dcb

With No Exit Strategy, Bernanke's Fed Turns to Lobbying

It's amazing how many people on this site make comments without understanding how the fed works. they need to read more of your posts!!!


On Jul 22 12:03 AM Moon Kil Woong wrote:

> If the Fed's mandate is only to maintain price stability that would
> be asking for it to cut its own throat. The simple fact is the dollar
> was more stable the hundred or so years without the fed than with
> the Fed who has depreciated it some 90 some odd percent in less than
> a decade.
>
> Likewise, the US should bar the fed from lobbying since its purpose
> is purely to act on the behalf of the American public. But they argue
> thay are a normal private company. Normal is not the word for a private
> company backed by the US government with regulatory authority which
> a holds a monopoly on US bond sales. Furthermore, it is granted laws
> barring people from knowing who owns its shares, how it spends its
> money, and laws exempting it from public audits, reserve requirements,
> and every other financial rules known to man.

With No Exit Strategy, Bernanke's Fed Turns to Lobbying

wholesale price inflation was 1.8% just last month!!!
we already are in stagflation. don't compare YOY. just look at the last five months. no real increasing economic activity but commodity prices have gone up huge.


On Jul 21 05:11 PM dybydx wrote:

> the price stability has been the primary role for the central bank
> of canada.
>
> they aim to hold inflation between 1% and 3%. and over the past 20
> yrs, they've been averaging like 2.1%. no one criticized their role
> in any economic booms or busts. a consistent 2% inflation is fair
> and reasonable for most ppl who had to rely on the currency.
>
> they dont do stupid stuff like "trying to maximize employment" or
> otherwise manhandle the economy. its entirely up to the executive
> branch to determine whether or not a bailout is warranted.

Goldman's Success: Put Down Those Pitchforks

Once more a touchy feely post that touts godlaman's benefits while all the hard data points the other way. I have yet to see an article that uses actual data to point out the good that goldman does. Yet those who stand up against what is going on have a huge amount of data to back their case.

All I have to say is this. Every reform effort has been torn asunder and the only hope of enacting some real regulatory reform is via public anger. The financial industry is buying washington to the tune of millions and millions of dollars. they have the resources and connections.

This is not about the profits, but how the profits are derived. a public company using fed window access to prop up stock prices and manipulate the stock market. this does not add to the economy, but in fact destroys wealth.

Nobody mentions the secondary effects of the overpriced S&P. this allows other markets to inflate, increases inflation on commodities, and raises the costs that the tax payer has to pay back on the borrowed money for the defect, and kills the dollar.

The fed policy of zero interest rates, a huge subsidy for the industry, kills the saving of millions of americans.

The fed tells us the economy is fragile, but that is not reflected in market prices for securites. this creates huge macro imbalances which we have to pay for in the log run.

Everyone knows the connections issues, etc. what galls me is that we are creating the seeds of another crisis by allowing these companies to manipulate the markets. Every legit pundit has pointed this out.

Goldman profits and we suffer because of it.

AIG's Cassano: The Man Who Crashed the World?

I hate to say this, but your comments are silly. People like chuck Prince made 161 million dollars pushing crap. if the taxpayer bails you out, if you don't go to jail, and if you get to keep the spoils of your bonus money the incentive is exactly to push out shit. The potential reward is huge, one good year and you can essentially retire, the potential downside in comparison is rather limited. Since the game can be player for years there is a really good chance you will be gone by the time the shit hits the fan. The incentive is exactly the opposite of what you describe.


On Jul 16 02:51 AM Augustus wrote:

> Good write up. generally Lewis does a good job. In this case he
> makes some reaches that don't pan out in the final analysis. When
> Lehman, Merrill, and Bear decided that there were excess profits
> to be made in eating their own cooking it was their decision and
> misunderstanding of the risks that took them down. Every time I
> read that they were crooks I know that the author simply does not
> understand. If they knew it was bad, they would not have owned it
> leveraged 50:1. But who knew that Americans would decide to quit
> making mortgage payments and abandon their homes?

AIG's Cassano: The Man Who Crashed the World?

While the piece was interesting, simple easy to tell stories are what the public wants. In very complex issues their eyes glaze over. That is why the Bonus issue stuck. The problem with such stores, if they end up being believed, is that such a belief can hamper reform efforts that address the true problem.

The problem is a system problem that has issues at every level. From individual people taking out too much debt, to rating agencies making sure the bonds are exactly what the customer needs, to a government that functions as an arm of wall street, to pay practices on wall street, to a wall street culture that privatizes gains and makes losses public, to CEO's who can ruin companies and make billions while shareholders take losses.

If AIG did not exist the system would have found another AIG to do exactly the same thing. Blaming the problem on individual actors does not end itself to finding a permanent solution to a problem that as things currently stand will happen again!!!

