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12 марта, 05:40

Paul Craig Roberts Explores "Make-Believe America"

Authored by Paul Craig Roberts, Americans live a never-never-land existence. The politicians and presstitutes make sure of that. Consider something as simple as the unemployment rate. The US is said to have full employment with a January 2018 unemployment rate of 4.1 percent, down from 9.8 percent in January 2010. However, the low rate of unemployment is contradicted by the long-term decline in the labor force participation rate. After a long rise during the Reagan 1980s, the labor force participation rate peaked in January 1990 at 66.8 percent, more or less holding to that rate for another decade until 2001 when decline set in accelerating in September 2008.  Today the labor force participation rate is the lowest since February 1978, reversing all of the gains of the Reagan years. Allegedly, the current unemployment rate of 4.1 percent is the result of the long recovery that allegedly began in June 2009. However, normally, employment opportunities created by economic recovery cause an increase in the labor force participation rate as people join the work force to take advantage of employment opportunities. A fall in the participation rate is associated with recession or stagnation, not with economic recovery. How can this contradiction be reconciled? The answer lies in the measurement of unemployment. If you have not looked for a job in the last four weeks, you are not counted as being unemployed, because you are not counted as being part of the work force. When there are no jobs to be found, job seekers become discouraged and cease looking for jobs. In other words, the 4.1 percent unemployment rate does not count discouraged workers who cannot find jobs. The US Bureau of Labor Statistics has a second measure of unemployment that includes workers who have been discouraged and out of the labor force for less than one year. This rate of unemployment is 8.2 percent, double the 4.1 percent reported rate. The US government no longer tracks unemployment among discouraged workers who have been out of the work force for more than one year. However, John Williams of shadowstats.com continues to estimate this rate and places it at 22 or 23 percent, a far cry from 4.1 percent. In other words, the 4.1 percent unemployment rate does not count the unemployed who do show up in the declining labor force participation rate. If the US had a print and TV media instead of the propaganda ministry that it has, the financial press would not tolerate the deception of the public about employment in America. Junk economists, of which the US has an over-supply, claim that the decline in the labor force participation rate merely reflects people who prefer to live on welfare than to work for a living and the current generation of young people who prefer life at home with parents paying the bills. This explanation from junk economists does not explain why suddenly Americans discovered welfare and became lazy in 2001 and turned their back on job opportunities. The junk economists also do not explain why, if the economy is at full employment, competition for workers is not driving up wages. The reason Americans cannot find jobs and have left the labor force is that US corporations have offshored millions of American jobs in order to raise profits, share prices, and executive bonuses by lowering labor costs. Many American industrial and manufacturing cities have been devastated by the relocation abroad of production for the American consumer market, by the movement abroad of IT and software engineering jobs, and by importing lower paid foreign workers on H1-B and other work visas to take the jobs of Americans. In my book, The Failure of Laissez Faire Capitalism, I give examples and document the devastating impact jobs offshoring has had on communities, cities, pension funds, and consumer purchasing power. John Williams of shadowstats.com questions whether there has been any real growth in the US economy since the 2008 crisis that resulted from the repeal of the Glass-Steagall Act. Williams believes that the GDP growth rate is an illusion resulting from the understatement of inflation. Just as unemployment is under-counted, so is inflation. Two “reforms” were introduced that result in the under-measurement of inflation. One is the substitution principle. When the price of an item in the basket of goods used to measure inflation goes up, that item is thrown out and a cheaper substitute is put in its place. The “reformers” argue that consumers themselves behave in this way. Thus, they claim this practice is reasonable. However, the old way of measuring inflation measured the cost of a constant standard of living. The new way measures the cost of a falling standard of living. The other reform is to classify some price rises as quality improvements rather than as inflation. The consumer has to pay the higher price, but he is said to be getting a better product, and so it is not inflation. There is some truth to this, but it appears it is over-used in order to report low inflation rates. Both of these reforms are suspected of being motivated by holding down Social Security costs by denying cost-of-living (COLA) adjustments to Social Security recipients. If inflation is under-measured, the use of the measure to deflate nominal GDP in order to arrive at real GDP leaves some price rises in the GDP measure. Therefore, price rises or inflation are counted as increases in real goods and services. John Williams suspects that most of the GDP growth reported since the alleged recovery is simply price rises, not increases in real goods and services. The historically high stock averages are another feature of make-believe America. The high price/earnings ratios do not reflect strong fundamentals, such as high rates of business investment, strong growth in real retail sales fueled by strong growth in consumer incomes. The Federal Reserve has used an increase in consumer debt to fill in for the missing growth in consumer income for so long that consumers have no more room to take on more debt. Without growth in wages and salaries or in consumer debt, consumer demand cannot drive the economy and business profits. What explains the high stock prices? The answer is the trillions of dollars the Federal Reserve has created in order to stabilize the large “banks too big to fail” and bail out their extremely poor investment decisions. All of this liquidity found its way into the financial sector where it drove up the prices of stocks and bonds, enriching equity owners and denying retirees any interest income on their savings. The values of financial instruments are supported by money creation, not by underlying fundamentals. Yet, the stock averages are treated as proof of economic recovery and America’s first place in the world. As I said, it is never-never-land in which we live. *  *  * PCR's website is committed to giving you the counter-narrative to the official BS you get from the presstitutes and the junk economists. Truth is hard to come by and is getting harder. To support PCR's website, donate: https://www.paulcraigroberts.org/pages/donate/

08 марта, 22:57

Make-Believe America

Make-Believe America Paul Craig Roberts Americans live a never-never-land existance. The politicians and presstitutes make sure of that. Consider something as simple as the unemployment rate. The US is said to have full employment with a January 2018 unemployment rate of 4.1 percent, down from 9.8 percent in January 2010. https://data.bls.gov/timeseries/LNS14000000 However, the low rate… The post Make-Believe America appeared first on PaulCraigRoberts.org.

03 февраля, 06:30

Nomi Prins Fingers Trump's Financial Arsonists: "Next Financial Crisis - Not If, But When"

