And here they are, ordered, and numbered for the year so far.
No banks for the last weekend of the year, so the number remains at 53 (Full FDIC list), but we did have the 15th credit union failure of the year, Chetco Federal Credit Union of Brookings, Oregon (Full NCUA list).
Here is the graph pr0n with last years numbers for comparison (FDIC only):
Much better than the last two years.
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I missed the 53rd bank failure of the year last week, Community Bank of the Ozarks.
I think that it is highly unlikely that a bank will be closed next week, so it looks to be 53 for the year, which is a pretty good number.
Here is a graph of the FDIC closings.
Less than ⅓ the closings of 2010. Not so bad.
Joe Firestone notes that we are starting to see coverage in the media of the trillion dollar platinum coin:
Did the MSM’s new wave of commentaries on platinum coin seigniorage (PCS) miss the really big story about it? Of course, I think it did, and I’ll continue my review of the MSM commentaries with the efforts of Chris Hayes at MSNBC, substituting as host on the Rachel Maddow show (12/05 at 9:20 PM); and John Carney at CNBC (12/06 at 11:54 AM). This is my second review post on this subject.
Platinum Coin Seigniorage is the idea that the US Treasury can use its right to print coins or arbitrary value, (the Federal Reserve has this power with regard to paper and electronic currency) which can then be used to pay down the debt by depositing at the Federal Reserve.
I think that this is a good thing, and so does Firestone, but he takes issue with a couple of points made by Hayes and Carney.
First, he objects to their characterization that such an action is unlikely to happen. I disagree.
I understand his point, that the legal and economic barriers to doing this are not great, but the psychological and political barriers, particularly for two people as wedded to economic and financial orthodoxy as Barack Obama and Timothy Geithner does make the possibility that this strategy would be implemented to be vanishingly small.
The area where I disagree is his argument that using the coin won’t cause inflation.
While it is clear that if the coins are used exclusively to retire debt held by the Fed will not have much inflationary effect, Federal Reserve held Treasury Bonds are basically an accounting trick.
That being said, if you start retiring other debt, that money has to go somewhere, and if the trillions parked in US government securities need to find another place to park, one could expect these funds to slosh around and this would have an inflationary effect.
My more significant area of disagreement is his assumption that inflation is a bad thing, which is why he argues against the potential inflationary impacts.
I do not think that inflation right now is a bad thing. Given that we have a significant debt overhang, and inflation serves to devalue debt, favoring the debtor over the creditor, I think that inflation is a good thing.
In a very real way, we are in a position very similar to that at the end of the 1800s, when William Jennings Bryan gave his “Cross of Gold” speech.
Seigniorage is today’s free silver, and much like free silver, it is not a likely to be implemented, except as a bargaining strategy.
Case in point, HSBC, which was literally laundering drug cartel money.
It will not be criminally prosecuted because it is too big to fail:
State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.
Instead, HSBC announced on Tuesday that it had agreed to a record $1.92 billion settlement with authorities. The bank, which is based in Britain, faces accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries.
While the settlement with HSBC is a major victory for the government, the case raises questions about whether certain financial institutions, having grown so large and interconnected, are too big to indict. Four years after the failure of Lehman Brothers nearly toppled the financial system, regulators are still wary that a single institution could undermine the recovery of the industry and the economy.
But the threat of criminal prosecution acts as a powerful deterrent. If authorities signal such actions are remote for big banks, the threat could lose its sting.
Behind the scenes, authorities debated for months the advantages and perils of a criminal indictment against HSBC.
Some prosecutors at the Justice Department’s criminal division and the Manhattan district attorney’s office wanted the bank to plead guilty to violations of the federal Bank Secrecy Act, according to the officials with direct knowledge of the matter, who spoke on the condition of anonymity. The law requires financial institutions to report any cash transaction of $10,000 or more and to bring any dubious activity to the attention of regulators.
Given the extent of the evidence against HSBC, some prosecutors saw the charge as a healthy compromise between a settlement and a harsher money-laundering indictment. While the charge would most likely tarnish the bank’s reputation, some officials argued that it would not set off a series of devastating consequences.
A money-laundering indictment, or a guilty plea over such charges, would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States, officials said.
Seriously. Burn, motherf%$#er burn.
If there is no rule of law, the banks don’t matter.
H/t Matt Stoller.
The Federal Reserve has made a major change in its targeting, raising its inflation target tfrom 2% to 2½% and stating that they will continue quantitative easing until unemployment drops below 6½%.
This is a very big deal for two reasons, first, it’s the first time that the Fed has ever linked its rates to employment levels, and second, it’s a marked departure from their previous statements which said stuff like, “ZIRP for the nest 6 months, and then we reevaluate”.
What they are doing now is much clearer, and makes it much easier to determine near term behavior.
