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The British Bankers Association calls for new rules in setting of the LIBOR rate. Angela Knight, CEO of BBA said: "I don't think even in your wildest dreams you could have thought it was going to be like that." The Bank of England is more likely to to be directly involved in the setting of the LIBOR rate under new rules.

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The legacy of extremely low interest rates near zero left by Italian banker Mario Draghi has he leaves the European Central Bank to be succeeded by French head of the IMF Christine Lagarde. There is considerable division in the ECB as Draghi launches yet one more program of bond buying called QE for quantitative easing- in effect reducing the interest rate of the ECB to minus 0.5%. All this is being done to address problems of economic growth in the eurozone which originate from other causes such as poor banking practices, overborrowing by member states and lack of transparency in countries such as Greece, the lack of investment in infrastructure, increase in part time workers in economic uncertainty generated from poor banking, essentially a lost decade. The ECB's monetary policy committee staff oppose the move and so do 7 of 25 members in the governing council.  Instead of tackling root causes this had the adverse effect of hurting savers in Europe and the U.S. leading to higher inequality and wearing out of social safety nets.   ...

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A new report, "China: 2030," by the World Bank and the Development Research Center (DRC), has major implications for the course of action taken by new Chinese leaders. The limits to China's economic model with the dominant role of state owned companies has been pointed out in the past. It has now reached a point where China must choose to move to a modified model or face the "middle income trap" of countries like Brazil and Mexico, where income levels and growth reaches a certain level and then decelerates suddenly with little warning. The report makes some major recommendations that would modify the current system. It says the state owned companies should be supervised by asset management firms focussed on commercializing these companies, and not supervised by the State-owned Assets Supervision and Administration Commission (SASAC). The asset management firms would restrict the state owned companies on what areas they participate and sell off businesses to make it possible for private companies to compete. Zoellick says- "China needs to restrict the role of the state-owned companies, break up monopolies, diversify ownership and lower entry barriers to private firms." The state owned companies would be required to pay sharply higher dividends to the government which could then be used for social programs. Currently state owned companies invest in land which is sold by local governments for revenue helping fuel the real estate bubble. Significantly, the report had its origins when it was proposed by Mr. Zoellick, head of the World Bank, during a visit to Beijing in Sept 2010. It was supported by Li Keqiang, then vice premier, and now expected to be the new prime minister of China. The World Bank is widely respected by Chinese leaders because of its assistance during the early stages of reform in the 1980's. The DRC reports to China's State Council, a top governmental institution, and the No. 2 person at DRC, Liu He, is a senior advisor to the Politburo Standing Committee. He helped draft the current five year plan and is close to Li and Xi Jinping, the next president of China. The SASAC has opposed these ideas, especially any shift in its personnel selection of management at the state owned companies, which it shares with the Communist party's personnel department. Respected China economists say China faces large risks of a sudden sharp slowdown because the the state owned companies have largely copied foreign technology and have not generated enough technological advances, which will be needed for the next stage of growth. Lower growth rates could worsen problems in China's banking system leading to a crisis. The Conference Board, estimates China's growth at 8% for 2012, slowing to an average annual growth rate of 6.6% from 2013 to 2016. Barry Eichengreen of UC Berkeley, Donghyun Park of the Asian Development Bank, and Kwanho Shin of Korea University, say the annual growth rate will drop by at least 2 percentage points by 2015....

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This editorial in the Economist says Britain's economic recovery will not be complete until interest rates are well above zero and productivity growth is established. Without productivity growth and growth in wages, both lacking in the economic recovery since 2009, tax revenues will not be enough to reduce the deficit, requiring more spending cuts. That means the Bank of England will not raise interest rates, keeping a situation of no rate changes prevailing since March 2009 when the central bank cut rates by 0.5%. In the current situation the Bank of England is not expected to raise rates till 2016, only after the U.S. Federal Reserve increases rates to avoid appreciation in the pound and further deflationary pressure, according to Goldman Sachs. With inflation currently at zero, following the drop in oil prices, and 10% appreciation in the pound since mid 2013 making imports cheaper, there is little pressure to increase interest rates. In 2011 inflation with rising food and energy prices reached 5.2% , but the Bank of England did not raise rates because of the eurozone economic crisis affecting growth. Only since 2013 has economic growth picked up with 1.2 million jobs created since the beginning of 2013, bringing unemployment down from a high of 8.5% in 2011 to 5.6% in May 2015. Throughout the recovery productivity growth is falling behind- 2014 productivity measured by output per hour worked was 1.3% lower than in 2011, and 14% below the pre-crisis trend, according to the Economist....

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Gongloff points out that the word exemption occurs on 100 of the 200 pages of the final draft of the Volcker Rule published for comments in September 2011, for a total of 426 times. The banks have 2 years after its introduction in July 2012 to comply with its provisions and are allowed to petition the board for 3 one year extensions taking the process to July 2014 or July 2017. And this whole exercizes resembles some form of kabuki theater as the title of this piece suggests, and makes going through its detail meaningless. Especially since the probability of a new administration in 2014 or in 2017 are high. At that time new rules would be written.

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Visa Inc., MasterCard Inc. and some large banks agreed to a $6 billion settlement for a lawsuit that alleges price fixing. It provides an additional $1.2 billion fee relief for retailers. Visa will pay 67% of the settlement, MasterCard 12%, and the large banks 21%. Merchants pay about $25 billion each year to card issuing banks in interchange fees charged for each credit card transaction. Large retailers filed the lawsuits in 2005, including Kroger, Safeway, Walgreen. Other merchants including doctors and small business owners joined the lawsuits, which were later combined in the U.S. District Court of Brooklyn.

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Of the $19 billion in aid to farmers for the coronavirus, $16 billion of the Coronavirus Food Assistance Program, goes in direct payments to farmers and rancher with checks going out end of May. Another $3 billion goes to mass purchases of dairy, meat and produce that will be distributed through food banks. Faced with loss of sales with restaurants and schools closed, and disruptions in deliveries to grocery stores, farmers in the U.S. have stopped or slowed production. As a result huge quantities of food that can't be sold are being destroyed. Plowing under thousands of acres of vegetables, dumping millions of gallons of milk, and destroying eggs. In addition to this aid Agriculture Secretary Perdue says the department is using funds set aside under the larger coronavirus relief aid package of $2 trillion for the U.S., and funds from the Commodity Credit Corporation. Mr. Perdue is himself a farmer from Georgia, who was governor for eight years. These funds are separate from the $28 billion to farmers being distributed by USDA to offset losses from loss of sales to China. USDA plans to make monthly purchases of $100 million each of fresh produce, dairy products and meat, and work with the nation's food distributors to assemble a pre-approved box of food to be given out at food banks and other outlets. ...

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Paul de Grauwe, a economist at the London School of Economics points to two problems with the June 28, 2012 EU deal that allows the EU rescue fund to buy Spanish and Italian bonds and provide capital aid directly to Spanish banks. One is the limited funds of the rescue fund, European Financial Stability Facility or by its other name European Stability Mechanism. The EFSF or ESM lacks credibility because it lacks resources, it has only 248 billion euros, and has to first raise money in the bond markets. A better approach would be for the ECB to buy Spanish and Italian bonds aggressively, allowing a smaller spread between these bonds and the German bonds, says Grauewe. Germany is the largest shareholder at the ECB and opposes this move as a form of mutualizing of debt in the EU. Grauwe's recent paper shows that the depressed bond conditions for Spain and Italy are driven largely by a psychology of fear and not hard true economic numbers. Christopher Marks, global head of debt capital markets at BNP Paribas, says it is important to create the confidence to get longer term core investors such as pension funds, sovereign wealth funds and insurance companies back into this market for Spanish and Italian bonds by reducing volatility and yield. These longer term investors have left the market creating a severe problem. The shorter term investors, who came into this market in the last 1-2 years, are now the loudest voice saying Spain and Italy are likely to fail. These shorter term investors are either selling these bonds short or getting credit default swaps. A big problem coming out of the June 28, 2012 agreement, is that it is short on details. The details of how the rescue fund will operate, its funding, and the conditions for making making direct loans for stakes in banks or buying government bonds are still to be clarified. Germany's Constitutional Court also will rule on how this would be conducted and the Merkel government would continue tough negotiations on the details creating added uncertainty. ...

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The new set of sanctions imposed by the United Nations on North Korea would mean the loss of about $1 billion from exports. China's support was won by delaying sanctions on Chinese banks that do business with North Korea. The sanctions prohibit all exports of iron ore, coal, and seafood. Exports of coal to China have come down from earlier efforts, the new restrictions will tighten the sanctions. Two areas that remain are the remittances of Korean workers overseas, for which a limit is set, and the Chinese crude oil exports to North Korea. Experts say this leaves some areas untouched. Chinese banks are critical to North Korea's access to foreign exchange, and oil imports from China are also critical.

 

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The checks and balances put inplace by the founders who designed the US Constitution with the two houses of parliament, the Supreme Court, the US Federal Reserve as central bank, and the state governments and large city governments, in a delicate system of balance. The entire house elected every 2 years and the presidency for 3+1 years 3 for governing and the 4th year of primaries and preparing for the next election are other forms of this checks and balances.

Jerome Powell at the Fed will be governor till Jan 2028 and Fed chair till May 2026. Powell plans to complete his term in office and preserve the Fed's independence as designed in the charter for the central bank.

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This report in the WSj shows the work of 477 on the ground workers and economists at government agency Bureau of Labor Statistics. These workers track changing prices on hundreds of thousands of goods and services every month. This work adds up to form the Consumer Price Index which shapes policy of central banks on inflation and cost of living increases for Social Security, government policy on inflation. Thus report looks at one day in the life of Ms. Mascitis, 50, as a price BLS price checker, visiting an auto mechanic shop for the cost of a rear brake job, full brake replacement, and a visit to grocery stores where she sees problems of shrinkage in packaging that affect price. 

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One of the failures of presidents who preceded Mr. Biden, was to let the revolving door policy of letting private sector executives to join government and set rules that favored the companies they had connections with. This made it harder to tackle the problems of the 2009 global financial crisis triggered by corporate overleveraging and shoddy mortgages. It also left workers and families unprotected, failed to invest in rebuilding American infrastructure, and did not do enough for the middle class. The result was a recovery that failed workers and families- a challenge left for Mr. Biden to tackle and requiring vigilance to avoid missteps such as this one of letting banks and  large corporations write the rules they must follow.

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A French Appeals Court upholds a 2019 verdict of penalty on Swiss bank UBS for helping wealthy clients in France evade taxes. The court ordered UBS to pay $2 billion, reducing the earlier penalty from $5 billion.

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Japan is playing an increasingly positive and significant role in stabilizing the international financial system, and in providing new ideas for solution and proactive measures, some of it based on its own experience with a long sustained economic downturn from which it only recently emerged. It has dedicated $100 billion to the IMF for loans to emerging economies, which will be a significant help in preventing a severe downturn in developing countries. Here Prime Minister Aso outlines ideas that Japan will bring to the global talks this weekend November 15-16, 2008. The significant immediate steps are early and thorough disclosure of nonperforming loans based on valuation and reliable standards, and the removal of these loans from their balance sheets as a top priority. Japan was slow to do this prolonging its downturn into a decade or more of no growth. Other two priorities are injecting capital into banks with government money, and supplying ample liquidity from central banks and US dollar liquidity. After the immediate challenge there lie 7 areas to be addressed in the medium term. Improving savings and reducing consumption in countries dependent on external debt and moving to domestic demand led growth in export dependent economies. Bolstering the resources of the International Monetary Fund and the Asian Development Bank. Changing the governance structures of the IMF and the World Bank and other bodies to give proper representation to emerging economies that play an important role in the world economy. Giving the Financial Stability Forum a status above standard setting institutions like the Basel Committee, the Forum reinforced and reorganized to give membership to emerging economies. International Accounting Standards Board, governments, companies and investors in ajoint effort work to come up with a set of standards that have global application. And tightening standards for credit rating agencies through the International Organization of Securities Commissions. Aso proposes giving various countries legal authority over these agencies and the nurturing of credit rating agencies in each region in addition to global agencies, for the development of regional bond markets. Aso is also pushing for regional cooperation like the initiatives in East Asia such as the foreign exchange swap mechanism. ...

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India's central bank, the RBI, said inflation is expected to moderate to 7% by March 2012. RBI's economic growth forecast for India was lowered to below 7.6% for 2012.

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After years of austerity policies from the Conservative Party, Britain is looking at new ideas to reorganize the economy and society. The 40% of the British vote taken by the Labour Party has given new impetus to think tanks looking at ways to reshape the British economy and society in coming decades. At issue are the effects of austerity in increasing poverty, rising inequality, and fewer protections for working class people.  The new think tanks include Common Wealth which aims at making changes to British business to provide more representation for labour and provide share of ownership to workers in an enterprise. Common Wealth came up with the ideas and policy for the Labour Party's plan to give 10% of ownership equity in large companies to worker owned funds. Mr McDonnell, chief economic policy maker of the Labour Party, has suggested a trial of a universal basic income, which has led to policy ideas and economic framework development from think tanks. A key idea is to frame how these new ideas can be implemented under a future Labour government, now that there is public disillusionment with the Tories under Theresa May.  ...

