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In a conversation before an audience at the IMF on May 6, 2015, U.S. Federal Reserve chairwoman, Janet Yellen, says about stock market valuations in early 2015- "I would highlight that equity market valuations at this point are generally quite high. Not so high when you compare returns on equity to returns on safe assets like bonds, which are also very low, but there are potential dangers there." She was responding to a question from IMF Managing Director Christine Lagarde on whether the Fed's low rate policies were creating a bubble in financial markets. S&P 500 company earnings for the 1st quarter- with 417 companies having reported results- show earnings growth of 0.2%, according to FactSet. The Dow Jones Average is up 0.1%, and the S&P 500 up 1%, for the year. Yellen said about financial stability- "Risks to financial stability are moderated, not elevated at this point. There was a great deal we missed before the crisis, I believe we are better prepared." The preparation includes the stress tests and higher capital requirements being set by the Fed to ensure banks can cope with losses, and the living wills arrangement for too-big-to-fail companies. Yellen conveyed her own sense of the proper role of the financial sector and the role of the Federal Reserve in promoting that role for social, economic and technological progress, in a clear and insightful manner- " A well-functioning financial sector promotes job creation, innovation and inclusive economic growth. But when the incentives facing financial firms are distorted, these firms may act in ways that can harm society. Appropriate regulation, coupled with vigilant supervision, is essential to address these issues."...

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Considering the fines and sanctions by the Financial Industry Regulatory Authority, during the time Mary Schapiro headed the organization from 2007 -2008, it did not take a serious watchdog role over the brokerage business that it was expected to supervise. NASD which she formerly headed, and FINRA, did several examinations of the brokerage business of Mr Madoff who ran a$50 billion Ponzi scheme, but failed to find anything wrong. Her agency in 2007 concluded that Madoff's firm had only violated some technical rules. Also fines and sanctions assessed by FINRA declined during the time she headed it. Fines levied by FINRA declined from $148 million in 2005, the year of her predecessor, to $40 million in 2008. Ms. Schapiro headed NASD regulatory arm in 1996, NASD itself in 2006, and FINRA after its creation in 2007. FINRA is a private agency set up by Wall Street to regulate itself. As the prevailing opinion at the time, with the SEC severely understaffed, was that Wall Street could regulate itself, agencies like FINRA had a bigger responsibility than was realized by Ms Schapiro and others. One securities lawyer who represented firms examined by FINRA, says FINRA should at least have asked more questions about the Madoff operation. In a November 2006 speech to the Securites Industry and Financial Markets Association, Mary Schapiro says, "we remain utterly committed to our regulatory mission but we should be also committed to doing no unnecessary harm or restriction to innovation in the industry and markets". Some of the stuff that went on in the name of innovation went against some basics and commonsense, and the failure to follow tested old good financial practices to separate sound innovation from unsound innovation, was a failure of that period. Schapiro's statement seemed to be a contradiction of a severe nature when examined closely, because how could she remain committed 100% to the regulatory mission if she made strong exceptions for innovations whose true logic and effectiveness only time could tell. The element of caution that should be a key part of the regulator's temperament and mental build was entirely missing. See the link to financial regulators in India, and of how this task was handled with that element of caution and skepticism of prevailing opinion. Other failure of FINRA is that it lagged behind state regulators in catching upto the mess resulting in afreeze up of auction rate securites markets. In June and July 2008, Massachusetts and New York securities regulators filed fraud charges against big firms in that matter. Another failure was the failure to look into the mortgage securites that were held in brokerage accounts and see that the valuations of these securites are sound. Finra only filed small cases against Lehman Brothers, with a fine of only $125,000 for failing to keep accurate books and records. As late as May 7, 2008 in speaking at the Financial Services Institute meeting, Schapiro was asked about what FINRA was doing to regulate complex packaged products like mortgage securites. And even though credit rating agencies had by this time been exposed as having failed, Ms Schapiro would only say, according to a financial advisor who asked the question, that "we have credit rating agencies that rate them." A pretty hands off view for a regulator when the cracks in the system were already exposed in mid 2008. Another facet of this is the high levels of compensation especially for a regulator. For her job at FINRA she received pay of $3.1 million a year including $2.5 million in compensation and $615,000 in benefits and deferred pay. In 2007 she also earned $449,000 in cash and stock grants as director of Duke Energy and Kraft Foods. All of which means that it is straining credulity for Obama to suggest that Mary Schapiro is the best person the Democrats could find for this critical job, in which the record has been severely impaired....

