Free Republic

Congressmen are like myna birds. If you teach them a phrase, they will repeat it over and over, without the slightest idea what they're saying or what it means. Like “upside down.” Last week a congressman was boasting about a big mortgage bailout plan the Democrats flushed through the House of Representatives. It would put the taxpayers on the hook for the mortgages of people who weren't making their payments. Under the legislation, home lenders would sell their bum mortgages to the federal government at 90 percent of the value of the mortgaged property. That requires the lender to take...

Former Federal Reserve Chairman Alan Greenspan said on Thursday that the worst of the credit crisis is over, according to attendees at a New York speech. Greenspan also said house prices still had a long way to fall and it was unlikely they would stabilize by year-end, according to meeting attendees who provided Reuters details of the speech delivered at the Alternative Public Strategies Conference. The attendees, who declined to be identified by name, said Greenspan mentioned that U.S. growth was likely to be sluggish for an extended period of time. The U.S economy is reeling from a housing-led slowdown,...

The global credit crunch has eased for bankers, says Warren Buffett. “The worst of the crisis on Wall Street is over,” Buffett said. “In terms of people with individual mortgages, there’s a lot of pain left to come...

President George W. Bush may turn out to be the top economic forecaster in the country. About a month ago he told reporters, "We're not in a recession, we're in a slowdown." At a White House news conference a few weeks later, despite the fact that reporters pressed him to use the "R" word, Mr. Bush refused. And on Friday, after the most recent jobs report -- which produced a much-smaller-than-expected decline in corporate payrolls, a huge 362,000 increase in the more entrepreneurial household survey (the best gain in five months), and a historically low 5 percent unemployment rate (4.95...

Is Treasury Chief Hank Paulson the financial equivalent of Civil War General George B. McClellan? The "Young Napoleon" brilliantly organized and trained Union armies in the first year and a half of the Civil War. His problem: He couldn't bring himself to actually engage the enemy, always proffering excuses as to why he couldn't take decisive action. An exasperated Abraham Lincoln finally fired him. Mr. Paulson repeatedly says he wants a strong U.S. dollar. Last month he told Reuters: "I've been as consistent as anyone that you've ever heard in saying that the strong dollar [is] in our nation's interest."...

The Federal Reserve on Friday issued proposals to restrict various credit-card billing practices, including double-cycle billing and unreasonable late charges. The proposals aim to protect credit-card users and clarify costs by prohibiting actions such as raising an annual percentage rate unless certain exceptions apply, treating a payment as late unless consumers have been provided with a reasonable amount of time to make payments and unfairly maximizing charges. -SNIP- In a statement Friday, Edward Yingling, president and chief executive of the American Bankers Association, said the Fed's proposal is an "unprecedented regulatory intrusion" into the marketplace. "The proposal would greatly restrict...

SAN FRANCISCO (MarketWatch) -- The dollar was up against most other major currencies Friday, though down from session highs, after government data showed that the U.S. labor market and factory orders were not as weak as expected. The economy lost 20,000 nonfarm payroll jobs last month, according to a survey of business establishments, much less than the 81,000 lost in March and way below the 78,000 decline expected by economists surveyed by MarketWatch. See Economic Report. "The unemployment rate also dropped from 5.1% to 5.0%, triggering a widespread dollar rally. The better-than-expected NFP number will help to confirm the near-term...

NEW YORK (MarketWatch) -- The Federal Reserve, along with other central banks, said Friday that it was increasing the funding it is providing to banks and announced that, for the first time, it was willing to accept bonds backed by auto loans and credit cards. "In view of the persistent liquidity pressures in some term funding markets, the European Central Bank, the Federal Reserve and the Swiss National Bank are announcing an expansion of their liquidity measures," the Fed said in a statement. The Fed took the move in an attempt to flood the market with supply and lower short-term...

