Too Big To Succeed

Bernanke: A Tenure of Failure

"Can Fed policy get worse under the leadership of either Dr. Yellen or Dr. Summers? Most definitely YES. Unfortunately leadership of the Fed is not the only problem. An institution that relies on good leadership to avoid harm to the economy and the nation is not a good institution. If banks and other financial institutions should not be too big to fail, neither should the Fed. While in the perception of too many, the Fed is both too big and too important to fail, it is an institution that not only could be, but has been, a complete failure." Continue reading →

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Obama nominates former Freddie Mac executive to lead IRS

"President Barack Obama on Thursday nominated John Koskinen, who has held a variety of roles in government, to lead the Internal Revenue Service amid a controversy over the agency’s scrutiny of conservative political groups. Koskinen was in charge of the government’s effort to prevent computer failures to prepare for the year 2000, is a former executive of Freddie Mac, the government-controlled mortgage funding group, and served as deputy mayor for Washington, D.C." Continue reading →

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Former IMF Chief Economist: Sadly, Too Big to Fail Is Not Over

"There are three issues: the powers of the Federal Reserve, the mandate of the Federal Deposit Insurance Corporation and the vulnerability of taxpayers when one or more large complex financial institutions fail. We have at least five such companies in the United States, all of which are intensely cross-border in their operations (in order of size, JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley). The biggest and most leveraged financial companies in the United States today are all now bank-holding companies, with access to the discount window at the Fed, via their commercial banking subsidiaries." Continue reading →

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People Are Using Borrowed Money To Buy Stock Like It’s 2007 Or 1999

"Deutsche Bank has a monster note out on margin debt that has been making the rounds. The conclusion of the note is rather simple – today’s euphoric borrowing on margin to buy stocks is reminiscent of past bubbly equity market periods (see here for more). The note reviews commentary from the 1999 & 2007 periods and compares it to what’s being said today. So, are we in a 2007 or 2000 type environment? Yes. I would say we are given that the data is confirming the same sort of market trends and debt trends. But the question is what’s the trigger? The market is kind of like a Jenga set at this stage in the cycle." Continue reading →

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Intersecting Currents of Change

"Our era is characterized by two considerably overlapping contradictions or fracture points. First, we’re in the early stages of historic transition from a social organization dominated by large, centralized, hierarchical institutions like corporations and nation-states, to a world of small, self-governing units connected together horizontally through networks. Things get interesting when the first contradiction (between the old hierarchies and the self-organized networks which are supplanting them) is reinforced by the contradiction between the World Hegemon and dissident states or rival coalitions of states." Continue reading →

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Cyprus Asks Creditors to Help Biggest Bank

"Cyprus has asked its European partners to help ease a cash crunch at the island's biggest lender, saying this spring's bank-rescue deal was struck 'without careful preparation' and was imperiling its ability to meet budget targets. In a letter sent to European leaders, Cyprus President Nicos Anastasiades said the success of the island's bailout depended on Bank of Cyprus PCL's survival, and he criticized capital controls put in place as part of the deal, which he said are severely damaging the economy. 'I stress the systemic importance of Bank of Cyprus, not only in terms of the banking system but also for the entire economy,' said the letter." Continue reading →

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Britain’s Co-operative Bank faces nationalisation if junior bondholders reject ‘haircut’

"The Co-operative Bank's rescue recapitalisation needs the support of £1.05bn – or around 80pc – of the holders of £1.3bn of its junior debt or the lender could end up being nationalised. A group of pensioners and other retail investors in the Cooperative Bank are facing massive losses under the rescue. Holders of £370m of permanent interest bearing shares (PIBS) issued by the Co-op and Britannia Building Society before its takeover are expected to have their coupons cancelled, making them effectively worthless. Roughly 7,000 retail investors will be affected and the bank said that, on average, they held less than £1,000 in these bonds." Continue reading →

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Forget Too Big to Fail Banks — It’s Time to Break Up the Fed

"St. Louis Fed President Jim Bullard recently laid out four criteria that a bank needs to be split up — namely, if its assets are too voluminous, if it's too leveraged, if it has too much short-term funding of longer term assets and if it creates too much systemic risk. Alex Pollock said of the Fed: It's too big, with over $3.3 trillion in assets, it's too leveraged at 60 to 1, it's extremely short-funded and it's 'a frequent contributor through its interest rate and money-printing action of gigantic systemic risk.' 'Therefore, it follows pretty clearly from the same logic that we should break up the Fed,' said Pollock, a former bank CEO." Continue reading →

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Companies Cook the Books to Meet Tough Targets: Survey

"Hard-pressed company bosses across much of the world are under so much pressure to deliver on growth that many have resorted to cooking the books, Ernst & Young said in a survey Tuesday. One in five of almost 3,500 staff quizzed in 36 countries in Europe, the Middle East, Africa and India said they had seen financial manipulation in their companies in the last 12 months, the accounting and consultancy firm said. In addition 42 percent of board directors and top managers questioned in the fraud survey said they were aware of 'some type of irregular financial reporting.'" Continue reading →

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