Category: Finance

That Sound You Hear is Millions of Eurozoners Moving Their Money to Swiss Bank Accounts

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Well, we have already seen how the economic crisis is treated around the world.

The tax payers take it on the chin, and the bond holders, who under laws have no claim to payment from bankrupt banks, get all (or nearly all of) their money.

Well, the EU powers that be have taken it a step further, by stealing money from the account holders to pay the bond holders:

European finance ministers have agreed an £8.7bn bailout for Cyprus which includes all Cypriot bank customers handing over up to 10% of their savings.

 Cyprus becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the eurozone for financial help amid the region’s debt crisis, but also faces a possible run on its banks as depositors try to avoid losing up to 10% of their savings.

 The savers, half of whom are thought to be Russian, will raise almost €6bn. It is the first time a bailout has included such a measure.

 “I wish I was not the minister to do this,” the Cypriot finance minister, Michael Sarris, said after 10 hours of late-night talks in which eurozone finance ministers agreed the package. “Much more money could have been lost in a bankruptcy of the banking system or indeed of the country.”

 Without a rescue, Cyprus would default and threaten to unravel investor confidence in the eurozone, a renewed confidence fostered by the European Central Bank’s promise last year to do whatever it takes to support the euro.

They do not understand what this means.

Something north of 50% of the deposits in Cypriot banks will be gone in the next few months, going to banks in Germany, Switzerland, or into mattresses.

This comment is delusional:

Such levies break the taboo of hitting bank depositors with losses, but [ Dutch finance minister Jeroen] Dijsselbloem said it would not have otherwise been possible to salvage its financial sector, which is around eight times the size of the economy.

They have just destroyed the financial sector in Cyprus, and perhaps through much of the Euro Zone.

Since the 1930s, in the developed world, at least, deposit insurance that makes the the depositors, at least the smaller ones, whole has been the core of our banking system.

This will likely precipitate a return to the days before the FDIC and its brethren around the world, when people stored kept their wealth in safes, or in commodities like gold, and the (temporarily)better off of members of the EU have just made it insane for anyone to ever put more than a few days walking around money in the banks of any Euro Zone nation. (Except perhaps for Germany and the Netherlands, for now.)

H/t Atrios.

Tentacles of the Vampire Squid

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It was nice when the last remaining New England Republican, Christopher Shays, was defeated.

Unfortunately, he was by former Goldman Sachs executive Jim Himes, who is doing his level best to gut the most effective provisions of Dodd Frank: (See also here)

Connecticut Congressman Jim Himes said a provision in the Wall Street reform legislation aimed at limiting taxpayer exposure to risky elements of financial products sold by banks goes too far and must be changed.

 Himes, a Greenwich resident and member of the U.S. House Financial Services Committee, joined with Republicans from North Carolina and Illinois and a fellow Democrat from New York to introduce the Swaps Regulatory Improvement Act this week that would amend the 2010 Dodd-Frank Act. A similar bill has been brought forward in the Senate. An attempt to amend the provision last year failed.

 ………

 As part of the Dodd-Frank Act, banks with access to the Federal Reserve’s overnight lending program and insured by the Federal Deposit Insurance Corp. would be required to set up independent subsidiaries in order to continue selling the financial instruments, called swaps.

 Underfunded swap positions among big banks and other financial institutions were a major reason for the 2008 financial disaster. Swap trades were not made on any exchanges and many of them were based on mortgages. Fearing bank failures of staggering proportions, Congress bailed out the largest institutions.

So, he’s trying to put tax payers on the hook for the gambles at the big casino yet again.

So, what does this mean? It means that the Democratic leadership will make him head of the DCCC finance committee for the 2014 elections:

Rep. Jim Himes of Connecticut will be the new national finance chairman for the Democratic Congressional Campaign Committee in the 2014 cycle, according to two well-placed Democratic sources on Capitol Hill.

 Officials announced the new position for Himes, a three-term Democrat from Connecticut, at a morning meeting for members.

Jeebus.  The Vampire Squid owns us all.

