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Questions abound about Steven Chu, is he a scientist who handled administrative positions, like being vice chairman of the Physics department at Stanford, and head of the Berkeley Lawrence Livermore Laboratory, with its $600 million budget and 400 staff? Or is he something more with the stuff to get things done to remake the way America makes and uses energy? Because running the Energy Department means running a place with 114,000 employees and a budget that has doubled under the Obama administration. And he has to disperse $39 billion in Stimulus money without it being wasted. And the priorities are just as big and important- ending America's dependence on fossil fuels, rebuilding the nation's electrical grid, and addressing climate change. WIth so much to be done, answering questions in Congress and handling the media may not be the hardest part, even though its the stuff that he likes the least. Its making things happen with the right investments in place for the new technologies that would help break the dependence on fossil fuels, and address climate change. Right now he has no Deputy secretary. He has brought in Matt Rogers an energy expert at McKinsey & Company. Matt and Chu's brother Morgan provide insights into his character. Says Matt Chu is kind and nice but he is not patient. He likes to see things move muuch quicker than things are done around the Energy Department. Chu himself talks about this. He says the bureaucracy in Washington is a place where Newton's law of motion does not work. Once things are set in motion you have to apply force or the bureaucratic atmosphere gets it derailed and it stops. His brother Morgan points to Chu's inclination to challenge established dogma. ...

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A review of the Volcker Rule for bank regulation in its final form by the WSJ in Dec. 2013 shows it leaves out language permitting portfolio hedging. Banks will not be allowed to use portfolio hedging creating new risks. Regulators wrote in the rule that hedges are not to "give rise .. to any significant new or additional risk that is not itself hedged contemporaneously." The Volcker Rule in its final form was influenced by regulators awareness of the J.P. Morgan Chase bank's huge losses from portfolio hedging in the Whale case. Senators Merkley and Levin in the U.S. Congress wrote to regulators saying a loophole in the Volcker Rule allowing portfolio hedging would lead to a repeat of the "London Whale."

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The difficult task ahead for Fiat's Marchionne, trying to reverse Chrysler's decline. Running Opel and Fiat, will take a lot of energy and initiative, and its by no means clear how he is going to go about doing this. Some arithmetic done by analysts shows the value of the Fiat, Opel, Chrysler auto companies, by excluding other non-auto parts of Fiat, and taking out Fiat debt and liabilities estimated at $8 billion euros. And taking that number and Fiat's market cap, the difference gives a value of 5.5 billion euros as what investors ascribe to Fiat Auto and its ambitions. This is just one fourth of the Fiat auto units 2009 revenues of 21.7 billion euros, as estimated by Morgan Stanley.

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In this report November 29, 2019 Jeanna Smialek in the NYT raises the cautionary flag on the Randy Quarles  period as Fed's vice chair of supervision. The Fed and FDIC report issued April 29th 2023, puts the fault for the lax supervision of Silicon Valley Bank on the culture that sees the less regulation the better.  Smialek shows the meetings Randy Quarles had including with a former employer Davis Polk Wardwell- Republican Senators 29, Democratic Senators 17  Davis Polk  law firm 22,                     Daniel Tarullo his predecessor 0 Goldman Sachs 24, JP Morgan Chase 22                   Daniel Tarullo his predecessor had this to say about Quarles role at Fed- It is he said "A kind of low intensity deregulation, consisting of an accumulation of non-headline grabbing changes and an opaque relaxation of regulatory vigor." To which Quarles reply is- "The argument that it is a drip-by-drip erosion: the quantification of that, they can't really demonstrate any quantifiable reduction in the overall resilience of the industry." The Silicon Valley Bank and Signature Bank crisis could have damaged the US banking system, and the capacity of the US to make the huge needed investments in the country, without the strong action of the Biden administration. It showed the very erosion of banking supervision that Smialek pointed out in the NYT in 2019. The costs of a weakening of the banking system and the US capacity to invest in the country are borne by the American people, by workers and families in the US. Which is why the Biden administration acted quickly and decisively to limit the ripples from this crisis.       ...

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Jean Edward Smith who wrote on FDR, calls him the Great Divider. But he asks who today would not ask how anyone could oppose social security, and yet FDR passed Social Security against the vote of entrenched interests. And in establishing the Tennessee Valley Authority to priovide cheap electric power to the impoverished South, FDR did not consult wth utility giants Commonwealth and Southern. When he created the SEC he did not request the cooperation of those to be regulated. When passing Glass Steagall Act that separated investment banking and commercial banking he did not look for approval from JP Morgan, Goldman Sachs and Lehman Brothers. So goes the situation in September 2009 as President Obama's initiative on health care is bogged down by lack of support from Blue Dogs in the Senate and Republicans.

