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Frontrunning: January 18
- Must read: Did foreigners cause America's financial crisis? Or what happens when all your debt and equities are belong to us (Newsweek)
- Ben Bernanke's term running out as Senate democrats try to set a vote (The Hill)
- Banks set for record pay, and you thought Goldman was bad - Morgan Stanley prepares to fork over a stunning 63.8% of revenue as compensation (WSJ)
- Dark pools may face pricing disclosure rules, EU watchdog says (Bloomberg)
- In defense of the case against HiFTers (Cassandra)
- Senate to vote on PAYGO legislation to clear way for debate over debt ceiling (The Hill)
- Dubai flare up 2.0? Abu Dhabi's Dubai aid shrinks to $5 billion (Reuters)
- ECB prepares legal ground for Euro rupture as Greek crisis escalates (Telegraph)
- The Wall Street pay puzzle (WaPo)
- Wall Street weighs a challenge to a proposed tax (NY Times)
- More pain in Japan: Ratings of Japan PM, ruling party fall on scandal (Reuters)
- Yen carry trade's appeal shows Japan is losing mojo (Bloomberg)
- David Tepper: Bullish at the Brink (Bloomberg)
- Rosenberg: can both the economists and strategists be right? (Globe and Mail)
- Leaders of SEC and FDIC says agencies' failings contributed to financial crisis (WaPo)
- The hunger artists: A cultural history of the Great Depression (The New Republic)
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Professor Caballero: If you attempt to strong arm foreign investors into U.S. assets other than treasuries by making them keep their money here, don't you run the risk they just say the hell with all U.S. assets, take their money completely out of here and buy gold, copper, platimun, and oil instead?
The Newsweek article is way off -- looks like a case of blaming the victim! BTW, most commentators overlook the fact that the global imbalance is because of the reserve status of the US currency -- all other commodity/energy deficit countries need to build up reserve to be able to purchase commodities/energy that is denominated in USD. Also the Chinese have pegged their currency to the USD so that they can reduce the undue competitive advantage that the US economy enjoys because of being the sole reserve currency -- the Chinese, by pegging their currency to the USD ensure that the US economy does not to get to eat the cake and have it too -- by pegging the yuan to the USD, the Chinese ensure that the cost advantage that they enjoy does not get effected even when there is severe bilateral trade imbalances and transmit some pains back to the US by sucking up jobs thru relentless outsourcing.
Outsourcing caused the US economy to overemphasis the real estate sector as that was one sector that was largely domestic -- so that caused the real estate sector into a bubble that finally burst.
In my view, the global exchange system with the USD as the reserve currency has caused the trade imbalances. You may say that the current situation is a feature of exchange system. So, to fix the global imbalances, an alternative to USD as reserve currency may be the real solution. But, I fear our politicians are too addicted to their ability to spend recklessly that is enabled by the current arrangement. So, the dance will continue...
I also thought it a case of blaming the victim. If a million Americans became ill over tainted beef, none could get away with stories blaming the guilty hamburger eaters. That their high demand for meat put pressure on the food processing industry to bring toxic product to market. Average people understand food enough to form a critical judgment on that topic.
I agree with Caballero to some degree. Foreigners buying up US Bonds did keep the long yield artificially down (just as they are doing now btw). But he has the cause and effect backwards. He doesn’t bother to explain what caused this imbalance in the first place.
Globalization, which is based on voodoo economics, is the source of the problem, and the resulting trade imbalance has caused China and others to accumulate such a large Forex reserve, that when they invest this money, they end up altering the underlying markets that they are participating in. In other words, sovereigns like China, Saudi Arabia, and Canada are too big to invest.
Caballero also left out a minor detail: that the Federal Reserve triggered a massive speculative bubble by keeping rates low for too long. Without Greenspan's magic wand, the real-estate market would have never taken off.
Markets Closed - this would be a good day for an open thread
Markets are open, only US is closed. This is a international site is it not ?
