Friday, April 22, 2016

Takeaways from the IMF/World Bank Spring Meetings

Each spring "the International Monetary Fund (IMF) and the World Bank Group..bring together central bankers, ministers of finance and development, private sector executives, and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness." We have attended this event for the past six years.
Prior to the event, the IMF issues a Global Spring Meeting Economic Forecast, this year predicting the world's economy will grow by 3.2% in 2016, down from the 3.8% forecast issued last year. This decline was due mainly to an increase in political ( as opposed to purely economic) risks. Keep in mind that these are the same factors (austerity as an inappropriate focus on reducing deficits in a time of recession, inability to rationally address the causes and solution to the crisis) that led to the shallow global recovery in the first place.
Our analysis indicates that the key risks to the global economic forecast are all potentially self inflicted political injuries: TrumpBrexit, and the Premature Celebration of the end of the financial crisis. These are described below. 
Premature Celebration 1: We questioned Clinton Treasury Secretary Larry Summers about the relevance and ability of economic policy to meet the needs of all of the world's people, especially people of African descent. We noted the inability of economic policy makers to forecast the financial crisis, cited damage done to the environment, and pointed out that key monetary policy tools are now ineffective, at least without extraordinary effort (QE1, QE2, QE Etc.). A video of the question is provided below.
His response (really a non response) cited Churchill, a man who, prior to his achievements in WWII, fought to preserve the continued exploitation of Black Africans by the British. 
I think that says it all.
We believe Mr. Summers is angling for rehabilitation as Fed Chair in the Hillary Clinton Administration. Given his track record, this would be another self inflicted political injury. 
Trump. During the taping of an episode of the BBC news show Hard Talk, IMF Managing Director Christine Lagarde forcefully addressed the Trump issue, saying that she thought Mr. Trump a risk to global economic stability.  
Brexit. On June 23rd, Britain will decide whether or not to exit the European Union. The IMF made their opinion clear: a vote to exit will add significant volatility and risk to global markets. We think a vote to exit the EU would be suicidal for both Britain and the EU, and therefore forecast that they will not leave.
Premature celebration 2: In a session on cyber risks to financial institutions, SARAH BLOOM RASKIN, Deputy Secretary of the U.S. Department of the Treasury, (pictured in white) the Treasury point person on cyberthreats and financial institutions, seemed woefully ill informed concerning upcoming changes to the administration of the internet's root servers. She indicated this was a "new issue" for her. The ROOT SERVERS. A NEW ISSUE. This is truly problematic. Below is the video of the question posed.

Other Observations
Five years ago, most of the catering support staff were white working class people and white middle class people damaged by the recession and desperate for any employment opportunity. This year, most of the catering support staff were Black working class people, mainly from the Washington, DC area. (Thank you, Madam Director...) This tells us that the economic recovery is finally reaching the difficult to reach populations, those hardest hit by the crisis to begin with.
This means that economic growth, and the employment it generates, will continue to be strong domestically until the end of the Obama Administration.
Given his performance, Mr. Obama would be forgiven for "dropping the mike" before leaving.

Thursday, April 14, 2016

The Real Superpredators

The Real Superpredators

SachsRecently, the Department of Justice announced that Goldman Sachs “agreed to Pay More than $5 Billion in Connection with Its Sale of Residential Mortgage Backed Securities.” Close scrutiny reveals that Goldman will actually pay, for a number of reasons, $0.

Goldman’s Track Record:

We note that:

On April 28, 2003, Goldman Sachs was found to have aided and abetted efforts to defraud investors.

On September 4, 2003, Goldman Sachs admitted that it had misused material, nonpublic information that the US Treasury would suspend issuance of the 30-year bond.

On April 28, 2003, Goldman Sachs was found to have "issued research reports that were not based on principles of fair dealing and good faith .. contained exaggerated or unwarranted claims.. and/or contained opinions for which there were no reasonable bases ". .

On January 25, 2005, "the Securities and Exchange Commission announced settled civil injunctive actions against Goldman, Sachs & Co. relating to the firms' allocations of stock to institutional customers in initial public offerings (IPOs) underwritten by the firms during 1999 and 2000 ".

On July 15, 2010, “the SEC announced that Goldman paid $550 million to settle SEC charges that Goldman misled investors in a subprime mortgage product just as the U.S. housing market was starting to collapse.”

Our Track Record:
On July 3, 1993, we wrote to US Securities and Exchange Commissioner (SEC) Mary Schapiro to notify the Commission about the "Nigerian letter scam."

