Category: regulation

Signs of the Apocalypse

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First, and most visibly, it’s the fact that the New Orleans Saints are now the world champions, having won the Super Bowl.

Secondly is that fact that David Stockman, one of the young Turks at the core of the “Reagan revolution,” he was Budget Director during Reagan’s first term, is arguing that the government should tax the financial sector to shrink its size:

While supply-side catechism insists that lower taxes are a growth tonic, the theory also argues that if you want less of something, tax it more. The economy desperately needs less of our bloated, unproductive and increasingly parasitic banking system. In this respect, the White House appears to have gone over to the supply side with its proposed tax on big banks, as it scores populist points against the banksters, too.

Not surprisingly, the bankers are already whining, even though the tax would amount to a financial pinprick — a levy of only 0.15 percent on the debts (other than deposits) of the big financial conglomerates. Their objections are evidence that the administration is on the right track.

Make no mistake. The banking system has become an agent of destruction for the gross domestic product and of impoverishment for the middle class. To be sure, it was lured into these unsavory missions by a truly insane monetary policy under which, most recently, the Federal Reserve purchased $1.5 trillion of longer-dated Treasury bonds and housing agency securities in less than a year. It was an unprecedented exercise in market-rigging with printing-press money, and it gave a sharp boost to the price of bonds and other securities held by banks, permitting them to book huge revenues from trading and bookkeeping gains.

Stockman is suggesting that people who he saw in the 1980s as the epitome of the heroes in Ayn Rand’s fiction should be taxed with the explicit aim of shrinking their size, because the business they do does not serve the public good.

This is a refutation of the “Objectivist” philosophy at the core of much of Mr. Stockman’s public life, which saw the glorification of greed as a force for good, and a legitimate basis for public policy decisions.

Stephen Andrew Wakefield Acted Unethically

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Medical regulators in the UK have now ruled that Stephen Andrew Wakefield acted unethically in the conduct of his study linking vaccinations and autism.

The doctor who first suggested a link between MMR vaccinations and autism acted unethically, the official medical regulator has found.

Dr Andrew Wakefield’s 1998 Lancet study caused vaccination rates to plummet, resulting in a rise in measles – but the findings were later discredited.

The General Medical Council ruled he had acted “dishonestly and irresponsibly” in doing his research.

, Dr Wakefield said the claims were “unfounded and unjust”.

The GMC case did not investigate whether Dr Wakefield’s findings were right or wrong, instead it was focused on the methods of research.

During the two-and-a-half years of hearings – one of the longest in the regulator’s history – he was accused of a series of charges.

‘Callous disregard’

The verdict, read out by panel chairman Dr Surendra Kumar, criticised Dr Wakefield for the invasive tests, such as spinal taps, that were carried out on children and which were found to be against their best clinical interests.

The panel said Dr Wakefield, who was working at London’s Royal Free Hospital as a gastroenterologist at the time, did not have the ethical approval or relevant qualifications for such tests.

The GMC also took exception with the way he gathered blood samples. Dr Wakefield paid children £5 for the samples at his son’s birthday party.

Dr Kumar said he had acted with “callous disregard for the distress and pain the children might suffer”.

(emphasis original)

It’s likely that they will pull his certification to practice medicine, though this might not mean much, as Wakefield left the UK, and now practices in the United States.

His research, which was not merely bad, but corrupt, had sickened thousands of children who were either not vaccinated, or caught disease from their unvaccinated friends. (vaccines are not 100%, and the loss of herd immunity is a serious issue)

Additionally, Lancet has already rescinded the original article.

One hopes that he ends his life in jail, because he wasn’t just wrong, he pushed forward his bogus study in the hopes of making money from an equally bogus therapy that he had patented.

[on edit]
A sharp eyed reader noticed that I got his name wrong. I have corrected, but have left the original strike through to show what a complete prat I am.

Dodd Says that Financial Reform Has Stalled

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I’m shocked, shocked to find that gambling is going on here!

