The Light: Hillary

I have often mentioned SEIU, the union co-founded by ACORN’s founder, Wade Rathke. That really should tell people as much as they need to know. Of course, there is more, though. SEIU’s recently resigned director, Andy Stern, has been a frequent visitor at the White House. And yes, SEIU helped to get Obama elected.

The SEIU also held California hostage when it was trying to reduce its payouts by bringing in their good buddy, Obama, to tell Ah-nold that he would get NO federal money if he touched the SEIU wages. Must be nice to have friends in high places, right? We are talking a union with only a little over 2 million members. That is some level of influence for so few people relatively speaking (the US has over 307 million people).

There is an even seedier side to SEIU, too. Who can forget this scene when a Tea Party member was assaulted by SEIU members:

That is but the tip of the iceberg. Here is another example of SEIU violence which, ironically, is directed toward people it wants as members:

If you go to YouTube, and do a search on “SEIU violence,” you will get more hits than most people have time to watch.

But as Erik Erickson pointed out at <a href="http://www.redstate.com/erick/2010/05/24/this-stuff-is-not-supposed-to-happen-in-america/"Redstate.com, what SEIU did over the weekend is taking their brand of intimidation to a whole new low. As he noted, had there not been a reporter (Nina Easton) living next door to the target house, chances are good we would not have known about their little weekend in Maryland.

And what they did is disturbing on oh-so-many levels, as this eye witness account from Ms. Easton highlights:

What’s Really Behind SEIU’s Bank of America Protests?

(Photo by Nina Easton)

Every journalist loves a peaceful protest-whether it makes news, shakes up a political season, or holds out the possibility of altering history. Then there are the ones that show up on your curb–literally.

Last Sunday, on a peaceful, sun-crisp afternoon, our toddler finally napping upstairs, my front yard exploded with 500 screaming, placard-waving strangers on a mission to intimidate my neighbor, Greg Baer. Baer is deputy general counsel for corporate law at Bank of America (BAC, Fortune 500), a senior executive based in Washington, D.C. And that — in the minds of the organizers at the politically influential Service Employees International Union and a Chicago outfit called National Political Action — makes his family fair game.

Waving signs denouncing bank “greed,” hordes of invaders poured out of 14 school buses, up Baer’s steps, and onto his front porch. As bullhorns rattled with stories of debtor calls and foreclosed homes, Baer’s teenage son Jack — alone in the house — locked himself in the bathroom. “When are they going to leave?” Jack pleaded when I called to check on him.

So these are the depths to which the SEIU, an incredibly powerful (thanks, Obama) union with very close ties to Barack Obama, has sunk. They went to someone’s HOUSE to protest, terrorizing – yes, terrorizing – a young teenager:

Baer, on his way home from a Little League game, parked his car around the corner, called the police, and made a quick calculation to leave his younger son behind while he tried to rescue his increasingly distressed teen. He made his way through a din of barked demands and insults from the activists who proudly “outed” him, and slipped through his front door.

“Excuse me,” Baer told his accusers, “I need to get into the house. I have a child who is alone in there and frightened.”

When is a protest not a protest?

Now this event would accurately be called a “protest” if it were taking place at, say, a bank or the U.S. Capitol. But when hundreds of loud and angry strangers are descending on your family, your children, and your home, a more apt description of this assemblage would be “mob.” Intimidation was the whole point of this exercise, and it worked-even on the police. A trio of officers who belatedly answered our calls confessed a fear that arrests might “incite” these trespassers.

Yes, “mob” is the perfect word for what the SEIU members did:

What’s interesting is that SEIU, the nation’s second largest union, craves respectability. Just-retired president Andy Stern is an Obama friend and regular White House visitor. He sits on the President’s Fiscal Responsibility Commission. He hobnobs with those greedy Wall Street CEOs — executives much higher-ranking than my neighbor Baer — at Davos. His union spent $70 million getting Democrats elected in 2008.

In the business community, though, SEIU has a reputation for strong-arm tactics against management, prompting some companies to file suit.

