The economic alarm bells are deafening. As of June 7th, the federal government is $13.052 trillion in the red. We now owe China nearly $1 trillion and Japan $800 billion and the debt continues to pile up. For every dollar we spend this year we will have to borrow 42 cents. (more)
The Treasury secretary, Timothy F. Geithner, said on Tuesday that taxpayers were recovering their investment from the financial bailouts as the program is wound down. But he acknowledged there would probably be a loss from the rescue of the insurer, American International Group. (more)
Investor confidence down: The Wall Street Journal reports that confidence among institutional investors has suffered its largest one-month drop since the collapse of Lehman Brothers, with uncertainty over of the U.K. election, the “flash crash” in the U.S. and high levels of market volatility combining to make investors more risk averse. The State Street Investor Confidence Index for May reports global investor confidence fell 11.2 points to 88.2, or about 10 percent. Declines in investing sentiment in North America were a key contributor, with institutional investor confidence falling among European investors, too. Investing patterns by institutional investors in Asia, by contrast, showed confidence was robust, rising about 7 percent. But these Asian investors were selective, favoring commodity-producing countries and avoiding Europe and the U.S. (more)
Although Greece’s output is just over two percent of the European Union economy, its financial collapse roiled continental markets and required an international bailout package. Imagine what would happen to U.S. markets if California, which is 13 percent of the national economy, experienced a Greek-style implosion. (more)
Federal prosecutors will not bring criminal charges against current and former American International Group Inc. executives for their role surrounding financial contracts that nearly brought down the insurer about two years ago, according to people familiar with the matter. (more)
The Senate Thursday evening passed a landmark financial regulation bill that Democrats said would prevent future taxpayer-funded bailouts of large Wall Street firms, but which Republicans said was a rushed and overbearing measure that could do more harm than good. The Senate passed the bill on a 59-39 vote, with four Republicans joining Democrats in voting for it and two Democrats voting against it. The bill will give the federal government new powers to take over failing financial institutions and unwind them, require complicated derivative trading to be routed through a central clearinghouse, and create a massive new consumer protection agency. The bill will now go to a conference committee so that it can be reconciled with a version passed by the House last fall. Democrats want to get the bill to President Obama’s desk by July 4. Democrats hailed the legislation. “It means that we’re finally going to put an end to the whole notion of ‘too big to fail.’ You’re never going to have to hear about taxpayers bailing out Wall Street,” said Sen. Mark Warner, Virginia Democrat, who was a key player in crafting the bill. Obama made a simple and firm promise: “There will be no more taxpayer-funded bailouts — period.” But Republicans slammed the bill for doing nothing to fix the problem of Fannie Mae and Freddie Mac, the two government-owned failed mortgage giants who have cost taxpayers $145 billion and are poised to hemorrhage hundreds of billions more over the next few years. Sen. Richard Shelby, the ranking member on the Senate Banking Committee, asked how the Senate could pass legislation on a topic so complex when the Financial Crisis Inquiry Commission, created by Congress to determine the causes of the 2008 financial crisis and near-meltdown, has just recently only begun its work and is nowhere near to delivering a final report. “This represents a fundamental failure of this body to do its own due diligence before we even attempt such a significant undertaking,” said Shelby, an Alabama Republican. “The American people expect more, and certainly deserved more from us.” The GOP also said the government’s takeover authority would privilege large financial institutions over smaller one and still leave risk of bailouts in such a way that Wall Street is incentivized toward greater risk-taking instead of less, that derivatives regulations would be overly burdensome and drive trading overseas, and that the consumer agency would be a huge and unnecessary bureaucracy that could end up intruding into every day American commerce. Sen. Lamar Alexander, Tennessee Republican, said the measure was “supposed to rein in Wall Street, but instead is just another Washington takeover – this time of Main Street.” Shelby said that “behind the veil of anti-Wall Street rhetoric is an unrelenting desire to manage every facet of commerce under the guise of consumer protection.” The president and Democrats framed the bill as a victory for the American people over the concerted efforts of Wall Street bankers and Republicans who stood against reform. “President Obama, Congressional Democrats and the American people achieved a victory … despite weeks of Republican attempts to weaken or delay the bill’s passage,” said Democratic National Committee Chairman Tim Kaine. (more)
WASHINGTON (AP) — Senate Republicans on Wednesday delayed final action on a sweeping financial regulation bill, raising a last-minute obstacle to the legislation as it approached the home stretch. (more)
Financial reform next steps: There have been reports that Democratic leaders are looking to move the financial reform bill, possibly with a vote to end debate as early as Monday, and a vote on the bill itself Tuesday. Late Thursday, it appeared that votes would continue through the night. Amendments will continue to be filed Friday, but no votes are expected. More Senate votes are scheduled for Monday and, “We’ll be in until at least the early part of next week,” according to Banking Committee Chairman Chris Dodd, Connecticut Democrat. Reconciliation of any Senate bill with the December House bill, may progress very differently than it did for health-care bill, where the House simply approved the bill that the Senate passed. In the case of financial reform, the plan may be for a formal “conference,” perhaps televised, with House and Senate leaders and administration officials discussing, debating and making changes. Both the House and Senate must vote again before it can be sent to President Obama. (more)
As a curious person who likes crowds and dislikes big government, it’s only natural that I’ve made my way to a couple Tea Party rallies in the past few months. My semi-regular attendance earned me a number of pins and buttons—including one with the now-again-emblematic “don’t tread on me” slogan—and it has placed my name on the mailing list of Dick Armey’s FreedomWorks organization, one of the principal sponsors of the rallies. (more)
Libertarian Ron Paul’s “Audit the Fed” movement has gained the support of socialist Sen. Bernie Sanders (I-Vt.) and conservative Sen. Jim DeMint (R-S.C.). At the same time, anarchists in Greece riot against fiscal austerity measures, while organs of the strongest government on the planet—namely, the U.S. Justice Department and SEC—accuse Goldman Sachs of skullduggery. (more)
Panic has gripped stock markets worldwide over the Greek debt crisis and the threat of a debt-deflation contagion through banks in Europe (primarily) and the U.S. that own the bonds of Greece, Portugal, Spain, and so forth. If these bond asset prices collapse totally, lending facilities would be badly crimped for both the short and long term. And that, in turn, would damage prospects for economic recovery.
