IMF still very critical of US banking and financial system

When I was reading CNN this morning, I came across a story regarding a strongly worded report from the International Monetary Fund, the Bretton-Woods financial organization that exists to foster international trade and monetary cooperation around the world that, while it noted some positives, noted a lot of negatives in the financial system of the United States.

Most troubling was the fact that the “Big Banks” noted in the 2010 report issued by the IMF have since “gotten bigger,” by absorbing or otherwise acquiring smaller banks. Indeed, it noted two prime examples in JPMorganChase and Wells Fargo, two powerhouse banks which got even larger as it acquired smaller banks during and after the Great Recession that weren’t able to do as well, further increasing their already behemoth sizes. Said the IMF: “Large and interconnected banks dominate the system even more than before.”

Further troubling was the Student Loan market, which has exploded since the Great Recession, tripling in size since 2005 to $1.2 Trillion, per CNNMoney. When one considers students who are drowning in student loan debt may not have a healthy enough debt-to-income ratio to acquire forms of credit, such as unsecured credit, automobiles or even mortgages, the threat to the economy in the future that could be developing becomes quite clear.

Further concern was that of the “shadow banking industry,” per CNNMoney as well, which is the more investment-based banking that includes hedge funds and big-money insurance companies, now account for more than 70% of assets, per the IMF. One major danger to this is that these organizations are not banks, and therefore, are not subject to the same laws and regulation that more “Main Street Banks” or even “Wall Street Banks” are subject to; which open the gates on possible threats to Main Street consumers.

Even moreover, was the detail that even though the Dodd-Frank Act is approaching its fifth anniversary, it’s largely not implemented. Dodd-Frank, often cited as the greatest overhaul in the American financial system since the Great Depression, included many consumer protections, particularly in the mortgage and credit industries.

While not necessarily stated in the IMF report, it does bear mentioning that the Volcker Rule, named for Federal Reserve Chairman Paul Volcker, was not included in the verbiage for Dodd-Frank, which would prohibit the trading of depositor monies with the [Main Street] Bank off of the Bank’s own accounts — like those on Wall Street Banks; one of the catalysts of the 2007 Great Recession, per his own words.

Further risks cited by the IMF were that of Fannie Mae and Freddie Mac, the common names for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, government-sponsored entities in the housing industry. The IMF has noted that because the government still has direct control of these entities, which creates fiscal risk, it noted.

So… have we made progress overall? Or do some of the new minuses subtract against the positives we’ve made, leaving us largely where we were several years ago?

Good question. I honestly don’t know. [weighs hands] Consumers have a lot of new protections compared to a decade ago, thanks largely to the new Consumer Financial Protection Bureau; and even in the mortgage industry’s new “Closing Disclosure,” which streamlines three closing documents into one document that makes things a little easier to understand — eliminating some paperwork, and eliminating three separate pieces of paperwork in favor of one.

Further Reading:

http://money.cnn.com/2015/07/07/investing/imf-warns-us-financial-risks/index.html

– http://www.imf.org/external/pubs/ft/gfsr/

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China shields North Korea from reports, citing them “divorced from reality.”

Having not posted recently, I figured this was as good a topic as any to cover…

The People’s Republic of China, through its representative in China’s Mission in Geneva, said of a UN Report on Human Rights abuses in North Korea; that the reports of Human Rights abuses in the Democratic People’s Republic of Korea are “divorced from reality,” placing themselves in the way as a shield to the atrocities reported of North Korea, particularly their prison camps.

The report itself, made by a panel of jurists commissioned by the United Nations, specifically pointed to reports from political prison camps; and indeed, by those fortunate few who have escaped and are able to give eyewitness [and, further, often physical evidence] accounts to the regimes tactics of political imprisonment.

The government of the DPRK has stated that the reports are “a fabrication by hostile forces,” the standard-issue rhetoric when North Korea speaks in relation to critical statements made of it.

By Beijing’s willful “shielding” of North Korea’s human rights abuses, it makes one wonder if they may not take further action to shield their ally — and how far they may go to do so.

Further Reading:
UN Report on North Korean Human Rights

China’s call for a “De-Americanized” Future?

317b5967cf5b1b4ca8849bfa3f7f89e52a4d4aeeWhile this would, no doubt, be disastrous for the American economy, which is vastly based on the “full faith and credit of the United States government” of the United States dollar — could China’s own less-than-impartial statement that the future of the world should be “de-Americanized” have a point?

Partisan infighting in Congress, on top of massive trade deficits with China and Japan (among others) are threatening the faith the world has in the US government’s ability to pay the debts it has already racked up — even in simple interest payments on Treasury Bills and other things.

While there’s yet been a default on any obligation of the United States, if partisan gridlock doesn’t change in Washington, could it be an inevitable future?

Those on the right say our borrowing to fund the government and to pay our obligations say this is an unsustainable model do have a point.  Borrowing forever with no intention to fix it will only result in a catastrophic failure — sooner or later.

However, liberal economics specifically state that when the economy is in a recession, or otherwise growing at an anemic rate, that it is the government’s duty to pump money into the economy to ensure that consumer confidence remains high and that people spend — particularly during problems like high unemployment or lower consumer confidence, the two silver bullets to economic futures.  When people are scared (fiscally speaking) they withhold money; and not spending money grinds the economy to a halt.  Very effectively.

Are both goals mutually exclusive?  I don’t think so.

While a plan to begin to work down our debt obviously needs to be in place, because consumer confidence still hasn’t fully recovered from The Great Recession, this is where [neo?]liberal economics comes in.  Adaptive economics, in particular.  The economy “running itself,” particularly without any regulation, obviously doesn’t work as much as an authoritarian, centrally planned economy.  A government buffer helps “prop up” the economy, while the wheels of the private sector continue to spin.

It’s a mess, but it’s one we can fix — if we come together and work the problem… and not just point fingers — and America can still be a leader in the world.

UN on Belle Isle? Detroit had a say in this…

English: The James Scott Memorial Fountain in ...

English: The James Scott Memorial Fountain in Belle Isle Park, Detroit, Michigan, United States. (Photo credit: Wikipedia)

Back in the 40s, even during the hottest parts of World War II, the world was trying to decide exactly where to place the headquarters of the up-and-coming United Nations, a place where the nations of the world could come together in a single place and discuss everything from commerce to diplomacy.  In the midst of this, Detroit jumped right in and said “We have the PERFECT place for it!”

The place: Belle Isle.  A large island connected to Detroit, now a preserve and park, then, almost became the world’s center of diplomacy.  It’s location almost dead-on the US-Canadian border made it an ideal place in the eyes of local leaders — on both sides of the border.

Indeed, almost over night, the City of Detroit found itself in hot competition with other cities across the nation, including Boston and Chicago.

When it was decided that the Midwest was far too against the idea of Globalization than more costal areas, that, and a grant from John Rockefeller in the amount of $8.5 Million USD essentially made the deal for the City of New York.