Category: regulation

I Like this Catch 22

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Uber and Lyft claim that their drivers are independent contractors, not employers.

Now San Francisco, accepting the Not-a-Taxi-is Really-a Taxi services argument, has has issued a notice that the drivers therefore require business licenses:

Uber and Lyft drivers have cruised the streets of San Francisco for years. But the city has now decided that drivers who work for more than seven days in a year need a business license.

Nearly 37,000 people have been identified by the city as drivers for either Uber or Lyft, according to a press release issued on Friday by city treasurer José Cisneros.

Cisneros did not say how the city came across a list of names, but the notice being sent to drivers comes from “two years of enforcement work, including multiple requests for information and subpoenas to get sufficient data about business operations” from companies like Lyft and Uber.

Knowing that both Lyft and Uber have both actively fought having information released, it’s likely the data wasn’t passed over voluntarily. San Francisco was not listed as a city that had requested data in Uber’s transparency report, although its airport has information about 44,000 drivers.

“Uber partners with entrepreneurial drivers and as independent contractors, they are responsible for following appropriate local requirements,” an Uber spokesperson said.

Lyft, on the other hand, was worried that forcing registration would compromise driver privacy.

………

Cisneros will start by sending out three batches of letters to the identified drivers over the coming days, according to the SF Chronicle. Each driver will need to register him or herself as a business within the next 30 days and pay a $91 annual registration fee and display the registration in the vehicle, or face additional fines. If each driver registers, that generates approximately an extra $3.37 million for the city’s coffers.

………

Now San Francisco is flipping the argument around on the ride-hailing companies arguing that if their drivers are truly independent contractors, then they need these business licenses to be able to operate in the city.

Sweet, sweet schadenfreude.

How Utterly Proper

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George Osborne, the UK’s Chancellor of the Exchequer, has decided to exempt people that he sees as significant from money laundering regulations:

………

George Osborne this afternoon accepted an amendment to the Financial Services Bill which will see some Politically Exposed Persons and their families exempted from these anti-money laundering rules. Ministers will now “exclude… specified categories of persons” from the list of so-called PEPs, as Osborne says it is “disproportionate” for banks to include MPs and relatives on the watch list. Mossack Fonseca will be able to whisk MPs and their families through the account opening process…

(emphasis original)

And once again, I have to note that this is not The Onion, it is reality ……… reality completely indistinguishable from the the pages of a parody magazine.

I am beginning to wish that Guy Fawkes had succeeded in the Gunpowder Plot.

H/t Naked Capitalism

Thanks Elizabeth

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The Federal Reserve and the FDIC just rejected the living wills required under Dodd Frank of the 5 largest banks in America:

“The goal to end too big to fail and protect the American taxpayer by ending bailouts remains just that: only a goal,” Thomas M. Hoenig, the vice chairman of the F.D.I.C., said in a statement.

 The regulators were responding to the so-called living wills that banks must submit to regulators on a regular basis to explain how the banks plan to enter bankruptcy in an orderly fashion in case of a crisis. The living wills are a requirement of the 2010 Dodd-Frank financial overhaul, intended to help make large financial institutions less of a threat to the wider economy.

 The Fed and the F.D.I.C., which jointly oversee the largest banks, agreed that the plans put forward by five of the big banks, JPMorgan, Bank of America, Wells Fargo, State Street and Bank of New York Mellon, were “not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code.”

 Only one of the biggest banks, Citigroup, was given a passing grade by both agencies, though it too was told that its plans needed improvements. Goldman Sachs and Morgan Stanley received passing grades from only one of the two agencies.

Of course the Vampire Squid got a passing grade.

BTW, the only reason that this happened is because Elizabeth Warren nailed Fed chair Janet Yellen to the wall over her inaction on this Dodd Frank requirement:

………

 A serious dust-up occurred on July 15, 2014 during a Senate Banking hearing between Senator Elizabeth Warren and Fed Chair Janet Yellen on the matter of these living wills. Warren told Yellen that at the time of its collapse in 2008, Lehman Brothers had $639 billion in assets and 209 subsidiaries and it took three years to unwind the bank in bankruptcy. Warren singled out JPMorgan Chase for comparison, saying that it has $2.5 trillion in assets and 3,391 subsidiaries.

