Via [Michael Ramirez]
Comment:
I hope that the Frontline show, The Warning, last night was widely viewed. If you didn't see it, it is available online here. I thought it was nicely done and got some points across that need to be more widely known, like the character of certain individuals who still wield a lot of power today in Washington DC. Like the fact that, the more things change, the more they stay the same. Watch it. Email it to your friends. Help spread the word.
from the show.... "We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"
Though I think it's wonderful that this show was produced and aired lasted night, it is also a reminder of how much the media in all forms has failed us in the looting of American taxpayers. Why wasn't this show on sooner? Why hasn't it been on front pages of newspapers daily? Why was it not prominent in the campaign election process? Why, other than Dylan Ratigan, are there not more shows on the air covering this story? The Naked Capitalism article which I ran here yesterday, describes how access journalism means a controlled press and other factors affecting journalism today, better than anything I've read anywhere else on this important subject. The John Bougearel opinion pick below does a reasonable job explaining the apathy. Appropriate reactions are finally gaining momentum, but it has taken way too long.
The best thing I read today follows on the opinion pick thread. It is, once again, by Yves Smith, titled Paul Volcker, Mervyn King, Glass Steagall, and the Real TBTF Problem. She explains why Glass-Steagall is no longer a solution to stopping the bailouts, touches upon derivatives, and ends with the dreadful conclusion, "That further implies the system will have to break down catastrophically before anything effective can be done. I really hope I am wrong on this one." I highly recommend reading it at the source in its entirety.
On another important topic, The LA Times article which follows, reports that the government and the banks have agreed that it is not in their best interests to flood the market with all of the existing foreclosed properties. It would drive home prices down far too much. The implication is that they are helping the homeowners by figuring out arrangements to let them stay in their homes. The US taxpayer owns many of these mortgages involuntarily through Fannie and Freddie. However, the foreclosed-upon home owner might be better off getting rid of their liability, and the next buyer would also be better off buying at a lower price. A final consideration is that there are investors buying these properties, hoping to rent or sell at higher prices, later.
Each day, here, I will be running the information about the upcoming peaceful protest to take place in Chicago later this month, in conjunction with the annual American Banker's Association Meeting, at the end of the news thread. (This is sponsored by economists William Black and Dean Baker.) I feel this is a very important step towards getting the attention of our nation's leaders, as well as its citizens who haven't become informed, yet, about what has really taken place.
--Kalpa
THE LATEST:
Fed survey: housing, manufacturing drive recovery
Improvements in housing and manufacturing are driving the early stages of the economic recovery, according to a Federal Reserve survey released Wednesday. The Fed's latest snapshot of business conditions nationwide found "many sectors" of the economy either stabilized or logged modest improvements over the last six weeks. The pickups, though, often were from "depressed" levels of activity. Still, the new report adds to evidence that a recovery has started from the worst recession since the 1930s. Only two of the Fed's 12 regions - Atlanta and St. Louis - reported weaker overall economic activity.
...Known as the Beige Book, the survey does not include precise figures, but rather offers anecdotal snapshots of economic and financial activity nationwide.
Jobless: 4 states above 12%, 15 above 10%
Jobless rates increased in 23 states and the District of Columbia last month. Additionally, 19 states posted a decrease in unemployment and eight states had rates hold steady. Michigan remains the hardest hit at 15.3%. Nevada was next with 13.3% unemployment, followed by Rhode Island at 13% and California, at 12.2%. Florida, which had 11% unemployment, as well as Nevada and Rhode Island all posted the highest unemployment rates on record since the state survey began in 1976. A total of 15 states reported jobless rates above 10% in September, according to federal data released Wednesday. The national unemployment rate is now 9.8%, the report said....
U.S. NEWS:
U.S. to Order Steep Pay Cuts at Bailed-Out Firms
Responding to the growing furor over the paychecks of executives at companies that received billions of dollars in federal bailouts, the Obama administration will order the companies that received the most aid to deeply slash the compensation to their highest paid executives, an official involved in the decision said Wednesday, The New York Times’s Stephen Labaton reports.
Under the plan, which will be announced in the next few days by the Treasury Department, the seven companies that received the most assistance will have to cut the cash payouts to their 25 best-paid executives by an average of about 90 percent from last year.....