There is probably an element of truth to Chris Dodd’s claim that he cannot come to an agreement with Senate Republicans on financial reform:

The chairman of the Senate banking committee said Friday that efforts to reach a bipartisan consensus on sweeping legislation to overhaul the nation’s financial regulatory system had “reached an impasse,” but he said he intends to move forward even without Republican support.

For the second time since November, talks have stalled between Sen. Christopher J. Dodd (D-Conn.) said ranking Republican Sen. Richard Shelby (Ala.). Both men have expressed interest in reaching a consensus on a wide-ranging bill that would revamp regulation of the financial services industry. But after months of negotiation, they have yet to overcome a key hurdle: the proposed creation of a consumer protection regulator to focus on mortgages, credit cards and other such financial products.

The part that is suspicious, and the reason that I’m inclined to believe that he has lost interest in reform now that he is no longer running for reelection, is that he is going all Claude Rains on the fact that Republicans are not negotiating in good faith.

We’ve seen this phenomenon over and over again: Republicans do not negotiate in good faith until you have something that would kill them politically to vote against.

First you jam them up, then you twist their arm, and then maybe, just maybe, they will agree to be cooperative as you move their head toward the toilet bowl.

Oh Crap.

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The Federal Reserve has announced that it is terminating its Term Asset-Backed Securities Loan Facility (TALF) at the end of March.

Basically, the Fed buys bonds secured by loans at sub market rates, in order to keep interest rates low.

Well, now that this program is starting to wind down, we are starting to just how much rates will climb when government support is withdrawn, and it ain’t pretty:

The end of a Federal Reserve program that helped unlock credit markets is spurring sales of asset- backed bonds with relative yields five times wider than on debt secured by car loans.

The expiration of the Fed’s Term Asset-Backed Securities Loan Facility is driving companies to sell bonds tied to loans that would otherwise require higher yields. Borrowers are offering bonds backed by subprime auto loans, mortgage-servicing payments and assets that have proved hard to sell after the worst credit seizure since the Great Depression.

They are talking about auto loans, where the spread (It’s not clear, but I think that this is in comparison to treasuries) for TALF instruments is 0.35% and for non-TALF it is 1.75%.

If the end of the TALF results in anything like a 1% increase in mortgage rates, home sales fall off the cliff again, and they fall hard, because for the same payment, you have about 11% less in home prices, and people buy houses on the basis of monthly payment, not price.

Andrew Cuomo Sues Ken Lewis and Bank of America for Fraud

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Now that the SEC has settled with Bank of America over its misrepresentations, New York State Attorney General Andrew Cuomo is going after the bank for the same thing:

Former Bank of America Corp. Chief Executive Officer Kenneth Lewis was sued by New York Attorney General Andrew Cuomo for defrauding investors and the government when buying Merrill Lynch & Co. The bank agreed to pay $150 million to settle a related lawsuit by U.S. regulators.

Cuomo also sued the bank’s former chief financial officer Joe Price and the bank itself for not disclosing about $16 billion in losses Merrill had incurred before it was bought by Bank of America in an effort to get the merger approved. Afterwards, Lewis demanded government bailout funds, Cuomo said.

“We believe the bank management understated the Merrill Lynch losses to shareholders, then they overstated their ability to terminate their agreement to secure $20 billion of TARP money, and that is just a fraud,” Cuomo said today at a telephone press conference. “Bank of America and its officials defrauded the government and the taxpayers at a very difficult time.”

Of note is the fact that Bank of America performed its due diligence on Merrill Lynch in only 25 yours, which, along with their firing of their general counsel when he suggested that there might be issues, does appear to indicate that something stinks here.

