TARP Watchdog Neil Barofsky: Government Bailout Has Increased Risk Of Economic Crisis

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DANIEL WAGNER AND ALAN ZIBEL

The government's response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future, an independent watchdog at the Treasury Department warned.

The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," Barofsky wrote.

Since Congress passed $700 billion financial bailout, the remaining institutions considered "too big to fail" have grown larger and failed to restrain the lavish pay for their executives, Barofsky wrote. He said the banks still have an incentive to take on risk because they know the government will save them rather than bring down the financial system.

Barofsky also said his office is investigating 77 cases of possible criminal and civil fraud, including crimes of tax evasion, insider trading, mortgage lending and payment collection, false statements and public corruption.

TARP Watchdog Neil Barofsky: Government Bailout Has Increased Risk Of Economic Crisis

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• Watchdog: Bailouts created more risk in system (seattletimes.nwsource.com)

'Underemployment' tops 20 pct in 3 states

By Christopher S. Rugaber

President Barack Obama said in his State of the Union Wednesday that "one in 10 Americans still cannot find work." But in nine states the figure is much worse -- closer to one in five, according to Labor Department data released Friday.

The figures are a stark illustration of how tough it is to find a full-time job, even as the economy has grown for two straight quarters. The official unemployment rate of 10 percent doesn't include people who are working part-time but would prefer full-time work, or the unemployed who have given up looking for work.

When those groups are included, the devastation in many parts of the country is clear: Michigan's so-called "underemployment" rate was 21.5 percent in 2009, the highest in the nation. California's was 21.1 percent, while Oregon's was 20.7 percent.

Many companies and state governments have cut back on workers' hours during the recession. And in the past six months, nearly 2 million unemployed workers have given up on their job hunts. Nationwide, the underemployment rate was 17.3 percent in December, just below the 17.4 percent reached in October, the highest on records dating from 1994.

In another three states -- South Carolina, Nevada, and Rhode Island -- the underemployment rate is above 19 percent. And in three more -- Arizona, Florida and Tennessee -- it's above 18 percent.

'Underemployment' tops 20 pct in 3 states

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• California Unemployment Rises To 12.4% (cehwiedel.com)

The Next Big Move In Gold

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The Federal Reserve System was created in 1913 on a promise of stabilizing the banking system. What followed instead was an unprecedented growth in fractional reserve banking, as well as the money supply, which helped fuel the roaring 20’s. The aggressive money printing created inflated values in bonds and stocks, which peaked in 1929. When the market began its precipitous slide, and the public began to realize that stock and bond values were artificially high, the populace began to convert its cash holdings into gold. The government lacked the ability to satisfy that demand and was thus forced to renege on the currency’s founding promise of gold convertibility. It’s important to point out that without this original promise of convertibility for citizens, the currency may never have been adopted.

In 1933, The Gold Reserve Act was passed by Congress and formalized into law the breaking of the gold standard. This law provided for a controlled-currency issue through the Federal Reserve System which was non-redeemable in gold. Although the link to anything tangible had been broken, the citizens had little choice but to continue using these non-redeemable dollars as a medium of exchange. The currency had already been broadly accepted, proven convenient and a perception of safety had already become entrenched.

After forty years of continued dollar printing, in August, 1971, President Nixon effectively declared the US dollar to be a completely “fiat” currency by refusing to allow foreign governments to convert their US dollar holdings into gold. The right of conversion which had been granted under the post World War II, Bretton Woods agreement could not be honoured because of decades of money supply expansion. The original ‘promise’, which had vaulted US dollar to its status as a global reserve currency and a stable store of value, was now completely broken.

These historical events resulted in a world in which all currencies are fiat; they are not backed by gold or any other tangible asset. The supply is infinite. In fact, the production of today’s newly created paper money in relation to historical commodity-based money is akin to counterfeiting. A US dollar printed today has no ties to anything tangible and as a result carries only four cents of the equivalent purchasing power of a gold-backed dollar of 1913. It is ironic that in a poor choice of wording on Wikipedia, the definition of counterfeiting states that “it is usually pursued aggressively by all governments.” It is only because the evolution of money has occurred slowly over generations that the obvious flaw with fiat currency is not widely understood.

