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The Cajas, local savings banks, are a symbol of the excesses and lack of financial controls of the bubble years in Spain. The local savings banks were run by authoritarian leaders who remained in office for many years, and were influential in the political system. The Cajas expanded into real estate during the real estate bubble, and many of the cajas had to be merged by the federal government under new management after the bursting of the bubble. Minder describes the culture at Cajas banks in Galicia, the region in the northwest of Spain that is the home region of prime minister Mariano Rajoy. Julio Fernandez Gayoso, or known as Don Julio in the old baronial manner, was one such bank executive who ran the the larges cajas bank in Galicia as his own fiefdom till he was 80, and only quit when forced to resign in an investigation.

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Britain's economy shrank by 0.5% in the last quarter of 2010, according to Office for National Statistics. Unemployment went up to 7.9% and 2.5 million jobless. Inflation up from 3.3% in the year to November, to 3.7% in December 2010. Mervyn King, governor of Bank of England, says inflation will go up to 4-5% in 2011. The austerity plan is only now beginning to go into effect and creates a difficult year. The VAT, a consumption tax, goes up to 20% from 17.5% on Jan 4th, and public spending cuts go into effect in April. With consumption depressed, higher investment and exports are the two areas supporting growth. There is a risk that the Bank of England will have to raise interest rates, as it left interest rates at 0.5% in December 2010. Under these conditions not much of a recovery can be expected in 2011-2012.

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Only 8 months into office, the leader of the Democratic party in Japan, resigns as Prime Minister. After perceived indecisiveness by the Japanese public on the Okinawa base change issue and on issues related to cutting wasteful spending. The base issue related to a campaign promse to move the American base out of Okinawa and even out of Japan. The North Korean government's aggressive behaviour led to a changing perception of the base issue, with a lengthy disagreement with Washington and eventual reneging on the campaign promise. By this time Hatoyama's popularity dropped to 25% and he resigned. Also resigning is Mr Ozawa, the Democratic Party's secretary-general. The indecisiveness and lack of leadership on issues made it difficult to sustain the electoral support which led to the Democratic party winning an overall majority, mainly to bring change for the post Liberal Democrat era.

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ECB president Draghi tells a Brookings Institution audience on Oct. 9, 2014 "for governments that have fiscal space, then of course it makes sense to use it," referring to Germany. IMF's Christine Lagarde is also calling on Germany to increase spending. The German statistics office says exports declined 5.8% in August from prior month. Mr. Draghi also emphasized that the survival of European governments depended on getting economic changes right- "if they don't do the right things, they will disappear forever because they will not be re-elected." Germany's respected economic institutes said in a joint statement that GDP growth in 2014 will be down from earlier forecast of 1.9% to 1.3%. In 2015 growth is forecast at 1.2%. For the 3rd quarter 2014 growth is zero and for the 4th quarter 2014 it is estimated at 0.1%. Economic contraction is not ruled out.

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The National Childhood Vaccine Injury Compensation Program protects vaccine makers from much of the litigation risk faced by pharmaceutical manufacturers. It limits compensation for death to $250,000. This special vaccines court is called Office of Special Masters at the U.S. Court of Federal Claims. This may be one reason for Pfizer's willingness to pay $68 billion for Wyeth which is amaker of childhood vaccines. Vaccines will generate $21.5 billion in sales by 2012, according to Sanofi-Aventis. Vaccines are biologic products that can't be copied. Wyeth's Prevnar is designed to protect children against 7 strains of pneumococcal disease. It has sales of $2.7 billion projected to grow to $5.5 billion in 2015 according to Sanford C. Bernstein & Co. Vaccines have driven huge reductions in childhood diseases, and the Act is designed to potect makers of vaccines, who suffered from excessive litigation in the 1980's.

