Three-Tiered Obfuscation and Nullification of the Volcker Rule

It suddenly dawned on me that the regulations are not there to regulate. They are spelled out so that the participants - the industry (like financials) and politicians fed by the industry - can do everything and anything that is NOT written and the regulators can safely look the other way.

Case in point: the Volcker Rule (prop trading regulation) in the Dodd-Frank (or DONK) financial "reform" bill.

Financial Times reports:

US regulators want to use techniques pioneered in the fight against money-laundering to crack down on “proprietary trading” by banks as part of new financial reforms, according to bankers and officials.

The question of how to define trading done with banks’ own funds is one of the thorniest for the US authorities in the post-crisis regulatory overhaul as it is difficult to differentiate such activities from market-making on behalf of clients.

The “Volcker rule”, proposed by the former Federal Reserve chairman Paul Volcker and included in last year’s Dodd-Frank law, aims to reduce banks’ risk-taking by forbidding them from placing short-term trading bets.

Draft guidelines for the Volcker rule are being circulated among members of the Financial Stability Oversight Council, the body of regulators charged with defining the rules of the road for the financial system. Publication of a final version is planned in the next two weeks.

After months of internal discussions and talks with banks, which have mounted a vigorous lobbying campaign, regulators are leaning towards a “multi-tiered test” like those used to detect illegal money transfers.

The first tier would involve automated “tripwires” that alert banks’ compliance departments.

People involved in the talks said that, depending on the market and the trade, “tripwires” could be the length of time a trader holds a position, its size, riskiness, or other measurable criteria. In detecting money laundering, banks look at “filters” such as size and provenance of a transfer.

The second tier would see internal compliance and risk management departments quiz the trader on the nature of the position. Finally, regulators, that keep inspectors on banks’ premises, will also be able to see the “tripwires” and monitor both traders and compliance departments.

Banks are likely to welcome this approach, after arguing that a strict definition of proprietary trading based on one-size-fits-all metrics would have cut off liquidity to large swaths of global capital markets.

So, in summary, the three steps are:

1. "Tripwires" - length of the trade, size, riskiness, and other measurable criteria to be automatically triggered;

2. Bank's internal compliance and risk management departments ask the trader about the trade;

3. Regulators may see the "tripwires" and monitor the bank.

I have to laugh out loud. They almost read like sort of a reverse-manual of what to avoid so as to prevent the "tripwires" from being triggered. Besides, how are they going to regulate traders when 80% the trades are done by HFT algo bots? Are they going to regulate only the carbon-based traders?

No wonder Wall Street banks are happy, and Mr. Volcker is leaving the White House.

But not to worry. Obama will be well-managed by his new handler, aka chief of staff, from J.P.Morgan Chase to restore confidence. CONfidence.

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Obama Says GOP Will Repeal Financial Reform

And I say "Hoorraaayyyy!!!!"

Politico reports:

In his weekly Saturday address, President Obama warned that if Republicans take control of congress this November, they would repeal consumer protections in the Frank-Dodd financial regulatory reform legislation, which he called “one of the most important victories” he has achieved in office.

“Despite the importance of this law—and despite the terrible economic dislocation caused by the failures in our financial system under the old rules—top Republicans in Congress are now beating the drum to repeal all of these reforms and consumer protections,” Obama said

The bill was designed “to rein in the secret deals and reckless gambling that nearly brought down the financial system,” the president said. “It set new rules so that taxpayers would never again be on the hook for the bailout if a big financial company went under.”

Have you read the bill, Mr. President? Taxpayers will be solidly on the hook for the bailout. Instead of one gigantic, highly visible TARP-like payment, taxpayers will be sucked dry over time with extra fees here, extra tax there, and forced to support the FDIC which is totally broke already.

"Rein in the secret deals and reckless gambling"? My problem here is two-fold. First, "rein in"? So he is saying the bill was designed to control and check "the secret deals and reckless gambling" - meaning they will never stop. Second, who enabled such "deals" and "gambling"? The Federal Reserve and GSEs like Fannie and Freddie. The former with the loose monetary policy, the latter with securitization of mortgages that encouraged loose underwriting standards. Where were the government agencies who were supposed to regulate them? Nowhere. And no one can regulate the Federal Reserve - a consortium or co-op of major banks.

Also, as they say, "Devil's in the details." The bill, even though it was another 1000-pages-plus monster, is not fleshed out with actual detailed rules and regulations. The Treasury Department and the Federal Reserve are going to come up with such rules and regulations over time - i.e. they can write whatever they (or Goldman Sachs or J.P.Morgan Chase, or Blackrock or PIMCO..) want.

But what does his financial "reform" bill do for sure? Empower the Federal Reserve even more so that it can preside over every aspect of the financial lives of ordinary Americans. Even the ex-central bank chief Paul Volcker was amazed (which by the way received scant attention and coverage. He even scrapped the prepared speech to deliver his very strong criticism.).

And what does the bill NOT do? Do anything with Fannie and Freddie, who keep sucking in taxpayers' money like blackholes. Now the final combined bills are estimated to be $259 billion, the worst scenario by the optimistic FHFA, and thanks to the Christmas present by Turbo Tax Timmy last year, the sky's the limit on how much they can continue to lose.

I don't like the lies in the next segment either:

The financial services industry has been wary of more stringent regulation in the Frank-Dodd financial reform bill, which Obama signed in July. And Obama has tapped Harvard Law Professor Elizabeth Warren, who is credited with conceptualizing the Consumer Financial Protection Bureau, to lead its formation in the coming months.

“Reform included the strongest consumer protection in history—to put an end to a lot of hidden fees, deceptive mortgages, and other abusive practices used to tilt the tables against ordinary people in their financial dealings,” Obama said. And the consumer protection bureau “will have just one job: looking out for ordinary consumers in the financial system.”

