Bank executives are grappling with a question that exasperates, even infuriates, many recession-weary Americans: Just how big should their paydays be? Despite calls for restraint from Washington and a chafed public, resurgent banks are preparing to pay out bonuses that rival those of the boom years. The haul, in cash and stock, will run into many billions of dollars.
Industry executives acknowledge that the numbers being tossed around — six-, seven- and even eight-figure sums for some chief executives and top producers — will probably stun the many Americans still hurting from the financial collapse and ensuing Great Recession.
It’s going to get out of control, as in some tea-bagging nut with a gun out of control, and I know that I won’t be sitting on the jury, because I could not bring myself to vote to convict.
Denbeaux calls this week’s outrageous Pentagon assertions the latest example of what he calls “numbers without names and trends without numbers.” He told me he’s outraged it’s been so widely picked up — including by the Times.
“I don’t see what the point is of a public editor criticizing a story for the New York Times if they’re going to republish it a year later,” he told me.
Gullible, amnesiac journalists are a dangerous thing. Is our profession really incapable of learning anything from its mistakes?
Yes, journalists are so tied to their sources that they will repeat the same lie, even if it it’s known to be a lie, over, and over, and over, and over again.
This has been another episode of simple answers to simple questions.
Silly peasant, it’s only the bankers, insurance companies, and other big players who get their promises kept. If it’s a promise to the little people, it doesn’t count.
The Obama administration and its allies at the Federal Communications Commission are retreating from a militant version of Net neutrality regulations first outlined by FCC Chairman Julius Genachowski in September.
That’s my reading of a number of recent developments, underscored by comments made by government speakers on a panel on the first day of a Tech Policy Summit at CES in Las Vegas.
…………
Signs of more modest Net neutrality regulations include resignation in late October of Susan Crawford, who took part in Thursday’s panel discussion and who was previously a key adviser to the president on technology and communications. According to the conservative-leaning American Spectator, [according to the paid to lie by Richard Mellon Scaife American Spectator] Crawford’s version of Net neutrality was too radical for White House economic adviser Lawrence Summers, contributing to her early departure.
…………
Part of the reason is some unexpected political pressure, including a letter signed by 72 congressional Democrats opposing the FCC’s proposed rules soon after they were announced.
But the bigger explanation is the growing priority within the administration for nationwide, affordable broadband service. In the course of preparing the national broadband plan, mandated by the 2009 stimulus bill, universal high-speed access has taken on increased significance in the government’s hopes for a rapid economic recovery. Beyond the current financial woes, Congress, the FCC and the White House all recognize the importance of improving the communications infrastructure to maintain U.S. competitiveness in technology innovation.
You see, the Telcos won’t build out high speed fiber/cable unless we allow them to bend us over the table and do us without any lube at all.
This is why the US has the highest costs and the slowest speeds for internet access in the developed world (here, here, and here), because allowing the Baby Bells and the Cable companies to squash competition and extort money.
Basically, because Visa can use its market share to force merchants to accept its products, and because it splits the interchange fees with the banks, it creates a situation where fees in the US are the highest in the world, and every merchant, and by extension every buyer, pays to shovel money to Visa and its client banks.
The reason for this is because Visa and MasterCard do not compete for end user consumers, they compete to get banks to offer their cards to end-user consumers, and they compete by raising prices, which they split with the banks:
As debit cards became the preferred plastic in American wallets, Visa has turned its attention to PIN debit too and increased its market share even more. And it has succeeded — not by lowering the fees that merchants pay, but often by pushing them up, making its bank customers happier.
In an effort to catch up, MasterCard and other rivals eventually raised fees on debit cards too, sometimes higher than Visa, to try to woo bank customers back.
“What we witnessed was truly a perverse form of competition,” said Ronald Congemi, the former chief executive of Star Systems, one of the regional PIN-based networks that has struggled to compete with Visa. “They competed on the basis of raising prices. What other industry do you know that gets away with that?”
This is only possible because Visa has a near monopoly, and even after it settled an anti-trust lawsuit, and agreed not to tie its expensive debit cards to all Visa products, merchants still cannot afford to diss the product, because the market share is too high.
This is, of course, what the Chicago School’s “perfect markets” create: Monopolies and near markets that create market “stickiness” that ill serve anyone but the monopolist.
It’s a capitalist’s dream, but a consumer’s nightmare, to the tune of about $427 per household per year.
The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.
AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.
