financial crisis

The Dow at 1000? Regime Change for the Stock Market

By Numerian

Wall Street cannot see that a regime change has come to the markets, one in which corporations will be increasingly on the defensive, hounded by governments everywhere looking to raise tax revenue, and assaulted by a permanent buyers strike from consumers adjusting to their own drop in living standards. Image

The financial press likes to talk up those occasions when the Dow presses on above 10,000. Such talk lately has become desultory, since it seems every other week the Dow lurches below 10,000 and then manages to climb its way back up. The market has been in this funk since February of this year, when the Dow began its most recent push from below 10,000, all the way to a peak around 11,200, only to fall three times below the 10,000 level since and recover with less and less conviction.

Iceland releases Report on Financial Crisis

Only from the land of the Icelandic sagas could such a story unfold. Homer would be proud to claim this epic tale as his own. Alas, while Greece will have its day, this one belongs to the Vikings.

Yesterday morning, Iceland released its long awaited report on just what happened with its banks. It now turns out the banks’ assets were overstated by ISK 7,400 billion before the collapse (approx US $59 Billion dollars). Iceland's annual GDP is - give or take - roughly US $19 billion.

The report is widely believed to be opening the door for criminal prosecution - but current cynicism in Iceland believes the billionaires are going to get away, making the fishermen pay for the mess. Several sections of the actual report are in English including an English language summary:

Report of the Special Investigation Commission (SIC) - English Skýrsla rannsóknarnefndar Alþingis - Icelandic

Former Prime Minister (1991-2004) Davíð Oddsson, largely responsible for the privatisation of Iceland's banks and the abolishment of the National Economic Institute, fled the country just three days before the report was released. Icelanders don't think that was coincidence.

Economic Warfare? Europe versus Wall Street

Michael Collins

(March 10) Wall Streets is headed toward international pariah status thanks to two recent actions by the European Union (EU).

On Tuesday, the EU announced that it was banning Wall Street banks from the lucrative government bond business in Europe. They didn't express official concern or fire off a warning shot. They simply banned Wall Street from financing government bond deals like the one Goldman Sachs sold to Greece. The Guardian pointed out that Wall Street bond business from European governments has gone down over the last two years. Now the business is gone period. In effect, the EU has labeled Wall Streets business tactics as too dangerous for their governments to handle.

Then on Wednesday, the President of the European Commission said that the EU was considering a ban on government debt speculation through Credit Default Swaps (CDS) President José Manuel Barroso announced that, "the Commission will examine closely the relevance of banning purely speculative naked sales on Credit Default Swaps of sovereign debt." While not an outright ban, the threat of banning CDS on national debt would be a major loss for the world's financial speculators, particularly those in the United States and Great Britain.

Flushing Out the Ongoing Bank Fraud and Financial Terrorism

The number of foreclosure filings hit a record high in the 3rd quarter: "Despite signs of broader economic recovery,
number of foreclosure filings hit a record high in the third quarter -
a sign the plague is still spreading."

And banks are keeping losses off the books as they ignore the people that are not paying their mortgages:

JUAN GONZALEZ: And William Black, where is the outrage? It
seems to me, at this stage, with the—as the foreclosures continue to
escalate in numbers, and yet we’re seeing these enormous profits less
than a year after the financial crisis. There doesn’t seem to be the
kind of outrage, even in Congress, that there was six months or eight
months ago.

WILLIAM BLACK: There’s no palpable outrage, certainly not
in Congress. The reform efforts on derivatives, for example, are a
scandal. They exempt virtually all of the problem derivatives, and
they’re designed to exempt it. And that’s the bill that’s introduced,
and of course it’s likely to get worse with additional lobbying from
the special interests.

Link the things that you’ve just been talking about. You talked
about foreclosures reaching record highs. But in fact, foreclosures,
relative to delinquencies, are quite low compared to historical ratios.
In other words, banks have tons of folks who are not paying their
mortgages on time, and they’re not foreclosing. And the reason they’re
not foreclosing is, once you foreclose, you have to recognize losses
under the accounting rules. And the banks gimmicked the accounting
rules. They put pressure on Congress, and Congress put pressure on the
accounting profession to gimmick the accounting rules now about a year
ago. Now, these bonuses, of course, are paid compared to alleged
What happens if you understate your losses dramatically? You
report much higher profits and much higher bonuses. So this is a web of
fraud, in which they are getting as much as they can before the place
goes to hell in a handbasket again.

Here we are neck deep in debt to pay off the gambling debts of the bankers and now they are completely ignoring their very real losses that are piling up at a record rate simply so they can keep the bonus money flowing into their own pockets:

The Dow is Up but Your House is Gone

So here we have another bankster scam being waged on the consuming public. The scam is to create another "too big to fail" scenario as they make record profits and pay out record bonuses by rigging their books.