Citing recent allegations of widespread foreclosure fraud in the still-weak housing market, Obama said the nascent bureau would protect consumers from “unfair practices in mortgage transactions and foreclosures.”

Instead of formally nominating Elizabeth Warren, Obama has made her one of his czars - accountable only to him, no Congressional oversight.

And it is really funny that he mentions foreclosure fraud. His emissaries - Geithner, Axelrod, HUD chief Donovan are outright dismissive, talking it down as minor processing errors and siding solidly with the bankers. According to this administration, forgery and misrepresentation are minor processing errors, if they are done by big banks and their affiliates.

The last bit of the article is equally funny:

He added that Republicans in Congress have promised to make repealing the bill a priority if they become the majority party.

“I think that would be a terrible mistake,” Obama said. “Our economy depends on a financial system in which everyone competes on a level playing field, and everyone is held to the same rules—whether you’re a big bank, a small business owner, or a family looking to buy a house or open a credit card.”

GOP needs 2/3 majority in the Senate to override his veto. Even under the most optimistic estimate, GOP will get about 50% of the Senate seats. Even adding the toss-up seats, it won't be anywhere near 2/3 majority.

"Our economy depends on a financial system in which everyone competes on a level playing field, and everyone is held to the same rules" - hahahahahahahahaha. What "level playing field"? What "same rules"? Did he even try to level the playing field, apply the same rules? (What are the rules? I didn't even know they existed.) The answer is resounding NO.

The rules and regulations have been there all along. No one has bothered to actually enforce them. To solve the problem of not having enforced the rules and regulations, he creates more rules and regulations and foist on the taxpayers the burden of funding the ever-growing federal government bureaucracy to maintain those rules and regulations. I have a feeling that any "enforcement" will be done on the easiest target, which is the taxpayers, the 'small people'.

Just like the health care "reform" bill, no one knows exactly what's in the financial "reform" bill, as the details of these bills are being written by the government agencies (and lobbyists and non-profit foundations and big labor unions and...). And we're supposed to take Obama's word for it, that it is good for us.

This financial "reform" bill - isn't it fitting that the bill's formal name carries two of the most corrupt, in-the-pocket-of-TBTF banks politicians on the Hill? The formal name of the bill which is the law of the land is "Dodd-Frank Wall Street Reform and Consumer Protection Act".

The full title is even funnier: "An Act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes."

And for other purposes. Like what? Funding Afghan war? Subsidizing Government Motors? Paying more to the public union workers (teachers, police, firefighters)? Prepare for anything and everything, as this bill is nothing but evolving, changing document.

OK, that's my rant for the Saturday morning...

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Millionaire Whistle-Blower Program in Dodd-Frank Financial "Reform" Bill

Irony and cynicism are not lost, at least not to me.

Another gem has been unearthed from the Dodd-Frank (or Donk) bill of financial "reform", now a law of the land. CNBC reports:

The Hypocrisy of the Millionaire Whistle-Blower Program (7/27/2010 CNBC)

"Under a little noticed provision of the Dodd-Frank Wall Street reform bill, the government will pay bounties that could amount to millions of dollars to whistle-blowers who bring evidence of fraud to the Securities and Exchange Commission.

"The odd thing is that just a few years ago, similar payoffs in securities fraud cases were regularly occurring-but they were illegal.

"Four years ago, a grand jury indicted the Milberg Weiss law firm for making illegal payments to lead plaintiffs in numerous securities class action cases from 1981 to 2001. The firm had been paying a portion of its attorney's fees to the lead plaintiffs in the cases.

"The government alleged that this "kickback" created a conflict of interest between the lead plaintiffs and the rest of the class members, ultimately reducing the payout to the victims in the cases.

"The Milberg Weiss partners all pled guilty. Two of the partners went to jail.

"The new Dodd-Frank whistle-blower award will allow people who give information to the government to collect rewards that can amount to up to 30 percent of the recovery from the resulting SEC case. This will reduce the amount of money available for distribution to victims of the securities fraud-just as the Milberg Weiss kickbacks allegedly reduced the payouts to the victims in the class-action suits.

"One of the strongest justifications for outlawing kickbacks to lead plaintiffs in class actions is that the payments seemed to be part of the class-action extortion racket, in which plaintiff's lawyers would file class-action suits any time a company's stock dropped. Having a ready-made set of paid-off lead plaintiffs made this task all too easy." [The article continues.]

But now since the government will be making the kickback, I mean, "incentive" payment, why it will be all dandy. Extortion racket? What are you talking about? The government in the business of extortion racket? (Have you read Smedley Butler yet?)

This "incentive" payment immediately brought up in my mind the "incentive" payment that the US military made to people in Iraq and Afghanistan to supposedly ferret out "terrorists". And we know who those "terrorists" mostly turned out to be, don't we? Instead of "terrorists", we imprisoned farmers, goat herd, anyone, who were turned in by someone who needed money, who held some personal grudge against them.

Another sublime irony is the whistleblowing by Wikileaks. Wikileaks has disclosed what a racket and an uncontrollable mess the whole Afghan war waged by the US and its NATO allies has been. Instead of rewarding the whisleblower, the US government is going after them. Bradley Manning is locked up in Kuwait for his whistleblowing - disclosing the video of the US military in Iraq gleefully shooting the civilians.

This is getting too rich. Rat out a fraudulent bankster and be a millionaire! But don't you dare rat out the government, or you will get 50 years in jail!

