Well, Congress is in the process of messing up once again. The current federal extension of unemployment benefits is set to expire on 12/31/11. That means that an unemployed individual will not be eligible for an extension unless he or she applies for it no later than the week between 12/25/11 and 12/31/11. Any person laid off after 7/1/2011 will be ineligible for it because the state normally pays 26 weeks of regular benefits.
Any simpleton can see this would be an utter economic disaster. Not only would many relatively long term unemployed be cut off depending on timing, but those losing their jobs any time in the latter half of the year would be cut off after the regular state benefits end (and some states are even cutting the number of basic weeks below 26).
This is a catastrophe for a 70% consumer driven economy. One of the most fiscally irresponsible things imaginable. Unemployment insurance is one of the most cost effective programs in existence. A federal Department of Labor economist I spoke with estimates that it provides a 130% return on each dollar of cost as it is completely re-injected back into circulation. It obviously can also save jobs through purchases at businesses that might be teetering on the brink of going under without such spending. It also relieves states, cities and towns from providing costly assistance to those who had otherwise been relying on unemployment benefits to pay for basic living costs.
Our Congress must be a collection of imbeciles who cannot relate to or cannot see what is happening all over America in order not to realize the immense priority this extension legislation should be given. Which in turn would mean that they have no right to hold their elected positions. They are there to serve their constituency, not to contribute to our floundering economy.
As I see it, this legislation is such an emergency that it should be proposed and enacted as a single piece of legislation with no ridiculous attachments. Just put it to a vote and vote on it immediately - and I mean right away after these "representatives of the populace" return from their Thanksgiving adjournment.
....................................................................................................................................
The above is sort of a macro view of the positive aspects of an unemployment insurance extension for those blasted by a 9% unemployment rate (actually around 18% when you consider underemployment, "fake consultants", part timers looking for full time jobs, etc). But one must look at the micro human-side of the equation. One must view the situation from the standpoint of someone actually in the situation in order to fully comprehend it. There are so many variables - some so cruel as to be almost Machiavellian.
Suppose you were laid off on 6/15/2011, while your neighbor held on to his job until 7/15/11. Assume you both live in a high unemployment state. You would be eligible for an unemployment extension because your regular benefits expired before 12/31/2011. Your neighbor would not since he got regular benefits into 2012.
In the same scenario, one neighbor might get an extension while another was ineligible due to a timing issue involving as little as one week. Everything depends on when you first applied. Heck, one could have delayed applying in hopes of quickly landing a new job, only to have it come back to burn him.
Now, if one had been relying on a $425 weekly unemployment check to pay rent/mortgage, utility bills, groceries, property tax, heat, auto gas and any number of loan payments - what happens when it's cut off? What do you do? Raid your diminished savings or 401(k) retirement account? Sell your possessions on e-Bay or Craigslist? Sell your house? Move back in with your parents? Take a job at McDonald's (as Chicago Mercantile Exchange inhabitants suggest)?
I guess responsible people would try to renegotiate every financial contract they've entered into. Would cut down on cable service features, suspend needed car maintenance, buy generic brands and anything else than could think of. But what happens when you've cut to the bone and you need to fill up your home heating oil tank in February to the tune of $650? Where do you get the money? One answer would be to apply for federally funded fuel assistance or apply for aid from your city/town welfare office. (Another example of misguided supposed savings from ending unemployment extensions).
There are hundreds of thousands, if not millions, of Americans on the way to this set of circumstances. It is just a matter of time. Some earlier, some later - but all in the same boat. Their lives will shortly be drastically changing. And Congress is dangling the lifeboat just outside their reach. This collective body with a less than 9% approval rating is farting around with these people's very existence.
.....................................................................................................................
So here is my philosophy on the "Passage of Time". A concept unappreciated by any bureaucrat, any elected official, any participant in the judicial process and many others. A great value must be placed on the swift implementation of what should have happened from the "get go". It is often simply too late when something that should have occurred from the beginning is accomplished retroactively. There is no appreciation of what transpires in the meantime. (Sorta like "justice delayed is justice never achieved"). This is why I left my position as an administrative law judge/appeal referee for a government agency. They could never understand nor comprehend the devastating impact on families when it took many weeks to get benefits they should have gotten from day one as a result of the ill-training of the initial decision makers. They simply couldn't see what difference it made if they ultimately received what they were entitled to. They couldn't correctly value or perceive the basic fact that a person's life could be destroyed in the intervening time.
I'm completely sure they will pass unemployment extension legislation. But they won't accomplish this basic step until much later - maybe some time in February of 2012. They will make it retroactive to 1/1/2012. By that point, my "passage of time" effects will already have taken place. It will be too late to stave off what already happened to the individuals impacted. The devastation will have already occurred and can't be corrected. Their screw-up will not be able to be reversed.
