Category: Corruption

These have Epic Fail Written All Over Them

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In order to deal with budget issues, Mayor Daley of Chicago is considering selling its water system to private operators, and allowing them to charge whatever they want.

So he gets the money, and succeeding generations get the revenue loss and more expensive water.

Also, the state that has so many bad ideas that it gave us both Barry Goldwater and John McCain is looking to turn over operation of their prisons to a private firm.

This one is a little different though, because private prisons have already been tried, and failed, with some of the institutions going so far as to bribe judges to send children to them for minor crimes.

This will not end well.

Just When You Thought that the Karzai Family Could Not Get Any Sleazier

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Would you buy a used car from this man?

It turns out that Ahmed Wali Karzai, the brother of Hamid Karzai is multi-tasking something fierce, he’s not just a major figure in Afghan opium production, but he is also on the CIA payroll:

Ahmed Wali Karzai, the brother of the Afghan president and a suspected player in the country’s booming illegal opium trade, gets regular payments from the Central Intelligence Agency, and has for much of the past eight years, according to current and former American officials.

The agency pays Mr. Karzai for a variety of services, including helping to recruit an Afghan paramilitary force that operates at the C.I.A.’s direction in and around the southern city of Kandahar, Mr. Karzai’s home.

The article then notes that this “raises questions” about our current Afghanistan policy.

Well duh!!! The army fights the Taliban, which is supported to a large degree by opium money, and the CIA pays money to one of the biggest opium producers and smugglers in the region, which would imply that in some small part, the CIA is paying the Taliban to kill American troops.

Those boyz from Langley are such kidders.

Gee, Here is a Surprise

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When president of the New York Fed, Timothy “Eddie Haskell” Geithner cut a secret deal on the credit default swaps of AIG.

It appears that AIG had already negotiated haircuts, on the order of 60¢ on the dollar, for the credit default swaps, but then Geithner stepped in, and decided to pay the counter parties, which included, big surprise, that great vampire squid wrapped around the face of humanity,* Goldman Sachs:

Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.

The argument was that some of the counter parties would have gone belly up if Geithner had not overpaid them, but I’m with John Carney of Clusterstock:

No doubt regulators would say that paying full price was necessary. But it was not.

A far better move would have been to transparently bailout firms that needed the additional capital instead of doing it in an under-handed way. Even better would have been to have forced those firms with too much exposure to AIG to seek out new capital in the markets, possibly converting debt to equity and wiping out existing shareholders. Goldman Sachs claims that it didn’t need the AIG bailout bucks to survive–a claim whose truth we’ll never actually know because of the bungled operation of the bailout.

Gee, I wonder why it was never made public?

Timothy Geithner should be fired, hell he should be fired and tarred and feathered.

*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.

Where is Your God Now?

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On my most recent bank failure Friday post, there was a small bank in Otsego, MN, Riverview Community Bank that was closed by regulators.

Well, it turns out that the story of this bank is just a bit weirder than your average bank failure.

Riverview Community Bank was run by a religious nutcase who attempted to foist his religious views on his employees:

Riverview Community Bank, an Otsego firm that attracted national media attention several years ago for espousing prayer in the workplace, has been shut down by state regulators.

…

Early in its life, Riverview had a reputation for mixing faith and finance. Chuck Ripka, one of the bank’s founders, once told the Star Tribune that God spoke to him and said, “Chuck, if you pastor the bank, I’ll take care of the bottom line.” Ripka and his staff would pray with customers in the bank’s Otsego branch and even at the drive-up window. In a 2004 New York Times story, Ripka said he occasionally slipped up and said, “Come on over to the church — I mean the bank.”

Of course, this makes his bank hostile to non-Christian, or for that matter, non-obnoxious Christian, and as a public accommodation it also makes it hostile to non-Christian, or for that matter, non-obnoxious Christian, customers.