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Guests at FinReg Signing Ceremony

(UPDATE) CNBC reports that:

J.P.Morgan Chase and Goldman Sachs CEOs were not invited;
Bank of America and Morgan Stanley CEOs were invited;
California's CALPERS Chief Investment Officer was invited.

Another article on the matter at CNBC quotes:

“Basically, the White House made the decision to invite only the banks that were most sycophantic in the run-up to the passage of Dodd-Frank,” one senior Wall Street executive said.

You're not kidding...
----------------------------

There are some interesting names in the list that names part of "a wide array of nearly 400 individuals who were instrumental in passing this historic legislation" announced by the White House press secretary.

Two 'small people' from ordinary, suffering Americans supposedly shared the stage this morning (I couldn't bring myself to watch the video) with Obama:

Mr. Andrew Giordano, who "was saddled with hundreds of dollars in overdraft fees on his veteran’s account because his bank had automatically enrolled him in “overdraft” protection that he never asked for."

Ms. Robin Fox, whose "credit card company retroactively increased the rate on her existing credit card balance from 10.90% to 17.90%, even though she paid her account on time."

In the "Expected Attendees" of the WH announcement, we find:

President of UK bank Barclays (Bob Diamond)
Chairman of Barclays America (Archibald Cox Jr., who is the son of the special prosecutor in the Watergate investigation)
CEO of Citigroup (Vikram Pandit)
President of Bank of New York Mellon (Gerald Hassell)
President and CEO of National Council of La Raza (Janet Murguia)
Vice Chairman of Federal Reserve under President Clinton (Alan Blinder)

A Former Vice Chairman of the Fed and CEO of La Raza were "instrumental in" passing this historic (not in the sense that Gibbs the mouthpiece probably means) bill.

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FinReg Promo Video from White House - It's Gotta Be a Joke, Right? Right?

Just saw this on Yahoo Finance. I hope it's a joke, I hope it was taken from the Onion Network.

If my hope proves to be totally unfounded, this video is supposed to have been produced by the Obama White House to sell the disgusting FinReg to us 'small people'. (Goebbels would be proud.)

Since it is so inane and basically only says "bad banksters caused all this", I have a sinking feeling that this was indeed produced by the economics-illiterate Obama White House.

It actually makes me angry, not so much at the "banksters" but at the Congress and this administration and the past two ones. And the Federal Reserve. (And I hate such an inate piano music.)

Obama is scheduled to sign this piece of you know what into law on 11:30AM EST on Wednesday.

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Unintended (and Totally Predictable) Consequence of FinReg: Cap on Debit Card Fees Will Hurt Consumers

(Or was it 'intended'?)

Consumers on the losing end, and this is just one of so many thanks to the financial "regulation" bill that's now ready to be signed by the vacationing golfer in chief.

Cap on debit card fees, aka the Durbin rule, has been lauded as protecting the consumer by lowering the transaction cost. It does no such thing, as it has nothing to do with the consumer. The beneficiary is the retailers who accept debit card payment, who now don't need to pay as much to the banks.

The banks, particularly the big banks who issue huge chunk of debit/credit cards - J.P.Morgan Chase, Citigroup, Bank of America, Wells Fargo - are bracing for the reduced revenue and profit resulting from this particular rule alone. As Bank of America made it very clear this morning,

"Bank of America’s debit-card revenue could shrink by $1.8 billion to $2.3 billion starting in the third quarter of next year because of restrictions on fees merchants can charge for each swipe of a debit card, Chief Executive Brian Moynihan said in a presentation today. The bank is seeking ways to replace some of the revenue lost to the Durbin rule, named after Sen. Richard Durbin, the Illinois Democrat who sponsored the amendment, Moynihan said.

"The bank also expects a goodwill charge of $7 billion to $10 billion in the third quarter tied to the value of the business after President Barack Obama signs the regulatory reform law approved by Congress this week, Chief Financial Officer Charles Noski said on a conference call. Goodwill is the difference between the price paid for an asset and its fair market value.

"Banks had lobbied against the Durbin amendment, while retailers touted the changes as being pro-consumer. “It’s regulating a transaction between two businesses,” Noski said. “This isn’t going to benefit consumers at all.” [Emphasis is mine.]

Put the price control on, and see the goods and services disappear. It has been the case ever since ancient Egypt and imperial Rome. In this case, these economics-ignorant politicians put the price control on the service (use of debit cards), and voila! free checking accounts disappear.

Don't believe me? Check this article out:

Banks Seek to Keep Profits as New Oversight Rules Loom (7/15/2010 New York Times)

"...Free checking, a banking mainstay of the last decade, could soon go the way of free toasters for new account holders. Banks are already moving to make up the revenue they will lose on lower overdraft and debit card transaction charges by raising fees on other services.

"Banks like Wells Fargo, Regions Financial of Alabama and Fifth Third of Ohio, for instance, recently began charging new customers a monthly maintenance fee of $2 to $15 a month — as much as $180 a year — on the most basic accounts. Even TCF Financial of Minnesota, whose marketing mantra championed “totally free checking," started imposing fees this year in anticipation of the new rules."

As Jamie Dimon, CEO of J.P.Morgan Chase, says in the article,

"If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger."

Wait till the Congress hear about this. They will force the banks to offer free checking accounts. What will disappear, then? Maybe they will lower the interest on CDs. Maybe they will put new restriction on who can qualify for free checking accounts (low-income families and union workers, my guess) and you will have to show the proof of income or union membership card to get free checking accounts.

The NY Times article also says so-called "regulations" to be imposed on the banks will be easily circumvented by the banks.

Who's the designated loser? We (small people) are. As always.

Anything is possible in this changey hopey world of Obamanation for groups with political clout with the administration (unions, big banks, big pharmas, big oils, big anything).

