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In the comments to Kossack NBBooks' outstanding diary on Wednesday, entitled, "Wall Street quietly paying billions in damages + Simon Johnson on financial 'Doomsday' UPDATED," another member of the community linked to what I may only reference as one of Yves Smith's most outstanding posts in quite awhile, over at her website: Naked Capitalism.

As some here may already know, Yves recently provided me with a blanket authorization to occasionally post her work here, in its entirety. Due to the fact that I had already posted a diary about a different topic on Wednesday before this appeared on her website, I had to wait until this morning to share it with you. But, it's really quite a powerful tome, IMHO.

For those that prefer reading it on its original webpage, as opposed to down below, here's a link to the original post: "The Empire Continues to Strike Back: Team Obama Propaganda Campaign Reaches Fever Pitch."

In advance, I hope it doesn't offend those here that have a tendency to conflate criticism of current economic policy with a lack of support of the President (and his overall agenda), himself. However, I'm pretty sure it will upset some that take the time to read it. (Yves takes no prisoners on this one; and, like many, she's at the end of her rope when it comes to the antics of one certain Treasury Secretary, too.)

Yes, when it comes to the U.S. Senate, "...the banks do own the place," too. And, unfortunately, as of March 2010, this is all but a matter of the official record. So, without spending another moment on the intro, here it is for those that missed it when it first appeared, less than 24 hours ago.

Strong stuff!

(By the way, I haven't read anything but a few of the reviews yet, however, you might want to checkout the links to information on Yves' [first] new book, "ECONNED." The buzz is quite powerful on it. Everything you could want to know about it is available via links over at the top page of Naked Capitalism.)

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"The Empire Continues to Strike Back: Team Obama Propaganda Campaign Reaches Fever Pitch"
Yves Smith
Naked Capitalism
March 10, 2010

I've seldom seen so much rubbish written by people who ought to know better in a single day. Many able people have heaped the scorn and incredulity on three articles, one a piece on Rahm Emanuel slotted to run in the Sunday New York Times Magazine, another an artfully packed laudatory piece on Timothy Geithner by John Cassidy in the New Yorker and a more even handed looking one (I stress "looking") in the Atlantic.

Ed Harrison has skillfully shredded parsed the Geithner pieces . Simon Johnson thrashed the New Yorker story. A key paragraph below:


The main feature of the plan, of course, was - following the stress tests - to communicate effectively that there was a government guarantee behind every major bank or quasi-bank in the United States. Of course this works in the short-term - investors like such guarantees. But there's a good reason we usually don't guarantee all financial institutions - or act happy when other countries do the same. Unconditional bailouts lead to trouble, encouraging reckless risk-taking and undermining responsible governance. You can't run any form of reasonable market system when some big players hold "get out of bankruptcy free" cards.

Banking expert Chris Whalen was so disturbed by the numerous distortions in the New Yorker piece that he had already fired off a long letter to the editor by the time I pinged him, with these starting paragraphs:


Jack Cassidy tells us that "Timothy Geithner's financial plan is working--and making him very unpopular." Unfortunately this is completely wrong. Cassidy's comment just illustrates why the New Yorker has fallen into such obscurity, namely because it is more Vanity Fair than its vivacious sibling and unable to perform critical journalism.

In fact, the banking system is continuing to sink under bad loans and even worse securities losses. Telling the public that the banks are "fixed" is irresponsible. Unfortunately this false perception is widespread, including among major media such as CNBC and also with a number of my clients in the hedge fund world.

And from Marshall Auerback, who had a ringside view of the aftermath of the Japanese bubble:


Cassidy's article brings to mind a retort by Chou En Lai when he was asked about the success of the French Revolution. He said, "It's too early to tell". Yet here we have John Cassidy from the New Yorker and Joshua Green from The Atlantic both making the assumption that the Geithner plan "worked". This whole line about "taxpayers to recover bailout money" is based on an accounting fraud, because accounting abuses are the primary means by which TARP recipients have repaid bailout money -- putting us at greater risk. That may seem paradoxical, but the rush to repay is driven by a desire to have unrestrained executive bonuses (a very bad thing associated with far greater accounting fraud and failures -- requiring future, larger taxpayer bailouts) and accounting abuses produce the (fictional) ability to repay the United States (primarily by failing to recognize existing losses). The TARP recipients weakened their financial condition, and increased moral hazard, when they rushed to repay the TARP funds. Both factors increase the risk of making more expensive future bailouts more likely.

Yves here. The reason that people who can discern clearly what is afoot are so deeply disturbed is simple, and all the comments touch on it. The campaign to defend Geithner and Emanuel, both architects of the administration's finance friendly policies has gone beyond what most people would see as spin into such an aggressive effort to manipulate popular perceptions that it is not a stretch to call it propaganda.

This strategy, of relying on propaganda to mask their true intent, has become inevitable, given the strategic corner the Obama Adminstration has painted itself in. And this campaign has become increasingly desperate as the inconsistency between the Adminsitration's "product positioning" and observable reality become increasingly evident.

Recall how we got here. Early in 2009, the banking industry was on the ropes. Both the stock and the credit default swaps markets said that many of the big players were at serious risk of failure. Commentators debated whether to nationalize Citibank, Bank of America, and other large, floundering institutions.

The case for bold action was sound. The history of financial crises showed that the least costly approach is to resolve mortally wounded organizations, install new management, set strict guidelines, and separate out the bad loans and investments in order to restructure and sell them. An IMF study of 124 banking crises concluded that regulatory forbearance, the term of art for letting impaired banks soldier on, found:


The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred...

Shuttering sick banks is hardly a radical idea; the FDIC does it on a routine basis. So the difference here was not in the nature of the exercise, but its operational complexity.

This juncture was a crucial window of opportunity. The financial services industry had become systematically predatory. Its victims now extended well beyond precarious, clueless, and sometimes undisciplined consumers who took on too much debt via credit cards with gotcha features that successfully enticed into a treadmill of chronic debt, or now infamous subprime and option-ARM mortgages.

Over twenty years of malfeasance, from the savings and loan crisis (where fraud was a leading cause of bank failures) to a catastrophic set of blow-ups in over the counter derivatives in 1994, which produced total losses of $1.5 trillion, the biggest wipeout since the 1929 crash, through a 1990s subprime meltdown, dot com chicanery, Enron and other accounting scandals, and now the global financial crisis, the industry each time had been able to beat neuter meaningful reform. But this time, the scale of the damage was so great that it extended beyond investors to hapless bystanders, ordinary citizens who were also paying via their taxes and job losses. And unlike the past, where news of financial blow-ups was largely confined to the business section, the public could not miss the scale of the damage and how it came about, and was outraged.

The widespread, vocal opposition to the TARP was evidence that a once complacent populace had been roused. Reform, if proposed with energy and confidence, wasn't a risk; not only was it badly needed, it was just what voters wanted.

But incoming president Obama failed to act. Whether he failed to see the opportunity, didn't understand it, or was simply not interested is moot. Rather than bring vested banking interests to heel, the Obama administration instead chose to reconstitute, as much as possible, the very same industry whose reckless pursuit of profit had thrown the world economy off the cliff. There would be no Nixon goes to China moment from the architects of the policies that created the crisis, namely Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, and Director of the National Economic Council Larry Summers.

Defenders of the administration no doubt will content that the public was not ready for measures like the putting large banks like Citigroup into receivership. Even if that were true (and the current widespread outrage against banks says otherwise), that view assumes that the executive branch is a mere spectator, when it has the most powerful bully pulpit in the nation. Other leaders have taken unpopular moves and still maintained public support.

Obama's repudiation of his campaign promise of change, by turning his back on meaningful reform of the financial services industry, in turn locked his Administration into a course of action. The new administration would have no choice other that working fist in glove with the banksters, supporting and amplifying their own, well established, propaganda efforts.

Thus Obama's incentives are to come up with "solutions" that paper over problems, avoid meaningful conflict with the industry, minimize complaints, and restore the old practice of using leverage and investment gains to cover up stagnation in worker incomes. Potemkin reforms dovetail with the financial service industry's goal of forestalling any measures that would interfere with its looting. So the only problem with this picture was how to fool the now-impoverished public into thinking a program of Mussolini-style corporatism represented progress.

How did the Administration and financial services message control teams work together?

The first was the refusal to consider investigations of any kind. Obama is widely reported to have studied the early days of Franklin Delano Roosevelt's administration for inspiration; it would be impossible for him to miss the dramatic steps FDR took, including supporting the continuation of a Senate Banking Committee investigation into the misdeeds of the Roaring Twenties, the Pecora Commission. The Pecora Commission not only kept the bankers on the defensive, but it also did the forensic work into the abuses. It was critical to bring the nefarious practices to light to devise durable and lasting reforms.

Why were there no inquiries into how the firms that needed bailouts got themselves into a mess? This was an obvious and comparatively easy avenue of inquiry which would make a great deal of useful background accessible and identified issues for further examination. For instance, after the rescue of UBS, the Swiss Federal Banking Commission required UBS to provide an extensive report of what went wrong, and also had the bank make considerable portions of that information public, via a special report to its shareholders. Yet no US firm has been asked to make any explanation of how it managed its affairs so badly as to require extensive public support to keep from failing.

The choice here was obvious. A refusal to investigate was tantamount to a refusal to reform. A good understanding of what had happened was essential, not merely to develop sound new rules, but also to keep the industry from muddying the waters, which would be easy to do, given how complex and opaque many of the products are

More compelling evidence of the Administration's lack of interest in reining in the money-changers came via Treasury Secretary Timothy Geithner's first presentation on his reform plan, which was more accurately a plan to have a plan. It was widely criticized for its sketchiness, but most observers missed the true significance. Had the Obama transition team done any serious thinking about the financial crisis? Obviously not, because you don't need to think too hard if the game plan is to go back to business as usual to the extent possible. Geither's presentation came nearly three weeks after Obama was sworn in, and all its initiatives were Bush/Paulson wine in new bottles: a new go at the failed idea of having the government overpay for bad bank assets; "stress tests" to put more discipline around the process of handing out TARP funds to the needy; and a mortgage modification program which pretended to be able to square the circle of saving borrowers without taking on investors in mortgage securitizations.

Geithner's not-much-of-a-plan exemplified the second tool in the Obama campaign to sell doing as little as possible to the financiers: the Theory of Positive Thinking.
.
That notion has a proud tradition in America and was much in evidence in the run-up to the crisis. It promises that the economy will be fine as long as everyone thinks happy thoughts about it. For instance, I noted in a March 2007 blog post that while the tone of the Financial Times as of March 2007 had become generally grim, the US had become a Tinkerbell market, where valuations are held aloft by faith, and participants conspire to stoke true belief. And as the crisis wore on, other magical personages intervened. As a hedge fund manager who writes as Augustus Melmotte noted,


The market responded with enthusiasm to reports that the Tooth Fairy has agreed to acquire Lehman. The purchase price has not yet been determined and will be set by Dick Fuld wishing upon a star, clicking his heels three times, and being transported back to that magical place where Lehman still sells for over $70 per share..... Meanwhile, the SEC has announced an investigation of mean, evil, bad short-seller David Einhorn. .... Einhorn reportedly suggested that the Tooth Fairy does not exist and that wishing upon a star is not a wholly reliable price discovery mechanism. Christopher Cox, chairman of the SEC, said, "Vicious rumors attacking the Tooth Fairy will not be tolerated. Our entire financial system and indeed the American way of life depend on the Tooth Fairy and wishing upon a star..." The SEC is reportedly planning to set up re-education camps for short-sellers.