 Dodd-Frank specifically states that these wind-down plans must be “credible” each year or the Fed and FDIC must reject them and force the banks to take remedial steps such as simplifying their structure or selling off assets.

 Yellen was clearly not prepared for this line of questioning and stumbled badly in her answers to Warren. She said the Fed was pursuing a “process,” that the plans are “complex” with some banks submitting plans that are “tens of thousands of pages.” Yellen then summed up with this:

“I think what was intended is this interpretation you’re talking about, whether they’re credible, in other words, do they facilitate an orderly resolution, and I think we need to give these firms feedback.”


This hearing came more than six years after the greatest Wall Street banking collapse since the Great Depression and Warren was visibly agitated by these stonewalling answers from Yellen. Warren responded:

“I have to say, Chair Yellen, I think the language in the statute is pretty clear, that you are required, the Fed is required, to call it every year on whether these institutions have a credible plan — and I remind you, there are very effective tools that you have available to you that you can use if those plans are not credible, including forcing these financial institutions to simplify their structure or forcing them to liquidate some of their assets — in other words, break them up.

 “And I just want to say one more thing about this process, the plans are designed not just to be reviewed by the Fed and the FDIC, but also to bring some kind of confidence to the marketplace and to the American taxpayer that in fact there really is a plan for doing something if one of these banks starts to implode.”


The public has never been allowed to see those 10,000 pages of what it would take to unwind one of the banking behemoths but is instead provided with a mere glimpse of each bank’s plan. Warren’s reference to bringing “confidence to the marketplace” was called into further question yesterday when the Government Accountability Office (GAO) released its own study on the living wills, which they refer to as “Resolution Plans.”

 The GAO noted that the FDIC’s Board of Directors determined that all of the 2013 plans submitted by systemically important banks with more than $250 billion in nonbank assets were “not credible” or “would not facilitate an orderly resolution under the Code.” The Federal Reserve, however, made no such determination and simply said the banks would have to improve their plans going forward.

 The GAO also gave low marks to the regulators in terms of public transparency on the living will process, writing in the report that “FDIC and the Federal Reserve are considering publicly providing more information about their resolution plan reviews. Federal Reserve officials told us that while they were continuously evaluating the release of more plan information into the public domain, they did not have a time frame for reaching a decision on this issue. FDIC officials also told us that the regulator was considering disclosing more information about its review process but had not yet reached the point of sharing such information with the public.”

Warren is one of the good ones.

It’s Bank Failure Friday!!!

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No bank failures, but I missed one last week:

  1. ​​Veterans Health Administration Credit Union​, Detroit​, MI

And on Wednesday, the NCUA closed 6 credit unions in Pennsylvania:

  1. Triangle Interests % Service Center Federal Credit Union, Bensalem, PA
  2. Servco Federal Credit Union, Bensalem, PA
  3. O P S EMP Federal Credit Union, Bensalem, PA
  4. Electrical Inspectors Federal Credit Union, Bensalem, PA
  5. Chester Upland School Employees Federal Credit Union, Chester, PA
  6. Cardozo Lodge Federal Credit Union, Bensalem, PA

I gotta figure that these are all somehow tied together, and a quick Google reveals that they all had the same CEO.

Rather unsurprisingly, the FBI is looking into the circumstances of the failures.

    Here is the Full NCUA list.

    Would You Like a Nice Cup of Shut the F%$# Up with Your Outrage?

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    After months of outrage the Obama administration has finally taking action againat the tax dobbed known as “Corporate Inversion”, and accoording to FT, this is provoking a, “foreign fury.”

    Cry me a f%$#ing river:

    A White House tax crackdown designed to put a halt to Pfizer’s planned $160bn takeover of Allergan has provoked fury from foreign multinationals with operations in the US.

    Barack Obama stepped up the offensive on Tuesday championing new proposals to deter “inversion” deals — such as Pfizer-Allergan — that companies use to move to low-tax jurisdictions, accusing them of exploiting “one of the most insidious tax loopholes out there”.

    Multinationals responded by saying they were being unfairly caught in the crossfire of Mr Obama’s campaign as their operations in the US could also be affected by the new rules.

    The angry rhetoric came a day after the Treasury department released new proposals which threatened the biggest planned inversion to date — Pfizer’s takeover of Irish-domiciled Allergan — and triggered big losses for some hedge funds, such as Paulson & Co and Third Point.

