Politics

From The Hill....

Rep. Peter DeFazio (D-Ore.) said Wednesday that he and other liberal House members are becoming increasingly tired of Obama administration economic policies that they say are too focused on maintaining the stability of Wall Street firms and largely ignore "Main Street."

"A growing consensus in the caucus [believe that Geithner should be removed]," DeFazio said on MSNBC this evening, adding that some lawmakers are "considering questions regarding him and other economic advisers."

No, really?

What was your first hint Peter?

Was it that Timmy couldn't be bothered to pay his taxes?  Was it that he was the Wall Street stooge who handed out billions of taxpayer money to the big banks through AIG via what I'd argue was a fraudulent scheme to pay off those CDS at par?  Or is it Timmy's incessant prattling on about a "strong dollar"?

One has to wonder, given that there's really nothing different about any of Geithner's views and actions than Paulson's - except for the blatant tax cheating (that we know of.)  Then again, being a tax cheat seems to be a requirement to be a Democrat official - shall we toll up the list both in the Obama Administration and Congress?

(The Dishonorable Chuck Rangel anyone?)

I find the faux populism of the Democratic Party particularly offensive.  There is absolutely nothing in the Obama Administration's record to indicate that they have ever intended to proceed from any such viewpoint - not now, not ever.

The veteran congressman specifically mentioned last year's bank bailouts and the Geithner's handling of the collapse of insurance giant AIG. At the time, Geithner was head of the New York Fed in the Bush administration. 

"We may have to sacrifice just two more jobs to get millions back for Americans," the congressman added.

This, of course, is why The Democrats were all for Geithner last winter.  Remember that Peter?  Where was your outrage at his appointment then?

Here's one of the articles I wrote at the time - just post-election.

How about you Tim (Geithner, at the NY Fed)?  Is everything on the up-and-up over there in NY?  If so, why don't you "bare all" and let us have a look-see?

Since it's our money you're playing with, in that we the taxpayer are the source of the wealth you shuffle around, we have every right to know what the hell you're doing with it and so does Congress.

If you refuse then I believe Congress should revoke your charter and subpoena everyone involved, including the Treasury Secretary's and both Bernanke's and Geithner's notes, phone records and meeting minutes, along with the details of every transaction taken by any of the above since August of 2007.  Publish it all in The Federal Register and online via the web.

Funny how only now, after the looting has taken place, after the banks have rate-jacked Americans' credit cards to 29.9%, after Timmy funneled over $100 billion of taxpayer money through AIG to banks both foreign and domestic, and after Timmy has repeatedly refused to put a limit on what authority he wants to keep under TARP, now you bleat.

Here's reality:

This Administration, just as with the Bush Administration, is kneeling before Zod - the banksters that infest Wall Street - and selling out Americans.

Washington may be starting to panic about jobs - as well they should be.  They should be in panic about the budget too - it has grown 30% in the last couple of years, and the claimed "5% reduction" that is being whispered around on The Hill will do exactly nothing.

Politically the reduction of government spending has simply never happened.  We call it a "cut" when the rate of increase declines - and the lapdog American Public, most of whom failed 3rd Grade Math, nod in agreement.  We then ladle on more public entitlement program spending, as was done with Medicare Part "D", which was sold as a sop to Seniors but which was really a sop to drug companies like Pfizer - who, I remind you, has pled guilty twice in the last few years to criminal felony charges for off-label marketing practices.  Oh, and their putative head at the time then got a Federal Reserve Bank of NY Board seat.  You Democrats wrote that bill (yes, I know, Bush signed it, fool that he was) but in fact it was not intended to benefit the public - it was simply (another) rip-off of Americans for the benefit of a handful of big pharmaceutical companies, who are one step (and only one step!) behind the banks when it comes to how badly they've screwed ordinary Americans.

Sacking Geithner would be a good first step, but only a first step.  We also have to sack the entire OCC and OTS staff and tell Sheila Bair that the next bank she seizes - after a short grace period to go in and close ALL of the bankrupt banks NOW - that has more than a 5% loss on assets to the deposit fund better be accompanied by her resignation or she will be sacked as well.

