Revival of Volatility Signals Historic Era in U.S. Politics

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For many years the "titans" of Wall Street could pretty much have their way with Congress. They -- and their huge campaign contributions -- had convinced the Republicans, and many of the Democrats -- that what was good for Wall Street, was good for the country.

Then came the financial collapse in September, 2008, and the sudden realization that the emperor of Wall Street didn't have any clothes. Turned out that the policies that allowed reckless Wall Street traders to run wild -- and gave a tiny number of Wall Streeters the ability to claim a bigger and bigger share of our national income -- weren't actually so smart for the rest of us.

Democrats in Congress and the Obama Administration turned on Wall Street and -- from Wall Street's point of view -- had the "audacity" to pass legislation that reined in the recklessness that had cost eight million Americans their jobs.

Many among the Wall Street types -- who actually think of themselves as the "masters of the universe" -- were shocked. They -- and much of the conventional wisdom in Washington -- assumed that the Wall Street reform bill would be watered down into thin gruel by the massive army of lobbyists they sent to do battle on the Hill. Wall Street spent almost a half-billion dollars lobbying to stop Wall Street reform. But the bill actually got tougher and tougher as the battle went on.

That was because Progressives held political ground so high on the issue that even the most "moderate" members of Congress were terrified to stand up for the Wall Street elite.

But this November, the Wall Street Empire plans to strike back. According to Politico:

The vilification of bankers, what one bank lobbyist called the 'show trials' of congressional hearings and especially the outcome of financial regulatory reform has prompted an all-out effort to wrest Congress from Democratic control, several financial industry insiders told Politico."

Karen Klugh, spokeswoman for the American Financial Services Association, told Politico: "Our target ratio for the 2010 cycle is 80-20 Republicans..." She said this ratio, "reflects our deep concerns with the work of the 111th Congress." You betcha.

And the amount Wall Street is directly investing in campaigns is almost certainly just the tip of the iceberg. It is likely dwarfed by the massive secret contributions they have made to the various Republican attack groups. And you can bet they are encouraging their partners in the huge outsourcing deals -- on which they make billions -- to pony up as well through secret contributions to the Chamber of Commerce that can spend unlimited amounts to distort the records of their Democratic targets.

Many of those contributions, as ThinkProgress has documented, come from foreign corporations that profit from outsourcing of American jobs.

The thing that is especially galling about Wall Street's approach to politics is that it so brazenly plays upon the fears of the very people who are often the biggest victims of their greed.

It is no small irony that the very people whose recklessness caused so many everyday working class families to lose their jobs - who have systematically skimmed off a larger and larger portion of our national product and left smaller and smaller pieces of the pie for everyday Americans - are now stoking the anger caused by their own actions and directing it toward Democrats who have brought them to account.

In the Tea Party fantasy world everyday Americans are oppressed by bureaucrats with eyeshades who go to work on the Washington Metro. They are abetted by crunchy academics who spend their days dreaming up "social engineering" schemes in their offices at Yale or Harvard. And their oppressive regime is supported by liberal news anchors and the nihilistic denizens of Hollywood who spend their nights in hot tubs surrounded by Playboy Bunnies. That is the Tea Party version of class warfare; everyday Americans versus these "elites."

This is a very convenient mythology for Wall Street. It ignores the existence of the real "elites" in America. They aren't the bureaucrats who go to work on the Metro but rather the men and women who go to work in chauffeur-driven limousines, jet around the country in Gulfstream G-Vs, and make more on the first day of the year, before lunch, than a minimum wage worker makes all year long.

The gang on Wall Street wants normal Americans to forget that they -- and the top one percent of the population -- control 34.6% of net assets, compared to only 15% for the bottom 80%.

They want you to ignore that 42% of the financial wealth is controlled by the top 1% of the population, compared to only 7% controlled by the bottom 80% -- or that 62% of the business equity that controls corporations is in the hands of the top 1% compared to only 7% for the bottom 80%.

Remember all of the reckless speculation in financial securities that sunk the economy? Well 61% of financial securities are owned by the top 1% -- and just 2% by the bottom 80%.

And when it comes to income, the share going to the top 1% had grown from 12.8% in 1982 to 21.3% in 2006 while the percent going to the bottom 80% shrunk from 48.1% to 38.6%.

When you look at numbers like that, in broad strokes it's pretty obvious why the economy sunk into recession. The greed of the top 1% sucked the buying power out of the rest of the population who were needed as customers to keep levels of demand high enough so that investors found it profitable to expand employment, create jobs and generate more consumers to demand more goods and services. Their greed killed the goose that laid the golden egg.

