Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics
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S&P Futures |
1336.0 |
1.9 |
0.14% |
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Eurostoxx Index |
2179.7 |
-22.2 |
-1.01% |
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Oil (WTI) |
94.71 |
-0.1 |
-0.07% |
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LIBOR |
0.466 |
0.000 |
0.00% |
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US Dollar Index (DXY) |
80.89 |
0.280 |
0.35% |
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10 Year Govt Bond Yield |
1.78% |
0.02% |
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RPX Composite Real Estate Index |
175.5 |
0.4 |
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Markets are up this morning on a lack of news out of Europe and some mixed economic data. The Consumer Price Index showed inflation remains benign, while retail sales data showed spending up slightly and below expectations. Bonds and MBS are down slightly. Greek bond yields are up 160 basis points. Portugal and Ireland are up as well
The New York Fed released its Empire State Manufacturing Survey this morning, which came in better then expected on higher shipments. Six month optimism fell.
The National Association of Home Builders released its builder confidence survey this morning, which showed improving sentiment.
The Washington Post is starting to focus on the tax hikes that will take place in the beginning of 2013. They note the uncertainty that it is causing. So far, there seems to be no discussions in Washington about what to do about it. IMO this has been driving some of the recent deceleration in the economy.
Lots of institutional investors are clicking “Like” – Facebook raised the range of its IPO price from 28-35 to 34-38. At the top end of the range, FB would be valued at 26x sales – or about twice the valuation of the Google IPO.
Ally doesn’t plan on re-organizing the mortgage business and getting back in to the housing market. They are going to stick with car loans. Money Quote from Ally CEO Michael Carpenter: “You can live in your car if you don’t pay your mortgage. I don’t mean to be cute, but the fact is people make their car payment before they pay their mortgage.”
Chart: NAHB Index:
Filed under: Morning Report |
All Things in Moderation 
I told you when Dodd-Frank passed that it was weak and ineffective legislation that scared no one on Wall Street. It was the result of having a group of lawmakers involved that simply were not up to the task.
There is simply nobody on the Dem side right now who has the intellectual heft and financial experience to dispute the financial industry leaders toe to toe.
They needed the weight of Obama during this fight as a countermeasure, but he was asleep at the wheel on ACA at the time. I told you then and I tell you again now that the biggest mistake of his presidency was not to go after the banks when he had the whole weight of the country on his side, but he had other priorities.
So in this campaign the Dems are left to make the curious argument that when they had the majority they wrote demonstrably weak and ineffective legislation BUT if you only give them ANOTHER shot, they’ll get it right this time!
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Greeks made thier debt payment today, as predicted by insiders. The ECB will probably very quietly forego their payments in the near future to keep the wreck afloat.
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The Warren thing brings up a point I make that I regularly get hooted at for. If you like Warren and think she’ll make a good Senator, then you should consider that if Kennedy had not died in office finally she never would have had a shot.
On the Dem side she is part of that generation that have to wait hat in hand for the ancient Senators to be escorted from the building while the Carl Levins get run over by opposing forces far younger and tougher than they.
If you think that JPM did something wrong, why isn’t anybody mad at the Dem legislators who did such a poor job on one of their centerpieces of Obama’s first term?
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banned:
If you think that JPM did something wrong…
Clearly what JPM did was not clever, but if by “wrong” you mean something they should not be legally allowed to do, I suspect that most people aren’t in a position to have an informed opinion about the matter, unless it is based simply on the principle that banks should not be legally allowed to do anything that could ever possibly lose money.
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banned:
I told you when Dodd-Frank passed that it was weak and ineffective legislation that scared no one on Wall Street.
What exactly do you want Wall Street to be scared of?
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“ScottC, on May 15, 2012 at 9:58 am said:
banned:
I told you when Dodd-Frank passed that it was weak and ineffective legislation that scared no one on Wall Street.
What exactly do you want Wall Street to be scared of?”
Fraud. Also, using customer money to settle the firms accounts, ala MF Global.
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scott:
I don’t, but I meant that for anyone who asserts that JPM was wrong on some highger level.
In a larger sense, yes Wall Street need a “healthy” fear that sitting across the table from them is not the cartoonish Dodd and Frank, but someone who understands the business and can cut the crap. don’t you agree?