Now, I take anything from Darrell Issa with a grain of salt, he’s a liar, and one of the rather more corrupt Republican members of Congress, but seeing as how House Banking Committee Chairman Barney Frank is saying that this is “Troubling,” and he wants hearings, and both Edolphus Towns, Chairman, and Elijah Cummings, member, of the House Oversight and Government Reform Committee, have been screaming about getting a hearing about this, it seems that Frank may get his wish.
The big deal here is that the NY Fed took over negotiations, and paid off AIG’s swaps at 100¢ on the dollar, which is pretty much unheard of, and at the time that this information was being suppressed, Geithner was already the nominee to be Secretary of the Treasury:
This episode suggests that the NY Fed – and Geithner, then a nominee for Secretary of the Treasury – were worried about any political fallout from the swap payments. When the details were released months later (and after Geithner was confirmed as Treasury Secretary), critics alleged that Geithner had failed to negotiate a better deal for the swap payments with the Wall Street firms.
They perpetuated a fraud upon the American public and on Congress, because little Timmy wanted to be SecTreas.
Geithner was front and center in making sure that the swaps were paid off at face value, so the attempt to suppress the date was either because he was covering his own ass., or because he was incompetent and uninvolved, and the Fed bureaucracy bailed him out because they saw him as being the Fed’s Bitch*.
FWIW, I think that this was all part of the campaign by the bureaucracy of the Fed to make Geithner Secretary of the Treasury, though Felix Salmon has a point when he says that the completely over the top culture of secrecy at the central bank was has always been a flaw in the culture of the institution: Independence does not equal secrecy, though the Fed always has seen it that way.
David Dayen at FDL makes the cogent point that even if the payouts were legal, it appears that the cover-up was not legal.
Between Summers and Geithner, it appears that President Obama has made the exact same mistake that one George W. Bush did: Instead of filling his administration’s most important posts with his own people, he reached back to prior admins (Cheney, Rumsfeld, etc) and loaded up on incompetent retreads.
(emphasis mine)
One thing is certain though, that the case for auditing the Federal Reserve has been made much stronger by the most recent scandal.
*A good bet, since the history shows that Timothy Geithner has been the bitch of anything remotely close to a bank or a brokerage his entire career.
Investors are suing Bank of America, charging that the bank (and I use the term loosely) deceived investors over the terms of bonuses to Merrill Lynch executives prior to the vote to acquire the brokerage.
Well, it appears that much BoA’s defense appears to be that if its investors ignored what they said, and read the financial press, they would have known anyway, but the judge just shot down that argument:
Bank of America Corp. suffered a setback in its defense to civil claims that it misled investors after a judge ruled that it may not introduce at a trial testimony about media reports predicting it would pay bonuses.
The U.S. Securities and Exchange Commission sued the lender on Aug. 3 claiming it misled investors about bonus payments while buying Merrill Lynch & Co. Bank of America said in a November 2008 proxy statement that Merrill agreed not to pay year-end bonuses when the bank had already agreed to Merrill’s paying as much as $5.8 billion, the SEC claims. A trial is scheduled for March in New York.
As part of its defense, Bank of America has argued that shareholders already knew, as a result of media reports, that Merrill would likely pay billions of dollars in bonuses. U.S. District Judge Jed Rakoff in Manhattan today barred the bank from offering testimony about such reports because the proxy statement itself told shareholders to ignore them.
“In effect, the bank is arguing that, even though it expressly warned its shareholders to disregard the media, it can now defend itself by asserting that a reasonable shareholder would have disregarded these warnings and, by consulting the media, perceived that the bank’s alleged lies were immaterial,” Rakoff wrote in a six-page opinion. “Even a zealous advocate might perceive that such an argument hints at hypocrisy.”
(emphasis mine)
So your argument is that you were telling a baldfaced lie, and everyone knew that you were lying?
Well, good luck with that.
When your defense against fraud charges is that the newspapers had shown that they were lying sacks of s%$#, I think that you are missing this whole “how to win the case” thing.
I would note that she is the only one of the AIG executives to go through with their threat to leave, which implies that she might have been pushed, and as general counsel, she doubtless played a central role in the creation of these severance deals.
Sorry, but I think that it is time for the DoJ and SEC to see if she was doing something illegal in the way of self dealing.
Considering her background, she was also general counsel at the MCI/Worldcom, perhaps the bar association should investigate her too, since they can take action against incompetent lawyers.