Beware Counterfeiters

Sarkozy calls for action on currencies

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By Gillian Tett in Davos and Ben Hall

President Nicolas Sarkozy on Wednesday stepped up his calls for a new Bretton Woods system to stabilise global exchange rates, promising proposals for reform of the international monetary system when France takes over the presidency of the G8 and G20 next year.

“The prosperity of the postwar era owned much to Bretton Woods … we need a new Bretton Woods,” he told the World Economic Forum in Davos. “We cannot preach free trade and tolerate monetary dumping. France, which will chair G20 in 2011, will place reform of the monetary system on the agenda.”

France has consistently called for action on currencies before international meetings, but its calls have either fallen on deaf ears, or it has failed to raise the issue at the meeting itself.

French officials say Paris is determined to come up with concrete proposals next year. But the US and UK would almost certainly reject a new global pact to peg currencies, and most European countries, including France, would reject any suggestion that China could peg its exchange rate at anything like the current rate.

Mr Sarkozy, the first French president to address Davos, delivered a fiery half-hour speech full of rhetorical blasts against the excesses of financial capitalism that prompted many Davos delegates to stand in applause.

Sarkozy calls for action on currencies

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• Davos reflects West-to-East shift (financialpost.com)

Obama bank plan ‘could be law within months’

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By Patrick Jenkins and Gillian Tett in Davos

President Barack Obama’s proposals to rein in the US banking sector and its practices could be enacted into law within six months, according to a key congressional leader.

Barney Frank, chairman of the House of Representatives finance services committee and a linchpin of White House banking reform efforts, told the Financial Times that the proposals could be incorporated into legislation making its way through Congress.

Mr Frank said he was confident the bill would be in place well before mid-term elections in November.“I think Chris [Dodd, Mr Frank’s counterpart in the Senate] will get a bill out in March,” he said.

The plan unveiled last week was drafted by Paul Volcker, the former Federal Reserve head and chairman of Mr Obama’s Economic Recovery Advisory Board.

“We’ve been working with Paul for most of the [past] year, so I wasn’t surprised [by the proposals],” said Mr Frank. Mr Volcker, previously seen as an “odd man out”, had now been recognised by the administration for the “cogency of his work”, he added.

The twin proposals unveiled by Mr Obama last week would constrain the biggest banks from growing and force them to shed hedge fund, private equity and proprietary trading activities.

Obama bank plan ‘could be law within months’

Senate backs increase in debt limit to $14.3 tln

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By Andy Sullivan

The U.S. Senate voted narrowly on Thursday to increase the government's borrowing authority to $14.3 trillion, which would allow the Treasury Department to continue servicing the country's spiraling national debt through most of 2010.

Senate Democrats hope the 60 to 40 party-line vote will enable them to avoid another politically toxic vote on the issue before the November congressional elections.

The House of Representatives will vote on the legislation next week, House Majority Leader Steny Hoyer said. It will then go to President Barack Obama and be signed into law.

Congress must periodically raise the legal limit for the government's borrowing, and the Treasury Department is expected within weeks to exceed the current $12.4 trillion limit set in December.

Failure to raise the limit would roil financial markets, but lawmakers are never eager to sign off on a measure that allows the government to dig itself deeper into debt.

Senate backs increase in debt limit to $14.3 tln

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• Debt Limit Increased: Senate Allows For Additional $1.9 Trillion In Borrowing (huffingtonpost.com)

Geithner's AIG Bailout

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by GREG KAUFMANN

Treasury Secretary Timothy Geithner was summoned to testify before the House Committee on Oversight and Government Reform yesterday in order to answer two questions: why did he sign off on AIG paying the big banks full value on insurance for bad assets like mortgage-backed securities--using $62 billion in taxpayer money--at a moment when everyone else was taking losses? And what was his role in the decision not to disclose to the public--which owned 80 percent of AIG at the time--the names of the banks and the payments they received, as AIG was prepared to do before the Federal Reserve Bank of New York (FRBNY) run by Geithner advised them not to?