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Schmidle describes how the militancy in Pakistan's border provinces is shifting to younger people who continue fighting the old battles against America and the West. He observes the opening of a campaign office of the Islamist party, the Jamiat Ulema -e-Islam or J.I.I., from a crowded rooftop in Quetta, Baluchistan, where this party runs the provincial government. The rhetoric against the U.S. is mild compared to earlier years, as a new election approaches. In the last election the Islamist parties under the alliance Mutahida Majlis-e-Amal, won 10% of the vote with pro-Taliban sentiment running high. The MMA alliance ran two provincial governments. Now there is asplit in the Islamist parties, between the factions working within the democratic process and other factions including younger militants who are against Musharraf and elections. This comes after the shooting of Benazir Bhutto by militant Islamists.

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The Bank of Cyprus and the Cyprus Popular Bank (Laiki Bank), passed stress tests given by the EU in 2010 and 2011. By the end of 2010- even as other banks such as Barclays were cutting their Greece government bonds by over 50%- the two banks held 5.8 billion euros of Greece bonds, over $1 billion euros larger exposure to Greece than nine months earlier, according to European regulators. Regulatory supervision failed to alert the banks and the banks risk management failed to see the warning signs in Greece. The Laiki Bank Risk Officer went in the opposite direction actually increasing exposure to Greece, saying in a conference call in August 2010, that he had used the bank's capital position "to deepen selectively some highly profitable client relationships." What went wrong with the stress tests by the EU regulators in July 2010 of these two banks, was that the tests looked at what would happen if economic conditions deteriorated, but did not consider the possibility that government bonds could produce losses. The two banks suffered total booked losses of 4.3 billion euros in 2013 from holdings of Greece bonds. The EU stress tests of July 2010 showed the two banks having total of 572 million in surplus capital. The two banks then went on to issue dividends in 2010-2011 totalling 141 million euros. By March 2013 the Laiki Bank was "on respirator" for a few months, according to the Central Bank of Cyprus, until the 10 billion euro EU bailout in March 2013 with the closing of Laiki Bank and the sharp downsizing of Bank of Cyprus....

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Experiences of individual homeowners the at a bankruptcy lawyer Neil Crane offices in Hamden, Conecticut. Nurses with home improvement projects and creditcard debt, truck driver, manager at a fast food place and so on. Economist, Mark Zandl sees the situation deteriorating because of a self reinforcing downward cycle for some time.

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Failure of U.S. regulatory agencies to implement an important provision of the Dodd-Frank legislation- instructing regulators to find all references to ratings agencies in their rules, and then replace them with better standards for judging credit risk. Treasury's Office of the Comptroller of the Currency, is one of the agencies trying to gut this reform, says this Wall Steet Journal editorial. The S.E.C. voted unanimously in March and April to propose rules eliminating credit agencies in their regulations on money funds and stock brokerages. As the comment periods have ended, the Journal calls for the rules to be immediately made final. Officials from FDIC and OCC are dragging their feet on this. One problem they face is their assumption that the Dodd-Frank law requires them to come up with the perfect rule for measuring credit risk. This is not what the change is intended to do. It is enough says the Journal to return the responsibility for the right metrics and the hard work of analyzing a security back to where it belongs- to people who manage these assets and institutional managers. Even if they made some mistakes it would be far less than the systemic risk posed by having all major institutions making the same mistake at the same time and the entire system following flawed ratings by the big three credit ratings agencies. This happened in the 2008 mortgage securities financial crisis. S&P has stated that it does not support the old system. And new alternatives are appearing for ratings- CreditSights, Rapid Ratings, Kroll Bond Ratings which got S.E.C.' support, and other alternatives still to come....

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The FSB, or Federal Security Service, and the power structure under president Putin, that includes former KGB or security and intelligence officers from the soviet era. In effect the power vacuum created after soviet collapse was filled by a power grab by individuals and interests able to do so from the soviet era. These used the security people from the soviet era. Then came Putin and brought together most of the former security and intelligence officers from the soviet era that he was closely associated with especially those he knew from his St. Petersburg days under the FSB, and filled the power vacuum left by the exit of the socalled oligarchs or those who had captured chunks of the economic anf business interests. These economic and business interests were now brought back into government control.to serve what the former soviet era officials and officers see as the interest of the country and the public. See the account in the Economist about this August 25, 2007, which describes the origins and influence of the FSB. The above account is of differences among the different security officers, as some of them are engaged in business and economic interests that they feel are threatened. ...

