"Congress left consumers extremely vulnerable when it gave the credit card industry as long as 15 months to end the deceptive predatory practices outlawed in the spring in the Credit Card Accountability, Responsibility and Disclosure Act. The credit card industry, which clearly wants to make a killing in the Christmas season, used this unnecessarily long grace period to intensify its predations, doubling interest rates on people who pay on time and driving up rates by an industry wide average of about 20 percent. NOTE: Merry Xmas everyone! Get out there and shop till you drop.

The Barack Obama administration and the US Congress are now trying to address the fundamental issue of TBTF, generally acknowledged as a key contributing factor to the near collapse of the global financial system in 2008. Yet, government bailout programs for big financial institutions have resulted in banks becoming even bigger than before the crisis. Apparently, the administration’s solution to "too big to fail" is to make banks bigger. JP Morgan Chase is reportedly holding more than $1 of every $10 on deposit in the US. The four biggest super banks (JP Morgan Chase, Bank of America, Wells Fargo and Citibank) now issue one of every two mortgages and about two of every three credit cards in the US. Since the financial crisis, these four super banks are each allowed to hold more than 10% of the nation's deposits, having been exempted from a longstanding rule barring such market dominance. In several metropolitan regions, these new super banks are now permitted to take market share beyond what the Department of Justice's anti-trust guidelines previously allowed. The American banking system is now one of a handful of large global trading companies pretending to be banks, taking huge profits from high-risk proprietary trades with government-backed money, instead of one of a network of small conservative local institutions serving their domicile communities merely as intermediaries of money through local deposits for nominal fees.

In the Senate, both the chairman of the Banking Committee, Christopher Dodd, and the ranking Republican, Richard Shelby, think putting the Federal Reserve in charge of regulators would be a mistake. On November 10 Dodd unveiled a draft bill that strips the central bank of its regulatory function and creates a new overarching regulatory administration that pre-empts existing agencies. Shelby argues further that the Fed should be reorganized to eliminate the role of private bankers in making internal decisions at the twelve regional Federal Reserve banks (Dodd would require Senate confirmation for presidents of those banks). "I believe this is an inherent conflict," Shelby said, "because the banks decide who will be their regulator. I don't think that's a healthy thing." Senator Bernie Sanders, always the point man for big ideas, proposes that the Treasury be required to identify and dismantle banks that are too big to fail. Amid the usual cast of characters, a strong new voice showed up this season to advise Congress--Richard Trumka, the new president of the AFL-CIO. "Our members were not invited to Wall Street's party," Trumka told the House Financial Services Committee, "but we have paid for it with devastated pension funds, lost jobs and public bailouts of private-sector losses. Our goal is a financial system that is...the servant of the real economy rather than its master."

Financial institutions soon will be banned from charging many overdraft fees without first getting customers' consent, the Federal Reserve announced Thursday, the latest in sweeping reforms aimed at protecting consumers who have been hit hard by the recession. The new regulations cover overdrafts from ATM withdrawals and debit card purchases, officials said. The rules are intended to address widespread complaints that banks allowed consumers to use their cards despite having insufficient funds and then hit them with large fees afterward. Banks will be required to send customers a notice explaining their overdraft protection services and fees before they decide whether to sign up. The regulations take effect July 1, 2010. The rules represent an ongoing regulatory shift toward increasing protections for the most vulnerable consumers while limiting the reach of financial institutions.

Now let’s see what went into this legislative sausage. (a) Everyone agrees that the unregulated “dark markets” of Wall Street’s trading in over-the-counter derivatives such as credit default swaps moved the financial crisis from major problem to total disaster. Currently, most trades in these “products” are privately negotiated on the phone, dealer to dealer. It’s appallingly risky – that’s why we have a multi-trillion dollar bailout. But because the dealers at major banks can quote different prices to different customers, with huge spreads between buy and sell quotes, the banks are making huge profits and want to keep it that way. So while congress is busy working on reform legislation, Wall Street’s lawyer-lobbyists in Washington are working hard to neutralize such efforts.

United Commercial was one of five bank failures Friday, following bank closings earlier in the day in Georgia, Michigan, Minnesota and Missouri. The number of bank failures for the year now stands at 120. It’s the most failures since 1992, when the FDIC closed down 181 banks. The total cost of the other four bank failures to the deposit fund was an estimated $132.7 million. (See ProPublica’s complete list of bank failures this year.)

U.S. Senator Bernie Sanders unveiled legislation requiring Treasury Secretary Timothy Geithner to name banks whose collapse may shake the economy and break up the firms in a year, fueling efforts to end taxpayers bailouts. “If an institution is too big to fail, it is too big to exist,” said Sanders, a Vermont independent. “We should break them up so they are no longer in a position to bring down the entire economy.” The legislation would give Geithner 90 days to list the commercial and investment banks, hedge funds and insurance companies deemed “too big to fail.” Those firms would be broken up within a year, he said. Representative Paul Kanjorski, a Pennsylvania Democrat, is considering a measure in the House that would break up large financial firms.

