Beijing | November 6

Al Jazeera - China has described as protectionist new US anti-dumping duties on steel pipes and demanded Washington's recognition that it is a market economy.

The reaction came a day after the US imposed preliminary anti-dumping duties ranging up to 99 per cent on $2.63bn in Chinese-made pipes used in the oil and gas industry.

Where are my green shoots?

The U.S. unemployment rate climbed to 10.2% in October, topping the 10% mark for the first time in 26 years, the Labor Department reported Friday.

Nonfarm payrolls dropped by a seasonally adjusted 190,000 in October, bringing to total number of jobs lost in the recession to 7.3 million. It was the 22nd straight decline in payrolls. Large losses were seen in manufacturing, construction and retail. Health care and temporary-help agencies added jobs.

10.2% is not, I repeat, is not a good number.

Earlier this week, President Obama signed into law the $680 billion FY 2010 Defense Authorization Bill, the largest such budget since the end of World War II. If you missed that aspect of the story, you weren’t alone. Many news stories chose instead to focus on the hate crime provisions tacked onto the bill.

I’ve often quarreled with the inclusion of superfluous legislative riders, and the hate crime provision is more superfluous than most. (Indeed, as my Cato colleague David Rittgers has pointed out, it might be worse than superfluous.)

Linda Shen | Nov 2

Bloomberg - CIT Group Inc.’s decision to seek court protection probably will keep money flowing to bondholders and 1 million customers of the 101-year-old commercial lender. Shareholders and taxpayers won’t be as fortunate.

CIT’s Chapter 11 bankruptcy may give bondholders new notes at 70 cents on the dollar plus new common stock, and Chief Executive Officer Jeffrey Peek said clients will be able to get funds. Common stock owners could be mostly wiped out, and the U.S. Treasury Department said it won’t recoup much, if any, of the $2.33 billion of taxpayer money that went into CIT, the largest firm to go bankrupt after getting a federal bailout.

“It doesn’t look too good for the government preferred or any preferred holders,” Brian Charles, a debt analyst at New York-based brokerage RW Pressprich & Co., said yesterday. “It’s unlikely common shareholders realize any value.”

Nov 1

AFP - High US unemployment, which has lagged in an otherwise recovering economy, likely will begin rebounding early next year, US Treasury Secretary Timothy Geithner said Sunday.

"Economists say... that they think you'll start to see net jobs created at the beginning of the year," Geithner told NBC television, adding that the US economy could see jobs added "in the first quarter some time."

The US economy is suffering the deepest recession in decades with crushing unemployment of just under 10 percent.

Damn these guys are good. At fucking us over, that is. Remember when the public rose up and rejected the TARP bail-out? Congressmen were flooded with calls, did their duty and voted against the bill. Then the propoganda machine went to work. A few meaningless concessions were made, the bill was repackaged and passed.

Not only are you going to eat shit, you're going to like eating shit. Got it?

Now it appears Ron Paul's audit the fed bill is doomed to similar fate. Congress can't ignore public outcry for tranparency so they're busy removing teeth from the bill. They'll pass some meaningless drivel that allows the powers that be to continue fucking us over and claim victory on behalf of the American public.

Ain't democracy wonderful?

Nov 1

BBC - UK: Government to create bank chains

The government is to create three new High Street banking chains by 2015 as part of a major overhaul of the sector.

They will be set up by selling off parts of Royal Bank of Scotland, Lloyds and Northern Rock - the banks which had to be bailed out by the taxpayer.

Ministers and the European Competition Commissioner are in talks over the move, which would go some way to recoup the public money invested in the banks.

There is speculation that buyers might include Tesco and Virgin.

The new chains will be standard retail banks concentrating on deposits and mortgages.

In order to boost competition, they will only be sold to new entrants to the UK banking market and not to existing financial institutions.

Ministers say that creating more competitors on the High Street in this way will invigorate the mortgage market and ultimately lead to a better deal for customers.

Greg Gordon | Nov 1

McClatchy - In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers that it also was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Now, a five-month McClatchy investigation has found that Goldman's failure to disclose those secret bets may have violated securities laws.

Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.

"The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's banks. "This is fraud and should be prosecuted."

