Category: Finance

Silly Developing Nations, Don’t You Know that the IMF is for White People?

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So, Christine Lagarde has been appointed the new head of the IMF.

What striking about all this is how the powers that be have insisted that they need to have a European in charge, because of the current crises in the Euro zone.

Gee, no one ever said that when it was Indonesia, Mexico, Korea, Malaysia, etc., but once it’s the Euro’s head in the noose, suddenly we need to institute a affirmative action for white people legacy admissions program for the window office at a major international financial agency.

Not Enough Bullets

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Just who do you think that the World Bank would hire as their treasurer? Why it would be the chief risk officer for Lehman when it collapsed:

The World Bank has appointed Madelyn Antoncic as its new vice president and treasurer.

Ms Antoncic served as Lehman Brothers’ chief risk officer from 2002 to 2007 and following the collapse of the bank, stayed on for a year as managing director and senior advisor at the Lehman Estate, helping to maximise value for creditors.

Having begun her career as an economist at the Federal Reserve Bank of New York, she has worked for Goldman Sachs in various posts (including head of market risk management), and for Barclays Capital, before joining Lehman Brothers in 1999.

In her new role, Ms Antoncic will be responsible for maintaining the World Bank’s standing in financial markets and for managing an extensive client advisory, transaction, and asset management business.

Seriously, in the self dealing nepotistic and moronic world in which they live, there is literally nothing that a bankster can do,* that can prevent them from being given high profile high prestige jobs.

There are indications that she was opposed to Lehman’s high risk strategy, but she chose to stay, and get a do-nothing government relations position.

If she, as chief risk officer, was unwilling to leave when she saw what was going on, and she was frozen out, any organization that hires her as treasurer has absolutely no credibility at all.

It’s like putting Charlie Sheen in charge of your chastity and sobriety department.

This is why not prosecuting was such a bad idea. Like bad pennies, people like this keep coming back to do even more harm.

H/t Naked Capitalism.

*As long as you are white anyway. See the fall of Raj Raj Rajaratnam as an illustration.

Senators Call for OCC Head’s Removal

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After pimping for the big banks for the past few years, Acting Comptroller of the Currency John Walsh has finally become so blatant that 3 Senate Dems called for his removal:

On Tuesday, Acting Comptroller of the Currency John Walsh said regulators are in danger of going too far to curb risk-taking by big banks.

Now, some Democratic senators are calling for his head.

Three Senate Democrats – Jack Reed of Rhode Island, Carl Levin of Michigan and Jeff Merkley of Oregon – have publicly called for the White House to replace Mr. Walsh, a Republican, following his speech in London Tuesday.

The lawmakers were particularly rankled by Mr. Walsh’s statements that bank capital requirements – the cushion banks hold against future losses — are already “exceedingly high” and that regulators should be cautious about much more they require the largest banks to hold, something foreign and U.S. regulators are now negotiating.

“Mr. Walsh’s latest comments provide further evidence that he is not interested in leading an agency charged with ensuring the safety and soundness of our financial institutions,” Mr. Reed said in a statement. Mr. Reed, a senior member of the Senate Banking panel which oversees the OCC, went on to call for the Obama administration “to fundamentally re-think the OCC’s leadership and ensure that American taxpayers are never again on the hook for Wall Street’s misdeeds.”

Mr. Levin, who leads an investigative committee that investigated the 2008 financial crisis, said it is “past time for the president to nominate new leadership at the OCC to protect American families and businesses from the excesses of Wall Street.”

When Yves Smith wrote, “OCC Gives Banks Another Blow Job,”  she was spot on.

It was past time to ditch him, and for that matter, to ditch the whole OCC,  in January 2009, but he he’ll keep Walsh, for the same reason that Timothy “Eddie Haskell” Geithner is Obama’s secretary of the treasury.

More Evidence That We Live in a Feudal Society

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This time, it’s the credit report bureaus who are practicing Droit du seigneur* on us without lube:

The credit rating bureaus, whose reports influence everything from credit cards to mortgages to job offers, have a two-tiered system for resolving errors — one for the rich, the well-connected, the well-known and the powerful, and the other for everyone else.

The three major agencies, Equifax, Experian and TransUnion, keep a V.I.P. list of sorts, according to consumer lawyers and legal documents, consisting of celebrities, politicians, judges and other influential people. Those on the list — and they may not even realize they are on it — get special help from workers in the United States in fixing mistakes on their credit reports. Any errors are usually corrected immediately, one lawyer said.

For everyone else, disputes are herded into a largely automated system. Their complaints are often electronically ferried to a subcontractor overseas, where a worker spends, on average, about two minutes figuring out the gist of the matter, boiling it down to a one-to-three-digit computer code that signifies the problem — “account not his/hers,” for example — and sending a dispute form to the creditor to investigate. Many times, consumer advocates say, the investigation translates to a perfunctory check of its records.

“The legal responsibility of the credit reporting agencies and of the creditors is well established,” said Leonard Bennett, a consumer lawyer in Newport News, Va. “There is a requirement that they do meaningful research and analysis, and it is almost never done.”

For the rest of us, it’s all just serfdom.

*Droit du seigneur is the apparently mythical practice of granting the lord of the manor the right to deflower new brides on their wedding night.

The Federal Reserve Speaks

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And they are saying that the economy sucks, and will continue to suck, but they won’t do anything about it:

The economic recovery is slowing and the outlook for next year has gotten worse, Federal Reserve Chairman Ben S. Bernanke said Wednesday, backing away from the view that the slowdown of the past few months was merely temporary.

The central bank released new economic projections that showed weaker growth in both 2011 and 2012 than had been forecast just two months ago. Despite the slowdown, the Fed said it will end a program of buying vast sums of Treasury bonds at the end of June as scheduled and gave no sign it is contemplating new action.

We are unbelievably screwed.

It’s Bank Failure Friday!!!!

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There were no failures last week, and I missed the one that happened on the 3rd, but we are definitely seeing a slowdown, which is a good thing

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

  1. Atlantic Bank and Trust, Charleston, SC (on June3rd )
  2. McIntosh State Bank, Jackson, GA
  3. First Commercial Bank of Tampa Bay, Tampa, FL

Full FDIC list

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

Yves Smith’s Takedown of Obama on Warren is a Thing of Beauty

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This is truly good writing.

She details the machinations that the Obama administration has gone through to avoid making her the head of the Consumer Financial Protection Bureau, and it ain’t pretty.

Not only does it make justified critiques of the basic policies (the banksters must be protected at all cost), but it details the shortcomings in basic approach that have characterized his first two years in office.

Go read.

2 Years Too Late, Timmeh

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So, the US Treasury is finally taking action against banks who have not engaged in HAMP in good faith:

As the nation’s housing market continues to teeter, the Treasury Department on Thursday penalized three of the nation’s largest banks for subpar performance in administrating a government-sponsored program to modify mortgage loans for distressed homeowners.

As part of a new assessment of mortgage servicers, Treasury officials said they would withhold incentive payments for the three banks — Bank of America, JPMorgan Chase and Wells Fargo — until the problems are resolved. At that point, those payments would be made, a Treasury spokeswoman said.

In May, the three banks received $24 million in incentives as part of the modification program.

The Treasury Department has previously withheld payments from mortgage servicers, but Thursday’s action focused on some of the biggest players in the program. Called the Home Affordable Modification Program, or HAMP, it is voluntary for mortgage servicers. Nearly all of the nation’s largest banks have signed contracts to participate.

Only, as Yves Smith observes, this is not accountability, it’s accountability theater, from the folks who so f%$#ed up HANP so badly that, “HAMP was so clearly a disaster that Treasury Department officials didn’t try very hard to defend it in a meeting with bloggers that I [Yves Smith] participated in last August. The best they could do was claim that it helped the housing market by spreading out foreclosures over a long time period,” so in this bit of atmospherics, the banks still get their money, they just won’t get it today.