The Dow closed today off nearly 350 points. Earlier in the day the Dow was down 850 points, though there is talk of computer glitches and technical problems that may have temporarily undermined trading. Either way, the market is getting creamed as a result of the Greek story. (more)
The International Monetary Fund board has approved a $40 billion bailout for Greece, almost one year after the Senate rejected my amendment to prohibit the IMF from using U.S. taxpayer money to bailout foreign countries. (more)
A tax even a Republican can like: A hot topic in certain circles is the possibility of the federal government enacting a “value-added tax,” or VAT, as one solution to America’s fiscal mess. Basically, a VAT is a more easily enforced (and collected) retail sales tax. Democrats tend to love it and Republicans tend to hate it, because it adds revenue to fund more federal programs. Paul Volcker, head of President Obama’s economic advisory board, said a VAT was “not as toxic an idea” as it used to be. In April, Sen. John McCain, Arizona Republican, offered a “sense of the Senate” resolution expressing opposition to a VAT, which passed in the Senate by an 85 to 13 vote. So it interesting that five Republican House members are co-sponsoring a bill by Rep. Pascrell, New Jersey Democrat, that would impose a VAT on imports from countries that use the tax. In the Senate, Republican Senator Voinovich, Ohio Republican — who was the sole Republican vote in opposition to that sense of the Senate resolution — now has suggested that replacing income taxes with a VAT could be one way to streamline the tax code. (more)
Many empty promises have been made to the American people in the past year and half, starting with a promise for “Change in Washington.” Unfortunately, what they’ve seen happening for the past 15 months isn’t the change people were bargaining to see. (more)
Republicans in the Senate agreeing to allow debate over a financial reform bill is an interesting development in what could amount to a reform of the financial sector not see in this county in roughly 80 years. (more)
April 29 (Bloomberg) — Senate Republicans abandoned their efforts to block debate over legislation overhauling U.S. financial rules, vowing instead to fight for changes to the bill on issues ranging from consumer protection to derivatives. (more)
If the Senate bill passes, what’s next? – The Senate will vote today on its first steps toward passing a financial reform bill. Any financial reform bill that passes the Senate still needs to be reconciled with the House bill. Bloomberg reports two major — but manageable — differences between the House and Senate version. The Senate bill includes a plan to study how to implement Obama’s “Volcker Rule” banning proprietary trading by banks, named after former Fed Chairman Paul Volcker, who’s advising the president. The administration came up with the Volcker rule after the House had passed its bill. The Senate bill permits such a ban when the Fed finds a threat to the safety and soundness of the company or to national financial stability. Both bills propose a Consumer Financial Protection Agency; the Senate bill has the consumer protection bureau at the Fed, and the House bill proposes a standalone agency. (more)
Today, at 5 p.m. in the U. S. Senate, the GOP will face a test of their team spirit and cohesion. This is when the Senate Majority Leader has scheduled a procedural vote on the highly anticipated financial reform bill. The question Senate Republicans will have to answer is whether or not they are ready to begin the debate on this “too-big-to-fail” banking regulation bill. The Republicans and Democrats have been negotiating all aspects of this bill for months, with the meetings sputtering at times, but mostly flowing smoothly as both sides believed there was a way for them to jointly support this unique, sweeping reform of the financial services industry. (more)
Greece expects to receive before May 19 the first tranche of funds under a 45 billion euro ($60.49 billion) EU/IMF aid package it has formally requested, Finance Minister George Papaconstantinou said on Friday. (more)
It is so sad it’s almost funny when a majority political party thinks if they name legislation something positive, the negative aspects will not be examined. There is no debate against the fact that our financial services system is damaged. With remaining scars from Goldman Sacs, Bernie Madoff and others, there is a need for reform. However, the democrats’ definition of such as seen through this recent bill begs to differ from what is really required for us to escape the continuing turmoil of recession. (more)
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