The point of an economic stimulus package is to grow the economy. There is no question in my mind that the stimulus enacted by Obama and the Congress succeeded in doing that. I've been pretty clear in giving credit where credit is due on that front. But the problem is this: it was the wrong kind of stimulus--too many tax cuts and not enough money to the states. Cash-for-clunkers? A beefed up subsidy for first time home buyers? Lots of military Keynesianism? Wasn't it this kind of free-for-all in credit what got us here in the first place?

Meanwhile, the states are still in the red, bloody oozing red that it is. And business spending, that engine of economic growth and employment? Where's that? One could go on and on.

As Krugman says, "we’ve gotten the big boost, and it’s clearly far short of what we really need."

Do you feel stimulated? Or are you still personally retrenching?

To repeat: the stimulus was good, but it wasn't enough and was targeted correctly. And we'll see the results of a committee designed stimulus plan soon enough.

Do you work to live, or live to work? There was a time when I asked myself that question on a regular basis. But now that I'm a complete and total corporate drop-out not so much. I think Joe Bageant sums it up nicely in this graf:

It may be my bias, or my imagination, or my distaste for toil, but from here America looks like one big workhouse, "under God, indivisible, with time off to shit, shower and shop." A country whose citizens have been reduced to "human assets" of a vast and relentless economic machine, moving human parts oiled by commodities and kept in motion by the edict, "produce or die." Where employment and a job dominates all other aspects of life, and the loss of which spells the loss of everything.

Read the whole post, Bageant captures the tedium and ennui that I feel for contemporary American life quite well.

GDP was up in the third quarter, 3.5%. Barry has an analysis of the numbers, here.

Washington | Oct 28

AFP - Financial companies with more than 10 billion dollars in assets will have to pay for rivals' failures or rescues, under draft legislation which has been released by the US Treasury and lawmakers.

The plan to address systemic risk in the financial sector will wind down failing institutions and end "too big to fail" bailouts that have been borne by taxpayers, the Treasury and the House Financial Services Committee said Tuesday.

The proposed Financial Stability Improvement Act "provides for the orderly wind-down of failing firms and ends 'too big to fail' to ensure that industry and shareholders absorb the risks and costs of failure, not taxpayers," they said in a statement.

The measure would be a cornerstone of President Barack Obama's commitment to reform financial regulation and avert costly taxpayer bailouts of banks and other financial firms.

"The Financial Services Committee and the Obama administration are committed to ensuring that the taxpayers are never again called upon to take responsibility for Wall Street's business decisions," the bill's sponsors said.

I'm not really sure what the subtext of this story about Maurice Greenberg really is. Do you?

Update: I think this graf--among many others--is the most disturbing bit of the story:

After he was pushed out, Mr. Greenberg fought bitterly with A.I.G. over how to untangle assets that they both laid claim to. Over the summer, he won, earning the rights to $4.3 billion in A.I.G. stock that he had removed from an unusual offshore retirement plan. The company had argued that he had improperly cashed out the stock and used the money to finance new business ventures that were competing with his former company.

If I read that correctly he basically stole $4.3 from AIG. The money was frozen but subsequently released to him that he might build a firm to compete with AIG?

Guy Tridgell | Alsip, IL | Oct 25

southtownstar.com -
The Rev. Dan Willis is passing the collection plate in reverse. He will give you money to go to church.

For the last three weeks, his Lighthouse Church of All Nations in Alsip has raffled a combined $1,000 to attendees at the three Sunday services.

Big surprise, but attendance has shot through the chapel roof.

"It is gimmicky. It is totally gimmicky. I make no bones about that," Willis said. "But if I could get someone who would not normally come to church, why not?"

If the lure of free money has you breaking out the Sunday best, be prepared for some testimony from the preacher on how to spend that money.

You will hear of the glory of paying down debt, the revelation that comes with living on a budget and the miracle of compound interest.

For Willis, the cash is a mere carrot to get you through the doors. By sowing the seeds of the responsible personal finance, he hopes to create a few converts.

"I was worried how people were going to respond," Willis said. "I thought they might be, 'Oh, yeah, a classic preacher.'

"We've been blown away by the response. (read the rest)

Simon Johnson over at Baseline Scenario has this to say about the consensus surrounding regulating the banks to big to fail, versus breaking them up:

Volcker may not have the ear of the President (as the NYT points out), and Alan Greenspan – also arguing for bank breakup, but along different lines – might also be ignored. But watch Mervyn King closely.

Mervyn King is governor of the Bank of England and a hugely influential figure in central banking circles. Time and again he has proved to be not only ahead of his peers in terms of thinking about the latest problems, but also the person who is best able to frame an issue and articulate potential solutions so as to draw support from other officials around the world.

Johnson goes on to quote from a speech King gave recently. I'm not convinced. First, as I commented over at Ian Welsh's blog a few days ago:

Actually, Greenspan’s “conversion” was hedged by his typically obscurantist language. But he hasn’t changed his stripes at all.

Here's what the Time's wrote about Greenspan:

Alan Greenspan, the only other former Fed chairman still living, favored the repeal of Glass-Steagall a decade ago and, unlike Mr. Volcker, would not bring it back now. He declined to be interviewed for this article, but in response to e-mailed questions he cited two recent public statements in which he suggested that the nation’s largest financial institutions become smaller, so that none would be too big to fail, requiring a federal rescue

How does one go about making them small without breaking them up is beyond me, but I digress. I don't see this as a consensus shattering development in the least. But Johnson does have a point, in a sense. If King can convince Gordon Brown of his views, then yes, the consensus will break down and then real reform might be possible. Why? Well, Brown really did lead the way in the early days of the financial crisis and if he threw his weight around in favor of something like this in London then policy-makers in the US would have to take note. Until then just because Volcker is getting press doesn't mean a thing.

Rex Nutting | Washington | October 21

MarketWatch - The government has spent trillions to rescue the banking system from the brink of disaster, but the biggest cost may be the loss in the government's credibility from an understandably distrustful and angry public, according to a quarterly report released Wednesday by the congressional watchdog over the bank bailout.

"The anger, cynicism and distrust created must be chalked up as one of the substantial, albeit unnecessary costs" of the Troubled Asset Relief Program, said Neil Barofsky, the special inspector general for the TARP, in a report to Congress. Read the report.

Dave Johnson outlines the seven steps to making money in the leveraged buyout scam racket (the kind that raped Simmons Mattress) and then outlines an idea for a Government incentive regime that rewards a different kind of behavior:

I have described here a destructive, unsustainable system that creates company- and society-breaking machines. These exist because of the economic and social incentives that our government has set up and we allow to stay in place. Breaking unions, stealing pensions, outsourcing jobs and squeezing customers all depend on government not enforcing laws and regulations – especially labor, consumer and environmental rules. (The last administration’s Labor Dept actually gave advice on how to break unions.) As long as we let the economic incentives call us "costs" and getting rid of us "efficiency" this will continue.

Certainly there is no incentive at the top to stop this. This system helps a wealthy few get ever wealthier and do not feel the consequences. The people who do this are celebrated as "successful." And if they don’t like the resulting devastation to the economy, community, country and world they can just hop into their private jet or yacht to retire to their private island or tax haven.

Of course, in the last year we have seen that this was not a sustainable system. The economy collapsed because everyone in the system – the workers, consumers, companies, banks, Wall Street – all hit the limits of how much debt you could pile on our backs. But we haven’t started to make any changes in the design of the system, or in the machines that unsustainably grind up our companies, workers, customers and country. And we haven't changed the ideology and rationalizations used to justify destroying lives and companies and our long-term prospects for short-term profits for a few.

But imagine if instead we put in place economic and social incentives that set up a sustainable system with company-making machines that direct all of this capital and energy toward building good companies that serve all of our interests. Call them "green machines." What if we set things up so people could get rich doing this instead? Then people would create green machines that would grind through the economy, finding companies and transforming them into businesses that serve their customers and communities, creating rewarding and fulfilling jobs in stimulating and enjoyable work environments, and building a better future for all of us.

Here.

Have you had it with the scams, frauds, "mark to myth" and lies?

Tired of this sort of garbage - being punished for being responsible?

You may believe that your exemplary behavior shields you from unexpected credit card fees. Sadly, that is no longer the case.

You can stop it.

Yes, you.

All 330,000,000 of you.

Here's how.

Go withdraw all your money and business from the following institutions:

Bank of America
Wells Fargo/Wachovia
Citibank
JP Morgan/Chase

Those four.