Yes, a religious test on employment is illegal, and it’s pretty clear that this guy made it clear that non-Christian, or for that matter, non-obnoxious Christian, people need not apply for jobs.

There is also the whole “Chasing the money changers from the temple,” irony thing, but I’m not up on my Christian mythology enough to follow the finer points.

It is worth noting that the bank was the subject of consent enforcement actions in the year before its closing, and were instructed to stop paying dividends when they were always circling the drain.

There is a lesson in all this, though: If you believe that God is on your side, you are always wrong, but if you worry whether or not you are on God’s side, you have a possibility of being right.

There is something deeply disturbing and deeply hypocritical about all these folks who seem to think that Christianity is nothing more than a path to wealth.

Inouye to Propose Changes to Franken Anti-Rape Amendment?

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Well, we know that appears that defense contractors really hate Al Franken’s amendment limiting their ability to use binding arbitration to keep things like rapes of employees and discrimination cases from appearing from in open court.

Well, it now appears that, in addition to the 30 pro rape Republicans and the Obama administration, there are now reports Senate Appropriations Committee Chairman Daniel Inouye is looking at stripping out the amendment.

This would be regrettable, because the law currently supports the rights of defense contractors to gang rape a woman and lock her in a box, and so the law needs to be changed.

I contacted his office, and have not heard any response at press time yet.

Full text of Franken’s amendment after break:

Sec. 8104. (a) None of the funds appropriated or otherwise made available by this Act may be used for any existing or new Federal contract if the contractor or a subcontractor at any tier requires that an employee or independent contractor, as a condition of employment, sign a contract that mandates that the employee or independent contractor performing work under the contract or subcontract resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention.
(b) The prohibition in subsection (a) does not apply with respect to employment contracts that may not be enforced in a court of the United States.

Well, Here’s a Shocker

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It appears that Citizens Against Government Waste (CAGW), the favorite rent-a-crowd for corporate interests, like Microsoft, Tobacco, and Jack Abramhoff, has now weighed in against the GE/Rolls F136 alternate engine for the JSF:

The group is lambasting congressional funding for a second F-35 Joint Strike Fighter engine, made by General Electric and Rolls-Royce.

In the process, the nonprofit watchdog organization is spending as much as an estimated $2 million on advertising that includes posters in D.C. Metro trains, paper and digital ads in Capitol Hill publications and billboards in several districts across the country.

But wait, there’s more:

CAGW refuses to disclose the campaign’s expenses, but it appears to represent a sizable chunk of its total budget.

In 2008, CAGW’s total revenue, which includes the nonprofit and its lobbying arm, the Council of Citizens Against Government Waste, was $5,158,515.

…

Pratt & Whitney spokeswoman Erin Dick said that her company “is not paying for the CAGW ads.” When asked whether Pratt & Whitney donated to CAGW, Dick said that the company does not disclose the public interest groups it supports.

CAGW and Pratt & Whitney share the same ad agency, Sullivan Higdon & Sink, based in Wichita, Kan., according to a Bloomberg report in August.

That same month, Pratt & Whitney said that it was erroneously [“erroniously”, Ha!] named the paid sponsor of a video made by the agency on behalf of CAGW. Since then, the paid sponsor reference has been changed, and the advertising group said that CAGW and Pratt & Whitney are separate customers, according to Bloomberg.

….

A 2006 Finance Committee report, published by the minority Democratic staff but backed by the Republican chairman at the time, tracked how convicted ex-lobbyist Jack Abramoff enlisted tax-exempt groups on behalf of his clients. The report documented how Abramoff got CAGW, among other groups, to publish articles and news releases on behalf of his clients, and then directed tens of thousands of dollars to the taxpayer groups.

(emphasis mine)

Seriously, why anyone takes CAGW seriously is completely beyond me.

