Category: Finance

Shareholders Revolts Against Executive Compensation is Getting More Common

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This time it’s Barklays, and once again it failed:

Shareholders have demonstrated their mounting anger over runaway boardroom pay, delivering a huge protest against Barclays pay policies – including the £17m package for chief executive Bob Diamond.

Nearly a third of shareholders failed to back the remuneration report at a sometimes hostile annual meeting in the Royal Festival Hall, London, where one shareholder warned of the damage to the bank’s reputation because of its pay deals.

Shareholders also handed a severe rebuke to Alison Carnwath, the non-executive director who sanctioned the pay deals. More than one in five investors failed to support the re-election of Carnwath, a veteran of many boardroom battles, to the board – a huge protest given that directors usually expect near-unanimous support for their positions.

You used to hear about this once a decade.

We’ve had 3 in the past 6 weeks.

Even if they lose, it’s a step in the right direction.

Still???

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The SEC still hasn’t finished its investigation of Lehman?

It’s been 4 years, and we’ve not seen anything:

The U.S. Securities and Exchange Commission is still probing Lehman Brothers more than three years after the investment bank collapsed during the global financial crisis, agency chairman Mary Schapiro said on Wednesday.

Schapiro told lawmakers it would be inappropriate to comment on a matter that “remains under investigation,” but assured lawmakers that the SEC has conducted interviews with management at the highest levels and has reviewed millions of pages of documents.

“It is still under review,” she said at an SEC oversight hearing before a House Financial Services subcommittee.

Schapiro’s comments come after “60 Minutes” on Sunday aired a segment revisiting the March 2010 findings by Lehman Brothers Holdings Inc’s court-appointed examiner, Anton Valukas.

Valukas’ report said that Lehman used accounting gimmicks and had been insolvent for weeks before it filed for bankruptcy in September 2008.

But we haven’t even seen administrative actions.

Nobody has been banned from the securities industry, no prosecutions, no fines, no nothing.

The fix is in.

Not Enough Bullets

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The banksters have discovered another way to pay their obscene levels of executive pay, they push poor customers to high fee products:

An increasing number of the nation’s large banks — U.S. Bank, Regions Financial and Wells Fargo among them — are aggressively courting low-income customers like Mr. Wegner with alternative products that can carry high fees. They are rapidly expanding these offerings partly because the products were largely untouched by recent financial regulations, and also to recoup the billions in lost income from recent limits on debit and credit card fees.

Banks say that they are offering a valuable service for customers who might not otherwise have access to traditional banking and that they can offer these products at competitive prices. The Consumer Financial Protection Bureau, a new federal agency, said it was examining whether banks ran afoul of consumer protection laws in the marketing of these products.

In the push for these customers, banks often have an advantage over payday loan companies and other storefront lenders because, even though banks are regulated, they typically are not subject to interest rate limits on payday loans and other alternative products.

Some federal regulators and consumer advocates are concerned that banks may also be steering people at the lowest end of the economic ladder into relatively expensive products when lower-cost options exist at the banks or elsewhere.

“It is a disquieting development for poor customers,” said Mark T. Williams, a former Federal Reserve Bank examiner. “They are getting pushed into high-fee options.”

“We look at alternative financial products offered by both banks and nonbanks through the same lens — what is the risk posed to consumers?” said Richard Cordray, director of the bureau. “Practices that make it hard for consumers to anticipate and avoid costly fees would be cause for concern.”

Seriously, we should have tarred and feathered these f%$#s, not bailed them out.

Here’s hoping that the CFPB takes a look at this.

It’s Bank Failure Friday!!!!

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

  1. Bank of the Eastern Shore, Cambridge, MD
  2. HarVest Bank of Maryland, Gaithersburg, MD
  3. Inter Savings Bank, fsb D/B/A InterBank, fsb, Maple Grove, MD
  4. Plantation Federal Bank, Pawley’s Island, SC
  5. Palm Desert National Bank, Palm Desert, CA

Full FDIC list

Last week, I was noting how much the closure rate had slowed down, and I predicted less than 50 closures this year, and this week we see 5 closures.

Go figure.

