Afghan bank crisis clouds future European aid-EU | Reuters

Tags

Afghanistan, anti-corruption, banks, Central Banks, corruption, credit default swaps, cricketdiane, EU, foreign international aid, IMF, US foreign aid, World Bank

Afghan bank crisis clouds future European aid-EU | Reuters.

Corruption, bad loans and mismanagement have cost Kabulbank hundreds of millions of dollars and the government’s inability to come up with a serious solution has caused growing concern among Afghanistan’s international partners.

In many cases and to varying degrees, aid from donor countries and agencies is mandated on an IMF programme being in place. Donors (including the United States) contribute about 70 percent of the Afghan state operating budget, itself dwarfed by billions more in direct aid.

(etc.)

***

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Obama: World witnessing history in Egypt – UPI.com

Tags

anti-corruption, corruption, cricketdiane, Egypt, Human Rights, MidEast, Mubarak, UN, US foreign aid, US foreign military aid, US foreign policy

Obama: World witnessing history in Egypt – UPI.com.

WASHINGTON, Feb. 10 (UPI) — The world has a front row seat to watch history being made in Egypt, U.S. President Barack Obama said Thursday.

“What is absolutely clear is that we are witnessing history unfold,” Obama said of the anti-government protests calling for President Hosni Mubarak’s departure. “People are calling for change.”

Read more: http://www.upi.com/Top_News/US/2011/02/10/Obama-World-witnessing-history-in-Egypt/UPI-83481297339365/#ixzz1DauPym1z

**

That is exactly right. This is the history of our time unfolding before our eyes. Even if it ends in great horror, that too will be history. Let us hope the world leaders can do a better job than that.

– cricketdiane

***

Egypt and Iraq – interesting decision-makers in Washington

Tags

anti-corruption, corruption, cricketdiane, Egypt, Human Rights, MidEast, Mubarak, UN, US foreign aid, US foreign military aid, US foreign policy

Andrew W. Marshall (born 1921) is the director of the United States Department of Defense‘s Office of Net Assessment. Appointed to the position in 1973 by United States President Richard Nixon, Marshall has been re-appointed by every president that followed.

http://en.wikipedia.org/wiki/Andrew_Marshall_%28foreign_policy_strategist%29

**

Zalmay Mamozy Khalilzad (Nastaliq: زلمی خلیلزاد – Zalmay Khalīlzād) (born: 22 March 1951) is an American counselor at the Center for Strategic and International Studies (CSIS) and president of Khalilzad Associates, an international business consulting firm based in Washington, DC. He was the United States Ambassador to the United Nations under President George W. Bush. He has been involved with U.S. policy makers at the White House, State Department and Pentagon since the mid-1980s, and was the highest-ranking Muslim American in the Administration of U.S. President George W. Bush.[2] Khalilzad’s previous assignments in the Administration include U.S. Ambassador to Afghanistan and U.S. Ambassador to Iraq.

From 1985 to 1989, Khalilzad served in President Ronald Reagan‘s Administration as a senior State Department official advising on the Soviet war in Afghanistan and the Iran–Iraq War. During this time he was a member of the policy planning staff and the State Department’s Special Advisor on Afghanistan to Undersecretary of State Michael H. Armacost. In this role he developed and guided the international program to promote the merits of a Mujahideen-led Afghanistan to oust the Soviet occupation. From 1990-1992, Khalilzad served under President George H. W. Bush in the Defense Department as Deputy Undersecretary for Policy Planning.

Between 1993 and 2000, Khalilzad was the Director of the Strategy, Doctrine, and Force Structure at the RAND Corporation. During this time, he helped found RAND’s Center for Middle Eastern Studies as well as “Strategic Appraisal,” a periodic RAND publication. He also authored several influential monographs, including “The United States and a Rising China” and “From Containment to Global Leadership? America and the World After the Cold War.” While at RAND, Khalilzad also had a brief stint consulting for Cambridge Energy Research Associates, which at the time was conducting a risk analysis for Unocal, now part of Chevron, for a proposed 1,400 km (890 mile), $2-billion, 622 m³/s (22,000 ft³/s) Trans-Afghanistan gas pipeline project which would have extended from Turkmenistan to Afghanistan and further proceeding to Pakistan. As one of the original members of Project for the New American Century, Khalilzad was a signatory of the letter to President Bill Clinton sent on January 26, 1998, which called for him to accept the aim of “removing Saddam Hussein and his regime from power” using “a full complement of diplomatic, political and military efforts.”[10]

In 2001, President George W. Bush asked Khalilzad to head the Bush-Cheney transition team for the Department of Defense and Khalilzad briefly served as Counselor to Secretary of Defense Donald Rumsfeld. In May 2001, National Security Advisor Condoleezza Rice announced Khalilzad’s appointment as Special Assistant to the President and Senior Director for Southwest Asia, Near East, and North African Affairs at the National Security Council. In December 2002 the President appointed Khalilzad to the position of Ambassador at Large for Free Iraqis with the task of coordinating “preparations for a post-Saddam Hussein Iraq.”[11]

(etc.)

http://en.wikipedia.org/wiki/Zalmay_Khalilzad

**

IRAQ – CIA – STATE DEPARTMENT FILES

2440 pages of CIA, State Department, and Congressional documents covering Iraq.
http://www.paperlessarchives.com/iraq.html

**

(from a wikipedia entry about US economics – )

Subsidies considered excessive, unwarranted, wasteful, unfair, inefficient, or bought by lobbying are often called corporate welfare. The label of corporate welfare is often used to decry projects advertised as benefiting the general welfare that spend a disproportionate amount of funds on large corporations, and often in uncompetitive, or anti-competitive ways. For instance, in the United States, agricultural subsidies are usually portrayed as helping honest, hardworking independent farmers stay afloat. However, the majority of income gained from commodity support programs actually goes to large agribusiness corporations such as Archer Daniels Midland, as they own a considerably larger percentage of production.[5]

According to the Cato Institute, the U.S. federal government spent $92 billion on corporate welfare during fiscal year 2006. Recipients included Boeing, Xerox, IBM, Motorola, Dow Chemical, and General Electric.[6]

Alan Peters and Peter Fisher have estimated that state and local governments provide $40-50 billion annually in economic development incentives,[7] which many critics characterize as corporate welfare.

Some economists consider the recent bank bailouts in the United States to be corporate welfare.[8] U.S. politicians have contended that zero-interest loans from the Federal Reserve to financial institions during the global financial crisis were a hidden, backdoor form of corporate welfare.[9]

http://en.wikipedia.org/wiki/Corporate_welfare

**

The Republicans bailed out the banks and established the most grandiose, crony-based government funded set of industries, security contractor industries, huge agri-businesses that put small farms out of business, horse farms and horse breeder farms, military industry contractors and sub-contractors such that no one could compete with any of them with a level playing field or enter the field at all, in many cases – since those same subsidies, grants and incentives were not available to them.

– my note

**

The term corporate welfare is widely used to describe the bestowal of favorable treatment to particular corporations by the government. One of the most commonly raised forms of criticism are statements that the capitalist political economy toward large corporations allows them to “privatize profits and socialize losses.”[1] The argument has been raised and cited on many occasions.

http://en.wikipedia.org/wiki/Socialism_for_the_rich_and_capitalism_for_the_poor

**

The military-industrial complex in the United States is often described as an example of crony capitalism in an industry. Connections with The Pentagon and lobbyists in Washington are described by critics as more important than actual competition, due to the political and secretive nature of defense contracts. In the Airbus-Boeing WTO dispute, Airbus (which receives outright subsidies from European governments) has stated Boeing receives similar subsidies, which are hidden as inefficient defense contracts.[8] In another example, Bechtel, claiming that it should have had a chance to bid for certain contracts, said Halliburton had received no-bid contracts due to having cronies in the Bush administration.

(also from the same entry on wikipedia – )

More direct government involvement can lead to specific areas of crony capitalism, even if the economy as a whole may be healthy. Governments will, often in good faith, establish government agencies to regulate an industry. However, the members of an industry have a very strong interest in the actions of a regulatory body, while the rest of the citizenry are only lightly affected. As a result, it is not uncommon for current industry players to gain control of the “watchdog” and use it against competitors. This phenomenon is known as regulatory capture.

A famous early example in the United States would be the Interstate Commerce Commission, which was established in 1887 to regulate the railroad “robber barons“; instead, it quickly became controlled by the railroads, which set up a permit system that was used to deny access to new entrants and functionally legalized price fixing.[5]

(from)

http://en.wikipedia.org/wiki/Crony_capitalism

**

(further from another wikipedia entry – )

Economist Dean Baker expressed similar views in his book The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, in which he pointed out several different policy areas in which government intervention is essential to preserving and enhancing wealth in the hands of a few.[13]

Also Noam Chomsky has criticized the way in which free market principles have been applied. He has argued that the wealthy use free-market rhetoric to justify imposing greater economic risk upon the lower classes, while being insulated from the rigours of the market by the political and economic advantages that such wealth affords.[14] He remarked, “the free market is socialism for the rich—[free] markets for the poor and state protection for the rich.”[15]

Arguments along a similar line were raised in connection with the financial turmoil in 2008. With regard to the federal takeover of Fannie Mae and Freddie Mac, Ron Blackwell, chief economist of AFL-CIO, used the expression “Socialism for the rich and capitalism for the poor” to characterize the system.[16] In September 2008, the US Senator from Vermont, Democratic Socialist Bernie Sanders said regarding the bailout of the U.S. financial system: “This is the most extreme example that I can recall of socialism for the rich and free enterprise for the poor”.[17] The same month, economist Nouriel Roubini stated: “It is pathetic that Congress did not consult any of the many professional economists that have presented […] alternative plans that were more fair and efficient and less costly ways to resolve this crisis. This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street”.[18]

http://en.wikipedia.org/wiki/Socialism_for_the_rich_and_capitalism_for_the_poor

**

Crony capitalism in practice

In its lightest form, crony capitalism consists of collusion among market players. While perhaps lightly competing against each other, they will present a unified front to the government in requesting subsidies or aid (sometimes called a trade association or industry trade group). Newcomers to a market may find it difficult to find loans or acquire shelf space to sell their product; in technological fields, they may be accused of infringing on patents that the established competitors never invoke against each other. Distribution networks will refuse to aid the entrant. That said, there will still be competitors who “crack” the system when the legal barriers are light, especially where the old guard has become inefficient and is failing to meet the needs of the market. Of course, some of these upstarts may then join with the established networks to help deter any other new competitors.

(etc.)

http://en.wikipedia.org/wiki/Crony_capitalism

**

Franklin D. Roosevelt in an April 29, 1938 message to Congress warned that the growth of private power could lead to fascism:

The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism—ownership of government by an individual, by a group, or by any other controlling private power.[60][61][62]

From the same message:

The Growing Concentration of Economic Power. Statistics of the Bureau of Internal Revenue reveal the following amazing figures for 1935: “Ownership of corporate assets: Of all corporations reporting from every part of the Nation, one-tenth of 1 percent of them owned 52 percent of the assets of all of them.”[60][62]

Critics of the notion of the confluence of corporate power and de facto fascism included President Dwight D. Eisenhower,[63] who nevertheless brought attention to the “conjunction of an immense military establishment and a large arms industry”[64] in his 1961 Farewell Address to the Nation, and stressed “the need to maintain balance in and among national programs — balance between the private and the public economy, balance between cost and hoped for advantage.”[64]

Some authors also discuss modern American corporatism.[65][66]

http://en.wikipedia.org/wiki/Corporatism

**

Just a thought –

Sometime, when you’ve nothing better to do –

In 1727, Benjamin Franklin, then 21, created the Junto, a group of “like minded aspiring artisans and tradesmen who hoped to improve themselves while they improved their community.” The Junto was a discussion group for issues of the day; it subsequently gave rise to many organizations in Philadelphia.

Reading was a great pastime of the Junto, but books were rare and expensive. The members created a library, initially assembled from their own books. This did not suffice, however. Franklin then conceived the idea of a subscription library, which would pool the funds of the members to buy books for all to read. This was the birth of the Library Company of Philadelphia: its charter was composed by Franklin in 1731. In 1732, Franklin hired the first American librarian, Louis Timothee. Originally, the books were kept in the homes of the first librarians, but in 1739 the collection was moved to the second floor of the State House of Pennsylvania, now known as Independence Hall. In 1791, a new building was built specifically for the library. The Library Company is now a great scholarly and research library with 500,000 rare books, pamphlets, and broadsides, more than 160,000 manuscripts, and 75,000 graphic items.

 

Benjamin Franklin (center) at work on a printing press. Reproduction of a Charles Mills painting by the Detroit Publishing Company.

