Sunday, September 28, 2014

Neoliberalism defined

Definition.  Neoliberalism.
In addition to an economic policy, neoliberalism is also a political project .

 Important components of neo liberalism are the consideration of the market as a pre eminent process of decision making. Markets are privileged and regulations or rules on trade and commerce are opposed.  Advocates of neoliberalism promote cutting public expenditures such as schooling and health care and social services. The promote deregulation of markets such as eliminating the Glass Steagals limits on banking and deregulation of any practice that produces profits for some.

In many places they promote privatization of of state owned enterprises through private investment, including energy companies, utilities, and similar companies. 

1.   The Rule of the Market which liberates “free” enterprise from any bonds (regulations) imposed by the government no matter how much social damage this causes.
2.   Cutting Public Expenditures for social services such as education and health care.

Dodd- Frank

Going Abroad With Dodd-Frank

AP Images/Harry Hamburg
One of the biggest catastrophes of the 2008 financial crisis came out of the AIG Financial Products division, whose disastrous trades eventually led to a $182 billion bailout of the insurance company. One of the largest financial market blowups since the crisis came from the Chief Investment Office of JPMorgan Chase, where similar trades backfired and cost the company at least $6.2 billion. The common thread? Both of these offices, despite being subsidiaries of American corporations, were based in London, and they enjoyed a degree of autonomy, both from their management teams and from federal regulators, who were unable to recognize the outsized risk until it was too late.

Saturday, September 27, 2014

The Secret Goldman Sachs tapes
Portside Date: 
September 26, 2014
Michael Lewis
Date of Source: 
Friday, September 26, 2014
Bloomberg View
Probably most people would agree that the people paid by the U.S. government to regulate Wall Street have had their difficulties. Most people would probably also agree on two reasons those difficulties seem only to be growing: an ever-more complex financial system that regulators must have explained to them by the financiers who create it, and the ever-more common practice among regulators of leaving their government jobs for much higher paying jobs at the very banks they were once meant to regulate. Wall Street's regulators are people who are paid by Wall Street to accept Wall Street's explanations of itself, and who have little ability to defend themselves from those explanations.
Our financial regulatory system is obviously dysfunctional. But because the subject is so tedious, and the details so complicated, the public doesn't pay it much attention.
That may very well change today, for today -- Friday, Sept. 26 --- the radio program "This American Life [1]" will air a jaw-dropping story [2] about Wall Street regulation, and the public will have no trouble at all understanding it.
The reporter, Jake Bernstein [3], has obtained 46 hours of tape recordings [4], made secretly by a Federal Reserve employee, of conversations within the Fed, and between the Fed and Goldman Sachs. The Ray Rice video for the financial sector has arrived.
First, a bit of background -- which you might get equally well from today's broadcast as well as from this article [5] by ProPublica. After the 2008 financial crisis, the New York Fed, now the chief U.S. bank regulator, commissioned a study of itself. This study, which the Fed also intended to keep to itself, set out to understand why the Fed hadn't spotted the insane and destructive behavior inside the big banks, and stopped it before it got out of control. The "discussion draft" of the Fed's internal study, led by a Columbia Business School professor and former banker named David Beim, was sent to the Fed on Aug. 18, 2009.
It's an extraordinary document. There is not space here to do it justice, but the gist is this: The Fed failed to regulate the banks because it did not encourage its employees to ask questions, to speak their minds or to point out problems.

Sunday, September 21, 2014

Only 26 % of unemployed receive benefits - that is austerity

Paul Krugman, NYT. 
Last week John Boehner, the speaker of the House, explained to an audience at the American Enterprise Institute what’s holding back employment in America: laziness. People, he said, have “this idea” that “I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around.” Holy 47 percent, Batman!
It’s hardly the first time a prominent conservative has said something along these lines. Ever since a financial crisis plunged us into recession it has been a nonstop refrain on the right that the unemployed aren’t trying hard enough, that they are taking it easy thanks to generous unemployment benefits, which are constantly characterized as “paying people not to work.” And the urge to blame the victims of a depressed economy has proved impervious to logic and evidence.
But it’s still amazing — and revealing — to hear this line being repeated now. For the blame-the-victim crowd has gotten everything it wanted: Benefits, especially for the long-term unemployed, have been slashed or eliminated. So now we have rants against the bums on welfare when they aren’t bums — they never were — and there’s no welfare. Why?