In preparing this piece, I spoke with the Washington, D.C. offices of my two Senators and Representatives. I simply asked all four what their stance was on extending unemployment insurance beyond 12/31/2011, given the high rate of unemployment. Three offices promised to respond in writing but failed to. The office of one Senator immediately presumed I was unemployed (although I am not and never said I was). This office sent me an e-mail filled with nothingness and political vapor about the Senator supporting whatever is decided by whomever.
And this is why I feel confident that Congress is about to betray us once more. They are either not cognizant of the ramifications of the issue or are unable/unwilling to answer a very simple and incredibly timely question. And these are the very people who are there to serve and preserve the interests of the electorate who are the victims of the behavior of Congress. I'm sure they are all having a wonderful Thanksgiving and planning their unencumbered Christmas celebrations.
Thursday, November 24, 2011
Tuesday, November 15, 2011
Cool MF Global Stuff
According to the proudly displayed MF Global Client Asset Protection Policy Statement:
" The protection of its customer's funds is MF Global's paramount concern ".
" Probably the cardinal safeguard of both futures and securities customer's funds by the
Commodities Enforcement Act, the Securities Enforcement Act and the rules and
regulations of the CTFC and SEC is that the funds be segregated from the funds of
the FCM/broker and may not be used to meet any obligations of the FCM/broker ".
- It appears that MF Global by apparently co-mingling client's funds not only violated its
pronounced paramount concern, but further violated a regulatory cardinal safeguard.
............................................................................................................................
The 2002 Sarbanes-Oxley anti-corporate fraud legislation requires that corporate CEOs
personally certify the accuracies of SEC submissions. By implication, it also called for
accurate statements during public presentations such as earnings calls and other
conference calls. This law was co-written by Jon Corzine when he was US Senator.
- Some filings submitted to the SEC did not list European sovereign debt on the balance
sheet, instead moving it to the obscure and easy to miss off balance sheet section. Other
filings apparently excluded it entirely.
- As late as an October 2011 earnings conference call, Corzine said that the "structure of
of the firm's Euro bond transactions essentially eliminates market and financing risk".
- Recent SEC filings stated that the company's liquidity position remained strong".
This strikes me as wilful and deliberate attempts to evade and circumvent the very law
he was partially responsible for. Another medal of honor for our co-opted present and
former Roman Theater called Congress.
...........................................................................................................................
The New York Fed employs a rigorous process including governance, the existence of
effective internal controls and other thoroughly measured practices before adding an
applying firm to its list of Primary Dealers. MF Global was added to this august group
in February of 2011. This despite the fact that MF Global in the previous 10 years had
been more sanctioned by regulatory agencies than any of its closest peers and within that
time frame had the 2nd highest amount of fines involving risk supervision and record-
keeping. They were the subject of repeated CFTC sanctions and fines totaling $12 million for continual failures in these areas. Not to mention settled civil suites where they were an "unwitting"partner to the use of MF Global accounts to further ponzi schemes. A former
regulatory official summarized the outfit as showing a "pattern of weakness in internal
supervision versus its peers".
- So why did the NY Fed decide to anoint them as a Primary Dealer? They were new to
investment banking and their capital at the time was substantially less than most of
the others. Was it just because Jon Corzine was buddies with ex-Goldman Sachs alum
NY Fed head William Dudley, or because of the very fine MF Global Client Asset
Protection Policy Statement above, or was it just because the dude was ex-Goldman
Sachs, ex-Senator, ex-Governor and all that neat sounding stuff? (Forget that he was
summarily bounced from his NJ governorship the first time NJ voters had the
opportunity to rectify their mistake).
- Some people suggest the the Fed should never have abrogated its supervision of the
Primary Dealers as it did in 1992. This left these upstanding financial institutions
in a virtual reporting playground where the Fed then expected them to submit accurate
data but does not audit the data. Instead expecting them to act voluntarily and with
transparency on their submissions. Sorta like asking the most unethical group around
to suddenly voluntarily act with honor and integrity when they are driven solely by
all the overwhelming temptations surrounding the concept of money.
I actually believe it to be far less than wise to have a private, bank-owned Fed oversee
the accuracy of anything to do with the Primary Dealers. Please give this authority to
some other body - and not any of the inept, morally challenged existing regulators.
....................................................................................................................................
Finally, nothing advantageous ever happens to broker/dealers without the help of the #1
enabler of the financial system. (OK, at least they're in the top 3). Yes, the (formidable)
SEC had to stick their sorry-ass into the mess. In 2004 the SEC voted unanimously
to change the Net Capital Rule to allow those with "tentative net capital" exceeding
$5 billion to increase leverage ratios. Welcome to the 6 x its capital MF Global bet
on European debt.