Upon Denham’s death, Franklin returned to his former trade. In 1728, Franklin had set up a printing house in partnership with Hugh Meredith and the following year became the publisher of a newspaper called The Pennsylvania Gazette. The Gazette gave Franklin a forum for agitation about a variety of local reforms and initiatives through printed essays and observations. Over time, his commentary, and his adroit cultivation of a positive image as an industrious and intellectual young man, earned him a great deal of social respect. But even after Franklin had achieved fame as a scientist and statesman, he habitually signed his letters with the unpretentious ‘B. Franklin, Printer.’^[11]

 

Franklin’s birthplace site directly across from Old South Meeting House on Milk Street is commemorated by a bust above the second floor facade of this building

Declaration of Independence

 

John Trumbull depicts the Committee of Five presenting their work to the Congress.^[62]

By the time Franklin arrived in Philadelphia on May 5, 1775, the American Revolution had begun with fighting at Lexington and Concord. The New England militia had trapped the main British army in Boston. The Pennsylvania Assembly unanimously chose Franklin as their delegate to the Second Continental Congress. In June 1776, he was appointed a member of the Committee of Five that drafted the Declaration of Independence. Although he was temporarily disabled by gout and unable to attend most meetings of the Committee, Franklin made several small changes to the draft sent to him by Thomas Jefferson.^[54]

At the signing, he is quoted as having replied to a comment by Hancock that they must all hang together: “Yes, we must, indeed, all hang together, or most assuredly we shall all hang separately.”^[63]

(from)

http://en.wikipedia.org/wiki/Benjamin_Franklin

**

The Bill of Rights is the name for the first ten amendments to the United States Constitution.^[1] They were introduced by James Madison to the First United States Congress in 1789 as a series of legislative articles and came into effect as Constitutional Amendments on December 15, 1791, through the process of ratification by three-fourths of the States.

The Bill of Rights is a series of limitations on the power of the United States federal government, protecting the natural rights of liberty and property including freedom of speech, a free press, free assembly, and free association, as well as the right to keep and bear arms. In federal criminal cases, it requires indictment by a grand jury for any capital or “infamous crime”, guarantees a speedy, public trial with an impartial jury composed of members of the state or judicial district in which the crime occurred, and prohibits double jeopardy. In addition, the Bill of Rights reserves for the people any rights not specifically mentioned in the Constitution^[2] and reserves all powers not specifically granted to the federal government to the people or the States. Most of these restrictions on the federal government were later applied to the states by a series of legal decisions applying the due process clause of the Fourteenth Amendment, which was ratified in 1868. The Bill was influenced by George Mason‘s 1776 Virginia Declaration of Rights, the 1689 English Bill of Rights, works of the Age of Enlightenment pertaining to natural rights, and earlier English political documents such as Magna Carta (1215).

http://en.wikipedia.org/wiki/United_States_Bill_of_Rights

The Bill of Rights plays a key role in American law and government, and remains a vital symbol of the freedoms and culture of the nation. One of the first fourteen copies of the Bill of Rights is on public display at the National Archives in Washington, D.C.

**

My Note –

Because if you don’t stand for something, you’ll fall for anything.

Maybe it is time to take a look at what America stands for and make good on it – across the board, both with our own people and those of other nations around the world.

– cricketdiane

Just a thought.

***

It is rather hard to imagine doing anything of value in the United States when the game is rigged.

Our nation has agreed to the principles of our Constitution and Bill of Rights for all of this time, including now. I don’t recall any of us having a vote to change those principles and doctrines to something else – not thirty years ago, not five years ago and not yesterday nor today. So, therefore these things have been our law the whole time – and these aren’t matters that are buried fifty elements down on some back page of our Constitution. They are placed at its first page as the most important thing from which all the rest is derived and secondary. These are in effect, our national principles upon which we have all agreed – not something else.

And, when those funds were taken from our Treasury and sent to places as diverse and brutal to people from Egypt to even states and systems in the United States that have brutalized our people – it was illegal. It was against the very Constitution which places any power in the hands of anyone in our state or federal government or its agencies.

That was a “no-no” to say the least. And, now the price of this foolishness, is that we have put sophisticated weapons of destruction in the hands of whatever horrific regime has been in power for thirty years and whatever comes next. Brilliant is not the word I would use to describe that. And, at the same time it has thieved money from every single American alive today in opportunities, resources and moneys from their paychecks which could have been spent more effectively for their own needs.

It is wrong.

And, the people who participated in it – knew it was wrong and in violation of our Constitution when they were doing it.

***

$3.5 million dollars a day being given to Egypt every single day for over thirty years – what did they think they were doing?

(sometimes more and that doesn’t include a vast array of other financial resources being given from our tax dollars to the Egyptian government for an infinite variety of excuses.)

Times how many other governments and nations and programs and militaries and police states and police secret brutality guards and how many other things that not one American citizen would have agreed to take money from their paychecks and sponsor?

– cricketdiane

***

I noticed this just now on one of my documents – how is it that these folks knew this and yet, bankers, Wall Street groups and our government have said there was no way they could’ve known what was coming?

**

Financial crisis of early 21st Century

According to their Report to Policyholders 2007, in early 2007 the company’s managers became concerned about the state of credit markets, so in February 2007 “based on our belief that the markets were acting irrationally” New York Life decided to move much of its cash flow into safer investments such as US Treasury bonds. “By August 2007, the credit market problems we had feared were front page news,” the Report notes.

(from)

http://en.wikipedia.org/wiki/New_York_Life_Insurance_Company

***

Notes about – Egypt Foreign Minister Warns of Military Intervention – NYTimes.com

Tags

anti-corruption, corruption, cricketdiane, Egypt, Human Rights, MidEast, Mubarak, UN, US foreign aid, US foreign military aid, US foreign policy

Egypt Foreign Minister Warns of Military Intervention – NYTimes.com.

For anyone interested – this entire article is well worth reading. The second page has a list of the labour strikes and where those have happened during the day there (over the course of the night here.)

It says Sharm al-Sheikh is closed. And, notes that there are vast scores of people by the thousands now participating across Egypt.

This part is actually pretty amazing –

There were signs that the police, under the jurisdiction of the hated Interior Ministry, were trying to remake their image. The authorities have announced in recent days that prosecutors are weighing charges against Habib el-Adly, recently removed as interior minister. The charges, including murder, are related to the killing of protesters by security officers during the unrest.

On Wednesday, some cellphone customers in Egypt received the equivalent of marketing messages from the new minister, Mahmoud Wagdy. One read, “From the Ministry of Interior: The police will do nothing but serve and protect the people.” Another said, “Starting today, we will only deal through truthfulness, honesty and rule of law.”

Beyond all else, it shows that the Egyptian government leaders are embracing the fact that something is amiss. But, there is every indication that the staunchly entrenched and enriched Mubarak / Suleiman government members are unpredictable and unstable in what they might do next.

On CNN last night, a couple segments really caught my attention. Once on Parker Spitzer when there was Ron Suskind speaking about what things are in context. And later as a lady from a pro-women’s group who had grown up under Islamic Sharia law (in Algiers, maybe) was describing on AC360 that the Muslim Brotherhood is the only political group with a head start and political resources in place.

All of her points were accurate – that is a very good interview to see. She appeared with intel guy adding pertinent info – but her points were valid. It will take sustained efforts efficiently made for Egypt’s protesters to quickly develop the organized political parties that could participate in an election and forward their own candidates, or there would be only one party doing so – the Muslim Brotherhood who already having backing and resources in place.

It still so floors me that the State Department and others in European governments would state publicly that Suleiman is a good answer, when he is responsible for much of the violence and oppressive tactics that have been used against Egypt’s people for decades. I don’t get that part. It doesn’t make sense. Why would they have nothing better to say at this point? They would have to know the kind of man his strong-arm style of dictatorship would indicate, just as much as Mubarak – if not more so. I don’t get it.

I’ll look up those video clips and see if they are available by a link here or find the portions of the transcripts that include them. They are really an amazing look at the in-depth picture and the US role in it over many, many years (and five presidents.)

– cricketdiane

***

And, I do want to note – that Egyptian government leaders telling our national security team, our vice president, our state department, our president, the UK government leaders, the UN and the entire 27 nations of the EU’s leaders that it is none of their business is unacceptable.

Not only have they used our resources and depend on them even now to stay in power, but the Egyptian government has called on our specialists in the region that we (and all of the above named leadership resources) are supporting every time they wanted to do a business deal or had some concern that they wanted fixed within the region. At their beckon call over thirty years – and now they say its no one’s business what they do?

 

No. And, it is probably going to take what the entire world can do from the Arab world to the European and US / Canadian world, Russia, China, Japan and half of South America to help Egypt’s people have the freedom and democracy they want with fair and open elections and a substantial number of political parties available from which to choose while maintaining some transitional period to do it.

***

 

Hedge fund managers arrested in insider case | Reuters

Tags

collusion in Wall Street insider trading cases, corruption, cricketdiane, financial industry, financial reform, hedge fund managers, hedge funds, investment firms bailouts, SEC, Wall Street, Wall Street insider trading

Hedge fund managers arrested in insider case | Reuters.

CNNI Quest Means Business just had an announcement by the prosecuting group responsible for the arrests who mentioned that 30 arrests had been made and more were to be made . . . (my note).

http://www.businessweek.com/news/2011-02-08/ex-sac-employees-are-charged-in-u-s-insider-probe.html

The arrests in what prosecutors called a four-year scheme signal an expansion of a 16-month attack on insider trading on Wall Street that U.S. Attorney Preet Bharara said is “rampant.” The criminal complaint refers to six hedge funds, which it doesn’t name, that employed the defendants or executed trades.

The charges are connected to earlier arrests of eight employees or consultants at Primary Global LLC, a Mountain View, California-based firm that links investors with employees of public companies who work as consultants. Barai got inside tips from Primary Global consultants Anthony Longoria and Winifred Jiau, both of whom were previously charged, today’s complaint says.

My Note –

These articles simply name three that were arrested. Hmmm…… And a few others, and well, maybe I should find some more info about it. But the most interesting part is the idea that insider trading is “rampant” among these companies, hedge funds, consultants and analysts. Yes, I’d say that isn’t news because everybody knows that, but it is news that the government regulatory agencies are finally doing something about stopping it.

That is amazing.

***

Mubarak and Suleiman declare war on anti-Mubarak protesters, international journalists and human rights groups in Egypt

Tags

America, brutality against Egypt's citizens, Cairo, corruption, cricketdiane, Democracy, Egypt, Freedom, Human Rights, Mubarak, Suleiman, US foreign aid, US foreign military aid

Cairo braces for possible new protests as Mubarak holds on – CNN.comVice President Omar Suleiman laid some of the unrest’s blame on the media.”I actually blame certain friendly nations who have television channels, they are not friendly at all, who have intensified the youth against the nation and the state,” Suleiman told Nile TV. “They are actually continuing. They have filled in the minds of the youth with wrongdoings, with allegations, and this is unacceptable.”

via Cairo braces for possible new protests as Mubarak holds on – CNN.com.

Journalists covering the crisis also became targets — beaten, bloodied, harassed and detained by men, most all in some way aligned with Mubarak.

Numerous news outlets — including the BBC, ABC News, Fox News, the Washington Post and CNN — reported members of their staffs had either been attacked or arrested. Amnesty International and Human Rights Watch also reported that staffers were detained.

In several cases, news personnel were accused of being “foreign spies,” seized, whisked away, and often assaulted.

Graeme Wood, a correspondent for The Atlantic, told CNN he was dragged from a car at a checkpoint Thursday and accused of spying for Iran.

Cairo braces for possible new protests as Mubarak holds on – CNN.com

(from another article)

Sources have told TIME Magazine that Lara Logan, chief foreign affairs correspondent for CBS News, has been detained along with her crew by Egyptian police outside Cairo’s Israeli embassy.

Read more: http://newsfeed.time.com/2011/02/03/time-exclusive-cbss-lara-logan-and-crew-detained-in-cairo-as-violence-escalates/#ixzz1CxfyvLIA

My Note –

Even after Mubarak and his thugs clear out the protesters from Cairo and every city in Egypt through whatever means – likely whatever violent means . . .

And after declaring war on journalists around the world, and instigating violence and bloodshed on the peaceful unarmed protesters that had been asking for democratic reform . . .

Egypt’s Mubarak government insists on unbridled violence as the way to handle everything and demands that the world look the other way while they murder, maim and torture.

You know how many businesses in Atlanta could’ve been built for the $150 Billion Dollars plus that the US has given to Mubarak’s regime over the last thirty years?

That is my money they gave him. Those were opportunities that my country gave away from our resources to him rather than to use them for our lives. And, now Mubarak and Suleiman would declare war on everyone calling for democratic changes to occur there?

What the hell do they think that will do? I, for one – want our money back and for the money that they have denied to everyone of our citizens and theirs to be taken away from their hands.

