Busted: Bankers and The Global Economy

July 16, 2009

Global Economic Crisis: G8 and the Papacy

G8 ItalyDuring the G8 economic meetings and debate in Italy, Pope Benedict released a new encyclical saying “there is urgent need of a true world political authority.” In that document, Pope Benedict XVI urged G8 leaders meeting in Italy to rewrite global financial rules and to defend the world’s poor from the effects of the economic crisis.

responsibility of the market

In and of itself, the market is not, and must not become, the place where the strong subdue the weak. Society does not have to protect itself from the market, as if the development of the latter were ipso facto to entail the death of authentically human relations. Admittedly, the market can be a negative force, not because it is so by nature, but because a certain ideology can make it so. It must be remembered that the market does not exist in the pure state. It is shaped by the cultural configurations which define it and give it direction. Economy and finance, as instruments, can be used badly when those at the helm are motivated by purely selfish ends. Instruments that are good in themselves can thereby be transformed into harmful ones. But it is man’s darkened reason that produces these consequences, not the instrument per se. Therefore it is not the instrument that must be called to account, but individuals, their moral conscience and their personal and social responsibility.

responsibility of business

Owing to their growth in scale and the need for more and more capital, it is becoming increasingly rare for business enterprises to be in the hands of a stable director who feels responsible in the long term, not just the short term, for the life and the results of his company, and it is becoming increasingly rare for businesses to depend on a single territory. Moreover, the so-called outsourcing of production can weaken the company’s sense of responsibility towards the stakeholders — namely the workers, the suppliers, the consumers, the natural environment and broader society — in favour of the shareholders, who are not tied to a specific geographical area and who therefore enjoy extraordinary mobility. ...business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference.

The papacy has taken an interesting step by inserting itself into the G8 debate framework and  by ordering the involvement of Italy in the process. Certainly, in much earlier times, the papacy was directly involved in such matters without better consequences in those times. History is the best  witness of that truth. Now, the pope indicates that we need a man in charge once again as if the G8 institution is really in charge beyond politics. The real charge has been given to multinational corporations including central bankers on a global basis. The central bankers operate as a global corporate fraternal brotherhood through none other than the Swiss and Rome. Is the papacy and politics going to ‘take authority back’ or have they really lost any authority? The reality is that the papacy already holds ‘such coveted authority’ through the central bankers. Most of them have simply forgotten their moral compass in their need to service their clients. Pope Benedict is simply reminding his league that he holds them to a higher priority and that they need to exert a new influence as they continue to profit from money lending.

G8 first ladies and pope

October 30, 2008

Economic Hurricane Ravages Globe

U.S. economic contraction is in the news again as quarterly statistics pour in. Central bankers in economies across the world are cutting interest rates in the vain hope of sustaining banking rates for lending. While the United States is reporting the sharpest economic contraction in seven years, this statement is likely quoted to throw you off the economic trail that this is the worst economic fallout in a century. Why? It makes no sense to quote such a fact when the rest of the world is reeling with fear and trepidation with a full factual account. We are still on the front side of the hurricane as it comes into shore.

U.S. business collateral damage is being reported as U.S. citizen bail out of making major purchases and cut back on spending in an effort to avoid the plight of shrinking prosperity. Business have been hit hard by consumer cutbacks and lack of credit. Huge job losses have the nation staggering as confidence wanes. The talk of fiscal stimulus is in the air, now a constant topic in U.S. Congressional hearings. Strangely, many bankers, notably on Wall Street are still trying to issue bonuses to commissioned employees despite record losses and major taxpayer bailouts.

One bright light in the eyes of many is huge cash infusion and enlargement of central banking swap lines. This is seen as relieving the stress of frozen interbank lending even though this has not been thoroughly proved. U.S. bankers of any size have been notoriously resistant to anything but their own interests as they seek government guarantees for every aspect of their businesses. The other down side is the deflationary havoc that this will ultimately play on the dollar in the long term. However, short-term stability is main concern of most parties across the globe.

The International Monetary Fund has become the latest scorekeeping organization for tracking the plight of foreign and emerging economies in crisis. In any event, the news is overwhelmingly bad. While the news is mostly bad, it isn’t bad for everyone. Economic damage from the recession has slowed global growth, but has strengthened the dollar, allowing for a temporary export blitz for many capital goods like in the aviation industry. This temporary bonus can’t last, but is the lone bright spot in business on the U.S. horizon. The United States has once again become a global store house for many investors that need the feeling of safety.

The world certainly isn’t over, but Americans and other economies are going to have to reduce their expectations and living standards for some time while everyone waits for the cyclical upturn. Unfortunately, we are still seeing downturns in most markets, notably in the housing industry as nearly 2700 homes are day are foreclosed by U.S. bankers. This is putting a huge strain on the housing market and the U.S. economy. For the first time in history, the U.S. government has seen fit to bail out everyone but the American people. In the past, the American people were the ONLY recipients of U.S. economic bailouts.

