The BofA Witch Hunt

How confusing.

First Congress passes Dodd Frank. A law which imposes crushing and expensive regulatory burdens on consumer banking. And generally dissuades banks from doing as much consumer banking activity as they did prior to the law. A normal economic reaction when a producer experiences rises in costs of delivering a service- less is delivered.


So BofA responds by cutting 30,000 net employees and shifting focus from retail to institutional banking, because new legislation has made the former less profitable.


To make up revenues lost by new credit and debit card rules, BofA recently announced- explicitly and transparently- a new $5 fee in any month that a customer uses their debit card.


Wonderboy responded, when asked about the new fee, by attacking BofA for hidden fees.


But it's not hidden. It's a natural and expected response to Dodd Frank, and totally transparent. It's meant to drive customers back to using credit cards for small and mid-sized transactions, which will recoup some of the revenue for BofA, at no cost to customers who would pay the balance in the current period anyway.

Yet now people are protesting this explicit fee, which they have a choice not to incur. And Wonderboy blasts BofA for a fee that meets his own requirements.

The Skeleton In Spencer Bachus' Closet

As the GOP begins to name its House committee chairmen, the Wall Street Journal peeked into the closets of a few Republicans. What it reported in last Wednesday's edition, in its lead staff editorial, was troubling.

It turns out that Alabam's Spencer Bachus, a frequent guest on CNBC, was far less conservative and responsible regarding Fannie Mae than he has been talking recently. Specifically, the Journal cited Bachus' efforts in 2005 and 2007 to fend off tighter regulation and stiffer capital requirements for the GSE.

Not coincidentally, Bachus "was the single largest House recipient of campaign cash from Fannie and Freddie from 1989-2008."

The editorial argued for Californian GOP Representative Ed Royce to take over the Financial Services committee.

From what I read, though, it's clear that Bachus' recent charade is just that. And that he should be denied control of this important House committee.

Wonderboy's Illegal Appointment of Elizabeth Warren

For a president who promised the most transparent administration in history, the establishment of the newly-created Consumer Financial Protection Bureau and appointment of Harvard professor, lawyer and scold Elizabeth Warren provide evidence that Wonderboy's promise was and continues to be a lie.

The Wall Street Journal's editorial on the subject in this past weekend's edition, Elizabeth III, makes this clear.

Here's how the new bureaucracy has been situation to avoid, at least in the administration's opinion, the necessity of having Warren nominated and confirmed to head it.

The bureau is officially organized to report to the Treasury Secretary, but its head, Warren, will become an assistant to Wonderboy.

According to the recently-passed financial sector regulatory legislation, however, the bureau is actually part of the Federal Reserve, with its budget provided by that entity, rather than an explicit Congressional allowance.

The Constitution is clear that any "Officers of the United States" are subject to Senatorial confirmation. Given Wonderboy's heavy verbal buildup up Warren and her spanking-new Bureau, you'd think she qualifies. But that would mean she'd have to pass muster with the Senate. And these days, even the Democratically-controlled upper chamber isn't considered a rubber stamp for Warren.

And, according to the Journal article,

"On July 21, Mr. Obama signed a bill passed by both Houses stating that the "Director shall be appointed by the President, by and with the advice and consent of the Senate."

That phrase would now seem to have the force of law, thus requiring Warren to be confirmed by the Senate. The Journal editorial ends by observing,

"We have here another end-run around Constitutional niceties so Team Obama can invest huge authority in an unelected official who is unable to withstand a public vetting. So a bureau inside an agency that it doesn't report to, with a budget not subject to Congressional control, now gets a leader not subject to Senate confirmation. If Dick Cheney had tried this, he'd have been accused of staging a coup."

It makes me wonder what might happen if a) Republicans gain control of both Houses and require Warren's confirmation, and/or b) the next president, presumably a Republican, simply leaves the new bureau unled and unstaffed.

This newly-created and ominously-named Consumer Financial Protection Bureau surely is among the most strangely-devised, organized and 'led' of perhaps any ever created in the federal government.

As to its probably effect on the financial sector, more on that in a subsequent post on my companion business blog.

