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Tag: Federal Reserve

  • Regulators Shut Down Signature Bank

    Regulators Shut Down Signature Bank

    Regulators have shut down Signature Bank, the third bank in the last week, citing “systemic risk.”

    The last few days have been difficult for banks, especially those servicing the tech industry. Silicon Valley Bank has been in the news as the second-largest bank collapse in US history. With the financial downturn, tech customers withdrew enough funds to help cause a run on the bank, leading to its collapse. Regulators see the same kind of risk with Signature Bank, leading them to shut it down.

    A joint statement by Treasury, Federal Reserve, and FDIC announced the closure:

    We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

    Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

    Regulators did reaffirm that Silicon Valley Bank depositors will have access to their money on Monday:

    After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

  • Inflation Only Expected to Last Six Months

    Inflation Only Expected to Last Six Months

    Consumers and businesses struggling with inflation received some positive news, with one expert saying it will only last six months.

    Recent months have seen the fastest-growing inflation rates in a decade, with prices soaring for common items and goods. Many families and businesses have been struggling to keep up with rising prices, with many wondering if/when prices will level out.

    Former Federal Reserve Governor Randall Kroszner has weighed in, saying he believes the current inflation is largely the result of a perfect storm of circumstances, including pent-up demand, large savings people had built up, stimulus-fueled spending and supply bottlenecks, such as the semiconductor shortage.

    Kroszner does not, however, believe the increased prices will be a sustained trend.

    “We’re going to see a lot of price increases in the short-run,” Kroszner said in an interview with Bloomberg. ”The key question is: Are those transitory or are those sustained? I think we’re going to see them transitory for a while. I don’t think they’re necessarily going to be sustained over the year-to-two-year horizon. But over a six-month horizon? I think certainly.”

  • Federal Reserve Disrupted Due to Operational Error

    Federal Reserve Disrupted Due to Operational Error

    The Federal Reserve’s operations were disrupted Wednesday, due to an “operational error.”

    The Federal Reserve essentially acts as a bank for the nation’s banks. As such, one of its services is the Fedwire Funds Service, facilitating electronic wire transfers between banks. The Fedwire Funds Service was one of the impacted services that was taken offline.

    “A Federal Reserve operational error resulted in disruption of service in several business lines. We are restoring services and are communicating with all Federal Reserve Financial Services customers about the status of operations,” said Jim Strader, Richmond Federal Reserve spokesman, in a statement emailed to multiple outlets.

    Officials are saying a fix will require a reboot of the servers involved in payment channels. The service should be back online Wednesday afternoon.

  • Elizabeth Warren Calls For Probe Into The Federal Reserve Bank of New York

    Elizabeth Warren, United States senator from Massachusetts, has called for an investigation into the relationships the Federal Reserve Bank of New York has with the financial institutions it regulates. Whistler-blower Carmen Segarra gave secret tapes to “This American Life”. The program published them, and they seemed to suggested that the Fed has been far too deferential in its regulatory duties.

    “Congress must hold oversight hearings on the disturbing issues raised by today’s whistle-blower report when it returns in November — because it’s our job to make sure our financial regulators are doing their jobs,” Warren said according to Bloomberg.

    Sherrod Brown, her fellow Democrat on the Senate Banking Committee, has come to Warren’s side. He called for “a full and thorough investigation”, according to CNN.

    What does the Fed have to say for itself? The institution has released a statement to “This American Life”:

    “The New York Fed categorically rejects the allegations being made about the integrity of its supervision of financial institutions. The New York Fed works diligently to execute its supervisory authority in a manner that is most effective in promoting the safety and soundness of the financial institutions it is charged with supervising. To accomplish this important task, the New York Fed employs and trains a large workforce of examiners and specialists and works with the Board of Governors, which sets supervisory policy, and other experts throughout the Federal Reserve System.”

    Segarra is holding her ground in the matter. “The audio on the tapes speaks for itself. Regardless of whether our case proceeds on appeal, we are gratified that Carmen is vindicated by the recorded words of employees of Goldman Sachs and the New York Fed,” she said according to Reuters.

  • Mortgage Rates Decline; Rises Loom in Future

    As the spring season rolls in and the winter doldrums roll out, people are finally exiting their homes and exploring the world once again. Luckily for those recovering from an intense winter hibernation, the economy shows positive signs for the first quarter. Job growth increased by 192,000 for the month of March, and unemployment remained at 6.7 percent. More important for future home-buyers, though, was news that mortgage rates are slowly declining despite fears of an increase in 2014.

    Recent reports show that average mortgage rates fell from 4.5 percent to 4.375 percent at the beginning of April, a much-needed positive sign for the housing market.

    While most big banks are reporting a drastic decline in the number of mortgage originations for the first quarter, with Wells Fargo reporting a 67 percent decline in originations and JP Morgan reporting a 68 percent decline, most signs showcase that for the month of April, more homeowners are coming onto the market and expressing interest in purchasing a new home.

    The Mortgage Bankers Association has reported a 13 percent increase in home-purchase mortgage applications over the past five weeks, hitting a two-month high.

    Along with a recent increase in home-buying applications, US consumer confidence ratings hit its highest point in the past six years, indicating that consumers feel secure in the current economic climate and are more willing to make large purchases.

    The surge in demand for houses and the rise in mortgage applications may simply be a brief blip on the radar, however.

    Mortgage rates increased over the past year most likely in response to news that the Federal Reserve was going to draw-back on its bond-buying program, pulling $10 billion from the economy in monthly installments until the average monthly investment dropped from $85 billion to $55 billion.

