Among the targets: Conservative donor David Koch, media mogul Rupert Murdoch and JPMorgan Chase CEO Jamie Dimon. The march plays into the broader themes of the 99 Percent movement by directly confronting leaders of the business and financial elite. It also specifically condemned Gov. Andrew Cuomo’s (D) proposal of a cap property taxes thought to benefit New York’s highest earners.

But Dimon has another connection to economic policy apart from his wealth, his politics and his role as head of a major financial firm: He sits on the Board of Directors of the New York Federal Reserve, one of the most important economic policymaking institutions in the country.

Dimon is a “Class A” director on the New York Fed board, meaning he is a banker who was chosen by the New York Fed’s member banks to represent them on the board. Under the Dodd-Frank financial regulation law, “Class A” directors no longer have a role in selecting the president of the regional Feds, but they did have that power during the first three years of Dimon’s tenure on the board.

When it comes to the Fed’s power to stimulate the economy by boosting spending, Dimon has mostly been a supporter. He endorsed “quantitative easing” and keeping short-term interest rates low. However, he has also been one of the leading proponents of the view that many of the current economic problems are caused by too much government regulation.

In the minds of many Wall Street observers, Dimon’s name is strongly associated with the financial crisis of 2007-2008. It was JPMorgan that initially developed the type of credit derivative that caused the failure of multiple financial firms, although JPMorgan itself managed to escape mostly unscathed from the crisis because it wasn’t as exposed as other firms.

Dimon has been a strong critic of financial regulation in the post-crisis era. He has called for the United States to withdraw from the Basel international regulatory regime after a raise was made to the minimum amount of capital that banks are required to keep on their books. He called the new rules “anti-American.” And he has publicly speculated that sluggish U.S. job growth is caused by new financial regulations from the federal government since 2008.

Most economists point to insufficient capital as the reason why so many financial firms failed or were bailed out by the government during the crisis. The New York Federal Reserve, as one of the institutions charged with regulating Wall Street banks, approved Wall Street’s use of credit derivatives, contracts that transfer risk from one financial firm to another. Wall Street banks used derivatives as a way to free up capital that they were otherwise required to keep on their books as insurance against a loan failing.

Since the crisis, Dimon has also been very involved in politics. He has close ties with the Obama administration and for a while had open access to Treasury Secretary Tim Geithner, who was president of the New York Fed during Dimon’s first three years on the board.

Many say that Dimon’s close relationship with Obama officials has cooled, and he has recently met with Republican presidential candidate Mitt Romney, who has surpassed President Obama as the biggest recipient of Wall Street campaign contributions in 2012.

Here’s video of the “Millionaires’ March” getting ready to head to Dimon’s house:

Chicago has been ground zero for the national mortgage crisis in many ways, and critics say that a welcome like the one received by the bankers isn’t surprising in an area where 1/3rd of the homes have underwater mortgages.

Take Back Chicago, organized by a coalition of labor unions and community groups and joined by Occupy Chicago, is just the latest show of public anger at the financial system in the Windy City — and in particular at its handling of the housing crisis.

“The government bailed the banks out on our backs, but they haven’t bailed us out,” said Thurlester Ibrahim, a member the Anti-Eviction Campaign, a community group in Chicago. “We’re losing our homes.”

In August 2011, the Chicago area saw a dramatic increase in home foreclosures – notices of mortgage default, which is the first step in foreclosure, were 6,239 in seven Chicago-area counties, according to RealtyTrac.

In a statement to The Wall Street Journal, the Mortgage Bankers Association acknowledged that they share responsibility for the financial crisis that has devastated communities around the country, and that it has cause their industry a “trust deficit.”

Groups on the state and federal level have tried to remedy this mistrust – most recently, Illinois Attorney General Lisa Madigan opened an investigation into ‘mortgage rescue companies’ in Chicagoland alleged to have used attorneys to collect fees to help customers and then not delivering, cheating homeowners out of nearly $375,000.