Simon Johnson was right when he said that the first step in recovery from the implosion of your finance system is to break grip on power of the elites who  f%$#ed us like a drunk sorority pledge.  (I’m paraphrasing)

Quote of the Day

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Attorney General Eric Holder hails from the corporate law firm Covington and Burling, which has heavy ties to Wall Street. The head of Holder’s criminal division, Lanny Breuer, hails from the same firm. White is a partner at Debevoise and Plimpton and has represented JPMorgan, Morgan Stanley and UBS. Her husband, John W. White, is a partner at a Wall Street law firm, Cravath, Swaine & Moore. It’s becoming crystal clear that the problem in America is not bad laws; the problem is finding someone other than deeply conflicted Wall Street lawyers to enforce them.

—Pam Martens

Speaking of Back Loaded Bribery………

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Did you hear the one about the SEC chair who got a choice gig on the GE Board of Directors for protecting the banksters?

Well, now you have:

Mary L. Schapiro is starting to get a taste of opportunities in the private sector after stepping down as chairwoman of the Securities and Exchange Commission in December.

General Electric announced on Monday that it had nominated Ms. Schapiro to serve as one of its directors. She will stand for election at the company’s annual meeting on April 24.

The G.E. board position will certainly pay her more than she made in government service. G.E. paid its directors about $250,000 in 2011; at the S.E.C., her annual salary was around $165,000. Presumably, there will be other board positions and job offers, although Ms. Schapiro has not hinted at her future career aspirations.

“Future career aspirations?”

I believe that her “future career aspirations” are spelled “Ka-Ching!“

If we could hook a generator to the revolving door that she is using, we could power the world.

Unfortunately, this is a feature, not a bug of live in the nation’s capitol.

Seriously, Why are We Not Jailing these Mother F%$#ers

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Joe Nocera at the New York Times, takes a look at at how Goldman Sachs screwed over eToys when they managed their IPO:

ONCE upon a time, in a very different age, an Internet start-up called eToys went public. The date was May 20, 1999. The offering price had been set at $20, but investors in that frenzied era were so eager for eToys shares that the stock immediately shot up to $78. It ended its first day of trading at $77 a share.

 The eToys initial public offering raised $164 million, a nice chunk of change for a two-year-old company. But it wasn’t even close to the $600 million-plus the company could have raised if the offering price had more realistically reflected the intense demand for eToys shares. The firm that underwrote the I.P.O. — and effectively set the $20 price — was Goldman Sachs.

 After the Internet bubble burst — and eToys, starved for cash, went out of business — lawyers representing eToys’ creditors’ committee sued Goldman Sachs over that I.P.O. That lawsuit, believe it or not, is still going on. Indeed, it has taken on an importance that transcends the rise and fall of one small company during the first Internet craze.

 The plaintiffs charge that Goldman Sachs had a fiduciary duty to maximize eToys’ take from the I.P.O. Instead, Goldman purposely set an artificially low price, so that its real clients, the institutional investors clamoring for the stock, could pocket that first-day run-up. According to the suit, Goldman then demanded that some of those easy profits be kicked back to the firm. Part of their evidence for the calculated underpricing of eToys, according to the plaintiffs’ complaint, was that Lawton Fitt, the Goldman executive who headed the underwriting team and was thus best positioned to gauge the market demand, actually made a bet with several of her colleagues that the price would hit $80 at the opening. (Through a Goldman Sachs spokesman, Fitt declined to comment. Goldman denies that it did anything wrong, about which more shortly.)

 ………

 Earlier this week, I tracked down Toby Lenk, the founder and former chief executive of eToys. Back when the S.E.C. was investigating I.P.O. excesses, the government deposed him. During the deposition, he mostly defended Goldman Sachs, even though he had the uneasy feeling that eToys had been taken advantage of.

 After the deposition, he recalled, the S.E.C. lawyers began to show him some Goldman Sachs documents. He saw that one big firm after another had been allocated shares — and had immediately flipped them, even though Goldman had promised that its clients would support the stock. “That’s when I thought, ‘We really got screwed,’” Lenk told me.

 Although the experience still angered him, he now has 14 years’ worth of perspective. “Look at what has happened since then,” he said. “If you think eToys got screwed, what do you think happened to the country?”

 “What Wall Street did to us in 1999 pales in comparison to what they did to the country in 2008,” he said.

The argument of the Vampire Squid* is that this was just business as usual.

