Greece comes out with its new proposal. Here it is. Ready? It's called, "Let's cave again."

Seriously, dear readers, I am getting as tired of writing this as you are of reading it, but I feel that repetition is important.

ATHENS (Reuters) - Greece promised to implement pension and tax reforms as early as next week as the first step to securing a three-year rescue loan to cover debt obligations, according to a letter requesting the funding from European partners on Wednesday. Read more.

And what are pension and tax "reforms?"

They're fucking cuts (pensions) and increases (taxes) on workers and the poor, of course.

I keep repeating it because I want you to reach a level of incredulousness and disgust that brings you deep, deep, deep, deep, in touch with your own, true, raw, inner feelings. (Either that or, I'm really just a sadist.)

That's how the fire of revolt and revolution will be galvanized within you and within all of us. Mwhahahahaha!!!! (rubbing my hands together devilishly.)

No, really, this is bullshit.

Russia raids infrastructure fund to save the banks

I have never seen such disastrous, ill-conceived policy. (Well, maybe with the exception of the Eurozone austerity, but we know that is solely to benefit the plutocrats.)

Russia is taking money away from infrastructure investments and giving it to the banks to "save" them.

First of all the banks don't need to be saved. They can still function in the role of clearing and settlement as long as the central bank makes sure their liabilities are met. No problem there--the libabilities are in rubles.

Did anyone over there ever have a look at Japan? Those banks have been zombies for decades thanks to loads of really bad investments, but no problem...people deposit money, checks get cashed, cleared...all the usual banking stuff happens without a hitch. They even make loans; the ones that are solvent at least.

Russia's in dire need of infrastructure investment. In fact that would be a great way to immunize the entire Russian economy against Western sanctions: boost infrastructure investment, massively.

But instead their new finance minister (excuse me, I meant to say, finance idiot) is imposing austerity as a way to "fix" the economy. Russia apparently ran out of rubles(?) and the ones they got left they're giving to the banks? Why this is happening I am not sure? I can only chalk it up to idiocy at the top levels of leadership.

I was bullish on Russia. I even bought some Russian ETF's recently. But now I think it's a dumb move. So much stupidity going on. So much. I really feel bad for the Russian people. They're good people. They deserve better.

Randy Wray on the Crisis, the Bail-out, China, and the Job Guarantee

Here is a list of 3 recent activities, two of which have videos for your viewing pleasure.

Economonitor — Great Leap Forward
Wray on the Crisis, the Bail-out, China, and the Job Guarantee
L. Randall Wray | Professor of Economics, University of Missouri at Kansas City

Now We've Heard Everything - Some Think That The Fed Needs A Bailout

   (Commentary posted by Roger Erickson.)



OMG! Yes, Maude, it's true. This raises the most dire spectre of all!!! The USA itself could run out of fiat! If that were to happen, who would be left to bail us out? Who and what would they have to defraud next, to make it look real? The US Constitution? Please, let's not take the idiocy that far.

As stimulus tab rises for Fed, worries grow it may require a bailout

Just when you thought the level of discussion could not sink further.

LA Times: "The Fed's bond-buying binge could put the central bank's finances at risk if interest rates were to rise sharply, critics warn."

Seriously? In a prominent US newspaper? With a straight face?

You couldn't make this stuff up! What's next? Bail needs an out? In case systemic fraud were to rise sharply? Coupled with an increase in ignorance about fiat currency operations? It could happen, you know.

So who are the geniuses espousing this view?

James D. Hamilton, an economics professor at UC San Diego."It's really pretty cut-and-dried as far as the arithmetic goes: If you buy bonds and interest rates go up, you're going to take a capital loss on those bonds. The more they buy, the bigger their balance sheet, the bigger the loss they're going to face."

Sounds like the organ responsible for generating his logic DID dry up! No intellectual capital left.

Rep. Mick Mulvaney, R-SC. "The Fed stands to lose a lot of money, and by a lot of money, I mean hundreds of billions of dollars. It is not hyperbole to suggest the next big bailout could be of the Federal Reserve."

Ooh! He means it. There's a lot of fiat involved in denominating Public Initiative. Somebody get his train of thought a track to run on. It's chugging, but obviously derailed.

Et tu, Ben Bernanke? "The bottom line is that for any reasonable interest rate path, this is going to end up being a profitable policy for the taxpayer" says spineless, pandering Ben, as he sinks further into the political quicksand.

Sounds like Ben Bernanke is the one bailing out! Seems he pines for his cushy job at Princeton, where he can just go back to writing his little papers, not responsible for even pretending to counter the Erble Logic that is leading his nation astray. Ben prefers to sit in a comfortable deck chair and play his violin, as the ship goes down? With a stiff drink? Anyone noticed if he's been drinking more lately? Maybe he's planning to move to Switzerland too, or the Cayman Islands.