Authored by Nomi Prins via TomDispatch.com, There’s been lots of fire and fury around Washington lately, including a brief government shutdown. In Donald Trump’s White House, you can hardly keep up with the ongoing brouhahas from North Korea to Robert Mueller’s Russian investigation, while it already feels like ages since the celebratory mood over the vast corporate tax cuts Congress passed last year. But don’t be fooled: none of that is as important as what’s missing from the picture.  Like a disease, in the nation’s capital it’s often what you can’t see that will, in the end, hurt you most.   Amid a roaring stock market and a planet of upbeat CEOs, few are even thinking about the havoc that a multi-trillion-dollar financial system gone rogue could inflict upon global stability.  But watch out.  Even in the seemingly best of times, neglecting Wall Street is a dangerous idea. With a rag-tag Trumpian crew of ex-bankers and Goldman Sachs alumni as the only watchdogs in town, it’s time to focus, because one thing is clear: Donald Trump’s economic team is in the process of making the financial system combustible again. Collectively, the biggest U.S. banks already have their get-out-out-of-jail-free cards and are now sitting on record profits after, not so long ago, triggering sweeping unemployment, wrecking countless lives, and elevating global instability.  (Not a single major bank CEO was given jail time for such acts.)  Still, let's not blame the dangers lurking at the heart of the financial system solely on the Trump doctrine of leaving banks alone. They should be shared by the Democrats who, under President Barack Obama, believed, and still believe, in the perfection of the Dodd-Frank Act of 2010. While Dodd-Frank created important financial safeguards like the Consumer Financial Protection Bureau, even stronger long-term banking reforms were left on the sidelines. Crucially, that law didn’t force banks to separate the deposits of everyday Americans from Wall Street’s complex derivatives transactions.  In other words, it didn’t resurrect the Glass-Steagall Act of 1933 (axed in the Clinton era). Wall Street is now thoroughly emboldened as the financial elite follows the mantra of Kelly Clarkston’s hit song: “What doesn’t kill you makes you stronger.” Since the crisis of 2007-2008, the Big Six U.S. banks -- JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley -- have seen the share price of their stocks significantly outpace those of the S&P 500 index as a whole. Jamie Dimon, chairman and CEO of JPMorgan Chase, the nation’s largest bank (that’s paid $13 billion in settlements for various fraudulent acts), recently even pooh-poohed the chances of the Democratic Party in 2020, suggesting that it was about time its leaders let banks do whatever they wanted. As he told Maria Bartiromo, host of Fox Business’s Wall Street Week, “The thing about the Democrats is they will not have a chance, in my opinion. They don’t have a strong centrist, pro-business, pro-free enterprise person.” This is a man who was basically gifted two banks, Bear Stearns and Washington Mutual, by the U.S. government during the financial crisis. That present came as his own company got cheap loans from the Federal Reserve, while clamoring for billions in bailout money that he swore it didn’t need. Dimon can afford to be brazen. JPMorgan Chase is now the second most profitable company in the country. Why should he be worried about what might happen in another crisis, given that the Trump administration is in charge? With pro-business and pro-bailout thinking reigning supreme, what could go wrong? Protect or Destroy? There are, of course, supposed to be safeguards against freewheeling types like Dimon. In Washington, key regulatory bodies are tasked with keeping too-big-to-fail banks from wrecking the economy and committing financial crimes against the public. They include the Federal Reserve, the Securities and Exchange Commission, the Treasury Department, the Office of the Comptroller of the Currency (an independent bureau of the Treasury), and most recently, under the Dodd-Frank Act of 2010, the Consumer Financial Protection Bureau (an independent agency funded by the Federal Reserve). These entities are now run by men whose only desire is to give Wall Street more latitude. Former Goldman Sachs partner, now treasury secretary, Steven Mnuchin caught the spirit of the moment with a selfie of his wife and him holding reams of newly printed money “like a couple of James Bond villains.” (After all, he was a Hollywood producer and even appeared in the Warren Beatty flick Rules Don’t Apply.) He’s making his mark on us, however, not by producing economic security, but by cheerleading for financial deregulation. Despite the fact that the Republican platform in election 2016 endorsed reinstating the Glass-Steagall Act, Mnuchin made it clear that he has no intention of letting that happen. In a signal to every too-big-not-to-fail financial outfit around, he also released AIG from its regulatory chains. That’s the insurance company that was at the epicenter of the last financial crisis. By freeing AIG from being monitored by the Financial Services Oversight Board that he chairs, he’s left it and others like it free to repeat the same mistakes. Elsewhere, having successfully spun through the revolving door from banking to Washington, Joseph Otting, a former colleague of Mnuchin’s, is now running the Office of the Comptroller of the Currency (OCC). While he’s no household name, he was the CEO of OneWest (formerly, the failed California-based bank IndyMac). That’s the bank Mnuchin and his billionaire posse picked up on the cheap in 2009 before carrying out a vast set of foreclosures on the homes of ordinary Americans (including active-duty servicemen and -women) and reselling it for hundreds of millions of dollars in personal profits. At the Federal Reserve, Trump’s selection for chairman, Jerome Powell (another Mnuchin pick), has repeatedly expressed his disinterest in bank regulations. To him, too-big-to-fail banks are a thing of the past. And to round out this heady crew, there’s Office of Management and Budget (OMB) head Mick Mulvaney now also at the helm of the Consumer Financial Protection Bureau (CFPB), whose very existence he’s mocked. In time, we’ll come to a reckoning with this era of Trumpian finance. Meanwhile, however, the agenda of these men (and they are all men) could lead to a financial crisis of the first order. So here’s a little rundown on them: what drives them and how they are blindly taking the economy onto distinctly treacherous ground. Joseph Otting, Office of the Comptroller of the Currency The Office of the Comptroller is responsible for ensuring that banks operate in a secure and reasonable manner, provide equal access to their services, treat customers properly, and adhere to the laws of the land as well as federal regulations. As for Joseph Otting, though the Senate confirmed him as the new head of the OCC in November, four key senators called him “highly unqualified for [the] job.”  He will run an agency whose history snakes back to the Civil War. Established by President Abraham Lincoln in 1863, it was meant to safeguard the solidity and viability of the banking system.  Its leader remains charged with preventing bank-caused financial crashes, not enabling them.  Fast forward to the 1990s when Otting held a ranking position at Union Bank NA, overseeing its lending practices to medium-sized companies. From there he transitioned to U.S. Bancorp, where he was tasked with building its middle-market business (covering companies with $50 million to $1 billion in annual revenues) as part of that lender’s expansion in California. In 2010, Otting was hired as CEO of OneWest (now owned by CIT Group).  During his time there with Mnuchin, OneWest foreclosed on about 36,000 people and was faced with sweeping allegations of abusive foreclosure practices for which it was fined $89 million. Otting received $10.5 million in an employment contract payout when terminated by CIT in 2015. As Senator Sherrod Brown tweeted all too accurately during his confirmation hearings in the Senate, "Joseph Otting is yet another bank exec who profited off the financial crisis who is being rewarded by the Trump Administration with a powerful job overseeing our nation’s banking system." Like Trump and Mnuchin, Otting has never held public office. He is, however, an enthusiastic proponent of loosening lending regulations. Not only is he against reinstating Glass-Steagall, but he also wants to weaken the “Volcker Rule,” a part of the Dodd-Frank Act that was meant to place restrictions on various kinds of speculative transactions by banks that might not benefit their customers. Jay Clayton, the Securities and Exchange Commission The Securities and Exchange Commission (SEC) was established by President Franklin Delano Roosevelt in 1934, in the wake of the crash of 1929 and in the midst of the Great Depression. Its intention was to protect investors by certifying that the securities business operated in a fair, transparent, and legal manner.  Admittedly, its first head, Joseph Kennedy (President John F. Kennedy’s father), wasn’t exactly a beacon of virtue. He had helped raise contributions for Roosevelt’s election campaign even while under suspicion for alleged bootlegging and other illicit activities. Since May 2017, the SEC has been run by Jay Clayton, a top Wall Street lawyer. Following law school, he eventually made partner at the elite legal firm Sullivan & Cromwell. After the 2008 financial crisis, Clayton was deeply involved in dealing with the companies that tanked as that crisis began. He advised Barclays during its acquisition of Lehman Brothers’ assets and then represented Bear Stearns when JPMorgan Chase acquired it. In the three years before he became head of the SEC, Clayton represented eight of the 10 largest Wall Street banks, institutions that were then regularly being investigated and charged with securities violations by the very agency Clayton now heads. He and his wife happen to hold assets valued at between $12 million and $47 million in some of those very institutions. Not surprisingly in this administration (or any other recent one), Clayton also has solid Goldman Sachs ties. On at least seven occasions between 2007 and 2014, he advised Goldman directly or represented its corporate clients in their initial public offerings. Recently, Goldman Sachs requested that the SEC release it from having to report its lobbying activities or payments because, it claimed, they didn’t make up a large enough percentage of its assets to be worth the bother. (Don’t be surprised when the agency agrees.)  Clayton’s main accomplishment so far has been to significantly reduce oversight activities. SEC penalties, for instance, fell by 15.5% to $3.5 billion during the first year of the Trump administration.  