    Once this transition is complete, much economic pundits believe mortgage rates will increase. Because of this, many first-home-buyers may be rushing to the market now to circumvent potential higher mortgage rates in the future.

    If the Fed is planning on pulling $30 billion out of the US economy each month soon, it should hope that banks keep mortgage rates low. Lower mortgage rates spur increased consumer spending, a sector which accounts for 70 percent of the US GDP.

    Image via YouTube

  • Janet Yellen’s First Press Conference Goes Awry

    Recently confirmed Federal Reserve Chair Janet Yellen held her first press conference and Federal Open Market Committee meeting on Wednesday.

    In general the meeting went over well, except for some confusion about the fate of the Fed’s low short-term interest rates which unfortunately spiraled into even more trouble for Yellen.

    Under the previous Chair, the board agreed to maintain the low interest rates until the unemployment rate had fallen below 6.5 percent. Since the unemployment rate stood at 6.7 percent as of February this year, revisiting the issue was necessary. The market was wondering what would happen after the certain, impending 0.2 percent drop.

    In the end, the committee decided to drop the definitive 6.5 percent threshold, but maintain its “forward guidance” towards lowering unemployment and achieving 2 percent inflation.

    Many did, indeed, interpret this as Yellen allowing for continued low rates even after, hopefully, unemployment falls to below 6.5 percent. Yellen is well-known for being passionately pro-employment, so it is unlikely she would do anything to hinder the improving employment rate.

    Some, however, interpreted her statements in the opposite direction. With no certain time frame, who really knew when the rates would spike again? Matters were not helped when Yellen estimated the time between the last asset purchases and the end of the low interest rate to be around “six months”, sooner than many expected. A minor panic ensued on Wall Street.

    Fortunately, the Federal Reserve quickly released a clarifying statement. In the press release, FOMC outlines the factors they will be looking at in addition to unemployment before deciding to raise rates. These include “labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments”. In essence, it gives the market even more time to partake of the low rates.

    If more clearly stated in the beginning, this may have quelled many fears. Instead it caused a small uproar. Still, the matter was clarified in only a couple days. Yellen’s fate as a Chair is no where near decided yet. But, many critics posit, Yellen may choose to be more vague with her timelines in the future.

    Image via Wikimedia Commons

  • Student Loans Spike to Top $1 Trillion

    The sharp rise in the nation’s student loan debt, now upwards of $1 trillion, is most concentrated among Americans with poor credit, according to a report released by the Federal Reserve Bank of New York on Tuesday.

    According to the report, student rose debt rose 12 percent in 2013 to reach $1.08 trillion. Student debt remains the second largest source of household debt behind mortgages.

    The report shows that the rise in student debt has not been universal among groups with different credit profiles, according to the Wall Street Journal.  A third, or four percent, of the 12 percent overall rise in student debt came from borrowers with the worst credit history, with credit scores of 620 or below. About five percent of borrowers were from the 621 to 680 credit score range, and two percent from the mid-range of 681 t0 720. The data showed that there were no new borrowers with credit scores at or above 780.

    The data suggests that with the onset of the recession, more Americans are enrolled in school in an effort to gain new skills and hopefully secure higher paying employment after graduation.

    Data released by the U.S. Census Bureau in September 2013 showed that the majority – at nearly 50 percent – of overall income goes to households headed by a member holding at least a bachelor’s degree.  Twenty percent goes to high school graduates, and five percent to those without a high school diploma.

    With student loan repayment delinquencies by borrowers on the rise, there is growing concern among economists on the effects of student loan debt on the recovery of the housing market and the consumer market in general. Missed loan payments may affect borrowers’ credit and affect one’s ability to obtain credit for loans to purchase cars and homes. A senior official at the Consumer Financial Protection Bureau recently warned that the rising student loan debt “may prove to be one of the more painful aftershocks of the Great Recession, reported the Washington Post.

    According to the data, approximately 11.5 percent of student loan balances were in default in the fourth quarter of 2013, up from 8.5 percent in 2011. A default in payment means no payment had been made in at least 90 days. However, the data did not differentiate on the delinquency rate among borrowers with different credit scores.

    Image via Wikimedia Commons

  • Janet Yellen to Make First Speech as New Fed Chair

    Janet Yellen, as the newly appointed Fed chair and first woman to ever hold the post, will make her first comments today before the House Financial Services Committee and then Thursday before the Senate Banking Committee.

    She has addressed these committees before as vice chair for three years and as a leading economist for a long time, but now she faces a whole new spotlight as she steps into the shoes of Ben Bernanke.

    What investors are anxious to find out is if Fed officials are going to hold fast to the message that the economy’s outlook is bright enough to withstand a slight pullback in their stimulus but that rates should stay low to fuel a shaky economy, according to Bloomberg.

    Her first address is important, because it will also give them a clue as to where she stands on their concerns about the economy and the job market, turmoil in global markets and uncertainty about her direction at the Fed. She has already stated that she wants the U.S. central bank to be known as a champion of Main Street, but does she have what it takes to see it through?

    “A new Fed chair’s first testimony is always a testing period,” said Diane Swonk, chief economist at Mesirow Financial.

    Yellen will most likely address many issues, including payroll and her likely intention to continue with the strategy to trim bond buying by $10billion, even though last month employer’s added only 113,000 jobs instead of the anticipated 180,000.