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

Because they are Whiny Babies

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Brad Delong wonders why Wall Street dislikes Barack Obama so much:

A worker bee at a mainline investment bank told me last fall:

Back in 2008 Wall Street was split 40-60 Obama-McCain. Now it is split 10-90 Obama-Romney.

Why? It is not as though Wall Street has done badly under Obama. Stock prices are up and interest rates are down, so leveraged financial institutions long assets–as Wall Street inevitably is–have done very, very well indeed. The standard bargain that the Democrats offer Wall Street has held. It is:

We will try to tax you (and, given the power of your lobbying operation in Congress, probably fail to do so), but we will give you competent economic management in striking contrast to that offered by the ideologically-blinded wingnuts who are the Republicans.

That has been the bargain that the Democrats have offered Wall Street from the days of Hoover to Bush II, and when Wall Street has had a sense of its own long-run interests, it has taken the Democrats up on it. And it has been happy.
But not this time.

Why not? What is going on? What is there about 50% real increases in equity values over less than 3 1/2 years that is not to like?

For the past 30+ years, these guys have been surrounded by people who treat them like they were Pashas, both in their social circles on Wall Street as well both sides of the partisan divide in Washington, DC, so when Barack Obama  calls them “Wall Street Fat Cats”, their heads explode.

This is despite the fact he, and his sidekick Timmy Geithner, bail them out, and quash prosecutions.

One wonders just how insecure these guys are about their value to society. 

Hmm…come to think of it, this answer was a bit more involved than I intended.

Here’s a hint:  You are all worthless parasites.

What a Surprise

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Obama announces a DoJ investigative task force to investigate foreclosure fraud, in order to bring the state Attorney Generals, most notably NY’s Eric Schneidermann, and they are not staffing it:

Three months ago, in his State of the Union speech, President Obama announced a new task force to investigate mortgage fraud and bring some measure of relief to the 12 million American families who are either losing their homes or in danger of losing them.

The new Residential Mortgage-Backed Securities Working Group would be co-chaired by New York State Attorney General Eric Schneiderman, U.S. Attorney John Walsh of Colorado and three Washington insiders from the Justice Department and the Securities and Exchange Commission.

Obama said, “This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans.”

Whether or not the President, attorney general and others intend to get around to this task someday, “speed” was a terrible word to choose. Because 85 days after that speech, there is no sign of any activity.

………

Yes, for a few days, there seemed to be a renewed sense of purpose and focus from the administration. U.S. Attorney General Eric Holder held his own news conference and announced that at least 55 Justice Department lawyers, agents, analysts and investigators would be assigned to the effort. A news release promised 30 staffers would be joining efforts “in the coming weeks.”

………

On March 9 — 45 days after the speech and 30 days after the announcement — we met with Schneiderman in New York City and asked him for an update. He had just returned from Washington, where he had been personally looking for office space. As of that date, he had no office, no phones, no staff and no executive director. None of the 55 staff members promised by Holder had materialized. On April 2, we bumped into Schneiderman on a train leaving Washington for New York and learned that the situation was the same.

Tuesday, calls to the Justice Department’s switchboard requesting to be connected with the working group produced the answer, “I really don’t know where to send you.” After being transferred to the attorney general’s office and asking for a phone number for the working group, the answer was, “I’m not aware of one.”

The promises of the President have led to little or no concrete action.

In fact, the new Residential Mortgage-Backed Securities Working Group was the sixth such entity formed since the start of the financial crisis in 2009. The grand total of staff working for all of the previous five groups was one, according to a surprised Schneiderman. In Washington, where staffs grow like cherry blossoms, this is a remarkable occurrence.

Schneidermann got punked.

There were over 1000 FBI agents assigned to the Savings and Loan crisis, so 55 is a joke, but they aren’t even staffing that.

If there was any question as to whether the banksters owned Obama, it’s been answered.

And on the other side is Mitt, who is a bankster.

What a choice.

