Financial Regulation

Guest Post: The Politics Of Consistently Bad Legislation

The big news this morning, aside from the relatively strong economic data out of the US (of course, we’ll have to wait for the downward revision on jobs to see the real number, which is an ongoing statistical aberration for the record books but anyway) is the news that the German parliament overwhelmingly passed the measure to support the EFSFIn reality, this wasn’t really that newsworthy as passing this particular legislation had been expected since Germany originally agreed to the deal in principal earlier this summer.  This was not the leveraged, CDO^2 like structure that failed NY Federal Reserve President cum Treasury Secretary Tim Geithner had been pitching recently in Europe.  No, that idea has been dismissed out of hand and Mr. Geithner properly ridiculed for recommending that the already over-taxed European people be further Major Kong-style strapped to the ticking atom bomb that is the European banks’ leveraged balance sheets.

In case you haven’t noticed lately, the market doesn’t move on good or bad earnings or economic data, it moves on political rumors and innuendo about government’s willingness to continue the TARP/cheap money/QE lifeline to the terribly over-leveraged banking sector.  It’s especially troubling when you consider the faith most members of Congress place in Ben Bernanke and the other Oracles of Delphi at the Fed.  One area that’s going to come home to roost very soon is the zero interest rate policy (ZIRP) that has been in place since late ‘08/early ’09.

Boycott Bank Of America Which Is About To Institute A $5 Debit Card Usage Fee

Just when we thought we had seen every imaginable form of stupidity out of Bank of America, they go ahead and stun us all over again. The latest shock is that starting next year, the repository of hundreds of billions in underreserved (apparently the SEC finally figured out what was obvious to Zero Hedge readers since October 2010) toxic Countrywide mortgages, instead of shoring up capital, will do the opposite and start charging anyone with a debit card $5 a month fee for said card usage. Needless to say, this is obviously a collusive attempt by all the big banks, who are so desperate to generate some revenue (with the 2s10s flatter than at any time in the past 2.5 years) they are willing to drive away millions of paying customers. The problem is that the bulk of depositor clients will simply walk away from Bank of America (which had $1,038 billion in deposits as of June 30), and any other institutions that piggy back on this (and from a game theory perspective, everyone has to do it, or nobody will do it), and instead pull cash out of any and all checking and time deposit account forms. As a result, the key buffer that big banks have had during the entire financial crisis, cash from deposits, is about to disappear. This comes at a time when every US bank is fighting tooth and nail against Basel III implementation which forces banks to have more not less tangible capital (read cash, up to and including deposit cash). Alas, doomed for failure such idiocy can only come out of the US banking system which should have long been insolvent and replaced, but instead the Fed's policy of intercontinental Moral Hazard continues to encourage such "survival of the anti-fittest" decisions with pride. It goes without saying that we urge any and all of our 5 million monthly readers to pull any funds they may have from Bank of America in retaliation for this insanity.

Watch Bernanke's Remarks At The Systemic Risk Conference

Ben Bernanke will provide brief prepared remarks at the Fed's systemic risk conference starting any minute. Watch it live below. Nothing new is expected to be revealed even though the speech is less than a week away from the FOMC meeting, and will be watched by many.

Bernanke Speaks In Jackson Hole Redux: "Fed Has Range Of Tools For More Stimulus"

The embargo has been lifted and here are the headlines, which are eeriely reminiscent of the Jackson Hole speech, courtesy of Bloomberg:

  • BERNANKE: POLICY MAKERS SHOULDN'T DISREGARD ECONOMY'S FRAGILITY
  • BERNANKE SAYS FED HAS `A RANGE OF TOOLS' FOR MORE STIMULUS
  • BERNANKE SAYS SUBSTANTIAL FISCAL TIGHTENING COULD HURT RECOVERY
  • BERNANKE SAYS FED PREPARED TO USE TOOLS `AS APPROPRIATE'
  • BERNANKE SAYS INFLATION `EXPECTED TO MODERATE' IN COMING Q'S
  • BERNANKE SAYS FED SEES `GREATER DOWNSIDE RISKS' TO OUTLOOK
  • BERNANKE: POLICY MAKERS SHOULDN'T DISREGARD ECONOMY'S FRAGILITY
  • BERNANKE: U.S. FINANCES COULD `SPIRAL OUT OF CONTROL'

Greek Bailout #3 Coming? Barroso Working On "New Greek Program"

Well the second Greek bailout lasted all of... 5 weeks. Time for Bailout #3?

  • EC PRESIDENT BARROSO SAYS WORKING ON NEW GREEK PROGRAM
  • BARROSO SAYS EC REVIEWING WITH ECB AND IMF GREEK FIN. ASSIST

In the meantime, we learn that while two broke Greek banks just merged to create a bigger broke bank, the country's 4th largest bank admitted to resorting to the last ditch liquidity program discussed on Zero Hedge a week ago.

Full Bernanke Speech: Nothing Now, But Wait For Sept 20 FOMC Meeting Which Has Been Extended To "Allow Fuller Discussion Of Tools"

Bottom line: nothing now, QE3 now expected to be delivered Sept. 20? or not...

  • BERNANKE SAYS FED HAS LIMITED ABILITY TO ENSURE LONG-RUN GROWTH
  • BERNANKE DOESN'T SIGNAL NEW STEPS FOR PROMOTING U.S. GROWTH
  • BERNANKE SAYS EXTRA DAY TO ALLOW `FULLER DISCUSSION' OF TOOLS
  • BERNANKE SAYS FED TO EXTEND SEPT. FOMC MEETING TO TWO DAYS
  • BERNANKE SAYS FED HAS `RANGE OF TOOLS' FOR STIMULATING GROWTH
  • BERNANKE SAYS `FINANCIAL STRESS' WILL BE A `DRAG' ON RECOVERY

The Bank of England Blasts The Threat To Capital Markets That Is High Frequency Trading

Zero Hedge has been warnings about the scourge of High Frequency Trading long before most in the general public had even heard about the concept. Over the past 2 years, and culminating with the Flash Crash it became all too clear that HFT is nothing but a parasitic phenomenon which churns volume in stocks providing the best liquidity rebates, while pretending to be adding liquidity. Recently the best we can do is to provide glaring examples of HFT algos gone wrong in hopes that some regulator somewhere will finally take the long overdue step to establish a minimum bid/ask time delay and thus put virtually the entire HFT frontrunning math Ph.D. crew out of business. The latest development in the ongoing saga against these parasites comes from none other than the Bank of England's Andrew Haldane who prepared a speech to the International Economic Association Sixteenth World Congress in Beijing China, titled "The race to zero" which essentially recaps the hundreds if not thousands of posts we have written on the matter of risks posed by High Frequency Trading, and blasts the concept, as well as the toothless captured regulators who continue to exist in their zombie, porn-addicted state, and refuse to move one finger to finally end this next Flash Crash-in-waiting.

rcwhalen's picture

Increasing numbers of economists, market participants and some members of the US policy establishment have come to a greater appreciation of the role of globalization on US economic performance. They view globalization and the US policy response to it as the cause of the US asset price bubbles and hence the balance sheet nature of this “recession”. This perspective also implies that counter-cyclical fiscal and monetary policies do not address the cause of the under-performance of the US economy and hence are not solutions.