    “While the last couple of payroll readings have been disappointing, we do not expect this to change the currentcourse of asset-purchase tapering,” Joseph Lavorgna, chief U.S. economist at Deutsche Bank Securities Inc. and a former New York Fed economist, said. “We view the recent payroll weakness as temporary and likely to reverse.”

    She will also probably back further away from the The Federal Open Market Committee’s December statement that they probably won’t raise the federal funds rate until “well past the time” the jobless rate falls below 6.5 percent. It is reported that most panel members didn’t favor moving the threshold.

    It is also likely that she will announce her intention to continue Bernanke’s policy of holding the main rate near zero and gradually tapering monthly bond purchases.

    As groundbreaking as her first address is, there is sure to be relentless scrutiny and pleas from both sides of the aisle for the direction which the Fed should now take. Republican lawmakers will most likely try to persuade Yellen to ease up on the incessant regulation of financial institutions and to “be more aggressive in reversing” record stimulus, said David M. Jones, president of DMJ Advisors LLC, a Denver-based economic consulting firm, and a former Fed economist.

    On the other hand, Democratic lawmakers are sure to plea for Yellen’s help to over income inequality and persistent joblessness, Jones said.

    Sen. Sherrod Brown, Democrat from Ohio who spoke with her at length during the confirmation process said of her recently, “She understands — people that are sober-minded about this understand — that income inequality is bad for the wealthy, too. It’s bad for a long-term growing economy. She’ll be a Fed chair that gets out and sees the real economy more and talks to people.”

    These are just a few of the expected inquiries and responses that Janet Yellen will face right away in the beginnings of her term as Fed Chair, and she will likely have a hard time hearing pleas from every direction and playing it right down the middle with Fed policy, but whether or not she will be able to handle it remains to be seen.

    Image via youtube

  • U.S. GDP Increases 3.2% in 4th Quarter

    U.S. GDP Increases 3.2% in 4th Quarter

    Ever since the government shutdown occurred in October last year, economists and consumers alike have been worried about the future state of the United States economy. Thanks to the latest reports from the Commerce Department, however, those fears should be allayed.

    During the 4th quarter last year, the GDP of the US rose 3.2%. While this figure is down from the 3rd quarter, which reported a 4.1% increase, it is significantly higher than growth earlier in 2013. For the entirety of 2013, the GDP only grew 1.9%, down from 2012 in which the measured growth was 2.8%. The initial decline earlier in the year was most likely the result of increased taxes and a tightened budget for federal spending.

    Along with the government shutdown, many people were worried that the economy was being artificially inflated through the Federal Reserve’s bond-buying program. Fortunately, the GDP report from the Commerce Department shows that that was not necessarily the case.

    Consumers and businesses were what spurred the 4th quarter growth. Consumer spending increased 3.3% over the holidays, up from a 2% increase in the 3rd quarter. This 3.3% increase marks the largest increase in consumer spending in the last 3 years.

    Businesses invested much more money into equipment, increasing their spending 7% in this department, while also increasing their stock inventories in anticipation of continued increased sales. If sales do not keep up with their current rates, however, these massive inventories could slow GDP growth in the 1st quarter of this year.

    A surprising contributor to GDP growth was an increasing number of US exports, which grew 11.4% in the 4th quarter. Imports showed a very minimal increase, meaning the US is finally making headway in its trade deficit.

    The biggest deductions came from the government shutdown and the housing market. The government shutdown reduced federal expenditures by 12.6%, leading to a 0.3% reduction in the overall GDP. (Lessened overall government spending reduced the 4th quarter GDP a total of 0.9%.) At the same time, the residential housing market declined 0.3%, marking the first decline for housing in the GDP since 2010.

    The biggest worry still, though, is the lack of job creation. While official unemployment rates currently sit at 6.7%, the majority of the decline in unemployment claims has come from those who have completely dropped out of the job market. The last report for weekly unemployment claims showed a 19,000 claim increase, the highest number in a month.

    “Everybody agrees that with each progressive quarter and year, it is getting better. But without a meaningful increase in employment, it makes it difficult to power strong growth in the future,” stated Guy Berger, a US economist at RBS.

    Luckily, the new Chair of the Federal Reserve just happens to be an expert on unemployment. Let’s hope Janet Yellen can help the US GDP and employment rates continue their upward trends.

    Image via WhiteHouse.gov

  • Janet Yellen Confirmed as Next Federal Reserve Chair

    Yesterday, the Senate voted 56-26 to usher in Janet Yellen as the next Chair of the Federal Reserve.

    Yellen’s acceptance came as no surprise, especially seeing as she was easily approved by the Senate Banking Committee in November. Yellen is the first woman to ever head the Federal Reserve and is expected to continue the country on the path it has been traipsing since the beginning of the “Great Recession” 8 years ago.

    Yellen will officially take office on February 1, after Ben Bernanke’s term is officially over. Bernanke’s shoes will be hard to fill due to the unique situation the Federal Reserve finds itself in at the current moment. In order to abate an impending economic collapse, the Federal Reserve has been investing $85 billion per month in a bond-buying program. This program was intended to push money into the US economy, driving down interest rates on loans and spurring investment and spending from consumers.

    However, Bernanke’s bond-buying program has come under much fire from the GOP, where many politicians insist that continuing the program “risks fueling an economic bubble and even hyper-inflation,” potentially leading to “real and lasting damage to our economy.” Senator Rand Paul has perhaps been the Fed’s most outspoken opponent, recently stating that the policies of the Federal Reserve have destroyed “97 percent of the dollar, along with millions of jobs” since its inception.