The SEC also issued enforcement actions against only 62 public companies in 2017, a 33% decline from the previous year. Perhaps you won’t then be surprised to learn that its enforcement division has an estimated 100 unfilled investigative and supervisory positions, while it has also trimmed its wish list for new regulatory provisions. As for Dodd-Frank, Clayton insists he won’t “attack” it, but thinks it should be “looked” at. Mick Mulvaney, the Consumer Financial Protection Bureau and the Office of Management and Budget As a congressman from South Carolina, ultra-conservative Republican Mick Mulvaney, dubbed “Mick the Knife,” once even labeled himself a “right-wing nut job.” Chosen by President Trump in November 2016 to run the Office of Management and Budget, he was confirmed by Congress last February. As he said during his confirmation hearings, “Each day, families across our nation make disciplined choices about how to spend their hard-earned money, and the federal government should exercise the same discretion that hard-working Americans do every day.” As soon as he was at the OMB, he took an axe to social programs that help everyday Americans. He was instrumental in creating the GOP tax plan that will add up to $1.5 trillion to the country’s debt in order to provide major tax breaks to corporations and wealthy individuals. He was also a key figure in selling the plan to the media. When Richard Cordray resigned as head of the Consumer Financial Protection Bureau in November, Trump promptly selected Mick the Knife for that role, undercutting the deputy director Cordray had appointed to the post. After much debate and a court order in his favor, Mulvaney grabbed a box of Dunkin' Donuts and headed over from his OMB office adjacent to the White House. So even though he’s got a new job, Mulvaney is never far from Trump’s reach. The problem for the rest of us: Mulvaney loathes the CFPB, an agency he once called “a joke.” While he can’t unilaterally demolish it, he’s already obstructed its ability to enforce its government mandates. Soon after Trump appointed him, he imposed a 30-day freeze on hiring and similarly froze all further rule-making and regulatory actions. In his latest effort to undermine American consumers, he’s working to defund the CFPB. He just sent the Federal Reserve a letter stating that, “for the second quarter of fiscal year 2018, the Bureau is requesting $0.” That doesn’t bode well for American consumers. Jerome “Jay” Powell, Federal Reserve Thanks to the Senate confirmation of his selection for chairman of the board, Donald Trump now owns the Fed, too. The former number two man under Janet Yellen, Jerome Powell will be running the Fed, come Monday morning, February 5th. Established in 1913 during President Woodrow Wilson’s administration, the Fed’s official mission is to “promote a safe, sound, competitive, and accessible banking system.” In reality, it’s acted more like that system’s main drug dealer in recent years. In the wake of the 2007-2008 financial crisis, in addition to buying trillions of dollars in bonds (a strategy called “quantitative easing,” or QE), the Fed supplied four of the biggest Wall Street banks with an injection of $7.8 trillion in secret loans. The move was meant to stimulate the economy, but really, it coddled the banks. Powell’s monetary policy undoubtedly won’t represent a startling change from that of previous head Janet Yellen, or her predecessor, Ben Bernanke. History shows that Powell has repeatedly voted for pumping financial markets with Federal Reserve funds and, despite displaying reservations about the practice of quantitative easing, he always voted in favor of it, too. What makes his nomination out of the ordinary, though, is that he’s a trained lawyer, not an economist. Powell is assuming the helm at a time when deregulation is central to the White House’s economic and financial strategy.  Keep in mind that he will also have a role in choosing and guiding future Fed appointments. (At present, the Fed has the smallest number of sitting governors in its history.) The first such appointee, private equity investor Randal Quarles, already approved as the Fed’s vice chairman for supervision, is another major deregulator. Powell will be able to steer banking system decisions in other ways.  In recent Senate testimony, he confirmed his deregulatory predisposition. In that vein, the Fed has already announced that it seeks to loosen the capital requirements big banks need to put behind their riskier assets and activities. This will, it claims, allow them to more freely make loans to Main Street, in case a decade of cheap money wasn’t enough of an incentive. The Emperor Has No Rules Nearly every regulatory institution in Trumpville tasked with monitoring the financial system is now run by someone who once profited from bending or breaking its rules. Historically, severe financial crises tend to erupt after periods of lax oversight and loose banking regulations. By filling America’s key institutions with representatives of just such negligence, Trump has effectively hired a team of financial arsonists. Naturally, Wall Street views Trump’s chosen ones with glee. Amid the present financial euphoria of the stock market, big bank stock prices have soared.  But one thing is certain: when the next crisis comes, it will leave the last meltdown in the shade because our financial system is, at its core, unreformed and without adult supervision. Banks not only remain too big to fail but are still growing, while this government pushes policies guaranteed to put us all at risk again. There’s a pattern to this: first, there’s a crash; then comes a period of remorse and talk of reform; and eventually comes the great forgetting. As time passes, markets rise, greed becomes good, and Wall Street begins to champion more deregulation. The government attracts deregulatory enthusiasts and then, of course, there’s another crash, millions suffer, and remorse returns. Ominously, we’re now in the deregulation stage following the bull run. We know what comes next, just not when. Count on one thing: it won’t be pretty. 

02 февраля, 03:05

Big Banks Punish Savers With Pathetic Interest Rates Despite Fed Hikes

Big banks such as JPMorgan, Wells Fargo, Citigroup and Bank of America have been shafting depositors with terrible interest rates - refusing to keep pace with the Federal Reserve's rate hikes. That's why he is richer than you . JPMorgan, for example, has only raised its average deposit rate by 0.21 of a percentage point, despite the Federal Reserve raising rates by 1.25% over the same period - effectively punishing customers by locking them into historically low rates required to bail out the same banks which caused the financial crisis a decade ago. The trend is so remarkable that analysts at Goldman Sachs Group Inc., a rival Wall Street firm with a comparatively tiny banking franchise, published a report on the matter earlier this month, noting that rates on savings were "virtually untouched" in 2017, even as banks charged fatter payments on loans and other assets whose rates jumped along with the Fed's increases. Consequently, a decade after the 2008 crisis, retirees and others who shun stocks and choose less volatile, government-insured savings accounts at big banks are still getting meager returns. -TheStreet "Some of the big banks literally have not moved deposit yields higher at any time during this cycle of Fed rate hikes," said Greg McBride, the chief financial analyst at BankRate.com, which tracks the savings and lending industry. In fact, none of the Fed's three rate hikes noted by Goldman were passed on to savers at JPMorgan, Bank of America and Wells Fargo, with Citigroup passing along just 4% of the rate increases, or 0.03 of a percentage point.  Goldman's takeaway? Shareholders in big U.S. banks are "not to worry," Goldman wrote in the Jan. 8 reports. "Large banks are still raising cheap funds." To review; Home lenders and "too big to fail" banks conspired with lawmakers to remove the Glass Steagall act, allowing banks to commingle investment and retail banking operations and making them "too big to fail." Said banks then went on a drunken lending spree as politicians like Barney Frank pushed affirmative-action lending practices, while insisting that Fannie Mae and Freddie Mac were in great shape. This was very disrespectful to the stability of America's financial institutions.  Of course, in order to keep banks alive, the Fed had to use trillions of taxpayer dollars  and drop it's target rate to a historically low zero percent to avoid what Ben Bernanke and Hank Paulson warned Congress was sure collapse were they not to act quickly.  And now - the same banks which created the crisis and then took taxpayer money during the crisis, refuses to reward savers now that the crisis is "over" (until it's not) - driving up profits as they use the cheap deposits to fund loans written at the new, fed-hiked rates. Partly as a result, JPMorgan's net interest income - the difference between what it makes on loans and other interest-earning assets and what it pays out on deposits and other borrowings - jumped to $50.1 billion in 2017 or a 15% increase from 2015 levels. For "retail, checking and core savings, there's been little to no movement" on deposit rates, Marianne Lake, JPMorgan's chief financial officer, confirmed to bank-stock analysts this month on a conference call. She signaled that regular depositors might again see little improvement in 2018 on their savings rate, at least relative to the Fed's expected rate increases of 0.5 percentage point to 1 percentage point. "My expectation, just given where we are, in the absolute level of rates, is that on the retail space, we would still see a lot of discipline," Lake told the analysts. -TheStreet Smaller banks are the place to be According to BankRate's McBrde, higher deposit rates can be found at smaller banks and online financial institutions, which have been forced to pay higher rates to attract deposits. "They don't have a branch on every corner, ATMs everywhere and their name on the stadium," said McBride, adding "You're not going to be able to out-market the big banks, so you pay a higher rate on deposits and compete that way." According to Bankrate, the top four savings rates can be found at CIT Bank, Goldman Sachs' Marcus Bank (which wrote the analysis referenced in this article), American Express, and Synchrony Bank - the largest provider of private label credit cards in the US to brands such as Amazon, Walmart, Lowe's, and whose NPLs have been rising at a dangerously fast rate recently.  Meanwhile, Wells Fargo and Bank of America clock in near the bottom of the list.  Bank of America CEO Brian Moynihan justifies his bank's crappy deposit rates by pointing to all of the wonderful services and conveniences offered by their savings accounts, which apparently can't be found elsewhere. Moynihan also points to an increase in average checking account balances - suggesting that savers are more interested in safety than return on capital.  Citigroup CFO John Gerspach said that the low deposit rates are a "reflection of the state of competition" between banks. "Given deposit rates have been largely unchanged following the December 2017 hike, strong industry deposit growth suggests larger banks continue to have little problem raising cheap funds," wrote the Goldman analysts.  In previous periods, top-yielding savings accounts kept pace with the Fed's increases, and would anticipate rate hikes by competitively raising their own payouts in advance according to McBride. Now, the top payers have a correlation with the fed of around 0.5, and the rates are dismal.  Of course, when the much talked about volatility rears its head in 2018 and funds flow out of risk assets and into the "safety" of cash, any hopes savers had of higher rates on their cash will be sadly disappointed, especially if said rotation is followed by QE X and NIRP, in which case Americans may soon pay their bank for the privilege of letting them park their savings.