The entire operation of The Fed needs to be examined by Congress and all of it peeled back in the open for all of America.  Foreign exchange swaps, lending, improper buying of non-full-faith-and-credit "assets", circumvention of the rules through setting up LLCs like Maiden Lane(s), all of it.

Every financial firm that has lied to investors, regulators and buyers of their trash over the last decade must be investigated and, when appropriate, indicted.  If convicted their charters must be revoked.

We need to either ban securitization entirely, impose strict liability for every transaction enclosed in a securitized loan package, or set a federal usury limit at some reasonable level over Fed Funds - not more than 10%.  If you can't loan profitably at a 10% interest  rate over Fed Funds, you're cheating - you're making loans you have every expectation will not be paid.

ALL off-balance sheet games must be stopped.  Period.  Hiding things off balance sheet should get you 20 years in "pound-me-in-the-butt" Federal Prison, not a fat bonus.

ALL lending in excess of collateral value (that is, "unsecured") must be backed by one dollar of capital for each dollar of loan outstanding.  Oh, and it's a loan when you write a "credit default swap" (whether on interest rates or anything else) where you do not have hard reserves behind your commitment.  The writing of CDS by AIGFP with no reserves was not one illegitimate act, it was two - first by AIGFP in claiming these policies were "good", and again by the banks who bought them and claimed to be "hedged" when their counterparty had no ability to pay.

The ugly reality is that we've wasted more than two years on trash "programs" and "fixes" that have done nothing more than blow over a trillion dollars of taxpayer money, enriching Wall Street (again) while millions of Americans lost their homes and jobs.   Only the American consumer has been forced to eat the bad loans they took out - the lenders have been protected at taxpayer expense.  The disincentive to make a loan you know or have reason to know won't be paid back only exists if making bad loans bankrupts BOTH the lender AND borrower.

Talk will no longer cut it.

Americans are a patient people, but it is my sense that the collective patience of this nation is nearing exhaustion.

Trust me on this Mr. DeFazio - if you and your ilk don't cut the theatrics and BS games you're going to eventually piss off the American public to a sufficient degree that they will spend their last $20 on this:

That day may be a lot closer than you think.

This is the "Discussion Draft" of Dodd's financial reform bill.

Commentary will be forthcoming; Ticker posted so you have a place to obtain a copy "easily" if desired.

As this is another 1k+ page monster (1136 pages in this case) it may take a day or two for me to read it all.

The link above should open the PDF for you.

Here is the claimed "discussion points" that are allegedly addressed:

Senate Committee on Banking, Housing, and Urban Affairs, Chairman Chris Dodd (D-CT) Contact: Kirstin Brost/Justine Sessions, 202-224-7391

Consumer Financial Protection Agency: Creates an independent watchdog to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, while prohibiting hidden fees, abusive terms, and deceptive practices.

Ends Too Big to Fail: Prevents excessively large or complex financial companies from bringing down the economy by: creating a safe way to shut them down if they fail; imposing tough new capital and leverage requirements and requiring they write their own "funeral plans"; requiring industry to provide their own capital injections; updating the Fed’s lender of last resort authority to allow system-wide support but not prop up individual institutions; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.

Protects Against Systemic Risks: Creates an independent agency with a board of regulators to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the financial system. The agency could require companies that threaten the economy to divest some of their holdings.

Single Federal Bank Regulator: Eliminates the convoluted system of multiple federal bank regulators to increase accountability and end unnecessary overlap, conflicting regulation, and "charter shopping;" keeps in place the healthy dual banking system that governs community banks.

Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and director nominations.

Closes Loopholes in Regulation: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated - including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

Protects Investors: Provides tough new rules for transparency and accountability from investment advisors, financial brokers and credit rating agencies to protect investors and businesses.

Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at the expense of American families and businesses. 2

Why Change Is Needed: The economic crisis was driven by an across-the-board failure to protect consumers. When consumer protections are handled by regulators whose primary responsibility is to safeguard the profitability of the companies they regulate, consumer protections don’t get the attention they need. The result has been unfair, deceptive, and abusive practices being allowed to spread unchallenged, nearly bringing down the entire financial system.

 Consumer Protections in One Place: Consolidates consumer protection responsibilities currently handled by the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, the Federal Reserve, the National Credit Union Administration, and the Federal Trade Commission.