Geithner's answer boiled down to this: the decision in early November 2008 to pay Goldman Sachs, Bank of America, Merril Lynch, Citigroup, Societe Generale, Deutsche Bank and others 100 cents on the dollar was part of a broader effort to save AIG and it prevented an economic catastrophe; and on November 24, 2008, when he was nominated to serve as treasury secretary, he recused himself "from involvement in monetary policy decision, policies involving individual institutions, and day-to-day management of FRBNY." (Was there anything left for him to do around the joint? And why was he still getting a paycheck?) Geithner said he therefore had nothing to do with the nondisclosure decision in December 2008.

But Geithner didn't recuse these AIG matters up from his office, he recused them down to the vice president of the NY Fed. Apparently, decision-making over tens of billions of dollars of taxpayer money wasn't deemed a top-level priority by him or his predecessor, former Treasury Secretary Henry Paulson, who also testified. In fact, Congresswoman Marcy Kaptur discovered through her questions that no formal recusal agreement outlining Geithner's new responsibilities (or lack thereof) was ever executed.

Geithner's AIG Bailout

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• Secret Banking Cabal Emerges From AIG Shadows: David Reilly (businessweek.com)

EU Has No Greek ‘Plan B;’ Finance Chief Pledges Cuts

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By Francine Lacqua and John Fraher

European Union policy makers have no “plan B” to help Greece, the bloc’s top economic official said, and Greek Finance Minister George Papaconstantinou said he’s not aware of talks of a possible rescue.

“There is no bailout problem,” Monetary Affairs Commissioner Joaquin Almuniasaid today in an interview with Bloomberg Television at the World Economic Forum’s annual meeting in Davos, Switzerland. “Greece will not default. In the euro area, default does not exist.”

Greek bonds have slumped on speculation the country will need help from the EU to cut the region’s highest budget deficit and tame its rising debt. Prime Minister George Papandreou yesterday said Greece is being victimized by rumors in financial markets and he denied seeking to borrow from European partners.

EU Has No Greek ‘Plan B;’ Finance Chief Pledges Cuts

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• Greece, Others, Move to Quash Rumors About Bailout (abcnews.go.com)

S&P: "We No Longer Classify The U.K. Among The Most Stable And Low-Risk Banking Systems"

Tyler Durden

Standard & Poors slams the U.K. in yet another preview of the imminent downgrade. The just released report has some of the harshest language from the rating agency on the island nation to date:

Standard & Poor's Ratings Services no longer classifies the United Kingdom (AAA/Negative/A-1+) among the most stable and low-risk banking systems globally due to our view of the country's weak economic environment, the reputational damage we believe has been experienced by the banking industry, and what we see as the high dependence on state-support programs of a significant proportion of the industry.

And because S&P, due to a chronic case of testicular lack of fortitude, will be the last to actually notch the United Kingdom, what it has done is to downgrade the country in its Banking Industry Country Risk Assessment group.

We therefore place the U.K.'s banking system in Group 3 out of our 10 Banking Industry Country Risk Assessment (BICRA) groups, which primarily reflects our view of relatively high leverage in the U.K. economy and the losses the industry could bear during the deleveraging process. BICRA rankings integrate our view of the strengths and weaknesses of a country's banking system compared with those of other countries, ranging from Group 1 (strongest) to Group 10 (weakest). Banking systems ranking similarly to the U.K. also include the U.S., Austria, Chile, and  Portugal. The macroeconomic and banking industrywide factors that affect the BICRA influence all bank counterparty credit ratings in the U.K.

In our opinion, the weak U.K. economy will continue to hinder the credit profile of the U.K. banking industry. We believe this factor affects the profile of the U.K. banking system more than it influences the banking systems of most other major mature market economies in Europe and around the world, notably Canada, France, and Germany in BICRA Groups 1 and 2. Household debt in particular is high, relative to disposable income. We expect that systemwide domestic nonperforming and impaired loans will peak in 2010 and remain elevated through 2011. In our opinion, credit demand in the U.K. will remain muted, and banks' net interest margin will continue to be narrow due to the low interest rate environment. The U.K. banking industry will, in our view, have limited opportunity in 2010 and 2011 to increase earnings to absorb high credit loss charges.

S&P: "We No Longer Classify The U.K. Among The Most Stable And Low-Risk Banking Systems"

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• UK economy likely to be downgraded, warns Invesco's Neil Woodford (telegraph.co.uk)

December Home Sales Take Largest Monthly Drop In More Than 40 Years

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ALAN ZIBEL

Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit.