A Nasty Surprise Buried Within FINREG

I read this morning's Wall Street Journal lead staff editorial concerning uber-liberal California Democratic Representative Maxine Waters' insanely stupid contributions to the FINREG bill now being hashed out in conference between the House and Senate.

Without going into too many details, Waters' is seeking to enshrine racial and gender preferences both in a new staff position in each region's Reserve bank, to be confirmed by the Senate, and, then, by extension, in the credit allocation policies each Reserve bank will implement.

In a related step, of which I was aware, one of the bills seeks to make the president of the NY Fed an administration appointee, thus removing more independence from the nation's central bank.

The most chilling part of the editorial was the passage citing Bernanke's Fed as instructing the Regional Fed banks to remain silent on Waters' legislation.

As the article noted, the mere appearance of the legislative changes to the Reserve banks in one house's version have been sufficient to muzzle the central bank.

This is not trivial. It's also why we don't want multi-thousand page, or even hundred-page bills being passed. Waters' ideas are toxic and stupid. Their passage will continue the nonsensical preferences with which Congress saddled Fannie and Freddie, to all of our regret and great expense.

This is one part of FINREG that has to be stopped. It wouldn't hurt if Waters could be given a new career, come November, either. That way, at least we'd be safe from her constant meddling in matters of which she displays no ability to actually understand.

Tennessee's Bob Corker Tells It Like It Is

Tennessee Republican Senator Bob Corker was all over the news yesterday for standing up to our "duplicitous" president.

In the recent closed-door session with Republican Senators, Wonderboy was bluntly asked by Corker how, to paraphrase the Senator,

'you could be so duplicitous as to sabotage my work on financial regulatory reform, then come here and claim to be open to our ideas.'

Yes, Corker used the word duplicitous.

News reports characterized Wonderboy's reaction as 'think-skinned.'

No kidding. For once not among a carefully chosen group of naive teen-aged college liberals, our First Rookie had to take fair and appropriate criticism from real adults.

I think it's indicative of how arrogant and self-centered Wonderboy is, that he believed that simply by showing up at a GOP Senate caucus and addressing them with his magical tones, they, too, would genuflect in worship to the country's first black president, just because he's black and was elected.

It's never been that way in the US, and there's no reason it should change now. Every president has been mercilessly lampooned and criticized, justly or not.

In Wonderboy's case, of course, it's more than justified. And Corker, more than anybody else of whom I can think, spoke truth to power, expressing the realities of our First Rookie's lies and dissembling in clear, unflinching language.

The Curious Case Of ShoreBank of Chicago

Since stories about large New York financial institutions chipping in to help avoid the closure of a modest bank in Chicago named Shore Bank, I've been wondering what would lead so many titans of finance to help some insignificant little Midwest bank.

This morning's Wall Street Journal provided the likely answer- corruption.

Framing a grinning mugshot-drawing of our First Rookie, the article stated,

"In letters to the White House, the lawmakers questioned whether the big banks are curring favor with the Obama administration at a time when many are under federal scrutiny. The lawmakers also asked whether the White House has been pressuring the big banks to help.

The White House denied putting pressure on bankers."

According to the piece, no less an august person than Lloyd Blankfein

"was personally making fund-raising calls to other banking executives, seeking private-sector pledges totaling $125 million for the failing community-development lender, Chicago's ShoreBank Corp."

Further on in the Journal article, various other denials are noted on the part of administration mouth pieces. They allege that all contact occurred between Treasury, regulators and the bank, not the White House.

Well, sure. I mean, does anyone really think Wonderboy is personally calling Lloyd Blankfein to suggest he help rescue ShoreBank? Or even one of his henchmen?

Everyone's smarter than that. All that need have occurred is for Rahm Emanuel to mention to Geithner that it sure would be a good thing if ShoreBank could be kept open.

I believe in espionage circles, this is what is known as 'using a cutout.'

There's never a direct, traceable link between the highest corrupt official and the people doing the actual questionable actions.

So it is here.

Because if you think Lloyd Blankfein just got out of bed one morning and decided his good deed for the day was to save a small community bank in Chicago, well, Lloyd probably has a few CDO's to sell you, too....