Madigan also opened an investigation into allegations of mass robo-signing in Illinois – a practice in which companies signed thousands of foreclosure documents without verifying their accuracy.

Yet some demonstrators say that in a state with an official unemployment rate at 9.9 percent, almost 1 percent higher than the national average, these moves are only a Band-Aid.

“We must target additional revenue for investment in public services and critical infrastructure that will create jobs and stimulate private investment in job creation,” said Curtis Smith, President of Lakeview Action Coalition, calling for a more long-term solution. “Serious living wage job creation is the fastest way to fix the economy – America is not broke, but our economy is broken.”

On Oct. 6, activists in major Texas cities plan to conduct nonviolent protests against economic injustice, corporate corruption and the major financial institutions they see as the cause of the current economic failure.

A centralized site called “Occupy Together” features links to local events in various regions around the country as well as international activity. The Occupy Texas site includes protest information for San Antonio, El Paso, Dallas, Austin and Houston.

Leaders say the demonstrations will be peaceful, apolitical and non-ideological. Civil disobedience training is in the works for Dallas-based activists and Houston rallyers are hosting a meet and greet to gauge protest attendance.

Dallas activists will gather at Pike Park and march to the Federal Reserve Bank while Houston protestors plan to walk from Market Square Park to the JP Morgan Chase Tower.

Nearly 900 people have RSVP’d at an Occupy Austin Facebook group. That group hasn’t picked a starting location — the Texas State Capitol is leading in an online poll, though a message on Occupy Texas says that Austin City Hall “is our focal point.”

More than 80 protestors among hundreds have been arrested since the New York City campaign launched on Sept. 17. Some activists say police have used unnecessary force on the crowds, including the use of pepper-spray, and dragging protestors face-down on the ground as shown in video posted to YouTube:

Women are fading from the U.S. finance industry.

In the past 10 years, 141,000 women, or 2.6 percent of female workers in finance, left the industry. The ranks of men grew by 389,000 in that period, or 9.6 percent, according to a review of data provided by the federal Bureau of Labor Statistics. The shift runs counter to changes in the overall work force. The number of women in the U.S. labor market has grown by 4.1 percent in the past decade, outpacing a 0.5 percent increase in male workers. The difference is pronounced at brokerage firms, investment banks and asset-management companies. [...]

[Y]oung women are becoming more rare in the country’s banks, brokerage houses and insurance companies. Since 2000, the number of women between the ages of 20 and 35 working in finance has dropped by 315,000, or 16.5 percent, while the number of men in that age range grew by 93,000, or 7.3 percent.

From a round-up of studies showing women are better investors than men, as they are likely to have lower short-term returns but are much better at avoiding catastrophic losses:

Women made fewer investment mistakes and were less likely to repeat them — or at least to admit to survey takers that they repeated them. [Merrill Lynch] said its results showed 35 percent of women said they had held a losing investment too long, while among men it was 47 percent. The worst part: Of those who did it once, 48 percent of the women and 61 percent of the men admitted to doing it again.

Similar gender differences turned up on other issues: 13 percent of women and 24 percent of men said they had bought a hot investment without doing any research. The men were more likely to repeat that mistake. “Everyone makes mistakes,” said Hannah Grove, chief marketing officer of Merrill Lynch Investment Managers. “Successful investors learn from theirs.”

The numbers come from a telephone survey of 1,000 people with household incomes of at least $75,000 and investable assets of at least $75,000. They jibe with what other surveys and studies have found.

Terrance Odean, a University of California at Davis professor who also has studied the issue, found women earn slightly better returns because they trade less frequently. Men, he says, are overconfident. That showed up in the Merrill Lynch survey, too. Women were more likely to say they are not knowledgeable about investing and more likely to rely on a financial adviser. Other studies show men are more willing to take risks and invest more aggressively than women.

