"The tension arises from the fact that it is often more profitable to rip a customer’s face off in the short term than to defer potentially larger profit opportunities with the same client in the long term. When bankers whose personal franchises, careers, and compensation depends on the former are evenly balanced with bankers whose interests are aligned with the latter, an investment bank perches profitably if precariously on the knife’s edge of sustainable profitability. Notwithstanding industry critics’ perception that all investment bankers are all looking for a quick and easy score, those of us who actually work in the relationship side of the business know that our best personal outcome depends on a sustained career success lasting over a decade or more. Unlike, perhaps, traders who transact daily with equally ruthless hedge fund counterparties on a no-regrets, no-grudges basis, bankers like me in corporate finance and M&A transact with the same limited universe of clients year-in and year-out. We simply cannot afford to screw them over, because they do hold a grudge."

"Thus the most logical interpretation is that as other sources of cash are drying up – jobs, equity lines, etc. -- consumers are now turning to credit cards for basic expenses, and as credit lines become exhausted another round of defaults is in store. Some may say that cash sales are not reflected in the data, but the American way of life and the core economic engine has been plastic-based for as long as we can remember, and is not about to change anytime soon."

"I'm not sure how much the additional pessimism that "bubble illusion" causes matters for people's outlook about their current situation, and thus how much it affects the willingness to spend -- that seems to be related more to actual values today than to how much was lost. But it may affect the goals people set for when they will feel "whole" once again, and thus have an effect on spending through that channel. In any case, the illusion does seem to be present."

"No, Mr. President, we’re not in this together with corporate America. Corporations are in it to maximize profits and boost CEO salaries, not help the U.S. economy or put people back to work.

With no “healthy increase in demand,” on the horizon and unemployment heading back up, the President has talked more about government-led solutions that would actually create jobs in America. Near the end of his address on Afghanistan, and in a full-throated pitch at a Democratic fundraiser in New York City the next evening, Obama called for investments in education, infrastructure, and clean energy at home.

Democratic leaders in Congress have also started to sharpen their focus on the failure of corporations to create jobs at home. Nancy Pelosi’s reaction to the Majority Leader Eric Cantor’s walking away from budget talks was, “”Yes, we do want to remove tax subsidies for big oil, we want to remove tax breaks for corporations that send jobs overseas… ”"

"To Sanders, the conclusion is simple. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed," he said.

The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.

The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo.  The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.

A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. "The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.""

"Now it's Prohibition, we hear a lot about that. Well, that's nothing to compare to your neighbor's children that are hungry. It's food, it ain't drink that we are worried about today. Here a few years ago we were so afraid that the poor people was liable to take a drink that now we've fixed so that they can't even get something to eat.

So here we are, in a country with more wheat, and more corn, and more money in the bank, more cotton, more everything in the world; there's not a product that you can name that we haven't got more of than any other country ever had on the face of the earth, and yet we've got people starving. We'll hold the distinction of being the only nation in the history of the world that ever went to the poor house in an automobile. The potter's fields are lined with granaries full of grain. Now if there ain't something cockeyed in an arrangement like that then this microphone here in front of me is, well, it's a cuspidor, that's all.

Now I think that perhaps they will arrange it, I think some of our big men will perhaps get some way of fixing a different distribution of things. If they don't they are certainly not big men and won't be with us long. Now I say, and have always claimed, that things would pick up in '32. Thirty-two, why '32? Well, because '32 is an election year, see, and the Republicans always see that everything looks good on election year, see? They give us three good years and one bad one. No, no, three bad ones and one good one. I like to got it wrong. That's the Democrats does the other. They give us three bad years and one good one, but the good one always comes on the year that the voting is, see? Now if they was running this year why they would be all right. But they are one year late. Everything will pick up next year and be fine.

These people that you are asked to aid, why they are not asking for charity, they are naturally asking for a job, but if you can't give them a job why the next best thing you can do is see that they have food and the necessities of life. You know, there's not a one of us has anything that these people that are without it now haven't contributed to what we've got. I don't suppose there is the most unemployed or the hungriest man in America that hasn't contributed in some way to the wealth of every millionaire in America. It was the big boys themselves who thought that this financial drunk we were going through was going to last forever. They over-merged, and over-capitalized, and over-everything else. That's the fix that we're in now."

