Dec 1, 2011, 11:18 am EDT
World markets got a nice tailwind Wednesday on news that the U.S. Federal Reserve is stepping into the fray along with other central banks to boost liquidity and support the global economy.
Of course it’s nice to see stocks make a hefty jump, but to be honest I’d rather see them rising on real news. Not that this isn’t a good development in terms of stock values — but come on, guys. When things are so bad that the Fed has to step into global markets and essentially bail out the world’s bankers who can’t wipe their own noses, we have serious problems.
Think about it. Read
Nov 30, 2011, 9:30 am EDT
Although people around the world are focused on holiday shopping and vacations, the global financial epidemic of too much public debt isn’t taking a break.
Since the beginning of Europe’s financial crisis, its corporate and political leaders told us the problem was contained. But each step of the way, they’ve been wrong. Right now, all signs indicate that Europe’s financial crisis is spreading like gangrene. This is not a scare tactic, but an honest evaluation of the facts. Let’s analyze some of the reasons behind this.
1. Europe’s Banks are Undercapitalized
European banks are facing a liquidity crisis, even though they’ve already received an emergency cash infusion from a coalition of world central banks. The International Monetary Fund in its “Global Financial Stability Report” estimates $408 billion in banks’ risk exposure to toxic government debt from countries like Greece, Ireland and Portugal. Because Europe’s crisis is moving so rapidly, even the IMF is having trouble estimating the true liabilities for European banks. In August, the IMF said it would take only $272 billion to cover banks’ capital shortfall. Read
Nov 29, 2011, 11:25 am EDT
The Republican presidential candidates all have the same answer to America’s budget and debt woes: Cut the corporate tax rate. Unfortunately, fixing the nation’s economy is more complicated than simple slogans that make for good politics and lousy policy.
Mitt Romney, the presumptive GOP standard bearer, promises to introduce a bill on his first day in office that would reduce the top corporate income tax rate from 35% to 25%. Former House Speaker Newt Gingrich does the ex-Massachusetts governor one better, calling to reduce the corporate rate to 12.5%. Rick Perry, the Texas governor, wants the rate set at 20%. Herman Cain speaks of instituting “across-the-board tax cuts to provide long-term relief” and is promoting his 9-9-9 tax plan.
The candidates and their ideological supporters often point out that U.S. corporate tax rates are among the highest for members of the Organization for Economic Cooperation & Development (OECD). That’s true, but it doesn’t tell the whole story. Of course, raising taxes too high can throttle growth. However, low corporate tax rates don’t necessarily lead to prosperity, and high rates don’t necessarily impede growth. Read
Nov 28, 2011, 5:25 pm EDT
Citigroup (NYSE:C) tried to pay off regulators with a $285 million settlement to squash accusations it duped investors into buying now-infamous subprime mortgage debt. But thanks to one Manhattan judge, that hush money won’t be paid and Citi might now face a day in court.
That, of course, is the hyperbolic description of what U.S. District Judge Jed Rakoff did Monday with his decision to reject a settlement between the Securities and Exchange Commission and Citigroup. The losses to subprime mortgage investors who relied on Citi total about $700 million, more than double the proposed fine. Oh yeah, and Citigroup does about $110 billion in annual revenue — yes, billion, with a “B.” Kind of makes $285 million seem like a parking ticket, doesn’t it?
But that wasn’t really what riled Judge Rakoff — at its core, this seemed to be a case where banks could just do whatever they want and pay a nominal fine to avoid any real penalties. Read