Washington - The US Federal Reserve in a joint effort with the European and Swiss central banks on Friday expanded lending to banks struggling to raise capital amid an ongoing financial crisis. The Fed increased its offering through a bi-weekly Term Auction Facility - first created in December to help investment banks boost liquidity - from 50 billion dollars to 75 billion dollars. The European Central Bank (ECB) boosted its own bi-weekly auction offering from 15 billion dollars to 25 billion dollars. The Swiss National Bank (SNB) said it would begin offering bi-weekly auctions of up to 6 billion dollars....

The housing finance bailout continues. There’s obviously still quite a bit of junk paper out there. And the Fed is going to spread money everywhere, the U.S., the EU and Switzerland, in response...The Fed announced today an increase in the amounts auctioned to eligible depository institutions under its biweekly Term Auction Facility (TAF) from $50 billion to $75 billion, beginning with the auction on May 5. This increase will bring the amounts outstanding under the TAF to $150 billion...

WASHINGTON (MarketWatch) - The Federal Reserve is expected to approve on Friday a proposal that would restrict various billing practices of credit card companies, including double-cycle billing and unreasonable 'late' charges. The proposals, aimed to protect credit card users, would prohibit practices such as: treating a payment as late unless consumers have been provided with a reasonable amount of time to make payment. increasing the annual percentage rate on an outstanding balance unless certain exceptions apply. double-cycle billing, in which institutions compute finance charges based on outstanding balances in billing cycles preceding the most recent billing cycle. assessing a fee...

The Fed said it was boosting the amount of emergency reserves it supplies to U.S. banks to $150 billion in May, from the $100 billion it supplied in April. The Fed took this action and several other moves to boost credit in coordination with the European Central Bank and the Swiss National Bank.

Investors were unimpressed by the Federal Reserve's relatively small interest-rate cut and downright spooked that the central bank's long-running cycle of pouring cheaper money into the U.S. economy may soon be over altogether. The result: A day-long stock rally sparked by profit news and economic data disintegrated following the Fed's announcement Wednesday, leaving major indicators in the red. The Dow Jones Industrial Average, which had posted a gain of more than 120 points prior to the Fed announcement, finished down 11.81 points, or 0.1%, at 12820.13. A 9.4% rise in its component General Motors helped the blue-chip avoid an even...

BANK AND OTHER FINANCIAL STOCKS rallied strongly Thursday on further optimism that the corner has been turned in the credit crisis. ...Ironically, financials jumped following a Wall Street Journal story Thursday suggesting the Federal Reserve will lower its key interest rate target only another 25 basis points (a quarter percentage pointLower interest rates are the traditional tonic for financials. But the stock market seems to have inferred that, if the Fed trims the overnight federal funds rate only one more time, it would signal it signals its work is done... After all, the Fed under Chairman Ben Bernanke not only...

When the Federal Reserve cuts interest rates for a seventh consecutive time this Wednesday, it will begin to wind down a pernicious campaign that has flooded the market with cheap dollars since last summer. At the same time, the whoosh of air from Europe's deflating credit bubble puts new pressure on the European Central Bank to begin cutting borrowing costs in order to goose growth. The strategy shifts by central banks will drive a greenback comeback against the overpriced euro, turning back the 15% slide that since August has lifted the euro -- to a record $1.60 last week --...

No bear wants to be a perma-pessimist, ever waiting for the sky to fall. So, sunk in a deep armchair with an optimistic bottle of Rioja (Baron De Ley Reserva), I have tried to tot up reasons why the great credit smash-up of 2007-2008 may now be safely over, heralding sunlit uplands once again. 1) Ben Bernanke has carried out the most dramatic rescue since the creation of the US Federal Reserve. His emergency rate cuts - 125 basis points over eight days in January - was a "game changer", as they say in London’s American Quarter, Canary Wharf. By...