"Yes, there are still bright developments. The Beacon Theater will have an ice cream parlor and a wine bar opening soon, and some performances are scheduled for later in the summer. The Beacon Falls Roundhouse project is lurching along, and the hotel/restaurant building looks nearly ready to have windows put in.

But there is a curious stillness, that I feel even in New York City. A feeling of being in a limbo, waiting for time to catch up.

Economists are obviously spending too much time reading each others’ reports, and not enough time on Main Street, listening to the guys under the tree in front of the DMV, or talking to the owners at Max’s Bar and Deli."

"This newspaper has a strong dislike of big government; we have long argued that the main way to right America’s finances is through spending cuts. But you cannot get there without any tax rises. In Britain, for instance, the coalition government aims to tame its deficit with a 3:1 ratio of cuts to hikes. America’s tax take is at its lowest level for decades: even Ronald Reagan raised taxes when he needed to do so.

And the closer you look, the more unprincipled the Republicans look. Earlier this year House Republicans produced a report noting that an 85%-15% split between spending cuts and tax rises was the average for successful fiscal consolidations, according to historical evidence. The White House is offering an 83%-17% split (hardly a huge distance) and a promise that none of the revenue increase will come from higher marginal rates, only from eliminating loopholes. If the Republicans were real tax reformers, they would seize this offer.

Both parties have in recent months been guilty of fiscal recklessness. Right now, though, the blame falls clearly on the Republicans. Independent voters should take note."

"Speculation: There’s a critique of the regulators and key decision makers during the crisis that invokes cultural capital and the idea that regulators are socialized with Wall Street in a way that it is difficult for them to exercise any type of power over them, to see their interests in conflict. I wonder if the same is true for the corporate sector. As the firm goes global, and as the white-collar workforce is broken by computerization and globalization, more and more elite corporate positions will be filled by those leaving Wall Street. (Has this already happened? Data/Studies?) If so, you’ll see an even more lucrative revolving door between corporate elites and financial elites. As such, any natural checks to financial sector power coming from the corporate market space is less likely to happen."

"The lesson here is that if we want serious regulation of banks, we can't trust it to be done by bank regulators. We've seen the Fed and the OCC time and time again bend over backwards to let the banks out of statutory requirements. We've seen this with inaction (HOEPA regs), with aggressive preemption (and OCC is back to its old tricks...).

And this isn't just in the realm of consumer finance. This is also in the safety and soundness area. I'm not talking about stretched interpretations of section 13(3) of the Federal Reserve Act. I'm talking about affiliate transaction rules and Prompt Corrective Action, cornerstones of the safety-and-soundness regime. Saule Omarova has a great paper that shows how the Fed granted affiliate transaction waivers like a drunken sailor during the financial crisis.  Those were rules that went back to 1932-33 as part of Glass-Steagal.  

And remember Prompt Corrective Action? That was a response to all of the Federal Home Loan Bank Board's screw ups during the S&L crisis (Who you say? There's a reason the FHLBB doesn't exist any more...). PCA is clear of a bunch of tripwires as you can get. The whole point was to make sure that the bank regulators regulated, not coddled. But Bernanke announced that he was suspending PCA for the banks during the financial crisis. Only after the stress tests cleared the big banks did PCA get applied to the small banks, and with a vengance. What a sorry state of the world we live in where the bank regulators are the last people we can trust to actually regulate the banks. "

"Much of the modernization that Marx triumphed was a victory of profit-makers over rent-holders. What Hardt argues is that, as the economy becomes more and more about information, the crucial ends of capital holders is to take things that could belong to the commons and instead appropriate them as property rights and sell them off. The implies a prioritization of rent-holders over profit-makers in terms of power over the economy (also implying a regression back from the future that Marx thought would come after profit-makers – take that Hegelian Marxism!).

If we look at some of the major economic battles taking place, they are over patents, how the risks and rewards of large, systemically important public-utility style financial institutions are distributed and who gets to control the residual over the delegated ends of the government with the mad rush for the privatization of government resources and responsibilities. These are all, in some way, about rents. And the battle over these will determine a lot about who gains in the future of the economy.

