Today’s Water Cooler: Shootings on Parliament Hill in Ottawa, Hong Kong, dueling autopsies in Ferguson, CPI release, slavery, and trouble with visualizations.
Recent Items
Wednesday, October 22, 2014
Matt Stoller: Why Is Alan Greenspan’s Lawyer, Scott Alvarez, Still Controlling the Federal Reserve? (AIG Bailout Trial)
Yves here. This important post explains why Scott Alvarez, the general counsel of the Federal Reserve Board of Governors, needs to be fired. His responses to the plaintiffs’ questions at the AIG bailout trial weren’t simply evasive; they reveal a deep, almost visceral, dedication to defending the very policies that nearly destroyed the world economy as well as a salvage operation that favored financial firms over the real economy. We have embedded the transcripts from the first three days of the AIG bailout trial, which cover Alvarez’s performance on the stand, at the end of this post.
Alvarez was brought to the Fed by Alan Greenspan. As a staff lawyer, he helped implement bank deregulation policies such as ending supervision of primary dealers in 1992, refusing to regulate derivatives in 1996 (I recall gasping out loud when I first read about the Fed’s hands off policy), and implementing the rules that shot holes through Glass Stegall before it was formally repealed in 1999. Among those measures was giving a commercial bank, Credit Suisse, waivers to take a 44% stake one of the biggest investment banks, First Boston, in 1988 and assume control in 1990.
Alvarez also has a poor record as far as representing broad public interest in his tenure as General Counsel, which started in 2004. The Fed did an even worse job than the bank-cronyistic Office of the Comptroller of the Currency in enforcing Home Ownership and Equity Protection Act, a law that put restrictions on high-cost mortgage lenders. The Fed was also one of the two major moving forces behind the disastrous Independent Foreclosure Review, an exercise that promised borrowers who were foreclosed on in 2009 and 2010. The result instead was a fee orgy by the supposedly independent consultants, capricious and inadequate payments to former homeowners, and virtually no disclosure of what was unearthed during the reviews.
Yellen has said she wants to make financial stability as important a priority of the Fed as monetary policy. That means, among other things, being willing to regulate banks. Scott Alvarez is too deeply invested in an out-of-date world view to carry that vision forward. If Yellen intends to live up to her word, Alvarez has to go.
Topics: Banking industry, Credit markets, Derivatives, Federal Reserve, Guest Post, Legal, Real estate, Regulations and regulators
Posted by Yves Smith at 9:55 am | 40 Comments »
Links 10/22/14
Topics: Banking industry, Credit markets, Guest Post, Investment outlook, Regulations and regulators
Posted by Yves Smith at 6:55 am | 82 Comments »
Forward Guidance: Human Plans and Divine Laughter
ves here. VoxEU has come to serve as a wonky alternative to the Financial Times comments section, which is Brit-speak for op-eds. While most FT comments are at least interesting and timely, now and again the pink paper serves as a venue where real policy players put a stake in the ground, sometimes in exclusive interviews but also in opinion pieces.
This article by David Miles of the Bank of England is clearly intended to reach a wider audience than the normal VoxEU piece. In it, he calmly and methodically tries to tell finance people that what they want from central bank forward guidance is tantamount to having their cake and eating it. Admittedly, the unreasonable expectations for what forward guidance can accomplish is partly central bankers’ own creation. In keeping, this piece suggests that a retreat from efforts at precision in forward guidance would probably be a plus.
Topics: Credit markets, Economic fundamentals, Guest Post, Investment outlook, Regulations and regulators
Posted by Yves Smith at 5:13 am | 4 Comments »
350.org’s Bill McKibben, His Parachute, and His Bubble
I know, I know. Criticizing Bill McKibben is like kicking a puppy.
Topics: Energy markets, Environment, Global warming, Guest Post, Politics
Posted by Lambert Strether at 2:55 am | 75 Comments »
Low Oil Prices Hurting U.S. Shale Operations
Yves here. In yesterday’s Water Cooler, Lambert posted a link from Bloomberg that indicated that oil at $80 a barrel would pop the fracking bubble, an outcome we’d discussed previously. Some readers in comments expressed doubts.