A new study by Ross professors Ran Duchin and Denis Sosyura found that banks with connections to members of congressional finance committees and banks whose executives served on Federal Reserve boards were more likely to receive funds from the Troubled Asset Relief Program, the federal government’s program to purchase assets and equity from financial institutions to strengthen its financial sector.
Further, their research shows that TARP investment amounts were positively related to banks’ political contributions and lobbying expenditures, and that, overall, the effect of political influence was strongest for poorly performing banks.
Hoocoodanode?
The process of bailing out the banks was an artifact of corruption and self-dealing.
The 2010 Defense Authorization Bill was signed into law by Barack Obama about 2 weeks ago, and the bill included Al Franken’s prohibition on defense contractors using binding arbitration to keep things like the rape of their employees by their employees out of court.
Since it’s attached to an appropriations bill, it only runs for a year, so I would suggest a stand alone bill, timed to hit the floor in the June-July time frame to permanently close the loophole.
We’ll see how many ‘Phants want to vote pro-rape a few months prior to elections, particularly given the outrage over the pro-rape Republicans over Franken Amendment in the first place.
Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.
This will raise questions about crime’s influence on the economic system at times of crisis. It will also prompt further examination of the banking sector as world leaders, including Barack Obama and Gordon Brown, call for new International Monetary Fund regulations. Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. “In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor,” he said.
There is no question: If a banker can launder drug money, and make money themselves from doing so, they will launder drug money.
Cue Captain Renault (see pic), and I do not expect any substantive law enforcement resulting from this revelation.
As I have said before, with the LSI model, you have the contractor supervising their own performance, which is almost literally a fox in the henhouse:
Defense contractors developing the Army’s largest modernization program — the Future Combat System — also were paid $91 million in 2007 to report back to the Pentagon on how well the program was performing, according to a new inspector general report, adding fuel to demands for tougher conflict-of-interest rules.
The Nov. 24 Defense Department inspector general report, reviewed by POLITICO, was sparked by an anonymous tip. The probe found that the $100 billion FCS program contained numerous conflicts that went unreported and that, between 1987 and 2007, the Pentagon increased its reliance on contractors for quality assurance and other tests by 375 percent.
……………
For instance, SAIC, a prime contractor doing systems engineering along with Boeing, received $2.2 billion for development of the FCS program, but in 2007 it also received $25.8 million for testing the program. Computer Sciences Corp., General Dynamics, Lockheed Martin and Northrop Grumman also received money to create elements of the FCS at the same time they were helping to test it, according to the report.
(emphasis mine)
I worked with folks from the SAIC when I was at FCS, and got very little “L” from the LSIs: they simply did not provide direction to the contractors.
It’s no surprise that the inspector’s report was marked “For Official Use Only”, because the powers that be in the Pentagon want this buried, but someone, probably someone who actually thinks about the soldiers who use the product, leaked it.
Note that this is an artifact of a number of administrations:
In addition to pursuing specific allegations of conflicts of interest, the inspector’s report looked more broadly at the trend toward using services contracts for testing. The review found that before the 1990s — when the Pentagon embraced the trend of cutting government employees and instead contracting for services — the Pentagon spent about $8.9 million a year on contractors for testing. In 2007, it spent $42.6 million.
The Pentagon started doing this under Bush I SecDef Richard Bruce Cheney, though it is fair to say that it was expanded under Clinton, and went, as did defense procurement generally, completely haywire under Bush II.
The problem is that when you have contractors testing for you, they lie, they self-deal, and they cheat.
That’s capitalism, baby: Cheating is a profit opportunity.
Unfortunately, the capabilities that the government has shed over the past few years will take much longer, but if the development of new systems is curtailed until the internal governmental testing capabilities, it will result in a exodus of people in private testing, because their jobs will be gone, and return to government.
Rick Sanchez has John Ensign on, when he bloviates about terrorism, and he quizzes him on his own little scandal, where he paid off the husband and children of his mistress, and Sanchez asks him about how he appears to have encouraged the illegal lobbying activities by former aide:
Reputed mobster William “Big Billy” D’Elia and former Luzerne County President Judge Michael T. Conahan were longtime friends who partied together, used courthouse employees as personal couriers and met frequently to talk court cases over ham and cheese omelets at a Perkins Restaurant & Bakery, witnesses testified Wednesday at a hearing over allegations the men conspired to fix a $3.5 million defamation verdict against The Citizens’ Voice newspaper.
I think that he realizes that under the stress of a campaign, the real Rudy, as opposed to the one who existed for about 18 hours on 9/11/01, comes out, and that the voters hate the real Rudy.