We designed the first mortgage security backed by home mortgage loans to low and moderate income persons and originated by minority-owned institutions. (See: Security Backed Exclusively by Minority Loans, The American Banker Newspaper. Friday, December 2, 1994.)
We opposed the elimination of Glass-Steagall, a law that separated commercial from investment banks. The removal of this law contributed to the financial crisis, as we warned it would on September 23, 1998.

On June 15, 2000,we testified before the Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises (GSE’s) of the U.S. House of Representatives and suggested that GSEs Fannie Mae and Freddie Mac be subject to a Social Audit. Had the GSE’s been subject to this audit, certain flaws in their operation, including ethical shortcomings, would have been revealed earlier, in a better market in which to make corrections.

In 2001, we participated in the first wide scale home mortgage loan modification project. The Minneapolis-based effort helped 50 families victimized by predatory lending practices.

On December 22, 2003, we warned US regulators that statistical models he created using the proprietary Fully Adjusted Return® Methodology signaled the probability of system-wide economic and market failure.

In 2005, we served as an expert witness in a case that sought to hold Credit Suisse First Boston, Fairbanks/SPS, Moody’s and Standard and Poor’s, US National Bank Association, and other parties legally responsible for supporting and facilitating fraudulent subprime lending market activities. Had this single case been successful, we believe the credit crisis would have been less severe.

On December 22, 2005, we issued a strongly worded warning that system-wide economic and market failure was a growing possibility in a meeting at the SEC with Ms. Elaine M. Hartmann of the Division of Market Regulation.

On February 6, 2006, we again warned regulators that statistical models created using the proprietary Fully Adjusted Return® Methodology confirmed that system-wide economic and market failure was a growing possibility. We stated that: Without meaningful reform there is a small, but significant and growing, risk that our (market) system will simply cease functioning.”

On December 9, 2013, we filed a "Friend of the Court" brief in the United States District Court, Central District of California in an action that the U.S. Department of Justice brought against McGraw-Hill Companies, Inc., and Standard & Poor’s Financial Services LLC.

Why This Deal Matters

This deal has ramifications well beyond the parties to the case. It protects the monetary interest of a narrow set of mainly white persons, short-circuits the justice process, fails to protect the interests of both DOJ and the general public, does little to protect victims of other financial crimes, and damages the country's long-term economic prospects.

Without an admission of guilt, transaction costs — in the broad economic sense of the costs of participating in a market — will increase in financial markets.

This deal continues a pattern of ineffective financial institution regulation and enforcement that is contrary to the public interest. It furthers the legal double standard that Black Lives Matters protesters highlighted when they castigated former President Bill Clinton for Hillary Clinton’s 1996 comments that some black youth were "superpredators."

The financial crisis shows the real superpredators were firms with names like Goldman Sachs, Bear Stearns, Lehman Brothers and Wells Fargo. The fact that many of these superpredators also damaged and destroyed themselves (as superpredators have a tendency to do) is beside the point. Responsible enforcement would have prevented them from also damaging the global economy.

Given their record, Goldman’s license to do business should have been suspended (at the very least.) Clearly, they have compromised both New York Attorney General Eric Schneiderman and the DOJ.

This deserves federal judicial review.

http://www.tnj.com/news/business/real-superpredators

Friday, April 1, 2016

DC Ward 7 Economic and Social Data Analysis by Creative Investment Research, Inc

At the request of community groups in DC's Ward 7, William Michael Cunningham and Creative Investment Research are conducting a preliminary analysis of the Ward's social and economic condition. An informal straw pool is also underway. These efforts will provide information on the real time economic and social landscape of Ward 7.

This data may also be used as a preface for a Ward 7 City Council Candidate Forum and Straw Poll. The Ward 7 Candidates Forum and Straw Poll will be h
eld on Saturday, April 9, 2016 at H.D. Woodson Senior High School at 9am. The moderator for the Forum will be Harold T. Fisher of WHUR-FM Radio The Daily Drum along with two Youth Mayors from the Marion S. Barry, Jr.'s Youth Leadership Institute.

Our preliminary economic and social data analysis reveals the quality of life in Ward 7 has declined. Further analysis reveals that this is due to the protracted lack of economic opportunity and an increase in certain negative social issues directly related to the lack of economic opportunity. Although, the population has remained predominantly African American, it is noted that the lack of economic opportunity is caused by major disparities in key areas and not by the mere fact that the ward is heavily African American.

The informal straw pool can be found at: https://www.surveymonkey.com/r/Ward7CommunityPoll.