I was trying to think of ways that we could possibly take down as many financial problems as we can while simultaneously bringing the power back to the people. That is, going through our own channels rather than the official process that has proven itself to be ineffective.
I was mulling bank bailouts, "too big to fail" and the notion of money as power when it hit me. What if we just took all of our money out of big banks and put it into local community banks and credit unions? This would greatly strengthen the community, rewarding banks that actually stick to banking, keep money local and even help bolster small business loans, while forcing the large banks to break down. Sure, things would be hairy at first and it wouldn't be pretty, but wouldn't it be a better situation in the long run?

Michael Smallberg | Nov 20

POGO - The House Financial Services Committee voted 43-26 yesterday afternoon in favor of an amendment introduced by Reps. Ron Paul (R-TX) and Alan Grayson (D-FL) that would remove restrictions preventing the GAO from auditing the Federal Reserve. The amendment was modeled after Rep. Paul’s long-standing bill to audit the Fed, which was co-sponsored by over 300 Members in the House and supported by POGO and many other groups.

The vote on the final passage of the financial regulatory package to which the Paul-Grayson amendment is attached has been delayed until after Thanksgiving. Nonetheless, yesterday’s vote signals a defeat for Rep. Mel Watt (D-NC), who had introduced an alternative amendment that would have limited the scope of the GAO’s audits.

Kudos to FDL: FDL Statement on the Committee Passage of H.R. 1207, the Paul-Grayson Bill to Audit the Fed

By Emily Kaiser and Nancy Waitz - Analysis

WASHINGTON (Reuters) - The U.S. government is having a tough time guesstimating how many small businesses failed in this recession, casting doubt on the reliability of vital data on employment and economic growth.

The formula the U.S. Labor Department designed to help it deliver timely, thorough monthly employment reports broke down in the heat of the financial crisis, miscounting the number of jobs by an estimated 824,000 in the year through March.

The most likely culprit is the so-called "birth-death" model, which the Labor Department uses to estimate how many companies were created or destroyed.

Scott Lanman | Washington | November 19

Bloomberg - A U.S. House committee advanced a proposal to remove a three-decade ban on congressional audits of Federal Reserve interest-rate decisions, a measure backed by a lawmaker who has called for the abolition of the central bank.

The House Financial Services Committee today, in a 43-26 vote and a second voice vote, attached the amendment for a broad audit of the Fed to legislation creating a council of regulators to monitor systemic risk. The proposal was offered by Representative Ron Paul, a Republican from Texas, and based on a bill with more than 300 co-sponsors.

Sean O'Grady | Nov 20

The Independent - When the masters of the universe came crashing down to earth last year, the reverberations were felt far beyond Wall Street and the City. Sean O'Grady surveys the best of the books that explode the myth that greed is good

One of the few welcome consequences of the global recession has been a modest upsurge in economic literacy, or at least interest. That's not to be exaggerated; most people still don't know their asset-backed securities from the elbows, but at least we're making some attempt to redress that deficit of understanding.

No previous economic crisis has brought forth such a crop of words – over 3,000 new books, a few more reprints, trillions of column inches of newspaper, magazine and web pieces, official reports, not to mention a Facebook page devoted to "Recession Survivors" and those Twittering and blogging their way to an understanding of seismic changes. OK, it isn't much to throw into the balance when you have mass unemployment, the derangement of national finances and the destruction of the world's banking system on the other side, but at least we are creeping towards some acknowledgement of what went wrong, and why. That's something.

So, what to read? A bit like the bewildering complexity of "exotic derivatives" that helped to get us into this mess (and which the bankers themselves never understood), the choice seems endless. It really boils down to which of the three prevalent treatments of the crisis you prefer: the anecdotal, the analytical or the apoplectic.

By now most people who follow Goldman Sachs in the news know that it received $13 billion from the Federal Reserve to liquidate its portfolio of derivatives with AIG. Because the Fed was willing to pay Goldman par value on these derivatives, even though the market valued them at about 48 cents on the dollar, Goldman walked away with no loss whatever from the AIG collapse. This has been described as a great gift for Goldman and all the other banks who dealt with AIG and who were treated the same way. Many others have described this as a colossal rip-off of the taxpayers.

