shaping the new financial architecture…

Let’s audit the Federal Reserve

Posted in Federal Reserve, Lobbying, TBTF by Kitty on May 6, 2010

President Obama should do Americans a favor and get behind the AUDIT THE FED amendment rather than fighting it so intensely as he seems to be doing.

His actions in this matter subvert every campaign promise he made about accountability and transparency.

When Congress passes the Sanders “AUDIT THE FED” amendment today important information will be audited by the Government Accountability Office such as:

> > > Decisions about what toxic assets were accepted by the Fed as collateral

> > > How such assets were valued

> > > Who bailout funds were given to

These decisions are wholly separate from the Fed’s core monetary policy decision: raising or lowering interest rates.

The GAO audits the US Department of Defense but they dont second guess the battlefield plans of the generals.

In the same light the GAO will be examining that proper controls are in place to protect the interests of American taxpayers and examine whether Wall Street is being disproportionately benefited in trading and borrowing from the Fed.

Current cosponsors for “Audit the Fed” amendment:

Sen Begich, Mark [AK] – 5/5/2010
Sen Bennett, Robert F. [UT] – 5/3/2010
Sen Boxer, Barbara [CA] – 4/29/2010
Sen Brownback, Sam [KS] – 4/29/2010
Sen Bunning, Jim [KY] – 5/3/2010
Sen Cantwell, Maria [WA] – 5/5/2010
Sen Crapo, Mike [ID] – 4/29/2010
Sen DeMint, Jim [SC] – 4/29/2010
Sen Dorgan, Byron L. [ND] – 4/29/2010
Sen Feingold, Russell D. [WI] – 4/29/2010
Sen Graham, Lindsey [SC] – 4/29/2010
Sen Grassley, Chuck [IA] – 4/29/2010
Sen Hatch, Orrin G. [UT] – 4/29/2010
Sen Leahy, Patrick J. [VT] – 4/29/2010
Sen McCain, John [AZ] – 4/29/2010
Sen Murkowski, Lisa [AK] – 5/5/2010
Sen Risch, James E. [ID] – 4/29/2010
Sen Shaheen, Jeanne [NH] – 5/4/2010
Sen Vitter, David [LA] – 4/29/2010
Sen Wicker, Roger F. [MS] – 4/29/2010
Sen Wyden, Ron [OR] – 4/29/2010
More at Riski: Reform of the Federal Reserve

http://freerisk.org/wiki/index.php/Reform_of_the_Federal_Reserve

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Bank locally!