Remember that the US has an entire cable channel devoted to the Theory of Positive Thinking, namely CNBC, and a goodly portion of the financial media falls into CNBC-style cheerleading with more than occasional abandon.

Now it is true that this idea has a kernel of truth. John Maynard Keynes attributed the Depression to a change in investor "liquidity preferences," which meant they had suddenly become very risk averse and preferred to hold cash until they felt conditions had improved, with devastating consequences for economic activity. Uncertainty can morph into a self-reinforcing downcycle. But it is one thing to use confidence boosting as a tool, quite another to regard it as a magic bullet. Merely clapping our hands all together will not cure the long-standing ailments in the economy.

Moreover, the Theory of Positive Thinking has been used, upon occasion, to suggest that conditions will only deteriorate if the public examines the financial services industry critically. It isn't hard to see whose interests benefit from that posture.

Now it is hard to prove in a tidy way that the tone of financial press coverage had shifted suddenly, and decisively, to optimism as of early March. But many professional investors in my circle started regularly talking of cheerleading. Two Wall Street veterans, Sandy Lewis and William Cohan, weighed in on this pattern at the New York Times:


Whether at a fund-raising dinner for wealthy supporters in Beverly Hills, or at an Air Force base in Nevada, or at Charlie Rose's table in New York City, President Obama is conducting an all-out campaign to try to make us feel a whole lot better about the economy as quickly as possible... We're concerned that nothing has really been fixed. We're doubly concerned that people appear to feel the worst of the storm is over -- and in this, they are aided and abetted by a hugely popular and charismatic president and by the fact that the Dow has increased by 35 percent or so since Mr. Obama started to lay out his economic plans in March.

This result relied on more than mere dint of personality. A Pew Research Center study found that roughly government and businesses originated over half the economics-related news after the crisis. Obama himself "dominated" the key images and ideas. The reporting had a clear arc. The early coverage focused on the struggles over the stimulus plan and the banking industry plans, and as those faded, so did coverage of the crisis in any form. The tacit assumption was that the crisis was over, and the performance of the supposedly forward looking stock market was proof. But as anyone with a modicum of detachment could see, the market was a false positive, treating an aversion of utter disaster as an imminent return to normalcy.

The stock market has rallied over 60% from its early March lows, enabling the wounded banks to sell new equity to the public and avoid further contentious taxpayer-funded rescue measures. But the justification for the soft glove treatment of the banking classes, that what was good for them would prove to be good for everyone else, has proven to be wildly false. When the Dow levitated over 10,000, mainstream news outlets celebrated the event, with nary a mention of the continued train wreck in the real economy. As Matt Taibbi observed, "the dichotomy between the economic health of ordinary people and the traditional `market indicators' is not merely a non-story, it is a sort of taboo -- unmentionable in major news coverage."

But banking boosterism has succeeded all too well, allowing Team Obama to fantasize that it can get away with creating Potemkin prosperity in lieu of waging the pitched battles needed to lay the groundwork for the real thing.

Indeed, the adoption of the Theory of Positive Thinking has virtually guaranteed that nothing will change, unless there is sufficient deterioration in the real economy or the financial markets to provide compelling counter-evidence. One example is the "paying back the TARP" charade. As the banks continued to post improved earnings, no matter how phony they were, they argued that they were now healthy and should be allowed to pay back the TARP funding that had been crucial to their survival. The reason they were so keenly motivated to do should have been reason enough to deny their request: namely, that they wanted to escape restraints on executive compensation, virtually the only demand that the government had made. But overpaying staff and keeping too little in the way of risk reserves was precisely the behavior that led to the near collapse of the financial system. Going back to business as usual would virtually guarantee more looting of major financial firm and another series of collapses.

But the Obama administration miscalculated badly. First, it bought the financiers' false promise that massive subsidies to them would kick start a economy. But economists are now estimating that it is likely to take five years to return to pre-crisis levels of unemployment. Obama took his eye off the ball. A Democratic President's most important responsibility is job creation. It is simply unacceptable to most Americans for Wall Street to be reaping record profits and bonuses while the rest of the country is suffering. Second, it assumed finance was too complicated to hold the attention of most citizens, and so the (non) initiatives under way now would attract comparatively little scrutiny. But as public ire remains high, the press coverage has become almost schizophrenic. Obvious public relations plants, like Ben Bernanke designation as Time Magazine's Man of the Year (precisely when his confirmation is running into unexpected opposition) and stories in the New York Times that incorrectly reported some Goldman executive bonus cosmetics as meaningful concessions have co-existed with reports on the abject failure of Geithner's mortgage modification program. While mainstream press coverage is still largely flattering, the desperation of the recent PR moves versus the continued public ire and recognition of where the Adminsitrations's priorities truly lie means the fissures are becoming a gaping chasm.

So with Obama's popularity falling sharply, it should be no surprise that the Administration is resorting to more concerted propaganda efforts. It may have no choice. Having ceded so much ground to the financiers, it has lost control of the battlefield. The banking lobbyists have perfected their tactics for blocking reform over the last two decades. Team Obama naively cast its lot with an industry that is vastly more skilled in the the dark art of the manufacture of consent than it is.

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Originally posted to http://www.dailykos.com/user/bobswern on Thu Mar 11, 2010 at 01:29 AM PST.

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Comment Preferences

  •  Tip Jar (182+ / 0-)
    Recommended by:
    claude, Superskepticalman, Joe Bob, rick, DeminNewJ, SarahLee, NYCee, roonie, irmaly, mattman, emal, wu ming, TJ, Pescadero Bill, Mnemosyne, Creosote, Gustogirl, opinionated, Justina, dvogel001, Dburn, mkfarkus, JuliaAnn, ovals49, slatsg, ctsteve, Wamsutta, Melanchthon, scorpiorising, CitizenOfEarth, pat bunny, gmb, crackpot, JimWilson, riverlover, alizard, Pohjola, dkmich, zerelda, Silverbird, CanYouBeAngryAndStillDream, jcrit, valadon, bibble, environmentalist, Big Tex, rapala, Massman, tovan, sandblaster, 3goldens, David R, PBen, PsychoSavannah, Militarytracy, Philoguy, Flint, panicbean, truong son traveler, eightlivesleft, basquebob, Brooke In Seattle, Mz Kleen, GreyHawk, Sandino, joy221, shiobhan, deepsouthdoug, the fan man, Ekaterin, Indiana Bob, Alan Arizona, Land of Enchantment, jay23, CJnyc, vigilant meerkat, Gorette, people for truth, NBBooks, DarkestHour, mikeatuva, 4Freedom, Glorfindel, Sagebrush Bob, Preston S, sceptical observer, richmonds, profh, spotDawa, Dreaming of Better Days, shaharazade, AllanTBG, Nulwee, seabos84, bigchin, One Pissed Off Liberal, Noor B, xaxado, Loudoun County Dem, Margfh, vets74, yoduuuh do or do not, daveygodigaditch, Jimdotz, Calvin Jones and the 13th Apostle, ilex, Unbozo, Seneca Doane, Kentucky Kid, HCKAD, mudslide, SeaTurtle, millwood, Sarea, ImpeachKingBushII, Vinnie Vegas, TomP, Empower Ink, MKinTN, Youffraita, jobu, MrJayTee, banger, bob zimway, BYw, allie123, papicek, forgore, SciMathGuy, cybrestrike, two roads, CanyonWren, stolen water, Stranded Wind, LibrErica, MKSinSA, Vengeur, annapaxis, ohmyheck, ruscle, methinshaw, coppercelt, on2them, UTvoter, Proud Mom and Grandma, wvmom, NY brit expat, axel000, 2020adam, halef, albrt, Publius2008, elengul, LtMarechal, rasfrome, allenjo, StateofEuphoria, jm214, BlackQueen40, QuestionAuthority, lighttheway, Wolf10, theone718, leftymama, tardis10, PhilJD, Dr Marcos, curtisgrahamduff, Wom Bat, jeffrey789, PrometheusUnbound, too young to give up, No one gets out alive, Azazello, lightshine, laker, wolfie1818, OHknighty, Williston Barrett, Reilly Diefenbach, dance you monster, J Brunner Fan

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Thu Mar 11, 2010 at 01:36:30 AM PST

  •  Really is devastating. (30+ / 0-)

    There's very little doubt left in my mind that the next crash will come sooner and will be exponentially worse. That, assuming you don't see them all as one big crash, which is also a sensible way of seeing the situation.

    •  The Status Quo is Dead. (10+ / 0-)

      Long Live the Status Quo.

    •  Since RayGun I've Expected Mad Max Blade Runner & (17+ / 0-)

      I've managed to be wrong -

      MY hope is that I continue to be wrong.

      rmm.

      Yond Cassius has a lean and hungry look; He thinks too much: such men are dangerous

      by seabos84 on Thu Mar 11, 2010 at 02:26:49 AM PST

      [ Parent ]

    •  No big crash (14+ / 0-)

      I used to think that we would see another big crash. I am now far less certain.

      In simple terms there is just too much money floating around looking for a return, and when you get 0% on short term government debt, there is an incentive to take a little bit of risk.

      As long as rates are low the market will likely not crash. If rates go up, they could get hit, but governments will have a hard time raising rates (because they won't be able to afford the rates themselves now that they have this massive short term debt). Any rate rise will also kill off housing.

      So what you likely get is a Japan style lost decade (or two). Very low rates, more debt, a sideways stock market and blah. Unless of course the government really cranks up the printing presses - stagflation ... then we are even more screwed.

      I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong- Feynman

      by taonow on Thu Mar 11, 2010 at 04:26:32 AM PST

      [ Parent ]

      •  Maybe (12+ / 0-)

        But the structural problems in finance caused by big banks knowing that, no matter how crazy they get, they are backstopped via "too big to fail" are ominous. Under the happy talk radar, the fundamental issues are not getting better, but worse (again, common sense when you keep giving the high-rollers more dough and no oversight).

        I think we do get a crash, but they could continue to kick the can down the road for another year or three. Until "too big to fail" is resolved for real, continuing bad bets, defaults, and then a massive crash remain possible. Or even inevitable. Until a real economy is restored, with real economic products and functional regulation, 'finance' is an ever-growing house of cards.

      •  We already had one (0+ / 0-)

        unless people are already forgetting the fall down to 666 on the S&P.  That was a crash and I would say it is very unlikely (not impossible, but very unlikely) that we get back down anywhere near there again.

      •  Well isn't that just as bad as another crash? (3+ / 0-)
        Recommended by:
        3goldens, Cassiodorus, SeaTurtle

        It sounds like the 1930's and we all know where that road leads...

        "How many times do you have to be hit over the head before you figure out who's hitting you?" - Harry S. Truman

        by methinshaw on Thu Mar 11, 2010 at 06:29:27 AM PST

        [ Parent ]

      •  Now that's just silly. (2+ / 0-)
        Recommended by:
        Brooke In Seattle, shaharazade

        In simple terms there is just too much money floating around looking for a return, and when you get 0% on short term government debt, there is an incentive to take a little bit of risk.

        No, there isn't.  The investors are all going to finance big factories to put out products that everyone is too broke to buy?  Uh, no.  

        If you are a rich enough investor you the easy way out, and pay some politicians to enact legislation in your favor.

