Too Big To Succeed

Why the Government Is Desperately Trying to Inflate a New Housing Bubble

"Many people claim the Federal government and Federal Reserve are trying to inflate a new housing bubble to trigger a new 'wealth effect,' i.e. people seeing their home equity rising once again will feel encouraged to borrow and blow money like they did in 2001-2008. But if we look at current income (down) and debt levels (still high), there is little hope for a renewed wealth effect from housing. That leaves us with this conclusion: The Federal government and Federal Reserve are trying to inflate another housing bubble to save the 'too big to fail' banks from a richly deserved day of reckoning." Continue reading →

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US Infrastructure’s Disastrous Solution

"It is a US scandal that the country's infrastructure is not just degrading but seriously degraded. While this is not a regular topic for mainstream reporting, every now and then it rises to the surface. Of course, the real issue is seldom dealt with, which is how the combined US government can spend trillions and more trillions while the country's infrastructure continues to collapse. There are accidents big and small as the result of this evolving condition, often never reported unless they rise to the level of serious injury or even death." Continue reading →

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CIA’s big data mission: ‘Collect everything and hang onto it forever’

"'It is really very nearly within our grasp to be able to compute on all human generated information,' he added, explaining that nearly all mobile phones now contain a camera, a microphone, a light sensor, an accelerometer and GPS, among other sensors. The prevalence of sensors has led to a whole new world of biometric information, Hunt said, listing off a variety of ways the sensors in a mobile device can be used to identify the person carrying it. He pinpointed the most effective method as gait analysis, or watching the way a person walks and creating a complex data profile based upon their movements." Continue reading →

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Cyprus and the reality of banking: Deposit haircuts are both inevitable and the right thing to do

"My sympathies for Cypriot depositors is somewhat limited. If you are a depositor in a Cypriot bank, whether of deposits of more or less than €100,000, who did you think was guaranteeing your deposit? The Blue Fairy? Did you really think that in such a small place with such a bizarrely bloated banking system – one that for years and, by now, very publicly had been investing in Greek government bonds! – your government had the resources to protect all depositors? The bailout of Cyprus’ two largest banks will cost the equivalent of 60% of GDP! And after what happened in Greece, did you really think that the Germans were willing to cover the whole bill?" Continue reading →

Continue ReadingCyprus and the reality of banking: Deposit haircuts are both inevitable and the right thing to do

Has the bull market in stocks become ‘too big to fail’?

"Officially, the Federal Reserve isn't supposed to worry about keeping stock prices flying high. But when Fed Chairman Ben S. Bernanke was asked about the market's outlook last week on Capitol Hill, he sounded like a lot of bullish Wall Street investment strategists. 'I don't see much evidence of an equity bubble,' he told the Senate Banking Committee in his semiannual testimony on Fed policy. Stocks 'don't appear overvalued given earnings and interest rates.' More important for the markets, Bernanke pledged to continue the Fed's policy of pumping colossal sums into the financial system to support the economic recovery." Continue reading →

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Private equity crash could trigger next wave of financial crisis, Bank of England warns

"The Bank of England warned on Thursday that the next phase of the UK's six-year financial and economic crisis may be triggered by the collapse of debt-laden companies bought by private equity firms in the boom years before the crash. In its latest quarterly bulletin, Threadneedle Street said the need over the next year to refinance firms subject to heavily leveraged buyouts posed a systemic threat. The Bank added that it would use its new role as the watchdog of the City to monitor private equity deals in future 'episodes of exuberance' to prevent a repeat of the debt-driven takeover boom in the run-up to the banking crisis." Continue reading →

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Bank of England Says Government Should Split Up RBS, Accept Loss

"Bank of England Governor Mervyn King urged the government to split up Royal Bank of Scotland Group Plc (RBS) and speed up the return of Britain’s biggest publicly owned lender to private ownership following its bailout in 2008. 'We’re four and half years on and there’s no sign of it going back to the private sector,' King told the Parliamentary Commission on Banking Standards at a hearing in London today. 'That indicates we’ve not been sufficiently decisive in recapitalizing or restructuring it.' RBS has been criticized by lawmakers for failing to boost lending to the economy, even though the taxpayer owns more than 80 percent of the lender." Continue reading →

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Eric Holder: Some Banks Are So Large That It Is Difficult For Us To Prosecute Them

"While it is widely assumed that the too-big-to-fail banks in the US (and elsewhere) are beyond the criminal justice system - based on simple empirical fact - when the Attorney General of the United States openly admits to the fact that he is "concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them, since, 'it will have a negative impact on the national economy, perhaps even the world economy,' one has to stare open-mouthed at the state of our union. It appears, just as the proletariat assumed, that too-big-to-fail banks are indeed too-big-to-jail." Continue reading →

Continue ReadingEric Holder: Some Banks Are So Large That It Is Difficult For Us To Prosecute Them

Fannie Mae and Freddie Mac to begin merging operations

"The regulator of mortgage finance giants Fannie Mae and Freddie Mac detailed plans Monday to begin contracting their business while merging their securitization operations. Federal Housing Finance Agency acting director Edward DeMarco said the two, rescued by the government in 2008 in a $180 billion bailout after the housing market collapse, needed to begin reducing their dominance of the market as private financing makes a comeback. One effort planned for this year is to raise the fees they charge to mortgage lenders for guaranteeing their loans, reducing the market’s near-complete dependence on the two." Continue reading →

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