Regulatory Zeal

I've been following two separate but equally important regulatory actions lately. Perhaps you have been, too.

The first involves Goldman Sachs. This weekend's Wall Street Journal carried a very extensive article detailing Mary Shapiro's rabid pursuit of the investment bank. Shapiro is portrayed as feeling the need to rescue the SEC's image and reputation from the stain of missing the Bernard Madoff fraud.

The other regulatory actions involve the Gulf coast oil spill from the rig hired by BP and partially operated by Haliburton.

In that case, while the regulatory agency is getting a black eye from possibly becoming too cozy with industry firms, our First Rookie and his henchman, Ken Salazar, have wasted no time letting voters know that they consider any and all companies involved to be untrustworthy and generally badly-intentioned entities.

While believing in capitalist economies, I also believe such economies need to be well- and effectively-regulated.

In the case of Goldman, if it can be proven, to the satisfaction of a jury or judge, to have clearly engaged in material fraud of customers, then it should be penalized appropriately.

Regarding the oil spill, recent news stories cast doubt on the management of the drill plugging process on the TransOcean rig leased to BP.

I'd be the first to insist that BP, Haliburton, or whoever the responsible managing firm which may be found to have been inept at handling the plugging be penalized.

But, surely, it would be better for everyone involved were the president to have waited until various investigations had discerned which entity or entities were culpable in the case of the oil spill, assuming it was not simply equipment failure and natural causes.

Then the president could have met privately, first, with that firm's CEO, and taken a more reasoned approach, ensuring the cooperation of the firm in making restitution and reforming their practices.

It does no good for our politicians to simply demonize private entities, especially in advance of due processes finding guilt.

Instead of calm, deliberative approaches to applying regulations to sectors in which business practices are found to be unacceptable, we have an administration which simply engages in thuggery and public accusations before the facts are known and available legal and regulatory processes have been allowed to operate.

This does our society no long term good.

Wonderboy At Cooper Union

So Wonderboy staged his second coming of Lincoln at Cooper Union yesterday.

Maybe he's turning out to be another Lincoln, after all, but not in the manner he envisioned. There are those who point to Lincoln's suspension of habeas corpus, imprisoning of newspaper editors who didn't agree with his prosecution of the war, and a few other choice violations of Constitutionally-guaranteed rights and freedoms.

In short, some viewed Lincoln as a dictator. Guess Wonderboy is making headway on being the second Lincoln, after all.

Yesterday's speech from the First Rookie, who, to my knowledge, has absolutely no background in, nor understanding of finance, was devoid of any sense of compromise or seeking a generally-agreed best solution for weaknesses in current law governing and structure in the sector.

Instead, as I expected, he simply demanded that Republicans vote for the flawed, dangerously-designed bill that bribed- and grafted-up Senator Dodd (D-CT) has cobbled together to a length of over one thousand pages. In effect, a financial sector version of the largely-unread, incomprehensible health care 'reform' rammed through Congress on a strictly party-line vote.

If Wonderboy truly wanted effective financial sector reform, he'd invite both parties to work together, using public testimony from affected firms in the industry, to write a widely-supported bill. And time wouldn't be an issue.

Why is it this president insists on ramming major, sector-changing laws through Congress without sufficient debate and input, claiming that 'something must be done now?' That any opposition is to total reform, not just his reform?

That's how you know that, with this president, the issue is never getting the best legislation. Instead, it's to get something liberal and accretive to federal power before the November elections limit what a Democratically-controlled Congress can still get away with.

Governing vs. Dictating

First it was healthcare.

Now it's financial services regulation.

Wonderboy doesn't believe in governing. Governing takes time, patience, an openness to the ideas of opponents, and a willingness to arrive at a result that will truly be embraced by a majority. It involves compromise.

Instead, our First Rookie demonizes anyone who disagrees with his preferred bill-du-jour.

You can't oppose his proposal. If you do, as Wonderboy targeted Republican Senators and, in particular, their leader, Mitch McConnell, you are called out to the American people as obstructing any and all 'reform.'

