Sign That You Are Treating Your Workers Like Shit

This is from a Walmart in Ohio, where they are running a canned food drive for their own employees.

If this is needed, you are probably not paying them enough.

Related: Walmart is America's largest employer by a lot.

Bring Back Glass-Steagall

It's a case I've made here plenty of times before, but Dean Baker is very good at articulating the specifics of why:

The ending of Glass-Steagall removed the separation between investment banks and commercial banks, raising the possibility that banks would make risky investments with government-guaranteed deposits. In principle, even after the ending of Glass Steagall banks were supposed to keep a strict separation between their commercial banking and the risky bets taken by their investment banking divisions, but this depends on the ability of regulators to enforce this restriction.

The Volcker Rule provision in Dodd-Frank was an effort to re-establish a Glass Steagall type separation but the industry is making Swiss cheese out of this regulation in the rule-writing process. Serious people cannot believe that this will keep the Wall Street banks from using their government-guaranteed deposits as a cushion to support their speculative game playing.    
If anyone questions how this story is likely to play out in practice, we need only go back a few years to the financial crisis of 2008-2009. At that time, most of the major banks, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley, almost surely would have failed without government support.

In fact, some of the top economic advisors in the Obama administration wanted to let them fail and have the government take them over, as the FDIC does all the time with insolvent banks. However Larry Summers managed to carry the day by arguing that such a move would be far too risky at a time when the financial markets were so unsettled. As a result, the big banks got their government money and were allowed to consolidate so that they are now bigger than ever.

This was primarily a problem of banks that are too big and too interconnected to fail, not just a problem of commercial banks merging with investment banks. But these mergers certainly help banks to reach too-big-to-fail status.

Some may argue that the crisis of 2008-2009 involved extraordinary circumstances. However when banks fail it is generally because the economy faces a crisis. They do not typically fail in good times. And it is a safe bet that there will always be a smart and belligerent Larry Summers on the scene aggressively arguing the case against anyone who wants to subject the banks to market discipline.

What is striking about the argument on re-instating Glass-Steagall is that there really is no downside. The banks argue that it will be inconvenient to separate their divisions, but companies sell off divisions all the time.

The arguments against bringing back Glass-Steagall seem to always come down to some form of how those advocating for it don't understand the complexities of the modern banking system and blah blah blah. I genuinely don't care. There is no reason a rule that worked will for a ton of years can't work again if designed properly. Bring it back and let the banks cry all they want while the deal with the consequences. As Dean Baker says, there really is no downside.

Profiling Criminals

Matt Bors is a national treasure:

No To Larry Summers At All Times, For Any Position

Larry Summers is apparently the Frontrunner to replace Ben Bernanke as Fed Chairman. I've spent plenty of time on this blog discussing my dislike of Larry Summers, but there is no need to not read David Dayen's similar minded take on the situation:

Summers would get the nod over the previous favorite, Fed vice chair Janet Yellen, in part because top-level officials have stressed to the President that Yellen is somehow “not strong enough” for the job, and would subsequently lack the confidence of financial markets. This gender-coded whisper campaign against the woman who would become the first female Fed chair in history is in line with an undercurrent of sexism about the selection — and the fact that Summers has an unfortunate history on this, from infamous comments he made while President of Harvard University (alleging there exist “innate” scientific aptitude difficulties for women) just amplifies the potential problem for the White House with its liberal base.

...

The Fed’s biggest preoccupations at the moment are 1) whether to continue monetary stimulus to prop up an economy that remains ailing, and 2) whether to implement financial regulations from the Dodd-Frank Act in a way that is adversarial or friendly to Wall Street.

On the first count, Summers’ public statements on the economy since leaving the Council of Economic Advisers in 2010 have largely been confined to fiscal policy, something that would be out of his reach as Fed chair (and which is also stuck due to Congressional gridlock). For what it’s worth, the Administration is confident that Summers would take seriously the full employment mandate of the central bank. But sources close to the situation worry that Summers would be more likely than Yellen, an inflation dove, to prematurely pull back on quantitative easing measures, and more important, become accepting of the current high levels of unemployment, without experimenting on bolder measures. Inflation would remain the primary Fed concern, a benefit to bankers, rather than full employment.

