Bernanke Lies, part 943643948 | Peak Delusion
 

Nice set of links, only-human. The NYT has a piece today on banks` trying to water down the vaguely-worded "banks should retain some skin in the game" aspect of Dodd-Frank with respect to mortgage issuance and securitization:

[url=http://www.nytimes.com/2011/02/18/business/18norris.html?_r=1&ref=business]Banks’ Plea to Transfer Mortgage Risk Likely to Fail[/url]
[quote]When the mortgage securitization market collapsed amid a flood of defaults and foreclosures — many of them on loans that should not have been made — the cry arose for lenders to have “skin in the game.” To properly align incentives, the argument went, those who make loans must suffer if the loan goes bad.
That principle was enacted by Congress last year in the Dodd-Frank law, but the mortgage industry managed to persuade legislators to insert an ill-defined loophole that would allow at least some mortgage loans — and perhaps nearly all of them — to escape the requirement that banks retain at least 5 percent of the risk.

Now it is up to an unwieldy council of regulators to set the parameters of that loophole. They will do that by defining the term “qualified residential mortgage.” If a loan is a Q.R.M., as bankers now refer to such loans, then it can be sold to investors without the lender retaining any risk.

Much of the banking industry has been pushing for an expansive definition that would leave few, if any, conventional loans subject to the skin-in-the-game requirement. To hear them tell it, there is virtually no way that any bank would make a mortgage loan at a reasonable rate if it had to share in any losses.[/quote]
[i]My Comment:[/i] That's right - the whole basic business model behind sustainable banking - taking in deposits and lending them prudently back out at a higher rate of interest so that even with the inevitable defaults of a small percentage of those loans, the bank can still make a profit - well, that math just doesn't work anymore, folks. (What the bankers are really saying is, "we want the government to continue to allow us to leverage miniscule amounts of capital to the moon and backstop us when things go sour, while we continue to reward ourselves lavishly for blowing up one financial firm after another").

--------------------------

[url=http://www.nytimes.com/2011/02/18/business/economy/18regulate.html?src=busln]NYT: Fed Chief Says U.S. Bolstered Its Ability to Handle Failure of a Big Bank[/url]
[quote]WASHINGTON — The chairman of the Federal Reserve said on Thursday that banking regulators would be better able to deal with the failure of a large bank today than they were two years ago, thanks in part to the Dodd-Frank Act, which overhauled financial regulation after the crisis of 2007-8.

Ben S. Bernanke, the Fed chairman, told the Senate Banking Committee that it would be some time before all of the rules of the new law were in place but that regulators had begun to tighten risk standards and “certainly we’ve all learned lessons from the crisis.”

When Senator Richard C. Shelby of Alabama, the ranking Republican on the committee, asked what those lessons were, Mr. Bernanke replied, “The importance of being very aggressive and not being willing to allow banks, you know, too much leeway, particularly when they’re inadequate in areas like risk management.” [/quote]
[i]My Comment:[/i] Apparently Bernanke does not consider proper valuation of on-and-off-balance-sheet assets to be an important part of "risk management", because the Fed has certainly not been agitating to a return to anything resembling "mark to market" accounting, likely because doing so would immediately test the assertion that "banking regulators would be better able to deal with the failure of a large bank today". [url=http://market-ticker.org/akcs-www?post=180131]Wells Fargo[/url], for instance.

[b]"Peak Bullshit": The Obama 2012 Budget Proposal[/b]

[url=http://www.zerohedge.com/article/guest-post-pump-it]"Peak Bullshit": The Obama 2012 Budget Proposal[/url]
[quote]I had been planning an article based on the Green Day song – [i]Static Age[/i] - about the propaganda, lies and misinformation that are endlessly directed at the American people by the government, the mainstream corporate media, and the wealthy elite that control the levers of our society. Then Barack Obama presented his 2012 Budget proposal, including his 10 year projection for our country. I know you’ve heard the term Peak Oil, but the term that came to my mind when I saw Obama’s budget was Peak Bullshit.
...
Obama, Wall Street, and the corporate mouthpieces in the mainstream media have been pumping up the American people for months with false data, unwarranted optimism, bank profits created out of thin air by accounting fraud, and attempting to create an economic recovery built on a foundation of sand, supported only by lies. The Obama budget is worse than a joke. It is a tragic joke. It amazes me that he can stand in front of the American people and present such a lie. The liberal media then unquestioningly presents the budget as a frugal cost cutting proposal that will reduce deficits and inflict painful cuts upon the poor American people. It would be laughable, if it wasn’t so sad. One look at Obama’s deficit projections for FY11 and FY12, presented one year ago, should be enough to convince you that no one in Washington DC has a clue what they are doing.
[code]
Year Federal Spending Surplus(Deficit)
(In Billions)
---- ---------------- ----------------
2011 $3,834 ($1,267)
2012 $3,755 ($828)[/code]
Obama projected a two year deficit of $2.1 trillion. His current projection, just one year later, is $2.75 trillion. He missed it by this much.