Another bit of weirdness is that while BoA had intended to buy a brokerage for some time, it wasn’t Merrill, at the board meeting in which the proposal was mooted, most of the board members thought that they would be purchasing Lehman:

When Bank of America Corp.’s board met to approve the acquisition of an investment bank on Sept. 15, 2008, members thought they were going to buy Lehman Brothers Holdings Inc., not Merrill Lynch & Co., according to New York Attorney General Andrew Cuomo.

The bank bought Merrill after examining its books for just 25 hours, Cuomo claimed. Shareholders approved the deal Dec. 5, 2008. The acquisition closed Jan. 1, 2009, after Merrill losses had increased by billions of dollars, a change the bank didn’t disclose before the shareholder vote, Cuomo said.

“It’s the way we approved acquisitions that ticks me off the most!!!” director Chad Gifford later wrote in an e-mail about the last-minute switch, according to a securities-fraud complaint Cuomo filed today in New York against the bank, former Chief Executive Officer Kenneth Lewis and ex-Chief Financial Officer Joe Price over their handling of the Merrill deal.

E-mails and written notes that were gathered by Cuomo for his investigation of the matter show personal reactions of executives as they learned of Merrill’s rising losses, which reached $16 billion before taxes by December 2008. They also show Merrill kept Price informed of the losses as they grew, yet he resisted pressure from his lawyers to disclose them to shareholders.

“Read and weep,” wrote Bank of America accounting officer Neil Cotty to Price on Nov. 4, 2008, when Merrill’s financial reporting unit forwarded preliminary October results with a loss of $6 billion. The merger documents had already gone out to shareholders. Five days later, the October loss was put at $7.5 billion before taxes.

I think that this was a deliberate scheme to get some more taxpayer money to do the deal, and I hope that Cuomo goes where the SEC did not, and throws Ken Lewis’ sorry ass in jail.

H/t Huffpo for the full complaint (90 pages, scrollable PDF window) after the break.


BoA_Complaint –

Economics Update

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Scary graph pr0n of the day, option ARM resets
h/t Calculated Risk

Well, today is “Jobless Thursday,” and initial claims unexpectedly rose to 480,000, rather than dropping as forecast, as did the rather more significant 4-week moving average, while continuing claims remained flat, though better productivity numbers might indicate a bit of an upswing.

Additionally, factory orders rose more strongly than forecast in December, which also is good news.

In the class half empty/full division. we have home listings rising for the first time in 18 months, which could presage a turn around in the market (full), or the fact that sellers who were trying to wait out the downturn are finally capitulating to the real estate market (empty), which would indicate further price declines ahead.

Me, I’m a bear on this.

Meanwhile, over on the other side of the pond, the Bank of England kept its benchmark rate at 0.5%, but perhaps more significantly, it announce that it is “pausing” in its quantitative easing (printing money) through buying bonds.

I’m not sure if they are just taking a month to survey the landscape, or if they think that recovery is, “just around the corner.”

Meanwhile, the recent swings in global stock markets, along with the jobs number, have investors worried, which has them buying up dollars, and these concerns also drove oil and other commodities lower.

Whiskey Tango Forxtot?

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Warren Buffet’s Berkshire Hathaway has had its long-term counterparty credit rating cut from AAA to AA-plus.

They don’t like his purchase of the BNSF railroad:

Counterparty credit ratings reflect how well a company can meet its financial obligations with customers, trading partners or other parties.

“We believe that the railroad acquisition will reduce what historically has been extremely strong capital adequacy and liquidity, and that investment risk with sizable concentrations remains very high,” S&P said in a statement.

The rating downgrade came on the same day that Berkshire announced a bond sale of up to $8 billion to help pay for the Burlington acquisition.

You see, if Buffet buys insurance companies, good, but if he buys companies whose business which involve something tangible, that’s bad, I guess.

It’s clear that rail is in a growth curve. Oil is permanently above $50/bbl (consider my poor track record on this), and there are signs that fees to over the road truckers will reduce the subsidies given to that industry.

But all S&P sees is money being spent on big iron, and they do not like this.