Summers’ true position on monetary policy is more conjectural (actually a problem when putting someone into a position of running monetary policy). But there’s no question that, on financial regulation, Larry Summers has perhaps the worst track record of any major economic figure in America. And the Federal Reserve plays a key role, perhaps the primary role, in regulating banks. Led by point person Daniel Tarullo, the Fed has recently doubled leverage requirements for the largest financial institutions. It’s hard not to see the Summers pick as designed to babysit Tarullo, and blunt any policies that come down hard on the banks. Tarullo and Summers are personally close, but Summers typically listens to his own set of sources on financial regulation – the ones in the very expensive suits – and this has had disastrous consequences for over 15 years.

In the 1990s, Summers and then-Treasury Secretary Robert Rubin led the effort to stop Brooksley Born from regulating derivatives, precisely the financial instruments that magnified the housing bubble and accelerated the financial collapse. Under his watch as Treasury Secretary, Congress eliminated Glass-Steagall’s firewall between commercial and investment banks, legalizing the merger of Citigroup (where Rubin would later become CEO). He further oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, even from state anti-gambling laws. Even Bill Clinton has apologized for deregulation of the riskiest sector in finance; Summers has not. Even well after the crisis, in 2011, Summers pronounced himself “more cautious than many about constraining financial innovation,” a not-so-thinly veiled code for encouraging a return to casino activity on Wall Street.

After contributing to the crisis, and then losing $1.8 billion for Harvard by investing most of their cash reserves in an endowment stuffed with risky trades, Summers denied the existence of the housing bubble. At the Federal Reserve annual conference in Jackson Hole, Wyoming in 2005, right before the crash, economist Raghuram Rajan warned of the imminent catastrophe in a formal paper, arguing that excessive risk-taking had surged, and that the banking system faced a “full-brown financial crisis” from the sliver of toxic securities on their own books. Larry Summers was the first to stand up and attack Rajan, bellowing that he found “the basic, slightly lead-eyed premise of [Mr. Rajan's] paper to be misguided.” Incidentally, Janet Yellen spoke publicly about the risks of the housing bubble around this same time.

In short, if we wanted to pin the crisis on one person, Summers would be a viable candidate. Nontheless, he failed upwards by taking a lead position on the Obama economic team, and the man responsible for much of the financial crisis would set to fix it. He predictably failed again. Summers lowballed the estimate of how much stimulus would be necessary to get the economy back to full employment; he lied to key members of Congress about the Administration’s commitment to providing housing debt relief and support for cram-down, where bankruptcy judges would be empowered to rewrite the terms of mortgages (this never happened, as the White House withdrew support and created a mortgage relief program that has massively underperformed); and he stood mute about monetary policy efforts to turn around the economy, which would be his main area of impact at the Fed. So on fiscal, debt relief and monetary terms, when the economy was reeling and everything counted, Summers missed on all three.

Larry Summers has been wrong about so much that his failing upwards is kind of the perfect symbol for how fucked up our economic policy has been for the past 20 years. Let's not make it worse.

So When They Say "The Banks Are Writing The Bills"...

That is literally the case:

WASHINGTON — Bank lobbyists are not leaving it to lawmakers to draft legislation that softens financial regulations. Instead, the lobbyists are helping to write it themselves.

One bill that sailed through the House Financial Services Committee this month — over the objections of the Treasury Department — was essentially Citigroup’s, according to e-mails reviewed by The New York Times. The bill would exempt broad swathes of trades from new regulation.

In a sign of Wall Street’s resurgent influence in Washington, Citigroup’s recommendations were reflected in more than 70 lines of the House committee’s 85-line bill. Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word for word. (Lawmakers changed two words to make them plural.)

The lobbying campaign shows how, three years after Congress passed the most comprehensive overhaul of regulation since the Depression, Wall Street is finding Washington a friendlier place.

The cordial relations now include a growing number of Democrats in both the House and the Senate, whose support the banks need if they want to roll back parts of the 2010 financial overhaul, known as Dodd-Frank.

This legislative push is a second front, with Wall Street’s other battle being waged against regulators who are drafting detailed rules allowing them to enforce the law.

And as its lobbying campaign steps up, the financial industry has doubled its already considerable giving to political causes. The lawmakers who this month supported the bills championed by Wall Street received twice as much in contributions from financial institutions compared with those who opposed them, according to an analysis of campaign finance records performed by MapLight, a nonprofit group.

In recent weeks, Wall Street groups also held fund-raisers for lawmakers who co-sponsored the bills. At one dinner Wednesday night, corporate executives and lobbyists paid up to $2,500 to dine in a private room of a Greek restaurant just blocks from the Capitol with Representative Sean Patrick Maloney, Democrat of New York, a co-sponsor of the bill championed by Citigroup.