The report reflects a sharp drop in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move.

"It's 'exit stage left' for first-time homebuyers," wrote Guy LeBas, an analyst with Janney Montgomery Scott.

December's sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the National Association of Realtors said Monday. Sales had been expected to fall by about 10 percent, according to economists surveyed by Thomson Reuters.

The report "places a large question mark over whether the recovery can be sustained when the extended tax credit expires," wrote Paul Dales, U.S. economist with Capital Economics.

December Home Sales Take Largest Monthly Drop In More Than 40 Years

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• Home sales slide 16.7 percent last month (msnbc.msn.com)

10 Must-Have Google Chrome Extensions

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by Alex Chitu

The Windows version of Google Chrome 4 is out of beta and you can finally try the features that were previously available in Chrome's beta and dev channels. Google will automatically update the browser to the latest version (4.0.249.78), but you can also click on the wrench button, select "About" and manually update the browser.
The most important feature released in Google Chrome 4 is the support for extensions. Chrome extensions are easier to create than Firefox extensions because they're nothing more than web pages that use Chrome's APIs. That's why you can install or disable extensions without having to restart the browser, that's why extensions use separate processes and this is one of the reasons why Chrome extensions are more limited and don't have a consistent interface.
Google Chrome has built-in support for user scripts, so you don't need to install an extension like Greasemonkey. Chrome can convert user scripts into extensions, so many Chrome extensions are just glorified Greasemonkey scripts.
To install an extension, visit Google Chrome's extension gallery and pick one of the 1,861 extensions that are currently available. Here are some of the most useful extensions that add missing features to Google Chrome:

10 Must-Have Google Chrome Extensions

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RealityTrac Year-End report Shows Record 2.8 Million U.S. Properties with Foreclosure Filings in 2009

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RealtyTrac® (www.realtytrac.com), the leading online marketplace for foreclosure properties, today released its Year-End 2009 Foreclosure Market Report™, which shows a total of 3,957,643 foreclosure filings — default notices, scheduled foreclosure auctions and bank repossessions — were reported on 2,824,674 U.S. properties in 2009, a 21 percent increase in total properties from 2008 and a 120 percent increase in total properties from 2007. The report also shows that 2.21 percent of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006.

Foreclosure filings were reported on 349,519 U.S. properties in December, a 14 percent jump from the previous month and a 15 percent increase from December 2008 — when a similar monthly jump in foreclosure activity occurred. Despite the increase in December, foreclosure activity in the fourth quarter decreased 7 percent from the third quarter, although it was still up 18 percent from the fourth quarter of 2008.

“As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans,” said James J. Saccacio, chief executive officer of RealtyTrac. “After peaking in July with over 361,000 homes receiving a foreclosure notice, we saw four straight monthly decreases driven primarily by short-term factors: trial loan modifications, state legislation extending the foreclosure process and an overwhelming volume of inventory clogging the foreclosure pipeline.

“Despite all the delays, foreclosure activity still hit a record high for our report in 2009, capped off by a substantial increase in December,” Saccacio continued. “In the long term a massive supply of delinquent loans continues to loom over the housing market, and many of those delinquencies will end up in the foreclosure process in 2010 and beyond as lenders gradually work their way through the backlog.”

RealityTrac Year-Emd report Shows Record 2.8 Million U.S. Properties with Foreclosure Filings in 2009

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Foreclosure help can’t rely on half-measures

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The News Tribune

The Goldilocks strategy isn’t working for the American housing market.

President Obama’s “just right” fix for homeowners facing foreclosure was intended to offer aid without absolution. Borrowers and banks would be shielded from the brunt of the real estate crash while the truly irresponsible would still have to reckon with their recklessness.

It has missed its mark. The $75 billion Making Home Affordable program has largely been a failure, helping far fewer people than expected and in many cases merely delaying the inevitable.

The main flaw is its halfway approach. The program is neither hands-off enough to allow the market to purge itself of bad real estate bets nor helpful enough to make a sizable dent in the inventory of foreclosed properties dragging down home prices.

The effect, experts say, is that a program intended to speed up economic recovery has delayed it.

