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With the health care fight and two weeks at home behind it, Congress is taking on proposals to reform Wall Street and prevent future financial collapses.
Nothing has really changed since the Senate Banking panel passed an overhaul measure along party lines in late March – except that the rhetoric on both sides has sharpened.
Senate Minority Leader Mitch McConnell, R-Ky., came out swinging Tuesday and Wednesday, slamming Banking Committee chairman Christopher Dodd's bill as a "perpetual taxpayer bailout of Wall Street banks."
Dodd, D-Conn., defended the bill on Wednesday, saying that nobody likes bailouts and "under our proposal they'll never happen again." Dodd also denied accusations he didn't work with Republicans on the bill and called their accusations "poppycock."
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Editor's Note: A financial crisis inquiry commission held its second day of hearings today to investigate the cause of the financial crisis. Former Citigroup executives are testifying today. Tonight at 10 p.m. ET Anderson talks to Andrew Ross Sorkin, author of a book on the financial crisis, ‘Too Big Too Fail,’ about what happened, who knew what and who’s ultimately responsible for the near-collapse of the financial industry.
Standing in the kitchen of his Park Avenue apartment, Jamie Dimon poured himself a cup of coffee, hoping it might ease his headache. He was recovering from a slight hangover, but his head really hurt for a different reason: He knew too much.
It was just past 7:00 a.m. on the morning of Saturday, September 13, 2008. Dimon, the chief executive of JP Morgan Chase, the nation’s third largest bank, had spent part of the prior evening at an emergency, all-hands-on-deck meeting at the Federal Reserve Bank of New York with a dozen of his rival Wall Street CEOs. Their assignment was to come up with a plan to save Lehman Brothers, the nation’s fourth-largest investment bank—or risk the collateral damage that might ensue in the markets.
To Dimon it was a terrifying predicament that caused his mind to spin as he rushed home afterward. He was already more than two hours late for a dinner party that his wife, Judy, was hosting. He was embarrassed by his delay because the dinner was for the parents of their daughter’s boyfriend, whom he was meeting for the first time.
“Honestly, I’m never this late,” he offered, hoping to elicit some sympathy.
Trying to avoid saying more than he should, still he dropped some hints about what had happened at the meeting. “You know, I am not lying about how serious this situation is,” Dimon told his slightly alarmed guests as he mixed himself a martini. “You’re going to read about it tomorrow in the papers.”
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Too big to fail, it appears, may be too big to solve.
Connecticut Senator Christopher Dodd's recently proposed financial reform bill creates a team of regulators with the authority to shut down troubled institutions. It calls for capital and liquidity requirements. It requires banks to fund a $50 billion bailout fund, as well as draft so-called living wills — detailed plans drawn up in advance of how the firms should be shut down if they run into trouble.
Yet, policy experts and economists from both ends of the political spectrum say the bill does little to end the problem of banks becoming so big that the government is forced to bail them out when they stumble. Some say the proposed financial reform may even make the problem worse.
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Andrew Ross Sorkin
New York Times
On Thursday, two of the biggest — and among the most tarnished — names on Wall Street will testify in front of the Financial Crisis Inquiry Commission in Washington: Charles O. Prince III, the former chairman and chief executive of Citigroup, and Robert E. Rubin, a former top adviser and director of the bank. On the watch of these men, Citigroup lost more money than almost any company in history, requiring an extraordinary government bailout.
There are, of course, many important questions for the commissioners to ask these men about how and why the bank filled its balance sheet with so many bad subprime loans, taking on enough risk to nearly topple the system.
But there is one small question, not so obvious, that has been crying out for an answer for years, and it has nothing to do with exoticisms like C.D.O.’s or C.D.S.’s. Instead, this question is about incentives and compensation on Wall Street and a mind-set — a group-think really — that pervaded not just Citigroup but the entire industry.
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Special to CNN
What if, at once, we could create millions of new jobs, greatly reduce the federal deficit and dampen the financial speculation that almost destroyed our economy?
Well, we can. And to do so, all we need is more political resolve from President Obama plus some actions by Congress.
The economic recovery that some in the administration allege to be underway is not really much underway at all.
CNN Financial News Producer
The Federal Reserve’s efforts to stabilize the financial system paid off handsomely last year as the central bank raked in a record-setting profit of more than $52 billion.