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banned:
In a larger sense, yes Wall Street need a “healthy” fear that sitting across the table from them is not the cartoonish Dodd and Frank, but someone who understands the business and can cut the crap. don’t you agree?
I will say upfront that I think D/F is not good legislation, and I certainly do wish regulators understood the business they are ostensibly regulating, but I’m not at all sure D/F is actually meant to do what you what you want it to do or think it should do.
As a political matter, D/F is meant simply to convey the sense that government is Doing Something, and that that something includes punishing banks in some way. I think it has accomplished that political goal.
As a practical matter, D/F (excluding Volcker) is largely meant to a) make the derivatives market more “transparent” to the outside world (reporting requirements) and b) force banks to hold more capital against derivative deals done (clearing and capital requirements) which in turn will c) reduce the future risk of cascading credit failure and hence the need for government backstops. Volcker in turn is intended to reduce the kinds of risks and activities that banks are allowed to engage in.
If and how well it does any of these things is open to debate, but anyone looking for D/F to, say, prevent MF from co-mingling funds or get tougher on banks doing things that are already illegal is, I think, missing the point of D/F.
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” If you like Warren and think she’ll make a good Senator, then you should consider that if Kennedy had not died in office finally she never would have had a shot.”
Its more than that. Coakley had to lose too; if Coakley were now the incumbent, rather than Brown, Warren would not be running. It is a bipartisan problem. Here in MN, Bachmann, Kline, Ellison & McCollum will hold their seats as long as they like & will not face serious primary challengers. Klobuchar gets not only a walk in the primary, but is unlikely to face a serious Republican challenger. Instead, the field is itching for a shot to take out Franken (who will not face a primary challenger).
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“Time Is Running Out for Treasury Market Rally: Pimco’s Gross”
http://www.cnbc.com/id/47424011
In a triumph of hope against experience I will probably wind up betting against Treasuries again!
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Because TARP is able to exist, “Wall Street” has no reason to alter its behavior.
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“bannedagain5446, on May 15, 2012 at 10:09 am said:
scott:
I don’t, but I meant that for anyone who asserts that JPM was wrong on some highger level.
In a larger sense, yes Wall Street need a “healthy” fear that sitting across the table from them is not the cartoonish Dodd and Frank, but someone who understands the business and can cut the crap. don’t you agree?”
So in short give Judge Jedd Rakoff powers equivalent to Judge Dredd?
http://en.wikipedia.org/wiki/Judge_Dredd
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Here’s a modest proposal:
End FDIC backing of all private bank deposits.
Instead individual depositors would be allowed to deposit up to the existing insurance limits ($250k per person/company, I believe) with the Federal Reserve banks directly and then write checks or otherwise draw on the funds. There would be no interest paid to the depositors, but for those who wanted a safe way to deposit their cash and be able to conduct most standard transactions (i.e. write checks, ACH payments, withdraw cash from ATM’s) that require the government to backstop the financial system in the first place would be able to do.
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jnc:
End FDIC backing of all private bank deposits.
In one of my first ever posts on ATiM, I proposed precisely this. It was not received well.
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jnc
I would settle for Carter Glass as a superhero.
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There already isn’t any interest being paid, or haven’t you noticed. LOL
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Scott proposed just that early on in ATiM history. If I recall, shrink was deeply butthurt on that thread.
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McWing:
Scott proposed just that early on in ATiM history
I haven’t been corked in a while.
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Sigh. Sometimes your arguments can be undermined by the people who (ostensibly) agree with you:
“It’s time to break up the big banks
By Katrina vanden Heuvel,
Updated: Tuesday, May 15, 7:38 AM
Consider $2 billion lost on a bad bet, plus billions more as investors dumped the stock, a providential warning.”
http://www.washingtonpost.com/opinions/its-time-to-break-up-the-big-banks/2012/05/15/gIQApOEvQU_story.html
Clearly loosing market capitalization due to investors selling the stock is a BAD THING equivalent to risky derivatives trading that also ought to require government regulation to prevent. Just ban short selling? Clearly inadequate. All stock selling should be banned. The stock market is only allowed to go in one direction, up.
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” End FDIC backing of all private bank deposits.
Instead individual depositors would be allowed to deposit up to the existing insurance limits ($250k per person/company, I believe) with the Federal Reserve banks directly and then write checks or otherwise draw on the funds.”
