It’s time once again for the politicians and other attention-seekers from the lunatic fringe to return to the spotlight. Politicians who intend on running for the Presidency in 2016 are already preparing to launch their primary campaigns. Because 2014 is a “midterm” year, the only voters who can be expected to vote in November will be the political zealots. Despite the fact that Congressional terms last only two years, the cretins in Congress are confident that the only people who will bother to vote in their gerrymandered districts will be the dependable hard core.
Unfortunately, we cannot assume that Americans will wise-up and respond to the recent plea from Dallas Federal Reserve President Richard Fisher, by going to their local polling places to address the problem.
Meanwhile, those intent on becoming the Republican Party’s 2016 Presidential nominee are busy currying favor with the two men who dictate the party’s agenda: Roger Ailes and Rush Limbaugh. As a result, there is no such thing as too extreme in crafting a campaign message to voters. With the midterms’ bringing increased attention to the lunatic fringe voters, politicians who are posturing themselves as Presidential candidates are busy preaching to the crazy choir. This effort usually involves making personal appearances with the most polarizing, controversial individuals who haunt the airwaves with outrageous statements. The logical consequence of this practice brought the Republicans their “Ted Nugent Moment” this past week.
In their desperation to find a “rock star” who could serve as a dependable spokesperson for Republican political candidates, somebody came up with the idea of appointing Ted Nugent to that role. Nugent has “jammed” with fellow quasi-musician, Mike Huckabee and he has taken the stage with countless politicians from the far-right.
During the past week, a good deal of attention was focused on some choice remarks made by Nugent during a January 18 interview with guns.com. During the course of the interview, Nugent infamously said:
I have obviously failed to galvanize and prod, if not shame enough Americans to be ever-vigilant not to let a Chicago communist-raised, communist-educated, communist-nurtured subhuman mongrel like the Acorn community organizer – gangster Barack Hussein Obama – to weasel his way into the top office of authority in the United States of America.
Given the fact that Nugent himself bears a rather close physical resemblance to our simian ancestors, there was more than a little irony here.
After a number of news outlets seized upon Nugent’s remarks, those Republicans who know that support from the lunatic fringe is no guaranteed ticket to the White House were quick to put some distance between themselves and Nugent.
Nevertheless, as I pointed out on October 16, because Roger Ailes has made it the mission of Fox News to promote the wingnuts of the GOP, is the party becoming marginalized? Will we soon hear from Nugent apologists who believe that there are elections to be won by speaking out in favor of some patriot who was forced to apologize for speaking his mind?
On the other hand, will the Republican Party’s “Ted Nugent Moment” be the first in a series of such events which motivate would-be Republican Presidential candidates to distance themselves from extermists?
Meanwhile, the Democrats appear resigned to accepting Hillary Clinton as their 2016 Presidential nominee. We can assume that Hillary’s sycophants in the news media will attempt to portray anyone who dares to oppose her as some sort of “extremist”. The cult of people I referred to in 2008 as the Hillarologists – those who believe that Hillary Clinton offers them the only hope of seeing a woman in the White House during their lifetimes – will be ready for a fight.
Will another women rise up to challenge Hillary for the Democratic nomination? I hope so.
On May 11, Bruce Krasting expressed outrage about Federal Reserve Chairman Ben Bernanke’s use of The Wall Street Journal’s Jon Hilsenrath as his “point man” for leaking out the latest news from the Fed. Hilsenrath’s Friday afternoon report (after the markets closed) that the Federal Reserve is working on a strategy to taper back its quantitative easing program was carefully orchestrated to avoid roiling the stock market.
We recently saw a demonstration of how important the quantitative easing program has been to investors. On Thursday, May 9, both the Dow Jones Industrial Average and the S&P 500 fell from intraday record highs during the last 90 minutes of the session. Philadelphia Federal Reserve president Charles Plosser announced that he would join forces with Kansas City FedHead Esther George to advocate attenuation of the quantitative easing program at the June 18 FOMC meeting. The news definitely spooked the stock market.
Friday’s report from Hilsenrath/Bernanke gave investors a chance to process what was being disclosed and to get comfortable with the idea that quantitative easing will not go on forever. The leak was obviously timed to provide a decent interval before the stock market opened again. There is no definite plan in place to end the quantitative easing program by any particular date, nor is there a planned date for the inception of the wind-down being discussed. Here is a bit of how Hilsenrath explained what is taking place:
Officials are focusing on clarifying the strategy so markets don’t overreact about their next moves. For example, officials want to avoid creating expectations that their retreat will be a steady, uniform process like their approach from 2003 to 2006, when they raised short-term interest rates in a series of quarter-percentage-point increments over 17 straight policy meetings.