    “It came as a total surprise. Everyone thought the Treasury had used all their firepower,” said one hedge fund manager.

    ………

    The Treasury’s latest moves would make inversions less lucrative by eliminating a tax benefit for “abusive” inverters. But its plan would also deny the benefit to foreign companies with US operations.

    “Rather than using a scalpel to deal with this issue they are using a machete,” said Nancy McLernon, president of the Organisation for International Investment, a trade group for foreign companies in the US.

    “It’s a misguided approach. They’re trying to go after those companies that are doing something they think is problematic and carelessly hitting a whole class of employers.”

    The tax benefit stems from companies’ use of internal loans to cut their tax bills. By loading up US subsidiaries with debt from head office, foreign companies can deduct the interest payments from their US tax bills — a practice called earnings stripping.

    Here is my response to the aggrieved tax dodgers:

    The fact that you have been able to skate on corporate taxes for the past few decades do not give you the right to continue stealing from the rest of us.

    A Real Estate Developer Does the Right Thing

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    In response to larcenous demands from the incumbent (monopoly) connectivity providers, the developer of Jasper Highlands built and wired up his own gigibit ISP to serve his new development:

    Tennessee is at the center of a nationwide battle over whether cities and towns should be allowed to build broadband networks without facing restrictions that help private ISPs avoid competition from the public sector.

    But with a lawsuit and legislative battle over a Tennessee state law still pending, one home developer decided to build his own ISP. John “Thunder” Thornton of Chattanooga needed to install high-speed Internet for “his mountaintop residential development in Marion County,” but was unable to get affordable service from AT&T or Charter Communications, a Chattanooga Times Free Press article said yesterday. He also couldn’t get service from a Chattanooga electric utility that also provides Internet because the state law prevents it from expanding to nearby areas that lack fast, affordable service.

    To solve the problem, Thornton “spent more than $400,000 to build his own fiber network and link it with a power cooperative in Stevenson, Ala., where fast broadband is available,” the article said. He announced yesterday that his Jasper Highlands community in Jasper, Tennessee, “is now able to offer high-speed, gigabit-per-second Internet service for all home sites in his 3,000-acre complex.”

    Thornton’s ISP is called Hi-Tech Data. It sells 100Mbps fiber service for $70 a month and gigabit service for $80 a month. Phone service is available for another $30 a month. Since the existing fiber didn’t go all the way to the Jasper Highlands development, Hi-Tech Data deployed its own fiber to cover the final 2,000 feet.

    This is a natural consequence of the rent seeking behaviors engaged in by the baby Bells, cable companies, and the rest of the incumbent providers.

    It’s yet another case where we have actors whose primary business model is to sit athwart the productive work of others, and extract rents, which they use to pay off politicians so that they maintain their privileged position.

    Bad Bosses Strike Back!

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    In Oregon Maine, where they are proposing raising the minimum wage, along with eliminating the sub-minimum wage for tipped workers, the worst boss in the world wrote an editorial saying that her workers hated the idea of being paid fairly.

    Her workers responded by resigning en masse and described their dysfunctional workplace, and their dysfunctional boss, in exquisite detail:

    Oh hey, it’s a Maine story (about the minimum wage, no less) that doesn’t directly involve Gov. Paul LePage!

    Five servers at a restaurant in Portland called Five Fifty-Five have quit in one hell of a mic drop, giving their notice in a Portland Press Herald op-ed. The inciting incident was when their boss, Michelle Corry, wrote an op-ed that claimed to speak for her employees about the citizen-initiated ballot referendum in the state to both increase the minimum wage to $12 and eliminate the tip credit (also known as the “sub-minimum wage”). It’s the latter point that had Corry in such a huff.

    ………

    Opponents of eliminating the tip credit say that doing so would bring about a restaurant industry apocalypse and there would be much rending of garments and gnashing of teeth. Restaurant owners in states like California, Washington, Oregon, and Minnesota, which pay their servers a guaranteed living wage and, at last check, had not devolved into a Road Warrior-esque hellscape, say “Um, not so much?”

