Show Bernanke and Geithner the Door

What has the financial crisis taught us? Among other things, we should show Bernanke and Geithner, enablers from the previous administration, the door. Paul Volcker is right to ask for a return to Glass-Steagall. It worked until it was eroded over several decades by bank lobbying. Banking and speculative trading activities--even when done for "customers"--don't mix.

"Financial innovation" must be limited, since much of it in recent years was the financial equivalent of card cheating. Banks should not be allowed to sponsor hedge funds and private equity funds, and furthermore, they should not be allowed to lend to them through prime brokerage units or other means. Financial institutions must be allowed to fail. Hedge funds require regulation. Malfeasance should be investigated and prosecuted. Credit derivatives should be traded and cleared through exchanges and made transparent. Compensation and financial incentives at banks must change. Bank employees cannot continue to reap huge rewards at no personal risk while shoving risk into the global financial system.

President Obama promised us change, and he should seize this opportunity to demand sweeping financial reform.

http://www.huffingtonpost.com/janet-tavakoli/show-bernanke-and-geithne_b_432897.html

Bernanke Senate Support Roll Call

A recent Senate poll of Bernanke support indicates the following (partial) results: of 34 senators polled, 5 (all democrats) are still undecided, 17 support Bernanke (13 Democrats, 4 Republicans), while 12 support the Pink Slip (7 Republicans, 5 Democrats/Indeps). 41 are needed for Bernanke to take a hike.

A full breakdown is provided on the following table:

http://tinyurl.com/yak222p

Taxing Wall Street Down to Size

Make no mistake. The banking system has become an agent of destruction for the gross domestic product and of impoverishment for the middle class. To be sure, it was lured into these unsavory missions by a truly insane monetary policy under which, most recently, the Federal Reserve purchased $1.5 trillion of longer-dated Treasury bonds and housing agency securities in less than a year. It was an unprecedented exercise in market-rigging with printing-press money, and it gave a sharp boost to the price of bonds and other securities held by banks, permitting them to book huge revenues from trading and bookkeeping gains.

Meanwhile, by fixing short-term interest rates at near zero, the Fed planted its heavy boot squarely in the face of depositors, as it shrank the banks’ cost of production — their interest expense on depositor funds — to the vanishing point.

The resulting ultrasteep yield curve for banks is heralded, by a certain breed of Wall Street tout, as a financial miracle cure. Soon, it is claimed, a prodigious upwelling of profitability will repair bank balance sheets and bury toxic waste from the last bubble’s collapse. But will it?

The baleful reality is that the big banks, the freakish offspring of the Fed’s easy money, are dangerous institutions, deeply embedded in a bull market culture of entitlement and greed. This is why the Obama tax is welcome: its underlying policy message is that big banking must get smaller because it does too little that is useful, productive or efficient.

http://tinyurl.com/yezfxb3

Goldman Sachs -the center of gravity-must be broken up!

http://tinyurl.com/ybxryca

AIG Took Four Tries on Filing as Fed Asked to Withhold Data

Jan. 21 (Bloomberg) -- American International Group Inc. submitted four rounds of regulatory filings in six months, with more than 1,000 redactions, as the Federal Reserve Bank of New York pressed the insurer to withhold data about bailout payments to banks.

The insurer made an initial filing on Dec. 2, 2008, about Maiden Lane III, the taxpayer-funded vehicle that bought assets from AIG’s trading partners. After the Securities and Exchange Commission asked for more information, AIG amended December filings three times. The last set of amendments, in May 2009, included more than 400 redactions, and the SEC granted the company permission to withhold the omitted data until 2018.

According to e-mails released this month, AIG was asked to limit what the public knew about the Maiden Lane transactions. The payments have been called a "backdoor bailout" by lawmakers because banks, including Goldman Sachs Group Inc. and Societe Generale SA, were reimbursed at 100 cents on the dollar for mortgage-linked securities that had declined in value…

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRexIMpLtIL4&pos=4

What did the Supreme Court just do to our democracy?

http://freespeechforpeople.org/

Fair Game
Resetting the Moral Compass

And some may wonder why the proposal’s spotlight is so trained on proprietary trading and hedge fund operations, since these were not where banks experienced their greatest losses in the crisis. The biggest money pits were a result of securities underwriting, especially in the mortgage arena. When the mortgage spree ground to a halt, firms like Lehman Brothers and Merrill Lynch were stuck with toxic securities they had underwritten but had been unable to persuade customers to buy.

Moreover, the entire financial system over the last two decades became linked in a potentially viral network of derivatives contracts that won’t go away simply because traders decamp to a different neighborhood than depositors.

Still, singling out proprietary trading, hedge funds and private equity units does make sense for a couple of reasons. First, the proposal moves us closer to resolving pieces of the “moral hazard” issue, that uncomfortable state of affairs that occurs when companies don’t worry about bet-the-ranch risks because they know that someone (usually the taxpayer) is waiting in the wings to save them if they blow it (as they so often do).

