The last mystery of the financial crisis. It's long been suspected that ratings agencies like Moody's and Standard & Poor's helped trigger the meltdown. A new trove of embarrassing documents shows how they did it. by Matt Taibbi in Rolling Stone.
Secret and Lies of the Bailout. "The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come." [Via]
The Rolling Stone's Matt Taibbi uses a paper bag to illustrate exactly how the sub-prime mortgage scam worked, and how we're still on the hook for the next catastrophe. [more inside]
BBC News asks independent trader Alessio Rastani "what would keep investors happy, make them feel more confident?" and gets a surprisingly honest answer: "Personally, it doesn't matter. See, I'm a trader. I don't really care about that kind of stuff. If I see an opportunity to make money, I go with that. So, for most traders, we don't really care that much about how they're going to fix the economy, about how they're going to fix the whole situation; our job is to make money from it. And, personally, I've been dreaming of this moment for three years. I have a confession which is I go to bed every night and dream of another recession, I dream of another moment like this." [SLYT]
Good morning, ladies and gentlemen. In a few hours, I will destroy the Greek economy. Unless, that is, you give me the sum of...one trillion dollars! (SLNYT, but with this much money I can afford to look frumpy)
Jan 7: The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.
Matt Taibbifilter: Among other things, the GAO report noted that the entire OTS had only one insurance specialist on staff — and this despite the fact that it was the primary regulator for the world's largest insurer! This week's MeFi stories have generally failed to explain the reasoning that caused the recession, even though Jon Stewart was basically on the mark. Now, Rolling Stone's only reporter lays it all out The Big Takeover, a typical combination of zealous snark and the overlooked, damning facts needed to clear up a ridiculously complicated story.
Nationalize. Reorganize. Decentralize. anewwayforward.org wants you to organize a protest on April 11th to express your frustration and disapproval with how our elected officials have handled the economic crisis.
Washington Post reports that the American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year. The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses.
President Obama's plan for American Recovery and Reinvestment [pdf] might be thought of as TARP round two [1,2] -- instead of hiding the bodies, this one's preparing the ground for a big tent or the economic equivalent of war. There are critics and detractors (cramdown nation ;) left and right, natch, but also conservative supporters and progressive defenders to save or create
three four million jobs; hooray! [more inside]
This American Life gives you Another Frightening Show About the Economy.. The guys who brought us The Giant Pool of Money (previously) explain the credit crunch and why it's so scary. And not in the Halloween fun-to-be-scared sense.
According to the latest biweekly numbers released last Thursday by the Federal Reserve, for the two weeks that ended January 16th American banks had negative $1.3 billion in non-borrowed reserves. This is, historically, extremely unusual; just two months ago they had $30 billion (positive, of course) in non-borrowed reserves. The only reason some banks haven't been shut due to insufficient -- negative! -- reserve requirements is that the Federal Reserve is currently loaning them enough money through the brand new TAF (Term Auction Facility) program (also running in Canada and Europe) to make up their shortfalls. Today's TAF press release says that 52 American banks or institutions are currently receiving loans totaling ~$40 billion -- but the Fed refuses to name who they are. [more inside]
At a time when fed-up American citizens are petitioning Congress to end the imprudent financial practices that caused the
housing bubble sub-prime mortgage crisis liquidity crisis impending recession -- including the banning of SIV's and refusing any bailouts for Wall Street, banks, or mortgage companies -- the United States Treasury Department has just announced the creation of a giant-mega-ultra SIV called "M-LEC" made up of assets from several of the largest American banks. Already unofficially nicknamed "Sivie Mae" (or worse, "the Frankenstein Fund"), it would be an off-balance-sheet way for these banks to pool and price the ABCP's that they've lately been having trouble pricing and thus selling -- i.e. the liquidity crisis. [more inside]