    However, Yellen has already shown that she is willing to work with both sides of the political spectrum, recently voting to ease the quantitative easing program of the Federal Reserve from $85 billion per month to $75 billion, a move which presents dangers in itself: If Yellen eases the program too quickly, it could worry potential investors and lead to withdrawal from the markets and increased interest rates; if she moves too slowly, more “bubbles” could appear in the economy, leading to constant fear that said bubbles may burst: “There are dangers, frankly, on both sides of ending the program or ending accommodation too early. There are also dangers that we have to keep in mind with continuing the program too long or more generally keeping monetary policy accommodation in place too long,” Yellen told Senators during Congressional confirmation hearings in November.

    While most politicians are worried about the logistics of the Fed’s bond-buying program, Yellen will most likely spend her time worrying about how to decrease the unemployment rate. During all of her time as a student, a professor (at UC Berkeley, Harvard, and the London School of Economics), and a policymaker, Yellen’s primary focus has been on unemployment. Yellen has been termed “dovish” on monetary policy, meaning she is willing to let inflation rise if it brings about higher employment more rapidly.

    After her confirmation, President Obama championed Yellen as the next Chair of the Federal Reserve, stating, “The American people will have a fierce champion who understands that the ultimate goal of economic and financial policy making is to improve the lives, jobs and standard of living of American workers and their families.” Obama originally nominated Yellen following the withdrawal of his initial nominee, Larry Summers, and at the behest of economists across the world.

    Image via Wikimedia Commons

  • Janet Yellen Approved for Fed by Senate Committee

    Thursday morning, the Senate Banking Committee approved Janet Yellen’s nomination to become the next Chair of the Federal Reserve by a 14 to 8 vote. This vote comes as no surprise to political pundits, especially seeing as Democrats hold 12 of the 22 seats on the committee and Yellen has been supported by Democrats and Republicans, alike, before the vote took place.

    In early October, Barack Obama announced Janet Yellen as his nomination to replace Ben Bernanke as Chair of the Federal Reserve when his term ends on January 31, 2014, and for good reason. Currently, Yellen holds the position as vice-chair of the Federal Reserve. Before her current role, Yellen had served as the President and Chief Executive Officer of the Federal Reserve Bank of San Francisco and as an economic adviser during the Clinton administration. Not only does Yellen have the pedigree to make her an appropriate candidate for the next chair of the Fed, but over 350 economists sent a letter to President Obama earlier this year voicing their approval of Yellen as the next nominee for Fed chair.

    Despite her credentials, however, many Republicans had voiced their opposition to her nomination. Republican Senator Marco Rubio, of Florida, has expressed his doubts that Yellen has the right monetary policy to lead the Fed during the current US financial situation: “She has championed policies that have diminished people’s purchasing power by weakening the dollar, made long-term savings less attractive by diminishing returns on this important behavior, and put the US economy at increased risk of higher inflation and another future boom-bust.”

    Senator Mike Crapo of Idaho, the ranking Republican on the Senate banking committee, also voiced concern about Yellen’s continued support of the US bond-buying program: “The long-term costs of these policies are unclear and, frankly, worrisome. The immediate benefits are questionable and markets have become too reliant on monetary stimulus.”

    While most Republicans have apprehensions and disagreements with how the Federal Reserve is handling the financial situation of the US, Yellen is most likely going to win nomination while continuing the same policies as her predecessor, Ben Bernanke. Yellen is described as a “dove”, meaning that during times of financial crisis, she will bolster Fed policies that fight against unemployment and attempt to drive spending. Conversely, Republicans would like to see a Fed chair who was a “hawk”, one who would focus more on suppressing inflation than worrying about unemployment.

    The biggest concern of Republicans, however, deals with the Fed’s bond-buying program. As it currently stands, the Federal Reserve purchases $85 billion of government bonds per month in an effort to drive down interest rates and encourage loans and investments. Republicans, as Senator Crapo expressed in the statement above, are worried that these investments are artificially driving-up the price of stocks and will soon result in a bubble-burst similar to the 2008 financial crisis.

    Democrats, and some Republicans (such as Bob Corker of Tennessee, Mark Kirk of Illinois and Tom Coburn of Oklahoma – who voted for Yellen’s nomination on the Senate banking committee, and Susan Collins of Maine, Orrin Hatch of Utah and Lisa Murkowski of Alaska – who have voiced that they will support Yellen’s nomination), point toward Yellen’s proven track record of intellect and success as the reasons as to why there should be no issues concerning her nomination: “She has devoted a large portion of her professional and academic career to studying the labor market, unemployment, monetary policy, and the economy. As we saw in her testimony last week, Dr. Yellen understands the challenges facing our economy and the balance the Fed must strike as we navigate the path back to full employment,” stated Senate Banking Committee Chairman Tim Johnson (D-S.D.).

    Due to her current role as vice-chair of the Federal Reserve and bipartisan support, Yellen should receive the 60 votes necessary to secure her position as the next Chair of the Fed (especially if Harry Reid is successful in changing the rules to make 51 votes the number required to secure nomination). If she is successful, Yellen will become the first woman to head the Federal Reserve since its inception over 100 years ago, a move which would be another huge step toward incorporating more women within politics in Washington, DC.

    What do you think? Is Yellen the appropriate candidate to become the next Chair of the Federal Reserve? Let us know in the Comments Section below.

