Category: Finance

Detroit Retirees Vote to Cut Own Pensions, Bond Scum Plan to Fight it in Court

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I understand how insurance works: You sell insurance, and when someone makes a claim, you do whatever you can to screw your policy holders.

In the case of Detroit pensioners, who have no access social security as municipal employees, made concessessions, but the bond insurers want it all:

Two major bond insurers that could lose billions on Detroit’s bankruptcy blasted the city’s plan to pay retirees more than financial creditors and vowed to fight retirees’ endorsement of the deal.

After pensioners voted by a wide margin to accept cuts and allow the Detroit Institute of Arts to spin off into an independent charitable trust, bond insurers Syncora and Financial Guaranty Insurance Co. (FGIC) pledged to continue their vigorous legal fight against the city.

Judge Steven Rhodes will now conduct a confirmation trial starting Aug. 14 to consider evidence and witness testimony before determining whether the plan is fair, feasible and legal and can be approved.

The bond insurers — which backed a $1.4-billion debt deal brokered in 2005 by Mayor Kwame Kilpatrick’s administration to fund pensions — voted no on the city’s offer to them, which ranged from 0 to 10 cents on the dollar.

BTW, they want the Detroit Institute of Art, one of the finest art collections in the United States, to sell off all of its art, because they cheated Detroit with their (probably illegal) interest rate swaps, fair and square.

Not enough bullets.

This Makes Me Chuckle

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Hedge fund billionaire William Ackman promised to deliver a deathblow to Herbalife from a Manhattan stage, but his long presentation on Tuesday bombed with investors and left the diet shake seller unscathed.

 Herbalife CEO “Michael Johnson is a predator,” Ackman said fighting back tears as he wrapped up the second hour of the presentation while referring to his family’s American story, which started when Ackman’s great-grandfather immigrated to the U.S. from Russia. “This is a criminal enterprise.” Ackman called Herbalife a $24 billion “scam.” “The fraud is affecting more and more people,” said Ackman. “It is time to shut the company down.”

 Shares of Herbalife rose steadily in the morning after Ackman started giving his talk on Herbalife’s nutritional clubs, increasing by 8% to $58.40 in the first hour of the presentation. Two hours into the talk the stock had risen by 11% to $60. That’s a little higher than the shares were changing hands for on Monday before Ackman drove down the stock by 11%, saying he would be delivering “the most important presentation that I have made in my career.” Ackman had promised in a CNBC interview on Monday that “we won’t disappoint.” Ackman’s presentation was still going on at 1:07 p.m., with the stock up by 15% to $62.22. During the presentation, Ackman suggested that Herbalife had been repurchasing shares in a material way on Tuesday. Shares of Herbalife continued to rise after the three-hour presentation ended, closing at $67.77, up 25% for the day.

 ………

 The company, which has vigorously denied Ackman’s accusations, said on Tuesday that Ackman was trying to drive down Herbalife’s shares over a relatively short period because a “substantial portion of the bet expires on January 17, 2015,” referring to put options Ackman purchased when he restructured his short position in the company’s shares. Circumstantial evidence suggests Ackman’s put options are currently not in the money.

 ………

 During the presentation, Ackman invoked Enron, Bernard Madoff, totalitarian regimes and even the Nazis. “The big lie is used by totalitarian regimes, and by the Nazis and by lots of people and people generally believe big lies because they are so bold that how can they possibly be false,” Ackman said. He criticized former Secretary of State Madeleine Albright for supporting Herbalife and claimed that Albright had successfully used her connections to make sure the company could continue to operate in the key China market after Ackman had attacked Herbalife’s China operations earlier this year.

Oh, yeah, and then there is those accusations of free babysitting:

“They are not selling weight loss in these clubs, they are selling business opportunities,” Ackman said at the presentation to investors in New York, adding the clubs provided free babysitting and had people working making nutrition drinks without pay.

 “This is all free labor, totally illegal,” he said.

Herbalife jumped, and his short bet dropped in value as a result.

