Numerian's blog

"Take Care That the Laws be Faithfully Executed"

There is a story that appeared yesterday in The New York Times that would have been worth reading if it had been published five years ago. In the article, the reporter, Edward Wyatt, analyzes the propensity of the largest financial institutions to violate securities laws despite having previously violated these same laws and made promises to the Securities and Exchange Commission never to violate them again.

The New York Times has a portentous way of writing such stories, as if the information they have uncovered is revelatory if not earthshattering. Case after case is presented, experts are interviewed and asked to provide analysis, and some weighty conclusions are reached. Readers should be left with at least a slight feeling of outrage that such things have been going on in high finance.

As an ex-subscriber to The New York Times, I too have been outraged by such stories, but not because I read them in the paper of record, which is not simply very late to the game of reporting on this phenomenon - it is too late. I’ve been outraged by these stories because I have been reading about this for years on internet blogs. Some of the most persistent reporters and analysts who write about this problem include Glenn Greenwald at, Yves Smith at the Naked Capitalist blog, and Karl Denninger at the Market Ticker blog. All three of these writers have no doubt lost some readers over the years because they write about these stories over and over, and manage to maintain a sustained fury over the debasement of the rule of law that is evidenced by the way the big banks operate, and the inability or refusal of the government to do much about it.

Give the People a Vote on Bank Bailouts? Markets and Politicians Horrified at the Thought

Stock markets around the world reacted with horror this week to the news that Greek Prime Minister George Papandreou has ordered that the terms of a proposed EU rescue package worth €130 billion should be voted on by the Greek people in a national referendum. The Nikkei, the German DAX index, the French CAC-40, and the Dow Jones Industrial index all ended the day down 2% or more. The euro took a pummeling on the foreign exchange markets.

Global leaders involved in the Greek rescue talks expressed shock and disappointment that the Greek government would throw into jeopardy the carefully-constructed rescue plans that required approval from all 17 EU governments. The White House press secretary, speaking on behalf of the President, urged Greece to accept the bailout terms as soon as possible. It was US Treasury Secretary Timothy Geithner who first recommended to the EU leadership that it significantly expand its bailout fund from €440 billion to as much as €2 trillion in order to calm global financial markets.

Now let’s step back a minute and consider how ludicrous this all is. The Greek Prime Minister proposes that the Greek people, who have borne the burden of one austerity package after another each time Greece has approached the EU for help, at long last get to have a say in these discussions. Politicians everywhere express dismay and surprise that any politician, especially one on the receiving end of the bailout talks, would even consider allowing the people to at long last have a vote in these decisions. Financial markets plummet on the news. Since when did democracy become the enemy of good governance in democratic countries?

Signs of Desperation: Fee Increases Signal End of an Era for Too Big To Fail Banks

Do you think the $5 monthly charge Bank of America announced for its debit card customers is all about squeezing the consumer? Think again. What we are really witnessing are the death throes of an industry – the Too Big To Fail Banks. These are the banks that, at the height of the housing bubble, acted like they were hedge funds. They expected to earn 20% a year on their equity, and they rewarded their top executives accordingly, with bonuses in excess of $10 million for the CEO. Now all sorts of forces are conspiring to drag these banks into the boring, and decidedly non-lucrative status of utilities, earning maybe 5% a year on their equity, with their income capped by government decree. The bank executives don’t like this one bit. They see themselves being sucked down into the quicksand of $100,000 annual bonuses, and they are fighting back with everything they’ve got, even if it means making their cash-strapped customers pay ridiculous fees for services that used to be free.

Fresh From Their Debt Ceiling Extortion Game, Republicans Turn to Bullying the Fed

Members of the Federal Reserve’s Open Market Committee woke up earlier this week to find a dead fish placed on the steps of the Marriner Eccles building in Washington. Everyone knows this is a traditional Mafioso warning to the recipient that they are soon to be “sleeping with the fishes”. But who would have the audacity to so-crudely threaten the distinguished and eminent governors and presidents of the Federal Reserve System? How about those masters of intimidation and economic terrorism, the Republican Leadership in Congress.

Yes, the warning came collectively from Mitch McConnell, Jon Kyl, John Boehner, and Eric Cantor, in the form of a letter to Fed Chairman Ben Bernanke ordering him not to institute any more monetary easing. The timing was exquisitely deliberate: a day before the FOMC was due to meet to discuss monetary policy and – according to many insider reports – vote to approve some new form of Quantitative Easing.

The letter didn’t exactly say that if the Fed voted for more monetary stimulus the august members of the FOMC would find cement blocks placed around their feet, but it didn’t need to. These are the same Republican leaders who just recently threatened to throw the United States into default if they didn’t get their way. They’ve already got cement blocks placed around the feet of Barack Obama, so they’ve certainly established their bona fides for murderous thuggery.

Pirate Party Scores Big Win in Berlin Elections

The Pirate Party surprised pollsters as well as the general public by procuring 15 seats in the Berlin parliament, following yesterday’s election. To win any seats, a political party has to obtain at least 5% of the vote in the election; the Pirate Party surpassed this total easily, reaching nearly 9% of the vote. To put this in perspective, Angela Merkel’s coalition partners, the Free Democrats, received only 2% of the vote and will not be allowed representation in the Berlin parliament. Despite its name, the Pirate Party is not simply a protest group. It is a serious political movement focused on individual rights to communication, particularly when it comes to the internet. The party does not identify itself as right or left, liberal or conservative. It is, however, anti-corporatist, and is especially opposed to corporations that seek monopolies in public communication.

