Federal Deposit Insurance Corporation

Live Hearing On Financial Stability And Data Security

Moments ago, the Senate Banking Committee started a hearing on the topic of "Financial Stability And Data Security." We assume the topic discussed will be financial stability, the highly diluted final version of the Volcker Rule, Dodd Drank, the London Whale, and other things legislators have no understanding of. As such it will be a complete waste of time, and the only thing that can possibly force anyone to fix the broken system is the next systemic crash, one which the central banks, already all in with their bailout efforts, will be unable to resolve.

Frontrunning: January 28

  • Emerging markets pray for Wall Street tumble (Reuters)
  • Yellen Faces Test Bernanke Failed: Ease Bubbles (BBG)
  • Samsung sets new smartphone sales record in fourth quarter, widens lead over Apple (Reuters)
  • China’s Foreign-Reserves Investment Chief Said to Depart Agency (BBG)
  • China’s Rescue of Troubled Trust May Stoke Risk-Taking (BBG)
  • Ukraine PM Azarov offers to resign 'to help end conflict' (Reuters) ... And Russia says may reconsider aid if this happens
  • But... but... it was all gold's fault: India Unexpectedly Raises Rate as Rupee Risks Inflation Goal (BBG)
  • Former Belgian king 'boycotting' public events after complaining £760,000 is not enough to live on (Telegraph)
  • Greek disposable income tumbles 8% in Q3 (Kathimerini)

Volcker Is LOLkered As TruPS CDO Provision Eliminated From Rule To Avoid "Unnecessary Losses"

So much for the strict, evil Volcker Rule which was a "victory for regulators" and its requirement that banks dispose of TruPS CDOs. Recall a month, when it was revealed that various regional banks would need to dispose of their TruPS CDO portfolios, we posted "As First Volcker Rule Victim Emerges, Implications Could "Roil The Market"." Well, the market shall remain unroiled because last night by FDIC decree, the TruPS CDO provision was effectively stripped from the rule. This is what came out of the FDIC last night: "Five federal agencies on Tuesday approved an interim final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities (TruPS CDOs) from the investment prohibitions of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, known as the Volcker rule." In other words, the first unintended consequences of the Volcker Rule was just neutralized after the ABA and assorted banks screamed against it.

Alan Greenspan's Modest Proposal: Fix Broken Economic Models By... Modeling Irrational "Animal Spirits"

We leave it to everyone's supreme amusement to enjoy the Maestro's full non-mea culpa essay, but we will highlight Greenspan's two most amusing incosistencies contained in the span of a few hundred words. On one hand the former Chairman admits that "The financial crisis [...] represented an existential crisis for economic forecasting. The conventional method of predicting macroeconomic developments -- econometric modeling, the roots of which lie in the work of John Maynard Keynes -- had failed when it was needed most, much to the chagrin of economists." On the other, his solution is to do... more of the same: "if economists better integrate animal spirits into our models, we can improve our forecasting accuracy. Economic models should, when possible, measure and forecast systematic human behavior and the tendencies of corporate culture.... Forecasters may never approach the fantasy success of the Oracle of Delphi or Nostradamus, but we can surely improve on the discouraging performance of the past." So, Greenspan's solution to the failure of linear models is to... model animal spirits, or said otherwise human irrationality. Brilliant.

Frontrunning: December 18

  • MOAR: BOJ Said to See Significant Room for More Bond Purchases (BBG)
  • Meltdown Averted, Bernanke Struggled to Stoke Growth (Hilsenrath)
  • New Mortgages to Get Pricier Next Year (WSJ)
  • Republicans to Seek Concessions From Obama on Debt Limit (BBG)
  • Hunting for U.S. arms technology, China enlists a legion of amateurs (Reuters)
  • Jury Begins Deliberating in Case of SAC Portfolio Manager (WSJ)
  • BP to Write Off $1 Billion on Failed Well (WSJ)
  • Rajan Unexpectedly Keeps India Rates Unchanged to Support Growth (BBG)
  • Thai protesters say they will rally to hound PM from office (Reuters)
  • SEC Brings Fewer Enforcement Actions, Slows Early-Stage Probes (WSJ)

"Anything Goes And Nothing Matters"

The so-called Volcker Rule for policing banking practices, approved by a huddle of federal regulating agency chiefs last week, is the latest joke that America has played on itself in what is becoming the greatest national self-punking exercise in world history. The Glass Steagall Act of 1933 was about 35 pages long, written in language that was precise, clear, and succinct. It worked for 66 years. The Volcker rule comes in the form of nearly 1,000 pages of incomprehensible legalese written with the “help” of lobbyist-lawyers furnished by the banks themselves. Does this strain your credulity? Well, this is the kind of nation we have become: anything goes and nothing matters. There really is no rule of law, just pretense.

DOJ Announces $13 Billion "Largest Ever" Settlement With JP Morgan

To the DOJ, a $13 billion receipt is the "largest ever settlement with a single entity." To #AskJPM, a $13 billion outlay is a 100%+ IRR. And perhaps more relevant, let's recall that JPM holds $550 billion in Fed excess reserves, on which it is paid 0.25% interest, or $1.4 billion annually. In other words, out of the Fed's pocket, through JPM, and back into the government. Luckily, this is not considered outright government financing.

Guest Post: Does The US Have A "Sane" Government?

The dollar is the world’s go-to currency. But for how much longer? Will the dollar’s status as the only true global currency be irreparably damaged by the battle in the US Congress over raising the federal government’s debt ceiling? Is the dollar’s “exorbitant privilege” as the world’s main reserve currency truly at risk? Sane governments do not default when they have a choice – especially not when they enjoy the “exorbitant privilege” of issuing the only true global currency. We are about to find out whether the US still has a sane government.

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An exclusive SmartKnowledgeU interview with World Bank Whistleblower Karen Hudes, in which we discuss the growing adoption of competitive currencies to fiat such as gold and silver, the reasons why the masses still largely remain ignorant of banking criminality, and the turniing tide against immoral Central Banking activities.

"A 21st Century Glass-Steagall Act"

We are confident the following amusing bill titled grandiosely enough "A 21st Century Glass-Steagall Act" (the Bill text here) by Elizabeth Warren, John McCain et al, to pretend Congress is not a bought and paid for by Wall Street marionette, will have a last minute rider that says "Compliance with any or all of the above provisions is purely voluntary."

Margin Calls Coming On US Too-Big-To-Fail Banks

This week's biggest news is not the Non-Farm Payrolls, or the European Central Bank or even Portugal's government falling. No - this week's big deal is the openness with which the Federal Reserve is preparing a major margin call on the too-big-to-fail banks in the US. This has been a long time coming since the introduction of the Dodd-Frank law back in 2010 but it is a game changer. Remember all macro paradigm shifts come from policy impulses, often mistakes. Is the Fed about to given the whole banking industry a major margin call?