Never mind that those opposing the Dodd bill have legitimate concerns. Dodd's deeply flawed bill allows executive powers over the financial sector that are truly imperial. It enshrines 'too big to fail' so that the currently-large and powerful financial institutions gain advantages under the presumed cloak of government rescue.

There are other flaws, as well.

The point is, just because some dispute that Wonderboy's health care or financial 'reform' bills are, as Candide might judge them, the best possible bills in all the world, doesn't mean they are against all reform of these sectors.

Republicans have offered credible, useful ideas and bills in these areas, but have been ignored by Democrats and, most visibly, Wonderboy himself.

Wonderboy is, by his actions, a dictator. Pure and simple.

He does not govern. He does not wish to govern. He only wishes to dictate.

That's not how our Republic was designed to be.....governed!

The Incredible Folly of Chris Dodd 'Reforming' Anything

It was enough to make you vomit.

Yesterday, 'doddering' Chris Dodd, chased into retiring from the Senate for both his ethics violations and inept handling of his chairmanship of the Senate committee overseeing the financial sector, was bloviating about his newly-released bill to overhaul regulation of the financial services sector.

Here's a very simple way to view this joke.

Why should a guy who botched the oversight of this sector be in any way involved in its so-called 'reform?'

In fact, why should any Democrat or Republican who served on the committee over term from, say, 2000-2007 be involved? Why are any of those nitwits even still on the committee?

Yes, including Richard Shelby. After all, Greenspan's initial mistakes in maintaining the low interest rates which stoked the mortgage boom which led to the crisis occurred during a period of Republican majority in the Senate.

In the private sector, you generally fire the failed CEO or functional executive, then bring in someone more competent to fix problems.

In the Congress, you make the idiot chairman and let him try to pass his own stupid ideas.

In Dodd's case, the moron isn't even returning to the Senate next year! Who actually takes any of his moronic ideas seriously? He's one of the idiots who let himself be bribed by sweetheart mortgages from Angelo Mozillo at Countrywide to look the other way as poor quality mortgages were orginated and fed into Fannie and Freddie.

Rather than cover his self-important press conference on the matter, then have him on air this morning, gushing worshipful tones at the jerk, CNBC should have instead announced yesterday,

'Senator Dodd, who is resigning after this term ahead of a thrashing from his GOP opponent in November, is releasing a bill he authored on financial sector reform. However, our network has decided, in view of Dodd's disastrous oversight of the sector, that he could not possibly have anything of value to express on the topic. So we won't be bothering to cover his announcement.'

It's an insult to the American voters that Dodd is even proposing this bill, let alone that any media outlet would actually cover it.

Lame Duck Chris Dodd Goes It Alone

Ready for some rich political humor?

Lame ducky Democratic Senator Chris Dodd is attracting all sorts of media attention as he attempts to push a massive, comprehensive financial sector regulatory bill through the chamber.

In an election year, when he isn't even running, having been effectively driven from office by scandals involving his lax oversight of the very sector he presumes to know how to re-regulate, does anyone really believe the pig in question will pass?

It's been criticized for being too sweeping, too naive in assuming that scrambling regulatory chairs will make a difference, and including simply wrong-headed remedies which will, in time, constrict consumer access to credit.

Yesterday, Republican Senator Bob Corker called a press conference to lament that health care issues had supplanted financial regulatory reform in importance. That the bill died a few yards' of consensus.

Dodd then trotted out and declared the bill not to be dead. On the other hand, sources generally reported that the garbage Dodd will present on Monday is not a bi-partisan product.

So let me get this straight. The Democrats now have only 59 votes in a Senate that requires 60 to pass legislation. Dodd is retiring and has no more pull. He's been disgraced by his own inept performance on the Committee he now chairs.

He has no Republican allies co-sponsoring the bill.

It's a tumultuous election year that could quite possibly see both Houses changing party majorities.

And Chris Dodd thinks he has a bill, all on his own, that can pass?

Now, that's funny.

