The public keeps losing and losing and losing to big finance because financiers have made an art form of using complexity, opacity, and leverage to cover their tracks.
The last example comes in an anodyne-seeming article in the Financial Times about collateralized loan obligations, or CLOs.
Read more...By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Dexia SA, the Franco-Belgian mega-bank that collapsed and was bailed out in 2008 and that re-collapsed in early October, is a big deal in Belgium where it employs 10,000 people and has over 21 million bank accounts. Its assets of $715 billion dwarf Belgium’s $395 billion economy.
Read more...Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives
Sixty Minutes’ December 11, 2011 interview of President Obama included a claim by Obama that, unfortunately, did not lead the interviewer to ask the obvious, essential follow-up questions.
I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn’t illegal.
Obama did not explain what Wall Street behavior he found least ethical or what unethical Wall Street actions he believed was not illegal. It would have done the world (and Obama) a great service had he been asked these questions. He would not have given a coherent answer because his thinking on these issues has never been coherent. If he had to explain his position he, and the public, would recognize it was indefensible.
I offer the following scale of unethical banker behavior related to fraudulent mortgages and mortgage paper (principally collateralized debt obligations (CDOs)) that is illegal and deserved punishment. I write to prompt the rigorous analytical discussion that is essential to expose and end Obama and Bush’s “Presidential Amnesty for Contributors” (PAC) doctrine.
Read more...Yves here. One of our ongoing frustrations at NC is when the media and blogosphere get up in arms about what we think are secondary issues.
We’ve been loath to comment on a Thomson Reuters article that claimed that rehypothecation of assets in customer accounts was the reason MF Global customer funds went missing. The reason we’ve stayed away from this debate is that the article, despite its length, did not provide any substantiation for its claim. While it did contend that US customer accounts were set up so as to allow assets to be rehypothecated using far more permissive UK rules, and described how rehypothecation could be abused, it did not provide any proof that this was what took place at MF Global. Note that this does NOT mean we are saying that rehypothecation did not play a role, merely that the article was speculative.
The bombshell testimony of CME chief Terry Duffy yesterday, that a CME auditor heard an MF Global employee say that “Mr Corzine was aware of the loans being made from segregated [customer] accounts,” suggests that some of the money went missing via much more straightforward means, namely, taking it and hoping to be able to give it back if the firm survived.
But there is plenty of reason to be worried about rehypothecation.
Read more...The wisdom of Judge Rakoff’s tough and controversial decisions taking issue with the decades-long SEC practice of entering into settlements in which companies admit to no wrongdoing is becoming apparent. This is the essence of Rakoff’s beef, as represented in his latest ruling on this topic:
Read more...By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
For some time now I have been pointing out poor economic policy implementations within the European economy and how those policies are likely to effect the real economies of European nations. As I re-stated on Monday, my major concern with the current thinking from European economic leaders is their misguided belief that implementing austerity before credit write-downs/offs is a credible policy for a highly indebted, non-export competitive nation with a non-deflatable currency.
Read more...When I worked for Sumitomo Bank, I needed to buy a pricey book that catalogued the equipment in cotton spinning mills for a client (we’d been engaged to help him acquire a manufacturer, and he was interested only in certain types of machinery).
I sent one of the guys in my department to get the expense approved by the General Affairs department (no approval, no reimbursement). For convenience, we’ll call the person I sent A and the General Affairs fellow Mr. Noh.
Read more...We had a conversation with Dylan Ratigan about how banks take more than their fair share. You can listen below or find an overview and transcript here.
Read more...The New York Times (hat tip Mary B) took note of a seamy JP Morgan effort at brand burnishing:
In a gambit to promote its charitable work — and maybe polish its image, which has suffered since the financial collapse in 2008 — JPMorgan Chase is financing and sponsoring the “American Giving Awards,” which will be televised by NBC on Saturday night. The two-hour show, with Bob Costas as host, will profile recipients of Chase donations, will be book-ended by Chase commercials and will regularly remind viewers that the whole event is “presented by Chase.”…/
Read more...
This Real News Network segment was recorded before the supposed “this time we’re really gonna fix it” Eurozone deal was announced today. Nevertheless, it is a useful discussion of the political dynamics that drove the pact.
Read more...Jon Corzine’s evasive testimony before the Senate Agriculture Committee was scripted so as to lay foundations for his defense against customer and possibly shareholder suits and reduce the already very low odds of an indictment.
Although I’ll touch on other interesting elements shortly, the key item from his presentation was one that the New York Times’ Dealbook noted:
Read more...As we’ve discussed repeatedly, bank stress tests have been a confidence building exercise, an effort to talk bank CDS spreads down and bank stock prices up. That was clearly the intent of the first effort by the US Treasury in 2009 and it succeeded so well as a PR exercise that the Eurozone copied it last year, incredibly finding that obviously undercapitalized Eurobanks needed a mere €3.5 billion euros more in equity. Mere months after the release of the results, lenders were being much more stringent and shunning banks who had been given an official clean bill of health.
This pattern has continued. Earlier this year, the EBA said the Eurobanks needed €80 billion in additional capital. We hooted:
Read more...By Andrew Dittmer, who recently finished his PhD in mathematics at Harvard and is currently continuing work on his thesis topic. He also taught mathematics at a local elementary school. Andrew enjoys explaining the recent history of the financial sector to a popular audience.
Simulposted at The Distributist Review
This is the sixth and final installment of an interview series. For the previous parts, see Part 1, Part 2, Part 3, Part 4 and Part 5. Red indicates exact quotes from Hans-Hermann Hoppe’s 2001 book “Democracy: The God That Failed.”
ANDREW: You’ve explained to me how in the libertarian society of the future, everyone will be free and their rights will not be violated. However, many people will be coerced in a noncoercive way, and a lot of people will be effectively slaves in a rights-respecting manner. Some people will be effectively killed in a rights-respecting manner. Why are you dedicating your life to making this society possible?
Read more...Tom Adams, an attorney and former monoline executive, provided considerable input into this post.
There is nothing more useful to people in authority than when a writer with an established brand name does their propagandizing for them.
Harvard Law graduate and Pulitzer Prize winning author James B. Stewart penned a remarkable little piece in the New York Times over the weekend. Titled “Few Avenues for Justice in the Case Against Citi,” it contends that Judge Jed Rakoff’s ruling against a proposed $285 million SEC settlement with Citigroup over a $1 billion CDO (Class V Funding III) that delivered $700 million in losses to investors and $160 million in profits to Citi is misguided. Stewart argues, based on “some reporting,” that the SEC is unlikely to do better in the trial that Rakoff has forced on the agency by nixing the settlement.
We will look at the caliber of Stewart’s “reporting” in due course, since his article reads like dictation from the SEC’s head of enforcement Robert Khuzami (the SEC’s interests are aligned with Citi’s in wanting the settlement to go through). He either did not read or chose to ignore critical information in the underlying complaints, which the Rakoff ruling cites, and he also overlooked relevant cases.
Read more...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.
Like many of you, I had mostly given up on electoral politics. One time I went through a log of Hank Paulson’s phone calls when he was Treasury Secretary, and then Tim Geithner’s phone calls when he was Treasury Secretary. And I realized that both men were talking to essentially the same people, even though they were ostensibly in different parties. When a switch in the party in power does not result in policy changes, there’s little point in electoral politics.
Read more...