How did this come about? We know a lot more this week about these transactions because of a report that has been issued by Neil Barofsky, the Special Inspector General for the bank bailout programs. The press has described this report as particularly damning of the NY Federal Reserve which negotiated these deals with the banks, and which was led at the time by Timothy Geithner, the current Treasury Secretary. These press reports, however, have mischaracterized what happened and what went wrong. The NY Fed acted properly and entirely as one would expect under the circumstances when they negotiated these contract abrogations. To see what really went wrong, follow along on the details below.

MarketWatch First Take

Nov. 13, 2009, 2:03 p.m. EST
The downside of a weak dollar
Commentary: Inadvertently driving a bigger trade defici

By MarketWatch

SAN FRANCISCO (MarketWatch) -- The latest international trade numbers border on blasphemy.

For the generations of college kids who learned the ABCs of global economics from Paul Samuelson, a weak dollar is supposed to tip the balance of trade in favor of the nation's exporters. So why is the trade deficit exploding?

The dollar has lost 16% of its value against six other major currencies since March. In one quarterly report after another, companies doing business abroad showed they padded their profits every time they converted sales in local currencies back into U.S. dollars -- effectively enjoying the equivalent of a price hike without actually hiking prices.

Brad Knickerbocker | Washington | November 18

CSM - Though the congressional debate and legislative sausage-making are far from over, the Senate took a major step Wednesday in putting forth a $849 billion healthcare reform bill.

The bill, launched by Senate majority leader Harry Reid – and vigorously opposed by Republicans – aims to provide health insurance for 94 percent of all Americans, including 31 million people now uninsured.

Bangkok | November 18

Bangkok Post -

Foreign investment for US bonds and other long term investments, including from China, rose beyond expectations despite concerns over the weakness of the dollar, official data showed Tuesday.

Net long-term capital flows to the United States climbed to 40.7 billion dollars in September from a revised 34.2 billion dollars the prior month, according to the Treasury International Capital Data (TIC) monthly report.

Most economists had expected flows to reach 30.0 billion dollars.

Mary Williams Walsh | Washington | November 16

NYT -
The Federal Reserve Bank of New York gave up much of its power in high-pressure negotiations with the American International Group’s trading partners last year, according to a government report made public on Monday.

Just two days before the New York Fed paid A.I.G.’s partners 100 cents on the dollar to tear up their contracts with the insurance giant, one bank volunteered to take a modest haircut — but it never got the chance.

UBS, of Switzerland, alone offered to give a break to the New York Fed in the negotiations last November over how to keep A.I.G. from toppling and taking other banks down with it. It would have accepted 98 cents on the dollar.

Tony Pugh | Washington | Nov 17

McClatchy - The number of U.S. households that are struggling to feed their members jumped by 4 million to 17 million last year, as recession-fueled job losses and increased poverty and unemployment fueled a surge in hunger, a government survey reported Monday.

These "food-insecure" households represent about 49 million people and make up 14.6 percent, or more than one in seven, of all U.S. households. That's the highest rate since the U.S. Department of Agriculture began monitoring the issue in 1995.

Additionally, more than one-third of these struggling families — some 6.7 million households, or 17.2 million people last year — had "very low food security," in which food intake was reduced and eating patterns were disrupted for some family members because of a lack of food.

In phone interviews, more than two-thirds of people with very low food security said they went hungry from time to time, and 27 percent of these adults said they didn't eat at all some days.

These families make up 5.7 percent of U.S. households, again the highest rate since 1995, up from 4.1 percent and 4.7 million households in 2007.

Like Blanche DuBois, the United States is "down on its uppers." We rely on the kindness of foreigners to finance our government.

A Whole Lot of Kindness

U.S. Department of the Treasury, Oct. 16, 2009

These customers must be extending kindness. How else do you explain the massive purchase of Treasuries Securities? They're ignoring wars that we can't afford and defense expenditures equaling 50% of the world's total spending. They're also ignoring the giveaways to failed Wall Street firms and others plus the forgiveness of the executives in charge by assuring their ongoing positions and bonuses.

It would be easy for an investor to look at the United States and say forget about it. But they don't. As a result, we're able to function, at least for a while, as though we're not totally upside down. Of course, there's self interest involved. If we hit the skids, they're likely to feel the back draft. But their self interest serves us well right now.

But there's another take on our benefactors. A "new kid" on the advocacy new block is sounding the alarm. Economy in Crisis is the new media group and their publication is America's Economic Report Daily.

"The American sellout is happening faster than ever as our companies are being taken over in a buying frenzy by foreign investors – like piranha fish consuming its weakened prey. Many of these companies have taken one hundred or more years to develop and were the source of our wealth, strength, and living standards; now overnight, gone. We should be concerned and even outraged that our government let this happen." About Economy in Crisis

This is golden:

2009's most influential author is a mirthless Russian-American who loves money, hates God, and swings a gigantic dick. She died in 1982, but her spawn soldier on. And the Great Recession is all their fault.

It's a brilliant take down of Rand.

One more quote. I just can't resist:

The days during which that 19-year-old has Rand's worldview vectored into his cerebral cortex are feverish and sleepless. Days of beautiful affliction during which the intransigence of others—roommates, a coed the patient has been hitting on, professors, parents, everyone—are shown to be the product of their shortcomings, their idiocy and sublimated envy of the patient's intelligence and talent. Days during which the infected comes to see himself and Roark/Galt as avatars of one another: superheroically mirthless protagonists in a drama of historical import. It's the damnedest thing. One day you've got a bright young kid dutifully connecting the dots of his liberal-arts education; the next, he's got Roark and Galt in the marrow and has become . . . an insufferable asshole.

Heh!

I'm not a contrarian, although I suppose on the face of it I probably come across as one. I'd label myself a skeptic more than anything else when it comes to markets. A skeptic in the sense that I rarely buy the official narrative. More of a realist I suppose. But that may just be a personal and intellectual conceit.

One of the official narratives I've been hearing a lot of lately--maybe not so much a narrative as a lot of cheerleading--is about gold. Now, there is a secular case to be made for gold. That case rests mostly on a falling dollar and the inverse correlation between our domestic markets and the rise in gold. The case has merit.

But when I see a story like this, one that says gold has a lot longer to climb, the red-flags of my bullshit detector go off. (Metaphor mixed on purpose.)

My question: where have we heard this before? And who's next? James Glassman of Dow 36,000 infamy?

The announcement of financial overhaul legislation in the U.S. Senate this week smacked of irony as its author, Senator Chris Dodd—the recipient of a sweetheart rate on his own home mortgage—announced a sweeping 1,136 page piece of legislation to “protect consumers.” It appears at this point that the protection consumers and Middle America really need is from this nation’s politicians, who have too long lined their pockets with campaign contributions from big business and who have allowed financial institutions to fleece Middle America.

It wasn’t but a couple of years ago that big business and congress all but eliminated the ability of consumers to effectively discharge their debts in bankruptcy proceedings. At the same time, banks and financial institutions were making loans to borrowers who clearly could not qualify. Banks, financial institutions and credit card companies continued extending generous limits on credit cards and lines of credit to consumers. Now be fair, much of the mortgage activity came from Democrats in congress who believed that everyone had an inalienable right to own a home, evidently whether they could afford it or not. And naturally, Republicans, who long ago sold their soul to big business, positioned their bank and financial institution contributors for all of the mortgage business.

Nov 15

AFP - After a year of soul-searching over the financial crisis that floored Iceland's economy, Icelanders are apparently yearning for the return of old-fashioned qualities like honesty.

Honesty came top on Saturday when 1,500 Icelanders gathered in Reykjavik were asked to discuss what kind of society they wanted.

A grassroots organisation calling itself The Anthill convened a so-called National Assembly of 1,200 people from the age of 18, chosen randomly, along with 300 representatives of organisations and institutions.

