Wall Street Journal: France’s Bonfire of Inanities

Recommendable! France is financially broke for years! What did President Macron (with his rich old wife) do about it? Apparently nothing!

(276) France’s Bonfire of Inanities - YouTube

Swiss Central Bank Delivers Third Straight Rate Cut by 25 basis points to 1%. Really!

Will a new era of too cheap money begin again fueling the next financial crisis? Most likely other central banks will follow like lemmings!

A 1% interest rate on money is ridiculous! The real interest rate again is is zero and/or negative!!!!

How many more times will the lessons of economic history and economics be ignored! As an economist myself, I can only despair!

Even the otherwise level headed Swiss people can not resist foolishness in this respect!

Swiss Central Bank Delivers Third Straight Rate Cut - WSJ "The Swiss National Bank lowered its key rate to 1% from 1.25%, having cut borrowing costs by the same amount in June"

Major stock markets around the world continue to tumble

Bad news!

A possibly looming World War III and other political uncertainties are not good for business (except for e.g. arms related industries)!

Or were the latest, favorable poll numbers for Mistress Kamala cause for concern?  She has not even come out yet in public to assure the public and the world that she is an avid free market advocate! (Caution: irony)

Will French Elections Trigger Another Euro Crisis? with Palki Sharma

Recommendable and concerning! France deep in government debt!

Assets held by U.S. banks that failed has exceeded 2008 levels

Source

Is China’s Economy Staring at a New banking Crisis with Palki Sharma

Very concerning! If serious enough, it could trigger the demise of the communist party rule! There are also reports of a shaky real estate market!

First Republic Bank LOSES $100 billion in deposits in the first quarter of 2023

Is this another shoe going to drop in a developing banking crisis?

Saudi National Bank chair resigns in wake of Credit Suisse loss

The Bedouin man, who graduated from the George Washington University, whose comments helped to topple the Swiss bank!

"The chairman of top Credit Suisse shareholder Saudi National Bank (SNB)  has stepped down less than two weeks after making comments blamed for contributing to the Swiss lender's demise.

Ammar Al Khudairy said on March 15 that the biggest Saudi bank by assets could not buy more shares in Credit Suisse on regulatory grounds.

That helped trigger to a further sell-off in the Swiss bank's shares, exacerbating a crisis of confidence in the lender which saw clients pull out more than $110 billion in the final quarter of 2022."

Saudi National Bank chair resigns in wake of Credit Suisse loss | Reuters

First Republic Bank shares tumble: How vulnerable is the banking sector?

Why was so little reported about the third and actually first defaulting bank (i.e. First Republic) compared to Silicon Valley Bank and Signature bank? Strange!

I did not know until now that the Swiss government used possibly dubious emergency powers to force the merger of UBS and Credit Suisse. If someone like a shareholder of Credit Suisse was to file a suit this deal may be at stake!

Moody’s Cuts US Banking System to Negative After Lender Failures

Another shoe drops!

FDIC Planning Another Silicon Valley Bank Auction

Bad news! And again one of the three big accounting firms was involved!

Looks like Elon Musk was perhaps not so eager to acquire SVB if this was not misinformation to begin with. Or was he prevented?

"Regulators are planning to take another crack at auctioning failed Silicon Valley Bank, according to people familiar with the matter, after they were unable to find a buyer for the firm over the weekend. 

Officials from the Federal Deposit Insurance Corp. told Senate Republicans on Monday that they had additional flexibility to sell the firm now that regulators had declared its failure a threat to the financial system ..."

"... The fallout could prompt a change in startups’ and venture investors’ financial practices and scrutiny of auditor KPMG, which gave both SVB and Signature clean bills of health weeks before they collapsed. ..."

FDIC Planning Another Silicon Valley Bank Auction - WSJ Auction comes after failed attempt to find suitor on Sunday

After Silicon Valley Bank: US regulators close NY based Signature Bank

SVB is not alone and these two banks may not be the only ones!

"The drama in the US banking system continues. Yesterday [3/12/2023?], the authorities there took over another bank seen to be in danger of collapse. The bank in question is Signature Bank, one of the main banks in the cryptocurrency industry, which manages assets of some $110 billion.

