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POPSMaybe the only way out We keep hearing that the economy is into a recovery, if so It'll be short lived. The almost limitless availability to credit led the world into this mess and now they tell us that more credit will save us. The Federal Reserve has to go! The clip above may provide an answer to a way out.
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POPSMichael Moore's Action Plan: 15 Things Every American Can Do Right Now FIVE THINGS WE SHOULD DO TO PROTECT OURSELVES AND OUR LOVED ONES UNTIL WE GET THROUGH THIS MESS:1. Take your money out of your bank if it took bailout money2. Get rid of all your credit cards but one 3. Do not invest in the stock market.4. Unionize your workplace so that you and your coworkers have a say in how your business is run.5. Take care of yourself and your family.
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POPSHere we go again? While this type of behavior will probably be celebrated on Wall Street - and perhaps even promoted by Washington - isn't this type of behavior (spending more than we make on credit cards, etc.) what got us into a mess in the first place?
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POPSSmall Banks Fail in Big Numbers
Closures and government takeovers of failing banks have become so routine that they barely gets noticed each Friday when the FDIC makes its announcements. While the banking crisis began with escalating defaults and foreclosures on home mortgages, the increase of bank failures in recent weeks has been driven by rising losses on commercial real estate loans, which are starting to default in large numbers. Community and regional banks hold a disproportionate share of commercial real estate and construction loans. My sister-in-law works at a local bank and says they are only accepting signature loan applications, fixed 5-yr home loans, and no car loans. My brother-in-law sells commercial real estate and every loan he has setup this year has been denied. My wife works for a car dealer who is losing his lines of credit after years of pristine credit. Our home value lost $50,000 and our property taxes went up $500. How the middle class is going to survive this mess is anyone
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POPSTo Put Billions $$$ in a Context David McCandless, an information designer based in London, was flummoxed by all the talk being bandied about, over government programs running into the billions. So he created a chart of the entire mess. As he writes over at Information is Beautiful: This image arose out of a frustration with the reporting of billion dollar amounts in the media. That is, they’re reported as self-evident facts, when, in fact, they’re mind-boggling and near incomprehensible without context. But they can start to be understood visually and relatively, IMHO. via Fast Company Picture credit: David McCandless
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POPSCapitalism in Crisis
An interesting column by Richard Posner on the background of and some lessons from the financial crisis. In short: 1) Capitalism is risky and is prone to bubbles and depressions (take home message is not that capitalism is 'bad' but that one must diversify and hedge); 2) The crisis is a consequence of deregulation (not that deregulation is 'bad' but that deregulated capitalism carries with it more of the bubble/depression risks). But in the end, as with so many, Posner concludes that the whole mess should be laid at the feet of government. This is not the right conclusion, not that government is not the responsible party, they are. But the key issue that underlies the government's failure is not that government is inherently 'bad' as many are often led to conclude but that it was made that way. A systematic attack and undermining of governance has occurred in the U.S. since the early 1980s. Not all was bad, likely much of it early on was needed, but like so many other human expe
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POPSEnvironmentalists being used by Big Business? Lets not forget to remind the environmentalists about the PCB mess in the Hudson River that GE fought for years against cleaning up... lest they think GE is being noble here. Wasn't this also the same GE who was funneling weapons to Iran that were used to kill our troops in Iraq.
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POPS Don't Mess With U.S. OK, time for Executive Grow-A-Set Order No 1. You can call it the Obama Doctrine. Anyone engaging in acts of piracy or terrorism on Americans anywhere in the world or in areas where American forces are lawfully operating can have his coconut drilled at any time, based on the discretion of the commander on scene. No further discussion. You holding your breath? I’m not. Yes, Obama allowed U.S. forces to do their job. It would have been shameful if he didn’t. But it involved no strategizing or anything beyond a yes or no by Obama, and frankly didn’t require that. It means nothing more than a happy day for America and the Phillips family, plus some wailing in a couple of Somali villages. Unless Obama has a plan, and the will to execute it. On that front, to steal a phrase, he has not yet begun to fight.
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POPS Geithner's Dirty Little Secret
president of the New York Federal Reserve Bank, argued that his intent was "not to sustain weak banks at the expense of strong". Yet this is precisely what the PPPIP does. The weak banks are the five largest banks in the system. The "dirty little secret" that Geithner is going to great degrees to obscure from the public is very simple. There are only at most perhaps five US banks that are the source of the toxic poison causing such dislocation in the world financial system. What Geithner is desperately trying to protect is that reality. The heart of the present problem, and the reason ordinary loan losses are not the problem as in prior bank crises, is a variety of exotic financial derivatives, most especially credit default swaps. What Geithner does not want the public to understand, his "dirty little secret", is that the repeal of Glass-Steagall and the passage of the Commodity Futures Modernization Act in 2000 allowed the creation of a tiny handful of banks . . . . .
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POPSBe Careful What You Protest For Unable to remove the guarantees and unwilling to properly charge for them because the banks remain too weak, they will try to limit the risks through more intrusive regulation. The results should be clear enough: lower bank profits, less capital generated, less credit created, lower economic growth and more bureaucratic control over the banks and the wider economy. The protesters should be careful what they wish for.
