Busted: Bankers and The Global Economy

October 16, 2008

Financial Crime of the Century

Today at the Senate Banking and Housing Committee meeting “Turmoil in the Credit Markets”, Senator Chris Dodd, now the “Congressional champion” for the American consumer against foreclosures along with others, aptly pointed out a fact that most of us have overlooked or conveniently forgotten. President Clinton assigned the Federal Reserve the full duty as regulatory policeman over the nation. The Federal Reserve, in the words of Dodd, ignored the assignment by doing nothing for years. Senators are seeking reelection this year and U.S. citizens would do well to remember that Senators are now trying to cover their lack of action and regulatory oversight for the last eight years. Now, hearings are in order to find the right degree of blame and then an effort made so that another economic tsunami never happens again.

Dodd’s words were perhaps among the most pointed opening comments of a recent hearing. He simply stated that bankers shifted risk through exploitation. You can hear the politics and excuses too. A mandate of Congress doesn’t mean anything with regulation. That has been the flaw behind the entire federal government for the last decade at a minimum. Interestingly, Dodd sees himself as doing a “post-mortem” examination on the U.S. economy. By that definition, the economy is dead. That is not a good comparison unless he knows something most Americans don’t. ~ E. Manning

Senator Dodd’s opening remarks

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October 11, 2008

June 3, 2008

Bernanke: Investor Profiteering Runs Amok

Ben Bernanke, Federal Reserve chief did an economic assessment for the International Monetary Conference is Barcelona, Spain. In his speech, he cleverly outlined, but separated the causes of the global financial crisis so as to not create any blame or responsibility. He outlined:
1. The U.S. housing boom,
2. A credit boom created by innovative lenders and investors,
3. unprecedented growth in developing and emerging market economies.

Bernanke spent an entire paragraph on blaming emerging nations, resulting in additional deficit in the industrial countries like the United States. Nowhere does Bernanke mention the burgeoning national debt of the United States, a huge flotsam of borrowed credit that continues to hold citizens of the United States and their children prisoner.

Bernanke noted “an increased appetite for risk-taking–a “reaching for yield”–stimulated some financial innovations and lending practices that proved imprudent or otherwise questionable. Regulators identified some of these issues in real time; for example, federal banking regulators issued new guidance on nontraditional mortgage lending and on commercial real estate lending.”

Strangely, bureaucrats of all kinds always suggest the panacea of additional regulation. The United States is full of endless rules, both effective and ineffective. How regulations are enforced or if regulations are enforced determines the effect. Yet, you will never hear of this truth. Lawlessness begets more lawlessness, not structure.

Bernanke rightly states that the housing boom came to an end because housing became unaffordable. Even creative financing could no longer sustain or bolster the market which was artificially inflated by “creative financing”.

Bernanke mentioned that “highly-rated corporations retain good access to credit, but credit conditions generally remain restrictive in areas related to residential or commercial real estate.” Highly-rated corporations, including corporate multinationals have achieved independence from national sovereignty and are largely unencumbered by financial credit access, much like the central bankers of the world. Multinationals can simply pick their deal from any country in the world. They are above, at least for the moment, the plight of economically strapped nations and are tied directly any nation of choice as it suits them.

Bernanke also notes that inflation remains high, but he fails to state the truth about how high inflation really is. TNTalk! notes that food price inflation is at 45% in the last nine months. That is a cruel inflation rate that most economists fail to deal with, let alone talk about. The Fed and U.S. federal government repeated fail to come clean by admitting theft by inflation.

Bernanke also points at futures commodity markets as the cause of price instability. “A rough stabilization of commodity prices, even at high levels, would result in a relatively rapid moderation of inflation, consistent with the projections of Federal Reserve governors and Reserve Bank presidents for 2009 and 2010… Another significant upside risk to inflation is that high headline inflation (perhaps referring to hyperinflation), if sustained, might lead the public to expect higher long-term inflation rates, an expectation that could ultimately become self-confirming.”

The paper tiger is unable to suggest a way to lessen the effect of profiteers in commodity markets. It would seem that investor profiteering is running the world amok.

February 2, 2008

Banks Playing Refi Rate Games

Filed under: banking, credit, money — Tags: , , , , , — digitaleconomy @ 9:00 pm

I am posting an emergency notice for those of you that may be refinancing your home loan. In Britain, The Times Online (UK) has revealed that while the Federal Reserve Bank or in this case, the Bank of England, is lowering rates, commercial bankers are not lowering rates or not lowering loan rates at an equivalent rate. Many lenders are apparently trying to recoup losses in any way possible including employing trickery in finance. While this has been revealed and proven in the UK, this has not been proven in the United States. However, considering similar circumstances, the person considering refinancing his or her home should be cautious with all loan paperwork and have the loan rates reviewed by a separate professional or attorney to insure that you are getting the loan rate advertised. Remember, the buyer should beware of rate trickery by banks in an effort to recoup banking losses. ~ E.M.

September 29, 2007

Fed Addresses Banking Risks

Governor Mishkin speaks out of both sides of his mouth as he addresses the vulnerable market and systemic risk to the banking system. He speaks of disruption of information flows. Why is there a communication problem between bankers in international banking? He stresses the risk management role as central banks cannot be a “lender of last resort” in third-world countries.

“After the calm of the past several years, the events of this summer are a strong reminder that our increasingly globalized and sophisticated markets are still vulnerable to systemic risk. When we speak of systemic risk, we mean the risk of a sudden, usually unexpected, disruption of information flows in financial markets that prevents them from channeling funds to those who have the most productive profit opportunities.”
~ Governor Frederic Mishkin at the Tenth Annual International Banking Conference, Federal Reserve Bank of Chicago, Chicago, Illinois on September 28, 2007

Systemic Risk and the International Lender of Last Resort

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