Author: Matthew G. Saroff

Andrew Cuomo Sues Ken Lewis and Bank of America for Fraud

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Now that the SEC has settled with Bank of America over its misrepresentations, New York State Attorney General Andrew Cuomo is going after the bank for the same thing:

Former Bank of America Corp. Chief Executive Officer Kenneth Lewis was sued by New York Attorney General Andrew Cuomo for defrauding investors and the government when buying Merrill Lynch & Co. The bank agreed to pay $150 million to settle a related lawsuit by U.S. regulators.

Cuomo also sued the bank’s former chief financial officer Joe Price and the bank itself for not disclosing about $16 billion in losses Merrill had incurred before it was bought by Bank of America in an effort to get the merger approved. Afterwards, Lewis demanded government bailout funds, Cuomo said.

“We believe the bank management understated the Merrill Lynch losses to shareholders, then they overstated their ability to terminate their agreement to secure $20 billion of TARP money, and that is just a fraud,” Cuomo said today at a telephone press conference. “Bank of America and its officials defrauded the government and the taxpayers at a very difficult time.”

Of note is the fact that Bank of America performed its due diligence on Merrill Lynch in only 25 yours, which, along with their firing of their general counsel when he suggested that there might be issues, does appear to indicate that something stinks here.

Another bit of weirdness is that while BoA had intended to buy a brokerage for some time, it wasn’t Merrill, at the board meeting in which the proposal was mooted, most of the board members thought that they would be purchasing Lehman:

When Bank of America Corp.’s board met to approve the acquisition of an investment bank on Sept. 15, 2008, members thought they were going to buy Lehman Brothers Holdings Inc., not Merrill Lynch & Co., according to New York Attorney General Andrew Cuomo.

The bank bought Merrill after examining its books for just 25 hours, Cuomo claimed. Shareholders approved the deal Dec. 5, 2008. The acquisition closed Jan. 1, 2009, after Merrill losses had increased by billions of dollars, a change the bank didn’t disclose before the shareholder vote, Cuomo said.

“It’s the way we approved acquisitions that ticks me off the most!!!” director Chad Gifford later wrote in an e-mail about the last-minute switch, according to a securities-fraud complaint Cuomo filed today in New York against the bank, former Chief Executive Officer Kenneth Lewis and ex-Chief Financial Officer Joe Price over their handling of the Merrill deal.

E-mails and written notes that were gathered by Cuomo for his investigation of the matter show personal reactions of executives as they learned of Merrill’s rising losses, which reached $16 billion before taxes by December 2008. They also show Merrill kept Price informed of the losses as they grew, yet he resisted pressure from his lawyers to disclose them to shareholders.

“Read and weep,” wrote Bank of America accounting officer Neil Cotty to Price on Nov. 4, 2008, when Merrill’s financial reporting unit forwarded preliminary October results with a loss of $6 billion. The merger documents had already gone out to shareholders. Five days later, the October loss was put at $7.5 billion before taxes.

I think that this was a deliberate scheme to get some more taxpayer money to do the deal, and I hope that Cuomo goes where the SEC did not, and throws Ken Lewis’ sorry ass in jail.

H/t Huffpo for the full complaint (90 pages, scrollable PDF window) after the break.


BoA_Complaint –

Yet More Evidence that Cap & Trade Sucks

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The latest is that the EU is looking to declare cutting down rain forests for farming are actually the maintenance of forests:

The European Commission and some EU member states hope to redefine palm oil plantations as “forests,” according to a leaked document from the EU executive.

Rules governing the use of biofuels were supposed to be designed to sort out the sustainable versions of the technology from their dirtier cousins following a massive backlash against it in 2008. At the time, an avalanche of reports revealed that many forms of the fuel source both increase greenhouse gas emissions and put pressure on food prices.

…………

But in a manoeuvre that has shocked environmental campaigners, a draft commission communication offering guidance to EU member states on the use of biofuels has classified palm oil plantations – the source of one of the most destructive forms of biofuels – as “forests.”

Essentially, the document argues that because palm oil plantations are tall enough and shady enough, they count as forests.

(emphasis mine)

This is why you go with a carbon tax: Because cap and trade, and the offsets that are inherent in the system are going to be dominated by forces that will use fraud and political influence peddling to make themselves money.

