Text: Henry Paulson Testimony before House Financial Services Committee | November 18, 2008

(Source: U.S. Treasury Department)

Click this link for PDF of Sec. Paulson’s Testimony

Text: Ben Bernanke Testimony to House Financial Services Committee | November 18, 2008

Click this link for PDF of Chairman Bernanke’s testimony.

Full Text: President George W. Bush, Speech on the Financial Markets and World Economy, Manhattan Institute, November 13

(Source: White House Press Office)

THE PRESIDENT: Thank you very much. Please be seated. Thank you. Larry, thank you for the introduction. Thank you for giving Laura and me a chance to come to this historic hall to talk about a big issue facing the world. And today I appreciate you giving me a chance to come and for me to outline the steps that America and our partners are taking and are going to take to overcome this financial crisis.

And I thank the Manhattan Institute for all you have done. I appreciate the fact that I am here in a fabulous city to give this speech. (Applause.) People say, are you confident about our future? And the answer is, absolutely. And it’s easy to be confident when you’re a city like New York City. After all, there’s an unbelievable spirit in this city. This is a city whose skyline has offered immigrants their first glimpse of freedom. This is a city where people rallied when that freedom came under attack. This is a city whose capital markets have attracted investments from around the world and financed the dreams of entrepreneurs all across America. This is a city that has been and will always be the financial capital of the world. (Applause.) Read more

Treasury Bailing Out AIG Again

Will There Be Spa Trips and English Hunting Excursions This Time?

I sure hope the executive pigs at AIG get it this time.  After all, the last time our tax money was used to prop up their failing business, they spent hundreds of thousands on a West Coast spa and an English hunting trip.

This morning, the U.S. Dept. of Treasury announced the federal government was upping the AIG bailout ante by $40 billion — bringing the taxpayer funded tab to keep the company solvent to $150 billion.  Additionally, AIG is getting a better deal today on the interest it is paying the federal government for loans the public is backing.  As this once shining capitalist jewel becomes nationalized, that means the public accounts will reap less from the bad business decisions sown by AIG executives.

One must also remember that just weeks ago, New York Attorney General Andrew Cuomo told the insurance company that he was able and willing to ‘help’ them do away with golden parachutes, executive pleasure outings and huge bonuses.  Then, U.S. Rep. Henry Waxman found that former AIG exec Joseph Cassano, who ran the company’s financial products section into the ground and left AIG in February was being paid $1 million a month - for nothing - even as the company slurped up taxpayers’ money. Read more

Bank Failures Surging in 2008

The last couple of times I’ve noticed that banks are failing it’s always on Saturday, as the FDIC quietly swoops in and takes over on a Friday afternoon.  It seems like it’s happening more and more often so I took a look at the FDIC’s website.  There is a spike this year, we’ve had 19 FDIC insured banks fail this year.  The record I found only went back to 2000, there is a chart below.  41% of the bank failures in the last eight years have occurred this year.  33% of U.S. bank failures since 2000 have happened since July of this year. 

Security Pacific Bank of Los Angeles and Franklin Bank of Houston, Texas became casulties on Friday.  I’m looking at these numbers, the jobless rate, the housing bubble, Ford’s and GM’s woes - the list goes on - and I’m thinking that all Barney Frank, George Bush and Henry Paulson have done is throw $700 billion at Wall Street. 

The U.S. Government Lie: $700 Billion Bailout

When the U.S. government begins renaming terrible things like killing civilians with misplaced bombs “collateral damage,” we should all know we’re in trouble. When the media doesn’t challenge this government gobbledy-gook but rather adopts it, we’re in bigger trouble. The de-sensitizing has begun. Read more

Cat bounces Monday – Dies again today – What’s in store for tomorrow?

DOWn over 700

• Dow loses 8% over recession fears – CNBC
• U.S. stocks plunge most since 1987 – Bloomberg
• Dow declines 733; S&P 9% - Wall Street Journal
• Plunge in stocks Highlights ailing economy – New York Times
• Most of Monday’s gain is erased – New York Times
• Wall Street plummets – Reuters

One Year DJIA Chart

Bernanke, Other News & Analysis

• Economic activity weak across U.S.: Beige Book – Reuters
• Bernanke says U.S. economy faces big threat – Reuters
• Fed considers more cuts – Wall Street Journal
• Bernanke says bailout will need time to work – New York Times
• Video Link: Bernanke’s Address Courtesy of CNBC

Full Text: Ben Bernanke Speech | Economic Club of New York, NY | October 15

(Source: U.S. Federal Reserve Board of Governors)

Stabilizing the Financial Markets and the Economy

Good afternoon. I am pleased once again to share a meal and some thoughts with the Economic Club of New York. I will focus today on the economic and financial challenges we face and why I believe we are well positioned to move forward. The problems now evident in the markets and in the economy are large and complex, but, in my judgment, our government now has the tools it needs to confront and solve them. Our strategy will continue to evolve and be refined as we adapt to new developments and the inevitable setbacks. But we will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity. Read more

Ohio Sunday Papers | October 12, 2008

Politics & Elections News

 