They were asked to name the values Icelandic society should be based upon, as well as their vision for the country's future and possible ways of rebuilding the country's economy and society.
..
Halla Tomasdottir, one of the National Assembly organisers, told AFP one of the reasons for the meeting was to try to halt the negativity that has prevailed in Iceland since the start of the crisis.

"We are seeking positive solutions to the situation we find ourselves in. This is a unique opportunity to ask ourselves what kind of a nation we want to be and what kind of a nation we want to hand down to our children," she said.

Lita Beck | Nov 15

Raw Story - A crime as old as the West is taking off again like a stampede as cattle rustlers armed with wire cutters and cattle trailers crisscross country roads.

"We've got some awful good cowboys, you know," said Marvin Willis, Texas Special Ranger. "They can load the cattle in a hurry."

For the second year in a row, cattle rustling may reach record levels. There were 6,404 cattle thefts in Texas in 2008 and only 2,400 thefts in 2007, according to the Texas & Southwestern Cattle Raisers Association.

A modern-day posse of more than two dozen Texas Rangers -- including Willis -- is charged with tracking down cattle thieves.

But it's nothing like the old Westerns, Willis said. Willis called the modern-day outlaws "common thugs."

"If it wasn't cattle, it would be something else they'd be stealing," he said.

Ranchers such as Sammy Ward said they fear the increase in cattle thefts is tied to the economic recession.

"But I think the worse the economy gets, you're going to see more," he said.

The victims are often small ranchers, and the loss cuts deep.

Nov 15

Reuters - The United States and China sparred over exchange rates at a meeting of Asia Pacific leaders today, pointing to tricky talks ahead for President Barack Obama when he flies to China to address economic tensions.

The discord surfaced at a summit of the Asia Pacific Economic Cooperation (APEC) forum in Singapore when a reference to "market-oriented exchange rates" was cut from a communique issued at the end of two days of talks. An APEC delegation official said Washington and Beijing could not agree on the wording.

That underscored strains likely to feature when Obama flies to Shanghai later on Sunday following moves by Washington to slap duties on various Chinese-made products and a growing drumbeat of pressure on Beijing to let its yuan currency strengthen.

Chinese officials have grown testy about the pressure over the yuan. Chinese banking regulator Liu Mingkang told a forum in Beijing on Sunday that ultra-low interest rates in the United States were fuelling speculation in overseas asset markets and threatened the global economic recovery.

Obama pledged on Saturday to deepen dialogue with China rather than seek to contain the rising power, which is set to overtake Japan next year as the world's second largest economy.

But issues ranging from the yuan and trade tensions to human rights could complicate what many regard as the most important relationship of the 21st century.

Nov 15

BBC - Leaders remain split on specifying targets
World leaders meeting in Singapore have said it will not be possible to reach a climate change deal ahead of next month's UN conference in Denmark.

After a two-day Asia-Pacific summit, they vowed to work towards an "ambitious outcome" in Copenhagen.

But the group dropped a target to halve greenhouse gas emissions by 2050, which was outlined in an earlier draft.

Leaders also vowed to pursue a new strategy for growth after the world's worst economic crisis in decades.

They resolved to conclude the Doha round of global trade talks in 2010.

In a joint declaration issued at the end of their two-day annual summit, they said: "We firmly reject all forms of protectionism and reaffirm our commitment to keep markets open and refrain from raising new barriers to investment or to trade in goods and services."

They also agreed to keep stimulus spending in place until a recovery was seen.

One € bought 1.49$ recently. Have you noticed that there is suspiciously little whining in the press about the falling exchange rate of US dollar?

Last time the exchange rate peaked in 1.59 or something like that.

In real terms, a liter of milk costs here now 91 €cents (down from 1.05) and a liter of juice costs 67 €cents. Hint: we buy milk in euros and juice in dollars, because it is imported.

80%-90% of time juice is more expensive than milk, thus you can see that dollar is at least 36% undervalued.

November 14

BBC -
Venetians have been taking part in a mock funeral procession to highlight the city's dwindling population. Organisers of Saturday's event say the population has dipped below 60,000, with many native Venetians choosing to live in more affordable areas. City officials have refuted the claims that Venice is simply a "ghost town", filled only with tourists.