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The government's rescue of Fannie Mae and Freddie Mac has so far cost $145.9 billon. According to the Congressional Budget Office its eventual cost could reach $389 billion. The federal government has put the companies on conservatorship and has a 79.9% stake in the companies. The federal governmet also provides a guarantee that investors will be repaid. By buying loans from banks and other companies that originate loans, Fannie and Freddie were ostensibly in the business of promoting home ownership. The implicit governmet guarantee of Fannie and Freddie's activities in the housing market had the potential to create a huge government liability if the activities are not run well, and this is exactly what happened. By pushing hard for increasing home ownership to unsustainable levels - setting a target in 2001 of creating six million homeowners by 2014 for instance way beyond what was sustainable for the finances of prospective homeowners- it only fueled speculation, easy money and a bubble in housing in the U.S. As investors get paid with the government guarantee, it is Fannie and Freddie that is ending up with ownership of foreclosed homes- one every 90 seconds in the the first quarter of 2010, according to an estimate. The two companies owned 168,000 homes in March 2010....

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AstraZeneca PLC showed a net profit decline of 8.3% in fourth quarter 2011, on sales that remained stable at $8.66 billion compared to $8.62 billion in the prior year quarter. AstraZeneca is facing competition from low cost generics and cuts in government health care spending similiar to the rest of the industry. The company has announced new job cuts of 7,300 job for 2012, which brings total job cuts to 30,000 for the last 5 years. Most of the job cuts are in the U.S. and Europe. Hiring has continued in emerging markets leaving the net job cuts over the last 5 years at 9,600. Of the 7,300 job cuts planned for 2012, 2,200 will be in R&D departments, 1,350 in manufacturing and 3,750 in sales. AstraZeneca is changing the way it will do research and development with these changes. It will close the neuroscience research laboratories in Sodertalje, Sweden and in Montreal. It will have in its place "virtual" neuroscience units, small groups of 40-50 researchers working with academic groups and scientists outside to utilize the best science in the field. This is one of the most radical changes in R&D practices among pharmaceutical companies. In marketing the approach has shifted from having full time sales people call doctors offices to using online marketing tools and telemarketers. This approach is also being adopted for emerging markets....

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BP is by far the oil company most concentrated in deep water oil exploration. So it is coming up for criticism in the industry for not having prepared better for a subsea oil leak at this depth. Talking with journalists BP's President Tony Hayward acknowledged this failure to "prepare for an emergency of this kind. " BP appears to observers to be trying to create the technology to deal with the leak on the go, and Hayward accepted this criticism by saying BP should have done things differently and had the capability to act instantly. Hayward went through two days of hearings in Congress, and the exchange of blame between Transocean Ltd, the Swiss based company that owned and operated Deepwater Horizon, and Halliburton which provided services for the rig, and BP, only worsened its image. Testimony showed that company managers at BP decided to go ahead with finishing work on Deepwater Horizon well even though tests showed highly combustible gas had seeped into it. The failure of a massive effort at its Houston offices to have much to show for results, only demonstrates that poor quality systems and maintenance cannot be corrected easily no matter what the scale of the effort. The publicity surrounding BP's handing out contracts to potential claimants to seal off future claims has not helped....

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Cara Buckley provides this intimate look at Garrison Keillor, host of Minnesota Public radio show "Prairie Home Companion." This is a Keillor who is quite different from the person people know from the radio show. Keillor finds release during the show using his imagination about a town he has made up called Wobegon. Strangely, in his own life Keillor is a very private person keeping his thoughts to himself and not saying much. Keillor is 73, and now plans to retire after about four decades hosting this show with music and tales about Lake Wobegon. At its peak the show had 4.1 million listeners in 2006, dropping to 3.2 million today. It is thought of as a homespun quaint, country stories show, yet it can touch on current issues such as the NRA and the gun lobby in a recent show, and builds on its bond with its audience.

