Yet another bad sign of the times on the economic front: Washington Mutual has lost $1 billion in the first quarter and the bank is going to slash 3,000 jobs nationwide:
Seattle-based WaMu (NYSE: WM), the nation’s largest thrift, has been hit hard by the mortgage turmoil, leading to speculation that its days as an independent financial institution are numbered.
A company spokeswoman said Tuesday that the majority of layoffs will be in its home loan operations, including sales and underwriting staff. She said some layoffs could occur in Texas but said regional numbers for affected employees were not yet available.
WaMu also said it was closing its 186 remaining freestanding home loan offices and exiting wholesale lending by the end of June. The bank instead will focus its mortgage business at its retail bank branches and expand its call center operations.
Last week was filled with awful reports about the state of the U.S. economy. But the stock market went up three percent. Why?
The stock market is supposed to be a barometer of the overall economy. It’s supposed to go up when economic times are good and fall when they aren’t. This barometer has never been perfect in this regard, of course. Market-specific quirks such as the recent leverage buyout craze can skew that relationship for awhile. These days, however, the schism between market direction and overall economy has a more fundamental and perhaps more long lasting cause. Manipulation by the Fed.
The manipulation at work here isn’t the Bear Stearns variety. It has to do with interest rates. Something almost unprecedented is happening with these rates today. Government securities, and the many fixed income ones (bonds, CDs, etc.) liked to Federal rate setting, are paying less than the inflation rate. (I speak here of the real world inflation rate, not the phony one favored by the Fed that excludes the costs of food and energy.)
What this means for investors large and small is that they can’t buy safe interest-paying securities as a defensive measure to protect their capital. Read the rest of this entry »
There is a ticking time bomb in the John McCain campaign and the sooner that Barack Obama can turn his full attention to exploiting it the bigger and consequential the explosion should be for this phony maverick.
The presumptive Republican nominee supposedly swore off lobbyists after the Keating Five scandal nearly destroyed his political career, but they continue to have him by the short and curlies.
Phil Gramm, who is co-chair of McCain’s campaign, is not just another lobbyist. He is the man most responsible for the repeal of Depression-era banking regulations that have led directly and inextricably to much of today’s economic turmoil, and parlayed that classic example of legislative legerdemain into a lucrative lobbying career for the very people who scratched the smug Texan’s back — as well as McCain’s — on Capitol Hill.
Gramm was the biggest of the big guns behind the 1999 repeal of the banking regulations — the Gramm-Leach-Bliley Act — which was officially called The Financial Services Modernization Act. (Don’t you just love the name!)
Passage of the law was greased with an astonishing $300 million in lobbying money, and it encountered little opposition other than from those old-fashioned banks that actually insure your deposits, while receiving the enthusiastic blessing of the Bill and Hillary Clinton co-presidency. And you had better believe that the so hands-on First Lady was all for it.
One of many consequences of the repeal was that a year later the Swiss bank UBS gobbled up brokerage house Paine Weber. A year after that, Gramm settled in as a vice chairman of UBS’s new investment banking arm and has since energetically lobbied Congress, the Federal Reserve and the Treasury Department on banking and mortgage issues.
This has included rolling back state rules that sought to stem the rise of predatory tactics used by lenders and brokers that led directly to the subprime mortrage meltdown, which cost USB more than $19 billion in writedowns this week and the prospect of massive job cuts.
Here’s yet another bit of bad economic news about an economy President George Bush insists is still really robust, just slowed down and — bite your tongue — certainly NOT in a recession:
Employers in the U.S. cut the most workers in five years last month, signaling that the economic contraction is deepening and that the Federal Reserve will continue to lower interest rates.
Payrolls shrank by 80,000, more than forecast and the third monthly decline, the Labor Department said today in Washington. The jobless rate rose to 5.1 percent, the highest level since September 2005, from 4.8 percent.
“This is the final blow,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “It’s clear the U.S. economy is in a recession. That’s going to shake the confidence of investors and companies across the world and cause people to curtail spending in other countries.”
This isn’t quite Bush’s interpretation (things look different from the White House when you have chef-cooked meals, government insurance and lots of friends who are CEOs and millionaires). He has insisted it isn’t a recession — merely a “slowdown.”
