Category: Finance

What a Bunch of Misogynistic Assholes

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In the Washington Post, Neil Irwin looks at the Federal Reserve Chairman selection process, and discovers that the Obama administration is full of a bunch of sexist assholes:

Why don’t they like Janet Yellen?

  • She actually has an opinion, “Yellen has a perfectly solid relationship with Bernanke, as best as I can tell, but she’s more of her own thinker within the institution.“
    • Because a Fed Chair should not have their own opinions?  (The Fed Chair is supposed to be independent).  I call this the “Uppity Woman” objection.
  • She has never been a part of the Obama “team”, as in “They are big on the team player concept, people diving in together to sort through the hard and messy challenges they face……… In the early months of the Obama administration, the same could be said of the group that included Geithner, Summers, Gene Sperling and others who are now influential voices advising the president on the decision.“
    • Notice, not a woman in the group.  Romer and Bair were marginalized too.
  •  She is too cautious and well prepared, “A second, and related, reason that Yellen’s leadership style isn’t a great mesh with the Obamaites is also one of her strengths. She is always meticulously prepared, a careful and systematic thinker who chooses her words carefully. In a Fed policy committee meeting or a gathering of international central bankers, she typically scripts herself in advance and reads those prepared comments. ……… She is methodical, not manic.“
    • Let me get this straight, they WANT a shoot from the hip, shoot from the hip loose cannon at Fed Chair?   This is the last thing you want from a Federal Reserve Chairman, or for that matter any central banker in any nation.  They are asking for something that would not pass muster for a central banker for Zimbabwe!
  • And then there is concerns about policing bubbles, “Third, the president very clearly frets about the risk of financial bubbles and wants a Fed chief who will be attuned to staving them off.”
    • Because Yellen was the first, and the most strident, Fed Governor to warn about the housing bubble.  

It’s no wonder that Anita Dunn told Ron Suskind that the Obama administration, “Actually fit all of the classic legal requirements for a genuinely hostile workplace to women.”(She later denied it, but Suskind had the tape)

And all this is about making Larry Summers the Fed Chair.

Larry Summers, who is pretty much the epitome of, “Does not work well with others,” is the guy that Barack wants to head a consensus driven organization.

Larry Summers is bad policy, and its bad politics, and that is ignoring Summers’ record of cashing in on Wall Street, which makes him suspect as a regulator.

Linkage

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I really want to know the backstory.

More Lying Liars

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This time it’s Attorney General Eric “Place” Holder, and he is lying about prosecutions for mortgage fraud.

Not only did he puff up the about the numbers and amount of mortgage prosecutions, but the DoJ retroactively edited the transcript of his speech on this subject:

Not sure that even the Bushies ever tried pulling the “modify the text of old archived speeches a year later” trick.

Yes, this is a level of mendacity that would impress Karl Rove.

OOPS!

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Not only am I day late for bank failure Friday, but I also missed last weeks bank closure completely.

My bad.

As the graph below shows, nothing has been happening lately, and I stopped looking.

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

  1. First Community Bank of Southwest Florida (also operating as Community Bank of Cape Coral), Fort Meyers, FL  <==From August 1
  2. Bank of Wausau, Wausau, Wisconsin

Full FDIC list

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

Linkage

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Three men deny Oompa Loompas attack The Guardian (I feel bad for laughing)
NSA Director Heckled at Blackhat computer hacker conference. Forbes
Ted Cruz Still Needs to Be Ditched: The Rude Pundit (Must read)
New York Times editors cut Obama a new one over secrecy. (I think that the persecution prosecution of James Risen may have pissed them off)
Obama Starting to Lose It Over Snowden Naked Capitalism (also must read)
Bubble Alert!! Morgan Stanley predicts buy-to-rent boom (HousingWire)

Pic H/t Police the Police

Yadda, Yadda, Yadda, Fabulous Fab Found Liable

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Goldman Sachs mid-level minion Fabrice Tourre was found Civilly liable for fraud related to mortgage backed securities:

A federal jury found former Goldman Sachs executive Fabrice Tourre liable Thursday for duping investors about a shoddy mortgage deal on the eve of the housing market’s crash, the first major court victory for the Securities and Exchange Commission in its quest to hold Wall Street accountable for the 2008 financial crisis.

