Category Archives: too big to fail

Membership Has Its Privileges

28 Wednesday Mar 2012

Posted by in Congress, Goldman Sachs, too big to fail, Wall Street

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As they say in the American Express commercials, membership has its privileges. Membership in the Big Club is no different. It allows you to do things like ignore six subpoenas from the Feds:

“U.S. securities regulators accused Wells Fargo & Co on Friday of repeatedly ignoring its subpoenas for documents in connection with a probe into the bank’s $60 billion sale of mortgage-backed securities.

The Securities and Exchange Commission’s filing in a San Francisco federal court seeks to compel the fourth largest U.S. bank to hand over documents. The SEC said it has issued several subpoenas since September…According to the SEC’s Friday filing against Wells Fargo, the agency has issued six subpoenas to Wells Fargo since September 30.”

Try that one time and see what happens to you. Membership also allows you to lie to Congress without any fear of repercussions:

“Jon S. Corzine, MF Global’s chief executive officer [also former CEO of Goldman Sachs as well as New Jersey’s former governor and senator], gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co., according to a memo written by congressional investigators.

Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says.

[..]

Corzine, 65, in testimony in front of the House panel in December, said he did not order any improper transfer of customer funds. Corzine also testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.

“I never gave any instruction to misuse customer funds, I never intended anyone at MF Global to misuse customer funds and I don’t believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds,” Corzine told lawmakers in December.”

Anybody think Corzine will be held accountable? If you do I’ve got a bridge for sale. Cheap.

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It’s the Demand, Stupid

04 Monday Jul 2011

Posted by in Clinton, economy, Financial Crisis, too big to fail

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Bill Clinton blathers:

“President Bill Clinton says the nation’s corporate tax rate is “uncompetitive,” and called for a lower rate as part of a “mega-deal” to raise the debt ceiling.

“When I was president, we raised the corporate income-tax rates on corporations that made over $10 million [a year],” the former president told the Aspen Ideas Festival on Saturday evening.

“It made sense when I did it. It doesn’t make sense anymore – we’ve got an uncompetitive rate. We tax at 35 percent of income, although we only take about 23 percent. So, we SHOULD cut the rate to 25 percent, or whatever’s competitive, and eliminate a lot of the deductions so that we still get a FAIR amount, and there’s not so much variance in what the corporations pay.”

Paul Krugman responds:

“Over the last two years profits have soared while employment has remained disastrously high. Why should anyone believe that handing even more money to corporations, no strings attached, would lead to faster job creation?

[…]

[T]he evidence strongly says that the real reason businesses are sitting on cash is lack of consumer demand. In any case, if corporations already have plenty of cash they’re not using, why would giving them a tax break that adds to this pile of cash do anything to accelerate recovery?

[…]

Lack of corporate cash is not the problem facing America. Big business already has the money it needs to expand; what it lacks is a reason to expand with consumers still on the ropes and the government slashing spending.

What our economy needs is direct job creation by the government and mortgage-debt relief for stressed consumers. What it very much does not need is a transfer of billions of dollars to corporations that have no intention of hiring anyone except more lobbyists.”

BTW Bill, I don’t think we need economic advice from the president who set “too big to fail” in motion with the repeal of Glass–Steagall, or the president who lit the fuse on the derivatives time-bomb with the Commodity Futures Modernization Act, or the president who fired Brooksley Born when she tried to warn us about what would happen if derivatives weren’t regulated. Keep it to yourself. Please.

Obama Makes Nice-Nice With the Banksters

13 Monday Jun 2011

Posted by in economy, financial reform, Obama, special interests, too big to fail, Wall Street

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FDR, 1936:

“We had to struggle with the old enemies of peace–business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me–and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.”

Barack Obama, 2011:

Can’t we all just get along?

“A few weeks before announcing his re-election campaign, President Obama convened two dozen Wall Street executives, many of them longtime donors, in the White House’s Blue Room.

 The guests were asked for their thoughts on how to speed the economic recovery, then the president opened the floor for over an hour on hot issues like hedge fund regulation and the deficit.

Mr. Obama, who enraged many financial industry executives a year and a half ago by labeling them “fat cats” and criticizing their bonuses, followed up the meeting with phone calls to those who could not attend.

The event, organized by the Democratic National Committee, kicked off an aggressive push by Mr. Obama to win back the allegiance of one of his most vital sources of campaign cash — in part by trying to convince Wall Street that his policies, far from undercutting the investor class, have helped bring banks and financial markets back to health.

[…]

 The president’s top financial industry supporters say they are confident that the support Mr. Obama needs will ultimately be there, despite the financial industry’s unhappiness over his efforts to tighten regulation of their businesses. But it is clear that those supporters will have to work much harder to win over the financial services industry than they did in 2008, before Wall Street’s bust, the subsequent clashes over policy and the sometimes bitter personal differences that lingered afterward.”

Just what in the Sam freaking Hill does the financial industry have to be unhappy about? “Too big to fail” is bigger than ever, no meaningful reform of the industry was passed, their salaries and bonuses are back at or above what they were before these greedy bastards nearly wrecked the world’s economy, none of them has gone to jail, and one of their lackeys is still the Treasury Secretary. Yeah, the big banks are back to good health alright. Nobody else is, but they are.

 “And as Mr. Obama seeks to rebuild, Mitt Romney, a former Massachusetts governor who is seeking the Republican presidential nomination, is using his background as a venture capital executive and his policy proposals to woo financial-industry donors.

Last week, Mr. Romney held three fund-raisers in Greenwich, Conn., and New York, including a reception hosted by Anthony Scaramucci, a hedge fund manager who donated to Mr. Obama in 2008. Mr. Scaramucci said he wanted a president who embodied pragmatism and middle-of-the-road solutions. In 2008, that candidate was Mr. Obama, he said; today, it is Mr. Romney.”

So if next year’s presidential election comes down to Obama vs. Romney it’s just a question of whose lips best fit on the bankster’s backsides as to who gets the biggest campaign contributions, not to mention the attached strings that come with said contributions. No matter who wins, Wall Street can’t lose.

And the beat goes on.

Senator Sanders on the Class War

11 Saturday Dec 2010

Posted by in budget, Clinton, Congress, economy, Financial Crisis, Obama, Politics, special interests, Taxes, too big to fail, Wall Street

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Just one small segment of Sen. Bernie Sanders’ marathon speech on the floor of the Senate yesterday, dealing with the class war and the winners and losers in that war:

“…in the year 2007, the top 1 percent of all income earners in the United States made 23.5 percent of all income. The top 1 percent earned 23.5 percent of all income–more than the entire bottom 50 percent.”

“From 1980-2005, 80% of all income went to the top 1%.”

Not much question who the winners are, and not much question now whose side President Obama is on. Charles Ferguson, director of Inside Job, wrote in Salon:

“It is…overwhelmingly clear that President Obama and his administration decided to side with the oligarchs — or at least not to challenge them. This raises the question of why they have made this choice, and whether it is a correct (in the sense of rationally self-interested) calculation on their part.

As to the “why,” several explanations have been proposed. One is that the president, as a matter of individual psychology, is extremely conflict-averse, preferring to avoid fights no matter how important. A second hypothesis is that the president is simply doing the most he can, given the political climate and the furious lobbying effort with which he is confronted. This explanation, however, is belied by [his] personnel appointments, among other evidence.”

The latest example of this is in President Obama’s choice for director of OMB. The new one, Jacob Lew, came from Citigroup. The old one, Peter Orszag, went to Citigroup. More Ferguson:

“A more disturbing possibility is that the Obama administration has simply codified a new strategic equilibrium in American politics, one first devised by the Clinton administration, in which both parties are supine with regard to the financial sector and the wealthy.”

President Obama brought out former President Clinton yesterday to endorse his “deal.” Bill Clinton, whose “bi-partisan outreach” during his administration left two ticking time bombs in the economy in the form of the repeal of Glass-Steagall, which created “too big to fail,” and the Commodity Futures Modernization Act, which banned the regulation of derivatives.

Sen. Sanders brought up the subject of free trade. Just last week President Obama signed the South Korean version of NAFTA. I hear Ross Perot’s giant sucking sound again.  All you need to know about the South Korean “deal” it is that it got two thumbs up from those two staunch defenders of the middle-class and working people–the Chamber of Commerce and Mitch McConnell.

As good as it was to hear Sen. Sanders’ speech yesterday, I fear he is just a voice crying in the wilderness. The president’s “deal” is now being loaded up with enough pork to buy enough votes to win passage. In short, the fix is in, the wealthy and powerful will win again. We keep going back to George Carlin, “It’s a big club and we’re not in it.”

“The Stealth Coup D’Etat”

30 Saturday Oct 2010

Posted by in Democrats, economy, Republicans, special interests, too big to fail, Wall Street

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“Give me control of a nation’s money and I care not who makes her laws.”—Mayer Amschel Rothschild.

From Tyler Durden’s, The Stealth Coup D’Etat:

“…for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations.

…From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent…The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man).”

…Once you have control of the financial powers of the U.S. via the tiny Elites of the Congress, the Executive Branch, the Federal Reserve and the U.S. Treasury, then the rest of the government will follow.

This is how the Stealth Coup D’Etat works: the machinery of governance grinds through a simulacrum [ a slight, unreal, or vague semblance] of democracy, but it’s all for show; the theoretical structures are now completely different from the political realities…The Power Elites and their Stealth Coup are apolitical. They don’t care about the color of your uniform; whether you wear a blue shirt or a red shirt is inconsequential.”

Or as Karl Denninger at The Market Ticker put it, “You’re just voting for which of the two bank robbers you like being assaulted by more – the guy with the red ski mask or the one with the blue one.”

Going back to where we began, Durden concludes:

“The Stealth Coup can be traced by a simple dictum: follow the money. Once you control the money–the money supply, the manipulation of yields and bond sales, the budgeting and borrowing–then you control everything.

This is how a small Financial Power Elite dominates the vast, sprawling American Empire.”

Openness and Transparency, Anyone?

28 Thursday Oct 2010

Posted by in bailout, Obama administration, too big to fail, Wall Street

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Fiction:

My Administration is committed to creating an unprecedented level of openness in Government.  We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration. Openness will strengthen our democracy and promote efficiency and effectiveness in Government.

Transparency promotes accountability and provides information for citizens about what their Government is doing.  Information maintained by the Federal Government is a national asset. My Administration will take appropriate action, consistent with law and policy, to disclose information rapidly in forms that the public can readily find and use.

Fact:

“The late Bloomberg News reporter Mark Pittman asked the U.S. Treasury in January 2009 to identify $301 billion of securities owned by Citigroup Inc. that the government had agreed to guarantee. He made the request on the grounds that taxpayers ought to know how their money was being used.

More than 20 months later, after saying at least five times that a response was imminent, Treasury officials responded with 560 pages of printed-out e-mails — none of which Pittman requested. They were so heavily redacted that most of what’s left are everyday messages such as “Did you just try to call me?” and “Monday will be a busy day!”

None of the documents answers Pittman’s request for “records sufficient to show the names of the relevant securities” or the dates and terms of the guarantees.”

So much for openness and transparency.

William Black: “Fire Holder, Fire Geithner, Fire Bernanke”

26 Tuesday Oct 2010

Posted by in AIG, bailout, Financial Crisis, Foreclosures, Justice Department, Obama administration, too big to fail, Wall Street

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Lisa Epstein and William Black on Dylan Ratigan’s show yesterday:

Speaking of Geithner telling “one lie after another”:

“The United States Treasury concealed $40 billion in likely taxpayer losses on the bailout of the American International Group earlier this month, when it abandoned its usual method for valuing investments, according to a report by the special inspector general for the Troubled Asset Relief Program.