Now those strong-arm tactics, stirred by supposedly free-floating (as opposed to organized) populist rage, have come to the neighborhood curb. Last year it was AIG executives — with protestors met by security guard outside. Now it’s any executive — and they’re on the front stoop. After Baer’s house, the 14 buses left to descend on the nearby residence of Peter Scher, a government relations executive at JPMorgan Chase (JPM, Fortune 500).

Targeting homes and families seems to put SEIU in the ranks of (now jailed) radical animal-rights activists and the Kansas anti-gay fundamentalists harassing the grieving parents of a dead 20-year-old soldier at his funeral (the Supreme Court has agreed to weigh in on the latter). But that’s not a conversation that SEIU officials want to have.

When I asked Stephen Lerner, SEIU’s point-person on Wall Street reform, about these tactics, he accused me of getting “emotional.” Lerner was more comfortable sticking to his talking points: “Millions of people are losing their homes, and they have gone to the banks, which are turning a deaf ear.”

Okay, fine, then why not continue SEIU protests at bank offices and shareholder meetings-as the union has been doing for more than a year? Lerner insists, “People in powerful corporations seem to think they can insulate themselves from the damage they are doing.”

Isn’t that just typical? Rather than actually addressing Ms. Easton’s concerns, she is dismissed as being “emotional.” So, let’s add “sexist” to the increasingly long list of things SEIU is, sadly too many of which are negative. But to Lerner’s accusations:

Bank of America officials dispute Lerner’s assertion about the “damage they are doing,” citing the success of workout programs to help distressed homeowners, praise received from community groups, the bank’s support of financial reform legislation, and the little-noticed fact that Bank of America exited the subprime lending business in 2001.

SEIU has said it wants to organize bank tellers and call centers — and its critics point out that a great way to worsen employee morale, thereby making workers more susceptible to union calls, is to batter a bank’s image through protest. (SEIU officials say their anti-Wall Street campaign has nothing to do with their organizing efforts.) Complicating this picture is the fact that BofA is the union’s lender of choice — and SEIU, suffering financially, owes the bank nearly $4 million in interest and fees. Bank of America declined comment on the loans.

Banks: The new punching bag

But SEIU’s intentions, and BofA’s lender record, are ripe subjects to debate in Congress, on air, at shareholder hearings. Not in Greg Baer’s front yard.
Why the media wasn’t invited

Sunday’s onslaught wasn’t designed for mainstream media consumption. There were no reporters from organizations like the Washington Post, no local camera crews who might have aired criticism of this private-home invasion. With the media covering the conservative Tea Party protesters, the behavior of individual activists has drawn withering scrutiny.

Instead, a friendly Huffington Post blogger showed up, narrowcasting coverage to the union’s leftist base. The rest of the message these protesters brought was personal-aimed at frightening Baer and his family, not influencing a broader public.

Of course, HuffPost readers responding to the coverage assumed that Baer was an evil former Bush official. He’s not. A lifelong Democrat, Baer worked for the Clinton Treasury Department, and his wife, Shirley Sagawa, author of the book The American Way to Change and a former adviser to Hillary Clinton, is a prominent national service advocate.

In the 1990s, the Baers’ former bosses, Bill and Hillary Clinton, denounced the “politics of personal destruction.” Today politicians and their voters of all stripes grieve the ugly bitterness that permeates our policy debates. Now, with populist rage providing a useful cover, it appears we’ve crossed into a new era: The politics of personal intimidation.

To say this “politics of personal intimidation” is unacceptable is a gross understatement. But it seems to be the MO of far too many Obama supporters (e.g., New Black Panthers in Philly, intimidation and machinations of caucuses in Texas, and on it goes). Where does it stop with these people?

Going to someone’s house, in 14 buses, no less, on a weekend, with no permit to protest, and a DC police escort to this home in Maryland, terrorizing a 14 year old boy, takes this to a whole new level, or new depth, however you want to spell it. I spell it, “D-E-S-P-I-C-A-B-L-E.”

