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Joe Nocera of the New York Times, says that it is the Attorney Generals of the 50 states in the USA, that have taken up the rights of homeowners, not the federal authorites. He points out that the Obama administration, the Treasury department and the federal agencies, have failed miserably in getting the banks and servicers to take loan modification seriously. It was the attorney generals of the states that were with homeowners from the beginning, to prevent predatory lending and outright fraud. Until they were stopped by federal bank regulators, who sided with the banks in court. The subprime lending crisis might never have ocurred, says Nocera, had the states not been obstructed in this way. As the subprime lending mounted, the state AG's were talking to people in their communities, and knew the reality on the ground. The Office of the Comptroller of the Currency and the Office of Thrift Supervision, two primary regulators of the banking industry, saw their role as protecting banks from consumers rather than protecting consumers. Professor Prentiss Cox, of the University of Minnesota Law School, who was an assistant attorney general in Minnesota in charge of consumer enforcement, says federal regulators should have been listening to us, instead of trying to shut us down....

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How Obama's new selection for Fed governor, Daniel Tarullo- who taught banking law at Georgetown University- is shaking things up at the Fed. He is in charge of regulation of the banking system at the Fed. He has instituted a review of bank review practices and supervision at all of the regional Federal Reserve banks. With many banks failures in the south, the Atlanta Fed came in for serious review, and regulators from outside the area were sent to the Atlanta Fed. Tarullo did not hesitate to make new appointments for serious oversight, as regulators had simply become lax. Tarullo has brough in economists to take a fresh look at how the banking system would perform in the event of another crisis, and what action needs to be taken. This compares to individual bank examiners having alimited perspective what damage the overall banking system could do with lax regulation. He has also asked the Fed regulatory staff to look closely and hard at the troubled commercial real estate loans and toughen regulatory measures. Welcome and overdue as this is, in another banking crisis this could be too little too late. Congress has weakened regulatory reforms proposed by the Obama administration, and the Obama administration itself has not the will to address the tough issues raised by the banking crisis. Both have buckled under pressure from the lobbying of the banking industry, and the close connections between some banking executives and the administration. This has raised the level of urgency felt by Tarullo, Volcker, Mervyn King and some in the financial industry itself, with the issue of "too big to fail" and breaking up the larger banks into smaller ones, moving to the top of everyone's agenda. With the simple fact that if banks were "too big to fail" before the crisis, then they are much bigger now, and the question of what action must be taken shoved aside as too big to tackle....

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O'Malley, Sanders, and Clinton emphasize the issue of wages, income disparities, rising inequality, and a shrinking middle class in the first Democratic debate of the U.S. 2016 presidential election. Clinton points out that "at the center of my campaign is how we're going to raise wages." Sanders says that "the middle class of this country for the last 40 years has been disappearing." Clinton points out her opposition to the Trans Pacific Partnership trade agreement because it does not help raise American wages. Clinton calls herself a progressive, but "a progressive who gets things done," and a moderate when it comes to getting things done. Sanders points to the "deep injustice, an economic injustice that threatens to tear our country apart, and it will not solve itself." Sanders points to the wealth concentration in the U.S. "with the top one tenth of 1 percent owning about as much as the bottom 90 percent, and 57% of all new income going to the top 1 percent." Clinton comes to Sanders defense on the issue saying "it's our job to rein in the excesses of capitalism so that it doesn't run amok and doesn't cause the kind of inequities we're seeing in our economic system."...

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Portfolio manager Robert Arnett, who manages two of PIMCO's funds, has some alarming things to say about the environment retirees face in the future. In ten years for every working age person added to the workforce there will be 10 new retirees, the complete reverse of what it was ten years ago when there were 10 new working age persons for every new retiree. The impact of this will take the shape of many more retirees selling stocks and bonds to live on and fewer buyers for the bonds and securities, lowering the prospects for higher prices for bonds and securities. He expects the demand for goods and services to continue with higher prices. He sees stocks giving a nominal return of about 5%, bonds a nominal return of 2-4%, for a balanced portfolio yield of about 4%, during the next 10-20 years. After inflation and taxes the returns will be very thin. Expectations of 10% returns do not take into account deficits, debt, and demography in developed countries, says Arnott.