OK, Count Me Disappointed

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I’ve generally been supportive of Chris Dodd. I think that he has been good on civil rights, particularly in his pushing back against torture and the PATRIOT act.

Additionally, I think that he was hung out to dry by Obama and Geithner over AIG.

Further, he was remarkably refreshing about why he dropped out of the Senate race.

That being said, his behavior on the Consumer Financial Protection Agency (CFPA) earlier, and now his opposition to the weak “Volker” banking reforms, has gotten me wholeheartedly agreeing with Barry Righoltz’s assesment of his behavior: “

Thus, Dodd proves that the only thing more corrupt than a congressperson whoring for a campaign donations to get re-elected congressperson not seeking re-election, whoring for a job.

See also here and here.

Economics Update

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Well, we had mixed signals, with factory activity rising faster than expected and construction spending falling faster than expected.

As to what you follow, I’ll go with disposable personal income and personal consumption expenditures, where spending went up less than income, increasing the savings rate, meaning that the consumer is still well into the “paradox of thrift”, and as The Big Picture observes, most of the increase in personal income is from government stimulus spending, but Obama has decided to go all 1937 on the budget. (Separate post for the budget)

Meanwhile in central bank/bond finance land, the Obama’s budget, along with the industrial growth reading pushed bond prices down, and yields up.

Meanwhile, in Oz, the Reserve Bank of Australia kept its benchmark rate at 3.75%, it had been expected to raise the rate to 4%, and so its currency took a hit.

Meanwhile in currency and energy, the ISM’s index of national factory activity drove both oil and the dollar up.

What Krugman Said

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So says the Shrill One, and so say we all:

Put it this way: if our financial system is so high-strung, so manic-depressive, that low rates for a few years can inflate a monstrous bubble, while a few discouraging words from high officials can send them into a tailspin, this doesn’t make the case that policy must walk on eggshells, forgoing any attempt to fight prolonged unemployment. Instead, it makes the case for much, much stronger financial regulation.

I would only add that one of the metrics that should be used in financial regulation is proportion of GDP. There must be a conscious effort by regulators to keep the financial industry from becoming the tail that wags the dog of our economy.

It’s Bank Failure Friday!!!!

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And here they are, ordered, and numbered for the year so far.

  1. First National Bank of Georgia, Carrolton, GA
  2. Florida Community Bank, Immokalee, FL
  3. Marshall Bank, N.A., Hallock, MN
  4. Community Bank and Trust, Cornelia
  5. First Regional Bank, Los Angeles, CA
  6. American Marine Bank, Bainbridge Island, Wa

Full FDIC list

BTW, here it is in chart with a handy, dandy least-squares trend line:

[on edit]: Updated with late failure in Washington State and tweaked graph for readability.

Economics Update

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H/t Calculated Risk

It’s what Atrios calls “Jobless Thursday”, and while the number of people filing for initial unemployment claims fell, it was less than forecast, claims fell t0 470,000, not the estimate of 450,000, the 4 week moving average rose, and the number of continuing claims fell by 57,000 to 4.6 million.

On a brighter side (above link) orders for durable goods did rise in December, as did orders for capital goods, and while the Federal Reserve Bank of Chicago’s economic activity index of fell in December, the 3-month moving average rose.

Personally, I tend to place more credence in the transportation based indices, and so the fact that the Baltic Dry Index, an index of shipping costs, fell to a 3 month low, to be the thing that I would hold onto, which makes me bearish ………… Then again, I’m always bearish.

Since I missed the economics update yesterday, I should note that the Federal Reserve Open Market Committee kept its benchmark Fed Funds rate 0.25%, effectively 0%, and while their statement was significantly more upbeat than last time, they are still signaling that the rates will remain low for some time.

Meanwhile, in real estate, Freddie Mac issued a report showing that mortgage delinquencies jumped in December, and new-home sales fell again in December, in yet another indication that the recent activity was an artifact of the tax credit, as opposed to any real market turn around.