        ""It is hardly a moral act to encourage others patiently to accept injustice which he himself does not endure." -- Dr. Martin Luther King Jr.

        by Cassiodorus on Thu Mar 11, 2010 at 07:45:32 AM PST

        [ Parent ]

        •  Uhm (0+ / 0-)

          There is a lot of money floating around ... but it is not going into productive assets. It is hot money chasing the latest micro trend, commodities, FX etc. All stuff you can flip quickly.

          I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong- Feynman

          by taonow on Thu Mar 11, 2010 at 10:19:45 AM PST

          [ Parent ]

    •  And the next crash could be coming real soon (7+ / 0-)

      From Zero Hedge:

      The Washington Post reports that the next "Lehman-sized" event may be just around the corner [1], as the European Commission is now supporting a ban on trading sovereign CDS. While we are in process of tracking down whether this is actual news or just some exaggeration based on semantics, we will caution, once again, that the consequences of a CDS trading ban will be severe and very likely result in the opposite of what the EC intends on achieving. Keep in mind that everyone expected the Lehman bankruptcy to be contained as it was at best a fringe cog in the financial system. The result was a systemic collapse as one interlinked component of the financial fabric imploded after another. The rush to unwind CDS positions ahead of a ban will be massive and have unpredictable consequences. But the biggest threat is what happens to bond prices, which once basis trades are made impossible, will be promptly unwound, leading to pervasive selling of the cash leg not by speculators but by plain vanilla mutual fund idiot money. What scapegoaters seem to forget is that the vast majority of existing sovereign CDS notional is tied into perfectly boring insurance "basis" trades, in which the bond is held in combination with associated CDS. Once there is an inability to have hedged cash sovereign exposure, the demand for European sovereign paper will plummet, achieving precisely the opposite of what the CDS ban is attempting to accomplish.

      An attempt by Europe to ban CDS could cause a crash.  The Banksters and the hedge fund hucksters have the world financial system by the balls.  

      http://www.zerohedge.com/...

      ...someday - the armies of bitterness will all be going the same way. And they'll all walk together, and there'll be a dead terror from it. The Grapes of Wrath

      by deepsouthdoug on Thu Mar 11, 2010 at 06:15:03 AM PST

      [ Parent ]

      •  I doubt it (5+ / 0-)

        More likely it would simply cause the PIGS interest rates to rise a bit as no hedging of risk would be available.  What we need are CDS regulation like all other financial instruments (ie a market, rules, and a regulator that oversees it).  That, however, would require a repeal of the CFMA, which for some odd reason the Democrats seem loathe to touch even though it was a Republican bill that was made at the request of Enron.

      •  its not a ban (3+ / 0-)
        Recommended by:
        Odysseus, 3goldens, 4Freedom

        The Europeans want CDS traded on open exchanges and limited to parties owning the security involved.  I would add that there should be margin limits (no more borrowing huge amounts with no security from government insured banks).   This will eliminate much of the speculation\gambling involved in the CDS market and return it to its intended purpose (private contractual insurance).

      •  The financial firm biggies are getting good (3+ / 0-)
        Recommended by:
        3goldens, deepsouthdoug, shaharazade

        at the protection racket.

      •  There is starting to be noise (2+ / 0-)
        Recommended by:
        TJ, 3goldens

        about banning sovereign CDS for the U.S. too.  U.S. CDS have been settled in Euros.  Now they want to settle them in gold.  

        I don't see how we get out from under this mess.  I've suggested that CDS simple be declared illegal, null and void.  Yes, I've heard that not all CDS are nefarious.  Yes, I know there would be major fallout.  But to me it is kind of like the big bank bailout - what can not be paid will not be paid and what can not contine will cease.

        Washington Must Ban U.S. Credit Derivatives as Traders Demand Gold

        Remember AIG?  When prices moved against AIG on its credit default swap contracts, AIG owed cash (collateral) to its trading partners.  AIG paid billions of dollars and owed billions more when U.S. taxpayers bailed it out in September 2008.

        U.S. credit default swaps currently trade in euros.  After all, if the U.S. defaults, who will want payment in devalued U.S. dollars?  The euro recently weakened relative to the dollar, and market participants are calling for contracts that require payment in gold.  If they get their way, speculators on the winning side of a price move will demand collateral paid in gold.

        The market can create an unlimited number of these contracts very rapidly.  The U.S. wouldn't have to ever default to trigger a major disruption in the gold market.  Spreads (or prices) on the credit default swaps could simply move based on "news," and demand for gold would soar.

    •  It looks like a train wreck (4+ / 0-)
      Recommended by:
      Silverbird, 3goldens, shaharazade, ilex

      in slow motion to me.  One car after another buckling, jack-knifing off the rails.

      What an ungodly mess.....

      "Fighting Fascism is Always Cool." -- Amsterdam Weekly, volume three, issue 18 (-8.50, -7.23)

      by Noor B on Thu Mar 11, 2010 at 06:52:51 AM PST

      [ Parent ]

    •  a little over a year ago (2+ / 0-)
      Recommended by:
      3goldens, shaharazade

      the talk was all about the big crash and for many it wasn't 'if' there would be a big crash, but how to handle it, just let it go and pick up the pieces, or attempt a 'soft landing' by slowing the tip over the cliff.  

      I don't think anything has changed in the fundamentals, I think you see an administration trying to implement the 'soft landing' approach.  I think you see a world, not just the US, pretty much in denial.

      In the long run, barter works.

  •  Truly an excellent piece by Yves Smith (15+ / 0-)

    I have a question relating to the Pecora Commission to which Yves refers.

    I have yet not seen a comparison between the Pecora commission and the ongoing congressional initiatives relating to the financial crisis. What are the differences and what are the similarities?

    Does anyone know the answer or can provide a link?

    •  Here's my very brief response ot that... (24+ / 0-)

      ...the Pecora Commission accomplished a lot. Angelides and the FCIC...not so much. Then again, the bar is so low (so to speak), I sometimes feel it's buried underground. Other times, I just feel it's up Main Street's ass. (Did I just say that? Yes...yes I did!)

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Thu Mar 11, 2010 at 02:31:06 AM PST

      [ Parent ]

      •  Thx... (5+ / 0-)
        Recommended by:
        gmb, Mz Kleen, 4Freedom, bobswern, cybrestrike

        ...but WHY don't they accomplish much (compared to the Pecora Commission)? Lack of  presidential support? subpoena power? budget? media coverage?

        I just need to know a good answer to the inevitable "Angelides reply":

        "Congress, with strong support from the President, has appointed Angelides to lead a wide-ranging probe into wrong-doings leading up to the financial crisis, just like FDR did with the Pecora commission. What more can congress and President Obama do to go after the culprits?"

        •  Case in point...there's a feature in today's... (36+ / 0-)

          ...NY Times on Gary Gensler, the current head of the Commodities Futures Trading Commission (the CFTC), one of two principal bodies responsible for overseeing the derivatives marketplace.

          This past year, Gensler came out and outright acknowledged in the MSM that Goldman Sachs quite deliberately speculated in the oil/gasoline futures market, in 2008, and was almost singlehandedly responsible for the runup in the price of gasoline concurrent with the crash of our markets in September '08, as well.

          Gensler made partner at Goldman by the time he was 30, by the way.

          Think about it...as you read the feature on him in today's Times. We're told he's truly reformed now, as we're also told that Brooksley Born (another CFTC board member back in the day, and well-known for her brave, staunch opposition to folks like Rubin et al, in terms of her advocacy of very tight controls of the derivatives marketplace, a position in which she found herself in the minority opinion as Gramm Leach Bliley was passed and put into law in 2000) now feels that Gensler's truly morphed into a bonafide reformer now, as well.

          But, we're talking about a person (Gensler) who's publicly acknowledged that Goldman stripmined and pillaged the public in 2008 as the economy was taking dive, too.

          And, abso-freakin'-lutely NOTHING's being done about it because it was all "perfectly legal."

          It's THAT type of mentality that rules the day now, that wouldn't have had a snowball's chance in hell back in the early 1930's, that is the real difference--IMHO--between Pecora and Angelides.

          "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

          by bobswern on Thu Mar 11, 2010 at 03:07:03 AM PST

          [ Parent ]

        •  Hint: Congress has unlimited subpoena power.. (15+ / 0-)

          ...The potus has the military 24/7/365, the DHS, the DoJ, the IRS, and could nationalize the banking and credit system, and give the FED their walking papers so fast it would make their heads swim! Any more questions/excuses for inaction?

          "Peace is the protector of genius. War is the mortal enemy of both peace and genius."

          by ImpeachKingBushII on Thu Mar 11, 2010 at 03:36:07 AM PST

          [ Parent ]

          •  Didnt the UK partially nationalize banks? (2+ / 0-)
            Recommended by:
            gmb, 3goldens

            Any comparisons been made yet btw our road taken and theirs?

            I mean, ours is fucked, I know that much. Just wondering if there is anything in the way of results to look at... after taking a machete to the dense underbrush of (((spin))) ...

            Should a "progressive" Dem blog dwell in the safe zones of a tame party, or should it drive a tame party to break out?

            by NYCee on Thu Mar 11, 2010 at 04:01:29 AM PST

            [ Parent ]

            •  hah! don't get me started... (5+ / 0-)

              ...one man's trash is another's treasure. Hypothetically speaking of course, Obama could nationalize the banks for one week, fire all the bums, and reboot the system. Or he could do it permanently or for any length of time according to his broad Unitary Executive powers. The comparing of UK and US political system is like apples and oranges. But that's where the dissimliarites end. For starters, Think! Google keywords: global financial system, FED bails out Greece, Fed fights Congressional audit bill.

              "Peace is the protector of genius. War is the mortal enemy of both peace and genius."

              by ImpeachKingBushII on Thu Mar 11, 2010 at 04:18:41 AM PST

              [ Parent ]

              •  Dont have time to google or think at present... (1+ / 0-)
                Recommended by:
                ImpeachKingBushII

                Which is why I was hoping to get others who have googled and thought to share a bit of a response to my question.

                You say "dont get me started" but I was rather hoping to do just that. This would seem to be the place for sharing such info...

                Oh well... maybe next time.

                Should a "progressive" Dem blog dwell in the safe zones of a tame party, or should it drive a tame party to break out?

                by NYCee on Thu Mar 11, 2010 at 04:34:55 AM PST

                [ Parent ]

                •  it is true that we have more freedom to think... (3+ / 0-)
                  Recommended by:
                  claude, 3goldens, ohmyheck

                  ...than we have the freedom to express ones thoughts openly. I kind of like it here, so I have a tendency to self-moderate and pull my punches, lest I offend the sensibilities of those who would prefer to live out their lives under an illusion of peace, however insulated that makes them to the frailties and pitfalls of the real world. I point to the right direction and much prefer and trust that one draws their own conclusions. What we pereceive as truth and what actually is the truth are often self-opposing and diametrically opposite one to the other. It's out there. When you're hungry and thirsty enough, I trust you'll find that loaf and tankard of ale rather quickly on your own.

                  "Peace is the protector of genius. War is the mortal enemy of both peace and genius."

                  by ImpeachKingBushII on Thu Mar 11, 2010 at 04:50:31 AM PST

                  [ Parent ]

                  •  fair enough... however... (3+ / 0-)
                    Recommended by:
                    Pescadero Bill, Noor B, ohmyheck

                    pulling punches so as not to offend can translate into obscuring info so as not to inform.