Another Reason Banksters Walk

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Because there are a lot of people who make a lot of money by finding the scammers and betting on the damage that they do, like this short seller:

But then he came to the nub of the issue. The easiest scammer to find is a repeat offender. We actively seek out people who promote dodgy stocks and who who are repeatedly involved in dodgy companies. The slogan is “once a scumbag, always a scumbag”. That slogan is probably not strictly accurate – but we only need to be right 90 percent of the time to be fantastic at this business – and the recidivism amongst scammers is surprisingly high.

………

So, says my son asks you like nasty people to steal from poor investors, mutual funds (and he did not say pension funds for school teachers) so that you can join them in taking the loot by being a short-seller – and you don’t want the regulators to do anything about it because there are more opportunities for you?

Sheepishly I confess yes.

And he says with a mixture of admiration and horror: “daddy you are more evil than I thought”.

As shocking as the outright law breaking on Wall Street it, what is legal is even scarier.

I’m surely not the first one to observe this, but the incentives in our financial system are seriously whack.

Vikram Pandit, F%$# You

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What Cee Lo Green Said (NSFW)

At the Bank of America’s annual meeting,; shareholders voted down Vikram Pandit’s pay package:

In a stinging rebuke, Citigroup shareholders rebuffed on Tuesday the bank’s $15 million pay package for its chief executive, Vikram S. Pandit, marking the first time that stock owners have united in opposition to outsized compensation at a financial giant.

The shareholder vote, which comes amid a rising national debate over income inequality, suggests that anger over pay for chief executives has spread from Occupy Wall Street to wealthy institutional investors like pension fund and mutual fund managers. About 55 percent of the shareholders voting were against the plan, which laid out compensation for the bank’s five top executives, including Mr. Pandit.

“C.E.O.’s deserve good pay but there’s good pay and there’s obscene pay,” said Brian Wenzinger, a principal at Aronson Johnson Ortiz, a Philadelphia money management company that voted against the pay package. Mr. Wenzinger’s firm owns more than 5 million shares of Citigroup.

Capitalism is a bitch, ain’t it, Mr. Pandit?

We need a lot more of this.

 In the meantime, I’ll just enjoy the feeling of amusement.

Stating the Obvious

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Eliot Spitzer notes that Barack Obama was on Wall Street’s side from Day One:

That being said, I think that Spitzer is wrong on the finer points here. He thinks that the tepid (largely phony) moves toward regulation have turned Wall Street against Obama, not his occasional speeches about “fat cat bankers.”

I think that it is these words. These are very rich men, who spend their lives surrounded by toadies and sycophants who validate their self worth, because of they have a pathetic need for affirmation.

People simply don’t tell them that they might not be the most valuable people in the world in their world, so when Obama offers the most tepid of critiques, while doing their bidding, they freak out.

I just wonder how small these guy’s penises are.

WhyEeveryone at the ECB Should be Fired and Replaced With Kitchen Appliances, Part CLXVII

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The banksters at the ECB, those self-appointed protectors against the ravages of inflation, are demanding an inflation adjustment for their pensions:

Since the start of the Eurosystem our brave inflation warriors at the ECB regularly praise themselves what a heck of the job they are doing about their primary objective the maintenance of price stability. But yesterday the German Daily Frankfurter Allgemeine Zeitung (FAZ) published an article (German), that our guardians of price stability fight another good fight. The employees of the ECB want their own pensions to be inflation protected.

So the same folks who lecture member states of the Eurozone about the danger of private sector labor and pension contracts being inflation-indexed because of moral hazard want their own pension contracts inflation-indexed. For this fight to be successful ECB employees deploy a very evil institution: the central banker union IPSO. According to the FAZ article a former employee sued the ECB with the help of IPSO at European Court of Justice.

Seriously, I cannot think of of a better illustration of the moral and intellectual bankruptcy of the so-called experts who want to tell us how we are supposed to run our economy.

Their rules only apply to us, not to them.

So, JP Morgan Is Being Hit Up for the Money it Stole from MF Global Customers

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They are, “in negotiations:

JPMorgan Chase is in talks with the authorities to turn over customer money that disappeared from MF Global when the firm went bankrupt last year.

