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Showing posts from April, 2009

Creative Investment studies community development and minority-owned financial institutions for PG&E

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Washington, D.C. — Creative Investment Research, Inc. announced that it has provided to Pacific Gas & Electric Company current, up to date social and financial credit ratings covering community development banks serving areas of high social need within PG&E’s service territory. PG&E has made FDIC-insured deposits in fifteen minority and community based institutions. The Community Investment Program (CIP) positively reflects the company’s values and has been undertaken as part of PG&E’s continuing effort to be responsive to the needs in communities it serves. The portfolio has a 90 day maturity. Performance data for the portfolio, relative to investing alternatives, is outlined above.

What happened. What now.

Commercial and investment banks used their size and money to make campaign contributions that allowed them to evade any meaningful effort to impose common sense and transparent risk controls in the public interest, known as regulation. One of the first regulations attacked dated from the Great Depression. This was the Glass-Steagall Banking Act, a law designed to separate commercial and industrial banking. Banks, commercial and industrial (the latter known as investment banks) could now combine operations to create products in fundamentally unstable ways.

Markets are ruled by two emotions: fear and greed, and these institutions got greedy, very greedy. They created financial products that served no real purpose, other than to generate profit for the bank. To keep customers (their only regulator) from understanding the bank’s true intent, they made these products horribly complicated. These products were, in part, simple bets. These bets were layered on top of each other until only th…

Relationship Map: Goldman Sachs and Treasury

See: http://muckety.com/Query

Black-owned bank has few urban loans

We note today's article in the Boston Globe: "Black-owned bank has few urban loans: OneUnited sought aid as community 'beacon'." OneUnited Bank got $12 million from the US bank bailout fund.

We take issue with several items in the story. Below, we reproduce sections of the story we have difficulty with and note our reply.

"OneUnited's chief executive, Kevin Cohee, said the bank is helping the community in other ways - by focusing on loans to churches and developers of apartment buildings. He said the bank pulled back on home mortgages because he saw the housing market overheating. He said he didn't want to compete with the many mortgage brokers peddling subprime loans with unrealistic rates and terms, loans that borrowers ultimately would not be able to repay. 'We knew this bubble was developing in residential housing' as early as 2004, Cohee said in an interview. 'If we had participated in inner-city housing lending, . . . we would have …

Adam Smith on the Current Financial Crisis

While there is much wrong with Mr. Smith's work, he did, in The Wealth of Nations, note the following:
"To promote the little interest of one little order of men in one country, it hurts the interest of all other orders of men in that country, and of all men in all other countries."
The result of policies favoring "one little order of men (Wall Street, in the current crisis)" gives rise to what Smith calls "a high rate of profit."
"But besides all the bad effects to the country in general, which have already been mentioned as necessarily resulting from a high rate of profit; there is one more fatal, perhaps, than all of these put together, but which, if we may judge from experience, is inseparably connected with it. The high rate of profit seems everywhere to destroy that parsimony which in other circumstances is natural to the character of the merchant. When profits are high, that sober virtue seems superfluous, and expensive luxury to suit better…