Financial System

NEW YORK - The drug cartels' boxes of cash fit precisely into tellers' windows at their bank in Mexico. When Iran needed to transfer $55 million in gold bullion, the country, like others on the United States' rogues list, found the same bank willing to assist: HSBC, the British financial giant. Although the U.S. Justice Department portrayed HSBC as an effective accomplice to violent drug lords and hostile regimes, authorities chose not to prosecute the bank. HSBC instead will pay $1.9 billion, a financial penalty worth about 11% of the bank's profit last year.

WASHINGTON - The Obama administration reacted with new sanctions and blunt warnings Monday to a North Korean declaration that it had "completely scrapped" the 1953 armistice that ended the Korean War. Sharpening the tensions on the peninsula, the North Korean regime declared in the party newspaper Rodong Sinmun that the 60-year-old truce was over and "the time for final showdown has arrived. " It severed a hotline that has been used to prevent an unintended confrontation between North and South Korea and angrily condemned a 13,000-troop U.S.-South Korean military exercise that began Monday.

WASHINGTON - It didn't take long for former Treasury Secretary Timothy F. Geithner to land a new job, and it's not on Wall Street, though it's in the same area code. The Council on Foreign Relations, a nonpartisan think tank in New York, said Wednesday that Geithner would become its newest senior fellow this month. He stepped down as Treasury secretary Jan. 25. President Obama has nominated White House Chief of Staff Jacob J. Lew to replace him. Geithner has followed this route before.

As the housing bubble was bursting in 2007, an analyst at credit rating firm Standard & Poor's made light of the situation with a song. He went from office to office serenading co-workers with his ode to America's deepening real estate crisis. "Strong market is now much weaker, subprime is boi-ling o-ver, bringing down the house," the analyst sang to the tune of the Talking Head's "Burning Down the House. " The scene was among the details - some meant to be embarrassing - released in government lawsuits against the world's biggest credit rating firm.

Federal officials told banks Monday that infusions of government bailout money would come with new strings attached -- specifically, the potential that taxpayer dollars could be converted into voting shares that would give the government more influence over how their institutions were run. The move, announced by the Treasury Department and other regulators, would allow the government to provide more capital to struggling banks while giving the banks more flexibility in how the money is repaid.

China may be the world's second-largest economy, but its financial system still answers to strict state controls that critics say hold back the country's development. The free market plays little role in determining how China's currency is valued, how banks set  interest rates or how much capital is allowed to flow in and out of the country. But in the last two weeks, a series of moves has raised hopes that financial freedoms could be expanding in the so-called birdcage economy.

Treasury Secretary Timothy F. Geithner has a message for voters as they listen to Republican presidential candidates call for repeal of the 2010 Dodd-Frank financial overhaul law: Remember the pain. "I would say remember 2008 and 2009," Geithner told reporters during a news conference touting the benefits of the overhaul. "Remember the fact that the reason why we're living with very high unemployment with millions of Americans that have lost their homes, terrible damage to the basic economics of America is because of the failures that caused this crisis in the financial system," he said.

WASHINGTON -- Bailed-out insurance giant American International Group, whose largely unregulated activities helped trigger the financial crisis, could face special federal oversight as one of a handful of large firms outside the banking system that pose a risk to the nation's fiscal health if they were to go bankrupt. The company, in which taxpayers still have a 15.9% ownership stake, said Tuesday it had been notified by federal officials that it is being considered for designation as a systemically important financial institution.

The rate now has nearly doubled since mid-March and has surged from 0.31% just since early May, when Europe's sovereign-debt crisis began to balloon. The rate now has nearly doubled since mid-March and has climbed from 0.31% just since early May, when Europe's sovereign-debt crisis began to balloon. The world's big banks continue to grow leerier about lending to one another, a signal that the latest tensions in the financial system aren't abating. Still, warning signs in the credit markets are a long way from what we saw in late 2008, when the banking system was on the verge of a total meltdown.

BEIJING - China may be the world's second-largest economy, but its financial system still answers to strict state controls that critics say hold back the country's development. The free market plays little role in determining howChina'scurrency is valued, how banks set interest rates or how much capital is allowed to flow in and out of the country. But in the last two weeks, a series of moves has raised hopes that financial freedoms could be expanding in the so-called bird cage economy.