 Independent: Led by a 5 member board with an independent director. The Chairman of the Financial Institutions Regulatory Administration will have a seat on the board.

 A Watchdog with Real Teeth: Unites rule-writing, supervision, and enforcement for consumer protection in a single, stand-alone agency with broad authority to investigate and react to abuses as they develop.

 Able to Act Fast: With this agency on the lookout for bad deals and schemes, consumers won’t have to wait for Congress to pass a law to be protected from bad business practices.

 Educates: Creates a new Office of Financial Literacy.

 Regulates Shadow Banking Industry: Levels the playing field for insured banks by regulating the shadow banking industry, such as mortgage brokers and payday lenders, for the 1st time and ensures that companies offering customers the same products receive the same regulatory treatment.

 Accountability: Makes one agency accountable for consumer protections. With many agencies sharing responsibility, it’s hard to know who is responsible for what, and easy for emerging problems that haven’t historically fallen under anyone’s purview, to fall through the cracks.

 Tougher State Laws: Allows states to pass tougher consumer protections that apply to all lenders, preventing federal regulations from preempting stronger state laws.

 Works with Bank Regulators: Coordinates with other regulators when examining banks to prevent undue regulatory burden.

 Bases Supervision on Risk: Focuses resources on companies that pose the biggest risk to consumers - mortgage bankers, brokers, finance companies and the largest institutions.

Why Change is Needed: The economic crisis introduced a new term to our national vocabulary – systemic risk.

 Strong and Independent: Governed by an independent chairman, appointed by the President and confirmed by the Senate, to provide insulation from political manipulation. The board will have 9 members including the federal financial regulators and two independent members. The board members' diverse areas of expertise will strengthen the board’s ability to identify and respond to emerging risks throughout the financial system.

 Tough to Get Too Big: Writes increasingly strict rules for capital, leverage, liquidity, risk management and other requirements as companies grow in size and complexity, imposing significant costs on companies that pose risks to the financial system.

 Break Up Large, Complex Companies: Gives the regulators the authority to break up large, complex companies if they pose a threat to the financial stability of the United States.

 Close Gaps in Regulation: Identifies unregulated financial companies that pose systemic risk and assigns them to a federal regulator for supervision.

 Lean and Mean: Expected to be staffed with a highly sophisticated staff of economists, accountants, lawyers, former supervisors, and other specialists. With just rule writing authority and no direct supervision, the agency can remain small but effective.

 Make Risks Transparent: Collects and analyzes data to identify and monitor emerging risks to the economy and make this information public in periodic reports and testimony to Congress twice a year.

 Oversight of Important Market Utilities: The Agency for Financial Stability will identify systemically important clearing, payments, and settlements systems to be regulated by the Federal Reserve.

Why Change is Needed: As long as giant firms (and their creditors) believe the government will prop them up if they get into trouble, they only have incentive to get larger and take bigger risks, believing they will reap any rewards and leave taxpayers to foot the bill if things go wrong.

 Discourage Excessive Growth: Imposes increasingly strict standards for companies as they grow larger, more complex, or more interconnected, including heightened capital, leverage, and liquidity requirements, that ensure these companies have greater resources to deal with financial shocks.

 Require Companies Provide Their Own Capital Injections: Requires institutions to issue long-term hybrid debt securities that will provide them with capital during a systemic crisis so failing institutions can provide their own life support.

 Funeral Plans: Requires large, complex companies to periodically submit plans for their rapid and orderly shutdown should the company go under. Companies will be hit with higher capital requirements and subject to restrictions on growth and activity as well as required divestment if they fail to submit acceptable plans. Plans will help regulators understand the structure of the companies they oversee and serve as a roadmap for shutting them down if the company fails. Significant costs for failing to produce a credible plan create incentives for firms to rationalize structures or operations that cannot be unwound easily.

 Orderly Shutdown: Creates a mechanism for the FDIC to unwind failing systemically significant financial companies through receivership, but not open assistance. Costs of unwinding these companies will ultimately be charged to financial firms with assets of over $10 billion, not to the taxpayers.

 Limit Federal Reserve Lending: Updates the Federal Reserve’s 13(3) lender of last resort authority to allow system-wide support for healthy institutions or systemically important market utilities during a major destabilizing event, but not to prop up individual institutions.