I joke about schadenfreude all the time, but this really does make me feel good.

Does that make me a bad person?

The Financial Times Suggests that Private Equity is Screwing their Clients

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No, seriously. It is the Financial Times, and they are suggesting that private equity is fundamentally corrupt in their business practices:

It is too early to say whether the $30bn leveraged buyout of First Data in 2007 on the eve of the financial crash was a bad deal. KKR, the private equity group with a controlling stake, could yet recoup its investment, which it has written down by 20 per cent: the payment processing specialist will attempt to go public, possibly this year.

But one thing is certain: the Atlanta company, which has struggled under $24bn of debt since the KKR acquisition, will have paid its owner more than $100m in fees for a range of advisory, transaction and consulting services – including some that may never be required.

For the past three years alone, total fees to KKR-related parties amounted to $117m, according to First Data’s yearly regulatory filings. The bulk was an annual charge of about $20m that the company has to pay until 2019 for being “monitored”. If KKR, run by Henry Kravis and George Roberts, decides to sell or float its stake before that date, it is entitled to a termination fee.

First Data also paid KKR’s capital markets unit $21m for financing and underwriting services, and $35m for consulting work to Capstone, a company that works exclusively for the New York buyout house.

Such arrangements, struck with companies that can hardly say no to their majority owners, are coming under growing scrutiny by regulators. They are also sparking frustration among some investors, although few have incentives to reform the system.

“Those fees pump substance out of portfolio companies. It is the sort of greed you would typically see in investment banking,” says Georges Sudarskis, an industry veteran who advises Asian and Middle Eastern sovereign wealth funds.

The US Securities and Exchange Commission is taking a hard look at the industry’s fees. Andrew Bowden, a director at the SEC, said in May that his team had identified “violations of law or material weaknesses in controls over 50 per cent of the time” when reviewing payments from portfolio companies to their private equity owners.

(emphasis mine)

I just love the phrase, “It is the sort of greed you would typically see in investment banking.”

BTW, private equity do not deliver higher rates of return that would justify these fees.

I’m beginning to think that if we simply threw everyone who worked on Wall Street in jail, you would have a wrongful conviction rate in the single digit percentiles.

Rick Santelli Gets Told that He Is Wrong About Everything

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I think that his cow-orkers at CNBC are sick and tired of Rick “Tea Party” Santelli’s clown show:

Santelli gets completely owned, even if he doesn’t realize it, when Steve Liesman says, “Rick, it’s impossible for you to have been more wrong. Every single bit of advice you gave would have lost people money, Rick. Lost people money, Rick. Every single bit of advice. There is no piece of advice that you’ve given that’s worked, Rick. There is no piece of advice that you’ve given that’s worked, Rick. Not a single one.“

It’s not often that you hear one employee call out another one on the network as completely incompetent and worthless.

H/t TPM.

How Barack Obama Made People Stop Believing in Government

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Do you remember the history HARP?

Barack Obama and Timothy Geithner, said that they had a program to help distressed homeowners, when it was actually a program that consistently screwed homeowners in order to “foam the runway” for the banksters by allowing them to puff up their balance sheets.

Well, people remember this, and now that Obama is (allegedly) trying to provide real aid to homeowners, they are finding that have no takers because the homeowners in question do not trust the government to help them any more:

We all remember the fable of The Boy Who Cried Wolf. The moral of the story: Lie one too many times and nobody will believe you, even when you’re telling the truth. Now we have a case of The Government Who Cried Wolf, showing how the failure of the Obama administration’s foreclosure mitigation programs haunt them to this day.

 The Federal Housing Finance Agency (FHFA), which oversees mortgage giants Fannie Mae and Freddie Mac, wants to help around 676,000 homeowners it has identified as eligible for refinancing under the government’s Home Affordable Refinancing Program (HARP).

 ………

 But these remaining homeowners appear to have no interest in the program, and Watt explained why in Chicago. “We have written to them. We have called them, and they’re saying this is too good to be true,” he said.

