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Dante Dallavalle: The Senate recently passed the Economic Growth, Regulatory Relief, and Consumer Protection Act or S.2115 with bipartisan support. Essentially the bill rewrites parts of the 2010 Dodd Frank Act. The piece of legislation whose purpose was to create a framework for oversight of the banking system responsible for the 2008 financial crisis and the economic downturn that resulted from basically the behavior of unscrupulous speculators.

The bill S.2115 was purportedly passed to exempt smaller banks from oversight and requirements for loans, mortgages, and trading. It would change the size at which banks are subjected to regulatory scrutiny. The bill has been called the Crapo bill, after its main author Senate Banking Committee Chair Mike Crapo. Crapo touts the bill as one that aims to help consumers gain easier access to credit and as a boon to regional banks by freeing them from burdensome regulations. Seen as the most significant portion of the legislation is the increase in the level at which a financial institution is considered a systemically important financial institution or SIFI – which subjects institutions to more oversight than other banks not given this designation. It would drop the number of SIFI designated institutions from 38 to just 12. The problem opponents cite is that many of the institutions that contributed to the downturn were capitalized at significantly less than the SIFI threshold–namely 250 billion dollars.

Professor, what are your thoughts on this bill?

Michael Hudson: They are using a lot of euphemisms as a cover for dismantling the fairly modest regulation that was put in by Dodd Frank. They want to work at the weakest link, which is the local community banks – and after starting with them, then proceeding to the larger banks.

…click on the above link to read the rest of the article…

Here’s How Regulators Are Inadvertently Laying The Groundwork For The Next Housing Crisis

February 24, 2018

Here’s How Regulators Are Inadvertently Laying The Groundwork For The Next Housing Crisis

Only a few weeks ago, we pointed out a remarkable development in the US mortgage market that has significant implications not only for mortgage borrowers, but perhaps the broader economy as a whole: Wells Fargo, formerly America’s foremost mortgage lender, had seen its share of the market eclipsed by Quicken Loans – the Detroit-based, nonbank lending behemoth that pioneered applying for mortgages on the Internet with its now-famous Rocket Mortgage (readers will remember RM’s celebrity-packed SuperBowl spot).

Many factors (aside from Wells’ own criminality, which recently drew a strong, but ultimately meaningless, rebuke from the Fed) have contributed to this shift, as Bloomberg points out.

But as it turns out, the rising dominance of nonbank lenders like Quicken could portend a massive, bad-debt fueled binge reminiscent of the circumstances that led up to the housing crisis. That is to say, a wave of bad debt could create a cascading wave of defaults with repercussions far beyond the housing market.

Considering all the restrictions that Dodd-Frank and other post-crisis regulations slapped on mortgage lenders, one might wonder how this might be possible.

Of course, as Bloomberg explains, instead of making the market safer, regulators are inadvertently enabling the rise of lenders like Quicken who aren’t bound by many of the rules that restrict banks’ mortgage-lending practices. As a result, Quicken Loans is effectively free from many of the regulations that have forced some of the biggest mortgage lenders into a period of retrenchment…

Make no mistake, regulators have done plenty to rein in the mortgage business since the 2000s. New rules require that lenders carefully assess borrowers’ ability to pay, and that mortgage servicers — which process payments and manage other relations with borrowers — give troubled customers plenty of opportunity to renegotiate their debts before resorting to foreclosure.

…click on the above link to read the rest of the article…

Should Bank Regulation be Relaxed?

August 27, 2017

SHOULD BANK REGULATION BE RELAXED?

Leading Federal Reserve policymaker Stanley Fischer has hit out at plans to unwind banking regulation, calling it a “terrible mistake.”

President Donald Trump and republican politicians have advocated the repeal of Dodd Frank, a major piece of post-crisis legislation, and the loosening of some capital and liquidity requirements in a bid to ease banks’ ability to lend.

In an interview with the Financial Times on August 16 2017, Fischer said that loosening capital and liquidity requirements is dangerous and could lead to a new economic crisis. “I find that really, extremely dangerous and extremely short-sighted.”

Whilst Fischer is not a friend of a free market, in this case we are in agreement with Fischer’s comment.

True free financial environment versus financial environment controlled by central bank

The proponents for less control in financial markets hold that fewer restrictions imply a better use of scarce resources, which leads to the generation of more real wealth.