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Mark Landler of the NYT intervews Ben Bernanke at his office overlooking the Washington Mall, and Secretary Paulson in his Treasury office. Both men look back at events that led to Chinese savings financing excessive American consumption, and currency and other policies on both sides perpetuating the dependence of America on lowpriced Chinese products, and of China on the American export market. Now that this export market is collapsing it presents China with serious problems with unemployment in the export sector, and pesents America with the hangover from a consumption binge that now must be paid for with years of low or negative growth. Could this have been foreseen and if foreseen could things either have been mitigated or prevented. In March 2005, Prof. Bernanke at Princeton was not at the Fed (his Fed job started in 2006), and cautioned about the imbalances presented by Chinese savings finacing American consumption. But Bernanke saw this as a market phenomenon that would take years, even a decade to work itself out in a global economy. He said "for now, we have little choice except to be patient." The prevailing opinion among Greenspan, Bernanke and others was that the global economy worked in ways that were ultimately benign and regulation was not a good thing. After all the situation benefitted American consumers and kept inflation low while also providing China as an additional engine for global economic growth. The American economy it was believed was large and resilient, and it would not be adversely affected in the long run by such a large dependence on foreign savings. Only the positive effects were visible and the adverse effects were simply talked away as not serious for now. Zoellick, who was deputy secretary of state says that successful models are very hard to change, and Paulson says that without some kind of crisis its hard to get changes made once asituation gets entrenched. For China efforts to strengthen the currency that would slow exports and improve internal consumption were stymied by a reluctance to disturb the status quo, and Americans were lulled into complacency as years of low priced imports provided the best of both worlds, high growth and low inflation. ...

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David Kappos, head of the U.S. Patent & Trademark offfice, comments on the smartphone patent issue and the issue of quality patents.

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Mexican president Nieto's poll numbers are at all time low of 24%, according to Reforma newspaper. He took office in late 2012 and has been hurt by human rights scandal of the murder of 43 students in the state of Guerrero, corruption issues, and failure to improve the economy. The invitation to Trump to visit Mexico left even people close to the president surprised, and was criticized widely inside Mexico. It is not clear what Trump or Nieto gained from the trip. As Trump continued his talk about building a wall on the Mexican border and having Mexico pay for the estimated $23 billion it would cost. He did this in a speech to supporters in Pheonix on the same day he met Nieto, showing the use of teleprompters and prepared script was not his way of campaigning. Just as the message to black people that Democrats take them for granted cannot resonate without the basic message delivered with compassion and understanding- such as done by the presidents Bush and Reagan- so also the message to Hispanic people is suffering from the same lack of empathy. Recent polls show only 3% of blacks support Trump. McCain and Romney gained only 4-6% in the U.S. presidential elections of 2008 and 2012. The message of the wall is also baffling as an election strategy. A Gallup poll in July 2016 shows only 15% of Americans opposing a pathway to citizenship for illegal immigrants, and only 24% of Republicans. There is another problem in the strategy. The rhetoric about walls and mass deportations, and the Trump temperament combined with handling of nuclear weapons is not winning college educated women in the suburbs with polls showing Trump lagging behind Clinton by about 20 points or 4 million voters with this group. It is hard to undo the damage done by this kind of rhetoric used in the primary elections as it gains distrust of voters. It would require a bad economy with illegal immigrants taking local jobs, and handling of immigration seen as weak, for such a message to gain some national traction. Both are absent for the most part with a steadily improving economy since 2012, lower unemployment, a tough enforcement policy on deportatons under Obama that exceeded that under Geoge W. Bush, and the talk of a wall comes with illegal immigration having declined steeply since the 2008 financial crisis. The real culprit appears to be elsewhere, the triple hit taken from hollowing out of the manufacturing economy that hurt the Conservatives in Canada, the insecurity created for older whites from the job losses and hits to net worth from the 2008-2009 financial crisis, and the increasing loss of access to health care and educational opportunities with high  costs. About 62 million households or the bottom half of the distribution in the U.S. have a net worth of about $10,000, a quarter of this group having zero net worth, according to the Federal Reserve's Janet Yellen at an Inequality Conference in Oct 2014. Problems no wall is going to solve, problems that built up over 2 decades, problems that will take a generation to fix.  It shows the tech miracle of the last 2 decades as a mirage for quality of life of the middle and working class. Tech as a tool to a goal, not a goal in itself, is the better way forward. ...