The BIG Question....
If the securities had junk ratings would foreigners have bought them ?
And did they not deserve junk ratings ?
...............................
A new form of fact based wiki style information that is totally unbiased should replace the rating agencies....
...............................
And would this have happened if banks were separated from the securities business ?
Absolutely not....
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There is a purpose for banks....and there is a purpose for securities....and they should not be mixed businesses....
I think the bankers bonuses should get redirected into increasing rates paid on savings, money market and CD accounts. Until those accounts provide a reasonable return for the average Joe they don't deserve one dime in bonus. Oh, but that would be looking at the issue from the point of view of those who funded the banker bail out and would be inconsistent with the goal of the Fed to pump up the banks at the expense of the US tax payer.
I believe joe 6 pak will be very angry in some month.
No more bail out.
Rosie offers more wisdom in his Globe article. The market, according to his calculations may be overvalued by as much as 22%.
In otherwords, the worst case for Dave is SPX 930?
Dave what ever happened to SPX 600 and the sucker's rally of the spring?
he change his mind like everybody, bulls, bulls ...
Enjoy this Fed induced rally as long as you can. Without this all of us would have been ****ed, and Dave would have been right many times over. As with most things in life this, too, could be ephemeral and be gone before you wake up tomorrow. So, all this - Dave looks so stupid - and - I am so smart - is nothing but drive by shooting on the web, posturing in the virtual world, and the bravery of being out of range.
Cute. Says Newsweek, points to Time article.
The criticism that the financial problems need more regulation are laughable, considering that in the same breath he points to all the Fannie and Freddie borrowing that led to the problems.
Just whom does Caballero think is in charge of Fannie and Freddie, and who created them? And what kind of political hacks were in charge of Fannie and Freddie? More regulation by the same politicians that created and encouraged the activities of Fannie and Freddie? Perhaps we need more foxes in the henhouse to assure higher egg productivity?
Actually, that's a Time article, not Newsweek.
http://www.villagevoice.com/2010-01-12/columns/george-w-obama/
.....may i be so bold as to add this link to front running
Scandal hits corporate role models IBM, McKinsey
Marla, I am still in Awe of your Saturday eclaircissement Father Knows Best. Twas the weekend Elucidation Clinch*****
Tyler...could you please retract the Dubai article? Information like this just wrecks the fun of the ultimate equity bull trap being set up.
thx.
Given today, got this from Birgitta Jonsdottir, the icelandic poet who is taking the bankers on head on. Inspiration for the boys. (Also See her interview with Max Keiser)
http://www.youtube.com/watch?v=Ot8YGiRtB7U
Monday, January 18, 2010
Are Securitized Mortgages Subject to Usury Laws?
His argument is effectively the routes that allowed banks to evade state usury laws (a Supreme Court decision plus adept jurisdiction-shopping) may not extend to securitization trusts. And note this logic would apply to other types of securitizations, such as auto loans.
These aren’t mere academic questions. Securitization trusts hold around 60% of mortgage debt and 25% of other consumer debt. There’s no law directly on point, but if I’m correct, then usury could be raised as a viable defense to the collection of a sizable portion of consumer debt. And states would have pretty broad rein to regulate the collection of debts held by securitization trusts.
http://tinyurl.com/y8uydeb
I knew all along that Canada was behind our (US)
financial disaster.
I say we pull out of Iraq and Afghanistan and
head North!
Unbelievable and delusional, as usual.
Will we ever wake up to how WE created this mess?
An alcoholic either hits bottom and sobers up or dies.
I think this alcoholic is going to die, no sign of
sobering up, no capabilty of sobering up me thinks
Happy MLK day.
Why didn't you know this?
http://www.examiner.com/x-18425-LA-County-Nonpartisan-Examiner~y2010m1d1...
Now I know must be blamed for the Us-deficit: China! Without chinese money the debt of the USA could not be as high.