And, I am so thoroughly disgusted that our nation in the hands of conservative Republicans over the last thirty years has given power and our money, my family’s money, my neighbor’s money, and my money to these corrupt, vile and completely psychotic leaders.

There are 84 million Egyptians. Not one of them agreed for these leaders to hold Egypt for thirty years and to get away with the things they have been using their power to do to their own people.

The administration in charge of Egypt has taken, and taken and taken, including to have Egypt leveraged to the hilt even right now. And, they think it is none of our business – but they want us to come fly on their airlines, stay in their hotels, spend money in their restaurants and stores, build businesses in their country and send our companies to establish their? Are they nuts?

How dare they declare war on us and on our journalists and on the principles of our nation? How dare they flaunt their power and abuse it when they have used America’s name and backing? How dare they say that our President and the world’s leaders have nothing to do with it? Who the hell do they think they are?

There is no place on this planet that does not affect us all. And, Egypt is using our resources, our backing, our name, our nation, and our goodwill to do corrupt and brutal things to their own people and now to our journalists and citizens there? NO.

They dare to tell our President to stay out of it while snubbing everything said by the international community and our nation? NO. Not while standing with equipment paid for by us with our name on it and education offered by us, training paid for by us and while using our name for what they are doing. NO.

Suleiman invited the Muslim Brotherhood to speak with him – but they are not the representatives of the protesters that we have all watched during the last ten days as those families and young people demanded to have democratic elections and representation in their government for all of Egypt.

***

From an article on bloomberg – about Egypt’s debt –

Egyptian government officials sought to blame part of the turmoil on foreigners, having earlier pointed to domestic Islamic groups such as the Muslim Brotherhood and Hamas. Meantime, State Department spokesman Philip J. Crowley said yesterday the U.S. has evidence that “elements close to” Egypt’s government or ruling party, and not foreigners, played a role in violent counter-demonstrations in Cairo.

http://www.businessweek.com/news/2011-02-03/egypt-s-friday-prayers-threaten-violence-as-mubarak-won-t-go.htmlMubarak supporters stormed hotels in the capital searching for journalists, Al Jazeera and Al Arabiya television channels reported yesterday. Many members of the foreign press have been staying in hotels near Tahrir Square, a focal point for nine consecutive days of protests aimed at forcing Mubarak to resign.

Reporters at Risk

Employees of Time Warner Inc.’s CNN and Canada’s state- owned Radio Canada are among those who reported being assaulted. Amnesty International said one of its members was detained in Cairo in a raid on the Hisham Mubarak Law Center.

“These attacks seem to have been acts of revenge against the international media for relaying” the message of the protesters, Jean-François Julliard, secretary-general of Reporters Without Borders, a rights group, said in a statement.

(it also says – )

Reopening the financial system won’t create problems because the country’s lenders are “very liquid,” Deputy Central Bank Governor Hisham Ramez said in a telephone interview from Cairo yesterday. He said government debt auctions will resume next week and the Finance Ministry will announce a schedule. Two planned sales were canceled this week.

http://www.businessweek.com/news/2011-02-03/egypt-s-friday-prayers-threaten-violence-as-mubarak-won-t-go.html

Well, that is the important thing. There’s where all our money is sitting along with the military hardware and training that Mubarak and Suleiman and their ministers are using against their own people. I resent that – and American businesses and leaders have been supporting this and giving our money and resources to them for it to be used this way – in horrific brutality, assaults against people for years across Egypt and torture of them in jails and corrupt government systems – all this time. No wonder everybody hates us.

And, when I think of all the things that money could’ve done for America – here where I have lived for thirty years and in my city and in my state and in my life and for the lives of my family – I am absolutely sickened by the choices that have been made by America’s thirty years of leaders who have done these things in our name, using our resources to do it and by doing so, denying those resources to every one of us. And, for what?

The Egyptian people will never even know what happened. They will never have seen the hundreds of thousands of families and young people peacefully protesting in the Cairo square and other cities. They will never have seen the brutality brought upon them as the Egyptian government sent armed mobs to support themselves by brutal slaughter of those protesters. And, they will never know that those protesters never were a part of the Muslim Brotherhood or any other extremist group, but rather their own daughters and sons and neighbors who simply wanted the opportunity for an open democratic society, real elections, freedom to pursue their own economic well-being and to participate as honorable citizens of their nation. They will never even know.

– cricketdiane

***

But, I do know that our business leaders know about it. Our politicians of our parties know. Our nation’s people know. The international community does know. And, I do know. And, I will always remember the brightness and sparkle of the eyes and hopes and dreams of those families in Egypt that stood in those streets protesting en masse peacefully in all desire to either be free or die. As it turns out – at least they tasted and cherished freedom when Mubarak and Suleiman slammed them to their deaths.

Strange Conspiracy – a continuing saga of human rights abuses in America – Chicago police and school children / special needs students / crimes against women, crimes against children / Do the state and city governments know what civil and human rights are – does anybody in our government honor any of our laws, rights and basic human rights of US citizens?

Tags

Chicago, Chicago schools, Civil Rights, conspiracy, corruption, cricketdiane, Human Rights, injustice, life in the United States, police brutality, US government policy, US history

Caught on tape: Cop assaults 15-year-old special needs student

By Stephen C. Webster
Thursday, October 8th, 2009 — 8:18 pm

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UPDATE (at bottom): Cop who assaulted teen now in jail on rape charge; shot ex-wife’s new husband 24 times in ‘self defense’

For the offense of not having his shirt tucked in, 15-year-old special needs student Marshawn Pitts was slammed into a wall of lockers and pounded repeatedly in the face by a police officer who broke the boy’s nose and bloodied his mouth.

The Dolton, Illinois teen told a local CBS affiliate that the officer was cursing at him as he complied with the order to tuck in his shirt. Then, “it was just like, boom!” he said.

The assault, which took place in May, was recorded on a security camera at the Chicago suburb’s Academy for Learning.

“The academy is a high school for special-needs students who are emotionally disturbed or struggle with behavioral disorders,” noted Chicago Breaking News. “Marshawn was a student there because he suffered brain injuries when he was hit by a car years ago, [family attorney Edward] Manzke said.”

During the recording, the officer stoops down and places a cup of coffee on the floor, then threw the teen into the lockers before pummeling him and pinning him to the floor in a maneuver known as the “face-down take-down.”

“Zena Naiditch of Equip for Equality, a legal advocacy group that fights for the rights of people with disabilities, looked at the video and said the type of physical restraint used by the officer has killed students,” CBS News reported.

Naiditch added that the hold can be lethal because those trapped by it are left unable to breathe. CBS noted that seven states currently prohibit officers from using the “face-down take-down.”

The officer has not been identified, but due to the filmed evidence of the assault he has been terminated from the force.

Manzke told WBBM News Radio 780 that Marshawn has since transferred to a new school and the family is planning to file a lawsuit.

This video is from CBS 2 in Chicago, broadcast Oct. 7, 2009.

UPDATE: Cop who assaulted teen now in jail on rape charge; shot ex-wife’s new husband 24 times in ‘self defense’

The officer who brutally beat special needs student Marshawn Pitts has been identified as 38-year-old Christopher Lloyd, according to Chicago Breaking News, which spoke to Lloyd’s father.

The news agency reported that Lloyd is currently in jail after being charged with the rape of a woman he knew and is facing a 20-year sentence should he be convicted.

The Chicago Tribune-backed service adds: “A lawsuit filed by his ex-wife, Nicole McKinney, last summer alleges he gunned down her new husband Cornel McKinney in front of their children outside their home on the 6100 block of South Langley Avenue on Feb. 17, 2008.”

An autopsy revealed Lloyd shot the man 24 times, the agency found. He was not jailed at the time as Chicago police accepted his explanation that the killing was in self-defense.

Lloyd also reportedly told his father that the boy he was filmed assaulting had a history of behavioral problems and had cursed at him when told to tuck in his shirt.

Image sample credit: CBS News.

[from – ]

http://rawstory.com/2009/10/camera-catches-cop-assault-of-15-year-old-special-needs-student/

***

My Note –

If the Chicago authorities had not let this police officer get away with shooting somebody 24 times which was violent brutality and MURDER – the rest of the damage he has done, wouldn’t have been done.

And, since when does anything someone might say, excuse brutality, violence, physical assault or murder by police or anybody else. What kind of model of behavior is that? It is against the law by anyone’s standards and is nothing but sadistic and criminal behavior and the law should apply to police officers when they engage in criminal brutality against us.

When the police officers act no differently than the most evil and sadistic of criminals, they are no longer serving the public good.

– cricketdiane

***

Life in the United States of America – I really see a whole lot of excuses for letting the place go in the crapper

Tags

abuse of power, conflicts of interest, corruption, President Bush, Republican policies, US Congress, US Torture, Wall Street

Note – The United States has been instrumental in pursuing and bringing to prosecution those that acted in the Gestapo and in war crimes all over the world, in bringing down demagogues that operated tyrannies and engaged in police brutality all over the world — so why is there no accountability for the same crimes in America against human rights, against civil rights and against our Constitution and Bill of Rights and the Geneva Convention agreements?

***

Since the conservatives put Reagan into office and took over our country’s governance, there has not been a woman or child in America that has been safe in their own beds, in their own homes, or under the roof with the person they came to love and trust. Domestic violence rarely holds the perpetrator responsible and yet if a man is assaulted in a bar fight or out on the street somewhere, the full extent of the law comes to his aid.

Crime has been rampant in every city, town, county and outlying district despite a third of the population being put in jail and forced to live in prisons across the country. There isn’t one place in the country where a child can safely play out in the yard at dusk and in many cases, even in the middle of the day anywhere. Children are taken from their beds, women are beaten to death in their own homes, our daughters and sons are raped in cities and countryside alike, drugs and drug industry warlords run more of our country’s choices than we do and there isn’t one safe place to call home in America.

So, why don’t we all pack up and leave, you say? No, why don’t those vile enough to have destroyed this country while at the helm have some consequence for running it into the ground and then we’ll all just stay and enjoy living in a free country again.

I will always remember – I will never forget.

There isn’t a day that has gone by during these years that it has been the America we want it to be, except for the rich, the Wall Street bankers and the politicians. They’ve got it fine. Everyone else is living in America, the land of poverty and injustice at the hands of profit-driven greed, malice and intolerance, police brutality, eminent domain and sovereign immunity.

In America, if we were willing to confront reality, our expectations would include being viciously assaulted, or even killed, in our own homes by our husbands or boyfriends or fathers, being further victimized by state social systems that make money by herding us through their facilities, being subjected to a hellish existence as our children are taken away to be raised by and often abused by strangers, and enduring never-ending poverty, destitution and despair.

And then, as if that isn’t enough, if we accepted reality as it really is and has been in America for the last thirty years, we would know that the only thing we would get out of it all would be the cruelties and sniping of our fellow human beings, not love, not compassion, not consideration, not justice, not kindness, not a hand of hope, help and healing. The only thing America’s leaders and political conservatives have for us is desolation and a waste of every talent, intelligence, skill, knowledge, experience, creativity, innovation and invention that we could have offered.

I will always remember – I will never forget.

There was a little man on the tv that ran around the New York stock exchange screaming like a crazed heathen that said, “we don’t want to pay for people keep their homes – they shouldn’t have gotten those homes in the first place.” The news stations carried it over and over and over, having been so proud to have found a newsworthy moment of such impact and passion.

That little man has made money off every one of those homeowners who are now losing their houses. That is how he and his friends make money – that is why they work in Wall Street instead of making a living at something honorable and productive. But, his opinion is newsworthy. He is the one that Washington wants to hear and that news station owners want to see, if we are to believe the news producers who chose to play it over and over.

If I ran around screaming like that saying what he did, in Atlanta, Georgia or in Marietta where I live, there wouldn’t be two hours before the police here would’ve picked me up, locked me up without a phone call and within a short period of time thereafter our “health authorities” would have been forcing a high dose of Halidol or Thorazine into me while having six people hold me down. That is what I and any other woman in America gets for expressing an opinion like that.

In fact, I would say that any poor person of any color, race, nationality or sexual orientation gets treated much as I do – and we certainly don’t get news coverage for it. Our voices aren’t heard. Our opinions don’t count. We aren’t given rights. There is no access to an attorney or an advocate for days, weeks and sometimes longer. Our friends and family members aren’t generally alerted, although they can have any of us put away with no more than a word and police will come into our homes without a warrant to lock us up without even a crime being committed whether we are any danger to ourselves or to anyone else.

Now, see if we accepted reality for what it is in America, I would’ve known that I would never make a living ever. I’m 50 years old now, I can say that. I would have known that having a small business or starting a business was never going to be available to me or to my daughters or to my little family. No wonder people are offing themselves. They are living in reality and everyone around them is telling them it is something other than what it is. Why would anyone say to a woman that she is safe in her own home when every last shred of evidence proves that women are being beaten to death every day in America in their own homes with the person they trusted enough to love.