    [Image via Wikimedia Commons]

  • Labor Department Reports 148,000 Jobs Added

    The U.S. Labor Department finally released its September employment report Tuesday morning, having been delayed by the government’s 16-day shutdown, which began on October 1. According to the monthly overview, U.S. employers added 148,000 new job positions in September, a dismal comparison to the 185,000 jobs that were added each month last year. The most enterprising positions indicated in the summary were in warehousing, transportation, construction, and wholesale trade.

    Currently, the number of people employed by the federal government looks even more discouraging, economically, as only 2% of Americans worked in federally-run positions before the shutdown – the lowest of this century, as well as the lowest in almost 50 years; in 1966, 4.6% of citizens were on federal payrolls – more than twice what it is now. To further put that into perspective, those figures don’t even include military employment, which was 2.6 million people in 1966 and, today, is 1.4 million.

    Now, upon the bleak figures of the report, economists are concerned about the Federal Reserve’s spending; the Fed was presumed to be planning to cut down on major asset purchases, as the economy showed a steady incline. With September’s report, however, that does not now seem likely.

    In a letter to customers, Barclays analysts’ wrote, “In light of the moderate tone of the September employment report, we have pushed out our expectation for the first Fed tapering in the pace of asset purchases to March 2014 from December 2013.”

    As reported by The New York Times, Pantheon Macroeconomics’ chief economist Ian Shepherdson expressed to clientele that, now, because of the shutdown, economic data based on the monthly employment report by the Labor Department will continue to be tainted until December. That means that the Fed, whose “core criteria to change policy is clear evidence of a sustained improvement in labor market outlook,” probably won’t make any effort to reduce spending until December’s report comes out in January 2014.

    You can read the entire report for yourself by clicking the link above or visiting the homepage for the Bureau of Labor Statistics at bls.gov.

    Image courtesy Dan Smith (Rdsmith4) via Wikimedia Commons.

  • JP Morgan Chase and US Justice Department Cut $13 Billion Deal as America Suffers

    The ongoing Kabuki theater between Big Government and Big Finance took a new turn on Saturday, when it was announced that JPMorgan Chase & Co, one of the top 10 banks in the world, has struck a preliminary $13 billion deal with the US Justice Department.

    The deal will quietly mothball Federal investigations into hyper-destructive mortgage loans the bank sold to investors throughout the Bush regime, culminating in the 2008 financial crisis. To keep the chattering classes busy, the deal will not explicitly let the bank off the hook from criminal liability related to its mortgage finance operations that were re-packaged into AAA rated bonds before sale to investors.

    While the overall inflationary monetary system under the monopoly of Federal Reserve remains unscathed, in order to soothe the public at large, the bank will continue to cooperate in criminal investigations of some JP Morgan employees who were involved in the mortgage operations. http://www.youtube.com/watch?v=iR-gJ5N014o

    Authorities at JP Morgan and Justice Department did not respond to Reuters request for comments, but some sources say that the details behind the agreement are still being hashed out away from full public view or the glare of 24/7 C-SPAN cameras.

    The $13 billion settlement is peanuts for the 800-lb gorilla of global finance, which sits on a cool $2.4 Trillion in worldwide assets, larger than the economies of all but the top 7 countries globally.

    The settlement will make many of JP Morgan’s legal troubles go away, even as the bank disclosed this month that it had set aside $23 billion in reserves for the deal with Washington DC and other legal expenses to be paid to expensive DC lawyers to patch up further scrutiny over its conduct before and after the 2008 financial implosion.

    Attorney General Eric Holder and JP Morgan Chief Executive Jamie Dimon enjoyed phone conversations on Friday evening to finalize the broad outlines of the deal. Long trumpeted by the media as one of the most well run banks, JP Morgan is no longer able to hide the skeletons in its cupboard while maintaining an image of world esteem.

    With foreign governments and financial giants relentlessly infiltrating the highly unstable American banking system, the Justice Department was threatening to sue the bank over complex mortgage backed securities it sold to questionable investors, leading to more than doubling of home prices until the September 2008 crash.

    Some of the criminal liabilities are carry overs from the now defunct Washington Mutual (WaMu) and investment bank Bear Stearns, which were absorbed by JP Morgan with Federal Reserve’s backing behind the scenes. Together, Bear Stearns and JP Morgan were able to extract more than $1.2 Trillion from tax-payers as unemployment soared and millions of Americans lost their life-time savings.

    [image from youtube and government accountability office]

  • Janet Yellen Nominated to Lead Federal Reserve

    As expected, President Obama announced Wednesday that he would be nominating Fed vice chairwoman Janet Yellen to lead the Federal Reserve. She would replace retiring chairman Ben Bernanke.

    “For nearly 8 years, Ben has led the Fed through some of the most daunting economic challenges of our lifetime…Against the volatility of global markets, he’s been a voice of wisdom, and a steady hand. At the same time, when faced with global economic meltdown he has displayed tremendous courage and creativity. He took bold action that was needed to avert another depressions, helping us stop the freefall, stabilize financial markets, shore up our banks, and get credit flowing again. And all this has made a profound difference in the lives of millions of Americans,” said President Obama of outgoing head Ben Bernanke.

    “A lot of people aren’t necessarily sure what the chairman of the Federal Reserve does, but thanks to this man, more families are able to afford their own home, more small businesses are able to get loans, more folks can pay their mortgages and their car loans. It’s meant more growth, and more jobs.”

    Of Yellen, Obama had this to say:

    “Janet is exceptionally qualified for this role. She’s served in leadership positions at the Fed for more than a decade. As vice chair for the past three years she’s been exemplary and a driving force of policies to help boost our economic recovery…she has a keen understanding of how markets and the economy work.”

