Finance gurus damn reform with faint praise | Industry Summits | Reuters

NEW YORK (Reuters) - Bank executives are cautious about slamming the lawmakers trying to rein in Wall Street excess, leaving the impassioned arguments to their armies of lobbyists in Washington.

Bankers, analysts and other financial experts at the Reuters Global Finance Summit in New York this week, chose their words carefully when talking about policymakers and members of Congress, acknowledging the need for some reform as long as it does not torpedo the industry.

"The industry rightfully deserves a good portion of the regulation that we're about to see, and there will be some extremes and there will be some unintended consequences," said Denis Salamone, chief operating officer of Hudson City Bancorp (HCBK.O: Quote, Profile, Research, Stock Buzz), the largest U.S. savings and loan.

Like many in the industry, Salamone argued that over-regulating banks will just hurt consumers.

FT.com / Europe - Germany warns US on market bubbles

Germany's new finance minister has echoed Chinese warnings about the growing threat of fresh global asset price bubbles, fuelled by low US interest rates and a weak dollar.

Wolfgang Schäuble's comments highlight official concern in Europe that the risk of further financial market turbulence has been exacerbated by the exceptional steps taken by central banks and governments to combat the crisis.

Last weekend, Liu Mingkang, China's banking regulator, criticised the US Federal Reserve for fuelling the "dollar carry-trade", in which investors borrow dollars at ultra-low interest rates and invest in higher-yielding assets abroad.

Speaking at a banking conference in Frankfurt on Friday, Mr Schäuble said it would be "naive" to assume the next asset price bubble would take the same guise as the last.

He said: "More likely today is a scenario in which excess liquidity globally creates a new [sort of] asset market bubble."

He added: "That low interest rate currencies such as the US dollar are increasingly being used as a basis for currency carry trades should give pause for thought. If there was a sudden reversal in this business, markets would be threatened with enormous turbulence, including in foreign exchange markets."

What if a Recovery Is All in Your Head?  ROBERT J. SHILLER     NYT

Beyond fiscal stimulus and government bailouts, the economic recovery that appears under way may be based on little more than self-fulfilling prophecy. Consider this possibility: after all these months, people start to think it's time for the recession to end. The very thought begins to renew confidence, and some people start spending again -- in turn, generating visible signs of recovery. This may seem absurd, and is rarely mentioned as an explanation for mass behavior late in a recession, but economic theorists have long been fascinated by such a possibility.

The notion isn't as farfetched as it may appear. As we all know, recessions generally last no more than a couple of years. The current recession began in December 2007, according to the National Bureau of Economic Research, so it is almost two years old. According to the standard schedule, we're due for recovery. Given this knowledge, the mere passage of time may spur our confidence, though no formal statistical analysis can prove it.

Certainly, people did not always believe that there is a regular "business cycle" that starts and stops in a definite pattern. The idea began to spread in the popular consciousness in the 1920s and reached full bloom in the '30s -- with one major complication, the Great Depression, which received its name in midcourse, from a 1934 book with that title by Lionel Robbins.

In fact, in 1937, "Think and Grow Rich," a book by Napoleon Hill, urged readers to adopt a positive mental attitude and to channel the power of the subconscious mind so that real wealth would follow. It became a runaway best seller. Faddish interest had already emerged not only in Freud's theory of the unconscious mind, but also in the theories of the psychologist Émile Coué, who urged people to recite that "every day in every way I'm getting better and better." He said this "autosuggestion" would bolster the unconscious self.

In important ways, we are still using that 1930s pattern of thinking. We are instinctively fearful of reckless talk about depressions, and we try to support one another's confidence. We like the idea that modern scientific economics seems to show that all recessions end in due course.

My mother's copy of Think and Grow Rich remains a treasured part of my library--as an example of US popular psychology.  Sadly, it seems not to have worked for either of us. It was written by the then CEO of Ralston-Purina, a well known manufacturer of dog food. That odd fact perhaps adds a layer of meaning to former Virginia Congressman Tom Davis's comment about the Republican Party's brand image: "If our party's brand were dog food, they would be taking it off the shelves. No one is buying our dog food."  

"It is not necessary to have hope in order to persevere."

Are the American people finally starting to stand up to Wall Street?  By George Washington, Zero Hedge

Shareholder Revolt

Some of Goldman Sach's biggest shareholders are demanding that executive compensation be reduced. As the Wall Street Journal notes:

   Their complaints in private conversations with the company and at analyst meetings show how anger over its big-money culture is spilling into the ranks of investors who typically shy away from debates over Wall Street pay.