Foreclosure help can’t rely on half-measures

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• U.S. Loan Effort Is Seen as Adding to Housing Woes (nytimes.com)
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SEC mulled national security status for AIG details

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Matthew Goldstein

The request to keep the details secret were made by the New York Federal Reserve -- a regulator that helped orchestrate the bailout -- and by the giant insurer itself, according to the emails.

The emails from early last year reveal that officials at the New York Fed were only comfortable with AIG submitting a critical bailout-related document to the U.S. Securities and Exchange Commission after getting assurances from the regulatory agency that "special security procedures" would be used to handle the document.

The SEC, according to an email sent by a New York Fed lawyer on January 13, 2009, agreed to limit the number of SEC employees who would review the document to just two and keep the document locked in a safe while the SEC considered AIG's confidentiality request.

The SEC had also agreed that if it determined the document should not be made public, it would be stored "in a special area where national security related files are kept," the lawyer wrote.

In another email, a New York Fed official said the SEC suggested in late December 2008, that AIG file the document under seal and then apply to the regulatory agency for so-called confidential treatment, if central bankers wanted to stop the information from becoming public.

SEC mulled national security status for AIG details

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• AIG Took Four Tries on Filing as Fed Asked to Withhold Data (businessweek.com)

Indisciplined Democrats vs regulatory reform

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Felix Salmon

Barack Obama ran what was arguably the most disciplined and on-message presidential campaign in history. But all that the Republicans need to do right now to ensure that financial regulatory reform never happens is sit back and watch the Democrats fight each other to a bloody stalemate. It’s inconceivable that the GOP would ever allow itself to get into a mess like this.

I don’t think anybody anticipated this turn of events back in June, when we saw the first relatively detailed Treasury proposal on the subject. Sure, there were a lot of problems with it, but it was necessary, the Democrats had control of both houses of Congress, and at least it was something. What’s more, insofar as there were weaknesses in the proposal, they were generally a direct consequence of the fact that Treasury had been careful to put together a proposal which could pass political muster.

Except, Treasury’s finely-honed political calculations turned out to be somewhat awry: it wasn’t long before Barney Frank was tearing into one of the key legs of the proposal, removing bothcommunity banks and the vanilla option from the Consumer Financial Protection Agency.

And then Chris Dodd came along, with his own set of entirely idiosyncratic ideas: where Treasury put the Fed at the center of the regulatory nexus, for instance, Dodd wanted to remove from that role entirely. And where Treasury soft-pedaled on regulatory consolidation, for fear of angering powerful constituencies, Dodd went much further, combining not only the Office of the Comptroller of the Currency with the Office of Thrift Savings, but throwing in the Federal Deposit Insurance Corporation for good measure.

Indisciplined Democrats vs regulatory reform

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• Democrats in a bind over bank bill (guardian.co.uk)

The woman Democrats need

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By Ethan Porter

ON THE day after Tuesday’s electoral loss, the Obama administration brought an unfamiliar face to the White House - Elizabeth Warren, the Harvard Law professor noted for her staunch advocacy on behalf the middle class and fierce criticism of the bank bailouts. Perhaps the administration will take a more aggressive approach to Wall Street, along the lines of what Warren wants. But for Democrats to truly take ownership of the economic crisis, Warren will need to play a more prominent role. Not just her ideas, but the force of her personality is needed.

Warren and the Democratic Party need to think seriously about her prospects for higher office. Going into 2012, Massachusetts Democrats will have no shortage of candidates to choose from, eager, party-trained politicians ready to take a run. Republican Scott Brown’s victory to the US Senate last week made clear that voters crave something besides the norm: someone from outside the traditional political structure who can speak to their everyday, bread-and-butter concerns in a credible way. Warren fits the bill.

Warren has spent her career laying the groundwork for what might be called progressive populism. From her perch in Cambridge, she’s excoriated the unfair credit and lending practices that, in part, gave rise to the current crisis. She was the architect of the Consumer Financial Protection Agency, which, if created, would regulate credit cards and mortgages in the same way home appliances are regulated now. (Full disclosure: Warren once wrote about the agency in the publication I help edit.) And well before the bubble broke in the summer of 2007, when America was still riding high on George W. Bush’s economy, Warren was speaking out against the incredible pressure the 21st century economy was putting on the middle class. She was derided as a Cassandra, but she was right.