The banking criminals that brought this debacle about are hanging in the dark shadows, hoping that the massive crisis will render them bulletproof as far as criminal prosecution is concerned. Unfortunately, ignorance continues to rear its ugly head. Government, business and the people are so overwhelmed, they really can’t see the forest for the trees. Whether the nation has the will to punish for past conduct as well as protect against future conduct of abusive practices remains to be seen. It is clear that the world cannot afford another financial debacle like this again. Politicians are looking to the upcoming Summit for answers and ideas. Have no doubt that security is on the minds of most politicians and global citizens. Decisions will be made with that in mind.
~ E. Manning

August 1, 2008

Oasis Wealth & Fraud: Simply Unsustainable

Since World War II, the United States has been the center of global finance. It has used that position to virtually dictate the conditions under which many other nations get access to capital. Letting weak and mismanaged companies fail has been high on the list. As of late, this reality is no longer the case as bailout fever ensues to glorify national confidence.

Henry Paulson, the U.S. Treasury boss, has not reigned in criticism of other countries that have nationalized corporations in the past. Since March, he has been in the position of recommending the same ideal himself. How times change. Fascism has come home to roost in America.

The U.S. economy is a shambles for most, perhaps subsistence at best. However, this does not include the up-and-coming flank of investors and administrators that are tapped into commodities futures. Unhappily, this too is a desert vision of an oasis. Eventually, thirsty investors will be gobbling down sand in an effort to sate their thirst for money and profits. This has already happened with the mortgage crisis. As the environmentalists would say: “this is isn’t sustainable.” The multi-level marketing scheme will become oversaturated and lose its potency. Eventually, the poison of fraud takes hold of those that practice it.

The U.S. is now enjoying the reality of an economic hangover from unbridled credit, financing and speculation compounded by ignorance and mismanagement. Wages haven’t kept pace for what seems like an eternity for all but the wealthiest. This was conveniently ignored as long as the nation thought borrowing would sustain the national lust for the appearance of wealth. The desert vision wasn’t sustainable and now, like the Japanese, Americans are thirstily looking for the next oasis. Surely corporate wealth and the corporate oligarchy will sustain us. Most plans for unbridled wealth are unsustainable. Is yours? ~ E. Manning

June 5, 2008

U.S. Banking Pressures Continue Unabated

Uncertainties in today’s economic environment continue to pose significant challenges for the banking industry, households and bank regulators. Banks continue to experience increased pressure on earnings resulting from a deterioration in credit quality noted first in higher-risk nontraditional mortgage loans and now evident in other sectors. Construction and development loans have continued to deteriorate in quality and threaten to destabilize lending.

Many American citizens know that economic life is tough. The FDIC recognizes that economic weakness combined with rising food and energy costs have increased risks to banking because of the suffering consumer/home buyer. The FDIC anticipates a rise in the number of problem institutions over the next few quarters, but so far the number of under-capitalized institutions remains well below levels seen during previous economic downturns.

This news is not entirely surprising considering that the Federal Reserve put a new floor into the banking system with banking auctions (TAF) and with the rescue of Wall Street. The actions of Federal Reserve have allowed the beleaguered U.S. banking system to tread water, but little more so far. As a result, bank failures have been very limited.

Because of difficulties arising from problems in the housing sector, financial markets and the overall economy, the FDIC fears that the insurance fund could suffer losses that are significantly high than projections. Bankers have cleverly learned to mask many of their debts with an increasingly complex system. For example, brokered deposits are a recent complexity in recent bank failures that have cost the FDIC dearly in the effort to maintain consumer confidence.

The FDIC has re-evaluated the banking system in the last year in order to restructure risk and the cost of required insurance to banks. Problem banks are many and the FDIC is zealously protecting the banking community from public knowledge and individual scrutiny.

Interestingly, the FDIC has admitted to developing projections of expected failures and is hiring new staff to coordinate with those projections. Like other government agencies, they expect to hire private contractors and the perils that third-party hiring brings to the mix. In the face of significant risks from economic conditions, the fallout from recent unsustainable mortgage lending practices and disruptions in the credit/capital markets, the FDIC insists that most banks are well capitalized.

On a similar note, the Federal Reserve Board announced approval of Bank of America Corporation to acquire Countrywide Financial Corporation and some non-banking subsidiaries. The Federal Reserve has admitted that it is still learning about the increased complexity in financial products and markets.

Reflecting deterioration in the mortgage industry, nonperforming assets more than doubled over the past year from $37 billion to $81 billion. This number is notoriously small considering the huge wealth within the industry and yet threatens to destabilize the country by the admission of many experts. The shows the severity of the bad management and gambles for profitability of the last 8 years or so.

The Federal Reserve admits that they and bankers have failed dismally at determining actual risk. They claim that lessons have been learned, but have failed to gain a complete understanding of what the actual breakdowns are and how to deal successfully with the result.

With all the finger-pointing, could outright graft and fraud be so outrageous that it looks like ignorance? Could this scenario be the real answer for U.S. bankers, Wall Street and their institutions? As Bugs Bunny often said, “Eh-h, could be doc.”