If you tax carbon when it comes from the ground, you disincentivize using fossil fuels. If you allow for offsets, you create phony carbon offsets, like palm oil forests, and Chinese hydroelectric dams that do not hook into the grid.

This is going to be a disaster.

Economics Update

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Click for full size


Scary graph pr0n of the day, option ARM resets
h/t Calculated Risk

Well, today is “Jobless Thursday,” and initial claims unexpectedly rose to 480,000, rather than dropping as forecast, as did the rather more significant 4-week moving average, while continuing claims remained flat, though better productivity numbers might indicate a bit of an upswing.

Additionally, factory orders rose more strongly than forecast in December, which also is good news.

In the class half empty/full division. we have home listings rising for the first time in 18 months, which could presage a turn around in the market (full), or the fact that sellers who were trying to wait out the downturn are finally capitulating to the real estate market (empty), which would indicate further price declines ahead.

Me, I’m a bear on this.

Meanwhile, over on the other side of the pond, the Bank of England kept its benchmark rate at 0.5%, but perhaps more significantly, it announce that it is “pausing” in its quantitative easing (printing money) through buying bonds.

I’m not sure if they are just taking a month to survey the landscape, or if they think that recovery is, “just around the corner.”

Meanwhile, the recent swings in global stock markets, along with the jobs number, have investors worried, which has them buying up dollars, and these concerns also drove oil and other commodities lower.

Formal Charges of Child Kidnapping in Haiti

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Let’s be clear about this: There is sufficient evidence for formal charges to be filed against these “missionaries” attempting to “rescue” the children.

Now that they have been officially charged with a crime that can result in 5-15 years in prison, we can see some truth seeking.

As I have said before, I think that they were kidnapping the children with the goal of raising them as Evangelical Christians, and so I welcome the fact that they have been charged.

There has been all to much in the way of prosecutorial discretion cutting in favor extremist religious fundamentalists, and the realization that they can charged, tried, and sent to jail when convicted makes for a good deterrent.

Much of the problem with violent religious extremists throughout the world has been an outgrowth of authorities ignoring the “little things”, because it is seen that their hearts are in the “right place”.

Big Change in Birth/Death Adjustment

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Last night, I made a brief mention of changes to the birth/death adjustment for jobs numbers.

Birth/death is basically a way to deal with the fact that small companies are being formed and ceasing to exist all the time, and the normal methods, the survey of employers miss the effect on net employment.

Well, tomorrow, the Department of Labor will release their annual adjustment, and it looks like the statistical fudge factor missed 824,000 job losses.

I guess they thought that all those people had chucked it all to become professional eBay merchants, but they were wrong:

As bad as the government’s jobs readings numbers have been during the Great Recession, we’ll soon find out the real situation likely was worse.

Much worse.

ob losses during the recession may have been underestimated by close to a million jobs. So instead of employers cutting just over 7 million jobs from their payrolls since the economic downturn began in December 2007, it’s expected that the Labor Department’s new estimate will be a loss of 8 million jobs.

“It’s an enormous understatement of the severity of the crisis,” said Heidi Shierholz, labor economist with the Economic Policy Institute, a union-supported think tank. “It confirms that things were actually worse on the ground than what the reports suggested.”

(emphasis mine)

The phrase, “The problem is that BLS models appear to have grossly overestimated the number of new businesses that opened during the recession.” is kind of an understatement.

With banks not lending to anyone how can someone start a business anyway?

I’m inclined to think that this was something that was driven in some manner by electoral concerns from Bush and His Evil Minions™, but that might just be tinfoil hat.

Talk About Mixed Emotions

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Dan Coats will run against Evan Bayh for the US Senate in Indiana, and I have mixed emotions about this.

Coats is clearly a wingnut, he was screaming “wag the dog” about Clinton military activities in addition to being a fierce supporter of Harriet Miers, but he is running against Evan Bayh, and Evan Bayh really sucks.

I know that LBJ said that, “Better to have him inside the tent pissing out, than outside pissing in,” but Bayh is inside the tent pissing in.

What’s more, he’s corrupt, bought and paid for though his wife, who gets highly remunerative board positions by virtue of his pro-special interest votes.