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POPS25 People to Blame for the Financial Crisis
Rebubbacans and Ayn Rand disciples abound. Kathleen Corbet Corbet ran the largest agency, Standard & Poor's, during much of this decade, though the other two major players, Moody's and Fitch, played by similar rules. By slapping AAA seals of approval on large portions of even the riskiest pools of loans, rating agencies helped lure investors into loading on collateralized debt obligations (CDOs) that are now unsellable. Dick Fuld steered Lehman deep into the business of subprime mortgages Lehman even made its own subprime loans. The firm took all those loans, whipped them into bonds and passed on to investors billions of dollars of what is now toxic debt. Marion and Herb Sandler In the early 1980s, became the first to sell a tricky home loan called the option ARM. And they pushed the mortgage, which offered several ways to back-load your loan and thereby reduce your early payments, over the next two decades. pocketed $2.3 billion when they sold their bank to Wac
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POPSJames K. Galbraith Talks to TYT About the Bailouts Some real talk about the economic mess. BTW, Republicans, stop blaming the damn victims. The bankers are not your friends. They are boning you and everybody else with your own tax dollars. And Obama, ditch the neoliberal economic policies, they will not do anyone, any good, except the Wall Street robber barons, of course!
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POPSExchange System Approved For Credit Default Swap Mess CHICAGO, March 13 /PRNewswire-FirstCall/ -- CME Group, the world's largest and most diverse derivatives exchange and its associated joint venture, CMDX, today announced that they have received a special exemption from the U.S. Securities and Exchange Commission (SEC) for clearing and trading credit default swaps (CDS) through CME Clearing and the CMDX platform. With this exemption, CME Group and CMDX have completed the regulatory reviews necessary to launch CDS clearing and trading in the U.S. The SEC exemption allows CME Group to use its existing clearing membership structure to offer CDS clearing services backed by CME's industry-leading financial safeguards package of approximately $7 billion. Clearing members that are registered FCMs or Broker-Dealers will be able to clear CDS trades on behalf of their qualified customers. CME Group will utilize its robust portfolio-based margin methodology for determining index and single name margin requirements.
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POPS Econ 101 ~ ~ ~ ~ Economic Mess for Dummies ~ ~ ~ ~ ~ What is a CDO or CDS? Imagine taking paper debt like mortgages, subprime mortgages, car loans, credit cards loans, and pretty much anything you can imagine. Now combine and mix the paper in a blender, spiking it with worthless rhetorical hyperbole that derivatives are the new paradigm of investments. Then pour the mixture in a pyramid of champagne glasses, to represent the varying levels of return (and risk), with the higher the glass, the lower the risk return and risk. That represents the CDOs. Now as you sell the mess, insure against the risk of the CDOs decreasing in value with CDSs. Presto, $1 trillion of bad loans is transmuted into $62 trillion in faux wealth. An alchemist would be proud. http://nobullbert.blogspot.com/2009/02/economic-mess-for-dummies.html
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POPSDon't Push Banks to Make Bad Loans Bankers should always lend prudently, as they are now doing. If they are jawboned or worse by Washington into reckless lending, the U.S. will set itself up for another debt crisis, even before the present mess has been cleaned up.
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POPSGOP Sen. Gets His Own Pork in Stimulus Further in the post we learn: Dean Baker, more succinctly, simply calls it the House Flipping Subsidy . And oh, by the way, it costs $30 billion more than Isakson originally claimed it would cost. The amendment is still in the "compromise bill" (the cowardly Senate voted it through on a voice vote), and Isakson is not about to vote for the final bill. See, Republicans know that this is going to pass no matter what they do, so they feel free to load it up with honest-to-goodness pork amendments, then vote against it and claim to be standing up to liberal spending. This is called "having your cake and eating it too." Or hypocrisy.
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POPSWhy I don't like Obama's new stimulus package
This is exactly why I don't like the new Obama stimulus package. Like I have been saying all along, we are going into a depression, not a recession. Depressions are caused by huge buildups of debt and then the debt destruction that comes with the large credit bubbles. Recessions are hiccups in the buildup of debt that can be cured by jump starting the addition of new debt. The bubble has popped. This is not a hiccup in the build up. So adding new debt just makes the problem worse. Here are some details of the new stimulus package and why it's only going to make things worse. "...there is $54 billion in the bill in the House of Representatives for new forms of "American energy," a phrase with an air of nationalism, along with a series of 'Buy America" requirements of dubious legality under trade treaties; $141 billion for education; $24 billion for lowering health care costs; and $6 billion for broadband service..." etc. etc. Colleague Porter Stansberry adds this assessment
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POPSThe Economist: U.S. In Depression, Not Recession Where does that leave us today? America’s GDP may have fallen by an annualised 6% in the fourth quarter of 2008, but most economists dismiss the likelihood of a 1930s-style depression or a repeat of Japan in the 1990s, because policymakers are unlikely to repeat the mistakes of the past. In the Great Depression, the Fed let hundreds of banks fail and the money supply shrink by one-third, while the government tried to balance its budget by cutting spending and raising taxes. America’s monetary and fiscal easing this time has been more aggressive than Japan’s in the 1990s. However, these reassurances come from many of the same economists who said that a nationwide fall in American house prices was impossible and that financial innovation had made the financial system more resilient.
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POPSSocial Justice and the Mortgage Mess Next up was Comptroller of the Currency John Dugan, who agreed the CRA “certainly was not the cause of the subprime crisis.” ... In a more aggressive pursuit of “social justice,” the Clinton administration revised the CRA in April 1995 to mandate that banks pass lending tests in “underserved” communities and suffer tough new sanctions for failing to make enough loans there. According to the language of the new Clinton regs, banks that used “innovative or flexible lending practices” to address the credit needs of low-income borrowers passed the test. Banks with poor CRA ratings were hit with stiff fines and blocked from expanding their operations. But it wasn’t enough. So Clinton ordered HUD to pressure Fannie Mae and Freddie Mac to buy the higher-risk loans from private banks and lenders, while adopting the same “flexible” credit standards.
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POPSYUK!!!! This is definitely NOT for the squeamish. Click at your own risk.( No, it's not nudity.)
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