Depending on your view, the Bible is divinely inspired or a collection of tall tales. But many see it as a source of financial wisdom that transcends individual faith and the centuries between when it was written and today’s tough times. [...]

Purveyors of biblically based financial advice count up to 2,300 verses on money management. Frequently cited verses in the Book of Proverbs urge careful spending, including “The plans of the diligent lead to profit, as surely as haste leads to poverty.” Another warns debtors that “the borrower is servant to the lender.”

Blue sees advice to diversify stock portfolios in a verse about a man’s “bread” from Ecclesiastes: “Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.”

But the many verses can be interpreted in different ways.

For instance, in the Gospel of John, Jesus says, “I have come that they might have life, and have it to the full,” which some “prosperity gospel” preachers see as a promise of material wealth to faithful givers. Others say it’s an assurance of joy or contentment.

USA Today: Many look to the Bible for financial advice, but is it wise?

(via Religion News)

See also: Prosperity gospel’s role in crashing the economy

Drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, the United Nations’ drugs and crime tsar has told the Observer.

Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.

This will raise questions about crime’s influence on the economic system at times of crisis. It will also prompt further examination of the banking sector as world leaders, including Barack Obama and Gordon Brown, call for new International Monetary Fund regulations. Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. “In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor,” he said.

Some of the evidence put before his office indicated that gang money was used to save some banks from collapse when lending seized up, he said.

Guardian: Drug money saved banks in global crisis, claims UN advisor

(via Global Guerrillas and Cryptogon)

The main point, he says, is that too often people’s emotions get in the way of clear financial thinking about mortgages, turning them into what he calls “woodheads” — “individuals who choose not to act in their own self-interest.” Most owners are too worried about feelings of shame and embarrassment following a foreclosure, and ignore the powerful financial reasons for going through with it, he said.

Buttressing these emotions is a system that White labels “the social control of the housing crisis” — pressures and messages continually sent to consumers by the “social control agents,” namely banks, government and the media. The mantra these agents — all the way up to President Obama — pound into owners’ heads, White says, is that “voluntarily defaulting on a mortgage is immoral.”

Yet there is an inherent imbalance in the borrower-lender relationship that makes this morality message unfair to consumers: Banks set the rules during the housing boom, handing out home loans with no down payments, no income checks and inflated appraisals. Now that property values have dropped 20 to 50 percent in many areas, banks have been slow to modify troubled mortgages and reluctant to reduce principal debts.

Only when homeowners cut through the emotional fog and default strategically in large numbers, White argues, will this inequitable situation be seriously addressed.

Washington Post: The moral dimensions of ditching a mortgage

(Thanks Trevor)

Michael Hudson wrote back in February:

The officials drawn from Wall Street who now control of the Treasury and Federal Reserve repeat the right-wing Big Lie: Poor “subprime families” have brought the system down, exploiting the rich by trying to ape their betters and live beyond their means. Taking out subprime loans and not revealing their actual ability to pay, the NINJA poor (no income, no job, no audit) signed up to obtain “liars’ loans” as no-documentation Alt-A loans are called in the financial junk-paper trade.

I learned the reality a few years ago in London, talking to a commercial banker. “We’ve had an intellectual breakthrough,” he said. “It’s changed our credit philosophy.”

“What is it?” I asked, imagining that he was about to come out with yet a new magical mathematics formula?

“The poor are honest,” he said, accompanying his words with his jaw dropping open as if to say, “Who would have guessed?”

The meaning was clear enough. The poor pay their debts as a matter of honor, even at great personal sacrifice and what today’s neoliberal Chicago School language would call uneconomic behavior. Unlike Donald Trump, they are less likely to walk away from their homes when market prices sink below the mortgage level. This sociological gullibility does not make economic sense, but reflects a group morality that has made them rich pickings for predatory lenders such as Countrywide, Wachovia and Citibank. So it’s not the “lying poor.” It’s the banksters’ fault after all!

There has been plenty of evidence that firms like Goldman Sachs (GS) have had such huge profits that their bonus payouts may be at all-time highs.

The federal government has systematically begun to control bank pay packages. The Treasury “pay czar” is effectively controlling compensation at companies which still owe TARP money. The Fed is pressuring other large financial firms to tie pay to risk.

None of those efforts seems to be working well, because bankers are ignoring the signals from Washington.