Inmates Redesign The Asylum- Barney Frank & Chris Dodd's Bogus New Financial Regulatory Vision

I recently wrote this post discussing the stealth approach that House and Senate Democrats are taking with their financial sector regulatory "reform" bills.

What I didn't adequately touch on in that piece is the very perverse prospect of two of the major architects of the recent US financial services sector's crisis claiming to be capable of redesigning regulatory and related elements to prevent future occurrences of such problems.

Let's recall the facts. Barney Frank personally drove Fannie Mae and Freddie Mac to purchase higher proportions of option ARM, low-doc, no-doc and, generally, poorer-quality mortgages from the private sector. Chris Dodd and fellow Democratic Senator and Finance Committee member Kent Conrad both accepted sweetheart loans from Countrywide, Angelo Mozillo's mortgage finance company, while failing to adequately supervise and rein in the growth of poor quality, often improperly documented mortgage loans. Both also failed to act on Bush administration concerns regarding the explosive growth of Fannie Mae and Freddie Mac through guarantees of bonds backed by the poor quality loans.

Oh, and, by the way, Barney Frank, to my knowledge, has never addressed the contetion that a person with whom he was romantically involved was a lobbyist involved with Fannie Mae. I'm sure it's irrelevant.

Now, these Congressional worthies would have us believe that, having been instrumental in wrecking the residential finance sector and, by extension, the entire US finance sector, they are in a position to tell us how to organize, supervise and regulate the sector in the future to avoid similar calamities.

Nothing could be further from the truth. In fact, they overlook the rather simpler, more obvious solution, i.e., fewer government guarantees and less inept regulation.

If Fed, FDIC, OCC and other regulators had done their job in the first place, Frank's and Dodd's judgemental errors and political favoritism would have been stopped in their tracks. Unfortunately, our vast, overmanned and overly-complicated bank regulatory system failed in its primary mission.

Shouldn't that have triggered a more cold-eyed look at how the current players failed in their regulatory oversight jobs, rather than simply layering on more and more complicated rules, classifications and regulations?

How many people believe that, if someone failed to do their job in the first place, the right solution is to give them increased responsibilities and hope for a better outcome next time around?

Well, evidently, at least two- Frank and Dodd.

Stealth Passage of the Barney Frank's Financial Regulation Bill

Yesterday morning on CNBC, I heard Wisconsin Republican Representative Paul Ryan remark that Barney Frank had rammed his bloated, misguided bill on financial sector regulatory reform through the House.

It's another one of those huge bills with so many hidden details and bad ideas that few Congressmen probably even know what they passed. It's sure to have loads of unintended consequences.

For example, certain large financial institutions will qualify for treatment as 'too big to fail,' and be subject to a federal government commission to determine if it is in danger of insolvency, and if it should be saved.

Funny, but I always thought that was up to creditors. Or, if it's a bank, perhaps the FDIC.

But some shadowy federal government panel?

What happened to bankruptcy as the normal process for those companies which get into too much financial trouble?

Ryan opined that this bill will abet "crony capitalism." That is, large, bloated financial service firms will make use of the revolving door between industry and government to insulate themselves from failure and buy government accommodation. The smaller banks, Ryan noted, will be hurt because they have to play by the rules without such connections.

You can bet that nowhere in this legislation did Frank allow his own culpability in driving Fannie Mae and Freddie Mac to securitize more questionable mortgage loans to be addressed and, for the future, prevented.

Instead, we will have a bewildering new set of rules for credit provision. Some will put onerous new demands on companies that simply want, as a by-product of their main business, to allow customers to buy using credit.

As Ryan indicated, by using health care as the big distraction, the Congressional Democrats are stealthily redesigning yet another sector of the US economy.

Thomas Frank Gets It Wrong Again

The Wall Street Journal's token liberal columnist, Thomas Frank, managed to write yet another misinformed piece in an edition of the paper last weekend.

In a pre-Thanksgiving piece, he held forth on how thankful he is that last year's and this year's financial mess have muzzled those who argue for free markets. In his view, what befell the US economy and financial sector in the past year is a complete failure of free market ideology.

How wrong he is.

