Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: bankers

New York Fed: Economy Will Benefit From Harvey and Irma

This article appeared online at TheNewAmerican.com on Monday, September 11, 2017:

Frédéric Bastiat

Frédéric Bastiat

In a statement reflecting a worldview taught by all major universities and espoused by central bankers around the world, the president of the Federal Reserve Bank of New York, William Dudley, said on Friday that, on net, the destruction wrought by the hurricanes will be positive for the economy: “[The initial] effects tend to be pretty transitory. [But] the long-run effect of these disasters unfortunately is it actually lifts economic activity because you have to rebuild all the things that have been damaged by the storms.”

Dudley got the first part right:

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Fracking’s Vicious Cycle Making Bondholders Nervous

This article appeared online at TheNewAmerican.com on Thursday, July 20, 2017:

King Abdullah ibn Abdul Aziz in 2002

King Abdullah ibn Abdul Aziz

Investors in high-yield bonds issued by small fracking companies are getting nervous. Last year those bonds, according to Bloomberg, gained some 38 percent as they rebounded from lows set earlier. In June they slipped two percent. In the bond business, that’s enough to make bond fund managers and individual investors nervous. It’s bad enough that the S&P 500 Energy Sector Index of energy stocks has lost 16 percent so far this year. What’s worse is the vicious cycle that frackers find themselves in.

For instance,

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Donald Trump Meets Ayn Rand

The Passion of Ayn Rand

This article was published by The McAlvany Intelligence Advisor on Wednesday, November 30, 2016:  

Ayn Rand passed away in 1982 at age 77 when Donald Trump was just 36. But the astounding success of her masterwork, Atlas Shrugged, led to an interview at the Trump Tower on Monday in the form of one of her most avid fans: John Allison.

Allison, a Phi Beta Kappa graduate of the University of North Carolina in 1971, read a copy of it as a young man and it changed his life. There’s an outside possibility that it might change the life of millions of others.

Following graduation he went to work for BB&T Corporation, a small rural bank in North Carolina. By 1989 Allison was the bank’s CEO. By 2010 he had grown the bank from $4.5 billion in assets to

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Trump Meets With Former Banker Who Wants to End the Fed

This article appeared online at TheNewAmerican.com on Tuesday, November 29, 2016: 

John Allison BB&T

John Allison

Donald Trump met with former banker John Allison on Monday in a meeting that was largely ignored by the mainstream media. It remains unclear whether Allison was being interviewed for the job of secretary of the Treasury or was just giving Trump some advice from a free market perspective.

Either way, it’s a breath of fresh air in an era where statism and excessive hubris (the idea that mere politicians and economists can guide, even stimulate a $20-trillion-dollar economy with monetary policy) has reigned for decades.

Right after graduating Phi Beta Kappa from the University of North Carolina in 1971,

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About That New, Dreadfully Misnamed Puerto Rico Bailout law

This article was published by The McAlvany Intelligence Advisor on Friday, July 1, 2016:  

English: Map of Peuto Rico, with inset showing...

Investors saw the market values of their Puerto Rican bonds soar with news that Congress passed the “Puerto Rico Oversight, Management and Economic Stability Act” (PROMESA). They had a right to be happy: prior to the news their long bonds were trading at about 62 cents on the dollar. Afterwards they jumped to 66 cents. Still a paper loss of a third of their initial investment, but better than anticipated.

What’s anticipated is that the new oversight board, populated with politicians (but none from Puerto Rico), will solve all of the island’s problems,

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Regime Change in Brazil is Imminent

This article was published by The McAlvany Intelligence Advisor on Wednesday, March 16, 2016:

More than three million Brazilians, fed up with corruption that goes all the way to the top, went to the streets last Sunday to protest Dilma Rousseff’s regime and to demand her removal. This is likely to signal the end of Rousseff, who has steadfastly declared her innocence in the Petrobras scandal that has rocked the country for years.

Dubbed “Operation Car Wash” and driven by Judge Sergio Fernando Moro, the first break in the case came with a phone call two years ago from a local car wash and currency exchange business owner to police that he thought

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Brazil’s “Prince of Contractors” Sentenced to 19 Years for Corruption and Bribery

This article appeared online at TheNewAmerican.com on Wednesday, March 9, 2016:  

English: Vice President of Brazil Michel Temer...