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Senate Passed FinReg, 60 - 39

Consumers and small businesses, welcome to servitude under the private banking cartel (the Federal Reserve).

Big Wall Street banks, rejoice.

(Look no further than the stock price of Goldman Sachs today. It is celebrating, up over $2 in a generally negative market.)

What's in Financial Reform Bill? Most Americans Don't Know (7/15/2010 Reuters/CNBC)

Most Congressmen and Senators don't know either, but that's nothing new.

Vote out all the incumbents in November. Even the good ones. Vote in anyone who will nullify this bill, the health care "reform" bill, and any bill that the lame-duck Dem Congress dare passes.

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Racial and Gender Quota Coming to Financial Institutions?

under the financial "reform" bill, aka Dodd-Frank bill.

Thomas DiLorenzo at LRC Blog writes:

How Washington Plans to “Stabilize” Financial Institutions (July 8, 2010)

"By ordering them to abandon merit in hiring decisions and replace it with skin color and type of sex organ. This is no surprise, of course, since the defining charactaristic [sic.] of the American Left, in academe, politics, and elsewhere, is hatred of white heterosexual males (“while male oppressors” in the language of the academic Marxists who dominate higher education). A second defining characteristic of the American Left, which is on display every week with Paul Krugman’s New York Times columns, is radical and belligerent economic ignorance."

What??

So I followed the link, and here is what I landed:

Racial, Gender Quotas in the Financial Bill?
(Diana Furchtgott-Roth, 7/8/2010 Real Clear Markets)

"WASHINGTON - What one finds when reading congressional legislation is invariably surprising. Take the Dodd-Frank financial regulation bill, for instance, which was created by merging Senate and House bills. When the Senate returns from recess one of its first actions will be to vote on the bill, which passed the House on June 30.

"I was searching the bill for a provision about derivatives. What did I find but Section 342, which declares that race and gender employment ratios, if not quotas, must be observed by private financial institutions that do business with the government. In a major power grab, the new law inserts race and gender quotas into America's financial industry.

"In addition to this bill's well-publicized plans to establish over a dozen new financial regulatory offices, Section 342 sets up at least 20 Offices of Minority and Women Inclusion. This has had no coverage by the news media and has large implications.

"The Treasury, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the 12 Federal Reserve regional banks, the Board of Governors of the Fed, the National Credit Union Administration, the Comptroller of the Currency, the Securities and Exchange Commission, the new Consumer Financial Protection Bureau...all would get their own Office of Minority and Women Inclusion.

"Each office would have its own director and staff to develop policies promoting equal employment opportunities and racial, ethnic, and gender diversity of not just the agency's workforce, but also the workforces of its contractors and sub-contractors.

"What would be the mission of this new corps of Federal monitors? The Dodd-Frank bill sets it forth succinctly and simply - all too simply. The mission, it says, is to assure "to the maximum extent possible the fair inclusion" of women and minorities, individually and through businesses they own, in the activities of the agencies, including contracting." [Emphasis is mine. The article continues.]

My immediate question is "What is 'fair' and who defines it?"

My second question is "What the hell does this have to do with preventing the financial crisis?" If there had been more minorities and women in the financial industry, the credit crisis and sovereign debt crisis wouldn't have happened? Is that the rationale?

Do they even know (with a few exceptions) WHY the financial crisis and market/economic crash occurred? (It's because of the private banking cartel whose name is "Federal" and who doesn't have "Reserve", and who will be in charge of presiding over all financial transactions of 'small people'.)

(The Congress does deserve a 'fair' wage for coming up with such a brilliant idea. They deserve to be paid NOTHING. Zero. Nada. Null.)

The bill, which by the way dropped "Wall Street" from the bill title in the Senate (isn't that telling?), is currently titled "Restoring American Financial Stability Act of 2010". H.R.4173 is the bill number.

The writer, however, may have gotten the Section number wrong (or the sections got moved around in conference). I found the Section 1801 in the final House bill (referred to Senate) that defines the Office of Minority and Women Inclusion.

If you are curious, here's the PDF file of the House bill. Go to page 522. I couldn't find it in the current Senate amendment, which does not mean it is not there.

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House Approves FinReg, Awaits Senate

As expected, the House passed the financial regulations (237-192) that will surely regulate 'small people' a whole lot more while giving a pass at TBTF Wall Street banks and completely ignoring Fannie and Freddie as if they don't exist.

The Senate will follow suit, I have no doubt even if the vote is being delayed. The usual suspects in GOP who always side with Dems (why don't they just switch parties?) will vote for it, and Scott Brown, who was carried into office with the Tea Party mantra of fiscally conservative, smaller government, may vote for this massive bureaucracy creator of a bill because $19 billion bank tax has been dropped. (People of Massachusetts, be sure to vote this guy down the next chance.)

House OKs sweeping bank rules; Senate vote awaits
(6/30/2010 AP via Yahoo Finance)

"WASHINGTON (AP) -- Nearly two years after a Wall Street meltdown left the economy reeling, the House on Wednesday passed a massive overhaul of financial regulations that would extend the government's reach from storefront thrifts to the executive suites of Manhattan.

"Senate support for the far-reaching bill remained in flux, however. The Senate was forced to delay its vote to mid-July, denying President Barack Obama a victory before Independence Day. Democrats struggled to secure the votes of a handful of Republican senators even after meeting their demands and backing down on a $19 billion tax on big banks and hedge funds.

"The legislation, swelling to more than 2,000 pages, would rewrite the nation's regulatory books. Simple supermarket purchases and exotic derivatives trades would be subject to new laws. And the entire financial system would be placed on a risk watch in hopes of thwarting the next threat of a financial crisis." [The article continues.]