Least Shocking Factoid of the Day

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It turns out that the Federal Housing Administration is ill-equipped to handle the explosion in mortgage loans that it is handling as a result of the private banks pulling back:

The Federal Housing Administration may be under-equipped to manage its exploding market share, according to an internal audit released last week. The report gave the FHA poor marks for its steps to screen lenders that are allowed to sell loans backed by the federal agency.

The FHA’s market share has grown sharply as the private mortgage market collapsed over the past two years, and the FHA now insures around one-quarter of all U.S. mortgages, up from around 2% in 2006. The FHA doesn’t actually make loans, and instead insures lenders against losses. To make FHA-backed loans, lenders and brokers must apply to the FHA to become certified by the agency.

The audit, by the inspector general for the Department of Housing and Urban Development, found that the agency was under-equipped to manage a big inflow in applications by lenders to make FHA-backed loans. The number of FHA-approved lenders more than tripled in 2008 to around 3,300 from 1,000 in 2007.

Gee, you think?

The people what cheated honest folks during the housing boom are going where the money is.

It’s another example of why the entire 60+ year focus on supporting home ownership of our government should be abandoned.

It gives us suburban sprawl, global warming, housing bubbles, mortgage fraud, and various other mishugas, all of it bad….He said from his home, which he bought with a mortgage, in a suburb of Baltimore, MD.

Insider Trading Wiretap May Be Result of Terror Investigation

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On top of his arrest for insider trading, Raja Rajaratnam now faces a civil suit over his alleged funding of the Tamil Tigers terror group.

Mr. Rajaratnam is a Tamil born in Sri Lanka, and he has given to organizations that have later been shut down and accused of funneling money to the LTTE, so it is hardly surprising that he was the subject of a wiretap.

My older post does not mention Tamil tiger link, but suggests that the introduction of wiretaps against Wall Street crooks is a good thing.

Unfortunately, it now appears that the wiretaps may not be a case of regulators choosing a tool to pursue fraud, but just an a terror investigation revealing a different crime.

Yet More Fed Ass Covering

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Gee, I guess that they aren’t done with trying to pretend that they care about the ordinary folks, because the Federal Reserve has now issued pay guidelines for banks, allegedly in an attempt to reduce risk.

I’ve had multipule posts about the Fed doing this so that they can keep or expand their regulatory purview, including that essay that I sent to the WaPo, and they just keep doing it.

Well, at least it makes my essay that much more timely.

Accountability on Wall Street, My Ass!!!

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Have you heard the latest? John Meriwether is setting up a new hedge fund.

Just who is John Meriwether, you ask?

Why he is a noted hedge fund manager, he:

  • Established Long term Capital Management
    • Which imploded in 1999, threatening to take down the entire financial system, until Alan “Bubbles” Greenspan used the Federal Reserve to bail his ass out.
  • Established JWM Partners.
    • Which he closed 3 months ago after losing 44% of his investors’ money.

So, after all that, he’s STILL in line to get to play with billions of dollars of other people’s money, and skim 2% of the principal, and 20% of any profits (HAH!!!) that he might earn.

Will no one rid us of these parasites?

I’m not suggesting murder, but I am saying that if I was on a jury, I would vote to acquit.

Hoocoodanode?

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So it turns out that the industry gave us the phony property assessment to qualify for home mortgages is low fraudulently employing the tax credit for first-time home buyers:

The Internal Revenue Service is examining more than 100,000 suspicious claims for the first-time home-buyer tax break, another sign of potential trouble for the soon-to-expire program.

I am gobsmacked that realtors and mortgage brokers might game the system.

More Fun With the Mortgage Racket

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Click for full size

Calculated Risk Loan Securitization Diagram
Or Maybe a Description of N-Dimensional Space

Here’s a factoid that should surprise no one, securitized loans 500% more likely to be delinquent.

That a loan that you planned to offload on some poor schlub was executed with less due diligence than one you planned to hold onto, in part or in full, for the life of the loan.

Hoocoodanode?