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Expectations of lower inflation in the U.S. for 2012. The Commerce Department showed inflation slowing with consumer prices up 2.5% over the prior year in November, down from 2.7% in October and 2.9% in September. The Labor Department's consumer price index went up by 0.8% annual rate in the last 3 months. Increase in labor costs are also mild. Hourly wages of private sector U.S. workers were up 1.8% in November 2011 over the prior year. Commodity demand in emerging markets is slowing with lower growth, which reduces pressure on commodity prices. The consumer price index is expected to rise by 1.2% in 2012, according to J.P. Morgan economists. The Federal Reserve in its recent statement after a Dec. 13 meeting stated it expects inflation at below 2%.

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This story by Emmarie Huetteman describes the effort of three Republican women in the U.S. Senate who had the courage to listen to the different voices in their home state and use their informed judgement in deciding how to vote on a Republican healthcare bill or Affordable Care Act repeal effort. Especially when they heard that it would hurt people in their state, the elderly, low income and other vulnerable people without offering alternatives. Even when this meant resisting pressure from fellow Republicans. The senators are Capito of West Virginia, Collins of Maine, and Murkowski of Alaska. This is particularly significant at a time when too much polarization has led to paralysis in coming up with informed discussion and good solutions to problems. It is also significant that senators from the midwestern states such as Iowa- Mr Grassley, and Kansas- Mr. Moran, also joined the effort to listen first to people back home in their districts before making up their mind. 

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German banks have the largest exposure in Europe to Spain- $139.9 billion in 2012. Of this $45.9 billion is exposure to Spanish banks, according to the Bank for International Settlements. The Landesbanks in Germany have a large exposure in covered bonds to Spain, which are covered by collateral in the form of residential mortgages that have lost value and could lead to losses. At the same time they are not likely to default says Leef Dierks of Morgan Stanley, because they are used as collateral to borrow from the ECB. Some of these cedulas or jumbo covered bonds are trading at 52 cents on the dollar, according to Mr. Dierks. Geman banks have limited loss absorption capacity says Moody's. Moody's has reduced Germany's outlook to "negative" from "stable" for this reason, and warned Germany could lose its triple A credit rating.

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Only by learning the lessons of "normal" trade with China, and accepting a feeling of "buyers remorse," says Senator Sherrod Brown of Ohio, will a better bilateral trade relationship with China evolve. He points out that every $1 billion of the trade deficit with China, has destroyed 13,000 net jobs, making the $226 billon deficit a tale of shuttered factories and devastated communities. He says China uses illegal subsidies and currency manipulation, and punitive steps are needed, not the moral suasion that the Obama administration keeps doing with no result. He says price manipulation keeps Chinese products 40% cheaper than comparable American made products. He wants the Senate to give tariff authority to the President, to impose tariffs on countries that manipulate their currency, when it convenes next month. Brown is the author of the book- Myths of Free Trade.

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With housing, credit, the consumer and export markets all going out quickly in rapid sequence the predictions even with the Fed's stepping up to the plate with assets buildup to $5 trillion and the $1 trillion stimulus package Obama plans, it looks like 2009 and 2010 are going to be difficult years. After the 20% decline in 2008, BW's surveyed 45 economists see another 10% decline in house prices in 2009. Inflation sharply lower is expected down to 1.2% in 2009 from the 2.1% of 2008 end. The risks of a worse outcome than the 1973-75 and the 1981-82 downturns are high say economists at Citigroup and Chase JP Morgan, Global Insight. There is just too much happening at the same time and a self reinforcing dynamic that is not going to self correct anytime soon.

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Bush's last news conference, or exit interview as he called it. He thinks about Katrina hurricane relief failure but says 30,000 people were lifted off rooftops. Iraq, the security council resolution 1441 did make it clear- disclose, disarm or face serious consequences. He thinks the "Mission Accomplished" banner on an aircraft carrier after liberating Iraq was a bad idea, and "Abu Ghraib", a big disappointment". But regarding Guantanamo Bay and Iraq he thinks it may be that the elite and some some countries in Europe find it unpopular. Some say that the moral standing of the US is damaged in the world. But he says go to Africa, go to India, and ask about their view of America. Go to China and ask. "But people still understand that America stands for freedom, that America is a country that provides such great hope."