No one knows exactly what's in it or how it may or may not work, as admitted by none other than Chris Dodd, whose name is attached to the bill for history.

Derivatives 'regulation' is just a sop, as it doesn't regulate the bigger chunk of $600 trillion (notional) derivative markets - interest rate swaps and currency swaps. The 'regulation' on prop trading and investing in hedge funds by TBTF Wall Street banks will likely to benefit, not harm, these TBTF banks. It won't reduce risks; on the contrary, it may increase risks as banks will not be required to put a big stake in the venture.

But it squarely puts the private institution (a banking industry cartel or co-op) - the Federal Reserve - in charge of "protecting" the consumer by making decisions on and creating new regulations for all financial transactions that 'small people' do - from mortgage application to grocery shopping using debit card.

One of the promotional line fed to 'small people' is this: "The regulation will put the cap on the interest and fees banks can charge on the credit card." It may sound great, but what it is doing essentially is to put a price control on money. Price control never works in lowering the price of goods and services. Goods and services will simply disappear and go underground. Ask ancient Roman citizens.

$19 billion bank tax has been dropped, and instead the TARP money will be used. That's the money extorted by Hank and Ben and the obliging Democratic Congress against the overwhelming opposition from taxpayers. So we are paying for it.

How is regulating 'small people' going to prevent the next financial crisis? (Did you know that we were out of the previous financial crisis? I thought we're still in the middle of it.) Derivatives control will not be there in any meaningful way, Fannie and Freddie will likely cost $1 trillion and the government refuses to deal with them while the FHA and Ginnie Mae churn out government-backed subprime mortgages.

Besides, the next big crisis, as it has been shaping up for the past few months over there in Europe, may be of totally different character anyway. Instead of private debt crisis (mortgages, credits, ABS, MBS, CDO, CDS on these debt instruments), it is going to be sovereign debt crisis and currency crisis. Instead of CDS, we will have the blowup of interest rate swaps and currency swaps, which this so-called regulation doesn't address. There's no need to remind you that the US government is the world-largest debtor and keeps on getting larger.

My conclusion is therefore highly cynical. The only purpose of this bill is to regulate us the 'small people' so that the government can keep track of one of the most vital and most important activities in life - finance. Free flow of money and capital is what defines a free and productive society. This bill is about the government CONTROL of that flow. You can guess what kind of society that they want, can't you?

And the government doesn't even have the guts to do it directly; it has delegated that authority to a private industry cartel. It is selling us the 'small people' down the river.

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Gerald Celente on FinReg: Mickey Mouse Congress

Celente on financial "reform":

As Barney Frank said, "Get ready for the double feature." It's nothing but a political theater, to keep the status quo in place.

On Obama's economic policy:

Insanity for President Obama to keep telling nations and people to take on more debt, as if the new debt wipes away the old debt.

Before the clock strikes 2011, the whole world will know the Crash of 2010 has occured. These measures will do nothing to stop it.

On "jobs bill":

Just window dressing.

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'FinReg' Is 'Ready' for Vote

by our hard-working Congressmen and Senators who stayed all night to finalize this piece of you know what. Didn't even wait for Sunday night, like when they passed the health insurance "reform" bill. (They would go extra miles for their true constituents.)

Financial stocks are UP. That alone should tell you who will benefit from this so-called "reform".

More later.

Here's the screenshot of Drudge Report top page. Just like any other 1000-plus bills, no one in Congress don't really know what's in it. (Barney, get your hands off your pants.)


Consumers - the 'small people' - will be so "protected" by the crooked institution who prints money for the world (Federal Reserve) that everything will be alright from now. Consumer CONfidence in June rose to the highest level since January 2008, we are told.

Hope you are feeling it.

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Debtors' Prison, 2010 Version

Police now works for the debt collectors. Star Tribune of Minneapolis-St Paul reports:

In jail for being in debt
(CHRIS SERRES and GLENN HOWATT, 6/9/2010 Startribune.com)

"You committed no crime, but an officer is knocking on your door. More Minnesotans are surprised to find themselves being locked up over debts.

"...It's not a crime to owe money, and debtors' prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.

"...Whether a debtor is locked up depends largely on where the person lives, because enforcement is inconsistent from state to state, and even county to county.

"In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man "to indefinite incarceration" until he came up with $300 toward a lumber yard debt.

""The law enforcement system has unwittingly become a tool of the debt collectors," said Michael Kinkley, an attorney in Spokane, Wash., who has represented arrested debtors. "The debt collectors are abusing the system and intimidating people, and law enforcement is going along with it."

"How often are debtors arrested across the country? No one can say. No national statistics are kept, and the practice is largely unnoticed outside legal circles. "My suspicion is the debt collection industry does not want the world to know these arrests are happening, because the practice would be widely condemned," said Robert Hobbs, deputy director of the National Consumer Law Center in Boston."

"...The laws allowing for the arrest of someone for an unpaid debt are not new.

"What is new is the rise of well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect." [Emphasis is mine. The article continues.]

It looks like 'ambulance chasers' have found a more secure, if less lucrative, line of business.

These collection firms are not much different in what they do from high-flying hedge funds like Paulson & Co. They buy distressed assets from the banks (credit card debt for the former, residential mortgages for the latter) at a huge discount. Now it is up to them to collect more than the discounted amount that they pay to the banks.

Hedge funds and wealthy investors who purchase discounted mortgages have the US government (i.e. taxpayers) as backstop. The debt is secured by the property.

Unlike mortgage debt, credit card debt is unsecured. So the new owners of this debt have to be aggressive if they want to maximize their return on the investment. That's where the police and the court system come in. Instead of protecting citizens from predatory firms who abuse the public justice system to increase their profits, the system works for these firms.