 After two days of deliberation, the jury decided Tourre — best known by his “Fabulous Fab” nickname — was liable for six of the seven claims pursued by the SEC. The agency had accused the 34-year-old Frenchman of defrauding investors out of $1 billion by selling them a financial product that was secretly designed to fail.

 The trial was one of the few to emerge from the financial crisis, and it cast Tourre as a symbol of Wall Street greed. Only twice before has the SEC brought individuals to trial in cases related to the crisis, and each time ended with lackluster results. The victory this time around is a boon for the agency, which is often criticized as a risk-averse regulator that shies away from court battles in favor of slap-on-the-wrist settlements.

 Tourre was only a mid-level executive at Goldman — not a marquee Wall Street figure, some legal experts noted. Still, the morale boost is likely to build momentum inside the agency as it pursues one of its most prominent targets yet: hedge-fund billionaire Steven A. Cohen. Last month, the agency charged Cohen with failing to properly supervise two employees who engaged in insider trading, a case that could potentially end the industry tycoon’s storied career.

Note that there is no possibility of jail time, just a fine, that will be paid after what will likely be endless appeals.

So no real possibility of  getting to testify against higher up.

There are two bits in the article that are particularly important in understanding this:

“You would think the SEC convicted the Al Capone of Wall Street today when all it did was scapegoat a single mid-level Goldman Sachs’ trader who bragged in emails to his girlfriend,” Dennis Kelleher, chief executive of a nonprofit group called Better Markets, said in a statement.

 John C. Coffee Jr., a professor at Columbia Law School, said a question still remains: “Why didn’t they go after someone important and not this sacrificial lamb?”

 ………

 Jacob Frenkel, a former SEC enforcement lawyer and former federal prosecutor, said the SEC’s victory came just in time. The five-year statute of limitations is running out on cases from the time of the financial crisis.

So,this is not a beginning, this is an end, and as that it is almost less than nothing, because it allows the banksters and Their Evil Minions™ can point to this, and claim that not everyone skated, even though all they got was a 28 year French number cruncher.

Damn.

Federal Court Rules that Federal Reserve Cannot Be the Banksters Bitch Over Swipe Fees

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U.S. District Judge Richard Leon just ruled that the Federal Reserve’s rules on debit card swipe fees are too bank friendly and ignore the statutory requirements of Dodd-Frank:

The Federal Reserve disregarded Congress’s intent when deciding how much banks can charge merchants for debit-card transactions, a judge ruled, rejecting Dodd-Frank-imposed regulations governing “swipe” fees.

U.S. District Judge Richard Leon in Washington ruled today that the Fed didn’t have the authority to set a 21-cent cap on debit-card transactions. Leon said the rule, which has been in effect since October 2011, would remain in place pending new regulations or interim standards.

“The Board has clearly disregarded Congress’s statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit card transaction,” Leon said in his 58-page ruling.

The groups, in a lawsuit filed in November 2011, said merchants will be “substantially harmed” by the fees the Fed set under the Durbin Amendment, a provision of the Dodd-Frank legislation. The rule went into effect on Oct. 1, 2011.

“The board’s final rule permits banks to recover significantly more costs than permitted by the plain language of the Durbin Amendment and deprives plaintiffs of the benefits of the statute’s anti-exclusivity provisions,” the retailers argued in their complaint.

What?  The law is not friendly enough to the banks, and so the Fed draws up regulations ignoring the law? 

I am so (not) surprised.

Linkage

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Libertarian Paradise:

Schadenfreude on 401(k) Plans

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Ian Ayres, a professor at Yale, has been reviewing 401(k) programs, and will publicize the really sucky plans that charge excessive fees:

A Yale Law School professor is causing a ruckus among U.S. corporations with plans to publicize a study of employers’ 401(k) plan costs.

 The professor, Ian Ayres, has sent about 6,000 letters to companies, saying he would disseminate the results of his study using Twitter, with separate hashtags for each company.

 Prof. Ayres has mailed out several different versions of the letter since June, and at least one said that he had identified an employer’s 401(k) specifically “as a potential high-cost plan.” He said that he and his research partner planned to publicize the results in spring 2014.

 Tri-City Electrical Contractors Inc., in Altamonte Springs, Fla., received one such letter on July 5. It said that the company’s plan ranked worse than 77% of plans of comparable size based on total plan cost.

