US Politics: Furor Over Move to Aid Big Banks in Funding Bill - by Jonathan Weisman

In a 1,600-page, $1.1 trillion spending bill, a provision to roll back an obscure financial regulation became a focal point of uproar as Congress struggled to keep the government funded.

The “push-out” regulation — a measure to ensure that banks trade their riskiest financial instruments without the protection of the Federal Deposit Insurance Corporation or the Federal Reserve’s backup — was controversial from the start. Hundreds of billions of taxpayer dollars were shoveled into Wall Street banks after instruments like credit default swaps became worthless in the financial crisis, but even some crucial Democrats were unsure if Congress went too far when it voted to include push-out in the landmark Dodd-Frank law to regulate Wall Street in 2010.

But with regulators pressing to put rules into effect to carry out the law, a provision in the enormous spending bill to remove the push-out regulation drew bipartisan outrage. Representative Nancy Pelosi of California, the House minority leader, said she was “heartbroken” by the “taint” visited upon the spending bill, which would finance virtually all of the government through September.

The fierce Democratic opposition over the Dodd-Frank rollback provision created the odd spectacle of President Obama and Vice President Joseph R. Biden Jr. calling Democrats to muster support for the spending bill over the opposition of Ms. Pelosi.

“I love the American political system, I really do, but the ability to sneak in substantive policy measures and make it take it or leave it, I think it’s appalling,” said Simon Johnson of the Massachusetts Institute of Technology’s Sloan School of Management and a former chief economist at the International Monetary Fund, who is a prominent critic of the nation’s big banks.

The push-out legislation assumed outsize importance, not only because of what it does but because the biggest Wall Street companies have fought it since it was proposed.

The language in the spending bill was inserted by Representative Kevin Yoder, Republican of Kansas, but he did not write it. Citigroup did. In 2013, the bank and its allies were able to corral a bipartisan vote to pass the rollback out of the House Financial Services Committee. In an analysis by The New York Times of Citigroup 

The banking industry strongly supports the rollback measure. James C. Ballentine, an executive vice president at the American Bankers Association, said financial instruments like credit deferred swaps are used to mitigate risk, not bolster it. To force their trading into units unprotected by federal taxpayers would be onerous, he argues.

“The push-out requirement to move some swaps into separate affiliates makes one-stop shopping impossible for businesses ranging from family farms to energy companies that want to hedge against commodity price changes,” Mr. Ballentine said.

Read more: Furor Over Move to Aid Big Banks in Funding Bill - NYTimes.com

Global Economy: Wall Street braces for big losses as global stocks sink

Investor fear resumed Thursday as Wall Street looked set for another angst-ridden trading session triggered in part by worries that major economies around the world are seeing slowing growth.

The prospect of the Ebola outbreak in West Africa spiraling out of control is also weighing heavily.
U.S. stock futures wavered several hours ahead of the market open, before moving firmly lower Thursday. Dow, S&P 500 and Nasdaq indexes are all off about 0.8% or more.

Stock markets in Asia tumbled earlier after Wall Street saw wild swings Wednesday before ending down 173 points.

Tokyo's Nikkei 225 index dived 2.3% Thursday. Hong Kong's Hang Seng index dropped 1%. China's Shanghai Composite index fell 0.7%.

European shares fared no better despite initially displaying some signs of stabilization following huge losses in the prior session.

The German DAX was down 1.7%. Spain's IBEX 35 index tanked 2%. Italy's FTSE MIB closed in on a 3% loss.

The fate of Greece was a particular concern in Europe. Investors are worried the country might need more financial support as its government borrowing rates have risen sharply in recent days. Greece's benchmark 10-year-bond yield rose 1.13 percentage points Thursday to 8.86%.

Oil prices continued to come under pressure.

U.S. crude was down over 2% to $79.91 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 6 cents to close at $81.78 on Wednesday.

Read more: Wall Street braces for big losses as global stocks sink

Fake US Economy : A disaster in the making says Donald Trump and Robert Wiedemer

The United States could soon become a large-scale Spain or Greece, teetering on the edge of financial ruin.

That’s according to Donald Trump, who painted a very ugly picture of where this country is headed. Trump made the comments during a recent appearance on Fox News’ “On the Record with Greta Van Susteren.”

According to Trump, the United States is no longer a rich country. “When you’re not rich, you have to go out and borrow money. We’re borrowing from the Chinese and others. We’re up to $16 trillion in debt.”

He goes on to point out that the downgrade of U.S. debt is inevitable.

“We are going up to $16 trillion [in debt] very soon, and it’s going to be a lot higher than that before he gets finished. When you have [debt] in the $21-$22 trillion, you are talking about a downgrade no matter how you cut it.”