As such, they are the only place where the financial sector and the real economy fight it out."

"Giving sophisticated models and fast computers to traders is like giving handguns and tequila to teenage boys. Only complete mayhem can result (and as we saw recently, complete mayhem did result) . The quants were there to make sure the guns were loaded, but also to make sure the traders didn’t shoot themselves in the foot.

Not that we were terribly appreciated. In fact, we were basically the trader’s little bitches, and any quant who’s honest with himself realizes that. In time, we quants developed knee callouses from genuflecting to service the traders, on whose profits our livelihoods depended."

Mr Levin said: “It is past time for the president to nominate new leadership at the OCC to protect American families and businesses from the excesses of Wall Street.”

"It is no surprise that Florida has the largest number of excess vacant units and that Nevada has the largest percentage of excess vacant units. What might be a surprise to some is that California is below the U.S. average."

"Does any of this matter? Why should we be concerned about the effort to shift the blame for bad policies onto the general public?

One answer is simple accountability. People who advocated budget-busting policies during the Bush years shouldn’t be allowed to pass themselves off as deficit hawks; people who praised Ireland as a role model shouldn’t be giving lectures on responsible government.

But the larger answer, I’d argue, is that by making up stories about our current predicament that absolve the people who put us here there, we cut off any chance to learn from the crisis. We need to place the blame where it belongs, to chasten our policy elites. Otherwise, they’ll do even more damage in the years ahead."

"Anyway, the truth is that older Americans really should fear Republican budget ideas — and not just because of that plan to dismantle Medicare. Given the realities of the federal budget, a party insisting that tax increases of any kind are off the table — as John Boehner, the speaker of the House, says they are — is, necessarily, a party demanding savage cuts in programs that serve older Americans.

To explain why, let me answer a rhetorical question posed by Professor John Taylor of Stanford University in a recent op-ed article in The Wall Street Journal. He asked, “If government agencies and programs functioned with 19% to 20% of G.D.P. in 2007” — that is, just before the Great Recession — “why is it so hard for them to function with that percentage in 2021?”

Mr. Taylor thought he was making the case for not increasing spending. But if you know anything about the federal budget, you know that there’s a very good answer to his question — an answer that clearly demonstrates just how extremist that no-tax-increase pledge really is. For here’s the quick-and-dirty summary of what the federal government does: It’s a giant insurance company, mainly serving older people, that also has an army. "

"…These properties with large negative equity positions are like ticking time bombs for the banks. Eventually these owners will grew tired of the monthly loss, and try to take action. Corelogic reported there were 11.1 million properties with negative equity at the end of last year, and close to 5 million properties with more than 25% negative equity."

"Taibbi discusses the lack of financial reform and failure to prosecute Wall Street…"

"As the foundations of this crisis were laid, there were always arguments against massive regulatory intervention to deal with it. Those arguments always sounded convincing. The stayed convincing even as the situation transformed itself from a justified boom in long duration assets driven by advances in diversification and by capital inflows pushing down interest rates, to froth, to irrational exuberance, to a full-fledged bubble."

"In this interview, Rajan, who famously told Greenspan at his last Jackson Hole conference that recent changes in financial services industry policy had increased risk, takes on the question of the role of government. He contends that economists have neglected this issue due to overspecialization."

"In practice, all that “the exchange rate is the purview of the Treasury” means is that no official other the Treasury secretary is supposed to talk about it (and even he isn’t supposed to say very much). That strikes me as a shame. Perhaps if government officials could talk about the exchange rate forthrightly, there would be more understanding of the issues and more rational policy discussions.

Such discussions would start with some basic economics. The desire to trade with other countries or invest in them is what gives rise to the market for foreign exchange. You need euros to travel in Spain or to buy a German government bond, so you need a way to exchange currencies."

"What’s striking, though, is that even in January of 2010, when unemployment was over 10%, deficits received equal mention as unemployment. The media is certainly culpable here, but I’m guessing that their headlines are driven by the political discussion, which since the passage of the stimulus has been entirely warped. Goes to show that our political leaders, and the media by extension, will never give unemployment the attention it deserves."

"…(So the shock was even bigger than the one leading up to the Depression because Geithner and his buddies helped blow the bubble and try to cover up wrongdoing on Wall Street.)