THE ABOVE PATHETIC-NESS ARE MERELY THINGS TO CHEW ON IN CASE
ONE MISSED IT WHILE AWAITING THE COURT RULING AS TO WHETHER
JP MORGAN CHASE WILL BE GRANTED SENIOR-LIEN HOLDER STATUS
TO SCREW OVER THE "SMALL GUY" ONCE AGAIN IN THE MF GLOBAL
CHAPTER 7 BANKRUPTCY LIQUIDATION PROCEEDINGS.
" The protection of its customer's funds is MF Global's paramount concern ".
" Probably the cardinal safeguard of both futures and securities customer's funds by the
Commodities Enforcement Act, the Securities Enforcement Act and the rules and
regulations of the CTFC and SEC is that the funds be segregated from the funds of
the FCM/broker and may not be used to meet any obligations of the FCM/broker ".
- It appears that MF Global by apparently co-mingling client's funds not only violated its
pronounced paramount concern, but further violated a regulatory cardinal safeguard.
............................................................................................................................
The 2002 Sarbanes-Oxley anti-corporate fraud legislation requires that corporate CEOs
personally certify the accuracies of SEC submissions. By implication, it also called for
accurate statements during public presentations such as earnings calls and other
conference calls. This law was co-written by Jon Corzine when he was US Senator.
- Some filings submitted to the SEC did not list European sovereign debt on the balance
sheet, instead moving it to the obscure and easy to miss off balance sheet section. Other
filings apparently excluded it entirely.
- As late as an October 2011 earnings conference call, Corzine said that the "structure of
of the firm's Euro bond transactions essentially eliminates market and financing risk".
- Recent SEC filings stated that the company's liquidity position remained strong".
This strikes me as wilful and deliberate attempts to evade and circumvent the very law
he was partially responsible for. Another medal of honor for our co-opted present and
former Roman Theater called Congress.
...........................................................................................................................
The New York Fed employs a rigorous process including governance, the existence of
effective internal controls and other thoroughly measured practices before adding an
applying firm to its list of Primary Dealers. MF Global was added to this august group
in February of 2011. This despite the fact that MF Global in the previous 10 years had
been more sanctioned by regulatory agencies than any of its closest peers and within that
time frame had the 2nd highest amount of fines involving risk supervision and record-
keeping. They were the subject of repeated CFTC sanctions and fines totaling $12 million for continual failures in these areas. Not to mention settled civil suites where they were an "unwitting"partner to the use of MF Global accounts to further ponzi schemes. A former
regulatory official summarized the outfit as showing a "pattern of weakness in internal
supervision versus its peers".
- So why did the NY Fed decide to anoint them as a Primary Dealer? They were new to
investment banking and their capital at the time was substantially less than most of
the others. Was it just because Jon Corzine was buddies with ex-Goldman Sachs alum
NY Fed head William Dudley, or because of the very fine MF Global Client Asset
Protection Policy Statement above, or was it just because the dude was ex-Goldman
Sachs, ex-Senator, ex-Governor and all that neat sounding stuff? (Forget that he was
summarily bounced from his NJ governorship the first time NJ voters had the
opportunity to rectify their mistake).
- Some people suggest the the Fed should never have abrogated its supervision of the
Primary Dealers as it did in 1992. This left these upstanding financial institutions
in a virtual reporting playground where the Fed then expected them to submit accurate
data but does not audit the data. Instead expecting them to act voluntarily and with
transparency on their submissions. Sorta like asking the most unethical group around
to suddenly voluntarily act with honor and integrity when they are driven solely by
all the overwhelming temptations surrounding the concept of money.
I actually believe it to be far less than wise to have a private, bank-owned Fed oversee
the accuracy of anything to do with the Primary Dealers. Please give this authority to
some other body - and not any of the inept, morally challenged existing regulators.
....................................................................................................................................
Finally, nothing advantageous ever happens to broker/dealers without the help of the #1
enabler of the financial system. (OK, at least they're in the top 3). Yes, the (formidable)
SEC had to stick their sorry-ass into the mess. In 2004 the SEC voted unanimously
to change the Net Capital Rule to allow those with "tentative net capital" exceeding
$5 billion to increase leverage ratios. Welcome to the 6 x its capital MF Global bet
on European debt.
THE ABOVE PATHETIC-NESS ARE MERELY THINGS TO CHEW ON IN CASE
ONE MISSED IT WHILE AWAITING THE COURT RULING AS TO WHETHER
JP MORGAN CHASE WILL BE GRANTED SENIOR-LIEN HOLDER STATUS
TO SCREW OVER THE "SMALL GUY" ONCE AGAIN IN THE MF GLOBAL
CHAPTER 7 BANKRUPTCY LIQUIDATION PROCEEDINGS.
