Category Archives: Banking industry

Mosler/Pilkington: A Credible Eurozone Exit Plan

By Warren Mosler, an investment manager and creator of the mortgage swap and the current Eurofutures swap contract and Philip Pilkington, a journalist and writer based in Dublin, Ireland

The Eurozone has certainly seen better days. The mess – to paraphrase a dodgy Irish politician – is only getting messier.

This is all avoidable, of course, and if the European authorities decided to take action and have the ECB backstop the sovereign debt of the periphery the whole crisis would come to an end. But the European authorities, for a variety of reasons, do not seem to want to do this. And even if they did there would be the issue of austerity: would they continue to force ridiculous austerity programs down the throats of the periphery governments? And if so, then for how long? Leaked documents from within the Troika show the austerity programs to be an abject failure and yet European officials continue to consider them the only game in town. So, we can only conclude at this stage that, given that European officials know that austerity programs do not work, they are pursuing them for political rather than economic reasons.

So, we contend that the periphery governments should have a credible exit strategy on hand and it is to this that we now turn.

Former AIG CEO Suing Treasury and Fed Over AIG Bailout

Hubris knows no bounds. AIG’s former CEO Hank Greenberg, who was a significant shareholder of AIG stock via C.W. Starr (which was basically an executive enrichment vehicle) is suing the Treasury and Fed over its rescue of AIG. He has hired litigation heavyweight David Boies, who famously made Microsoft CEO Bill Gates squirm when he put him on the stand in the Microsoft antitrust case.

While the public might similarly enjoy the spectacle of Timothy Geithner, Hank Paulson, and Ben Bernanke through the wringer, based on the report from Gretchen Morgenson, this case reads like a stretch

Swiss Central Bank Forces MegaBanks UBS and Credit Suisse to Shrink and De-Risk

The Financial Times gives prominent play to a story that I suspect will go largely unnoticed in the US, that of the way that the Switzerland’s bank regulator, the Swiss National Bank, has forced its two biggest banks, UBS and Credit Suisse, to shed risk in a serious way and shrink.

Matt Stoller: Nevada Attorney General Catherine Cortez Masto Cracks Open the Financial Crisis

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller.

Learn the name Catherine Cortez Masto, because she just took a big leap in front of every public servant in the country in terms of restoring faith in government. As Nevada AG, she actually indicted someone for blowing up our housing system. Specifically, she handed down 606 counts of felony or gross misdemeanor indictments on robo-signing against two employees of big bank subcontractor Lender Processing Services.

It’s pretty clear from the indictment that these are mid-level employees, one level up supervisors of fraud rather than top CEOs. And yet, even if this were as far as it goes, it would still be a big deal. These would be the only charges served involving the housing crisis and its link with the structurally corrupt securitization chain so far. By itself, these indictments signify that the fraudulent foreclosure game is over for the big mortgage servicers in Nevada, which is the center of the foreclosure epidemic. It says the rule of law matters, in at least one corner of the country.

Michael Olenick: Don’t Buy Mortgage Industry Hype on Mortgage Modifications

By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha)

The Mortgage Bankers Association (MBA) boasts that its members have modified over five million mortgages over the past few years. As a data analyst focused on patterns of foreclosure fraud, I’ve analyzed tens of millions of pieces of information. I was willing to take the MBA’s claims at face value but, years ago, came to the conclusion that the MBA and their members have a severe credibility gap.

Remember, the reason for advocating mods is that, properly structured, they are a win-win: investors take a lower loss than they would in a foreclosure, the borrower stays in his house, and another real-estate-price-depressing sale is averted.

But this “everyone comes out ahead” is not what I’ve seen. I’ve been able to check modifications, since they are recorded in public records. It quickly became apparent that while theses modifications are, at best, worthless, and more often than not border on an extension of the same predatory practices that resulted in the original mortgages.

These modifications are to mortgages as vultures are to predators, another opportunity to take one last bite out of people trying to keep their homes. Banks are “modifying” lots of loans, but to terms even more favorable to banks.

Mark Ames: Austerity & Fascism In Greece – The Real 1% Doctrine

By Mark Ames, the author of Going Postal: Rage, Murder and Rebellion from Reagan’s Workplaces to Clinton’s Columbine. Cross posted from The eXiled

See the guy in the photo there, dangling an ax from his left hand? That’s Greece’s new “Minister of Infrastructure, Transport and Networks” Makis Voridis captured back in the 1980s, when he led a fascist student group called “Student Alternative” at the University of Athens law school. It’s 1985, and Minister Voridis, dressed like some Kajagoogoo Nazi, is caught on camera patrolling the campus with his fellow fascists, hunting for suspected leftist students to bash. Voridis was booted out of law school that year, and sued by Greece’s National Association of Students for taking part in violent attacks on non-fascist law students.