UPDATE: Now the DC Metro Police claim they contacted Montgomery County Police, and broke away at the border. The Chief said one police officer accidentally crossed over. A Montgomery Police Captain claimed since the SEIU dispersed peacefully from the front STOOP of the house, there were no arrests. Thanks to ~~JustMe~~ for the link to the video of the SEIU members. I will keep an eye out for the video of the two police officers making their claims regarding the Metro PD, and the Montgomery PD. Currently, there is a major contradiction between what Captain Paul Stark is saying, and the statement issued by Cpl Daniel Friz who said there was NO courtesy call that a protest was heading toward Montgomery County, and that the DC police were ON SITE in MD. Someone ain’t telling the truth here. Wonder why??

FINALLY, here are the two police officers giving their side. Bear in mind that AFTER this interview, the underling in Montgomery County contends there were NO phone calls from Metro DC police:

Watch the latest news video at video.foxnews.com

ABC’s Jake Tapper covers an interesting proposition from Republican Senator Bob Corker on financial reform for Wall Street — he wants a “clawback provision” forcing failed executives who have driven companies into the red to give back their earnings for the past five years. Loving it!!!

Read how Austan Goolsbee, one of Obama’s chief economic advisors, tiptoes, avoids and runs away from this idea!!

CORKER: There is no question, and I think that first of all, I plan to offer changes to this resolution authority that say that, if a large entity like this has to go through this resolution where in essence they’re liquidated in an orderly way, I think that everything that the executive team and the board members have earned through this company over the last five years needs to be clawed back. In other words, there needs to be some penalties assessed to the management that have caused the country to have to go through this orderly liquidation process. So absolutely, I will be offering an amendment that deals with that, so that we’re taking back, we’re clawing back all the earnings that management has made out of this firm, if it has to go through orderly liquidation. I think that’s very appropriate, and certainly I’m going to be doing that on the floor if it doesn’t make
it into the base bill.

TAPPER: Austan, can the White House get behind that clawback
provision? Are you being out-populisted by Republicans?

GOOLSBEE: Well, look, in the bill now — the president went to
Cooper Union this last week to revisit the spot where more than two
years ago, he went and said we need to have fundamental reform–

TAPPER: But there is no clawback in this bill?

GOOLSBEE: There is a requirement that they’re all fired. If you
get to that point, all the management is fired–

TAPPER: So they take their $500 million to their home in the Hamptons.

GOOLSBEE: — all the shareholders are wiped out. Well, look, as I say, on any details, we’re open to looking at negotiating the details of how we carry out the president’s principles. But if negotiation — and Senator Corker, to his credit, is not in this camp — but if the negotiators are going to come forward more as a delaying tactic and we’re just going to put in hundreds of amendments and try to keep this going so as to stall, delay and kill reform, that’s not going to happen. This is going to pass.

Um. No. It’s not a delaying tactic. But since we saw in the case of Goldman Sachs that they were betting on the market crashing and profiting by our losses, we need to find some way to put the fear of God into these jerks so that they do not try to profit by playing Ponzi schemes with our dough. Corker’s idea is just one way to make sure we have leglsiation with teeth.

Whether Senator Corker is just doing some populist-type posturing or not, the point is made — if we don’t have accountability in this reform bill and, as Dem. Senator Sherrod Brown discussed earlier, a way to overcome this “too big to fail” debacle, any reform falling short of tackling those two concerns effectively is meaningless.

What do you think would be fitting punishment for irresponsible and dishonest Wall Street sharks? I have a feeling I know the answer!

President Obama and the Democratic Party are now going to attempt to “regulate” Wall Street. I have the feeling it will be handled much like they “regulated” health care – with insurance companies writing the bulk of the bill. So will Goldman Sachs et al be writing this one? In the interest of image management as he takes on this latest mess, Mr. Obama is once again attempting to come across as a man of the people with his latest whopper:

“The vast majority of the money I got was from small donors all across the country.”

– Barack Obama on Wednesday, April 21st, 2010 interview with CNBC’s John Harwood

“Vast majority.” According to Politifact, the Truth-O-Meter Says: FALSE!!!!

Obama campaign financed by large donors, too.

More of CNBC’s John Harwood and his interview with the President:

“In the 2008 campaign, you got a lot of money, about $1 million from employees of Goldman Sachs,” Harwood said. “Your former White House counsel Greg Craig is apparently going to represent Goldman Sachs. In light of this case, do either of those things embarrass you?”

“No,” Obama said. “First of all, I got a lot of money from a lot of people. And the vast majority of the money I got was from small donors all across the country. And moreover, anybody who gave me money during the course of my campaign knew that I was on record again in 2007, and 2008, pushing very strongly that we needed to reform how Wall Street did business. And so, nobody should be surprised in the position that I’m taking now because it is one that I was very clear about in the course of the campaign.”

Clearly, nothing embarrasses President Obama because he sort of made it up as he went along on the campaign trail and nary a soul in the media called him out on it.

Politifact pointed out the evidence didn’t back up Mr. Obama’s statement. More important, he got more from Wall Street than any other candidate. The public records bears this out:

While Obama got more money from small donors than his opponents, they did not account for the majority of his funds.

[snip]

In the general election, Obama got about 34 percent of his individual donations from small donors, people who gave $200 or less, according to a report from the Campaign Finance Institute. Another 23 percent of donations came from people who gave between $201 and $999, and another 42 percent from people who gave $1,000 or more.

His numbers for the primary were similar….

These numbers were compiled by the nonpartisan Campaign Finance Institute, and included in a report Reform in an Age of Networked Campaigns, which was published jointly with the Brookings Institution and the American Enterprise Institute.

During the campaign, Obama ended up opting out of the public financing system for presidential candidates, because the system limits how much money candidates can raise, and Obama realized he could raise much more money outside of the system.

Well, he did more than “opt-out” – he backed out of a written promise he made to take public financing.

…John Harwood, was correct when he said Obama got about $1 million from employees of Goldman Sachs; the nonpartisan Center for Responsive Politics puts the number at $994,795.

A topic for newsroom and pundit chatter this week has been the peculiar timing of the investigation of Goldman Sachs given the administration’s push for Wall Street regulation.

Another article, Goldman’s White House Connection Raises Eyebrows, reported:

Several former Goldman executives hold senior positions in the Obama administration, including Gary Gensler, the chairman of the Commodity Futures Trading Commission; Mark Patterson, a former Goldman lobbyist who is chief of staff to Treasury Secretary Timothy Geithner; and Robert Hormats, the undersecretary of state for economic, energy and agricultural affairs.

Jacobs of the University of Minnesota said that the administration now risks “kind of a feeding frenzy.”

“The administration has to be very careful,” he said, “because . . . they’re seen as the ones who bailed out Wall Street. If there are indications that the administration was talking to regulators or to Justice Department people about when and how Goldman or other firms would be investigated, I think that’s going to create almost a mob scene.”

And now we also know the CEO of Goldman Sachs has visited the White House several times. President Obama seems to enjoy railing against the very groups he likes making deals with behind closed doors. It would be nice if he acknowledged he is a lot more banker-friendly than he lets on.

As Goldman Sachs continues to be in the news, this revelation could affect the SEC’s charges (h/t to HelenK for alerting me to this ):

Testimony Could Undercut SEC Charge Against Goldman

The government has testimony from a Paulson & Co. official that could contradict its own claims against Goldman Sachs, CNBC has learned.

Paolo Pellegrini told the government that he informed ACA Management that Paulson intended to bet against, or short, a portfolio of mortgages ACA was assembling.

If true, the testimony would go directly against government claims that ACA did not know Paulson was hoping the collateralized debt obligations would fail, and subvert charges that Goldman breached its duty by not informing ACA of Paulson’s position.

