Weekly Immigration Wire: White House Meeting a First Step to Reform

by Nezua, TMC MediaWire Blogger

After postponing twice, President Obama finally met with a bipartisan group of lawmakers on June 25 to discuss moving immigration reform legislation forward. The meeting was applauded by activists and advocates for immigration reform, as the issue seemed to have stalled, and the acrimonious tone of the debate has proven deadly.

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It's Official, the "Stress Test" Was Just Theater

We are getting reports now of what Timothy "Eddie Haskell" Geithner's stress test has determined, and it's clearly not reality.

Bank, Needs Capitalization, Amount
Bank of America     Yes    $34 B
Wells Fargo    Yes    $15B
Citigroup    Yes    $5B
Morgan Stanley    Yes    $1-2B
Goldman    No   
MetLife    No

JP Morgan Chase    No

Bank of NY Mellon    No

American Express    No

Capital One    No

BB&T    No

This is a damn joke.

You have one "oh my God" number, for Bank of America, and it's about 50% of their market cap, but Citi, which is clearly in much worse shape is somehow better capitalized by a factor of 6.

This is simply not true, even after BoA's disastrous acquisition of Merrill Lynch and Countrywide.

Also note this joint statement from the Treasury Department, Federal Reserve, FDIC, and Office of the Comptroller of the Currency, which, to my untutored eye, appears to say that they are going to go with their cockamamie scheme to claim that capital is increased by swapping preferred for common stock.

It's an accounting trick, and what's more, it's one where the taxpayer has just taken a second haircut.

They are making great theater by pretending to talk tough and giving a month for the banks that need to to present a plan to raise capital, and 6 months to have this plan in action, but it's all a lie, since the plan may very well be, "suck on this, taxpaying rubes".

I disagree with former IMF chief economist Simon Johnson's analysis, which is that they are selectively leaking to create confusion in order to keep people from looking at whether the test was too hard on the banks.

I think that his analysis is incomplete.  The "stress test" begins and ends with public relations.  It's a sham, and it has always been a sham, intended to show that the government was serious about reigning in the big banks, without actually engaging in the necessary actions, like <span style="font-weight: bold;">seizure of insolvent institutions</span> that would actually be required for it to work.

Cross posted from 40 Years in the Desert.

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A Little Gem in the FDIC Job Postings

Peterr at Firedoglake was looking at job postings on the FDIC website, and saw something that was probably not intended for the general public, specifically some job postings by the FDIC that may indicate that there will be some very big fish on a path to be caught in the FDIC's net.

First, there is a posting for a Deputy Chief Accountant (announcement number 2009-EM-0096) who is responsible for, "identifying emerging accounting, auditing, and taxation issues, particularly those raising systemic concerns, for which the timely development of policy guidance for FDIC -supervised and -insured institutions and the Division's examination staff is critical" (emphasis mine).

"Raising systemic concerns?" Sound like anyone we know?  As Peterr notes, it looks like part of their duties will be teasing out responsibilities amongst other financial regulators, which may involve putting a finger in the eye of Timothy "Too Big to Allow to Fail" Geithner's Treasury Department.

Additionally, there are two openings for two Senior Large Financial Institution Specialist (announcement number 2009-HQD-B1089) located in New York, NY and Charlotte, NC, which are where the HQ's of Citi and BoA are located, though obviously there are many financial institutions with headquarters in the New York City area, as well as a Chief, Examination Support and Risk Analysis Section (announcement number 2009-HQDEU-1113), who seems to be in charge of "Formulates, refines, and updates supervisory expectations relative to Basel II implementation efforts," which means risk evaluation of banks.

Additionally, we have Treasury announcing a delay in the reporting the results of the stress tests, "until after the first-quarter earnings season."

People do not delay good news.

I wouldn't expect anything this Friday on one of the big 20 financial institutions, but it could get interesting in a few weeks.

Cross posted from 40 Years in the Desert.

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Patience My Ass.....

You know, for some time, it seems that any time someone complains that Obama's economic team is too close to the banks, the answer is that we are seeing some sort of chess game, and it's just that the White House is 3 steps ahead of everyone else.

I don't buy it.  I think that Larry Summers just jumped the shark into accepting bribes, as this Wall Street Journal analysis of his 2008 disclosure forms shows.

Among other things, he got $5.2 million from hedge fund D.E. Shaw for his thoroughly part time (he was a full time professor at Harvard) position, and he got $2.7 million for speaking, with his fees ranging from, "$10,000 for a Yale University speech to $135,000 for an appearance paid for by Goldman Sachs & Co."

So we know that the market rate for his speeches is about $10K, but Wall Street investment firms were paying more than 10 times that in a year in which the Democrats were favored, and he was likely to be on the team of either Democratic nominee.

A Tiny Revolution went through his  disclosure form (PDF) and came up with the following, with  Merrill-Lynch being a week after the election, and Charles River Ventures being the day before:

    • Goldman Sachs: $202,500 (two speeches)
    • Citigroup: $99,000 (two speeches)
    • JP Morgan: $67,500
    • Merrill Lynch: $45,000 (donated to charity)
    • Investec Bank: $157,500
    • State Street Corporation: $112,500
    • Pricewaterhouse Coopers LLC: $67,500
    • Lehman Brothers: $67,500
    • American Express: $67,500
    • Siguler Guff & Company (private equity): $67,500
    • TA Associates (private equity): $67,500
    • Charles River Ventures (Venture Capital): $67,500
    • Skagen Funds (Scandinavian mutual fund): $180,000 (three speeches)
    • Centro de Liderazgo y Gestion (the Center for Leadership and Management, in Colombia): $112,500
    • Association of Mexican Bankers: $90,000
    • Securities Industry & Financial Markets Association: $33,750
    • Pension Real Estate Association: $67,500
    • Hudson Institute: $10,000
It should be noted that the Hudson institute is a very right wing "think" tank which has consistently been dogged by accusations of racism and Islamophobia, and it's at the same "market rate" as Yale.

I can't see this as anything but bribe taking, with the various financial institutions paying forward to get favorable treatment.

What sort of treatment were the looking for?  Well, there was probably not a specific request, a quid pro quo, if you will, but something like the White House coming up with phony entities to act as intermediaries in order to skirt Congressional limitations on executive compensation:

The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials.

Administration officials have concluded that this approach is vital for persuading firms to participate in programs funded by the $700 billion financial rescue package.

You know, the threat of being frog marched out of their workplace in handcuffs would work better.
The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.

Although some experts are questioning the legality of this strategy, the officials said it gives them latitude to determine whether firms should be subject to the congressional restrictions, which would require recipients to turn over ownership stakes to the government, as well as curb executive pay.

The administration has decided that the conditions should not apply in at least three of the five initiatives funded by the rescue package.


Enough is enough.

This is more than being too close to the financial sector, this is corruption, and it pervades Obama's economic team.

Larry Summers, and possibly Timothy Geithner, need to spend more time with their families.

Cross posted from 40 Years in the Desert.

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Mr. Obama, Tear Down That Wall!

In his meeting with bank presidents, he said, "My administration is the only thing between you and the pitchforks."

True, and perhaps you would get better results if these people felt fear, rather than smugness.

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