Geithner has been equally bad as Treasury boss. Indeed, there is hardly a single independent economist who thinks he has been responding appropriately to the economic crisis.

Sorry to say, but Geithner has long been a yes-man to the powers-that-be, who ships pallets of money wherever he is told without question or any follow-up or tracking whatsoever.

Even worse, Geithner has been called an idiot by Nassim Taleb and a “con man” by Time Magazine.

No wonder we’re going to eventually have another crash …

And because Geithner (along with Bernanke) have insisted that the big banks be bailed out at Main Street’s expense, that the status quo be protected instead of reformed, and that the U.S. insure the debts of the too big to fails, the next crisis will be even bigger than the last."

"…They then got attorneys who demanded that we settle for 2,000 or they would appeal. We again refused and told them we would see them in court. They filed an appeal and a hearing date was set. We prepared ourselves, deciding to forgo an attorney after discussing the case with one. However, two days before the hearing we received a notice from them informing us that they would not pursue the appeal and would be paying us. We received the money in April. This was our little moment of victory. Collection companies have no right to harass anyone. The Fair Debt Collection Practices Act is very clear regarding calls to people other than debtor."

Which brings me to a paradox. Most of those who are marching today are, I suspect, supporters of the free market. They believe the market, in general, knows better than governments.

When it comes to government debt, though, they abandon this faith in the market, and expect the government to over-ride its wishes.

The charts below give us a rather different view of the U.S. retail economy and the long-term behavior of the consumer. The sales numbers are adjusted for population growth and inflation. For the population data I've used the Bureau of Economic Analysis mid-month series available from the St. Louis FRED with a linear extrapolation for the latest month. Inflation is based on the latest Consumer Price Index. April retail sales adjusted accordingly declined 0.2% from March.

"People aren't envious, they are frustrated and furious with a system that causes them to lose equity in their homes, have their retirement funds evaporate, have their employment prospects plummet, while at the same time bailing out those at the top who caused the problems.…"

"People aren't envious, they are frustrated and furious with a system that causes them to lose equity in their homes, have their retirement funds evaporate, have their employment prospects plummet, while at the same time bailing out those at the top who caused the problems.…"

"So, let’s get down to the nitty gritty. If consumer debt was $13.8 trillion at the end of 2008 and the banks have since written off 5.66% of that debt, total write-offs were $800 billion. If total consumer debt now sits at $13.5 trillion, then consumers have actually taken on $500 billion of additional debt since the end of 2008. The consumer hasn’t cut back at all. They are still spending and borrowing. It is beyond my comprehension that no one on CNBC or in the other mainstream media can do simple math to figure out that the deleveraging story is just a Big Lie."

"I strongly suspect these patterns are driven mostly by customers, i.e., that more accurate professionals would be less successful in inspiring confidence by others in them. If you are a successful professional, that is probably in part because of your unjustified arrogance."

"The remaining charts compare market performance since 2000 with the equivalent elapsed time following the peak in 1929. As the final chart shows, the current real total return over the past decade is worse than the performance over the equivalent timeframe during the Great Depression."

"We tried a variant of this program starting in 2002 with a more solid economy and we are still trying to recover from how that movie ended. Einstein defined insanity as doing the same thing over and over again and expecting different results. And since the financial sector profited so handsomely from this exercise the last time around, they have every reason to encourage this insanity."

"It wasn’t all that long ago that the media and banking industry commentators would worry about the coming train wreck in commercial real estate. But peculiarly, that topic has more or less receded from view. It appears the public has only so much interest in banking stories, and the frenzied coverage of financial services non-reform plus eurozone sovereign debt woes, which are really eurozone bank woes, took center stage."

"Look no one wants to see violence in the streets, but history shows that it is not only the capitalists that have 2nd amendment remedies. Joe Hill may have more life in him than they like."

"I'm not an economist, but we've got five applicants for every single job opening. If you tell me that the best response to that situation is to lay off hundreds of thousands of teachers, I will not accept that this means that you're smarter and more expert than I am. I will instead conclude -- regardless of your prestige or position or years of study -- that you're a moral imbecile. And knowing what I know about your inability to make moral judgments I will have no reason to trust you to make complicated macroeconomic ones."