One interesting data point, again from Freddie, is that the ratio of people cashing out from their houses to those lowering balances or rates hit an all time low, meaning that people were refinancing to lower their payments, and not using their homes as an ATM.

In the long run, this is a good thing, but in the short run, it runs headlong into the paradox of thrift.

In the more general world of finance and banking, we are seeing skittishness about things like the Greek financial problems, and so there is a flight to quality, which has increased demand for US Treasuries, which has driven the rate on the 1-month treasury to a negative interest for the first time in 10 months, interestingly enough, the T-bill auctions seem to indicate that it’s Americans who are fleeing to quality, as the last auction had robust demand, but foreign buyers seemed to be backing off, at least the foreign central banks.

In consumer debt, credit card charge-offs fell a little in December, which indicates that people are a bit more able to pay off their debt, though the fact that Chase had a “payment holiday” may be a large reason for this.

In the old standards of energy and currency, crude oil fell slightly, while the dollar hit a 6½ month high against the Euro, largely on concerns that Greece will go the way of Ukraine, the Baltic States, or Iceland.

Of course, since Greece is in the Euro zone, when none of the other nations were, that is where it gets pretty hinky.

Full FOMC statement after the break:

Press Release
Federal Reserve Press Release

Release Date: January 27, 2010
For immediate release

Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit will be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.

Well, All Signs Point to a Senate Appointment of Ben Bernanke Soon

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The current whip count has more than 50 Senators voting for him, and because Wall Street wants him, it appears that arms are being twisted in the Senate to get Senators who vote against him to vote for cloture, because, I guess, a stimulus package to reduce unemployment, or a fix to America’s broken healthcare plan, both of which required 60 votes to clear the Senate are less important than reappointing Wall Street’s lapdog at the Federal reserve.

Paul Krugman nails it in one sentence

I can hardly think of anything more calculated to solidify the view that Wall Street doesn’t have to play by the rules that apply to everyone else.

We have had reports of a number of Senators, including Barbara Boxer, who now appears to have a contentious reelection bid ahead of her.

I think that the two are tied together: Voting for Bernanke is voting for Wall Street, and your opponent can make hay of it.

Harry Reid took a slightly lower key approach, announcing his support for Helicopter Ben late on a Friday evening, so it would not get much press, and the wording is intended to make it sound conditional (it’s not). Faint praise indeed.

FWIW, if you vote for cloture, your opponent will make just as much hay of it.

Interestingly enough it is the arguments for his reappointment that make the best argument against his reappointment.

For example, we have a story saying that a Bernanke defeat would rattle Wall Street and so might precipitate a double dip recession.

It’s wrong on a number of levels, not the least of which is that we are going to have a double dip recession anyway, because, between new defaults in residential and commercial real estate and the increase in oil prices, the so-called recovery that we have seen won’t happen.

The bigger point though is the reason that Bernanke leaving the post would rattle the financial markets is because that they feel that if they screw up royally, then Bernanke will bail them out by pumping money into the system or slashing rates.

Wall Street is looking at a “Bernanke put,” which much like his predecessor’s “Greenspan put,” (both described at the same link) create moral hazard and encourage risk taking.

It’s pretty clear that Ben Bernanke is aggressively lobbying Senators to get reappointed, see his promises of transparency in the Federal Reserve that he made in a meeting with Dick Durbin, but it is just as true that all the moves toward transparency and consumer protection will end once he is reappointed and the audit bill is killed.

At this point, I think that the only chance that he won’t be reappointed lies with the accusations by Senator Jim Bunning and Darryl Issa that Bernanke is lying about his involvement in the AIG fiasco, and relying on those two lying chowder-heads is not something that I am particularly sanguine about.

Is Joe Biden Suggesting that He Might Rule the Filibuster Unconstitutional?

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He’s coming down very hard on the filibuster, and I’m wondering if he is sending a signal that, as President of the Senate, he is prepared to rule that the filibuster is unconstitutional:

“As long as I have served … I’ve never seen, as my uncle once said, the Constitution stood on its head as they’ve done. This is the first time every single solitary decisions has required 60 senators,” he said at a Florida fundraiser, according to the pool report. “No democracy has survived needing a super majority.”

The author of the story seems to think that this is an attempt to create a groundswell for using reconciliation to fix healthcare, but I think that Biden might be suggesting something even more radical.

I think (hope) that he is prepared to kill the filibuster.

The interesting thing here, is that the “Centrists” must be crapping their pants over this possibility, since their real agenda is to do nothing ever, and a change to the filibuster rules would make it much more difficult to do nothing ever.

Sent to My Senators, Re: Bernanke (Please Vote No)

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I sent them the following:

I am writing to ask you to vote against reappointing Ben Bernanke as Chairman of the Federal Reserve. Additionally, I am requesting that you support a filibuster of his nomination.

While I believe that he is a very talented economist, I believe that his outlook, and his prior performance, make him unsuited for continued service in this position.

First, and most importantly, he has made it clear that he will not move on unemployment if it means moving away from a 2% inflation target by the Federal Reserve.

His statements saying that his goal was to preserve, “the anchoring of inflation expectations,” is simply dangerous and wrong in the midst of the worst downturn since the Great Depression.

By expressly stating that he will choose to ignore the 2nd mission of the Federal, the maintenance of full employment, he has shown himself to be ideologically unsuited to the post.

Given that unemployment is at 10% by the U-3 measure, or 17.3% by the more representative U-6 measure, and there is little if any indication that there will be significant improvement in the jobless rate this year, this is short sighted and destructive.

Additionally, his fierce opposition to reforms of the financial system, particularly his opposition to the Financial Consumer Protection Agency (FCPA) shows that he is out of touch with the need to protect consumers from predatory institutions marketing dishonest financial instruments.

His suggestion that the Federal Reserve would fulfill this role, when it had that role pre-crisis, and refused to act on credible evidence of fraud and deception, is simply nonsense.

This is further compounded by his position on transparency at the Federal Reserve, where he is clearly stonewalling every effort for investigators to understand the nature of the financial meltdown of 2008.

The unwillingness to come clean on the failures that might have happened at the Federal Reserve Board and the regional banks means that there will be no meaningful disclosure, and without disclosure, no lessons will be learned, and this cycle will be repeated, particularly given his record of being an enthusiastic cheerleader for the housing bubble, and the associated dodgy mortgage bubble, before they popped.

The primary argument for his reappointment is that if he is not reappointed, it will somehow shake the financial markets, and trigger another disaster.

This analysis assumes two things:

  1. That he has been thoroughly captured by Wall Street, and so the large investment banks are demanding that he kept to serve their interests, and not those of the people.
  2. That he is simply indispensable, and as Charles de Gaulle said, “The graveyards are full of indispensable men.”

If there are lessons to be learned from Alan Greenspan’s disastrous tenure, it is that the “Greenspan Put”, where the expectation of bailout created moral hazard that led to reckless behavior, and that the “Rock Star” Fed Chair is to be avoided at all cost.

I followed up with a phone call to both offices.

Economics Update (a Day Late)

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So, we now have some idea just how much the new home buyer tax credit artificially inflated the market, because existing home sales fell 16.7% from November to December.

Since existing home sales are recorded at closing, and in order to qualify for the tax credit, the sale had to close before the end of November, this (seasonally adjusted) number shows that just anemic residential real estate is.

In overseas central banks, the Bank of Japan has kept its benchmark rate at 0.1% (effectively 0%) as they continue to fight what is now a nearly 20 year long deflationary spiral.

In energy, oil was up slightly, while in currency, the US dollar fell slightly.