    Obama called the nomination one of the most important economic decisions he’ll make as President, as the head of the Fed is one of the most important policy-making positions in the world.

    Before her appointment to the vice chair position, Yellen served as President and Chief Executive Officer of the Federal Reserve Bank of San Francisco, and before that the Chair of the White House Council of Economic Advisers under Bill Clinton.

    “While I think we all agree, Mr. President, that more needs to be done to strengthen the recovery, particularly for those hardest hit by the Great Recession, we have made progress. The economy is stronger and the financial system sounder,” said Yellen.

    The nomination comes at a time when the country is facing economic uncertainty as the government shutdown enters its second week and the countdown keeps ticking for Congress to act on the impending debt ceiling deadline.

    Images via Wikimedia Commons, YouTube

  • Obama Nominates Yellen To Fed Chief Position

    President Obama will nominate the Vice Chair of the Federal Reserve, Janet Yellen, to fill Ben Bernanke’s position as chairman of the nation’s central bank when Bernanke’s term ends on January 31st. The fact that Janet will be the first woman to head the organization especially in the middle of the present economic climate is being widely discussed and, in many cases, enthusiastically promoted.

    The Head of the Senate Banking, Housing and Urban Affairs Committee, Senator Tim Johnson, D-S.D., recently praised Professor Yellen’s skill and knowledge.

    “She has a depth of experience that is second to none, and I have no doubt she will be an excellent Federal Reserve chairman,” Senator Johnson said.

    Others have taken to Twitter in order to vocalize support for the sixty-seven-year-old University of California, Berkeley, professor.

    She has an impressive CV including serving as the president of the Federal Reserve Bank of San Francisco as well as her time teaching at the University of California, Berkeley. The following video gives a brief overview about her political viability for the newly appointed role in which she finds herself.

    In December 2007, Janet Yellen spoke about the important task banks faced to encourage financial growth in spite of reservations and hesitations.

    “If banks only partially replace the collapsed shadow banks or, worse, if they cut back their lending in anticipation of a worsening economy, then the resulting credit crunch could push us into recession. Thus, the risk of recession no longer seems remote, especially since the economy may well already have begun contracting in the current quarter,” Janet Yellen said.

    Her past expertise during the near financial breakdown of 2008 was instrumental in seeing the country through that difficult period. Her anticipated efforts to continue striving to lower unemployment and encourage economic growth will be critical for the nation’s future.

    The following video shows Janet Yellen speaking at the Haas School of Business, University of California, Berkeley, where her focus on “communication” serves as the crux in ensuring that “monetary policy” is sustainable.

    [Image Via Wikimedia Commons/ Courtesy of U.S. Government And Serves As The Official FRBSF Picture For Janet Yellen]

  • New $100 bill: As Federal Reserve Destroys Dollar, Chinese Yuan Rises

    Federal Reserve, the government agency in control of the dollar fiat standard will roll out the new $100 bill, with an array of high-tech security features designed to purportedly thwart counterfeiters, on Tuesday, despite partial shutdown of the mammoth federal government.

    What is stunning about this whole counterfeiting affair is that in reality, the Federal Reserve remains the world’s greatest legalized counterfeiting crime syndicate. It prints trillions of dollars out of thin air, year after year, while the ignorant, impotent and powerless Congress quarrels over bulging budget deficits and spending allocations.

    Never in its 99 year history, this opaque agency shrouded in mystery and total secrecy has been audited by third parties, and its activities brought to light in full public view. So in essence while the illegal counterfeiters holed in Latin America, Middle-East and China are busy creating millions in fake dollars, the Federal Reserve is legally permitted to create trillions at the same time.

    Gullible America is being presented with such worthless details as “The 3-D security ribbon is magic. It is made up of hundreds of thousands of micro-lenses in each note…This is the most complex note the United States has ever produced,” according to Larry Felix, the director of the Bureau of Engraving and Printing.

    If this doesn’t remind you of the proverbial “ignoring the elephant in the room” than America is indeed in deep trouble. What is the point of such dazzling “complexity” when inflation keeps hemorrhaging dollar’s value and a $100 dollar bill from 1913 would be now worth as little as $1? Here is a chart on the dollar’s purchasing power from the horse’s mouth itself

    On the other side of the pacific, China, on the strength of its manufacturing output and enormous trade surpluses, is resolutely determined to make Chinese yuan the world’s dominant currency. And by printing untold trillions, the Federal Reserve is surreptitiously aiding and abetting yuan’s growing might.

    How big is yuan going to get? And how soon? According to Bank for International Settlements (BIS), the yuan has already vaulted to the 9th position among the most traded currencies on the global markets. It was in 30th place as late as 2004.

    The speed and scale of expansion in yuan trading is such that HSBC reckons it is going to be the third most traded currency by 2015, behind dollar and euro.

    So how important is a redesigned $100 bill? Not much, considering the harrowing experience of Wiemar Germany, and what hyperinflation can do to a people and civilization.

    [image from examiner and Federal Reserve]

  • New $100 Bill, Counterfeit-Proof?

    Are you ready to get your hands on the new $100 bill? If so, you’re not alone. The $100 bill is the second most common bill only behind the $1 bill. So, it should come as no surprise that the public is anxiously waiting for the release of the newly upgraded $100 bill.