For many years, there has been an undercurrent of concern regarding the financial audits required of listed companies. Instead of actually assuring anyone of much of value, SEC-mandated audits lulled investors into ignorance, resulting in the Enron and WorldCom scandals.

Similarly, FDIC insurance for bank deposits caused retail customers to pay less attention to the actual health of their banks. It may seem like pocket change to pay off consumer deposits when insured banks go broke, but that money has to come from somewhere. The FDIC's outflows in recent years have exceeded their inflows from bank insurance levies.

Result? Society at large pays for the risks which indifferent consumers take with their money.

How about Fannie Mae and Freddie Mac? Their GSE status caused everyone, including the Chinese government, to blithely assume that their bonds were as sound as Treasuries. Thus, nobody really paid any attention to the trash which Congressional leaders demanded the agencies to create out of mortgage loans to increasingly poorer, riskier home buyers. Low-doc, no-doc and option ARM mortgages became components of pass through bonds backed by the US government. Ratings agencies went along for the ride and income. Oh, they are protected, too. Special exemptions in US law allow them both an oligopoly and protection from lawsuits for their opinions and ratings.

It was mortgages cranked out by the private financial sector, passed through the GSEs and turned, like rancid sausage, into something different-looking, which polluted financial markets and ultimately led to severe equity losses on the book of several of the largest US commercial and investment banks.

Nowhere in all of this were so-called "free markets" operating. No, it was all coddled and wrapped in a big green blanket of US government guarantees, insurance and regulation.

These alleged safeguards are precisely why nobody bothered to conduct any serious due diligence of their own.

When mediocre civil servants couldn't even do their regulation and oversight jobs effectively, the whole mess exploded.

Thus, Frank got it completely backwards.

Last year's penultimate financial service sector problems stemmed from too much legislation, regulation and insurance by the federal government which supplanted investors' sound judgements and critical appraisals of risks. Risks of institutional failures, instrument quality and repayment failures.

We don't have too much free market capitalism which needs more regulation and supervision.

We have too little of the former, and far too much of the ineffectual latter.

More Democratic Congressional Misunderstanding of the Recent Financial Crisis

Just yesterday afternoon, during Congressional questioning of former Treasury Secretary Hank Paulson, I caught part of Democratic Representative Elijah Cummings' silly rant regarding last year's global financial crisis.

Sounding full of himself, Cummings summarily declared that, for so much financial damage to have occurred, someone must have done something criminal, and Congress would be getting to the bottom of it.

Well, yes, in one sense, Cummings is right. His colleague, Barney Frank, and over in the Senate, Democrats Chris Dodd and Kent Conrad, who took bribes from Countrywide Finance, all greenlighted many practices, if not insisted on them, involving Fannie Mae, Freddie Mac, the CRA, and various allowances to private mortgage conduits. So, if there is criminal activity to be found, Capitol Hill is an excellent place to start, Rep. Cummings. In fact, your own party's House and Senate Caucuses will do fine.

Beyond that, a logical next step is to ask why so many questionable mortgages were overseen and allowed by Fed and FDIC regulators. It fell to these civil servants to supervise the soundness of banking and lending practices at various housing finance lenders, but they evidently took a break from this activity.

So far, we're not really even at the private sector, and we have a target-rich environment.

Isn't it just what you'd expect from a Congressional member these days? To turn his gun sites on the private sector and threaten unspecified witch hunts and criminal penalties, when his own colleagues led the way in fostering, demanding and facilitating unwise lending practices which figured heavily in the financial crisis of the past few years?

Wonderboy's Demonizing of Legitimate Creditors

I try not to watch Wonderboy's speeches. The mere sound of his voice sickens me, so I head for the 'mute' button as fast as possible.

However, this afternoon, CNBC replayed some of the First Rookie's noon speech concerning Chrysler.

If you ever needed more evidence of why government should not interfere in private sector affairs, that speech was it.

Not that the presidential limousines are Chryslers, but our new president assured the nation that he, too, loves Chrysler cars and hopes we all buy one.

Gee, don't you typically have to pay for advertising? Will Alan Mulalley be demanding equal Oval Office time for his company's cars? I guess Wonderboy could shill for GM, since his actions are making that company the next likely government-owned auto maker.