It is true that a free financial environment is an agent of wealth promotion through the efficient use of scarce real resources, whilst a controlled financial sector stifles the process of real wealth formation. The proponents of deregulated financial markets have overlooked the fact that the present financial system has nothing to do with a free market. What we have at present is a financial system within the framework of the central bank, which promotes monetary inflation and the destruction of the process of real wealth generation through fractional reserve banking. In the present system the more unrestricted the banks are the more money out of “thin air” generated and hence greater damage inflicted upon the wealth generation process. (Note that in the genuine free banking i.e. the absence of the central bank, the potential for the creation of money out of “thin air” is minimal).

…click on the above link to read the rest of the article…

Bank Lobby Takes Aim at Last Remaining House Republican Who Backed Dodd-Frank

May 14, 2016

Bank Lobby Takes Aim at Last Remaining House Republican Who Backed Dodd-Frank

THE BANK LOBBY is making another attempt to unseat Rep. Walter Jones, R-N.C., the maverick House Republican who consistently supported greater oversight of the finance industry, and is the last remaining member of the GOP caucus to have voted in favor of the Dodd-Frank reform law.

The American Bankers Association, a lobby group for the banking industry, this week used a subsidiary called the Fund for Economic Growth to pour $50,000into campaign advertisements in support of Taylor Griffin, a candidate seeking to unseat Jones in the Republican primary on June 7.

This is the second attempt by Griffin. In 2014, Griffin left a position with Hamilton Place Strategies, a consultancy that helps Wall Street firms with political strategy, to challenge Jones. Griffin’s bid was backed by a Super PAC funded by hedge-fund manager Paul Singer, as well as funds from many major corporate political action committees, particularly from big banks such as Wells Fargo and J.P. Morgan Chase.

Despite well-heeled support from the establishment, Griffin lost.

Campaign finance records show that banks are again fueling his primary challenge this year. PACs controlled by J.P. Morgan Chase, Goldman Sachs, Bank of America and Wells Fargo have contributed to Griffin’s campaign, according to Federal Election Commission disclosures. So, too, has the American Bankers Association’s PAC, which provided the maximum donation of $5,000. Thanks to the Citizens United Supreme Court decision, however, the ABA is allowed to exceed the traditional campaign donation limit by using a corporate subsidiary to spend $50,000 in support of Griffin’s campaign as an independent expenditure.

“Griffin has the experience and expertise to advocate for pro-growth economic policies in Congress that will foster job creation,” says Elizabeth Colt, a spokesperson for the American Banking Association’s FEG. “He is a proven leader with principled values.”

…click on the above link to read the rest of the article…

The Fed Sends a Frightening Letter to JPMorgan and Corporate Media Yawns

April 15, 2016

The Fed Sends a Frightening Letter to JPMorgan and Corporate Media Yawns

Jamie Dimon, Testifying Before the Senate Banking Committee on June 13, 2012 Over Massive Derivative Losses at the Depository Bank of JPMorgan Chase

Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system.

A rational observer of Wall Street’s serial hubris might have expected some key segments of this letter to make it into the business press. A mere eight years ago the United States experienced a complete meltdown of its financial system, leading to the worst economic collapse since the Great Depression. President Obama and regulators have been assuring us over these intervening eight years that things are under control as a result of the Dodd-Frank financial reform legislation. But according to the letter the Fed and FDIC issued on April 12 to JPMorgan Chase, the country’s largest bank with over $2 trillion in assets and $51 trillion in notional amounts of derivatives, things are decidedly not under control.

At the top of page 11, the Federal regulators reveal that they have “identified a deficiency” in JPMorgan’s wind-down plan which if not properly addressed could “pose serious adverse effects to the financial stability of the United States.” Why didn’t JPMorgan’s Board of Directors or its legions of lawyers catch this?

It’s important to parse the phrasing of that sentence. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”

…click on the above link to read the rest of the article…

Alan Greenspan’s Pickled Economy

March 6, 2016

Alan Greenspan’s Pickled Economy

Winter of Discontent

Former Federal Reserve Chairman Alan Greenspan resurfaced this week. We couldn’t recall the last time we’d heard from him. But, alas, the old fellow’s in desolate despair.

Alan-Greenspan Unexpectedly rising from the crypt: Alan Greenspan Photo credit: AP

On Tuesday, for instance, he told Bloomberg he hasn’t been optimistic for “quite a while.” Obviously, this is in contrast to the perennial Goldilocks attitude he had during the 1990s. So what is it that has the Maestro playing a low dirge?

China, the dollar, Dodd-Frank, and associated unknowns are all part of his negative outlook. But the long winter of his discontent is something else. Greenspan said he “won’t be [optimistic] until we can resolve entitlement programs.”

