Wednesday, January 13, 2010

Snotty questions for "Too Big To Fail" banksters

The New York Times invited financial experts to submit questions that should be asked in the Financial Crisis Inquiry Commission hearings, beginning today. Officials from Goldman Sachs, JP Morgan Chase, Morgan Stanley, and Bank of America will be grilled.

James Grant suggests the following question: Bankers are dealers in money. The Federal Reserve is a creator of money — since the crisis began in August 2007, it has conjured up $1.1 trillion. Given the ease with which these dollars are materialized on a computer screen, how can they be worth anything?

Financial blogger and former IMF official Simon Johnson asks some of the meanest questions:

1. Describe in detail the three worst investments your bank made in 2007 and 2008 — that is, those transactions on which you lost the most money. How much did the bank lose in each case?

2. What was the total compensation of each manager or executive supervising those three transactions — including yourself — in 2007 and 2008?

3. Are those executives still with your bank?

Yes, I think these are questions we would like to know the answers to. More here.

Friday, January 1, 2010

How bad is unemployment, really?

A little investigative work by Zero Hedge, using Treasury Department figures, reveals some interesting anomalies.

In December, the amount of Unemployment Insurance payments disbursed by the US Treasury totalled $14.7 billion, a 24% increase over the $11.8 billion paid out in November. (For purposes of comparison, the government paid out $14 billion to federal employees last month, meaning that Uncle Sam is paying more in unemployment benefits than it is paying in salaries to its own workers.)

But what is really odd -- click the link above to look at the charts and graphs -- is that the amount of unemployment benefits paid by the Treasury used to very closely track with the official number of "total insured unemployed." Yet in the last year there has been a huge divergence. Unemployment payments outgoing are far above what one would expect from the number of unemployed officiall reported. This indicates that the total number of unemployed may be as much as 32% higher than officially reported.

Look at the charts. Draw your own conclusion. It looks like the goverment has found a way to hide a large part of the unemployed from the official statistics. What they can't hide is the amount of money flowing out to those insured unemployed former workers.

[UPDATE: Zero Hedge has subsequently raised the possibility that instead of an increase in unemployment that is not reflected in the Bureau of Labor statistics, perhaps the Treasury is now helping out state governments burdened with their own share of unemployment outlays. The truth is, they don't know. Further investigation will be necessary to reveal the jump in the Treasury's outlays for unemployment insurance, and why it is so out-of-whack with the BLS official unemployment numbers.]