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Beware of the Manager's Amendment

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Beware of the Manager's amendment! Today it was announced Senators Chris Dodd and Richard Shelby are putting a manager's amendment into the Financial Reform bill currently before Congress.

Manager's amendments are notorious. They are often massive, no one gets to read them before a vote. Literally they can gut the very bill being crafted and voted on for months in a matter of seconds.

According to the Huffington Post, a number one corporate lobbyists' priority is being considered for the manager's amendment.

Senator Dodd seems lukewarm at best on the question of state authority and has refused to rule out including a version of Carper in his manager's amendment

The Carper amendment would block states from enforcing consumer protection laws.

To introduce a massive bill, under the guise of a manger's amendment, at the last minute, which no one has read, is common. When the financial reform bill was passed out of committee, Chris Dodd introduced a manger's amendment then, at the last minute.

House Financial Services Committee Chair Barney Frank did the same thing.

Derivatives, derivatives, derivatives!

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Over and over again, we discover, upon some obscure audit or forensic accounting report being published, derivatives were the real culprit behind some bank/credit union/country failing.

Now we have Greece considering suing U.S. banks over credit default swaps on their sovereign debt and other derivatives.

Greece is considering taking legal action against U.S. investment banks that might have contributed to the country’s debt crisis, Prime Minister George Papandreou said.

“I wouldn’t rule out that this may be a recourse,” Papandreou said.

While this interview is making headlines buzz, to read the details of why Greece would consider suing U.S. banks click here and here

What a surprise, having a vehicle that pays out hansomely if a nation defaults on their debt might create some shady dealings. Bloomberg:

European Central Bank President Jean-Claude Trichet said May 6 that he was concerned about speculation in bond markets using credit default swaps. “By first buying the CDS and then trying to affect market sentiment by going short on the underlying bond, investors can make large profits,” he said.

Rethinking the Political Economy

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One of the most misused and abused terms in language today is "free market".
The definition of a free market is business governed by supply and demand, and not restrained by government regulation or subsidy.
This definition is often used in conjunction with environmental regulation and minimum wage laws, but almost never with trade between firms and corporations. Which is the problem, because without government protections this "free market" wouldn't exist.

Europe Does a TARP Redux of almost $1 trillion dollars

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Europe is putting up a $952 billion loan package.

European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases as they spearheaded a global drive to stop a sovereign-debt crisis that threatened to shatter confidence in the euro.

Jolted into action by last week’s slide in the currency and soaring bond yields in Portugal and Spain, the 16 euro nations agreed to offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators. The European Central Bank will counter “severe tensions” in “certain” markets by purchasing government and private debt.

So, instead of bailing out banks, this sounds similar to TARP except it is to bail out European countries.

Meanwhile, the Federal Reserve is opening up currency swaps to loan to foreign central banks. From their press release:

Press Release
Federal Reserve Press Release

Release Date: May 9, 2010
For release at 9:15 p.m. EDT

The Ouzo Effect Redux

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When the stock market plunged 1,000 point in half of an hour on Thursday, the immediate rumors were of a "fat finger" trader who punched in $16 billion instead of $16 million. It's a disturbing idea, that a single trader could cause such financial destruction, but its better than the alternative - that the stock market plunge happened while the markets were functioning the way they were supposed to.

Must Read Posts for May 8, 2010 - Greece Edition

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On The Economic Populist you might have noticed the left column. We try to list other sites and blogs who have exceptional insight and writing on what is happening in the U.S. economy.

Sometimes though, one cannot say it better but miss those who did. These posts are all related to the Greek Crisis.

Must Read Post #1

The New York Times has a fantastic graphic of the interdependence in Europe on Greek Debt with an accompanying article describing the EU dominoes.

 


Click on Image to Enlarge. Source: New York Times

 

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