*From the Hebrew. Literally it means “foreigner” of “alien”, but it is generally used to mean non-Jew.
That while on the board at Freddie Mac, Emanuel signed off regarding gross financial irregularities.
Participating in actions by Freddie Mac to make illegal in-kind contributions to politicians in the form of hosting fundraisers, including one Rahm Emanuel.
Writing a law allowing the Office of Federal Housing Enterprise Oversight (OFHEO) to fire its inspector general by dissolving the organization and replacing it, as well as the the Federal Housing Finance Board (FHFB), with the Federal Housing Finance Agency (FHFA).
It should be noted that the Obama administration has refused to appoint a new IG to its successor organization, and the Obama administration has refused a Freedom of Information Act (FOIA) request on Freddie claiming that, the report from the fired IG was “commercial information”.
Now, I understand that Grover Norquist is an bad guy, but you get coverage by getting a diverse coverage for such things, as Hamshire makes clear when she looks at some similar efforts, such as the CAF letter to delay confirmation of Bernanke until there was an audit of the Fed, which was signed by a diverse group of people including, Chris Bowers, Dean Baker, Mark Calabria, James Kenneth Galbraith, Matt Kibbe, Grover Norquist, Phyllis Schlafly (WTF?!?!?), Robert Weissman, and John Whitehead. (Neanderthals in italics)
I’ve always known that Rahm is intellectually corrupt, his actions. During the Obama and Clinton administrations, as well as his time head of the DCCC show a real hostility to anything but the most corporate of corporatist Democrats, and he has always exhibited a tremendous hostility to liberals.
Now appears that he may be legally corrupt too, but I don’t think that Obama would get rid of him short of an indictment, because the President thinks that he needs Rahm to keep the DFHs* in line.
*Dirty F%$#ing Hippies Full letter after break:
December 23, 2009
Attorney General of the United States of America U.S. Department of Justice 950 Pennsylvania Avenue, NW Washington, DC 20530-0001
Dear Attorney General Holder:
We write to demand an immediate investigation into the activities of White House Chief of Staff Rahm Emanuel. We believe there is an abundant public record which establishes that the actions of the White House have blocked any investigation into his activities while on the board of Freddie Mac from 2000-2001, and facilitated the cover up of potential malfeasance until the 10-year statute of limitations has run out.
The purpose of this letter is to connect the dots to establish both the conduct of Mr. Emanuel and those working with him to thwart inquiry, and to support your acting speedily so that the statute of limitations does not run out before the Justice Department is able to empanel a grand jury.
The New York Times reports that the administration is negotiating to double the commitments to Fannie and Freddie for a total of $800 billion by December 31, in order to avoid the congressional approval that would be needed after that date. But there currently is no Inspector General exercising independent oversight of these entities. Acting Inspector General Ed Kelly was stripped of his authority earlier this year by the Justice Department, relying on a loophole in a bill Mr. Emanuel cosponsored and pushed through Congress shortly before he left for the White House. This effectively ended Mr. Kelly’s investigation into what happened at Fannie and Freddie.
Since that time, despite multiple warnings by Congress that having no independent Inspector General for a federal agency that oversees $6 trillion in mortgages is a serious oversight, the White House has not appointed one.
We recognize that these are extremely serious accusations, but the stonewalling by Mr. Emanuel and the White House has left us with no other redress. A 2003 report by Freddie Mac’s regulator indicated that Freddie Mac executives had informed the board of their intention to misstate the earnings to insure their own bonuses during the time Mr. Emanuel was a director. But the White House refused to comply with a Freedom of Information Act request from the Chicago Tribune for those board minutes on the grounds that Freddie Mac was a “commercial” entity, even though it was wholly owned by the government at the time the request was made.
If the Treasury approves the $800 billion commitment to Fannie and Freddie by the end of the year, it will mean that under the influence of Rahm Emanuel, the White House is moving a trillion-dollar slush fund into corruption-riddled companies with no oversight in place. This will allow Fannie and Freddie to continue to purchase more toxic assets from banks, acting as a back-door increase of the TARP without congressional approval.
Before the White House commits any more money to Fannie and Freddie, we call on the Public Integrity Section in the Justice Department to begin an investigation into the cause of Fannie and Freddie’s conservatorship, into Rahm Emanuel’s activities on the board of Freddie Mac (including any violations of his fiduciary duties to shareholders), into the decision-making behind the continued vacancy of Fannie and Freddie’s Inspector General post, and into potential public corruption by Rahm Emanuel in connection with his time in Congress, in the White House, and on the board of Freddie Mac.
