Simon Johnson's Economix blog on the New York Times' site has some notions to chew on regarding too-big-to-fail. His key idea: Banks' capital ratios need to be increased three or four fold from what's proposed (and being fought by bankers as too high). What would a 25-percent cap ratio requirement do to "the system?" ... [MORE]

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The Washington Post seems to be catching on to a story Crash Course warned about last fall: that FHA is not in good shape, and may need a taxpayer bailout. As with most WaPo stories, the problem is depicted in the past tense:FHA Commissioner David H. Stevens, who joined the agency in July, flagged his agency's troubles with the 2007 and 2008 loans in October, when he told a House panel that "rogue players on the margin" immediately migrated to the world of FHA lending after the subprime mortgag ... [MORE]

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The NY Times' Floyd Norris has a column today about a surprising paper just out at the National Bureau of Economic Research. Turns out those securitized mortgage derivatives that sank the economy two years ago were not new. They were just like the ones that triggered the Great Depression. Norris: The original wave of securitizations took place in the 1920s, when the United States went on the greatest building boom ever. Many investors saw how rapidly real estate prices were rising and wanted ... [MORE]

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Both ABC News and the Wall Street Journal are saying that the Senate vote to reconfirm Federal Reserve Chairman Ben Bernanke, whose term expires Jan 31, is no longer a sure thing. ... [MORE]

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A federal judge dismissed Baltimore City's lawsuit against Wells Fargo yesterday, saying it was implausible that the mortgage lender's business practices had done as much damage as the city claimed. "In the present case, the city's allegations . . . of a causal connection between Wells Fargo's alleged misconduct and the damages the city claims is not plausible," Judge J. Frederick Motz wrote in his decision, released Jan 6. The city had claimed that Wells Fargo's reverse redlining—targe ... [MORE]

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Here's the government trying to hide the bad deal it made on taxpayers' behalf. The e-mails leave no doubt: Tim Geithner gave the banks, including a foreign bank, at least $13 billion extra U.S. taxpayer dollars over and above the amount AIG execs were negotiating. Bloomberg got it first. NYT's Dealbook gives you the e-mails. Hat tip to Rep. Darrell Issa (R-CA) for getting them. Speaking of AIG, it is the insurer covering Taylor Bean & Whitaker's executives—but it's not yet payin ... [MORE]

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The Wall Street Journal tells us about the New American Dream—default on your mortgage, rent for half the price and go to Disney World in your BMW. My favorite part of this story: The two main characters are a teacher and a firefighter. Both walked out on $400K-plus mortgages; one owns other rental properties, the other hung on to his 6-series Beemer. Think of these two the next time someone starts blathering about how we need the government to subsidize developers so they can build "aff ... [MORE]

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The WSJ estimates CitiGroup's exposure to Dubai World's defaulted $80 billion (est.) debt at $1.9 billion. The beauty part is Andrew Sorkin's reminder (in the NYT) that Citi lent $8 billion to the palm-island-building megajoke last Dec. 14, shortly after the U.S. government pumped $45 billion into the ailing banking conglomerate. As Sorkin notes: CitiGroup's Chairman, Win Bischoff, said at the time, "This is in line with our commitment to the U.A.E. market in general, and reflects our positive ... [MORE]

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Win McNamee/Getty Images via Photo Journal

The Sun has some predictable drivel today regarding the state's all-important "millionaire" head-count. Seems it's gone down. By 30 percent! And this is a terrible thing! And it's all because of taxes and Democrats! Goddamn Democrats. As the Sun reports, last year the stated number of "millionaires" in the state, for tax purposes, was 4,910. The year before that it was 7,067. The drivel part comes next:Sen. David R. Brinkley, a Frederick County Republican on the Budget and Taxation Committee, ... [MORE]

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The New York Times had a don't-miss story Sunday showing how good news for some homeowners facing foreclosure may mean bad news for everyone else. The story looks at the market for distressed mortgage-backed securities, and explains that some of the institutions that buy these toxic assets from failing banks pass on some of the discount to the homeowners-which is good for them-but then pass on all of the default risk to the taxpayers. Statistics show that 70 percent of loan modifications ultim ... [MORE]