Someone must have informed Timothy “Eddie Haskell” Geithner that even if Barack Obama would never fire him,* if the voters fire Obama, he’s still out of job.

*This fact that Geithner is unfirable makes a pretty argument against a 2nd Obama term.†
†We now have revelations that Larry Summers was more on the ball than he.

Now the New York Times is Calling it a Coverup

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Click for full size

Round up the Usual Suspects

Specifically, they note that in the matter of indicted trader Fabrice Tourre, it appears that he is being singled out as a scape goat, while the SEC is studiously ignoring the fact that he was acting in pretty much the same way as everyone else at Goldman Sachs:

Hundreds of employees worked closely in teams, devising mortgage-based securities — billions of dollars’ worth — that were examined by lawyers, approved by management, then sold to investors like hedge funds, commercial banks and insurance companies.

At one trading desk sat Fabrice Tourre, a midlevel 28-year-old Frenchman who was little known not just outside Goldman but even inside the firm. That changed three years later, in 2010, when he achieved the dubious distinction of becoming the only individual at Goldman and across Wall Street sued by the Securities and Exchange Commission for helping to sell a mortgage-securities investment, in one of the hundreds of mortgage deals created during the bubble years.

How Mr. Tourre alone came to be the face of mortgage-securities fraud has raised questions among former prosecutors and Congressional officials about how aggressive and thorough the government’s investigations have been into Wall Street’s role in the mortgage crisis.

The tell here is the fact that he was set up by Goldman, and the SEC, as a patsie is the fact that he was told that he had to use a Goldman Sachs lawyer to represent himself:

In April 2010, when the S.E.C. filed its case against the bank and Mr. Tourre, the young banker told friends that he believed Goldman had been chosen to be the commission’s “case study,” according to several who spoke on the condition that they not be identified. The friends also said they were concerned that Mr. Tourre’s dependence on Goldman for advice and legal counsel was not in his best interest.

In September 2009, for instance, Mr. Tourre told friends he thought he had to use a lawyer from a list of lawyers at three firms that Goldman gave him.

Robert Follie, a lawyer in Paris, said Mr. Tourre told him he was not authorized to use lawyers other than those Goldman selected. Mr. Follie said he cautioned Mr. Tourre that his interests might diverge from Goldman’s, so he should consider hiring his own counsel.

“As a practitioner, I mentioned to him that I felt the risk in the long run was that the lawyer who was acting for him might end up in a near conflict-of-interest situation,” Mr. Follie, whose daughter is friends with Mr. Tourre, said in an interview last December.

After the S.E.C. case was filed in summer 2010, Mr. Follie wondered how Mr. Tourre had wound up as the only defendant. “I felt that somewhere down the line, he must have done or not done the proper things to get out of this. I was personally wondering if he had sufficient representation disassociated from Goldman,” he said.

Mr. van Praag, the Goldman spokesman, said the bank did not impose lawyers on its workers and had not done so on Mr. Tourre. He said that “ultimately the decision is for the individual and counsel to determine whether they are right for each other.”

Well, Mr. van Praag, if that is in fact your real name, I am sure that Goldman management worked scrupulously to ensure that there was no paper trail of them instructing Tourre to take a lawyer who worked for them instead of him, but that is a far cry from what any honest employer would do.

Vampire Squid Subpoenaed

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It sounds like a big deal:

Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, was subpoenaed by the Manhattan District Attorney’s office for information on the firm’s activities leading into the credit crisis, two people familiar with the matter said.

The subpoena relates to the U.S. Senate’s Permanent Subcommittee on Investigations report on Wall Street’s role in the collapse of the financial markets, which accused New York- based Goldman Sachs of misleading buyers of mortgage-linked investments, the people said, speaking on condition of anonymity because the inquiry isn’t public.