• Endorsement: Forward with Obama – Toledo Blade
• Endorsement?: 2 Good men, Obama right man for today – Dayton Daily News
• What’s the real story: Terrorists - Columbus Dispatch
• Only 39% of Ohio voters approve of bailout
  – Dayton Daily News
• Obama, McCain in dead heat in new state poll
  – Columbus Dispatch
• Ohio Poll Raw Data
  – Dayton Daily News
• Democrats set sights on Ohio House takeover
  – Toledo Blade
• Op-Ed, Thomas Suddes: Ohio’s numbers crunching Obama’s way – The Plain Dealer
• Editorial: Provoking Doubt – Ohio Secy of State
  – Columbus Dispatch
• Op-Ed, Jonathan Riskind: Boilerplate conservative issues not saving McCain – Columbus Dispatch
• Cuyahoga County investigates voter registration fraud
  – The Plain Dealer
• FDR’s economic fairness initiative resonates today
  – Toledo Blade
• ‘Smear for smear’ in presidential race – Dayton Daily News
• Region’s wallets open to GOP
  – Cincinnati Enquirer

 

Other News

• Online overdose – Columbus Dispatch
• Small town pharmacist caught up in scheme
  – Columbus Dispatch
• Bailout boss got start at Case Western Reserve Academy
  – The Plain Dealer

Greenspan: Why History is not Written Contemporaneously

Today the New York Times has what I would call the definitive mainstream media piece (so-far) regarding just what 19 years of Alan Greenspan meant as head of the Federal Reserve. You can read it here.

One cannot place the blame for today’s out-of-control financial system on person or one institution. Greenspan’s still unyielding scorn for government regulation of the financial sector and markets does invite debate. There is a conversation and ensuing action that needs to take place over such issues as transparency and governance – and what role the federal government will take. Today’s mess also invites another look at the rules which were loosened under Presidents Bill Clinton and George W. Bush affecting what businesses should be engaged in lending, securities, and insurance. Under the old system where banks lent, insurers insured and brokers made markets I don’t think we would be dealing with problems which may cost the “little people,” taxpayers, trillions.

Another point worth debating is human nature. Just last week, at a speech at Georgetown University, Greenspan concluded:

Wealth creation requires people to take risks, and thus we cannot be sure our actions to enhance our material wellbeing will succeed. But the greater our ability to trust in the people with whom we trade, that is, the more enhanced their reputation, the greater the accumulation of wealth. In a market system based on trust, reputation has a significant economic value. I am therefore distressed at how far we have let concerns for reputation slip in recent years.

Reputation and the trust it fosters have always appeared to me to be the core attributes required of competitive markets. Laws at best can prescribe only a small fraction of the day-by-day activities in the marketplace. When trust is lost, a nation’s ability to transact business is palpably undermined. In the marketplace, uncertainties created by not always truthful counterparties raise credit risk and thereby increase real interest rates and weaker economies.

During the past year, lack of trust in the validity of accounting records of banks and other financial institutions in the context of inadequate capital led to a massive hesitancy in lending to them. The result has been a freezing up of credit.

As I noted in my opening remarks, trust will eventually reemerge as investors dip hesitantly back into the marketplace. From that point, history tells us, financial and economic revival sets in. I suspect it will be sooner rather than later. In either event, human nature being what it is, revival will come. It always has in this society governed by that remarkable document we call the Constitution of the United States.

What I would say to Greenspan is that humanity is broken by nature. Take a look at history and the things people still do to one another on a daily basis all over the world. The bad actors are a minority, but common sense regulation protects the rest of us from the minority of bad actors who are apparently able to take a whole loosely or unregulated system down. When Greenspan speaks of trust as foundational to the marketplace, I can’t help but think: “Trust but verify.” If there is weak regulation, and there are billions or trillions of dollars at stake who other than the government can guarantee the “validity of accounting records of banks and other financial institutions …?”

Americans should hope that the next president is willing to take back the control Wall Street has had over federal financial and economic policy since at least the Clinton Administration. It might even be nice to have a Treasury Secretary who is not an alum of Goldman Sachs.

Everyone hailed Greenspan as “The Oracle” when his low interest rates inflated the value of the housing market and helped create the boom of the nineties and early 2000s. Now those same interest rates and his relentless fight against regulation are being derided. At some point, years from now, we’ll know the true legacy of Alan Greenspan’s Federal Reserve.

Click Here for Text of Greenspan’s Speech at Georgetown

Full Text: Ben Bernanke Speech to National Association for Business Economics, Washington D.C., October 7, 2008

Current Economic and Financial Conditions

Good afternoon. I am pleased to have once again the opportunity to address the National Association for Business Economics. My remarks today will focus on recent developments in the financial sector and the economy and on the challenges we face.