A new compensation survey described in The Wall Street Journal predicts that Wall Street incentive pay will rise 40% this year. For those in the fixed-income part of the industry, the increase could be closer to 60%.

MSN Money: Wall Street bonuses to rise 40%

(via Braincrowbar)

I didn’t believe this story was true at first — thought it had to be a spoof. But it turns out to be true. The great banks of the world have gone on a p.r. counteroffensive in Europe, and are sending spokescrooks in shiny suits into churches to persuade the masses that Christ would have approved of the latest round of obscene bonuses.

Goldman Sachs international adviser Brian Griffiths explains it this way: that Christ’s famous injunction to love others as one would love oneself actually means that one should love oneself as one would love oneself. This seemingly baffling outburst by a Goldman executive in what appears to have been a prepared speech — someone actually wrote this, and thought about it, before saying it out loud — gets even weirder when one tries to figure out what could possibly have motivated this person, and by extension his employer Goldman Sachs, to make such statements in such a place as St. Paul’s Cathedral.

Matt Taibbi: Goldman One-Ups Gordon Gekko, Says Jesus Embraced Greed

Update: Anyone who’s been reading this blog for a while will be familiar with The Family. Reader Joe points out in the comments:

This shouldn’t be surprising for anyone who has read Jeff Sharlet’s book _The Family_. This rhetoric is straight out of their play book. This guy is likely a member (he *spoke at* the funeral of Wallace Haines, The Family’s ‘man in Europe’, in 2007). http://www.wallacehaines.com/inmemoryof.htm

The plot sickens.

Those who like banks that are too big to fail will love the latest financial reform proposals circulating in the US Congress. The bill put forward by Barney Frank, the chairman of the House finance committee, does little to change the current structure of the financial system.

The “too-big-to-fail” banks will be left in place, even bigger and less accountable than before. There will be nothing done to separate commercial and investment banking, so giants like Goldman Sachs will be free to speculate with money guaranteed by the Federal Deposit Insurance Corporation. The main difference is that the Federal Reserve Board will be granted even more power than it has now. And, we will tell the Fed to be smarter in the future, so that it doesn’t make the same stupid mistakes that gave us the current crisis. [...]

The bottom line is that this bill is almost certain to leave the taxpayers holding the bag for future bailouts. Even worse, it does nothing about the moral hazard created by having institutions that are too big to fail. There is nothing in the bill to lead creditors to believe that the government will not make good on their loans to Goldman, JP Morgan and the other banking behemoths.

Guardian: Breaking up the banks is hard to do

Until the day he was outed, the most influential commentator on South Korea’s economy lived the life of a nobody. Park Dae-Sung owned a small apartment in a middle-class neighborhood of Seoul and freelanced part-time at a telecom company. Thirty years old, he still hoped to earn a four-year degree in economics. In the mornings, he would bicycle to the public library to study for the university entrance exam. His standard uniform was slacks, loafers, and wrinkle-free button-down shirts, as though he were going to work in an office. But with his slightly chubby moon face, glasses, and neatly parted hair, he easily blended in among the rows of students. While they worked through school assignments, he immersed himself in the text of his chosen profession.

In the evenings, Park would go online, frittering away the hours like millions of other geeks. He often played the simulation game Capitalism II, where he’d assume the role of a blue-chip investor, closing million-dollar deals and speculating on skyscrapers. Nothing that he did earned him any attention.

Then, in March 2008, Park opened an account on South Korea’s popular Daum Agora forum. Here, he decided, he would call himself Minerva, after the Roman goddess of wisdom, and write exclusively on economics, drawing on both public reports and his years in the stacks poring over Adam Smith and Joseph Stiglitz. Affecting the effortless command of a seasoned investor, he strove to project the authority that had eluded him in real life. The world economy is in the midst of collapse, he warned, so pay your debts and stock up on noodles and drinkable water. He made pronouncements on when to buy or sell a home, exchange Korean won for dollars, and pull out of the financial markets altogether.

Wired: The Troubles of Korea’s Influential Economic Pundit

See also:

Christian Science Monitor: Financial blogger’s arrest tests Korea’s progress on human rights

Korea Times: Foreigners Puzzled Over Minerva’s Arrest

Also of interest:

New York Magazine’s article on Zero Hedge and Matt Taibbi’s response.

Back in the spring, the Obama administration had no problem insisting that union autoworkers give up some of the health care benefits that they were entitled to in their contract. In some cases, workers had already put in more than 30 years earning these benefits. Note that this was before any of the manufacturers went into bankruptcy.

While these workers were forced to make large concessions on contractually promised benefits, we are told yet again that AIG, an effectively bankrupt company, has a contractual obligation to pay big bonuses to its top executives and traders. It would be interesting to hear why this would be the case and if it is legally committed, why shouldn’t the company just go into bankruptcy now that the immediate post-Lehman panic is over.

Dean Baker: Why Are Contracts for AIG Execs Different Than Contracts for Autoworkers?

The question answers itself.

From: Financial Services Technology: Federal deficit: who owns what?

(Via Contexts via Brainsturbator)

You floss regularly, yield to oncoming traffic and use your credit cards judiciously, dutifully paying off your balance every month.

You may believe that your exemplary behavior shields you from unexpected credit card fees. Sadly, that is no longer the case.

Starting next year, Bank of America will charge a small number of customers an annual fee, ranging from $29 to $99. The bank has characterized the fee as experimental. But card holders who have never carried a balance or paid late fees could be among those affected.

Citigroup, meanwhile, has started charging annual fees to card holders who don’t put more than a specific amount on their cards, typically $2,400 a year. Other banks are charging inactivity fees if customers don’t use their credit cards during a specific period of time. You heard that right: You could be spanked for staying out of debt.

USA Today: Pay your bills on time? There’s a charge for that.

Also: Citibank is randomly closing credit cards without warning.

Here’s how naked short-selling works: Imagine you travel to a small foreign island on vacation. Instead of going to an exchange office in your hotel to turn your dollars into Island Rubles, the country instead gives you a small printing press and makes you a deal: Print as many Island Rubles as you like, then on the way out of the country you can settle your account. So you take your printing press, print out gigantic quantities of Rubles and start buying goods and services. Before long, the cash you’ve churned out floods the market, and the currency’s value plummets. Do this long enough and you’ll crack the currency entirely; the loaf of bread that cost the equivalent of one American dollar the day you arrived now costs less than a cent.

With prices completely depressed, you keep printing money and buy everything of value — homes, cars, priceless works of art. You then load it all into a cargo ship and head home. On the way out of the country, you have to settle your account with the currency office. But the Island Rubles you printed are now worthless, so it takes just a handful of U.S. dollars to settle your debt. Arriving home with your cargo ship, you sell all the island riches you bought at a discount and make a fortune.

This is the basic outline for how to seize the assets of a publicly traded company using counterfeit stock. What naked short-sellers do is sell large quantities of stock they don’t actually have, flooding the market with “phantom” shares that, just like those Island Rubles, depress a company’s share price by making the shares less scarce and therefore less valuable.

Rolling Stone: Wall Street’s Naked Swindle

Talk about putting wolves in charge of protecting sheep…

A former Goldman Sachs (GS.N) vice president has been named the chief operating officer of the U.S. Securities and Exchange Commission’s enforcement division, the regulator said on Friday.

Adam Storch, who was a vice president in Goldman’s “business intelligence group,” will be responsible for managing projects and other operational aspects of the SEC’s enforcement division, the agency said.

Reuters: US SEC hires Goldman vice president for enforcement

One would think the financial elites would be well pleased with the Democrats right now. Not so. It just doesn’t stop:

Democratic political committees have seen a decline in their fundraising fortunes this year, a result of complacency among their rank-and-file donors and a de facto boycott by many of their wealthiest givers, who have been put off by the party’s harsh rhetoric about big business.

The trend is a marked reversal from recent history, in which Democrats have erased the GOP’s long-standing fundraising advantage. In the first six months of 2009, Democratic campaign committees’ receipts have dropped compared with the same period two years earlier.

The vast majority of those declines were accounted for by the absence of large donors who, strategists say, have shut their checkbooks in part because Democrats have heightened their attacks on the conduct of major financial firms and set their sights on rewriting the laws that regulate their behavior.

Washington Post: Democrats Are Jarred by Drop In Fundraising

Not from the Onion:

Tired of the government bailing out banks? Get ready for this: officials may soon ask banks to bail out the government.

Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors, The New York Times’s Stephen Labaton reports. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune.