The public is outraged about reports that Citi, Goldman Sachs Group Inc. and Morgan Stanley along with other big New York employers, received hundreds, even thousands, of H1N1 vaccine doses before hospitals and other healthcare providers, many of which have run out of the precious drug. For Goldman Sachs, accused of unfairly benefiting from government bailout funds and its close relationships with administration officials, the problem is especially acute. Jokes are already circulating on Wall Street about how Goldman will create derivatives out of the few doses it has and begin trading them.

I have been covering the option ARM fiasco for a very long time now and as I have highlighted before, this is very much a California problem. Apparently I’m not the only one that has realized that option ARMs are a ticking time bomb just waiting to go off. None other than our own attorney general, Jerry Brown is going after the top option ARM banks and servicers. He has a few of the same questions that we have. How in the world are banks going to deal with the coming recasts? Have banks done anything since the crisis has started in addressing these loans? Inquiring minds would like to know. The AG has been busy in the last year. He went after toxic mortgage poster child Countrywide successfully and recently, has gone after State Street. Jerry Brown recently came on CNBC regarding State Street:

"LIKE a tsunami that follows an undersea earthquake, collateral damage from the collapse of credit markets is about to strike the millions of daily transit riders in America’s biggest cities. Public transit agencies in cities including New York, Atlanta, San Francisco and Washington are under pressure to surrender $2 billion from their budgets because financial institutions have spotted a chance to gain a windfall from complicated tax-shelter deals known as “leasebacks.”

Pouring money into the private banking system has only fixed the economy for bankers and the wealthy; it has not done much to address either the fundamental problem of unemployment or the debt trap so many Americans find themselves in. President Obama's $787 billion stimulus plan has so far failed to halt the growth of unemployment: 2.7 million jobs have been lost since the stimulus plan began. California has lost 336,400 jobs. Arizona has lost 77,300. Michigan has lost 137,300. A total of 49 states and the District of Columbia have all reported net job losses. In this dark firmament, however, one bright star shines. The sole state to actually gain jobs is an unlikely candidate for the distinction: North Dakota. North Dakota is also one of only two states expected to meet their budgets in 2010. (The other is Montana.) North Dakota is a sparsely populated state of less than 700,000 people, largely located in cold and isolated farming communities. Yet, since 2000, the state's GNP has grown 56 percent, personal income has grown 43 percent and wages have grown 34 percent. The state not only has no funding problems, but this year it has a budget surplus of $1.3 billion, the largest it has ever had.

The tally of bank failures easily broke past the No. 100 milestone on Friday night, with regulators announcing the year's 103rd closure.

Washington has spent much of this year showing how tough it is on tax cheats. The Justice Department triumphantly declared in August that it had reached a settlement with Swiss banking giant UBS for it to turn over the names of approximately 4,450 American account holders suspected by the IRS of evading taxes. This week, the IRS revealed the formation of a special task force to go after wealthy tax dodgers, and members of Congress introduced a bill to force foreign firms doing business in the U.S. to disclose all its U.S. clients with accounts overseas. But for all the bluster about cracking down on Americans who hide money overseas, the U.S. turns a virtual blind eye to foreign tax cheats who are parking money in the U.S. banking system. In particular, the U.S. effectively serves the role of Switzerland for Mexico, which suffers from rampant tax evasion — rates go as high as 70% among professionals and small businesses, and 40% among larger businesses. Much of the estimated $42 billion a year of illicit funds flowing out of Mexico each year (not including drug cartel money) ends up in U.S. banks, according to Global Financial Integrity, an advocacy group in Washington. Soon after the Obama Administration took office, Mexico sent Treasury Secretary Tim Geithner a letter complaining about the de facto secrecy U.S. banks offer Mexicans holding accounts by not reporting to anyone the names or interest income paid on those deposits.

I hope that US regulators are watching and getting ideas. The European Union will today approve the split of Northern Rock into two sections, a "good", profitable, bank with no bad debt, and a "bad" bank. The Lloyds and RBS sell-offs will follow over the next three to five years and will be supervised by UK Financial Investments, the government body set up to oversee taxpayers' investment in the banks. The Government is understood to have made clear that existing larger operators will be banned from participating in the sales. Ministers want to drive competition in a sector they believe is too concentrated in the hands of the "Big Four" of Barclays, HSBC, Lloyds and RBS. Virgin Money is known to be watching the situation closely and is in talks to add former Northern Rock chairman Bryan Sanderson to its board ahead of a possible bid for Northern Rock.

