Efforts by US President Barack Obama and other global leaders to restore confidence failed to do the trick Tuesday as markets hit new lows in a massive sell-off driven by fears of a new recession.[...]
"The financial crisis has changed its nature and become even more vicious," Berenberg Bank chief economist Holger Schmieding added.
[...]
Investors were now looking ahead to US Federal Reserve meeting later in the day in the hope the US central bank could come up with some fresh cash to spur activity under its policy known as Quantitative Easing (QE) but many were sceptical it has any firepower left with which to stem the tide.
Quantitative Easing. That’s another term I’ll have to remember that really means making money from thin air.
The US president stressed in a televised speech that the United States "always will be a triple-A country."
That’s right, sports fans. We’ll always be number one. Don’t let the markets fool you.
“I think this debt ceiling deal was really a declaration of war on the poor,” [talk show host (?) Tavis Smiley] said. “The Congress and the president have declared war on the poor. You can’t sign into law legislation that raises the debt ceiling but opens up a crater in the floor.”“Put another way, no unemployment extensions for poor people, no closing of a single corporate loophole, not one new tax on the rich and the lucky – so once again the corporations get off scot-free, Wall Street and the big banks get off scot-free, yet all these cuts aimed at the poor.”
Okay, I see we are going to have to silence some agitators.
The Federal Reserve gathers on Tuesday under growing pressure to take some type of action to stem a financial market meltdown linked to fears of a new U.S. recession.[...]
While most analysts expect the Federal Reserve to not make any major changes in policy at its meeting on Tuesday, some wonder whether market disruptions of recent sessions warrant some kind of central bank intervention.
[...]
"If the Fed does nothing, it could prove to be a disappointment at this point," said JP Morgan analysts on a conference call to discuss the S&P downgrade.
Some economists argue the Fed is close to out of bullets. Interest rates are effectively zero and the Fed's balance sheet stands at a record $2.9 trillion after an unprecedented program of unconventional monetary easing.
Wait…..Moody’s to the rescue!
The United States remains on a fiscal footing that is as solid as other AAA-rated countries, the Moody's ratings agency said Monday, in a retort to last week's downgrade by its rival Standard & Poor's.
"Relative to other large AAA-rated governments, the US debt position is somewhat high, but not out of line with the positions of these countries," Moody's said in an analyst note.
See? We’re not going under any faster than Europe.
[March 20] While the world has been transfixed with Japan, Europe has been struggling to avoid another financial crisis. On any Richter scale of economic threats, this may ultimately matter more than Japan’s grim tragedy. One reason is size. Europe represents about 20 percent of the world economy; Japan’s share is about 6 percent.[...]
Just last week, European leaders were putting the finishing touches on a plan to enlarge a bailout fund from an effective size of roughly 250 billion euros (about $350 billion) to 440 billion euros ($615 billion) and eventually to 500 billion euros ($700 billion). By lending to stricken debtor nations, the fund would aim to prevent them from defaulting on their government bonds, which could have ruinous repercussions. Banks could suffer huge losses in their bond portfolios; investors could panic and dump all European bonds; Europe and the world could relapse into recession.
The old "You can't pay that debt? I'll just loan you some more money. It's all interest to me."
The American International Group sued Bank of America on Monday over hundreds of mortgage-backed securities, adding to the surge of investors seeking compensation for the troubled mortgages that led to the financial crisis.[...]
[AIG] claims that Bank of America and its Merrill Lynch and Countrywide Financial units misrepresented the quality of the mortgages placed in securities and sold to investors.
[...]
A.I.G., still largely taxpayer-owned as a result of its 2008 government bailout, is among a growing group of investors pursuing private lawsuits because they believe banks misled them into buying risky securities during the housing boom. At least 90 suits related to mortgage bonds have been filed, demanding at least $197 billion.
[...]
A.I.G. is preparing similar suits against other large financial institutions including Goldman Sachs, JPMorgan Chase and Deutsche Bank.
[...]
The private actions stand in stark contrast to the few credit crisis cases brought by the Justice Department, which is wrapping up many of its inquiries into big banks without filing any charges. [... The] Justice Department has brought three cases against employees at large financial companies and none against executives at large banks
I supposed when they own you, you can’t very well press charges against them. Those government inquiries we see put into motion from time to time seem almost always to be toothless and time-wasting. We may as well say, “Convene an inquiry and have the report on my desk in half an hour.” Save everyone time and money.
Even more investigations may soon be shut down because the Justice Department is heavily involved in negotiations between big banks and state attorneys general that may give the banks broad immunity against future claims.
Because they don’t have enough leeway as it stands.
It seems pretty clear to me. It won’t.Cases like A.I.G.’s may turn up information in interviews and document discovery that could be helpful to the government, though it is unclear if the Justice Department would seek to reopen closed cases.
This seems like a good place to lodge the next Creature installment.
A Second Look at the Federal Reserve
Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.
Installment 2
Chapters 2-3
The name of the game is “Bailout.” [The objective] is to shift the inevitable losses from the owners of the larger banks to the taxpayers.
Just to review banking 101...When a loan is made, the bank doesn’t just put it down in its records as a liability (in case it doesn’t get repaid), it puts it down in its records as an asset, because the bank is drawing interest on it and expects that it will be paid back. If it’s not paid back, it comes off the asset side of the balance sheet, but remains a liability. It will remain on the asset side, however, for as long as the bank wishes to pretend it’s going to be repaid. In this fashion, a bank’s reports can make it seem to have assets even as it is going belly up. And having huge loans out is actually a plus for the bank as long as the interest gets paid. If you’re permitted to “loan” money you don’t actually have (and banks are), then it’s all profit. So actually, a bank’s interest is perpetual interest, and not being paid back.
FDR …took the next step … by establishing the Federal Deposit Insurance Corporation (FDIC) and the Federal Saving and Loan Insurance Corporation (FSLIC)…At the same time, loans on private homes became subsidized through the Federal Housing Authority (FHA).
[Under Carter, the amount of federal insurance for a private depositor was raised] from $40,000 to $100,000. Those with more than that merely had to open several accounts, so, in reality, the sky was the limit.
And now, the sky is falling.
The American people have no idea they are paying the bill (for corporate and foreign defaults)…they think it is the greedy businessman who raises prices or the selfish laborer who demands higher wages or …
They do not realize that these groups also are victimized by a monetary system which is constantly being eroded in value by and through the Federal Reserve System.
But the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Federal Deposit Loan Corporation now guarantee that massive loans made to large corporations and to other governments will not be allowed to fall entirely upon the bank’s owners should those loans go into default…on the argument that, if these corporations or banks are allowed to fail, the nation would suffer from vast unemployment and economic disruption.
Yes, we well remember the exact phrase: Too big to fail..
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