I will always remember – I will never forget.

There will never be a day that passes that I don’t think about the tens of thousands of people who have died from food poisoning simply because our business leaders didn’t want to be bothered with all those nasty little regulations that made it so difficult for them to do business and make hoards of profits without consequence. That is true as well for the pharmaceutical companies who have profited by making people live in an intolerable hell as a result of their profit desires at the expense of everyone.

It isn’t possible for that many drugs of varying kinds to have the same set of side effects which make it impossible to function, to do simple things like taking a shit and to eat a meal without throwing it up. There isn’t a likelihood that by coincidence a great variety of pharmaceuticals have a common side effect of pneumonia, organ failure, coma and death. Then what is the point of taking it? If it doesn’t make life better, what are they selling?

General Motors wants the American people to bail them out but their cars are commonly being recalled because people die in them as a result of that company’s manufacturing and business choices. They don’t need to be in business if that is how they do business. We don’t keep places in business that cause harm to people. What would be the good in that? Let people work at a company that takes its place which treats the consumer and the working members of its business in honorable and conscientious ways. No one else in America would get away with that – why should they?

It isn’t that there are double standards in America, because that wouldn’t begin to describe it. In the last five years, news story after news story have described “the system” in America as broken and it didn’t start there by a long shot. It started when the fundamentalists and religious right-wing conservatives decided we should all do it their way. But, “their way” doesn’t work for everybody else in America or anywhere, in fact. And, it isn’t supposed to either. God did not give them my life to live, nor anybody else’s. Why our government decided to let their choices run everybody’s life is beyond my understanding. What could they know of what other people need to do, or need to have, or need to say, or need to live? As it is, the only thing they have created besides chaos, confusion and destitution is homelessness, despair and let’s not forget, criminal behavior at the highest levels of our country where there used to be honor.

I will always remember – I will never forget.

When I watched the Olympics in Beijing, China and saw the journalist that was arrested for taking pictures of a protest about the Tibetan issue, it was obvious that it wasn’t happening in America because the Chinese police didn’t beat the crap out of the reporter before holding him on the ground and Tazing him two or three times, or shooting him “accidently” while on top of him. That is how its done in the United States from New Orleans to Oakland, New York to Atlanta and everywhere in between on every single day across America.

And, that reporter would probably still be in jail today, if it had happened here because there is no good sense to any of it. The laws are only used when the government decides to use them against regular people, working people, and poor people. That is why someone with a marijuana cigarette on them can spend two years in jail, lose everything their home, their children and everything they own, and the “professionals” that tortured people with inhumane, cruel and obscene acts are living happily ever after with a pension and benefits and a bonus and a salary over $100,000 a year in a nice house in a safe pretty neighborhood where their children are safe with two cars in the driveway and a yacht in the harbor.

Nobody accuses these perpetrators who have committed inhumane violent actions against women, against the poor and against both prisoners of war and the regular people of America, as insane. No, their given fine opportunities and will go on to work somewhere else putting forth their distorted and malicious views of the world. In fact, if history serves anything it is to tell us that every one of these perpetrators in America will be treated like kings while the rest of us are treated like slaves and otherwise useless aggravations.

No one is going to hold the bankers accountable that have driven our country’s economy into the ground and no one is going to hold those that tortured or killed prisoners accountable. There is something to be said for the fact that laws which don’t apply to the rich or to the well-connected is no law at all. And, that is what we have. It has been a monarchy – an aristocratic monarchy, much of which is still in operation and still determining how the rest of us live and what our opportunities will be or won’t be.

I have already been the victim and I’ve been the rescuer. I’ve been the hapless fool and the wizened idiot shriveled beyond repair, but I’m still here. That makes me either one of the lucky ones or unfortunate enough to have to live through more of it, depending on how I look at it. But, I’m still here for right now. And, I did not drive this thing into the ground.

It was not my choices that made America cruel and her heart wicked in deceit and greed and power-mongering by the hands and minds of the Republican Party and the conservatives who’ve been running it. I am not the one who did that. I did not create her injustice, nor did I cause her police brutality, cronyism, victimization of those least likely to be able to protect themselves from authorities and abuse of authority by those in power. Those are neither my sins nor my crimes against humanity.

But, I might have one or two I can claim. It is about to be my sin against humanity that I never lift a hand to help. That I might indeed have to answer for, because I am within a hair’s breadth of doing just that. The more I hear and the more I see of those who have been in power claiming to have had no hand in it being driven into hell – the more I think that it is not about what I do, but about what I do not do at this point. And, I can choose to let it go and to do nothing to help fix it, because there is not one thing worth saving among them. And there is no use trying to catch a falling knife – might as well back up and get out of the way.

I will always remember. I do remember and I will never forget.

I’ve never lived in an America where I will get to buy a house, where freedom exists and I have rights to my country’s Constitution or where my children and I have the opportunities that exist only for the rich and politically connected in America. It doesn’t matter what talents and knowledge we have, access and opportunities only exist for a few in the country where I live no matter what I’ve been told in books and what people want to believe about it. Real life is the way I’ve experienced it – not what I want to believe it so.

– cricketdiane

US and Global financial macroeconomic model of disaster – Trillions upon Trillions of dollars that is just air

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accounting principles, bailouts, banking, banks, bonds, budget deficits, Business, CDOs, corruption, credit crunch crisis, credit default swaps, credit derivatives, Cricket Diane C Sparky Phillips, cricketdiane, currency values, Economic depression, Economics, Economy, Federal government, financial derivatives, global economic crisis, government corruption, IMF projections US economy, international balance of payments, investment banking, local government, macro-economic future forecasting, macro-economics, Principles of Economics, Recession - Depression, Solutions, state budgets, state government, states, States Rights, stimulus bill, stimulus package, US currency, US dollar, US economic bailout, US economic crisis, US government policy, Wall Street corruption, world economy

The FBI is investigating, from top to bottom, Wall Street executives who participated in Wall Street’s financial engineering factory, where executives compulsively minted and fraudulently pushed on investors dangerous securities built on bad mortgages, bad credit card payments, bad auto loans, bad student loans, you name it.

All stuffed through Wall Street’s underwriting pipeline, and all magically emerging as Triple-A rated securities, safe as a US Treasury.

Bonds and derivatives that were then sold by companies Wall Street purposely set up offshore in places like the Cayman Islands or Guernsey, away from the prying eyes of  market regulators.

http://emac.blogs.foxbusiness.com/2009/02/06/inside-wall-streets-subprime-bond-factory/
February 6, 2009 10:06AM
Inside Wall Street’s Subprime Bond Factory
By Elizabeth MacDonald

***

Three U.S. Banks Shut by Regulators as Financial Crisis Deepens

By Margaret Chadbourn and Ari Levy

Feb. 7 (Bloomberg) — Three banks, two in California and one in Georgia, were seized by regulators, bringing this year’s tally of closings to nine as a recession and record foreclosures extend the biggest financial crisis in more than 70 years.

County Bank of Merced, California, with deposits of $1.3 billion and assets of $1.7 billion, was shut yesterday by the state’s Department of Financial Institutions, according to an e-mailed statement from the Federal Deposit Insurance Corp.

The Georgia Department of Banking and Finance closed McDonough-based FirstBank Financial Services Inc., which had $337 million in assets and $279 million in deposits as of Dec. 31, the FDIC said in a statement. The California Department of Financial Institutions shut Culver City-based Alliance Bank, with assets of $1.14 billion and $951 million in deposits.

Regulators seized six banks in January, the largest monthly toll since 1993, including Salt Lake City-based MagnetBank, which the FDIC closed Jan. 30 after being unable to find a buyer. The FDIC shuttered 25 banks last year, matching the total for 2001 through 2007.

Congress also may extend the FDIC’s line of credit with the Treasury to $100 billion from $30 billion to replenish the deposit fund. The FDIC said bank failures through 2013 may cost the fund more than the $40 billion estimated in October.

The FDIC on Dec. 16 doubled premiums it charges banks to replenish its reserves, which totaled $34.6 billion as of the third quarter. The Washington-based agency oversees 8,384 institutions with $13.6 trillion in assets.

The FDIC and the Office of the Comptroller of the Currency have taken steps to stem failures, such as allowing private- equity firms and other bidders to buy assets and deposits of lenders running out of cash. IndyMac Bank, the fourth-largest U.S. lender to fail last year, was sold to a private-equity investor for $1.3 billion on Jan. 2. The sale was led by Steven Mnuchin of Dune Capital Management LP.

Washington Mutual Inc., the biggest savings and loan, was seized on Sept. 25 and its assets were sold to JPMorgan Chase & Co. after customers drained $16.7 billion in deposits in less than two weeks. Wachovia Corp. was near failure before being bought by Wells Fargo & Co. for $12.7 billion.

To contact the reporters on this story: Margaret Chadbourn in Washington at mchadbourn@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net.
Last Updated: February 7, 2009 00:00 EST

http://www.bloomberg.com/apps/news?pid=20601103&sid=aaLkBFzdzwmM&refer=news

***
World Growth Grinds to Virtual Halt, IMF Urges Decisive Global Policy Response: World growth is forecast to fall to its lowest level since World War II, with financial markets remaining under stress and the global economy taking a sharp turn for the worse, sending both global output and trade plummeting, the IMF said in its latest assessment of the world economy.

Last Updated: February 04, 2009
http://www.imf.org/external/np/exr/key/finstab.htm

***
World Economic Outlook Update
Global Economic Slump Challenges Policies

January 28, 2009
PDF version (533kb)

World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. A sustained economic recovery will not be possible until the financial sector’s functionality is restored and credit markets are unclogged. For this purpose, new policy initiatives are needed to produce credible loan loss recognition; sort financial companies according to their medium-run viability; and provide public support to viable institutions by injecting capital and carving out bad assets. Monetary and fiscal policies need to become even more supportive of aggregate demand and sustain this stance over the foreseeable future, while developing strategies to ensure long-term fiscal sustainability. Moreover, international cooperation will be critical in designing and implementing these policies.

The world economy is facing a deep downturn.
Financial markets remain under stress.

Financial market conditions have remained extremely difficult for a longer period than envisaged in the November 2008 WEO Update, despite wide-ranging policy measures to provide additional capital and reduce credit risks.1 Since end-October, in advanced economies, spreads in funding markets have only gradually narrowed despite government guarantees, and those in many credit markets remain close to their peaks. In emerging economies, despite some recent moderation, sovereign and corporate spreads are still elevated. As economic prospects have deteriorated, equity markets in both advanced and emerging economies have made little or no gains. Currency markets have been volatile.

Financial markets are expected to remain strained during 2009. In the advanced economies, market conditions will likely continue to be difficult until forceful policy actions are implemented to restructure the financial sector, resolve the uncertainty about losses, and break the adverse feedback loop with the slowing real economy. In emerging economies, financing conditions will likely remain acute for some time—especially for corporate sectors that have very high rollover requirements.

A pernicious feedback loop between the real and financial sectors is taking its toll.

Global output and trade plummeted in the final months of 2008 (Figure 2, view: Data Figure 2). The continuation of the financial crisis, as policies failed to dispel uncertainty, has caused asset values to fall sharply across advanced and emerging economies, decreasing household wealth and thereby putting downward pressure on consumer demand. In addition, the associated high level of uncertainty has prompted households and businesses to postpone expenditures, reducing demand for consumer and capital goods. At the same time, widespread disruptions in credit are constraining household spending and curtailing production and trade.

Advanced economies are suffering their deepest recession since World War II.

Against this uncertain backdrop, output in the advanced economies is now expected to contract by 2 percent in 2009. This would be the first annual contraction during the postwar period, with a cumulative output loss (relative to potential) comparable to the 1974-75 and 1980-82 periods (Figure 3, view: Data Figure 3). Nevertheless, assuming more comprehensive and coordinated financial policy actions that support a gradual normalization of financial market conditions, as well as sizable fiscal stimulus and large interest rate cuts in many advanced economies, output is expected to start recovering in late 2009 and rise by about 1 percent in 2010. Stabilization in the U.S. housing market should help underpin recovery during this period.

Anemic global growth has reversed the commodity price boom.

The slump in global demand has led to a collapse in commodity prices (Figure 4, view: Data Figure 4). Despite production cutbacks and geopolitical tensions, oil prices have declined by over 60 percent since their peak in July 2008, although they remain higher in real terms than during the 1990s. The IMF’s baseline petroleum price projection has been revised down to $50 a barrel for 2009 and $60 a barrel for 2010 (from $68 and $78, respectively, in the November WEO Update), and risks to this projection are on the downside. Metals and food prices have also been marked down in line with recent developments. These price declines have dampened growth prospects for a number of commodity-exporting economies.