The rocket scientists running our country underestimated the deficit by 31% in the space of one year. I suppose that is considered highly accurate for a government drone. Now let’s get some perspective on Obama’s projected FY11 deficit of $1.65 trillion. This is the projected DEFICIT. Do you remember back to the Clinton administration? Did you feel like your Federal government wasn’t spending enough? In 1998 the TOTAL SPENDING of the Federal government was $1.65 trillion. We now run deficits that equal the entire budget of the United States in 1998, without blinking an eye or questioning how we got here. The politicians have scared the populace into thinking that the country will collapse without the Federal Government spending $3.8 trillion of your money, every year.[/quote]
[i]My Comment:[/i] The actual (revenues-spending) shortfall for calendar 2011 looks to hit around $2 trillion, which is roughly the same as Obama "targeted" as the total for the next TWO years. And the intensity of the faux-partisan wrangling over the relatively miniscule cuts proposed by both sides so far - the Republicans, even after being pressured by freshman Tea Party members, have come up with only roughly $100 B in savings over the coming budget year (roughly $60 B for calendar 2011), and that without specifying precisely what is going to get cut: So far those are the kind of vaporous "cuts in discretionary spending blah blah" numbers that inevitably get scaled way back once the lobbying to "cut someone else`s wasteful spending, but spare mine" begins. Not even close, folks. We could cut 100% of federal "discretionary" spending (I put that in quotes because it includes the $700-800 Bln defense budget, which may be classified as discretionary but is in treated as an untouchable sacred cow by both parties in practice) and we still would not close the budget gap. And the so-far-completely-out-of-the-question mammoth entitlement programs (Social Security, Medicare and Medicaid) continue grow in size (but not funding level) rapidly as the baby boomers enter retirement in ever-increasing numbers.

The rest of the above piece looks mainly at the delusionally optimistic revenue-side "estimates" which went into the administration`s budget proposal. A snip:
[quote]Again, some perspective is needed to realize how out of control our Federal Government has become. According to the BLS, inflation has risen by 33% since 1999. Real GDP has grown by 23%. [u]The population of the U.S. has grown by 10%. The number of employed Americans has risen by 1.8%[/u]. The average pay for a Federal drone (aka worker) has risen by 58%, while the average pay for real workers has risen by only 30%. Therefore, the average non-government employee has seen a decrease in their standard of living as inflation has risen faster than wages. As you can calculate yourself, [b]Federal government spending surged by 124% between 1999 and today. Have you noticed a doubling in service level, competence, educational scores, new energy solutions, or safety and security? What did we get for an extra $2.1 trillion of spending?[/b]

What we got was exhausting wars of choice, less freedom, less liberties, less safety, more rules, more regulations, more bureaucrats, more corruption, a financial collapse, and a government that has put us on a path to fiscal ruin. [u]We’ve almost tripled spending on Defense. Are we safer? We’ve more than doubled spending on healthcare. Are we healthier? We’ve more than doubled spending on welfare. Are the poor less impoverished? We’ve more than doubled spending on education. Are our children smarter?[/u] The Federal government is out of control. When you hear a politician or pundit detailing the horrors of “spending cuts”, please keep in mind they are lying. There will be no cuts until they are forced upon the government by the looming collapse of our economic system.[/quote]

Getting back to the "is inflation on the rise?" theme, Barry Ritholtz has a piece today called [url=http://www.ritholtz.com/blog/2011/02/goods-vs-services-a-tale-of-two-inflations/]Goods vs Services: A Tale of Two Inflations[/url], in which he discusses a WSJ article about how even though prices of goods are rising, labor costs are relatively flat:
[quote]Prices rose 1.6% in January 2011 vs 2010 — the biggest increase in eight months. The key has been commodities — gasoline, cotton, wheat, coffee, and oil are all higher.