Why Change is Needed: Today, we have a convoluted system of bank regulators created by historical accident. There are 4 federal banking agencies that oversee national and state banks and federal and state thrifts. The result has been charter shopping, where firms look around for the regulator that will go easiest on them and fee-funded regulators go easy on those they regulate in order to keep their business, as well as a mess of overlaps, redundancies, and blurred lines of responsibility.

 Independent: Headed by an independent chairman appointed by the President and confirmed by the Senate, a Vice Chairman experienced in state banking regulation, and a board including the chairmen of the FDIC and the Federal Reserve and two other independent members. It will be funded primarily by assessments on the industry.

 Single Focused Agency: Combines the functions of the Office of the Comptroller of the Currency and the Office of Thrift Savings, the state bank supervisory functions of the Federal Deposit Insurance Corporation and the Federal Reserve, and the bank holding company supervision authority from the Federal Reserve.

 Dual Banking System: Preserves the dual banking system, leaving in place the state banking system that governs most of our nation’s community banks.

 Separate Community Bank Division: Establishes a separate division within the new regulator to regulate community banks given the different supervisory issues they pose.

 Eliminates Charter Shopping: Stops financial institutions from choosing the easiest regulator, and stops fee-funded regulators from going easy on those they regulate to keep their business.

 Increases Accountability: Having a single regulator will mean an identifiable agency is held responsible for shortcomings in the banking system.

 Speeds Action, Increases Efficiency: Ends slow, cumbersome, coordinated rulemaking that creates extra red tape and inconsistent enforcement of the same rules by agencies. Overlaps impose unnecessary costs on regulated institutions and their customers.

 Focuses the FDIC and the Federal Reserve: The FDIC will focus on its jobs as deposit insurer and resolver of failed institutions, retaining backup examination authority over troubled banks and gaining additional authority to accompany the new agency on examinations of healthy banks and holding companies to ensure it has sufficient information to perform its insurance functions. The Federal Reserve will focus on monetary policy without being distracted by responsibilities for bank oversight and consumer protections. The Federal Reserve will continue to play a key role in assessing financial stability and have guaranteed access to financial institutions and any needed information.

Why Change is Needed: The over-the-counter derivatives market has exploded in the last decade – from $91 trillion in 1998 to $592 trillion in 2008. During last year’s financial crisis, concerns about the ability of companies to make good on these contracts and the lack of transparency about what risks existed caused credit markets to freeze. Investors were afraid to trade as Bear Stearns, AIG, and Lehman Brothers failed because any new transaction could expose them to more risk.

 Closes Regulatory Gaps: Provides the SEC and CFTC with authority to regulate over-the-counter derivatives so that irresponsible practices and excessive risk-taking can no longer escape regulatory oversight. Uses the Administration’s outline for a joint rulemaking process with the Agency for Financial Stability stepping in if the two agencies can’t agree.

 Central Clearing and Exchange Trading: Requires central clearing and exchange trading for derivatives that can be cleared and provides a role for both regulators and clearing houses to determine which contracts should be cleared. Requires the SEC and the CFTC to pre-approve contracts before clearing houses can clear them.

 Safeguards for Un-Cleared Trades: Requires traders post margin and capital on un-cleared trades in order to offset the greater risk they pose to the financial system and encourage more trading to take place in transparent, regulated markets.

 Market Transparency: Requires data collection and publication through clearing houses or swap repositories to improve market transparency and provide regulators important tools for monitoring and responding to risks.

Why Change is Needed: Hedge funds are responsible for huge transfers of capital and risk, but generally operate outside the framework of the financial regulatory system, even as they have become increasingly interwoven with the rest of the country’s financial markets.

 Fills Regulatory Gaps: Ends the "shadow" financial system in which hedge funds and other private pools of capital operate by requiring that they provide regulators with critical information.

 Register with the SEC: Requires hedge funds to register with the SEC as investment advisers and provide information about their trades and portfolios necessary to assess systemic risk. This data will be shared with the systemic risk regulator and the SEC will report to Congress annually on how it uses this data to protect investors and market integrity.

 Independent Custody of Client Assets: Requires investment advisers to use independent custodians for client assets to prevent Madoff-type frauds.