Inflation pressures are subsiding.

Sluggish real activity and lower commodity prices have dampened inflation pressures (Figure 5, view: Data Figure 5). In the advanced economies, headline inflation is expected to decline from 3½ percent in 2008 to a record low ¼ percent in 2009, before edging up to ¾ percent in 2010. Moreover, some advanced economies are expected to experience a period of very low (or even negative) consumer price increases. In emerging and developing economies, inflation is also expected to subside to 5¾ percent in 2009 and 5 percent in 2010, down from 9½ percent in 2008.
Global monetary and fiscal policies are providing substantial support.

Faced with a quickly deteriorating outlook and subsiding inflation pressures, central banks in the advanced economies have taken strong actions to cut policy rates and improve credit provision. Policy interest rates have been brought down substantially in recent months, especially as inflation pressures subsided, although falling inflation expectations are mitigating the impact on real interest rates. Relative to the November WEO Update projections, short-term market interest rates in 2009 are assumed to be about ¾ percentage point lower in the United States, the euro area, and the United Kingdom, in line with market expectations. Central banks in emerging economies are also moving to ease their policy stance and improve market liquidity.

To combat the downturn, many governments have announced fiscal packages to boost their economies. Consequently, unlike the November WEO Update, the new projections incorporate a substantial fiscal expansion. Specifically, fiscal stimulus in G-20 countries in 2009 is projected to be 1.5 percent of GDP. Deficits are also expected to be boosted by the operation of automatic stabilizers and the impact on revenues of sharp asset price declines, as well as the costs of financial sector rescues. As a result, the fiscal balance in advanced economies is projected to deteriorate by 3¼ percentage points to -7 percent of GDP in 2009 (Figure 6, view: Data Figure 6).
The uncertainty surrounding the outlook is unusually large.

Downside risks continue to dominate, as the scale and scope of the current financial crisis have taken the global economy into uncharted waters. The main risk is that unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth. In addition, the risks of deflation are rising in a number of advanced economies, while emerging economies’ corporate sectors could be badly damaged by continued limited access to external financing.2 Furthermore, while fiscal policy is providing important short-term support, the sharp increase in the issuance of public debt could prompt an adverse market reaction, unless governments clarify their strategy to ensure long-term sustainability.

There are also upside risks. In particular, global financial conditions could improve faster than expected due to stronger policy actions. This could boost consumer and business confidence and alleviate the credit crunch, thereby lifting global growth.

Strong and complementary policy efforts are needed to rekindle activity.

Policy efforts so far have addressed the immediate threats to financial stability (through liquidity support, deposit insurance, and recapitalization schemes), but they have done little to resolve the uncertainty about the long-term solvency of financial institutions. The process of loss recognition and restructuring of bad loans is still incomplete. Therefore, financial sector policies should focus on advancing this process by forcing credible and coordinated loan loss recognition and by providing public support to the viable financial institutions. Such policies should be supported by measures to resolve insolvent banks and set up public agencies to dispose of the bad debts, including possibly through a “bad bank” approach, while safeguarding public resources.

Monetary policy remains an important policy lever. The projections incorporate a substantial easing in policy rates, although the effectiveness of interest rate cuts to support activity is likely to be constrained as long as financial conditions remain disrupted. With interest rates approaching zero in several major countries, central banks are exploring alternative policy approaches that rely on using their balance sheets to ease monetary conditions further. The focus should be on unlocking key (high-spread, low-liquidity) credit markets.

In current circumstances, the timely implementation of fiscal stimulus across a broad range of advanced and emerging economies must provide a key support to world growth.3 Given that the current projections are predicated on strong and coordinated policy actions, any delays will likely worsen growth prospects. Countries that have policy room should make a firm commitment to do more if the situation deteriorates further. Fiscal stimulus packages should rely primarily on temporary measures and be formulated within medium-term fiscal frameworks that ensure that the envisaged buildup in fiscal deficits can be reversed as economies recover and that fiscal sustainability can be attained in the face of demographic pressure. Countries that have more limited fiscal space should focus their efforts on supporting the financial sector and credit flows, while ensuring that budgets adjust to less favorable external conditions. However, it will be important to avoid cutbacks in foreign aid in response to tightening budget constraints, lest hard-won economic gains in developing countries are lost.

Table 1.1. Overview of the World Economic Outlook Projections
(Percent change, unless otherwise noted)

Year over Year                             Q4 over Q4

Difference from November
Projections           2008 WEO Projections     Estimates     Projections
2007     2008    2009 2010           2009     2010     2008     2009     2010

World output1
5.2     3.4     0.5     3.0                -1.7     -0.8     1.1     1.2     3.4

Advanced economies
2.7     1.0     -2.0     1.1                -1.7     -0.5     -1.1     -0.5     1.6

United States
2.0     1.1     -1.6     1.6                -0.9     0.1     -0.7     —     2.0

Euro area
2.6     1.0     -2.0     0.2                -1.5     -0.7     -0.7     -1.4     0.9

Germany
2.5     1.3     -2.5     0.1                 -1.7     -0.4     -1.2     -1.0     0.4

France
2.2     0.8     -1.9     0.7                -1.4     -0.8     -0.5     -1.8     2.2

Italy
1.5     -0.6     -2.1     -0.1               -1.5     -0.1     -1.5     -1.3     0.8

Spain
3.7     1.2     -1.7     -0.1                -1.0     -0.9     -0.4     -1.5     0.5

Japan
2.4     -0.3     -2.6     0.6               -2.4     -0.5     -3.0     -0.2     0.8

United Kingdom
3.0     0.7     -2.8     0.2                -1.5     -0.9     -1.8     -1.5     0.8

Canada
2.7     0.6     -1.2     1.6                -1.5     -1.4     -0.4     -0.4     2.0

Other advanced economies
4.6     1.9     -2.4     2.2                -3.9     -1.0     -1.6     0.1     2.7

Newly industrialized
Asian economies
5.6     2.1     -3.9     3.1                -6.0     -1.1     -3.4     0.6     3.3

Emerging and developing economies2
8.3     6.3     3.3     5.0                -1.8     -1.2     4.5     3.5     5.8

Africa
6.2     5.2     3.4     4.9                 -1.4     -0.5     …     …     …

Sub-Sahara
6.9     5.4     3.5     5.0                 -1.6     -0.7     …     …     …

Central and eastern Europe
5.4     3.2     -0.4     2.5                -2.6     -1.3     …     …     …

Commonwealth of Independent States
8.6     6.0     -0.4     2.2                 -3.6     -2.3     …     …     …

Russia
8.1     6.2     -0.7     1.3                 -4.2     -3.2     2.7     -1.3     1.9

Excluding Russia
9.7     5.4     0.3     4.4                  -1.3     -0.3     …     …     …

Developing Asia
10.6     7.8     5.5     6.9                -1.6     -1.1     …     …     …

China
13.0     9.0     6.7     8.0                -1.8     -1.5     6.8     7.5     8.1

India
9.3     7.3     5.1     6.5                   -1.2     -0.3     5.1     5.3     7.1

ASEAN-5
6.3     5.4     2.7     4.1                   -1.5     -1.3     4.1     3.1     4.5

Middle East
6.4     6.1     3.9     4.7                  -1.5     -0.6     …     …     …

Western Hemisphere
5.7     4.6     1.1     3.0                  -1.4     -1.0     …     …     …

Brazil
5.7     5.8     1.8     3.5                  -1.2     -1.0     4.3     2.2     4.2

Mexico
3.2     1.8     -0.3     2.1                 -1.2     -1.4     —     0.2     3.3

Memorandum

European Union
3.1     1.3     -1.8     0.5                 -1.6     -0.8     …     …     …

World growth based on market exchange rates
3.8     2.2     -0.6     2.1                -1.7     -0.7     …     …     …

World trade volume (goods and services)
7.2     4.1     -2.8     3.2                -4.8     -2.5     …     …     …

Imports

Advanced economies
4.5     1.5     -3.1     1.9                -3.0     -1.8     …     …     …

Emerging and developing economies
14.5     10.4     -2.2     5.8           -7.0     -3.6     …     …     …

Exports

Advanced economies
5.9     3.1     -3.7     2.1                 -5.0     -1.8     …     …     …

Emerging and developing economies
9.6     5.6     -0.8     5.4                -5.8     -3.5     …     …     …

Commodity prices (U.S. dollars)

Oil3
10.7     36.4     -48.5     20.0           -16.7     9.7     …     …     …

Nonfuel (average based on world commodity export weights)
14.1     7.4     -29.1     7.3                  -10.4     6.3     …     …     …

Consumer prices

Advanced economies
2.1     3.5     0.3     0.8                   -1.1     -0.8     2.6     0.3     0.9

Emerging and developing economies2
6.4     9.2     5.8     5.0                  -1.3     -0.5     7.6     4.7     4.2

London interbank offered rate (percent)4

On U.S. dollar deposits
5.3     3.0     1.3     2.9                -0.7     -1.4     …     …     …

On euro deposits
4.3     4.6     2.2     2.7                -0.8     -0.8     …     …     …

On Japanese yen deposits
0.9     1.0     1.0     0.4                  —     -0.3     …     …     …

Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during December 08, 2008-January 05, 2009. Country weights used to construct aggregate growth rates for groups of countries were revised.

1The quarterly estimates and projections account for 90 percent of the world purchasing-power-parity weights.

2The quarterly estimates and projections account for approximately 76 percent of the emerging and developing economies.

3Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dollars a barrel was $97.03 in 2008; the assumed price based on future markets is $50.00 in 2009 and $60.00 in 2010.

4Six-month rate for the United States and Japan. Three-month rate for the euro area.

1 See the January 2009 Global Financial Stability Report—Market Update.

2 See Gauging Risks for Deflation, IMF Staff Position Note (SPN/09/01)

3 See Fiscal Policy for the Crisis, IMF Staff Position Note (SPN/08/01)

http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm

***
http://www.imf.org/external/datamapper/index.php?db=BOP

IMF Data Mapper – with balance of payments info charted
The current account of the balance of payments covers all transactions (other than those in capital and financial items) that involve economic values and occur between resident and nonresident entities.  Also covered are offsets to current economic values provided or acquired without a quid pro quo.  Included are goods, services, income, and current transfers.
The balance on goods, services, income, and current transfers is commonly referred to as the “current account balance”.

Send comments about the IMF Datamapper to –
StatisticsQuery@imf.org <StatisticsQuery@imf.org>
United States                                  -731.21   Billion dollars
United Kingdom                             -119.16
France                                                -31.25
Russian Federation                           +76.24
Japan                                               + 210.49
China                                               + 371.83

Balance of Payments (Disparities) – 2007 IMF

***
The word nationalization calls to mind banks owned and run by the government in perpetuity, as with China’s largest banks. In Western economies, however, nationalization more often resembles detox. The government takes control, scrubs away problems and returns the company to private ownership.

Countries including the United States have a long history of temporarily nationalizing large, troubled banks. Smaller banks that get into trouble can be absorbed by healthy companies, but the largest banks often can be absorbed only by the government itself.

The most recent domestic example was the July nationalization of IndyMac Bancorp, a California mortgage lender. The company was seized and run by the Federal Deposit Insurance Corp. for about six months before the government sold the company to private owners last month. John Bovenzi, the FDIC’s chief operating officer, served as chief executive.

But IndyMac is an example of a company that needed to be seized. The nationalization now envisioned by proponents, including lawmakers and economists, would involve companies that could remain private, at least for now.

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/07/AR2009020702074.html

***

All governments need to act. Measures to clean up the banks and revive the housing market in the United States are an important part of the solution, and are needed urgently. But they are no longer enough.

This is because the crisis is now much broader, and it is having profound effects on both advanced and emerging economies. Consider what is happening here in Asia. Every day we hear dire news about exports and industrial production—mirroring the remarkable collapse in global trade and industrial activity.

{ . . . }

It is now widely recognized that financial market regulation has to change. Given the globalization of financial markets, we will also need greater international coordination, and all countries—especially those with growing financial centers—must play their part in that.

The IMF has a special role in this process, because of its expertise in assessing the linkages between financial sector and financial market rules and macroeconomic outcomes. This perspective is critical for designing regulatory frameworks and conducting oversight.

http://www.imf.org/external/np/speeches/2009/020709.htm

Speech By Dominique Strauss-Kahn, Managing Director of the International Monetary Fund
At the 44th SEACEN Governors’ Conference
Kuala Lumpur, Malaysia, February 7, 2009

***

A Window Into the Wall Street Frauds
February 6, 2009 10:06AM
Inside Wall Street’s Subprime Bond Factory
By Elizabeth MacDonald

Third in the Crackdown on Wall Street series

(Excerpt – )

After an Evanston, Illinois hedge fund called Magnetar pushed Merrill to set up “a tailor-made bet on subprime mortgages,” Merrill cooked up a CDO deal and nicknamed it “Norma,” according to an important but overlooked Wall Street Journal article by Carrick Mollenkamp and Serena Ng on December 27, 2007.