Labor, on the other hand is not. Wages are flat, unemployment is stubbornly high, and hence, prices for Services are flat to lower. That is keeping a lid on inflation.[/quote]
[i]My Comment:[/i] First off, about those goods-price numbers: The BLS reports that goods prices were up 2.2% from a year earlier. Contrast that with the latest-month data from the [url=http://www.zerohedge.com/article/us-2011-inflation-106]MIT Billion Price Project[/url], which aggregates huge numbers of actual prices-paid data and concludes that prices rose nearly a full percent in January alone.

Next, to the poltical/economic spin on the data: The government wonks are using the disparity between goods and labor-cost inflation to argue that the overall trend is favorable "because the two cancel each other out" or some such nonsense. But if one replaces the dry faceless "labor costs are flat" with what it represents in human terms, "wages are flat", the conclusion is that "the average working person is paying more for goods but not getting paid more for their labors", and it suddenly looks a wee bit less benign. One reader comment to the above piece posits that this trend of squeezing workers may in fact be a deliberate, twisted "jobs creation strategy" by the powers-that-be:
[quote][b]The Curmudgeon Says:[/b]
February 18th, 2011 at 2:28 pm

This is sort of a dog bites man story. Of course there’s inflation. That’s what Bernanke and Co. have been aiming for, and like he says, he can print as many dollars as he likes.

What people also don’t get is that Bernanke and Co know full well that the best means of lowering the unemployment rate is lowering the cost of labor, i.e., reducing the wage rate. Guess what happens when “goods” increase in price and “services” don’t? The cost of labor/wage rates goes down as relative matter, thereby juicing employment rates. They can’t say that this is their strategy, but they fully well understand that lowering wage rates can be accomplished through outright cuts or through inflation. They are betting that people are too stupid to understand that if their wages stay the same yet everything else gets more expensive, then their wages, and thereby standard of living, have declined.

Lower real wage rates will result in higher employment rates. That’s their aim. It seems to be working, and without the political fallout that would result if nominal wage rates declined.[/quote]
[i]My Comment:[/i] It`s an interesting perspective, but what I see so far is companies enjoying the lower labor costs (in this arena, the glum-sounding "companies squeezing remaining workers to do more for less" is invariably replaced by the upbeat "companies benefit from rising productivity") by way of increased profits, but that not resulting in any appreciable increase in hiring. I think the figure of 24 million missing U.S. jobs (which represent the difference between where we are today and where we would be if labor-force participation and unemployment rate were the same as at the start of 2000) tends to support the latter view. We *wish* large numbers of low-wage jobs were being created.

Oil Rockets on Libya Turmoil
 

Brief news roundup:

- Oil futures skyrocketing on the [url=http://globaleconomicanalysis.blogspot.com/2011/02/libyas-deputy-ambassador-calls-for-no.html]increasing turmoil in Libya[/url] (Unlike Egypt, Libya is a major oil exporter, especially to Europe; perhaps this partly explains the wishy-washy European "support" [url=http://www.nytimes.com/2011/02/22/opinion/22iht-edcohen22.html?_r=1&ref=opinion]to date[/url] for the pro-democracy movements in the Arab world. Such support, after all, would endanger the lavish despot-paid paid visits long enjoyed by many European leaders and diplomats to many of the same Arab countries...Italian mega-crook PM Berlusconi is probably most concerned that instability in North Africa may endanger hsi supply lines of underage Moroccan hookers;

- Latest Case-Shiller data confirm U.S. home price [url=http://www.zerohedge.com/article/case-shiller-confirms-housing-double-dip-accelerated-20-city-composite-lowest-june-2009]double dip[/url]; "Resumption of previous mean reversion" seems more apt to me;

- South Korean Banking System showing cracks as [url=http://www.zerohedge.com/article/korean-bank-run-accelerates-financial-services-chairman-deposits-17864-demonstrate-all-well#comments]bank runs accelerate[/url]

- In Germany, Merkel`s coalition suffered a huge [url=http://www.nytimes.com/2011/02/21/world/europe/21hamburg.html?ref=europe]rebuke in Hamburg[/url] in first of seven regional elections this year. I love the pro-Merkel counterfactual spin on this; contrast the facts in bold with the underlined [i]Schpinmeistering[/i]:
[quote]According to preliminary results as reported by public television channels ARD and ZDF, Mrs. Merkel’s candidate, Christoph Ahlhaus, the incumbent, was decimated in the race for mayor of the city-state, the equivalent of the premier in other German states. [b]Her party’s share of the vote was cut to 21 percent, from 42 percent in the 2008 elections[/b].

The Social Democrats, led by Olaf Scholz, made a big comeback, winning slightly less than 50 percent of the vote, up from the 34 percent in 2008. If the preliminary results stand, the Social Democrats would be able to govern without having to depend on coalition partners.

It was the first of seven regional elections this year, and the conservative Christian Democrats tried to play down the results.
[u]
“It has no consequences for the federal level,” said Ekhard von Klaeden, a leading Christian Democrat and adviser to Mrs. Merkel. “The people of Hamburg were completely preoccupied with local issues.”[/u][/quote]
[i]My Comment:[/i] Right, local issues, like whether they want to continue sending local monies to the central bankers in Brussels to distribute to various insolvent European countries.


[b]And Speaking of Delusional counterfactual spin...[/b]

[url=http://www.ritholtz.com/blog/2011/02/more-doubts-about-nar-home-data/]More Doubts About NAR Home Data[/url]:
[quote]Last week, we discussed data that suggested the [url=http://www.ritholtz.com/blog/2011/02/is-the-nar-overstating-re-sales/]NAR has been dramatically overstating home sales[/url] and understating stating inventory. I have a much longer piece in the works, tracing how the NAR’s data errors were discovered and by whom — but today’s must read MSM article is in the [url=http://online.wsj.com/article/SB10001424052748704476604576158452087956150.html]WSJ[/url]:
[i]
The National Association of Realtors, which produces a widely watched monthly estimate of sales of previously owned homes, is examining the possibility that it over-counted U.S. home sales dating back as far as 2007.

The group reported that there were 4.9 million sales of previously owned homes in 2010, down 5.7% from 5.2 million in 2009. But CoreLogic, a real-estate analytics firm based in Santa Ana, Calif., counted just 3.3 million homes sales last year, a drop of 10.8% from 3.7 million in 2009. CoreLogic says NAR could have overstated home sales by as much as 20%.
[/i]
One key correction: The NAR tracking error did not begin in 2007, as the WSJ suggests, but dates back to their last benchmark in 2000.[/quote]
[i]My Comment:[/i] I am shocked - shocked, I say! - to hear that the most self-serving, delusionally counterfactually-data-spinning of all retail trade associations is suspected of manipulating data in a self-serving fashion. Next thing you know, the muckrakers and rabble-rousers of the yellow press will be accusing our own government of massaging economic data in order to garner support for the administration`s policies.

From the folks who brought you the Greek version of the Euro crisis: [url="http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103?printable=true#ixzz1CugKJW8o[/b]"]the Irish version[/url] (also very well-written)

On bank failures and "tipping points"
 

[url]http://www.cbsnews.com/stories/2011/02/23/business/main20035506.shtml[/url]

[QUOTE]The number of banks at risk of failing made up nearly 12 percent of all federally insured banks in the final three months of 2010, the highest level in 18 years.

The Federal Deposit Insurance Corp said Wednesday that the number of banks on its confidential "problem" list rose to 884 in the October-December quarter, up from 860 in the previous quarter. Those are banks rated by examiners as having very low capital cushions against risk.

Twenty-two banks have failed so far this year. And more banks are at risk, even as reported the industry's highest earnings as a group since the financial crisis hit three years ago.[/QUOTE]

Now lets put this in perspective. The FDIC is notoriously schizoid about defining any bank as "troubled". Combine this with a notoriously fragile economy. Now speculate what happens if the economy has even the slightest jangle over the next 2 years. What happens to the number of crashed banks?

They are looking in a crystal ball and asking us to take the diviners statements as gospel. The same statement applies to the amounts they state will be needed to buy out and close institutions over the next 2 years.

DarJones

The Third Bubble
 

[url=http://www.ritholtz.com/blog/2011/02/nyse-market-capitalization-as-of-gdp/]NYSE Market Capitalization as % of GDP | The Big Picture[/url] … you can see the third of the Greenspan bubbles (which is technically a Bernanke bubble, but Bernanke learned the art of bubble-blowing all too well from his former mentor) forming at the extreme right. The funny thing is, the last 15 years have been so inflated all around that even the market trough in early 2009 didn’t quite suffice to take things back to their historical average.

One of today’s entries in TBP also has a great “historical quote” by the esteemed former chairman: [url=http://www.ritholtz.com/blog/2011/02/qotd-greenspan-on-financial-innovation/]Greenspan on Financial Innovation[/url].