The bank had $80 billion in uninsured deposits, and its share price plunged 23% last Thursday, its largest ever daily fall. The bank tried to reassure the market, saying that its financial position was strong and that it was well diversified ..."

After SVB: US regulators close NY bank with Israeli history - Globes Bank Hapoalim founded Signature Bank in 2000 to attract wealthy private clients in New York, but exited from it in 2005.

Chinese citizens boycott mortgages in 86 cities

Serious stuff going on and Western media are not reporting it, but the Indian WION is! Evergrande Group involved. Massive number of borrowers are defaulting on their mortgages. Bank runs ... Perhaps up to $4 trillion loans are at stake. Real estate market dropped by over 70%.

On top of this, the insane zero Covid-19 policy with lockdowns in major areas crippling the economy.

Will this end in a global great depression with the Russo-Ukrainian war going on etc.? Possibly!

The Big Government Bank Robbery Continues

Posted: 8/24/2014

Just read this opinion piece “Banking in a Time of Cholera Bank of America pays $16.65 billion for doing the feds a favor.” about the latest U.S. federal government extortion of Bank of America. I have blogged about this subject before several times.

What I am seriously wondering about why the CEO did not simply tell the federal government he would instantly sell CountryWide and Merrill Lynch again if necessary for $1 to any bidder.

As I said before, as the CEO of BoA I would have told the federal government to go to screw themselves! CEOs who have no spine have no business being CEO!

Big Government Goes After Deutsche Bank

Posted: 8/9/2014

Trigger

The print edition of wall street journal reported yesterday (8/8/2014) in an article “Deutsche Bank Ordered by U.S. Regulators to Improve Reporting Systems, Risk Controls/Confidential Memo Requires that Bank Make Far-Reaching Improvements”

Deutsche Bank is also under repeated pressure from the U.S. Commodity Futures Trading Commission.

A Pattern Has Emerged

The U.S. government under President Obama has an urge or obsession to punish large banks for alleged charges of causing the Financial Crises and Great Recession. The U.S. federal government has now extracted or shall we say extorted 10s of billions of dollars from large banks. Big government is always addicted to more money!

Populists have long claimed that the large banks or any of their employees need to be punished.

A Confidential Memorandum Of Understanding

As the wall street journal reported it is a private, confidential memorandum between the Federal Reserve Bank of New York and New York’s Department of Financial Services and Deutsche Bank to overhaul its technology and compliance procedures by mid-2015. This agreement is in effect since 2012.

Wall street journal failed to mention whether this agreement had previously been disclosed in any of the financial filings of the Deutsche Bank or whether it was so confidential that Deutsche Bank was even discouraged from disclosing it. The Wall street journal, however, says “Memorandums of understanding like the one involving Deutsche Bank aren't typically made public. Lawyers who have dealt with them estimate a half-dozen of the biggest banks might be subject to them at any one time, though they differ in severity and often are resolved in a year. They can immediately affect a bank through extra reporting burdens and examinations.” (emphasis added).

Further, the Wall street journal reports that “In a separate move, the New York banking regulator is planning to install a monitor inside Deutsche Bank, and another one inside Barclays PLC, in the U.S. as part of a continuing investigation into potential manipulation of the foreign-exchange market, the Journal reported last week. Agreements with the banks over how and when the monitors will operate are expected to be in place by September”

Blatantly Unconstitutional

This kind of tight and expansive government control and supervision of any private businesses in the U.S.  is blatantly unconstitutional! Doing business in the U.S. is becoming more and more a pain!

The extensive usurpation of the private financial sector in the U.S. by federal and state governments has been going latest since the Great Depression. This is totally unconstitutional!

Unfortunately, too many politicians and government officials in the U.S. are statist authoritarians!

Free The Markets!

Get big government out of the way and let free markets handle companies that are not cautious!

In free markets, individuals would privately insure their accounts, irresponsible banks vanish or have to pay higher premiums for insurance etc. etc.

New York Times In Admiration On Timothy Geithner

Trigger

Just happened to read  the New York Times book review on Timothy Geithner's “Stress Test“. Thanks to the NYT we learn  more about an incompetent, foolish man who was at the helm of federal government during the time of Great Recession and financial crisis of 2008.