We also call for the immediate appointment of an Inspector General with a complete remit to go after this information.
We both come from differing political ideologies. One of us is the conservative head of a transparency foundation, and the other is the publisher of a liberal political blog. But we make common cause today out of grave concern for the future of our country in the wake of corruption-riddled bailouts. These bailouts continue to rob Main Street to benefit Wall Street, and, because of that, we together demand the resignation of Mr. Emanuel, a man who has steadfastly worked to obstruct both oversight and inquiry into the matter. Rahm Emanuel’s conflicts of interest render him far too compromised to serve as gatekeeper to the President of the United States.
We will lay out the details further below, and are available at your earliest convenience to meet with you directly.
In support the idea that he will put his name to anything marked healthcare reform, barack Obama gave an interview to the Washington Post, and he told a complete and utter lie:
Those elements are in the House and Senate versions of the legislation; their competing proposals will have to be reconciled in conference committee next year. The House bill includes a government-run insurance plan favored by progressive Democrats; the Senate version does not. “I didn’t campaign on the public option,” Obama said in the interview.
(emphasis mine)
It takes about 15 minutes on Google and Youtube to see that it’s a lie, see the video on the right.
With this level of hypocrisy, it’s no wonder that Drew Westen, a psychologist, neuroscientist, and political scientist whose book The Political Brain was widely considered to be the bible of the Obama campaign just wrote a scathing article condemning Obama’s unwillingness to lead:
As the president’s job performance numbers and ratings on his handling of virtually every domestic issue have fallen below 50 percent, the Democratic base has become demoralized, and Independents have gone from his source of strength to his Achilles Heel, it’s time to reflect on why. The conventional wisdom from the White House is those “pesky leftists” — those bloggers and Vermont Governors and Senators who keep wanting real health reform, real financial reform, immigration reform not preceded by a year or two of raids that leave children without parents, and all the other changes we were supposed to believe in.
Somehow the president has managed to turn a base of new and progressive voters he himself energized like no one else could in 2008 into the likely stay-at-home voters of 2010, souring an entire generation of young people to the political process. It isn’t hard for them to see that the winners seem to be the same no matter who the voters select (Wall Street, big oil, big Pharma, the insurance industry). In fact, the president’s leadership style, combined with the Democratic Congress’s penchant for making its sausage in public and producing new and usually more tasteless recipes every day, has had a very high toll far from the left: smack in the center of the political spectrum.
What’s costing the president and courting danger for Democrats in 2010 isn’t a question of left or right, because the president has accomplished the remarkable feat of both demoralizing the base and completely turning off voters in the center. If this were an ideological issue, that would not be the case. He would be holding either the middle or the left, not losing both.
What’s costing the president are three things: a laissez faire style of leadership that appears weak and removed to everyday Americans, a failure to articulate and defend any coherent ideological position on virtually anything, and a widespread perception that he cares more about special interests like bank, credit card, oil and coal, and health and pharmaceutical companies than he does about the people they are shafting.
………
Leadership means heading into the eye of the storm and bringing the vessel of state home safely, not going as far inland as you can because it’s uncomfortable on the high seas. This president has a particular aversion to battling back gusting winds from his starboard side (the right, for the nautically challenged) and tends to give in to them. He just can’t tolerate conflict, and the result is that he refuses to lead.
………
What’s they’re seeing is weakness, waffling, and wandering through the wilderness without an ideological compass. That’s a recipe for going nowhere fast — but getting there by November.
(emphasis mine)
As I’ve said before, the problem is that he believes that he is likable enough that he can bring people together even when there is no common ground, and the idea of people actually having honest differences of opinion, or of having legitimate political reasons for opposing his policies, appears to be completely beyond him.
When word spread earlier this year that American International Group had paid more than $165 million in retention bonuses at the division that had precipitated the company’s downfall, outrage erupted, with employees getting death threats and President Obama urging that every legal avenue be pursued to block the payments.
New York Attorney General Andrew M. Cuomo threatened to publicize the recipients’ names, prompting executives at AIG Financial Products to hastily agree to return about $45 million in bonuses by the end of the year.
But as the final days of 2009 tick away, a majority of that money remains unpaid. Only about $19 million has been given back, according to a report by the special inspector general for the government’s bailout program.
This business will get out of control. It will get out of control and we’ll be lucky to live through it. 
