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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...

Jonah rightly calls today’s David Brooks column a must-read. Brooks discusses Reckless Endangerment, the new book by Gretchen Morgenson and Joshua Rosner exposing Fannie Mae’s role in the runup to the financial crisis. Brooks also rightly credits Michele Bachmann for her important role in publicizing a topic many other national politicians have been silent on. I’ve only had a chance to give Reckless Endangerment a quick look, but my impression is that it tells the right story, if a bit too much from Fannie Mae’s point of view. In Morgenson and Rosner’s telling, Fannie Mae effectively buys off ACORN and other...

The feud between ECB president Jean-Claude Trichet and German finance Minister Wolfgang Schaeuble escalated in a major way today with members of German Parliament siding with Schaeuble and against the wishes of the ECB. German Politicians Demand Private Creditors Participate Please consider Germany MPs discuss resolution on Greece aidGerman members of parliament are discussing on Thursday a joint motion for a resolution demanding the fair participation of private creditors in future aid to Greece, a draft of the paper obtained by Reuters said. The deputies from all three parties in Chancellor Angela Merkel's center-right coalition are demanding to have a say...

With its shiny buildings and galloping economy, Gurgaon is often portrayed as a symbol of a rising “new” India, yet it also represents a riddle at the heart of India’s rapid growth: how can a new city become an international economic engine without basic public services? How can a huge country flirt with double-digit growth despite widespread corruption, inefficiency and governmental dysfunction?...In Gurgaon and elsewhere in India, the answer is that growth usually occurs despite the government rather than because of it. India and China are often considered to be the world’s rising economic powers, yet if China’s growth has...

Have you heard the one about a homeowner foreclosing on a bank? Well, it has happened in Florida and involves a North Carolina based bank. Instead of Bank of America foreclosing on some Florida homeowner, the homeowners had sheriff's deputies foreclose on the bank. It started five months ago when Bank of America filed foreclosure papers on the home of a couple, who didn't owe a dime on their home. The couple said they paid cash for the house. The case went to court and the homeowners were able to prove they didn't owe Bank of America anything on the...

The mixed signals regarding the economy's health are taking a toll. Americans are growing increasingly doubtful about direction of the US economy, according to the latest survey from business-advisory firm AlixPartners. In fact, an increasing number, some 61 percent, say they don't expect to return to their respective pre-recession lifestyles until the spring of 2014, if ever. What's worse, a full 10 percent said they expect they will never return to pre-recession spending. That's a more pessimistic view than last year, when those surveyed expected that they could be back to pre-recession spending levels by the middle of 2013. "Americans...

WASHINGTON -- WASHINGTON-In the absence of federal prosecutions over Wall Street's role in the financial crisis, the Manhattan district attorney has subpoenaed Goldman Sachs regarding allegations that the giant investment bank bet heavily against its clients in risky mortgage deals, two people familiar with the matter said Thursday. [snip] It could not be learned whether the office of District Attorney Cyrus Vance Jr. is examining any other of 27 offshore deals pegged to the performance of $28 billion in risky mortgage securities that Goldman sold in 2006 and 2007. The Senate panel limited its inquiry to four of those deals...

(Reuters) - The recovery of Citigroup and Bank of America provided famed hedge fund managers like Lee Ainslie and Jeff Altman some of their biggest gains last year, but now the smart money is getting out while the getting is good. With Ainslie's Maverick Capital, Altman's Owl Creek Asset Management and other major funds backing away from the banking sector in the first quarter, financials suffered the biggest decrease in sector holdings among the Smart Money 30, a group of some of the largest stock-picking hedge funds. Ainslie, Altman and Stephen Cucchiaro's Windhaven Investment Management dumped their entire holdings in...

The following is just a sampling of the financial warnings that we have seen in recent days from some prominent voices.... *Economist Nouriel Roubini: "I think right now we're on the tipping point of a market correction. Data from the U.S., from Europe, from Japan, from China are suggesting an economic slowdown." *Jim Rogers: "I would expect to see some serious problems in the foreseeable future….By 2011, 2012, 2013, 2013, I don't know when, we're going to have an economic slowdown again." *Mark Mobius, the executive chairman of Templeton Asset Management's emerging markets group: "There is definitely going to be...