WASHINGTON -- It didn't take long for former Treasury Secretary Timothy F. Geithner to land a new job, and it's not on Wall Street -- though it's in the same area code. The Council on Foreign Relations, a nonpartisan think tank based in New York, said Wednesday that Geithner would become its newest senior fellow later this month. He stepped down as Treasury secretary on Jan. 25. President Obama has nominated White House Chief of Staff Jacob J. Lew to replace him. Geithner has followed this route before.

WASHINGTON - In unveiling a new stimulus plan, Japan's central bank for the first time set an ambitious inflation target aimed at breaking the nation out of its long deflationary trap and economic stagnation. But many analysts and investors were disappointed with Tuesday's action. They said the moves by the Bank of Japan, in response to relentless nagging by Japan's new prime minister to be more aggressive, fell far short of what was needed to put the world's third-largest economy on a path of sustained growth - offering little hope that Japan would provide a boost to the fragile global economy any time soon.

Revolutionary changes are coming at us at supersonic speed, bringing new challenges that are existential and global. Yet our political system seems incapable of adapting to, or even fully acknowledging, those changes. Instead, the system is constricted by ideas and attitudes better suited to the 19th century. In the current issue of Vanity Fair, Todd Purdum equates the current era with the decades before and after 1500 during which the New World was discovered and explored, trade became a global enterprise, the Reformation broke the religious monopoly of the Roman Catholic Church, the feudal system gave way to nation states and movable type and the printing press created the first form of mass communication.

WASHINGTON - President Obama on Thursday will nominate his chief of staff, Jacob J. Lew, a fiscal policy expert with deep Washington roots, as his new Treasury secretary to help lead the administration through budget battles ahead. Lew, 57, would replace Timothy F. Geithner, who has been planning to leave the administration this month, according to a White House official. The official announcement is expected to come at 10:30 a.m. Pacific time. “Throughout his career, Jack Lew has proven a successful and effective advocate for middle-class families who can build bipartisan consensus to implement proven economic policies,” the White House said.

In “The Fountainhead” and her other tomes of hyper-libertarian fantasy, Ayn Rand posits that society is composed of “Makers and Takers.” In her vision, it is the creative supermen of industry who are the Makers and it is the work-averse, collectivist leeches who feed off the wealth of capitalist empire builders who are the Takers. This week's news about AIG and the big banks suggests that Ayn Rand was wrong. A pretty strong argument can be made that the Makers in American society are the millions of men and women who raise their children the best they can, take part in the life of their communities as coaches, classroom helpers and volunteers for a thousand good causes and put in long hours as employees keeping the nation's businesses and industries going while receiving diminishing pay and benefits.

WASHINGTON -- At the same time American International Group Inc. has been running high-profile ads thanking America for the bailout that saved the company, the insurance giant reportedly is considering joining a shareholder suit against the U.S. government for the rescue. The AIG board will meet Wednesday and could decide to join a $25-billion suit led by former chief executive Maurice "Hank" Greenberg, the New York Times reported . The suit by Greenberg's Starr International Co. alleges that the 2008 bailout of AIG by the Treasury Department and Federal Reserve Bank of New York in which the government received an 80% ownership stake in the company violated the rights of shareholders.

The Obama administration this week will propose the most significant new regulation of the financial industry since the Great Depression, including a new watchdog agency to look out for consumers' interests. Under the plan, expected to be released Wednesday, the government would have new powers to seize key companies -- such as insurance giant American International Group Inc. -- whose failure jeopardizes the financial system.

On the day when the nation's biggest bank suspends cash dividend payments to shareholders--for the first time since 1813--it should be easy to paint a picture of America's troubled financial system. A black hole . . . a pathetic tale of bad loans and outrageously inept managers . . . a monumental disaster that threatens to bring down the entire economy, not to mention the stock market. That would be an easy picture to paint, all right.

WASHINGTON - American International Group Inc. has been trying to put on a new face by thanking America for its bailout. But it may end up with more egg on its face for weighing a lawsuit against the U.S. government over the rescue. Directors of the insurance giant, at their regular meeting Wednesday, are expected to consider joining a suit that argues the bailout - U.S. pledges totaling more than $182 billion - shortchanged the company's shareholders. "It takes a lot of gall to say the government that bailed you out didn't pay you enough," said John C. Coffee, a Columbia Law School professor and expert on corporate governance.