Ballooning debt and a credit downgrade aren’t Trump’s only worries for this country. He says that the official unemployment rate “isn’t a real number” and that the real figure is closer to 15 percent to 16 percent. He even mentioned that some believe the unemployment rate to be as high as 21 percent.

“Right now, frankly, the country isn’t doing well,” Trump added, “Recession may be a nice word.”

While 15 percent to 16 percent unemployment, a looming credit downgrade, and ballooning debt are a bleak outlook for the United States, they are hardly as alarming as the scenario laid out by another economist.

Without earning celebrity status or having his own television show, Robert Wiedemer did something else that grabbed headlines across the country: He accurately predicted the economic collapse that almost sank the United States.

In 2006, Wiedemer and a team of economists foresaw the coming collapse of the U.S. housing market, equity markets, private debt, and consumer spending, and published their findings in the book America’s Bubble Economy.

Where Trump sees ballooning debt and a credit downgrade, Wiedemer sees much more widespread economic destruction.

In a recent interview for his newest book Aftershock, Wiedemer says, “The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012.”

When the host questioned such wild claims, Wiedemer unapologetically displayed shocking charts backing up his allegations, and then ended his argument with, “You see, the medicine will become the poison.”

The interview has become a wake-up call for those unprepared (or unwilling) to acknowledge an ugly truth: The country’s financial “rescue” devised in Washington has failed miserably.

The blame lies squarely on those whose job it was to avoid the exact situation we find ourselves in, including former Federal Reserve Chairman Ben Bernanke and Chairman Alan Greenspan, tasked with preventing financial meltdowns and keeping the nation’s economy strong through monetary and credit policies.

At one point, Wiedemer even calls out a Bernanke saying that his “money from heaven will be the path to hell.”

The Bank for International Settlements (BIS), sometimes known as the central bankers’ bank, warned in its quarterly review that the present lack of volatility in global financial markets was not a sign of strength, but rather a herald of new dangers.

As BIS chief economist Claudio Borio told reporters in a briefing on the review: “It all looks rather familiar.

"The dance continues until the music eventually stops. And the longer the music plays and the louder it gets, the more deafening is the silence that follows,” when markets become illiquid precisely at the moment “when liquidity is needed most.”

Fortune Magazine writes:  "In early 2014, investment buzz over the great promise of social media, e-commerce, and biotechnology stocks had investors pouring money into both domestic and foreign social media and e-commerce stocks (e.g., Alibaba) and small biotechnology stocks (e.g., Intercept Technologies).

Like individuals, collective overconfidence is usually aggravated by mental accounting, as investors end up
chasing one class of assets (rather than diversifying) and end up buying when valuations are high.

That was the case in the high-tech bubble of the late 1990s. Investors who invested in the technology-heavy NASDAQ during the high-tech bubble of the late 1990s- early 2000s made big gains as the bubble expanded, but lost a great deal of money as the bubble burst in the early 2000s.

The fear of losing is another emotional button that is turned on by a string of losing bets. Overconfidence is succeeded by over-pessimism — negative WOM succeeds positive WOM, and the bubble busts.

The market correction that began in 1929, for instance, took the price of US stocks down by 86 percent. T
he October 1987 correction drove US equities down 20 percent over three days.Investors panicked over a collapse of the dollar and rising interest rates, which made stocks less appealing than alternative investments.

In 2007-08, major indices lost more than 50 percent of their value, as investors fled equity markets, fearing a collapse of the financial system. This means that emotional investors are rushing to buy at a time when valuations are high, blowing the bubble bigger faster; and rushing to sell at time when valuations are low, busting the bubble faster.

That may prove to be the case in 2014. Wall Street may finally be exposed what it really is: a "financial Casino" which has seen its best days.

 EU-Digest

Cyprus financial meltdown as lawmakers reject bank tax; bailout in disarray

The vote in the tiny legislature was a stunning setback for the 17-nation currency bloc, angering European partners and raising fears the crisis could spread; lawmakers in Greece, Portugal, Ireland, Spain and Italy have all accepted austerity measures over the last three years to secure European aid.

With hundreds of demonstrators outside the parliament chanting "They're drinking our blood", the ruling party abstained and 36 other lawmakers voted unanimously to reject the bill, bringing the Mediterranean island, one of the smallest European states, to the brink of financial meltdown.

Finance Minister Michael Sarris had already headed to Moscow, amid speculation Russia could offer assistance given the high level of Russian deposits in Cypriot banks. President Nicos Anastasiades, barely a month in office, spoke by phone with Russian President Vladimir Putin after

Read more: Cyprus lawmakers reject bank tax; bailout in disarray | Reuters