Industry officials acknowledged that they played a role in drafting the legislation, but argued that the practice was common in Washington. Some of the changes, they say, have gained wide support, including from Ben S. Bernanke, the Federal Reserve chairman. The changes, they added, were in an effort to reach a compromise over the bills, not to undermine Dodd-Frank.

Chris Hayes also had a really good segment on this, particularly about the freshmen democrats involved:

Visit NBCNews.com for breaking news, world news, and news about the economy

Senator Warren's Amazing Idea on Student Debt

This is such a smart way to frame what would be a really great policy:

“The U.S. government invests in big banks by giving them a great deal on their interest rates,” freshman Sen. Elizabeth Warren said in an interview with Salon on Wednesday afternoon (the transcript of which is below). “We should make at least the same investment in our students.”

Warren was discussing the first bill she has introduced in the Senate, a plan released on Wednesday to address the crisis of outstanding student debt – which topped $1 trillion this year, with over 37 million Americans owing thousands of dollars in higher education costs that could take decades to pay back.

Student debt is now the second-highest form of debt in America – behind only mortgage debt – with the number of borrowers and the average balance increasing 70 percent since 2004. Research from the New York Federal Reserve Board indicates that this has begun to have an impact on the broader economy, with young people burdened by student debt more reluctant to take out auto or home loans. And without congressional action, this will get worse: on July 1, interest rates on federally subsidized Stafford student loans will double, from 3.4 percent to 6.8 percent. This will effectively raise costs for 8 million student borrowers by $1,000.

President Obama’s budget proposal would set subsidized student loan rates at 1 percent above the interest rate it costs the Treasury Department to borrow money for the U.S. government. But a variable rate without a cap would come back to haunt students when interest rates rise again. Another proposal would simply freeze the current rate of 3.4 percent, and would institute a plan limiting payment to 10 percent of income over a 10-year period.

Warren’s plan takes it a step further. For the next year, she would reduce the subsidized student loan interest rate to the same rate that America’s largest banks pay to borrow money from the Federal Reserve at the “discount window.” Currently, banks pay a minimal 0.75 percent to borrow from the Fed, one-ninth the rate that students would pay if Congress fails to act by July 1. Under the plan, the Federal Reserve would give the Department of Education the funds necessary to equalize those rates.

I expected her to kick ass, and pretty much everything she'd done since she got to the senate has been awesome.

Our Economy is Fucked and No One Cares

I've devoted quite a bit of time towards pointing out how much Obama has spent advocating hurting the economy during this time of long term unemployment, but there is obviously plenty of blame to go around. This kind of says it all:

Hearing on long-term unemployment kicks off with... *one* lawmaker in attendance. twitter.com/nirajc/status/…
— Niraj Chokshi (@nirajc) April 24, 2013

Economy is Turning Around, Just Very Slowly

With today's jobs report (read Jared Bernstein for more on that), the scariest chart in the world from Naked Capitalism has been updated:

We're getting there, just extremely slowly.

Sign Mitt Romney is Running a Terrible Campaign

The fact that you probably haven't seen this graph: (via business insider)

Housing Help is Not On The Way

One of the last hopes of a large scale project that would improve people's lives and the economy without the help of congress was using Freddie and Fannie to perform principle reductions on people's mortgages.

That hope died last week when the Director of FHFA, Ed DeMarco, announced his refusal to do so. David Dayen:

The important part is actually what Dylan Matthews notes in passing AFTER this, that Levitin said “replacing him means Obama can’t blame DeMarco for the state of the housing sector.” This is quite right, and you can see it something I tweeted yesterday. James Lockhart left FHFA, making Ed DeMarco acting director, in August of 2009, three years ago. In the total time he has been acting director, there has been a Presidential nominee for the position for roughly two months. The Administration didn’t get around to nominating Joseph Smith – the banking commissioner of North Carolina and currently the enforcement monitor for the foreclosure fraud settlement – until November 2010, during the lame duck session. Smith was denied an up or down vote in the lame duck and he withdrew his name from consideration in January 2011. And that’s been it. There has never been a replacement nominee for FHFA Director since.

