The Greedy B*st*ards Can't Help Themselves

A great article today
"How the Banks are Worsening the Foreclosure Crises"

The banks cannot help themselves and unfortunately Congress is listening to the banking lobby. Every "new idea" to turn around this economy seems to start out with good intentions and then the banks get involved. Despite the best efforts of some ... the greed is too great.

[..]on Apr. 18, 2007, behind closed doors in an ornate hearing room in the marble-faced Dirksen Senate Office Building. Dodd told them they needed to get out in front of the foreclosure fiasco by adjusting loan terms so borrowers would continue to make some payments, rather than stopping altogether.

NY Times: "You Try to Live on 500K in This Town"

In many ways, the past forty years of Anglo-American history have been marked by a revolution of a few who live by wealth upon the many who live by labor. If the first half of the 20th century can be seen at the revolt of the masses, this latter half has been a revolt of the elites. Nowhere is this more apparent than in delinking of increases in labor productivity from growth in real wages. I think that this graphic illustrates what's been happening pretty clearly.

Given this the plea to "Save the Bankers" which will appear on the front page of the style section of tomorrow's New York Times is all the more galling.

The article begins by explaining how $500,000 a year (the CEO salary cap propose by the Obama administration) is simply not enough to keep them in the manner to which they have become accustomed.

Econ' Notables & Quotable for the Week


Hello everyone, sorry I’ve been away.  I do wish everyone is doing well in these economic hard times.  If it pleases this court, I would like to start something new today.  Talking to our esteemed Mister Oak, he noted that something would be nice to fill in the weekend shift.  Well, today I would like to submit “Econ’ Notables & Quotable”.

Word Du Jour - Nationalize

What is Nationalization? It means to put under government ownership and/or control a private sector institution.

Like a grassroots tsunami wave, the blogs are now a buzz with the concept of nationalization of the banks. But we pointed out, months ago, by nationalization, Sweden had the best result and least pain during their financial crisis.

Tony has made a list of some of the nationalize now blog posts sprouting up like mushroom clouds in a nuclear implosion.

"Banks aren't lending": Oh, REALLY???

This morning Mish has an entry entitled
Huge Demand For Treasuries As Banks Refuse To Lend
in which he cites bank reserves and a sluggish M1 multiplier in support of the conclusion that:

Look at the Base Money chart and the Reserve Bank Credit chart. Base money is soaring but all of it is sitting in bank reserves. In other words, banks are not lending. Clearly we have a huge monetary distortion, but banks seem to understand that lending money in this environment would do nothing but increase losses

Of course, Mish's article is simply received wisdom at this point. There can be no recovery until banks start lending, and they are refusing to lend.

There's just one problem with this argument: it isn't true.


FDR's solution to the Banking Crisis - a model for Obama

Despite a $700 Billion Wall Street Bailout, despite the Federal Reserve scooping over a $Trillion of questionable bank assets onto its balance sheets, despite an alphabet soup of new programs designed to aid the banking system, and despite -- or perhaps in part because of -- the almost-daily rule changes in the banking system I have dubbed Global Financial Calvinball; the economy and the financial emergency continues to worsen.
This is imho precisely because, as Jim Kunstler puts it:

Banks Who Don't Need Bail Out Money are the Ones Getting It

The Chosen Ones. I flipped on the local news late last night and saw a local bank CEO announce they have received millions of money from the bail out even though they don't need it. Images and drawings trying to explain how giving taxpayer money to some of the most consumer unfriendly banks would help the taxpayer abounded from the infomercial newscast. Arrows and redirects flooded a white board where one could have written corporate public relations B.S. clip in it's place. Paulson is helping the worse bank in Oregon, notorious for old growth timber clear cutting. The CEO said he would probably use the money for acquisitions, consolidation.

Hillary : "The Patient is not well"

Senator Clinton is on CNBC right now, she just met with the Fed.  She's wanting to resurrect or bring about a new version of the Home Owners Loan Corporation (HOLC). The fact that all existing mortgages could not be renegotiated to make them more affordable makes her uncomfortable in regards to support for the Paulson plan.  She wants that in the plan or at least an accompanying legislation passed at the same time.

When asked about Representative Barney Frank's statement about executive compensation.  She also came in favor of curbing CEO's of financial companies' bonuses and pay.  So long as we're providing tax dollars, she says, then they can't get their old rewards. 

" We shouldn't be running a long-term bail out program."

Updated: NEWSFLASH: Gov't to offer "loan" to AIG

Not all the details have been released, so I will update this as new things come forth.
Bottom line, the government is going to offer American International Group (AIG) a bridge loan. The amount of the loan will be to the tune of $85 billion. In return, from what we know now, AIG will begin to sell assets ASAP to serve as collateral for the loan. Also, the company will grant the government Warrants.