Norma was pushed onto investors as a Triple-A rated, diversified investment with yields of 10% or more, the Journal says. Moody’s, Standard & Poor’s and Fitch Ratings all gave Norma their highest, triple-A rating–implying it had as little risk as Treasury bonds of the U.S. government.

It Was Anything But Safe

Within eight months of selling $1.5 bn in bonds to investors, Norma dropped to a fraction of its original value, the Journal says. Credit-rating firms, “which had signed off approvingly on the CDO, slashed its ratings to junk,” the paper says.

http://emac.blogs.foxbusiness.com/2009/02/06/inside-wall-streets-subprime-bond-factory/

***

The Collapse of Wall Street Was Just Beginning

After reporting record losses in the fall of 2007, Merrill Lynch ousted its chief executive E. Stanley O’Neal and other top executives.

Norma’s CDO creator Margolis by that time was already gone, the Journal says.

Merrill Lynch, near collapse after more than $45 bn in writedowns and losses in a year’s time, was taken over in a shotgun wedding with Bank of America in September 2008.

A deal made under pressure from the US government–with the help of $20 bn in taxpayer money to get BofA’s CEO Kenneth Lewis to pay for the $20 bn deal price for Merrill.

BofA also got $118 bn in government guarantees on its bad assets, after Lewis threatened to walk away in December of 2008. — with reporting by Cristine Ambrose

http://emac.blogs.foxbusiness.com/2009/02/06/inside-wall-streets-subprime-bond-factory/

***

The Independent Evaluation Office (IEO) was established in 2001 to conduct independent and objective evaluations of Fund policies and activities. Under its Terms of References, it is fully independent from the Management of the IMF and operates at arm’s length from the Board of Executive Directors.

The IEO’s mission is to

* enhance the learning culture within the Fund,
* strengthen the Fund’s external credibility,
* promote greater understanding of the work of the Fund, and
* support institutional governance and oversight.

http://www.ieo-imf.org/

Give us your views
Your opinion is important to us.

We are constantly considering topics for future evaluations. We are also very grateful for any comments or suggestions that you might have regarding past or ongoing evaluations. Please
send your feedback to feedback@ieo-imf.org

Learn more about Ongoing Evaluations.

***

Work with us
Consultants, we want you

We’re always looking for talented consultants who can contribute to our evaluations. There are a variety of options to work for the IEO as a consultant, including long-term and short-term as well as on-site and from your home office. If you are interested, please send your CV and areas of interest to employment@ieo-imf.org

Learn more about Working for IEO.

August 5, 2008

The IEO has posted a menu of Possible Topics for Evaluation over the Medium Term (PDF). In this note, IEO presents a deliberately broad list, which reflects the many suggestions received from outside stakeholders as well as IMF Executive Directors, Management, and staff. Additions to its work program will be finalized in early fall. Any comments and further suggestions would be greatly appreciated and can be sent to feedback@ieo-imf.org by September 12, 2008.

***
Home > Links
Links
Evaluation in International Financial Institutions

Evaluation Cooperation Group (ECG)

The World Bank Group’s Independent Evaluation Group (IEG)

The Asian Development Bank’s Operations Evaluation Department (OED)

European Bank for Reconstruction and Development (EBRD) : Project Evaluation Department (PED)

Islamic Development Bank (IsDB) : The Operations Evaluation & Audit Office (OEO)

African Development Bank’s Operations Evaluation Department

European Investment Bank’s Operation Evaluation

Inter-American Development Bank’s Office of Evaluation and Oversight (OVE)

Evaluation in Other International Organizations

International Fund for Agricultural Development (IFAD) : The Office of Evaluation

International Labour Organization (ILO) :The Evaluation Unit

The Development Assistance Committee (DAC) network on aid evaluation

United Nations Development Programme (UNDP): The Evaluation Office (EO)

United Nations Educational, Scientific and Cultural Organization (UNESCO), The Internal Oversight Service (IOS)

United Nations Population Fund (UNFPA) : The Office of Oversight and Evaluation

Global Environment Facility (GEF): Monitoring and Evaluation Unit

EuropeAid Co-operation Office : The Evaluation Unit

Council of Europe Development Bank Ex Post Evaluation
http://www.ieo-imf.org/evalres/

***

http://www.ieo-imf.org/pub/speech/warsaw_speech.pdf

October 27, 2008

Transcript of IEO Director Tom Bernes’ speech on Evaluation, Learning, and Accountability: The IMF in a Time of Global Crisis

1. Good morning.
It’s a great honor to be here with such a distinguished group of evaluators.
I also would like to sincerely thank the Polish Ministry of Regional Development and the Polish Agency for Enterprise Development for the opportunity to join you today at this important conference on “The Role of Evaluation in the Identification of Opportunities and Threats to Development”.

2. My topic today is evaluation, learning, and accountability at the International Monetary Fund.
On the face of it, a rather dry topic that may seem distant from today’s proceedings.
But one that takes on far greater interest considering the power and influence the institution is often seen to wield, which also magnifies the importance of its carrying out its activities in a professional and fully-accountable manner.
Nothing demonstrates this importance more clearly than the dramatic events of the past few weeks, with the rapid unfolding of the global financial crisis—and I will use the example of the Fund’s role in the crisis to illustrate my main points today.
To be useful, evaluation must result in learning. But to do so, I will argue, there also must be accountability—without accountability there is unlikely to be learning. So the three—evaluation, learning and accountability—are inextricably linked.

3. Last weekend in Washington, the world’s financial and economic leaders gathered for the IMF/World Bank Annual Meetings. As financial markets around the world plunged, they put their heads together to focus on the crisis—and the scope for coordinated action to address it.
These are developments of enormous proportions. Given its scale, the crisis itself and the attendant spread of recession around the world will shape the global landscape and adversely affect the lives of billions of people around the world for years to come.
They provide a compelling test of the effectiveness of evaluation with respect to the adequacy of learning from it (especially as reflected in management follow-up actions), and accountability for any identified lapses.

4. Against this background, I will organize my remarks this afternoon under five broad headings.
First, I will provide background on the IMF.
Second, I also will provide background on the IEO, including some of the IEO’s completed evaluations to date.
Third, I will say a few things about the financial crisis, and the Fund’s role and involvement in crisis management.
Fourth, I will set out what I see as the take-away lessons learned for the effectiveness of evaluation—both for Fund Management and for the IEO.
Fifth, I will draw a few conclusions about the role of evaluation in the identification of opportunities and threats to development, the overarching theme of the conference.

Starting first with some background on the IMF

5. I begin with a few key points about the Fund—its genesis, rationale, and recent evolution—to provide the context for the points I want to make:
As many of you know, the IMF was created at the end of World War II to avoid the beggar-thy-neighbor policies and currency devaluations that had contributed to the Great Depression and its spread around the world. Concerns about international policy spillovers remain the Fund’s central raison d’être.
Of course, the specifics have changed over time—especially since the breakdown of the Bretton Woods system of fixed exchange rates in the early 1970s. Since then, the Fund’s mandate for bilateral and multilateral surveillance has broadened to the wider set of monetary, fiscal, and other policies that determine exchange rate levels.
These changes put the global financial crisis squarely in the Fund’s bailiwick—de jure if not fully de facto—a central theme to which I shall return momentarily.

.}{1    6. But first, a brief look at what was happening (or not) on evaluation during this period. Actually, as the Fund evolved over its first 50 years, there was little discussion of an evaluation function, even after the World Bank launched its evaluation office in the 1970s and subsequently pursued a very ambitious evaluation agenda, as did many national governments.
.}{2    Yes—research on key policy and implementation issues was undertaken. Also, there was some self-evaluation of Fund lending programs, carried out by the Fund’s policy department. Combined with widespread perceptions about the Fund’s effectiveness among major shareholders, these efforts were sufficient to keep at bay suggestions that the Fund follow in others’ footsteps along the evaluation path. So, the answer remained no to independent evaluation, at least on a resident basis.
But confidence in the Fund began to wane in the mid-1990s. Concerns arose about its work with several important member groupings. First was its perceived neglect of institutional issues—especially problematic in the context of conditionality on privatization—for example in the Former Soviet Union. Second were long-simmering worries about its effectiveness in Sub-Saharan African and other low-income countries that were looked at anew as other performance weaknesses surfaced. And third was its handling—or mishandling, as Fund critics would have it—of the East Asian Crisis and its subsequent spread to Brazil, Russia, and elsewhere.

Indeed, it was in these crises that the problems were the most central to the institution’s core mandate on international financial stability—and the most relevant to my remarks today. There, the Fund was criticized for its surveillance work before the crisis in not identifying the problems that ultimately sparked it, particularly in Korea, and later in Indonesia. It was also criticized for its program work during/after the crisis, where its stabilization prescriptions did little to fix what was ailing the economy and some have argued, worsened the situation.
As confidence in the Fund eroded, the Fund’s Executive Board launched a series of high-profile external evaluations, my second topic…

7. The most germane to my remarks today is the External Evaluation of IMF Surveillance, issued some ten years ago. Better known as the Crow Report, its most important recommendations remain highly relevant—and prescient—in light of today’s troubles. Addressing the potential for large adverse spillovers to other countries, the report set out what in today’s parlance might be characterized as a “risk-based surveillance strategy”, urging the Fund to focus its efforts and resources on:
the most systemically important countries;
the international aspects of the systemically important countries’ policies;
and the financial sector/macroeconomic policy interface of the systemically important countries’ policies.

Clearly these are the big-ticket risks. The massive sums we have been hearing about in respect to the costs of the current crisis drive home the wisdom of concentrating resources and Management focus on such risks. Quite frankly, if the Fund doesn’t get these right, it won’t be in a position to help very much with the others.

8. Reflecting the Board’s appreciation of the Crow Report, and the other external evaluations, the Independent Evaluation Office was created in 2001, principally to enhance transparency, contribute to learning, and support institutional oversight and accountability. Fourteen major evaluations have now been completed. I will say a few words on three in

particular that deal quite centrally with systemic risks caused by spillover effects from one economy and financial sector to another.

***

http://www.imf.org/external/country/USA/index.htm

***

• Fourth, going forward, we in the IEO need to be even more pointed in challenging Management’s and staff’s evenhandedness in dealing with members and shareholders—as these have proved to be the institution’s Achilles heel in pursuing its mission of global stability. In retrospect, perhaps we should have pushed more on the FSAP issue, when the U.S. declined to “volunteer” for an assessment and the issue was not pursued vigorously. Similarly, on governance, perhaps we should examine more the institution’s ability to “speak truth to power”, and highlight the risks of not doing so, when the members that pose the greatest systemic risk are also the largest shareholders.

• Finally, both the IMF and the IEO must be bolder in identifying and highlighting downside risks. The Fund in the context of surveillance related assessments, such as the FSAP. The IEO in highlighting Management and staff failures to follow-up on evaluation recommendations. In many ways, this was the greater truth of the Crow Report ten years ago. It remains equally valid today.

In conclusion—and stepping back—what (if anything) might we infer from my remarks about the IMF and the IEO for the theme of this conference—the role of evaluation in identifying opportunities and threats to development…?

17. First, my reading of the IMF-IEO experience is that evaluation clearly has an important role in identifying opportunities and threats to the IMF’s ability to carry out of its mission. In the example of the financial crisis that I used, evaluation clearly identified the need for enhancing the Fund’s macro-financial sector links; it clearly identified the FSAP loophole as a major issue; and it clearly identified the need for much greater connectivity

between bilateral and multilateral surveillance. The problem is that little happened after the problems were identified.
18. Second, this is not unusual, as identification alone is almost never enough. Lack of knowledge is seldom the impediment to change. On rare occasions, we may have a eureka moment of discovery, unlocking the door to effective action. But this is not the norm. More often, things are the way they are not out of ignorance, but because someone wants them that way or simply doesn’t have the energy to change. This is why the IEO’s evaluations have increasingly sought to identify the drivers/non-drivers within the Fund—that is, the Board, Management and staff—and to spell out the incentives and other factors that are creating the identified problem(s).
October 27, 2008

Transcript of IEO Director Tom Bernes’ speech on Evaluation, Learning, and Accountability: The IMF in a Time of Global Crisis

http://www.ieo-imf.org/pub/speech/warsaw_speech.pdf

US economic crisis – Global economic crisis based in credit derivatives – gambling by Wall Street – by Banks – by Hedge Funds – by The Rich Upper Class – by Traders – by Ratings Agencies

Tags

bailouts, banking, bonds, Capitalism, cash, CDO, CDS, commercial paper, commodities, consumer based economy, consumerism, corruption, corruption and abuse of power, corruption in US government, counterfeit currency, counterfeit securities, credit crunch crisis, credit default swaps, credit derivatives, Cricket Diane C Sparky Phillips, cricketdiane, currencies, currency values, Economics, Economy, Federal Reserve, financial derivatives, free market economy, global economic crisis, Global Economy, government bailout of credit default swaps, government bailout of Wall Street, International Concerns, investment banking, investment banking bailouts, Macro-economic analysis 2008, macro-economic future forecasting, Money, mortgage backed securities, non-collateralized credit, Office of Thrift Supervision, principles of economic, securities, Securities and Exchange Commission, stock market, stocks, unsecured loans credit, US Congress, US dollar, US economic crisis, US Government, US government bailout, US government policy, US Treasury, Wall Street

Also, stock index futures and options are known as derivative products because they derive their existence from actual market indices, but have no intrinsic characteristics of their own. In addition to that, one of the reasons some believe they lead to greater market volatility is that huge amounts of securities can be controlled by relatively small amounts of margin or option premiums. One reason derivatives are popular is that they can be transacted off-balance-sheet.

http://en.wikipedia.org/wiki/Derivative_security

Derivatives are financial instruments whose values depend on the value of other underlying financial instruments. The main types of derivatives are futures, forwards, options and swaps.