The President and the Treasury Department claim that principal reduction and refinancing are priorities (now, after three years of doing nothing toward that purpose; the HAMP principal reduction program did nothing until the incentives got tweaked this year). They claim that they strongly object to DeMarco’s position. They have rallied a large section of the housing advocacy community around to focusing attention on DeMarco, a virtual unknown just a few months ago. DeMarco, in fact, is very useful to the Administration right now. He’s an excellent foil, a means to distract attention away from the terrible housing policies of the past few years. Suddenly it’s Ed DeMarco’s fault that housing hasn’t improved. It’s Ed DeMarco’s fault that you can buy a house for the price of a Lexus in 10 cities in America. DeMarco as cartoon villain puts the guys who have been running housing policy for the last three-plus years in the white hats.

That’s been sold brilliantly, and a recess appointment would mean that Obama would have to take ownership of the policy. There’s a chance that could actually fail. And so, for three years, there’s been a named nominee for two months. This is working out nicely for the Administration.

This is not to say that DeMarco is somehow right. I think Jared Bernstein’s analysis of DeMarco’s flawed analysis is spot-on. And DeMarco re-imagining himself as the executor of all taxpayer funds – by rejecting the cost savings for principal reduction by saying it just moves money from Treasury to the GSEs, as if he has any say over how tax dollars are spent at Treasury – is a breach of jurisdiction and simply a dodge to force an ideological rejection of principal reduction. Will DeMarco stop facilitating home purchases in the suburbs because suburban sprawl forces more hydrocarbon use, leading to increased taxpayer dollars for the Defense Department to secure oil supplies? The whole thing is ridiculous.

But DeMarco knows he won’t be fired. He’s become the symbol in the story, and the Administration is much more interested in symbolism when it comes to housing.

And now, Bailout author Neil Barofsky, someone who actually worked through this whole process with the Treasury department, has also given his take:

Last week the acting director of the Federal Housing Finance Agency, Ed DeMarco, made a familiar argument. He announced that he would not approve the Obama administration’s request that struggling borrowers whose mortgages are backed by Fannie Mae and Freddie Mac receive debt relief through principal reductions subsidized by the Troubled Asset Relief Program (TARP). DeMarco’s refusal was based on his concern that granting such relief would encourage other borrowers to “strategically default” by not making payments on their loan to take advantage of the promise of a reduction in their debt. This is a version of the moral hazard argument we heard about so often in the early days of the financial crisis. Secretary Geithner, in response, argued in a public letter that notwithstanding such concerns, and for the greater good of the overall economy, such relief should be granted whenever it would result in a better economic outcome than foreclosure.

This is not the first time this debate is happening – but last time around, Geithner was the one arguing DeMarco’s points. Although one can argue whether principal reductions are the right way to address the ongoing housing slump – I have championed principal reductions for years but acknowledge that there are passionate arguments on both sides of the issue – no one should be fooled that the administration’s entreaties to DeMarco are anything but political posturing. As I recount in my recently released book, Bailout, during my time as the special inspector general in charge of oversight of the TARP bailouts, Treasury Secretary Timothy Geithner, using the same justifications now offered by DeMarco, consistently blocked efforts to use TARP funds already designated for homeowner relief through a principal reduction program that could have a meaningful impact on the overall economy.

For example, in 2009, $50 billion in TARP funds had been committed to help homeowners through the Home Affordable Modification Program (HAMP), a program that the president announced was intended to help up to 4 million struggling families stay in their homes through sustainable mortgage modifications. Hundreds of billions more were still available and could have been used by the White House and the Treasury Department to help support a massive reduction in mortgage debt. But Geithner avoided this path to a housing recovery, explaining that he believed it would be “dramatically more expensive for the American taxpayer, harder to justify, [and] create much greater risk of unfairness.” Treasury amplified that argument in 2010, after it reluctantly instituted a weak principal reduction program in response to overwhelming congressional pressure. That program incongruously left it to the largely bank-owned mortgage servicers (and to Fannie and Freddie) to determine if such relief would be implemented. In response to our criticism that the conflicts of interest baked into the program would render it ineffective unless principal reduction was made mandatory (when in the best interests of the holder of the loan), Treasury reinforced Geithner’s early statements, refusing to do so primarily because of fears of a lurking danger: the ”moral hazard of strategic default.” The message was clear: No way, no how would Treasury require principal reduction, even when Treasury’s analysis indicated it would be in the best interest of the owner, investor or guarantor of the mortgage.

Indeed, at every critical juncture at which Treasury could have unilaterally implemented meaningful principal reduction, the same argument now presented by DeMarco was hauled out as an excuse for inaction.

I want to believe the best intentions of the administration, and if they've had a real change of heart over the importance of principled reductions, but it really would fly in the face of everything we've seen on housing policy in the Obama Administration.

