No bank failures this (or last) week, see the full FDIC list, but we had the 8th credit union failure of the year, United Catholic Credit Union. Full NCUA list)
As the graph pr0n shows, things are looking up:
Category: Finance
What a Surprise, The Vampire Squid Skates
What a surprise, Goldman Sachs gets to defraud its customers in and lie to Congress about the Abacus deal, where they sold bad loans to investors, and then bet against them, and there is no prosecution:
Neither Goldman Sachs Group Inc nor its employees will face U.S. criminal charges related to trades they made during the financial crisis that were highlighted in a 2011 U.S. Senate report, the Justice Department said on Thursday.
The unusual announcement not to prosecute criminally came in an unsigned statement attributed to the department.
Few expected the bank to face criminal charges, but in April 2011, U.S. Senator Carl Levin asked for a criminal investigation after the subcommittee he leads spent years looking into Goldman.
Levin’s subcommittee held televised hearings as part of its inquiry, which centered on a subprime mortgage product known as Abacus. He said Goldman misled Congress and investors.
Goldman employee Fabrice Tourre still faces a civil complaint from the U.S. Securities and Exchange Commission. He has denied any wrongdoing and was the only person accused.
Goldman itself settled with the SEC for $550 million in July 2010 without admitting wrongdoing.
(emphasis mine)
Why am I not surprised?
Iceland Gets it Right, Part XXVII
Now Iceland is separating its commercial and its investment banks:
Iceland was brought to the brink of bankruptcy when its biggest banks failed four years ago. Now, the site of the world’s most spectacular financial collapse is becoming a pioneer in banking reform.
“We’ve been burned by this and that’s why we have to look very closely at what we need to do to prevent it happening again,” Economy MinisterSteingrimur J. Sigfusson said in an interview. “Icelanders are more interested in taking greater steps than small steps when it comes to regulating banking.”
His party, the junior member in Prime Minister Johanna Sigurdardottir’s coalition, has submitted a motion to parliament to stop banks using state-backed deposits to finance risky investments. The move puts Iceland on course to become the first western nation since the global financial crisis hit five years ago to force banking conglomerates to split their business.
It’s a proposal that’s gaining traction elsewhere. Even Sanford “Sandy” Weill, whose 1998 creation of New York-based Citigroup Inc. (C) triggered the Gramm-Leach-Bliley Act that paved the way for financial behemoths, now says investment banks should be separated from deposit-taking banks. Opponents including JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon say diverse businesses are needed to spread risk across divisions and stay competitive.
Gee, Glass Steagall was a good idea.
There is a shocker.
They appear to be the only government in the world that has had the fortitude and the foresight to actually learn from their own financial disaster.
Spitzer Ain’t Olbermann but He’s Good
Bringing on Felix Salmon* and Dennis Kelleher to discuss our we need to put some senior banksters in handcuffs was a good move:
*Unfortunately, he was not wearing his Willy Wonka suit.
Banks Got Eated
Yep, bank number 50 40, Waukegan Savings Bank of Weaukegan, IL, and credit union number 8 (I missed one) A M Community Credit Union of Kenosha, WI.
So here is another late bank failure Friday.
Here is the graph pr0n (FDIC only)
What a Surprise
When another vote comes up on a bill to audit the Federal Reserve, the Democratic Leadership in the House whips against it:
Yesterday, on the House floor, there was a furious debate over the prospect for HR 541, Ron Paul’s bill to audit the Federal Reserve. The Republicans are by and large supportive of this bill, seeking to hamstring the ability of the Federal Reserve to act in secret. Democratic members, were they left to their own devices, would be split. But on votes on bills like this, party leaders can choose to endorse a position, or not endorse a position. Some votes are what’s called “whipped”, and some aren’t. There’s an intricate system of whips and assistant whips and staff networks who encourage members to vote a certain way, so when the party takes a position on an issue, it has a big impact on the final vote count. This is a whipped vote, which means that this is one of those times where the Democratic leadership – Steny Hoyer, Barney Frank and Nancy Pelosi – are putting their stamp on an issue. They have come out firmly for Fed secrecy.
Here’s the whip notice from Democratic leadership on the House side encouraging members to vote against transparency at the Fed.
………
UPDATE: The bill passed, 327-97. A bunch of Democrats flipped against an audit. Just glancing at the roll call, Louise Slaughter, Lynn Woolsey, Marcy Kaptur, Heath Shuler, and Donna Edwards (among others) cosponsored the bill either last Congress and/or this Congress, and then voted against it on the floor. Go Team Blue!
UPDATE, AGAIN: The Democratic leaders, despite whipping, barely got a majority of the caucus to vote no. This is a massive failure on their part, and shows how weak they are.
It won’t ever make it to the floor of the Senate, and if it passed there, Obama would veto it.
I am not a Ron Paul gold nut, but I do think that the Fed, with regard to its non-monetary activity in particular, should be more accountable, and I think that opposition to that idea is because they (they being the usual suspects) want to make sure that the Fed is free to bail them (them being the usual suspects) the next time that they (they being the usual suspects) drive themselves (they being the usual …… you get the point) off a cliff and need rescuing.
It’s Bank Failure Friday!!!!
Back to the new normal this week, only 1 failure.
Here they are, ordered, and numbered for the year so far.
- Jasper Banking Company, Jasper, GA
So, here is the graph pr0n with last years numbers for comparison (FDIC only):
No, This is Not The Onion
Goldman Employee Struggles With Inability To Regularly Visit Summer Home.
Not enough bullets.
It’s Bank Failure ……… What the F%$#?
What the hell is going on with this ADHD bank failure sh%$?
There are five failures this week, tied for the most this year.
And here they are, ordered, and numbered for the year so far.
- The Royal Palm Bank of Florida, Naples, FL
- Georgia Trust Bank, Buford, GA
- First Cherokee State Bank, Woodstock, GA
- Heartland Bank, Leawood KS
- Second Federal Savings and Loan Association of Chicago, Chicago, IL
The FDIC has been wicked busy.
So, here is the graph pr0n with last years numbers for comparison (FDIC only):
I Gotta Read This Book
Neil Barkofsky’s book on his experiences monitoring the TARP, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, and the Bush administration comes off better than the Obama administration:
The Huffington Post described a scene in a forthcoming book by Neil Barofsky, the former Special Inspector General of TARP, where Treasury Secretary Timothy Geithner delivered a string of F-bombs during a discussion about transparency. I’ve read the book, and while that’s an amusing diversion, it’s nowhere near the headline story.
The important moment in the book for me comes conveniently after Barofsky recounts this FDL News item, one of my HAMP horror stories. Barofsky shows how HAMP’s faulty design led to all sorts of problems like this, with trapped borrowers, extended trial payments, no-doc modifications, and eventually unnecessary foreclosures. Barofsky mused that Treasury didn’t care about the suffering of borrowers under HAMP, and the issue came up in a meeting with the Treasury Secretary, which was also attended by Elizabeth Warren, then the head of the Congressional Oversight Panel, another TARP watchdog.
Warren asked Geithner repeatedly about HAMP. After several evasions, Geithner said about the banks, “We estimate that they can handle ten million foreclosures, over time… this program will help foam the runway for them.”
This is a revelatory moment for Barofsky in the book, and should be for everyone reading. Geithner’s concern, first of all, was with how the banks would respond to the program, not how homeowners would respond to it. In fact, homeowners are quite besides the point. Regardless of their situation, they will be one of the 10 million foreclosures, in Geithner’s construction. His goal was merely to space out the foreclosures and give the banks time to earn their way back to health, mostly through the other parts of the bailout, that enabled them to earn profits.
I will note that the Cossacks work for the Czar, and notwithstanding all the turnover on the economic side of his cabinet, Geithner has been a constant.
This is going on because this is what Obama wants.
CFPB Draws First Blood
Capital One Financial agreed to pay $210 million to resolve charges by banking regulators that its call-center representatives misled consumers into paying for extra credit card products.
The enforcement action, announced on Wednesday, is the first by the Consumer Financial Protection Bureau, which said it unearthed the activities through an examination of the bank.
The CFPB was created by the 2010 Dodd-Frank financial reform law and is nearing its one-year anniversary.
The government said $150 million of the sanctions will go to reimburse affected customers, while the remaining penalty will be split between the Office of the Comptroller of the Currency, which fined the bank $35 million, and the CFPB, which will collect $25 million.
“We are putting companies on notice that these deceptive practices are against the law and will not be tolerated,” said CFPB Director Richard Cordray.
The regulators alleged that employees at call centers used by Capital One pressured and misled consumers into paying for “add-on products” such as payment protection and credit monitoring when they activated their credit cards.
In a briefing with reporters, Cordray said he anticipated actions against other banks over similar tactics but declined to name any targets.
“We know these deceptive tactics are not unique to a single institution … we expect announcements about other institutions as our ongoing work continues to unfold,” Cordray said.
In a statement, the president of Capital One’s credit card business, Ryan Schneider, apologized to customers who were affected and said the bank is committed to “making it right.”
What’s in your wallet?
The Good Guys Beat the Borg (For Once)
Specifically, Wikileaks has won a case against Visa for cutting off their credit card donations:
The Reykjavík District Court has ruled that Valitor, formerly known as VISA Iceland, violated contract laws by blocking credit card donations to Wikileaks, according to a press release posted on the whistleblowers’ Twitter account.
