Grand Theft Economics
Robert Weissman
Common Dreams
Thu, 12 Nov 2009 21:09 EST
Today marks the 10-year anniversary of the passage of the repeal of the 1933 Glass-Steagall Act and related legislation. It is an anniversary worth noting for what it teaches us about forestalling financial crises, the consequences of maniacal deregulation, and the out-of-control political power of the megafinancial institutions.
The repeal of Glass-Steagall removed the legal prohibition on combinations between commercial banks on the one hand, and investment banks and other financial services companies on the other. Glass-Steagall's strict rules originated in the U.S. government's response to the Depression and reflected the learned experience of the severe dangers to consumers and the overall financial system of permitting giant financial institutions to combine commercial banking with other financial operations.
Glass-Steagall protected depositors and prevented the banking system from taking on too much risk by defining industry structure: Commercial banks could not maintain investment banking or insurance affiliates (nor affiliates in non-financial commercial activity).
As banks eyed the higher profits in higher risk activity, however, they began in the 1970s to breach the regulatory walls between commercial banking and other financial services. Starting in the 1980s, responding to a steady drumbeat of requests, regulators began to weaken the strict prohibition on cross-ownership.
By Kevin Martinez and Dan Conway
World Socialist Website
Wed, 11 Nov 2009 19:56 EST
California finance officials have announced that the state has a current budget deficit of $1.1 billion. News of the shortfall comes less than 10 weeks after a balanced budget deal was reached by Republican Governor Arnold Schwarzenegger and the State Legislature.
An October report released by State Controller John Chiang announced that the latest budget deficit was mainly due to a large drop in third quarter income tax collection; revenues were 11 percent lower than initially projected.
The California Department of Finance is also expecting a deficit of $7.4 billion at the start of fiscal year 2010-2011, which begins next July. This could climb to as high as $20 billion by the start of fiscal year 2011-2012.
Loss of tax revenue due to the economic crisis and widespread unemployment and wage reductions is not the only component of the budget deficit. The state's fiscal health is also largely dependent upon the willingness of outside investors to purchase its municipal bonds and other securities.
Doug Hornig
Casey Research
Tue, 10 Nov 2009 19:42 EST
...wait until you see what's in the cards for commercial real estate.
That's right, the next train wreck will be in commercial real estate. Couldn't be worse than last year's residential market crash? That remains to be seen. But it's coming soon, probably as early as the second quarter of next year, and there's nothing that can prevent it. The government will intervene, trying desperately to delay the day of reckoning, and may even succeed. For a while. But make no mistake about it, that train is going off the tracks no matter what.
Every part of the sector - from multifamily apartment buildings to retail shopping centers, suburban office buildings, industrial facilities, and hotels - has accumulated a huge amount of defaulted or nonperforming paper. It's an impossible, swaying structure that cannot long stand.
Dan Levy
Bloomberg News
Thu, 12 Nov 2009 15:31 EST
U.S. foreclosure filings surpassed 300,000 for an eighth straight month as unemployment made it tougher for homeowners to pay their bills, RealtyTrac Inc. said.
A total of 332,292 properties received a default or auction notice or were seized by banks in October, up 19 percent from a year earlier, Irvine, California-based RealtyTrac said today. One in every 385 households received a filing. The tally fell 3 percent from September, the third consecutive monthly decline.
American Small Business League
Thu, 12 Nov 2009 15:16 EST
Petaluma, California - On October 21, President Barack Obama announced he would convene a small business conference to address increasing access to capital for small businesses. Yet less than a week before the conference is set to convene on Wednesday, November 18, the Administration has refused to release any information regarding the event's location, time, agenda or attendees.
The American Small Business League (ASBL) is concerned that the administration is withholding details on the conference as a means of preventing legitimate small business concerns, small business advocates and the media from attending.
"This is a clear indication that President Obama has no intention of adopting any policies that will actually benefit legitimate small businesses. My guess is that this is going to be a love-fest for his venture capitalist buddies and the Fortune 500 firms he is giving small business contracts to every day," ASBL President Lloyd Chapman said.
Danny Schechter
market Oracle
Wed, 11 Nov 2009 00:00 EST
Hedge Fund Perps Walk Free From Financial Crisis Criminal Trial
I had come from a heated financial journalism conference in a far more orderly Brussels where I had been thundering against Wall Street crime. The first news I saw from "the homeland" was that the only two big shots busted for crimes against their investors when they ran Hedge Funds, now imploded, at Bear Stears were acquitted in a New York courtroom dramatizing the difficulties prosecutors face in achieving the "jail-out" I have been calling for.