You think Chris "Friend of Angelo" Dodd's so-called financial 'reform' bill has anything to say about this new breed debt collectors and to actually protect consumers?

As for the banks who sell distressed/delinquent unsecured debts to these collection firms (Bank of America, Chase, Citigroup, etc.), they have nothing to complain, as far as I'm concerned. They issued those unsecured credits; no one compelled them to. They simply created 'money' from thin air, and put the digits in the borrowers' accounts. It cost them zero to create the money. On their balance sheets they recorded them as 'assets' (magic of fractional-reserve banking), so when they write them down the balance sheets get hit. So what? It still didn't cost them anything, they got some money when they sold these assets to debt collectors, and they have the government backstop.

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Another Circus in the US Stock Market

What a spectacle every day!

It opened in deep red alright, did some DCB (dead cat bounce). Then the news hit that the derivatives regulation may be ditched (longs can thank Barney Frank). (Sooo... what's the point of "reforming", Barney?) Another miraculous recovery, except this time the algo bots were programmed to more closely simulate humans and not to shoot up 100 points on Dow in 10 minutes. They duly took time, 2 hours, to achieve yet another show of strength of the US economy. (Never mind that the stock market is NOT the economy.)

The chart is 15-minute Dow 5-day. It ended today 10 points below yesterday's low.


Europeans had better be moving their funds to the US stock market, where day in and day out and during the dead of night, Goldman, JP Morgan, Citi, algo bots of quant funds, the PPT, NY Fed, and God knows who else, work diligently to prop up the market the best they can. The ECB is yet to learn the trick.

Futures are cheerfully green: Dow +64, S&P 500 +7.80, Nasdaq 100 +13.50. (Data: Bloomberg, as of 20:30, plus or minus one minute..)

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Youtube: "Mouse Crashes Obama's 'Fat Cat' Speech"

Smart title by the poster on the now-famous incident in the Rose Garden the other day.

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So-Called Financial "Reform" Bill Passage Is Greeted Favorably

by the US stock market, and particularly by the big bank stocks.

Currently,

Goldman Sachs (GS): up 4.4%
Morgan Stanley (MS): up 4.8%
JP Morgan Chase (JPM): up 5.45%
Citigroup (C): up 4.1%
Bank of America (BAC): up 4%
Wells Fargo Bank (WFC): up 4.6%

The broader market as measured by Dow Jones Industrial Average is up 0.78%, by S&P500 up 1.1%.

That alone should tell you that these big banks will benefit from the so-called "reform". Smaller regional banks are generally up, but not by much. Some of the more prudent banks like Hudson City Bankcorp (HCBK) are actually in red, albeit very slightly.

The so-called consumer "protection" will be in the domain of their cartel, the Federal Reserve. The Fed will be able to write any regulation it wants without the Congress approval.

Caps on interests on loans and fees mean the government will impose a price control on money. Banks will be prohibited from pricing the cost of money (interest) according to the risk that they see. The likely end-result: Banks won't lend, except to large businesses and high net worth individuals. Since ancient times, price controls have never worked for the benefit of the hapless consumers. They have always backfired, driving goods and services underground, or to the black market.

The lesson from history is that people (particularly those in power) will never bother to learn from history.

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Senate Approves Financial "Reform" Bill by 59-39

Look out below, look out below, Main Street ...

I am firmly convinced now that the word "reform" has changed its meaning in the last year or so. It used to mean, I think, to change something that's not working and create something that will work. But now, it means to keep on doing something that's not working and make that something even bigger and see if that changes anything.

Now the Federal Reserve will have all the power to do whatever it wants to do over just about anything. They can write any regulation so that they can change the very definition of "financial firms" so that they can regulate them at their will.

Just like any bill that has passed under Obama, I bet no one in the Congress even read the entire bill. I am sure they will pass the cap and crap climate bill soon, to be followed by the immigration "reform". Cram down hard and fast. They (Dems) must know they are going to lose so big in November. "We did it (everything) for the good of the country" will be their heroic speech. Uh huh. I guess they've changed the definition of "good", too.

Along with usual defectors from the Republican side (Olympia Snowe et al), the new Senator from Massachusetts Scott Brown voted yes. (So much for his campaign promise of transparency or accountability or small government; to vote for expanding the Fed's power and for a vast, new bureaucracy!)

Not that it mattered. All Harry Reid needed was a simple majority. A bill that will unleash the biggest change since FDR's era, and all it took was a simple majority. And no one read the bill. What a joke.

Big bankers have won. Losers? They are us, the rest.

Senate passes sweeping Wall St. reform (5/20/2010 Politico)

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GOP Capitulates, Finance "Reform" Bill Moves Forward

The timely leak of the SEC lawsuit against Goldman Sachs and a circus of the Senate hearing the other day over a CDS whose main buyers (two) were both large institutional investors who knew the risk have resulted in GOP capitulating to the "public opinion" (according to the article from Huffington Post, which has a photo of jubilant Chris "friend of Angelo" Dodd..ugghh) and agreed to proceed with the debate of the bill on the floor.

If the public do support this bill that no one has read, I'm so close to giving up and rolling over.

What's hilarious about this so-called "reform" to me is this:

"The bill would establish a nine-member Financial Services Oversight Council, including the treasury secretary, Federal Reserve chairman and the heads of regulatory agencies to monitor markets for threats, such as the bubble in housing prices and mortgage-backed securities that preceded the financial near-collapse two years ago."

In other words, people who didn't have a clue that anything was amiss until the collapse in 2008 would be put in charge of monitoring the market threats. Either they would deem any activity as "threat" or they wouldn't see a "threat" at all, just like before. And we would be paying for these people and their soon-to-be-created new bureaucracy of supporting staff members and outside so-called experts who didn't see anything coming either.