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Money managers, including AllianceBernstein's Daniel Loughney, say months of difficult negotiations and brinksmanship on Greece have affected the euro currency and may appear negatively in the euro's future in the coming years. The euro declined at one point in the negotiations to $1.05 in March before going back up to its current value of $1.12 in June 2015. This compares to the value of $1.40 in summer 2015. Compared to 2012 the markets in Southern Europe and the euro currency are largely protected from the situation in Greece, as little of the Greek government debt is held by banks and the private sector outside Greece. Some money managers (Franklin Templeton Inc. and SLJ Macro Partners) are even saying Greece's exit from the euro may be a good thing. Extraordinary liquidity is available from the ECB's bond buying program started in March 2015, protecting the eurozone banks and markets.

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The FTC's $108 million settlement with the Bank of America for some of the questionable practices of Countrywide in its mortgage business, and its billing of borrowers way beyond the usual rates for services. The money will go to some 200,000 borrowers.

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The Beige Book report of the U.S. Federal Reserve for April 23-May 25, 2012, showing moderate growth in 10 of 12 bank districts.

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The first of a series of quarterly reports put out by the Federal Reserve Bank of New York, on the subject of household debt and credit. It shows that the process of unwinding consumer debt in the US is a slow and painful one. The figures tell the story, which touch every aspect of the US economy and business, with ripple effects through the world economy. Total consumer debt is $11.7 trillion as of June 30, 2010, which is down 6.5% from the crest reached in the third quarter 2008. Credit card accounts are down 23% from the high reached in second quarter 2008, and mortgage obligations down 6.4% from 2008. By mid 2010 11.4% of consumer debt was delinquent, and this was up from 11.2% in 2009. $1.3 trillion of consumer debt is delinquent, and $986 billion is seriously delinquent- that is 90 days late. Serious delinquencies are up by 3.1%. Other figures fromt he Fed report: Half million people in the USA had a foreclosure added to the credit reports for the period March 31, 2010 to June 30, 2010. This was up 8.7% above the figure for first quarter of 2010. New bankruptcies showed up in credit reports for 624,000 people during that quarter, an increase of 34%. Another major problem stacked on top of this for consumer spending- the Fed's interest rate policy according to Todd Petzel, chief investment officer of Offit Capital Advisors, burdens consumers with a tax of $350 billion in income lost from low to zero interest rates. This creates two problems of its own. Not only does it depress consumer spending. It also makes consumers reach out for riskier investments. This figure was calculated by taking $14 trillion in debt issued by Treasury, federal agencies and municipalities. Rates are near zero on short term Treasuries compared to 3% average over the years. Taking 2.5% on $14 trillion, the figure of $350 billion was arrived at. Or 2% of gross domestic product. Analysts say that it would be better not to save a few zombie banks at the expense of consumers and pension funds. It lowers the cost of the deficits through the lower interest rates the government pays on its debt, but lower consumer spending and a limping economy hurt tax revenues and increases the deficit....

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The impact on ASEAN countries of the monetary expansion policy of the Bank of Japan, Japan's central bank, and the policies of the Abe administration. Infusion of new liquidity into Malaysia, Singapore, Indonesia, Thailand and Vietnam.

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The American Treasury Secretary who handled the 2008 financial crisis, Henry Paulson, gives the new US financial reform legislation an incomplete grade. His main concern is that the too-big-to fail risk in the US banking system continues, and without clear rules a lot depends on the regulators. He does not see higher capital requirements doing much to ease that problem, and sees another crisis in a few years as inevitable. Former SEC chief, Harvey Pitt, gives it an F for failure or an I for Incomplete. He sees it as a boon for lawyers, because it is not clearly written and leaves so many loopholes, to a degree that is simply astounding. He says it does nothing in the way of preventing another crisis. Does nothing for transparency, nothing for monitoring and action by regulators, all factors that led to the crisis of 2008. Nouriel Roubini gives it a C+, because it does little to fix the reasons why securitization failed and caused the crisis, and in this way will keep credit creation and expansion in a weak state. He sees this financial reform bill as a failed effort that is laying the ground for the next crisis, with little action in the "too-big-to-fail" area, a huge dilution of what former Fed Chairman paul Volcker had advocated in the Volcker rule, and no real impact on the risky trading of derivatives. Bill Gross of PIMCO gives his frank assessment in no uncertain terms. A D+ for this bill. It shows how lobbyists for the banks still control Congress he says. It would have been better to let Paul Volcker take charge completely, than to have the lobbyists dilute the critical reform proposals. Simon Johnson gives it the lowest passing grade at MIT, a B. The only large change he says, is the Kanjorski Amendment, which give federal regulators the authority to breakup the large banks. But he cautions that it may require another crisis for the regulators and Congress to "get it," and do what they should be doing....