New York Times: F.D.I.C. May Borrow Funds From Banks

Easier said than done:

My whole idea is to lower risk in society by developing a system that can resist human error, rather than one where human error rules. The first step is to make sure that no financial institution is too big to fail. Next, make sure governments don’t favour big companies. Governments should also decrease the role of economists – they’re no more reliable than astrologers, and they do more damage. [...]

My advice is that instead of investing in medium-risk securities, you should put most of your money in very low-risk securities, and a little bit in high-risk securities. Then you might get a good black swan. Also, it’s good to have more than one profession, in case your own profession goes out of style. A Wall Street trader who’s also a belly dancer will do a lot better than a trader who winds up driving a taxi.

Globe and Mail: We still have the same disease

Note: article contains error, Black Swan was published in 2007, not 2008.

Emphasis mine:

What’s very amusing about this New York Times article is that, while describing this, there is no passage that reads anything like, “This utterly insane plan, which will condemn all those involved with it to an eternity of elaborate torment in the afterlife, is ironically being promoted by the very institutions that only just recently tried to destroy the world by creating similar casino-like gambits based on home ownership.” [...]

What the fuck??? This feels like financial innovation as practiced by Josef Mengele meets the Zucker Brothers; not just evil, but wacky evil. I don’t even want to think about what happens when Goldman Sachs suddenly has a large financial stake in the premature deaths of a bunch of old people. Where are the crazy police? Where is the crack federal crazy squad with the big butterfly net? I don’t know about betting on anyone’s life expectancy, but I think I’d like to bet on whether or not this idea ends well.

Matt Taibi: Wall Street Gambles on Old People Dying

Will conservatives protest Wall Street death panels?

“Hey Friends.Two years ago I began a campaign to expose a massive circle of corruption on Wall Street involving something called ‘naked short selling.’ The financial press, which had previously been quite generous towards me, immediately began devoting a tremendous amount of energy to misrepresenting, dismissing, and downplaying my allegations. It began to seem as though they were taking part in a cover-up, especially given that I simultaneously became persona non gratis on Wall Street, so that the entire discourse about whether or not I was right went forward with precisely one person precluded from taking part: me. The lengths to which this cover-up was prosecuted astonished even me: for example, last year a large conference (‘Value Investors’ Congress’) invited me to speak, but some powerful hedge funds threatened to boycott if I were allowed to tell me side of the story, and the invitation was rescinded.Times are changing, however, and a few weeks ago I was invited to speak to an even bigger conference of hedge funds. I did so, and was finally able to connect the dots for the public.”

(“Deep Capture” the Movie. “Deep Capture”, The (very long) Story)

“A fundamental problem in the financial markets right now – a problem that’s often traced to the failure of Lehman Brothers last month – is the breakdown of trust. Because financial institutions don’t “trust” the solvency of other institutions and corporations, they aren’t willing to lend money. The end result is a frozen credit market. This is precisely what happened during the Great Depression. After Black Friday, the public lost confidence in the economy, and people began to hastily withdraw their money from banks. The result was a rash of bank failures, and an even larger push to withdraw cash. From 1929 to 1933, over nine thousand banks collapsed, leading to a loss of deposits worth over $6 billion. Because the normal bonds of economic trust were broken, a moderate recession became a devastating and deflationary depression.

But what triggers the breakdown of trust?”

(via The Frontal Cortex)

(Related: “Loss Aversion and the Stock Market”. And the follow-up to “The Giant Pool of Money”, “Another Frightening Show About the Economy” via This American Life. This excellent show goes into detail about exactly what happened to cause the mess we’re in. Thanks Stewart!)

An old radio show from May that gives a good explanation on the sub-prime mortgage crisis.

“A special program about the housing crisis produced in a special collaboration with NPR News. We explain it all to you. What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? It all comes back to the Giant Pool of Money.”

(via NPR. Thanks Stewart!)

(Related: “Hear: Is The Bailout Worth It?”)

“Two and a half years ago, Overstock.com CEO Patrick Byrne penned an editorial for The Wall Street Journal, warning that widespread stock manipulation schemes – including abusive naked short selling – were threatening the health of America’s financial markets. But it wasn’t published. “An editor at The Journal asked me to write it, and I told him he wouldn’t be allowed to publish it,” Byrne says. “He insisted that only he controlled what was printed on the editorial page, so I wrote it. Then, after a few days, he got back to me and said ‘It appears I can’t run this or anything else you write.’”