 Greater State Supervision: Raises the assets threshold for federal regulation of investment advisers from $25 million to $100 million, a move expected to increase the number of advisors under state supervision by 28%. States have proven to be strong regulators in this area and subjecting more entities to state supervision will allow the SEC to focus its resources on newly registered hedge funds.

Office of National Insurance: Creates a new office within the Treasury Department to monitor the insurance industry, coordinate international insurance issues, and requires a study on ways to modernize insurance regulation and provide Congress with recommendations.

Streamlines the regulation of surplus lines insurance and reinsurance through state-based reforms. 8

Why Change is Needed: Rating agencies market themselves as providers of independent research and in-depth credit analysis. But in this crisis, instead of helping people better understand risk, they failed to warn people about risks hidden throughout layers of complex structures.

 New Office, New Focus at SEC: Creates an Office of Credit Ratings at the SEC with its own compliance staff and the authority to fine agencies. The SEC is required to examine Nationally Recognized Statistical Ratings Organizations at least once a year and make key findings public.

 Disclosure: Requires Nationally Recognized Statistical Ratings Organizations to disclose their methodologies, their use of third parties for due diligence efforts, and their ratings track record.

 Independent Information: Requires agencies to consider information in their ratings that comes to their attention from a source other than the organizations being rated if they find it credible.

 Conflicts of Interest: Prohibits compliance officers from working on ratings, methodologies, or sales.

 Liability: Investors could bring private rights of action against ratings agencies for a knowing or reckless failure to investigate or to obtain analysis from an independent source.

 Right to Deregister: Gives the SEC the authority to deregister an agency for providing bad ratings over time.

 Education: Requires ratings analysts to pass qualifying exams and have continuing education.

Why Change Is Needed: In this country, you are supposed to be rewarded for hard work.

 Vote on Executive Pay and Golden Parachutes: Gives shareholders a say on pay with the right to a non-binding vote on executive pay and golden parachutes linked to corporate takeovers. This gives shareholders a powerful opportunity to hold accountable executives of the companies they own, and a chance to disapprove where they see the kind of misguided incentive schemes that threatened individual companies and in turn the broader economy.

 Nominating Directors: Gives shareholders proxy access to nominate directors. Providing shareholders a greater role in choosing directors can help shift management’s focus from short-term profits to long-term growth and stability.

 Independent Compensation Committees: Standards for listing on an exchange will require that compensation committees include only independent directors and have authority to hire compensation consultants in order to strengthen their independence from the executives they are rewarding or punishing.

 Clawbacks for Executives at Public Companies: Requires that public companies set policies to take back executive compensation if it was based on inaccurate financial statements that don’t comply with accounting standards.

 SEC Review: Directs the SEC to clarify disclosures relating to compensation, including requiring companies to provide charts that compare their executive compensation with stock performance over a five-year period.

Why Change Is Needed: The Madoff scandal demonstrated just how desperately the SEC is in need of reform. The SEC has failed to perform aggressive oversight and is unable to understand the very companies it is supposed to regulate. And investors have been used and abused by the very people who are supposed to be providing them with financial advice.

 SEC Reforms: Mandates an annual assessment of the SEC’s internal supervisory controls and a biannual GAO study of SEC management.

 Uniform Standards for Advisors: Mandates uniform standards for anyone providing customers investment advice, eliminating different standards for broker‐dealers and investment advisers. Small investors should have uniform protections regardless of the title of the financial professional advising them has.

 Best Interest of the Client: Brokers who give investment advice will be held to the same fiduciary standard as investment advisers – they will be required to act in their clients’ best interest.

 Aiding and Abetting: Investors will be able to sue persons who help commit securities fraud.

 New Advocates for Investors: Creates the Investment Advisory Committee, a committee of investors to advise the SEC on its regulatory priorities and practices as well as the Office of Investor Advocate in the SEC, to identify areas where investors have significant problems dealing with the SEC and FINRA and provide them assistance.

 Funding: The self-funded SEC will no longer be subject to the annual appropriations process.

Why Change Is Needed: Companies made risky investments, such as selling mortgages to people they knew could not afford to pay them, and then packaged those investments together, called asset-backed securities, and sold them to investors who didn’t understand the risk they were taking. For the company that made, packaged and sold the loan, it wasn’t important if the loans were never repaid as long as they were able to sell the loan at a profit before problems started. This led to the subprime mortgage mess that helped to bring down the economy.