Now that a turning back of the financial deregulation that began under Reagan and continued under Bush I, Clinton and Bush II looks imminent, what U.S. President is most to blame for the current crisis? Patrik Etschmayer writes for Switzerland’s Nachrichten, “Only when regulations were relaxed under Ronald Reagan did the first rather costly banking disaster ensue: The Savings and Loan crisis. This led to the recession of the early 1990s, which helped secure Bill Clinton’s 1992 electoral victory. But Clinton didn’t heed the warning. Even though it is now no longer discussed, and all fingers point toward George W. Bush - his actions alone could not have resulted in today’s disaster. … Clinton worked until almost the end of his term to abolish Glass-Steagal. The Congress fought him for years just as it had under Reagan and Bush the First. But in 1997, the FED Board of Directors under Alan Greenspan eliminated rules that limited securities trading for savings banks.”
In explaining why things have gone so badly that stricter banking rules are now necessary, Etschmayer writes, “Legal regulation seems to be the only way to rein in the apparently boundless greed - because bankers, speculators, hedge-fund managers and other stock market players large and small - and not only in the United States - seem to have lost the capacity to distinguish between freedom and foolishness.”
A smarty pants commenter or two took umbrage a couple of weeks ago when I said that it would only be a matter of time before taxpayers were asked to pay for the meltdown of Bear Stearns and other greed-inflicted Wall Street bigs who got scorched in the subprime mortgage and related disasters.
I blew coffee through my nose when I read the details of the Bush administration “overhaul” of Wall Street regulation announced this morning.
The so-called reforms, called the broadest since the Great Depression, would create a new regulatory maze but do virtually nothing to deal with the roots of the problem, which The New York Times charitably called an “alphabet soup of sophisticated financial products that have fueled the current financial crisis.”
Indeed, the reforms do not rein in practices like those that have lead to the subprime mortgage meltdown, while the oversight given the villains of the current crisis — hedge funds and private equity firms – would be minimal and mainly consist of collecting information.
Henry Paulson, who became Treasury secretary after a long career on Wall Street, explained why the feds were going so easy on his pals by claiming that any real effort (my term) to tighten regulation could hamper America’s ability to compete with foreign rivals.
Indeed, the reform plan is a huge joke unless you’re a Bear Stearns or Merrill Lynch — and the joke is on Main Street Americans.
With cries for change sweeping the United States and even the ‘hermetically-sealed totalitarian regime’ of the Castro brothers, some in Venezuela are sounding downright envious. Fernando Luis Egaña writes for Venezuela’s Correo del Caroni, “Both in the United States and its hemispheric polar opposite Cuba, there are growing expectations of political, economic and social change. … The oldest democracy and the longest dictatorship on the Continent are preparing for change. May long-suffering Venezuela not be left behind.”
By Fernando Luis Egaña
Translated By Halszka Czarnocka
March 25, 2008
Venezuela - Correo del Caroni - Home Page (Spanish)
Both in the United States and its hemispheric polar opposite Cuba, there are growing expectations of political, economic and social change. Domestic and global reasons have resulted in this push for new directions.
No one knows if Barack Obama will in the end obtain the Democratic Party’s presidential nomination, and even if he does - whether he’ll manage to defeat Republican John McCain. But much of this feat has already been accomplished. Read the rest of this entry »
Supposing I were to tell you that financial markets were over-regulated. That the way to ensure endless economic well-being was to lessen the government’s oversight of these markets. That these markets are in fact self-regulating, and that the risk management tools already built into them eliminate the need for growth deadening outside interference.
Hearing this rap today you would immediately think about recent upheavals in world financial markets caused by under-regulation and judge the above arguments quackery.
You would note that regulations of the kind instituted during the New Deal expedited rather than detracted from steady and impressive economic growth for decades. You would also note that the withering away of such regulations since the 1980s, climaxing with the present Bush Administration’s extreme efforts in this realm, brought about the present financial crisis.
Such negative consequences, however, are nothing, utterly nothing, compared to the harm under-regulation could cause when it comes to environmental protection. Economies can recover from mistakes, even very serious mistakes. Natural ecologies, once lost, are lost forever, with potentially devastating impacts on entire civilizations.
With this in mind consider Wall Street’s latest budding cash cow. It’s a market that will trade pollution credits, credits that give companies and other polluting entities who find it inconvenient to meet regulated pollution standards a means to buy emission credits that give them an out from doing so.
The so-called “cap and trade” system to make this possible works like this: Emission caps are set on pollution-emitting entities, the traditional regulation way of controlling these emissions. Polluters who emit less than their assigned caps, however, can trade away these surplus reductions to polluters exceeding their own caps, allowing the latter to meet cap standards in a backhand way. Exceeding polluters can also buy other offsets for their excess emissions from unspoiled natural ecologies such as rainforests, whose owners guarantee they will continue to soak up more pollutants than emission exceeding companies produce over their assigned caps.
