MATT TAIBI: MITT ROMNEY FINALLY LIBERATED FROM TRUTH AND FACTS

...You know those Balsa wood airplanes – not the glider-types but the deluxe models, powered by rubber bands, with little propellers on the nose? I thought of those planes watching Mitt Romney debate Barack Obama the other night.

Romney's journey toward the presidency has been a marvel to behold. Dating back to his first political steps – his race against Ted Kennedy, followed by his assault on the Massachusetts governorship – Romney has been constantly twisting and contorting himself, exchanging position for position, trading pro-choice for anti-choice, flirting with pro-gay rhetoric before shifting swiftly the other way, pioneering state health care reform before bashing virtually the same plan designed on a national scale, claiming the center on everything from guns to global warming before careening right as a presidential candidate.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/finally-liberated-from-facts-mitt-romney-the-pure-bull-artist-takes-flight-20121019#ixzz29pvRKKwP

LIBOR RIGGING SCANDAL AFFECTED HUNDREDS OF MILLIONS OF MORTGAGE PAYMENTS IN EUROPE. BARCLAYS RELEASES EMAIL IMPLICATING UK GOVERNMENT.

The LIBOR manipulation story has exploded into a major scandal overseas. The CEO of Barclays, Bob Diamond, has resigned in disgrace; his was the first of what will undoubtedly be many major banks to walk the regulatory plank for fixing the interbank exchange rate. The Labor party is demanding a sweeping criminal investigation. Mervyn King, Governor of the Bank of England, responded the way a real public official should (i.e. not like Ben Bernanke), blasting the banks:

It is time to do something about the banking system…Many people in the banking industry are hardworking and feel badly let down by some of their colleagues and leaders. It goes to the culture and the structure of banks: the excessive compensation, the shoddy treatment of customers, the deceitful manipulation of a key interest rate, and today, news of yet another mis-selling scandal.

The furor is over revelations that Barclays, the Royal Bank of Scotland, and other banks were monkeying with at least $10 trillion in loans (The Wall Street Journal is calculating that that LIBOR affects $800 trillion worth of contracts).

The banks gamed LIBOR for two semi-overlapping reasons. As noted here last week, there were instances of Barclays traders badgering the LIBOR submitters to "push down" rates in order to fatten their immediate bottom lines, depending on what they were trading or holding that day. They also apparently rigged LIBOR downward in order to produce a general appearance of better health, essentially tweaking their credit scores a few ticks upward.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/why-is-nobody-freaking-out-about-the-libor-banking-scandal-20120703#ixzz1zgV7yVgb

Again: Libor, the London Interbank Exchange Rate, is the rate at which banks borrow from each other. A huge percentage of the world’s variable-rate investments are pegged to Libor. When Libor rates are high, it suggests that the banks’ confidence in each other is low, and high Libor rates are generally an indicator of shaky financial health among the banks. If the banks manipulated Libor, they did it to make themselves look healthier, but this had the consequence of affecting hundreds of trillions of dollars’ worth of financial products worldwide.

During the crash of 2008, governments understandably would have been concerned about high Libor rates – high rates and a lack of confidence in banks threatened economic stability – but the notion that governments would have encouraged banks to fake those rates would have been beyond unthinkable even a decade ago.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/libor-banking-scandal-deepens-barclays-releases-damning-email-implicates-british-government-20120704#ixzz1zgVs4hxy

MATT TAIBI: JOBS ACT POSES A THREAT FOR REVERSE MERGERS AND MORE "FACEBOOK STYLE" NIGHTMARISH IPOS FOR SMALL INVESTORS

(...) One story I did want to pass on while I was gone is a very interesting Wall Street Journal  piece entitled, "Meet the JOBS Act's Jobs-Free Companies." A few months ago, I wrote a few articles about the JOBS Act, which a number of friends of mine from congress and from the regulatory community insisted would pave the way for a return to the IPO fraud boom of the late nineties, if not for a return to the penny-stock fraud age.

Well, eight weeks after the passage of the law, we're finding some unexpected results. Among the more controversial provisions of the JOBS Act, remember, was a sort of blanket regulatory exemption for so-called "Emerging Growth Companies," which were loosely defined as public companies with less than $1 billion in annual revenues. Among other things, the new law allows such companies to avoid independent accounting requirements for the first five years of their existence.

According to the WSJ, what's happening now is that the JOBS Act is being used to facilitate what are known as "reverse mergers." Because it's traditionally been difficult for new companies to meet the regulatory requirements for going public, what's often happened is that young companies look for dormant or dead corporations that are already registered. They then merge with those "empty shell" companies, use their corporate structures, and thusly avoid the IPO process altogether. This process is called a "reverse merger."

