Citi is a particularly blatant example of a way of operating that has become endemic in American business: when things get tough, throw as many employees as possible under the bus, and use that to maintain or even increase the pay of the top echelon.
Read more...By Abigail Field, a lawyer and writer. Cross posted from Reality Check
Showalter pushes the ‘it’s not the mod terms, it’s the bad borrower’ idea with far more than just a “Living Large” headline. He invents two couples, pitched as archetypes of good and evil, probably hoping to copy the policy-killing success of Harry and Louise. But this invocation of the irresponsible borrower myth is particularly egregious–both borrowers are trying to be responsible in the face of insolvency.
Read more...As we’ve detailed in numerous posts, the performance of SEC enforcement chief Robert Khuzami has been abysmal. It was bad enough that the SEC was weak before the crisis. But the fact that the agency hasn’t upped its game in the wake of the biggest financial markets debacle in history is a colossal fail. And as we’ve pointed out, there’s good reason Khuzami has engaged in (at best) entering into settlements with banks that judge Jed Rakoff described as mere “cost of doing business” level punishments. Any serious pursuit into the conduct at the heart of the crisis would have implicated him. He was General Counsel for the Americas for Deutsche Bank, and its senior trader Greg Lippmann was patient zero of toxic CDOs, so Khuzami was directly responsible for the failure to rein him in (specifically, note that Khuzami sued Goldman over one of 27 Abacus CDOs but did not sue Deutsche over a similar Deutsche Bank CDO program called Start).
The latest revelation makes it clear that the new head of the SEC needs to replace Khuzami.
Read more...American readers may tell themselves that the failures and stresses of European banks are Europe’s problem. That’s a simplistic view. Major European banks are significant lenders in the US, particularly to corporations. And European banks also fed heavily at the trough of US rescue facilities, as did the bank in case study, Dexia.
Dexia is a classic example of a not very sophisticated bank deciding to get into the big leagues and coming to ruin.
Read more...By Abigail Field, an attorney and writer. Cross posted from Reality Check
Friday HousingWire ran a six-and-a-half page big bank/mortgage servicer propaganda piece called “Living Large“, by Tom Showalter. The article, subtitled “A person’s lifestyle plays into whether they will pay their mortgage after a loan modification”, purports to explain why people default on loan modifications. Instead, it spins a bank-exonerating morality play not justified by the data supposedly being interpreted.
Read more...Given that the Obama Administration appears to think that missing-in-action Attorney General Eric Holder has been doing a fine job, it probably isn’t surprising to see the SEC’s head of enforcement, Robert Khuzami, included on a short list of names rumored to be under consideration to head of the agency.
But if the object is to prove that regulators can’t regulate and it’s too hard to enforce securities laws, then Khuzami’s your man.
Read more...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.
Read more...By Lynn Parramore, a senior editor at Alternet. Cross posted from Alternet
A gang of brazen CEOs has joined forces to promote economically disastrous and socially irresponsible austerity policies. Many of those same CEOs were bailed out by the American taxpayer after a Wall Street-driven financial crash. Instead of a thank-you, they are showing their appreciation in the form of a coordinated effort to rob Americans of hard-earned retirements, decent medical care and relief for the poorest.
Read more...ow that student loans are undeniably in bubble territory, the officialdom is starting to wake up and take notice.
Read more...Yves here. It was very telling, and disappointing, to find out that the Governor of the Bank of England in waiting, Mark Carney, has been critical of the ideas of Andrew Haldane, the executive director of financial stability of the Bank. Haldane has the goods on major banks, and has come up with both colorful and insightful critiques as well as creative solutions. It now becomes clear why George Osborne made this surprising pick: Carney sees nothing wrong with large, universal banks, while the departing Governor, Mervyn King, Haldane, and the head of the soon-to-be-disbanded FSA, Adair Turner, were unified in their desire to cut the mega-banks down to size.
By Marshall Auerback, a portfolio strategist, fellow with the Economists for Peace and Security, and a research associate for the Levy Institute. Cross posted from New Economic Perspectives
As a Canadian, perhaps I should feel a surge of patriotic pride now that Mark Carney has been designated the new head of the Bank of England – quite a step up for the current governor of the Bank of Canada. That said, his recent attack on the Bank of England’s Andy Haldane in a Euromoney interview last month, does give one some cause for concern, particularly as it evinces the usual complacency that most Canadians seem to feel about the basic soundness of their own banking system, which essentially upholds the universal banking model as a viable one.
Read more...Well, given that our current Treasury secretary was forgiven for being a tax cheat (Turbo Timmy never did settle up for his underpaid taxes that were beyond the IRS statute of limitations), there is a certain logic in upping the ante with his replacement. Having a Treasury secretary who is a slam-dunk case for criminal Sarbanes-Oxley violations (see here and here) as well as running a bank where the auditors signaled the worst level of accounting failure short of signaling “going concern” worries is par for the course for the ever-risinng level of corruption among what passes for our elites.
Read more...Most news reports on financial regulatory reform hew to a few storylines: banks pushing back in private and winning on diluting regulatory reform; banks attributing lousy profits to new regulations (with a notable lack of proof of this convenient blame-shifting); bank regulators demonstrating capture, corruption and incompetence (which even though true to a fair degree is played up by industry incumbents to support the notion that regulation is futile).
So it’s refreshing to see a contrasting storyline….
Read more...Like it or not, you in the not too distant future are going to have to submit to personal surveillance to get many types of insurance and certain financial products. And that future is closer than you probably realize.
Read more...We’ve written at some length about the failure of the IRS to go after what look like slam-dunk violations of the rules governing the tax treatment of mortgage-backed securities. Apparently the noise has been made about the failure to pursue REMIC violations, the latest by two law professors in a journal article, has roused the IRS from its official somnolence.
Read more...This admission of guilt by Lorraine Brown of Lender Processing Services subsidiary DocX for wire and mail fraud on the federal level and fraudulent and forged document filings in Missouri now allows the Obama Administration to claim it has sent another “executive” to jail.
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