Of course the latest example of the consequences of Wall Street's reckless greed is the mortgage foreclosure documentation disaster. Seems that they were in such a hurry to make more and more on their exotic mortgage-backed securities that they simply neglected to properly document the changes in ownership for the mortgages they packaged up and sold on financial markets.

Why would the brilliant graduates of some to the finest universities in America make such an obvious mistake? You have to assume it's because they figured that they would make their millions and pass the risk of their actions on the "the market" at large rather than take the time and expense to do it right.

Now that their actions have come to light they may once again threaten the stability of the financial system.

And let's remember that when you fall behind in your credit card payments, these same guys are the first to invoke every provision in the fine print of your credit card agreement so they can charge you a fortune in fees. But when it comes to transferring titles of mortgages correctly, turns out they couldn't be bothered. One more example of how Wall Street thinks it's exempt from the rules that apply to the rest of us.

Now, Wall Street is trying to harness the anger of ordinary people -- who are furious because of the economic disaster that Wall Street itself created -- to allow them to use the Republicans as a vessel to take back the control of Congress.

It's up to us to stop them. The plain fact is that there are more of us than there are of them. But if we don't vote, we don't count. Time for Progressives to get out of a defensive crouch and march -- along with everyone we know -- to the polls. As the MTV s slogan says: Vote again in 2010.

In most jurisdictions early voting has already begun. The time to vote is now.

I know a guy who trades on Wall Street, call him George, who is absolutely disdainful of ordinary Americans. He thinks that anyone who can't get rich, like he is, must be a chump. He's happy to exploit anyone and anything to make money for himself.

Don't let George make us all into chumps. Don't let Wall Street use the anger caused by the economic disaster that they themselves caused, to elect Republicans and take back control of Congress. (by: Robert Creamer-www.huffingtonpost.com)

Robert Creamer is a long-time political organizer and strategist, and author of the recent book: Stand Up Straight: How Progressives Can Win, available on Amazon.com.

U.S Step up Pressure on China

WASHINGTON—The U.S. will try to intensify pressure further on China over its exchange-rate policy after a weekend meeting of the International Monetary Fund failed to produce an agreement on international currency movements.

Reuters

IMF Managing Director Dominique Strauss-Kahn and China's Vice Finance Minister Zhu Guangyao in Washington.

A U.S. official said the Obama administration was pleased that it was able to put China's currency policies at the center of discussions at the IMF's annual meeting, and felt that Beijing was responding to U.S. efforts by lifting the value of the yuan at an accelerated pace over the past month. But the official said continued pressure was needed to prevent China from backsliding.
The U.S., European nations and a number of emerging markets complain that China is deliberately undervaluing its yuan to aid its exporters. To compete, Japan, South Korea, Brazil and others have taken measures to beat down the value of their currencies as well, leading to fears these efforts may presage a trade war.

Youssef Boutros-Ghali, Minister of Finance of Egypt and Dominique Strauss-Kahn, IMF Managing Director, spoke at a press briefing by the IMF's Board of Governors during the IMF's meeting in Washington, DC.

Chinese officials took a much more visible role at the IMF meetings than they usually do, making their case in press conferences, speeches and public seminars. They sought to ease tensions, but were careful not to go beyond Beijing's policy that a "gradual" ascent in the yuan was to be expected—though they didn't define gradual.
On Sunday, China's central bank governor, Zhou Xiaochuan said if China can keep inflation low and the economy stable, "then the currency would become stronger and stronger." But he warned not to expect immediate changes, comparing the policy to a Chinese doctor putting together a package of 10 herbs to cure an illness.
"It solves the problem not overnight, but in a month or two months," he said to laughs at a meeting of the Institute of International Finance, a bankers' trade association.

Asia Braces for Currency Wars

The U.S will focus its attention on a summit of the leaders of the Group-of-20 industrialized and developing nations in Seoul in November. The Obama administration is betting China will make a further move on its currency before then, as a way to keep its exchange-rate policies from dominating the meeting—and South Korean negotiators are scrambling to convince Beijing to do just that.
Shortly before the last G-20 summit in Toronto in June, Beijing agreed to show "flexibility" in its exchange-rate policy, ending a two-year period of tightly tying the yuan to the dollar.
However, China barely budged its currency upward, producing yet another round of U.S. pressure, including a Sept. 6 visit to Beijing by White House economic adviser Lawrence Summers. Since then, the value of the yuan has gained about 2% against the dollar, a pace the U.S. official said was encouraging, though the U.S. wants further movement.