The main use of derivatives is to reduce risk for one party. The diverse range of potential underlying assets and pay-off alternatives leads to a wide range of derivatives contracts available to be traded in the market. Derivatives can be based on different types of assets such as commodities, equities (stocks), residential mortgages, commercial real estate loans, bonds, interest rates, exchange rates,

**or indices (such as a stock market index, consumer price index (CPI) — see inflation derivatives — or even an index of weather conditions, or other derivatives). Their performance can determine both the amount and the timing of the pay-offs. Credit derivatives have become an increasingly large part of the derivative market.

***

A bank may have substantial sums in off-balance sheet accounts, and the distinction between these accounts may not seem obvious. For example, when a bank has a customer who deposits $1 million in a regular bank deposit account, the bank has a $1 million liability. If the customer chooses to transfer the deposit to a money market mutual fund account sponsored by the same bank, the $1 million would not be a liability of the bank, but an amount held in trust for the client (formally as shares or units in a form of collective fund). If the funds are used to purchase stock, the stock is similarly not owned by the bank, and do not appear as an asset or liability of the bank. If the client subsequently sells the stock and deposits the proceeds in a regular bank account, these would now again appear as a liability of the bank (although the same funds held in a brokerage account may or may not be off-balance sheet). However, it’s been argued that the contrary is also feasible.

http://en.wikipedia.org/wiki/Off-balance-sheet

Off balance sheet (OBS) usually means an asset or debt or financing activity not on the company’s balance sheet. It could involve a lease or a separate subsidiary or a contingent liability such as a letter of credit. It also involves loan commitments, futures, forwards and other derivatives except such derivatives pertaining to equity securities, ESOP, or phantom stock, which usually must be held as reserves in the Long Term Debt section of a Balance Sheet (See Also Backdating Options), when-issued securities (famous in the US)^[clarify] and loans sold.

***

Financial instruments can be categorized by form depending on whether they are cash instruments or derivative instruments:

• Cash instruments are financial instruments whose value is determined directly by markets. They can be divided into securities, which are readily transferable, and other cash instruments such as loans and deposits, where both borrower and lender have to agree on a transfer.
• Derivative instruments are financial instruments which derive their value from the value and characteristics of one or more underlying assets. They can be divided into exchange-traded derivatives and over-the-counter (OTC) derivatives.

Alternatively, financial instruments can be categorized by “asset class” depending on whether they are equity based (reflecting ownership of the issuing entity) or debt based (reflecting a loan the investor has made to the issuing entity). If it is debt, it can be further categorised into short term (less than one year) or long term.

Foreign Exchange instruments and transactions are neither debt nor equity based and belong in their own category.

http://en.wikipedia.org/wiki/Financial_instrument

* See chart on this page – very good

Some instruments defy categorization into the above matrix, for example repurchase agreements.

***

OTC and exchange-traded

Broadly speaking there are two distinct groups of derivative contracts, which are distinguished by the way they are traded in market:

• Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, and exotic options are almost always traded in this way. The OTC derivative market is the largest market for derivatives, and is unregulated. According to the Bank for International Settlements, the total outstanding notional amount is $596 trillion (as of December 2007)^[1]. Of this total notional amount, 66% are interest rate contracts, 10% are credit default swaps (CDS), 9% are foreign exchange contracts, 2% are commodity contracts, 1% are equity contracts, and 12% are other. OTC derivatives are largely subject to counterparty risk, as the validity of a contract depends on the counterparty’s solvency and ability to honor its obligations.

• Exchange-traded derivatives (ETD) are those derivatives products that are traded via specialized derivatives exchanges or other exchanges. A derivatives exchange acts as an intermediary to all related transactions, and takes Initial margin from both sides of the trade to act as a guarantee. The world’s largest^[2] derivatives exchanges (by number of transactions) are the Korea Exchange (which lists KOSPI Index Futures & Options), Eurex (which lists a wide range of European products such as interest rate & index products), and CME Group (made up of the 2007 merger of the Chicago Mercantile Exchange and the Chicago Board of Trade and the 2008 acquisition of the New York Mercantile Exchange). According to BIS, the combined turnover in the world’s derivatives exchanges totalled USD 344 trillion during Q4 2005. Some types of derivative instruments also may trade on traditional exchanges. For instance, hybrid instruments such as convertible bonds and/or convertible preferred may be listed on stock or bond exchanges. Also, warrants (or “rights”) may be listed on equity exchanges. Performance Rights, Cash xPRTs and various other instruments that essentially consist of a complex set of options bundled into a simple package are routinely listed on equity exchanges. Like other derivatives, these publicly traded derivatives provide investors access to risk/reward and volatility characteristics that, while related to an underlying commodity, nonetheless are distinctive.

Common derivative contract types

There are three major classes of derivatives:

1. Futures/Forwards, which are contracts to buy or sell an asset at a specified future date.
2. Options, which are contracts that give a holder the right to buy or sell an asset at a specified future date.
3. Swappings, where the two parties agree to exchange cash flows or returns.

http://en.wikipedia.org/wiki/Derivative_(finance)#OTC_and_exchange-traded

***

CME Group

From Wikipedia, the free encyclopedia

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CME Group Inc.

Type	Public
Headquarters	Chicago, IL, USA
Key people	Craig S. Donohue
Industry	Security & Commodity Exchanges
Market cap	19.7 billion USD[1]
Employees	1970[1]
Website	www.cme.com

CME Group Inc. (NASDAQ: CME) is the world’s largest futures exchange. CME Group was created July 12, 2007 from the merger between the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT). On March 17, 2008, it announced its acquisition of NYMEX Holdings, Inc., parent company of the New York Mercantile Exchange, which was formally completed on August 22, 2008.[1]

http://en.wikipedia.org/wiki/CME_Group

***

Other examples of underlying exchangeables are:

• Property (mortgage) derivatives
• Economic derivatives that pay off according to economic reports ([1]) as measured and reported by national statistical agencies
• Energy derivatives that pay off according to a wide variety of indexed energy prices. Usually classified as either physical or financial, where physical means the contract includes actual delivery of the underlying energy commodity (oil, gas, power, etc.)
• Commodities
• Freight derivatives
• Inflation derivatives
• Insurance derivatives^{[citation needed]}
• Weather derivatives
• Credit derivatives

http://en.wikipedia.org/wiki/Derivative_(finance)#OTC_and_exchange-traded

Cash flow

The payments between the parties may be determined by:

• the price of some other, independently traded asset in the future (e.g., a common stock);
• the level of an independently determined index (e.g., a stock market index or heating-degree-days);
• the occurrence of some well-specified event (e.g., a company defaulting);
• an interest rate;
• an exchange rate;
• or some other factor.

Some derivatives are the right to buy or sell the underlying security or commodity at some point in the future for a predetermined price. If the price of the underlying security or commodity moves into the right direction, the owner of the derivative makes money; otherwise, they lose money or the derivative becomes worthless. Depending on the terms of the contract, the potential gain or loss on a derivative can be much higher than if they had traded the underlying security or commodity directly.

***

VALUATION –

Market and arbitrage-free prices

Two common measures of value are:

• Market price, i.e. the price at which traders are willing to buy or sell the contract
• Arbitrage-free price, meaning that no risk-free profits can be made by trading in these contracts; see rational pricing

http://en.wikipedia.org/wiki/Derivative_(finance)#OTC_and_exchange-traded

***

Criticisms

Derivatives are often subject to the following criticisms:

Possible large losses

See also: List of trading losses

The use of derivatives can result in large losses due to the use of leverage, or borrowing. Derivatives allow investors to earn large returns from small movements in the underlying asset’s price. However, investors could lose large amounts if the price of the underlying moves against them significantly. There have been several instances of massive losses in derivative markets, such as:

• The need to recapitalize insurer American International Group (AIG) with $85 billion of debt provided by the US federal government^[3]. An AIG subsidiary had lost more than $18 billion over the preceding three quarters on Credit Default Swaps (CDS) it had written.^[4] It was reported that the recapitalization was necessary because further losses were foreseeable over the next few quarters.
• The loss of $7.2 Billion by Société Générale in January 2008 through mis-use of futures contracts.
• The loss of US$6.4 billion in the failed fund Amaranth Advisors, which was long natural gas in September 2006 when the price plummeted.
• The bankruptcy of Long-Term Capital Management in 2000.
• The bankruptcy of Orange County, CA in 1994, the largest municipal bankruptcy in U.S. history. On December 6, 1994, Orange County declared Chapter 9 bankruptcy, from which it emerged in June 1995. The county lost about $1.6 billion through derivatives trading. Orange County was neither bankrupt nor insolvent at the time; however, because of the strategy the county employed it was unable to generate the cash flows needed to maintain services. Orange County is a good example of what happens when derivatives are used incorrectly and positions liquidated in an unplanned manner; had they not liquidated they would not have lost any money as their positions rebounded.^{[citation needed]} Potentially problematic use of interest-rate derivatives by US municipalities has continued in recent years. See, for example:^[5]
• The Nick Leeson affair in 1994

Counter-party risk

Derivatives (especially swaps) expose investors to counter-party risk.

[ Etc. ]

http://en.wikipedia.org/wiki/Derivative_(finance)#OTC_and_exchange-traded

***

http://en.wikipedia.org/wiki/Derivative_(finance)#Common_derivative_contract_types

Common derivative contract types

***

Here’s an interesting perspective in light of reality that we know today –

“Remember the bankruptcy of Orange County, California, and the Barings Bank due to poor investments in financial derivatives? At that time many policymakers feared more collapsed banks, counties, and countries. Those fears proved unfounded; prudent use, not government regulation, of derivatives headed off further problems. Now, however, the Financial Accounting Standards Board, the Federal Reserve, and the Securities and Exchange Commission are debating the merits of new rules for derivatives. But before adopting regulations, policymakers need to separate myths about those financial instruments from reality.”

10 Myths About Financial Derivatives

by Thomas F. Siems

Thomas F. Siems is a senior economist and policy adviser at the Federal Reserve Bank of Dallas. The views expressed here are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of Dallas or the Federal Reserve System.

Cato Institute
1000 Massachusetts Ave, NW
Washington DC 20001-5403
Phone (202) 842-0200
Fax (202) 842-3490
Contact Us

Also in this text:

“Most financial derivatives traded today are the “plain vanilla” variety–the simplest form of a financial instrument. But variants on the basic structures have given way to more sophisticated and complex financial derivatives that are much more difficult to measure, manage, and understand. For those instruments, the measurement and control of risks can be far more complicated, creating the increased possibility of unforeseen losses.” – Thomas F. Siems

http://www.cato.org/pubs/pas/pa-283.html

The largest appeal of derivatives is that they offer some degree of leverage. Leverage is a financial term that refers to the multiplication that happens when a small amount of money is used to control an item of much larger value. A mortgage is the most common form of leverage. For a small amount of money and taking on the obligation of a mortgage, a person gains control of a property of much larger value than the small amount of money that has exchanged hands.

Derivatives offer the same sort of leverage or multiplication as a mortgage. For a small amount of money, the investor can control a much larger value of company stock then would be possible without use of derivatives. This can work both ways, though. If the investor purchasing the derivative is correct, then more money can be made than if the investment had been made directly into the company itself. However, if the investor is wrong, the losses are multiplied instead.

http://www.wisegeek.com/what-are-financial-derivatives.htm

Derivatives made the news in 1995 when rogue trader Nick Leeson single-handedly caused the failure of the Barings bank of England. Nick Leeson was a derivatives trader whose trades did not work out, and due to the enormous leverage of the trades used, the losses became so large that the bank was bankrupt when the results of his trades become due. Warren Buffet, a much revered and very successful investor, has stated in one of his annual reports that he is very much against the use of derivatives and he expects that they will lead to eventual failure for anyone who uses them. In spite of all this negative press, derivatives have long been a normal part of business and investing and are likely to be so for many more years.