“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.� -Thomas Jefferson The Founding Fathers put Congress in control of the the U.S. monetary system. In 1913 Congress relinquished this awesome power and gave it to a private cartel with the passage of the Federal Reserve Act. For almost 100 years, Federal Reserve policy has swindled Americans...

Some say the world will end in fire, Some say in ice. -- Robert FrostAnd some say it will end because of subprime mortgages. But for those who cultivate fears of catastrophes as excuses for expanding government supervision of other people’s lives, the bad news is that the world is not going to end—not from global warming or economic cooling or anything else. Today’s untethered Federal Reserve will, however, make the muddle-through interesting. The late Sen. William Proxmire, a populist Democrat who represented Wisconsin for 32 years, wanted all members of Congress to write on their bathroom mirrors, so it...

There has been a lot of talk in the news recently about the Federal Reserve and the actions it has taken over the past few months. Many media pundits have been bending over backwards to praise the Fed for supposedly restoring stability to the market. This interpretation of the Fed's actions couldn't be further from the truth. The current market crisis began because of Federal Reserve monetary policy during the early 2000s in which the Fed lowered the interest rate to a below-market rate. The artificially low rates led to overinvestment in housing and other malinvestments. When the first indications...

Economy: Ex-Fed chief Alan Greenspan has spent the past few weeks denying he deserves blame for the housing crisis. Sorry, maestro, you do deserve some blame — but not for the reasons people think.Greenspan left office on Jan. 31, 2006, amid much praise. Indeed, he mostly did a fine job as the nation's top banker for 18 1/2 years. But his last seven years were rocky and marred by errors — errors that helped create a record stock market crash and a subsequent tailspin in the housing market that we're still trying to clean up. Writing recently in the Financial...

Alan Greenspan may be correct that a glut of global saving pumped up the housing bubble by keeping long-term interest rates low. If so, then watch out, because the situation has gotten worse: Foreign stockpiles of U.S. dollars are fatter and interest rates lower than at housing's zenith in 2005. Global central-bank reserves surged to a record $6.4 trillion in the fourth quarter of 2007, according to the International Monetary Fund, up from about $4 trillion in 2005. Those reserves are pouring into U.S. Treasury bonds for safekeeping. Foreigners held $2.32 trillion in Treasurys in the fourth quarter, compared with...

The Bush administration yesterday unveiled a plan to rescue 100,000 homeowners at risk of foreclosure by relaxing eligibility standards for government-backed loans and encouraging lenders to forgive a portion of their debt. The proposal was quickly criticized by consumer groups, who said it would do little to slow a mortgage meltdown that last year threw more than 1.5 million households into foreclosure. But it was embraced by key Democrats, who said the White House is acknowledging that more aggressive government action is needed to help the most hard-pressed borrowers who owe banks more than their homes are worth because of...

Is M3 1 really gone? After reading this little known press release a few weeks ago, I started to wonder… and the surprising result is that (except for the Eurodollars element of M3), the data is still available with which to reconstruct M3.

While conservatives inside the administration are unhappy about intervention in markets, President Bush seems content with how the Federal Reserve and Treasury cooked up the deal with erstwhile colleagues in Wall Street. There is little conservative or Republican about the administration's approach to the fiscal crisis, as reflected in Room G-50. Uncritical Democratic senators were not even inquisitive. The closest a senator came to asking who set the price for JPMorgan was this apologetic question from Committee Chairman Christopher Dodd: "There's just reports -- I want to share them with you -- that JPMorgan Chase would make an offer of...

"Oh, no! Two dollars!" So cried investors three weeks ago. The Federal Reserve had just announced that it was lowering the discount rate by a quarter of a point and had arranged for the sale of Bear Stearns to JPMorgan Chase. Stock futures jumped on news of the discount rate cut and Bear sale until investors heard the price. The market's anxiety was justified. If a legendary Wall Street investment bank that investors valued at over $100 per share just last December was suddenly worth next to nothing, what were the other Wall Street firms, such as Goldman Sachs, Merrill,...

