But hey, look over there! Ben Bernanke's the Man of the Year!
WASHINGTON — The value of loans held by the biggest beneficiaries of the government's bank bailout fell for the ninth consecutive month in October, the Treasury Department reported Tuesday, a day after President Barack Obama criticized top bankers for not doing enough to boost lending.
The department's monthly report, which monitors the top 22 recipients of support from the government's $700 billion rescue fund, showed that their average loan balances dropped in October by $36.8 billion, or 0.9 percent. That followed a decline of 1.1 percent, or $45.9 billion, in September.
Obama on Monday urged the nation's big banks to make "extraordinary" efforts to increase lending to help consumers and businesses who have been staggered by the worst recession since the 1930s.
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(When the collective psyche was overrun by Pokemon)
Only ten years ago - the Friday after Thanksgiving 1999. In retrospect, not much has changed, if you discount the Christmas ads starting just before Halloween, the lines forming in front of shopping malls and Walmarts before midnight - the twenty-four hour shopping, the conspicuous consumption, the unemployment, the numbers of bankrupt stores.
No, in 1999 it was considered an event, the real conspicuous consumption would take place ten days before Christmas as it always had. In 1999 consumer confidence was high, the stock market was barreling towards 10,000 and online shopping was a nice idea, but would never replace good ol' retail.
Lou Miliano (CBS News): “This is no longer the busiest shopping day over recent years. Most purchasing has been done ten days prior to Christmas. This has become more of an event. And with unemployment down and stock prices up and consumer confidence strong, retailers are hoping it’s an event that leads to a 5-6% increase in sales.”
Black Friday hadn't been invented yet - the world was dealing with Pokemon and the dreaded Y2K, just around the corner.
He would also drop language requiring providers to adhere to a “reasonableness” standard in offering products; in other words, financial institutions would have been required to asses whether there products were clearly understandable to consumers. That language was seen as too vague and would leave providers open to legal challenges.
The Administration is willing to go along. In an appearance Sept. 23 before Frank’s committee, Treasury Secretary Timothy Geithner acknowledged some of the criticism of the Administration’s proposals and called Frank’s proposed changes, “a pragmatic helpful way to make sure you have the choice for protection.”
“There are lots of different ways to make sure that you don’t create too much unbridled authority that would be damaging to what’s an important part of our financial system,” Geithner said, according to the Associated Press.
Frank is also seeking to clarify just who would be regulated by the new agency, to address complaints by the US Chamber of Commerce that every small business that provides credit to its customers, or the service providers such as CPAs or advertisers who work for them, would be regulated by the new agency. Administration sources from economics chief Larry Summers on down have dismissed those criticisms as nothing more than “scare tactics” but they have nonetheless been effective. In an effort to eliminate that confusion and take it off the table as an issue, Frank will propose language that clarifies that many such businesses will not be included in the new agency’s mandate. Only bona fide providers of consumer finance offerings will be included.
In proposing the changes, Frank is “bowing to political reality” says Howard Glaser, a former top lobbyist for the Mortgage Bankers Association who now runs his own firm. In a note to clients, he points out that the Administration’s proposal was running into trouble with conservative Blue Dog Democrats.
They appear to have raised many of the concerns that have been voiced by the financial services industry and its allies at the US Chamber of Commerce, who have been lobbying heavily against the plan for the last couple of months. They argue that the proposed agency would cut back on the availability of credit, discourage innovation, and tie up many banks and small businesses in a new web of regulation. The Chamber and the community bankers have been taking the lead in fighting off the Administration’s proposal, since small business folk and local bankers who serve them win far more sympathy than do big banks and mortgage brokers at the moment.
Not that Frank’s moves are likely to slow them down. Even amidst news reports this AM that Frank was pulling back on the proposal, the Chamber announced a press conference for tomorrow morning once again criticizing the agency and how it would hurt small business.
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( . . and not to the happiest place on earth either!)
In 1975, the big concern (post-Watergate) was where our consumer society was heading. Ralph Nader, riding the crest of the Consumer bandwagon was actively pursuing the development of a Consumer Advocacy Agency, geared toward safeguarding the people of the U.S. against unsafe water, unsafe cars, unsafe food and anything else seen as endangering our society.
Then, as now, it was met with a lot of resistance and fear. Fear that all these regulations would indeed hurt and doom our society, our economy and our free enterprise system, not improve on it. Trying to protect the American people from unscrupulous business practices was seen as a dangerous red flag in the eyes of the Republican leadership.
As part of its continuing series of National Town Meetings, broadcast by NPR, a debate and Q&A session took place on April 23, 1975. It featured Ralph Nader - Consumer advocate and Senator Carl Curtis (R-Nebraska).
It is interesting to note the level of desperation Curtis addresses the Meeting, citing dire consequences to even our Foreign Policy should such legislation become law.