"But even if we substantially improve education, it won't fully solve the problem. There will still be a need for quality jobs that are not all that dependent upon knowledge based skills. However, it's harder to imagine an emerging set of industries that will provide the large number of quality jobs that we need to replace those lost from industries in decline."

"If countries like Germany start to have issues selling their treasury bonds, how long will it take before it impacts the global bond market? It shouldn’t take long. That’s why Europe cannot afford the same quantitative easing as the U.S. has done in the last year. Thus, the Greece Crisis is not well contained yet. Is the Great Depression Avoidable?"

"If the government can take over giant global insurer AIG and the auto giant General Motors and replace their CEOs, in order to keep them financially solvent, it should be able to put BP’s north American operations into temporary receivership in order to stop one of the worst environmental disasters in U.S. history."

"During the century separating the 1830s from the 1930s, proponents of laissez-faire were so successful in advocating an economy that purportedly operated independent of the political system that New Deal supporters had to convince voters that the government could (and should) intervene economically on behalf of suffering Americans. In the 1930s, Dorothea Lange used a technology unavailable in 1837 to photograph the plight of economic victims in her composition "Migrant Mother." Shot in a California pea picker's camp during the Great Depression for the government's Farm Security Administration, the photograph is strikingly similar to "Specie Claws." The posture of the central characters is nearly identical. Both pictures appeal to emotion to make an argument about the effects of economic events on families.…"

"… This was not because they doubted whether there was a moral imperative to pay one's debts. Rather, they were shocked to see the idea of bank credit, based as it was on getting something for nothing, vying for the moral high ground. Credit of this sort was a speculation. Allowing it to flourish was one thing; granting it not only legitimacy, but moral status was horrific. If people were taught to consider their relationship with their banker as analogous to their obligations toward family, community, and state, the multitudes would indeed have come to ruin."

"… The Panic of 1837 launched America's biggest and most consequential economic depression before the Civil War. And it was the decisions and behavior of thousands of actors like Bieller that created a perfect financial storm: bringing an end to one kind of capitalist boom; destroying the confidence of the slaveholding class, impoverishing millions of workers and farmers who were linked to the global economy; demolishing the already disrupted lives of hundreds of thousands of people like Harry and Roberson.…"

"Where does this all leave us? The rest of the world is intent on pursuing a begger thy neighbor strategy, with the US being the neighbor. I suspect US policymakers will eventually relent; it will be the only choice left. All we can do now is sit back and wait for the inevitable explosion in the US trade deficit, waiting idly by for the next crisis and the "chance" to bring some sanity to the global financial architecture."

"I am listening to a presentation at the Homer Hoyt meetings on the condo meltdown in South Florida. Developers planned on building 95,000 units in the city of Miami between 2002 and 2007. In the 2000 census, the whole city had 163,000 units."

"Good financial regulation and supervision are important in their own right. A good financial system will better serve the interests of borrowers and lenders. It will create benefits on the supply side. And financial crises will almost certainly cause demand to fall. But just because something causes demand to fall doesn't mean monetary and fiscal policy can't work. The whole point of Keynesian policy was that when (not if) something did cause demand to fall, monetary or fiscal policy could and should be used to increase it back again."

"Unfortunately, our political leaders don't give a damn about mundane issues such as unemployment and economic growth. It is far easier for them to bandy about silly cliches about fiscal responsibility and generational equity, even though the policies they are pushing are 180 degrees at odds with anything that will help our children or grandchildren. Their main concern is pushing policies that keep the financial industry happy. And 10 million unemployed never bothered anyone at Goldman Sachs, just as Fabulous Fabio."

"If the NYSE, Nasdaq, Amex and OTC are trading 2 Billion shares a day or more , like today, thats $ 500 Million Dollars PER DAY. If there are 260 trading days a year. Thats about 130 Billion dollars a year. If volumes drop because of the tax. It is still 10s of Billions of dollars per year.

Thats real money for the US Treasury. Thats also an annual payment towards the next time Wall Street screws up and we have a black swan event that no one planned on."