18 июля 2017, 05:22

SUPPLY-SIDE ECONOMICS, THEORY AND RESULTS

Supply-Side Economics Explained Paul Craig Roberts Supply-Side economics burst onto the economic policy scene in Washington, D.C., on September 21, 1975 in the Sunday Washington Star in an article I had written for US Representative Jack Kemp that provided a supply-side economic basis for his capital formation bill. Subsequently, I generalized the supply-side approach when… The post SUPPLY-SIDE ECONOMICS, THEORY AND RESULTS appeared first on PaulCraigRoberts.org.

22 июня 2017, 03:21

Support Your Website

Dear Friends: This website exists because of you. You called me out of retirement. We made a deal that you would support the website. And you have. Voluntary monthly subscriptions now exceed in number the responses to my quarterly call for donations. Part of this is due to growth in the signups for monthly donations.… The post Support Your Website appeared first on PaulCraigRoberts.org.

09 июня 2017, 14:15

Without Glass-Steagall America Will Fail

This is your website. Support it. Without Glass-Steagall America Will Fail Paul Craig Roberts For 66 years the Glass-Steagall act reduced the risks in the banking system. Eight years after the act was repealed, the banking system blew up threatening the international economy. US taxpayers were forced to come up with $750 billion dollars, a… The post Without Glass-Steagall America Will Fail appeared first on PaulCraigRoberts.org.

08 июня 2017, 19:01

Dear President Trump: Breaking Up Banks Isn’t So Hard To Do

Glass-Steagall or Another Economic Meltdown? Cross-posted with TomDispatch.com Donald, listen, whatever you’ve done so far, whatever you’ve messed up, there’s one thing you could do that would make up for a lot. It would be huge! Terrific!  It could change our world for the better in a big-league way! It could save us all from economic disaster!  And it isn’t even hard to grasp or complicated to do.  It’s simple, in fact: reinstitute the Glass-Steagall Act. Let me explain. In the world of romance, if you break up with someone, it’s pretty simple (emotional complications aside).  You’re just not together anymore. In the world of financial regulation, it used to be as simple as that, too. It was like installing a traffic light at a dangerous intersection to avoid deaths. In 1933, when the Glass-Steagall Act was passed, it helped break up the biggest banks of the day and for good reason: they had had a major hand in triggering the most disastrous economic depression our country ever experienced. Certain divisions of those banks were no longer allowed to coexist with others. The law split the parts of banks that placed bets by creating and trading certain risky securities and those that took deposits and provided loans.  In other words, it ensured that the investment bank and the commercial bank would no longer cohabit. Put another way, it separated bankers with a heinous gambling habit from those who only wanted a secure nest egg. It was simplicity itself. After 1933, the gamblers and savers went their separate ways, which proved a boon for the economy and the financial system for nearly seven decades. Then legislators, lobbyists, bankers, and regulators started to chisel away at the wall separating those two kinds of banks. By November 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act that repealed the Glass-Steagall Act totally. The abusive marriages of gamblers and savers could once again be consummated. And who doesn’t remember the result: the financial crisis of 2007-2008 that led to taxpayer-funded bailouts, subsidies, loans, and sweetheart fraud-settlement deals. Just as the Crash of 1929 had been catalyzed by the manufacturing of shady “trusts” stuffed with shady securities, this crisis was enabled by the big banks that engineered complex assets stuffed with subprime mortgages and other loans that were sold around the world.  Under President Obama, the 2010 Dodd-Frank Act was signed into law. The Act sought to limit the ability of big banks to trade the riskiest types of securities. Through inclusion of something called the “Volcker Rule,” Dodd-Frank prohibited the trading of securities (even if with many loopholes). What it didn’t do was actually break up the big banks again.  That meant another 1933 still awaited its moment.  Then along came the bizarre 2016 presidential election campaign during which, strangely enough, Democrats and Republicans found one issue on which they had some common ground: the banking system.  Key figures in both parties agreed that it was time to stop the investment bank and the commercial bank from commingling. Bernie Sanders ran on a campaign to break up the banks ― and so did Donald Trump. At at an October campaign rally in Charlotte, North Carolina, Trump even stated, “It’s time for a twenty-first-century Glass-Steagall.” The Democratic National Committee platform offered a similar message. “Banks,” it said, “should not be able to gamble with taxpayers’ deposits or pose an undue risk to Main Street. Democrats support a variety of ways to stop this from happening, including an updated and modernized version of Glass-Steagall as well as breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy.” The Republican National Committee wasted even fewer words making the point in their platform: “We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.” And it didn’t even suggest that the act should be “modernized” or mention a “twenty-first-century” version that didn’t do what the twentieth-century one had done. [Glass-Steagal] was like installing a traffic light at a dangerous intersection to avoid deaths. For the first time since its repeal, in other words, a return to the Glass-Steagall Act had bipartisan support. It couldn’t have been simpler, right? Two parties, one idea: split banks into two pieces. But then, as if you hadn’t already guessed, it got complicated.   Breaking-up, Republican-Style In the new administration, two key figures are now offering quite different and conflicting views of what a resurrection of the Glass-Steagall Act might mean.  At his Senate confirmation hearings, Steven Mnuchin, former Goldman Sachs partner and Trump’s nominee to be secretary of the Treasury, faced Senator Maria Cantwell (D-Wash.) as she bluntly asked “Do you support returning to Glass-Steagall?” He replied, “I don’t support going back to Glass-Steagall as is. What we’ve talked about with the president-elect is perhaps we need a twenty-first-century Glass-Steagall. But, no, I don’t support... taking a very old law and say we should adhere to it as is.” Cantwell then pressed him further: “And so, is that the position of what the Republican platform was? Because I thought it was Glass-Steagall?” To this, Mnuchin responded, “Again, the Republican platform did pass at the convention Glass-Steagall and... [when] we talked about policy with the president-elect, our view is we need a twenty-first-century Glass-Steagall.” The skepticism in the room was thick enough to cut with a knife. Here, after all, was a man who had made windfall profits on the fallout from the 2007-2008 “too big to fail” financial crisis by organizing a cadre of hedge-fund billionaires to buy the collapsed IndyMac Bank at a discount. He then proceeded to foreclose on some of its mortgages and resell it for a $2.5 billion profit. Why should such a man want to restrict banking activity, Glass-Steagall-style, when his loan practices had allowed him to make a fortune off the taxpayer bailouts that were the result of not doing so? What would the point be when a crisis, as history had just shown, forced the federal government to subsidize risk and failure? The only problem he faced: the Republican platform said he should.   Last month, testifying before the Senate Banking Committee and under questioning from Senator Elizabeth Warren, he backtracked even further: “The president said we do support a ‘twenty-first-century Glass-Steagall,’ that means there are aspects of it that we think may make sense. But we never said before we support a full separation of banks and investment banking.” Warren responded incredulously, “Tell me what twenty-first-century Glass-Steagall means if it doesn’t mean breaking up those two parts. It’s an easy question.” Mnuchin replied, “It’s actually a complicated question... We never said we were in favor of Glass-Steagall. We said we were in favor of a twenty-first-century Glass-Steagall. It couldn’t be clearer.”  Which, of course, couldn’t have been murkier. And then there’s that other former Goldman Sachs man, Gary Cohn, Trump’s director of the National Economic Council.  He had quite a different Glass-Steagall tale to tell Senator Warren. According to Bloomberg News, he insisted that he “generally favors banking going back to how it was when firms like Goldman focused on trading and underwriting securities, and companies such as Citigroup Inc. primarily issued loans.” That sounds a lot like breaking up the banks. This division and the as-yet unresolved nature of the Trump administration response to the Glass-Steagall question could, in the face of another financial crisis, come back to haunt us all, if it translates into more bailouts and systemic failures. The Democrats’ Dilemma As with the proverbial difficulty of chewing gum and walking at the same time, certain Democrats seem to find the very idea of supporting both Dodd-Frank and a new Glass-Steagall Act perplexing. Many of them have promoted the idea that no big bank actually failed in the Great Recession moment (which was true only because those banks got huge infusions of federal aid to remain solvent).  As a result, they avoided all responsibility for the way the repeal of Glass-Steagall allowed too-big-to-fail banks to come into existence in the first place.  In the process, they also conveniently ignored the way the big banks lent money to, or funded, the investment banks that did fail like both of my former employers, Bear Stearns and Lehman Brothers. Without those loans or that funding, those outfits couldn’t have purchased the overload of toxic assets that, in the end, imploded the whole system. President Obama summed up this position when he told Rolling Stone in 2012, “I’ve looked at some of Rolling Stone’s articles that say, ‘This didn’t go far enough, we didn’t institute Glass-Steagall’ and so forth, and I pushed my economic team very hard on some of those questions. But there is not evidence that having Glass-Steagall in place would somehow change the dynamic. Lehman Brothers wasn’t a commercial bank; it was an investment bank. AIG wasn’t an FDIC-insured bank; it was an insurance institution. So the problem in today’s financial sector can’t be solved simply by reimposing models that were created in the 1930s.”  He needed a more astute team. Hillary Clinton took a similar tack in her campaign and it may have contributed to her devastating election loss.  The continued promotion of such fallacies does not bode well for the future of the party if it continues to adopt that view. A return to a safer system, on the other hand, would be more populist ― and far more popular. Glass-Steagall’s Bipartisan Past Fortunately, current legislation is circulating in Congress that would promote the long-term stability of the financial system by restoring Glass-Steagall for real. H.R. 790 (“Return to the Prudent Banking Act of 2017”) is one of two reinstatement bills in the House of Representatives. It has 50 co-sponsors from both parties and its passage is being spearheaded by Marcy Kaptur (D-Ohio) and Walter Jones (R-N.C.).  The second bill, H.R. 2585, sponsored by Mike Capuano (D-Mass.), bears a close relationship to Senate bill S.881 (the “Twenty-First-Century Glass-Steagall Act of 2017”), sponsored by Elizabeth Warren (D-Mass.) and nine cosponsors including John McCain (R-Ariz.), Maria Cantwell, and Angus King (I-Maine). Either of the bills, if enacted, would do the same thing: break up the banks. In order to understand just why passage is so crucial, a little history is in order.  Glass-Steagall, or the Banking Act of 1933, was signed into law by President Franklin Roosevelt. It represented a bipartisan effort and was even ― perhaps not surprisingly given the devastating nature of the collapse of 1929 and the Great Depression that followed ― actively promoted by some of Wall Street’s most powerful bankers. In its 66 years as law, it effectively prevented systemic banking and economic collapse. Even before Roosevelt began his first term, congressional Republicans had initiated an investigation into bankers’ practices.  In early 1933, as Roosevelt was preparing to take office with an incoming Democratic Senate, outgoing Senate Banking and Currency Committee chairman Peter Norbeck, a Republican from South Dakota, hired former New York Deputy District Attorney Ferdinand Pecora to lead the Senate Banking Committee in a new investigation. Later known as the Pecora hearings, they would shed light on the kinds of financial manipulations by unscrupulous bankers that had led to the crash of 1929. They would also provide the new president with the necessary populist political capital to enact America’s most sweeping financial reforms. No less crucial was the way banking leaders aligned themselves with Roosevelt’s new program. Duty to country over balance sheets seemed then to be the order of the day, even on Wall Street.  (It’s not an attitude that lasted into the twenty-first century.) Two days after his inauguration, for instance, Roosevelt invited incoming National City Bank Chairman James Perkins to the White House for a secret meeting. The next day, under Perkins’ direction, his bank board passed a resolution splitting apart its trading and deposit-taking divisions. Chase National Bank chairman Winthrop Aldrich, a major financial power player, lent a hand as well.  Both Perkins and he would back the new Glass-Steagall bill. (Lest you think that all was sweetness and light, they were also convinced that it would diminish the strength of their main competitor, the Morgan Bank.) Three days after Roosevelt called Perkins to the White House, Aldrich’s views on breaking up the banks hit the front page of the New York Times when he announced that Chase National Bank and Chase Securities Corporation would become separate entities, effectively enforcing the bill before it even became law. It wasn’t simple ― the Chase Securities Corporation was the biggest of its kind in the world ― but it happened. Aldrich then took part in a series of private meetings with the president at the White House about the pending legislation. Without the support of Aldrich and Perkins, it’s possible that the bill wouldn’t have passed. After all, a far weaker version proposed during the previous administration of Herbert Hoover hadn’t. The Glass-Steagall Act also created the Federal Deposit Insurance Corporation to insure citizens’ bank deposits. This left commercial banks with a choice to make. If they took deposits and made loans, they could not speculate with depositors’ money. If they wanted to create and speculate, they were on their own. There’s much to be said for protecting hard-working Americans in this fashion. How the Walls Came Tumbling Down In the 1980s, the walls between investment and commercial banking first began to crumble.  The deregulation of the financial sector that followed would prove to be as bipartisan as the passage of Glass-Steagall had been.  In 1982, as the Republican presidency of Ronald Reagan began, Congress passed the Garn-St. Germain Act, deregulating the kinds of investments that savings and loan banks could make to include riskier real estate loans. This had the effect of exacerbating the savings and loan debacle, which hit its pinnacle in the late 1980s. By 1989, more than 1,000 S&L banks in the U.S. would crash and burn. In total, the crisis wound up costing about $160 billion, $132 billion of which was footed by taxpayers. And the suppliers of risky S&L securities tended to be the big banks. In 1987, still in the age of Reagan, Federal Reserve Chairman Alan Greenspan, a past board member of JPMorgan, said that non-bank subsidiaries of bank holding companies could sell or hold “bank-ineligible securities” ― that is, securities prohibited by Glass-Steagall, including mortgage securities, asset-backed securities, junk bonds, and other derivative products.  The move exacerbated the S&L crisis, but it also offered an avenue for commercial banks to stock up on some of the securities at the heart of that crisis. The entire banking system was rotten to the core and that made disaster inevitable after the repeal of Glass-Steagall. And so commercial banks began investing in hedge funds, whose very purpose in life is to gamble on securities, stocks, and commodities.  In 1998, in an early warning of what the future might hold, one of them, Long Term Capital Management, crashed and nearly brought down the whole financial system with it.  Fifty-five commercial banks had invested in it using depositors’ money to back their bets.  Only an emergency meeting of the presidents of the major banks at the Federal Reserve averted a larger economic meltdown, but because Glass-Steagall was still in place, they had to figure out how to save themselves.  No government bailouts were forthcoming. Having narrowly avoided disaster, Wall Street only plunged deeper into financial deregulation. In 1999, Glass-Steagall itself was repealed. On December 21, 2000, Congress passed the Commodity Futures Modernization Act deregulating derivatives trading.  The big commercial banks then merged with investment banks, insurance companies, and brokerage firms.  By 2007, the assets of those big banks had tripled. The four largest ― Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo ― by then controlled (and still control) more than half the assets of the banking system. In the fall of 2007, that system finally started buckling because of the problems of Citigroup, not because of the investment banks, which would not have been covered by Glass-Steagall. The catastrophe that hit Citigroup makes it clear just how crucial the repeal of that act was to the financial meltdown to come. Citigroup would “require” a taxpayer-financed bailout of $45 billion, $340 billion in asset guarantees, and $2 trillion in near-0% Federal Reserve loans between the fall of 2007 and 2010. That in itself was staggering and Citigroup wasn’t alone. Federal Reserve Chairman Ben Bernanke would later testify that, by 2008, 11 out of the 12 biggest commercial banks were “insolvent” and had to be bailed out.  The entire banking system was rotten to the core and the massive buildup of bad paper, high leverage, and speculative bets (derivatives) that made disaster inevitable can be traced directly back to the repeal of Glass-Steagall.  Today, a fresh bubble is inflating. This time, it’s not U.S. subprime mortgages at the heart of a budding banking crisis, but $51 trillion in corporate debt in the form of bonds, loans, and related derivatives. The credit ratings agency S&P Global Ratings has predicted that such debt could rise to $75 trillion by 2020 and the defaults on it are starting to increase in pace. Banks have profited by the short-term creation and trading of this corporate debt, propagating even greater risk. Should that bubble burst, it could make the subprime mortgage bubble of 2007 look like a relatively small-scale event.   What Will the President Do? On the positive side, there’s a growing bipartisan alliance in Congress and outside it on restoring Glass-Steagall. This increasingly wide-ranging consensus reaches from the AFL-CIO to the libertarian Mises Institute, in the Senate from John McCain to Elizabeth Warren and Maria Cantwell, and in the House of Representatives from Republicans Walter Jones and Mike Coffman to Democrats Marcy Kaptur, Bernie Sanders, and Tulsi Gabbard.  In fact, just this week, Kaptur and Jones announced an amendment to the pending Financial Choice Act in the House of Representives, that would represent the first genuine attempt to bring to a vote the possibility of resurrecting the Glass-Steagall Act since its repeal. So, Donald, here’s the question: Where do you ― the man who, in the course of a few weeks, embraced Middle Eastern autocrats, turned relations with key NATO allies upside down, and to the astonishment of much of the world, withdrew the U.S. from the Paris climate agreement ― stand? In just a few months in office, you’ve turned the White House into an outpost for your family business, but when it comes to the financial well-being of the rest of us, what will you do? Will you, in fact, protect us from another future meltdown of the financial system? It wouldn’t be that hard and you were clear enough on this issue in your election campaign, but does that even matter to you today?  I noticed that recently, in an Oval Office interview with Bloomberg News, when asked about breaking up the banks, you said, “I’m looking at that right now. There’s some people that want to go back to the old system, right? So we’re going to look at that.” Your party and your own appointees are split on the subject.  Where will you fall?  You could still commit yourself to securing the financial well-being of our nation for generations to come.  You could commit yourself to Glass-Steagall.  The question is: Will you?  Nomi Prins, a TomDispatch regular, is the author of six books. Her most recent is All the Presidents’ Bankers: The Hidden Alliances That Drive American Power (Nation Books). She is a former Wall Street executive. Special thanks go to researcher Craig Wilson for his superb work on this piece. Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, John Dower’s The Violent American Century: War and Terror Since World War II, as well as John Feffer’s dystopian novel Splinterlands, Nick Turse’s Next Time They’ll Come to Count the Dead, and Tom Engelhardt’s Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World. type=type=RelatedArticlesblockTitle=Related... + articlesList=566585bae4b072e9d1c69ad7,578d30fde4b0a0ae97c2fb9d,572a4ebfe4b0bc9cb0458b68,570ea9d6e4b03d8b7b9f52aa -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

