The Washington Post reported today that commercial banks and investment institutions are shifting their political donations towards Republicans. Apparently Democrats were garnering two-thirds of those donations as recently as the beginning of 2009 and now that is shifting to an even split despite the Democratic majority.
This can sarcastically be placed under “shocking news” of the day category but there is something even more cynical at play in this world of no shame.
This week I saw a story about how a college intern at Lehman Brothers in 2006 was trading a $150 million proprietary trading book for the firm. It was a revealing anecdote about the nature of risk management at the time from a recently released book by former Lehman prop trader Lawrence McDonald.
Did you hear? Citigroup is paying back its $20 billion in TARP money! But as this New York Times editorial points out, big banks’ motives for paying back the government are (surprise, surprise) less than pure; namely, the banks want to get out from under the pay caps and restraints of the bailout. As the Times says:
“The Treasury Department, which seems to have no qualms about Citigroup’s self-proclaimed strength, plans to sell its $25 billion stake over the next six to 12 months… The Treasury Department’s approval is a grim reminder of the political power of the banks, even as the economy they did so much to damage continues to struggle.” (more…)
The CME Group’s Global Financial Leadership Conference held in Naples, Florida this week included several impressive speakers who analyzed markets and the economy in lieu of the credit crisis and efforts undertaken to deal with it.
While many issues were discussed and many points of view presented, there was an unmistakable common theme. That theme is that our current deficit spending and debt levels are unsustainable.
CME Group announced this week that they would launch a new 30-year bond futures contract, one that would be nearly identical to the contract traded at the Chicago Board of Trade for more than 30 years except that deliverable securities for the new Long-Term Bond future will comprise cash Treasury bonds with at least 25 years of remaining term to maturity. The benchmark 30-year contract accepts deliverables with at least 15 years remaining to maturity. The so called “Ultra” Treasury bond will begin trading in the first quarter 2010.
Today is the anniversary of the financial meltdown kicked off by the Lehman Brothers bankruptcy and there has been a lot of second guessing of the actions taken by the Federal Reserve and Treasury Department following it.
We have pointed out here often that Sept. 15 was not the start of the credit crisis, but just an acceleration of it and the point when people took notice and leaders could no longer diminish its seriousness.
The justification by many experts for the strong dollar recovery that began last summer was based on an assumption that the U.S. Central Bank was making all the right moves and being more proactive than Europe and Asia. The thinking went, the U.S. economy is bad, but it is worse everywhere else and we will recover first.
Now we are seeing signs that Asian and European economies appear closer to turning things around than the U.S. economy. This has bad implications for the dollar.
The Financial Times reported on its front page yesterday that there are signs of recovery in China and Europe but “U.S. slowdown continues.”
On Wednesday May 6 the House of Representatives passed the Fraud Enforcement and Recovery Act of 2009 that would create a commission to study the reasons behinds our current economic crisis. This would be similar to the 9/11 commission, which was created “to prepare a full and complete account of the circumstances surrounding the Sept. 11, 2001 terrorist attacks.” And like the 9/11 commission you would not expect government leaders to wait until such a commission had completed its work to make changes to prevent another attack, in the case of the 9/11 commission, or to repair the underpinnings of our financial structure in the current crisis.
However, given the amount of money that has been committed to various bailouts, we should be expecting the results of such a commission at this point not its formation.
The headline in today’s Financial Times was “Goldman push to repay US taxpayer.”
The story detailed how Goldman Sachs was planning to sell common stock to raise $5 billion to pay back the $10 billion in money it received through the TARP (Troubled Asset Relief Program) bailout. No where in the story did it talk about paying back the $12.9 billion it received from the bailout of AIG provided by US taxpayers.
The Wall Street Journal reported on Wednesday that the Treasury Department is planning to extend Troubled Asset Relief Program (TARP) funds to the life insurance industry. According to the story insurers who own Federally chartered banks would qualify for the program.
The news caused the stock of numerous life insurance companies to rally sharply this morning. It is hard to see how that is a good thing. But as one commenter to a wire story citing the WSJ article noted, “Failure is the new success.”
