In the debt-based currency system of today credit is the life-blood. Without credit the economy has no money and nothing can grow.
That's why all this talk about economic recovery is puzzling. There is no talk about more jobs, higher incomes, or more paid working hours. So any recovery must come from credit. Yet it is credit that is lacking.
Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).
"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."
Policies that set the pay for tens of thousands of bank employees nationwide would require approval from the Federal Reserve as part of a far-reaching proposal to rein in risk-taking at financial institutions.
The Fed's plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks' corporate boards and executives.
Same story different day? As As Dr. Palley argues is his report entitled: America's Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession, our current economic growth model depends on asset price inflation (ex. increase in housing prices). This asset price inflation has replaced income and wage growth and allows us to assume more debt by borrowing more against these inflated assets. This increase in debt replaces income and wages.
The economic bloggers of the world are digging into Wells Fargo's books, and they are finding a very foul odor.
#1) Market-ticker posted this little item, with the supporting document, that should make for interesting reading.
This borrower couldn't pay and thus stopped doing so. This should generate a "NOD" (Notice of Default) and ultimately lead to foreclosure, right? It should result in an impaired asset which might be sold to some other company (at a discount), right?
It got sold all right - right at the "120 day" late point where Wells counts a loan as "defaulted."
But look at who it got sold to.....
Yes, Wells bought the loan from.... itself?
Yep.
It's a classic shell game. Wells Fargo can avoid generating a NOD and go to foreclosure and thus book losses, but the losses are still real.
It's taken a full year before the first real regulation has come down the pike. But finally we can see something.
(Bloomberg) -- The U.S. Securities and Exchange Commission proposed banning flash orders after lawmakers said the practice may give hedge funds an advantage over other investors.
You are probably familiar with the old fable about the scorpion and the frog. The one where the scorpion asks the frog for a ride across a river and the frog declines because it fears that the scorpion will kill it. Then the scorpion cons the frog by appealing to the logic that if it kills the frog, it would surely die too. Convinced, the frog agrees to help the scorpion but half way across the river, the scorpion stings the frog anyway. Paralyzed, in shock of disbelief, and just before sinking, the frog asks the scorpion "Why did you sting me"? The scorpion replies that it was just in its nature.
No more feeding off of desperate students. That's what the House said today in passing H.R.3221, the Student Aid and Fiscal Responsibility Act of 2009. In a huge screw you predatory lenders, from now on the government will be the sole provider of guaranteed student loans.
This is great news for students and should increase access to higher education, hopefully for older students as well.
Such House action is especially welcome since student debt increased 25% in just one year.
Under the legislation, all lenders would be cut out of the market for originating loans. There would still be a role for private banks and lenders to bid for a limited number of contracts to service the loans after they are made by the government.
Why is this important? Because Trumka has been heavily focused on large economic, labor and trade policies which affect not only union members, membership, but also the middle class as a whole.
What I find scary is this concept to build a global union:
If you want to see a good overview of where the economy really is and where it's probably going, I strongly recommend reading this post by John Fernald, VP of the SF Fed.
The current recession is longer than any recession since 1933 and, in terms of GDP, is as deep as any in the post-war period. Yet the forecast for recovery is anemic compared with historical experience. The relative weakness reflects in part continuing tight credit conditions for households and businesses as financial institutions and markets slowly heal. At the same time, as noted earlier, consumer spending is likely to remain relatively weak. In the forecast, it takes 11 quarters, until the third quarter of 2010, just to get GDP back to its pre-recession level.
It's not enough to run a financial institution into the ground, but when a nation tries to limit executive pay, bankers scurry like rats to the Cayman Islands:
A group of 45 bankers at Barclays yesterday bypassed potential curbs on pay and bonuses by jumping ship to set up a Cayman Islands company and manage $12.3 billion of Barclays’ most toxic debt. They will be paid at least $400 million over ten years (see Commentary, facing page).
In an exotic piece of financial engineering, the bank will lend $12.6 billion to Protium, a newly created Cayman Islands-registered hedge fund, to buy the toxic assets.
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