 Why would homeowners exhibit so much skepticism in a government program that they feel inclined to turn down thousands of dollars in free money? You can track it back to all the promises made over the past five years to help homeowners, and the unfortunately sorry results.

 In 2009, when the foreclosure crisis was most acute, President Obama promised to save 4 million homes through the Home Affordable Modification Program (HAMP). Today, only around 900,000 hold active permanent HAMP modifications, while millions of others either re-defaulted or were rejected by the program. Mortgage servicing companies, which had a greater financial incentive to foreclose over modifying home loans, quickly figured out how to game the system, using it to pile more bad debt on borrowers for their own reward.

The process devolved into a horror show for homeowners. Servicers prolonged trial modifications well past the three-month period set out in HAMP guidelines so that they could rack up late fees. They deliberately lost borrower’s income documents to extend the default period, even shredding documents and purging records to do so. They pursued foreclosure while negotiating the modification, against HAMP rules. They granted modifications that folded servicer fees into the principal of the loan, increasing the unpaid principal balance — and thus their profit — while pushing the borrower further underwater. And they trapped borrowers after denying modifications, demanding back payments, missed interest and late fees, with the threat of foreclosure as a hammer.

This sometimes forced borrowers into “private” modifications with the servicer, usually on worse terms than the status quo. Or it led to many of the 5.6 million foreclosures we’ve seen since the collapse of the housing bubble. One set of employees at Bank of America testified that they were given bonuses like Target gift cards for pushing homeowners into foreclosure.

 Subsequent government programs, like the “Hardest Hit Fund” directed at states with the most nagging foreclosure crises, similarly failed to deliver. The failure to restructure mortgages and avert foreclosures is seen as the biggest policy mistake of the Great Recession.

It’s easy to prove to people that government cannot work, you just have to do things like HAMP, and lie to people and design programs to fail when view through the lens of their professed goals.

On the far side, however, when you actually want to help people, they no longer trust you, forever and ever.

Note that Obama and His Evil Minions™ had a completely free hand in designing these programs, so they own the fallou, or as Atrios notes:

Plenty of things are genuinely beyond Obama’s control, but we have an example of something which was 100% in his control. And it was horrible.

Uh-Oh

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You know about short selling?

The nickel tour is that it is a way to bet against an asset, and you make money if it falls in value.

Well, short selling has hit a 7 year low. In fact it hit the lowest level since the Lehman Brothers implosion that initiated the financial crisis:

Hedge funds have sharply scaled back their bearish bets that the value of stocks is about to fall, with the proportion of shares earmarked for short selling at its lowest level since before the financial crisis despite warnings of renewed market exuberance.
The percentage of stocks that have been borrowed by short sellers – who try to profit from a company’s share price falling – has dropped to the lowest level in the US, UK and the rest of Europe since the years before the collapse of Lehman Brothers, according to data compiled for the Financial Times by Markit.

The fall in short selling comes as Wall Street and markets in Europe trade at near record and multiyear highs, indicating that while some high profile hedge fund managers have warned of excessive market euphoria the industry is still unwilling to bet against the rally.

Put your cash in something safe and liquid, because we are in for a bumpy ride.

The Sound You Hear is Another Bubble Collapsing

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Remember those stories about all those investors paying cash to acquire rental properties?

Remember how they were going into single family rentals?

Well, it looks like the rush for the door has begun:

A year ago, buying foreclosed homes to rent out was the sure-thing trade for investment firms backed by money from private equity companies, hedge funds and pension systems. But with the supply of cheap foreclosed homes dwindling, some early investors are looking to cash out a bit by flipping homes to competitors.

The Waypoint Real Estate Group, one of the first companies to raise money from private investors to buy foreclosed homes, is quietly shopping as many as 2,000 houses in California that it acquired in the last few years in several private investment funds, said three people who had been briefed on the matter but were not authorized to discuss it. The homes, which are largely rented, are being shown to other companies backed by investor money that have also scooped up distressed houses in states including Arizona, California, Florida, Georgia, Illinois and Nevada.