In any case, it looks like that merry-go-round may be coming to an end, because it’s beginning to look like the Kansas decision that said that the electronic database of mortgages, MERS, has no standing in a foreclosure matter, which means that no one knows who has standing in a mortgage matter for about ½ of the mortgages out there is expanding, though I am not entirely sure whether or not this directly applies to MERS, but in Massachusetts, a ruling throwing out thousands of foreclosures has been reaffirmed, and it is clear that the Judge will have none of the banks counter arguments:

Despite the lender’s attempt to convince him otherwise, Judge Long came out (again) in favor of consumers:

The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature. To accept the plaintiffs’ arguments is to allow them to take someone’s home without any demonstrable right to do so, based upon the assumption that they ultimately will be able to show that they have that right and the further assumption that potential bidders will be undeterred by the lack of a demonstrable legal foundation for the sale and will nonetheless bid full value in the expectation that that foundation will ultimately be produced, even if it takes a year or more. The law recognizes the troubling nature of these assumptions, the harm caused if those assumptions prove erroneous, and commands otherwise.

Judge Long also had some choice words for lenders:

[T]he problem the [lenders] face (the present title defect) is entirely of their own making as a result of their failure to comply with the statute and the directives in their own securitization documents… What the plaintiffs truly seek is a change in the foreclosure sale statute (G.L. c. 244, § 14), which can only come from the legislature.

I think that the courts are looking at the situation, and deciding that the lenders and securitizers are people with huge legal resources who chose to ignore the law because of the cost, and that property law has developed over the past few century and so is very specific regarding the formalities of documentation for a good reason, just look at historical accounts of theft of deeds, forged property papers, etc.

In any case, I would also point you to the following document, which shows how many of these property transactions are actually fraudulent, with a person acting as an agent for both the seller and the buyer, non existent signatures, false notarization, etc.

Foreclosure Fraud – Guide to Looking up Public Records for Fraud
You can find the author’s blog here.

So, Were they F&^%ing Each Other, or Just Justice and the Taxpayer?

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Bummer of a birth mark, Chris

So, Chris Christie is running for Governor of New Jersey, and we know that he made a $46,000.00 loan to his close aid, Michele Brown, that he neglected to mention on his disclosure forms, but he claimed that she had done nothing for his campaign.

Oops, maybe she did a little:

But interviews with federal law enforcement officials suggest that Ms. Brown used her position in two significant and possibly improper ways to try to aid Mr. Christie in his run for governor.

In March, when Gov. Jon S. Corzine’s campaign requested public records about Mr. Christie’s tenure as prosecutor, Ms. Brown interceded to oversee the responses to the inquiries, taking over for the staff member who normally oversaw Freedom of Information Act requests, according to federal law enforcement officials in Newark and Washington. The requested information included records about Mr. Christie’s travel and expenses, along with Ms. Brown’s travel records.

In mid-June, when F.B.I. agents and prosecutors gathered to set a date for the arrests of more than 40 targets of a corruption and money-laundering probe, Ms. Brown alone argued for the arrests to be made before July 1. She later told colleagues that she wanted to ensure that the arrests occurred before Mr. Christie’s permanent successor took office, according to three federal law enforcement officials briefed on the conversation, presumably so that Mr. Christie would be given credit for the roundup.

So, it’s clear that she has been a mole for Christie in the US Attorney’s office, someone who he mentored and who repaid the favor, but though reporter, David Halbfinger, does imply that there might have been a bit more was going on:

Those records, which the Corzine campaign has parceled out to news organizations, have already proved embarrassing to Mr. Christie. News stories last week said the records showed Mr. Christie often stayed at expensive hotels on the taxpayers’ dime, routinely exceeding per diem rates set for Justice Department officials.

Additional records provided in raw form by the Corzine campaign and analyzed by The Times show that Ms. Brown accompanied Mr. Christie on 16 trips, the bulk of them in 2007 and 2008. They were often accompanied by a junior prosecutor, Kevin O’Dowd.