I have previously written another, critical blog post about this man and his new book here.

Salient Excerpts

Emphasis and comments added.

1. “The future Treasury secretary grew up everywhere and nowhere, a bit like a military brat, and came away from his childhood with a certain detachment from the American way of life: “At a local supermarket in suburban Virginia one summer, I was stunned to see an entire aisle stocked with pet food. It seemed bizarre in a world full of starving people.””
   [Thanks to NYT, we get more confirmation that this former U.S. treasury secretary and NY fed chief was and is a naive fool.]
2. “Politically, Geithner was more or less born a left-leaning Republican and appears to have become a right-leaning Democrat. …  As a student at Dartmouth in the early 1980s, he would have called himself a Republican, but “without much conviction.” …  “After The Dartmouth Review . . . published a ­McCarthy-style list of gay students on campus, I ran into a Review writer named Dinesh D’Souza at a coffee shop and asked him how it felt to be such a [expletive].””
   [What a man without conviction and what a bold guy to tell Dinesh D’Souza in College to be an expletive! Is there more such name dropping this book?]
3. “Oddly, for a Republican Ivy League graduate of the 1980s — and even more oddly for a future Treasury secretary — he found Wall Street pointless and the business world faintly ridiculous. He had no particular interest in money. “I did endure one job interview with a management consultant, whose first question was about how I would turn around a small failing beer company,” he writes. “I had no idea.””
   [Again who appointed this incompetent man for such a stellar career in the federal government?]
4. “The square that changed his life was Larry Summers, then a Treasury under secretary, who clearly saw in Geithner someone who would at least pretend not to be intimidated by him. But this part of the Timothy Geithner story — his rise in the world of important people — remains a bit vague.”
   [Was that it?]
5. “He became one of the guys who kept their heads as others lost theirs, defined less by what he was than by what he was not: in trouble. Mervyn King, the former governor of the Bank of England, joked (and as Geithner quotes him joking): “Tim was present at all the crises. But he didn’t cause the crises. The crises caused him.””
   [This is also typical for fools, they do not realize how serious the situation is!]
6. ““The fundamental causes of this crisis were familiar and straightforward,” Geithner writes. “It began with a mania — the widespread belief that devastating financial crises were a thing of the past, that future recessions would be mild, that gravity-defying home prices would never crash to earth.” ”
   [The causes were more like massive government failure in the form of affordable housing for everyone policies combined with recklessly low interest rates and toleration of ridiculous lending standards.]
7. “A few of the important people with a privileged view expressed concerns about the risks being taken, but most said nothing. Geithner counts himself in the minority. “I began asking questions about capital: Do our banks really have enough?” he writes, adding, “I was more worried than many of my colleagues, but I was not nearly worried enough.””
   [Sorry to say, but Timothy Geithner failed his job!]
8. “Interestingly, Geithner has little sympathy for those who wanted to see Wall Street bankers held accountable for whatever it was they had done. “Old Testament vengeance” is his pet phrase for such moralistic sentiments, and he argues persuasively that if he had indulged them, the crisis would only have caused more economic pain and suffering for ordinary people.”
   [What a weird viewpoint! Every day, numerous enterprises in a free market economy go bust for various reasons. If there is overinvestment in an economy fueled by reckless government policies, then more enterprises go bust than usual. ]
9. “He says President Obama very quickly grasped the merits of ignoring the desire for vengeance, and didn’t ask him to pursue some other, more punitive strategy. As if to ensure that no one leaves confused about his point of view on all this, Geithner argues at the end of his book that the only serious weakness of the Dodd-Frank financial reform measures is that they don’t give the federal government enough power to bail out banks in future crises.”
   [It only gets worse! What was going on in their minds, i.e. Geithner and president Obama? Dodd-Frank aptly named after two other characters/senators involved in the Great Recession is one of those massive big government take control laws.]
10. “The decisions he made are easier to criticize than they are to improve upon. I doubt many readers will put his book down and think the man did anything but his best. On his feet he might have stammered and wavered. That in itself was always a sign he was unusually brave.”
    [Thus ends the glowing review by the NYT.]