Waypoint is considering selling about half of its 4,000 homes. Some of the biggest institutional investors in the market for foreclosed homes — companies like the Blackstone Group, American Homes 4 Rent and American Residential Properties — have slowed their pace of acquisitions in response to an increase in home prices and a dearth of foreclosed homes that do not require significant renovation.

Waypoint is following other early investors like the Och-Ziff Capital Management Group and Oaktree Capital Management, which have sold homes bought near the start of the financial crisis. But unlike Och-Ziff and Oaktree, Waypoint is not leaving the single-family home market. It is still managing more than 7,000 homes for a publicly traded real estate investment trust, or REIT, it formed last year with the Starwood Capital Group called Starwood Waypoint Residential Trust.

Jason Chudoba, a spokesman for the trust and Waypoint’s management company, said the firm did not comment on market speculation.

The single-family home market, after a wave of acquisitions by companies backed by Wall Street money, is changing as institutional buyers now focus more on expanding their operations to manage tens of thousands of homes across the United States. Industry participants say that the rapid buying of foreclosed homes has ended and that they expect other early institutional buyers to sell homes to lock in profits. They say they also expect the business to consolidate into the hands of a few large companies.

So, the small operators are getting out, and the big operators, aka the too big to fail operators are doubling down, because they figure that they know better.

In a way, the TBTF players are right:  When this comes tumbling down, the taxpayers will find a way to bail them out, yet again.

We are f%$#ed.

It’s Bank Failure Friday!!!! (One Week and One Day Late)

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And here they are, ordered, and numbered for the year so far.

  1. Valley Bank, Moline, IL  <== Occurred on June 20
  2. Valley Bank, Fort Lauderdale, FL <== Occurred on June 20
  3. The Freedom State Bank , Freedom, OK

Yeah, I forgot to check last week.

Full FDIC list

The stuff does seem to happen in fits and starts.

So, here is the graph pr0n with last few years numbers for comparison (FDIC only):

A Mobbed Up Bank is the Least of His Problems

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Pope Francis just fired the whole board charged with overseeing the Vatican bank, the Financial Information Authority (AIF):

Pope Francis has removed the entire board of the Vatican’s financial watchdog in his latest attempt to rehabilitate the troubled Vatican bank.

 Two years before they were due to step down, the five Italians heading the Financial Information Authority (AIF) have been replaced with a more international group of experts, including one woman.

 The change follows reports of clashes between the board members and the body’s Swiss director, René Bruelhart, an anti-money laundering expert.

 The new members are Marc Odendall, who manages and advises philanthropic organisations in Switzerland, Juan Zarate, a Harvard law professor who was a security adviser to President George Bush, Joseph Yuvaraj Pillay, former managing director of the Monetary Authority of Singapore, and Maria Bianca Farina, the head of two Italian insurance companies.

 ………

 Pope Benedict XVI created the watchdog in 2010 to supervise and regulate the widely discredited Vatican bank – which is officially known as the Institute for Works of Religion (IOR) – and prevent it being used for money-laundering and for terrorism.

 But when Bruelhart, who cleaned up Liechtenstein’s banking system, arrived as director in 2012 he encountered resistance to the reforms from an old guard.

 The group reportedly wrote to Vatican Secretary of State Pietro Parolin earlier this year complaining that they were being kept in the dark, after Bruelhart’s arrival.

 Reformist members of the Curia had urged Francis to bring in professionals with a global perspective who could work with the Swiss lawyer.

 ………

 And in January he sacked all but one of the five cardinals in the commission that supervises the Vatican bank.

The Vatican Bank is clearly a big can of worms, but compared to Irish Orphanage scandal which includes hundreds of surreptitiously buried bodies and involuntary medical experiments:

It gets worse. One week after revelations of how over the span of 35 years, a County Galway home for unwed mothers cavalierly disposed of the bodies of nearly 800 babies and toddlers on a site that held a septic tank, new reports are leveling a whole different set of charges about what happened to the children of those Irish homes.

