Blog Posts by Peter Gorenstein

A few weeks back, the Daily Ticker's Henry Blodget wrote an editorial for the Business Insider entitled: OUTRAGE OF THE DAY: Do You Realize That The Government Is Still Paying Banks Not To Lend…?

In the story Henry describes how "the Federal Reserve is still paying big banks not to lend money. And it's doing that while screwing average Americans who have been responsible and lived within their means."

Never one for subtlety, Henry goes on to describe the consequences of having the Fed pay banks interest on what's called "excess reserves":

"The Federal Reserve is quietly continuing with one of the many outrageous bank-bailout programs it initiated during the financial crisis--the one in which it pays big banks interest on their "excess reserves." What are "excess reserves"? Money that the banks have but aren't lending out--money that banks are just keeping on deposit at the Fed.

The Fed is paying banks 0.25% interest on this money. 0.25% interest may not sound like much, but it's more

St. Louis Federal Reserve President James Bullard says the Federal Reserve is at the ready to act if the economy falters and deflation looks to be a threat. "If the economy weakens substantially, and especially if the inflation picture starts to deteriorate so that deflation becomes a risk again, then I think the committee would definitely take action," Bullard told Japan's Nikkei newspaper, according to a Reuters report.

With Friday's Federal Reserve conference in Jackson Hole, Wyoming looming, the big question in the market remains: Will they or won't they go ahead with another round of quantitative easing?

In the most recent round of QE, the Fed bought more than $600 billion of Treasury bonds between November 2010 and June of this year. In the first round of QE between Dec. 2008 and March 2010 - the Fed bought $1.7 trillion of debt, mostly mortgage securities.

Axel Merk, founder of Merk Investments and manger of the Merk Hard Currency Fund, says not only is it unwise for the Fed

This week's financial and economic calendar culminates Friday with Federal Reserve Chairman Ben Bernanke's policy speech at the Fed's annual summer getaway in Jackson Hole, Wy.

Will he or won't he announce another round of quantitative easing? That's the big issue facing financial markets.

It was at this same conference last August that Bernanke cued in the markets about the second round of quantitative easing, which resulted in the Fed buying $600 billion of Treasury bonds between November 2010 and June of this year. In the first round of QE between Dec. 2008 and March 2010 - the Fed bought $1.7 trillion of debt, mostly mortgage securities.

I'm sure the Feds have "QE3 through 30 queued up and ready," says Edward Dempsey chief investment officer at Pension Partners. "However, I don't know how effective it'll be."

Though markets ticked higher after the Fed's August 9 announcement that it would keep rates "exceptionally" low through mid-2013, it's done little to quell the volatility and

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Amid all the market volatility and weakness in the financial sector of late, you may have missed this WSJ front page story: "States Go After Big Bank on Forex".

The story is about growing scandal in the banking industry centered around banks allegedly overcharging pension funds for currency transactions.

"Attorneys general in Virginia and Florida filed civil suits against BNY Mellon alleging that the bank cheated pension funds in those states by choosing improper prices for currency trades the bank processed for the funds," The WSJ reports. "The Virginia lawsuit, filed in a Fairfax, Va., state court, cites internal bank emails allegedly showing that senior bank officials knew about, and endorsed, a currency-trading method that hurt state pensioners."

In addition to Virginia and Florida, California and Tennessee are also suing BNY Mellon and State Street Corp. over the alleged fraud.

The man who uncovered the alleged scam, Harry Markopolos,

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Former Michigan Congressman and former Reagan official David Stockman is a vocal critic of President Obama's Keynesian policies but he's also not very pleased with his GOP cohorts running for the White House.

As he details in the accompanying interview with Aaron Task, Stockman believes the Republicans are off base in their refusal to even discuss the notion of higher taxes at a time when the government faces an insurmountable debt burden. "I think it's absurd. It is willful ignorance of the facts of life."

At the Iowa GOP debates last week all candidates in attendance said they would reject any debt reduction compromise featuring a 10 to 1 ratio of spending cuts to tax increases. An incredulous Stockman's reaction: "that means the Republican party is checked out of reality."

Out of all the current contenders Stockman favors Texas Congressman Ron Paul. "If I were to pick any candidate who's saying the right things on the core issues of foreign

For two years now, Eurozone leaders have tried to deny reality, concocting one temporary bailout scheme after another in an effort to sweep Europe's budget problems under the rug.

But this game is nearing its end, says Rupal Ruparel of London-based think-tank OpenEurope.

A crisis that began in countries like Greece that seemed too small to worry about has now spread to countries like Spain and Italy that are big enough to take the whole Eurozone down. The only way to actually solve the problems, says Ruparel, is to acknowledge the facts: "Austerity" programs won't help countries pay back their debts. Either the whole Eurozone has to combine its fiscal spending--a solution in which German taxpayers would pay for Greece's deficits--or the debts have to be restructured.

Ruparel believes the "fiscal unity" solution is politically untenable. So that leaves restructuring.

A planned restructuring will be painful, Ruparel says, but it will be a lot less painful than a market-forced one. And

Texas Governor Rick Perry made headlines in only his second day on the presidential campaign trail when he said the Federal Reserve's money printing policies are almost "treasonous." President Obama reacted Tuesday saying the GOP hopeful should be "a little more careful" with his words.

The Daily Ticker's guest David Stockman agrees with Obama about Perry's poor choice of words but also wholeheartedly agrees with Perry's sentiment. " I think he was dead on in his thought," the former director of the Office of Management and Budget in the Reagan administration tells Aaron Task in the accompanying clip. "I think it's time Republicans woke up to the fact that is the fundamental problem in our economy today."

Stockman, who has long been a critic of the Fed's low interest rate policy, says it is "totally wrong." Stockman says "exceptionally low" interest rates have resulted in excessive speculation on Wall Street "that is utterly destroying our capital markets" and adding to the already

Warren Buffett wants the super-rich to pay more in taxes. In Monday's New York Times, he writes that Congress has coddled the super-rich for too long and it's time he and his uber-rich pals indulge in some "shared sacrifice." Judging by your comments on our coverage of the story yesterday, most of you agree.

If you haven't read the op-ed, Buffett says because most of his income comes from capital gains, he's paying far too little of his fair share.

"Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that's actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent."

His solution: raise capital gains taxes.

Sounds well and good but James Altucher of Formula Capital says Buffett's reasons aren't as altruistic as