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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Barack Obama is shameless to cite J.P. Morgan Chase & Co.’s (JPM) $3 billion trading loss as evidence banks need more regulation. More accurately, both may need more of a conscience, and the debacle raises serious questions about incompetence and corruption at the Federal Reserve, Treasury’s Comptroller of the Currency and the Obama White House.

Those two agencies already have 110 regulators imbedded in J.P. Morgan–not just visiting occasionally to check the books but domiciled inside. Yet, the Chief Investment Office, which is responsible for the London Whale’s ill-fated trades and manages nearly $400 billion, had not a single regulator inside its unit.

Senior J.P. Morgan executives convinced federal officials the CIO was merely hedging, managing cash and taking no significant risks, and naively, federal regulators believed them or were bullied into turning a blind eye.

It turns out, the unit was also taking equity positions in distressed firms, including the publisher of Ebony, which is headed by former Obama White House official Desiree Rogers.

Investing in distressed firms is work for private equity and hedge funds, not banks insured by the Federal Deposit Insurance Corp. It’s analogous to Grandma cashing in her CDs to play the slot in Las Vegas.

More importantly, those bets raise questions about whether senior bank officials lied to the regulators, and political influence in Morgan investments and the self interest of Obama White House Officials.

Senior Morgan officials can and do go over the heads of resident regulators to their bosses at the New York Fed and in Washington to deny on-site regulator’s requests for information and often succeed. In addition to revelations about Desiree Rogers, Barack and Michelle Obama have between $500 and $1 million invested in a J.P. Morgan “private client” account. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Derivatives are as ancient as civilization.

Greek farmers insured crops with investors prepared to speculate on the weather, just as life insurers hedge mortgage-backed securities by purchasing credit default swaps.

When written against real assets, whether farmers’ crops or homes, derivatives spread risk, lower capital costs and foster growth.

Like any other financial contract, derivatives can be abused, and the big-bonus culture on Wall Street has given us some high-profile shenanigans.

How derivatives are regulated or overregulated is central not just to curbing excess, but to ensuring that farmers can plant, home buyers can borrow and businesses can invest.

Continue reading…

By Michael S. Derby
    A Dow Jones Column

NEW YORK (Dow Jones)–Congressional testimony by Federal Reserve Chairman Ben Bernanke Wednesday flagged a potentially seismic shift in how the central bank communicates its objectives to financial markets.

He said odds are high that when policy makers decide to lift short-term interest rates, they will target something other than the fed funds rate, for decades the primary focus of central bank policy. “It is possible that the Federal Reserve could for a time use the interest rate paid on reserves, in combination with targets for reserve quantities, as a guide to its policy stance, while simultaneously monitoring a range of market rates,” he said in written testimony to the House Financial Services Committee, adding “no decision has been made on this issue.” Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Obama’s budget and deficit projections don’t reveal the sick state of U.S. finances, casting serious doubt on the safety of U.S. bonds.

Obama plans significant initiatives in health care, the environment, education, and jobs creation. Yet, the private sector, which must be taxed to finance government, is likely to grow slowly, resulting in too much federal borrowing.

To create jobs, businesses need customers and capital; without those they can’t sell what new employees make or buy equipment workers need.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Goldman Sachs, J.P. Morgan and other big Wall Street banks are awarding multi-million dollar bonuses to the same financiers who pushed the nation to the brink of financial ruin.

President Barack Obama voices outrage but fails to stem the abuse.

Wall Street leaders argue those bonuses were earned, much like jewel thieves refer to a big heist snatched from an impenetrable safe.

Wall Street has kept its mischief legal by salting the pockets of politicians running for Congress and president, and by making certain that key policy makers at the Treasury Department and the Federal Reserve are faithful Goldman Sachs alumni. Continue reading…