July 28, 2009 archive

Uh, no comment necessary:

1. Spiegel reports Banks reopen the global casino. “Investment banks… are making serious money again, thanks in part to government aid… They are benefiting from the crisis they helped to create. As profits go up, so do salaries — only this time, it’s the taxpayers who are shouldering the risks.”

   The casino is open again, worldwide. Many investment banks are raking in massive profits once again, driving up risks and attracting talent with high salaries. It’s as if nothing had happened, and as if it hadn’t been precisely this type of behavior that brought the financial system to the brink of collapse last fall and then plunged the world economy into its worst crisis since World War II.

   The collapse of the financial system was averted, but only through colossal public spending, as governments bolstered ailing banks with loan guarantees and equity injections and central banks pumped billions in liquidity into the markets.

   But now that the worst seems to be over, banks are back to behaving the same way they did before the crisis. Even worse, thanks to government guarantees for the financial sector and cheap money from central banks, it has never been easier for banks to make money…

   “The taxpayer is paying for the chips in the casino,” the head of the German operations of an international investment bank says quite openly, but anonymously nevertheless. “It doesn’t get any better.” … Investment banks, for their part, have bought the securities with money they borrowed from central banks at ridiculously low rates.

   Meanwhile, the CS Monitor reports Fed chairman Ben Bernanke defends bailouts – and himself. “Bernanke’s term as chairman of the Federal Reserve expires at the end of January”. “He’s running to keep his office and defend the Fed,” says Robert Brusca of Fact & Opinion Economics in New York.

   Bernanke DOES NOT merit reappointment, but I doubt Obama sees it that way. Instead of Bernanke doesn’t get the nod, speculation is that Larry Summers, Obama’s economic policy head, will get the job, which, of course, will be even worse.

   For his part, Bernanke wants MORE power for the Federal Reserve. Last week, the AP reported Bernanke told the Senate a new consumer protection agency isn’t needed, because the Fed is doing such a good job protecting the consumer already.

   “Bernanke also said he did not think conflicts existed between the Fed’s consumer protection and bank oversight roles.” And the Independent reported that Bernanke warned against meddling with Fed. Bernanke doesn’t want legislation passed by Congress that “would subject the Fed’s actions in these areas to audits by the Government Accountability Office, the investigative arm of Congress.”

   “Financial markets, in particular, likely would see a grant of review authority in these areas to the GAO as a serious weakening of monetary policy independence,” Bernanke said.

Four at Four continues with more banks behaving badly, Eric Holder, and calls for a Congressional inquiry into the CIA.

From Stephen Webster at RawStory:

GOP congressmen run from blogger asking ‘birther’ questions

Mike Stark of Firedoglake and Huffington Post thinks he has stumbled onto the reason George W. Bush was elected to the presidency twice: The GOP’s base, as exemplified by this ubiquitous “birther” nonsense, must be Insane.

In  the video below, he puts the birther fictions before a series of Republican congressmen on the hill, and their reactions are priceless.

Notes Jane Hamsher over at Firedoglake:

Foreclosures Are Often In Lenders’ Best Interest

Numbers Work Against Government Efforts To Help Homeowners

By Renae Merle

Washington Post Staff Writer

Tuesday, July 28, 2009

Government initiatives to stem the country’s mounting foreclosures are hampered because banks and other lenders in many cases have more financial incentive to let borrowers lose their homes than to work out settlements, some economists have concluded.

Policymakers often say it’s a good deal for lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable.

The problem is that modifying mortgages is profitable to banks for only one set of distressed borrowers, while lenders are actually dealing with three very different types.

 With Stubborn Unrest in Swat, Landowners Remain in Exile



By JANE PERLEZ and PIR ZUBAIR SHAH

Published: July 27, 2009

ISLAMABAD, Pakistan – Even as hundreds of thousands of people stream back to the Swat Valley after months of fighting, one important group is conspicuously absent: the wealthy landowners who fled the Taliban in fear and are the economic pillar of the rural society.

The reluctance of the landowners to return is a significant blow to the Pakistani military’s campaign to restore Swat as a stable, prosperous part of Pakistan, and it presents a continuing opportunity for the Taliban to reshape the valley to their advantage.

About four dozen landlords were singled out over the past two years by the militants in a strategy intended to foment a class struggle. In some areas, the Taliban rewarded the landless peasants with profits of the crops of the landlords. Some resentful peasants even signed up as the Taliban’s shock troops.

 Open Thread