But it isn’t, because even the most overzealous prosecutor out there, and Manhattan DA Cyrus Vance, Jr. is not one of those, would be told in no uncertain terms that any prosecution would destroy our economy, and so it would result in their own destruction (See Spitzer, Eliot) so it will just be a few bucks in fines, and no admission of wrong-doing.

Another Obama Cave

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And this time it’s the for profit colleges, who pretend to educate, or at least credential, people:

The Department of Education on Wednesday tightened its regulation of for-profit colleges and other vocational programs that get billions of dollars in federal aid but leave many students with crushing debt and credentials worth little on the job market.

Under the new rules, programs would lose their eligibility to dispense federal student aid — and as a practical matter, be shut down — if, over the next four years, their graduates fail to meet new benchmarks for loan repayment and ratio of debt to income. But amid intense lobbying by the for-profit college industry and pressure from Republican lawmakers, the department significantly eased the rules from an earlier draft: officials said, for example, that no program would lose eligibility until 2015.

“We believe that very few programs will be forcibly closed by our standards,” Secretary of Education Arne Duncan said. “We want to give people a chance to reform. As a country, we need this sector to succeed. This is not about ‘gotcha.’ ”

These rules, which try to define how such programs prepare students for “gainful employment,” have been the hardest-fought issue in the debate over exploitive and fraudulent practices in the industry. The colleges and their allies spent $12 million lobbying against the rules since the start of 2010, and this spring, the House passed a budget amendment that would have blocked the department’s work on them. The rules were supposed to be issued last summer, but were delayed after the Education Department received a record 90,000 comments on its draft proposal.

What does this mean? Let’s see what the market thinks:

For-profit colleges rallied as the U.S. Education Department gave the industry more time to comply with rules that will cut off federal aid to institutions whose students struggle the most to repay their government loans.

ITT Educational Services Inc. (ESI) soared 21 percent to $85.67. Career Education Corp. (CECO) rose 5.4 percent to $24.10. Strayer Education Inc. (STRA) gained 19 percent to $144.95. Apollo Group Inc. (APOL) advanced 11 percent to $46.90. DeVry Inc. (DV) rose 15 percent to $61.86.

Corinthian Colleges Inc. (COCO) jumped 27 percent to $5.06. Education Management Corp. (EDMC) increased 22 percent to $24.76. Grand Canyon Education Inc. (LOPE) advanced 9 percent to $13.97. Bridgepoint Education Inc. (BPI) rose 3.4 percent to $24.48. Capella Education Co. (CPLA) climbed 3.3 percent to $49.58.

Washington Post Co. (WPO) , owner of the Kaplan for- profit education business, advanced 5 percent to $426.42.

It’s pretty clear that they took meaningful rules, and gutted them, probably because they figure that a good way to get a bit closer to their $1 billion goal for campaign donations in 2012.

So real reform is replaced with phony reform.  How Hopey Changey.

This is Called Coopting a Threat

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It appears that the Democratic party is trying to encourage Elizabeth Warren to run for Senate in Massachusetts:

Officials in the Democratic Party are wooing Elizabeth Warren to run for the Senate against the Massachusetts Republican Scott P. Brown rather than have her continue to set up the new Consumer Financial Protection Bureau.

Ms. Warren has become a lightning rod for controversy over the new agency, which she conceived and is helping create. Consumer groups and some Democrats have demanded her appointment as its first director. A group of 44 Senate Republicans, with applause from the financial industry, has promised to block any nominee.

In seeking to enlist Ms. Warren for a different campaign, Democrats are taking aim at two birds. They can lay the groundwork for a potential compromise over a different candidate to lead the new agency and, they hope, they can increase their chances of reclaiming Mr. Brown’s seat by sending against him a woman who has won considerable acclaim and popularity among liberals for taking on the financial industry.

This is not about having a viable Senate candidate, though she would probably be a credible challenge to Scott Brown, but about removing here from any position of influence in financial regulation.

Warren is not the choice of either the Democratic Party or the Obama administration, are about as interested in her having real authority over the excesses of  Wall Street and the big banks as they are over investigating torture and abuse of power by Bush and His Evil Minions™.

