance

CalculatedRisk

From San Francisco Fed Senior Economist John Krainer: Recent Developments in Mortgage Finance As the U.S. housing market has moved from boom in the middle of the decade to bust over the past two years, the sources of mortgage funding have changed dramatically. The government-sponsored enterprises--Fannie Mae, Freddie Mac, and Ginnie Mae--now own or guarantee an overwhelming share of originations. At the same time, non-agency mortgage securitization and loans retained in lender portfolios have largely dried up.

Calculated Risk; Mortgage Finance; recent developments; SF Fed.

naked capitalism Fri 2009-10-23 09:50 EDT

Guest Post: The Ongoing Cover Up of the Truth Behind the Financial Crisis May Lead to Another Crash

George Washington of Washington's Blog

William K. Black -- professor of economics and law, and the senior regulator during the S & L crisis -- says that that the government's entire strategy now -- as during the S&L crisis -- is to cover up how bad things are (''the entire strategy is to keep people from getting the facts'')...PhD economist Dean Baker made a similar point, lambasting the Federal Reserve for blowing the bubble, and pointing out that those who caused the disaster are trying to shift the focus as fast as they can...Economist Thomas Palley says that Wall Street also has a vested interest in covering up how bad things are...The media has largely parroted what the White House and Wall Street were saying...One of the foremost experts on structured finance and derivatives -- Janet Tavakoli -- says that rampant fraud and Ponzi schemes caused the financial crisis. University of Texas economics professor James K. Galbraith agrees...Congress woman Marcy Kaptur says that there was rampant fraud leading up to the crash...Black and economist Simon Johnson also state that the banks committed fraud by making loans to people that they knew would default, to make huge profits during the boom, knowing that the taxpayers would bail them out when things went bust.

Crash; Financial Crisis; Guest Post; lead; naked capitalism; Ongoing Cover; truth.

Bank-Implode! Sun 2009-09-20 12:22 EDT

Bank-Implode! >> Blog Archive >> Exclusive -- Wells Fargo's Commercial Portfolio is a ticking time bomb

In order to sort through the disaster that is Wells Fargo's (quote: WFC) commercial loan portfolio, the bank has hired help from outside experts to pour over the books... and they are shocked with what they are seeing. Not only do the bank's outstanding commercial loans collectively exceed the property values to which they are attached, but derivative trades leftover from its acquisition of Wachovia are creating another set of problems for the already beleaguered San Francisco-based megabank...According to sources currently working out these loans at Wells Fargo, when selling tranches of commercial mortgage-backed securities below the super senior tranche, Wachovia promised to pay the buyer's risk premium by writing credit default swap contracts against these subordinate bonds...should the junior tranches eventually default, then the bank is on the hook.

bank implode; blogs Archive; exclusive; ticking time bomb; Wells Fargo's commercial portfolio.

naked capitalism Sun 2009-09-13 16:32 EDT

Guest Post: The Economy Will Not Recover Until Trust is Restored

George Washington of Washington's Blog

...our economy is not fundamentally stabilizing ...because the government and the financial giants are taking actions and releasing data which encourage more distortion and less trust..all of the happy talk in the world won't turn the economy around when the fundamentals of the economy are lousy, or there has been a giant bubble and vast overleveraging, or there has been massive fraud, or the government has gone so far into debt that it has formed a black hole... the chair of the congressional oversight committee of the bailouts (Elizabeth Warren) and the senior regulator during the S & L crisis (William Black) both say that hiding the true state of affairs and trying to put a happy face on an economic crisis just prolongs the length and severity of the crash...trying to instill false confidence will actually backfire on Summers, Geithner, Bernanke and the boys and make the crisis worse.

economy; Guest Post; naked capitalism; recover; restore; trust.

Tue 2009-04-21 00:00 EDT

naked capitalism: Guest Post: Mother of All Stealth Scams?

pension fund scam involved ``alternative investments, allowing private funds to collect exorbitant fees and senior pension fund managers to collect huge bonuses based on bogus benchmarks''

Guest Post; mother; naked capitalism; Stealth Scams.

Wed 2009-04-01 00:00 EDT

William K. Black: The Two Documents Everyone Should Read to Better Understand the Crisis

credit rater rebuffed by rating agency senior management; FBI reports endemic lender-initiated mortgage fraud

better understand; Crisis; documentation; reads; William K. Black.

Thu 2009-02-26 00:00 EST

naked capitalism: William Black: "There Are No Real Stress Tests Going On"

former senior bank regulator William Black

naked capitalism; Real Stress Tests Going; William Black.

Tue 2008-09-02 00:00 EDT

Mish's Global Economic Trend Analysis: Jon Nadler, Senior Analyst Kitco, Chimes In On The Precious Metals Conspiracy

chime; Jon Nadler; Mish's Global Economic Trend Analysis; Precious Metals Conspiracy; Senior Analyst Kitco.

Tue 2008-05-27 00:00 EDT

naked capitalism: Senior Bear Departures: Signs of Valuation Headaches for JP Morgan?

Real estate troubles too for JP Morgan

JP Morgan; naked capitalism; Senior Bear Departures; signed; Valuation Headaches.