Free Republic

It's time to finally lay to rest claims stretching back as far as 2007 that Goldman Sachs was peddling securities backed by risky home mortgages while it was secretly betting that the US housing market was in trouble. Far from being "secretly" down on the US housing market, very early on Goldman was publicly and privately warning that home prices would decline and that this decline would have an impact on mortgage backed securities. The complaints about Goldman being on both sides of the mortgage trade stretch at least as far back as December, 2007. Ben Stein wrote a column...

[Excerpt] "Sometimes our technology, in creating these securities, outpaces our ability to cope with them." That's what Larry Fink told the New York Times in May 1987 when asked about Howie Rubin's trading disaster. In the past, Fink would have made that statement to a reporter and then celebrated with his team the fact that one of his competitors, particularly one like Merrill Lynch, which he saw as a pesky upstart in the field he aimed to dominate, was now being nailed with massive losses. But Fink wasn't celebrating, because, much like Howie Rubin, he had just gotten his first...

There is no easy way to say this, but the country that some of us love is broke. Not broke in the whimsical sense or even shock value sense, but really broke. To illustrate the example clearly, let's say you have a decent job and are making about 80k/year. Not bad right? Even living on the east coast you can achieve a comfortable living for yourself. Go buy a a new Mercedes - you deserved it! But wait, you have promised certain people that you will take care of their retirement and medical needs and they depend you, after all...

Last week a new bill was introduced in the Senate to audit the Federal Reserve. Some backers of my bill HR1207 and the existing Senate companion bill S.604 were a little miffed at this, but depending on how you think about it, this new legislation poses no great threat to our efforts. With the economy in shambles, people are looking for answers - not just because of lost savings on Wall Street, but because of lost houses on Main Street. Because of the many problems we face, the Federal Reserve and its powers over the economy have come under scrutiny....

WASHINGTON (AP) — It's a big number that only tells part of the story. The number of banks that have failed so far this year topped 100 on Friday — hitting 106 by the end of the day — the most in nearly two decades. But the trouble in the banking system from bad loans and the recession goes even deeper. Dozens, perhaps hundreds, of other banks remain open even though they are as weak as many that have been shuttered. Regulators are seizing banks slowly and selectively — partly to avoid inciting panic and partly because buyers for bad...

WASHINGTON (CNN) – The banking system today may be in a more precarious position than it was a year ago, the man charged with overseeing a $700 billion bailout program said Wednesday. Neil Barofsky, the special inspector general managing the Troubled Asset Relief Program, told CNN's Wolf Blitzer on Wednesday that the government's decision to support bank mergers over the past year may have put the U.S. economy more at risk. "These banks that were too big to fail are now bigger," Barofsky said. "Government has sponsored and supported several mergers that made them larger and that guarantee, that implicit...

I have reason to suspect that the "monetary transmission mechanism" is full of rocks (again), and we are about to have another instance of what could colloquially be called "fun." (Yes, that's sarcasm.) Here's what we know and what I can deduce from it: JP Morgan's "cash position" was analyzed by a writer who published on SCRIBD, which showed that actual cash held has deteriorated radically. By more than half in the last year. The deterioration is continuing, not slowing. I am hearing repeated anecdotes from multiple areas that foreclosed property held by banks with multiple full-price offers that include...

By ALLAN H. MELTZER The United States is headed toward a new financial crisis. History gives many examples of countries with high actual and expected money growth, unsustainable budget deficits, and a currency expected to depreciate. Unless these countries made massive policy changes, they ended in crisis. We will escape only if we act forcefully and soon. As long ago as the 1960s, then French President Charles de Gaulle complained that the U.S. had the "exorbitant privilege" of financing its budget deficit by issuing more dollars. Massive purchases of dollar debt by foreigners can of course delay the crisis, but...

At least since the end of World War II, sovereign debt risk has been a very real problem, but one confined mostly to the developing world. Sure, there was the risk that the government might decide to inflate away the value of your loan, that risk abated in most places. (Though obviously not all--I'm looking at you, Italy!) Places where it didn't abate were increasingly forced to borrow in other currencies, leaving default as their main option--inflating away domestic denominated debt tended to make your dollar denominated debt problems worse. Oh, conservatives made noise about sovereign debt risk and inflation,...

The Federal Reserve may end up taking no losses on the emergency programs it put in place to fight the crisis, New York Fed president William Dudley said on Thursday, a view that was shared by Fed vice chairman Donald Kohn. "The Fed may ultimately avoid any losses on any of the programs," Dudley said in brief opening remarks before moderating a panel at the Boston Fed's annual conference. Dudley said the emergency facilities were shrinking naturally. "Things have gone pretty well," he said of the exit of some of the liquidity facilities. Fed vice chair Donald Kohn mirrored that...

Government regulators threatened to remove top Bank of America executives if they backed out of a buyout of failing brokerage giant Merrill Lynch, and offered to provide taxpayer funds to compensate for Merrill's poor performance, according to company records obtained by The Washington Times. The documents - e-mails between bank executives and their outside attorneys as well as board meeting "talking points" prepared for then-Bank of America Chief Executive Ken Lewis - offer new insight into the hardball tactics that produced one of the biggest deals negotiated during the late 2008 global financial crisis, one that is still reverberating on...

In the summer of 2008, two months before Lehman Brothers filed for bankruptcy, Richard S. Fuld Jr., the firm's chairman, was continuing his desperate efforts to find a lifeline. They had begun in March, shortly after the demise of Bear Stearns, when Mr. Fuld called the legendary investor Warren E. Buffett seeking a capital infusion, to no avail. Lehman had raised money elsewhere, but that didn't help for long, and its condition again was worsening.Adapted from "Too Big to Fail: How Wall Street and Washington Fought to Save the Financial System — And Themselves." The book, being published Tuesday by...

The U.S. has moved past none of the core issues that brought the economy to its knees last fall, Rep. Ron Paul (R-Texas) suggested Tuesday. Paul asserted that while some big financial institutions may be starting to reap large profits again, the bailouts put in place to help those firms last year have only worsened the long-term economic standing in the country. "None of this is behind us," the libertarian Republican said during an appearance on CNN. "All we have done is prolong the agony and very soon people are going to realize, in spite of all these huge profits,...

BIRMINGHAM, Ala. (AP) — Mayor Larry Langford, who could be tossed out of office and go to prison if convicted of federal bribery charges, recently offered some advice to a new Birmingham City Council member. "The illusion of power is the most dangerous drug on the planet," Langford said. "A little bit of power — nothing intoxicates like it." Last week's comment may sound a lot like the government's opening argument against Langford, 61, the most recent in a long line of prominent names in the state Democratic Party to face corruption charges. Jury selection begins Monday. Prosecutors claim a...

“IF you really want to know why the financial system nearly collapsed in the fall of 2008, I can tell you in one simple sentence.” The statement came from a man sitting three or four stools away from me in a sparsely populated Midtown bar, where I was waiting for a friend. “But I have to buy you a drink to hear it?” I asked. “Absolutely not,” he said. “I can buy my own drinks. My 401(k) is intact. I got out of the market 8 or 10 years ago, when I saw what was happening.” He did indeed look...

U.S. states suffer "unbelievable" revenue shortages By Lisa Lambert Fri Oct 9, 5:59 pm ET WASHINGTON (Reuters) – The U.S. economy may be creeping toward recovery after the worst slowdown since the Great Depression, but many states see no end in sight to their diving tax revenues. Tax revenues used to pay teachers and fuel police cars continue to trail even the most pessimistic expectations, despite the cash from the economic stimulus plan pouring into state coffers. "It's crazy. It's really just unbelievable," said Scott Pattison, executive director of the National Association of State Budget Officers, and called the states'...

The prime sponsor of a plan to audit the Federal Reserve, which oversees U.S. monetary policy, U.S. Rep. Ron Paul, R-Texas, says his plan has reached 300 co-sponsors in the U.S. House. The legislation calls for a full and complete audit of the Federal Reserve by the Government Accountability Office, reported to Congress by the end of 2010. "I continue to be pleased that so many of my colleagues are willing to stand up for transparency and accountability in government by cosponsoring this bill," Paul said today.

World Bank could run out of money 'within 12 months' The World Bank is close to running out of money, its president, Robert Zoellick, has disclosed. By Edmund Conway, Economics Editor in Istanbul Published: 8:36PM BST 02 Oct 2009 World Bank president Robert Zoellick has launched a major campaign secure more funding from rich nations Photo: REUTERS The Bank, whose job it is to support low-income countries, has had to hand out so much cash in the wake of the financial crisis that its resources could run dry within 12 months. “By the middle of next year we will face...

