Category Archives: Regulations and regulators

Bailout Ingrate Bank of America to Impose Monthly Fees on Many “Basic” Checking Account Customers

Of all the big US banks that managed to survive the global financial crisis, Bank of America and Citigroup were the two widely recognized to be at risk of failure in late 2008-early 2009. Sheila Bair, then head of the FDIC, really wanted to replace Citi’s CEO, Vikram Pandit, but settled for forcing the bank to do some pretty serious downsizing and streamlining. By contrast, Bank of America has not only been spared this sort of treatment (save being told it can’t pay dividends until its balance sheet is stronger) but it’s also the biggest beneficiary of the most recent “help the banks” full court press, namely, the mortgage settlement.

So how does Bank of America propose to shore up its equity base? Now that bank stocks have traded up smartly, it might be able to unload some more operations (it did a bit of that when it stock was under stress). But bankers prefer to run behemoths because executive pay is highly correlated with total asset size. And that means it’s a given that BofA has ruled out another way to improve its earnings: cutting manager and executive pay, as the Japanese banks did in their bubble aftermath.

Nah, the path of least resistance is to charge customers more.

Satyajit Das: Pravda The Economist’s Take on Financial Innovation

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 the old Soviet Union, Pravda, the official news agency, set the standard for “truth” in reporting. Discriminating readers needed to be adroit in sifting the words to discern the facts that lay beneath. Readers of The Economist’s “Special Report on Financial Innovation” (published on 23 February 2012) would do well to equip themselves with similar skills in disambiguation.

Brace Yourself for Election-Driven Enforcement Theater: Token Roughing Up of Crisis Bad Banksters, While Corzine Gets a Free Pass

It’s bad enough that we are being subjected to relentless propaganda about how housing is just about to turn the corner and the state-Federal mortgage settlement is such a great deal for homeowners. In fact, as we’ve stressed, and bond investors such as Pimco have reiterated, the deal is above all a back door bailout of the banks.

But to add insult to injury, the chump public will be given ~~bread and circuses~~ enforcement theater to distract it from the fact that the banks are getting a sweetheart deal.

Matt Stoller: Wall Street Fixer Rodge Cohen – Big Banks’ Key to American Global Dominance

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. Cross posted from New Deal 2.0.

Sometimes finance executives let slip the way they really feel: that they hold the world in the palm of their hands.

It’s not often that the people in charge admit what is really going on: a global game for political dominance.

Abigail Field: Insider Says Promontory’s OCC Foreclosure Reviews for Wells are Frauds. Brought to You by HUD Sec. Donovan

By Abigail Caplovitz Field, a freelance writer and attorney who blogs at Reality Check

U.S. Housing Secretary Shaun Donovan has embarrassed himself yet again. This time, though, he’s gone in for total humiliation. See, he praised the bank-run Office of the Comptroller of the Currency’s (OCC) foreclosure reviews as an important part of the social justice delivered by the mortgage “settlement“. But thanks to an insider working on an OCC review, we know that process is a sham. Worse, the insider’s story shows that enforcement of the settlement is likely to be similar, which is to say, meaningless. Doesn’t matter how pretty the new servicing standards are if the bankers don’t have to follow them.

Let’s start with Donovan’s sales pitch for the OCC reviews:

Fannie Putting More Dubious New Loans Back to BofA, So BofA Will Stick Them to Freddie Instead

Bloomberg has an article up “BofA Halts Routing New Mortgages to Fannie Mae,” doesn’t put the key issue, which is Bank of America’s continuing shoddy mortgage origination practices, in a sufficiently sharp spotlight.

The piece starts out in a direct-seeming manner:

Occupy the SEC Discusses Volcker Rule on RT

It’s always a pleasant surprise to see a TV program have a long form discussion on a fairly technical topic. Readers should enjoy the RT interview of Caitlin Kline and Alexis Goldstein of Occupy the SEC on its Volcker Rule comments. They discussed the major areas they were concerned with and some loopholes in the draft regulations.