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All the major investment banking houses are highly leveraged in their ratio of assets to shareholders equity. Bear Stearns was 32 to1, but so is Morgan Stanley, Lehman Brothers is 30 to 1, and Merril Lynch 27 to 1. And so what is Goldman Sachs ratio? It is 26 to 1. These are the ratios according to WSJ at the end of 2007 and likely haven't changed that much today. All of these banking houses searched for higher returns through high leveraging. This is becoming a problem in this crisis as a lot of capital has to be raised by these firms to reduce the extent to which they are leveraged. And the speed in which the unwinding is occurring in this nervous hangover for the markets requires that firms stay way ahead of the curve and some paranoia is in order.

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The most senior management person of Indian origin in the US financial business, Vikram Pandit came to Columbia University from India at the age of 16, receiving a doctorate from Columbia. He was in a teaching position at Indiana University in Bloomington, Indiana before joining Morgan Stanley and heading its institutional client division. Richard Parsons was leading the committee making the choice, and Robert Rubin was lobbying hard for Vikram Pandit because he is deeply thoughtful, has international background, and can bring the strategic sense that Rubin sees as important. Rubin will help from the sidelines as Head of the Citigroup Executive Committee.

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Over 50% of Israelis support Iran war, only 30% oppose. As Israelis see it Iran under religious clerics is the only real threat to Israel in 2025 because of Iran's policy of proxies for attacking Israel in Lebanon and in Gaza, and because of it's development of nuclear weapons and openly threatening Israel. The US involvement in Iranian politics dates from the Dulles and Eisenhower era with the CIA's involvement in the overthrow of the democratically elected Iranian prime minister Mossadegh in 1953. Working with British intelligence and for British oil interests, US oil interests, the US made a serious mistake as seen from today's perspective. The moral is British or French colonial policy stay from it America- George Washington himself would advise. Israel is paying the price and is asked to correct what was done by the British in Iran since 1850's- to bring back a peaceful democracy with the kind of struggles even Greece experienced. The unelected wholly unrepresentative government of the Shah who was put in the place of a democratically elected government was a serious mistake. The British and French colonialism and oil interests of Britain plus American oil companies have led to US getting on the wrong side of the Vietnamese people in the war in Vietnam against the French that ended at the battle of Dien Bien Phu in 1954. It had repercussions in the Vietnam war under Kennedy and Johnson. This has happened in the case of Iran where the US has gained so little and lost so much in lives and resources sunk in the ensuing was in Syria, Iraq, Kuwait, Afghanistan, Yemen. The European Union suffered from the huge migrant flow from Syria with splits in its ranks. The distractions of these 30 years through Reagan and Rumsfeld who supported Hussein in Iraq against Iran in a balancing act is now foolishness, of elder Bush as he diverted attention to a long desert war in Kuwait, of Bush and then Obama in Afghanistan, who wasted enormous resources and impoverished the American people. Leaving legacy wars for Trump and Biden to handle. After Vietnam another failed chapter of Iran in the US for the American people by incompetent leaders who were taken in by French and British colonial and oil interests in wrong directions.   ...

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Richard Barley points out that Italy has some breathing room even as the ten year yields on Italian debt reaches 6.15%, up 1.5 percentage points in 2011. Existing Italian debt has an interest rate of 4% and an average maturity of 7 years, according to Morgan Stanley. This means higher interest rates on new debt will take some time to have a serious impact. Fitch's estimates are that if 10 year yields on Italian debt went up to 7%, interest payments would go up to 6.1% of GDP by 2015 from 4.8% of GDP. This gives Italy some time to come up with solutions for competitiveness and growth issues. Italy's growth rate was only 0.1% for the 1st quarter of 2011, and debt is 119% of GDP. Italy also has a primary budget surplus which puts it in a better situation than other southern European economies.

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Joachim Gauck, the new president of Germany, is a pastor from East Germany who led the struggle against the Communist regime in the former German Democratic Republic from his hometown of Rostock. His father was a dissident who went to prison under the former communist GDR. After reunification he headed the agency in charge of handling the files of the former GDR spy agency, the Stasi. He did this so well and without rancor that it is now called the Gauck Authority. He was elected by an overwhelming vote of the German parliament and had the support of all major parties. Germany now has two East Germans running the country, one the daughter of a pastor, and the other a pastor. The moral authority that Germany needs as it faces the uncertain and difficult task of sorting out the finances of the eurozone, is something the country badly needs.