"There is no huge constituency worried about the estate tax--just the wealthy few whose estates might be subject to some taxation. But apparently Sens. Kyl, Baucus, Grassley and Lincoln are working to include a "bipartisan" proposal in the small business tax bill that they hope to put through Congress. Odds are it will cut the estate tax rate and increase the exemption amount, making the wealthy even less likely to pay any estate tax. ..."

"While some of the anti-fraud remedies of the securities laws still apply in 144A transactions, these have been watered down in recent years by Congressional action and judicial interpretation. In a series of opinions authored first by Justice Powell and then by Justice Kennedy, the Supreme Court has steadily scaled back the scope of the securities laws. Opinions by Justice Kennedy, in particular, limited the impact of anti-fraud protections as well as the ability of investors to sue gatekeepers who play a significant role in preparing offerings."

"Now folks, it's pretty revealing when lobbyists have become so accustomed to their privileged access and backroom dealings with politicians --as went on in regards to Cheney's energy discussions, and each of the Bush tax cuts drawn up by a secretive group of GOP without any sunlight (or bipartisansip), for example, and too much with the health care bill as well--that they don't even bother to hide their scorn for the public's views and their hopes for getting that back room deal to go their way. No wonder Wall Street honchos have been so brazenly arrogant about their "entitlement" to bonuses, their rights to continue proprietary trading and hedge funds and derivatives desks--"doing God's work" says Goldman CEO Blankfein--when they are merely running a casino market to strip as much gold off suckers as possible with their "financial innovations" like synthetic CDOs that made the market many times more volatile than "real" securitizations…"

"Unless we get better legislators, and a couple of hundred years of history says not to count on that, enhancing the automatic stabilizers may be our best bet going forward. There's considerable empirical evidence showing that they work, including this new evidence that automatic stabilizers work "always and everywhere"…"

"It clearly looks as if the NASDAQ was trying to protect the interests of some institutions which lost large sums of money during Thursday’s collapse. These institutions likely did not have safeguards in place to deal with a lack of bidders. When their automated market orders hit the market in the absence of bidders, transactions were done at ridiculously low prices. But as NASDAQ has noted, there was no failure of their systems."

"So when France and Germany make sure that Greece can pay its debt, they are also rescuing, well, France and Germany. Also makes it clear exactly how contagion could work in practice."

"It is a mantra of the deficit hawks that they are working to ensure their children and grandchildren will one day have the same opportunities that they have had. But right now, in real time, those same children and grandchildren are having those opportunities taken away. ..."

"In this case, the computers kicked in their sell programs and there were no buy programs engaged - and so there was no market - and stocks wound up selling for a penny a share.

Now already known as the “flash crash,” this remarkable event will almost surely put a whole generation of young math whizzes out of business as Congress and the SEC crawl all over these operations and limit this kind of insane action.

I’m all for it because, and you can call me old fashioned, I don’t think the global equities markets should be an online gambling casino which is what they’ve become with the rise of the “quants” and their hyperactive supercomputers."

"If a fund/institution/High Frequency Trader generates 100mm shares or contracts a day/week/month, market observers will tell you that's a great thing because it creates a liquidity premium. In other words, because there is always someone on the other side of a trade, it is easier to match buyers and sellers and that ease creates smaller spreads and often lower pricing. On the surface that's a great thing.

It is a great thing until the market becomes completely dependent on that liquidity. If every model expects X volume, what happens when that volume falls?"

"A “trading facility,” as defined under the U.S. Commodity Exchange Act, prohibits phone transactions, which is how swaps have been traded for three decades…Lincoln’s bill does create a framework for swaps to be traded competitively based on price, service and technology options, said Christopher Giancarlo, chairman of the Wholesale Markets Brokers’ Association Americas."

"What is striking is that caveat emptor arises as a legal principle mainly because of the tangle the courts would get into if they tried to enforce a more ambitious standard of right and wrong.
Chief Justice Marshall’s logic surely applies with even greater force to modern deals between investment banks and sophisticated qualified investors, both of which will be simultaneously working on many deals, each involving sensitive proprietary information."