And to round things out, here is the latest piece from Rolling Stone’s Matt Taibbi: [url=http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216?page=1]Why Isn’t Wall Street In Jail[/url]?

Japan Sovereign Debt Tragedy Enters Final Act
 

[url=http://globaleconomicanalysis.blogspot.com/2011/02/worlds-largest-pension-fund-needs-to.html]Japan`s Largest Pension Fund Set to Become Ne Seller of Government Debt[/url]
[quote][i]Japan’s public pension fund, the world’s largest, said it may become a net seller of bonds to cover payments in the world’s most rapidly aging society.

The Government Pension Investment Fund, which oversees 117.6 trillion yen ($1.4 trillion), in September forecast that it would sell 4 trillion yen in assets in the business year ending March 31 to fund payouts. Sales may be less than that in the year starting April as bonds reach maturity, said Takahiro Mitani, president of the fund, known as GPIF.

“We will likely be a net seller in the market,” Mitani, a former executive director at the Bank of Japan, said in an interview in Tokyo yesterday. “We certainly have to come up with an adequate amount” to pay pensions, he said, declining to elaborate on the amount.

Sales by the fund, which helps oversee public pension funds for Japan’s 37 million retirees, come as the first of Japan’s baby boomers is set to turn 65 in 2012, making them eligible for pension payments.

The GPIF, historically one of the biggest buyers of Japanese debt, held 82.4 trillion yen in domestic bonds, or 70 percent of its assets, as of September, according to the fund’s latest quarterly financial statement. That compares with 12.6 trillion yen in Japanese stocks, or 10.7 percent, 9.6 trillion yen, or 8.2 percent, in foreign bonds and 11.5 trillion yen, or 9.7 percent, in overseas stocks, the report shows.

GPIF doesn’t plan to start investing in so-called alternative assets such as commodities, real estate, infrastructure, private equity or hedge funds because the risks don’t suit its strategy, Mitani said.
‘Too Early’

“It’s too early to get into alternative investments now,” Mitani said. “Japanese investors are conservative and it’s hard to justify to the public investing in asset classes such as commodities, real estate and hedge funds.”

Japan’s 10-year bond yield is the lowest in the world, data compiled by Bloomberg show. Japan’s gross domestic product shrank an annualized 1.1 percent in the three months ended Dec. 31, the Cabinet Office said on Feb. 14, and China’s economy overtook Japan’s as the world’s second largest for 2010.

People aged 65 or older will account for 29 percent of the country’s population in 2020 and almost 40 percent in 2050, according to the statistics bureau. They accounted for 23 percent population at the end of 2010, the highest among the Group of Seven countries, data compiled by Bloomberg show. That compares with 12 percent in 1990.[/i]

[b]Thoughts and Implications
[/b]
There is not going to be a huge exodus of Japanese bonds anytime soon. However, the world's largest fund has gone from being a buyer of bonds to a seller of bonds. The amount is not trivial.

82.4 trillion yen in domestic bonds is about 1 trillion in US dollars. That is a lot of pent-up supply, especially when the government is running an annual deficit of of about $240 billion with no external buyers at all.

Those factors put huge long-term upward pressures on interest rates.[/quote]
[i]My Comment:[/i] Japan`s government debt (roughly 200% of GDP and steadily climbing) is so large that even a 1% rise in interest rates - which is likely highly conservative estimate as the government will have to turn increasingly to external buyers to fund its borrowing and those are not going to settle for 1-2% yields by a long shot - will likely tip the budgetary dynamic into a state of "death spiral financing" which can only end in outright default or currency collapse (default by another name). This coming fiscal train wreck is going to become the biggest issue in Japan`s economic and political landscape over the next 5 years, a decade at the most. Consider the above the first clear emergency whistle, soon to be followed by the screeching of the brakes and flying showers of sparks, which alas will occur far too late to prevent the wreck that has already been rendered ineluctable. The above Mish article has much more on the overall Japanese economic and political situation.

[b]On a Lighter Note:[/b]

Numismatists and [i]Doc Savage[/i] comics fans will be interested in this:

[url=http://www.zerohedge.com/article/your-chance-own-tiny-3-piece-hank-paulson]Your Chance To Own A Tiny 3" Piece Of Hank Paulson[/url]

I thought at first this was a reference to that weirdly-bent pinkie finger of Hank's ... he probably dislocated it from too much practicing of his Austin-Powers-Dr.-Evil-style "one trillion dollars" imitation while preparing TARP.