08 июня 2017, 19:01

Dear President Trump: Breaking Up Banks Isn’t So Hard To Do

Glass-Steagall or Another Economic Meltdown? Cross-posted with TomDispatch.com Donald, listen, whatever you’ve done so far, whatever you’ve messed up, there’s one thing you could do that would make up for a lot. It would be huge! Terrific!  It could change our world for the better in a big-league way! It could save us all from economic disaster!  And it isn’t even hard to grasp or complicated to do.  It’s simple, in fact: reinstitute the Glass-Steagall Act. Let me explain. In the world of romance, if you break up with someone, it’s pretty simple (emotional complications aside).  You’re just not together anymore. In the world of financial regulation, it used to be as simple as that, too. It was like installing a traffic light at a dangerous intersection to avoid deaths. In 1933, when the Glass-Steagall Act was passed, it helped break up the biggest banks of the day and for good reason: they had had a major hand in triggering the most disastrous economic depression our country ever experienced. Certain divisions of those banks were no longer allowed to coexist with others. The law split the parts of banks that placed bets by creating and trading certain risky securities and those that took deposits and provided loans.  In other words, it ensured that the investment bank and the commercial bank would no longer cohabit. Put another way, it separated bankers with a heinous gambling habit from those who only wanted a secure nest egg. It was simplicity itself. After 1933, the gamblers and savers went their separate ways, which proved a boon for the economy and the financial system for nearly seven decades. Then legislators, lobbyists, bankers, and regulators started to chisel away at the wall separating those two kinds of banks. By November 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act that repealed the Glass-Steagall Act totally. The abusive marriages of gamblers and savers could once again be consummated. And who doesn’t remember the result: the financial crisis of 2007-2008 that led to taxpayer-funded bailouts, subsidies, loans, and sweetheart fraud-settlement deals. Just as the Crash of 1929 had been catalyzed by the manufacturing of shady “trusts” stuffed with shady securities, this crisis was enabled by the big banks that engineered complex assets stuffed with subprime mortgages and other loans that were sold around the world.  Under President Obama, the 2010 Dodd-Frank Act was signed into law. The Act sought to limit the ability of big banks to trade the riskiest types of securities. Through inclusion of something called the “Volcker Rule,” Dodd-Frank prohibited the trading of securities (even if with many loopholes). What it didn’t do was actually break up the big banks again.  That meant another 1933 still awaited its moment.  Then along came the bizarre 2016 presidential election campaign during which, strangely enough, Democrats and Republicans found one issue on which they had some common ground: the banking system.  Key figures in both parties agreed that it was time to stop the investment bank and the commercial bank from commingling. Bernie Sanders ran on a campaign to break up the banks ― and so did Donald Trump. At at an October campaign rally in Charlotte, North Carolina, Trump even stated, “It’s time for a twenty-first-century Glass-Steagall.” The Democratic National Committee platform offered a similar message. “Banks,” it said, “should not be able to gamble with taxpayers’ deposits or pose an undue risk to Main Street. Democrats support a variety of ways to stop this from happening, including an updated and modernized version of Glass-Steagall as well as breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy.” The Republican National Committee wasted even fewer words making the point in their platform: “We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.” And it didn’t even suggest that the act should be “modernized” or mention a “twenty-first-century” version that didn’t do what the twentieth-century one had done. [Glass-Steagal] was like installing a traffic light at a dangerous intersection to avoid deaths. For the first time since its repeal, in other words, a return to the Glass-Steagall Act had bipartisan support. It couldn’t have been simpler, right? Two parties, one idea: split banks into two pieces. But then, as if you hadn’t already guessed, it got complicated.   Breaking-up, Republican-Style In the new administration, two key figures are now offering quite different and conflicting views of what a resurrection of the Glass-Steagall Act might mean.  At his Senate confirmation hearings, Steven Mnuchin, former Goldman Sachs partner and Trump’s nominee to be secretary of the Treasury, faced Senator Maria Cantwell (D-Wash.) as she bluntly asked “Do you support returning to Glass-Steagall?” He replied, “I don’t support going back to Glass-Steagall as is. What we’ve talked about with the president-elect is perhaps we need a twenty-first-century Glass-Steagall. But, no, I don’t support... taking a very old law and say we should adhere to it as is.” Cantwell then pressed him further: “And so, is that the position of what the Republican platform was? Because I thought it was Glass-Steagall?” To this, Mnuchin responded, “Again, the Republican platform did pass at the convention Glass-Steagall and... [when] we talked about policy with the president-elect, our view is we need a twenty-first-century Glass-Steagall.” The skepticism in the room was thick enough to cut with a knife. Here, after all, was a man who had made windfall profits on the fallout from the 2007-2008 “too big to fail” financial crisis by organizing a cadre of hedge-fund billionaires to buy the collapsed IndyMac Bank at a discount. He then proceeded to foreclose on some of its mortgages and resell it for a $2.5 billion profit. Why should such a man want to restrict banking activity, Glass-Steagall-style, when his loan practices had allowed him to make a fortune off the taxpayer bailouts that were the result of not doing so? What would the point be when a crisis, as history had just shown, forced the federal government to subsidize risk and failure? The only problem he faced: the Republican platform said he should.   Last month, testifying before the Senate Banking Committee and under questioning from Senator Elizabeth Warren, he backtracked even further: “The president said we do support a ‘twenty-first-century Glass-Steagall,’ that means there are aspects of it that we think may make sense. But we never said before we support a full separation of banks and investment banking.” Warren responded incredulously, “Tell me what twenty-first-century Glass-Steagall means if it doesn’t mean breaking up those two parts. It’s an easy question.” Mnuchin replied, “It’s actually a complicated question... We never said we were in favor of Glass-Steagall. We said we were in favor of a twenty-first-century Glass-Steagall. It couldn’t be clearer.”  Which, of course, couldn’t have been murkier. And then there’s that other former Goldman Sachs man, Gary Cohn, Trump’s director of the National Economic Council.  He had quite a different Glass-Steagall tale to tell Senator Warren. According to Bloomberg News, he insisted that he “generally favors banking going back to how it was when firms like Goldman focused on trading and underwriting securities, and companies such as Citigroup Inc. primarily issued loans.” That sounds a lot like breaking up the banks. This division and the as-yet unresolved nature of the Trump administration response to the Glass-Steagall question could, in the face of another financial crisis, come back to haunt us all, if it translates into more bailouts and systemic failures. The Democrats’ Dilemma As with the proverbial difficulty of chewing gum and walking at the same time, certain Democrats seem to find the very idea of supporting both Dodd-Frank and a new Glass-Steagall Act perplexing. Many of them have promoted the idea that no big bank actually failed in the Great Recession moment (which was true only because those banks got huge infusions of federal aid to remain solvent).  As a result, they avoided all responsibility for the way the repeal of Glass-Steagall allowed too-big-to-fail banks to come into existence in the first place.  In the process, they also conveniently ignored the way the big banks lent money to, or funded, the investment banks that did fail like both of my former employers, Bear Stearns and Lehman Brothers. Without those loans or that funding, those outfits couldn’t have purchased the overload of toxic assets that, in the end, imploded the whole system. President Obama summed up this position when he told Rolling Stone in 2012, “I’ve looked at some of Rolling Stone’s articles that say, ‘This didn’t go far enough, we didn’t institute Glass-Steagall’ and so forth, and I pushed my economic team very hard on some of those questions. But there is not evidence that having Glass-Steagall in place would somehow change the dynamic. Lehman Brothers wasn’t a commercial bank; it was an investment bank. AIG wasn’t an FDIC-insured bank; it was an insurance institution. So the problem in today’s financial sector can’t be solved simply by reimposing models that were created in the 1930s.”  He needed a more astute team. Hillary Clinton took a similar tack in her campaign and it may have contributed to her devastating election loss.  The continued promotion of such fallacies does not bode well for the future of the party if it continues to adopt that view. A return to a safer system, on the other hand, would be more populist ― and far more popular. Glass-Steagall’s Bipartisan Past Fortunately, current legislation is circulating in Congress that would promote the long-term stability of the financial system by restoring Glass-Steagall for real. H.R. 790 (“Return to the Prudent Banking Act of 2017”) is one of two reinstatement bills in the House of Representatives. It has 50 co-sponsors from both parties and its passage is being spearheaded by Marcy Kaptur (D-Ohio) and Walter Jones (R-N.C.).  The second bill, H.R. 2585, sponsored by Mike Capuano (D-Mass.), bears a close relationship to Senate bill S.881 (the “Twenty-First-Century Glass-Steagall Act of 2017”), sponsored by Elizabeth Warren (D-Mass.) and nine cosponsors including John McCain (R-Ariz.), Maria Cantwell, and Angus King (I-Maine). Either of the bills, if enacted, would do the same thing: break up the banks. In order to understand just why passage is so crucial, a little history is in order.  Glass-Steagall, or the Banking Act of 1933, was signed into law by President Franklin Roosevelt. It represented a bipartisan effort and was even ― perhaps not surprisingly given the devastating nature of the collapse of 1929 and the Great Depression that followed ― actively promoted by some of Wall Street’s most powerful bankers. In its 66 years as law, it effectively prevented systemic banking and economic collapse. Even before Roosevelt began his first term, congressional Republicans had initiated an investigation into bankers’ practices.  In early 1933, as Roosevelt was preparing to take office with an incoming Democratic Senate, outgoing Senate Banking and Currency Committee chairman Peter Norbeck, a Republican from South Dakota, hired former New York Deputy District Attorney Ferdinand Pecora to lead the Senate Banking Committee in a new investigation. Later known as the Pecora hearings, they would shed light on the kinds of financial manipulations by unscrupulous bankers that had led to the crash of 1929. They would also provide the new president with the necessary populist political capital to enact America’s most sweeping financial reforms. No less crucial was the way banking leaders aligned themselves with Roosevelt’s new program. Duty to country over balance sheets seemed then to be the order of the day, even on Wall Street.  (It’s not an attitude that lasted into the twenty-first century.) Two days after his inauguration, for instance, Roosevelt invited incoming National City Bank Chairman James Perkins to the White House for a secret meeting. The next day, under Perkins’ direction, his bank board passed a resolution splitting apart its trading and deposit-taking divisions. Chase National Bank chairman Winthrop Aldrich, a major financial power player, lent a hand as well.  Both Perkins and he would back the new Glass-Steagall bill. (Lest you think that all was sweetness and light, they were also convinced that it would diminish the strength of their main competitor, the Morgan Bank.) Three days after Roosevelt called Perkins to the White House, Aldrich’s views on breaking up the banks hit the front page of the New York Times when he announced that Chase National Bank and Chase Securities Corporation would become separate entities, effectively enforcing the bill before it even became law. It wasn’t simple ― the Chase Securities Corporation was the biggest of its kind in the world ― but it happened. Aldrich then took part in a series of private meetings with the president at the White House about the pending legislation. Without the support of Aldrich and Perkins, it’s possible that the bill wouldn’t have passed. After all, a far weaker version proposed during the previous administration of Herbert Hoover hadn’t. The Glass-Steagall Act also created the Federal Deposit Insurance Corporation to insure citizens’ bank deposits. This left commercial banks with a choice to make. If they took deposits and made loans, they could not speculate with depositors’ money. If they wanted to create and speculate, they were on their own. There’s much to be said for protecting hard-working Americans in this fashion. How the Walls Came Tumbling Down In the 1980s, the walls between investment and commercial banking first began to crumble.  The deregulation of the financial sector that followed would prove to be as bipartisan as the passage of Glass-Steagall had been.  In 1982, as the Republican presidency of Ronald Reagan began, Congress passed the Garn-St. Germain Act, deregulating the kinds of investments that savings and loan banks could make to include riskier real estate loans. This had the effect of exacerbating the savings and loan debacle, which hit its pinnacle in the late 1980s. By 1989, more than 1,000 S&L banks in the U.S. would crash and burn. In total, the crisis wound up costing about $160 billion, $132 billion of which was footed by taxpayers. And the suppliers of risky S&L securities tended to be the big banks. In 1987, still in the age of Reagan, Federal Reserve Chairman Alan Greenspan, a past board member of JPMorgan, said that non-bank subsidiaries of bank holding companies could sell or hold “bank-ineligible securities” ― that is, securities prohibited by Glass-Steagall, including mortgage securities, asset-backed securities, junk bonds, and other derivative products.  The move exacerbated the S&L crisis, but it also offered an avenue for commercial banks to stock up on some of the securities at the heart of that crisis. The entire banking system was rotten to the core and that made disaster inevitable after the repeal of Glass-Steagall. And so commercial banks began investing in hedge funds, whose very purpose in life is to gamble on securities, stocks, and commodities.  In 1998, in an early warning of what the future might hold, one of them, Long Term Capital Management, crashed and nearly brought down the whole financial system with it.  Fifty-five commercial banks had invested in it using depositors’ money to back their bets.  Only an emergency meeting of the presidents of the major banks at the Federal Reserve averted a larger economic meltdown, but because Glass-Steagall was still in place, they had to figure out how to save themselves.  No government bailouts were forthcoming. Having narrowly avoided disaster, Wall Street only plunged deeper into financial deregulation. In 1999, Glass-Steagall itself was repealed. On December 21, 2000, Congress passed the Commodity Futures Modernization Act deregulating derivatives trading.  The big commercial banks then merged with investment banks, insurance companies, and brokerage firms.  By 2007, the assets of those big banks had tripled. The four largest ― Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo ― by then controlled (and still control) more than half the assets of the banking system. In the fall of 2007, that system finally started buckling because of the problems of Citigroup, not because of the investment banks, which would not have been covered by Glass-Steagall. The catastrophe that hit Citigroup makes it clear just how crucial the repeal of that act was to the financial meltdown to come. Citigroup would “require” a taxpayer-financed bailout of $45 billion, $340 billion in asset guarantees, and $2 trillion in near-0% Federal Reserve loans between the fall of 2007 and 2010. That in itself was staggering and Citigroup wasn’t alone. Federal Reserve Chairman Ben Bernanke would later testify that, by 2008, 11 out of the 12 biggest commercial banks were “insolvent” and had to be bailed out.  The entire banking system was rotten to the core and the massive buildup of bad paper, high leverage, and speculative bets (derivatives) that made disaster inevitable can be traced directly back to the repeal of Glass-Steagall.  Today, a fresh bubble is inflating. This time, it’s not U.S. subprime mortgages at the heart of a budding banking crisis, but $51 trillion in corporate debt in the form of bonds, loans, and related derivatives. The credit ratings agency S&P Global Ratings has predicted that such debt could rise to $75 trillion by 2020 and the defaults on it are starting to increase in pace. Banks have profited by the short-term creation and trading of this corporate debt, propagating even greater risk. Should that bubble burst, it could make the subprime mortgage bubble of 2007 look like a relatively small-scale event.   What Will the President Do? On the positive side, there’s a growing bipartisan alliance in Congress and outside it on restoring Glass-Steagall. This increasingly wide-ranging consensus reaches from the AFL-CIO to the libertarian Mises Institute, in the Senate from John McCain to Elizabeth Warren and Maria Cantwell, and in the House of Representatives from Republicans Walter Jones and Mike Coffman to Democrats Marcy Kaptur, Bernie Sanders, and Tulsi Gabbard.  In fact, just this week, Kaptur and Jones announced an amendment to the pending Financial Choice Act in the House of Representives, that would represent the first genuine attempt to bring to a vote the possibility of resurrecting the Glass-Steagall Act since its repeal. So, Donald, here’s the question: Where do you ― the man who, in the course of a few weeks, embraced Middle Eastern autocrats, turned relations with key NATO allies upside down, and to the astonishment of much of the world, withdrew the U.S. from the Paris climate agreement ― stand? In just a few months in office, you’ve turned the White House into an outpost for your family business, but when it comes to the financial well-being of the rest of us, what will you do? Will you, in fact, protect us from another future meltdown of the financial system? It wouldn’t be that hard and you were clear enough on this issue in your election campaign, but does that even matter to you today?  I noticed that recently, in an Oval Office interview with Bloomberg News, when asked about breaking up the banks, you said, “I’m looking at that right now. There’s some people that want to go back to the old system, right? So we’re going to look at that.” Your party and your own appointees are split on the subject.  Where will you fall?  You could still commit yourself to securing the financial well-being of our nation for generations to come.  You could commit yourself to Glass-Steagall.  The question is: Will you?  Nomi Prins, a TomDispatch regular, is the author of six books. Her most recent is All the Presidents’ Bankers: The Hidden Alliances That Drive American Power (Nation Books). She is a former Wall Street executive. Special thanks go to researcher Craig Wilson for his superb work on this piece. Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, John Dower’s The Violent American Century: War and Terror Since World War II, as well as John Feffer’s dystopian novel Splinterlands, Nick Turse’s Next Time They’ll Come to Count the Dead, and Tom Engelhardt’s Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World. type=type=RelatedArticlesblockTitle=Related... + articlesList=566585bae4b072e9d1c69ad7,578d30fde4b0a0ae97c2fb9d,572a4ebfe4b0bc9cb0458b68,570ea9d6e4b03d8b7b9f52aa -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