 In harrowing new information revealed this weekend, the Daily Mail has uncovered medical records that suggest 2,051 children across several Irish care homes were given a diphtheria vaccine from pharmaceutical company Burroughs Wellcome in a suspected illegal drug trial that ran from 1930 to 1936. As the Mail reports, “Michael Dwyer, of Cork University’s School of History, found the child vaccination data by trawling through tens of thousands of medical journal articles and archive files. He discovered that the trials were carried out before the vaccine was made available for commercial use in the UK.”  There is no evidence yet – and there may never be – that any family consent was ever offered, or about how many children had adverse effects or died as a result of the vaccinations. Dwyer told the Mail, “The fact that no record of these trials can be found in the files relating to the Department of Local Government and Public Health, the Municipal Health Reports relating to Cork and Dublin, or the Wellcome Archives in London, suggests that vaccine trials would not have been acceptable to government, municipal authorities, or the general public. However, the fact that reports of these trials were published in the most prestigious medical journals suggests that this type of human experimentation was largely accepted by medical practitioners and facilitated by authorities in charge of children’s residential institutions.” In a related story, GSK — formerly Wellcome — revealed Monday on Newstalk Radio that 298 children in 10 different care homes were involved in medical trials in the ’60s and ’70s that left “80 children ill after they were accidentally administered a vaccine intended for cattle.”

 Irish Minister of State for Training and Skills Ciaran Cannon has called for a public inquiry into the treatment of the children and their deaths.  The archbishop of Dublin, Diarmuid Martin, has also called for an investigation, adding that it should be free of Catholic Church interference. “We have to look at the whole culture of mother and baby homes; they’re talking about medical experiments there,” he told RTE Radio this weekend. “They’re very complicated and very sensitive issues, but the only way we will come out of this particular period of our history is when the truth comes out.” And a spokesman for GSK said the latest revelations, “if true, are clearly very distressing.”

This is not even the first time information on these kinds of vaccine trials has come to light. In 2010, the Irish Independent uncovered how children born in the homes were subjected to a single “four-in-one” vaccine trial without their mothers’ permission. The children often didn’t even know what they’d been subjected to until well into adulthood. Appallingly,  Ireland had no laws regarding medical testing on humans until 1987. Mari Steed, who was born at the Bessborough home in the ’60s, told the Sunday Independent, “We were used as human guinea pigs.”

Yes, very distressing. 

Seriously, I don’t think that Francis could live long enough to drain this swamp.

I don’t think that he could live long enough to drain this swamp if he became Pope when he was 12 ……… And his dad was Methuselah.

It’s Bank Failure Friday!!!!

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And here they are, ordered, and numbered for the year so far.

  1. Slavie Federal Savings Bank, Bel Air, MD

Full FDIC list

And here are the credit union closings.  I’ve redone the whole list, because I screwed up at some point this year, and missed some credit union closings, counted assisted mergers, which I shouldn’t have, and accidntaly counted a bank twice:

  1. Bagumbayan Credit Union, Chicago, ​IL, ​1/21/2014
  2. St. Francis Campus Credit Union, ​Little Falls, ​MN, ​2/14/2014
  3. Parsons Pittsburg Credit Union, ​Parsons, ​KS, ​3/21/2014
  4. Mayfair Federal Credit Union, ​Warminster, ​PA, ​3/31/2014
  5. Health One Credit Union, ​Detroit, ​MI, ​5/16/2014
  6. Life Line Credit Union, ​Richmond, ​VA, ​5/23/2014

Full NCUA list

So, here is the graph pr0n with last few years numbers for comparison (FDIC only):

This is an Interesting Theory of Why the Obama Administration F%$#ed Homeowners

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I was thinking that Obama (About Geithner, I know) was captured by the banksters.

Well, Bob Kuttner thinks that is an artifact of Obama trying to distance himself from his skin color:

I’ve been very critical of Obama and I think his administration’s handling of mortgage relief was a disgrace, but I will offer a more charitable interpretation of why the administration turned its back on the victims of the mortgage bust. Race is still such a divisive issue that America’s first black president did not dare to look as if he was extending special help to blacks.