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Donald Trump is acquitted in the second impeachment trial with a vote in the Senate of 53 in favor to 47 against. A two thirds majority is required to impeach a president. Senators Burr of North Carolina and Cassidy of Louisiana were Republicans who joined the expected ones to vote for impeachment- the Republicans Mitt Romney of Utah, Pat Toomey of Pennsylvania, Ben Sasse of Nebraska, Susan Collins of Maine, Lisa Murkowski of Alaska. The Republican defense lawyer insisted that Trump's speech to his supporters was not an intention to incite them on the day of the Capitol riot on Jan. 6, 2021 but an expression of his rights to free speech guaranteed under the U.S. Constitution First Amendment. He made the point that the prosecution lawyers had selectively focused attention on the words "fight like hell" and taken them out of the entire context in which they were made, ignoring key parts of Mr. Trump's speech. The defense argued that the president had already left office and this made an impeachment unconstitutional. Seventy five million voters voted for Mr. Trump and he cited this as the most number of votes won by a sitting president. President Biden is shifting his attention to the president's agenda and needs Republican support to pass key legislation including financial help to households, unemployed, and business to recover from the pandemic. The U.S. health effort behind the vaccination drive and seeing the struggle in Europe to access key medical supplies of vaccine is also leading to new efforts to move beyond the rhetoric to the hard work ahead with support of all parties. As part of this the trial once it reached the Senate was quickly resolved in about 5 days. The defense used only a small fraction of the time allotted with bipartisan effort to not let the trial drag on, bipartisan effort to putting some statements simply on the record and not calling witnesses.   ...

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New rules in 2016 for U.S. bonus pay require banks and other financial institutions to defer at least half of executive bonus pay for 4 years, one year longer than industry practice. The rule also sets a period of 7 years for the largest firms to be able to "claw back" bonuses if the executive's actions have led to the financial institution having to restate financial results or hurt the institution. The Obama administration is making up for lack of earlier stronger action in this area during the last year it is in office. Excessive risks were taken during the financial crisis of 2008 because of executive compensation structures that incentivized this. The definition of "risk taker" is also widened to include high earners at banks who are not in senior management- to include the 5% of employees at banks that are highest paid and get a third of compensation from incentives.

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Activist investors such as Starboard Value hedge fund are pushing Yahoo to sell its Yahoo businesses and keep its investment in Yahoo Japan (35% stake valued at $8.6 billion) and Alibaba (16.5% stake valued at $35 billion). This would mean the sale of the Yahoo brand with 210 million visitors to its website each month. Yahoo's board has tried changing CEO's, and Marissa Mayer in office for 4 years has tried different strategies including acquisitions but failed to make a difference. Yahoo is not able to generate profits from its business the way Google and Facebook have done, and large investors are losing patience with Mayer. Mobile's importance has grown in recent years benefitting Facebook and Google but not Yahoo in generating more advertising revenues. Yahoo's content is seen as commoditized not commanding the advertising revenue of sites that help navigate the internet (Google) or social media sites (Facebook) that offer unique value to users.

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A former president of the Bank of China International's U.S. office describes the rampant shadow bank lending that is happening in China. The People's Bank of China (PBOC) and the China Bank Regulatory Authority (CBRC) is aware of this activity and regulations are in place to prevent such lending. Yet much of this lending continues as property developers and local governments devise new ways to get around these rules. The PBOC and the CBRC have no precise handle on nonbank sources of lending such as money from state owned enterprises and are not able to control the huge increase in credit and speculative uses of capital. And they have to struggle with local governments and the National Development and Reform Commission which support higher spending and credit levels. As a result there is a sense of a financial system that is out of control and building up risks whose precise nature and size are hard to calculate, even for China's senior leadership.