    Right, back to Maine and Michelle Corry’s op-ed. So, Corry argued strongly for a counter-proposal to the ballot initiative that would raise the minimum wage to only $10 and keep the tip credit intact. Since at last blush 75 percent of the state is in favor of raising the minimum wage, anti-minimum wage douchebuckets (even LePage — dammit, he showed up in this post despite our best efforts) know they’re going to have to compromise at least a little bit here, and the counter-proposal is that compromise. But in arguing for it, Corry tried to speak for those it would directly affect:

    Ask any tipped employee at a restaurant near you if they would prefer to make a set wage or hustle and create their own destiny. The employees at my restaurant would always choose their own initiative.

    Putting words in her servers’ mouths turned out to be a less-than-ideal move on her part.

    There have been many issues at the restaurant, from capricious schedule changes to questionable practices on wages and tips. This latest insult of our boss falsely claiming to speak publicly on our behalf on an issue we care deeply about is just the final straw. We are submitting our notice and will be leaving her employment.

    Translation: whatever the incredibly white Maine equivalent is of “oh HELL naw.”

    The kicker to all of this is that Michelle Corry is the vice chair of the Maine Restaurant Association.

    It is highly unlikely that I am going to be in Portland, Maine in the near future, but if I do, I won’t be going to Five Fifty-Five.

    H/t Atrios.

    Speaking of Unprosecuted Banksters

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    It turns out that former Secretary of the Treasury, Robert Rubin, was referred to the Department of Justice for criminal investigation by the Financial Crisis Inquiry Commission: (FCIC)

    In late 2010, in the waning months of the Financial Crisis Inquiry Commission, the panel responsible for determining who and what caused the financial meltdown that lead to the worst recession in decades voted to refer Robert Rubin to the Department of Justice for investigation. The panel stated it believed Rubin, a former U.S. Treasury Secretary who has held top roles at Goldman Sachs gs and later Citigroup c , “may have violated the laws of the United States in relation to the financial crisis.” Rubin, the commission alleged, along with some other members of Citi’s top management, may have been “culpable” for misleading Citi’s investors and the market by hiding the extent of the bank’s subprime exposure, stating at one point that it was 76% lower than what it actually was.

    No government action was ever brought against Rubin. And there is no evidence that Department of Justice acted on the crisis commission’s recommendations. A source close to Rubin says the former Wall Street executive was never contacted by the Justice Department in relation to the commission’s allegations. Nonetheless, the fact that Rubin was among a relatively small group of top bankers who the crisis commission referred to the Justice Department for potential wrong-doing, and the fact that is appears nothing happened, sheds new light on the financial crisis, and the government’s effort to pursue those who may have broken the law.

    Seven years after the bankruptcy of Lehman Brothers, the fact that no major Wall Street figure was ever prosecuted for crimes related to the financial crisis remains an sticking point for many. It is regularly brought up by presidential candidate Senator Bernie Sanders. When the Financial Crisis Inquiry Commission released its 662-page report nearly five years ago, members of the commission said they had formerly referred evidence of possible misconduct of a number of individuals to the Department of Justice. But it declined to say who. Brooksley Born, a member of the commission and a former regulator, said at the time, “Our mandate was to refer to the attorney general any individual that our investigation found may have violated US laws. We did make several such referrals, but we are not going to talk about any of those.”

    ………

    In the run up to the financial crisis, Citigroup aggressively expanded into the mortgage market and subprime lending. Despite warnings that a bubble was forming in housing and that lending standards had gotten to loose, CEO Prince in mid-2007 famously told the Financial Times that as long as the music is still going he would keep dancing. Rubin at the time was the chairman of the executive committee of Citi’s board. Rubin reportedly blessed the increased risk taking at Citi in the mid-2000s.

    By late summer 2007, Citi’s direct exposure to subprime bonds was $55 billion, according to the crisis commission. The staff notes of the commission say that “based on FCIC interviews and documents obtained during our investigation, it is clear that CEO Chuck Prince and Robert Rubin . . . knew this information.” It says the two top officials were made aware of the extent of Citi’s exposure “no later than September 9, 2007.”

    Yet, according to the commission, on October 15, Citi executives told analysts on a call that the bank’s total exposure to subprime was just $13 billion, or 76% less than it actually was. Two weeks later as pressure began to build on Citi, and values in the mortgage market fell, Citi told the market that its actual subprime exposure was $55 billion, and that its losses from mortgage-related assets could already be as big as $11 billion. Prince also announced he was resigning.