19 мая 2017, 22:50

Elizabeth Warren Slams 'Bizarre' Glass-Steagall Statements From Trump's Treasury Secretary

function onPlayerReadyVidible(e){'undefined'!=typeof HPTrack&&HPTrack.Vid.Vidible_track(e)}!function(e,i){if(e.vdb_Player){if('object'==typeof commercial_video){var a='',o='m.fwsitesection='+commercial_video.site_and_category;if(a+=o,commercial_video['package']){var c='&m.fwkeyvalues=sponsorship%3D'+commercial_video['package'];a+=c}e.setAttribute('vdb_params',a)}i(e.vdb_Player)}else{var t=arguments.callee;setTimeout(function(){t(e,i)},0)}}(document.getElementById('vidible_1'),onPlayerReadyVidible); WASHINGTON ― Do words and history mean anything? That question was the subject of debate on Thursday when Treasury Secretary Steven Mnuchin testified before the Senate Banking Committee. The Trump administration showed its now-routine sense for the absurd when Mnuchin said it supports a 21st-century Glass-Steagall Act ― referring to an updated version of the the Depression-era regulation that separated commercial and investment banks ― but also opposes any bill separating commercial and investment banks. Sen. Elizabeth Warren (D-Mass.), the lead sponsor of the bipartisan 21st Century Glass-Steagall Act of 2017, grilled Mnuchin on his statements. “The Republican platform did have Glass-Steagall,” Mnuchin said in response to a question from Warren asking if he was reversing the administration’s previous position. “We, during the campaign ... had the opportunity to work with on this specifically, came out and said we do support a 21st-century Glass-Steagall. Which is ... there are aspects of it, OK, that we think may make sense. But we never said before that we supported a full separation of banks and investment banks.” Warren, incredulous, responded, “There are aspects of Glass-Steagall that you support, but not breaking up the banks and separating commercial banking from investment banking? What do you think Glass-Steagall was if that’s not right at the heart of it?” Even though the 2016 Republican Party platform very specifically stated, “We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.” Mnuchin maintained on Thursday that when he says he supports a 21st-century Glass-Steagall that does not mean he supports the Glass-Steagall’s separation of commercial and investment banking, adding that the administration also didn’t want to bring back the law. This is like something straight out of George Orwell. Sen. Elizabeth Warren  But in October, during the campaign trail then-candidate Donald Trump did say, “It’s time for 21st century Glass-Steagall.” But he did not elaborate on what this would look like. In the recent months, both Trump and his top economic adviser Gary Cohn, a former Goldman Sachs banker, said the administration was open to reviving the Glass-Steagall Act. And Mnuchin himself said in January, “We need a 21st-century Glass-Steagall.” Despite Warren’s interrogation, Mnuchin refused to explain the 21st-century Glass-Steagall Act that he said the administration did support. “Let me get this straight,” Warren said. “You’re saying that you are in favor of Glass-Steagall, which breaks apart the two arms of banking, regular banking and commercial banking. Except you don’t want to break apart the two parts of banking. This is like something straight out of George Orwell.” “This is just bizarre,” she added later. Mnuchin insisted on responding that the Trump administration policies “couldn’t be clearer.” Glass-Steagall was repealed in 1999 by a Republican Congress and former President Bill Clinton. After it was repealed, the 1998 merger between commercial bank Citigroup and investment bank Travelers was retroactively approved, the investment bank JPMorgan merged with the commercial bank Chase in 2000, and much of the industry followed suit. Most of the country’s largest, too-big-to-fail banks now have both commercial banks that do things like take deposits and make loans, and investment banks that trade and underwrite securities.   -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

19 мая 2017, 22:50

Elizabeth Warren Slams 'Bizarre' Glass-Steagall Statements From Trump's Treasury Secretary

function onPlayerReadyVidible(e){'undefined'!=typeof HPTrack&&HPTrack.Vid.Vidible_track(e)}!function(e,i){if(e.vdb_Player){if('object'==typeof commercial_video){var a='',o='m.fwsitesection='+commercial_video.site_and_category;if(a+=o,commercial_video['package']){var c='&m.fwkeyvalues=sponsorship%3D'+commercial_video['package'];a+=c}e.setAttribute('vdb_params',a)}i(e.vdb_Player)}else{var t=arguments.callee;setTimeout(function(){t(e,i)},0)}}(document.getElementById('vidible_1'),onPlayerReadyVidible); WASHINGTON ― Do words and history mean anything? That question was the subject of debate on Thursday when Treasury Secretary Steven Mnuchin testified before the Senate Banking Committee. The Trump administration showed its now-routine sense for the absurd when Mnuchin said it supports a 21st-century Glass-Steagall Act ― referring to an updated version of the the Depression-era regulation that separated commercial and investment banks ― but also opposes any bill separating commercial and investment banks. Sen. Elizabeth Warren (D-Mass.), the lead sponsor of the bipartisan 21st Century Glass-Steagall Act of 2017, grilled Mnuchin on his statements. “The Republican platform did have Glass-Steagall,” Mnuchin said in response to a question from Warren asking if he was reversing the administration’s previous position. “We, during the campaign ... had the opportunity to work with on this specifically, came out and said we do support a 21st-century Glass-Steagall. Which is ... there are aspects of it, OK, that we think may make sense. But we never said before that we supported a full separation of banks and investment banks.” Warren, incredulous, responded, “There are aspects of Glass-Steagall that you support, but not breaking up the banks and separating commercial banking from investment banking? What do you think Glass-Steagall was if that’s not right at the heart of it?” Even though the 2016 Republican Party platform very specifically stated, “We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.” Mnuchin maintained on Thursday that when he says he supports a 21st-century Glass-Steagall that does not mean he supports the Glass-Steagall’s separation of commercial and investment banking, adding that the administration also didn’t want to bring back the law. This is like something straight out of George Orwell. Sen. Elizabeth Warren  But in October, during the campaign trail then-candidate Donald Trump did say, “It’s time for 21st century Glass-Steagall.” But he did not elaborate on what this would look like. In the recent months, both Trump and his top economic adviser Gary Cohn, a former Goldman Sachs banker, said the administration was open to reviving the Glass-Steagall Act. And Mnuchin himself said in January, “We need a 21st-century Glass-Steagall.” Despite Warren’s interrogation, Mnuchin refused to explain the 21st-century Glass-Steagall Act that he said the administration did support. “Let me get this straight,” Warren said. “You’re saying that you are in favor of Glass-Steagall, which breaks apart the two arms of banking, regular banking and commercial banking. Except you don’t want to break apart the two parts of banking. This is like something straight out of George Orwell.” “This is just bizarre,” she added later. Mnuchin insisted on responding that the Trump administration policies “couldn’t be clearer.” Glass-Steagall was repealed in 1999 by a Republican Congress and former President Bill Clinton. After it was repealed, the 1998 merger between commercial bank Citigroup and investment bank Travelers was retroactively approved, the investment bank JPMorgan merged with the commercial bank Chase in 2000, and much of the industry followed suit. Most of the country’s largest, too-big-to-fail banks now have both commercial banks that do things like take deposits and make loans, and investment banks that trade and underwrite securities.   -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

18 мая 2017, 22:45

Trump Treasury backs away from talk of breaking up big banks

The Trump administration on Thursday distanced itself from a populist push to break up the nation's biggest banks after months of publicly flirting with the idea. Treasury Secretary Steven Mnuchin emphatically rejected that move during a Senate hearing in response to a question by Sen. Elizabeth Warren (D-Mass.). Warren pressed him on what the administration meant by repeatedly saying it was open to an updated version of the Depression-era Glass-Steagall law, which separated commercial and investment banking.Mnuchin, a finance industry veteran who's leading the administration's drive to overhaul Wall Street regulations, said splitting up the banks "would be a huge mistake."That set off a testy exchange with Warren, who questioned how the administration could speak favorably of Glass-Steagall without supporting the breakup of the banks, which was at the heart of the law before it was repealed in 1999."This is like something straight out of George Orwell," Warren said during the Senate Banking Committee hearing.Mnuchin's comments put more daylight between the administration and the anti-Wall Street rhetoric that was a centerpiece of Trump's winning campaign. The GOP party platform even included a pledge that stated, "We support reinstating the Glass-Steagall Act of 1933, which prohibits commercial banks from engaging in high-risk investment." Yet Mnuchin's testimony raised more questions about what administration officials have in mind by promoting what they call a "21st Century Glass-Steagall" — branding that Warren had previously adopted for a bill that would force banks to cease certain activities. Early this month, National Economic Council Director Gary Cohn, a former president of Goldman Sachs, suggested in a private meeting with bankers that the administration's definition of Glass-Steagall was merely developing different sets of rules for large and small banks, according to people familiar with the discussion."If we had supported a full Glass-Steagall, we would have said at the time that we believed in Glass-Steagall, not a 21st Century Glass-Steagall," Mnuchin said on Thursday.He said the Trump team was "very clear in differentiating it." But many in the finance industry have been on high alert about the president embracing a breakup of the banks because the administration had not defined its position.For Warren, a potential 2020 presidential contender, the revelation marked one more opportunity to attack President Donald Trump for abandoning a populist movement that ushered him into office and embracing policies more in line with Wall Street's agenda."When it was politically convenient for Donald Trump and for the Republicans to say they were in favor of Glass-Steagall, then they were in favor of Glass-Steagall," Warren said in a rare scrum with reporters outside the hearing room. "But now that the giant financial institutions have been in to visit them, they've decided to reverse that 180 degrees."Senate Banking Chairman Mike Crapo (R-Idaho) said in an interview that Mnuchin's comments did not constitute a new position from the administration. "Separating the function of investment banking from deposit banking and making sure there are adequate protections there was something I think most members of Congress were willing to look at, and it's what I actually think they're talking about," he said. "But the notion of an absolute Glass-Steagall, which was what he discussed today, is not something I think the administration has ever said that they supported."

16 мая 2017, 10:38

Trump Reiterates Support for a New Glass-Steagall Act, But It Will it Pass Congress?

This Real News Network interview discusses where Trump and his allies stand on reviving Glass-Steagall.

Выбор редакции
15 мая 2017, 07:58

Trump Reiterates Support for a New Glass-Steagall Act, But It Will it Pass Congress?

Trump administration support for reinstating Glass-Steagall Act is an effort to appeal to Trump's base, but won't go anywhere. It would be beneficial, though, if it doesn't mean also deregulating the finance sector says Gerald Epstein of PERI Visit http://therealnews.com for more stories and help support our work by donating at http://therealnews.com/donate.