I disagree with the thesis.

I think that Obama is not so much Black as he is Crimson (Harvard) as are the banksters, and nothing binds like those old school ties.

Because Our Government Has Been Completely Captured by the Banksters

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James Kwak asks, “Why Is Credit Suisse Still Allowed to Do Business in the United States?”

Thia has been another episode of simple answers to simple questions.

On a slightly less glib level, Kwak wonders why, if the financial markets are all better, and the banks insist that they are not to big to fail, why we cannot see fit to suspend the banking license of a foreign bank that has spent decades defrauding the American government.

The fundamental point is that if Credit Suisse really is solvent, then there are no losses that have to be absorbed by someone else (other financial institutions or taxpayers). If its assets really are worth more than its liabilities, then it must be possible to close down the bank without harming anyone else (except shareholders), given enough time. The whole point of capital regulation is to make sure that this can always be done. People would lose their jobs, but the whole premise of the financial sector is that it is providing useful services, which means that those jobs would be recreated elsewhere in the industry (except for the jobs based on tax fraud, which should go away for good).

Our finance system is not just corrupt, it is criminogenic.

We gotta figure out a way to shut this all down in an orderly manner, and replace it with something, you know, sane.

But Remember, By Law this Vote is Non-Binding

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Following an abysmal performance, Chipotle shareholders voted against pay raises for senior executives:

Investors in Chipotle Mexican Grill voted overwhelmingly on Thursday against the company’s executive compensation plans, sending a strong rebuke to a company that had awarded more than $300 million to its co-chief executives in recent years.

More than 75 percent of investors voted against Chipotle’s say-on-pay measure, which asked investors to ratify a compensation plan that would continue such payments to Steve Ells, Chipotle’s founder, and his co-chief, Montgomery F. Moran, over the next few years. That was the highest vote against any say-on-pay measure among the country’s largest 3,000 companies this year.

Though the vote is nonbinding, Chipotle said it was taking investor sentiment into consideration.

“We take this very seriously,” a Chipotle spokesman, Chris Arnold, said in a statement. “It has always been, and continues to be, a top priority that our compensation programs are driving the creation of shareholder value. We thank our investors for the feedback we have received on this issue and will continue to engage with our investors as we review our compensation programs that build value for all of our investors.”

Shareholder discomfort with Chipotle’s multimillion-dollar executive compensation plans has grown. At last year’s meeting, 27 percent of shareholders voted against the say-on-pay measure. But in recent months, smaller investors, including the CtW Investment Group, have lobbied big institutional investors to join them in trying to rein in Chipotle’s executive pay.

Note however, this is a non-binding vote.

Binding shareholder votes on executive pay are forbidden by US law.

H/t Crooks and Liars.

Firefly Ran 1 Season, and Bank of America Still Exists?

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In the latest f%$#-up, Bank of America had to suspend its stock buyback and dividends because the “misfigured” its capital levels:

Bank of America Corp said on Monday that regulators had suspended its plan to buy back more shares and raise its dividend after the bank realized it had miscalculated a measure of the capital on its books.

 The second-largest U.S. bank said fixing the mistake reduced a capital level by $4 billion, or about three-quarters of the extra money that the Federal Reserve had approved its returning to shareholders over the next year.

 News of the gaffe sent the bank’s shares down 6.3 percent on Monday to close at $14.95, in the biggest one-day decline in the stock since November 2012.

The announcement illustrates how difficult it is to determine appropriate capital levels for the biggest banks, particularly under hypothetical stress situations that regulators consider. Bank of America now has to submit its request to return more capital to shareholders for a third time, and the Fed itself previously erred in projecting the bank’s minimum capital ratios under a stressed scenario.

 The previously approved increase in the bank’s dividend would have been the first since the financial crisis, and raising it has been a focus of top executives. Banks historically paid out relatively high dividends, spurring retirees and other investors seeing income to buy their shares.