That reflects the highest earnings in the Fed’s nearly 100-year history.
Let’s put that into perspective: In 2008, oil giant ExxonMobil reported the largest annual profit in U.S. history, making $45.22 billion on the back of record-high oil prices.
And unlike most government agencies, the Fed funds itself from its own operations, and its member banks are required to return all profits to the U.S. Treasury after certain deductions. That means Ben Bernanke and Co. returned about $46 billion to taxpayers. Not too shabby an accomplishment for Time’s “Person of the Year 2009.”
The Fed's 2009 profit marks a 47% increase over 2008. It comes as the central bank took in interest payments on an expanding portfolio of securities issued by the Treasury and by the government-sponsored mortgage agencies Fannie Mae and Freddie Mac.
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CNN Financial News Producer
The jobs picture is at least a little brighter today as two reports say the pace of job losses eased in December.
Payroll-processor ADP said private-sector employers cut 84,000 jobs last month, the fewest since March 2008. It was the ninth straight month that job losses narrowed from the previous month.
In a separate report, outplacement firm Challenger, Gray & Christmas said that 45,094 job cuts were announced in December, 10% less than November's 50,349 cuts. It was the lowest total since December 2007, when 44,416 cuts were announced.
All this comes ahead of Friday’s official employment report for December from the Labor Dept. Estimates there are all over the map, and experts are forecasting everything from a loss of 25,000 jobs, to our first job gains since December of 2007.
From job losses to billion-dollar government bailouts…
GMAC, the troubled finance company that just last week received its third government bailout, said Tuesday it expects to post a record fourth-quarter loss of $5 billion.
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CNN Financial News Producer
Stocks on Wall Street kicked off the last week of 2009 on a positive note Monday, with the Dow, Nasdaq and S&P 500 all edging up to close at record highs for the year in an otherwise lackluster session.
It’s likely to be an unpredictable week amid light trading volume, with many market participants on vacation and traders focused on 2010.
Stocks have now risen for 6 straight sessions, including the 3-1/2 days of last week's holiday-shortened trading week. All financial markets closed early on Christmas Eve and were closed for Christmas.
The market will be closed again Friday for New Year's Day and many traders are taking the entire week off.
Giving stocks a boost today was an initial report on the holiday shopping season that showed a solid year-over-year gain, both in stores and online.
The report from MasterCard Advisors' SpendingPulse data service showed a 3.6% increase in retail sales in the period from Nov. 1 to Dec. 24. That compared with a 2.3% drop in last year's report, which was based on charges rung up on MasterCard credit cards as well as a survey of sales made by cash or check.
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CNN New York
Our long national nightmare is over ... BlackBerry service is back.
For more than eight hours last night, BlackBerry customers throughout North America were without e-mail and Internet service after a widespread outage that began at about 6:30 p.m. ET. The company sent an e-mail to subscribers that estimated 100% of its users were affected at one point. It’s the second such outage in a week and raises questions about the reliability of the fast-growing service – there are now about 32-million subscribers according to Research In Motion, which makes the BlackBerry.
Mixed news on the economy this morning – on a negative side, housing is still in rough shape. New home sales plunged 11-percent in November, a bigger decline than expected. On the brighter side, personal income rose 0.4% in November, the fastest pace in six months. That helped boost personal spending a half percent last month, the second straight increase, though a bit less than expected. And consumers are in a better mood about things – the Reuters/University of Michigan Surveys of Consumers said the final December reading rose to the highest level since September.
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Special to CNN
Goldman Sachs, the most profitable firm on Wall Street, announced last week that it will set aside $500 million for "10,000 Small Businesses," a charity co-sponsored by famed investor Warren Buffett and devoted to helping small American businesses survive the economic crisis.
While Goldman may see this as a generous move, its charity is an offense to struggling entrepreneurs and a symbol of failed government policy.
The $500 million allocated to fund the initiative is a small share of the massive profits Goldman has earned on the back of huge government subsidies it has received since the onset of the financial crisis.
When the financial system collapsed in fall 2008, the federal government supported "too big to fail" firms like Goldman Sachs with generous lending conditions, government guarantees, and outright subsidies.