Since he’s given up on being President, he’s moved very far to the right, and he’s more of a hurt than a help.

Whiskey Tango Forxtot?

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Warren Buffet’s Berkshire Hathaway has had its long-term counterparty credit rating cut from AAA to AA-plus.

They don’t like his purchase of the BNSF railroad:

Counterparty credit ratings reflect how well a company can meet its financial obligations with customers, trading partners or other parties.

“We believe that the railroad acquisition will reduce what historically has been extremely strong capital adequacy and liquidity, and that investment risk with sizable concentrations remains very high,” S&P said in a statement.

The rating downgrade came on the same day that Berkshire announced a bond sale of up to $8 billion to help pay for the Burlington acquisition.

You see, if Buffet buys insurance companies, good, but if he buys companies whose business which involve something tangible, that’s bad, I guess.

It’s clear that rail is in a growth curve. Oil is permanently above $50/bbl (consider my poor track record on this), and there are signs that fees to over the road truckers will reduce the subsidies given to that industry.

But all S&P sees is money being spent on big iron, and they do not like this.

OK, I Might Consider Donating to Fiorina

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Rachael Maddow’s take


Full ad

If just because she is an even bigger disaster as a candidate than she was as CEO of HP, where staffers broke out into “Ding, dong, the witch is dead” upon announcement of her firing.

You see, she has followed up the worst political website ever with the worst political ad ever.

I’m beginning to wonder if former HPers are working on her campaign ad just to f%$# with her.

In any case, when one considers her history at HP, where she demoralized and hurt the company but got pay increases, or her history at AT&T, where her staff falsified sales data, she is a poster child for over-privileged senior management, and so would be dead meat on the table in the general.

But right not, she is flinging sheep at Republicans, so she’s doing “God’s work.”

Wish Me Luck

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I have a job interview for a short term contract, it starts now.

I posted this last night, but forward dated it.

It’s lower level than I would like, but hey, it’s work.

I won’t provide any information on the client, I think that it is a bad idea to blog about potential employers.

Google Mulls Jumping C. Megalodon*

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This is one big shark that they jumped.
With Frikken Lasers!

So, now that the Chinese have hacked into Google, the Google has decided to throw in their lot with the National Security Agency to protect themselves:

The world’s largest Internet search company and the world’s most powerful electronic surveillance organization are teaming up in the name of cybersecurity.

Under an agreement that is still being finalized, the National Security Agency would help Google analyze a major corporate espionage attack that the firm said originated in China and targeted its computer networks, according to cybersecurity experts familiar with the matter. The objective is to better defend Google — and its users — from future attack.

Google and the NSA declined to comment on the partnership. But sources with knowledge of the arrangement, speaking on the condition of anonymity, said the alliance is being designed to allow the two organizations to share critical information without violating Google’s policies or laws that protect the privacy of Americans’ online communications. The sources said the deal does not mean the NSA will be viewing users’ searches or e-mail accounts or that Google will be sharing proprietary data.

Of course, neither does giving money to a junkie mean that they will be buying heroin.

As Noah Schachtman notes, it doesn’t require a tinfoil hat to think that it is possible, nay, even likely, that the NSA will use this access to suck data like a giant hoover. It’s what they do:

But there’s a problem. The NSA and its predecessors also have a long history of spying on huge numbers of people, both at home and abroad. During the Cold War, the agency worked with companies like Western Union to intercept and read millions of telegrams. The during the war on terror years, the NSA teamed up with the telecommunications companies to eavesdrop on customers’ phone calls and Internet traffic right from the telcos’ switching stations. And even after the agency pledged to clean up its act — and was given wide new latitude to spy on whom they liked – the NSA was still caught “overcollecting” on U.S. citizens. According to the New York Times, the agency even “tried to wiretap a member of Congress without a warrant.”

All of which makes the NSA a particularly untrustworthy partner for a company that is almost wholly reliant on its customers’ trust and goodwill. We all know that Google automatically reads our G-Mail and scans our Google Calendars and dives into our Google searches, all in an attempt to put the most relevant ads in front of us. But we’ve tolerated the automated intrusions, because Google’s products are so good, and we believed that the company was since in its “don’t be evil” mantra.