 Skin in the Game: Requires companies that sell products like mortgage-backed securities to retain at least 10% of the credit risk. That way if the investment doesn’t pan out, the company that made, packaged and sold the investment would lose out right along with the people they sold it to.

 Better Disclosure: Requires issuers disclose more information about the underlying assets and to analyze the quality of the underlying assets.

Why Change is Needed: Financial advisers to municipal securities issuers have been involved in "pay-to-play" scandals and have recommended unsuitable derivatives for small municipalities, among other inappropriate actions, and are not currently regulated.

 Registers Advisors and Brokers: Requires SEC registration for financial advisers, swap advisers, and investment brokers – unregulated intermediaries who play key roles in the municipal bond market.

 Regulates Advisors and Brokers: Subjects financial advisers, swap advisers, and investment brokers to rules issued by the Municipal Securities Rulemaking Board and enforced by the SEC or a designee.

 Puts Investors First on the MSRB Board: Gives investor and public representatives a majority on the MSRB to better protect investors in the municipal securities market where there has been less transparency than in corporate debt markets.

Why Change is Needed: The new proposals will create three new agencies – the Financial Institutions Regulatory Administration, the Agency for Financial Stability and the Consumer Financial Protection Agency – each posing staffing challenges that will determine the regulators’ success or failure.

A Better Work Environment to Attract Better Staff: The bill will set up a panel to look at the staffing needs of the three new agencies based on the successful panel that helped the IRS to improve their hiring practices. The advisory panel will last only three years to see that these agencies are able to attract, cultivate, and retain competent staff qualified to regulate complex, 21st century financial institutions.

Perhaps.

Two Democrats - governors - were ousted.

Why?

Taxes, lack of jobs, in short: It's the economy stupid!

The fiscal side of the picture is done.  Those who are looking for some sort of fiscal stimulative posture out of DC?  Forget about it.  We had three of those (at least) which have been announced, and they have done nothing.

Now here's the challenge: The American People have had it with the job loss and with the vast and fast deterioration of their personal balance sheets and, more importantly, their cash-flow statements.

But these problems were two decades in the making with both Democrat and Republican governments.  They are to a large degree the consequence of bogus and even fraudulent credit creation - practices that were not intended to help the economy along at all, but rather were designed to siphon off the wealth of ordinary Americans and hand it to a fistful of oligarchs.

This behavior has not only been tacitly approved by the silence of Washington DC it has been explicitly promoted and advanced by both Washington DC and The Federal Reserve - on both sides of the aisle.

Indeed, when it comes to Washington DC the government even went to court to block state laws that would have stopped a big part of the mess from happening - and succeeded.

Worse, the policies of both the Bush and Obama administrations have not addressed the problem nor forced the bad debt created by these policies out of the system - the millstone remains around the economy's neck!

You can't get away from the issues - "more taxes" isn't going to sell in a world of 10%+ unemployment and, whether the government claims it or not, high inflation in the prices charged for food and fuel over the last decade.  The impact of this was masked by the fraudulent credit creation and asset bubble in houses, but now that's gone, laying bare the decimation of the average American's cash flow statement.  The asset bubble intentionally blown in the stock market by Bernanke and his pals Geithner and Obama cannot make up for this; indeed, irrespective of the "big rally" the average American is still missing 30% or more of his money from the 2007 peak!

Yet now the budget deficits and fiscal debt of the government - the "big carpet" under which we shoved all the defaults of the private sector that should have bankrupted every large financial institution in the nation, now demands to be paid.  You can either raise taxes dramatically or cut services dramatically, but in the end you cannot indefinitely grow debt faster than GDP, even if you're the government of the United States. 

The bottom line is that the American People want "blood", and in fact they deserve it. 

We the people, in the main, were scammed. 

We didn't just make bad decisions, we were lied to.

We didn't just buy bubble houses, they were sold to us with outrageous misrepresentations of alleged "growth" in price to come; witness David Lereah's two books, and he was NAR's head economist!

We the people failed to understand the 6th grade math, but the banksters and government told us that there was no such thing as immutable exponential functions at work in the economy, and that this growth in a finite world - the world in which we live - was in fact possible.