Thursday, November 10, 2011
Solyndra Will Raise Its Ugly Head....and Huntsman
I suspect the real fallout from the Obama administration's disastrous support and promotion of Solyndra as a green jobs creator has yet to surface. The last thing a candidate for re-election in these times needs is to have to answer for yet another waste of taxpayer dollars in the form of a $500+ million loan to finance a company which was clearly undeserving.
Beyond clearly supportable speculation over whether Solyndra even had a feasible business model - questions will have to be answered surrounding the means by which the obvious fast-track financing decisions were reached. And explanations so far do not look overly viable on the surface. I would not say the allegations of "crony capitalism" appear at all far fetched.
Some blame Solyndra's failure on Chinese unfair competitive cost advantages and all that involves. But that does not address the relative inefficiencies of the company's solar panel designs. What kind of true due diligence was actually done here before so proudly handing over the money? To be specific, was it ever determined how they would spend a significant portion of it? Did the Obama administration realize that they would build a 300,000 square foot state of the art facility with the extra cash? Did they realize that it would include robots whistling Disney tunes, spa-like showers with LCD displays of water temperature and glass walled conference rooms? (seemingly missing only necessities such as $15k umbrella stands). The facility was even described as the Taj Mahal of production plants. Boy, it must have been fun to work there - as long as one was not bothered by the constantly building and unshipped inventory.
The Solyndra debacle has already left a sour taste before the republican party and its presidential candidate have even had a chance to really feast on it. And feast on it they will, along with poor economic leadership in the environment of a clearly unacceptable ~9.0% unemployment rate. Joined by an escalating schism between the fortunes of the wealthy elite and the expanding poor and those barely scraping by living paycheck-to-paycheck with just an unexpected expense or financial setback or pink slip separating them from the abyss. It would be far less than shocking if Solyndra ultimately costs Obama re-election.
.............................................................................................................................................
Meanwhile, the Republican cavalcade of clowns candidates are doing the best they can to make Solyndra a harmless irritant. You have Rick Perry effectively ending his chances by delivering the crowning blow to his debate ineptitude. One had to be in awe of his forceful statement that he would eliminate three government departments - followed by his comical inability to remember more than two of them. Could you envision an actual President delivering such a dunce routine? We need a convincing leader, not comic relief.
Then you have Herman Cain trotting out the old "Clarence Thomas defense" against several sexual harassment allegations in his so-far amateur hour denials. (And never forget how Clarence Thomas and some Supreme Court bullies helped get the 21st century ball rolling when George W. Bush and his gang of "weapons of mass destruction" war mongers, after being handed the election, initiated the never ending military contractor-feeding military occupations of oil-strategic countries. You know, to foster our fabulous democratic values on others while ignoring the class inequality and broken political structure leading to the growing Occupy/99% protests against our own dysfunctional government).
Mitt Romney has shown even less dynamicism than the terminally droll Dukakis and Kerry in arousing any enthusiasm. And his pre-politician career with leveraged buyout specialist Bain Capital does not particularly speak well when such outfits have been known to perceive employees as "liabilities rather than assets" in search of return on investment.
Don't even waste your time considering the antics of Michelle Bachman or Newt Gingrich unless you value wasting your time.
Meanwhile, the main stream media continues with its mission to shut out Ron Paul, despite many feeling he has acquitted himself well. Personally, I have not eliminated him based solely on his long standing position on the poisonous entity known as the Federal Reserve.
This leaves the basically not yet recognized candidacy of Jon Huntsman. I'm fairly impressed with him to this point. But he must get some momentum or he's toast. The man made a very good decision by forgoing the Nevada debate and being the foremost proponent of opposing Nevada moving their presidential caucus ahead of the New Hampshire primary. In doing so, he greatly enhanced his chances of a good showing to propel himself back into the race. Remember that many NH independents and democrats feel betrayed by Obama's policies and selection of Wall Street connected advisers. The NH primary is an open one, meaning that independents can participate. This NH poster is strongly considering temporarily changing my party affiliation from democrat to republican to vote for Huntsman in this one primary. Because I would like to see a process which eliminates the pretenders and promotes the legitimate contenders. At least for one more round until America decides it needs to establish a third party devoted to democratic principles truly responsive to the needs and desires of the electorate.
Beyond clearly supportable speculation over whether Solyndra even had a feasible business model - questions will have to be answered surrounding the means by which the obvious fast-track financing decisions were reached. And explanations so far do not look overly viable on the surface. I would not say the allegations of "crony capitalism" appear at all far fetched.