But the good news is the Dow is up.

So you or someone you care about is likely without a job or looking for more work. But the elite are rigging the system again, and you are going to fix things next time by voting for a Republican.

And what are these bankers with their Enron style accounting doing to help the homeowners that are on the verge of losing their homes? You can be certain that they are still out there offering ARMs to unsuspecting victims of their financial rape of the world.

And as for you? You get nothing but shafted:

Open Thread: Coverup on Mortgage Defaults

A very interesting post:  by Karl Denninger, More Banking Fraud (Foreclosure Stats).

When does the willful blindness in terms of bank fraud taking place daily in the so-called "marks" on housing-related loans stop?

The Mortgage Bankers Association released its latest update:

LQD: Palley - Macroeconomic Causes of the Financial Crisis

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.

LQD: Matt Taibbi shreds Goldman Sachs excuses

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:

Democrats and Republcans Share Equal Blame for the Economic Crisis

Hat tip to Naked Capitalism for the link to The Animal Spirit, and to Emmanuel Saez for the chart.

I've posted this chart because provides a useful point of reference to an interesting debate between two progressive economists,  Paul Krugman and William Greider.

The issue is whether the economic crisis we are facing right now should be laid at the doorstep of Ronald Regan who signed into law the deregulation of the Thrifts (ie the Savings & Loanl banks) as Krugman says, or whether in fact deregulation has been a bi-partisan policy beginning when Jimmy Carter was president and continuing under Bill Clinton.

It is not a moot point of merely historical interest. We can lay  Barack Obama's failure so far, to take on the banks and major financial institutions effectively is traceable to his reliance on the same team of advisors whom Bill Clinton relied upon, a team put into place by Rubin.

Open Thread: Derivatives Market Still Hot, Swindling 101


 hat tip Naked Capitalism and the rockcookie bottom.

The New York Post reports on how Citigroups and Bank of America are still playing the derivatives markets, and financing their speculations with TARP funds.

As Treasury Secretary Tim Geithner orchestrated a plan to help the nation's largest banks purge themselves of toxic mortgage assets, Citigroup and Bank of America have been aggressively scooping up those same securities in the secondary market, sources told The Post.

Both Citi and BofA each have received $45 billion in federal rescue cash meant to help prop up the economy and jumpstart the housing market. \

But the banks' purchase of so-called AAA-rated mortgage-backed securities, including some that use alt-A and option ARM as collateral, is raising eyebrows among even the most seasoned traders. Alt-A and option ARM loans have widely been seen as the next mortgage type to see increases in defaults.

One Wall Street trader told The Post that what's been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay.

Feeling the Pinch - Roundup of Economic News

Things just seems to be getting more dismal on the economic front. Even after the approval of the bailout or TARP, the Dow is still flirting with 8,000 and foreign markets are declining. There are visible signs locally, with decreased traffic, fewer people eating out, and even tho retailers are offering huge sales the number of shoppers is down. 

Spitzer Whacked For Warning Of Financial Crisis, Bush Fed Targets Taxpayers As Bagholders

Roger Stone is the longtime dirty-trickster who knocked the socks off of Eliot Spitzer in a scandal of high-priced trysts that forced resignation of the NY Governor earlier this year. With a Republican pedigree stretching to Watergate, Stone needed little inducement more than Spitzer's capital "D" affiliation.

But, as the nation's taxpayers await the terms of our extortion by the Bush Administration's 'exempt from oversight' bankers' club under a plan -- including full immunity -- led by Henry Paulson, it's time to consider the political assassination of another White House enemy for the SOP it was.

Former Top Officials Propose Bankruptcy Reorganization of Financial Sector

promoted by roxy original publication date/time:2008-09-18 09:06:10 -1000 (HI time)

This proposal "Resurrect the Resolution Trust Corporation" was offered as an op ed in yesterday's Wall Street Journal. It was written by three former ranking officials with responsibility for financial affairs. They are Paul Volcker, Chairman of the Federal Reserve under Carter and Reagan, Nicholas Brady Secretary of the Treasury under Bush's father, and Eugene Ludwig, Comptroller of the Currency under Bill Clinton.

The three share the advantage of being old enough to remember a world in which derivatives did not exist, and in which "moral hazard" meant protecting depositors by limiting what financial institutions could do with their money.

Movin' On

No! Not from ePluribus Media, silly.

About a month ago I kindof disappeared from here. If any of you checked my home Blog you will already know why. Just in case you didn't, I am reposting the diary I put up before I (thankfully) did not slip through the cracks of this bush league economy.

On the Sub-Prime Crisis

Many of you already knew that we were probably losing our home in the first wave of foreclosures hitting this state and the country. I have been sort of busy the last couple of weeks with this issue and (some of) you may have noticed that my Blog has been dormant because I have been so busy.

The bad news? We have given up trying to save our home.