So, for average people, banks stop being banks. Might work. Those who want a meager return could use co-ops, as many people already do.
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And it’s an election year obviously:
“Justice Dept. launches criminal probe into JPMorgan’s $2B trading loss”
http://www.washingtonpost.com/business/economy/justice-dept-launches-criminal-probe-into-jpmorgans-2b-trading-loss/2012/05/15/gIQAFF7URU_story.html?hpid=z1
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“Clearly loosing market capitalization due to investors selling the stock is a BAD THING equivalent to risky derivatives trading that also ought to require government regulation to prevent. Just ban short selling? Clearly inadequate. All stock selling should be banned. The stock market is only allowed to go in one direction, up.”
Whatever is not forbidden is now mandatory.
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I thought this set of graphs about how bad the Chinese economy is doing was interesting.
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Scott
I’m not going to go back and read the post or the comments but if I remember, except for a couple of people who left after that btw, what we had was a lively discussion amongst most of the group. I think, unless my memory is badly flawed which is entirely possible, those are the kind of discussions I miss for the most part. I also remember one of my first posts was “Bankers Are People Too”……………
Of course I’ll probably regret not reading my comments as I’m sure someone will find fault with something I said back then. For some reason I hate re-hashing old arguments.
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lms:
if I remember, except for a couple of people who left after that btw, what we had was a lively discussion amongst most of the group.
Yes, indeed. But for the swift departure of Earl Moreo (cef, I think?), it was a fine discussion. But, still, the idea of eliminating FDIC insurance from bank accounts was largely rejected by most.
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Scott
Correct me if I’m wrong but I don’t recall jnc’s idea of this being part of your proposal.
Instead individual depositors would be allowed to deposit up to the existing insurance limits ($250k per person/company, I believe) with the Federal Reserve banks directly and then write checks or otherwise draw on the funds.
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lms:
Correct me if I’m wrong but I don’t recall jnc’s idea of this being part of your proposal.
No, I did not make this specific proposal, although given jnc’s stipulation that “There would be no interest paid to the depositors” is in line with the main point of my original post.
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” End FDIC backing of all private bank deposits.”
Thinking on this further, I think AIG was the biggest recipient of bailout funds. But AIG is an insurance company, isn’t it? Were they even covered by FDIC?
How does the elimination of FDIC protect the financial system from the financial whizzes who ‘eliminate’ risk by retranching mortgages into CDOs and create unregulated derivatives based on them?
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bsimon:
Were they even covered by FDIC?
Nope.
How does the elimination of FDIC protect the financial system…
I think it was proposed as a way of protecting taxpayers from backstopping the risks taken by banks, not as a way of protecting the financial system from, well, anything.
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Changing the subject here, but I thought this article on Romeny’s response to gay marriage now vs 2004 was interesting.
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jnc:
You and Katrina? Please use birth control in such an unholy union
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scott;
yes most are missing the point on DF. either you force investment banks to sell theri retail operations, or vice versa, or don’t think that anything you have written in DF will matter at all in a crisis.
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‘Stocks slumped in the final hour of trading Tuesday following a report that a transcript from the Greek meeting showed deposits leaving the banking system, adding to jitters over the euro zone after Greece’s leaders failed to agree on a coalition government earlier in the session”
Let the game begin!
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The point of the FDIC was to prevent bank runs.
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Brent:
The point of the FDIC was to prevent bank runs.
And to be fair, it has performed that function well.
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“ScottC, on May 15, 2012 at 1:35 pm said:
bsimon:
Were they even covered by FDIC?
Nope.
How does the elimination of FDIC protect the financial system…
I think it was proposed as a way of protecting taxpayers from backstopping the risks taken by banks, not as a way of protecting the financial system from, well, anything.”
Correct and also of isolating the spillover effects to “Main Street” from bank failures. I.e. going back to first principles and asking why a bank run and the associated failure is a bad thing to begin with.
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Reading through the old thread is interesting. I believe that post was before I joined. Trying to figure out who “Teilhard de Chardin” is.
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jnc:
That was shrink. He didn’t last long.
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jnc and I have been rebutting Ezra’s awful post on why the budget deificit in CA is the GOP’s fault, even though it’s hard to find one in the bluest of blue states.