The fact that every left leaning advocacy group simultaneously sent me some campaign action against Ed DeMarco is what sent my bullshit detectors into high gear. Focusing on DeMarco does nothing other than divert our attention from the people who have presided over our abysmal housing policy the past three years.   Wish it was something else, but that's really the only way I can see it at this point.

"TARP Was Worse than you think"

Great interview with Neil Barofsky. Now that I own the book, expect more quotes and revelations in the coming weeks.

The 800 Trillion Dollar Scandal You Haven't Heard About

Over the weekend and the last day, I've been reading a lot more about the LIBOR scandal that has been making headlines around the world, but not so much in the United States.

For a background, theses videos and this Sam Seder interview with Matt Tiabbi might help:







700 TRILLION dollars in assets could be effected. The scope literally could not get larger.

We will be writing more about this, for sure.

Economy Continues to Suck

Two charts from Calculated Risk:

This shouldn't be acceptable, and is doing real, long term damage to enormous amounts of people. The people in charge should probably get creative and do something about this. There are things that don't require 60 Senators or Congress. You're the fucking president. Do something.

Elizabeth Warren Blasts Schneiderman Task Force

Dave Dayen is the best reporter there is on the mortgage settlement/ Schneiderman led task force, so it's been interesting to see his takes on the latest developments. The most recent statement came from an interview he did with Elizabeth Warren, and it's fairly stunning. I've been nervous about Schneiderman's task force, but I didn't expect Warren to be this blunt:

FDL News: Are you confident that the current set of investigations, including this task force co-chaired by Eric Schneiderman looking into mortgage abuses – there’s been a lot of controversy about it, about staffing and resources – are you confident that the investigations in place today will actually lead to the necessary accountability for Wall Street for their role in the crisis?

Warren: I am not confident. No. And that’s the answer to your question. The American people are pushing for more accountability. They need to keep on pushing until it happens.

Well then. And I'm assuming she's pretty fucking plugged in to that process. Consider me a lot less confident as well.

"We Know We Were Stupid"

Hey, Barack! I know I'm not some awesome strategist who understands the awesome political benefits of cutting social security, but a brief bit of unsolicited advice: STOP PRAISING JAIME FUCKING DIMON!

“JPMorgan is one of the best managed banks there is,” Obama said. “Jamie Dimon, the head of it, is one of the smartest bankers we got and they still lost $2 billion and counting,”

Jaime Dimon, two days ago:

So we’ve had audit, legal, risk, compliance, some of our best people looking at all of that. We know were sloppy. We know we were stupid. We know there was bad judgment. We don’t know if any of that’s true yet. Of course, regulators should look at something like this, that’s their job. We are totally open to regulators, and they will come to their own conclusions. But we intend to fix it, learn from it and be a better company when it’s done.

Jaime Dimon, several months ago:

JPMorgan’s Dimon obviously doesn’t think a whole lot of the scheme.

“Paul Volcker by his own admission has said he doesn’t understand capital markets,” Dimon told Francis in the Fox Business interview. “He has proven that to me.”

Dimon also went on to say we won’t destroy the market, it will simply “go overseas.”

Can we buy your airfare? What will we ever do without your understanding of capital markets???

We know that Obama and Dimon and best buddies, so I don't expect him to have any less influence but the idiocy of having Obama praise him is fairly stunning. Who let that happen? For all the shit we've given Romney over his rich person's tourettes, this is honestly just as bad.

The He Said/She Said School of Reporting

I listen to NPR when I wake up in the morning, and tend to get frustrated endlessly by what Dean Baker describes here:

Is today Tuesday? Some people say it is and others say it isn't. It's just so hard to decide.

That is pretty much what NPR told us about President Obama's record in turning around the economy this morning. It cited Alan Blinder, an economist who has served in past Democratic administrations, saying that President Obama's policies helped the economy. It then cited Douglas Holtz-Eakin, who served in the Bush administration and was the chief economic advisor to John McCain saying that his policies harmed the economy.

It would have been helpful to give us the assessment of neutral observers such as theCongressional Budget Office. It also would have been helpful to try to make evaluate the claims of the Romney campaign that the stimulus harmed the economy.

NPR reported that the Romney campaign said:

"The president made the recession worse, the statement says, 'by pursuing a series of disastrous, partisan policies that created uncertainty, discouraged investment and stifled job creation.'"

There is a simple claim that can be evaluated here. The Romney campaign says that investment would have been higher had it not been for Obama's actions. This can be evaluated by comparing the path of investment with what might have been predicted absent the bad policies from President Obama.

