False Sense of Security From Masters of Econ Disasters And The Markets Empty Threats
It is becoming pretty darn clear that the fools that created the economic disaster think they can push us through it on their wishful thinking. Idiots like Geithner are painting rosy pictures of what they are doing - with Obama noddingly approving of it - and hoping you, the average American and the ones that are still being crushed economically, won't notice. Yves there:
Meanwhile and according to Paul Krugman,
Brad DeLong wonders how the proponents of tight budgets and tight money are prevailing in the midst of mass unemployment, low interest rates, and incipient deflation.
It’s actually not all that surprising. Horrifying, but not surprising.
The case for expansionary policies in the face of a slump is intellectually difficult; Keynes described the writing of the General Theory as a painful process of discovery, and so it is. The natural instinct of almost everyone is to think that tough times require tough measures, and that if the economy is suffering, the government should tighten its own belt. It would take a clear consensus from economists to overcome that natural bias.
And that consensus has, of course, been lacking — largely because a significant proportion of the economics profession has spent the last three decades systematically destroying the hard-won knowledge of macroeconomics. It’s truly a new Dark Age, in which famous professors are reinventing errors refuted 70 years ago, and calling them insights.
While we bear in mind that there may be real solutions that will stop this disaster from happening again, and the need to really address the results of it honestly, there are the underlying rules of a market whose obscene motto for years was:
Derivatives are a hotbed of abuses and bailouts. So why are taxpayers footing the bill?
We still have to contend with the empty threats of an unethical industry to just relocate if we try to force them to be ethical with our money. Aside from the fact that we already have means to control those overseas markets they say they'll take flight to and the only thing missing is decent rules for the Commodity Futures Trading Commission (CFTC) to enforce to ensure that reality:
Just about anything the CFTC wants to get its hands on, it can, and the current CFTC Chairman, Gary Gensler, is a committed reformer. We just need to write good rules for his agency to enforce.
Moreover, finance tricksters will have no incentive to move their destructive derivatives trading abroad, because the rules in other countries are, in fact, much tougher than those the U.S. is currently considering.
There are a lot of ways to crack down on Wall Street, but none of them will work without reining in the insane, secretive market for derivatives—speculative instruments that allow financiers to gamble on anything from subprime mortgages to the price of corn. Right now Wall Street is making a big push to roll-out new derivatives on movie box-office receipts, allowing the financial world to place raw bets on how much money a movie is going to make. It sounds crazy and destructive, and it is.
Germany is leading the way on derivatives reform by simply banning this kind of naked gambling outright. The U.S. effort is critically important, but much more modest. Instead of banning the casino, reformers in Congress are hoping to shrink it by ending the taxpayer subsidies that fuel it. This is at the heart of the proposal from Sen. Blanche Lincoln, D-Ark., that has earned so much ire from the bank lobby. Bankers love their taxpayer subsidies, and love converting them into bonuses—who wouldn't? The trouble is that this business is inherently risky, and can jeopardize the entire economy, as the collapse of AIG attests.
Essentially? Capital flight is an empty threat and, no doubt, those overseas markets are not only within our realm of control already but they are also getting ready to make their markets even more restrictive than our planned changes. There may still need to be a few tweaks to proposed solutions but unless they plan on running their businesses out of somewhere like Somalia - enjoy the unregulated libertarian utopia of warlords and piracy MR. CEO, if you really want unregulated markets - financial regulation for them is coming, regardless of where they say they'll go.
And there needs to be more changes in order to get people in place that might actually do something about all of this mess:
Sherrod Brown would like to see Elizabeth Warren appointed as the head of the new consumer financial protection agency, and so would I. I think she would make an excellent choice. Here's one reason why. She's been holding Tim Geithner's feet to the fire with her current TARP oversight duties.
When it comes to the health of the banking system, Timothy F. Geithner and Elizabeth Warren don’t see eye to eye.
Mr. Geithner, the Treasury secretary, told the Congressional Oversight Panel on Tuesday that the Troubled Asset Relief Program had been “remarkably effective” in stabilizing the banking system, noting that the program was on track to end in October with only minimal losses to the taxpayers.
But Ms. Warren, the panel’s chairwoman, questioned whether the banks were really stable enough to stand on their own without the program’s government safety net, and she called for another round of stress tests to make sure the banks are sound.
Ms. Warren was particularly concerned about the billions of dollars worth of bad securities and questionable commercial real estate loans still on the banks’ balance sheets. These relics from the boom years could haunt the banks in the future, possibly forcing them back into the arms of the government. Read on...
Elizabeth Warren appeared on the PBS Newshour and expressed similar concerns about the health of the banks and relief on foreclosures with Judy Woodruff.
While we listen to the meaningless blustering of financial institutions, there are still the realities of bad assets on their books and a double dip recession clearly being viewed off on the horizon that is only going to leave even more bad assets for them to deal with.
And the answers the financial institutions offer up to this, the very same financial institutions that walked away from their own debts and left forthe government, for all of us, to pay?
Fannie Mae Increases Penalties for Borrowers Who Walk Away
Seven-Year Lockout Policy for Strategic Defaulters
WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter timeframe.
This is the taxpayer owned Fannie Mae setting the tone for what the people can expect industry wide. Not only are they happy to keep us paying for their mistakes, they want to penalize the victims of their mortgage mill disaster capitalism, their excessive profits and bonuses all manufactured through a system of gambling designed to "Lure People Into That Calm and Then Just Totally F--k 'Em": in a casino that is guilty of little more than racketeering in how they fixed the game against everyone.