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Story about a Quant's life, this a math smart kid, Peter Muller, who worked for a risk analysis firm called Barra Inc in Berkeley, California, and later joins Morgan Stanley to help set up its Quant trading business. "Pairs trading" is one of the strategies Quants have used in the past in which two stocks which have a strong historical relationship provide clues as to how to short one and by another betting that the historical relationship will assert itself. "Statistical Arbitrage" is a more complex version of this and Muller's specialty was in this field at Morgan Stanley's Process Driven Trading Group (PDT). This Group produced profits from trading of about $3.5 billion in ten years upto 2006. This group now contains about $6 billion of Morgan Stanley's own money and accounted for 7.2 % of Morgan Stanley's net income with profits of $540 million in 2006. In the two weeks prior to August 9, Morgan Stanley's PDT lost about $500 million as the mortgage crisis broke out and put a wrench in the normal workings of the Quant's strategy and the fact that there are so many Quants operating with computerized trading may have added to the problem. the PDT has since recovered some of its losses. And its by no means certain that this has shaken Morgan Stanley's continued pursuit of income from Quant trading operations. The story thats told about Peter Muller is interesting as he tries everything to find happiness leaving his job for a while and playing his own music on albums and in the streets of Barcelona and New York city subway stations to soothe his restless soul and still comes back to his old job. All this happens while he is still 43. ...

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Ruchir Sharma, chief global strategist at Morgan Stanley, says Poland has achieved a remarkable transformation over 25 years with steady growth of 4% year after year. The bright spot is manufacturing. For emerging nations the average percentage of GDP from manufacturing exports is 22%. Poland is at 33 percent of GDP for manufacturing exports. Countries dependent on commodity exports such as Argentina, Brazil, Russia, lack this steady growth from a manufacturing base and are less likely to cross the line of $15,000 of GDP per person that qualifies for it to be called an "advanced economy" for the IMF. South Korea, the Czech Republic and Poland are some of the countries that have benefited from manufacturing exports. Poland's wages are one third of that in Germany and its currency is cheap, giving it an advantage as an export hub for German companies. Germany is the main destination for exports and the German automobile industry uses the Czech Republic and Poland as export hubs. Poland's and Czech Republic's geographical location near Germany with a highly educated population makes it attractive for German companies. Poland has gone from $2300 per capita GDP to about $13,000 in 25 years according to the IMF, and is likely to be the next country to make it to advanced economy status by 2020, says Sharma. It is important not to run up debt, to manage finances carefully, and to maintain steady growth not growth in spurts interrupted by declines, and have a manufacturing base, says Sharma.  ...

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Matina Stevis provides this exceptional account of 3 Greek leaders who fought hard for reforms to put Greece in the right direction for euro currency membership responsibilities, and lost. They tell Stevis they were savagely attacked in the media, by labor unions, and in their own party, so that the fight came at a high personal cost. The 3 politicians now mentioned inside Greece as having done the most to ensure euro currency responsibilities were taken seriously are- Alekos Papadopoulos, who as finance minister fought with Pasok party premier Simitis in 2002 about the dangers of cheap credit coming with the euro currency, Tassos Giannitsis who as labor minister was driven out of Pasok for proposing pension reforms in 2001, and Stefanos Manos who was driven out of New Democracy Party in 1998 after warning of risks in the economy from wasteful spending, including mismanagement of railways, and proposing changes. As Greece commits to a new program under the Syriza left government as a matter of "national responsibility," with reforms to pensions, fixing tax evasion to ensure the tax burden is evenly distributed, reduced military spending, and changes in other areas, the questions in the EU about Greece are about the degree of commitment to changes. In an intervew with WSJ's Bret Stephens Tsipras is candid about the situation when he says the country on its current course would build up the debt all over again, if the debt were to be written off. Problems Tsipras cited in that interview- bribery in health care, tax evasion, burden of taxes on the middle class and honest citizens, large inefficient bureaucracy. Yet 2 years after that intervew in the WSJ, Jan. 28, 2013, Tsipras headed a Syriza government that had no proposals on tackling tax evasion, aggravating the problem of moral hazard seen by the Europeans and the IMF under Lagarde. Stefanos Manos writes in the foreword to his book that its incomprehensible how the public good is ignored by so many people who seek only individual gain. ...

