I guess we are all socialists now. Even the titans of Wall Street are agreeing with the anti-war protesters.
JPMorgan Chairman and CEO Jamie Dimon, in a letter to shareholders, touched on a theme that critics of the Iraq war were highlighting more than a year ago: That spending on the war was damaging to the economy.
Dimon cited "an expensive war in Iraq" as one of the possible triggers of the economic collapse. Spending on the war ballooned the deficit and crowded out investment in domestic priorities. Meanwhile, the trade deficit soared.
The "cat is out of the bag" - the regulators performing the 'not too stressful stress tests' will take a harsher view of loans than other trouble assets. So, if a bank does more traditional banking such as loans the 'not too stressful stress tests' will scrutinized them more than a financial conglomerate who may have all kinds of securitized assets and "off-balance" exposure.
Some analysts said regulators are favoring the largest banks because if even one failed that would pose a severe economic risk. Banks that deal in securities are more interconnected to other corners of the global financial system.
I don't buy that excuse. There are politics at play here. The financial oligarchy has great interest in preserving financial conglomerates. The Obama Administration apparently does not want to take on the financial oligarchy.
The money lost with TARP won't be coming back. It's gone for good. It's also worth noting that the the public had no input on the decisions for the TARP program, and Congressional oversight has been nearly nonexistent.
$104 Billion is only the start.
Elizabeth Warren, who heads the Congressional Oversight Panel responsible for keeping tabs on the Troubled Asset Relief Program (TARP), estimates that $590.4 billion of the total $700 billion approved by Congress has been spent or committed over the past six months. But economic stabilization efforts that have relied on the Federal Reserve's balance sheet have "permitted Treasury to leverage TARP funds well beyond the funds appropriated by Congress," the panel said in its Apr. 7 oversight report.
In the race to sacrifice the public good for private profit, England has once again taken the lead. Could this be our future?
(Bloomberg) -- Chancellor of the Exchequer Alistair Darling this week will introduce guarantees for mortgage-backed bonds, allowing buyers to sell the securities at no loss, an effort to revive lending and wean U.K. banks off government aid, two people familiar with the plan said.
The Treasury will offer guarantees for about 50 billion pounds ($73 billion) of the bonds through the new mechanism, the people said. Treasury officials hope the backing will help banks now dependent on state support to write loans.
The IMF projects financial losses will hit $4.1 trillion with most losses originated from the U.S.:
Worldwide losses tied to distressed loans and securitized assets may reach $4.1 trillion by the end of 2010 as the recession and credit crisis exact a higher toll on financial institutions, the International Monetary Fund said.
Banks will shoulder about 61 percent of the writedowns, with insurers, pension funds and other nonbanks assuming the rest, the Washington-based lender said in a report released today on the state of the global financial system. The fund forecast $2.7 trillion in losses from U.S.-originated loans and assets, compared to its estimates of $2.2 trillion in January and $1.4 trillion in October.
There have already been $510 billion in writedowns but the IMF is projecting $550 billion more by 2010.
"[I]t remains tempting to pour additional funds into large firms in hopes of a turnaround,” {Kansas City Fed Chief Thomas] Hoenig said today in remarks prepared for a hearing of Congress’s Joint Economic Committee in Washington. Yet efforts “to protect our largest institutions from failure risk prolonging the crisis and increasing its cost.”
....
Hoenig said “we must maintain limits on financial leverage through strict rules setting minimum capital-to-asset ratios” to avoid risks of excessive leverage at financial companies.
Hoenig reiterated his view that the government, rather than prop up failing financial institutions, should temporarily take them over and wind them down. Speaking April 9 in Tulsa, Oklahoma, he said calling an institution “too big to fail” is a “misstatement.”
Now that the Treasury and the Federal Reserve have burned through all of the TARP money without a prayer's chance of Congress approving more, a new tactic is being reported:
In a significant shift, White House and Treasury Department officials now say they can stretch what is left of the $700 billion financial bailout fund further than they had expected a few months ago, simply by converting the government’s existing loans to the nation’s 19 biggest banks into common stock.
Converting those loans to common shares would turn the federal aid into available capital for a bank — and give the government a large ownership stake in return.
The corporate wing of the Democratic party hasn't lost any of its strength. If we can't even TALK about updating NAFTA then we are lost when it comes to agreements like GATT.
WASHINGTON — The Obama administration said on Monday that it had no plans to reopen negotiations on the North American Free Trade Agreement to revise its labor and environmental provisions, as then-Senator Barack Obama promised to do during his presidential campaign.
“The president has said we will look at all of our options, but I think they can be addressed without having to reopen the agreement,” said Ronald Kirk, the United States trade representative.
I read a very interesting letter to editor by Professor Eileen Appelbaum today. She argued that we cannot rely on the inventory cycle to lead us to recovery. She argued in the past we may have been able to rely on inventory cycle because increased demand caused by public and private demand would increase output and employment but not this time:
Unfortunately, this time around, things are likely to be very different. The US no longer manufactures most of the goods it needs to replace liquidated inventories, so will need to turn to imports to restock its shelves. Any gains from a rebound in inventories will be largely offset by the negative effects on gross domestic product from an increase in imports.
Even if the $700 Billion Wall Street Bailout, together with the $Trillion or more pumped by the Federal Reserve into Wall Street banks and their counterparties, succeed spectacularly in rescuing the economy from financial meltdown, even if they succeed in generating +GDP and economic recovery for years to come -- in short, even if they succeed beyond just about anyone's wildest expectations -- they will almost certainly still work harm on the average American household.
The political bailout of Wall Street will do harm because it is the biggest single example of "trickle down" economics in our nation's history, a particularly toxic "trickle" because the inflation it creates will affect prices long before the cash wends its way from fatcat corporate cronies to average consumers. This is the problem of "first/early receivers" vs. "late/non-receivers" of new money or credit. How it applies to the Wall Street Bailouts I will explain below.
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