Some blame Solyndra's failure on Chinese unfair competitive cost advantages and all that involves. But that does not address the relative inefficiencies of the company's solar panel designs. What kind of true due diligence was actually done here before so proudly handing over the money? To be specific, was it ever determined how they would spend a significant portion of it? Did the Obama administration realize that they would build a 300,000 square foot state of the art facility with the extra cash? Did they realize that it would include robots whistling Disney tunes, spa-like showers with LCD displays of water temperature and glass walled conference rooms? (seemingly missing only necessities such as $15k umbrella stands). The facility was even described as the Taj Mahal of production plants. Boy, it must have been fun to work there - as long as one was not bothered by the constantly building and unshipped inventory.
The Solyndra debacle has already left a sour taste before the republican party and its presidential candidate have even had a chance to really feast on it. And feast on it they will, along with poor economic leadership in the environment of a clearly unacceptable ~9.0% unemployment rate. Joined by an escalating schism between the fortunes of the wealthy elite and the expanding poor and those barely scraping by living paycheck-to-paycheck with just an unexpected expense or financial setback or pink slip separating them from the abyss. It would be far less than shocking if Solyndra ultimately costs Obama re-election.
.............................................................................................................................................
Meanwhile, the Republican cavalcade of clowns candidates are doing the best they can to make Solyndra a harmless irritant. You have Rick Perry effectively ending his chances by delivering the crowning blow to his debate ineptitude. One had to be in awe of his forceful statement that he would eliminate three government departments - followed by his comical inability to remember more than two of them. Could you envision an actual President delivering such a dunce routine? We need a convincing leader, not comic relief.
Then you have Herman Cain trotting out the old "Clarence Thomas defense" against several sexual harassment allegations in his so-far amateur hour denials. (And never forget how Clarence Thomas and some Supreme Court bullies helped get the 21st century ball rolling when George W. Bush and his gang of "weapons of mass destruction" war mongers, after being handed the election, initiated the never ending military contractor-feeding military occupations of oil-strategic countries. You know, to foster our fabulous democratic values on others while ignoring the class inequality and broken political structure leading to the growing Occupy/99% protests against our own dysfunctional government).
Mitt Romney has shown even less dynamicism than the terminally droll Dukakis and Kerry in arousing any enthusiasm. And his pre-politician career with leveraged buyout specialist Bain Capital does not particularly speak well when such outfits have been known to perceive employees as "liabilities rather than assets" in search of return on investment.
Don't even waste your time considering the antics of Michelle Bachman or Newt Gingrich unless you value wasting your time.
Meanwhile, the main stream media continues with its mission to shut out Ron Paul, despite many feeling he has acquitted himself well. Personally, I have not eliminated him based solely on his long standing position on the poisonous entity known as the Federal Reserve.
This leaves the basically not yet recognized candidacy of Jon Huntsman. I'm fairly impressed with him to this point. But he must get some momentum or he's toast. The man made a very good decision by forgoing the Nevada debate and being the foremost proponent of opposing Nevada moving their presidential caucus ahead of the New Hampshire primary. In doing so, he greatly enhanced his chances of a good showing to propel himself back into the race. Remember that many NH independents and democrats feel betrayed by Obama's policies and selection of Wall Street connected advisers. The NH primary is an open one, meaning that independents can participate. This NH poster is strongly considering temporarily changing my party affiliation from democrat to republican to vote for Huntsman in this one primary. Because I would like to see a process which eliminates the pretenders and promotes the legitimate contenders. At least for one more round until America decides it needs to establish a third party devoted to democratic principles truly responsive to the needs and desires of the electorate.
Monday, November 7, 2011
Corzine Tells CFTC Regulators What To Do
I guess I was mistaken in thinking that regulators actually perform their function by independently deciding on rules and enforcing them upon the bodies they are charged to oversee.
We now learn that the Commodity Futures Trading Commission was to vote on a rule to address the risky sovereign debt related trades that MF Global was entering into - partly by restricting their ability to borrow from their own customers to finance them. Ex- Goldman Sachs-er Corzine had decided it was a great idea to invest in the sovereign debt of fiscally outstanding nations such as Italy, Portugal and Spain. The passing of the proposed CFTC rule would have hampered their ability to make the big bets to sufficiently satiate their gambling habit.
The other impacted parties apparently just trotted out their usual lobbying teams to press against it. But MF Global's CEO Corzine directly and privately met with most of the five commissioners to enlighten them. He was obviously very convincing in lecturing them to the effect that such a rule was not needed and would hurt the profitability of firms such as MF Global. He so effectively intimidated, swayed and convinced the commissioners that the vote was delayed.
After the boneheaded bet backfired leading to bankruptcy, the issue of the missing $600 million arises. This, in itself invalidates half of Corzine's argument (that the existing accountability methods were fine and needed no further supervision). This leaves only the would hurt the profitability as being the accurate persuasive stance.