April 30, 2008

U.S. Economy: Bad News Rolls In

Filed under: banking, credit, money — Tags: , , , , , , , — digitaleconomy @ 8:32 am

Standard & Poor’s wrote that prices in 20 major markets dropped an average of almost 13% from a year ago in February. “There is no sign of a bottom in the numbers,” said David M. Blitzer, chairman of the Index Committee at S&P. “Prices of single family homes continue to drop across the nation.” This market correction is very real and not a short-term adjustment. This indicates the level of intense inflation promoted by predatory and negligent lending.

One of the large problems with easy credit is that prices for whatever items are being financed are continually inflated over time. You should also see a major correction in the new car market as most car makers take large hits for lack of sales. Corrections are part of a normal business cycle fostered in large measure by the inability of consumers to buy larger ticket items on their own. As a result, financing has for years propelled an artificial boom resulting in inflated prices that can no longer be maintained in the real market.

The business results for the lack of buying power (more…)

February 27, 2008

The Morality of Financial Literacy

Filed under: banking, central bank, credit, federal reserve, investment, money — Tags: , , , , , , , , — digitaleconomy @ 4:44 pm

2132654-internet.jpgFed Governor Fred Mishkin stated today that “There can hardly be a better time to make the case for economic and financial literacy than right now…We face a downturn in our housing industry fueled, at least in part, by unwise mortgage borrowing and, at times, abusive lending practices. Improving consumers’ knowledge of the home mortgage process will better equip them to avoid unsuitable mortgages in the future.” While this speech was largely aimed at a new public service program for the everyday financial consumer, it could have just as well been aimed at the bankers and financial gurus that ply their trade every day.

The Federal Reserve is on a mission to increase public knowledge and appear more consumer friendly, garnering helpful bits of consumer advice for education. With the Federal Reserve’s recent elevation of power within and around this economic system, the Fed has now graduated to the role of the nation’s “financial grandfather”.

What is this financial literacy that is so important? ‘Economic and financial literacy’ is the ability to identify economic problems, alternatives, costs, and benefits. This literacy is able to analyze the incentives at work in economic situations and examine the consequences of changes in economic conditions and public policies. This literacy involves collecting and organizing economic evidence and weighing costs against benefits.’ While most average folks meet the first part of the definition pretty well, the last part of the definition can be especially daunting, especially when you lack critical thinking skills. Who doesn’t lack the skills described in some way? When you realize that this is part of a consumer campaign, you also quickly realize that the Federal Reserve also seeks to educate the very people that put this economy in the mess it is in to begin with. Based on what the Fed has said and the definition involved, you can see that most banking and financial types fall far short of meeting optimal requirements just like you might.

There is one curiosity. In each document that is officially proposed by the Federal Reserve in the last several years, you will find no hint of morality, at least not directly. The money business is simply a process. There is no talk of accountability in any true sense or a display of right or wrong. Never once have I heard the word “integrity” in context with banking and finance. That is the problem. The definition of economic and financial literacy is amoral. It can be applied any number of ways. This literacy theory can be applied for the common good of mankind or using some kind of national responsibility. This is probably the perception of most Americans. When you listen to the high-minded philosophy of the founding father of this country, you simply draw the conclusion that those ideals are still alive and well. Within that same theory also reside the very seeds of destruction. All the constituent parts of that definition fit very well in the current mindset of the banking and financial industry: the desire for wild profits and good times. The literacy theory can be applied in the most selfish and manipulative ways depending on the mindset of the individual exercising it. Live for today and to heck with tomorrow.

greed-internet.jpgThe Federal Reserve clearly knows the truth behind the scenes. They aren’t beating their brains out with the banking community. They figure that since there are a few torched fingers around from banking avarice, a temporary lesson might be learned for the short-term while the lawmakers figure out the latest regulations to make it all better so that the world can be saved. How much more effective to educate the everyday man so that he can keep himself out of trouble? Arm the little guy with more information while putting more responsibility on him to do the right thing. If you put enough sage financial advice out there, maybe you can blame the consumer. The new spirit of financial education is let the buyer beware. The bankers and financial gurus are going to forget the lesson of this last financial tsunami soon enough and will find a new way to stretch the rules in their favor. In the meantime, maybe some of the sage advice being dispensed will stick and those consumers that aren’t living for today might heed the call to responsibility. You think?

The Federal Reserve isn’t interested in morality; just making more money and putting a kind face on it. That is corporate elitism at its very finest.

E. Manning

February 11, 2008

Fed Backs Up the FDIC while Bush Fiddles

bush-fiddles-internet.jpgThe role of abusive lending practices has become of special concern to the Fed in their publicity measures. Since the quiet admission by the FDIC on October 24 regarding abusive loan practices in the mortgage and banking industry, the Federal Reserve has recently continued to sound the alarm for the need for bankers to voluntarily change policies within the banking structure to avoid and eliminate continued banking losses, particularly based in the mortgage sector. Bankers have failed to protect borrowers with proper underwriting and protection as well as predatory loan rates. The Federal Reserve has advised tight-fisted bankers (more…)

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