In remarks that will fuel the row around excessive pay, Lord Griffiths, vice-chairman of Goldman Sachs International and a former adviser to Margaret Thatcher, said banks should not be ashamed of rewarding their staff.

Speaking to an audience at St Paul's Cathedral in London about morality in the marketplace last night, Griffiths said the British public should "tolerate the inequality as a way to achieve greater prosperity for all"

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A big tip o' the hat to disrael on DailyKos, who caught the latest from economist Thomas Palley, America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession.

Palley's introduction sets the hook quite well:

Most commentary has therefore focused on market failure in the housing and credit markets. But what if the house price bubble developed because the economy needed a bubble to ensure continued growth? In that case the real cause of the crisis would be the economy’s underlying macroeconomic structure. A focus on the housing and credit markets would miss that.

Cross-posted from The Economic Populist

A big tip'o the hat to okanogen at CorrenteWire for picking up this one: Death by Math.

Taunter analyzes the statement by Assurant CEO Don Hamm’s that "Rescission is rare." Rescission is when a health insurer cancels a policy, usually because the insured "lied" on the original application, usually by failing to disclose a previous condition. If you haven't heard the horror stories of people who required costly medical care only to be dropped by their health insurer, you haven't been paying attention to the world around you. In fact, the insurers have computer programs that screen their policy holders for a list of diseases and illnesses in order to drop those policy holders. Here is what Hamm told Congress in his prepared remarks to the Hearing of the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee on June 16 this year:

LQD = Lazy Quote Diary

Matt Taibbi has been wading through the objections to his Rolling Stone article a few weeks ago detailing how Goldman Sachs has profited obscenely by using its political influence to help create, then prick, a series of financial bubbles over the past century. Taibbi's reply is very much worth reading, to see the depths to which defenders of the financial status quo will stoop, such as hurling the "anti-semitic" charge. But, here is the conclusion, which I consider the best part:

Suggestions to solve the financial crises by basically shutting down most of Wall Street are always shouted down by howls of “How are companies going to raise money?” or “How are people going to invest in companies?”

Well, take a good, long look at this graph, which shows the percentage of capital expenditures by U.S. non-financial companies that was raised in U.S. financial markets from 1952 to 2006.

Hat tip to lambert on correntewire for providing the link to the latest cover story in the Columbia Journalism Review, Power Problem: The business press did everything but take on the institutions that brought down the financial system, by Dean Starkman.

Starkman and a team of researchers set out to examine how well the nation’s business press did in providing warning of the coming financial crises in the past decade. They selected a list of the nine business-news outlets they considered the most important (Wall St. Journal, New York Times, Washington Post, Los Angeles Times, Financial Times, Bloomberg, Forbes, Fortune, and BusinessWeek) and the financial institutions with leading roles in the collapse (Wall Street: AIG, Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley. Lenders: Ameriquest, Citigroup, Countrywide, Fannie Mae, Freddie Mac, IndyMac, New Century, Washington Mutual).

With the defeat of the bill allowing judges to force mortgage restructuring on reluctant creditors, and now the defeat of the bill reintroducing limits on usury, the momentum toward real reform of the American financial system has clearly been stopped. There is now a rapidly growing danger that the lack of reform, coupled with the growing consensus in “the Village” that multiplying signs of economic “green shoots”signal that “the bottom is near” (see Arianna Huffington’s May 12, 2009 post, Wall Street, DC, and the New Financial Euphoria),  will leave the majority of Americans who are not rich dealing with prolonged economic hardship.

This evening, Bill Moyers interviewed William K. Black, the former senior regulator during the savings and loan crisis of the 1980s, who blew the whistle on the Keating Five (the U.S. Senators implicated in taking “gifts” from S&L bankster Charles Keating was convicted of racketeering and fraud in both state and federal court after his Lincoln Savings & Loan). Black is now an Associate Professor of Economics and Law at the University of Missouri, and the author of the recently released book, The Best Way to Rob a Bank is to Own One.

Originally published 2009-03-27 22:47:51 -0500. Bumped by carol.

Have you ever been so broke all you can do is laugh about it?