The Journal never changed its stance. But last week, the editorial finally saw the light of day at Forbes – after Byrne added a few paragraphs explaining that naked shorting had hastened what could turn out to be the biggest financial crisis since The Great Depression. “With a traditional short sale, traders borrow shares and sell them in the hope that prices will drop. A naked short works much the same way – except the shares aren’t actually borrowed. They’re sold but not delivered. By the middle of the summer, these unresolved “stock IOUs” – as Byrne calls them – were pilling up in four Wall Street giants already struggling to stay afloat: investment banks Lehman Brothers and Merrill Lynch and mortgage finance companies Fannie Mae and Freddie Mac. On July 12, the Securities and Exchange Commission issued an emergency order banning naked shorts in a host of major stocks, and all four of those names were on the list.

The order expired in mid-August, and in the weeks since, Lehman Brothers has filed for bankruptcy, Merrill Lynch has swallowed into Bank of America, and Fannie and Freddie were seized by the US government. Then, on September 17, the SEC issued a new order meant to curb naked shorting of all stocks. “These several actions today make it crystal clear that the SEC has zero tolerance for abusive naked short selling,” read a statement from SEC chairman Christopher Cox. “The Enforcement Division, the Office of Compliance Inspections and Examinations, and the Division of Trading and Markets will now have these weapons in their arsenal in their continuing battle to stop unlawful manipulation.”

In the wake of the SEC’s crackdown, the mainstream financial press has acknowledged that widespread and deliberate naked shorting can artificially deflate stock prices, flooding the market with what amounts to counterfeit shares. But for years, The Journal and so many other news outlets ignored Byrne’s warnings, with some journalists – most notably a Forbes.com columnist and former BusinessWeek reporter named Gary Weiss painting the Overstock CEO as a raving madman. Byrne has long argued that the press dismissed his views at least in part because Weiss – hiding behind various anonymous accounts – spent years controlling the relevant articles on Wikipedia, the “free online encyclopedia anyone can edit.” “At some level, you can control the public discourse from Wikipedia,” Byrne says. “No matter what journalists say about the reliability of Wikipedia, they still use it as a resource. I have no doubt that journalists who I discussed [naked shorting] with decided not to do stories after reading Wikipedia – whose treatment [of naked short selling] was completely divorced from reality.”

(via Investigate The SEC)

(Many people believe that the current financial crisis is mainly due to the domino effect of the sub-prime mortgage collapse. This is just a part of the equation. The illegal practice of naked short selling has been going on for years under the radar of the SEC. It’s a complicated practice to explain, let alone uncover. This is why the SEC has a temporary ban on ALL short selling (some financial experts disagree with this). “Naked short selling” and “short selling” are two different things. For good definitions on short selling and naked short selling read the excellent articles provided by Investopedia.com.)

It is important to realize that Hirsi Ali may be the first refugee from Western Europe since the Holocaust. As such, she is a unique and indispensable witness to both the strength and weakness of the West: to the splendor of open society, and to the boundless energy of its antagonists. She knows the challenges we face in our struggle to contain the misogyny and religious fanaticism of the Muslim world, and she lives with the consequences of our failure each day. There is no one in a better position to remind us that tolerance of intolerance is cowardice.

[...]

There is also the matter of broken promises: Hirsi Ali was persuaded to run for Parliament, and to become the world’s most visible and imperiled spokeswoman for the rights of Muslim women, on the understanding that she would be provided security for as long as she needed it. Gerrit Zalm, in his capacity as both the deputy prime minister and the minister of finance, promised her such security without qualification. Most shamefully, Jan Peter Balkenende, the Dutch prime minister, has recommended that Hirsi Ali simply quit the Netherlands, while refusing to grant her even a week’s protection outside the country during which she might raise funds to hire security of her own. Is this a craven attempt to placate Muslim fanatics? A warning to other Dutch dissidents not to stir up trouble by speaking too frankly about Islam? Or just pure thoughtlessness?

Full Story: International Herald Tribune.

(via Hit and Run).

Link-Soup for 2006-04-10

A Taste of the Caribbean: Jamaican Jerk:
Keywords: recipes

The Kirk Report:
Keywords: blogs, finance