What’s the rationale for this convoluted approach to emission reductions? Why is it supposedly better than the straight forward cap on all polluters, which long experience and plain old common sense indicate is the best way to meet the challenge of controlling pollution?
The Wall Street crowd peddling this commish-generating nostrum bill its “counter-intuitive” advantages. They say it is example of “thinking out-of-the-box” when it comes to emission reductions. And the clincher, that it’s “a free market-based solution to pollution.”
The market mechanism that’s supposed to be at work here involves the totally unproved, and indeed, unprovable contention that polluters best able to reduce their own emissions will become even more avid in this regard in order to generate emission trading credits they can then sell in a free market. And that owners of pristine, emission absorbing lands will become better protectors of these properties in order to generate their own saleable emission trading credits.
Move beyond this counter-intuitive, think-outside-the-box, free markets solve everything blather, though, and the real potential of emissions trading becomes apparent. Read the rest of this entry »
Is there anything that President Bush - or any policy maker - can do to address the economic crisis that the United States and the world now confronts? More to the point, perhaps, how many people believe there is anything he can do? William Waack, World Affairs columnist for Brazil’s O Globo, writes, ‘If the economic consequences, as mentioned above, are difficult to foresee, the political consequences seem reasonably clear - especially for American politics … Change benefits the Democrats - and runs counter to the general perception of a government that (once again) is trying to use words to cover up reality.’
By William Waack
Translated By Brandi Miller
March 17, 2008
Brazil - O Globo - Original Article (Portuguese)
In Washington this Monday (3/17), St. Patrick’s Day should have been a day of celebration. It has become popular in the United States to enjoy (in general, with a lot of beer) this day of Ireland’s patron saint. But George W. Bush cancelled the party to talk about an issue that he claims isn’t that serious: the global financial crisis.
It’s obvious to any market novice that Bush (or any other head of state of a major economy) couldn’t have said anything other Read the rest of this entry »
A publisher I knew once proposed a picture book, “They Must Know What They’re Doing or They Wouldn’t Be Where They Are,” to show the captain of the Titanic, the designers of the Edsel, LBJ running the War in Viet Nam and other overseers of spectacular 20th century blunders.
The Bush Administration now rates a sequel all its own for being in charge of two cataclysms, in the Middle East and here at home.
As Bear Stearns, the poster boy for Wall Street greed, gets gobbled up with the help of taxpayer money, Paul Krugman asks, “When the feds do bail out the financial system, what will they do to ensure that they aren’t also bailing out the people who got us into this mess?”
March 17th, 2008 by DAVID SCHRAUB, Assistant Editor
Like anyone who wants America to still have an economy tomorrow, I support the government’s intervention to head off disaster in the Bear Stearns fiasco. But I admit discomfort, for this seems to be precisely the type of governmental assistance that I hear many people decry when it’s proffered to the less fortunate. We give it to Bear Stearns — even though they were reckless and irresponsible, even though their predicament is primarily of their own making — because they “matter”. They matter because they’re powerful, and if they go down, they take a lot of people with them. Most of us don’t matter, so if we go down, nobody cares.
Sentient Americans long ago became accustomed to the gap between George Bush’s words and reality. But when the president spoke to the Economic Club in Manhattan the other day his understanding of arguably the biggest economic crisis since the Crash of 1929 was so shallow, his misrepresentation of the causes so complete and his solutions so inadequate that I wanted to cry.
Few of those thinking Americans will miss hearing the phony twang of a man so able to lie and so unable to lead when he commences the search for his squandered legacy among the scrub brush at his Texas ranch 10 months hence.
But when it comes to that ongoing economic train wreck – and believe me, there is a long way to go before the last car careens off the cliff and crashes into Recession Ravine despite the Federal Reserve’s panicked actions yesterday to stave off further chaos — it really doesn’t matter.
This is because no one in a position of authority, let alone any of Bush’s possible successors as president, seems willing to acknowledge let alone confront the demons that got the economy into such a mess in the first place, so throwing money at the toxic waste dump that is Wall Street becomes a substitute for real action. Kinda like those $600 economic stimulus taxpayer lollipops.
In fairness, the president inherited some of the time bombs that are exploding on the economic train tracks. That so noted, the befuddlement of he and his top economic advisors would be hilarious if it was’t so bloody pathetic.
Bush is probably the last person on earth with a Harvard MBA to not acknowledge the U.S. is in recession, but he did say that “Our economy obviously is going through a tough time.”
