Good question.

* First, it was the administration's ongoing
insistence (via Geithner) that this is a
liquidity crisis, not a credit crisis--the Wall
Street view.

* Then it was the failure to do anything more
than express "anger" at the AIG bonuses.

* Then it was Geithner's plan to, yet again,
bail out banks at taxpayer expense.

* Then it was the administration's decision to
force GM into bankruptcy, fire its CEO, and hit
its bondholders--setting up a bizarre
double-standard with Wall Street.

* Then it was a "stress test" for banks in which
the baseline scenario has already been eclipsed
by the deterioration of the economy--once again
slamming the administration's credibility

* Then it was the revelation that Larry Summers
made $5+ million from Wall Street last year,
which added to the perception that he, Geithner,
Rahm Emmanuel, etc. are reluctant to bite the
hands that feed them.

* Now it is the leaked announcement that "all
banks have passed the stress test!", combined
with a refusal to share the results of that
stress test on a bank-by-bank basis.

Gee...they all passed. Ho convenient. That means they don't need
any more of OUR money and can START GIVING IT BACK.

The more disturbing explanation, meanwhile, is
that the Obama administration really is in Wall
Street's hip pocket.  Jonathan Weil at Bloomberg
thinks there's a chance this is the case.  And
Obama certainly isn't doing anything to
discourage this.

By maintaining a double-standard and refusing to
address the elephant in the room, Obama is
risking his credibility and his reputation for
telling it like it is.  This behavior, both
toward the banks and toward Americans, is a
disturbing echo of the Bush administration.
It's time for Obama to address it head on.

Damn straight. With his stance on the wire taps and secrecy,
one has to wonder.

C

This is truly amazing.

[S]enator Ted Stevens was the poor sap who made
the unpleasant discovery that if Congress didn't
like the Fed handing trillions of dollars to
banks without any oversight, Congress could
apparently go fuck itself - or so said the
law. When Stevens asked the GAO about what
authority Congress has to monitor the Fed, he
got back a letter citing an obscure statute that
nobody had ever heard of before: the Accounting
and Auditing Act of 1950. The relevant section,
31 USC 714(b), dictated that congressional
audits of the Federal Reserve may not include
"deliberations, decisions and actions on
monetary policy matters." The exemption, as Foss
notes, "basically includes everything."
According to the law, in other words, the Fed
simply cannot be audited by Congress. Or by
anyone else, for that matter....

In January, when Rep. Alan Grayson of Florida
asked Federal Reserve vice chairman Donald Kohn
where all the money went - only $1.2
trillion had vanished by then - Kohn gave
Grayson a classic eye roll ....

Grayson pressed on, demanding to know on what
terms the Fed was lending the money. Presumably
it was buying assets and making loans, but no
one knew how it was pricing those assets -
in other words, no one knew what kind of deal it
was striking on behalf of taxpayers. So when
Grayson asked if the purchased assets were
"marked to market" - a methodology that
assigns a concrete value to assets, based on the
market rate on the day they are traded -
Kohn answered, mysteriously, "The ones that have
market values are marked to market." The
implication was that the Fed was purchasing
derivatives like credit swaps or other
instruments that were basically impossible to
value objectively - paying real money for
God knows what.

"Well, how much of them don't have market
values?" asked Grayson. "How much of them are
worthless?"

"None are worthless," Kohn snapped.

"Then why don't you mark them to market?"
Grayson demanded.

"Well," Kohn sighed, "we are marking the ones to
market that have market values."

An oldie but a goodie, I will confess. But the absolute power
the FED has ..... is not to be believed. I wonder what the
founding fathers would think of this.
"I sincerely believe... that banking establishments
are more dangerous than standing armies, and that the
principle of spending money to be paid by posterity
under the name of funding is but swindling futurity
on a large scale." --Thomas Jefferson to John Taylor,
1816. ME 15:23

Not good, that's for sure.

C

Well if you believe it is, then I have a bridge and some prime Florida real estate
you maybe real interested in as well.


Update:

Well....maybe not.


C

Paul Krugman gives some perspective on his current blog
with a link to a paper on VOX Eu. Pretty alarming stuff
with graphs like this one.


Figure 1. World Industrial Output, Now vs Then

And this one.


Figure 2. World Stock Markets, Now vs Then

Pretty interesting comparison, wouldn't you say ?

C