Marvin Goodfriend, an economics professor at Carnegie Mellon University's Tepper School of Business. [Finally! Surely we can expect a bit more from people grounded in business, not just nominal economics?]

"In the short term, it's a money-maker. The borrowing cost is cheap right now. Those borrowing costs are going to rise."

Ok, guess not. Another hope dashed. Move along folks, no situational awareness to see here.

The last word goes to the venerable LA Times. "When interest rates begin rising, the Fed will have to pay a higher rate on bank excess reserves. That will eat into the Fed's bottom line."

Let me get this straight. The Federal Reserve, accountant to the Treasury of the USA, denominator of a growing nation's purely nominal records of Public Initiative ... has a bottom line of nominal? Perhaps in nom only? Where'd this come from? How do we turn out citizens like this with no remaining connection to reality? Is our education system now completely nominal as well? Real situational awareness is considered purely nominal?

The article goes on to quote the least authority of recent times, Peter Schiff. I won't bother dipping into his meandering path, as his skiff sails further beyond the bounds of reason. Maybe he'll drop off his imagined horizon someday.

Too bad the US electorate doesn't set a bottom line in situational awareness. We could use a threshold defining a minimal, survivable level for an informed electorate right about now. Our economists are advising us to tighten the nominal noose we've placed around our own economy's real neck. Even if this is just some eco-erotic game for economists, please stop now, before it's too late for everyone?

Since assisted suicide is illegal, surely citizens could plausibly arrest all orthodox economists, for promoting and abetting economist_assisted_national_suicide?

AFP — Massive $238 billion financial bailout 5 years ago ‘avoided catastrophe,’ but only $3 billion has been paid back: Treasury

The US Treasury said Wednesday the government’s massive response to the economic crisis five years ago paid off, avoiding a catastrophic breakdown of the financial system.
In a report marking the anniversary of the bankruptcy of investment bank Lehman Brothers — which snowballed into the worst crisis since the 1930s — the Treasury defended deploying hundreds of billions of taxpayer dollars to save other banks, major financial institutions and auto companies.

“Without the government’s forceful response, that damage would have been far worse, and the ultimate cost to repair the damage would have been far higher,” the report summarized.

While the rescue effort required piling up government debt, it was necessary, said Treasury officials who briefed reporters.
“We prevented a collapse of the financial system,” one said on condition of anonymity.

The Raw Story
Massive $238 billion financial bailout 5 years ago ‘avoided catastrophe,’ but only $3 billion has been paid back: Treasury
Agence Presse-France

Deborah Orr — Neoliberalism has spawned a financial elite who hold governments to ransom

Neoliberal ideology insists that states are too big and cumbersome, too centralised and faceless, to be efficient and responsive. I agree. The problem is that the ruthless sentimentalists of neoliberalism like to tell themselves – and anyone else who will listen – that removing the dead hand of state control frees the individual citizen to be entrepreneurial and productive. Instead, it places the financially powerful beyond any state, in an international elite that makes its own rules, and holds governments to ransom. That's what the financial crisis was all about.

The Guardian (UK)
Neoliberalism has spawned a financial elite who hold governments to ransom
Deborah Orr
(h/t Yves Smith at Naked Capitalism)

Matt Taibbi — Secret and Lies of the Bailout

The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come

Rolling Stone
Secret and Lies of the Bailout
Matt Taibbi

Weekend reading, if you are interested in experiencing some outrage.

The JPMorgan Trade: Time for a Special Counsel

HOLDER MUST APPOINT SPECIAL COUNSEL TO INVESTIGATE POLITICALLY CONNECTED DIMON, JPMORGAN

Better Markets is a non-profit started by Mike Masters, who has frequently testified before Congress on commodities regulation.

Dennis Kelleher is Pres/CEO of Better Markets.  Here's an intro to the letter they sent to Congress.

Better Markets sent a letter Monday to Attorney General Eric Holder, calling for
the appointment of a special counsel in connection with the multibillion-dollar
trading loss at JPMorgan Chase & Co. What's at stake is very important, and goes
to the heart of whether Americans still have faith that the judicial system can
hold Wall Street accountable, especially after failing to prosecute any major figures
for the 2008 financial crisis.

A probe by the Justice Department would present conflicts of interest, as well as
the overall appearance of a conflict of interest. The most glaring example was this
weekend when President Obama pre-judged the ongoing investigations by calling the
$2 billion to $5 billion derivatives trading loss just "a big mistake" in his radio
address.

This appears much more than a big mistake. In fact, the reported trade is the same
type that resulted in a $182 billion taxpayer bailout to AIG. Moreover, JPMorgan
and its CEO Jamie Dimon on April 13 apparently gave false information on the trade to the public, shareholders, regulators, and the media. And "big mistakes" don't
typically trigger simultaneous probes by the FBI, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.