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Yesterday (Nov. 12) was the 10th anniversary of the signing ceremony for the Gramm Leach Bliley Act. Though hailed at the time as a great breakthrough in financial regulatory reform—headlines predicted the coming time of consumer plenty, big savings on mutual funds, insurance premiums and bank fees—it was never anything more than a scheme to allow CitiGroup, Goldman Sachs, and a few other already huge financial institutions to do whatever they wanted. Given what happened after that ... [MORE]

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The Wall Street Journal has an interesting story today explaining that AIG has gotten back several billion dollars in collateral it posted last year against losses in the credit-default swap market. But, most of the "bad" contracts, which now look not-so-bad, were "closed out" by the government bailout, meaning that AIG lost that money forever, which means that the taxpayers have lost that money forever, which means that AIG's counterparties have gained that money forever. As the WSJ reports: ... [MORE]

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Watch Frontline's historical retelling of the roots of the financial crisis. Yes, folks, it's derivatives, and Brooksley Born, the former head of the Commodity Futures Trading Commission, fought the good fight, trying to get them regulated and transparent, in 1998. The usual suspects (Rubin, Summers, Greenspan) shot her down. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?" Maryland Public Television has it listed tonight ... [MORE]

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Gaithersburg-based AmeriDream, Inc. is prominently mentioned in a Huffington Post story looking at seller-funded down payment assistance (DPA) programs for new home buyers. The programs allow home builders to give a three percent down payment to possibly unqualified buyers by laundering it through a nonprofit corporation, which takes a fee for the service. As the HuffPo concludes: Defaulting at up to three times the rate of other FHA loans, they are one reason the housing agency's insurance fund ... [MORE]

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Alan Greenspan has changed his mind, proving finally that he has one. As Bloomberg reports, Greenspan told the influential crowd at the Council on Foreign Relations yesterday that the too-big-to-fail doctrine must end:"If they're too big to fail, they're too big," Greenspan said today. "In 1911 we broke up Standard Oil—so what happened? The individual parts became more valuable than the whole. Maybe that's what we need to do." This is big news, as two other stories in today's New York Ti ... [MORE]

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The Wall Street Journal crunched some numbers and declared that, even though 10 percent of U.S. citizens are out of work while most of the rest are taking pay cuts, the Gilliganesque bunglers in the financial sector are again partying like its 1999, only more so. According to the Journal: Total compensation and benefits at the [23] publicly traded firms anaylized by the Journal are on track to increase 20 percent from last year's $117 billion—and top 2007's $130 billion payout. This year ... [MORE]

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The Federal Housing Administration's boss is saying he'll need no bailout, "absent any catastrophic home-price decline." The New York Times is flashing red on this one, and it's an entertaining read. U.S. Rep. Barney Frank (D-Mass.): A 7-plus percent FHA foreclosure rate is no bad thing: "I don't think it's a bad thing that the bad loans occurred," he said. "It was an effort to keep prices from falling too fast. That's a policy." FHA-which used to make sellers fix houses to exacting standards ... [MORE]

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The New York Times says CitiGroup is selling its secretive oil-trading arm, Phibro, to Occidental Petroleum, apparently to avoid bad publicity. Still no one's questioning the idea that the head guy in a business division that yields $400 million a year is all by himself worth $100 million a year. ... [MORE]

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In a Times Sunday Mag preview Columnist and Princeton Economics Professor Paul Krugman expends a lot of words explaining how the fellow Nobelists at the University of Chicago have been cranky and absurd since, at least, the mid-'70s. The story is headlined, "How Did Economists Get It So Wrong?" The piece has some hilarious lines (mostly quotes and paraphrases of his rivals), such as, "Unemployment is a deliberate decision by workers to take time off" (Edward Prescott of the University of Minnes ... [MORE]

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Michael Greenberger, Rock Off Crew, Robert Strupp, and many other Baltimore folks are featured in a video clip viewable on Amy Goodman's Democracy Now! site It's a preview of Leslie and Andrew Cockburn's new documentary, American Casino, which illustrates how credit default swaps and other derivatives sank the economy—and how a few pols (cough, Phil Gramm, cough) gave us out-of-control derivatives—using mostly Baltimore examples. Long vid (20 minutes-plus) but worth a look. ... [MORE]

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