The woman Democrats need

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7 Things About The Economy Everyone Should Be Worried About

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Dan Froomkin

An extraordinary series of articles recently appeared on the Nieman Watchdog Web site, anchored by investigative reporter John Hanrahan and mostly based on interviews with some of the nation's most perceptive, prescient and prophetic economists. The series laid out a broad landscape of economic issues that have been largely overlooked during the reporting of the nation's economic collapse -- to our great peril.

Hanrahan's articles explore key elements of the story that reporters should have been -- and should still be -- writing about. Among them: The endemic fraud at the heart of the collapse, the resultant need for a comprehensive dissection of some key financial institutions, how the wars in Iraq and Afghanistan have weakened the economy, the dramatic effects of the crash on domestic poverty and world poverty, and underlying it all, the critically important role of government spending in a recovery, be it through a second stimulus or expanded entitlements or jobs programs, all of which requires that deficits be seen, for the short run at least, as the solution, not the problem.

As a coda to Hanrahan's series, here is a list of seven things all of us should be more alarmed by than we currently are, going forward.

A common theme underlying them all is that while our leaders -- and the voices of conventional wisdom -- treat our current recession as cyclical in nature, and are essentially mostly just waiting around for growth to pick up again, there is plenty of reason to believe that this crisis was instead an expression of structural problems. And if that is so, and we don't take the proper action, then the wait could be a long one.

7 Things About The Economy Everyone Should Be Worried About

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UK rejects Barack Obama's bank reforms

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By Louise Armitstead and Helia Ebrahimi

The City minister said he saw the President's proposals to break up the investment banks as solutions to "American issues" rather than "necessary actions" for the UK.

"President Obama came out with a solution to the idiosyncratic problems that he sees in the American banking system which is around investment banking in particular," he said. "It's worth remembering that proprietary trading, hedge funds, private equity, these were not at the heart of the difficulties that Northern Rock, or Royal Bank of Scotland or HBOS experienced."

Lord Myners added: "He's developing a solution to what he sees as the American issues, we've already taken the necessary action in the UK."

As banking shares dragged the FSTE 100 down 32 points to 5302.99, its lowest level this year, shadow chancellor George Osborne appeared to row back from his previous position backing Mr Obama.

Mr Osborne had suggested a Tory Government would introduce similar trading curbs for banks. However, on Friday he qualified his response saying: "We don't want to return to the crude Glass-Steagall separation of retail banking and investment banking."

UK rejects Barack Obama's bank reforms

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• Can we have a new Glass-Steagall? Yes we can (guardian.co.uk)

Barney Frank: Abolish Fannie and Freddie

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Shahien Nasiripour

House Democrat Barney Frank vowed on Fridayto get rid of mortgage giants Fannie Mae and Freddie Mac as part of an overhaul of the country's taxpayer-supported system for financing home loans.

"The remedy here is to, in fact, as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," said Frank, chairman of the House Financial Services Committee. "That's the approach, rather than a piecemeal one."

Frank's comments about the government-controlled entities, which help expand home ownership by buying up loans from lenders, come amid the Obama administration's renewed push to re-regulate Wall Street. Last week, the administration announced a proposed levy on the nation's biggest financial institutions. This week, Obama pushed for further measures to reduce risk-taking by megabanks.

Fannie and Freddie, though, have thus far escaped the chopping block. While Congressional Democrats and the administration push forward on measures to rein in Wall Street and protect consumers, there's been little public focus on what to do about the bailed-out mortgage giants, which were seized by federal regulators in 2008 due to their risk of failure.

Barney Frank: Abolish Fannie and Freddie

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The Next Financial Crisis Has a Name and it's the United Kingdom

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James Jubak

It's one thing when it's Greece or Portugal. A credit downgrade or warning for those two countries isn't exactly headline news for most investors. For most of our portfolios these are peripheral markets.

Ireland in trouble too? Yawn. Don't own any Irish stocks.

Italy? What's new? Italy's always running a deficit.

Spain? That's a surprise. Time to check the portfolio. But, whew, don't own any Spanish stocks.