[HP, admiring his freshly polished dome in full-length mirror at Treasury Central] "...One TRILLION doll...[snap] - Ow! I think I broke it! ... OK, better make it SEVEN HUNDRED BILLION dollars..."

I've been keeping an eye on the used car market in Los Angeles in recent months. I've not been gathering hard facts but did worry that my decrepit car would not pass smog testing last year. There is a disposal program that buys old smoggy cars but, no surprise, it is currently unfunded. My car passed smog testing once more but perhaps not next time. Anyway, cheap used cars aren't around anymore.

[URL="http://www.nytimes.com/2011/02/26/business/26upgrade.html?_r=1&src=me&ref=business"]Consumers Hold On to Products Longer[/URL] has some information of owner retention of new and of used cars from 2008 to the mid 2010. [URL="http://www1.eere.energy.gov/vehiclesandfuels/facts/2010_fotw622.html"]Average Length of Light Vehicle Ownership[/URL] has the retention information from 2002 through 2008. Both links draw their information from R. L. Polk and Company statistics.

The bottom line is that new cars retention by consumers was 48.4 months in 2002 and new cars were held for a continually increasing duration up to the most recent figure of 63.9 months at the second quarter of 2010.

Used cars were held for 31.6 months in 2002 and were held for 41.3 months at the second quarter of 2010.

Irish Elections | "Best Criminal Coverup" Oscar
 

Mish has a roundup uf the Irish election results and the likely implications:

[url=http://globaleconomicanalysis.blogspot.com/2011/02/massive-rout-in-irish-elections.html]Ireland's new government on a collision course with EU[/url]
[quote]Exit polls and early tallies from Ireland's general election heralded political annihilation for Fianna Fail (FF), the party which has ruled Ireland for more than 60 years of the Irish Republic's eight decades of independence.

The unprecedented and historic defeat, Fianna Fail's worst result in 85 years, makes the Irish government the first eurozone administration to be punished by voters in the aftermath of the EU's debt crisis. Voter turn-out was exceptionally high at more than 70 per cent, indicating public anger at the government and the EU.

Late last year, Ireland was forced to accept a £72 billion EU-IMF bailout to cover huge public debts that were ran up to save failed Irish banks.

The bail-out was designed to prevent financial contagion that threatened the existence of the euro, but according to economic forecasts, the cost of servicing Irish bank debt and the EU-IMF bank loans will consume 85 per cent of Ireland's income tax revenue by 2012, a burden that a majority of voters find intolerable.
...
Enda Kenny, Fine Gael's leader, will later on Sunday, start to form a new government, almost certainly with Labour, after full election results under Ireland's complicated PR system come through.

Both Mr Kenny and Eamonn Gilmore, Labour's leader, have promised Irish voters that they will renegotiate the EU-IMF austerity programme to reduce the burden for taxpayers and to force financial investors to shoulder some of the bank debts currently paid out of the public purse.

At a summit of centre-right EU leaders in Helsinki next Friday, Mr Kenny will use his position as Ireland's new Prime Minister to beg the German Chancellor, Angela Merkel, and French President, Nicolas Sarkozy, for concessions ahead of an emergency March 11 Brussels summit to restructure the euro zone.

But neither the two European leaders nor the European Central Bank or EU will permit any substantial changes, despite the huge popular Irish revolt against the bailout.

Chancellor Merkel will tell Mr Kenny that if he wants to reduce the high, punitive 5.8 per cent interest rate charged on EU loans then Ireland will have to give up its low corporate tax rates - a measure regarded as vital to Ireland's recovery and one of the few economic policies it has not yet handed over to Brussels or Frankfurt.

The new Irish premier will also be warned that there is no question of forcing privately-owned financial institutions to assume Ireland's £85 billion bank debts because the resulting market panic would spread to Germany and France, tearing the euro single currency apart.

As Irish voters headed for the polling booths on Friday, the European Commission bluntly declared that the terms of the EU-IMF bailout "must be applied" whatever the will of Ireland's people or regardless of any change of government.

"It's an agreement between the EU and the Republic of Ireland, it's not an agreement between an institution and a particular government," said a Brussels spokesman.
[b]
A European diplomat, from a large eurozone country, told The Sunday Telegraph that "the more the Irish make a big deal about renegotiation in public, the more attitudes will harden".