 Banks failed to cut their dividends even as their earnings shrank during the financial crisis, burning up valuable capital and leaving them more vulnerable as the housing market deteriorated. In response, lawmakers have given regulators much more control over banks’ plans to return funds to shareholders.

 The Fed said Bank of America has 30 days to submit a new plan that corrects the errors and ensures no further reporting problems if it would like to return more money to shareholders over the next four quarters.

Seriously.  Just how f%$#ed up does a bank have to be to have the Federal Reserve, an organization which has not just been captured by the finance industry, but which is in part owned by the by the finance industry, to reverse a decision to increase dividends?

BTW, does anyone actually believe that it “miscalculated” its capital ratio?

My guess is that there were a bunch of stock options vesting, and this accounting “error” facilitated top execs cashed in.

This bank is too corrupt, or too incompetent, to continue to exist in its current form.

Fed press release after the break:

Press Release


Release Date: April 28, 2014
For release at 9:00 a.m. EDT

The Federal Reserve Board on Monday announced it is requiring Bank of America Corporation to resubmit its capital plan and to suspend planned increases in capital distributions. The decision relates to the disclosure by Bank of America that the banking organization incorrectly reported data used in the calculation of regulatory capital ratios and submitted as inputs for the most recent stress tests conducted by the Federal Reserve.

The Federal Reserve can require a banking organization that is part of the annual Comprehensive Capital Analysis and Review (CCAR) program to resubmit its capital plan at any time if there is a material change that could potentially lead to an alteration in a firm’s capital position. Bank of America will be required to resubmit its capital plan within 30 days, unless that time is extended by the Federal Reserve. Bank of America must address the quantitative errors in its regulatory capital calculations as part of the resubmission and must undertake a review of its regulatory capital reporting to help ensure there are no further errors.

Until receiving notice that the Federal Reserve has not objected to the new capital plan, Bank of America will not be able to increase its capital distributions, including those increases approved during the 2014 CCAR exercise last month.

The Federal Reserve in CCAR evaluates the capital planning processes and capital adequacy of the largest bank holding companies, including the firms’ proposed capital actions such as dividend payments and share buybacks and issuances.

For media inquiries, call 202-452-2955

Times Ombud Calls Out Shoddy Financial Reporting

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The New York Times public editor Margaret Sullivan criticizes their coverage of Bank of America’s latest financial results, because they completely ignored the massive fines for fraud:

Reading The Times’s coverage of Bank of America’s quarterly loss last week, I almost felt sorry for the financial behemoth. It has mortgage troubles, you see. It has onerous legal costs.

“The disappointing news shows how Bank of America is still paying for its mortgage problems nearly six years after the financial crisis,” the article said.

I thought of sending a small check to help or at least conveying my sympathy.

I really should have remembered what this is all about because it was only last month that Bank of America settled a lawsuit that claimed the bank had committed mortgage fraud. The cost of the settlement? More than $9 billion. Bank of America was one of the banks that sold mortgage securities backed by subprime mortgages, which went south during the housing and financial crises – in many cases driving American consumers into financial ruin.

Some Times readers wrote to me about it, pointing out that there was more to the story. They hadn’t forgotten what happened, it seemed. Jamison Wilcox, for example, noted in an email that he was “dismayed to see the term ‘legal costs’ given a vague and euphemistic meaning – and repeated in a headline – as a short replacement for the specific identification of monies paid out … as a legal consequence of wrongful conduct by a corporation or bank.”

………

The language certainly isn’t overheated. In fact, nowhere in this article is there any straightforward mention of what really caused these legal troubles and costs.

It says only this: “At the heart of the additional legal expenses was a $6.3 billion settlement that the bank announced last month to settle a lawsuit arising from troubled mortgage-backed securities it bundled and sold to Fannie Mae and Freddie Mac before the financial crisis.” (The bank also agreed to buy back $3.2 billion in mortgage securities, bringing the penalties to $9.5 billion.)

Bundles and troubles and costs, yes. Fraud accusations, not so much.

I do not think that this will make a difference, though.