The United Kingdom? Whoa. Now we're getting serious. How could the home of Big Ben, the Queen, the Bank of England, the pound sterling, and double-clotted cream be facing a credit downgrade? And maybe even worse. The cost of insuring against a U.K. default in the derivatives market is only slightly lower than the price of insuring against a default by Portugal.

I don't think the United Kingdom is headed toward a default on its debt. But it is in the midst of a crisis that could reopen wounds in a global financial system that is still healing from the last crisis.

The Next Financial Crisis Has a Name and it's the United Kingdom

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Obama Bank Plan Shows Global Coordination Dearth

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By Gavin Finch, Andrew MacAskill and Caroline Binham

President Barack Obama’s plan to curb proprietary trading shows banking regulations are being implemented unilaterally, not on the global scale lenders urged, according to lawyers.

Obama proposed yesterday to limit the size of banks and prohibit them from investing in hedge funds and private equity funds as a way to reduce risk-taking and prevent a repeat of the credit crisis. Other countries, including the U.K., are pushing firms to cut risk by boosting their capital reserves instead.

“There seems to be an element of governments trying to outbid each other in regulation proposals,” said Michael Wainwright, a London-based partner in financial services at law firm Eversheds LLP. “They are all trying to catch the mood of the moment with the electorate.”

Obama Bank Plan Shows Global Coordination Dearth

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Democrats propose $1.9T increase in debt limit

By ANDREW TAYLOR

Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $1.9 trillion to pay its bills, a record increase that would permit the national debt to reach $14.3 trillion.

The unpopular legislation is needed to allow the federal government to issue bonds to fund programs and prevent a first-time default on obligations. It promises to be a challenging debate for Democrats, who, as the party in power, hold the responsibility for passing the legislation.

It's hardly the debate Democrats want or need in the wake of Sen.-elect Scott Brown's victory in Massachusetts. Arguing over the debt limit provides a forum for Republicans to blame Democrats for rising deficits and spiraling debt, even though responsibility for the government's financial straits can be shared by both political parties.

The measure came to the floor under rules requiring 60 votes to pass. That's an unprecedented step that could mean that every Democrat, no matter how politically endangered, may have to vote for it next week before Brown takes office and Democrats lose their 60-vote majority.

Democrats propose $1.9T increase in debt limit

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Darrell Issa Accuses FRBNY Of Contempt For Selective Document Disclosure

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Tyler Durden

Rep. Darrell Issa comes out guns blazing once again, alleging that the Fed provided a selective response to the subpoena to provide all documents relating to the AIG bailout, and asks Edolphus Towns, Chairman of the House Committee on Oversight and Government Reform, to hold Fed officials responsible for this act, in contempt.

First, the FRBNY's production does not include documents related to the FRBNY's knowledge of AIG's credit default swap counterparty exposure before AIG was bailed out in September 2008. The Committee needs to understand AIG's counterparty exposure and the FRBNY's knowledge of the potential problems at AIG before federal officials thought it became necessary to spend billions of taxpayer dollars to bail out the company.

Second, the FRBNY's production does not include documents related to the counterparty payments after May of 2009, including but not limited to the FRBNY's response to Congressional and press inquiries, such as this Committee's investigation. As you know, has stonewalled this Committee's investigation at every turn since I initially requested information from FRBNY in October of 2009. It is crucial that this Committee understand the full extend of FRBNY's efforts to cover up the counterparty payments and to prevent and delay other efforts to bring details about these transactions to the public.

Dear Congressman Issa, while we are on this topic, and since you are requesting additional information from the FRBNY, we were hoping to provide some suggestions on incremental disclosure which should be critical in your ongoing investigation, and that should be opened up to the public's interest immediately.

Darrell Issa Accuses FRBNY Of Contempt For Selective Document Disclosure

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Gold & The Keynesian Elixir

Yaser Anwar

Gold the Keynesian Elixir (January 2010)

Insider Selling Outpaces Buying By 24 Times In Last Week

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Tyler Durden

What is there to say about the endless barrage of insider sales that hasn't been said for 9 straight months before. Insiders are selling into the never ending rally, as domestic mutual funds have no equity inflows, yet stocks somehow miraculously keep rising, providing yet more attractive exit price points for directors and insiders. In the past week insiders bought $18 million worth of stock and sold $419 million. There is no way to spin this data. There were no notable buyers, while Nelson Peltz was vacating HNZ shares with a vengeance, selling $30 million worth of the canned food maker. Ralph Lauren also apparently wasn't too hot on Polo's Spring/Summer collection.