As you know, financial systems in the United States and in much of the rest of the world are under extraordinary stress, particularly the credit and money markets. The losses suffered by many banks and nonbank financial firms have both constrained their ability to lend and reduced the willingness of other market participants to deal with them. Great uncertainty about the values of financial assets, particularly more complex and opaque assets, has made investors extremely reluctant to bear credit risk, resulting in further declines in asset prices and a drying up of liquidity in a number of funding markets. Even secured funding has become expensive and difficult to obtain, as lenders worry about their ability to sell collateral in illiquid markets in the event of default. In addition, many securitization markets, such as the secondary market for private-label mortgage-backed securities, remain closed or impaired. Read more

Dow 8,000?

Financial, Markets, Economy News Roundup

Do you call a day like today bad or just reality?

• Chaotic day with Dow down 3.8% - New York Times
• Dow below 10,000 for first time since 2004 - Bloomberg
• B of A cuts dividend, offers stock – Bloomberg
• Paulson looking for ways to unlock credit – Bloomberg

I think we just gave him 700 billion ways.

• Lehman managers portrayed as irresponsible – New York Times
• Fuld blames Lehman’s collapse on ‘rumors’ – Bloomberg

Fuld is obviously a hopeless jackass.

• Bond risk rises – Bloomberg
• Oil prices fall below $90 per bbl – New York Times
• Bailout’s limit on pay will be tough to realize – Wall Street Journal
• Jim Cramer: Time to get out of market – NBC
• Germany takes hot seat as Eurpope falls into the abyss – The Telegraph

  We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars. — Ambrose Evans-Pritchard

The $50 Trillion Swindle the Investment Class Doesn’t Have Us on the Hook For - Yet

Credit Default Swaps and the Potential Cost of a Las Vegas Financial System

If you’ve been paying any attention to my posts and choice of content over the last two weeks, you know I’m not for the current $700 billion federal bailout of Wall Street which is underway thanks to the jackasses in Washington – and I’m talking all of them regardless of party.

Granted, I’m not a financial expert. But, I have tried to educate myself, and this bailout just seems to be rewarding bad behavior with worse public policy. One book I’m about done with is Kevin Phillips’ Bad Money. This book is currently ranked 63 on Amazon and I highly recommend it. At any rate, just when I was getting resigned to the fact the bailout is now a fact of life, and there’s nothing I can do about it, I got a little more education this weekend.

On Sunday morning, I heard the latest edition of This American Life. Part of the show dealt with the impending doom that is ‘credit default swaps.’ You should give this show a listen online. Ira Glass’s gang simply defines and exposes the scope of the risk out there with these ’swaps.’ Later in the day came this report by 60 Minutes. This is another great piece of journalism exposing the problem with these financial vehicles. So, what are they – and why should we care?

Let’s say I’m a hedge fund and I have $1 billion wrapped up in a collateralized debt obligation (CDO) – aka a bunch of mortgages bundled together, many of which are shit. Lehman Brothers or CitiGroup comes to me and says, “We will insure you against loss for 2% of what you paid for the CDO.” I’m a little worried about the underlying assets in the CDO, so I say, sure, and fork over $20 million. CitiGroup has now made $20 million for nothing. When banks, investment banks, and hedge funds were doing these deals, they were merely placing a bet that the CDOs they were “insuring” wouldn’t tank.

We know what’s been happening. There’s more junk in the CDOs than anyone realized or cared to admit. I believe part of the reason Lehman failed is that the folks they sold credit default swaps to began to come calling for their insurance payout. But wait, I’m talking about insurance, right? Why are they called ’swaps?’ Simply put, if they called it insurance, it would be regulated, ie. the Lehmans of the world would have to show capital, or a risk reserve fund, backing up their deals. That’s cash. They call them swaps so the whole transaction remains the unregulated, gambling pile of poo that it is.

So far, taxpayers, we’re on the hook for $700 billion. If you watch the 60 Minutes segment, you’ll find out that the estimated value of all the credit default swaps out there in the world’s markets is around $50 trillion. That’s a “T” and an “R” at the beginning of that “illion.” How many more of the “insured” are going to demand payment from the underwriters of these swaps? How many more banks, insurance companies, or investment houses are going under? Who is going to pay for that?

Bailout Bill Done Deal - News Roundup

Bush Signs Rescue Bill After House Passes - New York Times

How Your Member Voted - New York Times

House Approves $700 Billion Bailout - Washington Post

How Bailout Politics Changed - Washington Post

Bailout Pork - MSNBC

Bailout Bill’s Value to Economy in Long Term Worth the Expense?

Apparently, the first Wall Street Bailout wasn’t big enough for the House Republicans and Democrats who voted against it on Monday. Congressional leaders from both parties are now saying heading into Friday’s planned vote that they’ll have the support they need to saddle the federal government with $700 billion in junk investments and billions more in tax breaks. What doesn’t appear to be in the bill, as passed by the Senate, is even the beginning of rulemaking or regulation to see that the investment class in New York and Washington doesn’t do this to the rest of us ever again.

It still seems ironic that all of the “free market” politicians in Congress are lining up behind what appears to be a huge social program for yachtsmen and polo players. The question tonight is will the action in Congress do anything at all constructive for an American economy that seems to be leading the world only due to the sheer size of an inefficient health care system and more imagination than value in our investment markets.

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