Moral Hazard, Goldman Edition

I am glad the author clearly sees what some of the problems with Goldman are. Time to take away their access to the fed window and not allow them to be a bank holding company anymore.

Our government is making things more unstable for the futire by their actions. this is why I hate Obama, I voted for the guy, but he has betrayed the american people

Asking the Fed: Let's See the Transcript of the AIG Bankruptcy Negotiations

Hurrah for Tyler,
Let the American people know what a sham our democracy is. Only then will we start to take the steps to win it back.

Tyler,
I assume many of your questions are rhetorical. What big investment bank would not have gotten paid off if AIG went bankrupt that a former head of treasury ran. It aint rocket science.

Questioning Conventional Wisdom on Credit Default Swaps

False, securitizing was the final straw that led to over leverage and collapse. What you mean is that the false log returns of the stock market (and therefore bonus structure) will only be able to expand that their natural linear rate. We will recover, it will be painful, we will have a much more stable system when it is done with. I for one do not want to recover with such high degrees of leverage and walk around with an economy that is the same thing as having a gun pointed at my head that could go off at any time

what you don't understand is that the average (great majority) of people desire stability. Wall street, CEO's with their perverse compensation structure want booms and busts.


On Jun 26 02:40 PM Gtarras wrote:

> "I know the high-level answer (in fact, I already said it): firms
> have unique hedging needs."
>
> Not sure why this is not good enough explanation. Most of this noise
> is because it is hard to customize securitized products, having worked
> with them for 15 years, i will testify to that. Securitization, meanwhile
> accounted for two-thirds of money flow in the US. If securitization
> is not restored, the economy will not recover. Think about it. CP
> and auction paper funding programs are DEAD. And they were huge.
> We need to bring back to life ABS, CDOS etc. They will be critical,
> especially now that the reserve requirements for the banks will be
> increased.
>
> So why not introduce this solution: Allow OTC trading for only certain
> types of credit products (for instance, customized tranches). In
> addition, allow purchase of a CDS contract only if the asset is already
> on purchaser's books.

Questioning Conventional Wisdom on Credit Default Swaps

From all the BS from the bankers one would assume that the world didn't exist before all these derivative contracts. It did and we didn't have a nuclear weapon strapped to our backs at all times. So you have the answer there as simple as can be.

Any discussion of regulation with the industry being regulated is just stupid. they always use a variant of the same argument (it will hurt the consumer or the economy), and they are always against regulation. think cars and fuel milage, food safety, pollution, capital requirements, etc. Each and every regulation is always the "end of the world as we know it".

the market loves not having to post capital, and having to worry about risking the world economy, and loves profits. If the market applauds a pundit or a solution I can assure you it is a shitty answer to the problem. The market is heaping praise on Bernanke right now. all he has done is give it an unlimited cheap funds at tax payer expense with the fed taking a great deal of risk off their hands and transferring it to the taxpayer. Of course the market loves him. Market loved Greenspan and we know how that turned out.

I am going to tell you one real problem. Goldman bundles together shit they know will fail and then buy insurance on it before anyone realizes they have bundled together shit. they get the upside, and the downside and the economy and public get screwed.

They also pervert the system so you want to drive a company into the ground because the CDS pays off the most instead of finding the best solution,

I don't settle my claims because the CDS contract pays off more. These are not the market incentives we want in place



Morph and John as usual very good insightful points

Questioning Conventional Wisdom on Credit Default Swaps

> Subject: How fading political will..... (forward to Mr. Plender)
> To: [e-mail]

> Date: Saturday, June 27, 2009, 10:06 AM
>
> Please forward to Mr. Plender
>
> Dear Mr. Plender,
> It is with great dismay that each and every day I read in
> multiple sources about how the efforts of reform of the
> financial system are getting bogged down because of a lack
> of political will in the United States. Perhaps it is time
> that columnists around the world start to look beyond the
> traditional excuses for "the lack of will". If one ignores
> the rhetoric with which Mr. Obama used to get elected, but
> instead looked only at his appointments, his policy choices,
> and his support for change (in summary a real black box
> analysis of the reform effort) one would conclude that in
> fact no real reform was intended from the start.
>
> President Obama's appointment of Mr. Geitner, Summers, and
> multiple other insiders suggests that change was not high on
> the agenda to begin with. The decision to hand to congress
> the details of policies allows for greater influence by
> special interests groups. By beginning the debate with very
> mild reform efforts Mr. Obama ensured the final reforms,
> after compromise, would be even further diluted.
>
> At a certain point the evidence pointing towards one
> direction becomes overwhelming. At what point does
> politeness get put aside and the clear and obvious
> conclusion get mentioned in the press. From the start Mr.
> Obama never intended for any significant financial reform to
> occur.
>
>
>
>
>
>

Why Congress Is Asking Bernanke Bogus Questions

--- On Sat, 6/27/09, davidcdavid64........ <davidcdavid64@yaho... wrote:

> From: davidcdavid64........ <davidcdavid64@yaho...
> Subject: How fading political will..... (forward to Mr. Plender)
> To: [e-mail]
> Cc: [e-mail]
> Date: Saturday, June 27, 2009, 10:06 AM
>
> Please forward to Mr. Plender
>
> Dear Mr. Plender,
> It is with great dismay that each and every day I read in
> multiple sources about how the efforts of reform of the
> financial system are getting bogged down because of a lack
> of political will in the United States. Perhaps it is time
> that columnists around the world start to look beyond the
> traditional excuses for "the lack of will". If one ignores
> the rhetoric with which Mr. Obama used to get elected, but
> instead looked only at his appointments, his policy choices,
> and his support for change (in summary a real black box
> analysis of the reform effort) one would conclude that in
> fact no real reform was intended from the start.
>
> President Obama's appointment of Mr. Geitner, Summers, and
> multiple other insiders suggests that change was not high on
> the agenda to begin with. The decision to hand to congress
> the details of policies allows for greater influence by
> special interests groups. By beginning the debate with very
> mild reform efforts Mr. Obama ensured the final reforms,
> after compromise, would be even further diluted.
>
> At a certain point the evidence pointing towards one
> direction becomes overwhelming. At what point does
> politeness get put aside and the clear and obvious
> conclusion get mentioned in the press. From the start Mr.
> Obama never intended for any significant financial reform to
> occur.
>
> Sincerely,
>
>
>
>
>

Goldman Sachs' AIG Collateral Demands Behind Company's Implosion

You think goldman may have been shorting the stock too!!!!

Goldman Sachs' AIG Collateral Demands Behind Company's Implosion

I have provided a very plausible way goldman could have actually beenthe cause of this crisis in a prior post. I have combined this data from Zero hedge to make a very compelling case they were entirely the cause of the drop from Jan into march and the strength of the following rally. this data then comes out.
Tyler, it is time fir you to post a petition calling for a federal investigation into the role goldman may have played in the crash, their connections, and how they ended up with theAIG money.
I'm sure with your access to parties you could get some real signers.


On Jun 22 09:14 AM Heaven, Hell or Hoboken wrote:

> Goldman Sachs did not precipitate the "biggest financial collapse
> in history" but rather, AIG did with its indiscriminate writing of
> CDS protection on a woefully inadequate capital base. Goldman, SocGen,
> DB and others merely availed themselves of the collateral protections
> available to them in the contracts they signed with AIG. To have
> not invoked such legitimate contractual provisions would have been
> a failure in the fiduciary duties that these firms owe their shareholders.
> It may not make for as interesting a story, but what Goldman et al
> did was practice effective risk management. If only AIG had done
> so........

TARP for Regulators

Let me tell you something. there is very little difference between Iran and the US. they are smart enough to riot.

In Iran they elect different people, but the government ensures the people do not change and their voice is not reflected in the ballot booth. In the US we elect different people but the government ensures nothing changes. they net effect is the exact same. The people are not represented. Nothing changes in both systems, and those in power maintain their power and wealth. we are given the illusion of choice/control to pacify us. There is in fact little difference, the governments us different systems of control, but the outcome is the same.

TARP for Regulators

Please pay attention to how a professor a professor documents how the snow job will be pulled over on the taxpayer. I have stated that what is going on is the biggest criminal ripoff of the tax payer ever. It just continues. Obama is all smoke and mirrors. And my stipulation that he was installed y the elites as the anti bush to represent change but actually do nothing becomes more a reality each and every day.

If you want to know why I have been openly advocating a non violent popular revolution this is just another reason.


Fair Game
Too Big to Fail, or Too Big to Handle?

By GRETCHEN MORGENSON
Published: June 20, 2009

“No one should assume that the government will step in to bail them out if their firm fails.”
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That’s Timothy F. Geithner, the Treasury secretary, talking tough with lawmakers last week as he promoted the government’s remake of the financial regulatory framework.

Talk is cheap, however. And the notion that the plan shows a new aversion to bailouts is not at all supported by its chapter and verse. In fact, there’s precious little in the 88-page document about how the government will eliminate systemic risks posed by financial firms that aren’t allowed to fail because they’re simply too big or to interconnected to other important economic players here and abroad.

Rather than propose ways to shrink these companies and the risks they pose, the Geithner plan argues instead for enhanced regulatory oversight of the behemoths. This suggests the taxpayer safety net will be larger after our national financial train wreck, not smaller.

More than two years after the crisis began, “too big to fail” remains “too problematic to address” with anything other than more souped-up regulation. Given that earlier efforts at policing these entities failed so miserably, why should anyone think that a new-and-improved regulatory approach will fare better?