                    Being provocative is needed more, not less. (As in bobswern, here)

                    Isnt that the very heart of the matter re criticism of our media, in this very diary? They seek not to offend... Wall St and its many beneficiaries... and thus... we are swimming in muddled puddles of disinformation and ignorance... and the beat goes on.

                    Anyway... okay. Off to work... no wiser, but that's okay. Like you said, for another day...

                    Should a "progressive" Dem blog dwell in the safe zones of a tame party, or should it drive a tame party to break out?

                    by NYCee on Thu Mar 11, 2010 at 05:01:07 AM PST

                    [ Parent ]

            •  Norway did, and made money when (4+ / 0-)
              Recommended by:
              alizard, 3goldens, 4Freedom, on2them

              they sold them a bit later.  We get squat from our bail out.  The citizens who phoned DC last year and were 200 to 1 againt the bail turned out to be correct.  Nothing has been fixed and it will all happen again.

              2.5 trillion dollars have been "borrowed" since the [SS] system was "reformed" in the 80s and they simply don't want to pay it back. - dKos Blogger -

              by Silverbird on Thu Mar 11, 2010 at 08:22:32 AM PST

              [ Parent ]

          •  What would David Broder say? (4+ / 0-)

            The administration doesn't dare take any steps that would cause Fox News or the more 'moderate' shills in the corporate media cartel to shake their heads or cluck their tongues.  Remember the prescient words of one of the great unsung leaders of the 20th century:

            "There is no good and evil, there is only power and those to weak to seek it." - Lord Voldemort

            •  I much prefer Lord Acton's dictum... (11+ / 0-)

              ..."Power tends to corrupt, and absolute power corrupts absolutely."

              "I cannot accept your canon that we are to judge Pope and King unlike other men with a favourable presumption that they did no wrong. If there is any presumption, it is the other way, against the holders of power, increasing as the power increases. Historic responsibility has to make up for the want of legal responsibility. Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or certainty of corruption by full authority. There is no worse heresy than the fact that the office sanctifies the holder of it."

              "The office sanctifies the holder of it". Did you hear that? This could very quite possibly be the most prescient man in world history!

              "Peace is the protector of genius. War is the mortal enemy of both peace and genius."

              by ImpeachKingBushII on Thu Mar 11, 2010 at 04:38:51 AM PST

              [ Parent ]

          •  Right. Just ask Karl Rove about that. (4+ / 0-)

            These people are raiders, they are lawless. How long did it take Rove to comply with that subpoena?

  •  Joshua Green is a village toady. His DLC stenoing (7+ / 0-)

    is a waste of paper.

    At least he saved me my hard earned money - I cancelled my Atlantic subscription a few years ago.

    Phoebe Lou Adams had such fun book reviews.

    rmm.

    Yond Cassius has a lean and hungry look; He thinks too much: such men are dangerous

    by seabos84 on Thu Mar 11, 2010 at 02:24:15 AM PST

  •  It has been obvious... (44+ / 0-)

    ...for a while that our elites (politicos, media, financiers, etc.) are unwilling and/or unable to cope with the crisis and implement the painful reforms that must be made.

    I'm saying unwilling because some don't want to lose their share of Versailles, and unable because the ones who would do it are blocked by the others.

    There is a all-too-human and yet mystifying "Apres moi le déluge" mindset in Washington and Wall Street. I think many intelligent, educated folks know our country is going the way of the the French Monarchy or the old USSR, but they can't or won't do anything to prevent it.

    I suppose they figure they got theirs, and their children and grandchildren will be OK too? Living in a third world-like country with gated communities for them and barrios for the poor mustn't bother them.

    Maybe some believe that the miracles of modern science will swoop in and suddenly restore us to greatness again? I honestly don't know.

    What I do know is that many of us here will suffer greatly during the coming decade, and likely have no help coming from Washington. If you don't have, say, $300,000 in your bank/savings/investment account today, you're going to be in deep shit soon enough.

    To a large extent, the rest of us should concentrate on personal survival. National politics is increasingly a distraction. Voting for a Democrat is like voting for Gorbachev, instead of a dangerous cretin, so by all means, let's continue to support them, but they're not going to help us.

    There's no single advice or single path here. My wife and I slashed our income and lifestyle and moved to a small rural community abroad 4 years ago. And yet we're still better off today than we were then. But others will have to pursue other paths, different objectives.

    As great fortunes were built in times of crisis (look at Russia again) some may strike it rich, starting a security company example.

    What I'm saying is that the game is mostly rigged and we should focus on us more than on Washington.

    (Sorry for the rambling rant.)

    OVER HERE: AN AMERICAN EXPAT IN THE SOUTH OF FRANCE, is now available on Amazon US

    by Lupin on Thu Mar 11, 2010 at 02:34:11 AM PST

    •  And the American people aren't as dumb... (16+ / 0-)

      as some wish they were.

      Yves' blog post is the best summary of what has happened.  I read it last night and was hoping that bobswern or gjohnsit would diary it.  Thanks, bobswern.

      The American people aren't buying this crap either.  Edward Harrison, a frequent guest blogger on NC, has a piece today about the most recent Gallup measure of right track/wrong track.  It started at 13% when Obama took office (up from an all time low of 7% in October, '08).  It rose up to 36% in August, and we were hearing a lot about it back then.  Now it's down to 19% on a steady downward march.

      One of Yves' best points is about the Theory of Positive Thinking.  We sure see plenty of that around this site.  The danger politically is that institutions that continually pump out "Happy Days Are Here Again" completely lose their credibility and legitimacy when enough people realize they're full of crap.  We are at that point now.

      This is way beyond who wins in November and party politics, and history will judge what Obama, Geithner and Bernanke have done with a harshness that exceeds what Ms. Smith writes in this blog post.

      "Capitalism is irresponsibility organized into a system." -- Emil Brunner

      by goinsouth on Thu Mar 11, 2010 at 04:13:56 AM PST

      [ Parent ]

      •  But They ARE Dumb (and, more, Deceived) Enough (11+ / 0-)

        to return the Republicans to power. 40 years of coordinated libophobia has left civilized governance completely un credible as a choice.

        We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

        by Gooserock on Thu Mar 11, 2010 at 05:15:23 AM PST

        [ Parent ]

        •  Therein lies the real, enduring tragedy (2+ / 0-)
          Recommended by:
          Silverbird, 3goldens

          It isn't just that the needed reform is ignored, it's that the perception of who is to blame will shift indelibly to the Democratic Party.

          "If you do not read the paper, you are uninformed. If you do read the paper, you are misinformed."--Mark Twain.

          by ovals49 on Thu Mar 11, 2010 at 06:27:27 AM PST

          [ Parent ]

          •  Tragedy yes, but don't blame it on voters. (5+ / 0-)
            Recommended by:
            Silverbird, 3goldens, Noor B, ilex, Arza

            They wanted change.  They put the Democrats in charge of two branches of government with big majorities in both houses of Congress.

            And what did they get?  More corporatocracy.

            If a bias toward a two-party system wasn't so built-in in the U. S., the Republicans would not benefit from this.  Some other party would.  As it is, people run from one party to the other, hoping to get some relief, but they never do.

            That's when legitimacy breaks down and people look for other options.

            "Capitalism is irresponsibility organized into a system." -- Emil Brunner

            by goinsouth on Thu Mar 11, 2010 at 06:58:42 AM PST

            [ Parent ]

        •  They'll return the Republicans to power (6+ / 0-)
          Recommended by:
          Silverbird, 3goldens, goinsouth, ilex, Wom Bat, Arza

          because there isn't any other option in a two-party system.  It isn't that people like Republicans again, its just that they are angry at Democrats.  If you are angry at the Democrats you don't keep voting for more Democrats, you either don't vote or you vote Republican.

           

          "How many times do you have to be hit over the head before you figure out who's hitting you?" - Harry S. Truman

          by methinshaw on Thu Mar 11, 2010 at 06:41:58 AM PST

          [ Parent ]

      •  At the risk of being flamed to cinders and ashes, (3+ / 0-)
        Recommended by:
        Silverbird, 3goldens, goinsouth

        Obama is starting to remind this historian of Grant -- seen as personally good, but surrounded by goons, and blind to that reality.  Heartbreaking....

        "Fighting Fascism is Always Cool." -- Amsterdam Weekly, volume three, issue 18 (-8.50, -7.23)

        by Noor B on Thu Mar 11, 2010 at 07:07:24 AM PST

        [ Parent ]

      •  and then the irony (2+ / 0-)
        Recommended by:
        3goldens, goinsouth

        Indeed, the adoption of the Theory of Positive Thinking has virtually guaranteed that nothing will change.

        It's sad that our leaders treat predatory financial practices as critical to the American way of life.  Behind the facade of optimism and religiousity and exceptionalism, we have become a very cruel and frightened people.

        A terrible beauty is born. --W.B. Yeats

        by eightlivesleft on Thu Mar 11, 2010 at 07:50:43 AM PST

        [ Parent ]

  •  not to worry. (19+ / 0-)

    ...my brain works so well, I can compmentalize and separate my criticisms/disappointments of Obama from one bone of contention to the other, without them affecting my over-all disapointment or his final grade come final examination time in 2012. Also, not to worry, if his goal is to best the best one-termer he can be, he's well on track to graduating magna cum-laude from the University of Hard Politics, with minors in Bush channeling, bipartisanship and senate comity. Extra credit: How he managed let Chairman Max Baucus throw his Finance Committee 3-seat Democratic majority (and our party)under the bus when he formed the 50/50 Gang of 6 HCR club.

    "Peace is the protector of genius. War is the mortal enemy of both peace and genius."

    by ImpeachKingBushII on Thu Mar 11, 2010 at 02:55:30 AM PST

  •  On the hopeful side... (13+ / 0-)

    ...I'd like to say that America today is not just what we see in Washington today -- the GOP Senators, the Versailles-like fawning, idiotic media court, the superstitions and the xenophobia being legitimized by short-sighted greedy little men.

    It's also all the bright and wonderful people who moved in from other parts of the world.

    For example this great American -- the man who will get us to Mars in 40 days. His name is Franklin Chang-Diaz, originally from Costa Rica.

    Folks like him are our future.

    What we're seeing are the violent death throes of the old white male bigots. The next few years will be difficult, no doubt, but there is already light at the end of the tunnel. We shall overcome!

    OVER HERE: AN AMERICAN EXPAT IN THE SOUTH OF FRANCE, is now available on Amazon US

    by Lupin on Thu Mar 11, 2010 at 03:05:58 AM PST

  •  I just love this conflation game... (4+ / 0-)
    Recommended by:
    3goldens, Mz Kleen, bobswern, cybrestrike

    .."the banks own the place". The FED owns the banks. If A=B and B=C, then A=C.

    "Peace is the protector of genius. War is the mortal enemy of both peace and genius."

    by ImpeachKingBushII on Thu Mar 11, 2010 at 03:06:24 AM PST

    •  Or... (2+ / 0-)
      Recommended by:
      3goldens, shaharazade

      do the banks own the Fed?  Given the kid-glove treatment the Fed's shown the banks, I rather think the banks own the Fed, as well as Congress and the courts and....  You get my drift.

      "Fighting Fascism is Always Cool." -- Amsterdam Weekly, volume three, issue 18 (-8.50, -7.23)

      by Noor B on Thu Mar 11, 2010 at 07:12:56 AM PST

      [ Parent ]

  •  Damned shame (17+ / 0-)

    that, despite claims from the right wingers, Obama IS NOT a liberal.

