On Intrade, a futures exchange in which people can place bets on whether specific events will occur or not, the wager titled “Will ‘Obamacare’ health care reform become law in the United States before midnight ET 30 Jun 2010″ is now priced at about 78. That means the market for this bet has judged the [...]

Tip o’ the hat to Laura at EconomyStory for sending us Sub-prime the Musical. The site consists of a series of podcasts by a college student named Madison Koshy, who created them from research she did on the causes of the credit crisis. Naturally, she then wrote song parodies to illustrate the concepts she had [...]

Peter Schiff is the president of Euro Pacific Capital, a former adviser to Ron Paul’s presidential campaign, a libertarian financial pundit, and a current candidate for the Connecticut Senate seat held by the retiring Christopher Dodd. He’s also a bit of a downer, as can be seen in his video blog from last week, in [...]

Last year in The American Spectator, Peter J. Wallison wrote about the political importance of determining causes of the financial crisis that blew up in 2008.

Two narratives seem to be forming to describe the underlying causes of the financial crisis. One, as outlined in a New York Times front-page story on Sunday, December 21, is that President Bush excessively promoted growth in home ownership without sufficiently regulating the banks and other mortgage lenders that made the bad loans. The result was a banking system suffused with junk mortgages, the continuing losses on which are dragging down the banks and the economy. The other narrative is that government policy over many years–particularly the use of the Community Reinvestment Act and Fannie Mae and Freddie Mac to distort the housing credit system– underlies the current crisis. The stakes in the competing narratives are high. The diagnosis determines the prescription. If the Times diagnosis prevails, the prescription is more regulation of the financial system; if instead government policy is to blame, the prescription is to terminate those government policies that distort mortgage lending.

“…it is not at all clear…that a Special Inspector General should be weighing in on government policy decisions, much less predicting the housing market or economy’s future.” Yesterday we ran a post about the Special Inspector General for TARP’s Quarterly Report to Congress. The report was highly critical of the bailout’s inability to increase bank [...]

Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program (that’s SIGTARP to you) has released his Quarterly Report to Congress, which you can read here in .pdf. The opening section of the Executive Summary is below. My own executive summary:

• The financial system is far more stable in parts than at the height of the crisis in fall, 2008. Banks can raise funds and many formerly on the verge of collapse have repaid the emergency government loans early. These repayments have resulted in a profit for the U.S. Treasury on some of the TARP investments, decreasing the cost of the bailout to taxpayers.
• The TARP goal of increasing financing to U.S. businesses and consumers has not been met, as lending continues to decrease and home foreclosures remain at record levels. The repayment of government funds by banks and the exit of the U.S. as a major shareholder in the banks have signficantly decreased the government’s ability to influence the policies of these financial institutions.
• Fundamental problems in the financial system have not been addressed to date, and “too big to fail” institutions are even larger, thanks in part to TARP and other bailout programs. Incentives to take reckless risk are even greater, as the market is convinced government will step in to cover losses that could threaten the system. Executive compensation also remains an incentive to take inordinate risks.
• The government’s efforts to support home prices risk re-inflating a housing bubble.

Today marked the first meeting of the Financial Crisis Inquiry Commission. The Christian Science Monitor reports: The Financial Crisis Inquiry Commission is a bipartisan 10-member committee that’s been handed the job of recording what went wrong prior to the near-collapse of the world financial systems in 2008. Congress has ordered the commission to work through [...]

Take a look at this chart of the S&P 500, and note the big dip starting in 2000 and repeating in 2008. If you happen to be an investor who went on that roller coaster ride both times, you can probably be forgiven for being too dizzy at this point to delve into the obfuscatory world of 10-Qs, 10-Ks, and other byzantine company filings mandated by the SEC in the interest of transparency.

Unfortunately, however, maybe that’s the only way these days to get the real scoop on a company’s financial health. Investor outsourcing of crucial due diligence to the media, stock analysts, and even the ratings agencies led to massive losses in the accounting scandals in early last decade and in the financial collapse later on.

So when it comes to your money, how can you trust anyone but yourself these days?

“While there aren’t a lot of hard and fast rules for mining SEC filings for interesting nuggets, it’s a pretty safe bet that if the words “company yacht” are mentioned in the filing, it’s worth at least a quick skim.” The web site footnoted.org received a lot of favorable press last year, including this report [...]

Chalk up another one for the abysmal 2000s. This decade was the worst ever for U.S. stocks. Ever. From last week’s Wall Street Journal:
In nearly 200 years of recorded stock-market history, no calendar decade has seen such a dismal performance as the 2000s.I nvestors would have been better off investing in pretty much anything else, from bonds to gold or even just stuffing money under a mattress. Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade.

The rest of the article is filled with alarming statistics. Let’s go to the blogs, shall we?