The issue here is not that Google would voluntarily allow the NSA to access personally identifiable data, it is that they are ill equipped to defend themselves against a company that hoovered the entire Internet.

If the NSA does not leave a back door in the Google servers, without the knowledge of Google management, as part of their efforts, then they would not be doing their job properly.

This is like employing Lady Gaga as a model for tastefully modest evening wear.

*The largest shark, and likely largest predator fish ever. It died out some 1.5 million years ago. The Genus is still in dispute, between either Carcharodon (Great White) or Carcharocles (broad toothed Mako). But in either case, you are jumping C. Megalodon, you have jumped the biggest shark ever.

I Said that This Would Happen

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When GM backed out of its deal to sell Opel, so that it could suck up the promised state aid from Germany, I said that they were snatching defeat from the jaws of victory.

Well, they are now seeing blowback from this decision.

The German government is demanding that GM put significant resources into Opel, resources that it really doesn’t have, before it will make any state aid available:

Germany wants General Motors Co. to increase its contribution to the Opel unit’s reorganization before considering whether to provide state aid, according to two people familiar with the matter.

Economy Minister Rainer Bruederle is using a two-day U.S. visit, which includes a meeting with Treasury Secretary Timothy F. Geithner in Washington, to express that view, said the people, who declined to be identified because the discussions are confidential. GM has said it will provide 600 million euros ($836 million) for Opel’s restructuring and ask for as much as 2.7 billion euros from European governments.

I said that the result of the decision would be labor unrest, consumer disgust, and hostility on the part of German authorities.

You can’t go wrong betting on the managerial incompetence of GM.

Economics Update

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In the “recovery, my tuchas” division, we have the latest ADP estimate as to job losses, which shows that yet again, private sector employment fell, though the panglossian financial “journalists”, are now expecting employment to grow this month.

I don’t think so, seeing as how this is when the so-called birth/death adjustment gets rejiggered for the new year (more on this later).

Along with this, the Institute for Supply Management’s index of nonmanufacturing activity continues to remain in the doldrums, which is better than it was early last year, but still does not point to employment increases.

In the nexus of real estate and banking, mortgage applications were up sharply this week, but this was refinance activity, not home purchases.

In the old favorites of currency and energy, the dollar rose on the ADP report, as well as concerns about the potential Greek meltdown, while oil fell slightly on reports of strong inventories.

Don’t Give to the DNC

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Contributions to the DNC Paid This Man to Sabotage Healthcare Reform

Here’s a shocker, the DNC just spent nearly ½ a million dollars for the Nebraska State Democrats to run a campaign commercial for Ben Nelson’s obstructionism:

Turns out, though, that it’s [see attached video] not a Ben Nelson campaign ad. It’s hard to read the disclaimer, but the ad was paid for by the Nebraska Democratic Party. It’s one of a series of ad touting Nelson’s “courageous” effort to bring down real health care reform. More of the ads can be seen here and here.

So, one wonders, where did the Nebraska Democratic Party get the money to pay for these TV ads?

We already know that they are doing nothing about LGBT civil rights, now we know that since Howard Dean has left the chairmanship, they oppose meaningful healthcare reform too.

Find your candidates, and donate to them. The DNC, DCCC, the DSCC, and OFA are going to spend your money on people like Ben Nelson.

OK, Count Me Disappointed

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I’ve generally been supportive of Chris Dodd. I think that he has been good on civil rights, particularly in his pushing back against torture and the PATRIOT act.

Additionally, I think that he was hung out to dry by Obama and Geithner over AIG.

Further, he was remarkably refreshing about why he dropped out of the Senate race.

That being said, his behavior on the Consumer Financial Protection Agency (CFPA) earlier, and now his opposition to the weak “Volker” banking reforms, has gotten me wholeheartedly agreeing with Barry Righoltz’s assesment of his behavior: “

Thus, Dodd proves that the only thing more corrupt than a congressperson whoring for a campaign donations to get re-elected congressperson not seeking re-election, whoring for a job.

See also here and here.

Why I Hate the World

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It makes te Gay, or so it seems

Because the folks at Christwire have put out a blistering screed against the 1980s sitcom The Golden Girls” titled, “How One TV Show Turned A Generation Of American Boys Into Homosexuals.” (Their server is slow, so you may have to wait)

It makes me hate the world.