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Bear Stearns is taken over by JP Morgan Chase at $2 a share, a year ago it was trading at $170 a share. This was arranged with the Federal Reserve agreeing to protect JP Morgan from liabilities on Bear Stearns balance sheet and was done overnight in an emergency basis by the Fed and Treasury to protect the rest of the financial system from scares originating from a collapse of Bear Stearns.

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The largest U.S. bank holding companies, including Bank of America, J.P. Morgan Chase and Citigroup, and two foreign banks Deutsche Bank and Barclays PLC must submit initial plans for "living wills" by July 1, 2012. The Dodd-Frank legislation requires financial firms to develop plans that lay out how they could be liquidated if they went under in a crisis. This legislation gives the FDIC and other regulators the power to seize and dismantle a failing financial firm, to help mitigate the problems of "too-big-to-fail" firms. The FDIC and U.S. regulators lacked such powers at the time of the collapse of Lehman Brothers in 2008. The FDIC and the U.S. Fed co-wrote the living will rule for "comprehensive and coordinated resolution planning." In all, 124 banks, including 100 foreign banks with U.S. affiliates, which have over $50 billion in assets worldwide, must submit plans and update on a regular basis. Smaller banks will have the deadline extended to December 2013.

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The Fed's quarterly Senior Loan Officer Opinion Survey, says U.S. banks have relaxed lending standards and more businesses looked for loans in the first quarter. Yet the demand for loans is sluggish. While auto loans increased, credit cards and other instalment loans were flat, and mortgage demand is decreasing. The sluggish demand for loans is holding back the growth in the profits of banks. This is also why the KBW Bank Index fell by 7.9% this year and bank stocks are not doing well. Lower revenue reduces the Net Interest Margin, a key measure for bank profitability- the difference between what is earned on assets and the cost of deposits and other laibilities. NIM went up to 3.77% in 2010 with the Fed's low interest policy. Since the first quarter of 2010 NIM is falling. NIM at 2.67% is flat at Bank of America, fell for Citigroup and Well Fargo, and only rose slightly at J.P. Morgan Chase.

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Flipkart, India's largest online retailer, was started by 2 Amazon executives in 2007. Flipkart has 22 million registered users and hosts 3000 merchants selling products ranging from electronics to clothing. Flipkart sales reached $1 billion in the last 12 months. In July 2014 Flipkart raised $1 billion from a group of investors including Tiger Global Management, Morgan Stanley Investment Management, Singapore's sovereign wealth fund GIC. This follows the raising of $210 million in May 2014 from a group of investors led by DST Global, a Russian investor. Competitors include Amazon and eBay backed SnapDeal. Funds raised will be used to hire more engineers and improve mobile technologies, as over half of sales are made on mobile phones. India's online retail market is expected to grow 11 fold to $23 billion by 2018, according to Nomura brokerage firm. Flipkart earns money by charging merchants a fee for products sold on its online website.

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The government of president Hollande in France added about 7 billion euros of new taxes after May 2012, and an additional 20 billion euros in the 2013 budget. Spending cuts totaled about half the tax increases. France's taxes are the highest of the major EU countries and there is concern that this may hinder the economic recovery. French businesses are cutting back on capital spending. Insee survey for April 2013 showed French manufacturing businesses planning cuts in investment of 4% for 2013. The government says spending cuts go up in 2014 to about two thirds of the deficit reduction and tax increases about 6 billion euros. France's statistics agency Insee says economic growth was 0.5% in the second quarter of 2013 compared to the prior quarter. The recovery was supported by consumer spending, with private capital investment lagging behind. This is about 1.9% growth in GDP on an annualized basis, according to J.P. Morgan.

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Important research presented by experts from University of Chicago, Princeton university Goldman Sachs and Morgan Stanley, presented at a forum in New York on the Federal Reserve organized by the University of chicago and Brandeis University. The presentation indicates that there will be amagnified effect of the current credit crisis once you take into account the accounting rules to use market prices and the risk practices of financial institutions that lead to adding to reserves. They calculate that leveraged institutions like banks, thrifts and securtities dealers will want to boost their capital to asset ratios by 5% because of the increased risk. Even after raising $100 billion in new capital (such as the money raised from sovereign funds) these institutions will still try to shrink their assets of about $20.5 trillion by about $2 trillion. The impact of this would be to restrict lending in a magnified effect and could cost the economy about 1.5% points in growth.