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“bannedagain5446, on May 15, 2012 at 2:44 pm said:
jnc and I have been rebutting Ezra’s awful post on why the budget deificit in CA is the GOP’s fault, even though it’s hard to find one in the bluest of blue states.”
To be fair, I believe you may be overstating the case. Ezra’s post struck me as more of a critique of super-majority requirements in general and also generic “polarization”.
This I found interesting as well:
“New California Taxes Pay for Pensions, Not Schools
By David Crane
Most Californians would be surprised to learn that 100 percent of education’s share of the tax increase proposed by Governor Jerry Brown will go to pensions instead of classrooms. But that would be no surprise to longtime observers of the California State Teachers’ Retirement System, which administers teacher pensions.”
http://www.bloomberg.com/news/2012-04-23/new-california-taxes-pay-for-pensions-not-schools.html
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“ How does the elimination of FDIC protect the financial system…
I think it was proposed as a way of protecting taxpayers from backstopping the risks taken by banks, not as a way of protecting the financial system from, well, anything.”
Correct and also of isolating the spillover effects to “Main Street” from bank failures. I.e. going back to first principles and asking why a bank run and the associated failure is a bad thing to begin with.”
So.. if we bailed out institutions that weren’t covered by FDIC anyway, it seems that eliminating FDIC doesn’t solve the backstop problem at all.
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bsimon:
So.. if we bailed out institutions that weren’t covered by FDIC anyway, it seems that eliminating FDIC doesn’t solve the backstop problem at all.
Correct. As I pointed out the other day, as long as government reps are willing to bail out whoever for whatever reason, it will happen. There is no way to eliminate the political risk to taxpayers of government mandated bailouts. If taxpayers don’t want anyone bailed out, their only chance is to elect politicians that won’t bail out anyone.
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“rebutting Ezra’s awful post on why the budget deificit in CA is the GOP’s fault”
My understanding of the CA problem is:
Ballot initiatives have limited the legislature’s & governor’s ability to control the budget, and passing a budget (or just tax increases?) requires a supermajority. Perhaps this latter bit is where Klein blames Republican intransigence?
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” going back to first principles and asking why a bank run and the associated failure is a bad thing to begin with.”
A bank run and a bank failure aren’t such a big deal. But cascading bank runs & bank failures start to create problems.
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Worth a read:
“Sen. Tom Coburn, part one: Defusing the debt bomb
Posted by Ezra Klein at 02:02 PM ET, 05/15/2012”
http://www.washingtonpost.com/blogs/ezra-klein/post/sen-tom-coburn-part-one-defusing-the-debt-bomb/2012/05/15/gIQAIUteRU_blog.html
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jnc, I loved this answer. It sounds like he might vote for Obama……….haaaaahaaaaa
I thought the rest was typical Coburn deficit scold. He may be right but he doesn’t sell it very well IMO.
TC: I don’t know. I’m not good at predicting that. If President Obama is president again, those problems are still there and we have to solve them. He knows that. We’ve had conversations where he’s told me he’ll go much further than anyone believes he’ll go to solve the entitlement problem if he can get the compromise. And I believe him. I believe he would.
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Regarding CA, there’s no simple explanation for what went wrong. Honestly, it started with Prop 13, then came the super majority, then the lousy investments by financial geniuses to reap big rewards, that never materialized of course, for the pensions followed by the crash of the housing market. A perfect storm. It’s not actually a R vs D story IMO……………………..lots of blame to go around tenfold. That Bloomberg piece regarding where the 40% of the money for schools will go is really a depressing piece. School districts basically have very little choice as they have to fund their portion of the pensions which were legislated btw.
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“lmsinca, on May 15, 2012 at 4:28 pm said:
jnc, I loved this answer. It sounds like he might vote for Obama……….haaaaahaaaaa
I thought the rest was typical Coburn deficit scold. He may be right but he doesn’t sell it very well IMO.
TC: I don’t know. I’m not good at predicting that. If President Obama is president again, those problems are still there and we have to solve them. He knows that. We’ve had conversations where he’s told me he’ll go much further than anyone believes he’ll go to solve the entitlement problem if he can get the compromise. And I believe him. I believe he would.”
It’s also the sort of comment that disturbs many progressives/liberals as it indicates that President Obama is willing to “sell out” on entitlements.
