Is Washington, D.C. Going Totally Out of Control?

It seems apparent to those paying any attention to our government circus that a leadership vacuum is now complete.

Not only are the Democrats and Republicans fighting in a new escalation but both parties show open dysfunction

inside each of those parties. No one in the House or Senate can join hands and work for their constituents.

The Sunday talk shows on 12-14-14 report the GOP voter sweep cannot offer new hope

Voters are wondering if the entire congress should be fired. They continue to operate like a bunch of kids disobeying basic rules of both protocol and decorum. Name-calling is the order of the day as rule-making and presidential executive orders signal any law is up for grabs. America has experienced bouts of wild politics before but this one is beyond the pale. -Roger

A New Threat to Financial Reform–Bloomberg View 12-14-14   

“Passing a last-minute spending bill to avoid shutting down the U.S. government might be better than another self-inflicted budget crisis, but the deal on the table is nothing to be proud of. The measure approved by the House of Representatives last night and now before the Senate carries with it a set of so-called riders, which change policy in ways that haven’t been examined or discussed. One of them is especially troublesome. It weakens the Dodd-Frank financial reforms.

The rider in question removes the so-called swaps push-out rule, which was intended to reduce the risks posed by the  largest U.S. banks’ trading in derivatives. Without it, regulators will have to work harder in other areas to promote stability.

The rule addressed a dangerous incentive created by the pre-crash regulatory system. Various government backstops, such as deposit insurance and access to emergency loans from the Federal Reserve, have given the largest banks a great advantage in the derivatives market: Counterparties assume that the government will help them make good on their obligations. This implicit subsidy encouraged them to build huge, interconnected trading operations. Trouble at any one of them could trigger a broader panic and necessitate a rescue. Roger: Derivative writing by banks is worse than ever. Banks are running a win-win casino with the U.S. government designated as guarantor of last resort…which means taxpayers pay.

The size of the business is staggering. As of June, the top four banks, JPMorgan Chase, Citigroup, Goldman Sachs and Bank of America — had written derivative contracts on the equivalent of more than $200 trillion in stocks, bonds and other assets.

The rule told banks to move some of their derivatives out of federally insured, deposit-taking subsidiaries and to put them in other units instead. This was never going to make the financial system safe on its own. In the case of the biggest banks, all units, not just deposit-takers, enjoy government support, as the bailouts of 2008 and 2009 plainly demonstrated. In addition, pleading practical difficulties, banks had already succeeded in narrowing the scope of the requirement. Still, the swaps rule would have been helpful. Its demise gives regulators more work to do. They will probably need to take further steps to reduce the value of the government subsidy, by making banks less likely to need it.

How? First, by making sure that banks have ample capital, and plenty of cash on hand, to cope with sudden setbacks. Here, the regulators have made a start but need to do more. Second, by requiring derivatives trades to be routed transparently through new central counterparties and by setting up trading hubs that let investors transact directly with one another. This strengthening of the financial infrastructure is in train. Third, by monitoring the market for dangerous concentrations of risk, such as the credit-derivative positions that almost brought down insurance giant AIG and a number of large banks in 2008. Here, progress has been sluggish at best.

The killing of the swaps rule needn’t be a disaster. That’s what it would be, though, if it proved to be the first step in a broader rollback of financial reform, and if regulators failed to use other powers to better effect.”  – Bloomberg View, Bloomberg.net 12-12-14

International Credit Problems Were Planned and Executed for Deliberate Failure Just like ObamaCare.

Any good student of economics who can count and understands the “line of no return” in GDP numbers, knows these massive debts will not be repaid. The One World-One Currency elites have planned a giant wipeout smash and complete take-over of global economic credit and currency.The Euro Currency was supposed to be a Phase One beginning on the continent. How well is that working out? Europe is on the cusp of total economic failure as their bonds are so far off in the mist of nothingness, traders and investors are dumping them with both hands running to USA dollars and bonds instead. Yes, they will start their wars to stop mayhem, but when their bond markets, their personal piggy bank is empty, its game, set, match. How close is D-Day? It is hard to say, but trees don’t grow to the sky. Bond traders hold all the keys. -Roger