RollingStone.com: Matt Taibbi | Taibblog Thu 2010-09-23 09:37 EDT

Bob Rubin Cuddles

Matt Taibbi

...No man's behavior looks attractive when he's cheating on his wife, but this little tell-all by a woman who had a sort-of fling with former Goldman chief and Treasury Secretary Bob Rubin is more than unusually embarrassing...The most disgusting (and revealing) part of the story is, to me, this part of Iris Mack's narrative... A multi-multi-millionaire giving a homeless guy a dollar on the way to the Ritz...if that isn't the perfect metaphor for the modern ``Third Way'' Democratic Party, I don't know what is...Bob Rubin's main job at Citi was to hang around and be available for his political connections. His job, as I understand it, was a sort of permanent, ongoing bribe...

Bob Rubin cuddle; com; Matt Taibbi; rollingstone; Taibblog.

Thu 2009-11-19 19:43 EST

Jesse's Café Américain: Willem Buiter Apparently Does Not LIke Gold, and Why Remains a Mystery

Dr. Willem Buiter of the London School of Economics, and advisor to the Bank of England, has written a somewhat astonishing broadsheet attacking of all things, gold. I have enjoyed his writing in the past. And although he does tend to cultivate and relish the aura of eccentric maverick, it is generally appealing, and his writing has been pertinent and reasoned, if unconventional. That is what makes this latest piece so unusual. It is a diatribe, more emotional than factual, with gaping holes in theoretical underpinnings and historical example.

Jesse's Café Américain; likely gold; mysteriously; remains; Willem Buiter Apparently.

Tue 2009-10-27 12:58 EDT

Looting: The Economic Underworld of Bankruptcy for Profit by George Akerlof, Paul Romer

During the 1980s, a number of unusual financial crises occurred. In Chile, for example, the financial sector collapsed, leaving the government with responsibility for extensive foreign debts. In the United States, large numbers of government-insured savings and loans became insolvent - and the government picked up the tab. In Dallas, Texas, real estate prices and construction continued to boom even after vacancies had skyrocketed, and the suffered a dramatic collapse. Also in the United States, the junk bond market, which fueled the takeover wave, had a similar boom and bust. In this paper, we use simple theory and direct evidence to highlight a common thread that runs through these four episodes. The theory suggests that this common thread may be relevant to other cases in which countries took on excessive foreign debt, governments had to bail out insolvent financial institutions, real estate prices increased dramatically and then fell, or new financial markets experienced a boom and bust. We describe the evidence, however, only for the cases of financial crisis in Chile, the thrift crisis in the United States, Dallas real estate and thrifts, and junk bonds. Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society's expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.

bankruptcy; Economic Underworld; George Akerlof; Looting; Paul Romer; profits.

zero hedge Sat 2009-10-10 11:57 EDT

The Federal Reserve's Balance Sheet: An Update

Ben S. Bernanke

...the Federal Reserve has faced two historically unusual constraints on policy. First, the financial crisis, by increasing credit risk spreads and inhibiting normal flows of financing and credit extension, has likely reduced the degree of monetary accommodation associated with any given level of the federal funds rate target, perhaps significantly. Second, since December, the targeted funds rate has been effectively at its zero lower bound (more precisely, in a range between 0 and 25 basis points), eliminating the possibility of further stimulating the economy through cuts in the target rate. To provide additional support to the economy despite these limits on traditional monetary policy, the Federal Open Market Committee (FOMC) and the Board of Governors have taken a number of actions and initiated a series of new programs that have increased the size and changed the composition of the Federal Reserve's balance sheet. I thought it would be useful this evening to review for you the most important elements of the Federal Reserve's balance sheet, as well as some aspects of their evolution over time. As you'll see, doing so provides a convenient means of explaining the steps the Federal Reserve has taken, beyond conventional interest rate reductions, to mitigate the financial crisis and the recession, as well as how those actions will be reversed as the economy recovers...

Federal Reserve's balance sheet; Update; Zero Hedge.

Jesse's Café Américain Tue 2009-09-22 09:15 EDT

Confessions of a 'Flationary Agnostic

Jesse

I have no particular allegiance to either the hyperinflation or the deflationary camps. Both outcomes are possible, but not yet probable. Rather than being a benefit, occupying the middle ground too often just puts one in the middle, being able to see the merits in both arguments and possibilities, and being unwilling to ignore the flaws in each argument...The growth rate of dollars is slowing at the same time that the 'demand' for dollars, the velocity of money and the creation of new commercial credit, is slowing. GDP is negative, and the growth rate of money supply is still positive, and rather healthy. This is not a monetary deflation, but rather the signs of an emerging stagflation fueled by slow real economic activity and monetization, or hot money, from the Fed. The monetary authority is trying to lead the economic recovery through unusual monetary growth. All they are doing is creating more malinvestment, risk addiction, and asset bubbles...Using money as a 'tool' to stimulate or retard economic activity is a dangerous game indeed, fraught with unintended consequences and unexpected bubbles and imbalances, with a spiral of increasingly destabilizing crises and busts. The Obama Administration bears a heavy responsibility for this because of their failure to reform the system and restore balance to the economy in any meaningful way.

confessed; Flationary Agnostic; Jesse's Café Américain.

Taibblog Wed 2009-09-02 09:06 EDT

Bailout Propaganda Begins

Matt Taibbi

``the Fed's decision to brag publicly about a few loans that are actually performing is sort of scary -- it speaks to a level of intellectual desperation and magical-thinking unusual even for a banker in the subprime/MBS era''

Bailout Propaganda Begins; Taibblog.

Mish's Global Economic Trend Analysis Wed 2009-08-26 16:00 EDT

Critically Under-Capitalized Banks Direct Result Of "Wonderful Chain of Stupidity"

Michael Shedlock

Last week the Wall Street Journal ran an article about how trust securities sank Guaranty Financial Group and six family-controlled Illinois banks in early July. Please consider In New Phase of Crisis, Securities Sink Banks. Federal officials on Thursday were poised to seize Guaranty Financial Group Inc., in what would be the 10th-largest bank failure in U.S. history. Guaranty's woes were caused by its investment portfolio, stuffed with deteriorating securities created from pools of mortgages originated by some of the nation's worst lenders. Delinquency rates on the holdings have soared as high as 40%, forcing write-downs last month that consumed all of the bank's capital. Guaranty is one of thousands of banks that invested in such securities, which were often highly rated but ultimately hinged on the health of... Security losses are a non-operating item and are listed after pre-tax operating income on the call report. This is very unusual and possibly reveals another cancer hiding on many banks balance sheets. those garbage trust-preferred securities problems are on top of the widely expected fallout from commercial real estate problems affecting small to medium-sized regional banks. Thus, banking woes are much deeper in many areas than either the FDIC or Fed is admitting.

Capitalized Banks Direct Result; Criticizes; Mish's Global Economic Trend Analysis; Stupid; Wonderful Chain.