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Actually some of this is a healthy development as more nations and people have a stake in the world economy. Take the Brazil situation for example . Clearly the Brazilian people are more favorable to globalization and its benefits than they were a decade ago at the height of the Asian crisis and the contagion effect on Brazil. Actually the advantages of free trade and a global trading system that benefits Brazil as well as China and India and other countries that buy its commodities such as iron ore is more now than ever because these nationas are benefitting from this trade. Because of the high prices of commodities and the agricultural products of Brazil, it has a currrent account surplus and its currency is strengthening. Instead of having to go to the IMF for assistance Brazil has large foreign exchange reserves that support its currency and which help it push up its investments as a share of GDP from 19% to closer to 25%, which should enable it to sustain about 5% growth year after year., according to Sergio Vale of MB Associados. A strong real, lower interest rates, and consumer credit have boosted the purchasing power of the middle class and the antipoverty programs of the Lula government have helped the poorer classes have a stake in the development. According to a recent Observador/Ipsos survey 23 million Brazilians have left social classes D and E and joined class C whose distinctive markings are a rented apartment, a car and some new gadgets. Actually quite to the contrary of the impression created by this article Brazil according to a former central bank governor is now showing a new enthusiasm for this kind of development which encompasses free trade and markets, a feeling that the stockmarket is not a casino and being part of the world economy is a good thing. The big discoveries of oil at Tupi and Carioca-Sugar Loaf in Atlantic offshore waters by Petrobras even though they are in miles deep waters and require special expertise must only have reinforced this mood. The danger to Brazil's enthusiasm comes not from nationalism of different countries trying to find better ways of meeting the aspirations of their people but from the risks in a global slowdown that started with the US subprime and mortgage crisis, the resulting credit tightening, and fall in consumption thats expected after years of overspending by the American consumer. Its now upto these individual countries, like Brazil, China, India and Russia, Japan as well as Germany France and other countries that are not directly part of the housing bubble and subprime and mortgage securitization mess affecting the USA, and the UK and Ireland and Spain to a lesser extent, to find ways of maintaining more modest but still substantial growth to meet the growing aspirations of people in these countries. In this sense the policy errors and regulatory errors made during this last decade in the US will actually have hurt the world economy and markets in a serious manner, and it is this that has now to be managed in a better way by these countries with the close cooperation between them and the USA. The situation in Brazil is repeated in the experience of India, China and Russia where for the first time there is enthusiasm for being part of the world economy. In the light of this development there is more reason for hope and more need for careful navigation mechanisms for these and other countries to weather the difficulties from a global slowdown and still sustain development that itself could help the USA work its way out of the current crisis through its exports....

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The case brought against Bank of America's Countrywide unit under the Firrea Act of 1989 for the "Hustle" mortgage program and misrepresenting the loans sold to Fannie and Freddie mortgage agencies. The case was brought by the U.S. Attorney for the Southern District of New York and is being handled by Manhattan District Court Judge Jed Rakoff.