CNBC has examined documents in which a government official asked Pellegrini whether he informed ACA CDO manager Laura Schwartz about Paulson’s position in the portfolio, named Abacus 2007-AC1.

“Did you tell her that you were interested in taking a short position in Abacus?” a government official asked Pellegrini, referring to the name of the CDO portfolio.

“Yes, that was the purpose of the meeting,” Pellegrini responded.

Oops. I am guessing that is not the answer they anticipated:

The exchange is key in that the Securities and Exchange Commission is charging that the failure to disclose Paulson’s position was a “material” factor that could have caused both ACA and German Bank IKB to back out of the CDO investment. When the CDO failed, Paulson reaped a gain of more than $900 million, the government has said.

The SEC does not mention the exchange in its complaint against Goldman.

“We look forward to presenting a complete and accurate evidentiary record in court,” SEC spokesman John Nester said in a statement to CNBC.

CNBC further learned that Pellegrini and Schwartz met at least three times to discuss the CDO and Paulson’s short position on Abacus.

Because of the deal’s structuring, Paulson stood to gain $900 million from the deal but lose only $20 million.

Here’s the thing. Couldn’t they have actually done a TAD more investigating before making these charges against Goldman Sachs? I mean, they make the charges just the other day, and voila, a few days later, this testimony comes out completely contradicting their charges. I’m just saying, maybe SOMEONE could have done a little more homework before leveling these charges, don’t you think?

And while I am at it, NQ reader Peggy Sue supplied this fascinating testimony from William Black on Lehman Brothers to the House Finance Committee. It is quite an indictment of a number of federal entities, especially the Fed, as well as the SEC:

Holy smokes. Mr. Black didn’t mince any words, did he? He is exactly the kind of straight talker we need to clear up this big, huge, mess. And he exposes the sheer incompetence of those who have been charged with oversight of financial institutions, especially continuing “business as usual” when that business was costing us millions and millions of dollars.

It sounds to me like there are a helluva lot of people running this show deserving of lawsuits, too – I’m not holding my breath that they will get their comeuppance, though. They’ll probably get promotions…

I think we are in for a world of hurt. So does Chairman Ben Bernanke:

Did you catch that? Our federal debt will exceed 100% of our GDP. Um, that’s a bit of a problem, folks. And ten years is not that far away, either.

You get the reputation you deserve.

Whether on Wall Street or Main Street, individuals, firms, or entire industries are known by the manner in which they carry themselves. While I am all for having a good time, that little virtue called class should never be compromised. To that end, the mortgage banking industry has always had a reputation for being less than classy and professional.

I see rampant evidence of this in a story which the industry certainly would have preferred to keep buried. What story is this? A corporate shindig thrown by Washington Mutual in Maui in 2006. The Wall Street Journal highlights this boondoggle in reporting, At Mock Countrywide Funeral, the Last Laugh Was on WaMu:

In most instances in life, it is never a good idea to wish that someone was dead. It seems doubly bad Karma to stage a mock funeral for that person.

The same would seem true in the mortgage business.

And yet buried in the trove of documents Washington Mutual submitted to the Senate subcommittee is the curious transcript of a corporate-party script in which the Seattle thrift did just that.

It was in 2006, as the housing market showed signs of strain but before the credit markets had crumbled, that Washington Mutual held an annual party for employees in Maui. One evening, the company put on a sort of talent show that featured an appearance by Magic Johnson and a song called “Baby Got Bucks” – referring to all the money WaMu’s mortgage brokers were raking in at time time (“You just spends…Like it never ends…Cuz you gotta have that big new Benz).

WaMu also thought it would be funny to stage a fake funeral for Countrywide Financial Corp., which at the time was a high-flying subprime mortgage lender. A transcript of the skit is contained in the file of exhibits released by the Senate subcommittee investigating WaMu’s collapse.

The skit opens with a coffin imprinted with the Countrywide logo being slowly carried on stage by four pallbearers wearing dark sunglasses.

Brothers and sisters of the Home Loans fraternity … it is my sad responsibility today on this otherwise joyous occasion to be the bearer of tragic news. For this day, we have lost one of the true legends in our industry,’’ the MC says.