English: Vice President of Brazil Michel Temer, President Dilma Rousseff, former President Luiz Inácio Lula da Silva and Marisa Letícia Lula da Silva at Rousseff’s inaugural ceremony.

On Tuesday a Brazilian judge sentenced Marcelo Odebrecht, the former CEO of the Odebrecht conglomerate who is known popularly as the “Prince of Contractors,” to 19 years in prison after being convicted of bribery, money laundering, influence peddling, and associating with criminal elements in Brazil.

Now reaching the highest levels of business and politics in Latin America’s largest sovereign state, an investigation known as “Operation Car Wash” is

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Puerto Rico Defaults Today on Part of $1B Debt Payment

This article appeared online at TheNewAmerican.com on Monday, January 4, 2015:  

Both the Puerto Rican flag and the United Stat...

Both the Puerto Rican flag and the United States flag fly over Puerto Rico

Last June Puerto Rico’s Governor, Garcia Padilla, said his government was out of money and would have to default on some of the bonds issued by various government agencies. It owed some $54 million to the Public Finance Corporation and another $140 million to the government’s Development Bank. By moving some funds around on the government’s balance sheet, Padilla was able to make most of those payments.

Since then Padilla’s financial woes have snowballed.

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Greek Vote the Death Knell for the EU?

This article was published by The McAlvany Intelligence Advisor on Wednesday, July 8, 2015:  

English: Nigel Farage at Lord's cricket ground...

Nigel Farage

Nigel Farage, named “Briton of the Year” in 2014 by the London Times, has finally found his voice. He noisily departed the Conservative Party in 1992 after the signing of the treaty that created the European Union to start his own UK Independence Party (UKIP). His criticism of the EU has been steady ever since, culminating in his eulogy on Monday: “The European Union is Dying Before our Eyes.”

According to Farage, Sunday’s referendum in Greece sealed its death warrant, even if somehow the Greek PM Alexis Tsipras is able to come to terms with the troika and have them turn on the financial spigot once again: “It [was] a crushing defeat for those Eurocrats who believe that you can simply bulldoze public opinion.” He added,

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HSBC Downsizing to Core Business: Money Laundering, Terror Funding

This article first appeared online at TheNewAmerican.com on Wednesday, June 10, 2015: 

Officially, London’s Hong Kong and Shanghai Banking Corporation (HSBC), the world’s third-largest banking firm, is cutting costs to improve profits. The intended moves are for the benefit of the shareholders, asserted Stuart Gulliver, the bank’s chief executive on Tuesday: “We recognize that the world has changed and we need to change with it. I am confident that our actions will allow us to capture expected future growth opportunities and deliver further value to our shareholders.”

Unofficially, HSBC is going to ply its underground wares and provide its vast money-laundering services where its customers are mostly likely to reside in the years ahead:

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Impacts of Lower Crude Oil Prices Continue to Spread

This article first appeared online at TheNewAmerican.com on Tuesday, January 13, 2015:

 

After oil forecaster Jeremy Warner got lucky last year when he accurately called the top in oil prices, with a fall to at least $80 a barrel, he doubled down by predicting “that the oil price will remain low for a long time, sinking to perhaps as little as $20 a barrel over the coming year before recovering a little.”

Warner got lucky once again when Goldman Sachs confirmed his prognosis, setting off an eye-popping five percent decline in oil to $45 a barrel which continued into Tuesday. Tuesday’s low was $44.20. As Goldman Sachs noted,

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Swiss Issue an Unequivocal Buy Signal for Gold

This article first appeared at The McAlvany Intelligence Advisor on Friday, December 5, 2014:

Rarely do the precious markets receive such an unequivocal, unblemished, unalloyed buy signal as the one issued by the Swiss when they voted down, 3-to-1, a referendum that would have modestly restricted the activities of its central bank.

Months earlier, polls showed that the “Save Our Swiss Gold” initiative was likely to pass, but massive publicity campaigns and moves by Citigroup to cash in on it caused a huge shift in public sentiment, with the final vote on Sunday, November 30 defeating it by a 78-22% margin.

The Swiss, being a direct democracy, are known for referendums, voting on an average of five of them every year, with most of them failing. But this one caused rejoicing among observers and Swiss National Bank (SNB) officials that likely put in a bottom in the gold market. Had it passed, the referendum would have required the SNB to

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Article in CFR Magazine: Give Away Money to Stimulate Economy

This article first appeared at TheNewAmerican.com on Thursday, August 28, 2014:

 

Los Angeles Police Department (LAPD) Bell 206 ...