Investment in equipment and software is currently close to 7.5 percent of GDP. It was 7.9 percent before the downturn in 2007. Given the huge amounts of excess capacity in large sectors of the economy, it is difficult to envision a scenario in which investment would have been much higher than it is today. If the Romney campaign is to be taken seriously in this claim then it should have to present some evidence that would establish its counter-factual as being credible. On it's face, it is not.

I actually heard this live this morning and was driven a bit nuts for the same reason. Also, if you ever listen to Marketplace or a bunch of their other shows they take the same approach. It's not helpful, and no one learns anything from the stories. But NPR doesn't see themselves as "taking sides" between truth and non-truth and being accused of liberal bias, so it all works out ok!

The System Needs Less Rules, More Fraud

Most of us look back on the Gramm–Leach–Bliley Act, and the Commodity Futures Modernization Act with dismay. How did such overwhelming bipartisan majority gleefully undo regulations that had been in place since the great depression, and think that all would end well?

As always, I'd be happy to be wrong, but the more I read about the JOBS Act, I feel like we'll be looking back in a few years and wondering the same thing. Matt Taibbi:

The "Jumpstart Our Business Startups Act" (in addition to everything else, the Act has an annoying, redundant title) will very nearly legalize fraud in the stock market.

In fact, one could say this law is not just a sweeping piece of deregulation that will have an increase in securities fraud as an accidental, ancillary consequence. No, this law actually appears to have been specifically written to encourage fraud in the stock markets.

Ostensibly, the law makes it easier for startup companies (particularly tech companies, whose lobbyists were a driving force behind its passage) to attract capital by, among other things, exempting them from independent accounting requirements for up to five years after they first begin selling shares in the stock market.

The law also rolls back rules designed to prevent bank analysts from talking up a stock just to win business, a practice that was so pervasive in the tech-boom years as to be almost industry standard.

Even worse, the JOBS Act, incredibly, will allow executives to give "pre-prospectus" presentations to investors using PowerPoint and other tools in which they will not be held liable for misrepresentations. These firms will still be obligated to submit prospectuses before their IPOs, and they'll still be held liable for what's in those. But it'll be up to the investor to check and make sure that the prospectus matches the "pre-presentation."

The JOBS Act also loosens a whole range of other reporting requirements, and expands stock investment beyond "accredited investors," giving official sanction to the internet-based fundraising activity known as "crowdfunding."

The next provision he describes sounds the law was designed to promote fraud:

When I first read this, I asked myself: how does a law exempting a Silicon Valley startup from independent accounting actually encourage investment? If American companies have to have their internal processes independently verified before and after they go public, doesn't that give investors all around the world a big reason to put their money here, instead of investing in, say, Mobbed-Up Siberian Aluminum LLC, or Bangalore Sweatshop Inc.?

In other words, how does letting www.investonawhim.com go to market (and stay on the market for five years!) without publishing real numbers actually help the industry attract more financing in general, when the whole point of all of these controls is to make investment a less risky experience for the investor?

Get ready for the ostensible answer, because you won't believe it. Here's how CNN explained the reasoning behind that exemption:

Having 500 investors or raising $5 million previously forced a company to register with the SEC -- a costly endeavor. Filling out stacks of legal forms and undergoing independent accounting audits can cost hundreds of thousands of dollars. The law loosens requirements for most companies by raising several thresholds.

We needed Barack Obama and the congress to compromise the entire U.S. stock market because it's too expensive for a publicly-listed company with billion-dollar ambitions to hire an accountant? That almost sounds like a comedy routine:

SILICON VALLEY EXECUTIVE: Listen, IJustThoughtOfSomething.com is the hottest thing on the internet. We're so huge it hurts... I can't even walk to my corner bodega without women throwing me their phone numbers!

INVESTOR: I'd love to invest. Can I see your numbers from last year?

SILICON VALLEY EXECUTIVE: Well, that's just the thing. We painted the bathrooms last March, and then we also had that Vitamin Water machine put in the lounge. You know, the one next to the ping-pong table? So we just didn't have any money left over for an accountant. But I estimate our revenues for 2014 to be $4.2 billion.

INVESTOR: Sounds hot! Where do I send the check?

There's just no benefit that the JOBS Act brings to an honest startup company. In fact, it puts an honest company at a severe disadvantage, because now it has to compete against other, less scrupulous companies that can simply make their projections up on the backs of envelopes.