The pain that is due to be taken has not been worked through the system, and in fact government has made the situation worse.  Economic contraction is not over, despite the claimed "GDP" number - as I've said repeatedly if you go to the bank and borrow $20,000 on your credit card you are poorer, not richer, even though you might then spend that $20,000.  Cook the books all you want but it won't change the average American's income - only a good job that pays enough to stay ahead of ramping mandatory personal spending does that.

Most of America has the true cost of health care ("insurance") hidden from them.  Those who actually write the checks have seen those costs rise 10, 15, even 25% in a single year - every year for the last decade.  You who are "W2" employees don't see it directly, but it in fact comes straight out of your pay, as employers do not offer you the salary increases you would otherwise receive - that money is instead diverted to your "free" insurance.

The Republican Party has a tough road here.  They need to break up the oligarchs, and deal with the fact that the math is never wrong - and the sooner we deal with it, the better.

It won't be an easy sell, but if they fail to make it, or worse, win on the back Obama's refusal to deal with the banksters and then continue the "anything goes in ripping off America" policies that both Bush and Obama have countenanced and in fact explicitly endorsed, we will suffer a political and economic collapse unlike anything previously seen in the world - a catastrophe worse than Germany in the 1930s.

"May you live in interesting times" has new meaning this morning.....

I wish this was about economics.

It is only tangentially so.

No, this is about the war in Afghanistan.  The FT reports:

Some time in the next two weeks, Mr Obama is likely to bring months of agonised deliberation to a close when he decides how many more troops to send to Afghanistan. The number, which could be as high as the 40,000 recommended by Stanley McChrystal, the general in charge, will be analysed minutely for what it can achieve on the ground in Afghanistan.

But as Mr Cheney’s contrasting observations illustrate, the more influential war is being fought politically on the ground in America. Somehow, the compulsions of US politics have brought the candidate who electrified America by promising to pull out of Iraq to a position where many of his most ardent backers fear he may be about to get America into another Vietnam.

We have already done that.

We must as a nation choose whether we are going to prosecute this as a war, or leave.

We have not fought a war since WWII.  None of the engagements we have entertained as a nation since with our military power have been wars, irrespective of what someone has called them.

There is only one way to fight a war.  You commit your nation's resources - material and the most precious of all, human - to the complete obliteration of your enemy.

You mass those resources against each objective in turn, without reservation, without holding back, without care for collateral damage or world opinion.

You do so until your adversary sues for peace, not because it is the political thing to do, not for expedience, but for one and only one reason: they're tired of dying.

There is no "armistice" or "cease fire" in a war.  There is only victory or defeat.  There is only death or life.  Collateral damage, including the loss of innocent life, is a known price that will be paid, although the toll is not of concern in that regard - only the certainty that it will occur.

If we are justified in utilizing military force - the last resort of any nation in the resolution of grievance - then we are justified in utilization of every bit of force we can muster, without mercy, without limit, without fear or favor.

If we are not justified in doing so we have no business placing our nation's resources, including and most especially the lives of our men and women in uniform, in harm's way, since each such excursion guarantees that some of them will not come home to their families and friends.

This nation once knew these facts.  We fought two World Wars, the first of which was arguably without risk of invasion or damage to our territory, the second of which began the same way but escalated dramatically on December 7th, 1941.  In both cases we mobilized not just our men and women in uniform but also every man and woman at home - we realigned factories to produce the machines of war, we rationed goods and services in our nation, we sacrificed.  We applied the full force of this country and its people to the task at hand, and we were victorious.  In the process we all honored those who fought, for behind each infantryman on the ground or airman in the sky there were a hundredfold more at home building the guns, ammunition and fighting machines - day and night - that they required.  When each of those who died on the battlefield fell, they gave their life knowing that our nation and her resources - all of them - were behind each and every fallen soldier, without limitation or exception.

If we are to press a military engagement in Afghanistan or elsewhere we owe it to our fighting men and women to approach that engagement with no less vigor than we did in World War I and II. 

We dishonor those who serve in our uniform when we ask them to fight and die with less than a full commitment of our national resources to the task we set before them. 

