financial crisis

How to Fix Too Big Too Fail

tbtfminnfedlogo Meet Roberta Karmel, an unassuming law professor. Meet Professor Karmel's answer to finally break up the big banks.

Another financial crisis, a prolonged recession, or changing political ideologies could cause a re-examination of the status quo and lead to a decision to break up the big banks. If that should happen, policy makers could well take another look at the Public Utility Holding Company Act of 1935 as a model for accomplishing such a breakup over a limited time span of, say, seven years. The political mood is already shifting. The 1980s mantras -- government regulation as problematic, free-market competition as an unquestioned good, financial engineering as worthwhile innovation and finance as more important than commercial and industrial enterprise -- are now being reconsidered. This could lead to a more responsible balance between government, finance and industry. Dodd-Frank, despite its length and complexity, is only the beginning of real regulatory reform. It's a continuation of the complexity of already overly complex financial and regulatory systems. What we need is a simple regulatory scheme to create a simpler banking system.

You've Been Warned!

europestormYou've Been Warned. So says the European Central Bank about an impending collision between the never ending European debt crisis and Europe's increasingly slowing economies.

Risks to euro area financial stability increased considerably in the second half of 2011, as the sovereign risk crisis and its interplay with the banking sector worsened in an environment of weakening macroeconomic growth prospects. Indeed, several key risks identified in the June 2011 Financial Stability Review (FSR) materialised after its finalisation. Most notably, contagion effects in larger euro area sovereigns gathered strength amid rising headwinds from the interplay between the vulnerability of public finances and the financial sector. Euro area bank funding pressures, while contained by timely central bank action, increased markedly in specific market segments, particularly for unsecured term funding and US dollar funding.

Here's the money shot statement from the ECB. Things are worse than right after Lehman Brother's, the OMG Economic Armageddon global meltdown almost, collapse:

The transmission of tensions among sovereigns, across banks and between the two intensified to take on systemic crisis proportions not witnessed since the collapse of Lehman Brothers three years ago.

domino
Here come the dominoes in the form of global economic malaise. Contagion is when one nation's economic disaster spills over and affects the globe. That's the United States folks.

60 Minutes Asks Why Isn't Anybody in Jail for the Financial Crisis?

You might recognize a pattern. There is systemic fraud inside a corporation. Someone tries to blow the whistle. Their reward? Fired, their income lost and reputation ruined. Such is the fate of those who tried to do anything regarding the massive subprime mortgage fraud, a major underlying cause of the financial crisis.

Bloomberg's Bail Out Bombshell Du Jour

nuclear bombBloomberg news has served up another bombshell story on the Federal Reserve loans during the 2008-2010 bail outs. Banks made $13 billion off of secret and ultra-cheap loans from the Federal Reserve. Banks lost $21.6 billion during the same time. That's $13 billion of free money in essence.

Literally the Fed committed $$7.77 Trillion to bailing out these banks. This dwarfs the $700 billion TARP bail out. Bloomberg:

Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.

A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.

Legal Congressional Bribery Exposed by 60 Minutes

CBS 60 Minutes has another bombshell report. It seems while handing cash under the table to members of Congress is graft, offering pre-IPO stock, guaranteed to make a profit for an elected representative...isn't. In Congress: Trading stock on inside information, we have yet another blow by blow playbook on how to use your elected public office to get rich quick.

Oh Those Burdensome Rules

bernankegeiithnerpaulson
Here come the Banksters. It was not enough that so called financial reform is Swiss Cheese legislation, full of loopholes. What regulation is left, the banks are going after and seemingly with help from the Government.

Who is their biggest cheerleader? Why, Federal Reserve Chair, Ben Bernanke. From a regulation speech in Chicago:

No one’s interests are served by the imposition of ineffective or burdensome rules that lead to excessive increases in costs or unnecessary restrictions in the supply of credit. Regulators must aim to avoid stifling reasonable risk-taking and innovation in financial markets, as these factors play an important role in fostering broader productivity gains, economic growth, and job creation.

According to Reuters, Goldman Sachs is having a freak out over the Swiss Cheese Financial Reform bill.

Goldman Sachs Group Inc (GS.N) has just a few more months to put its stamp on the Volcker rule, and it is not wasting any time.

Pages