Tell It To Al

Why is that the stock market soars every time the Federal Reserve Bank finds a clever new way to inject more free money into the banking system?

The Fed would not be doing this if a) it’s last plan worked and b) it wasn’t scared of the prospect of a global economic collapse. It is simply not good news when the Fed does something it has never done before, like last week when it rallied central banks around the world to provide cheaper dollars to European banks. Markets, however, rally, because there’s more free Fed money up for grabs.

None dare call it socialism. But if the Fed were providing interest-free loans to welfare moms instead of bankers, you can bet they would.

Click here to read my column in The Sunday Wall Street Journalism.

Another multibillion-dollar investment firm blows up. Hundreds of millions of dollars are missing. Regulators asleep at the wheel. Some overpaid CEO making reckless bets with other peoples money …

It sounds like the banking industry during the Bush era, but no, the game goes on under President Obama.

Click here to read my column on Jon Corzine’s MF Global debacle in The Sunday Wall Street Journal.

Why isn’t anyone asking the most obvious question?

How is  it that regulators failed to spot the risky bets that MF Global was making? Didn’t they learn anything after 2008?

Where was the Federal Reserve Bank of New York, MF Global’s primary regulator? asks Steve  Blitz,  senior economist at ITG Investment Research.

“How is it that the Fed (FRBNY) allowed a primary dealer to operate with 40 to 1 leverage in this day and age?,” he writes.

“The FRBNY has, and always has had, minimum capital requirements for primary dealers in order to effectively eliminate counterparty risk on settlement.

“In the past several years the Fed, Bernanke in particular, has made the point that the Fed is the regulator of choice to oversee macroprudential risk as far as the financial system is concerned. Yet here we are in 2011 and the Fed (FRBNY) and the SEC for that matter have failed yet again, it is as if we are back in 2007.

“Running the ship aground but taking credit for the rescue operation worked to enhance Bernanke’s reputation in 2009/2010, but it shouldn’t any longer.”

“This really is the story of MF Global’s demise – once again the Fed and the SEC were absent and failed in their self-appointed role as guardians shielding the economy from macroprudential risk created by the financial system. The markets and the economy are lucky MF Global was too small to matter, they could have been bigger. What other dealer desks are leveraged to this extent? Does the Fed or SEC know?”

Well, Mr. Blitz, if they don’t know, it’s probably because they don’t want to know. At least they’re good at asking one question, though:  Where did all the money go?

What could be worse than Angelo Mozilo and his reckless mortgage company Countrywide Financial Corp.?

Well, a recently filed federal lawsuit claims lending at Bank of America was so loose it used to shock even Mozilo.

Click here to read my column on MarketWatch.

How heavily should banks be regulated following the 2008 meltdown that almost sent the U.S. economy into another Great Depression?

How high can regulators raise their capital requirements without stifling lending?

These are not easy questions. JPMorgan Chase CEO Jamie Dimon got in Federal Reserve Chairman Ben Bernanke’s face about them last week. He’s one of the few who can get away with it.

Regulators, as history has shown, don’t always get it right. Dimon, however, risks a little blow-back, though, from people who see banks as basically taking bailouts when they fail and then telling their regulators what to do.

Click here to read my column in the Sunday Wall Street Journal.

Here’s another grim statistic converted into a glimmer of economic hope: 39 banks have failed so far this year, but that’s not so bad because last year at this time there were 64 failed banks.

This week’s Failure Friday claimed five more banks in Florida, Georgia and Michigan, a headline that hardly gets noticed among the hundreds of banks that have failed  since Lehaman Brothers failed in the fall of 2008. Click here to read more about those failed banks from the Associated Press. Geez, they held on this long. Why now when everything is so rosy and there’s so much free money from the Federal Reserve sloshing around.

The economic news is almost always leavened with hope. Bad numbers are portrayed as “better than expected” or improving by some large percentage over the following year, without always acknowledging that the following year was really, really, really bad and that the improvement just brings it to really, really bad.

But take heart. For what it’s worth bank failures are down 39% this year.

Automation is supposed to lead to new efficiencies – but not in the case of robo-signers.

Wells Fargo & Co., the nation’s largest mortgage lender, today disclosed that it could soon face regulatory sanctions for it’s shoddy foreclosures practices and that it faces class action litigation that could result in $1.2 billion in losses.

“It is likely that one or more of the government agencies will initiate some type of enforcement action against Wells Fargo, which may include civil money penalties,” the company said in a filing with the U.S. Securities and Exchange Commission.

Wells Fargo, among other banks, is accused of submitting fraudulent documents and affidavits to courts in foreclosure cases on homes. Robo-signers – people the rubber stamp thousands of documents at a time – are often cited as the biggest part of the problem. The other is that the paperwork on a lot of homes sold during the mortgage boom is simply missing.

So it looks like  Wells Fargo make a lot of bad home loans, and then got into a lot of bad foreclosures. Can’t it get anything right?

Mike Perry, former CEO of IndyMac, one of the biggest banks to bust in the 2008 meltdown, claims he didn’t see it coming.

But some of things he wrote to investors in newsletters suggest he not only saw the financial crisis coming, but welcomed it with open arms.

Click here to read column.

At least some bankers admit it:

“Over the course of the crisis, we, as an industry, caused a lot of damage. Never has it been clearer how poor business judgments we have made have affected Main Street.” – Brian Moynihan, CEO Bank of America.

I pulled Moynihan’s quote from the report released last week by the Financial Crisis Inquiry Commission. The report comes to no new conclusions. Nor will it result in any indictments or regulatory actions.

It basically blames everyone one, and when everyone is to blame, no one is to blame.

But at least it is chock-full of colorful quotes

Click here to read my column on the report.

Click here to read the full report from the Financial Crisis Inquiry Commission.

Almost every Friday, the Federal Deposit Insurance Corp. shuts down a bank or as many as seven banks. I call it “Failure Friday.” Last week, Failure Friday it Denver, which got me to talking about this very long trend on Denver’s NBC affiliate 9News with anchor Eric “UDAMAN” Kahnert.