I’m not a big fan of the “confidence fairy” theory of economics, particularly when used to justify “expansionary austerity”, but the opacity of the Fed has not served the economy; all it has done is to reinforce the “high priesthood” aspects of the Federal Reserve’s reputation.
Fed statement after the break:
Press Release
Release Date: December 12, 2012For immediate release
Information received since the Federal Open Market Committee met in October suggests that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Although the unemployment rate has declined somewhat since the summer, it remains elevated. Household spending has continued to advance, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowed. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and, in January, will resume rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee views these thresholds as consistent with its earlier date-based guidance. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed the asset purchase program and the characterization of the conditions under which an exceptionally low range for the federal funds rate will be appropriate.
The 14th credit union of the year, Border Lodge Credit Union in Vermont, was closed November 30.
Should have included this in last week’s bank failure Friday.
Naked Capitalism has been writing for some time about how the SEC’s chief of enforcement, Robert Khuzam, has been hostile to the idea of actual enforcement, particularly with regards to reports from whistle blowers, but the latest case is indisputably corrupt:
Two days ago, we said it was time to fire the SEC’s chief of enforcement Robert Khuzami, who has not provided the tough policing warranted by the biggest financial crisis in the agency’s history. Our call was based on compelling evidence of failure. Specifically, a year and a half after Dodd Frank created a $450 million whistleblower fund, which Khuzami confirmed had produced hundreds of high quality leads, the agency had taken only one referral far enough to merit a payout, that of a measley $50,000. We stressed that this was an astonishing lapse:
… whistleblowers are insiders and therefore should in many cases have access to the sort of internal documents that would serve to substantiate conduct and save the SEC a ton of time. In other words, this should be a prime, potentially its best, source of leads, since the SEC would be further along in case development if any of these tips had meat (ie, both damning info and on target with a clear violation).
We didn’t anticipate that the story of Khuzami’s negligence would blow so big so quickly. Today, the Financial Times reported that three separate whistleblowers charged that Deutsche Bank had mismarked up to $12 billion in exposures to make it look healthier in 2008 and 2009 than it was, yet the agency had not acted on these allegations. And this level of window dressing most assuredly would make a difference.
………
Khuzami’s position is hopelessly conflicted. He was general counsel for the Americas for Deutsche from 2004 to 2009, so this behavior took place on his watch. Although he has recused himself from this probe, that’s inadequate. Recusal does not work when the people working on the matter in the end have the party with the conflict as their boss. They can’t pursue any real dirt that could implicate him without hurting themselves. If it came to naught, they’d still fear the risk of reprisal if he survived. And if he were forced to leave, they’d be faced with a new boss who might not be at all to their liking.
The only way to have an effective investigation is either to have Khuzami resign or to have the matter handed off to a completely independent firm (and even that’s a stretch, both from the agency side, and from the dearth of firms with decent securities law expertise that would be willing to face off against a major bank. Just as with the bankruptcy bar, you either work for the banks [the creditors] or against them [for the debtors]). It’s also a wee bit too cozy that Deutsche’s current general counsel is also a former SEC head of enforcement. And KPMG, the accountant that blessed all this highly dubious financial footwork, and Fried Frank, which led an investigation initiated by Deutsche and apparently found nothing much wrong, also don’t come out looking very good.
When you look Republican investigations of alleged Obama corruption, what is clear is that they are trying to gin up a false bullsh%$ like Benghazi and “Fast and Furious”.
This one is real, and it’s an accusation that would serve to benefit the Republicans politically, and unlike the investigatory theater that Darryl Issa favors.
Additionally, such an investigation might lead the white house to get tougher with the banksters, because it is clear that one of the administration’s conceits, notwithstanding the rapidly spinning revolving door (Elizabeth Fowler anyone?), is that they are a model of probity, and this, along with the political consequences, might produce some meaningful action.
A man in the process of breaking up with his wife, and alleged that she was involved with laundering money transfers to Switzerland, and the bank got him committed to a mental hospital for ten years:
A German man committed to a high-security psychiatric hospital after being accused of fabricating a story of money-laundering activities at a major bank is to have his case reviewed after evidence has emerged proving the validity of his claims.
In a plot worthy of a crime blockbuster, Gustl Mollath, 56, was submitted to the secure unit of a psychiatric hospital seven years ago after court experts diagnosed him with paranoid personality disorder following his claims that staff at the Hypo Vereinsbank (HVB) – including his wife, then an assets consultant at HVB – had been illegally smuggling large sums of money into Switzerland.
Mollath was tried in 2006 after his ex-wife accused him of causing her physical harm. He denied the charges, claiming she was trying to sully his name in the light of the evidence he allegedly had against her. He was admitted to the clinic, where he has remained against his will ever since.
But recent evidence brought to the attention of state prosecutors shows that money-laundering activities were indeed practiced over several years by members of staff at the Munich-based bank, the sixth-largest private financial institute in Germany, as detailed in an internal audit report carried out by the bank in 2003. The report, which has now been posted online, detailed illegal activities including money-laundering and aiding tax evasion. A number of employees, including Mollath’s wife, were subsequently sacked following the bank’s investigation.
………
Asked why the bank kept the report to itself and did not approach the authorities, the spokeswoman added: “In 2003 HVB initiated extensive investigations via internal audits in response to information provided by Mr Mollath on transactions that had taken place a long time before … It was determined that employees had acted contrary to their instructions regarding Swiss banking transactions”.
But while the findings, it said, had resulted in sackings, the audit “did not produce sufficient evidence indicating criminal conduct … that would have made a criminal charge seem appropriate”.
If you believe that the banks had nothing to do with his commitment, you are naive.
This is Bavaria, the heart of the German right wing, and doing the banks’ bidding is pretty much a requirement for civil servants there, so I have no doubt that Hypo Vereinsbank decided to act like Stalin’s NKVD.
H/t Naked Capitalism.
Tyrie to Hornby: It would appear the ability to see risk is inversely proportional to the time spent trying to model it.”
— David McKibbin (@creditplumber) December 3, 2012
This really does
encapsulate the essence modern finance in just 19 words.
H/t Naked Capitalism
The bankster lobbyists lost, and Elizabeth Warren will get a seat on the Senate Banking Committee:
Sen.-elect Elizabeth Warren (D-Mass.), one of the harshest critics of the financial sector, is being tapped to serve on the Senate Banking Committee.
The Harvard law professor is expected to join Sen. Joe Manchin (D-W.Va.) on the committee in the next Congress, according to a Democratic Senate aide.
The decision is pending final approval from Senate Majority Leader Harry Reid (D-Nev.), but would mean that Warren will play a lead role in overseeing the financial firms that have sparred with her for years over consumer protections and regulations.
Warren originally came to Washington as head of the government’s official bailout watchdog, and later served as President Obama’s architect of the Consumer Financial Protection Bureau (CFPB), which was created by the Dodd-Frank financial reform law.
She butted heads with congressional Republicans as an adviser to the CFPB, and Obama ultimately selected one of her top deputies, Richard Cordray, to serve as its first director. Warren was recruited by Democrats to run for the Senate from Massachusetts, where she defeated Sen. Scott Brown (R) last month.
Boo Yah!!!!
The inestimable Murray Waas uncovers the fact that Wall Street’s “favorite private eye” engaged in a systematic spying and character assassination in support of Alan Stanford’s Ponzi scheme:
In 2006, Allen Stanford had yet to be identified as the mastermind of one of the largest and longest-running Ponzi schemes in U.S. history, but he faced mounting pressure.
Federal securities examiners were pushing for an investigation into his investment operation, which tens of thousands of soon-to-be victims had entrusted with nearly $7 billion. Some of the Texas financier’s own employees were threatening to tell authorities what they knew about his fraud.
Stanford was so concerned that a former senior State Department official named Jonathan Winer might expose his colossal con game that he ordered an investigation into Winer’s private life, according to Stanford’s previously secret records obtained by McClatchy.
Kroll Inc., an international corporate intelligence firm that Stanford had retained for over a decade, obliged. Tom Cash, a Miami-based a managing director of Kroll, soon informed Stanford in an email that he was looking into whether Winer’s ex-wife was a lesbian, according to the internal documents obtained by McClatchy.
………
They looked into the sexual orientation of Winer’s ex-wife, and Stanford used the information collected to blackmail regulators, politicians, and journalists.
What’s more, it worked:
SEC examiners concluded as early as 1997 that Stanford was running a massive Ponzi scheme, agency records show. But Stanford was able to stall the opening of any formal inquiry for a full decade, much like the man behind the only bigger U.S. Ponzi scheme, Bernard Madoff.
The biggest whopper told by Kroll, when a representative says that “its employees had no clue they were helping to conceal the second-biggest Ponzi scheme in U.S. history.”
No, they were told to collect information so that Stanford could blackmail people, and it’s clear from the emails from Stanford that this was what he charged them to do.
Sorry, but that dog don’t hunt.
Even if they did not have specific information about Stanford being a fraud, they had to have known from what he wanted that he intended to use this information for to extort silence from people.
H/t Felix Salmon.
So Spanish banks lied to their customers, selling them preferred shares and telling them that they were government insured accounts, and now the EU is requiring that they get wiped out as part of a bailout:
Yves here. We’ve flagged in earlier posts how the Spanish banking crisis had the potential to become destabilizing politically, as if Spain wasn’t already at considerable risk of upheaval. Spanish depositors were pushed to convert their deposits into preference shares, which they were told were just as safe. That of course was never true.
