Today we partnered with National People’s Action (NPA) to release a new report, The Predators’ Creditors: How the Biggest Banks are Bankrolling the Payday Loan Industry. The report details ties between payday lenders and big banks, including financing arrangements, shared leadership, and ownership ties.
To paraphrase Paul Krugman, it looks like the zombies have won. Insolvent banks continue to roam the earth, sucking up unfathomable sums of taxpayer capital, provided to hedge fund intermediaries as nonrecourse loans. The scheme is designed to create inflated “auction” prices by incentivizing investors to over-bid on assets which carry almost no downside risk – for them, that is.
Geithner, Summers and company test-marketed the plan with friends and former colleagues on Wall Street thoroughly over the past month to find the formula that would send high finance into the fits of ecstasy we witnessed on Monday. Hedge fund directors were among Treasury’s most coveted focus groups.
I want to raise a few points on AIG that don’t seem to be coming up elsewhere, but that need critical attention if we are to understand how this disaster came to pass and who else is implicated.
There have been a few reports that AIG stopped selling credit default swaps – the financial instruments that eventually destroyed the company – in late 2005 (the latest timeline comes from TPM). But asset-backed credit default swaps, which allow investors to short CDOs, were not even invented until early 2005, according to a Dow Jones article published on January 27, 2005. The article was titled “New Derivatives Could Boost Asset-Backed Secondary Market”:
In earlier posts, we’ve highlighted Robert Rubin‘s network of protégés, who have assumed nearly every economic policy post of consequence in the Obama White House. In spite of his abysmal record of institutional leadership – Citigroup entered penny stock territory on Friday and Harvard, where Rubin’s influence as a member of the Corporation is unrivaled, has all but run out of cash – Rubin’s “wise man” brand won over Obama, who moved most of the policy staff of the Rubin-founded Hamilton Project and top Rubin advisers from the Clinton era into key administration posts at Treasury, the OMB and the inner sanctum of the White House.
While Rubin’s role in re-shaping the Democratic Party has been chronicled (and discussed here), less attention has been paid to his adeptness in building a power base of hedge fund capitalists that parallels his political network. Many of the techniques that allowed Rubin to pack the White House with friends – such as deep mentorship of bright-eyed Ivy League recruits fresh out of school and subsequent placement of the recruits in strategic institutions – have served also to place Rubin at the center of an unrivaled web of capital.
After spending the better part of five years running for office, a victorious John F Kennedy set out to realize the promises made in the course of his 1960 presidential campaign, which was built on the New Frontier theme. As William Domhoff recounts in The Powers That Be, while Kennedy was an expert campaigner, he lacked executive experience and was overwhelmed by the task of filling hundreds of appointments in the upper realms of the Federal bureaucracy. He thus turned to Robert Lovett, a financier who’d been an ally of his father. Domhoff writes:
The dominant analysis of Obama’s historic fundraising effort is that small donors carried the day. His campaign certainly inspired record-smashing levels of small donor support, but the feel-good story of Obama lifted to victory by a $5 army obscures the crucial role that traditional fundraising mechanisms and networks played in Obama’s campaign.
After all, Obama took in more money from Wall Street in the first quarter of 2007 than any other presidential candidate, an early boost from high finance that is often overlooked. This paved the way for consistently high Wall Street fundraising numbers. How did this come to pass?
LittleSis is a latecomer to Twitter, and we’re still learning the ropes, but one thing is clear: microblogging makes nuanced argument difficult, but is quite effective for documenting simple facts and leads. What better model to mimic, then, for LittleSis’s much-needed analyst note system?
We’ve decided to modify Twitter’s format to make it more flexible for LittleSis analysts, thus feeding many birds with one worm:
- Notes let analysts keep memos — public or private — that make their own research easier and more complete. Notes are more useful when concise, but aren’t limited to Twitter’s 140 characters.
- Notes let analysts “alert” other analysts using Twitter’s @username format. Multiple analysts can be “alerted” within one note. A private note can only be viewed by its author and any analysts it alerts.
- Notes can link to any combination of entity, relationship, and list pages using a simple markup. For example, @entity:1 will create a link to Wal-Mart Stores, whereas @entity:1[biggest company in the world] will create a link to the biggest company in the world. @rel and @list work the same way.
- While notes are designed to the above needs, all of which LittleSis analysts have asked for, we encourage you to experiment with them and find new uses we haven’t thought of.
We hope the new note system, available as of this post, will strengthen the social layer on LittleSis, which is essential to keeping our data fresh, accurate, and relevant. Notes are still a work in progress, so let us know what you think!
PS: As you can see, we’ve also taken the opportunity to reshuffle our start page layout. Feedback about that is welcome too.