An Arrogant Fool At The Helm - Timothy Geithner

Prologue

I do not know this man personally and I do not like ad hominem attacks. However, sometimes it is easier to expose the excesses of Big Government by focusing on some of its prominent representatives. In the end it is individual humans in power who either promote individual liberty or who take it away, latter because they think they are superior or paternalistic etc.

Trigger

Recently, Geithner's book “Stress Test” was published. Here is a review published by the Wall Street Journal (Source1). I freely admit, I do not have the time to read a 580 pages tome.

Timothy Geithner recently (5/13/2014) also wrote a defensive op-ed article for the Wall Street Journal titled “The Paradox of Financial Crises/Aggressive government intervention will lead to a stronger financial system less dependent on the taxpayer.” (Source2)

In this blog, I will refer here to his op-ed article and the above review of his book.

Some Questions

1. Who made Timothy Geithner’s stellar career possible?
2. Was he a useful idiot?
3. Is not President Barack Obama ultimately responsible that this man became the U.S. treasury secretary?

The Man Who Did Not Pay His Taxes

“During his confirmation, it was disclosed that Geithner had not paid $35,000 in Social Security and Medicare payroll taxes from 2001 through 2004 while working for the International Monetary Fund.[32] The IMF, as an international agency, did not withhold payroll taxes, but instead reimbursed the usual employer responsibility of these taxes to employees. Geithner received the reimbursements and paid the amounts received to the government, but had not paid the remaining half which would normally have been withheld from his pay. The issue, as well as other errors relating to past deductions and expenses, were noted during a 2006 audit by the Internal Revenue Service” (Emphasis added; Wikipedia)

I believe, there were more details revealed to his lapses to honestly pay his taxes, but I do not have the time to do more research now.

Salient Excerpts From The Book Review

I added emphasis.

1. “His core principle is that, during a crisis, the creditors of large financial institutions should not suffer any losses.”
2. “But Mr. Geithner intervened to give the firm [Bear Stearns] short-term liquidity and arranged a sale to J.P. Morgan, a move that put U.S. taxpayers on the hook for some of Bear's risky mortgage paper. And so the taxpayer safety net was stretched to cover not just commercial banks but Wall Street investment houses as well.”
3. “Regardless of the story Mr. Geithner is telling now, there remains the question of why exactly America couldn't survive without a firm like Bear Stearns, which held no taxpayer-insured deposits.”
4. “Mr. Geithner tells the story of Warren Buffett approaching him at a conference shortly after the rescue to offer congratulations. "I was sort of hoping you wouldn't do it, because then everything would have crashed and I would have been first in line to buy," said Mr. Buffett, according to the book. "It would have been terrible for the country, but I would've made a lot more money." A scenario in which Mr. Buffett is snapping up bargains doesn't sound like Armageddon.”
   [Geithner, the fool, tries to brag that he had the backing of Warren Buffet, the buffoon. Indeed had some of these Wall Street investment banks gone bust others domestic and foreign would have snapped up the pieces.]
5. “One of the themes in "Stress Test" is Mr. Geithner's difficulty in understanding the health of large financial firms. He admits that he didn't see the mortgage crisis coming and didn't grasp the severity of the problems after it appeared. He didn't require that the banks he was overseeing raise more capital because his staff's analysis couldn't foresee a downturn as bad as the one that occurred.”
   [Thank you Mr. Geithner for admitting total incompetence!]
6. “None of this is particularly surprising in a man who, at the time he became president of the New York Fed, had never worked in finance or in any type of business—unless one counts a short stint in Henry Kissinger's consulting shop. At Dartmouth, Mr. Geithner "took just one economics class and found it especially dreary." After three years at Kissinger Associates, he spent 13 years at the Treasury Department, becoming close to both Robert Rubin and Larry Summers, and then worked at the government-supported International Monetary Fund. Messrs. Rubin and Summers recommended him to run the New York Fed. "I felt intimidated by how much I had to learn," he writes of taking up the job in 2003. Mr. Geithner's New York Fed was the primary regulator for Citigroup”
7. “Mr. Geithner scoffs at what he calls the "moral hazard fundamentalists" and "Old Testament" types who worry that bailing out financial firms will encourage even riskier behavior. He says that the financial rescue programs enacted in the crisis years were a success because the alternative—which no one can ever know—would have been far worse. ”
   [Fools are men of action and overconfidence!]