“In our view, this is a significant failure in their transparency,” said Neil M. Barofsky, the inspector general, in an interview on Monday.”

Zero Hedge has more of Mr. Barofsky’s report:

“This conduct has left the Treasury vulnerable to charges it has manipulated its methodology for calculating losses to present two different numbers depending on its audience: one designed for release in early October as part of a multifaceted publicity campaign touting the positive aspects of TARP and emphasizing the reduction in anticipated losses, and one, audited by the GAO for release in November as part of a larger audited financial statement. Here again, Treasury’s unfortunate insensitivity to the values of transparency has led it to engage in conduct that risks further damaging public trust in the Government.”

‘Manipulated its methodology for calculating losses?” Didn’t Jeff Skilling and Andy Fastow go to prison for that?

“Risks further damaging public trust in the Government?” Is that even possible?

Foreclosuregate, Cont’d

20 Wednesday Oct 2010

Posted by in economy, Foreclosures, Justice Department, Obama administration, too big to fail, Wall Street

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Bank of America has completed its “internal review” of alleged improprieties in its foreclosure proceedings–a review of 102,000 foreclosures that took all of 17 days–and found, surprise surprise, zero mistakes:

“Bank of America  announced on Monday that it would resume home foreclosures in nearly two dozen states, despite the running controversy over how banks handled tens of thousands of cases of homeowners facing eviction.

Bank of America, the nation’s largest bank and the servicer of roughly one in five American mortgages, insisted that it had not found a single example where a foreclosure proceeding was brought in error.”

Not so fast, says one state’s assistant attorney general involved in their own investigation:

“A day after the bank said it would once again pursue defaulting borrowers in the 23 states where foreclosures were overseen by the courts, judges in Florida said they were expecting even more challenges from defaulting homeowners.

…“There has been an attempt by some of the major servicers to indicate there are no problems,” said Patrick Madigan, an assistant attorney general in Iowa. “We’re not at the end of this process. We’re at the beginning.”

But BofA has much bigger problems than a few lawsuits from a few homeowners, the big boys are coming after them to buy back the mortgage bonds packed with toxic garbage that BofA was peddling:

“The fears behind mortgage bond-gate might be real after all. Reports indicate that Bank of America is has been asked to repurchase some of its mortgage bonds by some very prominent investors due to procedural failures. Who are those investors? BlackRock Inc. — the largest money manager in the world, PIMCO — the largest Bond fund investor, and the New York Federal Reserve are said to be among them…Metlife, the biggest U.S. life insurer, is expected to join this group of investors demanding repurchase.

Bank of America is the target thanks to its acquisition of Countrywide in 2008. These investors say that Countrywide failed to properly service mortgages which were repacked into bonds. How many bonds? According to Bloomberg, these investors want Bank of America to repurchase $47 billion worth.”

Here’s why this entire fiasco, from origination to securitization to foreclosure, is going to be difficult if not impossible to unwind. From a BofA June court filing:

“It appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies”…[T]hat is the reason that two different banks sometimes try to simultaneously foreclose on the same home.”

Finally, the feds are getting in on the act, too:

“Members of President Obama’s Financial Fraud Enforcement Task Force [Justice, Treasury, HUD, and the SEC] and other administration officials are scheduled to meet Wednesday to discuss the foreclosure crisis.”

Frankly, I have no confidence that anything substantive will come from this group. I see one of two outcomes. Either they open an investigation, bury it, and we never hear a word of it again, or they go after a few low-level flunkies and the MOTU skate. As usual.

To be continued…

Who Says Crime Doesn’t Pay?

16 Saturday Oct 2010

Posted by in economy, Financial Crisis, Justice Department, Obama administration, too big to fail, Wall Street

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It certainly paid well for two former executives of Countrywide yesterday in the settlement of a civil lawsuit brought by the Securities and Exchange Commission charging Angelo Mozilo, former CEO, and David Sambol, former president, with securities fraud and insider trading. A scam which netted the two a total of nearly $160 million.