    The new $100 bills were originally intended for a 2011 release; however, complications with the printing led to a delayed release date. The bills will be released on October 8, 2013. Initial complications stemmed from the bills creasing, which led to blank spaces.

    Additional time was required due to the intricate process needed to create each bill where the blue security 3-D ribbon had to be sewed into the fabric of the bill instead of just stamped on the exterior. The extra efforts for this special design will help fight the potential for counterfeit.

    Dennis Forgue, who is a currency expert based out of Chicago, sounded optimistic about the capability of the bills limiting counterfeit.

    “That’s something that’s not going to be able to be reproduced on a photocopy machine, that’s for sure, or even on the computer,” Dennis Forgue said.

    The Associate Director of the Federal Reserve, Michael J. Lambert, mirrored the sentiments of Dennis Forgue when speaking about the decreased likelihood of counterfeit. “It only takes a few seconds for people, if they know what they’re looking for to know what they’re looking at is genuine,” Michael J. Lambert said.

    The following video depicts the detailed changes to the recent $100 bill upgrade.

    http://www.youtube.com/watch?v=G9spCFYYXUQ

    Multiple changes will be noticed on the bill including: the 3-D security ribbon with rotating “bell” and “100’s”, color-changing ink from copper to green when the bill is moved, Benjamin Franklin will no longer be encased in a dark oval, the picture of an an ink well will now be on the front, and a different view of Independence Hall will be placed on the back of the bill.

    Have the extra efforts to fight counterfeit been necessary? Many think so.

    “I would say it’s absolutely worthwhile to do whatever it takes to make sure that we have the best currency that we can,” Benjamin Mazzotta, a cost currency expert said.

    [Image Via Federal Reserve]

  • Stock Market Dips Drastically After Wednesday’s High

    On Wednesday, September 18, the Dow set an all-time high at closing, as did the S&P. The boom came shortly after the Federal Reserve announced that it would continue its economic stimulus program.

    However, the investment-high did not last long. The stock saw itself losing all of its gains from Wednesday on Thursday and Friday. Economic pundits believe the dip in the market is due to uncertainty surrounding the actual strength of the market: “Investors need to take a step back and consider the idea that maybe the U.S economy is on weaker footing than we originally thought,” stated Marc Doss, regional CIO for Wells Fargo.

    Investors were surprised when Ben Bernanke announced that the Fed would continue its $85 billion bond-buying program. All signs pointed to the program being decommissioned this September. However, the Federal Reserve stated that it “decided to await more evidence that progress will be sustained” before ending the program.

    The purpose of the Fed’s bond-buyig program is to pump money into the economy to encourage people and banks to borrow and lend more money. Thus, it is a program that would need to be implemented when the market is not at its strongest. Because of its continuance, investors are wary as to current market strength, hence the drop in the stock market after the announcement.

    Companies themselves, however, seem to have much faith in the market. There have been 140 IPO’s added to the market this year, 46% more than 2012. More companies are offering IPO’s because they see promise and stability in the market. While this is generally seen as a positive sign, it does offer more risks to companies and could create a bubble situation of its own – the influx of IPO’s may start a trend which could diminish the quality of offerings and lessen peoples’ investments in said companies.

    The main concern with the Fed’s bond-buying program right now concerns the time-table as to when the Fed will feel ready to end the program:

    “Fed officials have never been able to agree among themselves what exactly would constitute the ‘substantial’ improvement in the labor market outlook that would persuade them to halt the monthly asset purchases. As a result, they have done a very poor job of communicating to the markets how improvements in the labor market should be gauged,” stated Paul Ashworth, chief US economist at Capital Economics.

    There is also the concern that the market growth the US has seen in September is the result of quantitative easing rather than actual company growth. If this is the case, many investors, such as Doug Kass of Seabreeze Partners Management, believe that the Fed has gotten itself in a situation that it can’t escape: “There is no way out for the Fed once it started the process of printing. Getting in was easy. Getting out—not so much. The Fed is trapped and can’t end tapering or else the bond and stock markets will blow up. The longer this continues the bigger the inevitable burst.”

    Then there are the other factors such as potential conflicts in the Middle East, worries over government shutdown, and the question of who will become the next chair of the Federal Reserve. In essence, nothing has changed – no one does not understand economics, and no one ever will.

    Image via Wikimedia Commons

  • Gold Recovery? What Does This Mean For Business?

    Gold has had a resurgence recently. This comes as good news for investors and people that follow the market closely. As of today, gold is on track for its biggest weekly gain in five weeks. Several analysts are saying that the precious metal that we once used to pay for everything may have good times ahead. The Federal Reserve also surprised the market by announcing that it would continue bond purchases, which is currently at $85 billion per month.

    CNBC mentions that John Meyer, a mining analyst at SP Angel has said these stocks are down on their luck but have rallied in recent weeks off a very low base.He told CNBC that they are hoping for better performance from gold going forward as well as a resurgence of funds going into the sector. Gold also surged 4.3 percent after the Federal Reserve announced that they would postpone the reduction of their large bond-buying program. The metal has gained nearly 3 percent this week overall and hit an all-time high at the end of the 2011. At this time, it was going for just over $1,900 per ounce, but has since stalled.

    Despite this success, The Fed announcement is unlikely to boost the price of the yellow metal high enough to give the miners a sufficient spread between production costs and the price at which they can sell gold on the open market, according to The Street. Is the metal back on track to help business yet? We may just have to wait and see.