Salient Excerpts From His Op-Ed Article

To sum up: Timothy Geithner never comprehended the function and importance of the FDIC insurance of bank deposits implemented nor the unemployment insurance in the wake of the Great Depression and other historic economic recessions. He does not even mention these important instruments in his op-ed.

Emphasis added.

1. “Meg McConnell, a colleague, pressed the mute button on the speakerphone [during a conference call with Hank Paulson and Ben Bernanke during Autumn 2008] and pleaded with me to tell them that if they didn't go to Congress now, "there will be shantytowns and soup lines across the country."”
   [Is this really his lame excuse! Was he intimidated by this lady? Who was this lady making such hysteric comments?]
2. “We were in the midst of a classic financial panic—similar to the bank runs in the Great Depression. But most people did not yet feel the impact of the run. The losses suffered on Wall Street seemed welcome and deserved, and of no consequence to the vast majority of Americans.”
   [What an idiot! He does not realize that he contradicted himself within two sentences. When was there a financial panic comparable to those experienced earlier in the 20th or 19th century with bank runs?]
3. “There was little memory of how panics kill economies, but the panic was already killing ours. American households lost 16% of their wealth in 2008 alone, several times as large as the losses at the start of the Great Depression, during which unemployment rose to 25% and total output fell more than 25%.”
   [Obviously, Mr. Geithner had little memory why we have FDIC deposit insurance and unemployment insurance, which did not exist at the outset of the Great Depression. He also has little understanding that it was a socialist U.S. President (FDR) who needlessly prolonged the Great Depression by several years. There could be more said about Geithner’s stupid remarks here.]
4. “And so the government had very limited weapons with which to combat the financial crisis of 2008”
   [We The People should be very thankful that this fool as well as Hank Paulson and Ben Bernanke did not have more powerful weapons at the time! Ben Bernanke, Hank Paulson, and Timothy Geithner could have prevented the meltdown in the residential real estate market by raising interest rates and consequently enforcing higher lending standards such as minimum down payments etc.]
5. “ In a financial crisis, the natural instinct is to let creditors suffer losses, let firms fail, and protect taxpayers from any risk of loss. But in a financial panic, a strategy based on those instincts will lead to depression-level unemployment.”
   [Timothy Geithner has no clue how a free market economy works!]
6. “Instead, the government and the central bank have to step in and take risks on a scale that the private sector can't and won't. They have to reduce the incentive for investors, lenders and depositors to run and liquidate assets in panic selling. They have to raise the confidence of businesses and individuals that there will not be a system wide collapse—breaking a vicious cycle in which the fear of a financial-system collapse and a deep recession feed on each other and become self-fulfilling.”
   [The central planner is speaking! Only the government can rescue us from government’s big mistakes in the first place! That is laughable!]
7. “Breaking this cycle requires a massive injection of cash into the economy, as directly as possible into the hands of those who will spend it, to offset the loss of private earnings and the collapse in private demand.”
   [Why did Geithner not try instant moratorium on all federal tax payments?]
8. “Herein lies the central paradox: The more aggressive the government is in designing a rescue plan, the easier it is to force more restructuring in the financial sector, and the better the chances of leaving the surviving system stronger and less dependent on the taxpayer.”
   [Who is this central planner trying to fool? What we are left with is now is a more government controlled financial sector, which was prior to the Great Recession already highly regulated and supervised.]
9. “But we did do the essential thing, which was to prevent another Great Depression, with its decade of shantytowns and bread lines. We put out the financial fire, not because we wanted to protect the bankers, but because we wanted to prevent mass unemployment.”
   [I don’t think I have to comment this nonsense anymore!]

Financial Crisis Of 1907

Before the Fed was established in 1913 leading men of private enterprises would come together to prevent a deepening of economic recessions or financial panics.

What did John Pierpont Morgan and other businessmen do back then, they pledged their own money!

By the way, the Financial Crisis of 1907 was also caused by among other things massive government failure when the U.S. Congress passed the Hepburn Act of 1906 establishing the Interstate Commerce Commission which set maximum prices for railroad rates. How much dumber does it get when Big Government gets involved!

Why is a highly educated man like Timothy Geithner not smarter?