“The sudden failures of large U.S.-based investment banks and of American International Group were among the most destabilizing events of the financial crisis,” the Geithner proposal said. “These companies were large, highly leveraged, and had significant financial connections to the other major players in our financial system, yet they were ineffectively supervised and regulated.”

All true, of course, with Citigroup — a bank that Mr. Geithner himself regulated — being Exhibit A. But the solution the document proposed is “a new, more robust supervisory regime for any firm whose combination of size, leverage, and interconnectedness could pose a threat to financial stability if it failed.”

Hmmm. Sort of an enhanced status quo, just with a bigger safety net.

That this taxpayer-supported net will be larger and more encompassing when this mess finally ends comes as no surprise to some people. Last August, Edward J. Kane, a finance professor at Boston College, wrote about just this likelihood in a paper titled “Ethical Failures in Regulating and Supervising the Pursuit of Safety-Net Subsidies.”

In the paper, Professor Kane described why the policy responses to financial crises historically had involved expanding the universe of companies eligible for taxpayer support if another mess arose.

“When a substantial portion of the financial sector appears to be at risk, it is far easier to patch up the weaknesses in the system with ad hoc loans and guarantees than to negotiate genuine reform,” he wrote.

PROFESSOR KANE’S paper certainly is prescient. For top regulators to be able to push through larger bailouts, he argued, two conditions must hold. “First they must be able to control the flow of information,” he wrote, “so as to keep taxpayers and the press from convincingly assessing either the magnitude of the implicit capital transfer or the anti-egalitarian character of the subsidization scheme.”

Sound familiar? Recall the months of secrecy surrounding the bailout of A.I.G.’s counterparties and the refusal of the Federal Reserve Board to disclose how it chose BlackRock to oversee three of its rescue programs and what it was paying the firm to do so?

Then there is Professor Kane’s second condition: Regulators’ commitment to these bailout policies “must be continually nourished by praise and other forms of tribute from the bankers, borrowers and investors whose losses are being shifted to less-influential parties.”

We’ve heard a lot of this, of course, in recent weeks. Here is Timothy Ryan, president of the securities industry lobbying group, responding to the Treasury plan on the group’s Web site. “This is an important step forward,” he said. “We have a once-in-a-generation opportunity to rebuild our regulatory structure so that our financial system is more stable, more resilient and better underpins a dynamic U.S. economy.”

To be sure, the Treasury proposal does hope to curb the growth of large, systemically scary companies by raising their costs of doing business. But entrusting greater responsibilities to the same supervisors who missed the risks at the institutions they oversaw during the mania doesn’t inspire confidence.

And with the exception of merging the Office of Thrift Supervision into the Office of the Comptroller of the Currency, the plan doesn’t suggest how the regulators who failed will be held accountable for their mistakes.

According to some experts who study systemic risks posed by huge and complex companies, installing a “more robust supervisory regime” isn’t enough.

I do not think that intensification of traditional supervision and regulation of large financial firms will effectively address the too-big-to-fail problem,” Gary H. Stern, president of the Federal Reserve Bank of Minneapolis and an authority on resolving big and troubled institutions, said last month in Congressional testimony.
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Mr. Stern declined to comment last week on the Treasury proposal, citing Fed rules against its officials speaking publicly in the days surrounding meetings of its Federal Open Market Committee. But he told Congress that the key to tackling problems posed by financial behemoths is to convince uninsured creditors of these companies that they will not be bailed out by the government. (Rescuing uninsured creditors is exactly what the government did a great deal of in 2008; think Bear Stearns and A.I.G.)

To protect other companies from also becoming unnecessary casualties when a troubled institution founders, regulators must have a quick-response plan in hand, Mr. Stern advised. Reforms that do not materially reduce spillover effects, he warned in his testimony, shouldn’t be relied upon.

There isn’t much in the Treasury plan about such spillovers. Nevertheless, it is candid about the failings of regulatory efforts during the recent credit boom. “It is clear now that the government could have done more to prevent many of these problems from growing out of control and threatening the stability of our financial system,” it says.

It’s beyond disappointing that the Treasury plan offers no way to measure regulators’ effectiveness or hold them accountable for their failures. Neither is there a discussion of mechanisms that could be used to signal regulatory failings well before they put the entire system at peril.

True financial reform should reward efficient regulation and supervision, Professor Kane said in his paper. “Regulators should be made accountable not just for producing a stable financial economy, but for providing this stability fairly and at minimum long-run cost to society,” he wrote. This means creating incentives that encourage regulators to perform in the taxpayers’ interests.

“The public policy problem,” Professor Kane concluded, “is to design employment contracts that would make it in supervisors’ self-interest to invoke ‘market mimicking’ disciplines when and as a country’s important institutions weaken.”

It may be naïve to expect the nation’s top regulators to devise ways to ensure that their dismal performance of late will not occur again. But it’s certainly worth hoping for.