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Kenneth Rogoff of Harvard University, expert on debt crises, and author of "This Time is Different," says China is one of the best examples of the idea that this time is different, with the idea created that somehow China was impervious to the massive build up of debt. The debt is now over 250% of GDP, and this was possible for so long because of the high savings rate of 30% of disposable income and the millions of young migrants moving to cities to work in manufacturing. The growth of shadow banking, opaqueness in decisionmaking, unreliable data, use of local government financing vehicles, the bubble in housing with a large portion of loans tied to the real estate market, all combine to create serious problems that will take a long time to sort out. Rogoff says the crisis in Tianjin with the deadly explosions in the port area, and the government's inability to provide answers to questions from a alarmed public, only added to the uncertainty and loss of credibility. Rogoff says he hopes the trillions of dollars in reserves will provide China with the tools adequate to tackle the debt problems before they spread to other countries....

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The approval of 254 investment projects in China, accelerating investments in infrastructure and construction as part of a second stimulus plan in 2012, folllowing the first stimulus in 2009. The risks are higher this time because of the inflated housing prices in China, the increasing lack of affordability of housing for average families, and the continuation of policies that emphasize infrastructure spending at the expense of consumption and earnings on savings for ordinary families. With that kind of spending has come increased levels of corruption. The glut in the steel industry will grow worse with more spending on steel plants.

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Chrysler reported second quarter 2012 income of $436 million, compared with a loss of $370 million in the prior year quarter. The prior year quarter included charges for repaying U.S. government loans. First quarter 2012 income was $473 million. Fiat reported a loss of 246 million euros for the second quarter 2012. The combined operations Fiat-Chrysler reported aloss of 103 million euros. This shows how the effort by Sergio Marchionne to takeover Chrysler and turn it around have proved to be a very successful move for Fiat. With a relatively small investment Fiat is now a majority owner of Chrysler having invested mainly its management knowhow and leadership.

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Conversation with Ford's marketing chief Jim Farley who had 17 years with Toyota and marketed the Scion brand. He is a guy who likes to get a fresh look at things like talking to a security guard before coming up with a marketing plan for the Scion, and talking to a maintenance technician about the 150, all off the beaten track. This is reflective of the approach of Jim Farley. Even talking to psychologists about how to convince people to come and try out Ford cars. He is excited about Ford's Eco-boost engine which is a direct injection technology engine which Ford can democratize as he puts it to put it, on some 500,000 cars and trucks by 2013, something not done before. This is a technology that scales up pretty well. Drivers in Western Europe are familiar with direct injection diesels as a way to cut high gas costs and cut emissions, but Americans are not that familiar with it. It boosts fuel economy by 20% and reduces emissions by 15%, and giving a V6 the power and torque of a V8 engine. Basically it injects fuel directly into the engine in small specific amounts so that very little is wasted and the turbocharger uses waste energy from exhaust gas to drive the turbine. He is also in charge of promoting and marketing the Eco-Boost engine, which will show up first in the 2009 MKS Lincoln sedan. ...

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Krugman points to the connection between the failure to achieve debt reduction through debt forgiveness and the sluggish economic growth in the eurozone and U.S., five years after the global banking and financial crisis of 2009 and four years after the beginning of the eurozone debt crisis in 2010. In the U.S. debt reduction for homeowners was delayed with a wave of foreclosures, and in Europe austerity budgets were the norm as Germany pushed hard for austerity policies. In 2014 small relaxation of austerity to give relief to voters took place in Greece, France, Italy and Spain, with austerity budgets still in place. Growth also slowed in Germany to slight contraction in the third quarter and no growth in the fourth quarter of 2014. This is leading to the formulation of new policy to address growth challenges in the eurozone. Debt to GDP is growing in eurozone countries and Britain because of lack of growth, even though spending cuts have been made, showing the need for rethinking policy. ...