Mortgage applications plummet 13.7%
Mortgage applications plunged last week as rates ticked higher above 5%, an industry group said Wednesday, as the expiration of a home buyer tax credit drew nearer. The Mortgage Bankers Association said its index of mortgage application volume fell 13.7% in the week ended Oct. 16 from the prior week. The decline in activity came as rates on the widely-used 30-year fixed mortgage increased to 5.07% from 5.02%, according to the MBA. The week's adjustments included the Columbus Day holiday....
Feared flood of foreclosures in California may be averted
Signs are emerging that a much-feared escalation of California home foreclosures may not happen, as banks respond to government pressure and scale back their repossessions of troubled properties. Statewide, the number of homes taken back by lenders dropped sharply in the three months ended Sept. 30, falling 37% over the same period a year earlier, when foreclosures were at an all-time high.......lenders are now more willing to give borrowers time to catch up with their payments, partly out of concern that more foreclosures will further depress the housing market -- and the value of their inventory.
"It's not out of the goodness of their hearts," John Walsh, president of MDA DataQuick, which provides real estate research, said of lenders' reluctance to foreclose. "It's because they've concluded that flooding the market with cheap foreclosures in this economic environment may not be in their best financial interest."......Others believe that big lenders and government officials are operating under a tacit agreement: Keep a lid on foreclosures.......Default notices -- the first step toward foreclosure -- jumped 19% to 111,689. But the fact that foreclosures are not rising at the same pace as defaults is evidence that banks are being more lenient.
What's more, default notices for the most recent quarter declined 10.3% from the previous three months, another sign that the tide of foreclosures is ebbing. California has an estimated inventory of 90,000 foreclosed properties, according to ForeclosureRadar, along with more than 140,000 other properties scheduled to be auctioned......Data from First American CoreLogic show that about 35% of Los Angeles area home mortgages are upside down....
Bailout's hidden costs
Neil Barofsky, overseer of the $700 billion TARP program, says the cost to taxpayers will be a lot greater than the government is letting on....Barofsky, in the interview, wouldn't comment on which of the administration's regulatory reform plans he favors, but he said action needs to happen soon. In his report, he argued that the recent stock market rally has removed some of the urgency of dealing with the financial system's fundamental problems, but the cost of inaction could be even higher than the current bailout....
TARP report slams lack of transparency
In a scathing report out Wednesday, a government watchdog blasts the Treasury Department for its handling of a $700 billion bailout program and for not adopting all of its earlier recommendations. Special Inspector General Neil Barofsky, who is in charge of overseeing the Troubled Asset Relief Program (TARP), said Treasury's failure to provide more details about the use of TARP funds has helped damage "the credibility of the program and of the government itself, and the anger, cynicism, and distrust created must be chalked up as one of the substantial, albeit unnecessary, costs of TARP."....
Tarp inspector threatens subpoena
....The report from Mr Barofsky says the Treasury is refusing to provide access to the records of the affiliates that are “critical” to identifying conflicts of interest. It adds that the special inspector general’s office would not hesitate to obtain these records using all of its tools, including its subpoena authority.
Broadly, the report credits Tarp with playing “a significant role in bringing the system back from the brink of collapse” but warns that the taxpayer is unlikely to see a return on the investment in spite of profits reaped from some banks repaying government loans with interest.
Panel votes to give states more power over banks
A key congressional committee on Wednesday approved a contentious provision that would give state regulators more authority to impose consumer protection restrictions that go beyond federal laws on mortgage and other products issued by big banks....
Two key votes to break up the megabanks
Former Federal Reserve Chairman Paul Volcker has been arguing for the breakup of the biggest banks to make sure history doesn’t repeat. Current Bank of England Gov. Mervyn King now is endorsing the same idea. But the U.S. and British governments both seem unwilling to give up on the megabank concept that marries commercial banking with Wall Street banking......King referenced Volcker’s idea to reimpose some version of the Glass-Steagall Act, restricting banks to traditional commercial banking and forbidding them from engaging in higher-risk Wall Street-related businesses....
Volcker’s Voice Fails to Sell a Bank Strategy
....“The banks are there to serve the public,” Mr. Volcker said, “and that is what they should concentrate on. These other activities create conflicts of interest. They create risks, and if you try to control the risks with supervision, that just creates friction and difficulties” and ultimately fails.
The only viable solution, in the Volcker view, is to break up the giants. JPMorgan Chase would have to give up the trading operations acquired from Bear Stearns. Bank of America and Merrill Lynch would go back to being separate companies. Goldman Sachs could no longer be a bank holding company. It’s a tall order, and to achieve it Congress would have to enact a modern-day version of the 1933 Glass-Steagall Act, which mandated separation.