But the low point was when he demonized legitimate bondholders by claiming that they are the only ones not sacrificing enough for Chrysler's survival. As if that is some pre-destined good.

No, Wonderboy heaped public opprobrium on those who lent money to Chrysler with an expectation of repayment, and clear legal rights if that doesn't occur.

How is that a lawyer, as president, is taking the lead in using thuggery and recommending the explicit ignorance and breaking of laws?

Is this the change we were to believe in?

As bad as George Bush's economic policies were, beginning in late 2007 by not amending mark-to-market methodologies via executive order, Wonderboy is much, much worse.

He's publicly choosing not only which companies will win, and which will not be granted government funding. He now is turning to specific investor classes and calling for senior secured debt holders to relinquish their legal rights.

This is surely government gone way, way too far with intervention into the private sector.

Confusing "Wall Street" With Investors

I caught a fragment of some CNBC anchor's comment the other day involving the administration's remarks concerning the cable network's staff and guests' observations and opinions on Wonderboy's economic moves.

One remark referred to the First Rookie proudly proclaiming that he 'doesn't pay attention to Wall Street.'

The other referred to administration spokesperson comments directed by name at CNBC hothead Jim Cramer. He apparently now has joined Rick Santelli as a specific target of Wonderboy's animus regarding free speech and opinions of his failing economic policies.

It seems to me that Wonderboy is confusing "Wall Street," the now-vanished investment banking sector of the American economy, with investors.

Investors are the driving force behind markets. They, through their demand for securities, both debt and equity, set prices and make financially-oriented judgments on government policies.

The continued fall of equity prices since Wonderboy's inaugural tells you all you need to know about broad investor sentiment about his economic plans and programs.

That's not "Wall Street," that's the broad US and global investing classes pronouncing what they see evolving as a colossal failure.

So This, Too, Is Change?

Larry Kudlow had a priceless response to Tim Geithner's hearings for appointment as incoming Treasury Secretary.

After pointing out the lack of credibility Geithner will always have for being a tax cheat and scofflaw, even to the point of fencing with and dancing around a direct answer to a US Senator, John Kyle (R-AZ), Kudlow bore in on a more glaring weakness.

Time and again, when quizzed on what he will actually do differently, i.e., what 'change' he will bring, to addressing problems in the financial services sector, Geithner basically said, 'we're working on it.'

Kudlow blew up and observed, to paraphrase him,

'Working on it? C'mon, Geithner's had months to figure this out and come up with a detailed plan. What's he been doing all this time, playing dress up in front of a mirror for the inaugural ball?'

Larry makes an excellent point. Wonderboy's team of new 'change' mavens was supposed to be ready to fix all American problems on day one. So what's Geithner's excuse?

Maybe he was, ah, writing checks for back taxes to the IRS, and didn't have time to come up with a plan to fix the financial sector?

Honestly, one can go further in criticizing Geithner. He was part of the current 'solution,' hip deep in the decisions regarding Bear Stearns, Lehman, AIG, et. al. And, really, beyond that, Geithner has never been accused of being a 'big idea' man.

Rather, he is sort of an operations guy. He's head of the NY Fed, but doesn't command the sort of awe that his predecessors, Corcoran and Volcker did.

Finally, I listened to part of Volcker's opening remarks on Geithner's nomination. I confess to having trouble believing, in a nation of over 300 million people, that only Tim Geithner can be Treasury Secretary. There's nobody else with sufficient experience, judgment and without Geithner's tax problems?

This is just hard to swallow. Even from Tall Paul.

As I noted in this post, I'm leery of men on horseback, and Geithner seems to become more like one with each passing day.

He'd damn well better be worth it.

Congress' Lies About Fannie & Freddie

I would be extremely remiss if I did not call to my readers' attentions this excellent piece in yesterday's Wall Street Journal, entitled "What They Said About Fan and Fred."