This is like formally eliminating steroid testing for the first five years of a baseball player's career. Yes, you can pretty much bet that you'll see a lot of home runs in the first few years after you institute a rule like that. But you'd better be ready to stick a lot of asterisks in the record books ten or fifteen years down the line.

As we ask with the overwhelmning majorities that passed banking deregulation in the 90s, you ask: Why would people do this? There isn't a majority of tea party members, why on earth would otherwise not completely awful members of congress get behind this bill?

The best I can come up with is:
1) Most members of congress are financed heavily by the banks, which makes supporting something that helps them a priority at all times, whether it makes logical sense or not.

2) People in congress are freaking out that the economy sucks and they might lose their jobs, and since one party doesn't care about governing and large portions of the other party are almost as bad, passing a a piece of legislation that promotes fraud that has the word "Jobs" in the name is better than doing nothing. It's low risk, and as they say on Wall Street, by the time this goes bad IBGYBG (I'll be gone, you'll be gone).

It's worth pointing out that things like the JOBS act are exactly why our system is broken. We have the biggest economic collapse since the great depression 4 years ago that was caused in large part due to massive fraud made possible by the non enforcement of existing protections and the deregulation of the banking industry. A mere 4 years since the crisis, congress passes a measure that deregulates these industries in a way that basically encourages fraud.

What's happened with the JOBS Act should basically be studied as a template for why our system is fucked up beyond belief. I don't have any easy answers, but it is worth pointing out how insane this whole thing is.

"Creating Jobs" = Giving Money To Rich People

This is the case with every single conservative "jobs" plan, and it's a point that doesn't get emphasized enough. If anyone wants to find a conservative jobs plan that isn't some form of giving money to rich people or rich corporations, I'm all ears. (via atrios)

Since taking office in 2010, Gov. Chris Christie has approved a record $1.57 billion in state tax breaks for dozens of New Jersey’s largest companies after they pledged to add jobs. Mr. Christie has emphasized that these are prudent measures intended to help heal the state’s economy, which lost more than 260,000 jobs in the recession. The companies often received the tax breaks after they threatened to move to New York or elsewhere.

The generous distribution of subsidies in New Jersey has come under fire from government-reform groups, Mayor Michael R. Bloomberg of New York City and some New Jersey landlords, who contend that the programs are an expensive and ineffective form of assistance to wealthy corporations.

The critics pointed out that even when the promised jobs have not materialized, the Christie administration has merely reduced, not withdrawn, the subsidies. And they say that the administration is mortgaging the state’s future by forgiving so much tax revenue for the next 10 to 15 years.

“Christie has taken this to a whole different level; it’s become a feeding trough,” said Deborah Howlett, executive director of New Jersey Policy Perspectives, a liberal policy organization. “It seems ridiculous to steal jobs from one city in the state and move them to another city a couple miles away. There just doesn’t seem to be any benefit to taxpayers.”

It should be pointed out that there is no evidence that giving money to rich people makes them any more or less likely to create jobs. It does in fact, give them more money, usually at the expense of poorer taxpayers, who either pay more to make up the balance or don't get the services that their taxes pay for.

Also, this is another reason Republicans don't give the slightest shit about the budget, or budget deficit. If we suddenly had a balanced budget or a budget surplus it's not like they'd be happy and go home. No, they'd find a way to make the budget unbalanced again by giving trillions of dollars to rich people. Yes, this actually happened.

"Why I'm Leaving Goldman Sachs"

Holy crap, read this:

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

Read the whole thing.

Foreclosure Settlement In

I need to read more about this, but my initial verdict is: Not good:

Forty-nine states, every one but Oklahoma, as well as federal regulators will participate in a foreclosure fraud settlement that will release the five biggest banks (Wells Fargo, Citi, Ally/GMAC, JPMorgan Chase and Bank of America) and their mortgage servicing units from liability for robo-signing and other forms of servicer abuse, in exchange for $25 billion in funding for legal aid, refinancing, short sales, restitution for wrongful foreclosures and principal reduction for underwater borrowers. The announcement will be made on Thursday.