"We will be safe so long as the present crisis is fresh in our minds and caution is the order of the day in the financial marketplace, but it won't be too long until we forget and that's when the danger begins.…"

"In plain terms, derivatives are THE cause of the Financial Crisis. They are behind EVERY failure/ default that has occurred thus far. The fact that virtually no one is willing to address this issue or include it in the discussion of how to insure we don’t have a Second Round of the Crisis only confirms the fact that no one has a clue how to resolve this situation."

"Then something bad happens. The new product shows its flaws. And precisely because no one really understands it, the market cracks. Investors all run away at once, as they don't really have the tools to assess the situation. Where lack of knowledge about the product originally drove demand, now it accelerates flight."

"What’s striking about the contrast between the Texas story and Georgia’s debacle is that it doesn’t seem to have anything to do with the issues that have dominated debates about banking reform. For example, many observers have blamed complex financial derivatives for the crisis. But Georgia banks blew themselves up with old-fashioned loans gone bad."

'…These guys aren't number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money. "It's not high finance," says Taylor, the former bond regulator. "It's low finance." And even if the regulators manage to catch up with them billions of dollars later, the banks just pay a small fine and move on to the next scam. This isn't capitalism. It's nomadic thievery."'

"Here's why I don't think of "too big" as a myth for resolving a firm. In my mind, the farther you are from the origin in that graph, the harder it is for the government to detect problems and properly deter large firms under resolution authority. (This is why I draw our "safe" resolution as a circle, instead of a square.) Holding for a liquidity risk, the larger the firm, the more vicious the effects of having a shadow banking run on the rest of the financial sector and on the real economy. It is possible that the green circle here will be cast out far, and that size and pressures of campaign donations won't play a major part. But why take the chance?"

"From Bill at Calculated Risk, an update to his regular comparison of job losses in post-war economic downturns. The severity of the current recession/depression remains the most striking thing, but we are looking awfully trough-like."

"When paper entrepreneurs look for solutions to America’s declining productivity and international competitiveness, they come up with paper remedies to stimulate large-scale capital investment: accelerated depreciation, tax credits, government subsidies, relaxation of antitrust laws.

Product entrepreneurs focus on techniques for improving output: better quality controls, improved labor-management relations, more effective incentives for managers and employees, more aggressive marketing and sales.

If we are to increase the economic pie, we will need to redress the balance of entrepreneurial effort. Which strategies will stimulate more paper, and which more product? "

"So, for large complex financials, capital cannot be measured precisely enough to distinguish conservatively solvent from insolvent banks, and capital positions are always optimistically padded. Given these facts, and I think they are facts, even “hard” capital and leverage restraints are unlikely to prevent misbehavior. Can anything be done about this? Are we doomed to some post-modern quantum mechanical nightmare wherein “Schrödinger’s Banks” are simultaneously alive and dead until some politically-shaped measurement by a regulator forces a collapse of the superposition of states into hunky-doriness?"

"In the last two months, involuntary part-time employment has increased by 738,000. See Table A-8. This implies that either (1) more people who were already employed have been reduced to part-time status or (2) part-time positions are being added to payrolls."

'“Most U.S. metro areas actually experienced more moderate increases in house prices than the nation between 2000 and 2006. In fact, 249 of the 383 metropolitan areas tracked by the Federal Housing Finance Agency saw price increases below the national rate of 8.1% during the boom”... Many of these areas, in turn, didn’t experience the resulting bust.…'

"Yves here. The end game of lending too much money is creditor losses. The better path is to accept writedowns and restructurings, for the lenders to take their lumps. The record of past financial crises is clear on this matter. Even though it leads a larger initial economic downturn, its duration is comparatively short. Even though US policymakers refuse to listen, the Japanese are strongly of the view that their prolonged slump is mainly the result of the failure to write down bad loans and recapitalize its banks, rather than insufficient fiscal and monetary stimulus. And a deflationary spiral produces the same result, creditor losses, in this case via default, with more damage to the economy and higher costs of repairing the financial system."

"Yowza! Somewhere in 2004, the world changed, and we didn’t realize it. Employers in the private sector put a lid on the cost of benefits (which includes healthcare, retirement, vacation, and supplemental pay of all sorts). Meanwhile the cost of benefits in state and local govt jobs just kept rising, with barely any break, both before and after the financial bust. This is not good."

