“We conclude dramatic failures of corporate governance and risk management at many systemically important financial institutions (italic added) were a key cause of this crisis .… They took on enormous exposures in acquiring and supporting subprime lenders and creating, packaging, repackaging, and selling trillions of dollars in mortgage-related securities, including synthetic financial products. Like Icarus, they never feared flying ever closer to the sun.” (pp. XVIII-XIX).”
the Federal Reserve has more tools under its control through Dodd-Frank. For example, under section 619 (one of the key sections outlining the so-called Volcker Rule that tries to ban proprietary trading), states that for these financial institutions “no transaction, class of transaction, or activity may be deemed a permitted activity……(iv) would pose a threat to the financial stability of the United States.” The Federal Reserve would have significant power to issue regulations in this situation....
Citibank get a tax payer bail-out in the amount of $476.2 billion in cash and guarantees. Why did similarly placed Bank of America get $336.1 billion?
During their years in the White House, the Clintons shifted the Democratic Party further to the right, repudiating any program of social reform or redistribution of wealth from the top to the bottom in favor of traditional Republican nostrums. Their strategy of “triangulation” included new draconian prison sentencing laws and the termination of the sixty-year-old federal welfare program called Aid to Families with Dependent Children, driving millions of the poorest Americans into destitution.
At the same time, the Clintons oversaw the final dismantling of any serious banking regulation, marked by the repeal of the 1930s Glass-Steagall Act and its separation of commercial and investment banking.
Since the end of the Clinton presidency, Hillary and Bill have parlayed their White House tenure into a personal fortune in the hundreds of millions of dollars. The two have collected over $140 million in the 15 years since the end of the Clinton administration, while workers were losing their jobs, retirement savings and homes. A major part of this windfall has come in the form of speaking fees from big corporations and banks. In the first 15 months after she left her post as Obama’s secretary of state in 2012, Hillary Clinton took in $5 million in such rewards for services rendered....
As for the culpability of the biggest US banks, the US Senate Permanent Subcommittee on Investigations issued a voluminous and detailed report on the 2008 financial meltdown in April of 2011, which concluded: “The investigation found that the crisis was not a natural disaster, but the result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.”
On the specific role of the big Wall Street banks, the Senate committee pulled no punches, writing:
“Investment banks were a major driving force behind the structured finance products that provided a steady stream of funding for lenders to originate high risk, poor quality loans that magnified the risk throughout the US financial system. The investment banks that engineered, sold, traded and profited from mortgage related structured finance products were a major cause of the financial crisis.”
Just to underscore the point, the 640-page Senate report devoted over 110 pages to the corrupt practices of Washington Mutual, the sixth largest US bank at the time of its collapse, 46 pages to Deutsche Bank, and 250 pages to Goldman Sachs. It also documented the complicity and corruption of the bank regulatory agencies and the credit rating firms.
On issuing the report, the committee chairman, Democratic Senator Carl Levin, said the investigation had found “a financial snake pit rife with greed, conflicts of interest and wrongdoing
At the G20 meeting earlier this year, the IMF’s call for a coordinated economic boost to the world economy was rejected before it could even be placed on the table because of irreconcilable differences between the major economic powers.
Rather than increased collaboration, the geopolitical situation is characterised by a rise of economic nationalism reminiscent of the conditions that led to World War II, as every capitalist government, faced with a slowdown in world trade and growth, seeks to boost its position at the expense of its rivals through protectionist measures and the lowering of the value of its currency.
Both the European Central Bank and the Bank of Japan have sought to advance their own economic agendas by pushing down the value of the euro and the yen through negative interest rates and quantitative easing measures....
The ruling classes are conscious of the potential dangers they face in the US, Europe and around the world. As she issued her downbeat assessment of global prospects, Lagarde warned of dangers to social stability and remarked that with the growth of individual fortunes and “persistent, excessive and rising inequality,” it is no wonder that “perceptions abound that the cards are stacked against the common man—and woman—in favour of elites.”
What is different this time is probably what we are seeing in our politics. Extreme choices. No middle ground. No middle class. The investor class and the debtor slaves. You can have your crap shack but the bank is going to own your life. And what about that next recession? Of course human psychology being what it is, an open house smelling like a rescue pound has people trying to buy without seeing what is directly in front of them. People drank the Kool-Aid again. Those of us who have lived through previous bubbles recognize the chorus but on a different soundtrack.
The culprit: a historic bull market for housing, fueled in part by easy-to-get mortgages, that encouraged record levels of home buying until the financial system cracked and the housing market collapsed. Earlier generations such as baby boomers, who entered the market before the frenzy of the early 2000s, have fared better...
But Generation X’s travails promise to disrupt traditional real-estate patterns as well. The housing market can be viewed as a progression through time: younger people start out renting, save enough to buy houses, build equity and then trade up to more desirable homes.
Now that trajectory has been interrupted, with fewer middle-aged buyers trading up, which would open up the inventory of smaller homes for younger buyers
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again… the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.....
It follows from the above that, if the marginal propensity to consume is not far short of unity, small fluctuations in investment will lead to wide fluctuations in employment; but, at the same time, a comparatively small increment of investment will lead to full employment....
When full employment is reached, any attempt to increase investment still further will set up a tendency in money-prices to rise without limit, irrespective of the marginal propensity to consume; i.e. we shall have reached a state of true inflation. Up to this point, however, rising prices will be associated with an increasing aggregate real income.
How to prop up stock prices? Just beat the street.
The S&P 500 Index .SPX is trading at about 16.6 times its components' earnings over the next 12 months, well above the long-term average of 14.7, according to Thomson Reuters data.
But roughly 80 percent of S&P companies that have already declared first-quarter results are beating expectations. That is higher than usual, and includes strong performance from a diverse group of companies, including Lennar Corp (LEN.N), FedEx Corp (FDX.N) and Adobe Systems Inc (ADBE.O).
Furthermore, analysts who started the year expecting a 2.3 percent increase in S&P 500 earnings may have gone overboard with downward revisions as the gloomy quarter unfolded.
It was "an absolute collapse in expectations," said Jonathan Golub, chief equity strategist at RBC Capital Markets in New York.
The drop in analysts' views between Jan. 1 and now was almost triple the typical 3.5 percent preseason decline, he said, and "about as bad as we've ever seen, with the exception of the period going into the '08-09 crisis."
For the first time since the second quarter of 2011, sales are expected to hold the line better than earnings. S&P 500 sales are expected to have fallen just 1.2 percent in the quarter.
In the end, investors may receive just enough good news to put a positive spin on an otherwise "pig of an earnings season," Golub said.