Reuters

World Bank President Robert Zoellick, left, and IMF Managing Director Dominique Strauss-Kahn in Washington Saturday

"It is critical to see more progress by the major emerging economies to more flexible, more market-oriented exchange-rate management," U.S. Treasury Secretary Timothy Geithner said at an IMF session Saturday, in remarks clearly aimed at China.
The U.S. has other levers too, but it is wary of pushing some of them. Most prominent is a semiannual report that Treasury is required to release by Friday examining whether exchange rates—including China's—are being "manipulated." Mr. Geithner has testified in Congress that a manipulation finding on China's yuan could be counterproductive. Such a finding, under a 1988 trade law, simply requires the U.S. to negotiate with Beijing, which it already is doing, and could open U.S. companies to retaliation from Beijing.
In April, Treasury delayed the report, giving China more time to change its policy, and then gave China a passing grade after it said it would allow more flexibility.

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Xinhua/ZUMApress.com

International Monetary and Financial Committee Chair Youssef Boutros-Ghali, Finance Minister of Egypt, at a press briefing in Washington Saturday.

Still, giving China a pass in the upcoming report could cause political problems for the administration at a time when China has become a potent political issue in fall campaigns. That argues for Treasury delaying the release of its finding, as it has done in the past under Democratic and Republican administrations. Mr. Geithner has told lawmakers he'll file in a "timely" manner, without a more specific commitment.

Officials from the International Monetary Fund expressed the need for cooperation between nations and discussed protectionist economic policies at their annual meeting in Washington. WSJ's Jason Bellini reports.

Two proposals the U.S. took into the IMF meeting got no traction. In a talk in advance of the meeting, Mr. Geithner suggested that China might be willing to boost its currency if other Asian currencies did the same, in a kind of regional accord. That way, none of the countries would gain a competitive edge. But during a seminar at the IMF, Yi Gang, deputy governor of China's central bank, called such a deal "very unlikely."
Mr. Geithner also said that China's power and role at the IMF should be linked to its willingness to move its currency. That won the backing of IMF Managing Director Dominique Strauss-Kahn, but few others. "Nobody is linking this," said Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the IMF's policymaking committee and is overseeing a revamping of the organization's voting structure.
While European nations expressed concern about the yuan's value, they were less confrontational with Beijing. Some argued it's up to the U.S. and China to address the root causes of the dispute over currencies.
"The U.S. would have to reduce the internal and external deficits that they have. From the Chinese side, the most important aspect would be to increase internal consumption, and an appreciation [of their currency rate] would be one of the instruments," Ewald Nowotny, head of Austria's central bank, said in an interview.
Olli Rehn, the European Commission's head of economic and monetary affairs, said he considered the yuan "significantly undervalued" and called on the IMF to take an "enhanced role" in solving the dispute.
Mr. Strauss-Kahn on Friday suggested an initiative in which the IMF would work on a number of fronts to ease currency battles. But by the end of the IMF meeting on Saturday, he described a narrower effort where the IMF would focus its reviews of country policies more heavily on currency issues. The U.S. official said the IMF should continue to play an advisory role to the G-20.
That leaves the U.S. with a combination of unilateral and multilateral levers to pull. Unilateral moves can be difficult because of domestic politics. Mr. Geithner and the White House have tried to use Congressional ire to convince China of the depth of U.S. concern. They point to a bill that passed the House last month that would make easier for domestic industries to win cases against China based on the argument that Beijing's restraint of its currency subsidizes its exports.
But the Treasury also worries that such a bill could backfire by provoking a trade war. So it hasn't endorsed the bill—or given lawmakers advice about what kind of provisions it wants.

Senate leaders say they don't think there is time to pass a similar bill and have it signed into law during a lame-duck session after the November elections. But that could change if anti-Chinese sentiment grows in the Congress. Senior Republican and Democratic Senate aides think a bill would pass by a wide, bipartisan margin.
The Treasury sees the Korea G-20 summit as more promising. Currency is on the agenda as part of what the G-20 calls its "rebalancing" process. Trade-surplus countries—especially China—have agreed to shift away from export-led growth to domestic consumption, which implies an appreciation of the yuan. Trade deficit countries—especially the U.S.—have agreed to boost savings and reduce imports. The overall goal is reduced reliance on U.S. consumer spending for global growth.
South Korean negotiators are talking to Beijing about the importance of striking a political deal with the U.S. over currency issues before the summit, where President Barack Obama is sure to press Chinese President Hu Jintao. Mr. Zhou, the central banker, said China agrees with the G-20 agenda.
Michael Spence, a Nobel Prize-winning economist now at New York University, on Sunday said Chinese and global interests coincide, rather than conflict. "We are into questions of speed. In my judgment [Chinese officials] are going too slowly....many of them don't get it."