Tom Deutsch of American Securitization Forum Finally Gets His Comeuppance: Pimco and Likely Other Investors Quit

Bloomberg reported a few weeks ago of a rift in the group that supposedly represents the mortgage securitization industry, the American Securitization Forum. We say “supposedly” because the interests of its two main types of members, the sell side, meaning the parties that put together deals, and the buy side, meaning investors, are now directly opposed.

That rift has now escalated to what looks like a fatal schism, as bond king Pimco has quit the ASF over the refusal of the ASF to send a letter voicing investors’ ~~objection to~~ concerns about the pending mortgage settlement. We are told by other investors that Pimco’s departure is likely to herald a wholesale exodus by investors who have long felt their views are not taken seriously by the ASF.

Politico: Schneiderman Caved to Administration Pressure on Mortgage Settlement, Did Not Get Tighter Release for Abandoning Opposition

While this blog has repeatedly pointed out that Tom Miller, the Iowa attorney general and leader of attorneys general in the settlement negotiations, is not the most credible source, the flip side is that the description of the release in the Administration’s own ~~propaganda~~ website strongly suggests that the release of bank liability is broad, rather than narrow, as deal cheerleaders claimed.

If you take this section of an article at Politico, “HUD boss jumps into mortgage melee,” (hat tip reader Deontos) at face value, you can only draw damning conclusions about New York attorney general Eric Schneiderman’s role:

Neil Barofsky on Taxpayer Subsidies to the Mortgage Settlement

Neil Barofsky, former Special Inspector General of the TARP, weighs in on the mortgage settlement at Bloomberg. One intriguing little aspect of this deal is the degree to which the Administration, particularly HUD, is frustrated that its PR efforts are landing with a thud. I’ve been told of HUD efforts to push back against my post, “The Top Twelve Reasons Why You Should Hate the Mortgage Settlement,” as well as an important article by Shahien Nasiripour at the Financial Times on how the administration’s mortgage modification program HAMP would wind up providing taxpayer subsidies to the settlement.

The Bloomberg reporter Erik Schatzker mentions how HUD has disputed the Financial Times reporting and Barofsky explains why the FT got it right.

“Crooks on the Loose? Did Felons Get a Free Pass in the Financial Crisis? “

I have to confess I have yet to do more than sample this video, but I intend to watch it in full as soon as I have a breather. This is a video of a panel discussion at NYU Law School earlier this month at which former prosecutors Neil Barofsky and Eliot Spitzer took on party-line-defending Lanny Breuer of the Department of Justice, and to a lesser degree, Mary Jo White, former US attorney who now works on the defense side. Various reports on the discussion indicate that sparks flew at several junctures, so I am confident the NC audience will find it engaging as well as informative.

Can Rep. Bachus and His Money-Crazed Congressional Colleagues Be Stopped from Insider Trading?

By Lynn Parramore. Cross posted from Alternet.

Back in the Gilded Age, venality was the rule in Congress. Bribes were as common as tobacco pipes. Lawmakers fattened their bank accounts through insider deals, with the needs of ordinary people an afterthought. Nelson Aldrich, a powerful Republican who served in the Senate from 1881 to 1911, was that corrupt era’s political poster boy, serving on the Finance Committee and using his position to invest in railroads, sugar, rubber and banking deals that made him rich.

Sound familiar? It should. We’re well on our way to repeating that money-crazed chapter in American history as a growing list of legislators use their office to play the game, “Who Wants to Be a Multi-millionaire?”

Quelle Surprise! Taxpayers Will Be Paying for Part of Mortgage Settlement

The whole purpose of a settlement is that a party pays damages to rid themselves of liability, and the amount they pay (and “pay” can include the cost of reforming their conduct) is less than what they expect to suffer if they were sued and lost the case (otherwise, it would make more sense for them to fight).

But in the topsy-turvy world of cream for the banks, crumbs for the rest of us, we have, in the words of Scott Simon, head of the mortgage business at bond fund manager Pimco, in an interview with MoneyNews, lots of victims paying for banks’ misdeeds: