Busted: Bankers and The Global Economy

July 7, 2009

Pope: Economy Needs Ethics

Without internal forms of solidarity and mutual trust, the market cannot completely fulfill its proper economic function. And today it is this trust which has ceased to exist, and the loss of trust is a grave loss.” According to the Vatican, the economy needs ethics in order to function correctly, just as the implementation of ethical financing and systems of micro-credit and micro-finance indicate. In development programs, the principle of the centrality of the human person must be preserved, while international organizations might question the actual effectiveness of their bureaucratic and administrative structure. This is one of the central messages of Benedict XVIs new encyclical Caritas in Veritate that was published July 7th and signed by the Pope. If you have been following this blog, you know what is up right now. I don’t need to say another word. ~ E. Manning

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June 14, 2009

Recovery: New Technology and Financial Literacy With a Glimmer of Hope

There are signs that the rapid decline in economic activity of the past few quarters is slowing. Per the observation by the Federal Reserve, stabilization or improvement will begin from very low levels compared with those the levels of previous recoveries. This recovery is likely to be painfully slow and “the economy unusually vulnerable to new shocks. The news remains bad in two areas of direct importance to American families: Unemployment continues to rise and housing prices continue to decline.”

“Government-provided liquidity and guarantees remain as necessary supports in many areas. Because the collapse of these same markets set off the present crisis and the serious recession that has followed, the case for far-reaching reform appears a strong one.”

The Federal Reserve admits the fact that banks are highly leveraged, presumably due to the fractional reserve backlash in this crisis and compounded by creative banking instruments that have brought the system to its’ knees. Many bankers have been highly creative in protecting themselves from public or government scrutiny on an ongoing basis.

The Fed readily admits:

“that a malfunction in the financial industry can immediately and profoundly harm the entire economy…As we have seen to our dismay in the last year, even where such support is forthcoming, the resulting damage inflicted on the real economy by the financial sector can still be extensive, and the potential costs to taxpayers can still be high.”

financial literacyFor some time, the Federal Reserve has heralded the idea of financial literacy as if it were some ‘new technology’. Now the Fed has realized its’ own training regarding the need for a new financial literacy. The Fed now admits “that systemic risk was very much built into our financial system,” spotlighting the too-big-to-fail phenomenon as one of the most problematic systemic risks in the financial system.

Many members of the Fed now admit that we much apply ‘new technology’ to financial literacy and systemic risk in an effort to overcome the greed syndrome that has wracked U.S. and global banking for the last several decades. The problem remains that central bankers, like the Federal Reserve, are now in charge of implementing policy that can pad and perpetuate their own bottom line and purpose for existence since all central bankers are, in reality, a closed brotherhood or society devoted to their own corporate and global power in the financial system as they tap profits from their own system to benefit the global system and the shareholders of the global corporate central banking system. ~ E. Manning

February 17, 2009

Federal Reserve Gets Religious Vision

But don’t be quick to forget that the seeds of the current global financial crisis were sown by the near total breakdown of mortgage-lending standards and banking-industry oversight. Most of this can be laid squarely at the feet of arrogant economic and political theoreticians who viewed the borrowing public as little more than a bunch of statistics and a springboard for their next personal bonus or career move.

elizabeth-duke-governorNow the Federal Reserve Board has a new religious vision in the form of eager, bright-eyed and perhaps the naivety of Governor Elizabeth Duke. In her speech to community bankers in Phoenix, Arizona, yesterday, she revealed her vision like a campaign pledge:

* I believe that the banking business plays a special role in the economy and carries with it special responsibilities. These responsibilities come from the role of the financial system as the circulatory system of our economy. And with respect to insured depository institutions, given the federal safety net provided by deposit insurance, access to the payment system, and the availability of discount window borrowings, bankers have a responsibility to operate in a safe and sound manner.
* I believe that rigorous supervision and enforcement are necessary companions to regulation. One of the lessons we have learned in the current crisis is that different levels of supervision and enforcement can cause problems, even when institutions are ostensibly following the same regulations. Nowhere was this more evident than in the mortgage origination market, in which banking organizations and firms outside the banking supervision system were all originating mortgages but were subject to very different levels of oversight.
* I believe in the separation of banking and commerce. The lending policies of banks should have as their purpose the efficient channeling of savers’ funds to their most productive uses. The allowance of banks to affiliate with commercial firms threatens the ability of banks to continue to serve as efficient and objective intermediaries of credit and has the potential to expose banks to the operational, financial, and reputational risks of commercial affiliates. It also has the potential to extend to commercial affiliates the federal safety net afforded to banks in recognition of their role in the economy.
* I believe that a bank holding company should act as a source of financial and managerial strength to its banking subsidiaries. That is, a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity, and it should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. The reasoning behind these functions is that a bank holding company derives certain benefits at the corporate level that result, in part, from the ownership of an institution that has access to the federal safety net, including deposit insurance. This principle is, naturally, very familiar to almost all bankers, since it is embedded in Federal Reserve regulation, but it is worth repeating from time to time.
* Finally, I believe that strict adherence to consumer protection is necessary to protect consumers and the financial system as a whole. We have now witnessed the severe consequences of inadequate consumer understanding of financial products and of lending to consumers without regard to their ability to sustain the payments. Reasonable regulations, such as the Federal Reserve’s recent rule changes for mortgages and credit cards, can help protect consumers and encourage responsible lending.

seeds-of-victorySure Ms. Duke is a banker-type. For a banker, her commitment in the face of the old cronies in the good old boys’ network of banking is a breath of fresh air, bordering on a religious outlook when we have a U.S. President that is similar in nature. Are the winds of change in the air? Is Ms. Duke the inspiration that ho-hum greedy bankers need? Will the Federal Reserve get the religion of financial literacy where people are concerned? Even more important, will they apply financial literacy to themselves? Are these the seeds of victory that we need or are we too late? Perhaps a little selfless vision never hurt anyone. Then again, do you believe it?

~ E. Manning

February 11, 2009

Kissing the Ring of the Banking Mafia

kiss-the-mafia-ringEven after years as a corporate economist, I could hardly comprehend the pride and arrogance that exists within the minds of the banking mafia were it not for one simple fact. You might think that beggars couldn’t be choosers unless you consider that the beggars have their own guys on the inside. From central bankers to commercial bankers to Wall Street mafioso, the banking mafia has moved into the political front of influence and power as the salvation of the new U.S. administration. What is the U.S. government doing? Involving themselves in a little ring kissing.

In private industry or in the world of everyday Americans, the borrower, especially a desperate borrower who is already bankrupt, doesn’t have the privilege of dictating the terms of his bailout. The one with the money is the one that sets the rules or at least those were the rules of the old capitalism.

treasury-secretariesThe last two Treasury Secretaries, intimate insiders, proclaim selflessly that banks and financial institutions will not take proffered bailout money if it hurts the personal and financial interest of their executives. That has politicians shaking in their boots instead of exercising their authority by strapping arrogant criminals off to jail. The nation clearly doesn’t operate by the innocent until proven guilty ideal in this current age, so what are we waiting for when it comes to the world of finance? Instead, the criminal and the incompetent are still running the show.

The only solution is not to make banks and their snooty executives thrive and prosper after ruining the national and global economy because they could. Bankers aren’t even cooperating or following the mandates of lawmakers. Even worse, bad business practices should not be encouraged or artificially prospered and that is what the nation is doing in the name of confidence.

The nation doesn’t have a need to kiss the ring of the banking mafia, yet that is what panicked politicians and insiders want to do. How gutless can America be in the face of criminal conduct and complete lack of accountability? Bankers proclaim that they are patriots first and bankers second. How laughable! Unfortunately, what Timothy Geithner indicated on his Tuesday night briefing was that business as usual on Wall Street and in the banking community must continue. Did America vote for more obscene profits, the complete lack of accountability and the justification of the Wall Street bubble? I think not.