    Corporate Democrats are the velvet glove on the Republican iron fist.

    by Sagebrush Bob on Thu Mar 11, 2010 at 03:21:10 AM PST

  •  Thank you bobswern. (15+ / 0-)

    Yves is a brilliant writer!  Very, very interesting diary.  This country is in more trouble than I thought.  My mattress is looking better and better as a place to stash cash.

    If the people lead, the leaders will follow.

    by Mz Kleen on Thu Mar 11, 2010 at 03:42:48 AM PST

  •  One thing (11+ / 0-)

    First, it bought the financiers' false promise that massive subsidies to them would kick start a economy.

    This implies that the Obama Administration had to be convinced of the scheme.  With Larry Summers, Geithner and probably a few more Hamilton Project thinkers on board it was a BELIEF already held by some in the Administration.

    "The definition of insanity is doing the same thing over and over again and expecting different results"

    by RebelCapitalist on Thu Mar 11, 2010 at 04:04:38 AM PST

  •  Yeah, bobswern. Youz doin good work here. (10+ / 0-)

    Keep it up. Consider the desperation of certain critics who demand you think happier as validation that you are onto something... that truly needs to be said. Often.

    Bring it on.

    Should a "progressive" Dem blog dwell in the safe zones of a tame party, or should it drive a tame party to break out?

    by NYCee on Thu Mar 11, 2010 at 04:05:57 AM PST

  •  Financial sector is a cancer (27+ / 0-)

    The useful purpose of the financial sector is to move capital from those who have it to those who can put it to good use. In return, those who supply capital get a fair return on their investment. The investment sector itself should be doing this at a near zero cost to the economy. In 1990 the investment sector reported 10% of all profits of the economy, in 2008 they reported 40% of all profits.

    The financial sector doesn't produce any useful goods or services, other than acting as a broker to provide capital. As it becomes more profitable all other endeavors in the economy become less so. That large sucking sound you hear is coming from Wall Street.

  •  This Issue, not HCR (25+ / 0-)

    Will be the doom of the Democrats in November and beyond.  

    Tipped and Rec'd for keeping the spotlight on what, IMHO, is the most important issue before us.

    The widespread, vocal opposition to the TARP was evidence that a once complacent populace had been roused. Reform, if proposed with energy and confidence, wasn't a risk; not only was it badly needed, it was just what voters wanted.

    But incoming president Obama failed to act. Whether he failed to see the opportunity, didn't understand it, or was simply not interested is moot. Rather than bring vested banking interests to heel, the Obama administration instead chose to reconstitute, as much as possible, the very same industry whose reckless pursuit of profit had thrown the world economy off the cliff.

    Indeed, this whole situation was a once in a generation chance for Democrats to act like Democrats.  Instead, we've gotten a fresh helping of the New Coke, Milli-Vanilli DLC approach.

    Is very bad to steal jobu's rum...is very bad

    by jobu on Thu Mar 11, 2010 at 04:23:59 AM PST

  •  This emperor is butt naked just like the last one (22+ / 0-)

    was.

    Team Obama naively cast its lot with an industry that is vastly more skilled in the the dark art of the manufacture of consent than it is.

    Only I'm not buying that it was naivete. Looking objectively at the president's conduct re imperialist wars, regressive taxation, union-busting, "HCR" and "financial reform," the seamless pattern says naivete has nothing to do with it. Obama has embarked on the ClintonGoofProofSuccessTrajectory. That means you talk progressive but you kowtow to the generals and coddle the rich. When your term is up, you become one of them. It's $100 mill for Bill & Hill, and that was last year's count. After 14 months of it, I'm through giving passes.

    When an old man dies, a library burns down. --African proverb

    by Wom Bat on Thu Mar 11, 2010 at 04:34:13 AM PST

  •  The President needs to clean his own house. (0+ / 0-)

    Because the cleaners he hired aren't cleaning the rest of the country.
    He need change from Rahm on down.

    St. Ronnie was an asshole.

    by manwithnoname on Thu Mar 11, 2010 at 04:35:21 AM PST

  •  Another test is fast approaching (9+ / 0-)

    Many EU politicians and regulators are calling for a ban on 'naked' or speculative trading of sovereign debt credit default swaps.  Something that should be banned.  But for this ban to be effective the Administration needs to agree to it.

    Geithner in past congressional testimony has not supported a ban on 'naked' CDS trading.  

    We will see.  

    "The definition of insanity is doing the same thing over and over again and expecting different results"

    by RebelCapitalist on Thu Mar 11, 2010 at 04:43:01 AM PST

    •  European governments are getting restive. (4+ / 0-)
      Recommended by:
      Odysseus, Silverbird, 3goldens, ilex

      They are shunning the American hedge funds and investment banks.

      "Governments do not have the confidence that the excessive risk-taking culture of the big Wall Street banks has changed and they still cannot be trusted to put the stability of the financial system before profit," said Arlene McCarthy, vice chair of the European parliament's economic and monetary affairs committee. "It is no surprise therefore that governments are reluctant to do business with banks that have failed to learn the lesson of the crisis. The banks need to acknowledge the mistakes that were made and behave in an ethical way to regain the trust and confidence of governments."

      If nothing is very different from you, what is a little different from you is very different from you. Ursula K. Le Guin

      by northsylvania on Thu Mar 11, 2010 at 07:08:54 AM PST

      [ Parent ]

  •  Well Bob... (2+ / 0-)
    Recommended by:
    vets74, QuestionAuthority

    I partially agree with your diary...while I disagree with your conclusions and the motives that you assign to Obama/Geithner concerning wanting to paper over the problem...

    They truly have the American people's best interests at heart and if there was any other way to save the global financial system without a substantial risk of a global financial meltdown...they would have done that...

    As for the banks are on the brink of failure still...the evidence does not support that and as the economy continues to recover, the banks will actually end up reversing the trillions of dollars of reserves they put on their books for loans they thought would be complete write-offs and actually end up being at least partially collectible and/or the underlying assets worth more than at the trough of the recession...

    But overall, not an awful diary...I will tip you...

    Obama - Change I still believe in

    by dvogel001 on Thu Mar 11, 2010 at 04:54:48 AM PST

    •  Kicking the can down the road, (11+ / 0-)

      which is what the current admin is doing (and many others have done) does not fix anything. In fact, it makes things worse.

      As for the banks, for the most part the evidence you suggest is greatly beautified by allowing the Tooth Fairy to mark the big banks' gargantuan piles of derivatives to fairy-dust levels. Honest GAAP would suggest that these banks continue to be underwater, and seriously so.

      I understand that Obama did not want to deal with the banks during his first year, and perhaps couldn't have, realistically. But if nothing is ever done to restructure them into sane and manageable businesses, this will not end well (for any of us).

      •  As an accountant... (1+ / 0-)
        Recommended by:
        vets74

        I would argue that GAAP is sound and the banks financial statements are fairly stated...unless you are an accountant and understand GAAP, I would suggest that this is too complicated for the casual blogger...

        Obama - Change I still believe in

        by dvogel001 on Thu Mar 11, 2010 at 06:02:56 AM PST

        [ Parent ]

        •  One doesn't need to be a CPA (5+ / 0-)
          Recommended by:
          Odysseus, 3goldens, xaxado, vets74, jobu

          To see the fictionality of mark-to-model, as real-life accountants and finance experts have pointed out. But as you suggest, the actual size and risk of the OTC derivatives situation is beyond the comprehension of a casual, financially uninformed blogger.  :-)

          •  See you actually do... (0+ / 0-)

            your ignorance is shown in not understanding the proper role of mark-to-market accounting and valuation in a financial institution...

            Obama - Change I still believe in

            by dvogel001 on Thu Mar 11, 2010 at 01:20:37 PM PST

            [ Parent ]

            •  I don;t think you are qualified (0+ / 0-)

              to remote-diagnose ignorance on this topic. Suffice to say that your position here is the clueless one, and that I have more credentials in this area than a garden-variety accountant.

              It does give me a chuckle that you go ad hominem, lacking any real facts on your side.

              •  When you show me your... (0+ / 0-)

                CPA and 20+ years experience understanding GAAP...come talk to me...

                Obama - Change I still believe in

                by dvogel001 on Thu Mar 11, 2010 at 04:04:17 PM PST

                [ Parent ]

              •  I am not a garden variety accountant... (0+ / 0-)

                I have been advising and working for public traded companies for over 20 years...do not do any tax work...I advise public companies how to comply with GAAP for a living...

                Obama - Change I still believe in

                by dvogel001 on Thu Mar 11, 2010 at 04:05:40 PM PST

                [ Parent ]

                •  Yeah, well (0+ / 0-)

                  You nonetheless show almost no knowledge of what is actually happening in world finance, which is where I have been for the last twenty years. Your CPA isn't going to get you more than a snicker at the derivatives desk of investment banks.

                  That you actually seem to believe the current  level of mark-to-model fantasy is valid accounting suggests that (like Arthur Andersen w/ Enron), you are not someone to trust about corporate finance. The recent past is littered with CPAs who wave their certification, but happily sign off on all kinds of financial nonsense or outright fraud. Can you tell me one place where you see anything fishy in the current OCC reports on Wall Street finance? I didn't think so. Case closed.

                  •  I have been critical at... (0+ / 0-)

                    times at my profession when they take shortcuts...but this attack on a valid clarification of M-T-M accounting is really pretty ignorant of real facts...I could explain it to you...but my guess is that you would not understand the real accounting theory because you are too busy spouting insults...

                    Derivative desks at investment banks do not understand accounting either...

                    Obama - Change I still believe in

                    by dvogel001 on Fri Mar 12, 2010 at 06:47:44 AM PST

                    [ Parent ]

                    •  I don't see any criticism of TPTB from you (0+ / 0-)

                      here on DK, or I (and others, I'm sure) would take your posts more seriously. You seem to only defend the conventional wisdom (CNBC style) on everything in the financial arena, and offer no questions of the Enron-like practices that pervade the system. These do not suggest an open or inquisitive mind, IMO.

                      But regardless, if you want to have a worthwhile discussion about any of these issues, you will need to actually show your reasoning on the validity of mark-to-model as applied to Wall Street firms, the OCC derivatives report, and the other issues brought up by Bob and others. Waving your CPA and suggesting only accountants are qualified to grasp all this is absurd and merely dodges real debate of the issues. It's a well-known disinformational tactic to pooh-pooh others as "unqualified", while making no display of "trained" insights into the topic at hand.

                      As for insults, the first aspersions (and several follow-ups) were yours. I prefer to debate the issues. And be corrected, if necessary. But that would require a real debate, and some real supporting facts  from you.

                      •  OK...so here is what happened with MTM... (0+ / 0-)

                        The original intent of MTM was to simply provide an accurate value of assets in a portfolio for a financial institution...simple right...well not really...

                        The first thing we need to talk about is going concern...what going concern means is that the business will continue to operate as a company and will not be liquidated in a fire-sale fashion...

                        Now I would argue that all the TBTF banks should have been treated as going concerns because the FDIC and the Treasury was not going to let them fail and the assets in question would not have to be liquidated outside the course of normal business...now politically you can say that was the wrong decision, but from an accounting standpoint, that is the logical conclusion to reach

                        So lets assume for the sake of this discussion the holders of these CDS are entities that will not have to dispose of these assets in a liquidation of the organization...

                        So first lets take the easy case...It is simple when you have a marketable security that is publically traded in an active market, just look at the market and see what another party is willing to pay for that asset...that is easy...