02 мая 2017, 07:18

Steven Mnuchin Tells Financiers They Should 'All Thank Him'

function onPlayerReadyVidible(e){'undefined'!=typeof HPTrack&&HPTrack.Vid.Vidible_track(e)}!function(e,i){if(e.vdb_Player){if('object'==typeof commercial_video){var a='',o='m.fwsitesection='+commercial_video.site_and_category;if(a+=o,commercial_video['package']){var c='&m.fwkeyvalues=sponsorship%3D'+commercial_video['package'];a+=c}e.setAttribute('vdb_params',a)}i(e.vdb_Player)}else{var t=arguments.callee;setTimeout(function(){t(e,i)},0)}}(document.getElementById('vidible_1'),onPlayerReadyVidible); Treasury Secretary Steven Mnuchin drew a scattering of laughs in a conference room full of financiers Monday when he said they should thank him for a surge in Wall Street stocks since the election of President Donald Trump in November. “You should all thank me for your bank stocks doing better,” Mnuchin, a 17-year veteran of Goldman Sachs, said during the Milken Institute’s annual global conference in Beverly Hills. In the video of his remarks, laughter can be heard following the comment. Mnuchin was the opening speaker for the economic research group’s Global Conference, and he spoke with Fox Business Network’s Maria Bartiromo about the ongoing efforts of the Trump administration to roll back financial regulations and launch the “largest tax reform in the history of our country.” Both the White House and Congress have taken swift action to repeal or suspend dozens of Obama-era regulations, including the dismantling of 2010’s Dodd-Frank Act, meant to rein in banks after the financial crisis. The Washington Post notes the Trump administration’s pro-finance rhetoric has likely helped bank stocks surge 18.6 percent since November, according to Standard and Poor’s. Mnuchin was confirmed as Treasure secretary Feb. 13. The president’s newly released tax plan is also expected to benefit big business, including banks, and lower tax rates on high-income earners, including bankers. Mnuchin’s comment drew sharp rebuke rather than laughter from some members of Congress, including Sen. Elizabeth Warren (D-Mass.), who called the statement “gross.” That’s the Trump Admin in a nutshell: Rich guys making each other richer & patting themselves on the back. Gross. https://t.co/c3UVpk4HSG— Elizabeth Warren (@SenWarren) May 1, 2017 Despite Mnuchin’s seeming coziness with Wall Street, Trump told Bloomberg News on Monday he was considering breaking up some of the country’s largest banks. The comments build on calls during his presidential campaign for a “21st century” Glass-Steagall Act that would once again separate consumer and investment banking. The legislation was repealed in 1999 and allowed for the rise of huge banking institutions. “I’m looking at that right now,” Trump told Bloomberg. “There’s some people that want to go back to the old system, right? So we’re going to look at that.” Watch Mnuchin’s full interview here. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

02 мая 2017, 07:18

Steven Mnuchin Tells Financiers They Should 'All Thank Him'

function onPlayerReadyVidible(e){'undefined'!=typeof HPTrack&&HPTrack.Vid.Vidible_track(e)}!function(e,i){if(e.vdb_Player){if('object'==typeof commercial_video){var a='',o='m.fwsitesection='+commercial_video.site_and_category;if(a+=o,commercial_video['package']){var c='&m.fwkeyvalues=sponsorship%3D'+commercial_video['package'];a+=c}e.setAttribute('vdb_params',a)}i(e.vdb_Player)}else{var t=arguments.callee;setTimeout(function(){t(e,i)},0)}}(document.getElementById('vidible_1'),onPlayerReadyVidible); Treasury Secretary Steven Mnuchin drew a scattering of laughs in a conference room full of financiers Monday when he said they should thank him for a surge in Wall Street stocks since the election of President Donald Trump in November. “You should all thank me for your bank stocks doing better,” Mnuchin, a 17-year veteran of Goldman Sachs, said during the Milken Institute’s annual global conference in Beverly Hills. In the video of his remarks, laughter can be heard following the comment. Mnuchin was the opening speaker for the economic research group’s Global Conference, and he spoke with Fox Business Network’s Maria Bartiromo about the ongoing efforts of the Trump administration to roll back financial regulations and launch the “largest tax reform in the history of our country.” Both the White House and Congress have taken swift action to repeal or suspend dozens of Obama-era regulations, including the dismantling of 2010’s Dodd-Frank Act, meant to rein in banks after the financial crisis. The Washington Post notes the Trump administration’s pro-finance rhetoric has likely helped bank stocks surge 18.6 percent since November, according to Standard and Poor’s. Mnuchin was confirmed as Treasure secretary Feb. 13. The president’s newly released tax plan is also expected to benefit big business, including banks, and lower tax rates on high-income earners, including bankers. Mnuchin’s comment drew sharp rebuke rather than laughter from some members of Congress, including Sen. Elizabeth Warren (D-Mass.), who called the statement “gross.” That’s the Trump Admin in a nutshell: Rich guys making each other richer & patting themselves on the back. Gross. https://t.co/c3UVpk4HSG— Elizabeth Warren (@SenWarren) May 1, 2017 Despite Mnuchin’s seeming coziness with Wall Street, Trump told Bloomberg News on Monday he was considering breaking up some of the country’s largest banks. The comments build on calls during his presidential campaign for a “21st century” Glass-Steagall Act that would once again separate consumer and investment banking. The legislation was repealed in 1999 and allowed for the rise of huge banking institutions. “I’m looking at that right now,” Trump told Bloomberg. “There’s some people that want to go back to the old system, right? So we’re going to look at that.” Watch Mnuchin’s full interview here. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

28 апреля 2017, 12:46

After 84 Years, FDR's First 100 Days Remain A Benchmark

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function onPlayerReadyVidible(e){'undefined'!=typeof HPTrack&&HPTrack.Vid.Vidible_track(e)}!function(e,i){if(e.vdb_Player){if('object'==typeof commercial_video){var a='',o='m.fwsitesection='+commercial_video.site_and_category;if(a+=o,commercial_video['package']){var c='&m.fwkeyvalues=sponsorship%3D'+commercial_video['package'];a+=c}e.setAttribute('vdb_params',a)}i(e.vdb_Player)}else{var t=arguments.callee;setTimeout(function(){t(e,i)},0)}}(document.getElementById('vidible_1'),onPlayerReadyVidible);   Thousands of banks had failed, reducing millions of middle-class Americans to sudden, shocking poverty. Families packed up and migrated from town to town in search of work as factories shuttered across the country. Farmers as far flung as the Dakotas, Tennessee and New York had taken over highways, physically blocking transport of meats and vegetables in a desperate bid to raise food prices. In a few weeks, a judge in LeMars, Iowa, presiding over 15 farm foreclosure cases would be dragged from his courtroom with a rope around his neck. A year earlier, police in Dearborn, Michigan, had fired on an army of unemployed workers led by Communist Party officials, killing five and injuring dozens more. This was no mere economic calamity. The American political project appeared to be in its death throes. It was early March of 1933. By mid-June, the threat of revolution would be gone. The American presidency would be redefined, and the federal government’s role in civic life overhauled under a political realignment unlike anything since the Civil War. The power of big business would be subjugated to the voting public for decades to come. Americans didn’t talk about the first 100 days of their first 31 presidents. But the frantic reforms implemented by Franklin Delano Roosevelt in the spring of 1933 set a new standard for leadership that his successors would struggle to live up to. When President John Fitzgerald Kennedy laid out his agenda in 1961, his plea for patience reflected heightened public expectations established by FDR: “All this will not be finished in the first 100 days. Nor will it be finished in the first 1,000 days, not in the life of this administration, nor even perhaps in our lifetime on this planet.” FDR signed 76 bills into law during in his first 100 days in office, 15 of which are legislative landmarks. Richard Nixon, Ronald Reagan and George W. Bush each signed fewer than 10 bills during their first 100 days, none of them iconic achievements. Donald Trump’s policy record is limited to the reversal of a few regulations approved by Barack Obama. (This has not prevented Trump from laughably declaring his first 100 days the most “accomplished” since FDR.) Roosevelt rescued the financial system, imposed sweeping new banking reforms, protected families from foreclosure, provided aid to farmers and laid-off factory workers, and created new government agencies that directly employed people desperate for jobs. FDR founded the Civilian Conservation Corps. to put millions of young men to work on environmental conservation efforts, along with the Public Works Administration to construct schools, dams, airports and other infrastructure. The Tennessee Valley Authority brought electricity to much of the South and broke predatory monopolies in the power market. Roosevelt established the Federal Deposit Insurance Corp. to guarantee citizens wouldn’t lose their savings in a bank failure (this came in pretty handy in 2008 and 2009), and the Securities and Exchange Commission to protect investors from corporate fraud. “Much of what was pushed through in the first 100 days were things for which there was pent-up demand within the Democratic electorate,” notes Eric Rauchway, a historian at the University of California, Davis and author of The Money Makers, a study of Roosevelt’s economic program. “There was farm relief, labor relief, there were some early steps at public works. … But other stuff was just forced on him by the extreme circumstance of the moment.” The bursting of a stock market bubble and the collapse of farm prices had all but destroyed the American banking system. Roosevelt’s first order of business upon taking office was to declare a bank holiday, closing every bank in the country and dispatch inspectors to pore over books and accounts. Under FDR’s Emergency Banking Act, the federal government agreed to meet the liabilities for any solvent bank. When the banks reopened a few days later, depositors were able to make withdrawals and the panic subsided. Today, many New Deal ideas and institutions are considered a normal part of governing. Even the most ardent conservatives don’t talk seriously about eliminating the FDIC or the SEC, and the TVA remains one of the largest U.S. producers of electricity.     Progressive and populist reformers had been clamoring for these policies for years, but they had no academic or intellectual support for their agenda. Roosevelt financed his project by taking the United States off the gold standard ― a radical change to the country’s monetary system that conservatives derided as “communist” well into the 1950s ― and by borrowing and printing money. In 1936, British economist John Maynard Keynes would publish his landmark The General Theory of Employment, Interest and Money, demonstrating why this strategy could work. But in 1933, the economic establishment believed these moves to be dangerous, even insane. But economists of the day had also believed that prolonged economic downturns were impossible. After a few weeks or months, prices would adjust and markets would get back to normal. The Great Depression upended these theories, throwing society into frightening, unchartered territory. Though it would take years for many of the projects from Roosevelt’s first 100 days to be implemented, the furious pace of activity helped calm an anxious public. “In his inaugural speech, Roosevelt says the country ‘demands action and action now,’” notes presidential historian Robert Dallek, whose FDR biography will be published in the fall. “And he set out that he could do what he could in the first 100 days of his term to remedy the sense of despair.” Although the titans of American finance and industry were generally opposed to Roosevelt’s policies, his firm agenda helped the economy rebound before the spending he had approved actually began flowing into the economy. “Roosevelt’s first 100 days revived business confidence, as is shown by the remarkable recovery of production which took place, without fiscal stimulus, during the second quarter of 1933,” economic historian Robert Skidelsky notes in an essay published in 1978. FDR’s presidency was experimental. It didn’t achieve anything like ideological unity until 1938. His spending projects repeatedly came into conflict with counterproductive efforts to balance the federal budget. Even his admirers, including Keynes, would at times accuse him of doing too much ― focusing too much on rewriting the rules of commerce and not enough on putting people to work (Keynes would not live long enough to fully appreciate the significance of FDR’s reforms. The Glass-Steagall Act’s separation between traditional banking and risky securities trading would put an end to U.S. banking panics for 50 years.). But after FDR’s first 100 days, the U.S. government wasn’t going back to a laissez-faire system. He had invented modern American government. function onPlayerReadyVidible(e){'undefined'!=typeof HPTrack&&HPTrack.Vid.Vidible_track(e)}!function(e,i){if(e.vdb_Player){if('object'==typeof commercial_video){var a='',o='m.fwsitesection='+commercial_video.site_and_category;if(a+=o,commercial_video['package']){var c='&m.fwkeyvalues=sponsorship%3D'+commercial_video['package'];a+=c}e.setAttribute('vdb_params',a)}i(e.vdb_Player)}else{var t=arguments.callee;setTimeout(function(){t(e,i)},0)}}(document.getElementById('vidible_2'),onPlayerReadyVidible); -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