Besides, I think I know what the next bubble is, and the government council would do its best to ignore: US sovereign debt bubble, which is already happening. Or worse, as more and more people move their paper assets to physical assets like gold, they would designate that flight to safety as "bubble" and restrict people from buying and/or holding gold.

Also under this "reform" bill, the Federal Reserve would have more power to do ... what? Do we know what they do? Not really, because they refuse to tell us anything, other than it (whatever it is) is a "national security":

"The Federal Reserve would begin policing large bank holding companies and interconnected nonbank institutions whose collapse might pose a threat to the economy. With approval of the council, the Fed could even break up complex companies that posed a grave threat."

The gravest threat is the Fed itself, particularly under this reckless chairman who doubled the balance sheet in one short month and refuses to tell us what he used it for.

Democrats may or may not drop $50 billion bailout fund to be managed by the insolvent FDIC, but the consumer protection would be another Federal Reserve's job. As far I have read, the definition of "financial" activity is extremely broad; any business extending credit to customers could be classified as "financial" firms and under the regulation and policing by the Federal Reserve.

So the small council to decide what is risky, the privately-held central bank with hardly any transparency to police the country's financial activities - the federal government would be in charge of the most vital part of any country. It would be so unlike America that the world has known. East Europeans and Russians must be shaking their heads in disbelief.

If the money and capital don't flow freely in and out, the country dies. Death may be slow, but it comes surely. Just like the body dies if the blood stops circulating. But this government doesn't seem to care for free-market capitalism that requires free flow of money and capital; it opts so readily for crony capitalism in which the people and big corporations who are well-connected with the government officials benefit and dominate.

This financial "reform" is no exception. Under this bill, anyone who wants to invest in a promising startup will be required to have either annual income of $450,000 minimum or net worth of $2.3 million minimum. In other words, only rich people need to apply. If a grandma wants to give $10,000 to her grandson's garage startup, unless she's that wealthy, the government wouldn't allow her. And the grandson would have to wait for 4 months to see if his application to the SEC to raise funds has been approved by the bureaucrats. For more, see my post from April 9.

And remember, Goldman's CEO said in the Senate hearing that he supports the bill.

Not that the previous government cared about free-market capitalism, but they at least pretended, and cooked the proverbial pot slowly. But this one, everything it does is "in your face", one after another.

I think I quoted this British Prime Minister before, but I'll do so again:

"Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves."

Looks like tyrants are winning, and we are being rendered slaves.

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Vampire Squid Is the US Government, Not Goldman

And it's set to grow bigger with the imminent passage of financial "reform" bill.

I'm almost ready to give up and stop wasting my breath.

As the so-called financial "reform" is being pushed as if it's a good thing - the "reform" that will give the Federal Reserve, the very institution (privately held, just to remind you) that has been the cause of boom and bust and of untold sufferings by the consumers for nearly 100 years, the very role to protect the consumers, that will create $50 billion bailout fund for so-called "too big to fail" and for so-called "investors" so that they don't lose their money, the questions of the timing of SEC leak to New York Times on Goldman Sachs and the ulterior motive of the Obama government have all but disappeared. (What a surprise.)

Now this corrupt Senator from Montana who is also the chairman of Senate Banking Committee assures us that there will be a bank tax.

Max Baucus: A bank tax is coming (David Rogers, 4/26/2010 Politico)

"It was a short hallway conversation but spoke volumes about the dilemma facing Democrats, hungry for new revenues after emptying the cupboard on health care reform.

"“I don’t think there’s much doubt that there will be a bank tax,” Senate Finance Committee Chairman Max Baucus told POLITICO. And more than ever, the Montana Democrat signaled that Congress will also crack down on wealthy hedge fund and private equity partners who shelter their income as capital gains — taxed at half the top 35 percent rate.

"Three times in recent years, the House has voted to rein in the so-called carried interest provision — only to meet Senate resistance. That’s changing with the pressure to find revenues to pay for other priorities such as a $35 billion measure extending popular tax provisions for businesses and families.

""I’ve asked my staff to look at alternatives ... Carried interest will probably be part of the offsets,” said Baucus. “We were thinking of putting it on later as part of tax reform. But we’re here; we’re here now.”

"Wealthy Democratic donors are sure to scream; Baucus concedes he could face opposition from his own party moderates. But isn’t the chairman himself the “very soul of the moderate Democrat?” a reporter asks. “I’m a ‘Do-the-Right-Thing’ Democrat,” Baucus grinned. "

Like giving another raise to your girlfriend, Senator Baucus? The article goes on and on but you get the idea. Do-the-Right-Thing Democrat and some Republicans (here's one, as usual) will shove the finance "reform" bill down the throat of the public, who, this time around, may remain stupid enough to think it's a good thing. It will punish the bad banksters like Goldman Sachs, won't it?

Keep hoping, sheeples. It's another tax bill, just like the health care insurance "reform" is just a gigantic tax bill, just like the so-called job bill is a tax bill. Just like all these bills, the financial "reform" bill will suck the money out of you. Bank tax? Added cost of banking will be passed on to the account holders, and that's you. Remember what happened when the Congress passed the credit card "reform" bill to "protect" you? The APR shot up, and many people lost credit lines. Some protection.

The Vampire Squid "wrapped around the face of humanity, relentlessly jabbing its blood funnel into anything that smells of money", a famous phrase by a liberal/progressive writer for the Rolling Stone magazine Matt Taibbi, is not really Goldman Sachs; it is the US federal government under this particular administration.

In the meantime, government union workers demand a huge tax increase so that they continue to get paid a generous pay and benefits, and a designer cupcake is all the rage. If you think your head is splitting, you are not alone.