                        But what happens when a market for a particular asset that was publically traded is temporarily or permenantly not traded anymore...what is the value then you need to look at the probable net realizable value of the asset when either required to be liquidated or likely to be liquidated...so how do you do that...

                        Well lets say you have a CDS with a book value of $100, you plan to keep it for 5 years...if you sold it right now nobody would buy it (at the peak of the crisis), so today at a fire-sale it is valued at $0.  That is what auditors were telling banks to do under MTM...which was never the intent of MTM, because the second step when a market is not readily available to sell an asset is to look at the underlying assets in the CDS and figure out what the likely NRV of the underlying assets are likely to be...

                        You see now the unfortunate part is this takes a lot of work (now I will bash CPAs a little) and sometimes CPAs are lazy and would rather just get the easy answer...zero...but by getting the easy answer it was also the wrong answer...

                        So you dig into the portfolio in the CDS and look at the loans, value of the underlying assets based on a recent appraisail and then determine the greater of the percentage of the loan likely to be paid back or the sale value of the underlying asset (real property in most cases)...so after doing all this work for thousands of assets in the CDS pools you can come up with a MTM value of that asset...

                        So if the average of the underlying assets is 62% of the book value of the CDS, you would MTM at 62% as opposed to 100% or 0%, then you continue to evaluate CDS portfolios on a roll-forward basis...

                        In order to get to 62% there would be a minimum of 3 parties that would have to agree on that value, the Independent Auditor, The SEC, The 3rd party appraiser and probably a bank examiner...

                        So in the end, why was there a clarification of the MTM rules...basically the rules were never changed...but in a stable and up market there is no reason to go to the complex, time-consuming and difficult task of evaluating the underlying assets and MTM does say if there is no current market for a security and you have no way of determining its value (like looking at the underlying asset values), you can and should write it down to zero...but the clarification was to tell auditors to look at the underlying asset values as well...also the clarification was that you did not need to use the current fire-sale value if the organization is determined to be a going concern..

                        Hope that explains the basics for you.../peace

                        Obama - Change I still believe in

                        by dvogel001 on Sat Mar 13, 2010 at 05:23:25 AM PST

                        [ Parent ]

    •  What window of truth are you looking through... (18+ / 0-)

      That I have somehow missed that presents you with the prescience to claim that The president and Geithner have the public's best interests at heart? What's so hysterically ironic about that claim is that all the evidence points without deviation to the exact opposite of that claim. They had the best opportunity in generations to change our financial trajectory and the public support to do it. It was clear what the public wanted. Then they did the exact opposite. And you claim they have the public's best interest "at heart?" What they have is a recipe for a collective heart attack.

      At best, they have fucked this up royally, and damaged the Democratic brand in the process, while concurrently blurring the line between what is expected of a Democrat fundamentally and that which is expected of Republicans.

      Perhaps the better question is: how is it possible that you continue to miss all the evidence staring you right in the face? Substantiating the propaganda and making excuses are part of the problem, not the solution.  

      Slap happy is a platform.

      by averageyoungman on Thu Mar 11, 2010 at 05:32:31 AM PST

      [ Parent ]

      •  Because the greater good... (2+ / 0-)
        Recommended by:
        Silverbird, vets74

        is 10 million less unemployed (difference between 17% and 25% unemployment in the great depression is about 15 million more unemployed...round it down to 10 million)...

        It was worth it just for that...

        When a building is on fire because of not following the fire codes, you do not start changing the fire codes, you put out the fire first then change the fire codes and increase enforcement...

        Obama - Change I still believe in

        by dvogel001 on Thu Mar 11, 2010 at 06:00:12 AM PST

        [ Parent ]

        •  The only problem with that analogy is that... (9+ / 0-)

          this appears to be a case of arson, and the arsonists' allies are the ones "putting out" the fire and "changing" the fire codes and "increasing enforcement."

          As far as I can tell, enforcement is still a joke not worth telling, Geithner is up to his elbows in the events leading up to the debacle, and nothing substantive is going to be done about it.

          GS is doing God's work, after all.

          Let every American... swear by the blood of the Revolution, never to violate ...the laws ... and never to tolerate their violation by others. A. Lincoln

          by PhotogHog on Thu Mar 11, 2010 at 06:41:51 AM PST

          [ Parent ]

          •  No because Arson... (0+ / 0-)

            would imply that the actions they took were clearly illegal...which in that case would imply that we need better law enforcement not new regulations...

            As we know as disgusting and immoral as some of the banks actions were they were not illegal...

            So the analogy is that we need better fire codes...and that comes after putting out the fire and saving the lives in and around the building on fire...

            Obama - Change I still believe in

            by dvogel001 on Thu Mar 11, 2010 at 01:22:57 PM PST

            [ Parent ]

        •  You act as if... (0+ / 0-)

          All the terribly misguided measures they've taken were necessary to "save" those jobs. They weren't. You look ahead to some magical time when somehow the Obama admin can direct an out of control industry they are currently helping gain stronger footholds.

          Your analogy fails completely to address the matter in the granularity it requires, and instead falls back on the same, nebulous blanket retort of "the greater good." Well, the "greater good" is counterbalanced by the "overwhelmingly bad," and that's what the Obama admin's economic policies are right now as it relates to these goons - overwhelmingly bad.

          Slap happy is a platform.

          by averageyoungman on Fri Mar 12, 2010 at 05:29:28 AM PST

          [ Parent ]

    •  Well the banks (5+ / 0-)

      are hardly the picture of health.

      FDIC wants pension funds to prop up failed banks

      The fake stress tests

      On paper, these companies are very well capitalized. However, in the real world, the likely losses they must eventually take on loans already on their books would probably render them insolvent.

    •  You're dealing in absolutes (11+ / 0-)

      It didn't have to be either give the banks a no-strings bail-out or let them fail. Look at how the rest of the world has handled the crisis. What is wrong with conditionalities being attached to a huge dispersal of tax payer money? What is wrong with using the opportunity of the crisis to reform the sector?

      There were other ways to go about rescuing the banks. They CHOSE the way most favourable for select (not all) organisations. And frankly, yes, I question their motives for doing so.

      It is no measure of health to be well adjusted to a profoundly sick society.

      by Grassee on Thu Mar 11, 2010 at 06:01:58 AM PST

      [ Parent ]

      •  The risk was too high... (0+ / 0-)

        for a global financial meltdown and run on the banks ala 1929...bold action needed to be done...and there was no time for compromise...

        We should reform now and we are reforming...and in fact banks are reforming themselves...

        Obama - Change I still believe in

        by dvogel001 on Thu Mar 11, 2010 at 06:04:35 AM PST

        [ Parent ]

        •  You really believe this? (6+ / 0-)

          for a global financial meltdown and run on the banks ala 1929...bold action needed to be done...and there was no time for compromise...

          Google how Europe dealt with the crisis. Don't buy this framing.

          It is no measure of health to be well adjusted to a profoundly sick society.

          by Grassee on Thu Mar 11, 2010 at 06:13:52 AM PST

          [ Parent ]

          •  Europe... (0+ / 0-)

            only fared as well as they did...because our financial heroes President Obama and Secretary Geithner saved the global financial system...if they had not...

            Not only would we be in a depression...so would the rest of the world...

            Europe should be throwing those guys a ticker tape parade as well...

            They took the ugly...but bold steps to save the world from a GLOBAL financial collapse...

            Obama - Change I still believe in

            by dvogel001 on Thu Mar 11, 2010 at 01:26:56 PM PST

            [ Parent ]

    •  Suggest some evidence (3+ / 0-)
      Recommended by:
      alizard, 3goldens, shaharazade

      As for the banks are on the brink of failure still...the evidence does not support that and as the economy continues to recover, the banks will actually end up reversing the trillions of dollars of reserves they put on their books for loans they thought would be complete write-offs and actually end up being at least partially collectible and/or the underlying assets worth more than at the trough of the recession...

      This is an assertion in need of diary sized backing.  

      Is very bad to steal jobu's rum...is very bad

      by jobu on Thu Mar 11, 2010 at 06:38:39 AM PST

      [ Parent ]

    •  Geithner is a bought and paid for (7+ / 0-)

      Bankster whore.  

      ...someday - the armies of bitterness will all be going the same way. And they'll all walk together, and there'll be a dead terror from it. The Grapes of Wrath

      by deepsouthdoug on Thu Mar 11, 2010 at 06:46:49 AM PST

      [ Parent ]

      •  Thank you for saying it so bluntly. (4+ / 0-)
        Recommended by:
        Silverbird, 3goldens, deepsouthdoug, Arza

        It is the truth, and we need to recognize it.  Magical thinking has gotten us nowhere.

        "Fighting Fascism is Always Cool." -- Amsterdam Weekly, volume three, issue 18 (-8.50, -7.23)

        by Noor B on Thu Mar 11, 2010 at 07:19:15 AM PST

        [ Parent ]

        •  Thank you for not understanding... (0+ / 0-)

          the real truth...Obama and Geithner saved the world from a financial catastrophy and are getting shafted for their bravery and bold as well as ugly but necessary actions...

          Obama - Change I still believe in

          by dvogel001 on Thu Mar 11, 2010 at 01:28:55 PM PST

          [ Parent ]

      •  He's cited in Moore's Capitalism as a failure at (2+ / 0-)
        Recommended by:
        3goldens, Noor B

        everything he has undertaken in his professional life. Moore postulates that's the reason he's in his present post - he's a tool.

        Smooth seas do not make skillful sailors. --African proverb

        by 4Freedom on Thu Mar 11, 2010 at 08:53:13 AM PST

        [ Parent ]

        •  And MM is somehow... (0+ / 0-)

          a great economist...NOT...

          Obama - Change I still believe in

          by dvogel001 on Thu Mar 11, 2010 at 01:29:34 PM PST

          [ Parent ]

          •  Michael Moore is one of the great satirists of (0+ / 0-)

            our age. His intelligence is more than capable of grasping enough economics to highlight some of the more egregious pitfalls of capitalism.

            And Mr. Moore is not alone in his alienation from capitalism.

            Smooth seas do not make skillful sailors. --African proverb

            by 4Freedom on Thu Mar 11, 2010 at 03:06:58 PM PST

            [ Parent ]

            •  Satirists... (0+ / 0-)

              and populist...true...understanding global financial systems and the effect of their collapse...I think not...

              But he could have done another tour of the 25% unemployed like he did in Flint...

              Obama - Change I still believe in

              by dvogel001 on Thu Mar 11, 2010 at 03:35:33 PM PST

              [ Parent ]

              •  Well, this ex-WS floor trader thinks Michael (0+ / 0-)

                scored some pretty direct hits on his targets.

                Our financial system has undone itself via its desire for deregulation and the riches reaped from excessive leveraging of assets. The system needs re-regulation and re-structuring. Instead, our government propped up the evildoers and MM called them on their crap.

                I say, very well done. You don't have to be an economics guru to see the systemic rot.

                Smooth seas do not make skillful sailors. --African proverb

                by 4Freedom on Thu Mar 11, 2010 at 04:09:56 PM PST

                [ Parent ]

                •  I am not against fixing the regulations... (0+ / 0-)

                  but I am in favor of saving the country's financial well being first which is what Secy Geithner did...

                  Obama - Change I still believe in

                  by dvogel001 on Thu Mar 11, 2010 at 08:14:47 PM PST

                  [ Parent ]

                  •  Geithner saved the banks, not the country. (0+ / 0-)

                    The banks and the Fed have not been transparent about the amount and application of our future tax dollars they were given to prop them up. Financial institutions have also not benefited Main Street with the largesse granted them by congress and the Treasury.