This debacle isn’t just about crime or revenge of the American public. National security is at stake. Lives are at stake.  America has been and continues to be thoroughly violated by corporations from banking to the Federal Reserve to Swiss and Italian bankers for corporate and fraternal prosperity. What is worse, the civil rights of every American have been violated in the name of capitalism. As usual, the Feds are ignoring the violation. They just want to run the show. What goes on off stage is simply ignored. ~ E. Manning

February 9, 2009

Mortgage Bailout on the Way?

obama-mortgage-fingerprintsRemember the mock outrage of so many politicians last year as the U.S. economic national debt ceiling approached $10 trillion? Last October, when we heard about a $700 billion bailout of the financial system, it seemed like all the money in the world as a manner of speaking. Never mind the debt ceiling since President Obama doesn’t recognize national debt as an issue. Since then, the collective “we” in this country have managed to spend another $10 trillion without accomplishing a thing beyond buying preferred shares in certain banks. The year isn’t over yet (it’s only February 9th) and more economic stimulus is probably on the plate as job losses continue.

How has the nation lost its’ way? A lack of common agreement regarding simple principles and a common vision for the future that makes sense reveals the true crisis. Deceptive flawed thinking among lawmakers portends a real problem for the future as far as the common American is concerned.  Disagreement and strife is the real standard that lawmakers hold to. There has been no presidential honeymoon that this writer can see. We have forgotten what stewardship really is. Hope isn’t on the plate where elected lawmakers are concerned. A divided house cannot stand indefinitely. Perhaps President Obama needs to campaign to the American people to grip some sort of vision….but I digress from this mental exercise.

Another couple of trillion dollars would pay off every residential mortgage in the country and Americans would be home free…literally. What foreclosure crisis? Every American with a home would have a piece of America to call their own without a bank involved. Think of the quick national stimulus  the nation would enjoy as everyone spent their house payment on disposable income and new vehicles, the current blight of lack in the current economy.

The fact remains that the national foreclosure crisis is always on the back burner, yet is blamed as the basis for the nation’s economic demise. Naturally, lawmakers can’t support any kind of quick national housing stimulus that I sarcastically penned because of the $40 trillion plus in potential interest  income that scandalous bankers would never receive because of early prepayment before the term. Any bailout like that won’t happen because it takes power away from the system. Taking money away from bankers would be far too simple while firing and imprisoning financial thieves is too difficult and embarrassing.  Real economic stimulus is far too simple when it comes down to rewarding honest income producing activities. Instead, politics simply gives bankers more money as if that will really solve the problem as they complain about esoteric banking derivatives that nobody knows how to fix. Let Timothy Geithner have a go at this bailout.  Based on what has been discussed, the nation is still looking at investment shell games that are no better than what bolstered the economic crisis to begin with on Wall Street. That is the financial literacy that the Federal Reserve and Wall Street know. ‘Democrats’ deserve a chance to repair the system and they will have that chance.

Can you imagine a retired economist presenting such ideas and speaking in such a way? Remember, it is always about money and authority, but then it always comes back to money and the status quo. That’s all about authority too. ~ E. Manning

January 8, 2009

How Will Obama Create a Wall Street Miracle?

obama-discusses-stimulus-2009Throughout America’s history, there have been some years that simply rolled into the next without much notice or fanfare. Then there are the years that come along once in a generation – the kind that mark a clean break from a troubled past, and set a new course for our nation. So started Barack Obama’s “stimulus speech” today. Perhaps Obama’s opening statement is somewhat understated, but certainly well placed in the realm of psychology.