A dictionary definition of the term "regulators" most assuredly does not include bending over to the profitability interests of those regulated against the best interests of the general public. I'm so sure that I won't even bother to look it up. But that is precisely what happened here. A maniacal ego-driven habitual gambler personally co-opted the CTFC commissioners authority - and they let him do it by bowing to his "expertise", reputation and perceived credibility.
As the financial industry has taken over world power, I guess it is now time to add to all dictionary definitions affecting financial matters in any way. Terms such as "regulator" should include additional entries beginning with the phrase "when applied to the financial industry it embodies a differing meaning......".
Yes - in this matter involving a proposed CFTC rule - Corzine might just as well have been the head of the CFTC. And the kicker is that the New York Fed saw fit to add MF Global to its list of primary dealers in February of 2011 in the first place. I wonder what the "true" standards for admission to the group are?
Finally, is there any particular reason why subject CEOs and lobbyists are allowed personal and direct access to regulatory commissioners? Any learning disabled observer could see the opportunity for corruption, graft and flat out vote-buying. Why not restrict them to submitting position papers or arms length questions and answers? Most likely around 80% or more of lobbying efforts come from companies trying to avoid further supervisory measures. So why abandon basic tenets of governance by allowing this set of circumstances to exist? Especially when failure to reign them has been repeatedly been found to be so profoundly damaging
We now learn that the Commodity Futures Trading Commission was to vote on a rule to address the risky sovereign debt related trades that MF Global was entering into - partly by restricting their ability to borrow from their own customers to finance them. Ex- Goldman Sachs-er Corzine had decided it was a great idea to invest in the sovereign debt of fiscally outstanding nations such as Italy, Portugal and Spain. The passing of the proposed CFTC rule would have hampered their ability to make the big bets to sufficiently satiate their gambling habit.
The other impacted parties apparently just trotted out their usual lobbying teams to press against it. But MF Global's CEO Corzine directly and privately met with most of the five commissioners to enlighten them. He was obviously very convincing in lecturing them to the effect that such a rule was not needed and would hurt the profitability of firms such as MF Global. He so effectively intimidated, swayed and convinced the commissioners that the vote was delayed.
After the boneheaded bet backfired leading to bankruptcy, the issue of the missing $600 million arises. This, in itself invalidates half of Corzine's argument (that the existing accountability methods were fine and needed no further supervision). This leaves only the would hurt the profitability as being the accurate persuasive stance.
A dictionary definition of the term "regulators" most assuredly does not include bending over to the profitability interests of those regulated against the best interests of the general public. I'm so sure that I won't even bother to look it up. But that is precisely what happened here. A maniacal ego-driven habitual gambler personally co-opted the CTFC commissioners authority - and they let him do it by bowing to his "expertise", reputation and perceived credibility.
As the financial industry has taken over world power, I guess it is now time to add to all dictionary definitions affecting financial matters in any way. Terms such as "regulator" should include additional entries beginning with the phrase "when applied to the financial industry it embodies a differing meaning......".
Yes - in this matter involving a proposed CFTC rule - Corzine might just as well have been the head of the CFTC. And the kicker is that the New York Fed saw fit to add MF Global to its list of primary dealers in February of 2011 in the first place. I wonder what the "true" standards for admission to the group are?
Finally, is there any particular reason why subject CEOs and lobbyists are allowed personal and direct access to regulatory commissioners? Any learning disabled observer could see the opportunity for corruption, graft and flat out vote-buying. Why not restrict them to submitting position papers or arms length questions and answers? Most likely around 80% or more of lobbying efforts come from companies trying to avoid further supervisory measures. So why abandon basic tenets of governance by allowing this set of circumstances to exist? Especially when failure to reign them has been repeatedly been found to be so profoundly damaging
Thursday, November 3, 2011
Econorama: Who Owns The Fed? - Wrong Question
Econorama: Who Owns The Fed? - Wrong Question: Many people have been frustrated when trying to determine who actually owns the private entity known as the Federal Reserve. That's because...
Wednesday, November 2, 2011
Why Didn't The Press Ask Bernanke "The Begged For" Question?
An analysis of the Fed Chairman's press conference performance of 11/2/2011 is up to others.
But the press had the perfect opportunity to ask the one question on the minds of so many citizens and the press blew it.
- It had to do with a question posed regarding the potential increased purchases of mortgage backed securities and how that could revitalize the housing sector. Mr. Bernanke stated that such monetary policy (MBS purchases) had not been as effective as hoped because Americans had been prevented from buying new homes or refinancing by tightened bank credit lending standards. Essentially saying that Banks had choked off the intended supply of credit to the housing market by instead increasing their own coffers.
