Trump Treasury Secretary Steve Mnuchin Renounces Commitment to Glass-Steagall While Saying He Isn’t | naked capitalism

I don’t understand this at all. Glass Steagall would help Goldman by disrupting the business models of JP, Citi, etc. Hmmmm. I suppose Jamie Dimon has been burning up the phone line?

Via Yves Smith at Naked Capitalism:

I’ve seen some pretty brazen performances over the years, but this one is a standout in a bad way. Steve Mnuchin tells Elizabeth Warren, with a straight face, that Trump’s campaign pledge to implement Glass Steagall has nada to do with breaking up banks. He also makes the utterly false claim that separating commercial and investment banks would hurt small bank lending. The integration between small business activities and investment banking is nada, save at most for brokerage and investmetn management targeting the more successful small business owners. That has bupkis to do with lending.

via Trump Treasury Secretary Steve Mnuchin Renounces Commitment to Glass-Steagall While Saying He Isn’t | naked capitalism


Can Goldman’s Rapacity and Trump’s Stupidity Together Actually Save Banking?

Trump’s two main economic advisors are telling him to do something great – resurrect Glass Steagall! He is too stupid to realize these two – Goldman pod people Cohn and Mnuchin – are doing this so all their gazillions in deferred investments in the firm grow even more grotesque. But so what? For once, having a malleable moron in the White House could be a good thing!

A new Glass-Steagall would split (taxpayer-insured, whether de jure or de facto) commercial banking from the casino of investment banking and go a long way toward unloading the Too Big To Fail gun that tumescent, serially incompetent commercial-investment bank hybrids like Citi hold to the heads of policymakers.

Effect on  (pure-ish play investment bank) Goldman? Zilch. Unless you count how happy they’ll be to see their big competitors – Citi, JPMC, BofA et al – kneecapped. You can bet Cohn and Mnuchin are smiling at The Donald’ s cluelessness. For once, we can, too.

Via Bloomberg: Trump Says He’s Considering Moves to Break Up Wall Street Banks





Why So Few Will “Retire” Comfortably

Serial blunders in the structure of retirement vehicles, especially Social Security, explained. A long post on Naked Capitalism, well worth reading – including the comments. From the embedded interview of Michael Hudson:

The Federal Reserve has just published statistics saying the average American family, 55 and 60 years old, only has about $14,000 worth of savings. This isn’t nearly enough to retire on. There’s also been a vast looting of pension funds, largely by Wall Street. That’s why the investment banks have had to pay tens of billions of dollars of penalties for cheating pension funds and other investors. The current risk-free rate of return is 0.1% on government bonds, so the pension funds don’t have enough money to pay pensions at the rate that their junk economics advisors forecast. The money that people thought was going to be available for their retirement, all of a sudden isn’t. The pretense is that nobody could have forecast this!

There are so many corporate pension funds that are going bankrupt that the Pension Benefit Guarantee Corporation doesn’t have enough money to bail them out. The PBGC is in deficit. If you’re going to be a corporate raider, if you’re going to be a Governor Romney or whatever and you take over a company, you do what Sam Zell did with the Chicago Tribune: You loot the pension fund, you empty it out to pay the bondholders that have lent you the money to buy out the company. You then tell the workers, “I’m sorry there is nothing there. It’s wiped out.” Half of the employee stock ownership programs go bankrupt. That was already a critique made in the 1950s and ‘60s.

via Michael Hudson: Retirement? What Social Obligation? | naked capitalism

NPR Labels Wilbur Ross, Trump Commerce Pick, a “Leader” in Private Equity. Great. It’s a Value Destroying, Rapacious Con Game.

This is a piece I wrote on “private equity” in 2014. Hearing Trump’s choice for Commerce Secretary, Wilbur Ross, described on NPR as a leader of the private equity industry, prompted me to repost it.


The implosion of the junk bond market in the early 1990s, along with a number of high profile LBO failures – Federated Department Stores, Macys, Revco, and of course, the deal dubbed “the Burning Bed,” Ohio Mattress – made the term “leveraged buyout” somewhat unsavory. Then, in one of the most successful rebrandings in financial history, dealmakers thought up a new moniker and since then have operated under the accurate if unwieldy name “private equity.”

But the blush was soon off the rose. Buyout shops hit an even worse rough patch during the financial crisis, when some of the biggest LBOs of all time – Tribune, Harrah’s Entertainment, Station Casinos, Realogy – went toes up and the high yield market cratered again.

European politicians came to refer to buyout shops as “locusts,” and private equity in the US unfortunately became associated in the public mind with the hapless Blackstone boss, Steve Schwarzman, who compared a proposal to change the tax treatment of funds like his to the Nazi invasion of Poland. By 2008, private equity was once again a pejorative term .

Today, it’s almost a smear. Regulators are publicly calling the industry to the carpet for dodgy and fraudulent practices. News outlets smell blood. On May 21, the Wall Street Journal reported that the iconic LBO shop KKR appeared to be holding on to millions of dollars that should have gone to investors in one of its funds. This comes a couple months after an SEC official, Drew Bowden, released the scathing results of the agency’s investigation into private equity practices (hat tip Naked Capitalism).

Bowden said, “Some of the most common deficiencies we see in private equity in the area of fees and expenses occur in firm’s use of consultants, also known as ‘Operating Partners,’ whom advisers promote as providing their portfolio companies with consulting services or other assistance that the portfolio companies could not independently afford.”

Yves Smith of Naked Capitalism goes on to write, “If anything, Bowden’s boss Mary Jo White had been more pointed in the section of her Congressional testimony at the end of April.”

White said, “Some of the common deficiencies from the examinations of these advisers that the staff has identified included: misallocating fees and expenses; charging improper fees to portfolio companies or the funds they manage; disclosing fee monitoring inadequately; and using bogus service providers to charge false fees in order to kick back part of the fee to the adviser.”

Ouch. Somewhere a bunch of guys in blue shirts with white collars and red ties must be putting their heads together to devise a new name for their business. They might consider “public disgrace” or even “private machinations.” In any case, to paraphrase an old saw, the third name’s a charm.