December 2010

Bank Failure Friday -

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The reason the FDIC releases bank failures on Friday is to avoid a panic. They also stagger the ones they are closing over time. We have had routine bank failures every Friday for the last two years. This week's bank failure lucky winners, along with their cost to the Deposit Insurance Fund are:

Scapegoating Fannie and Freddie - the New Republican Orthodoxy

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You have to be blind, dumb, or maliciously misleading to miss the contribution of Wall Street to the housing bubble and the financial crisis.

By Numerian posted by Michael Collins

Yesterday the four Republican members of the 10-member Financial Crisis Inquiry Commission issued their own report on what caused the credit crisis of 2008-2009. They did this because they wanted to put down a “marker” on what they think happened to the markets and the economy, before the whole commission releases its official report next month. Many observers say this unusual move will damage the credibility of the official report, and reflects yet again the bitter partisan struggle that is taking place in Washington between Republicans and Democrats.

This is not a partisan political struggle going on here, at least not for the most part. Enough Democrats on the Commission have spoken up that we see what is really happening. The Democrats who run the Commission are using fact-based arguments and reality-based research to determine what happened during the financial crisis. The Republican minority members are all theologians using a faith-based approach that says government is evil and fundamentally at fault here, the market is all-pure and all-wise, and the “financial industry” is certainly not to blame.

Federal Reserve Slashes Debit Card Transaction Fees in Proposal

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If you are not aware, Mastercard, Visa currently charge some nasty fees to retailers every time you use your debit card. Same is true for credit cards. The Federal Reserve has proposed some new rules on debit card fees. They propose to cut transaction fees to 12¢ per transaction. Currently it costs retailers 44¢ on every single use of a debit card for purchases. The Federal Reserve also proposed to kill the debit transaction network monopoly system. A transaction network is where your data goes in order to debit your bank account after you swipe that plastic.

The Board is requesting comment on two alternative interchange fee standards that would apply to all covered issuers: one based on each issuer's costs, with a safe harbor (initially set at 7 cents per transaction) and a cap (initially set at 12 cents per transaction); and the other a stand-alone cap (initially set at 12 cents per transaction). Under both alternatives, circumvention or evasion of the interchange fee limitations would be prohibited. The Board also is requesting comment on possible frameworks for an adjustment to the interchange fees to reflect certain issuer costs associated with fraud prevention.

If the Board adopts either of these proposed standards in the final rule, the maximum allowable interchange fee received by covered issuers for debit card transactions would be more than 70 percent lower than the 2009 average, once the new rule takes effect on July 21, 2011.

Bail-Out-O-Matic

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dimeomatic
Yes folks, it's Bail-Out-O-Matic The European Union has created a permanent bail out fund:

Despite deep differences over how to contain their continuing debt crisis, European Union leaders agreed Thursday to create a permanent support fund for the euro after 2013 — something they hope will be a first step to calming the markets.

Leaders did agree, however, on the creation of a bailout mechanism that would operate after 2013, when the mandate of the current fund expires.

Yet even here, vital questions on the size and scope of the fund were left until the spring.

The new body, known as the European Stability Mechanism, will take over in 2013 from the existing 440 billion euro, or $582 billion, bailout fund.

Bondholders could be asked to shoulder some losses in future debt crises on a case-by-case basis.

To set up this facility, the European Union will have to revise its governing treaty, but it plans to do so in such as way as to avoid requiring referendums in any of the 27 member countries, all of which will have to ratify the revision.

AFP has more details:

Changes to the Lisbon Treaty were demanded by Germany to enable a temporary, trillion-dollar rescue fund to be turned into a permanent umbrella that will allow governments who fall on hard times to seek and obtain help from currency partners.

GOP Spews Economic Fiction Again

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wall streetIt seems the only thing most Republicans know about economics is the price of propaganda to get job killing corporate and special agendas through Congress. This time is a winner, winner, chicken dinner. For a $2 buck derivatives bet you can blame the poor and middle class.

Ya know the housing bubble, all of those derivatives, the sub-prime disaster, credit default swaps that caused financial Armageddon? Oops, not so, say four Republicans on the Financial Crisis Inquiry Panel. They hate truth so much, they are going to write their own report, a tale of spin built upon the weave of woe. Call it Goldisachs in Kansas, or My Pet Scapegoat, but do not call it anything founded in economic theory and financial statistical reality.

The four Republicans appointed to the commission investigating the root causes of the financial crisis plan to bypass the bipartisan panel and release their own report Wednesday, according to people familiar with the commission's work.

The Republicans, led by the commission's vice chairman, former congressman and chair of the House Ways and Means Committee Bill Thomas, will likely focus their report on the explosive growth of subprime mortgages and the heavy role played by the federal government in pushing mortgage giants Fannie Mae and Freddie Mac to purchase and insure them. They'll also likely focus on the Community Reinvestment Act, a 1977 law that encourages banks to lend to underserved communities, these people said.

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