....His disagreement with the Obama people on whether to restore some version of Glass-Steagall appears to have contributed to published reports that his influence in the administration is fading and that he is rarely if ever in the small Washington office assigned to him.
He operates from his own offices in New York, communicating with administration officials and other members of the advisory board mainly by telephone. (He does not use e-mail, although his support staff does.) He travels infrequently to Washington, he says, and when he does, the visits are too short to bother with the office. The advisory board has been asked to study, amid other issues, the tax law on corporate profits earned overseas, hardly a headline concern. So Mr. Volcker scoffs at the reports that he is losing clout. “I did not have influence to start with,” he said.
Wall St. Giants Reluctant to Donate to Democrats
....Mr. Obama will fly to New York on Tuesday for a lavish Democratic Party fund-raising dinner at the Mandarin Oriental Hotel for about 200 big donors. Each donor is paying the legal maximum of $30,400 and is allowed to take a date. Four of the seven “co-chairs” listed on the invitation work in finance, and Democratic Party organizers say they expect that about a third of the attendees will come from the industry. But from the financial giants like Goldman Sachs, JPMorgan Chase and Citigroup that received federal bailout money — and whose bankers raised millions of dollars for Mr. Obama’s election — only a half-dozen or fewer are expected to attend (estimated total contribution: $91,200).....
Top banks cut small business lending by $8 billion
...The programs the President will unveil include an increase in the maximum amount businesses can borrow through the Small Business Administration's primary loan program, which currently stands at $2 million. In addition, the Treasury Department will expand access for smaller banks to the Troubled Asset Relief Program (TARP), a move aimed at spurring more local lending by community banks.
The TARP program was set up to recapitalize banks so that they would bolster their lending to consumers and small businesses. In March, as the administration and the SBA took steps to stimulate small business lending, Treasury Secretary Tim Geithner ordered the top TARP recipients to begin sending the Treasury monthly reports on their small business lending activity....
Fed Chooses Staff Economist as Head of Bank Supervision
The Federal Reserve on Tuesday named Patrick Parkinson, a longtime staff economist, to head bank supervision and regulation. Mr. Parkinson, who earned his doctorate in economics at the University of Wisconsin, Madison, has served as a top adviser to Fed chairmen Ben Bernanke and Alan Greenspan. He recently took a leave from the Fed to work at the Treasury, where he was an architect of the Obama administration's proposed overhaul of financial regulation. The administration's financial-revamp plan, now pending in Congress, would give the Fed more authority over systematically important financial institutions and move consumer regulation to a separate agency.....
Galleon Group to liquidate hedge funds after founder's arrest
Galleon Group notified investors in a letter Wednesday morning that it is liquidating its hedge funds in the aftermath of Rajaratnam’s arrest last week on charges of running a massive insider-trading ring. “I have decided that it is now in the best interest of our investors and employees to conduct an orderly wind down of Galleon’s funds while we explore various alternatives for our business,” Rajaratnam wrote in the letter addressed to employees, clients and friends. The move caps a dramatic downfall for Rajaratnam and Galleon, once a premier hedge fund that managed $3.7 billion....
Fed Should Hold Only Treasuries Among Securities, Plosser Says
Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank should limit the securities on its balance sheet to Treasuries and create a policy for serving as lender of last resort. The Fed’s emergency-credit programs and inconsistency in bailout decisions created confusion and showed the central bank “lacked a well-communicated, systematic approach,” Plosser said yesterday in a panel discussion at Palo Alto, California. Policy rules “would yield better economic outcomes for both monetary policy and financial stability policy,” he said.
....said tightening credit will be tougher than it was after past recessions. “It’s more difficult this time because of the composition of our balance sheet,” and there will be “hue and cry” from homebuilders and lawmakers if the Fed sells the mortgage-backed securities it’s purchased, he said....
Tug of war over financial reforms in US
Regulators, lawmakers and the Federal Reserve chairman engaged in a tug of war on Wednesday over the pace and reach of regulatory reform designed to prevent another financial crisis.
....On the derivatives bill, Mr Gensler told traders and users at a conference of the Futures Industry Association that they should not be awarded the right to continue trading derivatives over-the-counter without them passing through a central clearing house. “If Congress decides to exempt end-users from a clearing requirement, that exception should be very narrowly defined to include only non-financial entities that use swaps as an incidental part of their business to hedge actual commercial risks,” he said.