Wray — Will the Central Bank Bail-Outs Ever End?

To be sure, I do not share the worry of the BIS and many other commentators that the central bank expansions will cause inflation. My worry is this: the “too big to fail” (or as my colleague Bill Black calls them “systemically dangerous”) institutions have learned that no matter what they do, they will be saved and their top management will never be punished.

With the “deal-making” and “bail-out” approaches of the Fed and Treasury, it is unlikely that financial institutions have learned anything from the crisis—except that risky behavior will lead to a bail-out. In the Saving and Loan crisis of the 1980s, many institutions were shut down and resolved, and more than a thousand officers in top management served jail time. In the current crisis, no top officer has been prosecuted, much less jailed. Banks have been slapped on the wrists with some fines—usually without being forced to admit wrong-doing.

Critics like Walker Todd have long argued that continued expansion of government’s “safety net” to protect “too big to fail” institutions not only runs afoul of established legal tradition, but also produces perverse incentives and competitive advantages. The largest institutions enjoy “subsidized” interest rates—their uninsured liabilities have de facto protection because of the way the government (Fed, FDIC, OCC, and Treasury) props them up, eliminating risk of default on their liabilities (usually only stockholders lose). The “deal-making” approach described last week extended the principle of lender of last resort activities to entirely novel areas—protecting creditors of even shadow banks and, as discussed, favoring bond holders while forcing stockholders and securities holders (and defrauded homeowners) to take losses.  As William Black argues, these SDIs are mostly run as “control frauds” to enrich top management. As long as they remain in business they destroy economic value—not just the capital value of the firm, but the financial and real wealth of the economy as a whole. Total financial losses that can be attributed to the GFC already exceed $10 trillion and will eventually sum to much more. And of course that does not include the “real” economic losses—nearly 10 million jobs in the US alone.

Read it at Economonitor | Great Leap Forward
Will the Central Bank Bail-Outs Ever End?
by L. Randall Wray

Wray — $30 TRILLION TO PROMOTE CRONY CAPITALISM

Read it at Economonitor | Great Leap Forward
$30 TRILLION TO PROMOTE CRONY CAPITALISM: The Fed’s Bail-Out of Wall Street
by L. Randall Wray

Randy continue to follow the money trail wrt to cumulative liquidity provision by the Fed to the financial sector (read TBTFs), while also granting "forbearance" regarding solvency and pursuing an "extend and pretend" policy to buy time.

Dr. Housing Bubble — Get ready for the next stage of the bailouts

The Federal Reserve recently came out with an unprecedented analysis directed to the Committee on Financial Services regarding various methods to improving the housing market.  The paper is striking because it magnifies how little was learned from this banking and housing debacle.  One of the big recommendations centers on creating a “REO to rental” program by facilitating bulk sales to large investors.  Ironically the Federal Reserve by bailing out select banks has allowed home values to remain inflated thus causing this backup in inventory to emerge in the first place.  Setting that obvious point aside, let us examine the merits of an REO to rental program.

Read it at Dr. Housing Bubble
REO-to-rentals another Fed subsidy for big investors and select banks. Federal Reserve looking to engineer yet another bailout for key banking allies. Fed acknowledges 12,000,000 homes with negative equity.
by Dr. Housing Bubble

Steve Randy Waldman on bank bailouts

Speaking of wealth redistribution (up), here is a good compliment to Randy Wray and J. Andrew Felkerson's post on the Fed bailouts.

I find it really depressing that I have to write this. But it seems I have to write it.

Substantially all of the TARP funds advanced to banks have been paid back, with interest and sometimes even with a profit from sales of warrants. Most of the (much larger) extraordinary liquidity facilities advanced by the Fed have also been wound down without credit losses. So there really was no bailout, right? The banks took loans and paid them back.

Bullshit.

Read the rest at Interfluidity

Yes, Virginia. The banks really were bailed out

by Steve Randy Waldman

See also

TARP To Cost The U.S. Nearly Double The Initial Estimates: CBO

at The Huffington Post

The government's bailout of banks may cost U.S. taxpayers nearly two times more than originally estimated, according to the Congressional Budget Office.

The Troubled Asset Released Program, better known as TARP, will cost the federal government $34 billion, the CBO reported on its director's blog. That's $15 billion higher than the agency's previous estimate in March. The increase in the estimate is mostly due to a drop in the market value of the government's investments in American International Group and General Motors.

More from Wray on the Fed

 In case you missed any of this:

Read Randy's initial response at Economonitor, Great Leap Forward
Bernanke’s Obfuscation On The 29 Trillion Dollar Bailout: Response To Critics
by L. Randall Wray

In it Randy points to publication of Felkerson's working paper at Levy

$29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient

by James Felkerson

Randy also directs us to Barry Ritholtz's blog where BR gets Randy's point.