In fact, it was already happening as oil prices were falling from over $100 a barrel through the nineties. Seasoned energy hands had warned that shale operations could be shut down rapidly, and that has started to take place. However, the author of this article argues that the shutdowns are likely to be delayed and that most US shale operations have low break-even costs, insulating them from the impact of the oil price drop. However, he misses that another driver of the shale boom has been access to super-cheap credit and an overly-bullish mentality that has not factored in the short production lives of shale wells. The junk bond market has been much less accommodating of late, and if that skittishness continues, the prognosis isn’t quite as sanguine for the industry as Cunningham suggests.
Topics: Energy markets, Guest Post, Investment outlook, Middle East
Posted by Yves Smith at 1:33 am | 19 Comments »
2:00PM Water Cooler 10/21/14
Today’s Water Cooler: HK’s Leung says democracy = majority rule = bad, Ferguson leaks forecast cop’s acquittal, midterms, and Apple snooping
Topics: Guest Post, Water Cooler
Posted by Lambert Strether at 1:58 pm | 25 Comments »
Why is the Boston Globe Covering Up for Gubernatorial Candidate Charlie Baker? (Updated)
Boston’s paper of record is effectively covering up for Massachusetts gubernatorial candidate Charlie Baker by failing to cover a growing pay to play scandal in New Jersey, with Baker as one of its central figures. David Sirota has been doing impressive sleuthing, and his latest report, which we’ll cover shortly, reveals that Chris Christie is persistine in his effort to hide information that presumably implicates Baker.
Topics: Banana republic, Media watch, Politics, Private equity
Posted by Yves Smith at 9:55 am | 38 Comments »
Links 10/21/14
Topics: Links
Posted by Yves Smith at 6:55 am | 109 Comments »
Goldman Makes It Official That the Stock Market is Manipulated, Buybacks Drive Valuations
It’s remarkable that this Goldman report, and its writeup on Business Insider, is being treated with a straight face. The short version is current stock price levels are dependent on continued stock buybacks. Key sections of the story:
Topics: Doomsday scenarios, Economic fundamentals, Federal Reserve, Free markets and their discontents, Investment outlook
Posted by Yves Smith at 4:12 am | 41 Comments »
New Zealand’s GT Group in Romania, Moldova and the UK
Shady NZ shell company merchant GT Group’s global footprint just keeps growing, as do its links to the dreamy nonsense that is the “Maharal Network”. In our latest global tour, let’s visit Romania and Moldova first, via Ukraine and New Zealand.
Topics: Australia, Banana republic, Globalization, Guest Post, New Zealand, Ridiculously obvious scams, Russia, UK
Posted by Richard Smith at 4:03 am | 8 Comments »
Bill Black: DOJ Says it Cannot Prosecute “Rocket Science” Frauds
ves here. The excuse that Deputy Attorney General Juan Cole offered for DoJ’s failure to prosecute financial fraud, that they were overmatched by “rocket science” isn’t just pathetic, it’s a flat out lie. I know people personally who were experts in mortgage backed securities and collateralized debt obligations who offered not just their expertise, but specific legal theories to state attorneys general, as well as members of the famed Mortgage Fraud Task Force and were ignored. Individuals with similar skills offered to train the SEC and were also turned down. The idea that prosecutors and regulators were up against complicated technology above their pay grade is a self-serving canard. They were repeatedly offered ways to get down the learning curve and rejected them.
Topics: Banana republic, Banking industry, Guest Post, Legal, Regulations and regulators
Posted by Yves Smith at 1:54 am | 42 Comments »
2:00PM Water Cooler 10/20/14
Today’s Water Cooler: 2014′s desperate Democrats, 2016′s prospects, protests in Ferguson and Hong Kong, good news on ebola, and map geekery
Topics: Guest Post, Water Cooler
Posted by Lambert Strether at 1:58 pm | 38 Comments »
Links 10/20/14
Topics: Links
Posted by Lambert Strether at 6:55 am | 105 Comments »
Private Equity as the Latest Example of SEC Enforcement Cowardice?
One of Teddy’s Roosevelt’s famed sayings was “Speak softly and carry a big stick.” The SEC seems to be hoping that speaking loudly and brandishing a water pistol will be as effective.
Topics: Private equity, Regulations and regulators
Posted by Yves Smith at 6:00 am | 5 Comments »