    The staff notes say that “the representations made in the October 15, 2007 analysts call appear to have violated SEC Rule 10b-5,” and that Prince and Rubin, along with “members of the board” may have been “culpable” for “failing to disclose” the bank’s true subprime exposure.

    Rubin should have gone to jail, and he should have been banned from the finance industry for life.

    Rubin isn’t alone in this.

    This wasn’t just some sort of black swan.  It was aggressive, deliberate, and systemic fraud, but there were no prosecutions.

    To mind, this comes down to crass tribalism, where the regulators, and prosecutors, were, or were managed by, people who went to the same schools, and started their careers at the same firms, and so there are no prosecutions.

    It’s why we are seeing the rise of populism on the right and left right now.

    The corrupt elites maintained their grip on power, and so we are likely to see another financial crack-up.

    It’s Bank Failure Friday!!!

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    We have the first commercial bank failure of the year:

    1. North Milwaukee State Bank, Milwaukee, WI

    Full FDIC list

    The failures of credit unions continue apace (actually from last week, sorry):

    1. Education Associations Federal Credit Union, Washington, DC

    Here is the Full NCUA list.

    No graph pr0n, it would be kind of silly with only one commercial bank failure.

    Not clear why credit union failures are outpacing commercial bank failures.

    India Can Go Cheney Itself

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    India is taking the US to the WTO over the increase in fees for H1B visas:

    India has complained to the World Trade Organisation (WTO) about the United States’ decision to increase visa application fees.

    The USA last year doubled the fee required to apply for an H1-B visa, a class of temporary visa for skilled workers. Fees rose to US4,000 per application.

    Indian technology companies have complained long and loud about the cost of H1-B visas, arguing that they need to bring workers from India to the USA to grow their businesses. US businesses retort that Indian companies could hire locals with comparable skills, but prefer to import people who they pay lower wages.

    ………

    India’s now formally complained to the WTO, which sets the clock ticking on a 60-day mediation process. If nothing can be resolved, the WTO can rule on the dispute.

    If I had my druthers, I’d shut the whole program down.

    It’s rife with abuse, and depresses wages in technical fields in the United States.

    I Can Haz Prosecushuns?

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    We have a new development in the Flint water crisis, the Michigan Governor has retained private counsel, including a prominent criminal defense attorney:

    Gov. Rick Snyder has hired two outside attorneys in connection with the Flint drinking water crisis, including a criminal defense attorney retained to serve as “investigatory counsel,” a Snyder spokesman confirmed Thursday.

    Eugene Driker, a civil defense attorney, and Brian Lennon, a criminal defense attorney, were each awarded a contract worth $249,000 through Dec. 31, after which those contracts can be extended, Snyder spokesman Ari Adler told the Free Press.

    The contracts, which are to be paid with state funds, are just below the $250,000 threshold for contracts requiring approval from the State Administrative Board, which meets in public to approve state contracts and grants. Adler said that was by design because the governor wanted to hire the attorneys quickly in early February. The administration will be going to the State Administrative Board on March 8, seeking approval for additional spending on the contract with Lennon, he said.

    They are claiming that this is about processing documents, but this sounds an awful lot like hizzoner is lining up a defense team in the event of a criminal prosecution.

    About F%$#ing Time

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    This guy is in custody now too

    It looks like the the FBI is finally going after people who threatened federal officers at the Bundy ranch:

    FBI agents have been busy today. Another one (possibly two) of Nevada rancher Cliven Bundy’s sons was arrested, this time in Utah. According to what David ‘Davey’ Bundy’s wife told The Salt Lake Tribune today, her husband was arrested just after 7:00 a.m. Thursday at the site of the house the Millard County contractor is building for his family just south of Delta.

    Marylynn Bundy said she was told of her husband’s arrest by a worker who was blocked from getting to the house by law enforcement.

    “I think they are just trying to get all the Bundy men locked up, so they can raid their homes,” Marylynn Bundy said.

    The U.S. Attorney’s Office in Nevada confirmed to the paper that a charging document had been filed against Bundy, but said that it was sealed and the feds did not confirm his arrest.

    The feds are busy making arrests today. After his role in the armed standoff in Nevada almost two years ago at the Bundy ranch, tea party activist Jerry DeLemus was arrested on nine federal charges today. He’s also the husband of Rep. Susan DeLemus, a crazy-time New Hampshire Republican lawmaker and co-chair of the state’s “Veterans for Trump” coalition.