And now there are five -- five Wall Street behemoths, bigger than they were before the Great Meltdown, paying fatter salaries and bonuses to retain their so-called"talent," and raking in huge profits. The biggest difference between now and last October is these biggies didn't know then that they were too big to fail and the government would bail them out if they got into trouble. Now they do. And like a giant, gawking adolescent who's just discovered he can crash the Lexus convertible his rich dad gave him and the next morning have a new one waiting in his driveway courtesy of a dad who can't say no, the biggies will drive even faster now, taking even bigger risks. What to do? Two ideas are floating around Washington, but only one is supported by the Treasury and the White House. Unfortunately, it's the wrong one. The right idea is to break up the giant banks. I don't often agree with Alan Greenspan but he was right when he said last week that "[i]f they're too big to fail, they're too big." Greenspan noted that the government broke up Standard Oil in 1911, and what happened? "The individual parts became more valuable than the whole. Maybe that's what we need to do." (Historic footnote: Had Greenspan not supported in 1999 Congress's repeal of the Glass Stagall Act, which separated investment from commercial banking, we wouldn't be in the soup we're in to begin with.)

On the auction block in Detroit: almost 9,000 homes and lots in various states of abandonment and decay from the tidy owner-occupied to the burned-out shell claimed by squatters. Taken together, the properties seized by tax collectors for arrears and put up for sale last week represented an area the size of New York's Central Park. Total vacant land in Detroit now occupies an area almost the size of Boston, according to a Detroit Free Press estimate. The tax foreclosure auction by Wayne County authorities also stood as one of the most ambitious one-stop attempts to sell off urban property since the real-estate market collapse. Despite a minimum bid of $500, less than a fifth of the Detroit land was sold after four days. Many potential homeowners that Detroit desperately needs said they felt penalized by the auction process. They mostly found themselves outbid by deeper-pocketed investors from California and New York who were in a race to claim the auction book's relatively few livable properties. Dozens of potential bidders, mostly local residents, were turned away on the first day of the auction by deputies after they failed to meet the morning deadline for registration.---

At a conference in London, a Goldman Sachs international adviser, Brian Griffiths, praised inequality. As his company was putting aside $16.7 billion for compensation and benefits in the first nine months of 2009, up 46 percent from a year earlier, Griffiths told us not to worry. “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all,” he said.---Today, Congress is struggling to produce the tiniest shards of regulation that would at least give the appearance of doing something to rein in the Street. What happened in the intervening months? Two things. First, America's attention wandered. We're now focusing on health care, Letterman's frolics, and little boys who hide in attics rather than balloons. And, hey, the Dow is up again. The politicians who put off Wall Street regulation for ten months knew that the public would probably lose interest by now. Second, the banks keep paying off Congress.

While decision of the Chinese to stop buying dollars might be good for the economy, it is likely to be disastrous for Citigroup and the rest of the basket-case banks. If interest rates rose, then the value of the government bonds the banks hold would plummet. If the interest rate on 10-year Treasury bonds goes from the current 3.5% to a still low 4.5%, then the banks will have lost 8% on their holdings. At a 5.5% interest rate, a rate that would still be far below the average for the 1990s, the loss would be 15%. Citi and the other basket cases could not endure these losses in their current financial state. This could be why we see shrill pronouncements from the likes of Washington Post columnists and other "experts" who couldn't see an $8tn housing bubble that we need the Chinese government to keep buying up our debt. We absolutely do not need the Chinese government to keep buying US debt and would almost certainly be better off if it stopped tomorrow. Citigroup and the other big banks do need the Chinese government to keep the money flowing if they are to have a chance of getting back on their feet. And, we know where the sympathies of the Washington Post's editors and other "experts" lie.

"Even as the nation's biggest financial firms were struggling and the federal government was spending hundreds of billions of dollars to save many of them, the companies as a group were boosting the perks and benefits they pay their chief executives. The firms, accounting for more $350 billion in federal bailout funds, increased these perks and benefits 4 percent on average last year, according to an analysis of corporate disclosures filed in recent months. Some chief executives, such as Kenneth D. Lewis of Bank of America and Jeffrey M. Peek of CIT Group, the major small-business lender now on the brink of bankruptcy, each received about $100,000 more than a year earlier for personal use of corporate jets. Others saw an increase in the value of chauffeured services, parking or personal security. Ralph W. Babb Jr., chief executive of Dallas-based lender Comerica, was compensated for a new country club membership, with an initiation fee and dues of more than $200,000. GMAC Financial Services chief executive Alvaro de Molina benefited from a $2.5 million payment from his company to help cover his personal tax bill."

Brookings Institution reports that the US government has spent $5.1 trillion on the development and manufacture of nuclear weapons, adding that if 'clean up, stockpiling and dismantlement is included, the cost rises to $5.5 trillion. The bailout of banksters, meanwhile, is estimated at over 8 TRILLION bucks. Almost 14 trillion ---pissed away!