The court may agree with them.

If they do, it is not a mark of Goldman’s innocence, but rather it is a mark of how thoroughly corrupt high finance in the United States actually is.

*Alas, I cannot claim credit for the bon mot describing Goldman Sachs as a, “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” This was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.

Bummer………

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The Higgins Armory Museum is going to close at the end of this year. The collection will be merged with the Worcester art museum:

The Higgins Armory Museum, an 82-year-old Worcester institution with an internationally renowned collection of arms and armor that is the second largest in the country, announced Friday it will permanently close Dec. 31 after losing a long battle to raise enough endowment money to ensure its future.

The collection will be moved and integrated into the Worcester Art Museum, which plans in time to display all of Higgins’ core 2,000 objects. Higgins will stay open for the rest of the year and offer “top-notch” programs and events.

Although Higgins may not have succeeded in its long-term attempts to stay an individual entity, interim executive director Suzanne W. Maas said that she is excited the future of the collection has been secured and will be staying in Worcester. Meanwhile, Matthias Waschek, director of the Worcester Art Museum, said acquiring the collection gives the WAM “incredible opportunities.”

“Yes, we’re staying in Worcester,” Ms. Maas said in an interview Wednesday. “But I expect people to grieve the loss of this building as we grieve the loss of it.”

This is the arguably the best military history museum in the world.

I never went there when I lived in Massachusetts. Crap.

Oh Crap. NINJA Attack!

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I don’t mean the Japanese master of stealth and deception, I mean that no-documentation mortgages are back, NINJA stands for “No Income, No Job, (and) No Assets” loan.

Basically, all you had to do was fog a mirror.

The new twist is that all you have to do have a live insurance policy that equals the amount of a 10% down payment:

First we got GM subprime interest-free car loans,  then we got subprime ABS securitizations, then we got soaring student loan defaults and delinquencies, then we got the opportunity to sell and short student loan exposure, and now, finally, the credit bubble is complete as FastFunds Financial Corporation is proud to announce that it has acquired exclusive mortgage servicing rights for an “Innovative New Mortgage Product.” Why is it so innovative? Because it requires no credit verification, no credit history, no docs and needs no personal guarantees. In other words, it is the very worst of the worst lending practices we saw in 2006: the NINJA.

But there is a twist: “all that is required to qualify for a mortgage loan is qualifying for a life insurance policy, a down payment that usually amounts to 10% of the purchase price and verification that the borrower has the financial ability to pay the monthly payments.”

In other words: buy life insurance, get a subprime, no doc mortgage for free.

We are completely f%$#ed.

Un-Dirtyword-Believable

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Michael Winston was a high ranking executive who tried to blow the whistle at Countrywide Financial.

He was marginalized, and later fired by Bank of America after they took over the firm.

He filed suit, and was awarded $3.8 million dollars for wrongful termination.

Well, a few weeks after he described the rampant fraud and abuse on the Frontline piece, The Untouchables, the appeals court overturned the verdict based on the facts.

Now I’m an engineer, not a lawyer, dammit,* but even I know that appeals courts are to rule on issues of law, not issues of fact.

It smells to high heaven, as the great Matt Taibbi observes:

When I spoke to him last week, Winston was still as amazed and repulsed by what he saw at Angelo Mozilo’s crooked subprime mortgage company as he was when he worked there. Winston, who had worked for years at high-level positions at companies like Motorola and Lockheed before joining Countrywide in the 2000s, described a moment in his first months at the company, when he rolled into the parking lot at the company headquarters.

………

When Winston refused, he was essentially stripped of his normal responsibilities and had his corporate budget slashed. When Bank of America took over the company, Winston’s job was terminated. He sued, and in one of the few positive outcomes for any white-collar whistleblower anywhere in the post-financial-crisis universe, won a $3.8 million wrongful termination suit against Bank of America last February.

Well, just weeks after the PBS documentary aired, the Court of Appeals in the state of California suddenly took an interest in Winston’s case. Normally, a court of appeals can only overturn a jury verdict in a case like this if there is a legal error. It’s not supposed to relitigate the factual evidence.