Bailout Total: $29.616 Trillion Dollars

by Barry Ritholtz at The Big Picture

BR: One comment about some of the folks pushing back against this massive total: Yes, there is a big difference between a $100 lent for 3 days, and a $100 lent overnight rolled over 2 more times. And there is an enormous difference when temporary overnight lending lasts for three years.

Overnight lending, by its definition, is temporary, short term, lower risk, modest impact. It exists to allow slightly over-extended banks to meet their reserve requirements. But rolling overnight lending repeatedly for 3 years is none of those things. And it makes a mockery of these same reserve requirements, and the protective purposes they are supposed to serve.

The amount of overnight lending reflects how broken our financial system really is. A well capitalized, moderately leverage system does not require this massive liquidity from a central bank — interbank lending should be sufficient. What the data reveals is that the financial sector remains dangerously under-capitalized and overleveraged.To pretend these were merely minor overnight loans, rolled over once or twice, is foolish, dangerous nonsense

Randy elaborates further at New Economic Perpectives
Bernanke’s 29 Trillion Dollar Fog of Deceit

by L. Rabble Wray (sic)

Randy concludes at Economonitor
The $29 Trillion Bail-Out: A resolution and conclusion

by L Randall Wray

Lively comments on all these posts, too. This has really stirred up a hornet's nest of controversy, and Randy is clearly enjoying it.

Dennis Kucinich states some OWS demands in 2008 — 2 min.

(h/t Ralph Musgrave)

A bit ouf of paradigm in places, but Rep. Kucinich asks fundamental questions of Congress that have not yet been answered, and Occupy Wall Street is now asking them in the streets.

Bank bailout continues under guise of European sovereign debt crisis

The multi-trillion dollar rescue of the banks that started in 2008 has not ended. It continues today under the guise of sovereign debt bailouts. And the cutbacks – to pensions, education, welfare, and public sector jobs – that wreak havoc on the lives of millions are all about funnelling public wealth to banks, pure and simple.

Read it all at Information Clearing House, Follow the Money: Behind the European Debt Crisis Lie More Bank Bailouts By David McNally

h/t Russell Huntley

Wolfgang Münchau: Greece getting rolled

Uh oh.

With this construction, the downside to your losses is limited. Depending on how some of the parameters of this agreement evolve, you will probably make a small loss, relative to the par value of your holding. If you are lucky, you might come out positive. You will probably not be lucky. But you will still be better off than if you sold today, or if Greece were to default. More important, the accounting rules allow you to pretend that you are not making any losses at all.

If this was any other field of human activity, you would go to jail if you accepted, let alone made such an indecent offer. [emphasis added]

This structure is still not quite so complex as some of the more elaborate CDOs we have encountered in the global financial crisis. If you take some time to work through the arrows and boxes, you see relatively quickly that this complex structure is not a private sector participation at all. Rather it is a private sector bail-out.

Münchau concludes: "We are not just 'kicking' any old 'can down the road' any more. This is a can of explosives."

See the article and video at The Financial Times: The Greek rollover pact is like a toxic CDO

(h/t Zero Hedge)

UPDATE: Yves Smith weighs in: Partying on the Edge of the Eurozone Volcano

Calculated Risk: Greece Update: S&P says proposed Greece Debt Plan is "likely a Default"

Euro Intelligence: Finns Draw Line In The Sand Of Greek Collateral Requirement

The Finnish parliament, whose powers reign above those of the government in eurozone crisis resolution management, decided to attach a collateral requirement to all future loans to Greece. The document said that a collateral requirement was not a Finnish wish, but a rare case of a Finnish line drawn in the sand. But given the political situation in Greece, a collateral requirement, as part of which creditors would end up with a sizeable chunk of Greek assets, is hardly acceptable. The snag is that under the rules of the EFSF, any decision to disburse new aid requires unanimous support of all member states. It is possible, technically, for Finland to opt out of the scheme, leaving others to foot its relatively small share of the programme. But official are extremely nervous about this, as this may send a dangerous political signal

Hans-Werner Sinn Reveals The ECB’s Secret Bailout Strategy

"Normally, a country’s current-account deficit (trade deficit minus transfers from other countries) is financed with foreign private capital. In a currency union, however, central-bank credit may play this role if private capital flows are insufficient. This is what happened in the eurozone when the interbank market first broke down in mid-2007.

"The PIGS’ own central banks started to lend newly printed money to their private banks, and this money was then used to finance the current account deficit. These funds went to the exporting countries, where they circulated as part of normal transactions. The exporting countries’ central banks responded by reducing their emissions of fresh money to be lent to the domestic economy. In effect, central-bank money lending in exporting countries, above all in Germany, was diverted to the PIGS."

Read the rest, The ECB’s Secret Bailout Strategy, if you are into EZ government finance and where it is headed.