Here’s a scary thought: Let’s say the European sovereign debt crisis flares up again, and one or two Euro banks fail. (Not a bank like UBS or Deutsche Bank, but a medium-sized bank like Bank of Greece or a Landesbank.) That, in turn, causes a U.S. money market fund — many of which have large exposures to Euro banks — to “break the buck,” which leads to another run on money market funds.

The Fed would be powerless to help. The Fed’s emergency lending authority (the famed Section 13(3)) requires that any emergency lending facility to non-banks be approved “by the affirmative vote of not less than five members” of the Fed Board of Governors. Currently, there are only four members of the Fed board: Bernanke, Warsh, Elizabeth Duke, and Dan Tarullo. Donald Kohn retired earlier this month, and the Senate has yet to vote on Obama’s three nominees (Janet Yellen, Peter Diamond, and Sarah Bloom Raskin).

While I don’t expect this scenario to happen, it’s certainly not out of the realm of possibility. And if it did happen, the Fed would have to sit on the sidelines and watch the carnage unfold.

I understand that Senate floor time is scarce (really, I do), but this absolutely has to be at the top of the list. Yes, I know it would be time-consuming to overcome Sen. Shelby’s opposition, but you know what? Screw Shelby. This has to get done, and soon.

Let’s translate a bit. The worst of the financial crisis — not the whole recession, including housing and jobs and businesses and investment, just the part of the recession that really mucked up the United States’ big banks — hit in the fall of 2008. Lending markets seized. That did not just mean that banks could not give loans to homeowners or companies. It meant that banks had trouble loaning cash to one another.

The Federal Reserve recognized the credit crunch as a catastrophe, and immediately took extraordinary measures to prevent the equivalent of an old-fashioned bank run in the invisible interbank lending market. Out of thin air, the Fed created programs like the Term Asset Loan Facility, a $1 trillion fund to secure the asset-backed securitization market — a major source of financing for banks and other companies. The alphabet soup of emergency Fed programs, including TALF, helped to thaw credit markets and stabilize the banking system.

But, Economics of Contempt notes, due to the opposition of one senator — Richard Shelby (R-Ala.) — the Fed does not have enough seated members on its board to create such programs in a crisis. And Congress does not have the wherewithal or speed to create them itself. Granted, there’s no emergency on the horizon. But, given that the United States is suffering from, oh, possible disinflation, mass long-term unemployment and record high debts, now is hardly the time to short-staff the central bank.

At The New York Times, Sewell Chan has more details on the problem of vacancies in important economic positions.

In May, the commission’s executive director was moved aside and succeeded by an economist from the Fed, a decision that drew criticism since the central bank is an object of the investigation because of its leading role in handling the crisis. In addition, five of the commission’s 14 senior staff members have resigned, including Matt Cooper, a journalist who was drafting the report.

Moreover, the commission’s chairman, Phil Angelides, and vice chairman, Bill Thomas, are finding it challenging to maintain support from all eight other commissioners. While squabbling within the panel has not broken into open dissent, several commissioners are divided over how much to blame specific individuals and banks, how and when to release the documents it has gathered and whether to make available testimony of government officials and bank executives it has interviewed privately.

In a joint interview by phone on Tuesday, Mr. Angelides, a Democrat, and Mr. Thomas, a Republican, said that the turnover’s effects had been exaggerated and that they were optimistic about a consensus.

“We’re doing our very best, and we will do our level best,” said Mr. Angelides. He said he had spoken recently with Thomas H. Kean, the former New Jersey governor who led the 9/11 Commission, which produced an acclaimed report that was a surprise best seller. “Several weeks out, they doubted whether they would get any kind of agreement on anything,” Mr. Angelides said.

The FCIC has always been something of a lame duck. It will complete its work months after the financial regulatory reform bill became law, and will have done little to help legislators draft the bill. Moreover, its report will come out after dozens of other books and reports on the financial crisis — long after government, journalism, economics and Wall Street itself got a handle on, if not a perfect understanding of, just what tipped banks into chaos.