Place your business with a local community bank or credit union in their place, and tell the above four institutions to "piss off."

I've resisted doing this, but the idea that banks are now going to try to penalize those who do not carry balances or pay late fees is the last straw.

This is a call for a boycott.

I quit doing business with those guys a long time ago. Read the rest at the link

I can think of no better way of keeping Goldman in line and teaching it a lesson at the same time than a windfall tax. Indeed, folks at the Wall Street Journal are warming to the idea too:

“A windfall tax is blunt, arbitrary and something supporters of free markets usually instinctively avoid. Even so, following news that Goldman Sachs Group has already set aside a $16.7 billion bonus pool for 2009, the case for windfall taxes on banks that pay giant bonuses is becoming unanswerable.

This year’s bank profits are windfalls in the purest sense. They aren’t the due rewards for exceptional skill but gifts from taxpayers. Many banks are earning huge, risk-free profits borrowing from central banks at ultralow interest rates and lending back to governments at much-higher rates. If this giant, hidden subsidy was being used to support new lending, fair enough. Instead, it looks destined for bankers’ pockets.

Yes, you read that correctly, the Wall Street Journal published that piece. We might not need those pitchforks just yet.

Simon Nixon | New York | October 20

Wall Street Journal - “A windfall tax is blunt, arbitrary and something supporters of free markets usually instinctively avoid. Even so, following news that Goldman Sachs Group has already set aside a $16.7 billion bonus pool for 2009, the case for windfall taxes on banks that pay giant bonuses is becoming unanswerable.

This year’s bank profits are windfalls in the purest sense. They aren’t the due rewards for exceptional skill but gifts from taxpayers. Many banks are earning huge, risk-free profits borrowing from central banks at ultralow interest rates and lending back to governments at much-higher rates.

Kevin G. Hall | Washington | Oct 18

McClatchy - As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.

A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.

Instead, Moody's promoted executives who headed its "structured finance" division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: "toxic assets."

As Congress tackles the broadest proposed overhaul of financial regulation since the 1930s, however, lawmakers still aren't fully aware of what went wrong at the bond rating agencies, and so they may fail to address misaligned incentives such as granting stock options to mid-level employees, which can be an incentive to issue positive ratings rather than honest ones.

William Black writes of the five fatal flaws of finance (read the whole thing, his analysis is excellent and should enrage and terrify you):

The financial sector is a tool to help those that make real tools, not an end in itself. But five fatal flaws in the financial sector's current structure have created a monster that drains the real economy, promotes fraud and corruption, threatens democracy, and causes recurrent, intensifying crises.

1. The financial sector harms the real economy.
2. The financial sector produces recurrent, intensifying economic crises here and abroad.
3. The financial sector's predation is so extraordinary that it now drives the upper one percent of our nation's income distribution and has driven much of the increase in our grotesque income inequality.
4. The financial sector's predation and its leading role in committing and aiding and abetting accounting control fraud combine to:
   • Corrupt financial elites and professionals, and
   • Spur a rise in Social Darwinism in an attempt to justify the elites' power and wealth.
5. The CEOs of the largest financial firms are so powerful that they pose a critical risk to the financial sector, the real economy, and our democracy.

Robert Creamer adds four points in another outstanding piece:

1. History has shown that financial markets cannot accomplish their ostensible goal of allocating risk and directing capital to their highest and best uses unless they function within the context of very strict rules.
2. Much of the financial sector does not produce anything.
3. Left to their own devices, financial speculators often kill off productive enterprises through leveraged buyouts and private equity plays.
4. The bigger the financial sector gets, the more power it has to hold the entire economy ransom for huge bailouts when their speculative bubbles collapse.

Michael McKee and Scott Lanman | New York CityOc | October 15, 2009

Bloomberg - Oct. 15 (Bloomberg) -- U.S. regulators should consider breaking up large financial institutions considered “too big to fail,” former Federal Reserve Chairman Alan Greenspan said.

Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on Foreign Relations in New York.

David Cho | October 11

WaPo - The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees.

The upheaval on Wall Street has deluged public pension systems with losses that government officials and consultants increasingly say are insurmountable unless pension managers fundamentally rethink how they pay out benefits or make money or both.