Hilsenrath’s quote of Dallas FedHead Richard Fisher’s explanation of the plan was beautiful: “I don’t want to go from wild turkey to cold turkey“.
Bruce Krasting was the first to begin spreading panic and misinformation about Hilsenrath’s report. Here’s an example:
The Fed’s new plan is to taper off QE over the balance of the year.
Of course, the foregoing statement is completely untrue. Hilsenrath never said that. Does Bruce Krasting have his own source on the Federal Reserve Board, who is leaking secret information to him?
Perhaps we might see some of Bernanke’s foes initiate a Congressional inquiry into the “Tapergate scandal”. What did Jon Hilsenrath know and when did he know it?
For a long time, Hilsenrath’s role as Ben Bernanke’s de facto press secretary has been a subject of cynical commentary. Many have joked that Hilsenrath will replace Bernanke when he retires. At Bernanke’s press conferences which follow the FOMC meetings, I keep expecting to hear the moderator announce that the next question will come from Jon Hilsenrath of The Wall Street Journal . . . Hilsenrath would then take the microphone and say:
You know, Ben – that last question just reminded me of another matter which would be really important to these people . . .
Meanwhile, back in the real world, stock market investors are being confronted with the challenge of taking baby steps toward the idea of life without quantitative easing. At the same time – as Jon Hilsenrath explained – the Fed is attempting to reach a decision on when to begin such a tapering effort.
The Dimon Dog has been eating crow for the past few days, following a very public humiliation. The outspoken critic of the Dodd-Frank Wall Street Reform and Consumer Protection Act found himself explaining a $2 billion loss sustained by his firm, JPMorgan Chase, as a result of involvement in the very type of activity the Act’s “Volcker Rule” was intended to prevent. Financial industry lobbyists have been busy, frustrating regulatory attempts to implement Dodd-Frank’s provisions which call for stricter regulation of securities trading and transactions involving derivatives. Appropriately enough, it was an irresponsible derivatives trading strategy which put Jamie Dimon on the hot seat. The widespread criticism resulting from this episode was best described by Lizzie O’Leary (@lizzieohreally) with a single-word tweet: Dimonfreude.
The incident in question involved a risky bet made by a London-based trader named Bruno Iksil – nicknamed “The London Whale” – who works in JP Morgan’s Chief Investment Office, or CIO. An easy-to-understand explanation of this trade was provided by Heidi Moore, who emphasized that Iksil’s risky position was no secret before it went south:
Everyone knew. Thousands of people. Iksil’s bets have been well known ever since Bloomberg’s Stephanie Ruhle broke the news in early April. A trader at rival bank, Bank of America Merrill Lynch wrote to clients back then, saying that Iksil’s huge bet was attracting attention and hedge funds believed him to be too optimistic and were betting against him, waiting for Iksil to crash. The Wall Street Journal reported that the Merrill Lynch trader wrote, “Fast money has smelt blood.”
When the media, analysts and other traders raised concerns on JP Morgan’s earnings conference call last month, JP Morgan CEO Jamie Dimon dismissed their worries as “a tempest in a teapot.”
Dimon’s smug attitude about the trade (prior to its demise) was consistent with the hubris he exhibited while maligning Dodd-Frank, thus explaining why so many commentators took delight in Dimon’s embarrassment. On May 11, Kevin Roose of DealBook offered a preliminary round-up of the criticism resulting from this episode:
In a research note, a RBC analyst, Gerard Cassidy, called the incident a “hit to credibility” at the bank, while the Huffington Post’s Mark Gongloff said, “Funny thing: Some of the constraints of the very Dodd-Frank financial reform act Dimon hates could have prevented it.” Slate’s Matthew Yglesias pointed back to statements Mr. Dimon made in opposition to the Volcker Rule and other proposed regulations, and quipped, “Indeed, if only JPMorgan were allowed to run a thinner capital buffer and riskier trades. Then we’d all feel safe.”
Janet Tavakoli pointed out that this event is simply the most recent chapter in Dimon’s history of allowing the firm to follow risky trading strategies:
At issue is corporate governance at JPMorgan and the ability of its CEO, Jamie Dimon, to manage its risk. It’s reasonable to ask whether any CEO can manage the risks of a bank this size, but the questions surrounding Jamie Dimon’s management are more targeted than that. The problem Jamie Dimon has is that JPMorgan lost control in multiple areas. Each time a new problem becomes public, it is revealed that management controls weren’t adequate in the first place.