Yet this is exactly what happened: The court decided that the evidence that Winston was wrongfully terminated was insufficient, and then from there determined that the “legal error” in the original Winston suit against Bank of America and Countrywide was that the judge in the case failed to throw out the jury’s verdict:

In short, having scoured the record for evidence supporting the jury’s verdict on the issue of causation, we have found none. It follows that the trial court erred in denying defendants’ motion for judgment notwithstanding the verdict.

The f%$#ing fix is f%$#ing in.

This is a deliberate attempt to chill the activities of any potential whistle blowers.

If this were an isolated incident, I might not assume corruption, but it is not an isolated case.

It seems to be an cultural imperative to punish whistle blowers, as was shown when the only person to go to jail in the UBS tax evasion case was the whistleblower.

I don’t know how this can be fixed, but it needs to be fixed.

*I LOVE IT when I get to go all Doctor McCoy!!!

But Of Course

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The National Futures Association, the organization responsible for “self-regulating” the industry, wanted to ban Jon Corzine from the group for life.

They had a problem though, it turns out that the former head of the non-bankrupt MF Global was not a member:

The comedian vowed to avoid “any club that would accept me as one of its members.” Mr. Corzine, the former Democratic senator who ran MF Global until it collapsed in 2011, faced expulsion from a group to which he did not even belong.

The National Futures Association, the futures industry’s self-regulatory group, convened on Thursday to consider a lifetime ban of Mr. Corzine. Two of the group’s newest board members championed the plan as retribution for Mr. Corzine’s role in the demise of MF Global, which improperly took $1.6 billion from its customers before filing for bankruptcy.

If a majority of the board members voted yes, the group would have moved to hold a hearing over Mr. Corzine’s status before enacting the ban.

But when the board emerged from its meeting late on Thursday, the group issued a cryptic statement suggesting that Mr. Corzine could not be so easily ostracized because of, well, a small flaw in the plan: “Mr. Corzine is not currently a member of N.F.A.,” the board’s chairman declared in the statement.

………

His plan to expel Mr. Corzine grew from mounting frustration over the slowly developing federal investigation into MF Global. After more than a year of investigating Mr. Corzine, regulators and criminal investigators have not filed any charges, feeding concerns that Mr. Corzine will escape unscathed.

Of course, he’s going to emerge unscathed.

Silly rabbit, consequences are for little people.

Tell Me That This Is Not a Bribe

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Jack Lew, Obama’s nominee for Treasury Secretary, appears to have a deal with his current employer, Citigroup, that looks an awful lot like a bribe:

Jack Lew is the nominee for Treasury secretary whose own bonus as an investment banker was bailed out by the Treasury Department when it rescued Citigroup Inc. (C) in 2008. He owes much to America’s taxpayers. He should also be grateful to Citigroup for agreeing to let him rejoin the government without suffering much for it financially.

An intriguing revelation from Lew’s Senate confirmation hearing last week was that he stood to be paid handsomely by Citigroup if he left the company for a top U.S. government job, under his 2006 employment agreement with the bank. The wording of the pay provisions made it seem, at least to me, as if Citigroup might have agreed to pay Lew some sort of a bounty to seek out, and be appointed to, such a position.

………

Lew’s employment agreement with Citigroup said his “guaranteed incentive and retention award” wouldn’t be paid if he quit his job, with limited exceptions. One was if he left Citigroup “as a result of your acceptance of a full-time high level position with the United States government or regulatory body.” This applied if he left “prior to the payment of any incentive and retention award for performance year 2008 or thereafter.” Such an award wasn’t guaranteed but would be consistent with the company’s practice, the document said.

A similar provision concerned his stock-based compensation. If Lew left in 2008 or afterward to accept a high-level U.S. government position, all of his outstanding equity awards, including restricted stock, would vest immediately, the document said. Alternatively, Citigroup had the option of paying Lew the cash equivalent of any shares he forfeited upon leaving. The terms didn’t mention other kinds of public-service work, such as a midlevel U.S. government job, a position in municipal or state government, or working at a nonprofit organization such as a university.

The payoff here is very clear: You go and work for the government, and you are our boy, bought and paid for.

First, the Cayman Islands accounts, and now this.

This guy is going to be an even bigger creature of the Wall Street banksters than than Geithner was.