Wall Street wrap for 1 October 2010

The US Security & Exchange Commission is close to filing civil fraud charges against Satyam Computers, in connection with its $1 billion accounting scheme

New York: After logging the best September in 71 years, markets started off October on a high note. Moving the markets included a report out on manufacturing, which showed a decline in August to 54.4 from 56.3 in July. Although a figure above 50 indicates expansion, the report also showed new orders for manufactured goods slowed significantly in August, and production also fell, indicating the recovery in manufacturing could be slowing. Separately, personal income and spending also rose in August, slightly more than economists expected.

In corporate news, several automakers reported sales increased significantly from a year ago but slumped for the month.

Take a look on this video:

http://videos.livemint.com/video/4568694-wall-street-wrap-for-01-october-2010?src=vodpod

The US Security & Exchange Commission is close to filing civil fraud charges against Satyam Computers, in connection with its $1 billion accounting scheme.
And HP named an outsider, who has held high positions in companies like SAP, as its new president and CEO. Shares fell 3%.
In world markets, manufacturing in China picked up, rising to 53.8 in September, from 51.7 in August. A reading above 50 means growth in the sector. China is expected to clock a 10.5% growth rate in 2010, versus 4.5% growth for the global economy in 2010. Asian markets ended mostly higher on the news. Hong Kong’s Hang Seng fell slightly. European indices ended mixed.
Oil for November delivery soared 2%, rising $1.61 a barrel to $81.58, while gold for December delivery climbed to another all-time high, up $8.20 to $1,317.80 an ounce.
The yield on the 10-year bond rose to 2.55% from 2.52% on Thursday.

Source: livemint.com
@Vaishali Jain

Now They Tell Us: Wall Street Doesn’t Fear Dodd-Frank, Basel Reforms

Despite the financial industry’s bellyaching about financial reform, fully half of executives expect the new regulations to have little impact on how they do business, according to a new study (click on chart at right to expand):

Researchers at an IBMthink tank, the Institute of Business Value, interviewed 54 top financial industry executives around the world and a full half said the new regulations would prompt little or no change in how the industry functions, while another 7 percent saw only “moderate” change in the offing. The remaining 43 percent agreed there would be “significant change.”

Financial firms even see an opportunity to make money from the changes. The study’s lead author, Suzanne Duncan, notes that some banks are exploring forming businesses to advise other firms on how to adapt to the evolving regulatory regime:

“[T]he conversation at these companies is that we can actually make a lot of money on this — it is happening, lets figure out how we can monetize it,” Duncan said.

In other words, the banking industry isn’t nearly as frightened as it purports to be about the potential impact of Dodd-Frank and of the stiffer capital standards emerging from Basel. At least based on this one survey, I don’t detect much fear that these reforms will chill financial innovation, decrease lending and undermine competitiveness, the standard arguments against regulation.

That doesn’t mean bankers don’t have concerns. Asked “what keeps you up at night,” respondents pointed to 1) Uncertainty about their firms’ value proposition; 2) Keeping up with data volumes; and 3) Finding ways around regulation. Other significant worries among financial execs centered on shifting to less lucrative businesses, retaining talent, increased economic volatility and ethics, according to IBM.

Item three on that list should come as no surprise. The history of financial services in this country is of companies trying to skirt the rules — occasionally for the better, usually for the worse. Other findings from the survey, which will be released in full next year:

• 81 percent of financial execs expect industry financial returns to fall a little or stay the same; 13 percent forecast a “significant” decrease; and 6 percent expect them to rise
• Major factors inhibiting financial industry change are “greed,” distorted economic incentives and lack of accountability
• Major drivers of change in financial services are increased regulation, dwindling customer trust, and client risk-aversion
• Financial firms cite their top strategic initiatives as making better use of data, creating multi-asset class platforms and eliminating “siloes” of information, such as between wealth and asset management

Related:

• Knife’s Edge: Why Financial Reform Could Die In November
• Basel III Won’t Save Banks, Taxpayers from Basel IV
• Financial Reform: Four Reasons Stricter Financial Regulation Isn’t Enough
• States Need Bigger Role in Halting Predatory Lending
• Bank Mergers and the “Curse of Bigness”
• Ex-Citigroup Chief John Reed Admits Deregulating Banks Was a Mistake

by       : Alain Sherter

Source : www.bnet.com