naked capitalism Tue 2010-08-24 20:02 EDT

Boston Fed's New Excuse for Missing the Housing Bubble: NoneOfUscouddanode

It is truly astonishing to watch how determined the economics orthodoxy is to defend its inexcusable, economy-wrecking performance in the runup to the financial crisis...From the Wall Street Journal Economics blog: Should economists and policy makers have identified the housing market bubble before it burst? The answer is most likely no, says the Federal Reserve Bank of Boston, because economic theory was not up to the challenge... Yves: This recitation is truly embarrassing, in that the writers clearly see this abject failure as completely reasonable, as opposed to compelling evidence that the discipline is not qualified to provide policy advice. What could be more damning than admitting that economics was incapable of seeing the blindingly obvious?...

Boston Fed's New Excuse; housing bubble; missing; naked capitalism; NoneOfUscouddanode.

Wed 2010-08-04 20:48 EDT

Janet Tavakoli: Stranguflation: Deflation and Inflation Where it Hurts America Most

Janet Tavakoli

The U.S. is suffering from high unemployment combined with too much consumer debt in a weak economy...our bloated financial sector has been sucking the life-blood out of the U.S. economy for years, and recent decisions insure it will continue to feed off taxpayers, while the host economy struggles for life...The bailouts were a perversion of capitalism and the principles upon which The Republic was founded. This was the result of influential interested parties reaching into the U.S. Treasury with no accountability. Capitalism doesn't call for bailouts, instead investors take losses. Shareholders in failed financial institutions should have been wiped out, debt holders would have had to accept discounts combined with debt for equity swaps, and financial institutions would have then been recapitalized without taxpayers footing the bill. Instead banks lobbied for relaxed accounting and ineffective "financial reform." No one, including bank managers, can tell how much capital is truly needed, and taxpayers' ongoing heavy subsidies give these financial institutions the appearance of stability.

deflation; hurting America; Inflation; Janet Tavakoli; Stranguflation.

zero hedge Fri 2010-01-15 17:46 EST

Is The Mysterious "Direct Bidder" Simply China Executing 'Quantitative Easing' On Behalf Of The Federal Reserve?

...we make the claim that the Fed has now informally offloaded the Treasury portion of Quantitative Easing to China, which does so via the elusive Direct Bid. It also explains why the Fed has generically been much less worried about TSY purchases under Q.E. (a mere $300 billion out of a total $1.7 trillion in monetization). It does beg the question of just how much Chinese holdings of US Debt truly are, as this number is likely hundreds of billions higher than the disclosed $799 billion...if there is indeed an implicit understanding between Bernanke and his Chinese colleagues, it means that not only the housing market (via Agency and MBS security purchases), but the Treasury market as well, are both manipulated beyond recognition and implies that broad securities are massively overvalued due to the stealth purchasing of core "riskless" assets by the US and China, as investors look higher in the cap structure for yield. Lastly, implications for world trade are great, as Asian countries will have to deal not only with the Chinese behemoth, which will constantly seek to keep its currency as low as possible, thus exacerbating the rest of Asia's foreign trade balances, but that of the US itself. The immediate implication is that China (or the US for that matter) will likely not reflate their currencies out of their own volition any time in the foreseeable future. Look for a much weaker dollar in the coming months.

behalf; Direct bidders; Federal Reserve; mysteriously; Quantitative Easing; Simply China Executing; Zero Hedge.

The Money Game Mon 2009-12-28 16:44 EST

Here's The Secret Reason We Eliminated The Bailout Caps On Fannie And Freddie (FNM, FRE)

On Christmas Eve, when the news was assured of getting no coverage whatsoever, The White House announced that it had eliminated the maximum bailout cap for Fannie Mae (FNM) and Freddie (FRE). As some observers have pointed out, all the move really did was formalize what everyone has figured for decades, that the two zombie GSEs were truly organs of the federal government, and that their debts would be backed up ad infinitum. So, why the move, and why then? Credit analyst Edwart Pinto shares his theories.