This is deeply corrupt, in reality if not by law, but I think that the Obama administration sees this as a feature, not a bug.

It’s Jobless Thursday!!!!

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Not good news. Initial unemployment claims rose by 20K to 362K, as did the 4-week moving average and continuing claims, though extended claims fell, probably because of exhaustion of benefits.

Of more concern is that the Fed’s Open Market Committee minutes came out, and it looks like they are losing their nerve on quantitative easing:

The Federal Reserve signaled it may consider slowing the pace of asset purchases as officials extended a debate over whether record monetary easing risks unleashing inflation or fueling asset-price bubbles.

Several participants at the Federal Open Market Committee’s Jan. 29-30 meeting “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved,” according to the minutes of the gathering released yesterday.

This is not the right time for the Fed to take its head off the accelerator pedal.

The New York Times Notices that the Bank Settlements are Bullsh%$

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You see, they are making modifications to 2nd mortgages while continuing to foreclose on 1st mortgages.

This might sound like a meaningless difference, but banks are given credit for modifying a 2nd mortgage, but in the event of a foreclosure, they are subordinate to 1st mortgages, and so are wiped out.

This means that the foreclosure modification means nothing, though the banks get credit for it anyway:

In January, federal regulators announced an $8.5 billion agreement with 10 mortgage servicers to settle claims of foreclosure abuses, including bungled loan modifications and the wrongful evictions of borrowers who were either current on their payments or making reduced monthly payments.

Under the deal, announced by the Federal Reserve and the Office of the Comptroller of the Currency, the mortgage servicers will pay $3.3 billion to borrowers who went through foreclosure in 2009 and 2010 and an additional $5.2 billion to reduce the principal or the monthly payments of borrowers in danger of losing their homes.

………

The problem involves second mortgages, which millions of homeowners took out during the housing bubble. It’s estimated that as much as a quarter of all mortgage debt in the United States is in the form of second mortgages. Some of these loans were taken out to finance home improvements; others were part of a subprime product known as an “80/20 mortgage,” in which 80 percent of the purchase price was covered by a first, adjustable-rate mortgage, and the remainder by a second mortgage, often with a much higher interest rate.

The second mortgages have given the banks a loophole: each dollar a bank forgives goes toward fulfilling its obligation under last year’s settlement. But many lenders have made it a point to almost exclusively modify secondary loans while all but ignoring the troubled, larger primary mortgages.

It’s a real problem: when it comes to keeping your home, it’s the first mortgage that counts.

………

Why would a bank forgive a second mortgage completely but move forward with foreclosure on the first mortgage?

Surprisingly, such a tactic often makes sense for banks. When a lender forecloses on a first mortgage, the house in question is typically sold at auction. If the house is worth less than the loan amount, the bank gets only part of its money back. But after the sale, of course, there’s no asset left to pay off any of the second loan. The holder of that second loan — which has lower priority than the holder of the first — gets nothing.

So a lender can forgive a second mortgage — which in the event of foreclosure would be worthless anyway — and under the settlement claim credits for “modifying” the mortgage, while at the same time it or another bank forecloses on the first loan. The upshot, of course, is that the people the settlement was designed to protect keep losing their homes.

I would note here that the author, Elizabeth M. Lynch who is a lawyer who provides free civil legal aid,is being rather charitable:  she thinks that the banksters are taking advantage of loopholes in the settlement.

I believe that the intention of the deal on the part of the Fed and the OCC was to create a meaningless “Potemkin Agreement”.  They never intended to create better behavior.

Their goal was to indemnify the banks and to generate some propaganda to deflect moves toward real accountability.

Least Surprising Study Discovery Ever

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I’m shocked, shocked to find that gambling is going on here!

The Project on Government Oversight (POGO) has completed a study that shows that the revolving door at the SEC may have short circuited effective regulation:

Former U.S. Securities and Exchange Commission staffers who now work in the private sector may have helped derail last year’s effort to reform the $2.6 trillion money market fund industry, according to a report released on Monday.

The case study on money market fund lobbying is part of a 60-page report by the Project on Government Oversight (POGO). It is one example within a broader review by the non-profit government watchdog that examines in detail how the “revolving door” at the SEC may have impacted policy and enforcement decisions over a 10-year period.