Posted in Uncategorized by Kitty on March 6, 2010

From Huffington Post comes good news of a developing “bank locally” movement… it’s really an organic extension of eating local foods… 🙂    

~~~”Another landmark piece of legislation was passed today.

The City Council of Los Angeles voted 12-0 to pass Councilman Richard Alarcon’s motion 09-0234, also known as the “responsible banking practices” motion. This will set the City on a path to require banks doing business with the City, or seeking to do business with the City, to report on the details of their local reinvestment in the community. The ordinance to be drafted will tie a bank’s involvement in the community to contracts for the City’s operating funds and pension programs worth up to $28.9 billion dollars.

The legislative template, based on a 2006 act by the City of Philadelphia, calls for an updated approach to measuring banks, along the lines of a locally focused version of the Community Reinvestment Act (CRA), with special near-term emphasis on tracking foreclosure prevention and outreach to unbanked and underbanked persons. The ordinance also calls for a review of certain swap agreements entered into by the City in the past.

Unlike New Mexico’s initiative to shift its funds to local banks within state, the Los Angeles law doesn’t preclude any bank, large or small, from doing business with the city. Instead, it places a premium on banks that can deliver tangible proof that they are locally involved. Both approaches are designed to concentrate the local circulation of money.

Alarcon took up the motion as Agenda Item #11 for the day, starting with a short public hearing limiting speakers, including myself, to one minute statements. All oral statements given to Council were supportive. Rising rather eloquently to speak in support of the Alarcon measure were councilmembers Janice Hahn, Ed Reyes, Paul Koretz, fellow Jobs and Business Development Committee member Bernard Parks, and finally Tom LaBonge. Interestingly, LaBonge referenced the metaphor of George Bailey versus Mr. Potter that the Move Your Money campaign used in its video introduction.

After accepting a few friendly amendments calling on the city staff to make sure to cross all t’s and dot all i’s, Council Alarcon called for the vote. The electronic screen indicated a straight up, unanimous yes vote.

You don’t see truly groundbreaking events like this very often. This template — the effort of a major U.S. city to codify how measuring “investing local” works as a means to leverage local economies — represents a major systemic step as governments awaken to the need to ensure regional economies are sustainable in the 21st Century. Everyone on the planet should study it.”~~~

Goldman Sachs…

Posted in TBTF by Kitty on March 4, 2010

Lots of stories about the conflicts that Goldman has at Riski… here is just one… (HT ZeroHedge for highlighting the video embedded above)

Source: Goldman Sachs, Greece Didn’t Disclose Swap, Investors ‘Fooled’, Bloomberg, February 17, 2010

Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit.

No mention was made of the swap in sales documents for the securities in at least six of the 10 sales the bank arranged for Greece since the transaction, according to a review of the prospectuses by Bloomberg.

The New York-based firm helped Greece raise $1 billion of off-balance-sheet funding in 2002 through the swap, which European Union regulators said they knew nothing about until recent days.

Failing to disclose the swap may have allowed Goldman, a co-lead manager on many of the sales, other underwriters and Greece to get a better price for the securities, said Bill Blain, co-head of fixed income at Matrix Corporate Capital LLP, a London-based broker and fund manager.

“The price of bonds should reflect the reality of Greece’s finances,” Blain said. “If a bank was selling them to investors on the basis of publicly available information, and they were aware that information was incorrect, then investors have been fooled.”

Michael DuVally, a spokesman at Goldman Sachs in New York, declined to comment.

Legal ‘At the Time’

Goldman Sachs, Wall Street’s most profitable securities firm, is being criticized by European politicians including Germany’s ruling Christian Democrats, who have questioned whether the firm helped Greece hide its deficit to comply with the currency’s membership criteria. Greece is also being faulted by fellow euro-region countries for failing to disclose the swaps to EU regulators.

The swaps used by Greece to manage debt were “at the time legal,” Greek Finance Minister George Papaconstantinou said on Feb. 15. The government doesn’t use the swaps now, he said.

Eurostat, the EU’s statistics office, this week ordered Greece to hand over information on the swaps transactions by the end of this week in an investigation that may extend to other EU countries.

Goldman Sachs earned about 735 million euros ($1 billion) underwriting Greek government bonds since 2002, data compiled by Bloomberg show. Goldman Sachs underwrote 10 bond sales. Prospectuses for six of them, obtained by Bloomberg, contain no mention of the swaps. The other four couldn’t be obtained.

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Medicare, right now, has a $38 trillion unfunded liability

Posted in progress by Kitty on February 28, 2010

Rep. Paul Ryan made the opening statement for Republicans at the White House health care summit last week… openly discussing the costs and funding models for reform is critical.

Here is what Rep. Ryan said in the video above…

“Mr. President, you said health care reform is budget reform. You’re right. We agree with that.

Medicare, right now, has a $38 trillion unfunded liability.

That’s $38 trillion in empty promises to my parents’ generation, our generation, our kids’ generation.

Medicaid’s growing at 21 percent each year.

It’s suffocating states’ budgets.

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Stimulative projections

Posted in Deleveraging, progress by Kitty on February 19, 2010

via Econobrowser… (h/t Don)

Eleven principles of financial reform

Posted in progress, TBTF by Kitty on February 17, 2010

Repost from Jesse’s Cafe

~~~ “Personally I doubt that the US is capable of self-reform at this time.

The corruption of the socio-political system runs deep, and is embedded in the national consciousness as a reflexive set of slogans (the big lies) that substitute for practical thought and effective policy formation.

The examples of thinkspeak are numerous. People become parrots for their favorite corporate news/opinion channel, to which they become emotionally addicted, because otherwise, reality is too painful and complex to face. And so they are blinded and cut off from productive and even civil discourse, trapped within deep wells of subjectivity.

The major media in the States are owned by a few corporations. The Congress listens to its large contributors and ignores the public except at election time, when it inundates them with expensive media campaigns, political spin, false promises, and propaganda. And then it is back to business as usual.

“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” Frederic Bastiat

What will it take? It took the Japanese about twenty years of economic privation to finally get rid of the LDP political party that had ruled the country since the Second World War. It may take ten years of stagflation and economic hardship for the American people to wake up and put an end to the crony capitalism that has captured its two party political system. A good start would be to continue to defeat incumbents from both parties, and to start electing viable third party candidates.

But that demands a more thoughtful venue than is currently the norm. It really does seem that bad to a relatively objective observer.

Vox
Eleven Lessons From Iceland
Thorvaldur Gylfason
13 February 2010

…What can be done to reduce the likelihood of a repeat performance – in Iceland and elsewhere? Here are eleven main lessons from the Iceland story, lessons that are likely to be relevant in other, less extreme cases as well.

Lesson 1. We need effective legal protection against predatory lending just as we have long had laws against quack doctors. The problem is asymmetric information. Doctors and bankers typically know more about complicated medical procedures and complex financial instruments than their patients and clients. The asymmetry creates a need for legal protection through judicious licensing and other means against financial (as well as medical) malpractice to protect the weak against the strong.

Lesson 2. We should not allow rating agencies to be paid by the banks they have been set up to assess. The present arrangement creates an obvious and fundamental conflict of interest and needs to be revised. Likewise, banks should not be allowed to hire employees of regulatory agencies, thereby signalling that by looking the other way, remaining regulators may also expect to receive lucrative job offers from banks. (I would add a prohibition of movement between regulators and the banks without a significant hiatus of at least four years. – Jesse)

Lesson 3. We need more effective regulation of banks and other financial institutions; presently, this is work in progress in Europe and the US (Volcker 2010). (Too slow, too driven by the banks themselves in the US – Jesse)

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When pollsters address financial reform

Posted in Fraud, Lobbying, Senate Banking Committee by Kitty on February 9, 2010

Reblog from American’s for Financial Reform: Heather Booth: Beware Frank Luntz’s Lies

AFR Director Heather Booth has a new column on the Huffinton Post exposing Frank Luntz’s lies about financial reform.  Here’s an excerpt from her post:

Seen this ad from the “Committee for Truth in Politics”? If the name weren’t comical enough, the visuals are. But that doesn’t mean we shouldn’t take the message seriously. The claim that financial regulatory reform is a $4 trillion bank bailout doesn’t really resemble any truth, as Factcheck.org explains. Yet we know this is just the beginning of what we’ll see and hear as the weeks roll on for the push for real financial regulatory reform. And where did these conservatives get the idea to say black is white and up is down? Frank Luntz.

Frank Luntz, pollster to the right wing and Wall Street agenda, has written a 17-page memo on how to talk about financial reform in order to destroy it. This is the same Luntz whose health insurance reform talking points – on how to best stir up fear and confusion in the American people to derail reform and protect insurance industry profits – showed up across conservative websites and in the mouths of lawmakers. So it shouldn’t be surprising that he’s at it again. After all, his client list is a who’s who of the corporate interests who helped to create the crisis, including Merrill Lynch and Bear Sterns.

When the Frank Luntz Memo wasn’t making me laugh with its absurdity, I was outraged that he uses 1984 George Orwellian advice to call good, bad; to say the solution is the problem. It’s this kind of thinking that inspired belief in the “death panels” that were a fabrication in the health care debate. And it is dangerous because he may have enough money to promote it again and again — so that it may sound real.

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The Goldman push, push, push…

Posted in Federal Reserve, Fraud, TBTF by Kitty on February 8, 2010

From the New York Times… “Testy Conflict With Goldman Helped Push A.I.G. to Edge

~~~ “…When A.I.G. asked Goldman to submit the dispute to a panel of independent firms, Goldman resisted, internal e-mail messages show. In a March 7, 2008, phone call, Mr. Cassano discussed surveying other dealers to gauge prices with Michael Sherwood, Goldman’s vice chairman. At that time, Goldman calculated that A.I.G. owed it $4.6 billion, on top of the $2 billion already paid. A.I.G. contended it only owed an additional $1.2 billion.

Mr. Sherwood said he did not want to ask other firms to value the securities because “it would be ‘embarrassing’ if we brought the market into our disagreement,” according to an e-mail message from Mr. Cassano that described the call.

The Goldman spokesman disputed this account, saying instead that Goldman was willing to consult third parties but could not agree with A.I.G. on the methodology…”~~~

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TARP Top Cop On The Dylan Ratigan Show

Posted in Fraud by Kitty on February 4, 2010
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Teapot Dome 2.0?

Posted in Federal Reserve, Senate Banking Committee by Kitty on January 31, 2010

April 15, 1922 Senate Investigates the "Teapot Dome" Scandal

Repost from Jesse’s Cafe

“I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals — too many counterparties, too many lawyers and advisors, too many people from AIG — to keep a determined Congress from the information.” James P. Bergin, NY Fed, in an email to his Fed colleagues.

‘Though it is hard to divine much understanding from the unredacted filing, it has become clear that Goldman had more involvement than previously believed: In addition to the credit default swaps it bought from AIG, the filing shows that Goldman Sachs also originated many of the underlying assets that AIG and the New York Fed bought back from Société Générale.

The American people have the right to know how their tax dollars were spent and who benefited most from this back-door bailout,” said Kurt Bardella, spokesman for Issa. “Now that it’s public, let’s see if the sky really does fall as the New York Fed said it would to justify its coverup.”

Other lawmakers believed that the New York Fed was trying to hide its ties to Goldman Sachs.’ AIG Reveals the Story – CNN

“Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny…

By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve

This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank

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