That said, the FCIC is performing an enormously important function in demanding answers of the Wall Street titans responsible. It used its subpoena power, for instance, on Warren Buffett. And today, the FCIC is speaking with Dick Fuld, the now-reclusive former head of Lehman Brothers, whose spectacular collapse kicked off the worst of the credit crunch.

Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses: They created fake demand.

A ProPublica analysis shows for the first time the extent to which banks — primarily Merrill Lynch, but also Citigroup, UBS and others — bought their own products and cranked up an assembly line that otherwise should have flagged.

The products they were buying and selling were at the heart of the 2008 meltdown — collections of mortgage bonds known as collateralized debt obligations, or CDOs. As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created — and ultimately provided most of the money for — new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.

The biggest offender? Not Bear Sterns or Lehman Brothers, but Merrill Lynch, now part of Bank of America.

Just before the financial crisis and credit crunch, it originated 31 collateralized debt obligation deals and ended up purchasing parts of 13 of them, for instance.

Warren Buffett (Xinhua/ZUMA Press)

Testifying before the Financial Crisis Inquiry Commission this afternoon, Warren Buffett — the legendary value investor who heads Omaha-based investment giant Berkshire Hathaway — defended the behavior of the country’s credit ratings agencies and his own role in them, while acknowledging that the model under which they operate creates a flawed system of incentives.

[Economy1] The FCIC, now notorious for its grilling of Wall Street executives, mortgage originators, government regulators and others complicit in the boom and bust, summoned Buffett to discuss the ratings agencies, which assess the chance that a financial product will default and assign it a grade that determines its price and risk. Berkshire Hathaway is a major stakeholder in Moody’s, one of the country’s two main ratings agencies — a lucrative duopoly that gave wildly inaccurate assessments of mortgage-backed securities before the crash.

As a stakeholder, one might have expected Buffett to defend the industry. And he did to a certain extent, arguing that Moody’s executives were not negligent and do not deserve to be fired, for instance. But he also undercut his own defense, noting that he “hates” the ratings agency business model and seemingly admitting that he invested in Moody’s for its profitability rather than its soundness. It made for an anemic stand for a business on the verge of major regulatory changes.

The so-called “Oracle of Omaha” largely shifted the blame from himself and Moody’s, arguing that systemically important financial firms that require government life support should have their shareholders wiped out and managers fired — but not Moody’s. And he did not acknowledge the ratings agencies’ unique role in precipitating the financial crisis, instead saying that Moody’s main mistake was to miss the trillion-dollar housing bubble along with “the rest of America.”

He actually had to be compelled to testify before the commission, declining two invitations before the FCIC subpoenaed him, saying, “YOU ARE HEREBY COMMANDED to appear and give testimony.” Still, the 79-year-old appeared unruffled and energetic, dressed in a dark suit and a red tie, seated alongside the chief executive officer of Moody’s, Raymond McDaniel.

Bill Thomas, the vice chairman of the FCIC, broke the tension in the room as he opened his questioning. “Notwithstanding the subpoena, I want to thank you for coming,” he began.

Buffett quipped back, “I want to thank you for the supboena!”

But the exchange soon became heated, with Buffett providing defensive and gruff answers to questions. Phil Angelides, the head of the FCIC, said that he had found “a lot of fingers pointing away” and “very little self-examination” at the credit ratings agencies. There were “significant failures in the product your company offered,” he said, and ratings “proved to be highly defective, not just by a small measure, but by a large amount.”

Angelides added, “If we flipped a coin, it would have been five times more accurate” than Moody’s ratings of structured products — 90 percent of which needed to be downgraded.

But Buffett said that Moody’s just made the same “mistake that 300 million Americans made” and that he did not believe its business model should change or its management should be fired. “Rising prices are a narcotic,” he said, a narcotic that intoxicated investors including himself.

Angelides pressed him on whether he should have seen the housing bubble, given that government regulators and market participants started sounding the alarm in 2004. “The Cassandras were there,” Buffett conceded. “But who was going to listen to [hedge fund investors] John Paulson in 2005 or 2006 or Michael Burry?” (Both Paulson and Burry called the bubble early and shorted the housing market, making billions as the economy collapsed.) Buffett said, “I recognized something pretty dramatic going on,” but he thought it was a “bubblette” rather than a “four star” bubble.