The publication of the report comes a few weeks after President Barack Obama nominated Mary Jo White, a former prosecutor and high-profile white collar defense lawyer, to lead the SEC.

While White’s nomination has generated little controversy so far, some have questioned whether her past defense of Wall Street executives could impact how she does on the job.

“The revolving door is deeply embedded at the SEC and throughout the federal government,” the report said.

“The close linkage between the regulators and the regulated can influence the culture, the values and the mindset of the agency – not to mention its regulatory and enforcement policies.”

Well, duh.

But this is not an unfortunate linkage, it is bribery.  If you are a regulator, you know for a fact that when you leave public service, if you have played nicely with the finance industry, and haven’t murdered a prostitute, that you will get a job that would make you set for life in just a couple of years.

I’m not sure how to put an end to this, but a way needs to be found to stop this.

George F%$# ing Will??!?!?!!?

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George Will is not just a partisan hack. He’s the guy who prepped Ronald Reagan for the 1980s debate while knowingly using Jimmy Carter’s stolen briefing books.

So, it is with some surprise that I note that he is calling for a breakup of the big banks:

With his chronically gravelly voice and relentlessly liberal agenda, Sherrod Brown seems to have stepped out of “Les Miserables,” hoarse from singing revolutionary anthems at the barricades. Today, Ohio’s senior senator has a project worthy of Victor Hugo — and of conservatives’ support. He wants to break up the biggest banks.

 He would advocate this even if he thought such banks would never have a crisis sufficient to threaten the financial system. He believes they are unhealthy for the financial system even when they are healthy. This is because there is a silent subsidy — an unfair competitive advantage relative to community banks — inherent in being deemed by the government, implicitly but clearly, too big to fail.

 The Senate has unanimously passed a bill offered by Brown and Sen. David Vitter, a Louisiana Republican, directing the Government Accountability Office to study whether banks with more than $500 billion in assets acquire an “economic benefit” because of their dangerous scale. Is their debt priced favorably because, being TBTF, they are considered especially creditworthy? Brown believes the 20 largest banks pay less when borrowing — 50 to 80 basis points less — than community banks must pay.

 In a sense, TBTF began under Ronald Reagan with the 1984 rescue of Continental Illinois, then the seventh-largest bank. In 2011, the four biggest U.S. banks (JPMorgan Chase, Bank of America, Citigroup and Wells Fargo) had 40 percent of all federally insured deposits. Today, the 5,500 community banks have 12 percent of the banking industry’s assets. The 12 banks with $250 billion to $2.3 trillion in assets total 69 percent. The 20 largest banks’ assets total 84.5 percent of the nation’s gross domestic product.

 ………

 By breaking up the biggest banks, conservatives will not be putting asunder what the free market has joined together. Government nurtured these behemoths by weaving an improvident safety net and by practicing crony capitalism. Dismantling them would be a blow against government that has become too big not to fail. Aux barricades!

(Emphasis original)

This is not what I expect from Will, and there is a part of me that is wondering whether this is more of a political tactic than a recognition of reality.

If the Republicans want an effective line of attack, they could do a lot worse than saying that Obama is determined to protect and defend the too big to fail banks.

It is something that would undermine any populist cred that Obama might seek to achieve, and as a bonus, it’s true.

So, either Will is late to this game, or he’s the the first volley in a Republican attack.

If I were a betting man, I’d call it even money.

Meet the New Boss, Same as the Old Boss………

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It appears that we will get fooled again

Jack Lew, who has been nominated by Barack Obama as Timothy Geithner’s replacement as Secretary of the Treasury.

Well, if you think back to Geithner’s confirmation hearings, it turned out that he simply did not pay his Social Security taxes for a few years while working at the IMF.

Well Jack Lew does one better, he squirreled away funds in the Cayman Islands:

Jack Lew, President Barack Obama’s Treasury Secretary nominee, previously held up to $100,000 in investments in an offshore hedge fund located in the Cayman Islands, according to financial disclosure forms.

Lew’s financial disclosure forms, filed in 2009 and 2011, showed that Lew had invested between $50,000 and $100,000 in a fund called Citigroup Venture Capital International Growth Partnership (Employee) II, L.P. — the very type of fund President Obama has repeatedly criticized.