These fighting men and women, each and every one of them, takes an oath to uphold not an office, nor a person, but our Constitution - the defining difference between America and all other nations.

We must honor them in return, in that when our President and Congress determine that the use of military might is our right and duty as a nation, we the people must demand and our President and Congress must make a full declaration of war and the commitment of every resource within our nation, both military and civilian, without reservation.

President Obama, do what your predecessors did not in Korea, Vietnam, Kosovo and Iraq.

Either fully commit our nation to war with all of her resources or bring our troops home.

The WSJ reports:

WASHINGTON -- A deal between the Treasury Department and a key House Democrat would give the government sweeping new powers to police the country's largest financial companies, including the ability to seize and break up failing companies and order large firms to shrink.

Uh huh. 

The proposal would require financial firms with more than $10 billion of assets to pay for the unwinding of a collapsed competitor. The measure would also give the Federal Reserve the power to direct any large financial holding company to sell or transfer assets or stop certain activities if the central bank determined there could be a "threat to the safety and soundness of such company or to the financial stability of the United States." This suggests the Fed would win new authority to order companies to shrink.

The Fed.

The same Fed that ignored the subprime lending fiasco?  The same Fed that gave a rubber stamp to a black-letter unlawful merger between Citi and Travelers, then lobbied for retroactive passage of Gramm-Leach-Bliley to legitimate it?  The same Fed that permitted primary dealers and other large financial institutions under its supervision to transact credit default swaps with AIG despite the fact that AIG's financial products group was inadequately capitalized (by a factor of 50 or more) to cover those transactions?

The Hill of course sees it differently:

The Financial Services Committee and the Obama Administration are committed to ensuring that the taxpayers are never again called upon to take responsibility for Wall Street’s business decisions.  The bill creates a strong, inter-agency council to monitor and oversee stability of the financial system and address threats to that stability.  The bill provides strengthened supervision for large, interconnected financial firms to prevent failure.  A new resolution regime will ensure that firms that fail despite these measures will do so in a way that minimizes impacts on taxpayers, the health of the financial system and the overall economy.

Let's not mince words - there is good in here.  Among the good parts of this bill are that "too big to fail" will become formally invalid as public policy. 

It requires the failed firm's creditors and shareholders to bear "first loss", and, if the brief is to be believed, only if they are entirely wiped out and there remains a shortfall will assessments be laid - on other large financial institutions, not the taxpayer.  This should result in large amounts of "social pressure" to stop stupid actions, since the risk of them can fall on other large market participants.

It requires that securitized products retain 10% of the risk (which can be reduced to 5% but not lower by regulators) of any product so securitized, stopping the "pass it all on and watch the bomb go off on the back of the fool who you sold it to" game.

And finally, it requires approval of the Treasury Secretary for The Fed's employment of 13(3) authority - the blanket "we can lend to anyone" authority that The Fed has cited (and in my opinion both abused and exceeds the limits of) during this crisis.  In addition, it prohibits "special facilities" entirely - that's a real improvement.

Left unanswered is whether there are criminal penalties imposed for violations.  My expectation is that like the rest of the "toothless tiger that roared" games out of Washington DC the critical "or else" is missing, but we'll see once the markup is complete.

I cannot endorse this as written, but I can say that it is a vast improvement over what we have now, and what has happened to date.  For The Fed to have that primary seat at the table and the "final backup authority" they must be subject to regular and comprehensive audit, so as to insure that the people can see they are complying with the strictures of law - otherwise any so-called "restrictions" are nothing other than a joke.

In addition it is critical that this law include criminal penalties for violations as any failure to follow the constraints laid down will of necessity expose the taxpayer to enormous loss (as has occurred in this instance), and as there is no reasonable civil penalty available in such a circumstance, severe federal criminal penalties are appropriate.

We must not only end "too big to fail" we must also end "too bribed to give a damn", which has permeated the entirety of Washington DC over the last three decades.

The bill being debated in committee hearing today (and presumably being marked up soon) is a good start, but without the addition of full "sunshine" and criminal penalties for violations to the mix it will remain merely a set of suggestions that can and will be ignored when it suits the "rich and powerful", just as has been "Prompt Corrective Action" and the existing bevy of alleged "laws" that supposedly prohibit and should have prevented the outrageous practices that led us into this mess.