His cure? Don’t do anything major except keep his tax cuts for the rich on the books after he leaves office: “The temptation of Washington is to say that anything short of a massive government intervention in the housing market amounts to inaction. I strongly disagree with that sentiment. I believe there ought to be action, but I’m deeply concerned about law and regulation that will make it harder for the markets to recover.”
Meanwhile, feckless Fed chief Ben Bernanke, who makes predecessor Alan Greenspan look like a genius, all but contradicted the president the very same morning in pledging a panoply of new government regulations to limit the impact of the recess . . . er, whatever it is.
While Bush and Bernanke were bloviating, there was an old-fashioned bank run on Bear Stearns.
The name of Eliot Ness, that iconic crime fighter if the early 20th century - has reverberated down through history as the definition of justice and incorruptibility. In writing about his namesake Eliot Spitzer, Serge Truffaut of Canada’s French-language Le Devior writes in part, ‘You cannot make this up. … The first name of Governor Spitzer of New York is Eliot. The same as that other Eliot - Eliot Ness - the patron saint of the incorruptible who hunt down criminals, both white collar and blue … This image - fashioned with his [Spitzer’s] own bare hands on a canvas of moral rectitude - evaporated instantly at the end of an act of contrition … the spectacle was appalling.’
By Serge Truffaut
Translated By Kate Davis
March 12, 2008
Canada - Le Devior - Original Article (French)
You cannot make this up. The first name of Governor Spitzer of New York is Eliot. The same as that other Eliot - Eliot Ness - the patron saint of the incorruptible who hunt down criminals, both white collar and blue. It is in making life harder for fashionable crooks in neck-ties on the floor of the stock exchange that he built a reputation for himself as a “new incorruptible,” or even a “tireless crusader,” to borrow nicknames that the media gave him during scandals at WorldCom, Tyco, Enron and others we have forgotten. He proclaimed himself the “Sheriff of Wall Street.”
This image - fashioned with his own bare hands on a canvas of moral rectitude - evaporated instantly at the end of an act of contrition by the former New York Attorney General WATCH . This sheriff acknowledged paying a heavy price for his history of peccadilloes. He spent more than $4,000 to enjoy the favors of strumpets in chic hotels of the capital city. QED [It has been demonstrated - quod erat demonstrandum]: This prostitution network procured the services of the so-called call girls especially for high-flying politicians.
Posted by WORLDMEETS.US
Aside from any moral judgment, this affair is particularly distressing since it seriously cripples the work of the current attorney general and his staff - notably the investigations initiated while Spitzer was still the boss of the patrons of justice. One this is certain; when the news hit the presses, traders on Wall Street… Applauded!
Because this man, when he was hunting down crooked millionaires, had opted at all times and in his words - for a strategy of “aggressiveness.” He was at times so hard and his methods so brutal that even people in his camp now say that they considered Spitzer reckless or irresponsible. This inclination, or rather his certainty that he was always right - led him to demolish without proof, individuals who appeared on his prosecutor’s radar screen. An example? He started a rumor that the secretary of New York Stock Exchange Chairman Richard Grasso had been Grasso’s mistress. In short, he brandished a little poison, even if only an allegation, to reduce the reputation of another to a briny bouillon.
READ ON AT WORLDMEETS.US, along with many other translated foreign-press reactions to Spitzer’s downfall.
March 13th, 2008 by SWARAAJ CHAUHAN, International Columnist
Coming months/years would be spent in assessing whether the US administration’s strategy/decisions were worth it. It will be a tough task. Two leading economists seem to have set the agenda for future debate in their book that has attracted media attention. There are lot of questions that arise and deserve convincing, not emotional/ideological, answers.
The Economist reviews it: “The book mixes the patience of an auditor with the passion of a polemicist; it combines forensic intelligence with prosecutorial zeal. This reviewer responded more to its quieter virtues. As the authors say, the book is not just about the big number on the cover. More importantly, ‘by examining the costs, we come to understand better the implications of the war’.” More here…
The Three Trillion Dollar War: The True Cost of the Iraq Conflict
By Joseph E. Stiglitz and Linda J. Bilmes; Norton; 311 pages; $22.95. Allen Lane; £20 amazon.com
While I have a really good case of the ass about the state of the U.S. economy, let me pose a question: What kind of business schools do we have in this country that when I think of a stock broker or lender I think of a used car salesman with a really nice suit, an ethically impaired individual whose ethical compass was never properly calibrated when they got their MBA?