 “As a reminder, fiduciary duties are the most stringent imposed by the law, and require administrators to act solely in the interests of plan participants,” continued the letter, which was reviewed by The Wall Street Journal.

 The letters come as administrators of 401(k) plans have been under fire for what some workers and retirees say are excessive fees. Federal fee-disclosure rules went into effect last year requiring 401(k) administrators to better spell out the fees being charged to plan sponsors and participants.

The problem is that there are a lot of 401(k) administrators who over-promise returns to justify inflated fees.

Call me old fashioned, but I think that there should be (low) statutory limits on 401(k) and IRA because otherwise, the tax breaks are simply going straight into Wall Street’s pockets (expense ratio is largely unrelated to plan returns).

If you want to blow your money on a mutual fund manager who charges high fees, it’s your business, until Uncle Sam starts supplying tax benefits, at which point, it becomes a matter for the public to discuss.

Damn It Feels Good To Be A Banksta

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Because as a bankster you can break into someone’s house, and take all their stuff, and not only are not arrested, you don’t have to pay them anything for this:

An Ohio bank is refusing to reimburse a Vinton County woman whose house they unjustly repossessed while she was out of town.

 Katie Barnett recently returned home after being away for two weeks to find that the lock on her door had been changed. She crawled in through the window to find all of her stuff missing.

 Barnett suspected she had been robbed — and she wasn’t too far off.

 It seems that, while Barnett was gone, the First National Bank of Wellston arrived at her place of residence, broke in, and took possession of all her belongings, including the house.

 Except, as it later turned out, they had the wrong address.

 “They told me that the GPS led them to my house,” Barnett told 10TV. “My grass hadn’t been mowed and they just assumed.”

 Phoning the local police to report the incident did Barnett little good, as the McArthur Police Chief refused to investigate and considered the case closed.

But for Barnett, the ordeal is very much ongoing.

With all of her stuff either sold off by the bank or thrashed, the homeowner presented the bank’s president with an $18,000 estimate for restitution.

He refused to pay up.

“He got very firm with me and said, ‘We’re not paying you retail here, that’s just the way it is,’” Barnett recalled. “I did not tell them to come in my house and make me an offer. They took my stuff and I want it back.”

(emphasis mine)

Seriously, will no one prosecute these rat bastards?

They break into your house, they steal and trash all of your stuff, and when caught, they refuse to make you whole.

I would suggest that Katie Barnett lawyer up, put a lien on the f%$#ing bank’s HQ, and then start foreclosure proceedings.

Why Janet Yellen will not Become the Federal Reserve Chairman

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Because she has ovaries:

The favored parlor game of the political-economic complex right now is guessing who will replace Ben Bernanke as chairman of the Federal Reserve. The clear front-runner is Federal Reserve Vice Chairman Janet Yellen. But she’s by no means a sure thing.

One important reason she’s not — and I don’t know another way to say this — is sexism, as evidenced by the whispering campaign that’s emerged against her.

The message isn’t always delivered in a whisper, of course. In May, Federal Reserve Bank of Dallas President Richard Fisher suggested on CNBC that if Yellen is chosen, the pick will have been “driven by gender.” That’s more of a shouting campaign.

Fisher hastened to add that Yellen is “extremely capable.” But, he said, “there are other capable people.” Capable people, I guess, who are male, and thus whose picks wouldn’t be driven by gender.

But Fisher’s comments aren’t the sort that matter in this process. They’re too crude. The significant doubts about Yellen are transmitted with more subtlety, and for months they’ve been coursing through the cloistered, close fraternity that will drive the selection of Bernanke’s successor.

If you look at the dynamics of the Obama administration and finance, at least under the auspices of (the now thankfully in private life) Timothy Geithner was contempt against those who lacked a Y chromosome.

Notwithstanding the presence of Valerie Jarrett, the Obama administration has many of the aspects of an old boy’s club, and even if you ignore the “boys” part, it is a club, and Larry Summers is most assuredly a part of that club, and Janet Yellen isn’t.

What Yves Smith Said

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She makes a compelling case against Larry Summers being the next Chairman of the Federal Reserve.

Basically, it comes down to the fact that he is a polarizing personality who refuses to listen to others:

The big problem with Summers is not his record on deregulation (although that’s bad enough) or his foot-in-mouth remarks about women in math, or for suggesting that African countries would make for good toxic waste dumps. No, it’s his appalling record the one time he was in a leadership position, as president of Harvard. Summers was unquestionably the worst leader in Harvard’s history.