Protests

There were the protests outside of the Bankers Association meeting in Chicago. See this, this, this, this, this and this.

If you don't think that more - bigger - protests are coming, you haven't been paying attention.

Debtor's Revolt

Debtors are revolting against exorbitant interest rates and fees and other aggressive tactics by the too big to fail banks. See this, this, and this.

Congresswoman Kaptur advises her constituents facing foreclosure to demand that the original mortgage papers be produced. She says that - if the bank can't produce the mortgage papers - then the homeowner can stay in the house.

Portfolio manager and investment advisor Marshall Auerback argues that a debtor's revolt would be a good thing.

And even popular personal finance advisor Suze Orman is highlighting the debtors revolt phenomenon on her national tv show.

Congress Is Starting to Get the Message

The American people are shouting so loud at their congress members and Senators, that even some of the most pro-Wall Street congressman are starting to get it.

For example, the Congressional Black Caucus has been hearing so much about how congress is failing to address the crisis of unemployment from their constituents, that the CBC delayed Barney Frank's proposed financial reform.

The House Financial Services Committee received so many phone calls from constituents that it approved the Ron Paul/Alan Grayson bill to audit the Fed and defeated the trojan horse alternate bill written by Mel Watt. Indeed, I have heard from congressional sources that the only calls to support the Watt alternate bill were from the Fed itself.  And see this.

The Committee also approved Congressman Grayson's bill to rein in foreign currency swaps.

Both Geithner and Summers are coming under increasing pressure to resign due to their being in bed with Wall Street.

Even Bernanke's re-appointment is no longer certain.

There is even more substantiation on Washington's post. This confirms what I have been sensing over the last week.  The tide may be turning. The situation is just too blatant and people are letting their feelings be known.  The last time this state of public concern was exceeded was after the "Saturday Night Massacre" in Watergate under Nixon.  I suspect we might start having some riveting hearings on Capitol Hill. We are not yet at the stage where John Dean stuck a knife in Nixon during his testimony, but I wouldn't be surprised to see something similar.  AFT!

"It is not necessary to have hope in order to persevere."

Carbon Commentary · Spain's variable wind and stable electricity networks

One of the frequent criticisms of wind energy is that national distribution systems (`the grid') cannot cope with large number of turbines because of the variability and unpredictability of their output. Grids need to match supply and demand precisely, the critics say, and because wind varies so much it causes huge problems. Recent data from two meteorologically unusual days in Spain - the world leader in the management of renewable energy supplies - shows this assertion is almost certainly false.

• During part of 8 November, Spain saw over 50% of its electricity come from turbines as an Atlantic depression swept over the country's wind parks. (They are so big that no one seems to call them `farms'.) Unlike similar times in November 2008, when Spanish turbines were disconnected because the grid had an excess of electricity, the system accepted and used all the wind power that was offered to it.
• A very different event in January of this year saw unexpectedly high winds shut down most of the country's turbines with little warning. The grid coped with this untoward incident as well. These two events show that a well run transmission system can cope with extreme and unexpected events even with a large fraction of power provided by wind.

Over the course of this year Spain will generate about 14% of its total electricity from wind and this number is likely to rise to the high twenties by 2020. Spain is showing the rest of the world that these figures are not incompatible with grid stability. Although wind is `variable', `intermittent' and `unpredictable', a well functioning grid system can still use wind to help stabilise electricity costs, reduce carbon emissions and improve energy security.(continues)

"The future is already here -- it's just not very evenly distributed" William Gibson

In Britain, Visions of Japan's Decade of Economic Stagnation - NYTimes.com

LONDON -- Britain may finally be emerging from recession, but many analysts warn that it is a false dawn. In fact, they argue, the economy here is so ravaged by growing debts and ruined banks that it could well be following in the steps of Japan's lost decade of the 1990s.

The parallels are eerie: Like Japan, Britain enjoyed more than a decade of booming growth, fed by aggressive bank lending and real estate investments. Haunted by the comparison, policy makers have been extra aggressive in using fiscal and monetary levers in hope of preventing the stagnation and banking stasis that plagued Japan for so many years.

Some economic indicators over the last week have been positive: an uptick in retail sales, fewer jobs lost and an export revival. Yet analysts say they may well turn out to be teasers that cloak deeper, more structural flaws in the economy.

In addition to rising debt, the tax base is collapsing and the crippled banking industry has yet to show it can generate profit by lending to companies.

"The future is already here -- it's just not very evenly distributed" William Gibson