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WSJ on contrasting Chris Christie with Jerry Brown:
The role of Federal stimulus projects is interesting:
“When the Obama administration’s Transportation Department called on California to cough up billions for a high-speed bullet train or lose federal dollars, Mr. Brown went along. In sharp contrast, when the feds delivered a similar ultimatum to Mr. Christie over a proposed commuter rail tunnel between New York and New Jersey, he nixed the project, saying his state just couldn’t afford it.”
http://online.wsj.com/article/SB10001424052702304371504577404503988018824.html
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Checking accounts are now politically controversial if they are held at the “wrong” bank:
“The Obamas’ assets also include anywhere from $500,000 to $1 million held in a JPMorgan Chase checking account. The bank is under heightened scrutiny this week, as the Department of Justice is launching a criminal probe into the firm after reports of its staggering $2 billion trading loss.”
http://www.washingtonpost.com/blogs/election-2012/post/obamas-2011-assets-valued-at-as-much-as-8-million-financial-disclosure-forms-show/2012/05/15/gIQAsxy4RU_blog.html?hpid=z3
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WSJ has an op-ed piece today talking about the FDIC issue we we’ve been talking about. It also, unfortunately, perpetuates the myth that the demise of Glass-Steagall was responsible for the 2008 crisis:
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jnc
It’s also the sort of comment that disturbs many progressives/liberals as it indicates that President Obama is willing to “sell out” on entitlements.
We’ve known that for a long time now. Obviously something needs to be done, especially with M/M. Republicans are pretty much sold on Ryan’s plan though which I doubt he’ll ever endorse. There are reforms and then there are “reforms” where you turn people loose to completely fend for themselves without an income other than the one they’re trying to shrink. I thought Coburn was a little lukewarm on Ryan’s plan from the interview. He seems more interested in compromise.
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Another early night for me………………….g’night all.
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” It’s also the sort of comment that disturbs many progressives/liberals as it indicates that President Obama is willing to “sell out” on entitlements.”
It’s 1996 all over again. Will Gingrich win this time?
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“ScottC, on May 16, 2012 at 6:56 am said:
WSJ has an op-ed piece today talking about the FDIC issue we we’ve been talking about. It also, unfortunately, perpetuates the myth that the demise of Glass-Steagall was responsible for the 2008 crisis:”
I’d rephrase this as the demise of Glass-Steagall didn’t cause the 2008 crisis, but it did help make the TARP bailout both perceived as necessary and cost more than it would have otherwise had Glass-Steagall remained in effect.
Ezra Klein referenced the WSJ piece as well.
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jnc:
…and cost more than it would have otherwise had Glass-Steagall remained in effect.
How so? From what I can tell looking at this site which tracks TARP fund disbursements and repayments, out of the top 15 recipients of the most TARP money (disbursements between $4bn and $116bn), there is none still outstanding from any bank that would have been subject to Glass-Steagall restrictions, and indeed far from costing anything, its seems the government has actually made a return of roughly $27bn on the TARP funds loaned to these banks.
On TARP loans to the 4 largest banks alone, the activities of which most of this G/S talk seems to be centered (JPM, BoA, Citi, and Wells), the government earned $21bn. So it is not at all clear to me how the absence of G/S has cost the government anything.
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“bsimon1970, on May 16, 2012 at 7:42 am said:
” It’s also the sort of comment that disturbs many progressives/liberals as it indicates that President Obama is willing to “sell out” on entitlements.”
It’s 1996 all over again. Will Gingrich win this time?”
I predict at the end of the day after a budget deal between the House Republicans and President Obama the cost growth of entitlements will continue.
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the cost growth of entitlements will continue.
Or put another way, the cost growth of medical care will continue. That’s what I see when I look at the chart you linked in today’s morning report.
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” Or put another way, the cost growth of medical care will continue. That’s what I see when I look at the chart you linked in today’s morning report.”
There’s also a possibility that boomers will continue retiring faster than wages increase (and thus FICA tax revenue).
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[…] it is pointed out, as I did yesterday, that in fact the “bailout” of the banks didn’t cost the taxpayers anything, and […]
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I don’t know why or how this snippet from my new post shows up as a comment on a 2-day old morning report. Very weird.
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