The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail. Among the options: Having the Treasury borrow more money than it needs to fund the government and leave the proceeds on deposit at the Fed; issuing debt under the Fed's name rather than the Treasury's; and asking Congress for immediate authority for the Fed to pay interest on commercial-bank reserves instead of waiting until a previously enacted law permits it in 2011. No moves are imminent because the Fed still has plenty of balance sheet room for...

Growth worries prompt aggressive ease, but prompts vigorous dissent WASHINGTON (MarketWatch) -- When Federal Reserve officials gathered behind closed doors last month to set monetary policy, they confronted new projections of much slower growth, leading them to brush aside worries about rising prices and cut rates aggressively, according to a summary of the meeting released Tuesday. The officials learned that the Fed staff had slashed its growth forecast for 2008 in its projection prepared for the meeting. Although spending and production data early in the year wasn't much weaker than the staff had expected, "many other indicators of real activity...

NEW YORK (CNNMoney.com) -- Some members of the Federal Reserve are worried about the possibility of a "severe and protracted downturn" in the U.S. economy, according to the minutes of the central bank's latest minutes released Tuesday. The minutes show that some Fed policymakers are concerned that the problems in the "housing sector had deepened and that considerable uncertainty surrounded the outlook for housing." The Fed cut its key federal funds rate by three-quarters of a point at the March 18 meeting, its sixth rate cut since September. The Fed has been cutting rates in an effort to keep the...

NEW YORK (MarketWatch) -- Former Federal Reserve Chairman Alan Greenspan has endorsed Republican Sen. John McCain for president, according to Reuters, which cited an interview in El País published Sunday.

think few people realize that America/the world is facing the biggest financial storm ever, and how dangerous it is for investing in stocks before a full implosion. The housing-induced credit crisis has gone far beyond anyone can potentially control, probably not even the Fed. Reading over so many current/future proposals from politicians and bloggers, I have my own thoughts in this. For sure, there simply isn’t a solution without pain. But there can certainly be solutions that are more fair and less pain. One of the most fair and easiest way to help propping up the housing market is to...

[snipped] Could tightened regulation of subprimes have contained some of the reprehensible, and presumably criminal, acts of lenders? Probably. But the broader crisis would likely have arisen even with increased micro-surveillance. The core of the subprime problem lies with the misjudgments of the investment community. Subprime did not break from its localized niche status until 2005. As Ben Bernanke recently put it: “The deterioration in underwriting standards …appears to have begun in late 2005.” I assume that judgment reflected the increased delinquency behavior that is now evident for loans initiated in late 2005 and subsequently. Subprime securitization exploded because subprime...

Thursday's Senate hearing on the Bear Stearns bailout included a lot of obligatory testimony and political grandstanding, which was predictable. Missing from the dog and pony show, however: Any sense of accountability from Bear CEO Alan Schwartz. Schwartz blamed the disaster on a "run on the bank" stemming from "unfounded rumors and attendant speculation [which] became self-fulfilling." And while it's true rumors persist that Bear Stearns was the target of short-sellers, rumor-mongering is part of the reality on Wall Street. Schwartz also cited an "honest disagreement" over the length of a short-term lending facility granted by JPMorgan days before Bear's...

Bob Reich, whom I knew vaguely long ago, writes a demagogic column for the American Prospect about the Bear Stearns "bailout": Some of the dollars I'm sending to Washington are now being used to backstop Wall Street investment bankers, hedge fund and private equity managers, and anybody else associated with a borrower that's too big to fail. The reason they're too big to fail is they've borrowed so much from me and from you - from our pension funds and money-market funds - that if they went bust, our savings would disappear. *** The reason they've been able to borrow...