    ………

    UPDATE: The Idaho Statesman just reported that, “Eric James Parker, 32, and Steve Arthur Stewart, 36, both of Hailey, O. Scott Drexler, 44, of Challis, and Todd Engel, 48, of Boundary County were taken into custody, U.S. Attorney for Idaho Wendy Olson said.”

    “This investigation began the day after the assault against federal law enforcement officers and continues to this day,” U.S. Attorney for Nevada Daniel Bogden said in a release. “We will continue to work to identify the assaulters and their role in the assault and the aftermath, in order to ensure that justice is served.”

    The wheels of justice do grind slowly, but it appears that they grind sure.

    How Convenient

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    Normally, when one says that a Congressman is in bed with lobbyist, it is meant as a metaphor.

    Not this time:

    Congressman Bill Shuster from Pennsylvania, the Chair of the House Transportation and Infrastructure Committee and the lawmaker behind pro-airline legislation like this 2014 bill to remove any transparency from advertised airfares — and whose top campaign contributors are United and American Airlines — has admitted today to being in a romantic relationship with a top lobbyist for the airline industry.

    A lengthy report from Politico shines a light on the too-close-for-comfort relationship of Shuster and Shelley Rubino, VP for global government affairs for Airlines for America (A4A), an industry trade group whose members include the aforementioned United and American, along with other top Shuster donors like FedEx, UPS, and Atlas Air Worldwide.

    And when you look at which politicians have most benefited from A4A’s contributions, Shuster is right at the top of the list, at $16,700 for the 2014 election cycle. That’s more than A4A gave to Senate Majority Leader Mitch McConnell. Not bad for a Congressman who represents a largely rural section of Pennsylvania.

    “Ms. Rubino and I have a private and personal relationship, and out of respect for her and my family, that is all I will say about that,” said Rep. Shuster, who was recently divorced, in a statement to Politico.

    The Congressman says his office has “a policy that deals with personal relationships that cover my staff and myself. This was created in consultation with legal counsel and goes further than is required by the law. Under that policy, Ms. Rubino doesn’t lobby my office, including myself and my staff.”

    Even if the agreement prevents Rubino from lobbying Shuster directly, she is not prohibited from lobbying the dozens of other members of his powerful committee or their aides.

    Legal experts say there is no apparent violation of House ethics rules going on here.

    It does appear that the news of Congressman Shuster’s application of applied kinematics to Ms. Rubino has, temporarily at least, put the kibosh on privatizing air traffic control:

    The House Republican leadership is shelving plans to pass an overhaul of the Federal Aviation Administration, a major blow to House Transportation Chairman Bill Shuster of Pennsylvania, according to multiple senior aides

    Instead, the House will revert to a short-term extension of the FAA’s authority while “the Transportation Committee will continue their work on this transformative legislation,” a leadership aide said Thursday. The FAA must be renewed by the end of March.

    ………

    The bill was also a priority for Airlines for America, the lobby that represents every mainline U.S. air carrier except Delta. Shuster is very close with A4A, as it is known, and dates one of its top lobbyists. POLITICO reported that earlier this week, Shuster spent time lounging in Miami with Nick Calio, A4A’s leader, and Shelley Rubino, the group’s vice president and his girlfriend. The trip came days after Calio testified before Shuster’s committee.

    I gotta figure that the house leaders realized that this story was blowing up, and decided to put it on hold.

    This is a good thing.

    Air Traffic Control should not be placed in private hands, particularly when those hands are largely those of the 4 remaining large airlines, who are, after all, Shelly Rubino’s clients.

    Not a Surprise

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    Japan has started engaging in a policy of negative interest rates, where you pay the bank for the privilege of storing your money.

    It’s supposed to encourage people to spend money, because it creates a kind of a doppelganger of inflation to encourage consumption.

    It appears that the only spending that this is encouraging is for safes to store cash in:

    The Japanese are spending—but not in a way that is likely to strengthen the country’s economy.

    Following the Bank of Japan’s decision to lower interest rates below zero in January, many consumers have reportedly rushed to hardwares store in search of one thing: safes.

    Negative interest rates mean customers effectively pay a fee for parking cash in banks, so Japanese citizens are beginning to hoard yen, according to the Wall Street Journal, and they need somewhere to put it.