June 27, 1936: “What they really complain of is that we seek to take away their power.” March 21, 2009: “... the rest of us can't afford to demonize every investor or entrepreneur who seeks to make a profit.” The Washington Post has available the full text of President Obama’s press conference this evening. Near the end of his remarks, the President said:

Bankers and executives on Wall Street need to realize that enriching themselves on the taxpayers' dime is inexcusable, that the days of outsized rewards and reckless speculation that puts us all at risk have to be over.

Why “have to be over”? Why not “are over”?

At the same time, the rest of us can't afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity, and it is what will ultimately get these banks lending and our economy moving once more.

From Franklin Roosevelt’s first fireside chat, “On the Bank Crisis,” Sunday, March 12, 1933

As a result we start tomorrow, Monday, with the opening of banks in the twelve Federal Reserve bank cities -- those banks which on first examination by the Treasury have already been found to be all right. This will be followed on Tuesday by the resumption of all their functions by banks already found to be sound in cities where there are recognized clearing houses. That means about 250 cities of the United States.

We are at the end of an era – the end of cheap oil, the end of suburban sprawl, the collapse of the world’s “shadow banking system”, the end of Wall Street’s arrogation of our nation’s financial system, the end of treating our natural environment as a “free” externality that corporations and consumers can ravage at will. In this time, as we transition from one era to another, billions is the mark of a mere politician. A true statesman -- someone who understands what we need to bring our country into the new era dawning -- will be talking about how many trillions we need. That’s why I was not happy with the stimulus package proposed and won by President Obama. Fortunately, the President has noted that it was only the first stimulus, implying there may be more to come. What we need to do now is begin defining the terms of the debate as to what is needed, and how much it is going to cost.

Below I outline one -- just one -- such national program we need. To build adequate urban rail transit systems in the 39 largest U.S. cities, where nearly half of all Americans live, is going to require $3.195 trillion. That is just construction costs – it does not include the cost of new rolling stock and maintenance rail vehicles. It is a project that can create 7.5 million jobs a year, for ten years. And it is a project that we most assuredly will not even initiate so long as we are content with politics and business as usual. New York City Transit BMT Brighton Line, at West 8th Street, photo by David-Paul Gerber, 7/13/2008, www.nycsubway.org

Building 50,757 kilometers of new rail transit lines, at a cost of $3.195 trillion. is based on building urban rail mass transit systems to the same service density found in New York City, in the next 38 largest urban areas. I began by assuming a desideratum of having a rail transit line no more than 2.5 miles from any point in an urban area. That is, if you took a square of urban area five miles on each side, we want to have a rail transit line running directly across the middle of that square. Slice that 25 square mile area into one mile strips, and you get one mile of rail transit line for every five square miles of urban area, or a density of 0.2 mile of rail transit line for every square mile. Converting square miles to square kilometers, and miles to kilometers, what we are looking for is a density of 0.124 mi of rail transit line for every square kilometer of urban area.

First posted Sat, 02/14/2009 - 23:31, not to be overlooked - standingup

“The financial system is playing us for chumps”

That’s what Simon Johnson, former chief economist at the International Monetary Fund, told Bill Moyers on the Bill Moyers Journal that just last night.

And the interview became even scarier. What Johnson and Moyers made clear, without saying it in so many words, is that American democracy is on the line.

Not Chile. Not Argentina. Not Bolivia or anywhere else. America.

What is at stake is the continued existence of the United States as a democratic republic.

The past week, since the news that Merrill Lynch had hurried to pay out billions of dollars in bonuses before the end of the year, provoked a torrent of tirades and rage against Wall Street. Now, progressives are debating each other over the value and efficacy of President Obama’s attempts to attract Republican support for the stimulus program. Many defenders of President Obama demand to know what he might do differently.

Well, here’s my suggestion, in the form of a speech the President can give explaining measures I have concluded are essential to solving the financial and banking crises. Here is what I would do to root out and destroy the root cause of our troubles.

Last week ago, Institutional Risk Analytics interviewed Josh Rosner of Graham Fisher & Co and David Kotok of Cumberland Advisors, and the discussion is one of the most direct and revealing of the true political nature of the financial collapse I have yet seen.

Sorry, President Obama, there simply is no time for a honeymoon. As you said in your Inaugural Address yesterday, "The ways we use energy strengthen our adversaries and threaten our planet." Unfortunately, it seems that this idea has not yet filtered into your administration’s thinking and planning regarding what to do about the financial collapse.