Ralph Nader:
"The Consumer Advocacy Agency deals with such things as dangerous drugs, flammable fabrics, unsafe cars, gouging energy prices, contaminated food, and these are the areas that will be the province of the consumer agency. It also doesn’t regulate a thing. All it does is just make the government agencies, hold their feet to reason, and data. And if they can’t support their procedural and substantive courses of action, then this agency can take other agencies to court. That’s all. And that’s enough for big business."
Carl Curtis:
"I hold in my hand a letter from the National Council of Farmer Cooperatives, vigorously opposing this act. They say is will disrupt emergency food aid to foreign nations through the beneficial PL-480 Assistance Food Program, and thus seriously affect U.S. foreign policy. I’ll illustrate how that can happen: The Consumer Advocacy Agency can challenge a decision to send some food abroad, on the ground that any food that is shipped out of this country, it will effect the price here. They can drag that on for a long time."
As I've pointed out in the past, and as I've shown with posts dealing with the question of Health Care, the wages of fear and distortion are enormous. The resistance towards anything that opposes the status quo is almost immediately met with the threat of dire consequences. Consequences that are not based on anything remotely resembling facts.
But it is all fear. It is sometimes the only card those about to lose power can play.
I can't imagine the thinking behind this. We lend them the money and then let them pay it back - before we've fixed the problems that lead to the crash in the first place? And it won't do much for consumers, since half of them are investment banks.
Elizabeth Warren is skeptical, and wants to hear the terms of repayment. She also warns that the stress tests were not as strong as they should have been. Stay tuned:
... The decision to allow the banks to exit the Troubled Asset Relief Program, or TARP, also ushered in a new, and potentially risky, phase of the banking crisis. Letting the lenders out now — earlier than many had envisioned, and without the industry reforms some consider necessary to prevent future crises — raises many sobering questions for policy makers, bankers and taxpayers.
The program was aimed at purchasing assets and equity from banks to strengthen them and encourage them to expand lending during a tightening credit squeeze. But after banks return the TARP money, the administration will forfeit much of its leverage over them. With that loss goes a rare opportunity to overhaul the industry. The administration’s ability to push institutions to purge themselves quickly of bad assets and do more to help hard-pressed homeowners will be diminished.
Of even deeper concern is the running trouble inside the banking industry. Despite tentative signs of revival, many banks remain fragile. Four of the nation’s five largest lenders, including Citigroup and Bank of America, were not allowed to return their bailout funds.
Some analysts worry that financial institutions that repay bailout money now may turn to Washington again if the economy worsens and losses overwhelm banks. One of the most vexing problems of the credit crisis — how to rid banks of their troubled mortgage investments — remains unresolved.
Which, of course, is why so many experts were urging the administration to nationalize the banks. Those bad mortgages have to be dealt with sooner or later, and the bailout program simply postponed the day of reckoning.
The banks are eager to escape TARP and the restrictions that come with it, particularly the limits on how much they can pay their 25 most highly compensated workers. (Even so, the Obama administration plans to propose guidelines on executive compensation for the broader industry as early as Wednesday.)
Yet even banks that return taxpayers’ money will remain dependent on other forms of government aid. Among them are enhanced deposit insurance, incentive payments to modify home mortgages and federal guarantees on bonds that banks sell to raise capital.
“They may need the government’s money to get through this storm,” Christopher Whalen, a managing partner at Institutional Risk Analytics, said of the banks. “If the banks have to come back and ask for more money in a few months, I don’t think the response from Washington will be too kind.”
Wait, wait, I can hardly read these sad statements through my tears - of laughter! This, from the people who brought us this entire house of cards that just collapsed? The people whose lobbyists have stacked the financial deck against people like us with late fees, pre-payment penalties and unregulated interest rates are actually telling us IT ISN'T FAIR?
WASHINGTON -- The banking industry is aggressively lobbying the Treasury Department to make it less costly for financial institutions to get out of the Troubled Asset Relief Program.
The move could prove controversial for the banking industry, which is busy deflecting criticism about higher fees it is charging consumers for credit cards and other products and services.
At issue are "warrants" the government received when it bought preferred stock in roughly 500 banks over the past six months as part of TARP. The warrants allow the government to buy common stock in the banks at a later date so taxpayers can receive more of a return on their investment when the banking industry recovers.
Many banks want to return their TARP money and, as part of that effort, want to expunge the warrants. To do that, banks must either buy them back from the government or allow the Treasury to sell them to private investors.
Today, most of the warrants are essentially worthless, because their exercise price is higher than where most banks' stocks are trading. But the government believes the warrants still have value, since they give the Treasury the right to buy common stock at a set price for 10 years.
Bankers say it is unfair to charge what amounts to a "prepayment penalty," which makes it additionally onerous to escape TARP. Bank representatives say the cost of buying back the warrants could be equivalent to paying 60% annual interest on short-term loans. That, they argue, would exacerbate banks' existing problems.
