Basel, Switzerland. Keeping interest rates at near zero bails out banks, Wall Street and governments, but in the end kills savers, wrecks economies and ruins prospects for future generations. Many are hurt at the expense of a few. Even the Bank of International Settlements (BIS) agrees the rates that Ben Bernanke and his chums at the Fed are too low, and the same could be said about Jean-Claude Trichet and his gang at the European Central Bank (ECB). On June 28, 2010, the BIS, the central bank for the Fed and the ECB warned, “Keeping interest rates very low comes at a cost–a cost that is growing with time. Experience teaches us that prolonged periods of unusually low rates cloud assessments of financial risks, induce a search for yield and delay balance-sheet adjustments.” So the BIS says. A Minksy moment, a Weimar warning…so what is the skinny, Helicopter Ben?
Archive for June, 2010
Economic Warrior interviews Gerald Celente, founder and director of The Trends Research Institute. Gerald is a noted expert, visionary and keynote speaker known worldwide as one of the foremost authorities on forecasting, analyzing and tracking trends. Washington Times claimed that “Celente’s accurate forecasts include the 1987 stock market crash, the collapse of the Soviet Union in 1991, the 1997 Asian currency crash and the 2007 subprime mortgage scandal.” Celente has been a guest on The Oprah Winfrey Show, The Today Show, Good Morning America, CBS Morning News, The Glenn Beck Show, NBC Nightly News and now The Economic Warrior.
Topics Discussed; problems of the Federal Reserve, why this economic crisis is in many ways worse than the 1920s-1930s Great Depression, the military-industrial complex and its immense failures, the media being an accomplice in the financial meltdown, the insanity of investing in Wall Street products, how our nation has lost its way spiritually, mentally and physically, why quality always sells.
For more information about Gerald Celente and Trends Journal please visit www.trendsresearch.com
Kenneth Feinberg, who was President Obama’s czar to oversee executive compensation is gone. In America, a country with the attention span of a gnat, the BP Deepwater Horizon Oil Spill has now taken front and center attention of the media, and it appears that there will be no compensation reform, where executives and managers continue to loot corporate America. Now the focus is on the BP oil disaster, and so Feinberg, who oversaw the $6 Billion Victim Compensation Fund for the 9/11 World Trade Center Disaster, will now be the new chief of the Gulf of Mexico Oil Spill Compensation Fund. And so it goes…
“Free trade in banking is tantamount to free trade in swindling.” Thomas Tooke, nineteenth century English economist
“The issue which has swept down through the centuries and will have to be fought sooner or later is the people versus the banks…all power corrupts and absolute power corrupts absolutely.” Lord Acton, Historian, 1887
The historic finance deal to reform American finance–and the banking industry in particular, already appears to be a dismal failure. The issue folks, it’s that these mutant banks ARE STILL TOO BIG TO FAIL! Consider the following banks, the top five banks in the U.S. in terms of assets, in trillions according to the Federal Financial Institutions Examination Council.
Bank of America $2.34 trillion. The bank that now owns Countrywide Mortgage and bailed out Merrill Lynch, leading predatory credit card vendor when it acquired MBNA.
JP Morgan Chase $2.14 trillion. Darling of the media run by Jamie Dimon, who along with Sandy Weill created the foundation for Citigroup-the worse bank in the world. Yet, according to the General Accounting Office (GAO) report in 2008, JPMorgan Chase was the largest underwriter of leveraged buy-out private equity loans, between 2005-2007 it underwrote $95.3 billion or 272 leveraged buyout deals-15% of the entire deal volume.
Citigroup $2.00 trillion. Worse bank in the world award, the creation of Sandy Weill, Jamie Dimon et al. Brought predatory lending to new heights with the acquisition of The Associates. Too many problems to list.
Wells Fargo $1.12 trillion. Major warehouse lender, the submerged over $100 billion Alt-A loans it acquired from Wachovia-Golden West should scare the bejesus out of anyone.
Goldman Sachs $0.88 trillion. Robot casino capitalism.
Hold on to your seats. If there has been anything in regards to regulation, there has been none. Deepwater Horizon and the BP oil disaster shows there was not much regulation in the oil industry. The credit crisis and the Panic of 2008 shows us there was not much financial regulation, particularly on the big stuff. But to have the chief regulator of the financial service business be within the Federal Reserve System, a private corporation–owned by the nation’s commercial banks–which totally missed the financial crisis…woe is us…
Nell Minow is the editor of The Corporate Library, an independent research firm of Portland, Maine. She is an attorney, an expert on corporate governance , a “passionate capitalist” and one of the country’s leading experts on fiduciary obligations of executives and directors. Nell has worked at the Environmental Protection Agency, the Officer of Management and Budget, and the Department of Justice. She was also a principal of LENS, a $100 million investment firm that bought stock in underperforming companies and through shareholder activism, helped increase the company’s value.
Nell is perhaps the foremost expert on CEO compensation in the U.S., and what is wrong with it today. She has testified before The House Committee of Financial Services on these issues and has even had to coach government officials such as Secretary of the Treasury Timothy Geithner and Kenneth Feinberg on excessive executive pay. In 1965 the average CEO compensation was 24 times the average worker pay, by 2009, that multiple has gone to 275 to 1. What is more troubling is that banks and investment banks–the very entities which had to be bailed out by the taxpayer, extract 50% to 60% of their gross profits out in compensation. Being handsomely rewarded for failure. Mutual funds, according to the Investment Company Institute, have grown from a $35 billion dollar industry in 1965 to over $11 trillion by 2009.
Topics Covered; Extravagant CEO compensation, corporate governance, problems with mutual funds, and The Corporate Library
Tragically, as The Corporate Library report consistently demonstrates, mutual fund companies vote in favor of high CEO or management pay packages–making the industry more concerned about management pay packages versus shareholder returns. What further complicates matters is that target-date mutual funds, which are a basket of mutual funds, are a favored qualified default investment account (QDIA) for 401(k) plans as sanctioned by The Department of Labor in 2006-7. Not only are these target-date funds extremely complex, they simply have not performed. During the 2008 market meltdown, these funds lost as much as 40% of their value. Consumers, unfortunately are on their own, and now more than ever, look out for their own welfare.
For more information about Nell Minow and The Corporate Library, and mutual fund company pay practices, visit www.thecorporatelibrary.com.