Just so I don’t appear to be a total naif, I note that economic downturns are cyclical and therefore inevitable. But the ongoing unraveling of the American economy – and the reverberation in world markets — as the U.S. hurtles into recession is substantially the result of greed by the players at major financial institutions that borders on the criminal.
The trigger for the unraveling is, of course, the inevitable collapse of the subprime mortgage market, which preyed on – and reaped obscene profits from — the people with the lousiest credit who could least afford to own a home.
The subprime greed merchants are now paying the piper and further fueling the meltdown. This means that they may miss a payment on their Porsche Turbo, but it leaves your neighbor wondering how the hell he can keep food on the table, his son in college and granny in that managed-care facility.
Did these business school grads forget what they were taught? Were they taught that it’s every Gordon Gekko for himself? Or are business schools blameless?
This is meant to be a discussion stimulator. With the focus on business schools.
November 26th, 2007 by JOE GANDELMAN, Editor-In-Chief
Another poetic gem from TMV’s favorite poet, Michael Silverstein, aka Wall Street Poet.
POET’S NOTE: A few years back someone did a parody of Poe’s poem, “The Raven,” in the New York Times. It was called “The Maven” and was so good that out of respect I’ve held back from doing my own take-off of this poem. Now it’s time to move on. And with that in mind, I offer “The Shaven,” a timely tale of market angst.
The Shaven
Once I thought I had things ordered, had my future nicely hoarded
With the cap gains from a market that had soared as ne’er before;
‘Twas perhaps this in-head mapping, that caused me to be caught napping,
While the fates my wealth was sapping, sapping I can’t now ignore.
“It’s too much,” I whined and muttered, “I don’t want to end up poor.”
Told my broker: “Please, no more.”
Ah, recalling that old feeling, heady days of wheeler-dealing,
Buying stock was just like stealing, without the need to break a law;
CEOs were then my heroes, gutsy wealth-producing Neros,
Padding my accounts with zeros, zeros I deserved, they swore.
‘Who could guess this great accrual, wouldn1t have endless renewal,
Leave me begging: “Please, no more.”
In my mind I’ve gone researching, combed my thoughts for truth a’searching,
For the cause of market lurching, that no analysts foresaw;
Were we all just seeing double, shrugging off all signs of trouble,
Helping to inflate the bubble, hoping thus its growth ensure?
There’s a price for foolish dreaming,
I have paid it: “Please, no more.”
After all this asset shaving, having done my share of raving,
Nothing’s left but workplace slaving, gad, it’s such an awful bore;
On toward old age I go slinking, with a pension that is shrinking,
Facing now, with fortunes sinking, prospects for a mean detour..
I do fear it: “Please, no more.”
November 10th, 2007 by JOE GANDELMAN, Editor-In-Chief
Another poetic gem from TMV’s favorite poet, Michael Silverstein, aka Wall Street Poet:
A Wall Street giant reported losses of $8 billion in the third quarter of this year. Its CEO lost his job, but got a reported $161 million severance package on the way out the door. What’s wrong with this picture?
Pain At The Bottom, Cream At The Top
Profits may tumble, good jobs disappear
Foreclosures may soar in a climate of fear
But somehow they thrive, those who know how to rig it
Finessing the levers and jiggling the spigot.
In good times and bad times
The games never stop
Pain sinks to the bottom
Cream stays at the top.
When times they are fat, ‘mid great acclamation
The Corporate Elect take a huge extra ration
When times get much leaner they whine and they snivel
Their egos get bruised but their perks never shrivel.
In good times and bad times
The games never stop
Pain sinks to the bottom
Cream stays at the top.
Most folks who are pushed out the company door
Fear their standard of living will fall through the floor
But sev’rance for those in a CEO role
Make execs who are severed most wonderfully whole.
In good times and bad times
The games never stop
Pain sinks to the bottom
Cream stays at the top.
It’s a comfortable myth that we share the same boat
That we all work together so all stay afloat
In truth this great vessel’s a multiple decker
And being the captain’s a great hurt deflecter.
In good times and bad times
The games never stop
Pain sinks to the bottom
Cream stays at the top.
A smarty pants commenter or two took umbrage a couple of weeks ago when I said that it 
I blew coffee through my nose when I read the details of the Bush administration “overhaul” of Wall Street regulation announced this morning.
![[Excelsior, Mexico]](http://www.exonline.com.mx/XStatic/excelsior/images/espanol/carton_gregorio_1403.jpg)
The Three Trillion Dollar War: The True Cost of the Iraq Conflict