The development, announced this week by the trustee tasked with returning money to MF Global customers, suggests that a substantial sum of client funds is still sitting at JMorgan. The statement from the trustee, James W. Giddens, said that he and JPMorgan “are presently engaged in substantive discussions regarding the resolution of claims.”

What is going on here is that JP Morgan took money from MF Global for margin calls that came from customer accounts.

The reason that they are negotiating is because they knew that the money was dirty, because they knew that MF Global had no other source of liquidity, it’s why they made the margin call in the first place.

They did something similar in the collapse of Lehman as well.

Quote of the Day

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A few months ago, I was standing in a crowded elevator when Jamie Dimon, the chief executive of JPMorgan Chase, stepped in. When he saw me, he said in a voice loud enough for everyone to hear: “Why does The New York Times hate the banks?”

It’s not The New York Times, Mr. Dimon. It really isn’t. It’s the country that hates the banks these days. If you want to understand why, I would direct your attention to the bible of your industry, The American Banker. On Monday, it published the third part in its depressing — and infuriating — series on credit card debt collection practices.

—Joe Nocera

(emphasis mine)

As an aside, while I still have issues with him, Nocera is not a totally useless NYT Columnist.  (See Friedman, Thomas)

I Can Haz Prosecushions?

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We now have a smoking gun in the matter of MF Global, an email detailing how John Corzine ordered customer funds transferred to JP Morgan Chase, and the fact that JP Morgan asked for, and never got a statement that they weren’t customer funds:

Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co. (JPM), according to a memo written by congressional investigators.

Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.

…………

arry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was not returned to JPMorgan, the memo said.

The money transferred came from a segregated customer account, according to congressional investigators. Segregated accounts can include customer money and excess company funds.

So Corzine ordered the illegal transfer of customer funds, and JP Morgan was worried about this that they demanded a letter saying that they were not doing this, but never followed up on their demand.

I think that the bigger story here is JP Morgan. We already knew that Corzine was hip deep in stealing customer funds, what we didn’t know that JP Morgan knew, but took the money anyway.

These folks need to be frog-marched out of their offices in handcuffs.

They need to be tried under RICO and if they go to jail it should not be a white-collar resort prison, they should go to a federal POUND ME IN THE ASS prison.

The Banksters Acts Exceed My Cynicism

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When a mortgage firm sues their servicer because for being too cooperative with the people that they cheated:

Just when you think you’ve seen it all in mortgage-backed securities litigation, along comes the likes of Sand Canyon to prove you wrong.

The onetime California mortgage lender, which stopped originating loans in late 2007 and sold its servicing business to American Home Mortgage Servicing in 2008, has filed a complaint in New York State Supreme Court in Manhattan that accuses American Home of making it too easy for MBS trustees and insurers to get hold of underlying loan files. In essence, Sand Canyon’s lawyers at Cahill Gordon & Reindel are arguing that the servicer should be helping it thwart claims that it breached representations and warranties about the mortgages it sold to MBS issuers, not smoothing the way for put-back demands.
Sand Canyon’s 26-page complaint, filed last month, asserts that American Home pledged to act as an ally when it bought the servicing business in 2008. “Sand Canyon bargained for and obtained (American Home’s) cooperation in connection with Sand Canyon’s defense,” the complaint said. Under their agreement, according to the complaint, American Home was supposed to “refrain from disclosing confidential loan information to third parties except as required by law.”
Most pooling and servicing agreements permitted MBS trustees and insurers to see underlying loan files only during regular business hours and at the servicer’s offices, according to the Sand Canyon complaint. But American Home, the suit alleged, has provided electronic records in response to demands from trustees and insurers.

Until we start putting these f%$#s in prison, and we seize every penny that they have through RICO and asset forfeiture, they aren’t going to stop.

We need to put some of them in jail for the rest of their lives, and when they die, we need to take their fillings.

What is the Last Place You Would Expect to Hear Someone Calling for an Indictment of Jon Corzine?

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Well, you know, the OP/ED page of the New York Times is close to the top of that list, but Joe Nocera just called for prosecutions in the MF Global matter:

It’s sure starting to look as if Jon Corzine is going to get away with it.