So many of us warned the dearly departed about the risky – some may say reckless – behavior they engaged in. Throwing money around like Paris Hilton and selling products they don’t really know or understand.

The MC then takes a swipe at Countrywide’s perpetually sun-tanned former CEO, Angelo Mozilo:

“And while it is true that when you dance with the devil you have to expect to get burned, we are indeed sorry that it will be flames for eternity for them. A nice tan is one thing, but too much heat isn’t good for anyone’s complexion.”

The actors then break out into song: “Na, Na, Na, Na, Na, Hey, Hey, Hey Goodbye.”

“Now borrowers across the nation will all be better served with Simpler Banking and More Smiles! And some really scary and dangerous people won’t be on the street anymore. To tell you the truth, I never really liked them anyway.”

The irony, of course, is that WaMu underwrote the same kinds of risky mortgages as Countrywide did, using questionable underwriting. And just as Countrywide was sold off in a government brokered deal to Bank of America in 2007, WaMu was sold to J.P. Morgan Chase in 2008.

It is no wonder J.P. Morgan, which still is recording losses on WaMu’s mortgage portfolio, asked that the transcript of the Maui bash be kept confidential, according to a notation at the bottom of exhibit. Who could blame it?

Hat tip to Dealbreaker for posting a copy of the text/script of this skit. Check it out by clicking on the image below:

Having a good time is one thing. These types of outings, however, shed a view inside the crass, classless, and yes fraudulent culture of a firm which was heavily involved in originating mortgage products which crippled our nation. Where were the WaMu execs? Where were the regulators? Arrogant a$$holes? You tell me.

LD

I am thrilled to have James Kwak join me tonight from 8-9pm ET on No Quarter Radio’s Sense on Cents with Larry Doyle.

If Wall Street banks are ‘too big to fail,’ what is America to do? While those on Wall Street fight to maintain their power base and those in Washington deal with their conflicted interests between Wall Street and Main Street, two individuals lay out a very simple solution. Simon Johnson and James Kwak convincingly answer that if banks are in fact ‘too big to fail,’ then ‘make them smaller.’

Johnson and Kwak highlight this reality and so much more in 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, a book that was just released but will surely sweep the country. The reviews so far are off the charts. Kwak and Johnson are widely followed at their site Baseline Scenario, which, in my opinion, is the most well written and informative financial and economic website in the blogosphere. (Sense on Cents being a close second!!)

What are people saying about 13 Bankers? Well, let’s stop and start with Elizabeth Warren, Professor of Law Harvard Law School and Chair, TARP Congressional Oversight Panel. She writes:

“The best explanation yet for how the smart guys on Wall Street led us to the brink of collapse. In the process, Johnson and Kwak demystify our financial system, stripping it down to expose the ruthless power grab that lies at its center.”

Listen to the show LIVE at the BlogTalkRadio website. While listening, you can also join the always lively chat room. My interview with James Kwak is a can’t miss. Please spread the word to friends and colleagues.

LD

Who in America is going to stand up and accept appropriate culpability for his/her contribution to our current economic crisis? Who in America is also willing to expose the incestuous nature of the Wall Street-Washington relationship which provided the cover for the activities which have debilitated our nation?

Let’s review what we have learned so far:

1. Blame has been directed at bank executives…but they got paid handsomely, and have not accepted full responsibility.

2. Blame has been directed at ratings agencies….but they also got paid handsomely to provide ratings, while not really knowing what they were doing.

3. Blame has been directed at regulators…but the executives at FINRA got paid handsomely while the regulators at the SEC were largely asleep at the post. What was the payoff for SEC regulators? A hoped for job on Wall Street.