Oftentimes those empty shell companies – also called "blank check" firms or "special purpose acquisition companies" – are dead for a reason. Otherwise honest new companies that merge with those firms often find themselves in bed with unexpected, and unexpectedly shady, partners. In other cases, the problem goes the other way: the government has had issues in recent years, for instance, with Chinese startups that use American empty shell firms to establish businesses here.

So why does this matter? Well, the JOBS Act was ostensibly designed to make it easier to launch actual IPOs, and theoretically should have made the darker, more problem-ridden reverse merger process less appealing. But what we're finding now is that companies are using the JOBS Act to designate those "blank check" firms as "emerging growth companies." From the WSJ piece:

The Act... also allows [emerging-growth companies] to make fewer financial disclosures, use a new, confidential  SEC review process for IPOs and lets their bankers communicate more freely with potential investors. The confidential reviews are designed to let companies sort out any differences with the SEC behind closed doors.

Many of the hundreds of companies that have claimed to be emerging-growth companies under the new law are small biotech, technology, retail and energy companies. But 17 explicitly described themselves as blank-check companies or trusts.

About 30 companies have submitted IPO filings to the SEC confidentially under the law, according to the agency's staff. And at least two of those submissions are for blank check companies, an advisor to those companies said.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/jobs-act-fallout-more-fraud-fewer-ipos-20120607#ixzz1xEeeQaog

MATT TAIBI: ENOOUGH IS ENOUGH WITH AUSTERITY

It didn’t take long to crank up the backlash against European voters. This is inevitable whenever a socialist wins a major election, but particularly now, when new French president François Hollande rode to victory shouting, "Austerity can no longer be inevitable!"

This sounds like the beginning of what will be a very heated debate over who has to pay for the excesses of the financial crisis. It was previously assumed that everybody but the actual financial services sector would have to pay, but voters in Europe now are refusing to go along, sparking a wave of eye-rolling editorials in the financial press. Even David Brooks got into the act today, penning a lugubriouseditorial about the errant political instincts of the populist masses here and abroad.

Markets all over the world freaked out over the prospect of having ignorant European voters meddling in the recovery process the geniuses of the high finance world had already painstakingly laid out for them. The model for economic progress in the financial bubble era, after all, is supposed to go something like this:

1. Let banks inflate massive asset bubbles with the aid of cheap or even free government cash, and tons of leverage;
2. Before it all explodes, carve out gigantic sums for bonuses and compensation for the companies that inflated those bubbles;
3. After it explodes, get the various governments to bail those companies out;
4. Pay for it all by slashing services to what’s left of the middle class.

This is the model we used in America. We had a monster asset bubble based on phony mortgages, which Wall Street was allowed to inflate to spectacular dimensions with minimal reserve capital, huge amounts of leverage, and tons of fraud for good measure. When that bubble exploded, we first rescued the banks who inflated the thing in the first place, and then our plan for paying for it mostly revolved around folks like Paul Ryan and Chris Christie, who made great political hay by trying to take an ax to "entitlements" like health care and retirement benefits.

They're replaying the same script in Europe, sort of. The causes of crises in places like Spain, Greece, Portugal and Italy vary somewhat and are less simple to define, but a common denominator in all of them is weak growth mixed with giant budget deficits.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/austerity-cant-be-a-one-way-street-20120508#ixzz1vKYAxlkv

Matt Taibi: Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling' Read more: http://www.rollingstone.com/politics/blogs/taibblog/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-20120515#ixzz1v7Rm0peo

It doesn’t happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public.

The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time – primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.

Last week, in response to an Overstock.com motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed.

I contacted Morgan Lewis, the firm that represents Goldman in this matter, earlier today, but they haven’t commented as of yet. I wonder if the poor lawyer who FUBARred this thing has already had his organs harvested; his panic is almost palpable in the air.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-20120515#ixzz1v7RuyhE0

MATT TAIBI ON PAUL KRUGMAN'S:"FEDERAL GOVERNMENT HAS TO STEP IN AND SPEND A LOT TO MOVE OUT OF RECESSION"...

Four years after the start of the Great Recession, nobody would mistake U.S. economy for a thrumming engine of growth, prosperity, and human flourishing. Sure, we're officially out of "recession." But the recovery is painfully slow and uneven, and 24 million Americans are still unemployed or underemployed. There's a lot of pain out there, and a lot of potential going to waste.