The court also ordered that the donation gateway should be reopened within 14 days otherwise Valitor will be forced to pay a fine of $6,200 daily. Valitor CEO Vidar Thorkellsson told Bloomberg, however, that the company would appeal the ruling. He declined to comment further.
WikiLeaks founder Julian Assange said “This is a significant victory against Washington’s attempt to silence WikiLeaks. We will not be silenced. Economic censorship is censorship. It is wrong. When it’s done outside of the rule of law its doubly wrong. One by one those involved in the attempted censorship of WikiLeaks will find themselves on the wrong side of history.”
It’s Bank Failure Friday!!!
We had another bank failure this week, which gives us:
- Glasgow Savings Bank, Glasgow, MO
Not really much to say.
So, here is the graph pr0n with last years numbers for comparison (FDIC only):
I Call Coverup and Scapegoating
JP Morgan is now claiming that its traders intentionally deceived them when they lost $2 4.4 5.8 7 billion:
JPMorgan Chase & Co. (JPM)’s announcement that an internal inquiry may show “intent” to misprice trades in a unit that lost $5.8 billion may help a U.S. investigation while putting distance between management and any wrongdoers.
“E-mails, voice tapes and other documents, supplemented by interviews” were “suggestive of trader intent not to mark positions where they believed they could execute,” the bank said in a presentation yesterday as it reported net income fell 9 percent to $4.96 billion. “Traders may have been seeking to avoid showing full amount of losses,” the bank said, noting management had concerns about the integrity of the prices used. The bank didn’t provide evidence to support the allegations.
The U.S. Department of Justice and the Federal Bureau of Investigation in New York in May began a probe of the bank’s trading losses, a person familiar with the matter said. The Securities and Exchange Commission and the Commodity Futures Trading Commission, which regulates derivatives trading, are also examining New York-based JPMorgan’s trading activities, according to people familiar with those probes.
Yes, of course, none of it was senior management’s fault, it was all the fault of those damn Eskimos.
Quoting Richard Widmark playing Col. Tad Lawson in Judgement at Nuremberg:
There are no Nazis in Germany, didn’t you know that, Judge? The Eskimos invaded Germany and took over. That’s how all those terrible things happened. It wasn’t the fault of the Germans, it was the fault of those damn Eskimos!
This is such a transperent case of cover-your-ass as I have ever seen.
Yes, Geithner Sent Out a Strongly Worded Memo, and Kept LIBOR Fraud Secret
Yes, in response to proof that one of the most critical benchmarks in international finance was being fraudulently manipulated, Timothy “Eddie Haskell” Geithner sent a memo, and then followed up by doing ……… absolutely nothing.
What a surprise.
Geithner has always been supportive of allowing the banksters to amass ill gotten gains in order to fill the holes in the balance sheets.
It’s the Bankster’s World, We Just Live in It
Case in point, Moberly Missouri, where the New York Times scolds them for not paying debts incurred through fraud and the corruption and/or incompetence of banks and regulators:
Residents of Moberly, Mo., got a shock last year when they discovered that their city had guaranteed $39 million in bonds, sold by an independent authority, to help a Chinese company build a plant to make sucralose, an artificial sweetener.
The project fell apart in a matter of months, and residents learned that they had been misled about the company’s track record in China — and that they were now expected to make the bond payments.
But municipal bond market participants say they were shocked, too, by how quickly the city of about 14,000 would walk away from a solemn promise to guarantee the debt payments through 2025, the life of the bonds.
Cities like Moberly that guarantee debts for entities that borrow for projects like parking garages and hockey arenas often “don’t understand that they are responsible for making these payments,” said Matt Fabian, managing director of Municipal Market Advisors, a research and consulting firm. However, he said, “It’s as if your kid runs up a $400 cellphone bill. You can’t get out of paying it by saying you didn’t authorize that.”
Moberly, where the biggest employer is a state prison, had responded eagerly to a pitch by the Missouri Department of Economic Development to host the project, hoping for hundreds of jobs. The company, Mamtek International, was said to have a sucralose plant in Fujian Province producing a sweetener called SweetO, for use in drinks, candy and pharmaceuticals. Most of the authority debt, to go toward building and equipping the plant, was issued under a federal stimulus program allowing private investors to use tax-exempt municipal financing.
But when a bond payment came due last August, with the building still unfinished, Mamtek officials said they didn’t have the money. Construction stopped; the handful of employees in Moberly were laid off. Weeks of confusion followed, with subpoenas from the Securities and Exchange Commission, rumors of a split between the Chinese company and its United States subsidiary, reports that the plant would be liquidated and fears that the bond proceeds were gone forever.
………
Investigators also learned that state development officials had learned — before the bonds were sold — that Mamtek’s sucralose plant in China had never opened, because of environmental concerns. But that information was not relayed to Moberly, according to a report by the Missouri House Interim Committee on Government Oversight and Accountability.