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The U.S. Federal Reserve Flow of Funds report for 2011 shows Fed purchases of 61% of total net Treasury issuance. Goodman points out that the net issuance of Treasury securities for covering U.S. budget deficits is normally 0.6% to 3.9% of GDP on average for the last six decades since 1950, compared to on average 8.6% of GDP today. A big jump in Fed purchases with a corresponding steep fall in the participation of foreigners and the private sector. Foreign purchases declined from 6% of GDP in 2009 to 1.9% of GDP in 2011. U.S. private sector- mutual funds, banks, corporations and individuals- purchases declined from 6% of GDP in 2009 to 0.9% of GDP in 2011. This helps keep interest rates low and funds U.S. government needs. Lawrence Lindsay pointed out in the WSJ in 2011 that Fed has itself boxed in being forced to keep interest rates low for years. If the government borrowed at a more normal rate of 5.7%, instead of the Fed induced rate of 2.5% today, Lindsay estimated the U.S. government would face an additional $800 billion in interest costs by 2021....

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How do you get the hiring right. The worst way to go is to hire people and then find out that it doesn't work -its a wwaste of a lot of time and can cost the company dearly whether its small and beginning growth or facing a spurt of growth and needs more people. Jack Welch of GE suggests being very careful at such times so you don't mess it up. What about the involvement of other people in the company? This is important. From the top to other levels its a good idea to get involved especially in businesses where people can make a huge difference. Sony's Akio Morita used to personally get involved for each and every hiring in the early days of the company considering that a lifeline for the company- he used to see Sony as a pioneer and entirely dependent on the people it hired and what they did everyday. Jack suggests getting the involvement of other employees and who understand the company and whats its tryng to achieve and what kind of people strengths it wants. But in larger companies there may be a tendency not to get involved because no reward or incentive is there for time spent in this very important activity when there is so much else to do. So he suggests making it mandatory that employees be rated or scored and how well they do, so empolyees interviewing don't take a cursory or casual approach to interviewing. Employees are also mentored. After 6 months the hiring interviewers are rated based on the decision they made and this way at least one can keep score on who is more effective at this. However like all such practices when codified you run the risk of hiring interviewers playing it safe so that a lot of bold and exciting candidates might just be left out. So stick with the spirit of this more like Sony and let signal to people that every newemployee is important to the future of the company and the CEO personally taking an interest in individual employees and new hires interviews, and letting this energy flow into the ranks of those who are hiring. ...

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Bond investors are looking to Japan for clues after the U.S. credit downgrade and two years of zero interest rates. William O'Donnell, chief Treasurys strategist at RBS Securities sees similiarities with what happened in Japan- short term rates near zero and long term rates headed down. strategists see the U.S. 10 year Treasury note dropping to less than 2%, from 2.23% today. Japan's 10 year Treasury note yields 1.05%. O'Donnell's forecast is for 10 year rates to be at 1.70% by mid-2012.

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JP Morgan and Citicorp announced profits of $5.4 billion and $3.3 billion respectively in the second quarter of 2011. Christopher Whalen points to one area of serious risk on bank balance sheets, which is second liens or home equity lines of credit. FDIC data show U.S. banks holding $624 billion in second lien loans in the 1st quarter 2011. Core Logic data shows 11 million of the U.S. mortgaged properties - or 23% of all properties- being underwater in March 2011. Of this 4.5 million properties carry home equity loans. The average amount of negative equity for borrowers was $65,000. Whalen says the largest banks are pretending that the second liens are good because interest payments are being made. Borrowers pay only the interest for ten years on many of these home equity lines of credit. He says banks have written off $500 billion so far in assets related to housing, but this has not included much in the way of writing down second liens. If housing prices do not stabilize banks will need to make writedowns of first and second liens. Whalen says this loss is probably as large as the $500 billion already charged off by the banks. For the 1st quarter of 2011, the second liens were $136 billion for Bank of America, and it has written down $6.8 billion in 2010, Wells Fargo had $108 billion, and it had written down $4.7 billion in 2010. J.P. Morgan had $60 billion aso of the 2nd quarter of 2011. JP Morgan spokesman said the bank charged off $3.44 billion in 2010, and $1.3 billion in the first half 2011. Citibank had $46 billon in March 2010....

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Experts view Countrywide as being at the core of the problems at Bank of America, which has lost 60% of its share price in 2011.