Blog Posts by Aaron Task

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The economy is the main event but the LIBOR scandal will be on the under-card when Fed Chairman Ben Bernanke testifies before Congress today and tomorrow. (See: Bernanke Ready to "Throw in the Towel on Inflation": Jim Rickards)

At issue is what the Fed, and other bank regulators, knew about manipulation of the key lending rate and whether they condoned banks giving low-ball estimates of LIBOR in order to make themselves look healthier during the crisis of 2008.

Bernanke is likely to face some inquires about this issue, but the U.S. regulator most questions are being asked about is Treasury Secretary Tim Geithner, who is set to testify about the matter before the House Financial Services committee next week.

In 2008, while President of the NY Fed, Geithner sent a memo to British regulators to raise concerns about potential manipulation of LIBOR, as has been widely reported and confirmed Friday by the NY Fed.

The question now is why Geithner didn't

Monday's weak retail sales data provides more evidence of the economy's sluggish state, raising the stakes for Fed chairman Ben Bernanke's Congressional testimony this week.

The slowing economy -- and what Bernanke plans to do about it -- will top the agenda during the chairman's appearance before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. (Bernanke is also likely to face questions about the fiscal cliff and the brewing LIBOR scandal, among other topics.)

At issue is whether Bernanke will tip his hand about prospects for another round of quantitative easing (a.k.a. QE3) or some other form of policy easing. While Bernanke is unlikely to provide any specifics on the plan of action, he's almost certain to reiterate the Fed's prior pledge to "take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."

Despite chatter about the Fed

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The LIBOR scandal that has engulfed London's financial and political elites is entering its third week and picking up steam on this side of the Atlantic.

Among the latest developments:

• The NY Times reports the Justice Department's criminal division is "building cases against several financial institutions and their employees."
• State Attorneys General in New York and Connecticut are investigating whether states incurred losses because of LIBOR manipulation which "could lead to a wider multi-state enforcement action," The WSJ reports.
• Top officials of the British version of the SEC, the Financial Services Authority, will testify before Parliament on why regulators failed to respond to concerns about LIBOR rigging going back to 2008. Congress is set to hold similarly themed hearings later this week and Fed chairman Ben Bernanke is almost certain to be asked about the matter when he testifies on Capitol Hill Tuesday and Wednesday.

In the accompanying

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In mid-April, Jamie Dimon described reports of problems with JPMorgan's so-called 'London Whale' trade as "a tempest in a teapot."

On Friday, Dimon was singing a very different tune as the firm put losses on the trade at $5.8 billion, with the potential to grow another $1.6 billion in an worst-case scenario.

How this saga went from "tempest in a teapot" in April to one that Dimon now says has "shaken our company to the core," is critical and not yet fully understood, says Eliot Spitzer, former NY Governor and Attorney General, and now host of Viewpoints on Current TV.

To be sure, the losses revealed Friday were not as bad as the worst-case of $9 billion, as reported in The New York Times last month, and JPMorgan (JPM) shares rose sharply Friday.

But the firm also revised down its first-quarter results because "recently discovered information raises questions about the integrity of the trader marks, and suggests that certain individuals may have

The U.S. market hasn't yet paid much attention to the LIBOR scandal that's gripped London, but it's getting harder and harder to ignore.

This week, the chair of the Senate Banking Committee announced he is calling Fed chairman Ben Bernanke and Treasury Secretary Tim Geithner to testify about allegations big banks manipulated LIBOR, a key lending rate in global finance. Separately, the chair of the House Financial Services subcommittee's on investigations petitioned the New York Fed for information about whether the central bank knew banks were low-balling their LIBOR rates during the crisis.

"I assume there is going to be significant more fallout" from the LIBOR scandals, says former FDIC chairwoman Sheila Bair, now a senior adviser to the Pew Charitable Trusts. "How severe and pervasive we just don't know yet."

There are actually two separate scandals here, Bair notes. The first is whether the NY Fed ignored reports of irregularities in the

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With the expected launch of the iPhone 5, the iPad mini and potential announcements about Apple TV, the tech giant is set up for a blockbuster second half of the year.

"It's going to be really big," says Josh Brown, vice president at Fusion Analytics and author of The Reformed Broker blog. "The amount of things they have hitting at once, and the anticipation of things they're starting to talk about probably favors being long Apple as opposed to not being long." (Brown is long Apple (AAPL) and recommends to his clients.)

While Apple's product cycle is well known -- and widely rumored -- Brown's point is that the news isn't "priced in" to the stock, which is back above $600 after falling to as low as $530 in mid-May.

The iPhone 5 is "going to be a huge deal," Brown says, particularly in China where Apple currently has less than 20% of the smartphone market vs. nearly 70% for Google's Android. Some analysts expect the iPhone 5 will be compatible with

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For the past few years, economists and policymakers have been locked in a philosophical debate: Austerity vs. Stimulus.

Another test of the competing theories kicked off this week as Spain announced new tax hikes and spending cuts while China increased government spending in order to jump-start its economy.

If recent history is any guide, China's economy will get a short-term boost from the stimulus while Spain will fall further into its economic morass as a result of their respective choices.

Of course, these two countries find themselves in starkly different positions: China is sitting on huge surplus and thus can "prime the pump" without going into debt while Spain is struggling to bring down its budget deficit, which hit 8.9% in 2011.

Indeed, the latest austerity measures -- the fourth Prime Minister Mariano Roy has announced in roughly 7 months -- are the price Spain is being forced to pay for the EU's decision to provide an accelerated $123

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The LIBOR-rigging scandal that has engulfed London in the past week is now lapping at America's shores.

On Monday, an oversight panel of the House Financial Services Committee sent a letter to the New York Fed asking for transcripts of phone calls between Fed officials and Barclays (BARC.L) executives from 2007 and 2008, The New York Times reports.

At issue is whether the NY Fed ignored reports of irregularities in the LIBOR market during the financial crisis, as U.K. regulators are alleged to have done. (According to Reuters, the Fed knew of irregularities in the LIBOR market as early as August 2007.)

The bigger issue here is that LIBOR is at the very heart of the financial market and if you can't trust LIBOR, what can you trust?

"LIBOR is probably the single-most supposedly market-based price of credit in the world," explains David Kotok, CIO of Cumberland Advisors. "And now we see it may have been rigged and rigged for a long period of time.