WASHINGTON (MarketWatch) -- Following is the text of remarks that Timothy Geithner, president of the New York Federal Reserve Bank, delivered Thursday before the Senate Banking Committee, as provided by the bank. Good morning, Chairman Dodd, Ranking Member Shelby, and other members of the Committee. Thank you for giving me the opportunity to appear before you today. I am here to outline the actions by the Federal Reserve Bank of New York in response to present challenges in financial markets, including those in relation to the proposed merger of Bear Stearns and JPMorgan Chase. On the evening of Thursday, March...

The US Federal Reserve has sent staff into some of Wall Street’s biggest firms and its New York branch is gathering evidence on key traders’ activities as America’s central bank raises its scrutiny of risk to an unprecedented level. Fed staff have set up shop in Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns to monitor their financial condition just days after Henry Paulson, the US Treasury Secretary, proposed that the Fed become the financial industry’s “risk czar”. This is the first time in more than a decade that the Fed has put staff in securities firms...

Ever since the government bailout of Chrysler in 1979-80, this country has been on a course of raising the safety net so that the market’s discipline, in a capitalistic economic system, has been truncated. We have witnessed a growing level of decisions that are based upon expediency rather than sound long-term decision making. Each time these expedient decisions are made, the level of risk within the U.S. economy has been increased. The market’s discipline is not allowed to work for fear of the potential economic fallout. In light of the above comments, the partners of FPA came to a unanimous...

WASHINGTON — Homebuilders and the mortgage industry are emerging as big victors in a bipartisan agreement reached by Senate leaders on legislation designed to limit the housing crisis. The $15 billion Foreclosure Prevention Act of 2008, expected to be debated Thursday afternoon on the Senate floor, is drawing fire from critics who say it would do little to actually prevent foreclosures. The bill contains a $6 billion emergency tax break that would let companies use losses from 2008 and 2009 to offset profits earned over the previous four years, instead of the usual two-year timeframe. That's good news for big...

April 3, 2008 Ben Bernanke admits Bear Stearns was hours from collapse Dearbail Jordan US Federal Reserve chairman, Ben Bernanke, today revealed that Bear Stearns was just one day away from going bust when the central bank stepped in to save the Wall Street bank to prevent chaos and a "severe" impact on confidence. Speaking for a second day in front of US Congress, Mr Bernanke attempted to justify JP Morgan Chase's rescue of Bear Stearns, in a deal that included the US Fed agreeing to back $29 billion of the troubled investment bank's assets. Mr Bernanke said: "... on...

The gold bugs are coming out of their holes again. When I last wrote on gold, the metal was challenging $1,000, a level which was passed that day. See March 17 column. After that, gold's stumbled, down $70 at one point, although up $10.60 over this past week. But two crucial factors have swung encouragingly, rallying the gold bugs. The first: the price of gold in India, by far the world's largest importer of the metal. India is a massive buyer of bullion for jewelry and cares little for the rest of the world's concerns. If the Indians want to...

The Fed on SteroidsGeoff Metcalf "Giving money and power to government is like giving whiskey and car keys to teenage boys." ~ P.J. O’Rourke So the Treasury Department wants Congress to gift the Federal Reserve with broad new authority and power to ride rough shod over financial market stability (or lack thereof). The New York Times described it as “allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.” Giving the Fed more power is like giving crack cocaine to Jihadists…it’s NOT a good idea. This latest bureaucratic brain...

Depression postponed!

You might want to put a big red "X" on today's date. It may mark the start of the biggest financial revolution in the nation's history, and is a landmark in the planned, or otherwise, transition from 'free markets' to an emerging 'socialism for the rich' which is aimed at shifting the cost of bailing out bankers and speculators to the wallets of America's working class. It will come packaged as a 200 page set of proposed regulations which broad new powers to the (not really) Federal Reserve, designating it a "market stability regulator". In plain English, it means something...