Mark Blythe, a professor at Brown University, and Eric Lonergan, a hedge fund manager living in London, have conjured the ultimate solution to a stagnant economy: Central banks should give away free money.

These two authors of a lengthy and allegedly erudite article in the September/October 2014 issue of Foreign Affairs, published by the Council on Foreign Relations (CFR), appear to be living in an alternate universe, as their suggestion, if it were fully implemented, would push the world’s economy back to the Dark Ages.

The article, entitled “Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People,” rests on the false assumption that

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Obama Administration Choking off Bank Lending to Gun Dealers

Cover of "The Second Amendment"

Cover of The Second Amendment

For seven years Theodore Roosevelt Liberti – known to his friends as “T.R.” – ran a retail gun shop in New Jersey and then moved it to Florida. T.R.’s bank had always been BankUnited (BU) which handled his accounts and cleared his customer’s credit card purchases. But when he decided to open an online store called Discount Ammo-N-Guns, BankUnited closed his accounts on March 12 “pursuant to the terms and conditions listed in our Depositor’s Agreement.”

When T.R. demanded a further explanation, the bank remained silent. T.R.’s wife and business partner, Elizabeth said:

I was very angry. They were very inconsiderate. We had all our credit cards going through that bank.

All of a sudden we had to run and find another bank to keep our business going. We [had to] shut down for two weeks.

[BUT] wouldn’t even tell us why.

When the bank finally responded, its explanation was unsatisfactory:

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More Fraud Found by Detroit’s Emergency Manager

This article was first published by The McAlvany Intelligence Advisor on Monday, February 10, 2014:

It was no surprise to anyone that Kevyn Orr, Detroit’s interim emergency financial manager of the city during its bankruptcy, would uncover a massive fraud dating back to 2005 that helped precipitate the city’s descent into bankruptcy. It’s also no surprise that the two banks and the insurance company involved now want to cut a better deal

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Detroit’s Bankruptcy plan Reveals Fraud in Funding Pensions

Once Kevyn Orr, Detroit’s emergency financial manager during the city’s bankruptcy, presented his “plan of adjustment” – code for compromise in which no one is going to be happy – criticism was most loudly proclaimed by two people who have no financial interest in the outcome:

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Swiss banks are now IRS agents

Bloomberg’s note on Monday that Swiss banks were having a hard time complying with the terms of an agreement between the Swiss government and the US Department of Justice hardly caused a ripple of media concern much less outrage. The time for such expressions is long past.

In accordance with the deal cut back in August 2009 the Department of Justice now has the power to force Swiss banks to

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The Bitcoin and Paris Hilton

This article first appeared in The McAlvany Intelligence Advisor on Wednesday, November 27th, 2013: 

 

In a dismissive article in The New York Times on Monday, the author quoted a Bitcoin skeptic who predicted: “In a matter of months you won’t be hearing about it. It will go the same way of Paris Hilton.” He failed to follow the old rule: keep your words sweet and tender because someday

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Home Ownership Rates Continue to Fall; New Plans to Reflate Underway

When the Census Bureau announced on Tuesday that the rate of homeownership in the US continued its nearly 9-year decline, pundits were quick to lay the blame on higher lending requirements, bankers reluctant to make loans, increasing interest rates and a weak economy with slow job growth. In addition, young people are living at home longer due to student loan debt and poor job prospects. As a result, according to the Census Bureau, rental rates are climbing as families needing a place to live have few other options.

Having fallen from the peak of 69 percent reached in 2004, current home ownership has dropped to 65 percent, back to where it was in 1995. Robert Schiller, economics professor at Yale, thinks the rate will continue to fall further.

Home prices are increasing not because of demand by new buyers but because of investors seeing the opportunities in buying distressed properties and turning them into rentals. In some places in the country one out of every two home purchases are paid for in cash.

But something else is afoot: fewer citizens are buying into the notion that home ownership makes economic sense and is equivalent to a savings plan that can be turned into income in later years. As Emily Badger noted at The Atlantic Cities, “We have traditionally considered homeownership to be a sign of the health of the economy. But some of these people who would have been homeowners 10 years ago … have concluded that they would rather rent [today]…”

Some have no doubt been so badly mauled financially in the recession that they have few options. Others have long memories and remember the pain and suffering they endured as a result of deliberate government policies instituted to make homeownership possible to millions of unqualified buyers.