If she wins, she won’t have any influence in the boys club that is the Senate, and my money would be on her not even getting a seat on the banking committee.

They want to give her a shiny hat to shut her up.

It Appears that My Prescription for Europe is Not Completely Nuts

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Because Roosevelt Institute fellow Marshall Auerback thinks that the solution is to get Germany out of the Euro zone as well:

…

Perhaps we’re looking at this the wrong way around: Given the continued German aversion to more broadly-based pan European style fiscal programs, which its populace continues to see as nothing but bailouts for lazy Mediterranean free-loaders, there is another way to solve the euro crisis.

Let Germany leave the euro zone.

Let’s leave aside the politics for a moment as there are many who believe that a German exit from the euro zone in effect means the end of the euro because a number of other countries would leave.

So consider this exercise solely from an economic context: The likely result of a German exit would be a huge surge in the value of the newly reconstituted DM. In effect, then, everybody devalues against the economic powerhouse which is Germany and the onus for fiscal reflation is now placed on the most recalcitrant member of the European Union. Germany will likely have to bail out its banks, but this is more politically palatable than, say, bailing out the Greek banks (at least from the perspective of the German populace).

I’m not sure if it is reassuring or terrifying that some people who actually know about this sh%$ are agreeing with me.

Fundamentally, the Euro, at Germany’s insistence, was constructed as a bankster’s paradise, and their actions since the meltdown have only made this worse.

Read the full article, and the comment thread, it’s good stuff.

And It Will End With “Settled Without Any Admission of Wrongdoing”

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Because, notwithstanding the recent move by the CFTC to sue oil speculators for market manipulation, I do not believe that there will be a vigorous investigation of criminal wrongdoing by any arm of the Obama administration.

Still, when I read this:

After oil prices surged past $100 a barrel in 2008, suspicions that traders had manipulated the market led to Congressional hearings and regulatory investigations. But they produced no solid cases in the record run-up in gasoline prices.

But on Tuesday, federal commodities regulators filed a civil lawsuit against two obscure traders in Australia and California and three American and international firms.

The suit says that in early 2008 they tried to hoard nearly two-thirds of the available supply of a crucial American market for crude oil, then abruptly dumped it and improperly pocketed $50 million.

The regulators from the Commodity Futures Trading Commission would not say whether the agency was conducting any other investigations into oil speculation. With oil prices climbing again this year, President Obama has asked Attorney General Eric H. Holder Jr. to set up a working group to look into fraud in oil and gas markets and “safeguard against unlawful consumer harm.”

In the case filed Tuesday, the defendants — James T. Dyer of Australia, Nicholas J. Wildgoose of Rancho Santa Fe, Calif., and three related companies, Parnon Energy of California, Arcadia Petroleum of Britain and Arcadia Energy, a Swiss company — have told regulators they deny they manipulated the market.

If the United States proves the claims, the defendants may give up $50 million in profits that were believed to be made as a result of the manipulation and also pay a penalty of up to $150 million.

The commodities agency says the case involves a complex scheme that relied on the close relationship between physical oil prices and the prices of financial futures, which move in parallel.

In a matter of a few weeks in January 2008, the defendants built up large positions in the oil futures market on exchanges in New York and London, according to the suit, filed in the Federal Court in the Southern District of New York.

At the same time, they bought millions of barrels of physical crude oil at Cushing, Okla., one of the main delivery sites for West Texas Intermediate, the benchmark for American oil, the suit says. They bought the oil even though they had no commercial need for it, giving the market the impression of a shortage, the complaint says. 

It made me smile.

It’s Bank Failure Friday!!!!

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

  1. Atlantic Southern Bank, Macon, GA
  2. First Georgia Banking Company, Macon, GA
  3. Summit Bank, Burlington, WA

Full FDIC list

And here are the credit union closings:

  1. Hmong American Federal Credit Union, St. Paul, MN

Full NCUA list

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

I really can’t find a pattern here, but it seems to be better than 2010, and worse than 2009.

