Free Republic

As we watch the Eurozone struggle with its financial challenges Keynesians keep telling us the solution to our economic problems is to spend more money, to pile up bigger debts. A week and a half ago, Standard & Poor’s downgraded the debt of more than half of the Eurozone's countries, and the failure of those policies should be very obvious by now. Solving the Greek debt crisis hit yet another snag on Sunday afternoon. New aid for Greece from the IMF, the European Commission and the European Central Bank would have relied on private bondholders “voluntarily” agreeing to a 50...

Financial markets are gradually regaining confidence in the eurozone, German Finance Minister Wolfgang Schäuble said Sunday. "This can be seen in the market reaction," Schäuble said in an interview with German public television ARD. "We're not yet in the clear, but we have seen in recent weeks and during recent bond sales that the markets are slowly regaining confidence." … Asked about an article in German news magazine Der Spiegel, which said Italy's Prime Minister Mario Monti had argued for a doubling in size of the eurozone's European Stability Mechanism (ESM), Schäuble said leaders would look closely at the mechanism...

The maker of snack cakes including Twinkies, Ho Hos, and DingDongs has filed for Chapter 11 bankruptcy protection. But a company spokesperson has assured that production of the famous cream-filled treat will continue as usual for now.“Throughout the proceeding, we’re going to operate business as normal,� said Hostess spokesman Erik Halvorson, according to CNNMoney. “They’ll keep making Twinkies.�Hostess declared bankruptcy for the first time in 2004, and didn’t emerge until 2009, an unusually long time for the situation. Even more unusual is the second Chapter 11 filing (or “Chapter 22,� in some legal circles) so soon after.Hostess blames unions and...

BRUSSELS—European Central Bank (ECB) chief Mario Draghi said on Thursday (12 January) after a monthly board meeting that he will keep up a "temporary" program of cheap loans for EU banks because it has "prevented a more serious credit crunch." The ECB also kept the interest rate at 1 percent following a decrease from 1.25 percent in November. "The provision of liquidity will continue to support euro-area banks and thus economic recovery. Our non-standard measures had a substantial contribution to improving the financial situation of banks," Draghi said during a press conference in Frankfurt. … Draghi highlighted the need to...

Media propagandists continue to advance the Democratic Party line. On December 21, Bloomberg News breathlessly reported, "The leading Republican candidates for president have embraced an explanation of the financial crisis that has been rejected by the chairman of the Federal Reserve, many economists and even three of the four Republicans on the government commission that investigated the meltdown." Reporter David J. Lynch further explained, "Both former House Speaker Newt Gingrich and former Massachusetts Governor Mitt Romney lay much of the blame on U.S. government housing policies, saying they led to the real estate crash that almost brought down the banking...

Estonia is the euro's newest member and also has the eurozone's fastest growing economyMost European leaders would be delighted if their economy was growing as fast as Estonia's.The small Baltic state's economy is forecast to have grown by 8% during 2011, according to the EU's official statistics body. That's more than five times faster growth than the European Union as a whole. But Estonia is still regaining the ground it lost during a financial crisis that struck it and its Baltic neighbours in 2008-9, when a property bubble burst spectacularly, causing the economy to shrink and unemployment to rocket to...

The day before Christmas, Joe Nocera did it again—wasted a perfectly good column with another attack on us, Peter Wallison and Ed Pinto. It’s worth reading for what it says about the Left’s current situation. According to Nocera, we “almost single-handedly� have created a “myth that Fannie Mae and Freddie Mac caused the financial crisis.� Those who have fallen for this myth, according to Nocera, include congressional Republicans and the Wall Street Journal’s editorial page. It’s somewhat implausible that two guys at a Washington think-tank, arguing that the financial crisis was caused by government housing policy, could create a...

The sum of overnight deposits at the European Central Bank (ECB) is often considered to be an indicator of the level of fear brewing within the financial sector. The greater the degree of distrust between banks, the more money banks tend to deposit on a daily basis with the ECB, where interest rates are low, but deposits more secure. This week has seen the level of deposits at the ECB's overnight facility rise to close to €412 billion ($538.4 billion)—the greatest amount seen since the euro's introduction, and representing a single overnight increase on Monday of €65 billion. The previous...

There are clear signs of a liquidity crunch in the asset markets right now, and the question I keep hearing is, Is this 2008 all over again? No, it’s worse. Much worse. In 2008 there was a lot more faith and optimism upon which to draw. But both have been squandered to significant degrees by feckless regulators and authorities who failed to properly address any of the root causes of the first crisis even as they slathered layer after layer of thin-air money over many of the symptoms. Anyone who has paid attention knows that those "magic potions" proved to...

Trade finance is drying up amid the financial crisis, threatening jobs and economic growth, trade sources warned Saturday. Banks like Credit Agricole and BNP Paribas -- two of the 25 financial institutions most active in such financing -- have recently reduced their trade financing business, said a trade source on the sidelines of a World Trade Organization ministerial conference. ... More than 90 percent of commercial transactions in the world require such credit, but the current crisis is forcing banks to hold on to capital and liquidity, leading to the lending market drying up and making credit more expensive.

Nobel Prize–winning economist Vernon Smith on the financial crisis, Adam Smith’s underrated insights, and his journey from socialist to libertarian “I remember the ’30s like it was yesterday,” says economist Vernon Smith. And he’s not kidding. In 1935, when the future Nobel Prize winner was 7 years old, his family decamped to their Kansas farm to wait out the hard times. “On the farms,” Smith explains, “you can eat.” His parents only made it to eighth grade, but “they were people who read,” and they expected their son to go to college. They got their wish—and then some. Smith’s higher...

NEW YORK (CNNMoney) -- Another trading day and another low for Bank of America's stock. Shares of Bank of America dropped more than 3% Tuesday, hitting a new 52-week low of $5.03 -- its lowest level since March 12, 2009. After the close of trading Tuesday, Bank of America was one of 37 financial institutions downgraded by S&P. Beyond the S&P downgrade, trading could become even more complicated in Bank of America's stock, if it falls below $5. Under that threshold, many broker-dealers will not allow investors to buy or short a stock on margin, according to a spokesperson for...

David P. Goldman, writing as Spengler in the Asia Times, diagnoses the heart of the Wall Street crisis, and lays out the solution to the rot in our financial markets. This is an important article to read and digest.Goldman was himself an executive at Credit Suisse, and saw firsthand the generation of profit-making deals in the slicing, dicing, and resale of elements of risk associated with large bundles of individual home mortgages packaged as securities. In his customary clear-eyed, data-rich style, Goldman explains how it all works, and where it went wrong. The ratings agencies - Moody's, Standard and...

"There is definitely going to be another financial crisis around the corner," says hedge fund legend Mark Mobius, "because we haven't solved any of the things that caused the previous crisis." We're raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out. We raised it again after seeing the remarks of Mr. Mobius...he pointed to derivatives, the financial hairball of futures, options, and swaps in which nearly all the world's major banks are tangled up. Estimates on the amount of derivatives out there worldwide vary....

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It should be clear that among the causes of the recent financial crisis was an unjustified faith in rational expectations, market efficiencies, and the techniques of modern finance. That faith was stoked in part by the huge financial rewards that enabled the extremes of borrowing, the economic imbalances, and the pretenses and assurances of the credit-rating agencies to persist so long. A relaxed approach by regulators and legislators reflected the new financial zeitgeist. All the seeming mathematical precision that was brought to investment, all the complicated new products, including the explosion of derivatives, that were intended to diffuse and minimize...

Everybody knows that California’s economy has struggled mightily since the 2008 financial crisis and subsequent recession. The state’s current unemployment rate, 12.1 percent, is a full 3 percentage points above the national rate. Liberal pundits and politicians tend to blame this dismal performance entirely on the Great Recession; as Jerry Brown put it while campaigning (successfully) for governor last year, “I’ve seen recessions. They come, they go. California always comes back.” But a study commissioned by City Journal using the National Establishment Time Series database, which has tracked job creation and migration from 1992 through 2008 (so far) in...

Could the Euro Trigger A 2008-Like Crash? Si, Oui, Yes.If we dispense with all the fancy stuff, we end up with a simple see-saw with the euro and global equities on one end and the much-hated U.S. dollar on the other.If we scrape away the ever-hopeful headlines predicting a new figurehead lackey or another vote will magically fix Greece, Italy, the euro, Europe's crumbling banks, etc., the global stock markets can be distilled down to one chart. And here it is: a see-saw with the U.S. dollar on one end and the euro and equities on the other. I know the...