They fixed the game in running mortgage mills to build up enough paper to toss into their shitpile... And now they were caught trying to fix the game in how they are trying to take your home away:
Imagine, if you will, a bank sets up a mortgage backed security. The security is backed by a trust that holds all the mortgages and notes. The trust document says that all of the mortgages that would be included in that particular security had to be transferred into the trust by a particular date. That date is long since passed.
You are now in foreclosure, and attached to the summons and complaint is a copy of an assignment of your mortgage, within the last few days before the date of the summons and complaint, transferring your mortgage into the trust. What does that all mean?
It could mean that the trustee did not actually own your mortgage and that all the money that you have paid on that mortgage that went to pay the holders of the security associated with that trust was paid to the wrong party.
Why? Because the mortgage was not transferred into the trust before your payments were directed to it. And the after the fact assignment doesn’t remedy it, because the trust was required to close the book on adding new mortgages into the trust, on a date long since passed. So, the trustee accepted payments from you even though your mortgage was not a part of that trust. You were paying the wrong party.
Then to add insult to injury, the trustee is trying to take your home away.
Oh, and the last minute assignment –may be a forgery. Ain’t that just the icing on the cake?
I could add reams of information to this, but this is already getting too long and is getting more and more infuriating as each day passes and little to nothing has been done to actually fix the underlying problems because of a slew of politicians that are still beholden to the very people that have committed everything from crimes against governments to crimes against the little people. And literally looted the nation..
I'll take a little solace in the fact that many of these financial institutions are being investigated out the ying, losing court battles clearly showing their guilt and their bad faith in dealing with people that are little more than victims of their casino clusterfucks profit and bonus manufacturing schemes...
And there is still some legislation standing, coming from the least likely source to boot (Sen. Lincoln), that may make it to the end of financial reform.
No Deal Yet On Derivatives
Conference committee to take up derivatives today, without House-Senate deal in place. Politico: "...top Democrats told [Sen. Blanche Lincoln] the language was causing vote problems in the House, but she had no plans to budge ... Hoyer was leading a series of meetings, slated to include sit-downs with Lincoln, the New York delegation, members of the Congressional Black Caucus and the New Democrat Coalition and White House and Treasury officials..."
HuffPost's Ryan Grim says House counter-proposal to be considered today would somewhat weaken Lincoln language: "...the House offer does not alter Lincoln's most significant provision -- the swaps spinoff ... However, one analyst identified an end-run the House may be attempting ... a bank getting taxpayer assistance through the Federal Reserve window would still be required to spin off its swaps desk, but it could maintain it within a separate section of the bank holding company that isn't getting government assistance..."
NYT edit board lays out its criteria for strong derivatives reform: "...traded on transparent exchanges and processed through third-party clearinghouses ... the new rules must be broadly applied ... keep the definition of an 'exchange' narrow ... legal tools to stop or undo deals that have not been properly cleared or traded ... resist banks that want federal financial backing for derivatives clearinghouses ... separate banks’ derivatives dealing from federally insured deposits..."
Elizabeth Warren accepts compromise on consumer protection agency. HuffPost quotes: ""I'm disappointed that Congress seems to be taking the side of auto lenders ... But right now the bureau has the authority and the independence it needs to fix the broken credit market."
Feingold not expected to vote Yes. The Hill: "Feingold this week reiterated his view that the financial bill is not strong enough, underscoring the need for Senate Democrats to shore up at least a handful of Republican votes."
GOP Sen. Scott Brown not committing just yet. Boston Globe: "They're getting close ... I want to see everything before I decide whether or not I'm voting for this.”
Bank Brown seeks to protect is no innocent bystander. Time: "During the height of the financial crisis, Boston-based financial firm State Street, once one of the safest banks in America, became one of the industry's biggest risks ... One of the main culprits: highly leveraged investment vehicles, known as conduits ... Now Congress, as part of the financial reform legislation, is working on an exemption that would allow State Street to continue creating and investing in the conduits..."
How big a hedge fund loophole will Sen. Scott Brown get? TPMDC: "Multiple sources tonight say that in all likelihood the hedge fund loophole ... will be included in the offer ... An carveout allowing banks to invest a very small amount of capital, governed by strict trading rules might meet muster with reformers..."
House Dems drop resolution authority fund. W. Post: "House negotiators, seeking to reach agreement with their Senate counterparts over new far-reaching financial rules, dropped their proposal Wednesday for a $150 billion fund, paid for by industry, that would have been used to cover the costs of winding down large, failing firms. The upfront fund had drawn repeated criticism from Republicans..."
Some Senators looking to undermine deal on debit card swipe fees. Open Left's Kagro X: "Word is, so far so good for the swipe fee compromise worked out earlier in the week. And the best (and for now, perhaps the only) tool available to netroots activists during a fast-moving conference -- that is, our scrutiny -- is apparently having an impact. The previous report that Chuck Schumer (D-NY) was trying to engineer a deal to gut the swipe fee amendment was, by the time it was reported, already driving Schumer himself back onto the sidelines. So far, reports from conference watchers say he's not been able to work out a deal for a Republican Senator to offer up his amendment, but supporters of his amendment are still working their House contacts, notably Gary Peters (D-MI-09) and Dennis Moore (D-KS-03), to try to get that proposal on the table."
In the next few days we may just get to see if the government will do what they can and should do to fix some of the real problems.
[update] From the Real News Network, "Dean Baker: Most G20 leaders are pushing the same policies that led the world into the Great Depression"