The worst part? It doesn't have to be this way. Or so says Paul Krugman. In a new book, End This Depression Now!, the Nobel-winning economist and New York Times columnist makes an urgent, even passionate case that our economic problems are, at root, fairly simple, and we have the knowledge and the tools to solve them. We've been here before, Krugman argues, during the Great Depression, and the actions that got us out of that crisis will get us out of this one, too. 

The basic issue, says Krugman, is a lack of demand. American consumers and businesses, aren't spending enough, and efforts to get them to open their wallets have gone nowhere. Krugman's solution: The federal government needs to step in and spend. A lot. On debt relief for struggling homeowners; on infrastructure projects; on aid to states and localities; on safety-net programs. Call it "stimulus" if you like. Call it Keynesian economics, after the great economic thinker (and Krugman idol) John Maynard Keynes, who first championed the idea that government has an essential role in saving the free market from its own excesses.

Read more: http://www.rollingstone.com/politics/blogs/national-affairs/paul-krugman-on-how-to-fix-the-economy-and-why-its-easier-than-you-think-20120502#ixzz1uCcTfzfB

MATT TAIBI: FREE 10 MILLION LOANS FOR EVERYBODY!

http://www.rollingstone.com/politics/blogs/taibblog/free-10-million-loans-for-all-and-other-wall-street-notes-20120419

Have been on deadline this week, but wanted to post a few interesting links:

• I hope everyone saw ex-Federal Deposit Insurance Corporation chief Sheila Bair’s editorial in the Washington Post, entitled, "Fix Income Inequality with $10 million Loans for Everyone!" The piece might have set a world record for public bitter sarcasm by a former top regulatory official.

In it, Bair points out that since we’ve been giving zero-interest loans to all of the big banks, why don’t we do the same thing for actual people, to solve the income inequality program? If the Fed handed out $10 million to every person, and then got each of those people to invest, say, in foreign debt, we could all be back on our feet in no time:

Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)

Every time I watch a Republican debate, and hear these supposedly anti-welfare crowds booing the idea of stiffer regulation of Wall Street, I wonder how many audience members know that Bair's plan is more or less exactly the revenue model for all of America’s biggest banks. You go to the Fed, get a buttload of free money, lend it out at interest (perversely enough, including loans right back to the U.S. government), then pocket the profit.

Considering that we now know that the Fed gave out something like $16 trillion in secret emergency loans to big banks on top of the bailouts we actually knew about, you might ask yourself: How are these guys in financial trouble? How can they not be making mountains of money, risk-free? But they are in financial trouble:

• We’re about to see yet another big blow to all of the usual suspects – Goldman, Citi, Bank of America, and especially Morgan Stanley, all of whom face potential downgrades by Moody’s in the near future.

We’ve known this was coming for some time, but the news this week is that the giant money-managing firm BlackRock is talking about moving its business elsewhere. Laurence Fink, BlackRock’s CEO, told the New York Times: "If Moody’s does indeed downgrade these institutions, we may have a need to move some business around to higher-rated institutions."

It’s one thing when Zero Hedge, William Black, myself, or some rogue Fed officers in Dallas decide to point fingers at the big banks. But when big money players stop trading with those firms, that’s when the death spirals begin.

Morgan Stanley in particular should be sweating. They’re apparently going to be downgraded three notches, where they’ll be joining Citi and Bank of America at a level just above junk. But no worries: Bank CFO Ruth Porat announced that a three-level downgrade was "manageable" and that only losers rely totally on agencies like Moody’s to judge creditworthiness. "A lot of clients are doing their own credit work," she said.

• Meanwhile, Bank of America reported its first-quarter results yesterday. Despite that massive ongoing support from the Fed, it earned just $653 million in the first quarter, but astonishingly the results were hailed by most of the financial media as good news. Its home-turf paper, the San Francisco Chronicle, crowed that BOA "Posts Higher Profits As Trading Results Rebound." Bloomberg, meanwhile,summed up results this way: "Bank of America Beats Analyst Estimates As Trading Jumps."

But the New York Times noted that BOA’s first-quarter profit of $653 million was down from $2 billion a year ago, and paled compared to results of more successful banks like Chase and Wells Fargo.

Zero Hedge, meanwhile, posted an amusing commentary on BOA’s results, pointing out that the bank quietly reclassified nearly two billion dollars’ worth of real estate loans. This is from BOA’s report:

During 1Q12, the bank regulatory agencies jointly issued interagency supervisory guidance on nonaccrual policies for junior-lien consumer real estate loans. In accordance with this new guidance, beginning in 1Q12, we classify junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. As a result of this change, we reclassified $1.85B of performing home equity loans to nonperforming.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/free-10-million-loans-for-all-and-other-wall-street-notes-20120419#ixzz1uCZfJdBg