***

Unlike Warren Buffet, Sir Julian Hodge, the Welsh banker, issued his apocalyptic warning three years before the first rash of derivatives disasters involving Metallgesellschaft, Orange County, Sears Roebuck, Proctor & Gamble, happened in 1994. More was to come in 1995 in the form of the Daiwa and Barings scandals. None of those on their own, however, threatened to bring the world financial system to its knees. Until recently the crisis that came closest to doing so involved LTCM in September 1998. Nearly 10 years later, in March 2008, the FED took emergency action to avoid what was called derivatives Chernobyl. That action seems to have worked … so far, but could a mega-catastrophe lie around the corner …?

http://projects.exeter.ac.uk/RDavies/arian/scandals/derivatives.html

Derivatives and Speculation

The job of a derivatives trader is like that of a bookie once removed, taking bets on people making bets.

The description above comes from In Into the Fire a novel about fraudulent trading in derivatives (now out in a new edition), by Linda Davies. Why on earth should anyone want to be a bookie once removed? The answer was given 63 years earlier by John Maynard Keynes in his best-known work.

Keynes on Speculation

“Professional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not the faces which he himself finds the prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view.”

“It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree when we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practise the fourth, fifth and higher degrees.”

Keynes, John Maynard The general theory of employment, interest and money. London : Macmillan, St. Martin’s Press, 1936. page 156.

http://projects.exeter.ac.uk/RDavies/arian/scandals/derivatives.html

***

Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Because derivatives are just contracts, just about anything can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a particular region.

Derivatives are generally used to hedge risk, but can also be used for speculative purposes. For example, a European investor purchasing shares of an American company off of an American exchange (using American dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into euros.

http://www.investopedia.com/terms/d/derivative.asp

Introduction To Weather Derivatives
by Felix Carabello,Associate Director, Environmental Products, Chicago Mercantile Exchange (Contact Author | Biography)

Even in our advanced, technology-based society, we still live largely at the mercy of the weather. It influences our daily lives and choices, and has an enormous impact on corporate revenues and earnings. Until recently, there were very few financial tools offering companies’ protection against weather-related risks. However, the inception of the weather derivative – by making weather a tradeable commodity – has changed all this. Here we look at how the weather derivative was created, how it differs from insurance and how it works as a financial instrument.

http://www.investopedia.com/articles/optioninvestor/05/052505.asp

Temperature as a Commodity

Until recently, insurance has been the main tool used by companies’ for protection against unexpected weather conditions. But insurance provides protection only against catastrophic damage. Insurance does nothing to protect against the reduced demand that businesses experience as a result of weather that is warmer or colder than expected.

In the late 1990s, people began to realize that if they quantified and indexed weather in terms of monthly or seasonal average temperatures, and attached a dollar amount to each index value, they could in a sense “package” and trade weather. In fact, this sort of trading would be comparable to trading the varying values of stock indices, currencies, interest rates and agricultural commodities. The concept of weather as a tradeable commodity, therefore, began to take shape.

[ . . . ]

In 1997 the first over-the-counter (OTC) weather derivative trade took place, and the field of weather risk management was born. According to Valerie Cooper, former executive director of the Weather Risk Management Association, an $8 billion weather-derivatives industry developed within a few years of its inception.

CME Weather Futures and Options on Futures

In 1999, the Chicago Mercantile Exchange (CME) took weather derivatives a step further and introduced exchange-traded weather futures and options on futures – the first products of their kind. OTC weather derivatives are privately negotiated, individualized agreements made between two parties. But CME weather futures and options on futures are standardized contracts traded publicly on the open market in an electronic auction-like environment, with continuous negotiation of prices and complete price transparency.

Broadly speaking, CME weather futures and options on futures are exchange-traded derivatives that – by means of specific indexes – reflect monthly and seasonal average temperatures of 15 U.S. and five European cities. These derivatives are legally binding agreements made between two parties, and settled in cash. Each contract is based on the final monthly or seasonal index value that is determined by Earth Satellite (EarthSat) Corp, an international firm that specializes in geographic information technologies. Other European weather firms determine values for the European contracts. EarthSat works with temperature data provided by the National Climate Data Center (NCDC), and the data it provides is used widely throughout the over-the-counter weather derivatives industry as well as by CME.

http://www.investopedia.com/articles/optioninvestor/05/052505.asp

***

In finance, a credit derivative is a derivative whose value derives from the credit risk on an underlying bond, loan or other financial asset. In this way, the credit risk is on an entity other than the counterparties to the transaction itself.^[1] This entity is known as the reference entity and may be a corporate, a sovereign or any other form of legal entity which has incurred debt.^[2] Credit derivatives are bilateral contracts between a buyer and seller under which the seller sells protection against the credit risk of the reference entity.^[3]

The parties will select which credit events apply to a transaction and these usually consist of one or more of the following:

• bankruptcy (the risk that the reference entity will become bankrupt)
• failure to pay (the risk that the reference entity will default on one of its obligations such as a bond or loan)
• obligation default (the risk that the reference entity will default on any of its obligations)
• obligation acceleration (the risk that an obligation of the reference entity will be accelerated e.g. a bond will be declared immediately due and payable following a default)
• repudiation/moratorium (the risk that the reference entity or a government will declare a moratorium over the reference entity’s obligations)
• restructuring (the risk that obligations of the reference entity will be restructured).

Where credit protection is bought and sold between bilateral counterparties this is known as an unfunded credit derivative. If the credit derivative is entered into by a financial institution or a special purpose vehicle (SPV) and payments under the credit derivative are funded using securitization techniques, such that a debt obligation is issued by the financial institution or SPV to support these obligations, this is known as a funded credit derivative.

This synthetic securitization process has become increasingly popular over the last decade, with the simple versions of these structures being known as synthetic CDOs; credit linked notes; single tranche CDOs, to name a few. In funded credit derivatives, transactions are often rated by rating agencies, which allows investors to take different slices of credit risk according to their risk appetite.

http://en.wikipedia.org/wiki/Credit_derivative

Credit default products are the most commonly traded credit derivative product^[4] and include unfunded products such as credit default swaps and funded products such as collateralized debt obligations (see further discussion below).

The ISDA^[5] reported in April 2007 that total notional amount on outstanding credit derivatives was $35.1 trillion with a gross market value of $948 billion (ISDA’s Website). As reported in Times Sept. 15.08 “Worldwide credit derivatives market is valued at $62 trillion”. ^[6]

Although the credit derivatives market is a global one, London has a market share of about 40%, with the rest of Europe having about 10%.^[4]

The main market participants are banks, hedge funds, insurance companies, pension funds, and other corporates.^[4]

Unfunded credit derivative products include the following products:

• Credit default swap (CDS)
• Total return swap
• First to Default Credit Default Swap
• Portfolio Credit Default Swap
• Secured Loan Credit Default Swap
• Credit Default Swap on Asset Backed Securities
• Credit default swaption
• Recovery lock transaction
• Credit Spread Option
• CDS index products
• Constant Maturity Credit Default Swap (CMCDS)

Funded credit derivative products include the following products:

• Credit linked note (CLN)
• Synthetic Collateralised Debt Obligation (CDO)
• Constant Proportion Debt Obligation (CPDO)
• Synthetic Constant Proportion Portfolio Insurance (Synthetic CPPI)

http://en.wikipedia.org/wiki/Credit_derivative

***

Proposals for a makeover of the financial system include reform of the credit derivatives market, which offers over $50 trillion of default insurance coverage. Do investors need that much insurance, or is this mainly a dangerous casino operating under the radar of regulators — until a major financial institution like AIG needs a bailout? What sort of reform is needed?

The seller of protection in a credit derivatives contract receives premiums from the buyer of protection until maturity, or until default of the named borrower. Contracts are negotiated over the counter, not on an exchange, so it is difficult to know how much insurance exists on each borrower, or to know who has insured whom, and for how much.

That privacy is not unusual in the normal course of business contracts. What is unusual is the size of the potential claims. There is a public interest in knowing that systemically important sellers of protection have not overdone it. If a large bank or insurance company does not have enough capital to cover settlement claims, then its failure, or the threat of it, can cause mayhem, as we have just seen.

• OPINION
• OCTOBER 22, 2008

Derivatives and Mass Financial Destruction

Complex financial products can be useful if regulated properly.

By DARRELL DUFFIE

http://online.wsj.com/article/SB122463222894556573.html?mod=googlenews_wsj

The Fed is pressing dealers to quickly establish clearing in credit derivatives. The dealers have expressed an interest in using their own clearing counterparty, the Chicago Clearing Corporation. Alternatively, they could clear credit derivatives with a new joint venture of the Chicago Mercantile Exchange and Citadel (a large hedge fund). Either way, regulators should ensure that a clearing counterparty is extremely well capitalized and has strong operational controls.

Unfortunately, the urgency to set up clearing for credit derivatives may lead us to miss the opportunity to reduce exposures even further by clearing credit derivatives along with other forms of over-the-counter derivatives, such as interest-rate swaps and equity derivatives, which represent similarly large amounts of risk transfer.

Mr. Duffie is a professor of finance at Stanford University’s Graduate School of Business.

Please add your comments to the Opinion Journal forum.

http://online.wsj.com/article/SB122463222894556573.html?mod=googlenews_wsj

***

A credit derivative is an OTC derivative designed to transfer credit risk from one party to another. By synthetically creating or eliminating credit exposures, they allow institutions to more effectively manage credit risks. Credit derivatives take many forms. Three basic structures include:

credit default swap: Two parties enter into an agreement whereby one party pays the other a fixed periodic coupon for the specified life of the agreement. The other party makes no payments unless a specified credit event occurs. Credit events are typically defined to include a material default, bankruptcy or debt restructuring for a specified reference asset. If such a credit event occurs, the party makes a payment to the first party, and the swap then terminates. The size of the payment is usually linked to the decline in the reference asset’s market value following the credit event.

http://www.riskglossary.com/link/credit_derivative.htm

***

[PDF]

THE J.P. MORGAN GUIDE TO CREDIT DERIVATIVES

File Format: PDF/Adobe Acrobat – View as HTML
Blythe Masters, global head of credit derivatives marketing at J.P. Morgan in New … performer in credit derivatives rankings. J.P. Morgan was was placed: …
http://www.investinginbonds.com/assets/files/Intro_to_Credit_Derivatives.pdf –

(from Google)

***

[PDF]

A Beginner’s Guide to Credit Derivatives

File Format: PDF/Adobe Acrobat – View as HTML
This document will attempt to describe how simple credit derivatives can be. formally represented, shown to be replicable and ultimately priced, using rea- …
http://www.probability.net/credit.pdf –

(from Google)

***

When Delphi filed for bankruptcy October 8, investors had to start assessing their losses on more than $2 billion in the auto parts maker’s bonds, which have recently traded at around 60% of their face value. As bad as that is, there is more. Looming over the market like an invisible and unpredictable giant is an estimated $25 billion in credit derivatives, a form of insurance whose value is directly linked to the ups and downs of Delphi debt.

What happens to these complex contracts as the underlying bonds plunge in value? Will ripple effects amplify the Delphi damage, spreading harm to institutional and individual investors who otherwise have no stake in Delphi?

The Delphi situation points to a broader question: Is the credit derivative market, which grew from next to nothing in the mid-1990s to an estimated $5 trillion at the end of 2004 — and is perhaps more than twice that size today — pumping new, poorly-understood risk into the financial markets? Or are these exotic products helping to mitigate the shock from corporate crises, as their proponents claim?

The Ballooning Credit Derivatives Market: Easing Risk or Making It Worse?

Published: November 02, 2005 in Knowledge@Wharton

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1303

***

Calls to curb credit derivatives market

By Joanna Chung and Aline van Duyn in New York and Paul J Davies in London

Published: September 23 2008 23:30 | Last updated: September 23 2008 23:30

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Pressure to regulate the $62,000bn credit derivatives market mounted on Tuesday as the main US market regulator called on Congress to pass laws to supervise the industry.

Christopher Cox, chairman of the Securities and Exchange Commission, told the Senate banking committee that “significant opportunities” for manipulation existed in the market for credit default swaps, which offers a kind of insurance against companies defaulting on their debt.

http://www.ft.com/cms/s/0/d52898c4-89b9-11dd-8371-0000779fd18c.html

***

(compiled by Cricket Diane C Sparky Phillips, 10-22-08)