4. Blame has been directed at mortgage originators…but they also got paid.

5. Blame has been directed at consultants…how pathetic, but the consultants also got paid.

6. Blame has been directed at Fannie Mae and Freddie Mac execs…but they really got paid.

With all the finger pointing, the blame gets disbursed BUT nobody has stood up and highlighted the fact that the system itself, which allowed for these activities, is to blame. What is at the core of that system? The fact that Washington politicians and regulators were very effectively bought off by Wall Street….and it is ongoing!!

When will those who are investigating, that is the pols and the regulators, become the investigated? When will the Financial Crisis Inquiry Commission truly turn the tables and shine the bright lights on these incestuous participants?

When will the actions or inactions of these individuals (the list is too long but let’s start with Dodd, Gramm, Rubin, Schapiro, Emanuel, Summers, Paulson, Geithner et al) be fully vetted? Connecting the dots between the breakdown in regulations which promoted our crisis and the financial and political payoffs to this crowd is the investigation that America wants and needs to see.

Public service covering personal, private, individual profit and wealth accumulation by those involved in the incest is nothing more than a charade.

Don’t think for a second that America is not becoming increasingly aware that the Wall Street-Washington incest has eroded our nation’s moral fiber, while mortgaging our children’s future.

LD

My blood is boiling. Why?

The assault on the principles of free market capitalism is escalating with news that banks are poised to start reducing principal balances on certain mortgages.

I empathize with those who are strapped, but I have never felt more strongly on a topic than this principal reduction. Despite any and all bulls*%# put forth by those in Washington, the principal reduction program is an enormous escalation of the violation of moral hazard which our country sadly continues to embrace. I have no doubt it will expedite the development of a socialized housing finance system.

Do not think for a second that banks will take the hit on these principal reductions. Who will take the hit? Me and you. Those who have worked hard, saved, played by the rules, and taught our children to do the same. I have no intention of changing that approach and will work that much harder to instill these virtues in my children. That said, these virtues are under assault under this program. My children’s future is being negatively impacted as the costs of principal reduction will be pushed off on them.
(more...)

How often have Americans heard politicians screaming at banks for not providing credit? How often have those same politicians and bank regulators informed us that they are working to have banks inject money into the economy to support Main Street?

Regrettably, America deals with this pandering and posturing from our political leaders and regulators all too often. While Americans are being told one thing, what are the regulators telling the banks? Hold cash.

I am not shocked, but certainly disappointed, that American financial periodicals failed to run this story detailing these recommendations from our bank regulators. The London based Financial Times highlights this bombshell in writing, Regulators Tell U.S. Banks to Hold Funds: >>>>

US regulators have told banks not to increase dividends or buy back shares until political and economic uncertainty surrounding the industry dissipates, in a move that will delay by months the return of capital to shareholders.

Some investors in financial stocks argue that winners of the credit crisis, such as JPMorgan Chase and Goldman Sachs, have profitable businesses and strong balance sheets and should consider raising dividends or buying back stocks.

Executives at the two companies have talked in public and with regulators about the possibility of returning cash to investors after taking action to conserve resources during the turmoil. But they say they are not in a rush to go ahead, especially if their watchdogs oppose such moves. “Regulators are gun-shy at this stage, partly because they fear that giving the green light to healthier banks to return cash to investors would prompt demands from more troubled institutions to do the same,” one senior Wall Street executive said.

People close to the situation said?government?agencies,?led?by the New York Federal Reserve and the Treasury, told banks they would have to wait until the economic and legislative picture became clearer before returning funds to investors.

In a letter sent in December, officials reminded financial groups they would have to meet criteria, such as “stress-testing” their balance sheets and achieving sustainable profitability, before releasing funds to shareholders. The New York Fed and Treasury declined to comment.

Mike Mayo, an analyst at CLSA, said: “The word banks have used the most … is ‘fragile’.

Economic growth is predicated on the flow of money, otherwise known as the velocity of money. With news like this, we should expect that velocity to remain at a trickle.

The burden will remain on the Fed to keep its Fed Funds rate low so these banks can continue to recover. The burden should also remain on the regulators and bank executives to not allow the Fed liquidity to walk right out the front door of these banks in the form of big fat bonuses.

LD