Summers, unduly impressed with his own economic credentials, overruled two successive presidents of Harvard Management Corporation (the in-house fund management operation chock full of well qualified and paid money managers that invest the Harvard endowment). Not content to let the pros have all the fun, Summers insisted on gambling with the university’s operating funds, which are the monies that come in every year (tuition and board payments, government grants, the payments out of the endowment allotted to the annual budget). His risk-taking left the University with over $2 billion in losses and unwind costs and forced wide-spread budget cuts, even down to getting rid of hot breakfasts.

………

So Summers couldn’t keep his ego out of the way, bullied the people around him, ignored the advice of not one but two presidents of Harvard Management, and left a smoldering pile of losses in his wake. And serious adults are prepared to allow someone with so little maturity and such misplaced self confidence to have major sway over much bigger economic decisions?

Summers’ second big problem is the scandal that led to his ouster at Harvard, which was NOT the “women suck at elite math and sciences” remarks. The university has conveniently let that be assumed to be the proximate cause.

In fact, it was Summers’ long-standing relationship with and protection of Andrei Schleifer, a Harvard economics professor, who was at the heart of a corruption scandal where he used his influential role on a Harvard contract advising on Russian privatization to enrich himself and his wife, his chief lieutenant Jonathan Hay, and other cronies. The US government sued Harvard for breach of contract and Shleifer and Hay for fraud and won.

And yes, he was also hip deep in the ouster of Brooksley Born for her demands that derivatives be regulated.

So, he doesn’t listen, he alienates those around him, he is deeply involved in a massive corruption scandal, and he has been wrong on basically everything outside of academe.

Given this record, I expect him to fail up into the Federal Reserve.

Crap

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The Commodities Futures Trading Commission could have instituted real and effective rules on swaps trades by doing nothing, but they caved to the banks, because the banks refused to prepare for the deadline:

I’m going to be brief, in part because the CFTC’s probable demonstration of lack of gumption is still in play, while the SEC’s was expected but nevertheless appalling. But the bottom line is that even though we seem some intermittent signs of the officialdom recognizing that big banks remain a menace to the health and well-being to the general public*, the measures to constrain them continue to be inadequate.

As readers may recall, CFTC chairman Gary Gensler was in a position to stare down bank efforts to water down critical provisions of Dodd Frank on derivatives (see here for details of the issues at stake). The short version is that Gensler did not have the votes among his commissioners to support his position since the Administration had managed to appoint a bank stooge as one of the Democrats. However, Gensler controlled the agenda. That meant he had the option of not putting the matter to a vote of his fellow commissioners at all, which meant Dodd Frank would become effective as written (mind you, normally legislation does legitimately require some tweaking since the legislative language may be imprecise or not mesh well with existing rules).

What appears to have forced Gensler to relent was not the CFTC politics, but bank refusal to prepare, which meant they could stamp their feet and say if Gensler did not back down, the markets would blow up and it would all be his fault.

Read the rest, and you will not just be disgusted by the CFTC, you will want to replace the SEC with a trained monkey as well.

Back Loaded Bribery

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If you play ball with the monied people who want law and regulation structured to ensure that their wealth increases even more, then they reward you with lucrative jobs, like a high paid lobbyist, or, as in the case of Timothy “Eddie Haskell” Geithner, an absurdly lucrative speaking gig:

During his tenure as Treasury secretary, Timothy Geithner was constantly dogged by the belief that he was spawned from Wall Street. This thinking was false: If you need a refresher, Geithner had actually spent most of his career in government, and none of it at a bank. When he left office this year, Geithner said that it would be “extremely unlikely” for that to change.

But as it turns out, Geithner is now being paid hundreds of thousands of dollars by massive financial organizations. It’s just that he isn’t being paid to work on Wall Street; he’s just being paid to talk every now and then.

The Financial Times reports that Geithner, like countless former public servants before him, has hit the highly lucrative speaking circuit. He’s already made about $400,000 in just three engagements. And that tab is being footed by financial institutions such as Deutsche Bank and Blackstone, which paid him about $200,000 and up to $100,000, respectively.

No one ever explicitly told Geithner that if he protected the banksters, he woud get a payoff, but this is explicit in Washington, DC’s revolving door.