In May of 2008, Times Online ran an article entitled, Barack Obama: the New Great Redeemer. The author, Gerard Baker, recognized something many American voters at that time were unwilling to admit, which was, The idolatry of Mr. Obama is a shame...The Illinois senator is indeed, an unusually talented, inspiring and charismatic figure...But he is not a saint. He is a smart and eloquent man with a personal history that is startlingly shallow set against the scale of the office he seeks to hold... If the past 40 years have taught us anything they have surely taught that premature canonization...

From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again ### The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a...

It's 'extremely unlikely' that taxpayers will see a full return on their investment, Neil Barofsky, special inspector general for the Troubled Asset Relief Program, tells the Senate Banking Committee. Reporting from Washington - The Treasury is unlikely to get back the full amount of money lent under the Troubled Asset Relief Program despite a recent spate of repayments from large banks, warned the program's watchdog. The program "played a significant role" in rescuing the financial system from a meltdown, Neil Barofsky, special inspector general for TARP, testified before the Senate Banking Committee on Thursday. But it was "extremely unlikely that...

Throughout the history of American commercial life, one cultural trait has tended to dominate: Americans are optimists, a people prone to seeing the glass as not merely half-full but rapidly expanding, and bearing liquid that might yet be turned into gold. This exuberant optimism has proven beneficial, emboldening risk-taking that has achieved innovation and wealth. It has prompted entrepreneurs to invest borrowed money in untested ideas that sometimes yield breakthroughs. It has encouraged ordinary people to accept debt in the name of accelerated gain — more comfortable homes, higher education, late-model cars. Yet in recent times this eagerness to augment...

The financial collapse of 2008 and the Great Recession have had, not surprisingly, a major adverse impact on the economy of the country's financial center, New York City. There have been over 40,000 job losses in the financial community alone and both city and state budgets are deeply dependent on tax revenues from this one industry. There has been much talk that New York might take years to recover—if, indeed, it ever can. But if one looks at the history of New York there is reason for much optimism. The city's whole raison d'être since its earliest days explains why....

A year ago this week, Lehman Brothers blew up, dramatically advancing one of the worst financial disasters in history. The reckless behavior of greedy Wall Street bankers had come home to roost, making life a lot tougher for the rest of us. Since then, what have President Barack Obama and Congress done to prevent them from doing it again? Pretty much what Obama did when he spoke to Wall Street earlier this week. Talk. "They really haven't done anything that could prevent another meltdown," says Joseph Mason, financial-sector expert who used to work for one of the main national banking...

Many are accustomed to thinking in terms of a 'housing bubble.' But this is only part of the story. In fact, the first decade of the 21st century brought us a real estate double bubble—one in housing, and one in commercial real estate. Many are accustomed to thinking in terms of a “housing bubble.” But this is only part of the story. In fact, the first decade of the 21st century brought us a real estate double bubble—one in housing, and one in commercial real estate. They both involved property prices increasing by an obviously unsustainable 90 percent over six...

President Obama is speaking tonight, apparently to assure us all that his administration has the financial crisis resolved. Don’t bet on it. To see why, let me take you back a couple of years. In the fall of 2007, facing billions in losses on Merrill Lynch’s holdings of toxic assets, then-CEO Stan O’Neal approached his board at least twice to sell Merrill or merge it with a major bank — and at least twice got rejected. Merrill was bleeding, he warned, and might not survive the huge losses on its balance sheet. The board’s response: No way. The firm would...

Regulators today won't define 'systemic risk,' unlike 25 years ago. With Congress back in session and the anniversary of the Lehman Brothers failure upon us, the Obama Administration is resuming its quest for greatly expanded authority to bail out American businesses. Under the Treasury reform blueprint, any financial company, whether a regulated bank or not, could be rescued or seized by the Federal Deposit Insurance Corporation if regulators believe it poses a systemic risk. If recent history is any guide, when the feds stage their next intervention, they will not define "systemic risk" and they will refuse to release the...

After years of selling cheap goods to debt-fuelled Western consumers, China now has $2 trillion dollars of foreign exchange reserves. That's 2,000 billion – a reserve haul no less 25 times bigger than that of the UK. BY LIAM HALLIGAN (snip) The entire non-Western world rightly sees serious inflationary pressures down the track in the US, UK and other nations where political cowardice has resulted in irresponsible money printing. (snip) ...to send the dollar into freefall. US inflation would then soar and interest rates would have to be jacked up. Even if a fast-collapsing dollar is avoided, Fed rates may...