Why does it make me hate the world?

Well, it’s because, highlight the rest for my answer……………

It’s satire, only it took me a couple of hours to confirm this.

It’s what bothers me about The Onion. The parody is spot on, and should be funny, only all to often, I cannot tell the difference between satire and the real world.

The problem is that the real world is just too perverse and weird to be parodied. Truth is indeed stranger than the fiction of satirists.

We live in Bizarro World.

H/t Atrios.

Economics Update (a Day Late)

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Busy day yesterday, both good and bad, so this is short.

First, we have the personal bankruptcy numbers dropped 10% from December to January, but are up 15% year over year, and the American Bankruptcy Institute expects 2010 BK levels to be higher than 2009.

In real estate, pending sales of existing homes rose slightly in December, but the percentage of homes remaining vacant rose in the 4thquarter.

Real estate is not going to lead us out of the recession, and absent cram-down legislation, government action is not going to help.

Of Course They Were Trying To Steal Children

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For a few days, the Baptist missionaries currently detained in Haiti for trafficking in children has been in the news, and I have been marinating on this.

At its most basic, I think that this was a deliberate attempt to abduct these children, though I think that money was at the root of this evil.

These people weren’t just missing paperwork, they were moving children out of the country for a purpose: to save souls.

They believed that these children would go to hell unless they were raised as, and became, Baptists, so they were breaking the law to “save” these children, some of whom were probably actually had living relatives.

So, much like William Calley, they likely, “destroyed families to save them”.

You must understand, notwithstanding all the stories about Voodoo in Haiti, the populace there is overwhelming (80%) Catholic, and these people were not rescuing people from Voodoo, but from Catholicism, which they see as not Christian, and hence a road straight to hell.

This is the evil that true believers do: Stealing children from the families.

As to the disposition, should it be determined in court that they are guilty, they should go to jail for a very long time.

Any consideration in terms of sentencing on the of the sincerity of their faith will just encourage more people with similar world views to do similarly evil things.

FWIW, I chose the Al Jazeera link just because it f%$#s with these people, here is the Google news link.

Illinois Primary Results

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Well, Governor, for both parties is still to close to call, but for Senator, Alexi Giannoulias is the Democratic Nominee, and Mark Kirk is the ‘Phant nominee.

Unfortunately, Mr. Giannoulias last job, his current one is as state treasurer, was as vice president of his family’s bank, Broadway bank, which appears to be circling the drain.

So the Dems just nominated someone who will be campaigned against as a corrupt banker……………This is like when the LaRuchians won the nominations a few years back, which put Republicans in just about every state wide office.

Well, if the banks problems get worse, I hear that Martha Coakley is looking for something to do.

Chicago Tribune Election Center

If You Have Extra Cash…………

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You might want to give it to Wikileaks, which has suspended their operations because they have run out of cash:

Wikileaks, which has published anonymously contributed information that is both confidential and controversial, has one thing in common with many more-traditional media outlets: financial troubles.

The site has posted confidential 9/11 pager messages, tangled with banks and the Church of Scientology, revealed inner workings of the U.S. military base in Guantanamo, Cuba, and shared snippets of e-mail from vice presidential candidate Sarah Palin.

Now, though, Wikileaks has shut the site down at least temporarily.

“To concentrate on raising the funds necessary to keep us alive into 2010, we have reluctantly suspended all other operations, but will be back soon,” a note on the Wikileaks site said Monday. “We have raised just over $130,000 for this year but can not meaningfully continue operations until costs are covered. These amount to just under $200,000 PA [per annum]. If staff are paid, our yearly budget is $600,000.”

These guys do very good work, whether it’s uncovering things like money laundering, providing secret draft agreements on an “IP reign of terror” treaty, and torture manuals US military manuals for maltreating detainees.

Previous Wikileaks posts here, they have been a source for my scribblings not infrequently.

Brutal

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Stephen Colbert absolutely destroys Harold Ford, who has decided to try to run for Senate in New York, or maybe he’s just looking for a payoff not to run, but he’s been showing just how little he believes in.

He confronts him on his flip-flops, and exposes the fact that he has never voted in New York.

It couldn’t happen to a more smarmy hypocritical lying bastard .