This settlement arises from multiple abuses found in the servicing of loans and the foreclosure process over the past several years. At the height of the housing bubble, banks sliced and diced mortgages and traded them with little regard for the rules following land recording or securitization to such a sloppy extent that they lost track of the true owner on potentially millions of homes. To cover up for this massive failure, banks and their servicing units have been found to have routinely forged, back-dated and fabricated documents at county recorder offices and state courts across the country. Furthermore, they employed “robo-signers,” who signed hundreds of thousands (if not millions) of documents and affidavits without any knowledge of the underlying mortgages. In addition, investigations uncovered massive servicing abuses, including illegal fees charged to borrowers, putting borrowers into foreclosure at the same time as they were working out loan modifications, failing to honor previous settlements where promises were made on modifications, and countless other errors that maximized servicer profits and gouged homeowners. There are also cases of wrongful foreclosures where homeowners have been turned out of their homes without just cause, and servicer-driven foreclosures, where servicers illegally added late fees and applied payments inaccurately, pushing the homeowner into foreclosure. This is but a smattering of the examples of foreclosure fraud and servicer abuse found in a series of interlocking investigations, court depositions, reviews of documents in registers of deeds offices, and homeowner testimonials.

The deal caps a 16-month process that had several fits and starts, and closed with the final holdouts, New York and California, coming to terms. The deal will release claims from state Attorneys General, but individual homeowners retain private rights of action to sue over foreclosure fraud and other abuses. As part of the settlement, states will get a fixed amount in hard dollars that would go to fund legal aid services. “This will get a lawyer for everyone facing foreclosure in the state,” said one source in an Attorney General’s office. “This will stop every wrongful foreclosure.”

Oklahoma stayed out of the deal because the state’s Attorney General, Scott Pruitt, did not believe that the banks should face any penalty.

As far as the release goes, AG offices that signed onto the lawsuit claimed it was narrowly crafted to only affected foreclosure fraud, robo-signing and servicing (which I don’t feel is all that narrow, but I’m trying to just-the-facts this -ed). The lawsuit that New York AG Eric Schneiderman filed last Friday, suing MERS and three banks for their use of MERS, was preserved fully. There was a last-minute request by the banks to dissolve that lawsuit, but it was not successful. In addition, Schneiderman reserves the right to sue other servicers for their use of MERS along the same lines as the current lawsuit.

In addition, all securitization claims, tax fraud claims, insurance fraud claims, and more will be able to be investigated and prosecuted by individual AGs and the RMBS working group, set up at the Financial Fraud Task Force, with Schneiderman as one of five co-chairs. They will be able to use all findings gathered in multiple investigations into servicing and foreclosures in their investigation. At least one of those investigations, the HUD Inspector General report, will be made public as part of the settlement. That report, according to a senior Administration official, will show a wide variety of errors among the major servicers, but the worst will show up to a 60% error rate. In one incident described in the report, an employee of one of the servicers spent two weeks experimenting with her staff to see how long it would take to process foreclosure documents correctly. They determined it would have taken at least 1-2 weeks. This employee went to their manager and reported the information. The following week, the manager told the employee they were reducing the time spent on each file from 48 to 24 hours.

Read the entire article, because Dayen has been one of the best people covering this topic.

This seems to be a key point:

And then there’s the settlement price: $25 billion, divided up several ways. $3 billion will go toward refinancing for current borrowers who are underwater on their loans, as well as short sales. $5 billion will go as a hard cash penalty to the states, which can use them for legal aid services, foreclosure mitigation programs, and ongoing fraud investigations in other areas (one official close to the talks feared that much of that hard cash payout will go in some Republican states toward filling their budget holes). The federal government will get a cash penalty as well. Out of that $5 billion, up to 750,000 borrowers wrongfully foreclosed upon will get a $1,800-$2,000 check if they sign up for it, the equivalent of saying to them “sorry we stole your home, here’s two months rent.”

The bulk of the money, around $17 billion, will go to principal reduction credits for troubled borrowers. The banks will not get dollar-for-dollar credit for every write-down; reductions on loans bundled in private-label mortgage-backed securities, for example, will be under 50 cents on the dollar, and write-downs for second liens (mostly home equity lines of credit) will be more like 10 cents. Housing and Urban Development Secretary Shaun Donovan believes that they will be able to get between $35-$40 billion in principal reduction in real dollars out of the settlement. Donovan became the point person on the federal level, along with DoJ, as the Administration pretty much took over the investigation and settlement process from the states, who were led by Iowa AG Tom Miller.

But even this $35-$40 billion number, which is at best a guess since the direction of the principal reduction is mostly at the discretion of the banks, pales in comparison to the negative equity in the country, which sits at $700 billion. And the banks have three years to implement the principal reductions, drawing out the loss on their books. As the New York Times reports, banks have covered reserves for all of this, and should see major boosts to their stock price as a result of the settlement.

35-40 Billion out of 700 Billion = Not good. More to come once the full details of the settlement are released.