“Nobody wants to touch [entitlements]. But it is gradually crowding out capital investment and that is crowding out productivity and that is crowding out the standards of living,” said Greenspan.

Indeed, funding entitlement programs is becoming more burdensome by the year. As a greater percentage of the economy’s GDP goes toward entitlement programs, a lesser percentage goes towards capital investment. The effect of this negative feedback loop, as Greenspan infers, is quite simple.

ramirez-entitlement-cartoon An enticing lure…. Cartoon by Michael Ramirez

Less capital investment leads to lower productivity. Lower productivity leads to slower GDP growth. Slower GDP growth leads to an economy that can’t keep pace with entitlement programs. Thus, an even smaller percentage of GDP is, in turn, available for capital investment…to propel future growth. And so on, and so forth.

A 2012 forecast of entitlement spending by the Heritage Foundation. This seems not exactly sustainable – click to enlarge.

What Drives Economic Growth?

Certainly, this is a basic insight. But perhaps Greenspan is on to something much larger than just the issue of entitlement programs. From what we can tell he’s getting at the question of economic growth. Namely, what drives it?

…click on the above link to read the rest of the article…

Fourth Turning: Crisis of Trust–Part 2

September 15, 2015

Fourth Turning: Crisis of Trust–Part 2

In Part 1 of this article I discussed the catalyst spark which ignited this Fourth Turning and the seemingly delayed regeneracy. In Part 2 I will ponder possible Grey Champion prophet generation leaders who could arise during the regeneracy.

The nearly seven year reign of Barack Obama has resulted in furthering wealth inequality, in spite of his socialistic rhetoric. Notwithstanding his Nobel Peace Prize, military spending is at all-time highs and we are engaged in actual and proxy wars across the Middle East and in the Ukraine. Race relations have never been worse. Poverty levels have never been worse. Real median household income is lower than it was in 1989. Real hourly wages are at 50 year lows. Home ownership has plunged to 50 year lows, as middle class workers have been kicked out of their homes and young people are saddled with so much student loan debt and bleak job opportunities they will never have an opportunity to own. The ownership society pushed by Clinton and Bush, with the proliferation of Wall Street created “exotic” subprime mortgages, peddled to people incapable of paying their mortgages, blew up the world in 2008, and the fall out will last for decades.

Meanwhile, Wall Street banks have reaped $700 billion of ill-gotten profits since 2010 as the Federal Reserve has handed them trillions of interest free funds to gamble with, while rigging the financial markets, and paying their executives obscene bonuses. The hubris and arrogance of the Wall Street titans is appalling, as they buy politicians, write toothless financial regulations (Dodd Frank) for their bought off politicians to pass, report fraudulent financial results with the stamp of approval from the FASB, blatantly rig interest rate, currency, stock and commodities markets, and use deception and propaganda to distract and mislead the public through their corporate media mouthpieces – dependent upon Wall Street advertising revenue to thrive.

…click on the above link to read the rest of the article…

There Is No Solution To The Crisis

May 3, 2015

There Is No Solution To The Crisis

A long, long time ago…

it was the 16 September 1992, Black Wednesday, when the British Government was forced to withdraw the pound sterling from the European Exchange Rate Mechanism(ERM) after it was unable to keep the pound above its agreed lower limit in the ERM. A certain Mr.Soros, made over £1 billion profit by short selling sterling while costing the Treasury £27billion of foreign currency reserves trying to prop up the Pound and a tidy £3.4 billion loss.

Fast forward to now and one of the upshots of the 2008 crisis was that central banks eunuchized the commercial banks through Dodd Frank and other such regulations, for such embarrassing situations could never be repeated for a central bank. So they took full control without impunity.

Now initially I believe that it was with good intent. Too big to fail was something unacceptable. That governments should not have to foot the bill for the ineptitude of banks and hedge funds who invested in other funds because they had a good “name” (a nice name with words in them like “enhanced” or “high”, not because they were of reputable background),without the faintest idea of what they were investing in was indeed a joke.

And it could be argued that the Fed and ECB were correct in hiding all the problems from the general population. The idea being that the economy is entirely built on sentiment.

Tell people every day that things are OK, fudge economic numbers and plaster over the cracks in the hope that eventually it will all rectify itself, then people will actually start believing ,spending and therefore improving the economy and that the debt can be repaid via tax receipts.