Fed's Tarullo opposes splitting up banks
Federal Reserve board governor Daniel Tarullo said Wednesday that he opposes the "provocative idea" of getting banks out of the business of trading risky securities so they can focus on lending. In a speech to a business group, Tarullo said he doubted any ban would end the two-big-to-fail problem. Banks have gotten into trouble through risky lending along, Tarullo said. Secondly, the new firms that were allowed to trade risky securities would just become too-big-to fail. No one has come forward with a blueprint on how to separate the bank businesses, he said. "This is, in other words, more a provocative idea than a proposal," Tarullo said.
Treasury to shut down two more aid programs
The U.S. Treasury will shut down two more financial bailout programs along with its main bank capital injection program by the end of this year, a Treasury official said on Tuesday. The official, who spoke on condition of anonymity, said the Capital Assistance Program and the Targeted Investment Program would be shut down along with the Capital Purchase Program....
Wells Fargo reports record profits
Wells Fargo reported record profits of $3.2 billion, the company said Wednesday, nearly doubling the amount of money it made just a year ago. Despite facing an ongoing recession and rising loan losses, the San Francisco-based bank said its third-quarter results were lifted by strong performances in its mortgage lending business and other divisions....
Goldman Sachs Steps Up Political Donating After TARP Repayment
The political action committee of Goldman Sachs Group Inc. stepped up its donations in the third quarter of this year after the New York-based investment bank paid back its U.S. taxpayer rescue funds, Federal Election Commission records show. Goldman Sachs had made $2,000 in campaign donations before June, when it repaid $10 billion under the Troubled Asset Relief Program. Between June 1 and Sept. 30, Goldman contributed $58,500 to federal candidates and committees, including $37,500 in September.......Goldman Sachs and Morgan Stanley have a record as major political givers. Goldman’s employees gave $5.9 million for the 2008 elections, more than any other financial company, while Morgan Stanley employees were fifth with $3.7 million...
Bernanke: Don't move up new credit card rules
Federal Reserve Chairman Ben Bernanke contends that legislation to accelerate the effective date of credit card reform legislation would have a detrimental impact on small credit card issuers, according to excerpts from a letter to a key lawmaker released Wednesday....
Deserted shopping mall bleak symbol of Fed bailout
A $29 billion trail from the Federal Reserve's bailout of Wall Street investment bank Bear Stearns ends in a partially deserted shopping center on a bleak spot on the south side of Oklahoma City. The Fed now owns the Crossroads Mall, a sprawling shopping complex at the junction of Interstate highways 244 and 35, complete with an oil well pumping crude in the car park -- except the Fed does not own the mineral rights.....
Apartment market moving on up
....Bay Area landlords might not be entirely thrilled, having seen their rents drop by an average of 7.5 percent over the past year, compared with 3.7 percent nationwide, according to the report, based on figures up to Sept. 30. Still, not so bad in light of the 17.3 percent increase they enjoyed over the past four years. In San Francisco, rents dipped 5.6 percent over the past year - studios and one-bedrooms showing significant drops - compared with an overall 26.4 percent increase in the past four years.
San Francisco tenants might not be over the moon either. Averaging $2,270 a month, their rents are among the highest in the nation, and considerably more than the rest of the Bay Area, including Marin. But before you give your landlord 30 days' notice, be warned that Marin's 95.9 percent occupancy rate is even higher than San Francisco's, according to the report.......
Fewer short sales are coming up short
....From last September through March, about 600 short sales were completed in the nine-county Bay Area each month, accounting for about 9 percent of existing-residence sales. The monthly short sales topped 700 in April and May and has hovered around 900 to 1,000 a month since then, putting it at about 14 percent of sales. (Zip said the actual numbers may be higher, as not all short sales are flagged as such in the MLS.).....
INTERNATIONAL NEWS:
IMF tells Asia to keep spending
The International Monetary Fund has warned Asian nations not to withdraw their stimulus spending too soon....
Borrow for recovery, says Darling
hancellor of the Exchequer Alistair Darling has said government borrowing is the best way to support the UK economy in the long run. The chancellor admitted that borrowing "may feel counter-intuitive", but said in the longer run, it "will mean the bills we face as a country are lower"....
