Christopher Whalen

Is Bank of America preparing for a Chapter 11?

October 19, 2011

Bank of America has managed to step into the kimchee several times over the past couple of months, an achievement that only warms the hearts of crisis communications professionals. First came the abortive settlement of $10 billion or so in put-back claims by some large investors. The State of New York and anyone else paying attention intervened. Settlement is now mostly muerto in political terms, although the big investors are still paying the big lawyers to soldier on in hope of forcing a settlement on all parties.  Only in New York are such things possible.

Obama’s jobs plan is nothing new

October 17, 2011

“And that’s why FDR brains-trusters Rexford Guy Tugwell and Raymond Moley acknowledged later that Hoover “really invented” all the devices of the New Deal. Frederick Lewis Allen might not have recognized that in 1940, but Joseph Nocera should. And if we don’t want to relive the Great Depression, as Nocera worries, then we’d better learn what didn’t work in 1929-33 any better than it worked in 1933-39.”

Are the low US home mortgage rates for real?

October 11, 2011

We hear on almost a weekly basis that mortgage interest rates in the US are at all-time lows. The annual percentage rates in mortgage advertisements seem near an historic nadir. The Fed has even begun to purchase long-dated mortgage backed securities (MBS) in an effort to push rates even lower and, hopefully, spur more refinancing activity.

Fair-value accounting, derivatives increase global debt deflation

October 7, 2011

One of the themes I developed in my 2010 book, “Inflated: How Money & Debt Built the American Dream,” is the idea that significant amounts of the reported GDP and employment of the post-WWII period and especially since the 1980s has been based upon debt and inflation. The debt-deflation crises today affecting both the US, EU and even China and other “emerging” nations seems to confirm this view.

Watching the failure of the “New Economics”

October 4, 2011

In his classic critique of John Maynard Keynes, “The Failure of the ‘New Economics’,” Henry Hazlitt notes in a passage entitled “Equilibrium of an Ice Cube”:

The cure for higher ATM fees is competition

September 30, 2011

Why are Bank of America and other large US banks increasing fees for the use of debit cards and other services?

Do banks really need more capital?

September 28, 2011

Global regulators are united in the belief that banks need more capital. The crisis of the past five years or so, regulators testify, requires more capital. Former FDIC Chairman Sheila Bair, upon hearing my heretical ideas on the US rejecting Basel III entirely, asked me whether I supported her and US regulators in seeking more capital in general.

For Social Security, it’s print as you go

September 23, 2011

“Americans are more and more aware that Social Security contributions are not “invested” to finance future benefits; instead, they are used to disguise the true amount of borrowing necessary to fund the Administration’s unprecedented spending spree. As the General Accounting Office stated last September: ‘The present situation, in which trust fund surpluses are combined with and partially offset a deficit in the general fund, means that the payroll tax is being used, not to make provision for future retirement benefits, but to pay for today’s general operations of government.’”

Time to end the Keynesian pretense about fiscal stimulus

September 19, 2011

“The U.S. can pay any debt because we can always print more money.”

–Alan Greenspan
Meet the Press

August 7, 2011

Last week, Nouriel Roubini released a paper, “A Radical Policy Response to the Rising Risks of a Depression and Financial Crisis.” He writes: “Data suggest that developed and emerging markets alike are heading for a massive slowdown in growth, with advanced economies already slumping to stall speed.” Roubini is right, but for the wrong reasons.

Geithner and the delicacy of Euro-Dollar diplomacy

September 16, 2011

The departure of US Treasury Secretary Timothy Geithner to Europe to rescue our allies from themselves marks a change in the economic relations among the NATO countries that bears scrutiny. In the past, the loosely-connected federation we call the European Union has managed to muddle along. But now we see overt funding subsidies for the EU via the Fed and the active involvement of Geithner in what ought to be a purely domestic fiscal discussion.