- SO HERE IS THE OBVIOUS FOLLOWUP QUESTION THAT WAS NOT ASKED :
When the TARP monies were made available to the Biggest Banks by decision of the Treasury Department and Federal Reserve (followed by discount window access and ZIRP) - why were conditions not placed on these banks to ensure that this funding was to flow into the general economy? That it not be allowed to be hoarded and even used to support executive compensation and trader bonuses?
This strikes me as something that goes to the heart of the matter. Something that makes normal Americans question the relationship between the Federal Reserve and the financial system. When opportunities to clarify these types of things are missed, it is a disservice to any person trying to make sense out of our present state.
These institutions seem to want all the privileges of being bank holding companies without the obligations and incumbencies inherent under Federal Reserve regulation that these same newly coined bank holding companies proclaimed when they applied for their new status. And it appears that these inappropriate privileges are being granted.
But the press had the perfect opportunity to ask the one question on the minds of so many citizens and the press blew it.
- It had to do with a question posed regarding the potential increased purchases of mortgage backed securities and how that could revitalize the housing sector. Mr. Bernanke stated that such monetary policy (MBS purchases) had not been as effective as hoped because Americans had been prevented from buying new homes or refinancing by tightened bank credit lending standards. Essentially saying that Banks had choked off the intended supply of credit to the housing market by instead increasing their own coffers.
- SO HERE IS THE OBVIOUS FOLLOWUP QUESTION THAT WAS NOT ASKED :
When the TARP monies were made available to the Biggest Banks by decision of the Treasury Department and Federal Reserve (followed by discount window access and ZIRP) - why were conditions not placed on these banks to ensure that this funding was to flow into the general economy? That it not be allowed to be hoarded and even used to support executive compensation and trader bonuses?
This strikes me as something that goes to the heart of the matter. Something that makes normal Americans question the relationship between the Federal Reserve and the financial system. When opportunities to clarify these types of things are missed, it is a disservice to any person trying to make sense out of our present state.
These institutions seem to want all the privileges of being bank holding companies without the obligations and incumbencies inherent under Federal Reserve regulation that these same newly coined bank holding companies proclaimed when they applied for their new status. And it appears that these inappropriate privileges are being granted.
It Could Be Argued that the Financial Industry Occupation Started in 1970
PART ONE OF A TWO PART VERY GENERALIZED VIEWPOINT ON HOW THE FINANCIAL INDUSTRY WAS ALLOWED TO DETERMINE THE DIRECTION OF AMERICA
Prior to 1970 the New York Stock Exchange prohibited investment banks from going public. They were either partnerships or closely held private corporations. The NYSE relaxed this rule in 1970. This opened the floodgates for investment bank IPOs beginning in the 70s and 80s. It allowed them to raise huge amounts of capital against which to borrow for investing with leverage. It assuredly also spurred the business model of massive reward for short term performance. The new standard of setting aside nearly 50% of earnings for salaries and bonuses for non-partners germinated here. The need for rather conservative stewardship of partner's fortunes was over, replaced by adventurous risk taking Of course, the later proven-faulty risk management provisions were also established to control it. The latter part of the 20th century spawned the growth of all kinds of financial products and instruments that torture us today. Created the chance-taking trader in search of great riches with little to lose if it didn't work out (or if fired - come out well ahead).
By 1999 all the now-despised Wall Street heavyweights had gone public - Morgan Stanley (1998) and Goldman Sachs (1999) being the last. I'm sure the decisions made by these last two holdouts were based on the forthcoming change in the US from fractional to a decimal based trading system. This required substantial investment in computerization to provide the required instantaneous bid/quote spread and speed to profitably address it. It fostered the growth and need for technical talent, financial engineering, computer programs with resultant algorithms - generally a new type of skill set to compete in the new information age driven by the internet.
This profound transformation was accompanied by the ascension to power of two of the most destructive individuals in the history of finance/government. Federal Reserve Chairman Alan Greenspan and Treasury Secretary Robert Rubin. Greenspan tumbled from a widely respected Fed Chief to a tragically misguided clown at the end of his tenure. His legacy was to intensify the Fed's subservience to Banks, implement misguided monetary policy feeding bubbles (lastly the disastrous real estate bubble), to ultimately encourage recklessness and then proceed to not even recognize the bubbles he so greatly helped create. He also formed a tag team with Rubin to promote deregulation of derivatives and other dangerous products in the mistaken belief that markets can be effectively self governed. (Rubin's successor Larry Summers also lent his support and influence). These three, along with Bank lobby-bought politicians such as Phil Gramm were greatly responsible for shepherding through perhaps the most damaging financial related legislation in history. The Glass-Steagall Act so important to the stability of markets was repealed in 1999. (Thanks Congress - good work). No longer were the Investment Banks required to be separate from commercial banking operations. The Gramm-Leach-Bliley Act became law.