"The 1946-49 period isn't surprising since there was a flood of workers from the military (keeping income down), but people had significant savings from WWII when income far outpaced consumption. Of course, in the recent period, consumption was higher than income primarily because of mortgage equity extraction (The Home ATM).

The previous business cycle was "bad by any measure"."

"The biggest reason this is possible is because nobody realizes it. If it was conventional wisdom that a bunch of unelected bankers looking out for rich people were the reason everyone was out of work, politicians would be forced to explain to angry voters why we had this crazy system and might actually consider doing something about it. But, incredibly, it just seems like nobody has any idea. Voters don’t realize it, politicians don’t understand it, journalists don’t cover it. And, in fact, they’re so far from having any idea that it’s really difficult to explain it to them. When you say a bunch of unelected bankers are the reason there are no jobs, they just look at you like you’re crazy. I’ve just spent a page or two explaining it and you still probably think I’m crazy. But it’s true! This isn’t some Ron Paul-type crackpot idea; this is mainstream economics, from Paul Krugman to the head of George W. Bush’s Council of Economic Advisors."

"Here's some more on the subject of "Repo 105." Marketplace Senior Editor Paddy Hirsch tries to explain what Lehman Brothers was up to."

"Bailing out the financial system, but not bailing out schools in financial trouble because of the crisis, is unconscionable…"

"What really makes the current period stand out is the number of people (and percent) that have been unemployed for 27 weeks or more. In the early '80s, the 27 weeks or more unemployed peaked at 2.9 million or 2.6% of the civilian labor force.

In January, there were 6.3 million people unemployed for 27 weeks or more, or 4.1% of the labor force. The number declined slightly in February, but this is much higher than earlier periods."

"In 2008 and 2009 exports of debt (the toxic stuff plus the nominally non-toxic stuff (US Treasuries)), only accounted for 3%.

It is common practice to ignore exports of debt when calculating America’s balance of trade. But, conceptually, there is not much difference between selling a foreigner or a foreign government a toxic synthetic CDO (that blows up in his face) and selling him a ship-load of genetically engineered soya-beans (or melamine tainted milk).

The logic for leaving exports of debt out of the calculation is presumably that at some point in the future the CDO that was “sold” will need to be paid back, which will require funds to flow out of USA into the pockets of foreigners, who may then decide to exchange those dollars for something else."

"Now right now, consumers are facing a range of financial products, from student loans to credit cards to mutual funds, that are much more complicated than they faced in 1933. Some of this complication is innovation, some is meant to synthetically create opacity in the product innovating product differentiation, and some is just regulatory arbitrage. As Dan Geldon has written, the regime of disclosure has been turned into a weapon against consumers instead of the mechanism to let information and competition do its job. So it’s time to update that regime to handle the 21st century."

"So it probably would not take much for politicians to be persuaded that the press is essential to democracy, and that its survival ... depends on government support. Advertising revenue would be replaced by government subsidies, raising predictable questions about the impact on content.
The alternative is to focus on what communication technology cannot do: create rather than transmit a good story or a good policy. There will always be a market for quality. The disruption caused by emerging communications technologies consists in the fact that the best pens may not be on the staffs of newspapers, and that policies need not be formulated only in the corridors of government."

"So why not incorporate it into a savings account? Take a small interest rate cut, say a tenth of a percent, from each savings account, and then randomly give that to a few members, conditional on them saving money. I think it’s brilliant, and it doesn’t surprise me that it’s started with credit unions, where some of the most consumer friendly innovation is being tried. Where most commercial banks are looking to payday lenders for innovation, credit unions appear to be looking at cutting edge behavioral “nudge” style work for innovations to help people build their financial lives. How cool is that?"

"These could be investors buying REOs for cash flow, condo "reconversions", builders changing the intent of new construction (started as condos but became rentals), flippers becoming landlords, or homeowners renting their previous homes instead of selling.

As Scott Monroe noted, this huge surge in rental supply - what he calls the "gray or shadow market" - has pushed down rents, and pushed the rental vacancy rate to record levels. Yes, people are doubling up with friends and family during the recession, and some renters are now buying again, but the main reason for the record vacancy rate is the surge in supply. Eventually many of these "gray market" rentals will be sold as homes again - keeping the existing home supply elevated for years."