Let’s be clear here: the good citizens of Moberly were swindled by Mamtek, state development officials, and likely whoever issued the bonds.
There were serious material discrepancies.
This is the very definition of odious debt, and it should be repudiated without penalty.
I Can Has Prosecushuns?
The New York Bank of the Federal reserve has known since at least 2007, which means that current Treasury Secretary Timothy Geithner has known since at least 2007, that the banks were manipulating the LIBOR numbers:
The Federal Reserve Bank of New York may have known as early as August 2007 that the setting of global benchmark interest rates was flawed. Following an inquiry with British banking group Barclays Plc in the spring of 2008, it shared proposals for reform of the system with British authorities.
The role of the Fed is likely to raise questions about whether it and other authorities took enough action to address concerns they had about the way Libor rates were set, or whether their struggle to keep the banking system afloat through the financial crisis meant the issue took a backseat.
A New York Fed spokesperson said in a statement that “in the context of our market monitoring following the onset of the financial crisis in late 2007, involving thousands of calls and emails with market participants over a period of many months, we received occasional anecdotal reports from Barclays of problems with Libor.
“In the spring of 2008, following the failure of Bear Stearns and shortly before the first media report on the subject, we made further inquiry of Barclays as to how Libor submissions were being conducted. We subsequently shared our analysis and suggestions for reform of Libor with the relevant authorities in the UK.”
The Fed knew that any misstatement of LIBOR would have significant effects on Trillions of dollars of loans and derivatives, and that the manipulation of this rate would allow banks to steal money from their customers.
While the LIBOR is a matter for the British to regulate, it is, after all, the London Interbank Offered Rate, its use as a benchmark by American institutions in American markets, was a matter for the Federal Reserve.
The fact that the Fed did not even issue a warning about this is criminally negligent.
I so want to see Tim Geithner frog marched out of the White House in handcuffs.
Least Shocking News of the Day
Wall Street executives believes that their employees cannot succeed without breaking the law:
If the ancient Greek philosopher Diogenes were to go out with his lantern in search of an honest man today, a survey of Wall Street executives on workplace conduct suggests he might have to look elsewhere.
A quarter of Wall Street executives see wrongdoing as a key to success, according to a survey by whistleblower law firm Labaton Sucharow released on Tuesday.
In a survey of 500 senior executives in the United States and the UK, 26 percent of respondents said they had observed or had firsthand knowledge of wrongdoing in the workplace, while 24 percent said they believed financial services professionals may need to engage in unethical or illegal conduct to be successful.
Sixteen percent of respondents said they would commit insider trading if they could get away with it, according to Labaton Sucharow. And 30 percent said their compensation plans created pressure to compromise ethical standards or violate the law.
Truth be told, I’m surprised the number is so low.
The cynic in me says that most of the roughly ¾ who disagreed were lying because that’s what they do.
The realist in me says that most of the roughly ¾ who disagreed able to deduce the purpose of the survey, and determine that their, and their companies’ needs were, and then gave an answer that served those interests.
The optimist in me says that most of the roughly ¾ who disagreed have access to some really good drugs.
Here We Go Again
MF Global, meet PFGBest:
More than $200 million in customer funds appears to be missing from the accounts of U.S. futures broker PFGBest, regulators said on Monday just hours after the firm’s founder attempted suicide outside the company’s Iowa headquarters.
The suicide attempt and missing money renewed anxiety over the stability of the brokerage industry less than a year after the collapse of much larger MF Global. PFGBest told customers their funds had been frozen and clients would be allowed to liquidate open trading positions, but would not be able to withdraw funds or make new trades until further notice.
The National Futures Association (NFA), an industry group that also plays a regulatory role, said it had issued an emergency order to effectively freeze PFGBest’s operations after finding that a U.S. bank account the broker said contained $225 million in customer funds actually held only $5 million.
“It appears that PFG does not have sufficient assets to meet its obligations to its customers,” the NFA said.
The disclosure came hours after owner Russell Wasendorf Sr., a 40-year veteran of futures markets, was found in his car near the company’s new headquarters, having apparently attempted suicide. He is in critical condition at the University of Iowa Hospitals, according to local news reports.
(emphasis mine)
I’m wondering if I’m a bad person for thinking that Wassendorf’s attempt to top himself shows a little bit more common decency and remorse than we got from Jon Corzine in the MF Global matter.
I’m beginning to wonder if your money might actually be safer invested in Nigerian 419 scams than it is with financial professionals.
I’m Kinda Late for Bank Failure Friday
But there was some action, both on the bank and on the credit union side last week.
For the banks:
- Montgomery Bank & Trust, Ailey, GA
And here are the credit union closings:
- Western Bridge Corporate Credit Union, San Dimas, CA
This year is definitely shaping up better than last year.
So, here is the graph pr0n with last years numbers for comparison (FDIC only):