Tuesday, September 16, 2014

California Children below the poverty line

New Census Data Show That More Than One in Seven Californians -- One-Third of Them Children -- Lived in Poverty in 2013

SACRAMENTO -- Census Bureau data released today show that the share of all Californians with incomes below the federal poverty line in 2013 remained significantly higher than in 2006, the year before the Great Recession began. More than 5.6 million Californians -- over one in seven -- had incomes below the poverty line in 2013. California's overall poverty rate of 14.9 percent in 2013 is down significantly from 16.9 percent in 2011, but is still much higher than the pre-recession level of 12.2 percent in 2006.

Nearly 2 million California children were living in poverty in 2013, accounting for one in five children in the state (20.3 percent). Although this child poverty rate is down significantly from that in 2011 (24.3 percent), children still account for an outsize share of Californians living in poverty. Californians under age 18 were less than one-quarter of the total state population (23.9 percent) in 2013, but they accounted for nearly one-third of those living in poverty (32.5 percent). 

Monday, September 15, 2014

How Economists Got it Wrong - Krugman

    Last week I participated in a conference organized by Rethinking Economics, a student-run group hoping to promote, you guessed it, a rethinking of economics. And Mammon knows that economics needs rethinking in the wake of a disastrous crisis, a crisis that was neither predicted nor prevented.
It seems to me, however, that it’s important to realize that the enormous intellectual failure of recent years took place at several levels. Clearly, economics as a discipline went badly astray in the years — actually decades — leading up to the crisis. But the failings of economics were greatly aggravated by the sins of economists, who far too often let partisanship or personal self-aggrandizement trump their professionalism. Last but not least, economic policy makers systematically chose to hear only what they wanted to hear. And it is this multilevel failure — not the inadequacy of economics alone — that accounts for the terrible performance of Western economies since 2008.
In what sense did economics go astray? Hardly anyone predicted the 2008 crisis, but that in itself is arguably excusable in a complicated world. More damning was the widespread conviction among economists that such a crisis couldn’t happen. Underlying this complacency was the dominance of an idealized vision of capitalism, in which individuals are always rational and markets always function perfectly.

Tuesday, September 9, 2014

The People vs.Federal Bank Settlements

The People vs. Federal Bank Settlements and Liquidity Rules

By Nomi Prins
Last week, in an interview with Bloomberg News, former Countrywide CEO, Angelo Mozilo gave the nation the middle finger. He expressed zero remorse or culpability for his very personal (and personally lucrative) role in the subprime crisis that catalyzed a global economic recession. Apparently baffled by a potential lawsuit that could be levied by the Los Angeles US Attorney’s Office, he said, ““Countrywide didn’t change. I didn’t change. The world changed.” After blaming the world, he ended his segment by stating, “We didn’t do anything wrong.”
To him, the culprit was the real estate collapse itself.  The same excuse was used by Big Six bank CEOs before multiple Congressional hearings and business news hosts. “OMG, how could we have known prices could GO DOWN?” By placing the blame on the ‘market’, they spun their actions as reactive or ancillary to its apparently random whims, as opposed to proactive on practices leading to crisis events.
The more temporal distance from those events and airtime given to the bankers that inflated the market before crashing it, and Treasury Secretaries that did ‘what they had to do’ in an emergency, the more the Mozillian narrative is cemented in the main annals of history and the plight of the public is rendered a footnote.  Yet, it was not just the loans themselves, but more so, the immense and profitable re-packaging and global re-distribution of those loans in a pyramid of toxic assets wrapped with credit derivatives that blew up in the face of the nation and the world, The economic implosion that followed ignited by the weight of such epic fraud and CEO directed salesmanship, impacted initial borrowers with conditions beyond their control, on top of initial fraud and voracious pushing of those loans to begin with. Thus, banks concocted $14 trillion worth of assets using $1.5 trillion of high-interest loans, compounding and adding to each bit of fraud, instability and risk along the way.
Forbes ranked Mozillo one of the top ten highest paid CEOs in 2006. By 2009, the SEC charged him with fraud for lying about the quality of the loans he sold to Bank of America and insider trading for pocketing $140 million from selling his stock when he knew those loans, and his company, were crumbling. He wound up paying a $22.5 million fine to settle the charge of misleading investors and $45 million for the insider trading charge – leaving him a cool $72.5 million.

Sunday, September 7, 2014

Terminology from the Video- Inside Job

Terminology from the film – Inside Job.
You can find key terms in a number of places. 
One is Wikipedia.  Or, you can do a Google search.  When I did a google search for Mortgage backed securities I found this short video.
For brief definitions, there is a glossary in the back of the report;
The Financial Crisis Inquiry Report.  ( in your reading list.)

A source for details on each of the major parts of the video Inside Job is the book, Predator Nation: Corporate Criminals, Political Corruption and the Hijacking of America. – on your reading list.