…click on the above link to read the rest of the article…

DANGER WILL ROBINSON

March 25, 2015

DANGER WILL ROBINSON

It’s funny how the truth sometimes leaks out from the government. I’m guessing that Mr. Ted Berg will not be working for the Office of Financial Research much longer. This new agency was created by the Dodd Frank Law and is supposed to protect consumers from the evil Wall Street banks. But we all know the evil Wall Street banks wrote the bill, have gutted the major provisions, have captured all the regulatory agencies, own the Federal Reserve, and control all the politicians in Washington D.C. So, when an honest government analyst writes an honest truthful report that unequivocally proves the stock market is grossly overvalued and headed for a crash, the Wall Street banking cabal will surely call the top government apparatchiks to voice their displeasure. Truth is treason in an empire of lies.

The soon to be fired Mr. Berg’s verbiage is subtle, but pretty clear.

Option-implied volatility is quite low today, but markets can change rapidly and unpredictably, a phenomenon described here as “quicksilver markets.” The volatility spikes in late 2014 and early 2015 may foreshadow more turbulent times ahead. Although no one can predict the timing of market shocks, we can identify periods when asset prices appear abnormally high, and we can address the potential implications for financial stability.

Markets can change rapidly and unpredictably. When these changes occur they are sharpest and most damaging when asset valuations are at extreme highs. High valuations have important implications for expected investment returns and, potentially, for financial stability.

However, quicksilver markets can turn from tranquil to turbulent in short order. It is worth noting that in 2006 volatility was low and companies were generating record profit margins, until the business cycle came to an abrupt halt due to events that many people had not anticipated.

…click on the above link to read the rest of the article…

SAYONARA GLOBAL ECONOMY

January 5, 2015

SAYONARA GLOBAL ECONOMY

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” –Ludwig von Mises

The surreal nature of this world as we enter 2015 feels like being trapped in a Fellini movie. The .1% party like it’s 1999, central bankers not only don’t take away the punch bowl – they spike it with 200% grain alcohol, the purveyors of propaganda in the mainstream media encourage the party to reach Caligula orgy levels, the captured political class and their government apparatchiks propagate manipulated and massaged economic data to convince the masses their standard of living isn’t really deteriorating, and the entire façade is supposedly validated by all-time highs in the stock market. It’s nothing but mass delusion perpetuated by the issuance of prodigious amounts of debt by central bankers around the globe. And nowhere has the obliteration of a currency through money printing been more flagrant than in the land of the setting sun – Japan. The leaders of this former economic juggernaut have chosen to commit hari-kari on behalf of the Japanese people, while enriching the elite, insiders, bankers, and their global banking co-conspirators.

Japan is just the point of the global debt spear in a world gone mad. Total world debt, excluding financial firms, now exceeds $100 trillion. The worldwide banking syndicate has an additional $130 trillion of debt on their insolvent books. As if this wasn’t enough, there are over $700 trillion of derivatives of mass destruction layered on top in this pyramid of debt. Just five Too Big To Trust Wall Street banks control 95% of the $302 trillion U.S. derivatives market. The reason Jamie Dimon and the rest of the leaders of the Wall Street criminal syndicate commanded their politician puppets in Congress to reverse the Dodd Frank rule on separating derivatives trading from normal bank lending is because these high stakes gamblers want to shift their future losses onto the backs of middle class taxpayers – again. The bankers, with the full support of their captured Washington politicians, will abscond with the deposits of the people to pay for their system destroying risk taking, just as they did in 2008 by holding taxpayers hostage for a $700 billion bailout.

…click on the above link to read the rest of the article…

Will they Hang Bankers Again on Wall Street? | Armstrong Economics

December 21, 2014

Will they Hang Bankers Again on Wall Street? | Armstrong Economics.

What took place in Washington over the past two weeks with the repeal of Dodd Frank and then the effective repeal of the Volcker Rule sounds strikingly familiar to at least three previous periods in American History that led to total disaster. There were of course the Northern “carpetbaggers”, whom many in the South viewed as opportunists looking to exploit and profit from the region’s misfortunes following the Civil War.The “carpetbaggers” would play a central role in shaping new southern governments during Reconstruction period who were joined by Southerners who saw economic gain in joining the Northerners in the exploitation of the South. There were called “scalawags”.

Then there were the Silver Democrats who were bought and paid for by the mining industry. William Jennings Bryan’s red-hot emotional speech at the 1896 Democratic Convention will forever live on in history. The shenanigans of the Democrats and Republicans who tried to overvalue silver led to the near bankruptcy of the nation and made JP Morgan famous thanks to the Panic of 1896 when he had to arrange a gold loan to save the country.