Scottish economy shrinks further
Scotland's economy was in a steeper decline from April to June than the rest of the UK, official figures show. The second quarter saw the Scottish economy shrink by 0.8%, after a fall of 2.5% during the first quarter.....
Rising Debt a Threat to Japanese Economy
How much debt can an industrialized country carry before the nation’s economy and its currency bow, then break? The question looms large in the United States, as a surging budget deficit pushes government debt to nearly 98 percent of the gross domestic product. But it looms even larger in Japan. Here, years of stimulus spending on expensive dams and roads have inflated the country’s gross public debt to twice the size of its $5 trillion economy — by far the highest debt-to-G.D.P. ratio in recent memory. Just paying the interest on its debt consumed a fifth of Japan’s budget for 2008, compared with debt payments that compose about a tenth of the United States budget....
This is the bust in the boomtown that banks built
A monument to the financial crisis is rising amid this city's thicket of skyscrapers: a gleaming, glass-walled trophy tower that was intended as a fitting headquarters for Wachovia's national banking empire. It will open instead as the headquarters of a regional power company. Wachovia, unable to survive a run of bad decisions, was swallowed by San Francisco-based Wells Fargo during the depths of the crisis last year.
Few American cities prospered more over the past two decades than Charlotte, its growth propelled and gilded by Wachovia and its crosstown rival, Bank of America. Executives shoehorned gaudy mansions into old neighborhoods around downtown. Workers poured into vast subdivisions on the city's ever-expanding periphery. With coffers overflowing, giddy public officials spent tax dollars on a manmade river for whitewater rafting. Now Charlotte is suffering. Unemployment has spiked to 12 percent, well above the national average. Subdivisions sit unfinished. Mansions cannot be sold....
Global pirate attacks on the increase
The first nine months of this year has seen more pirate attacks than all of last year. And more than half of those attacks were carried out by suspected Somali pirates, an international maritime watchdog group said Wednesday....
Scottish City Prepares for Life Beyond Oil
.... The city also wants to reorient its vibrant oil services industry toward emerging offshore oil centers like Brazil. “Just because the production in the North Sea starts to decline doesn’t mean that Aberdeen as a global center also declines,” said Robert Collier, the chamber of commerce’s chief executive. “That expertise can still stay here and be exported around the world.”....
Euro tops $1.50, highest since August 2008
The euro rallied against the dollar Wednesday, rising above $1.50 for the first time in 14 months, as optimism about the global economic recovery boosted demand for higher yielding currencies.....
OTHER:
Remaking the American Dream
Since the recession began in December 2007, the number of unemployed Americans has risen to 15.1 million. Industries such as construction have halted production, shedding 1.5 million jobs, according to the U.S. Bureau of Labor Statistics, and many Americans who are still employed face stagnant wages.
But foreign companies can offer a lifeline to the United States in troubling economic times, says Micheline Maynard, .....foreign companies have helped revitalize forgotten towns, added 5 million jobs to the U.S. economy, and provided American workers with stable jobs that pay, on average, $66,000 per year, substantially more than the average U.S. professional salary, estimated at $42,270 in 2008....
Rent-A-Husband handyman service raises questions
Kaile Warren was depressed and homeless when, through "divine intervention," he got the concept — and brand name — that would make him something of a national celebrity. Warren says God presented him with the idea for a home-repair franchise and this slogan: "Rent-A-Husband: For those jobs that never get done." At the time, the former home builder was lying surrounded by rats in an abandoned warehouse — or in a homeless shelter or on a friend's couch, depending on the version he's pitching to the media.....
Fed buys $1.05 billion in Treasurys
The Federal Reserve Bank of New York bought $1.05 billion in Treasurys that mature from 2027 through 2039 on Wednesday, its second-to-last such operation in its $300 billion program started in March....
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NOTE: Economists William Black and Dean Baker are hosting a demonstration in Chicago to remonstrate against Wall Street on Oct 25-27 in Chicago at the American Bankers Association annual meeting. For more information go to "Showdown in Chicago, put people first" website here. From their website:
JOIN US on October 25-27 for a series of demonstrations when thousands of Americans - retirees, farmers, workers, homeowners, renters, students, clergy, and small business owners - come together on the streets of Chicago to demand a banking system that puts the American people first and a Congress that makes it happen! Take a look at the Showdown schedule of events, stay informed about event details and join our mailing list, and fill out the Showdown inquiry form to tell us when and where you want to plug into the fight!
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