    Since stalling out from its all-time in 2011, Gold selling accelerated in april of this year. This was due in large part to the fact that people were fearing that central banks were becoming less likely to contribute to stimulus measures. As a result, this has weakened currencies, additionally boosting gold as an inflation hedge. This week’s rally is a good opportunity to sell, while teh metal will average about $1,125 in the next year, as stated by Societe Generale SA in a statement to Bloomberg. However, Credit Suisse Group AG expects an average of $1,180.

    As with the history of the market, it is hard to know whether to invest with these types of things or not and at what time. The world of business can often be difficult to figure out, but if gold continues to rise, this will be very good for business and investors.

    http://www.youtube.com/watch?v=2aoyg97pcHg

    Image via Youtube

  • Larry Summers Withdraws Name from Fed Chair Debate

    In somewhat surprising news Sunday, Larry Summers has withdrawn his name for the discussion of who will replace Ben Bernanke as Chair of the Federal Reserve when his term ends in January. All signs seemed to point to Summers as Obama’s first choice to replace Bernanke, which is what makes the news surprising. However, Summers has recently come under much criticism for past actions and the push from economists and politicians alike has been for another candidate – Janet Yellen.

    In a letter sent to President Obama on Sunday, Summers stated that “I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, ultimately, the interests of the nation’s ongoing economic recovery.” Why would his confirmation prove so acrimonious? Summers’s appointment has come under much scrutiny from 3 Democrats who serve on the committee that would have to approve his nomination. These more-liberal Democrats find two main faults with Summers’s nomination: 1) Summers has a record of supporting deregulation in the US market; and 2) Summers has a history of being anti-feminist due to his relations with his female colleagues while serving as President of Harvard (A position he later resigned from due to increased tension and pressure from the faculty.)

    Summers served as the Secretary of the Treasury under Bill Clinton and has since developed a deregulatory reputation due to certain actions during this tenure. First, Summers supported the deregulation of derivatives, which means that he supported lessening the oversight on future contractual payments that were originally created to lessen the risk parties would take when selling or purchasing products. With less regulation comes greater risk, however, in speculation. Many people have argued that the deregulation of derivatives was a large contributor to the financial crisis of 2008 due to increased speculation on future prices from banks, hedge funds, and insurance agencies.

    Secondly, Summers supported repealing the Glass-Stegall Act, another action which many people believe helped the US crumble into the financial crisis in 2008. The Glass-Steagall Act was created under FDR during the Great Depression; It was an act which separated commercial and investment banking. By doing this, the FDIC was ensuring that the money individual placed into their checking or savings accounts would not be gambled with on the open market by banks. If a person wanted to invest their money into the open market and potentially reap the benefits of larger interest rates on their accounts, one could invest their money into an investment bank and let the market play out. The Glass-Steagall Act was eventually repealed under George W. Bush, which resulted in much market speculation by banks, higher interest rates, and potentially the housing and financial crises of 2008.

    The current front-runner for the position of Chair of the Federal Reserve, now that Summers has withdrawn, is Janet Yellen. Yellen obtained her PhD from Yale and has been working with the Federal Reserve ever since. She was recently nominated to serve as Vice-President of the Fed by Barack Obama. Yellen’s main focuses during her lifetime have been on interest rates, inflation, and unemployment. Summers not only has immense intelligence and vast experience on her side, but she also has the support of politicians and colleagues. The Democrats on the committee for approval of the Fed nominee have voiced their support for Yellen, and over 350 economists have signed a letter making a plea to President Obama to nominate Yellen as the next chair of the Fed.

    If Yellen was to become the next Chair of the Fed, it would be a monumental step for women in Washington. While President Obama has made pushes to include more women in Washington, Yellen would be the first woman to chair the Fed in its over 100 year history.

    What do you think? Is Yellen the best candidate for the next Chair of the Federal Reserve? Voice your opinion in the Comments section below.

    Image via Twitter

  • Turns Out Anonymous Did Hack Into The Federal Reserve

    On Sunday evening, Anonymous leaked over 4,000 banker profiles it claimed to have stolen from the federal reserve. The information contained names, addresses, IP addresses, hashed passwords and other sensitive information. Now the federal reserve has confirmed the hack, but says no “critical functions” were affected.

    ZDNet reports that the Federal Reserve sent out notices to affected individuals earlier this week confirming an intrusion on their system. In a statement to Reuters, a spokesperson said the Federal Reserve was “aware that information was obtained by exploiting a temporary vulnerability in a Web site vendor product.” The vulnerability was reportedly fixed, and should cause no more problems in the future.

    Of course, that doesn’t fix the fact that a list containing the personal data of over 4,000 bankers is still floating around the Internet. The Federal Reserve downplayed the hack by telling those affected that their passwords were not compromised. That’s technically true, but there’s still cause for concern.

    Speaking to ZDNet, Jon Waldman, a senior information security consultant for financial institutions, said the hashed passwords included in the leak could be easily decrypted by hackers. The list which contained the information is no longer on the original hacked Alabama Web site, but it’s reportedly being hosted on a Chinese Web site for hackers to get a hold of. Waldman says the existence of this information means that banking executives “will be specific targets of Social Engineering and hacking attacks.”

    It remains to be seen if any of the leaked information has led to attacks on individual banks. Waldman certainly thinks they’re at risk, but you would hope that banks would be wary of any attempts to solicit info after this latest attack.

    We’ll continue to follow the exploits of Anonymous in #OpLastResort. It doesn’t appear that the hacktivist collective is done just yet, and likely has more attacks planned in the coming weeks.

    [Image courtesy Wikimedia Commons]