Nevada Attorney General Masto Files 606 Count Criminal Indictment Against Two Title Officers (Updated: Lender Processing Services Employees)

The Nevada attorney general Catherine Cortez Masto has just filed a 606 count indictment against two title officers in a single county, Clark County, for supervising the filing of tens of thousands of fraudulent documents in a robo-signing scheme.

On the one hand, this indictment is not as gratifying, say, as busting Angelo Mozilo. On the other hand, if low level supervisors in bank frauds face the risk of serving time, you are going to find a ton fewer people willing to take that job. Those higher up on the food chain might also have to be a lot more careful and pay the people involved more money, which in turn undermines the basic logic of these abuses, which is cost savings.

Satyajit Das: In the Matter of Lehman Brothers – Part 2: Well Structured Messes

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

In this two part paper, the issues regarding settlement of complex derivatives arrangement revealed by the failure of Lehman Brothers is outlined. Many of the failures affect new regulatory proposals such as the rapid resolution regimes under consideration. The First Part dealt with terminating and settling derivative contracts. The Second Part deals with effects of the bankruptcy on structured products and collateral.

On the Dubious Defenses of the Netting of $4 Trillion of US Bank CDS to the Eurozone

One of the reasons I’m not a big fan of Twitter is that I don’t see it as being useful save for communicating short updates (Raid on Zuccotti Park! Come help fast!) or a terse assessment with a tiny URL. Even more can be misconstrued (or can pretend to be misconstrued by a nay-sayer) than in longer forms of communication.

Nevertheless, I think we can safely make some conclusions re the following tweet from Economics of Contempt on the over $4 trillion notional of US bank exposure to Eurozone risks. A Reuters story recounts how the Financial Stability Oversight Council is trying to get a grip on the positions. Even the bank lobbying group the International Institute of Finance is cautious:

“As such, the potential for contagion to the U.S. financial system is not small,” the Institute of International Finance, the lobby group for major international banks, said last week.

Nevertheless, there is not much room for misinterpretation of this exchange:

Satyajit Das: In the Matter of Lehman Brothers – Part 1: Breaking Up is Hard To Do

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

In this two part paper, the issues regarding settlement of complex derivatives arrangement revealed by the failure of Lehman Brothers is outlined. Many of the failures affect new regulatory proposals such as the rapid resolution regimes under consideration. The First Part deals with terminating and settling derivative contracts.

A generation was once measured by where they were when an American President was assassinated in Dallas. A newer financial generation measure themselves by where they were when Lehman Brothers filed for bankruptcy protection on 15 September 2008.

The controversial failure of Lehman has become a pivotal point in ideological debates about markets, finance and the role of government. At a more mundane level, Lehman’s bankruptcy points to deeper problems in the “plumbing” of the financial system. The policy debate so far has largely ignored these unfashionable issues.

Banks Jacking Up Fees to Retail Customers

It wasn’t hard to foresee that banks were going to start hitting retail customers with more fees. As we wrote when Bank of America tried introducing a $5 per month fee for debit card use:

Consumers should brace themselves for a brave new world of lots of bank fees. Bank of America is no doubt hoping that it will be a price leader and the other major banks will copy its move. Now that banks can borrow at pretty close to zero, cheap sources of funding, like interest-free checking accounts and float aren’t as valuable as they once were. When I lived in Australia, it was pretty much impossible to have a relationship with a bank and pay less than $25 a month for it. The US banks are moving in that direction.

The New York Times tells us that banks are in the process of imposing a host of new charges.

David Apgar: Between the Whirlpool of Riots and the Rocks of Default – Market-Based Debt Relief after Greece

By David Apgar, who just launched GoalScreen, a web app still in trials that lets investors test alternative price drivers of specific securities (free though the end of the year at www.goalscreen.com. He has been a manager at the Corporate Executive Board, McKinsey, the Office of the Comptroller of the Currency, and Lehman, and writes at www.goalscreen.com/blog.

So now we can all breathe easily again. After all, the bond markets have rid the world of a dynasty of prevaricating Greek prime ministers and a modern-day Il Duce reincarnated as a trousers-around-the-ankles buffoon. There is just one fly in the ointment. Investors may start serially mugging healthy countries. Sovereign borrowers have a defense, fortunately, if only they dare use it.