The quotes from Congressional buffoons such as Barney Frank, Chris Dodd, Frisco Nan Pelosi and, my favorite liberal idiot, California's Maxine Waters, are simply priceless. Did I mention Tom Carper, Chuckie Schumer, and, alas, even Republican Senators Jack Reed and Robert Bennett?


To my great shock, Nebraska's Chuck Hagel, for whom I also have little respect, is the only quoted voice of reason in the whole matter. He is quoted as saying,


"Mr. Chairman, what we're dealing with is an astounding failure of management and board responsibility, driven clearly by self interest and greed. And when we reference this issue in the context of -- the best we can say is, "It's no Enron." Now, that's a hell of a high standard."


I can't leave without at least one hilarious quote each from Frank, Waters and Dodd. At a September 10, 2003 hearing, we read,


Frank: I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. . .


Waters: Secretary Martinez, if it ain't broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals?


And two weeks later,


Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .


Then, on February 24-25, 2004, in testimony during a Senate hearing, we have these remarks:

Carper: What is the wrong that we're trying to right here? What is the potential harm that we're trying to avert?

Greenspan: Well, I think that that is a very good question, senator. What we're trying to avert is we have in our financial system right now two very large and growing financial institutions which are very effective and are essentially capable of gaining market shares in a very major market to a large extent as a consequence of what is perceived to be a subsidy that prevents the markets from adjusting appropriately, prevents competition and the normal adjustment processes that we see on a day-by-day basis from functioning in a way that creates stability. . . . And so what we have is a structure here in which a very rapidly growing organization, holding assets and financing them by subsidized debt, is growing in a manner which really does not in and of itself contribute to either home ownership or necessarily liquidity or other aspects of the financial markets. . . .

Dodd: I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time. And we don't want to lose sight of that and [what] has been pointed out by all of our witnesses here, obviously, the 70% of Americans who own their own homes today, in no small measure, due because of the work that's been done here. And that shouldn't be lost in this debate and discussion. . . .

And this from Schumer on April 5, 2005,

"I'll lay my marker down right now, Mr. Chairman. I think Fannie and Freddie need some changes, but I don't think they need dramatic restructuring in terms of their mission, in terms of their role in the secondary mortgage market, et cetera. Change some of the accounting and regulatory issues, yes, but don't undo Fannie and Freddie."

Can Schumer look any worse than this?

Where is the shame among Democratic Senators- Carper, Schumer, Dodd- and Barney Frank? With luck, all who are up for election in November will, with the public's outrage, be defeated.

Bob Corker (R-Tenn) Is An Idiot

This morning, on CNBC, I saw a Republican Senator, Bob Corker of Tennessee, make an absolute idiot out of himself.

He did it in a conversation with Dick Armey, a former GOP House Majority Leader and professor of Economics.

After Armey spent several minutes explaining why another failed attempt to pass the financial sector rescue bill in the House might actually be a good thing, he reiterated the point that all that is needed is to rescind, suspend, or modify 'mark to market' accounting to allow performing securities to be valued at their economic, 'hold to maturity' value.

Corker replied that this was not the case. To illustrate his point, the windbag from Tennessee compared a commercial bank to a farmer.

Corker described farmers who were 'land rich, but cash poor,' thus being unable to pay bills, but not being insolvent.

He then went on to tell Armey that US banks would have their fixed asset values refurbished by suspending mark-to-market accounting, but that they would still be 'cash poor.'

He then went further, saying that it was this cash need which the rescue bill would meet.

It's hard to believe just how stupid Corker is.

A commercial bank holding CDOs has nothing like the problem of a farmer with no cash, but valuable land.

First of all, banks are not short of cash. The problem is not one of having too much of a fixed asset, and too little of a liquid one, as Corker believes.

Rather, as described in this post, referencing Brian Wesbury's excellent editorial in the Wall Street Journal, the problem with mark-to-market accounting is that it

"forces all financial firms to treat potential losses as if they were cash losses."

That is, losses in theoretical value in fixed assets must reduce the bank's capital by a like amount.

The situation is nothing like Corker's farm example.

Frankly, it scares me to death to see one of the hundred buffoons who passed this monstrosity completely misunderstanding the phenomenon that is affecting our publicly-held financial institutions.