This was a simple desperation move by the banks to save their own skins, customers be damned, by raising equity from the most unsophisticated source to which they had access. And now that that gambit failed, these shareholders are due to have those investments wiped out unless the Spanish authorities can cut a deal to spare them. The conditions of a bank rescue, which Spain did try to resist, was to have equity holders wiped out, or at least haircut. And that plan is now about to be set in motion. Having losses imposed on small savers who were in many cases conned by their own bank to buy these preference shares is going to do serious harm as well as further delegitimate the government.
Remember that quote from the Icelandic President? It’s only two posts down.
He’s right: bail out the people and jail the bankers.
H/t DC at the Stellar Parthenon BBS.
I understand that all resources are finite, but I never thought that it would apply to human gullibility and stupidity, indicating a continuing fall in trading volume.
His explanation is that we are finally running out of rubes willing to trust Wall Street:
The uptrend bit is easy: volumes, at least until 2009, always went up over time, especially when they were helped along by things like decimalization and high-frequency trading. But what explains the downtrend? It’s not the decreasing number of stocks: that might explain a bit of what’s going on in the US, but it wouldn’t explain the rest of the world.
Instead, I think that what we’re seeing is the slow death of the stock-market investor — the kind of person who subscribes to Barron’s, idolizes Warren Buffett, and thinks of stock-market investing as a do-it-yourself enterprise. During the dot-com bubble, lots of people thought they were really smart when it came to stock-market investing, and then after the dot-com bubble burst, the rise of discount brokerages helped encourage new people to step in to the market and try their luck.
Nowadays, however, the message is sinking in: it’s a rigged game, you can’t win, and you’re better off with a passive strategy.
It is very hard for me to believe, but the idea that Wall Street is finally running out of hard-working, regular folks who are willing to be cheated is not an unreasonable thesis given this data.
The Commodity Futures Trading Commission has effectively shut down Intrade, the online gambling house futures trading exchange, for US investors:
Facing accusations that it allowed American investors to bet on the outcome of wars and other world events without the blessing of regulators, Intrade announced on Monday that it was closing its Web site to United States residents.
The disclosure, which referred to “legal and regulatory pressures,” was released hours after American authorities sued the company, which is based in Dublin, over its popular trading network. Investors log on to Intrade by the thousands to bet on the outcomes of elections, the weather and even whether the United States will bomb Iran.
But in a civil complaint filed in federal court in Washington, the Commodity Futures Trading Commission took aim at the company and an affiliate for offering the contracts outside traditional exchanges and without regulatory approval. The agency also accused the companies of “making false statements” to regulators and violating a past order barring it from offering so-called prediction contracts outside traditional exchanges.
“Unfortunately this means that all U.S. residents must begin the process of closing down their Intrade accounts,” the company said on its Web site. “We understand this announcement may come as a surprise and a disappointment, and we apologize for the short notice and haste required to deal with this.”
I’m stunned.
I’m pleased, but I am stunned.
It’s a refutation of the philosophy of the “free-market mousketeers” who are inclined to allow all kinds of crazy sh%$ to pretend to be high finance, as opposed to a particularly abusive casino, in which the house takes even more than Vegas.
BTW, Intrade’s record sucked too, witness the gyrations in the 2008 Democratic and 2012 Republican primary markets.
Will President Obama Restore the Rule of Law During His Second Term?
This has been another episode of simple answers simple questions.
Just one bank this week.
So, here is the graph pr0n with last years numbers for comparison (FDIC only):
And here they are, ordered, and numbered for the year so far.
Two more banks this week.
So, here is the graph pr0n with last years numbers for comparison (FDIC only):
A Judge in Australia has just found Standard and Poors liable for bad investments:
I’d never heard of Australian federal judge Jayne Jagot before today, but she’s my new favorite jurist, thanks to her decision in a recent court case which was brought against ABN Amro and Standard & Poors.
The coverage of the decision (Quartz, FT, WSJ, Bloomberg, Reuters) concentrates, as it should, on the hugely important precedent being set here: that a ratings agency — in this case, S&P — is being found liable for losses that an investor suffered after trusting that agency.
S&P is appealing the decision, which runs to an astonishing 635,500 words, or almost 1,500 pages: it’s literally longer than War and Peace. At this point, it’s fair to assume that Jagot is one of the world’s foremost experts on structuring and rating CPDOs — crazy derivative instruments which had a brief moment of glory at the end of 2006 before imploding spectacularly during the financial crisis. And helpfully, her decision begins with a 56-paragraph summary of her findings, which lays out exactly how culpable and incompetent S&P really was.
Needless to say, I have not read the whole opinion, though I did look at the summary, which was eye glazing on its own.
The substance of this ruling is that:
Basically, we are talking about is willful blindness, which does not eliminate culpability, and willful blindness is at the core of the the ratings agencies business model.
Here is hoping that this survives appeal.