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Romney says in the first presidential debate he will not increase taxes on the middle class: "I will not reduce taxes paid by high income Americans. And I will not, under any circumstances, raise taxes on middle-income families. I will lower taxes on middle income families." How he would do this is through limiting or eliminating deductions and loopholes among several measures, with work done on this by his advisor Martin Feldstein, Reagan's economic advisor and a professor at Harvard University- Romney's Tax Plan can raise revenue, WSJ, 8/28/2012. Where the Democrats and Republicans differ is that economic growth generated by creating incentives for business to invest and hire also plays a part in generating the additional revenues as it did under Reagan's economic plan. Behavioural factors play a large part of this as much as the incentives and other steps, to create a climate of business confidence- search in Janvoo for the Group "Reagan memo of 1980 by Shultz, Friedman," for more on this....

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The German and French positions on solutions to the eurozone debt crisis are in conflict. As a result the negotiations between France's Sarkozy and Germany's Merkel are deadlocked. The basic differences revolve around three basic issues. Germany wants to see a lasting solution in which Greece debt is restructured so that banks and other creditors that loaned money to Greece voluntarily take losses so that Greece's debt can be reduced to a sustainable level of no more than 50% of what it is now. France, the ECB and the French banks do not want to restructure Greek debt in this manner beyond the 21% reduction in value of debt under the July 2011 agreement. The voluntary reduction in Greek debt by the banks would prevent a default by Greece and unsettling of the financial markets. France fears market contagion from the restructuring of Greece debt that would place pressure on French banks as the value of the Greek, Spanish and Italian sovereign debt French banks hold declines in value. That would require a major recapitalization of French banks and additional cuts to the French budget. Additional twists to the negotiations are that Sarkozy is unpopular in France with elections six months away. For this reason Sarkozy would prefer to recapitalize after 9 months. A way to get around the need for more deficit cutting (austerity measures) in France, is for the European Financial Stability Fund to be able to borrow money from the European Central bank. The ECB can print euros in that situation. Germany's chancellor Merkel has to consider German public opinion and experts from the German central bank, who are adamantly against using the ECB to print money and Germany committing itself to bankrolling most of the effort. Germany wants France to use its own money to recapitalize French banks, with Germany only responsible for recapitalizing its banks. Merkel told her parliamentary caucus in Berlin that "the path is closed for using the European Central Bank to ease liquidity problems." Because of Germany's insistence on financial soundness for any solution, France being in the more difficult financial position and Sarkozy facing elections willing to come up with a short term fix, and the unwillingness of French and German banks to take the losses necessary for a lasting solution, the Germans see a real solution taking a long time. ...

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IHS Global Insight estimates that output in the US for the auto industry for 2009 will be 9.5 million vehicles, with capacity of 16.9 milllion vehicles this amounts to 56% capacity utilization number which is very low. Center for Automotive Research estimates that the sales began moving ahead of trend in 1996 and really accelerated after 1998. The easy financing fueled the boom. Now the 16-17 million sales years that were considered normal are seen as inflated and way above the trend. All this suggests that there is a lot of restructuring ahead for the auto industry.

