Saturday, April 24, 2010

Saint Ronald the economy slayer

The looneys on the right are still pushing for sainthood for Ronald Reagan, in the mean time they want to put his picture on the fifty dollar bill. In a poll released yesterday 79% of Americans oppose the idea and only 12% are in favor, about the same as Dick Cheney's approval rating. I think they should print a special bill with his picture issued in commemoration of Reaganomics. When you put it in your wallet it dissolves the rest of your money and leaves you in debt with no job.

Emails have emerged in evidence of Goldman Sachs rolling in profits during the housing collapse when they had claimed under oath that they had lost money. Their profits came from derivatives or bets against (short selling) the very mortgage backed securities they had been selling to their customers. Their response is that they are being victimized by the Senate Committee that released the messages because they are "cherry picking" only four out of thousands of emails. "if you only cherry pick just those four pictures of me in the bank brandishing a gun while holding the bag with the $ sign, of course I look like a criminal"

Friday, April 23, 2010

One thing we have no shortage of

New home sales were up in March but this was driven by the incentive program and some economists are predicting sales to drop to new lows. Durable goods orders are up if you don’t include sagging sales of aircraft and other transportation equipment which produce a negative number on overall orders. Aircraft is supposed to be one of those things that we can export to China but they aren’t buying that many. China is gearing up build their own in the future and already supply a lot of the aircraft parts used in the US.

Weekly unemployment numbers are down but mostly from hiring at the Census Bureau. Public employment is poised to drop sharply as local governments are forced to deal with their collapsing tax base. 300,000 teachers are expected to be cut in June but it won’t stop there. States and municipalities stubbornly refuse to tax the rich or the corporations they own choosing instead to heap more fees & service cuts on the middle class.

Seven bank failures in Illinois top the list today with the largest tied to the family of the man running for Obama’s Senate seat. Republicans are trying to make hay from this as if the bank failures had nothing to do with Republican policies. Eight banks failed last week and the FDIC has a hard time keeping up with the press releases so there could be more closing announcements by Monday. The seven today cost about a billion to clean up as did the eight last week but the deals to unload these banks contain guarantees on the outstanding loans so the cost could go much higher.

China has yet to do anything about its currency exchange rate with the US and China is feeling the pinch of domestic inflation. Obama is again saying publicly that China needs to take action. Brazil and India are putting pressure on China as well on the eve of the G-20 meeting. The USD continues to gain against the Euro as the crisis in Greece threatens to spill over into other Eurozone countries. This makes some imports cheaper and US exports to Europe more expensive but with China manipulating its currency most prices in the US remain unchanged. But Americans have less to spend as their income continues to fall and more and more people are out of work.

Some Fed District Governors are openly expressing worry about all the funny money inflating the markets and providing no jobs. The risk of hyper inflation is largely controlled by China but things could still get out of hand as US corporations are sitting on record amounts of cash. The biggest risk still remains deflation as this is driven by defaulting debt and that’s one thing there is no shortage of.

Wednesday, April 21, 2010

Playing Twister instead of Monopoly

The Senate Agriculture Committee passed its part of the Financial Reform Bill allowing the Feds to regulate derivatives. Extreme right-wing Republican Chuck Grassley of Iowa crossed party lines to vote for the bill. He’s up for election in a state that now has a majority of liberal Democrats in its delegation. Senator Saxby Chambliss of Georgia, the senior Republican on the committee sniffed that these reforms would put an undo burden on the community banks back home. The FDIC closed eight more failed community banks last week at the cost of a billion or more. This is the result of Republican policies over the past thirty years. Back home in Saxby’s Georgia there have been more banks closed than in any other state.

Gary Gensler, the chairman of the Commodity Futures Trading Commission who answered questions at the committee mark-up, disagreed with Senator Chambliss and said that community banks would not be treated like big banks under the bill. But its trades with those banks would need to be routed through a clearinghouse, he said, to protect the small bank if the big bank went out of business. Protect the small banks back home… what a crazy liberal idea.

The Republicans had been counting on Chairman Blanche Lincoln, the Democrat in name only of Arkansas to bottle up any regulation of derivatives. With an increasingly stiff primary challenge from a progressive Democrat back home she is suddenly shocked, shocked to discover there has been gambling going on. It was the quadrillion dollars worth of derivatives that collapsed the banking system two years ago and the big banks have not lost their appetite for gambling with an estimated 600 trillion still on the books.

These instruments include hedges against commodity market and currency swings but the bulk are simply casino bets and bets on bets. They are nothing but a method for the organized banking crime families to skim so-called profits from the financial system justifying the hundreds of billions of bonuses they take for themselves after creating nothing. The SEC complaint against Goldman Sachs is about bankers rigging those bets and it is only the tip of the Wall Street iceberg.

Bernie Madoff is reported to have been shocked that he would get real prison time for his activities. After 50 years as a major player on Wall Street he knew that fraud was just business. He could use some new cell mates from Wall Street to play Monopoly with. (his current cell mates prefer Twister)

Tuesday, April 20, 2010

There are lots of fat foxes around the chicken house

The Wall Street banks all reported record first quarter profits despite record losses in their lending divisions. The only divisions that they have that are making money are their investment banks. Inflating the stock market is making money for them and that money is of course coming out of your 401k. They have also driven up oil and gas futures which you pay for every time you stop at the pump.

They are also making money on credit derivatives with between 600 and a 1000 trillion of those bets on the books. Its not clear how they make money on these because a casino requires suckers to pay the bills and they burned all those pretty bad. Speaking of those burned: AIG says they are going after Goldman Sachs for all the derivatives bets that AIG had to pay off, now that it has been revealed the roulette wheel Goldman had been using was rigged.

The SEC is requiring the 24 biggest firms to reveal if they have been using anything similar to the Repo 105 transactions that Lehman Brothers used to keep 50 billion off their books right up until they collapsed. A standard Repo agreement is a paper shuffle between companies that amounts to a short term loan. A Repo 105 is treated as a sale of assets for cash even though it isn’t really. By loading up on them at the end of each quarter it made their books look better, like taking a payday loan. But these instruments lose money every time, they can’t possibly make money. Some people might call this accounting fraud, Lehman’s CEO swears under oath that he’s never heard of any Repo 105’s (that he can remember, he was careful to put it that way).

The Republicans are accusing the SEC of timing the lawsuit against Goldman to help Obama. He want’s to push through a law that will allow these fat parasites to be broken up the next time they are insolvent. The banks would have their assets seized, the executives fired without golden parachutes and the stockholders wiped out. The next time they are insolvent will be when somebody really goes through their books. In the mean time the executives are taking quarterly bonuses rather than waiting.

The Republicans are saying the SEC is being political because after all the SEC should have done this a year and a half ago. A year and a half ago the Republicans were in charge. It’s widely reported that Wall Street was relieved to find out that the Republicans on the Securities & Exchange Commission voted against taking any action against Goldman Sachs. In a clear cut case of fraud that cost Goldman’s own investors two billion dollars the Republicans voted to tie the hands of the SEC. Remember, it’s you pay for this fraud, these banks don‘t really make money, they take it from you.