                    Countries have recovered well, as in Norway, from temporary nationalization of their banks. A far cheaper remedy for the American taxpayer would have been a temporary takeover of the banking system by the government.

                    However, as this country has been so saturated in anti-socialistic rhetoric, such a solution was avoided by propaganda alone. How Geithner could be viewed as a savior in the rape of our economy is rather amazing/amusing.

                    Geithner may well be found accountable in the hiding aspects of Lehman's dissolution.

                    The unraveling isn’t merely implicating Fuld and his recent succession of CFOs, or its accounting firm, Ernst & Young, as might be expected. It also emerges that the NY Fed, and thus Timothy Geithner, were at a minimum massively derelict in the performance of their duties, and may well be culpable in aiding and abetting Lehman in accounting fraud and Sarbox violations.

                    Eliot Spitzer on Geithner:

                    Spitzer said that in the aftermath (of the market crash), the nation was also left with the same regulators like Secretary of Treasury Paul Geithner who oversaw Wall Street’s demise, which he described as "the Peter Principle on steroids."

                    "People got promoted to the point of their incompetence," said Spitzer. "They failed in their regulatory jobs. And then because they failed, there was a crisis, and then they used their crisis to get even more power."

                    Smooth seas do not make skillful sailors. --African proverb

                    by 4Freedom on Fri Mar 12, 2010 at 07:08:07 AM PST

                    [ Parent ]

                    •  More bullshit... (0+ / 0-)

                      if Secy Geithner and Secy Paulson had not done what they did...we would have 10 million more out of work right now...they did it for the people of our country and not the banks...

                      All the money is being paid back and the gains/interest are covering almost all the losses...

                      Secy Geithner does not deserve our scorn...he deserves our unyeilding praise...

                      The blog story you cite about the FRBNY and Tim Geithner being culpable for accounting fraud in Lehman is nothing more than slander...they have nothing to do with properly accounting for REPO swaps...that is all Lehman's responsibility...

                      Obama - Change I still believe in

                      by dvogel001 on Fri Mar 12, 2010 at 07:37:42 AM PST

                      [ Parent ]

      •  This only goes to show... (0+ / 0-)

        the axiom that "no good deed goes unpunished".../truly sad

        Obama - Change I still believe in

        by dvogel001 on Thu Mar 11, 2010 at 01:27:42 PM PST

        [ Parent ]

  •  Parasites and cancers kind of work the same way-- (7+ / 0-)

    Parasites usually have evolved to know that draining too much blood and treasure from the host will kill their livelihood. Although there are many examples, like the "strangler fig," where the parasite uses the host tree, structurally and for nutrition, until eventually all that's left of the old growth hardwood is a little cellulose...

    Cancers are adept at hiding from the immune/regulatory systems that would otherwise police the aberrant cells up, break them down and re-use the components for healthy growth. The Tumor has other tricks too, like "angiogenesis," using little otherwise healthy chemical signals to trick the body into growing newer and larger arteries leading only to the tumor site so the cancer can more effectively grow and spread at the expense of the rest of the body -- which keeps trying to feed the whole thing, ultimately to fail and die.

    "Economists" scoff at biological parallels, but hey, if it barks and shits and pees on your leg...

    "Is that all there is?" Peggy Lee.

    by jm214 on Thu Mar 11, 2010 at 05:18:25 AM PST

  •  The banks (13+ / 0-)

    25 banks failed and were taken over by the FDIC in 2008, vs 140 in 2009. In contrast, in the five years prior to 2008, only 11 banks failed in total.

    So far in 2010, 26 banks have already failed, vs 17 last year at the same time.

    No one knows exactly how much of a % of the financial institutions' balance sheet is "shitpile", and estimates vary from very bad to catastrophic.

    I don't mean to be dismissive of what you wrote, but honestly, we've barely scratched the surface of the insolvency of our financial system, which in turn accounts for one-third of our GDP.

    So color me wholly unconvinced by your rosy scenario.

    OVER HERE: AN AMERICAN EXPAT IN THE SOUTH OF FRANCE, is now available on Amazon US

    by Lupin on Thu Mar 11, 2010 at 05:21:52 AM PST

  •  Excellent. Good job Bob. (12+ / 0-)

    I am sick that nothing has been done to A:  Punish those that systematically destroyed the wealth of this nation, and B:  Institute fundamental changes to ensure that it never happens again.

    If any political figure could have been swept into office and changed business as usual, it was Barak Obama.  Now that it hasn't happened, I have lost all hope.  We are no longer a Democracy.  We are a Corporatocracy and Plutocracy.  

    Nothing will change, until we all go to hell in a hand basket.  Prepare for the worst people.  I hate to be an alarmist, but I would rather be prepared than not.

    Expose the lies. Fight for the truth. Push progressive politics. Save our planet. Health care is a right, not a privilege.

    by lighttheway on Thu Mar 11, 2010 at 05:24:55 AM PST

  •  Yves post was without a doubt the best (11+ / 0-)

    or among the best I've read that manages to take a very complex subject and make it clear and concise while pointing out the enablers and the apologists.

    As I was perusing some of the other articles she points to  that that made short work of the propaganda plants, I saw again and again in the comments area where people were accusing other people of being racists as the only response to this damning indictment of both Obama and his inner circle and the stenographers whose words somehow sully what used to be called newspapers.

    The one take-away I got  from one (or all) of the three columns. If you are doing a good job and people are feeling it there is no need to have stories planted in the newspapers that are full of adulation and no criticism.

    God that reminds me of the Bush days as the press fawned over him while he fucked up America. Certainly he had more fawning than Obama, but there is really no excuse for this kind of Journalism. Of course much of it came from NY where the financial machine lives and breathes.

    I recall a story from the NYT on how hard it would be for the Masters of the Universe to survive on a mere $500,000 a year. One line:  "Imagine them jammed up in a subway". I was thinking "Imagine them jammed in a 4 x 8 cell with another inmate"

    Choke Vomit.

  •  Well, The Worst Of The Storm IS Over.. (4+ / 0-)

    ...the first one that is. But the second one? Cat 5, baby.

    Why business as usual? Because what happened with subprime mortgages is going to happen with credit cards later this year. Bank on it (no pun intended).

    I think what Obama is doing is letting the banks spend what's left of their political capital. I don't think he has much choice in this-consider it a kind of political jiu-jitsu. Moreover, he has a number of other messes left by his predecessor to clean up while this particular crisis sorts itself out. As he has said several times (and I agree), it's likely that even two terms won't fix the damage Witless left behind.

    The other thing, as I pointed out yesterday here the culture on Wall Street is one of naked greed. At some point in time, to be able to fix the banking system, you're going to have to change the culture, and perhaps the thinking is nothing short of an apocalypse is going to change things in the financial sector.

    What I think will end up happening is that some of those institutions that were "too big to fail" will end up failing this time around. It would be poetic justice to see, say, a B of A ended up being owned by, say, Canadians.  

  •  The pain has not even begun (7+ / 0-)

    Part of the problem is none of our politicians have the will or courage to impose the pain of years of financial mismanagement by our financial institutions and the fantasy economics pushed by the GOP and sadly embraced by far too many Dems due to re-election fears. The can just keeps getting kicked down the road. We are just about at the end of the road. We managed to pull out of the Depression with a 90% tax rate on the rich. When do we start to put the burden on those who can afford it; particularly those who profited from or perpetrated this chicanery on the American public?

    "This sucks" - anonymous

    by jhecht on Thu Mar 11, 2010 at 06:29:53 AM PST

    •  the social security trust fund (6+ / 0-)

      i second this.  my bottom line is that the taxes of the wealthy need to be increased to pay off over time the IOU's held by the social security trust fund.   these IOU's represent money that was paid  by the working class and borrowed by the government to fund annual budgets so that income taxes would not have to be higher on the wealthy.   benefits payable to the working class should not be reduced to relieve that wealthy of the obligation to repay this debt.  the wealthy have no right to complain.  they had the benefit of the extra money for over 20 years and will be paying back the debt in significantly less valuable dollars.  

  •  Quiet, Out-of-Kourt Settlements to Lawsuits (3+ / 0-)

    filed against Wall Street thieves keeps the thieves out of the public limelight and their names out of the newspapers and off of the television.  

    These out-of-kourt settlements paid by the racketeering criminal enterprises on Wall Street are straight from the taxpayers' pockets and intended to avoid negative publicity that trials would repeatedly earn for them.  

  •  You should tell this to Barney Frank (0+ / 0-)

    Obama's repudiation of his campaign promise of change, by turning his back on meaningful reform of the financial services industry, in turn locked his Administration into a course of action.

    He will be surprised to hear that his legislation was not meaningful reform of the financial services industry.

    Also, this:

    For 18 years, Gary G. Gensler worked on Wall Street, striking merger deals at the venerable Goldman Sachs. Then in the late 1990s, he moved to the Treasury Department, joining a Washington establishment that celebrated the power of markets and fought off regulation at almost every turn.

    Gary Gensler, chairman of the Commodity Futures Trading Commission, made partner at Goldman by age 30, then worked at Treasury under Robert Rubin.

    Today, he is emerging as one of the nation’s archreformers, pushing to impose some of the most stringent new financial regulations in history. And as the head of the Commodity Futures Trading Commission, the leading contender to oversee the complex derivatives contracts that played a central role in the financial crisis and, in turn, the Great Recession, he is in a position to influence the outcome.

    But hey, I understand. You had your daily doom and gloom story to tell, which can only be accomplished by parsing facts to eliminate anything positive and quoting people with whom you agree.

    Standard bobswern practice. That's why I only rate this diary a C- on the bobswern distortion continuum.

    Progressivism, like conservatism, cannot fail. It can only be failed.

    by tomjones on Thu Mar 11, 2010 at 06:55:55 AM PST

    •  sigh... (6+ / 0-)

      What reform?  Last I heard we don't have Glass-Steagall back, never mind more complex stuff.

      Second point - another Goldman alum put in power.  Sounds a lot like putting the fox in charge of the hen house.  Maybe he will "reform" smaller players, but do you really think he will reign in Goldman?

      •  From the same article (1+ / 0-)
        Recommended by:
        shrike

        The proposals championed by Mr. Gensler, if adopted by Congress, would substantially alter what is now a largely unregulated market in over-the-counter derivatives, financial instruments used by companies and investors to protect themselves and bet on moves in variables, like interest rates or currencies, and to speculate.

        The proposals include forcing the big banks that sell derivatives to conduct their trades in the open on public exchanges and clear them through central clearinghouses, so that any investor can see the prices that dealers charge their customers. Today, those transactions are bilateral and private.

        The banks and their customers might have to post collateral or guarantees to prevent the kinds of panics seen during the financial crisis, in which some investors worried that trading partners might have trouble keeping their side of the contract.

        In this way, the clearinghouses would work as circuit breakers in the great web of derivatives trading encircling the globe. Shifting the products, and the risk of default, off the books of the banks and onto these middlemen would ensure that no single bank was too interconnected to fail, the rationale goes.

        [snip]

        Public statements from the organization’s member banks, however, have been less critical of Mr. Gensler’s proposals. Lucas van Praag, a spokesman for Goldman, said on Wednesday that the company supported letting regulators see derivatives trades and prices in real time, with a delay built in for public disclosure. Goldman also does not oppose a clearinghouse for trades, he said.