What Iceland Teaches Us: “Let Banks Fail” Agence France-Presse notes: Three years after Iceland’s banks collapsed and the country teetered on the brink, its economy is recovering, proof that governments should let failing lenders go bust and protect taxpayers, analysts say.***“The lesson that could be learned from Iceland’s way of handling its crisis is that it is important to shield taxpayers and government finances from bearing the cost of a financial crisis to the extent possible,” Islandsbanki analyst Jon Bjarki Bentsson told AFP.“Even if our way of dealing with the crisis was not by choice but due to the inability...

Cardinal Peter K. A. Turkson and Monsignor Mario Toso, President and Secretary of the Pontifical Council for Justice and Peace at the Vatican, released a note last week entitled "Towards Reforming the International Financial and Monetary Systems In the Context of Global Public Authority." The PCJP shares its reflections on the demands that integral development, globalization and the financial crisis make on society. It expresses the considered opinions of its authors and the Council. As with all communique's involving Catholic Social Doctrine, this one focuses on the common good and human dignity, the pillars on which CSD conceptually rests. Like...

CHARLOTTE, North Carolina (Reuters) - Bank of America Corp employees are flooding rival companies with resumes as a major cost-cutting program gets under way at the second-largest U.S. bank. Competitors say they are getting an influx of calls, emails and LinkedIn connection requests as the bank embarks on a plan to slash 30,000 jobs over the next few years. The employees are scouting jobs in retail, commercial and investment banking, bankers and recruiters said. "It's definitely picking up," said a senior executive at a rival consumer bank.

Gretchen Morgenson and Joshua Rosner have written a devastating critique of the public-private partnership that was aimed at putting Americans, including unqualified Americans, into their own homes. This government-sponsored, corporation-endorsed alliance lay at the root of the financial crisis. Their book is timely as the hallowed notion of public-private partnerships--the goodness of which is beyond question in government, academic, policy and even some corporate circles--represents policy makers' ideal for achieving social and political objectives in contemporaryAmerica. Noman says caveat emptor! The story traverses similar territory to that covered by Peter Schweizer's "Architects of Ruin," and Thomas Sowell's "The Housing Boom...

Can not excerpt or re-post Bloomberg. Text at link.

Charles E. "Ed" Haldeman, Jr., has announced his plans to step down as chief executive officer of mortgage giant Freddie Mac sometime in the next year. The Federal Housing Finance Agency (FHFA), which regulates Freddie and its counterpart Fannie Mae, announced Wednesday that Haldeman is looking to leave the government-sponsored enterprise some time next year.

A plan by beleaguered Bank of America to foist trillions of dollars of funky Merrill Lynch derivatives onto its depositors is raising eyebrows on Wall Street. The rarely used move will likely save the bank millions of dollars in collateral but could put depositors’ cash behind the eight ball. The move also brought to light fissures between the nation’s top banking regulators, the Federal Deposit Insurance Corp. and the Federal Reserve, in the wake of new regulations meant to curb the free-wheeling habits that fostered the worst crisis in a generation back in 2008. At issue is BofA’s decision to...

Between the candidates’ debates and my conversations with the Occupy Wall Street protesters, it seems to me that there is a persistent, dangerous disconnect between our political conversation and reality. On the right, we’re still too focused on taxes, rather than on the spending that drives taxes. On the left, they’re . . . the Left, still, unfortunately for them. With an eye on 2012, here are ten important but sometimes counterintuitive facts to keep in mind:1.      There is no austerity.2.      There was no deregulation.3.      You can’t trust Republicans on spending.4.      Wall Street loves Democrats.5.      People who voted for Barack...

Reserve Bank of India (RBI) has warned of another financial crisis brewing, as global liquidity becomes a concern amidst central banks pegging their lending rates at near zero levels, leaving scope for another asset bubble to take down the global financial system. "There is, thus, incontrovertible evidence that there is yet again a huge under-pricing of risks in the financial system and, therefore, it is not a question of if, but when, the generic asset bubble caused by manifold increases in balance sheets of central banks will burst," said RBI, executive director, VK Sharma in his address in Singapore on...

There is no such thing as a Unicorn that craps out pretty colored candies. In the case at hand in the United States we have a government on both sides of the aisle that has made promises that are mathematically impossible to keep. That same government conspired with The Fed and with Wall Street to blow a series of bubbles that led you to believe, over the space of 30 years, that you could have more than you can actually pay for with your work output. This claim was a lie and it infested virtually every area of our nation....