Like the ability for Investment Banks to go public, the Investment Houses jumped all over this. They all changed to bank holding company status. J.P. Morgan Chase, Bank Of America, Lehman Brothers, Bear Stearns, Citigroup, etc - followed by Morgan Stanley and Goldman Sachs to complete the foul mess by 2008 Their dream had come true. Their control and influence had become fully solidified. They got permanent access to the discount window and associated access to liquidity and funding. The public was then subject to their cynically comical stated reasons for pursuing the change in status. The "stability, flexibility and opportunity to better serve clients under regulatory supervision that the Fed provides with its full prudential supervision" etc. What a blasphemous way to describe the creation of moral hazard and the term "To Big To Fail". The only member of this august group to actually be allowed to fail was Lehman Brothers - and a 600 page book could be written to cover all the true reasons for that. Needless to say, Hank Paulson, Ben Bernanke and Timothy Geithner later took Congress hostage by deciding that should never happen again. And Congress continued on with its record of subservience to the Banking Elite. A situation still existing today.
PART TWO OF THIS PIECE WILL BE FORTHCOMING SHORTLY
Prior to 1970 the New York Stock Exchange prohibited investment banks from going public. They were either partnerships or closely held private corporations. The NYSE relaxed this rule in 1970. This opened the floodgates for investment bank IPOs beginning in the 70s and 80s. It allowed them to raise huge amounts of capital against which to borrow for investing with leverage. It assuredly also spurred the business model of massive reward for short term performance. The new standard of setting aside nearly 50% of earnings for salaries and bonuses for non-partners germinated here. The need for rather conservative stewardship of partner's fortunes was over, replaced by adventurous risk taking Of course, the later proven-faulty risk management provisions were also established to control it. The latter part of the 20th century spawned the growth of all kinds of financial products and instruments that torture us today. Created the chance-taking trader in search of great riches with little to lose if it didn't work out (or if fired - come out well ahead).
By 1999 all the now-despised Wall Street heavyweights had gone public - Morgan Stanley (1998) and Goldman Sachs (1999) being the last. I'm sure the decisions made by these last two holdouts were based on the forthcoming change in the US from fractional to a decimal based trading system. This required substantial investment in computerization to provide the required instantaneous bid/quote spread and speed to profitably address it. It fostered the growth and need for technical talent, financial engineering, computer programs with resultant algorithms - generally a new type of skill set to compete in the new information age driven by the internet.
This profound transformation was accompanied by the ascension to power of two of the most destructive individuals in the history of finance/government. Federal Reserve Chairman Alan Greenspan and Treasury Secretary Robert Rubin. Greenspan tumbled from a widely respected Fed Chief to a tragically misguided clown at the end of his tenure. His legacy was to intensify the Fed's subservience to Banks, implement misguided monetary policy feeding bubbles (lastly the disastrous real estate bubble), to ultimately encourage recklessness and then proceed to not even recognize the bubbles he so greatly helped create. He also formed a tag team with Rubin to promote deregulation of derivatives and other dangerous products in the mistaken belief that markets can be effectively self governed. (Rubin's successor Larry Summers also lent his support and influence). These three, along with Bank lobby-bought politicians such as Phil Gramm were greatly responsible for shepherding through perhaps the most damaging financial related legislation in history. The Glass-Steagall Act so important to the stability of markets was repealed in 1999. (Thanks Congress - good work). No longer were the Investment Banks required to be separate from commercial banking operations. The Gramm-Leach-Bliley Act became law.
Like the ability for Investment Banks to go public, the Investment Houses jumped all over this. They all changed to bank holding company status. J.P. Morgan Chase, Bank Of America, Lehman Brothers, Bear Stearns, Citigroup, etc - followed by Morgan Stanley and Goldman Sachs to complete the foul mess by 2008 Their dream had come true. Their control and influence had become fully solidified. They got permanent access to the discount window and associated access to liquidity and funding. The public was then subject to their cynically comical stated reasons for pursuing the change in status. The "stability, flexibility and opportunity to better serve clients under regulatory supervision that the Fed provides with its full prudential supervision" etc. What a blasphemous way to describe the creation of moral hazard and the term "To Big To Fail". The only member of this august group to actually be allowed to fail was Lehman Brothers - and a 600 page book could be written to cover all the true reasons for that. Needless to say, Hank Paulson, Ben Bernanke and Timothy Geithner later took Congress hostage by deciding that should never happen again. And Congress continued on with its record of subservience to the Banking Elite. A situation still existing today.
PART TWO OF THIS PIECE WILL BE FORTHCOMING SHORTLY
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