By now, it has been well established that Corzine’s former firm, MF Global, committed the sin of sins for a broker-dealer. In late October, during the final, desperate days before it entered bankruptcy proceedings, its executives took money from segregated customer accounts — money that belonged not to MF Global but to the farmers and commodities traders that were its clients — and used it to prop up its rapidly collapsing business. Nor was this petty cash: of the $6.9 billion in customer assets that MF Global held, a stunning $1.6 billion is missing. There is virtually no chance that the full amount will ever be recovered.

Let’s not mince words here. These executives committed a crime. Virtually every knowing violation of the Commodities Exchange Act is a crime, but taking money from segregated customer accounts is at the top of the list. And for good reason. Customer money is supposed to be sacrosanct. If a broker-dealer goes bankrupt, the segregated accounts are supposed to remain safe, a little like the way bank deposits remain protected if a bank goes under. Indeed, customers need to be able to trust the fact that their money is segregated and protected at all times. Otherwise, the markets can’t function.

Yet, a few weeks ago, Azam Ahmed and Ben Protess, who have done a remarkable job covering the MF Global bankruptcy for The Times, wrote an article suggesting that prosecutors were having trouble putting together a criminal case against anyone at MF Global. So far, wrote Ahmed and Protess, they’d been “unable to find a smoking gun.” In fact, they continued, “a number of federal prosecutors have expressed doubts” that MF Global “intentionally misused customer money.” Apparently, the current theory is that it was all just a big accident, the chaos of those final days causing the firm’s executives to tap into customer funds without realizing it.

Excuse me while I roll my eyes. Of course there isn’t a smoking gun. As a general rule, financial professionals tend not to write e-mails that say, “Hey, we’re desperate. Let’s break into the customer accounts!” And, of course, they are always going to say it was unintentional. They are saying it already, starting with Corzine, who told Congress last year that “there was no intention to violate segregation rules.”

He’s right.

He’s also right that the failure to prosecute is an assault on the idea of the rule of law.

It’s not a particularly surprising conclusion to draw, but the fact that it’s appearing in the New York times is a big deal.

It Aint Just Mortgages that the Banksters are F%$#ing UP

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Once again, the banks sold bad paper, in this case, credit card debts that they knew were not accurate and, and once again, Matt Taibbi has a distills the essence of the matter:

In a story that should be getting lots of attention, American Banker has released an excellent and disturbing exposé of J.P. Morgan Chase’s credit card services division, relying on multiple current and former Chase employees. One of them, Linda Almonte, is a whistleblower whom I’ve known since last September; I’m working on a recount of her story for my next book.

………

The Cliff’s Notes version of the story goes something like this: Late in 2009, Chase’s credit card services division sold a parcel of nearly $200 million worth of credit card judgments to a debt collector at a discount. This common practice in the credit-card industry is a little like a bookie selling the outstanding debts of his delinquent gamblers to a leg-breaker for 25 cents on the dollar. If the leg-breaker gets half the delinquents to pay, the deal works out for both sides — the bookie gets 25 percent of money he wasn’t going to collect, and the leg-breaker makes a 100 percent profit.

Only they did not do even the barest due diligence:

Linda [Almonte] subsequently found an enormous range of errors. Some judgments, she told me, were not judgments at all. In some cases, she said, Chase actually owed the customer money.

When she brought these concerns to her superiors, what do you think their response was? They told her and others to shut up and just sell the stuff anyway. Her boss, Jason Lazinbat, allegedly told her “she had better go along with the plan to sell the misrepresented asset.”
Think of the consequences of this: because Chase was so anxious to make money off this debt sale, countless credit card borrowers would now have collection agents chasing them for money they did not owe. The debt-buyer, too, was victimized by being sold accounts it could not collect on. It is almost impossible to estimate how many man-hours of pointless court proceedings would be lost because of this decision.

You know, this sounds familiar. Just like the foreclosure fraud.

In fact, it sounds like a pattern, a, “pattern of racketeering,” as in RICO, and the burden of proof in RICO, particularly for asset forfeiture, is not that high.

How about it, Barack?

It’s something that you can do in your 2nd term, and you don’t need Congressional approval to do this.