I have been trading barbs with Occupy Wall Street supporters via social media and my own website for a few weeks now, some of it civil, but most of it not. One thing I have learned is that the Occupy Wall Street movement and the Tea Party have a couple of things in common; they are both upset about the state of the economy and both are fed up with politicians. Unfortunately, that is where the similarities end and the differences begin. The OWS’ers want to blame Wall Street and banks for all their problems while the Tea Party and...

Explosive Audio Unearthed: After the Sub Prime Crisis already started in 2007 Obama says Sub Prime Mortgages that gave houses to people WHO COULDN'T AFFORD THEM was a GOOD IDEA!!

CHICAGO – Three years have now passed since the collapse of Lehman Brothers, which triggered the start of the most acute phase of the 2007-2008 financial crisis. Is the financial world a safer place today? Within days after the 9/11 terrorist attacks in 2001, the US had erected new and enormous security measures at airports throughout the country. Within a month, the US military was on the ground in Afghanistan. Within three years the US had an official report on the causes of the events of 9/11; the well-resourced expert commission that produced it identified the weaknesses of America’s national-security...

Former Speaker of the House Newt Gingrich got worked up when asked about the Occupy Wall Street protests at last night's Bloomberg-Washington Post debate. Gingrich first sought to tie the protests to "left-wing agitators" before calling for the firing of Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner. He then doubled down, calling on former Sen. Chris Dodd and Rep. Barney Frank to be thrown in jail, not anyone on Wall Street. Asked if he actually meant for them to do prison time, Gingrich said he did, alluding to past ethical scandals. Watch the video below: CLICK ABOVE LINK...

The desperate search for an acceptable Republican Party presidential candidate continues. Republican leaders apparently are pushing New Jersey Gov. Chris Christie, who previously said no, to jump into the race. The GOP's frustration is palpable. Mitt Romney has been running for four years but generates little enthusiasm. Rick Perry was an instant front-runner before losing much of his support after unimpressive debate performances. Michelle Bachmann briefly streaked across the political firmament but now barely registers in the polls. Newt Gingrich committed political seppuku shortly after announcing his candidacy. Ron Paul's support is fervent but limited. However, the real Republican problem...

IMF Issues Brand New Warning About The Massive Risks To The Banking System Joe Weisenthal Sep. 21, 2011, 9:37 AMReleased this morning by the IMF. A new statement on huge risks to the banking sector. ------------------------------ * Weak growth, balance sheets and political resolve cause crisis of confidence * Large number of countries effected by government debt risks * Policymakers need to act to repair household, government and financial balance sheets Financial stability risks have risen sharply in recent months, as slower economic growth, market turbulence in Europe, and the credit downgrade of the United States have weighed on the...

The reality of the beginnings of the Financial Crisis was government housing policy that reduced underwriting standards for mortgages and created a tsunami of subprime debt. The truth that the Democratic Party refuses to discuss.

There's a classic sequence near the end of the 1997 movie Titanic that depicts the ship's sinking. As the bow of the ship takes on water and slides beneath the ocean, the stern of the ship rises out of the water and ends up vertical. There's a pause as the stern just bobs there in the middle of the ocean leaving the remaining passengers afraid and confused. Then, after a brief pause, the ship quickly sinks. As I watch economic and political news unfold, I get the distinct impression that in 2008 the liberal ship Titanic hit an economic iceberg...

<p>Cheney writes that in 2008 he was puzzled about GOP presidential nominee John McCain’s decision to suspend his campaign and request a meeting with congressional leaders to discuss the financial crisis at the White House.</p> <p>“Senator McCain added nothing of substance,” Cheney writes about the now-famous meeting. “It was entirely unclear why he’d returned to Washington and why he’d wanted the congressional leadership called together. I left the Cabinet Room when the meeting was over thinking the Republican presidential ticket was in trouble.”</p>

A Bronx boom-and-bust story shows why the nation hasn’t yet recovered from the financial crisis. As the American economy limps through its second “recovery summer,” hobbled by trillions of dollars in bubble-era debt, politicians and regulators should take a long look at an unlikely place: Kingsbridge, a neighborhood in the northwest Bronx. In some ways, Kingsbridge’s credit-bubble experience was no different from the rest of the nation’s. As the bubble reached its greatest size in late 2006 and early 2007, the financial system—aided by dizzyingly intricate instruments and coddled by the government, which had long kept investors from facing the...

(Published three years ago. Still important today). The crisis affecting the economy is a crisis of our civilisation. The values that we hold dear are the very same that got us to this point. The meltdown in the economy is a harsh metaphor of the meltdown of some of our value systems. A house is on fire; we see flames coming through the windows on the second floor and we think that that is where the fire is raging. In fact it is raging elsewhere. For decades poets and artists have been crying in the wilderness about the wasteland, the...