Insider Selling Outpaces Buying By 24 Times In Last Week

South Africa: Threats Against Journalists

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The South African National Editors' Forum (Sanef) is outraged at reports that journalists in Mpumalanga are on a hit list targeting corruption busters in the province.

The existence of the hit list first surfaced in Sunday World of January 10 and has been repeated in Friday’s Mail & Guardian. So far two provincial government officials said to have been on the list have been murdered. Samuel Mpatlanyane, Mpumalanga's sports and culture department head of communications, was shot dead by assassins during the night last week.

Vusi Shongwe, the province's sports and culture minister, has blamed the murder on the same people who killed Mbombela municipality speaker Jimmy Mohlala. Mohlala was similarly executed at home in front of his son last January. He was a witness in a disciplinary hearing concerning financial mismanagement related to the Mbombela Stadium, a Fifa 2010 World Cup Venue.

The murder and threatened murder of potential witnesses and journalists puts a nasty twist to South Africa’s struggle against corruption.

South Africa: Threats Against Journalists

Rogers: Food Shortage Coming as Farmers Struggle

Dan Weil

Legendary investor Jim Rogers remains bullish on commodities and says the world will soon face food shortages.
"The fundamentals (for agriculture) have gotten better," he says.
"The inventories are now at the lowest they've been in decades, not in years.”
And that trend is just intensifying, Rogers tells CNBC.
“Things are getting worse. Many farmers can’t get loans to buy fertilizer now, even though we have big shortages developing."
And what will be the end result of this dynamic?
"Sometime in the next few years we're going to have very serious shortages of food everywhere in the world, and prices are going to go through the roof," Rogers said.

Rogers: Food Shortage Coming as Farmers Struggle

Watchdog's fate in Senate key to financial reform

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Reuters

The tag on U.S. financial regulation reform may as well say "Made on Wall Street" if bank lobbyists manage to gut the Obama administration's proposed consumer watchdog agency, said Elizabeth Warren on Monday.

The head of a panel monitoring the government's bank bailout program, Warren is a Harvard Law School professor and a fierce critic of the banking industry. She is also rumored to be front-runner to become the first chief of President Barack Obama's proposed U.S. Consumer Financial Protection Agency.

The CFPA would be a new government regulator devoted to shielding Americans from financial rip-offs like the abusive subprime mortgages at the core of the 2008 financial crisis, and the prolonged recession and bank bailouts that followed.

But the proposed agency, already pared back last month in the House of Representatives, is in trouble in the Senate.

Watchdog's fate in Senate key to financial reform

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Racketeering 102: Fed's Lacker Threatens With Mutually Assured Destruction If Fed Audited

Tyler Durden

It was a four short months ago that the Clearing House Association, in a court filing, threatened with untold destruction if the Fed was ordered to submit to an audit that would expose all their dirty laundry in the form of undervalued assets used as collateral by the Federal Reserve. We recall the direct threat used back then:

If the names of our member banks who borrow emergency funds are publicly disclosed, the likelihood that a borrowing bank's customers, counterparties and other market participants will draw a negative inference is great. Public speculation that a financial institution is experiencing liquidity shortfalls - which would be a natural inference from having tapped emergency funds - has caused bank customers to withdraw deposits, counterparties to make collateral calls and lenders to accelerate loan repayment or refuse to make new loans. When an institution's customers flee and its credit dries up the institution may suffer severe capital and liquidity strains leaving it in a weakened competitive position.

It is fitting that as attempts to expose the Fed's shady practices accelerate on all fronts, and include direct legal approaches as well as subpoena demands by various politicians, that a Fed President would once again come out today, and recap the good old Mutual Assured Destruction treatise that both Wall and Main Street have gotten used to since the beginning of the bailouts. Somehow financial M.A.D. makes an appearance every time the bankers demand something and have no other rational justifications. So why not just feed the stupid plebs something about the Apocalypse that is certain to transpire should the financial oligarchs not get their way. Today was no exception.

Racketeering 102: Fed's Lacker Threatens With Mutually Assured Destruction If Fed Audited

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