28 апреля 2017, 12:46

After 84 Years, FDR's First 100 Days Remain A Benchmark

function onPlayerReadyVidible(e){'undefined'!=typeof HPTrack&&HPTrack.Vid.Vidible_track(e)}!function(e,i){if(e.vdb_Player){if('object'==typeof commercial_video){var a='',o='m.fwsitesection='+commercial_video.site_and_category;if(a+=o,commercial_video['package']){var c='&m.fwkeyvalues=sponsorship%3D'+commercial_video['package'];a+=c}e.setAttribute('vdb_params',a)}i(e.vdb_Player)}else{var t=arguments.callee;setTimeout(function(){t(e,i)},0)}}(document.getElementById('vidible_1'),onPlayerReadyVidible);   Thousands of banks had failed, reducing millions of middle-class Americans to sudden, shocking poverty. Families packed up and migrated from town to town in search of work as factories shuttered across the country. Farmers as far flung as the Dakotas, Tennessee and New York had taken over highways, physically blocking transport of meats and vegetables in a desperate bid to raise food prices. In a few weeks, a judge in LeMars, Iowa, presiding over 15 farm foreclosure cases would be dragged from his courtroom with a rope around his neck. A year earlier, police in Dearborn, Michigan, had fired on an army of unemployed workers led by Communist Party officials, killing five and injuring dozens more. This was no mere economic calamity. The American political project appeared to be in its death throes. It was early March of 1933. By mid-June, the threat of revolution would be gone. The American presidency would be redefined, and the federal government’s role in civic life overhauled under a political realignment unlike anything since the Civil War. The power of big business would be subjugated to the voting public for decades to come. Americans didn’t talk about the first 100 days of their first 31 presidents. But the frantic reforms implemented by Franklin Delano Roosevelt in the spring of 1933 set a new standard for leadership that his successors would struggle to live up to. When President John Fitzgerald Kennedy laid out his agenda in 1961, his plea for patience reflected heightened public expectations established by FDR: “All this will not be finished in the first 100 days. Nor will it be finished in the first 1,000 days, not in the life of this administration, nor even perhaps in our lifetime on this planet.” FDR signed 76 bills into law during in his first 100 days in office, 15 of which are legislative landmarks. Richard Nixon, Ronald Reagan and George W. Bush each signed fewer than 10 bills during their first 100 days, none of them iconic achievements. Donald Trump’s policy record is limited to the reversal of a few regulations approved by Barack Obama. (This has not prevented Trump from laughably declaring his first 100 days the most “accomplished” since FDR.) Roosevelt rescued the financial system, imposed sweeping new banking reforms, protected families from foreclosure, provided aid to farmers and laid-off factory workers, and created new government agencies that directly employed people desperate for jobs. FDR founded the Civilian Conservation Corps. to put millions of young men to work on environmental conservation efforts, along with the Public Works Administration to construct schools, dams, airports and other infrastructure. The Tennessee Valley Authority brought electricity to much of the South and broke predatory monopolies in the power market. Roosevelt established the Federal Deposit Insurance Corp. to guarantee citizens wouldn’t lose their savings in a bank failure (this came in pretty handy in 2008 and 2009), and the Securities and Exchange Commission to protect investors from corporate fraud. “Much of what was pushed through in the first 100 days were things for which there was pent-up demand within the Democratic electorate,” notes Eric Rauchway, a historian at the University of California, Davis and author of The Money Makers, a study of Roosevelt’s economic program. “There was farm relief, labor relief, there were some early steps at public works. … But other stuff was just forced on him by the extreme circumstance of the moment.” The bursting of a stock market bubble and the collapse of farm prices had all but destroyed the American banking system. Roosevelt’s first order of business upon taking office was to declare a bank holiday, closing every bank in the country and dispatch inspectors to pore over books and accounts. Under FDR’s Emergency Banking Act, the federal government agreed to meet the liabilities for any solvent bank. When the banks reopened a few days later, depositors were able to make withdrawals and the panic subsided. Today, many New Deal ideas and institutions are considered a normal part of governing. Even the most ardent conservatives don’t talk seriously about eliminating the FDIC or the SEC, and the TVA remains one of the largest U.S. producers of electricity.     Progressive and populist reformers had been clamoring for these policies for years, but they had no academic or intellectual support for their agenda. Roosevelt financed his project by taking the United States off the gold standard ― a radical change to the country’s monetary system that conservatives derided as “communist” well into the 1950s ― and by borrowing and printing money. In 1936, British economist John Maynard Keynes would publish his landmark The General Theory of Employment, Interest and Money, demonstrating why this strategy could work. But in 1933, the economic establishment believed these moves to be dangerous, even insane. But economists of the day had also believed that prolonged economic downturns were impossible. After a few weeks or months, prices would adjust and markets would get back to normal. The Great Depression upended these theories, throwing society into frightening, unchartered territory. Though it would take years for many of the projects from Roosevelt’s first 100 days to be implemented, the furious pace of activity helped calm an anxious public. “In his inaugural speech, Roosevelt says the country ‘demands action and action now,’” notes presidential historian Robert Dallek, whose FDR biography will be published in the fall. “And he set out that he could do what he could in the first 100 days of his term to remedy the sense of despair.” Although the titans of American finance and industry were generally opposed to Roosevelt’s policies, his firm agenda helped the economy rebound before the spending he had approved actually began flowing into the economy. “Roosevelt’s first 100 days revived business confidence, as is shown by the remarkable recovery of production which took place, without fiscal stimulus, during the second quarter of 1933,” economic historian Robert Skidelsky notes in an essay published in 1978. FDR’s presidency was experimental. It didn’t achieve anything like ideological unity until 1938. His spending projects repeatedly came into conflict with counterproductive efforts to balance the federal budget. Even his admirers, including Keynes, would at times accuse him of doing too much ― focusing too much on rewriting the rules of commerce and not enough on putting people to work (Keynes would not live long enough to fully appreciate the significance of FDR’s reforms. The Glass-Steagall Act’s separation between traditional banking and risky securities trading would put an end to U.S. banking panics for 50 years.). But after FDR’s first 100 days, the U.S. government wasn’t going back to a laissez-faire system. He had invented modern American government. function onPlayerReadyVidible(e){'undefined'!=typeof HPTrack&&HPTrack.Vid.Vidible_track(e)}!function(e,i){if(e.vdb_Player){if('object'==typeof commercial_video){var a='',o='m.fwsitesection='+commercial_video.site_and_category;if(a+=o,commercial_video['package']){var c='&m.fwkeyvalues=sponsorship%3D'+commercial_video['package'];a+=c}e.setAttribute('vdb_params',a)}i(e.vdb_Player)}else{var t=arguments.callee;setTimeout(function(){t(e,i)},0)}}(document.getElementById('vidible_2'),onPlayerReadyVidible); -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

08 апреля 2017, 13:00

Political Polarization Killed the Filibuster

The practice once promoted debate and compromise, but now, the 60-vote requirement is tantamount to a legislative death sentence.

07 апреля 2017, 19:30

New Glass Steagall: Repeal & Replace for Dodd-Frank ?

One of the great misunderstandings about the financial crisis is the role that repealing the Glass-Steagall Act played. This is newly relevant, as there has been interest from White House economic adviser Gary Cohn in restoring the Depression-era legislation. President Donald Trump is said to want to keep his campaign promise to restore Glass-Steagall as… Read More The post New Glass Steagall: Repeal & Replace for Dodd-Frank ? appeared first on The Big Picture.

11 декабря 2013, 00:45

Правило Волкера одобрено и вступит в силу в 2015 г.

Пол Волкер, инициатор "правила Волкера" Американские регуляторы одобрили законодательство по ограничению торговой деятельности банков, которое получило название "правило Волкера". Банковские компании отрицают необходимость принятия данных мер и готовят судебные иски против данного закона.  За принятие “правила Волкера” проголосовали все пять регуляторов, которые участвовали в процессе создания данного закона: ФРС США, Комиссии по ценным бумагам и биржам (SEC), Комиссии по торговле товарными фьючерсами (CFTC), Федеральной корпорации по страхованию вкладов (FDIC), свою подпись под проектом закона также поставил глава Управления валютного контролера (OCC). “Правило Волкера” запрещает банковским компаниям участвовать в торговых операциях на финансовых рынках, в том числе “с целью хеджирования рисков”, с использованием собственных средств (proprietary trading). Кроме того, банкам также запрещается увеличивать размеры компенсаций и денежных вознаграждений с целью поощрения подобных операций на финансовом рынке. Впервые с инициативой введения данного законодательства в 2009 г. выступил Пол Волкер, бывший глава ФРС (он занимал этот пост с 1979 по 1987 гг.). По мнению Волкера, повышенная торговая активность банковских компаний США по целому спектру активов стала одной из причин финансового кризиса 2008 г. С данной точкой зрения согласились в администрации президента Обамы, который одобрил начало работы над законопроектом в 2010 г. Однако в своем конечном виде, который был одобрен регуляторами, законопроект появился только 3 с половиной года спустя. Целью данного законодательства является снижение риска для финансовой системы США, а также всей глобальной экономики от торговой активности банков. Одним из громких примеров подобной активности банков в посткризисный период стало дело “Лондонского кита”: из-за рискованной стратегии JP Morgan потерял свыше $6 млрд. “Правило Волкера” начнет функционировать только в 2015 г. Во многом такое решение было принято под давлением банковских компаний, которые активно лоббировали против принятия данного законодательства. По данным некоммерческой организации Sunlight Foundation, в период 2010-2013 гг. наиболее тесно с регуляторами общались именно представители крупных банковских организаций.   За это время представители JP Morgan встречались с регуляторами более 30 раз, Goldman Sachs – более 20 раз. Также свой активный интерес к процессу формирования “правила Волкера” проявили в Bank of America, Morgan Stanley, Bank of New York Mellon, Citigroup, фонде BlackRock и ряде других финансовых компаний. Главы ряда банковских компаний, в частности Брайан Мойнихан из Bank of America Merill Lynch, уже попытались принизить значение данного закона.  BofA: "правило Волкера" ничего не изменит По мнению Мойнихана, "правило Волкера" не окажет заметного влияния на банковский сектор США. Однако при этом банковские компании не оставляют надежд на противодействие нововведению. По информации издания Financial Times, американские банки уже готовят иски против принятия "правила Волкера" (Wall St prepares Volcker rule legal challenges). Ряд экспертов уже поставили под сомнение эффективность "правила Волкера", назвав закон слишком мягким и содержащим слишком много лазеек для продолжения торговых операций банков с использованием собственного капитала. Подобная точка зрения высказывается в издании Forbes (The Volcker Rule Will Not Work). Стоит добавить, что принятие "правила Волкера" многие рассматривают как попытку частичного воссоздания закона Гласса – Стиголла (Glass – Steagall Act). После финансового краха 1929 г., который стал одним из катализаторов Великой депрессии в США, американские власти постарались ограничить спекулятивную активность коммерческих банков. Банкам было запрещено заниматься инвестиционной деятельностью. Были серьезно ограничены их возможности по операциям с ценными бумагами. Закона Гласса – Стиголла действовал в США с 1933 по 1999 гг., пока не был отменен "Законом о финансовой модернизации".

23 сентября 2013, 23:25

Ричард Фишер призывал коллег начать сокращение QE3

Глава ФРБ Далласа Ричард Фишер заявил, что он призывал своих коллег на заседании ФРС, проходившем на прошлой неделе, сократить программу количественного смягчения. Фишер является противником третьего раунда программы по выкупу облигаций Бездействие в этом вопросе, по его словам, привело к неопределенности и посеяло замешательство на финансовых рынках. По словам Фишера, многие инвесторы недовольны действиями ФРС, так как они ожидали, что на заседании будет принято решение сократить объемы выкупаемых облигаций. Фишер является противником третьего раунда программы по выкупу облигаций, известной как количественное смягчение, или QE3. В других речах Фишер называл крупнейшие американские банки "кинжалами, направленными в сердце экономики США". Глава ФРБ Далласа также является сторонником возврата закона Гласса-Стиголла 1933 г., который запрещал коммерческим банкам заниматься инвестиционной деятельностью, существенно ограничивал право банков на операции с ценными бумагами и вводил обязательное страхование банковских вкладов. Закон был отменен в 1997 г. Напомним, сейчас ФРС ежемесячно покупает облигации на $85 млрд, что должно способствовать росту цен на активы и стимулированию найма, расходов и инвестиций. ФРС также сохраняет краткосрочные процентные ставки близко к нулю, для того чтобы поддержать рост экономики. Ричард Фишер не входит в число президентов ФРБ и управляющих, которые в 2013 г. обладают правом голоса в Федеральном комитете по открытому рынку (Federal Open Market Committee, FOMC). В рамках ежегодной ротации голосов в FOMC он войдет в список голосующих членов комитета в 2014 г.