He also said that while he recognized real faults in the credit ratings business, he did not think that changing the model was necessary. “I hate issuer pay,” he said, describing the system by which the companies that produce financial products pay agencies like Moody’s to rate them — a conflict of interest at the heart of the business, as financial firms pressure agencies to give them better ratings and shop around for triple-A marks.

But Buffett said that he did not think anything else would work better. When asked whether the United States should adopt Sen. Al Franken’s (D-Minn.) proposal to have the government assign a rater to a financial product, he demurred. “I suppose it could happen,” Buffett said. “I’m not arguing this is the perfect model. I’m just saying it’s hard to change.

“The wisdom of somebody picking out raters — is that going to be perfect? I don’t know,” he continued, noting that the Nebraska insurance authorities tell him which ratings agencies he needs to hire to rate his products.

At another point, Angelides criticized the “very structure of credit rating agencies,” saying, “It does seem in the end, there’s lots of upside but very little downside” if Moody’s and Standard and Poor’s misrate financial products. “I think much of corporate America is tilted that way,” Buffett said, before wanly arguing, “We’ve seen significant downside” due to hits to Moody’s stock price.

Buffett also acknowledged that he personally has little investment in accurate ratings. “We hope for misrated securities, because it gives us a chance to earn a profit,” Buffett said. “I think they misrate us! [Moody's] have us a notch below Standard & Poor’s.”

Douglas Holtz-Eakin, the Republican former director of the Congressional Budget Office, repeatedly noted that Buffett’s testimony showed that ratings agencies were profitable due to their duopoly, rather than the usefulness of their ratings. Buffett did not disagree, instead noting that Moody’s and Standard and Poor’s ability to “set prices” — to somewhat arbitrarily name the fee for a rating, due to a lack of competition — made it an attractive business.

Buffett conceded that as an investor, he considered the duopoly “a wonderful economic model for the business.” And he added that Berkshire Hathaway does not rely on credit ratings agencies to analyze financial products, instead doing its own due diligence in-house.

He later said that ratings agencies might function best as a monopoly. “If there were 10 ratings agencies, all equally well-regarded [and] all acceptable to the market, they would compete on price, laxity or both,” he said. “If there were just one ratings agency, they would have no reason to compete.” He also noted that Berkshire Hathaway is reducing its stake in the company.

The case is now famous. The homeowner had applied for the Home Affordable Mortgage Program, or HAMP, an Obama administration initiative to give distressed and tapped-out borrowers lower monthly payments. Applicants are meant to be just scraping by — they have to file hardship affidavits and the government presumes they have trimmed all the fat from their budgets. But this “HAMPlicant,” the writer on the blog Calculated Risk noted, had given up on a $1,880 a month mortgage and instead had spent hundreds of dollars at a spa, tanning salon, gourmet grocery store and liquor store, capping it all off with $1,700 in charges to mall stores from Baby Gap to Best Buy.

[Economy1] Bloggers seized upon the case, and used it to make a broader argument. Such “foreclosure queens,” to coin a term (and to try to capture some of the scorn heaped on these strategic defaulters on the Internet) are stopping paying their mortgages and taking to the malls in big enough numbers to account for a surprising rise in consumer spending. Put another way: People ditching out on their mortgages are holding up America’s consumption.

Anecdotally, at least, it seems true. Millions of homeowners now owe more on their mortgage than their house is worth (meaning that if even if they sold the house, they would still owe the bank) and therefore have simply stopped paying their mortgages. Mortgage lenders and courts are so backed up with foreclosures — hundreds of thousands of them per month — that the time between the first late payment and eviction now stretches as long as 20 or 24 months in some parts of the country. That means that when a homeowner decides to stop sending off that $1,000 or $1,500 or $5,000 check to the bank, she has that much more spending cash until she needs to move out and find a new home.