Treasury Secretary Henry Paulson revealed plans for the most sweeping overhaul of financial regulation since the Great Depression. ...Many critics blame lax oversight for the mortgage mess. But Paulson, a 30-year Wall Street vet, said regulation must be light enough to keep markets innovative. The plan, which would need congressional action for many changes, seeks to streamline a hodgepodge of overlapping jurisdictions that date back to the Civil War. It would give the Fed more power to protect the stability of the entire financial system while merging daily bank supervision into one agency, down from five now. It would create...

When This Week assembled a round-table of four liberals versus one conservative yesterday, I kvetched. Maybe I should have cheered. ABC's idea of balance looks good compared to that of CBS. This morning's Early Show segment on the Bush admin's plan, to be announced later this morning, to regulate the financial industry was essentially conservative-free. OK, to be absolutely accurate, there was a brief clip of Treasury Secretary Paulson saying the plan would protect the Fed's balance sheet and US taxpayers. But in her set-up piece, CBS's Kimberly Dozier emphasized the negative: "critics say it's win-win for banks, not the...

An influential member of the Federal Reserve called for more financial education to help low-income mortgage borrowers Monday. In a speech given at the National Interagency Community Reinvestment Conference in San Francisco, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, said the mortgage crisis could hit lower income and minority communities the hardest. Community impact "The foreclosure crisis is likely to have a profound impact on the communities you work in, with effects that go well beyond the housing sector," she said. A rise in foreclosures could drive down property values and increase crime, as well...

Never has one word been used so many times by so many people who think they know what's best for our sluggish economy than the word "taxpayers." Take the New York Times, for example. On Sunday, an editorial discussing the steps that the Federal Reserve recently took to prevent Bear Stearns Companies Inc. from going bankrupt mentioned the word "taxpayers" no less than nine times. -SNIP- Like many others, the Times is worried that taxpayers will bear some or all of the cost of rescuing Bear Stearns, and thus averting a possible crisis to our financial system. I'm not so...

The US Federal Reserve is examining the Nordic bank nationalisations of the 1990s as a possible interim solution to the US financial crisis. The Fed has been criticised for its rescue of Bear Stearns, which critics say has degenerated into a taxpayer gift to rich bankers. A senior official at one of the Scandinavian central banks told The Daily Telegraph that Fed strategists had stepped up contacts to learn how Norway, Sweden and Finland managed their traumatic crisis from 1991 to 1993, which brought the region's economy to its knees. It is understood that Fed vice-chairman Don Kohn remains very...

Central Planning and Herd Mentality Professional politicians, investors, and journalists are working in concert to push forward new legislation to greatly expand the powers and role of the Federal Reserve. "The markets have failed" they protest, and the solution they see is more central planning. The problem is, more central planning will only re-enforce the herd mentality that created the housing bubble and the current commodities spike. The herd theory of the markets is important to understanding how the housing bubble became such a problem, but too often the herd mentality is written off as "irrational." In this article, the...

WASHINGTON -- The cover of the latest issue of BusinessWeek shows Ben Bernanke in profile against a bright red and orange backdrop, pensively stroking his grey beard and looking remarkably like Vladimir Ilyich Lenin. The imagery is intentional and pointed. From BusinessWeek to The Wall Street Journal and beyond, the U.S. business elite has awoken to the realization that the U.S. Federal Reserve Board, backed by the Bush administration, has embarked on a revolutionary course to save financial capitalism from implosion. It isn't just about the Bear Stearns rescue, which Mr. Bernanke greased with a $30-billion (U.S.) loan. Mr. Bernanke's...

Treasury Secretary Henry Paulson's proposed sweep of financial regulation would emphasize more control at the federal level, at the expense of state oversight, and consolidate an alphabet soup of existing agencies. It is an idea that has been kicking around for a while, and one that is bound to provoke heated debate on Capitol Hill and among the various banking and market oversight agencies, which are already tripping over each others' turf. It is also bound to please some circles of Wall Street because the plan, while strengthening the Federal Reserve's role over certain aspects of the markets, like risk...