The fund is an international venture capital fund for employees of Citigroup. According to his official White House biography, Lew served as managing director and chief operating officer of Citi Global Wealth Management and then Citi Alternative Investments (CAI) from 2006 to 2008.

Yeah, he is so not going to be the guy who cleans up Wall Street

H/t AmericaBlog.

This is Called a Back Loaded Bribe

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The soon to be ex-Secretary of the Treasury Timothy Geithner plans to write a book:

Timothy Geithner, who played a lead role battling the global financial crisis both at the U.S. Treasury and New York Federal Reserve, is planning to write a book on the U.S. response, a spokeswoman said on Wednesday.

Geithner, who was the longest-serving member of President Barack Obama’s economic team when he stepped down as secretary of the Treasury last month, is credited with helping to calm the financial storm that swept through Wall Street in 2007-2009.

But his support for bailing out big banks was controversial and many critics have accused him of doing too little for Main Street. In 2009, some lawmakers called for his resignation.

His spokeswoman said he had not started writing the book and will meet with publishers soon.

Any guess as to the size of his advance?

I’m guessing that it will be 7 figures.

Say what you will about the banksters, but they do tend to throw a few crumbs to their evil minions.

Some Good News

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It looks like Europe will be implementing a financial transaction song with teeth:

The details of Europe’s new financial transactions tax won’t be made public for a few weeks, but the FT’s Alex Barker has seen a draft, and it looks impressively robust. The tax is being implemented by 11 countries, including most importantly Germany and France, and it’s going to be levied at two levels: 0.1% on securities trades, and 0.01% on derivatives trades. It’s also going to be very difficult to dodge: any trader whose institutional headquarters is in one of the 11 countries will have to pay the tax, as will all transactions taking place in those countries, and all transactions involving securities issued in those countries.

The tax will have two main purposes. The first is to raise substantial tax revenues on the order of $45 billion per year; the second is to discourage financial speculation. I’m hopeful on the former, but less so on the latter.

As Robert Peston and Avinash Persaud pointed out back in 2011, financial transactions taxes work pretty well: even the UK, which is implacably opposed to the European tax and which won’t ever join such a scheme, levies a surprisingly large 0.5% tax whenever anybody — anywhere in the world — trades a UK stock. And yet, somehow, London remains the first choice for international companies looking for a place to list their shares.

I aggee with Felix Salmon’s closing:

So let’s hope that this tax gets introduced; that it works; and that the rest of the world, seeing the costs and the benefits, starts to follow suit and sign on too. The area covered by the initial 11 countries is big enough that the tax will work well at inception, but as more and more countries join the scheme, the tax will become increasingly efficient and effective. Maybe, eventually, it could even incorporate the U.S.

Personally, I would like to see the tax on securities should be a bit hither (about 0.3%) derivatives should be much higher (at least .1%, and better yet something north of ½%), but I really want to see this camel’s nose to get under the tent.

Least Surprising News of the Day

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Timothy Geithner’s Treasury Department ignored guidelines and allowed bailed out banksters to write their own paychecks:

The Treasury Department ignored its own guidelines on executive pay at firms that received taxpayer bailouts and last year approved compensation packages of more than $3 million for the senior ranks at General Motors, Ally Financial and American International Group, according to a watchdog report released Monday.

 The report from the special inspector general for the Troubled Assets Relief Program said the government’s pay czar signed off on $6.2 million in raises for 18 employees at the three companies. The chief executive of a division of AIG received a $1 million raise, while an executive at GM’s troubled European unit was given a $100,000 raise. In one instance, an employee of Ally’s Residential Capital was awarded a $200,000 pay increase weeks before the subsidiary filed for bankruptcy.

 ………

 Monday’s report evaluates Treasury’s actions since then, with stinging allegations of lax oversight and supervision. Romero said Geoghegan deferred to the pay proposals provided by the companies, approving raises above pay limits and failing to link compensation to performance.

 “Treasury made no meaningful reform to its processes,” the special inspector said in the latest report. “Lacking criteria and an effective decision-making process, Treasury risks continuing to award executives of bailed-out companies excessive cash compensation without good cause.”

This is so not shocking.