But the anecdotes do not yet an economic reality make — and other economists caution that the evidence that the phenomenon is widespread enough to change the macroeconomic picture is thin. Despite that reality, the mortgage-distress and foreclosure blogs have hundreds of such stories of people “relieved” once they decide to default, determining that it makes more sense for the bank to take the house back. One young couple, for instance, wildly overpaid for their home in 2006. Six months ago, they decided to stop sending in checks, and to wait for the bank to contact them. They just returned from a week-long New York City vacation and have not heard a word from the bank.

It was Paul Jackson, the founder of Housing Wire, who first put the economic pieces together and said that strategic defaulters — people walking away from their mortgages — must be the reason consumption is rising despite high unemployment and declining real wages. “[M]illions upon millions of consumers in the U.S. [are] meeting their shelter needs for free, even if only temporarily; and what’s becoming of any extra disposable income, since no rent or mortgage need be paid?” Jackson wrote. “[W]e’re seeing consumer spending head northward, and for five straight months, too…. Put simply: people are spending their mortgages.”

The argument earned some guffaws — from, for instance, prominent economics and housing blogger Barry Ritholtz, who called it “bass ackwards.” People defaulting on their mortgages had run out of credit and still had high debt burdens, he argued. How could they be buying enough to raise consumption on a national scale?

But the idea gained support from some major economists who declared the logic impeccable. Mark Zandi, the chief economist at Moody’s Economy.com and a much-followed economic prognosticator, declared it a convincing case, and did some back-of-the-envelope math to support it. “Some 6 million homeowners not making mortgage payments [are] probably freeing up roughly $8 billion in cash each month,” he said. “Assuming this cash is spent (not too bad an assumption), it amounts to nearly one percent of consumer spending.”

Still, the hypothesis remains a hypothesis say other economists that specialize in housing — and ultimately the numbers do not add up, at least not yet. While the microeconomic phenomenon (of strategic defaulters spending more) is certainly occuring, the macroeconomic one (of strategic defaulters spending enough to lift national consumption rates) is not. Strategic defaulters on the loose in the malls account for just a small fraction of the gains in consumer spending, better explained by pent-up demand, continued low prices and improving sentiment on Main Street.

Christopher Thornberg — an economist, the principal at Beacon Economics in Los Angeles, and an early identifier of the real-estate bubble — calls Jackson’s theory an “urban legend,” compelling but illusory. “I did some calculations, and even being generous, all the money not being spent on mortgage payments equals about 0.7 percent of income, compared to 0.3 percent of income three years ago,” he says. “Consumer spending is rising at a 3 percent annualized pace [meaning] only a small portion of [rising consumer spending] can be explained by strategic defaults.” The rest simply stems from a better economic climate and many wage-earners and families tentatively deciding to open up their wallets.

Dean Baker, the co-director of the Center for Economic and Policy Research in Washington, D.C., agrees. He argues that the rise in consumption is simply a rebound from an unusually deep trough in 2009. “We had such a sharp fall-off last year that to some extent it’s going to be self-correcting,” he notes. “The fact that we’ve somewhat of an uptick is not that surprising to me.” He adds that most of the proponents of the theory on the internet were looking to March purchasing data that was unusually high due to the early Easter. “I’m just not conviced we’ve seen so much of a jump in consumption that we need to explain it,” he adds.

That said, the rising number of defaulters will only increase the backlog for banks and courts. The growing awareness of the phenomenon could further fuel it, as well. And in the next year — with unemployment still high and the foreclosure crisis worsening — the effect of the cash-rich strategic defaulters could become more and more outsize. To see if strategic defaulters are moving the national consumption figure, Baker says, look to to California, Florida, and Nevada – three states with sky-high unemployment and the highest rates of foreclosure. Thus far, consumer spending has not turned around in those three states. And if it does, and sharply, it might be the strategic defaulters to blame.

The hangover. It continues.