The first two paragraphs of the story read like this:

“Angelo R. Mozilo, who as head of home-loan giant Countrywide was at the center of the housing boom and bust, agreed Friday to pay a record fine as part of a $73-million settlement of a government fraud lawsuit over the lender’s near-collapse.

The deal with the Securities and Exchange Commission requires Mozilo, the highest-profile figure to be accused of wrongdoing in the mortgage meltdown, to personally pay a $22.5-million fine. The government said it would be the largest penalty ever paid by a senior executive of a public company in an SEC settlement.”

Then come the “buts”:

“Mozilo…also agreed to pay $45 million in “ill-gotten gains” to former Countrywide Financial Corp. shareholders, who lost billions when the company’s stock price plunged as defaults on home loans surged. But Bank of America Corp., which bought Countrywide in 2008, and Countrywide’s insurers will pay that amount under terms of Mozilo’s employment contract.

Countrywide’s former president, David Sambol, agreed to pay $520,000 in fines and $5 million in restitution. Bank of America will reimburse him for the latter.”

So to recap, Mozilo pays $22.5 million, Sambol pays $520,000. During the period covered by the suit Mozilo received $141.7 million, Sambol $18.3 million, while Countrywide was losing $1.6 billion. But that’s just a snapshot:

“For years, Mr. Mozilo was among the highest-paid executives in America and his S.E.C. fine is a fraction of the vast wealth he amassed running Countrywide. In one eight-year period, from 2000 until he left the company in 2008, Mr. Mozilo received total compensation of $521.5 million, according to Equilar, a compensation research firm.”

Mozilo is still the subject of a criminal investigation by the Justice Department, but anyone who believes this DOJ will pursue criminal charges against any of the financial industry’s Masters of the Universe hasn’t been paying attention. The next one prosecuted will be the first. Gotta keep looking forward, you know.

Foreclosure Fraud Just the Tip of the Iceberg

12 Tuesday Oct 2010

Posted by in bailout, Congress, economy, Financial Crisis, financial reform, financial regulation, Foreclosures, Justice Department, Obama administration, special interests, too big to fail, Wall Street

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Dylan Ratigan, Ohio Secretary of State Jennifer Brunner, and Karl Denninger of The Market Ticker unravel foreclosure fraud:

To reiterate, the fraud in foreclosures that we’re seeing now is just the tip of the iceberg. The purpose is to try and cover up, and cover for, the fraud in the mortgage process all the way back to the origination of the mortgages, which were then packaged into securities and fraudulently sold to investors as AAA quality, a rating gained by paying off the ratings agencies. As our parents always told us, one lie requires another one to cover up the first one, which requires another lie to cover up the second one, and so on, and so on, and…….

In my opinion, that’s why the Senate tried to sneak through the legislation that President Obama vetoed—it would have given the big banks protection from liability in this entire mess. As an aside–again just my opinion– but the only reason the president vetoed the bill was because of the attention it received and the light that was shone on its alleged “unintended consequences” (and if you’ll buy that….) My cynical nature when it comes to politicians tells me that “sending the bill back for modifications” translates into, ‘We’ll try again when the heat’s off.’

It’s also why, according to David Axelrod, the hope in the White House is that “this moves rapidly and that this gets unwound very, very quickly.” And why the White House opposes a national moratorium on foreclosures. A moratorium would give investigators and especially some 40 states’ attorneys general time to delve back into fraud and deceit at every level of the process

As Mr. Denninger explained, the only remedy is to force the big banks to buy back the toxic securities that they sold to investors under false pretenses. They can’t do that, which means Chase, BofA, et al, are insolvent. Actually, they’re insolvent now but for the phony profits from peddling this garbage to unsuspecting investors.

There is a provision in the financial reform legislation for resolution authority, that is breaking up large financial institutions that pose a “systemic risk” to the entire economy. Will Congress use it or will they do what they have done in the past and bail out their Wall Street cronies and contributors—again. If Republicans take control of Congress will they hold true to their campaign rhetoric of “no more bailouts” or will they dance to the tune of their big donors on Wall Street?

We may soon find out.