I really do not care about who Chris Christie f%$#s, but it is clear that he did his best to use his position as US Attorney for maximum partisan advantage, including the fact that he, “Discussed a run for governor with Karl Rove in 2006,” an action which which is expressly forbidden under federal law.

I’m not sure if this will drive voters to Jon Corzine, but if this doesn’t, it’s likely to drive people to independent candidate Chris Daggett, and Christie has already frittered away a double digit lead on this.

Afghanistan Will Hold Runoff

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So, now we know that once he is presented with overwhelming pressure, and the threat of a withdrawal of support, which would end with him being hung from a lamp post, Hamid Karzai will observes the cosmetic niceties of a democratic government:

Karzai welcomed the ruling by the government-appointed Independent Election Commission (IEC) after hours of closed-door meetings with western diplomats and mounting international pressure to accept the need for a second round.

He’s welcoming this ruling in the same way that you or I would welcome a prostate exam…With a bowling ball.

Bend over, this won’t hurt a bit…..

You Call This a Good Start

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A Rich Guy Being Frog Marched in Handcuffs
It makes me feel good

It appears that US Attorney for New York has come up with a new way to enforce the laws against stock fraud, by going after them as if they were members of organized crime, with things like court ordered wiretaps, which were used to bring an indictment against Raj Rajaratnam, the head of the Galleon Group hedge fund.

The thing is, it is organized crime, it requires an enormous amount of…well…organization to pull off insider trading schemes:

Mintz said the alleged $20 million scheme is the most elaborate insider-trading ring discovered since the 1980s when the government began using criminal laws to prosecute such allegations.

“This was an extensive web of insider trading built upon years of contacts and strategically placed people,” the former prosecutor said. “Typically, insider trading cases are much more narrowly focused on some significant deal that’s leaked from one or two sources. The more people who have knowledge, the more potential that the scheme will be uncovered.”

There are dozens of people involved who have to know what is going on, and who must either actively aid, or actively ignore the activity for it to go forward when it is much more than an individual who has foreknowledge of a single event and then buys or sells based on this, as was the case, for example, with Martha Stewart.

One thing to be noted here is that this is about what would be considered pennies, it amounts to about $20 million for a man worth well over a billion dollars, and so, on a deep level, it makes little sense: Why risk decades in jail for something that might net less than 2% of your total net worth.

Here is what going on, I think. Rajaratnam, and Galleon made their money through insider trading, and simply, he continued to do so once he was a made man.

One hopes that as prosecutors dig into this, they get more people to roll over, and they expand their investigation.

RICO, the Racketeer Influenced and Corrupt Organizations Act, as well as an aggressive use of aggressive asset forfeiture laws would spread the net further and wider.

The days of a Michael Millikan doing his 22 months and leaving prison fabulously wealthy should be a thing of the past.

More Ass Covering by the Fed

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As I have noted before, now that Congress is looking at having an agency dedicated to protecting consumers from the worst excesses of the banking industry, and the Federal Reserve Feels believes that this role belongs to it.

Of course, the history of the Fed over the past 40+ years is that they believe in dismantling consumer protections, so their record is less than stellar.

In response to numerous proposals which would make consumer protection more formal in financial markets, which they see as a reduction in their bailiwick, they have continued to make “a day lat and a dollar short” regulations in an an attempt to convince Congress that they do not need to assign this task to some other agency.

Case in point, is how, after decades of skyrocketing fees and increasingly punitive “overdraft protection” schemes, Bernanke and his merry band have decided to clamp down on overdraft fees:

The Federal Reserve is likely to soon pass new rules making it harder for banks to hit customers with fees for overdrawing their accounts, a top official told a Senate subcommittee Wednesday.

Note that it appears that these rules will require that banks have customers positively affirm their desire to opt in to overdraft protection.

It’s amazing what the prospect of some regulatory competition will do to a bureaucracy.

Earlier posts on the subject here.