    Sales of safes have doubled from the same period a year earlier at chain hardware store, Shimachu, according to the Journal. The chain has already sold out of one model worth $700. Others savers are considering more unconventional storage spaces.

    “In response to negative interest rates, there are elderly people who’re thinking of keeping their money under a mattress,” Mariko Shimokawa, a Shimachu saleswoman told the Journal.

    But hoarding cash is exactly what the Japanese central bank wants to avoid.

    Bank of Japan Gov. Haruhiko Kuroda lowered rates to -0.1% for certain deposits on Jan. 29. The idea was to prop up the economy and increase inflation by encouraging consumers to spend and borrow while discouraging banks from keeping large reserves.

    Officials have already noticed the increase in safe sales. The issue of cash hoarding was brought up in a parliamentary hearing Monday, with opposition lawmaker Katsumasa Suzuki saying that the increase in safe sales suggested a “vague sense of unease,” the Journal reported.

    Central banks have been using quantitative easing, essentially printing money, and it hasn’t worked, because the newly printed money has been handed to the banks, who either use it to shore up dodgy loans, or park it in the deposit accounts of those central banks so that they can make money on the spread between their interest payments and their interest income.

    Here’s an idea:  Print the money and give it to ordinary people, or drop it from a helicopter, as Ben Bernanke has suggested.

    Once people pay off their loans, they will spend the money, and the banks will have to find new business to replace their usurious consumer loans.

    It’s Bank Failure Friday!!! (On Saturday)

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    Still no commercial bank failures this year, but we have the 5th credit union failure of the year, ​Mildred Mitchell-Bateman Hospital Federal Credit Union, ​of Huntington, ​WI. (Full list)

    I do not know why credit unions are failing so much more often than commercial banks, the last bank failure was about 5 months ago.

    If my reader(s) have any insights, I would appreciate hearing from them.

    I Would Not Expect This from Him

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    Neel “Cash and Carry” Kashkari, current president of the Minneapolis Bank of the Federal Reserve and former minion of Goldman “Vampire Squid” Sach, has called for a breakup of the big banks and utility style management of essential financial institutions:

    What does one make of it when someone whose career has been based on having powerful friends and contacts at the top levels of the financial services industry appears to be acting as a traitor to his class? In this case, the apparent turncoat is one Neel Kashkari, ex Goldman, ex Treasury, ex Pimco employee, now the new President of the Minneapolis Fed, who in his first speech in his new job, said all sorts of unpleasant truths: the financial crisis imposed huge costs on society as a whole, Dodd Frank didn’t go far enough, the authorities won’t be willing to risk using untested new powers in a financial meltdown and will bail out banks again. He also argued that the financial system was now stable enough to make (by implication overdue) transformative changes to end the “too big to fail” problem, such as breaking up banks and regulating them like utilities. Kashkari plans to come up with a comprehensive plan by year end and is seeking public input, including having expert discussions that will be webcast.

    ………

    This is the guts of Kashkari’s speech:

    Now is the right time for Congress to consider going further than Dodd-Frank with bold, transformational solutions to solve this problem once and for all. The Federal Reserve Bank of Minneapolis is launching a major initiative to develop an actionable plan to end TBTF, and we will deliver our plan to the public by the end of the year. Ultimately Congress must decide whether such a transformational restructuring of our financial system is justified in order to mitigate the ongoing risks posed by large banks.

    ………

    I believe we must seriously consider bolder, transformational options. Some other Federal Reserve policymakers have noted the potential benefits to considering more transformational measures.6 I believe we must begin this work now and give serious consideration to a range of options, including the following:

    • Breaking up large banks into smaller, less connected, less important entities.

    • Turning large banks into public utilities by forcing them to hold so much capital that they virtually can’t fail (with regulation akin to that of a nuclear power plant).

    • Taxing leverage throughout the financial system to reduce systemic risks wherever they lie.

    My guess is that this is an attempt to generate some perceived gravitas as a tactic to be used in bureaucratic, though much like Bernie Sanders, I find this a positive development. (Hillary Clinton is on record as not a big fan of breaking up the big banks)

    Back Loaded Bribery

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    I’ve always said that much of the corruption in politics is not the result of an explicit quid pro quo, but an understanding that, once your political career is done, if you promulgate the agenda of the malefactors of wealth, you will be taken care of.