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Abut 3 million homeowners are expected to default on their mortgages in the 30 months ending in mid 2009, and two thirds of this or 2 million will go into foreclosure, according to Moody's Economy.com. So what led to all this which eventually hit the financial markets in the U.S., and also to a lesser degree in Europe, through the opacity of the mortgage securities created from bad mortgages with falsely tagged triple AAA ratings that ended up in the assets of banks and investment firms? The motivations of each group were perverted as things unfolded. When the packagers of securties were not responsible for what they were doing they pursued profit before ethical behaviour and all sorts of securities were created. As these packagers were allowed to shop for ratings the ratings companies gradually lowered their standards to attract business. Politicians failed in the free market atmosphere of the Republican Bush administration and Republican led Congress. Senator Bachus and Congressman Frank introduced legislation during the later period of the bubble but failed to draw support to curb the bad lending. Republicans blocked a new antipredatory lending law in North Carolina from being enacted for the country from 1999 onwards. And Bush without realizing the ramifications prodded HUD to push Fannie Mae and Freddie Mac to require higher percentage of loans to go to low income borrowers. Fannie and Freddie in turn met this requirement by increasing the demand for these subprime loans by buying the mortgage securities, which the packagers of these securities backed by subprime mortgage loans and incorrectly rated AAA by conniving ratings agencies were happy to supply. It was a sad situation with a happy -everyone could say the were bringing home ownership and the American dream to low income people, and business was signing up for this ride with short term gain in mind. And in all this financial innovation lost its legs as packaging these securities and constructing new investment vehicles like the conduits were being used in perverse ways. The basics of labeling something correctly was torn apart. You could not turn a subprime loan to low income borrowers or a loan without documentation to flippers and speculators into something different by simply labeling it as AAA. What the confidence in financial innovation in the American system did was help spread these securities all over the globe, where they were held with confidence by towns in remote parts of the Scandinavian north country as well as financial centres in Europe and Asia. At the state level politicians in California saw this as one of the state's star industries and protected it from legislation to curb bad lending, as most of the big lenders were based in California. Due to a strange set of affairs the Department of Corporations was left with the tasks of oversight of mortgage lenders in the state. It was concerned more with issues like protecting senior citizens from financial scams and was not staffed to meet the supervisory role of a huge mortgage lending business. When it comes to the Fed's role Greenspan also took the laissez fairre stand of not interfering with free markets, even when a lot of the bad lending was obvious and one Fed Governor Gramlich was pushing for better lending standards. The Fed supervisory role was over banks and banks were required to follow lending standards, but most of this lending had shifted to mortgage brokers and financial companies which were beyond the supervision of the Fed. Had the Fed extended its supervision to mortgage affiliates of the banks this could have increased the level of supervision and made a difference. But state regulation mechanisms in California by Department of Corporations show that the regulatory mechanism did not take into account the realities of mortgage lending and how it had changed. ...

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NYT reporters Lyman and Eddy show how the city of Weimar in Germany is coping with the arrival of about 900 refugees, and how well the integration efforts are working.

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A 93 year old hero of the French Resistance, Stephane Hessel, publishes a pamphlet called "Indignez-Vous!," released by a small publishing house from the publisher's home. He calls for resisting the "international dictatorship of the financial markets" and "defending the values of modern democracy." He protests France's treatment of illegal immigrants, the influence on the media by the affluent, cuts to the social safety net, French educational reforms. It was first published in October, and now has sold 1.5 million copies, all through word of mouth advertising. It has been translated into Spanish, Italian, Portuguese, and Greek. New editions are planned for Slovenian, Korean, Japanese, Swedish and other languages. In Britain, it was published with the title "Time for Outrage." The pamphlet is about 4000 words and only 14 pages of text. Its timing is good, as the French are debating what to do in their politics with an election approaching and Sarkozy's standing at new lows. The short length and low price are a big plus, at $4 it made a convenient Christmas gift. Britain, Spain, Portugal and Greece are going through austerity cuts. Public sentiment has been aroused by the cuts, and by the overarching influence of financial markets on the economies of these countries. Some of these countries referred derisively as piigs- Portugal, Ireland, Greece, Spain -countries in the financial markets. The economic impact has fallen disproportionately on the young, with high jobless rate for young people from Italy to Spain, and cuts in funding for universities and schools in the UK also fall heavily on young people. A sense that something has gone wrong in the free market system and the western world. Austerity cuts in spending in the U.S. create a similiar feeling and joblessness among young people is also high in the U.S....

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Higgins cites the IMF and other experts on Greece's debt being unsustainable. He includes a long discussion with Charles Dallara who negotiated in the Brady Plan restructurings for Latin American debt, and for the European banks in 2010-2012 with the EU. Dallara says the issue has become politicized with national parliaments involved making it difficult to tackle the issue of debt reduction. Dallara points out that the Brady plan restructurings were possible because national parliaments were not involved.

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A black supporter of Obama, Ms. Hart, tells him- " I'm exhausted of defending you, defending your administration. I've been told that I voted for a man who was going to change things in a meaningful way for the middle class." This encounter happened at an hour long town hall meeting on CNBC, which John Harwood moderated. Harwood asked Obama whether he was having difficulty connecting with average Americans because of attending Ivy League schools and spending part of his youth overseas. The incident reflects the frustration and disappointment felt by average Americans with the Obama administration and with Obama.

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This Journal editorial says the Bankia bailout continues to be handled poorly by the Spanish government, with Bankia continuing to be a drain on the government funds.