You can see why markets and governments both like to blame Lehman Brothers for the "Great Contraction". Such wishful thinking shields investors from the nasty reality that deeper forces are at work: it absolves officialdom from its own destructive role in fixing the price of credit too low for 20 years, luring us into debt. As my colleague Jeremy Warner puts it, Lehman no more caused the economic convulsions of the last year than the assassination caused the First World War. There was the little matter of a rising Germany then, and rising China now. Both scrambled the international system,...

SAN FRANCISCO (MarketWatch) -- Regulators closed Chicago-based Corus Bank N.A. and Woodbury, Minn.-based Brickwell Community Bank on Friday, bringing the number of U.S. bank failures this year to 91 and costing the federal deposit-insurance fund more than $1.7 billion as the credit crisis continues claiming victims.

The national debt may reach 181% of GDP in 2035 and 716% of GDP in 2080. The latest budget projections show the national debt rising from $5.8 trillion last year to $7.6 trillion this year and $14.3 trillion in 2019. According to the Congressional Budget Office (CBO), the debt will rise from 40.8% of the gross domestic product in 2008 to 53.8% in 2009 and 67.8% in 2019. This raises the question of how much debt is too much. At what point are the economic consequences in terms of inflation, higher interest rates, slow growth or a collapsing dollar so...

Korean Consortium Buys AIG Building for Bargain Price SEPTEMBER 11, 2009 08:03 Korean capital has advanced into Wall Street for the first time by purchasing a high-rise commercial building in the U.S. financial center. A consortium led by Kumho Investment Bank last week paid in full 150 million U.S. dollars to buy the AIG headquarters building after being selected as the preferred bidder. The consortium beat out 30 other consortia from 17 countries in June. The Kumho-led consortium held a housewarming party by inviting dignitaries the day when it received ownership rights to the skyscraper. Attending the event were Elizabeth...

Harvard’s endowment tumbled 27.3 percent in its latest fiscal year, largely because of problems with its private equity and hedge fund portfolios, lopping off $10 billion and shrinking its portfolio to $26 billion. The loss is the biggest percentage decline at Harvard in 40 years and has prompted a review of how it manages its money and allocates assets. Jane Mendillo, who took over the endowment on July 1, 2008, intends to manage more of the school’s assets directly instead of using outside money managers and to hire additional people to oversee the management by outsiders. In her letter describing...

WASHINGTON, D.C. (BNO NEWS) -- President Obama will deliver a "major speech" on the global financial crisis on Monday, the White House said on Thursday evening. The speech comes one year to the day after Lehman Brothers collapsed and precipitated a financial crisis that reverberated across the globe. Obama will deliver the remarks on the crisis at Federal Hall in New York City at midday. "He will discuss the aggressive steps the Administration has taken to bring the economy back from the brink, the commitment to winding down the government's role in the financial sector and the actions the United...

Near the start of this year Ron Paul (R-Texas) introduced H.R. 1207, the Federal Reserve Transparency Act of 2009. The bill was referred to the House Committee on Financial Services. As of this writing, H.R. 1207 has 282 cosponsors. A Senate equivalent, S.604, the Federal Reserve Sunshine Act of 2009, has been introduced by Bernie Sanders (I-Vt.). It has 23 cosponsors. Both bills have received a tremendous groundswell of grass-roots support. Much of the support is coming from ordinary people who have become aware of the fact that the Federal Reserve has created trillions of dollars literally out of nothing...

Financial Crisis Revisited - this is a political Satire song about Lehman Bros. (sept. 15 is the anniversary of their bankruptcy btw) and the recession. It was made by Ryan Stotland, a 22 yo Canadian, who is currently doing a 12,000 Km bike-ride is South America to raise money for charity (skin cancer center) Financial Crises Revisited watch on YouTube

To many observers, the Federal Reserve has never looked more heroic than it does right now. This past winter, America’s financial system faced the prospect of utter ruin. And, while the economy has suffered plenty in 2009, the worst did not come to pass. The banking system that lends to our employers, thereby allowing our economy to function, never did collapse. Now, many of the accolades for averting catastrophe are going to the Fed. President Obama himself ratified this analysis last week when he renominated Fed chairman Ben Bernanke for a second term. Bernanke, the president told reporters, had marshaled...

The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy. BY AMBROSE EVANS-PRITCHARD Cernobbio, Italy. Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing". "We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on...