Matt Taibbi is Wrong

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This Ain’t a “Pass the Popcorn” moment

Matt Taibbi notes that Eric Schneiderman, the New York State Attorney General is investigating irregularities in securitization of mortgage loans, and he is doing a happy dance at what looks like slam dunk at a real investigation, and prosecution, of the malefactors at the center of the financial crisis:

This investigation has the potential to be a Mother of All Nightmares situation for the banks for a couple of reasons. For one thing, the decision to go after the securitization process is a total prosecutorial bullseye. This is the ugly heart of the wide-scale fraud scheme of the bubble era. Again, the business model during this time was a giant bait-and-switch scam. Sleazy lenders like Countrywide and New Century first created huge masses of bad loans, committing every conceivable kind of fraud to get people into loans (from doctoring income statements with white-out to phonying FICO scores to engineering fake appraisals). They then moved the bad loans quickly to the big banks, which pooled them and chopped them up (this is the “securitization” process), sprinkled hocus-pocus math on them, and them sold them to suckers around the world as AAA-rated securities.

The questions Schneiderman will seek to answer are these: did the banks securitize loans they knew were fraudulent, throwing the rotten mortgages into the stew before serving them to customers? Did they also commit insurance fraud by duping the bond insurers (known as “monoline” insurers) into thinking the mortgages were not as risky as they really were? And did they participate in the fraud scheme on a more basic level by lending huge amounts of money to the Countrywides of the world, knowing that they in turn would immediately use that money to create the bad loans? In other words, did the banks finance the fraud in addition to brokering it?

(emphasis original)

He’s right on the basic facts, but he’s wrong on what happens next.

There very well may be a settlement, with no admission of wrongdoing, but in terms for real consequences towards the Vampire Squid and the rest of the universe on Wall Street, nothing meaningful is going to happen.

Either the Feds get involved, and block Schneiderman, or he gets destroyed like Eliot Spitzer was, or he, or the state of New York, gets bought off, but we are not going to see the laws applied to people like this, despite pervasive criminality involved, because we live in their world, and they just rent it back to us.

Here Is a Shocker

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The Registrar of Deeds for Guilford County, North Carolina, Greensboro and environs, after hearing horror stories about fraudulent loans, decided to go through his own deeds, and went through all the deeds transferred from 2006 to 2010.

The results? That in a cursory examination, well over half of the deeds were in some manner fraudulent:

But Jeff Thigpen, the register of deeds in Guilford County, North Carolina, a county of about 465,000 in the center of the state (the largest city is Greensboro), decided to survey all the mortgage documents submitted to his office by DocX, a notorious “mortgage mill” that processes documents on behalf of lenders, between August 2006 and April 2010. He was inspired by a 60 Minutes investigation revealing numerous forgeries, backdating, and other false information on mortgage documents. “When I saw that [story], I was basically on fire,” Thigpen says. “‘I know this material is in my office, I’ve got to find it, I’ve got to get it out.'”

Out of the 6,100 documents Thigpen examined, 4,500 showed signature irregularities. The name of one DocX employee, Linda Green, who was acting as a vice president for several major banks, was forged 15 different ways on the Guilford County documents, rendering them invalid. Thigpen’s investigation was one of the first systematic assessments of mortgage document fraud in the entire country, certainly more robust than anything conducted by state and federal regulators.

Thigpen, as well as his Essex County equivalent John O’Brien, have been making as much of a stink as they can about this, they have asked the Iowa Attorney General, Tom Miller, to hold off on his proposed national settlement pending a real investigation. (some older posts here)

That would be the right thing to do, of course, but considering the fact that Miller is angling for some sort of position in the Obama administration, and the Obama administration is as interested in pursuing the banks for wrong doing as they are in pursuing Dick Cheney for outing a CIA agent, I don’t expect that there will ever be a meaningful investigation of Bankster wrongdoing.