Then there was what people called the First Gilded Age more than a century ago, when senators and representatives were owned by Wall Street and big business. This culminated in the 1929 Crash.

What did all three of these period have in common with the last two weeks? Then, as now, those who footed the bill for political campaigns were richly rewarded with favorable laws. This is standard operating procedure in Washington and why we are in such desperate need of political reform.

…click on the above link to read the rest of the article…

PIGMEN WIN AGAIN « The Burning Platform

December 16, 2014

PIGMEN WIN AGAIN « The Burning Platform.

“The real owners are the big wealthy business interests that control things and make all the important decisions. Forget the politicians, they’re an irrelevancy. The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the statehouses, the city halls. They’ve got the judges in their back pockets. And they own all the big media companies, so that they control just about all of the news and information you hear. They’ve got you by the balls. They spend billions of dollars every year lobbying lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else.” – George Carlin

After the disgusting example of politicians of both spineless parties bowing down before Wall Street, the military industrial complex and corporate interests this weekend with the passage of a bloated pig of a spending bill totaling $1.1 trillion, how can anyone not on the payroll of the vested interests not admit there is only one party – and it serves only the needs of the wealthy business interests. Obama, champion of the common folk, signed this putrid example of political corruption and corporate capture of the American political system. For all the believers who voted for the red team in the November mid-terms, this is what you got – a bipartisanship screwing of the American people.

…click on the above link to read the rest of the article…

The Global Bankers’ Coup: Bail-In and the Shadowy Financial Stability Board | WEB OF DEBT BLOG

December 15, 2014

The Global Bankers’ Coup: Bail-In and the Shadowy Financial Stability Board | WEB OF DEBT BLOG.

On December 11, 2014, the US House passed a bill repealing the Dodd-Frank requirement that risky derivatives be pushed into big-bank subsidiaries, leaving our deposits and pensions exposed to massive derivatives losses. The bill was vigorously challenged by Senator Elizabeth Warren; but the tide turned when Jamie Dimon, CEO of JPMorganChase, stepped into the ring. Perhaps what prompted his intervention was the unanticipated $40 drop in the price of oil. As financial blogger Michael Snyder points out, that drop could trigger a derivatives payout that could bankrupt the biggest banks. And if the G20’s new “bail-in” rules are formalized, depositors and pensioners could be on the hook.

The new bail-in rules were discussed in my last post here. They are edicts of the Financial Stability Board (FSB), an unelected body of central bankers and finance ministers headquartered in the Bank for International Settlements in Basel, Switzerland. Where did the FSB get these sweeping powers, and is its mandate legally enforceable?

Those questions were addressed in an article I wrote in June 2009, two months after the FSB was formed, titled “Big Brother in Basel: BIS Financial Stability Board Undermines National Sovereignty.” It linked the strange boot shape of the BIS to a line from Orwell’s 1984: “a boot stamping on a human face—forever.” The concerns raised there seem to be materializing, so I’m republishing the bulk of that article here. We need to be paying attention, lest the bail-in juggernaut steamroll over us unchallenged.

…click on the above link to read the rest of the article…

House Votes On The $1.1 Trillion Cromnibus Bill: Live Webcast | Zero Hedge

December 11, 2014

House Votes On The $1.1 Trillion Cromnibus Bill: Live Webcast | Zero Hedge.

As is widely known by now, in a largely token vote, since it has the blessing of the White House, in a few moments the House will vote on H.R. 83, the bill containing $1.1 trillion in appropriations to fund the government through 2015, aka the “Cromnibus”. As noted previously, among the provisions in the bill is Citi-directed watering down of Dodd-Frank by way of a Swap “push-out” provision, which as we explained over the weekend, would put taxpayers on the hook for derivative losses as it “would allow financial institutions to trade certain financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp. — potentially putting taxpayers on the hook for losses caused by the risky contracts.”

Screen Shot 2014-12-05 at 3.32.12 PM

Then again, since we are talking about some $303 trillion in US-based derivatives (at just the top 25 US holding companies alone), the bottom line is that it really doesn’t matter where the swaps are housed or traded from: if and when these goes bad, it doesn’t matter if they are located in a FDIC-insured shell or somewhere else: the entire system will collapse all over again, unless it gets yet another multi-trillion Fed, as in taxpayer, bailout.

…click on the above link to read the rest of the article…

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