        "We’re in favor of central clearing for derivatives," he said. "We also think that all derivatives that can be traded on an exchange should be, but we don’t think it is a good idea to insist that derivatives can only be traded if they’re on an exchange."

        Take it for what it's worth.

        If you are of the paranoid mind that thinks Goldman is the root of all evil (as does the diarist), then this is just blowing smoke.

        If, on the other hand, you are of the rational mind and think Goldman is hardly different than any other financial services company, then like any company Goldman might occasionally do good as well as evil.

        Progressivism, like conservatism, cannot fail. It can only be failed.

        by tomjones on Thu Mar 11, 2010 at 08:15:03 AM PST

        [ Parent ]

    •  When Goldman is a co-equal branch of God's Work.. (2+ / 0-)
      Recommended by:
      3goldens, 4Freedom

      with the Jesuits, I'll believe that Gensler puts the public good ahead of Goldman.

      US Commodity Futures Trading Commission Chairman Gary Gensler -- that sounds good.

      President of Harvard Larry Summers -- that sounded great, too.

      Then Summers stole $1-billion from Harvard into the GS coffers.

      Why don't we just get some XXXXXXX mobsters in there with the shiny suits and the goomahs ???

      Black 1970s Lincolns with cavernous trunks ?

      Angry White Males + Personality Disorder delusionals + Pro-Life Christians

      =EQ=

      The GOPer Base

      by vets74 on Thu Mar 11, 2010 at 08:20:57 AM PST

      [ Parent ]

    •  please tell me about Barney Frank's (3+ / 0-)
      Recommended by:
      3goldens, 4Freedom, vets74

      meaningful reforms, and when they were enacted.

  •  Seems like the only real question in (3+ / 0-)
    Recommended by:
    3goldens, shaharazade, papicek

    American politics is when does the shit hit the fan?

    Denial is complicity.

    by Publius2008 on Thu Mar 11, 2010 at 07:25:29 AM PST

    •  the first turd... (2+ / 0-)
      Recommended by:
      3goldens, methinshaw

      meets blade in November. Nobody will be happy with the electoral results.

      Christmas will be dismal, so do your shopping early.

      Then, beginning in 2011, the toxic commercial real estate loans begin bubbling up to the surface (according to Steiglitz and Warren), beginning a three year downward spiral into an unimaginable abyss.

      I've no idea how one should prepare for this.

      •  toxic commercial loans (3+ / 0-)
        Recommended by:
        3goldens, shaharazade, papicek

        are already being liquidated.  Its a daily undertaking, maybe just not in the news as fact because its easier to talk about it happening next year.  Its just going to get worse, not start next year.

        Colleague told me of $17 million commercial loan, assets liquidated at $2.5 million this week.  

        I know another that went at 1% of face.

        •  I'm going on what... (0+ / 0-)

          Stiglitz and Warren said in their Charlie Rose interviews. Both indicated that the worst is yet to come, beginning next year.

          Today, I'm seeing businesses go under, commercial real estate coming available - in this terrible market - and I keep in touch with a pair of businesses that I helped get off the ground. One of those businesses is down to 4 employees and 20 hour work weeks. None of it good news.

          I'm now wondering just how resilient the consumer will prove to be in the next few years. 12% of homes are in foreclosure or delinquency. Unemployment tickling 10%. Public schools closing.

          On the other hand, manufacturing in the US is perhaps doing better.

          One thing I know: the economy is not going to just grow out of this one.

          •  there will be no free market solution (1+ / 0-)
            Recommended by:
            papicek

            but there are ways to grow the economy, we just aren't making the most of them.

            Manufacturing is still downsizing which hurts employment even as productivity and competitiveness increase.  

            The problem is non-productive sectors, finance and health care, dragging too much of the money with no real return to average workers.

  •  This video needs to go viral. (5+ / 0-)
    Recommended by:
    3goldens, 4Freedom, vets74, papicek, annapaxis

    Simon Johnson on the Doom Cycle (MMBM) from Roosevelt Institute on Vimeo.

    A succint explanation of consumer abuse and corporate socialism and how it perpetuates the doom cycle.

    If God didn't want me to believe Creationists are stupid, why did s/he create Sarah Palin?

    by whataretheysmoking on Thu Mar 11, 2010 at 07:27:35 AM PST

  •  I feel so brilliant... (0+ / 0-)

    when the Dow first hit 10,000 I ran away from the market. I still have the WSJ issue, with it's one-and-only banner headline announcing the "accomplishment" around here somewhere.

    In those days, I watched almost nothing but CNBC. I researched like a madman. It didn't take Jim Cramer's famous rant to show me that the market was totally in lalaland. All it took was years of watching earnings season reporting, reported on CNBC, in which no sector seemed to do well but housing.

    It took me a few years to piece together why this was so: it's about the only sector that can't be off-shored.

    ::

    I was watching CNBC's Fast Money the other night. A bunch of professional traders giving quick takes on a series of questions: should one invest in gold? (No, but there are other commodities one should look at, like copper). What US companies should one look at? (Companies that sell into emerging consumer markets.)

    Note that they don't like the bailout, though it succeeded in saving their portfolios, which was all it was meant to do.

  •  I'm wondering (2+ / 0-)
    Recommended by:
    3goldens, rasfrome

    if anyone here could recommend an article or essay that provides a good analysis- in very simple laymen's terms- of what has happened to our economy over the last 10 to 20 years?and even more recently?

    I'm looking for something that could be understood by teens and young adults who have little knowledge about economic theories and terms like credit default swaps, TARP, Glass-Steagall, bubbles, etc.  (I'd have no problem with an article that included these terms, but they would have to be defined/explained somewhere in the piece.)

    Does such an article exist?  (I know.. I'm probably being unrealistic.)

    •  capitalism: a love story. (0+ / 0-)

      that'd be a start.
      wikipedia is also very readable.
      then i'd try using role playing.  things always come alive when its simulated.  assign roles and have them research it, then have them act it out.  (start with the high gas prices of summer '07, a mortagee, a high risk lender, someone whose job is outsourced, a senator on the take, a lehman bros trader, etc etc)

      I died for Joe Lieberman's sins.

      by stagemom on Thu Mar 11, 2010 at 08:30:52 AM PST

      [ Parent ]

    •  I think Krugmans NYT yesterday does a pretty (1+ / 0-)
      Recommended by:
      MissInformation

      good job.  Not the comprehensive overview you're looking for, but it compares how disparate Ireland and US systems collapsed while Canada's regulated banking system didn't. the Simon Johnson's graph herein shows financiers share of profits overpower the rest of the county's since 1980 relate the collapse to the 20-yrs of deregulation (shenanigans).

      I think the "transactions" (scams) are pretty simple, but the past few years was a much bigger scale.  The 80's trading and loan scam (pretend worthless land is worth $10M, borrow cash out and buy a jet); Enron (bet the farm several times over, hide the losing bets in pretend offshore shell companies).  All are basically scams, that Wall St lets pass at the expense of "institutional investors" (i.e. Joe/Jane Sixpack's retirement savings) - because they win on both sides, as long as nobody fingers them.  

      The reason they work so hard to get their hands on Social Security funds is they are out of pools of scamees, at least big enough to step it up one more notch.

      disl: I don't think they're a bunch of thieves so much as an industry that lost it's ethics.  they can always point to a scapecoat in all these cases, Arthur Anderson accounting firm got it for Enron.  In the latest, the R's blame it all on black people trying to buy homes, truly a sad excuse - I take that as an indicator that the wheels of the Ponzi bus are just about off.  unfortunate that O put his chips in on a bad bet.

  •  in one sentence: (2+ / 0-)
    Recommended by:
    3goldens, shaharazade

    Potemkin reforms dovetail with the financial service industry's goal of forestalling any measures that would interfere with its looting.

  •  "Team Obama Propaganda Campaign" ? (0+ / 0-)

    What is this?  Tea Party Patriots web site?

  •  After reading your diary (2+ / 0-)
    Recommended by:
    CitizenOfEarth, 3goldens

    the 'news' of Congress's dog and pony show of financial reform, like Health reform  is a another sick joke of the by-partisan bankster's takeover of our government. You can't blame this on the insane Republican's past or present as it has since Raygun been a by-partisan screw. Neoliberal's and neocon's are running both party's. All 'reform' is a bamboozle.  

    'Senate Banking Committee Chairman Chris Dodd (D-Conn.) said he's "very optimistic" he'll be able to craft a bipartisan financial reform bill.

    Dodd, who several weeks ago expressed pessimism about the prospects of passing a bipartisan reform bill, said that his negotiations with Sen. Bob Corker (R-Tenn.) on a bill had turned efforts around.'

    At this point I can only 'hope' that they all fall down. Unfettered capitalism is eating itself and the only sensible thing to do is disconnect and watch out for falling banksters. Fixing it isn't possible as long as the government is all about 'wealth creation'. Since the 'economy' has nothing to do with the real one we all live and work in we should invest in our own economies, community and regional. It's the only solution to Crisis Capitalism.

    Will they 'mandate' us to pay our taxes directly to GS? How long will the people give their consent to be governed by the corporations that offer nothing but the people's demise? Take cover and let them fall. Asking us to support this is where I draw the line.            

    •  Dodd has moved on already (0+ / 0-)

      having said he will not run again, he is doing the bidding of his future masters. Actually, in retrospect, they have been his masters for a long time but he has had to be sneaky about how he worked for them. Now the kimono is open baby.

      Call it the 'Corporate New Deal' or a 'Plastic Democrazy'© if that makes you feel good. I call it Fascism.

      by CitizenOfEarth on Thu Mar 11, 2010 at 03:34:26 PM PST

      [ Parent ]

  •  So, what can regular people do? (0+ / 0-)

    Most of us are powerless to affect anything these guys do, while every little thing they do affects our entire lives.

    I don't have any property or money, so they automatically control my whole life.

    Can they be stopped, or are they so arrogantly ensconced in their high-level positions -- and aided by members of government that are supposed to look out for us -- that they can't be toppled from power?

    "The difference between the right word and the almost-right word is like the difference between lightning and the lightning bug." -- Mark Twain

    by Brooke In Seattle on Thu Mar 11, 2010 at 09:31:40 AM PST

  •  The CNN Parrots are all squawking now (0+ / 0-)

    that the "Recession is over. Let's move on.". Clueless.

    Call it the 'Corporate New Deal' or a 'Plastic Democrazy'© if that makes you feel good. I call it Fascism.

    by CitizenOfEarth on Thu Mar 11, 2010 at 03:08:49 PM PST

  •  One tiny bit of relevant history................. (0+ / 0-)

    Back in teh dya, there was a nasty South American bond collapse. Banks would have failed by the hundreds if Volcker hadn't cobbled together a deal to pretend that those bonds were NOT zombies.

    Later on the banks recovered and with "fat spreads" over a decade were able to cover the losses.

    Fat =EQ= profitable.

    Shit happens.

    BTW: what worked for Volcker then is not my idea of a super/brilliant/viable fix for today.

    Good work for mediocrities.

    The likes of Paulson and his crew back later 2008.

    Paulson was a fine tool at using CDS leverage to steal from pension funds. As SecTres, a fine tool.

    Angry White Males + Personality Disorder delusionals + Pro-Life Christians

    =EQ=

    The GOPer Base

    by vets74 on Thu Mar 11, 2010 at 04:17:57 PM PST

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