'Stagflation" is an ugly word for an ugly situation: persistent high inflation combined with high unemployment and stagnant demand in a country's economy. The term was coined by British politician Iain Mcleod in a speech to Parliament in 1965. We haven't experienced it here in the United States since the bad old days of the 1970s. Yet with prices on the rise and unemployment still high, the U.S. economy again seems to be entering stagflation. April's producer price index for finished goods, which excludes services and falling home prices, rose 6.8%. The Bureau of Labor Statistics reports that intermediate goods...

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A year after rescuing Greece from default, Europe stares into the abyss. The bailout is insufficient. Greece needs more money, and it can't borrow from private markets where it faces interest rates as high as 25 percent. But Europe's governments are reluctant to advance more funds unless other lenders -- banks, bondholders -- absorb losses by writing down their debts. This would constitute a default, risking a broader banking crisis that might torpedo Europe's fragile recovery in France, Germany and elsewhere. There is no easy escape. This "debt crisis" is increasingly a political and social crisis. Looming over the financial...

In an almost verbatim repeat of Carl Icahn's words of caution which we noted yesterday, Templeton's legendary chairman Mark Mobius said that "another financial crisis is inevitable because the causes of the previous one haven’t been resolved" ... at the Foreign Correspondents’ Club of Japan in Tokyo... "There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan in Tokyo today in response to a question about price swings...nothing in the structure of capital markets has changed,...

Pop quiz: Which country is in worse fiscal condition — Greece or the United States? Greece, struggling to avoid default on its massive national debt, obviously is in bad shape. This year it will run a budget deficit equal to 9.5 percent of its GDP. That actually is a significant improvement over last year, when its deficit topped 15 percent of GDP, though it remains well above its target of 7.4 percent. Greece’s overall national debt will be slightly higher than 150 percent of GDP by the end of the year. And the worst is yet to come. If Greece...

As we have seen time and again, every country pursuing profligate debt-financed fiscal policies ultimately hits some sort of wall - as was the case in Iceland recently, not to mention the Club Med countries in the euro zone. The United States may, too, if it doesn’t get its fiscal act together, as the recent Standard & Poor’s credit outlook warning attests. Canada did hit that debt wall nearly two decades ago as its deficits and debts became increasingly difficult to reverse. The federal government, both Liberals and Conservatives, borrowed and spent like drunken sailors for a long time. Similar...

Lately one of the primary topics discussed among my business associates in Europe is the question: How long before we [the U.S. and the world] confront a new financial crisis?  In fact, an overview of the financial landscape indicates there are many potential triggers that could initiate a new catastrophe. Normally a severe crisis, such as the one in 2008, takes a number of years to evolve into a prolonged recovery cycle.  Economies have to recover and bank capital has to be rebuilt concurrent with debt workouts.  These factors as a rule constrain risk appetite thus allowing for an...

I’ve written several articles skewering HBO for producing political projects destined to air immediately prior to the 2012 election, where the vast majority of the cast and crew are passionate Barack Obama supporters, and where the content is aimed at the Democrat’s two favorite Republican villains… Sarah Palin and Dick Cheney. So, when I sat down to watch HBO’s Too Big to Fail, I prepared myself for the worst. What I didn’t expect was the big surprise awaiting me. Too Big to Fail, which premieres on HBO on May 23, 2011, features a star studded cast recounting the events that...

I believe that the sine qua non of the financial crisis was U.S. government housing policy, which led to the creation of 27 million subprime and other risky loans -- half of all mortgages in the United States -- which were ready to default as soon as the massive 1997-2007 housing bubble began to deflate. If the U.S. government had not chosen this policy path -- fostering the growth of a bubble of unprecedented size and an equally unprecedented number of weak and high-risk residential mortgages -- the great financial crisis of 2008 would never have occurred...