Bank of America: Too Big to Obey the Law

If you’ve watched the collapse in Bank of America’s stock this past month, you’ve probably read that investors are concerned about the bank’s legal liabilities from the devastation of the housing market. Analysts usually cite the raft of lawsuits filed by just about anybody who had anything to do with the bank or Countrywide, which was bought by Bank of America when Countrywide was on the verge of bankruptcy. Analysts, however, don’t tell you the details behind these legal claims – what exactly did Bank of America do to earn its position as poster child for banking industry fraud? To the rescue comes a lawsuit filled with such details, from someone who has access to thousands of consumer complaints about Bank of America. The complaint was filed recently by the Attorney General of Nevada, Catherine Cortez Masto. You should take the time to read this lawsuit. It tells you in a comprehensive way what went wrong with the mortgage business from origination of the mortgage to foreclosure. But fair warning: be prepared to be nauseated. If Bank of America perpetrated even a fraction of the frauds outlined in this report, it raises a most serious question: why does this company still have a banking license?

Countrywide Sets the Tone

We Can't Just Sit Here Doing Nothing

Early in his tenure as Chairman of the Federal Reserve Board, Ben Bernanke promised to make the workings of monetary policy more transparent. By golly – that’s exactly what he’s done! We no longer read the minutes of the Federal Open Market Committee as if they contain hidden messages as to where policy might go in the future. We even bother to notice who is voting which way; gone are the days when every vote had to be unanimous because any no vote would be considered the equivalent of stabbing the Chairman in the back. These days, the people who vote no want their name out there in bright lights and their reasons spelled out in glorious detail.

The minutes released this week for the August FOMC meeting are a treasure trove of transparency. There is so much transparency because these people at the FOMC don’t know what to do. Some want more Quantitative Easing, but they don’t agree on the form it should take: add even more securities to the Fed’s gargantuan balance sheet (now equal to 4% of the entire GDP of the economy); or, sell some short term securities and buy long term securities in order to manipulate long term rates lower, yet keep the overall Fed balance sheet total unchanged.

Oh Unhappy Day

Originally published on The Agonist

From World War I until Gulf War II – these are the bookmarks that define the American Century. All through this period the United States enjoyed economic, military, and political ascendance, and by the time Germany surrendered in 1945, the United States was the preeminent global power in so many dimensions that it truly “owned” the 20th century. In the realm of finance, American supremacy was symbolized by the AAA rating accorded its government securities, a rating the United States has enjoyed since 1917.

Now the United States has lost its AAA rating, and deservedly so. It has shown itself incapable of dealing with many serious financial and economic problems, One of its two major political parties has deliberately – yes deliberately – attempted to force a default on US Treasury securities, so that it can engineer its vision of a fiscally prudent America, one in which it is forbidden ever to raise taxes on wealthy people. This despite the fact that, other than corporations, wealthy people are the only source of incremental tax revenue for a government desperately in need of cash flow.

Uncle Sam Gets a Visitor

Originally published on The Agonist

Hey, John! John Bull! How you doing? It’s been a while – I don’t get many visitors these days you know. You’re looking great! I gotta say – I loved that wedding. Loved it! I saw all of it from the very beginning to that balcony scene at the end. I saw it live too – at 3:00 a.m. – right here in the hospital room. I was up anyway; I don’t sleep too well these days. I have to say, you guys really do that pageantry stuff better than anybody. The Pope could take some lessons from you, and those guys at the Vatican have a few millennia of practice at that sort of thing. And that Kate and William! What a lovely couple. Do you know they came to visit me right after the honeymoon? Very thoughtful, they were.

Hey, you wouldn’t mind putting on one of those white face masks, would you? These hospitals are just full of germs and you shouldn’t take any chances.

You heard about my illness, didn’t you? Something to do with my debt ceiling. My blood count was too high – reaching the limit – I couldn’t follow it all. They had all these specialists in Washington running around shouting at each other. It was all over the television channels. A real embarrassment, I tell you! Half of them were saying I needed even more blood transfusions, and the other half were saying maybe I should slow down a bit or even reduce my intake. I’m all in favor of that; I’d like to get back to where I was ten years ago, when I wasn’t stuck in a hospital bed.

A Sugar-Coated Satan Sandwich

Originally published on The Agonist

Was it just a week ago that President Obama was hanging tough, insisting he would never accept a debt ceiling package that excluded tax increases? In rejecting a six month extension of the debt ceiling, Obama said last week:

But there’s an even greater danger to this approach. Based on what we’ve seen these past few weeks, we know what to expect six months from now. The House of Representatives will once again refuse to prevent default unless the rest of us accept their cuts-only approach. Again, they will refuse to ask the wealthiest Americans to give up their tax cuts or deductions. Again, they will demand harsh cuts to programs like Medicare. And once again, the economy will be held captive unless they get their way.

Here is what Speaker of the House John Boehner said today about the debt ceiling package that has now been agreed to by the House and Senate leadership, along with President Obama:

Now listen, this isn’t the greatest deal in the world," he said, according to excerpts of the call provided to press by Boehner's office. "But it shows how much we’ve changed the terms of the debate in this town."
Boehner painted the deal as victory for the Republican party because it did not include revenues, which Democrats have long called for as part of a final deal.
"There is nothing in this framework that violates our principles," he said. "It’s all spending cuts. The White House bid to raise taxes has been shut down." – source HuffPost