"It is not even take it or leave it. It's done. Ireland's only role in this now is to implement the programme agreed with the EU, IMF and European Central Bank. [u]Irish voters are not a party in this process, whatever they have been told[/u]," said the diplomat.[/b][/quote]
[i]My Comment:[/i] The unbelievable arrogance of the Euro-crats, telling voters in a sovereign democracy that they have no say in such crucial matters regarding the future of their nation. Let`s hope the Irish give Brussels and the rest of the "Euro über Alles" cabal a hearty Iceland-style middle finger (or index and middle, assuming the Irish use the UK-style 2-finger salute). Let`s not forget that revolutions have been fought over the issue of taxation without representation and similar self-determination issues. And world wars have been fought as a result of similarly unfair monetary-reparations arrangements. Obviously 21st-century Ireland is neither late-colonial America nor 1920s Germany, but in fact Ireland has the power here - nothing they do is likely to make their fiscal and economic situation much worse than it currently is, and they can credibly threaten to take down the European monetary union if the folks who administer the latter continue to be intransigent.


[b]And the Oscar For Best Financial-Crimes Cover-Up Goes To...[/b]

Amidst all the self-congratulatory fluff and avoidance of politically sensitive topics at last night`s academy awards ceremony, there was a bit of financial-crisis-related subject matter:

[url=http://www.mediaite.com/tv/inside-job-best-documentary-oscar-winner-notes-nobody-has-served-jail-time-for-financial-meltdown/]Inside Job: Best Documentary Oscar Winner Notes Nobody Has Served Jail Time For Financial Meltdown[/url]
[quote]As of this evening, Charles Ferguson is no longer just a documentary filmmaker, he is now a Academy Award winning documentary filmmaker for his film Inside Job. The film focused on the connections between the government and financial institutions that led to insane levels of profit-taking which endangered the global economy. Mr. Ferguson will also be known for creating perhaps the most entertaining and contentious moment during a thus far lackluster Academy Awards when he pointedly noted that no one has gone to jail for the financial misconduct.

It was the first quasi-political moment In a broadcast that has been remarkably devoid of any controversial comments (and pure entertainment value) and one that will surely be noted in the days of recap coverage that will come in the following days.[/quote]
[i]My Comment:[/i] The above page a video-clip link. Interestingly, while today`s WSJ spilled no small amount of ink discussing Melissa Leo`s verbal gaffe after her winning the best supporting actress award and her "controversial self-promotional ad campaign to Academy members", it also briefly mentioned Ferguson`s award but had nary a mention of his acceptance speech. Curious omission, that. Allow me to rectify - I`m sure Rupert & Co, courageous truth-telling critics of Wall Street as they are, regret not having had space in their piece for any frills aside from Ms. Leo`s verbal gaffe, Ms. Leo`s controversial ad campaign, and a tasteful 2.5" x 4" picture of Ms. Leo being escorted onto the dais by an aged but still-very-dapper Kirk Douglas - among all that, who has space for long-winded diatribes like the following?
[i]
"“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong.”"[/i] -- Charles Ferguson, accepting the 2011 Academy Award for Best Documentary for his film "Inside Job"

[QUOTE=ewmayer;253979]Let`s hope the Irish give Brussels and the rest of the "Euro über Alles" cabal a hearty Iceland-style middle finger (or index and middle, assuming the Irish use the UK-style 2-finger salute).[/QUOTE]AFAIK, the Irish follow the British rather than the US standard in this respect.
[QUOTE=ewmayer;253979]Let`s not forget that revolutions have been fought over the issue of taxation without representation and similar self-determination issues.[/QUOTE]Yes, let's not forget that. I, for one, pay taxes to the Infernal Revenue Service, despite not having any representation in that part of the world. I am not alone. The US quietly forgot that slogan long ago, just as soon as the thought they could get way with it.

Paul

Barry Ritholtz has a rant today about how the Republicans are trying to gut the SEC:

[url=http://www.ritholtz.com/blog/2011/03/gop-more-madoffs-please/]GOP: More Madoffs, Please[/url]
[quote]If you can’t stop the legislation, you can defund it.

That is what our Chart of the Day shows, the net impact of defunding regulation. As we previously discussed 1 year ago (SEC: Defective by Design?), there has been a concerted effort at keeping regulators under-funded. The SEC has lacked sufficient staff, thus holding enforcement efforts to a minimum.