The Venetian architect and historian, Francisco da Mosta, told the BBC that the government needed to step in to make the city habitable for its residents. He said Venice is not being run "with intelligence or dignity". The city's population has dropped by two-thirds since the 1950s and much of the blame has been put on tourism. It has driven up food and property prices, forcing many people to move to the mainland.

Residents carried an empty coffin in a procession of boats to the mayor's office.

Grant McCool | New York | November 13

Reuters - Two computer programmers provided technical support to falsify documents and trading records for swindler Bernard Madoff and took hush money to help keep the massive fraud going, U.S. authorities said.

The FBI arrested Jerome O'Hara, 46, and George Perez, 43, at their homes on Friday morning on criminal charges of conspiracy for falsifying books and records at both the broker-dealer and investment arms of Bernard L. Madoff Investment Securities LLC in New York.

As I recall Paul Krugman was very critical of the Germans in the early days of the recession. I believe his criticism went something like this: the Germans need to get on board a pan-European proposal to staunch the bleeding caused by the financial crisis. I could be wrong, but I don't think so.

So what happened? Apparently Germany's plan was successful. I don't mean to single Krugman out here, as I usually agree with him. But I cannot help but to point out that sometimes the choices nations make, when they buck the economic consensus--like Malaysia telling the IMF and World Bank to go fuck themselves during the Asian financial crisis--are the right choices.

Even Krugman is prey to the consensus--especially when he's the leading voice of it.

Just something to keep in mind.

Chris McGreal | Los Angeles | Nov 13

The Guardian - UN special rapporteur says wealthy US ignoring deepening homeless crisis while pumping billions into bank rescues

• Investigator meets homeless victims of American dream

UN special rapporteur Raquel Rolnik says the burden falls most heavily on the very poor, leaving the extent of the housing crisis invisible to many in the US. Photograph: Mario Tama/Getty Images A United Nations special investigator who was blocked from visiting the US by the Bush administration has accused the American government of pouring billions of dollars into rescuing banks and big business while treating as "invisible" a deepening homeless crisis.

Raquel Rolnik, the UN special rapporteur for the right to adequate housing, who has just completed a seven-city tour of America, said it was shameful that a country as wealthy as the US was not spending more money on lifting its citizens out of homelessness and substandard, overcrowded housing.

"The housing crisis is invisible for many in the US," she said. "I learned through this visit that real affordable housing and poverty is something that hasn't been dealt with as an issue. Even if we talk about the financial crisis and government stepping in in order to promote economic recovery, there is no such help for the homeless."

She added: "I think those who are suffering the most in this whole situation are the very poor, the low-income population. The burden is disproportionately on them and it's of course disproportionately on African-Americans

Tony Pugh | Washington | Nov 11

McClatchy - As job losses continue to slow the nation's economic recovery, labor experts and economists are urging Congress and the Obama administration to boost funding for a little-known program that 17 states are using to avert layoffs and keep workers in their jobs.

Mass layoffs of 50 or more employees claimed 278,000 jobs in the third quarter alone, according to new government data. All the laid-off workers were idled for at least a month and only one-third of their employers expected any of them to be recalled.

In the face of continuing business slowdowns, however, thousands of employers are forgoing layoffs and taking advantage of state "work-sharing" programs in which they cut the hours of full-time workers, who then recoup a portion of their lost wages — usually 50 to 60 percent — from unemployment insurance benefits.

The rules vary by state, but work sharing typically helps reimburse employees for wage reductions ranging from 10 to 60 percent.

For example, an employer that needs to cut 20 percent of its full-time work force could do so through layoffs. If those laid-off workers earned an average of $500 a week, they probably could expect roughly $250 a week in unemployment benefits.

However, if instead of layoffs those workers' hours were cut by 20 percent through the work-sharing program, they'd each earn $400 a week. They'd also be eligible for the program's jobless benefits, which would make up about half of that $100 wage cut, or $50. With this approach, the worker's earnings would be roughly $450 a week, a 10 percent cut instead of a 50 percent cut.

good program, we started this a few weeks ago AND you get to keep your insurance!