Now This is An Interesting Phenomenon

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The Dallas, TX alternate weekly, the Dallas Observer, has the story of a guy with hundreds of thousands of dollars in debt from the collapse of the real estate bubble (and short sighted greed, but I repeat myself) who is now earning money by suing debt collectors who contact him and forget to cross their “i”s and dot their “t”s:

………

He [Craig Cunningham of Northeast Dallas ] leans forward to lift some paperwork out of a plastic tub on the coffee table. The phone rings, and he answers with a soft voice. It’s just a friend, and soon he hangs up. He’s waiting for a particular type of phone call—one from a representative of a debt collection agency or a credit card company, whom he’ll try to ensnare like a Venus fly trap. It’s not unlikely that Cunningham’s next call will be from a bill collector, since he’s between jobs—except for being in the Army Reserve—and owes $100,000 in debts.

While most Americans with unpaid bills dread the collector’s call, Cunningham sees them as lucrative opportunities. Many collection and credit card companies, intentionally or not, violate little-known consumer rights laws, and Cunningham’s favorite pastime is catching them doing so and then suing them. In fact, it’s a profitable side job.

Call it ironic, but the only house on the block that appears to be the foreclosed end to some sad financial story is in fact the home of one of the debt collection industry’s emerging and persistent threats. Cunningham calls himself a private attorney general—someone who files private lawsuits in the public interest. Debt collectors call him a credit terrorist.

………

I do not think that he is a terrorist, but I do think that Mr. Cunningham is a slime, not because he’s using the small print to make money from, and avoid debt, that is, after all, the game, but because he went and used things like student loans in his attempts to juice his credit score [go to the full article] in an attempt to become wealthy without really working.

I know that some would argue that becoming wealthy without work or other productive activity is the American way, but it’s slimy, and if it is the American way, then the American way over the past 30 years has become slimy and parasitic.

The way that he gets money is that the the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA) and the Telephone Consumer Protection Act (TCPA), which forbid debt collectors from violating federal or state laws, and provides for statutory damages for each instance, so if a collector threatens to garnish wages in Texas, where it is illegal, they are liable, even if the caller is in Butte Montana or Bangalore, India.

So, for example, when a collection agency started leaving pre-recorded messages on his mobile, a violation of the, and refused to stop when he asked, while refusing to show that the bill (a tiny Comcast bill), both violations of the TCPA and FDCPA, and the collection agency has

CMI has countersued Cunningham, and even asked the court for a protective order from Cunningham: “Plaintiff Craig Cunningham (herein “Plaintiff”) has filed suit against a business, Credit Management, LP (herein “CMI”), and twenty-seven (27) of its employees in their individual capacities,” reads the motion for a protective order filed in Northern District of Texas in December 2009. “Defendants move for a protective order to protect Defendants from the annoyance, oppression, undue burden and expense of objecting and responding to improper, repetitive and irrelevant discovery requests.”

In December, Cunningham was called in for a six-hour deposition, the longest he’s ever sat through, at which the lawyers printed out pages of his online comments to accuse him of acting like a lawyer. Plus, CMI insists that they didn’t violate any laws and that Cunningham is acting in bad faith. Although the company already offered Cunningham money to settle the case, Cunningham refused, asking for much more than the “industry standard,” as Cunningham calls it, of $3,500.

“If they don’t pay a bunch of money, if they don’t feel pain, they will not change,” he says.

A big win in his case against CMI could go a long way toward clearing Cunningham’s debts—if he ever chose to pay them, that is.

“I took outsize risks, and I got burned,” he says. “When myself and some other fellow small investors were losing their assets, nobody cared.”

Up until now, everything was about making easy money for Cunningham. Now, it’s about justice—or at least what he sees as justice.

He’s right about that point: All those people who scream about how the small print, and the rule of law, matter for the small debtor, seem to think that it’s somehow evil to expect large debtor and their agents.

I see courts being more amenable to claims like Cunningham’s in the future, and that is not a bad thing.

H/t The Big Picture.