One of those with long memories is Henry Cisneros, a key player in developing the “National Homeownership Strategy” while he was Secretary of Housing and Urban Development (HUD) under Bill Clinton. Unanimously confirmed by the Senate, Cisneros took over at HUD in January, 1993 and by 1997 had boosted the US homeownership rate from 63.7 percent to 65.7 percent. Even after leaving office, his strategies continued blowing up the real estate bubble so that by the time Clinton left office in 2001 home ownership was at 67.5 percent on its way to peaking during the summer and fall of 2004.

In a remarkably candid and forthright article about Cisneros’ role in creating the real estate bubble, The New York Times told the story of a compassionate government bureaucrat with big dreams of providing home ownership to people who couldn’t afford them under current rules. So he changed the rules and invited bankers, realtors and homebuilders to participate in the party guaranteed by taxpayers. In 2008 as he contemplated the damage he had wrought while head of HUD, Cisneros claimed that his intentions were honorable, at least in the beginning, but that his plans to provide low-interest loans and much weaker underwriting requirements through Fannie Mae and Freddie Mac were hijacked by “unscrupulous participants – bankers, brokers, secondary market people. The country is paying for that, and families are hurt because we … did not draw line.” He expressed regret that his efforts had not only lured people into homes they couldn’t afford, but that his policies ultimately ejected them from those homes as a result. He said, “I’ve been waiting for someone to put all the blame on my doorstep.”

His strategy was to lower underwriting standards by allowing Fannie Mae and Freddie Mac to require less documentation and approve higher debt to income levels than normal. He reduced down payment requirements from 20 percent to 10 percent, and then to 5 percent, then down to 3 percent and ultimately to 0 percent. His strategy allowed these unqualified buyers to cover their closing costs with another loan, putting them into a home with truly nothing out of the own pockets. Lenders were happy with the new rules as the US taxpayer stood behind the loans bought by Fannie Mae and Freddie Mac.

Cisneros created a monster.

Once the ball got rolling, it was impossible to stop or even slow down. Said Cisneros:

You think you have a finely tuned instrument that you can use to say: Stop! We’re at 69 percent homeownership. We should go no further. There are people who should remain renters.

But you really are given a sledgehammer and an ax. They are blunt tools.

I’m not sure you can regulate when we’re talking about an entire nation of 300 million people and this behavior becomes viral.

Cisneros drank his own Kool-Aid. He joined with a major homebuilder to develop a housing project in San Antonio, Texas which made him wealthy but which turned sour during the collapse.

Those lessons are about to be learned again as there are new efforts to reflate the ownership bubble. Under the Dodd-Frank Act there’s something called the Qualified Mortgage Rule (QMR) which requires lenders to keep part of the loans they make in their own portfolios – they must have “skin in the game” to reduce the chances of another bubble. But more than 50 organizations tied to the real estate industry are advocating a softening of that rule, putting more government money into the market, with less risk to the lenders. One of those supporting such softening is Sarah Rosen Wartell, president of the Urban Institute, who sounds an awful lot like Cisneros:

I’m not suggesting indiscriminate access to home ownership, but there are many borrowers who are capable of demonstrating the capacity to pay…

[They include] those who had a job loss or foreclosure, in many cases through no fault of their own [and a result are] being shut out of a rising market.

Gary Thomas, the president of the National Association of Homebuilders, expressed his delight at the softening of the rules:

If what we’re heard about the [weakening of] the proposed QMR rule is true, the we are very pleased that the agencies are moving towards a broad definition that will benefit the American people by ensuring access to safe, affordable options for buying a home.

And then of course there’s the inevitable college professor who hasn’t learned from history, or from Cisneros. Christopher Mayer, professor of real estate at Columbia Business School, exulted:

Having a path that people can become a homeowner is an important path. And it’s really important for middle to lower-income folks who have a hard time saving…

At present efforts to reflate the real estate bubble through relaxing underwriting requirements and low-interest loans don’t appear to be working very well. But Washington has a mission where past experience and lessons and pain and hardship don’t matter. The Cisneros mentality remains alive and well in Foggy Bottom.

 

 

 

Central Banks’ bubble is bursting, sending markets down worldwide

When the Japanese stock market lost more than 6 percent of its value on Wednesday in a massive selloff, pundits jumped on the move to try to explain what happened, and what it all means. Evan Lucas, a market strategist at IG Markets, wrote:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.