Here's how the NY Times covered it:
"It was, prosecutors claimed, a clear case of Wall Street crime - and a chance to bring to account two culprits of the subprime age.
But jurors disagreed, and on Tuesday, two former Bear Stearns hedge fund managers were found not guilty of securities fraud in federal court in Brooklyn, in what legal experts called a setback for prosecutors hoping for easy victories in this era of bailouts and foreclosures.
Grant McCool and Michael Erman
Reuters
Wed, 11 Nov 2009 19:56 EST
New York - Two former Bear Stearns hedge fund managers were found not guilty of fraud, a decision that could make government prosecutors less likely to bring criminal charges against Wall Street executives for their role in the financial crisis.
The case -- the first major prosecution arising from the meltdown of major U.S. financial institutions -- was seen as a litmus test of whether a jury, presented with evidence from emails between money managers and conference calls with investors, would convict individuals for corporate collapses.
Ralph Cioffi, 53, and Matthew Tannin, 48, were acquitted of all charges on the second day of deliberations by a jury in U.S. District Court in Brooklyn, New York. Cioffi and Tannin left the courthouse with their smiling wives and relatives, some of them crying tears of relief.
Cioffi and Tannin managed two funds, crammed with subprime mortgage-backed securities, that lost institutional and individual investors a total of $1.6 billion when the funds collapsed in mid-2007 at an early phase of the Wall Street market meltdown.
The jury on Tuesday acquitted both men of conspiracy, securities fraud and wire fraud -- charges brought in a June 2008 indictment. Cioffi was acquitted of an additional charge of insider trading.
Andrew Martin and Lowell Bergman
New York Times
Wed, 11 Nov 2009 19:49 EST
Banks are struggling to make money in the credit card business these days, and consumers are paying the price. Interest rates are going up, credit lines are being cut and a variety of new fees are being imposed on even the best cardholders.
One recipient of new credit card terms is Anita Holaday, a 91-year-old in Florida, who received a letter last month from Citibank announcing that her new interest rate was 29.99 percent, an increase of 10 percentage points.
"I think it's outrageous they pursue such a policy," said Susan Holaday Schumacher, Ms. Holaday's daughter, who pays her mother's bills. "That rate is shocking under any circumstances."
While the average interest rates charged by banks are lower than Ms. Holaday's, her situation is not all that unusual. The higher rates and fees reflect the grim new realities of the credit card industry - the percentage of uncollectible balances has hit a record even as a new law may further limit the cards' profitability.
Jesse Jackson
Chicago Sun-Times
Tue, 10 Nov 2009 19:24 EST
Black Unemployment Tops 40 Percent
Unemployment has soared above 10 percent, but that figure doesn't count those forced to work part-time, those who have given up in despair, young people who were never able to get hired. There are now 25 million people unemployed.
For African Americans, it is worse. African Americans are experiencing a silent depression. Unemployment is more than 18 percent; underemployment even higher. And among black teens, unemployment is more than 40 percent.
This is combined with a staggering loss of wealth among what was the emerging African-American middle class -- a group devastated by the collapse of the housing bubble. African-Americans were prime targets of mortgage companies peddling misleading mortgages, with low entry rates, hidden fees and exploding interest-rate escalation clauses. Having redlined urban areas for decades, mortgage brokers then targeted them for subprime mortgages. Too many families aspiring to own their own homes assumed that their jobs were secure and that they could always remortgage after their low entry rates expired -- and got caught.
Andrew Cockburn
Counter Punch
Wed, 11 Nov 2009 19:15 EST
" Those who respect the law and love sausage should watch neither being made."
-- Mark Twain.
AMENDMENT TO THE PETERSON SUBSTITUTE FOR H.R. 3795 (a) OFFERED BY MR. PETERSON OF MINNESOTA (b) Page 21, after line 25, insert the following:
(19) by adding at the end the following:
''(50) ALTERNATIVESWAP EXECUTIONFACILITY. (c). - The term 'alternative swap execution facility' means a service that facilitates (d) the execution ortrading of swaps between two persons through any means of interstate commerce, but which is not a designated contract market (e), including any electronic trade execution or confirmation facility (f) or any voice brokerage facility (g).''
Now let's see what went into this legislative sausage.
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