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Jamie Dimon’s problem as Chairman and CEO–his dual role raises further questions about JPMorgan’s corporate governance—is that just two years ago derivatives trades were out of control in his commodities division. JPMorgan’s short coal position was over sized relative to the global coal market. JPMorgan put this position on while the U.S. is at war. It was not a customer trade; the purpose was to make money for JPMorgan. Although coal isn’t a strategic commodity, one should question why the bank was so reckless.
After trading hours on Thursday of this week, Jamie Dimon held a conference call about $2 billion in mark-to-market losses in credit derivatives (so far) generated by the Chief Investment Office, the bank’s “investment” book. He admitted:
“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed, and poorly monitored.”
At The New York Times, Gretchen Morgenson focused on the karmic significance of Dimon’s making such an admission after having belittled Paul Volcker and Dallas FedHead Richard Fisher at a party in Dallas last month:
During the party, Mr. Dimon took questions from the crowd, according to an attendee who spoke on condition of anonymity for fear of alienating the bank. One guest asked about the problem of too-big-to-fail banks and the arguments made by Mr. Volcker and Mr. Fisher.
Mr. Dimon responded that he had just two words to describe them: “infantile” and “nonfactual.” He went on to lambaste Mr. Fisher further, according to the attendee. Some in the room were taken aback by the comments.
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The hypocrisy is that our nation’s big financial institutions, protected by implied taxpayer guarantees, oppose regulation on the grounds that it would increase their costs and reduce their profit. Such rules are unfair, they contend. But in discussing fairness, they never talk about how fair it is to require taxpayers to bail out reckless institutions when their trades imperil them. That’s a question for another day.
AND the fact that large institutions arguing against transparency in derivatives trading won’t acknowledge that such rules could also save them from themselves is quite the paradox.
Dimon’s rant at the Dallas party was triggered by a fantastic document released by the Federal Reserve Bank of Dallas on March 21: its 2011 Annual Report, featuring an essay entitled, “Choosing the Road to Prosperity – Why We Must End Too Big to Fail – Now”. The essay was written by Harvey Rosenblum, the head of the Dallas Fed’s Research Department and the former president of the National Association for Business Economics. Rosenblum’s essay provided an historical analysis of the events leading up to the 2008 financial crisis and the regulatory efforts which resulted from that catastrophe – particularly the Dodd-Frank Act.
And now – only a few years after the banking crisis that forced American taxpayers to bail out the Street, caused home values to plunge by more than 30 percent, pushed millions of homeowners underwater, threatened or diminished the savings of millions more, and sent the entire American economy hurtling into the worst downturn since the Great Depression – J.P. Morgan Chase recapitulates the whole debacle with the same kind of errors, sloppiness, bad judgment, and poorly-executed and excessively risky trades that caused the crisis in the first place.
In light of all this, Jamie Dimon’s promise that J.P. Morgan will “fix it and move on” is not reassuring.
The losses here had been mounting for at least six weeks, according to Morgan. Where was the new transparency that’s supposed to allow regulators to catch these things before they get out of hand?
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But let’s also stop hoping Wall Street will mend itself. What just happened at J.P. Morgan – along with its leader’s cavalier dismissal followed by lame reassurance – reveals how fragile and opaque the banking system continues to be, why Glass-Steagall must be resurrected, and why the Dallas Fed’s recent recommendation that Wall Street’s giant banks be broken up should be heeded.
At Salon, Andrew Leonard focused on the embarrassment this episode could bring to Mitt Romney:
TheCenterLane.com offers opinion, news and commentary on politics, the economy, finance and other random events that either find their way into the news or are ignored by the news reporting business. As the name suggests, our focus will be on what seems to be happening in The Center Lane of American politics and what the view from the Center reveals about the events in the left and right lanes. Your Host, John T. Burke, Jr., earned his Bachelor of Arts degree from Boston College with a double major in Speech Communications and Philosophy. He earned his law degree (Juris Doctor) from the Illinois Institute of Technology / Chicago-Kent College of Law.
intend on running for the Presidency in 2016 are already preparing to launch their primary campaigns. Because 2014 is a “midterm” year, the only voters who can be expected to vote in November will be the political zealots. Despite the fact that Congressional terms last only two years, the cretins in Congress are confident that the only people who will bother to vote in their gerrymandered districts will be the dependable hard core.