Bailout Caps; eliminate; Fannie; FNM; FRE; Freddie; Money game; s; secret reasons.

zero hedge Sat 2009-10-10 14:13 EDT

Albert Edwards On The Upcoming Economic "Abyss"

As always, Albert Edwards provides a solid dose of economic observations based on facts, not hope...unless you truly believe that the stock market is its own isolated bubble, which many do, at some point cash from assets will have to support equity and debt valuations. And once the government cash funding vacuum pops, the market-economy divergence will also collapse. At that point, every dollar used by the government via stimulus and Federal Reserve pumps will have an equal and opposite effect on stocks, thereby throwing America not just into a debt funding crisis, but a complete economic and capital market tailspin. Alas, it appears impossible to prevent this, as the administration and the Federal Reserve Chairman are dead set on executing their inherently flawed experiment...and the American middle class.

abyss; Albert Edwards; upcoming economic; Zero Hedge.

zero hedge Sat 2009-09-19 16:59 EDT

Guest Post: Damien Hoffman Exclusive Interview With Alan Grayson

Exclusive Interview: Congressman Alan Grayson Talks Fed Transparency and Missing Money, from Damien Hoffman, of Wall St. Cheat Sheet...[The Fed is] performing a truly remarkable, surreptitious transfer of wealth from public to private hands. They are taking their ability to print money and shore up failed banks. They are simply stuffing money into the pockets of private interests...the Federal Reserve continuously puts all of us on the hook for decisions they make to play favorites with private interests to the tune of trillions of dollars.

Alan Grayson; Damien Hoffman Exclusive Interview; Guest Post; Zero Hedge.

The IRA Analyst Thu 2009-09-17 10:22 EDT

Back to Basis for Securitization and Structured Credit: Interview With Ann Rutledge

To get some further insight into the world of securitization and cash flows, we spoke last week to Ann Rutledge of RR Consulting...The difference between a futures contract for T-bonds and a credit default swap is that the former is a real contract for a real deliverable, whereas the CDS trades against what people think is the cash basis, but there is no cash market price to discipline and validate that derivative market. Rutledge: a contract or structure without a cash basis should not be allowed at all. You cannot have a derivative that is honest and fair to all market participants without a true cash basis. ...derivatives markets such as CDS and CDOs that have no cash basis tend to magnify speculative excesses, while derivative markets where there is a visible cash basis market to discipline investor behavior seem less unstable in terms of systemic risk. Rutledge: If the cash market were visible and could be examined by all participants, then it would give away the ability of the dealer banks to tax participants in the market and extract these abnormal returns. So how do we fix the problem... Rutledge: These originators play this game over and over again and they don't get caught, in part because we do not have a common, standardized set of definitions for governing the most basic aspects of the securitization process. The buyers don't do the work and the accounting framework is a counterparty-oriented framework, not one that is focused on the underlying assets. So banks like Countrywide and WaMu originated and sold some truly hideous structures during the bubble, but the buyers only diligence was reliance upon recourse to these banks. It costs maybe 50bp for a buyer to get the data and grind the numbers to really diligence a securitization based on cash flows, even a complex CDO. But the cost to the buyer and the system of not doing the diligence is an order or magnitude bigger. If the Congress, the SEC and the FASB, and the financial regulators only do one thing this year when it comes to reforming the world of structured credit, then it should be to impose by law and regulation common standards for the definitions used in the marketplace.

Ann Rutledge; basis; interview; IRA Analyst; securitizations; structured credit.

Tue 2008-09-02 00:00 EDT

The Newer Deal: The Path to a Democratic Supermajority | The New America Foundation

The Newer Deal: The Path to a Democratic Supermajority, by Michael Lind (Salon, 2008-08-15) | The New America Foundation; ``Social conservatives, having lost the culture war, should be offered not only a truce but also an opportunity to join a broad economic campaign for a middle-class America, as many of them did between 1932 and 1968. When pro-choicers and pro-lifers unite in cheering the public investment and living wage planks at the convention of the neo-Roosevelt party, we will know that the political era that began in 1968 is truly and finally over.''

Democratic supermajority; New America Foundation; Newer Deal; path.

Sat 2008-07-12 00:00 EDT

Accrued Interest: Maybe it's another drill

..."his is the first time in my career that I truly believe U.S. Treasury bonds sold off on credit concern."

Accrued Interest; drilling; Maybe.

Tue 2008-05-20 00:00 EDT

Minyanville -

What the ETF? by Minyan Peter, Minyanville; "a broadened investor base, particularly inexperienced investors, and enhanced liquidity have been critical elements of every financial bubble in history"; "for the first time in financial history, the bubbles -- in securitized debt and commodities -- are truly global phenomena"

Minyanville.