One of the goals of proposed regulatory changes of the financial industry is — as President Obama has argued — to create "a 21st century regulatory framework to ensure that a crisis like this can never happen again": Yet can a government — whether run by Republicans or Democrats — really anticipate future bubbles or meltdowns? And if it could, would the government have the political will (or political power) to prevent future meltdowns? The last time that we had a recession as deep as the current one was in 1980-82 when a Federal Reserve induced credit crunch caused short...

Of banks and vampire squid Patrick Hosking: On the money The row over the usefulness of bankers rumbles on, with many of our leaders rushing to the defence of the indefensible. The original remark by Lord Turner, the chairman of the Financial Services Authority, that some banking was socially useless, is on the face of it incontestable. Never mind useless, some banking has proved to be spectacularly harmful. Surely, with £1.3 trillion of public money committed to the bank bailout and business failures and unemployment soaring, we can at least agree on that? Apparently not. Alistair Darling, despite plenty of...

Regulators close banks in Arizona, Illinois, Iowa and Missouri. BY AMY HAIMERI NEW YORK (CNNMoney.com) -- Five small regional banks were closed by regulators on Friday evening, pushing 2009's tally so far to 88 institutions. Of the five failures, two were in Illinois, and there was one each in Arizona, Iowa and Missouri.

The federal government’s “footprint” in the housing market In a review of the 2010 budget, the federal government’s “footprint” in the housing market was broad and deep. In addition to the support provided by Fannie Mae, Freddie Mac, the Federal Home Loan Bank System and Farm Credit to the housing market, there were roughly 177 housing programs in the administration’s 2010 budget in more than 11 agencies, including the Federal Reserve (4 programs), Treasury Department (6), HUD (93), Department of Agriculture (46), Department of Defense (8), Department of Education (2), Department of Homeland Security (3), Department of Justice (1), Department...

It has been an interesting week indeed for the Federal Reserve. Early this week, it was announced that President Obama intends to reappoint Fed Chairman Ben Bernanke to a second term in January, signaling a vote of confidence in him. Bernanke seems to be popular with the administration and with Wall Street, and with good reason. His lending policies have left big banks flush with newly created cash that covers up old mistakes and allows for new ones. By buying up mountains of Treasury debt he has also enabled spending to soar to ridiculous levels that should startle any responsible...

Based on the evidence I have seen this month, it looks as though the world moved out of recession in the second quarter. When we see the evidence for this, in the third-quarter data, it is likely that many areas will have returned to close to trend growth. Just as many people responded to my column of August 10 suggesting that I was seeing things through some hazy, rose-tinted lens, I expect that many will respond in the same manner this time. In my last piece, I dubbed this recent crisis “Facebook Crisis”, its true distinguishing characteristic being lots more...

NEW YORK (Reuters) - Millions of Americans have already seen their credit card limits shrink, and millions more face the same fate as lenders prepare for tougher U.S. consumer protection rules. Since the financial crisis deepened a year ago, credit card companies have been closing millions of inactive accounts, cutting credit limits and raising interest rates to cushion themselves from record loan losses. This is just the beginning of the biggest shake-up in the credit card industry in at least 20 years, analysts said. . . . . . Going forward, credit card companies will purge customers rather than risk...

House Financial Services Chairman Rep. Barney Frank, Massachusetts Democrat, said he expects former GOP presidential candidate Ron Paul's legislation to audit the Fed to pass out of his committee in October as part of a larger regulatory package.

The number of institutions on the government's so-called "problem bank" list surpassed 400 in the latest quarter, climbing to its highest level in 15 years, according to a government report published Thursday. The numbers, published as part of a broader survey on the nation's banking system by the Federal Deposit Insurance Corporation, revealed that the number of banks at risk of failing reached 416 during the second quarter. The FDIC, which insurers bank deposits, has been hit by a wave of relatively large and costly failures as of late, prompting concerns about the size of the agency's insurance fund. To...

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WASHINGTON – The government insurance fund that protects more than $4.5 trillion in U.S. bank deposits fell to just $10.4 billion at the end of June, as the banking industry continues to struggle with souring loans. The Federal Deposit Insurance Corp. fund is at its lowest level since mid-1993, during the savings-and-loan crisis. That makes it likely that the government will have to charge banks another special fee to recapitalize its reserves. Officials could also consider borrowing up to $100 billion from the Treasury Department, but they have avoided this option so far.

On Friday, August 21, 2009, ebank, Atlanta, GA was closed by the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.