This is not an accident. Imagine being allowed to have an army and guns, but no bullets are allowed. The banks and big Wall Street firms are very comfortable with this arrangement. And as Matt Taibbi made clear (Why Isn’t Wall Street in Jail?) , the revolving door between the SEC and Wall Street has prevented any criminal prosecutions

And its not a bi-partisan issue this go around, its the crazy wing of the Republican Party:
[i]
“Congressional Republicans intent on big spending cuts are on a collision course with Wall Street’s top regulators over a plan to slash millions from agency budgets.

Lawmakers are targeting the Commodity Futures Trading Commission and the Securities and Exchange Commission. The work of both agencies is set to balloon as the Dodd-Frank financial reform law is implemented. . . .

The most recent comprehensive spending bill produced by House Republicans would chop the CFTC’s funding by $56.8 million — almost a third of the agency’s entire budget — over the next seven months. Funding at the SEC would be cut by $25 million over the same time period.”
[/i]
To give you an idea of what this looks like, consider the chart above — it shows how the SEC caseload has risen, while its budget remains flat.[/quote]
[i]My Comment:[/i] This may be true, but is so very far from pinpointing the root problem with the SEC that I felt compelled to post a reply/rebuttal, which I reproduce here:

------------------

More funding will do absolutely nothing to fix the real problem, which is that the SEC is completely captured, corrupted and co-opted by the industry it is charged with overseeing. Did no one here actually *read* Taibbi’s latest Rolling Stone piece? Barry, you frequently mention the demise of old-fashioned investigative journalism, well here ya go:

[url]http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216?page=1[/url]

[quote]The relationship between the SEC and the DOJ is necessarily close, even symbiotic. Since financial crime-fighting requires a high degree of financial expertise — and since the typical drug-and-terrorism-obsessed FBI agent can’t balance his own checkbook, let alone tell a synthetic CDO from a credit default swap — the Justice Department ends up leaning heavily on the SEC’s army of 1,100 number-crunching investigators to make their cases. In theory, it’s a well-oiled, tag-team affair: Billionaire Wall Street Asshole commits fraud, the NYSE catches on and tips off the SEC, the SEC works the case and delivers it to Justice, and Justice perp-walks the Asshole out of Nobu, into a Crown Victoria and off to 36 months of push-ups, license-plate making and Salisbury steak.

That’s the way it’s supposed to work. But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for [i]protecting[/i] financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who’s in office or which party’s in power. To understand how the machinery functions, you have to start back at least a decade ago, as case after case of financial malfeasance was pursued too slowly or not at all, fumbled by a government bureaucracy that too often is on a first-name basis with its targets. Indeed, the shocking pattern of nonenforcement with regard to Wall Street is so deeply ingrained in Washington that it raises a profound and difficult question about the very nature of our society: whether we have created a class of people whose misdeeds are no longer perceived as crimes, almost no matter what those misdeeds are. The SEC and the Justice Department have evolved into a bizarre species of social surgeon serving this nonjailable class, expert not at administering punishment and justice, but at finding and removing criminal responsibility from the bodies of the accused.

The systematic lack of regulation has left even the country’s top regulators frustrated. Lynn Turner, a former chief accountant for the SEC, laughs darkly at the idea that the criminal justice system is broken when it comes to Wall Street. “I think you’ve got a wrong assumption — that we even [i]have[/i] a law-enforcement agency when it comes to Wall Street,” he says.[/quote]

And for those of you – including Barry in a post from last year, when the SEC announced its new director of enforcement – who were hoping things might change in the wake of the biggest collective fraud in human history, so sorry to disappoint:

[quote]In the end, of course, it wasn’t just the executives of Lehman and AIGFP who got passes. Virtually every one of the major players on Wall Street was similarly embroiled in scandal, yet their executives skated off into the sunset, uncharged and unfined. Goldman Sachs paid $550 million last year when it was caught defrauding investors with crappy mortgages, but no executive has been fined or jailed — not even Fabrice “Fabulous Fab” Tourre, Goldman’s outrageous Euro-douche who gleefully e-mailed a pal about the “surreal” transactions in the middle of a meeting with the firm’s victims. In a similar case, a sales executive at the German powerhouse Deutsche Bank got off on charges of insider trading; its general counsel at the time of the questionable deals, Robert Khuzami, now serves as director of enforcement for the SEC.[/quote]

I urge readers to read the full article, which concludes with a very revealing vignette from a conference on financial law enforcement held last November in NYC – then, pray tell, tell us again with a straight face that the problem is that the SEC needs more funding.