    It’s a lot like being a “Made Man” in the mob.

    Case in point, Timothy “Eddie Haskell” Geithner:

    Former U.S. Treasury Secretary Timothy Geithner is preparing to borrow from JPMorgan Chase & Co. to help fund his new career in private equity.

    Geithner, 54, secured a credit line with JPMorgan, one of the largest banks he oversaw during the financial crisis, to finance personal investments in funds started by his current employer, Warburg Pincus, according to a filing with the New York Department of State. He is borrowing money to invest in a $12 billion private equity fund that the firm raised in November, its first main fund since he joined almost two years ago, a person familiar with the situation said.

    ………

    The regulatory filing doesn’t disclose the size of the loan or the financial terms, such as the interest rate. Warburg Pincus hasn’t said how much Geithner agreed to commit to the new fund, and the filing doesn’t say whether he made use of the credit line to finance it.

    Mary Zimmerman, a spokeswoman for New York-based Warburg Pincus, declined to comment or make Geithner available. Officials for JPMorgan declined to comment.

    This is the Timothy Geithner who claimed that he was not a banker, after being the fucking President of the Federal Reserve Bank of New York.

    It now appears that he was enough of a banker to get a sweetheart loan from JP Morgan for what is probably north of $100 million.

    Make no mistake.  This is a payment for his being one of them, and for running the Treasury Department for the banksters benefit.

    It’s Bank Failure Friday!!! (On Saturday)

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    We had 2 3 more failures this week, all of them credit unions.

    1. Montgomery County Credit Union, Dayton, OH
    2. Cory Methodist Church Credit Union​, Cleveland​, OH
    3. ​CTK Credit Union, Milwaukee, WI​

    Here is the Full NCUA list.

    So, we have 4 credit union failures, and no commercial bank failures so far this year, continuing on, and exptending on, the trend that began last year.

    It is odd that credit unions are failing faster than commercial banks.

    The Overton Window has Shifted

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    The editorial board of the New York Times has come out in favor of a financial transaction tax.

    It does not get any more establishment than that:

    A financial transaction tax — a per-trade charge on the buying and selling of stocks, bonds and derivatives — is an idea whose time has finally come. It has begun percolating in the Democratic presidential campaign, with all three candidates offering proposals.

     Hillary Clinton and Martin O’Malley have proposed a worthy but narrow tax on certain high-frequency trades, which generate windfall profits on small and fleeting differences in prices at the expense of ordinary investors and market stability. Bernie Sanders supports a hefty tax on a broader range of transactions to raise revenue from Wall Street, also a worthy goal, but his proposal would be likely to squeeze investors too hard. Republicans have not engaged the debate, except to say no to taxes no matter what.

     A well-designed financial transaction tax — one that applies a tiny tax rate to an array of transactions and is split between buyers and sellers — would be a progressive way to raise substantial revenue without damaging the markets. A new study by researchers at the nonpartisan Tax Policy Center has found that a 0.1 percent tax rate could bring in $66 billion a year, with 40 percent coming from the top 1 percent of income earners and 75 percent from the top 20 percent. As the rate rises, however, traders would most likely curtail their activity. The tax could bring in $76 billion a year if it was set at 0.3 percent, but above that rate, trading would probably decrease and the total revenue raised would start to fall.

     The burden of this tax would be concentrated at the top, because that’s where the ownership of financial assets is concentrated. However, individuals who buy and hold investments, including those who invest in index funds that trade infrequently, would be largely unaffected. Pension funds that devote a portion of their portfolios to speculative trading, often through hedge funds, would be hit, but some pension funds have already stopped using hedge funds because the returns do not justify the costs. A financial transaction tax that encouraged other pension funds to follow suit could actually benefit pension participants in the long run.

     Such a tax would also bring the United States more in line with other countries. There are already financial transaction taxes in Britain, Switzerland and South Korea as well as in Hong Kong and other developed markets and emerging nations, generally at rates of 0.1 percent to 0.5 percent on stock transfers. In addition, 10 countries in the European Union, including Germany and France, have agreed to apply a common financial transaction tax starting in 2017, though relentless lobbying by investment banks and hedge funds threatens to delay and even derail the effort.

    There are a number of arguments against this.

    The strongest one is that it will collect less revenue than expected, because it would disincentivize speculation.

    As if that were a bad thing.