He knew that he would get rewarded, and he has not been disabused of this belief.

H/t Gaius Publius.

An Old Idea Whose Time Has Come Again

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The idea that, in addition to having the US Post Office serve our letter carrier needs, that we have them supply basic retail banking services again:

On July 27, 2012, the National Association of Letter Carriers adopted a resolution at their National Convention in Minneapolis to investigate establishing a postal banking system. The resolution noted that expanding postal services and developing new sources of revenue are important to the effort to save the public Post Office and preserve living-wage jobs; that many countries have a successful history of postal banking, including the U.S. itself; and that postal banks could serve the 9 million people who don’t have bank accounts and the 21 million who use usurious check cashers.

 The USPS has been self-funded throughout its history, but it has been recently driven to insolvency because in 2006, Congress required it to prefund postal retiree health benefits [3] for 75 years into the future, an onerous burden no other public or private company is required to carry. The USPS has evidently been targeted by a plutocratic Congress bent on destroying the most powerful unions and privatizing all public services, including education. Britain’s 150-year-old postal service is also on the privatization chopping block, and its postal workers have also vowed to fight. Adding banking services is an internationally proven way to maintain post office profitability.

Not only has it been done before, it was done in the United States in my lifetime:

The now-defunct U.S. Postal Savings System was also quite successful in its day. It was set up in 1911 to get money out of hiding, attract the savings of immigrants, provide safe depositories for people who had lost confidence in private banks, and furnish depositories with convenient hours. Deposits ranged from $1 to $2,500, and the postal system paid 2% interest on them. It issued U.S. Postal Savings Bonds that paid annual interest, as well as Postal Savings Certificates and domestic money orders. Postal savings peaked in 1947 at almost $3.4 billion.

 The U.S. Postal Savings System was shut down in 1967, not because it was inefficient but because it became unnecessary after its profitability became apparent. Private banks then captured the market, raising their interest rates and offering the same governmental guarantees that the postal savings system had.

This is a good idea for a number of reasons

  • It would allow for an alternative to hit the ground running when (not if) the next time that the big banksters crash and burn.
  • It would allow for small depositors, who routinely take it up the ass from commercial banks, to have an alternative that is also national in scope.
  • It would help the Post Office out of its current Congressionaly generated financial crisis.

In order to take down the banksters, you have to do more than just regulate them: You need to create an effective state owned and operated alternative.

Props to Gary Gensler………

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He’s been canned by the Obama administration for being too hard on the banksters, but on the way out, is implementing the meaningful derivatives reforms for which he was fired:

US regulators are likely to close a crucial loophole in Dodd-Frank rules in the next few weeks, in a move that will cost US banks many millions of dollars of revenues in the US$640trn derivatives market.

Several sources familiar with the internal discussions at the Commodity Futures Trading Commission say that the current exemption – which allows US banks executing derivative trades outside the country to bypass tougher capital holding and reporting requirements – will be allowed to expire on July 12.

CFTC chairman Gary Gensler, the only person with the authority to call a vote on extending the exemption, is said to oppose any extension and a spokesman confirmed that no vote had been scheduled.

“He’s determined not to extend,” said a lawyer familiar with discussions between lobbyists and the chairman. “And if it’s true that Gensler is leaving, maybe he wants this to be his final act before leaving.”

This is clearly a very large f%$# you to Barack Obama, Jack Lew, and (particularly) Timothy Geithner, and it is a well deserved f%$# you.

Obama and his and His Evil Minions™ have been determined to subvert meaningful banking regulations, and it’s nice that someone is standing up to him.

It will cost the banks some money, but I do not care:

If the exemption expires, all swaps deals involving US banks would be subject to the Dodd-Frank rules. Banks would have to set aside significantly more capital against each trade, which would eat into profits and potentially even drive clients to other banks.

Such deals would also become subject to much more onerous reporting requirements and would have to be cleared through an exchange – which could also reduce profitability and push away custom.

Figures from the US Treasury show that US financial institutions reported derivatives trading revenues of US$4.4bn in the fourth quarter of 2012, a 73% increase on the previous year.

There is an old saying about people who are inconvenient, “It’s better to have him inside the tent pissing out, than outside the tent pissing in.”

I thank Gary Gensler for pissing in.  On the matter of financial regulation, it is a very well deserved smack down.

H/T Naked Capitalism.