The emphasis of his speech was largely inspirational in nature, but held a few small pearls where ideas are concerned. One area is of special concern:

“…it means reforming a weak and outdated regulatory system so that we can better withstand financial shocks and better protect consumers, investors, and businesses from the reckless greed and risk-taking that must never endanger our prosperity again. No longer can we allow Wall Street wrongdoers to slip through regulatory cracks. No longer can we allow special interests to put their thumbs on the economic scales. No longer can we allow the unscrupulous lending and borrowing that leads only to destructive cycles of bubble and bust.”

obama-big-brotherSafety in America is rarely a hard sell for a people obsessed with their own security. How is President Obama going to accomplish this miracle of financial national health that not a single man in existence has dared to attempt to act on? How will America create the miracle of coveted and elusive financial transparency without creating a “big brother” situation in the realm of business, privacy and the American Dream? How can a system be created that doesn’t limit freedom while making runaway theft and abuse a topic of the past on Wall Street and in financial circles. Much like Bush’s “war on terror” seemed like a good idea when the twin towers fell, a dramatic change in course including an invasion of privacy where Corporate America and Wall Street are concerned could be a slippery slope.

Unfortunately, the U.S. Federal Government is not a bastion of transparency in any regard, which leaves many Americans pausing to consider: “What will I have to give up to keep America safe from reckless greed and risk-taking that must never endanger prosperity again.” Is America preparing itself for another “war on terror” in the name of financial literacy? What new technology and control system will we use to create this mandated financial transparency or is this a resolution that will fall neatly into the hands of global finance ministers?

Nancy Pelosi and the elected lawmakers are about to make more bailout history in the hope of abating the tide of recession with the intention of avoiding economic depression. There will be no Congressional vacation without a legislative solution for bettering the economy. So far, throwing money and liquidity a la Milton Friedman has done little to help the situation. In desperation, the Feds are looking to avoid the specter of an 25% American unemployment rate and the resulting unpopularity, misery and perhaps rebellion against established authority as millions bite the economic dust in a nation ill equipped to deal with any blight. What America has now is nothing less than political panic.

November 7, 2008

Obama Promises Change: Fed Wants Control

conflict-of-power Obama FedWith the election of the new 44th U.S. President of the United States, the mandate of U.S. politics has been clarified. The hope of much of the American populace has been ignited. The Federal Reserve and the global consortium of central bankers aren’t nearly so excited, showing a typical understated and conservative resistance to change that doesn’t put them in the driver’s seat.

Apparently Kevin Warsh, Governor of the Federal Reserve believes that the world should look upon the financial hell of the last year with a hint of reminisce. “This challenge of creating a new financial architecture is hardly unique to the United States. The difficult choices made by policymakers and market participants around the globe will have real implications for future growth prospects.” That is in fact what many world leaders are intently interested in at the projected global financial summit that is planned at U.N. headquarters in New York City. The wild promotion of the financial summit is driven by the desire to change the current financial architecture.

Warsh spews plenty of bankerspeak which essentially boils down to this summary: the new financial architecture must be properly understood, in full recognition of current business relationships and restrained accordingly. Not so coincidentally, this recommendation would keep the control firmly among the International Society of Bankers, the loosely amalgamated brotherhood of central bankers headquartered in Switzerland and Rome.

Warsh correctly blames the current financial crisis on inadequate market discipline, excessive reliance on credit ratings coupled with poor credit and liquidity risk-management practices by many financial firms. However, until recently, the Federal Reserve has been unwilling to promote any changes, instead promoting the vaguely governmental mantra of financial literacy.

Warsh recognizes the global economic challenge, but does not admire the “implementation of well-intended housing policies.” Instead, the central banking consortium clearly sees the new financial architecture solely in business terms that will fuel economic growth, a clear promotion of continued Republican financial policy that has been gradually adopted over the last several decades. In essense, the advance of Republican power, policies and laissez-faire trickle-down economics has bolstered the role of not only the Federal Reserve, but the global power of central bankers through the power and prestige of the dollar, now firmly under their control.

The new Obama administration has more to fight than mere Republican policies. They must come squarely to terms with global bankers that currently hold the keys to their financial success. With the current fiscal situation of this nation regarding the fiat money of the dollar, the bankers have politicians largely where they want them. Arguably, John F. Kennedy lost his life as a result of opposing the global central banking community. They still hold the same power of life and death in the world today, only more so. ~ E. Manning

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