In a clip from his interview with WSJ's Simon Constable, Dr. Nouriel Roubini insists that it was the policies of George W. Bush that caused the current U.S. economic crisis.

NEW YORK—American consumers can expect bigger grocery bills in 2012, even as commodity prices are forecast to fall. (snip) In a recent report, the U.S. Department of Agriculture said grocery-store prices will likely rise 3% to 4% in 2012, on par with this year, even though ingredient costs may fall. The biggest increases would likely be in the first half of next year, but prices would most likely ease later in 2012, said USDA economist Richard Volpe.

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SHANGHAI — China, the largest foreign holder of United States debt, said Saturday that Washington needed to “cure its addiction to debts” and “live within its means,” just hours after the rating agency Standard & Poor’s downgraded America’s long-term debt. The harshly worded commentary, which was released by China’s official Xinhua news agency, was Beijing’s latest effort to express its displeasure with Washington. (snip) “The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” read the...

As Barack Obama continues to blame his predecessor for the tanking economy and the chronic unemployment that Obama promised to avoid with his big stimulus package more than two years ago, and as other Democrats get aboard the Blameshift Express, Byron York attempts to set the record straight. He focuses on the claim that eight years of spending and “reckless tax cuts� by the Bush administration bankrupted the country. When one looks at the numbers, the Democratic argument doesn’t stand up at all: This week a Florida Democratic representative, Corrine Brown, explained her vote against the debt-ceiling agreement by citing...

A large umbrella group for Tea Party activists targeted Republican leaders Tuesday for what they called caving in on the deficit talks. The Tea Party Nation put House Speaker John Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.) on notice "for betraying the movement that put Republicans in charge of the lower chamber last year." In a press release, Tea Party Nation founder Judson Phillips drew a hard line for the Tea Party position. Phillips warned that his organization is on the lookout for Republicans voting to give away "more borrowing authority to President Obama" without also ensuring spending...

        Papers & Studies Dissent from the Majority Report of the Financial Crisis Inquiry CommissionBy Peter J. WallisonAEI OnlineWednesday, January 26, 2011       Read the dissent in full as an Adobe Acrobat PDF.The question I have been most frequently asked about the Financial Crisis Inquiry Commission (the "FCIC" or the "Commission") is why Congress bothered to authorize it at all. Without waiting for the Commission's insights into the causes of the financial crisis, Congress passed and President Obama signed the Dodd-Frank Act (DFA), far-reaching and highly consequential regulatory legislation. Congress and the President acted...

President Barack Obama's best hope of re-election lies in provoking Republicans to force the United States into technical default, engineering a brief but severe financial crisis in order to appear as crisis-manager-in-chief. The Tea Party movement may be marching into a political ambush, in which Obama will be able to portray the born-again budget-cutters as irresponsible fanatics who threaten to tip America into a new depression. The now unpopular president then would assume the role of national savior in time of crisis. What would happen if August arrives without an increase in the US debt ceiling? There is no good...

In what could be a repeat of the easy-lending cycle that led to the housing crisis, the Justice Department has asked several banks to relax their mortgage underwriting standards and approve loans for minorities with poor credit as part of a new crackdown on alleged discrimination, according to court documents reviewed by IBD. [snip] Another Reno protege, Perez has compared bankers to Klansmen. Only difference is, he said, bankers discriminate "with a smile" and "fine print." He said this kind of racism, though more subtle, is "every bit as destructive as the cross burned in a neighborhood." Perez has put...

Nearly 4 in 10 Americans say they think the economy is in permanent decline, a new polls shows as deep pessimism about the economy becomes more widespread. Thirty-nine percent of those surveyed for a New York Times/CBS News poll released late Wednesday say they see the economy headed on a downward path - significantly worse than when the question was last asked in October and 28 percent of Americans said the economy was in permanent decline.

The entire U.S. financial system has become a gigantic shell game. While it is still in motion, a shell game can be mesmerizing to watch. But when it ends the consequences can be painful. So exactly what is a shell game? According to Wikipedia, a shell game "is portrayed as a gambling game, but in reality, when a wager for money is made, it is a confidence trick used to perpetrate fraud." Sadly, that is exactly what is happening on the global stage today. The Federal Reserve is like a con artist that is desperately trying to stay one...