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Obama Slams Wall Street, but What About His Own Government?

He has the audacity to criticize and vilify Wall Street, while his government continues to issue a tremendous amount of debt securities that get dumped on the entire world, further burdening the US taxpayers whom he claims he is helping.

I was just incensed to read this article ("Obama slams Wall Street ways while asking for support", 4/22/2010 AP via Yahoo Finance). Instead of counter-argument (the article has raised my blood pressure too much), I will reproduce my blog entry. To me, this is far more obscene than Wall Street supposedly bilking billions from investors. This guy (and his government) is bilking $500 to $700 billion every single month (or literally creating that money out of thin air, if you prefer), while still blaming his predecessor. Next week is another "selling a boatload of notes and bonds" week, which happens twice a month.

The US government issues debts for its ever-increasing new spendings, whether it's a new offensive in Afghanistan or new bureaucracy at some agencies and departments , and to retire old debts. Instead of paying the creditors back, it issues them the new debts. To the tune of hundreds of billions of dollars every month. It is a ponzi scheme, but since it's the government doing it, no one is behind bars.

So here's the entry on Treasury Auction Watch. Total amount for the week, including short-term bills, will probably exceed $200 billion, as the current total does not include 4-week bill and possibly another CMB for the Federal Reserve.

CMB stands for cash management bill, and SOMA stands for System Open Market Account at the Federal Reserve New York. SFP stands for Supplementary Financing Program created in September 17, 2008 (the day ) to give money to the Federal Reserve to do whatever the Fed thinks necessary to support whatever market (we don't know how they have spent their money):

The US Treasury Department will auction the following Treasury securities for the week of April 26, 2010.

Monday April 26, 2010

• 13-week bill: $24 billion (drop of $1 billion from this week)
• 26-week bill: $25 billion (same as this week)
• 5-year TIPS: $11 billion (issued once a year, with reopening in 6 months)
  

Tuesday April 27, 2010

• 4-week bill: TBD ($18 billion this week)
  
• 2-year note: $44 billion (same as last month)
  

Wednesday April 28, 2010

• 56-day CMB*: not scheduled yet (under SFP* to be used solely by the Federal Reserve; if there's an auction for this security, it will be the 10th straight week of issuing CMB under SFP)
• 5-year note: $42 billion (same as last month)
  

Thursday April 29, 2010

• 7-year note: $32 billion (same as last month)
  

Total for the week: $178 billion

• Bills: $ 49 billion (excluding 4-week bill, CMB)
  
• Notes and bonds: $129 billion
  

Total for April 2010 so far: $434 billion

• Bills: $360 billion
• Notes and bonds: $74 billion

Additional Purchase by SOMA for April 2010 so far: $21.432 billion

• Bills: $16.01 billion
• Notes and bonds: $5.422 billion

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Financial "Reform" Bill Is Just Another Tax Bill

for the general public to help out big investors (including Goldman Sachs).

SEC announcing civil charges against Goldman Sachs on Op-Ex (option expiration) day which tanked the stocks across the board, as President Obama pushes for his financial reform bill.

The move was so in-your-face and transparent it is not very hard for pundits to come up with a headline like this:

Wall Street suspects Goldman charges 'not coincidental' to financial reform effort (4/16/2010 New York Post), or;

Goldman Sachs case could help Obama shift voter anger (4/18/2010 LA Times)

as Obama threatens another catastrophe unless his financial reform bill passes:

Obama: Fresh crisis without new financial rules (4/17/2010 AP via My Way News)

If you think you heard something like that before, you did. This president said it would be "catastrophe" if his $800-plus billion so-called stimulus bill didn't pass in February 2009. Well, the catastrophe continues on job creation front, which this bill was supposed to be about. It has added to already catastrophic public debt. (See the debt clock ticking on this blog, upper lefthand corner.)

"..."Opposing reform will leave taxpayers on the hook if a crisis like this ever happens again," the president said", according to the above AP article.

Ummm, Mr. President, have you read what Chris Dodd wrote in that bill? The so-called reform will keep taxpayers on the hook for permanent bailout, by creating the $50 billion fund to dismantle "too big to fail" firms in an orderly manner so that the creditors get their money back. Just like Goldman did on credit default swaps it purchased from AIG. And who will those creditors be? They are likely to be big banks, hedge funds, pension funds, private equity groups - i.e. big boys.

Means for orderly dissolution already exists, and it's called bankruptcy. But no, that won't do, because in bankruptcy the creditors will lose some money! Can't have that!

So, my personal take remains that this move by SEC against the biggest corporate donor to the Obama campaign (GS) is to promote the administration's push for their "financial reform" by creating a perfect boogieman (who will likely to benefit from the "reform") to deflect the public's attention, when in fact this financial reform bill is yet another scheme to defraud US taxpayers who will be forced to fund the perpetual bailout in one form or another. Part of it may be increased and/or new tax (or "fees" if they prefer), part of it will be indirect, such as added fees passed on by the financial institutions who will be required to pay for the bailout fund.

If you think the financial institutions as defined by the bill are banks only, you will be in for a surprise. The definition of financial institutions is so broad it could include manufacturing companies who extend credit to customers (auto companies, big IT infra companies come to mind; basically the same companies that were considered "financial" and were protected from short selling, back when the market was rapidly deteriorating in September 2008). It will be another added cost to those businesses. Do you think it will encourage more hiring?

Just like the stimulus bill that hasn't stimulated, various job bills (that secure jobs for public workers), the health insurance "reform" bill, this financial "reform" bill is basically a tax bill. Beneficiaries? Who do you guess will benefit from increased tax?

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