So reducing the number of ways in which banks can engage in morally hazardous activities is a positive move.

THERE is another morality problem that the Volcker plan would address: insider trading. Proprietary trading, hedge funds and private equity units are three lines of business where Wall Street firms can profit mightily on inside information and data gleaned from their customer relationships elsewhere in the company.

As financial firms have become more vertically integrated in the past 10 years, adding to their stable of businesses, the potential for profiting on nonpublic information has increased exponentially. Meaningful information can emerge from a client’s securities holdings, from pending transactions the client wants to make or from a firm’s knowledge of the customer’s financial standing.

More troubling, said Christopher Whalen, editor of the Institutional Risk Analyst, is that the Volcker Rule would do nothing to solve the most disturbing problem to have emerged in the crisis: how Wall Street created flotillas of toxic securities and sold them to investors.

“We are tilting at stereotypes of what we think is the problem,” Mr. Whalen said. “But the bottom line is, we have prostituted our standards of securities underwriting and sales of securities to investors. When the Street starts justifying stuffing customers and saying, ‘It’s O.K., caveat emptor,’ that requires a public policy response. We need to say to the Street, ‘In all the things you do, especially if it is sold to a pension fund, you have a duty of care to every party in the transaction.’”

http://www.nytimes.com/2010/01/24/business/24gret.html

You should be very scared:

Greed, Be Thou My God
How Wall Street Destroyed Health Care

By PAUL CRAIG ROBERTS
It turns one’s stomach to watch libertarians and “free market economists” defend bureaucratized impersonal health care as “free market medicine.” There is no free market present. Corporate lobbies and campaign contributions use government power to create bureaucratized monopolies that destroy medicine for the practitioner and the patient. Wall Street pushes for greater shareholder earnings, which are achieved by denying care.

My doctor has more people employed doing paperwork than he does delivering health care.

While Medicare payments for in-office services to private doctors, including those for blood work and x-ray units, were drastically cut, payments to outside corporate facilities for the same services were increased. It is obvious what is afoot. Corporate lobbies are using their whores in Congress to shift income from physician offices to corporate labs, corporate medical service providers, and hospitals that are owned by national corporations.

Legislation that cuts payments to private physicians and increases the payments to large corporate entities is intended to destroy private practice and to create in its place corporate bureaucracies in which doctors are wage slaves. The physician’s income is diverted to shareholders, CEO bonuses, and Wall Street. Health care is being replaced with health business.

The fate of the health care bill demonstrates the power of private lobbies. What was to be health care for Americans was instantly transformed into 30 million new patients for the private health insurance industry. The “solution” to tens of millions of Americans being unable to afford health care is a law that requires them to purchase a private health care policy or be annually fined. As most of these uninsured Americans cannot afford to purchase a private policy, the plan is for the federal government to use taxpayers’ money to subsidize their purchase of a policy from private companies.

In other words, tax money is being diverted to the pockets of private businesses. This is par for the course in “capitalist” America.

In today’s America, Karl Marx’s criticisms of capitalism are understated. Wherever one looks, the scene is one of the government using taxpayers’ money to enrich private interests. Taxes are collected from people who can barely make it, and the revenues are transferred to multi-millionaires and billionaires. The federal government piles debt on the backs of heavily-burdened and dispossessed Americans in order that investment banksters can pay annual bonuses that exceed the lifetime earnings of most Americans.

http://counterpunch.org/roberts01222010.html

Can learn a great deal from this:

GMO Stop the Presses! Deep Thoughts From Jeremy Grantham

Everyone in Congress, and anywhere else for that matter, knows prop
desk trading (banks trading their own capital like a hedge fund) is a
conflict of interest. They may or may not think it important or that
it caused this or that problem, but they know it’s a real conflict.
Congressmen, since when wasn’t conflict of interest and poor ethical
standards reason enough to change the law? But since we bring it up,
of course prop trading was indeed the rot at the heart of our
financial problems (see last quarter’s Letter). Watching traders take
home their $28 million bonus sent a powerful message to lowly salesmen
and packagers of asset-backed securities, for example, to get out
there and really take some risk. This rot spread to the very top, and
pretty soon chairmen of boards were exhorting CEOs to leverage up and
look more like some much more profitable rival that resembled a hedge
fund rather than an investment bank. Thus encouraged – or intimidated
– some CEOs just kept on dancing right off the cliff. Let’s
learn from our near disaster. Viva Volcker!

http://www.zerohedge.com/article/stop-presses-deep-thoughts-jeremy-grantham?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Protecting Consumers Will Undermine Capitalism???????

Writing the Rules

So the fight is on to see whether consumers will get an agency that looks out only for them. Elizabeth Warren, the Harvard professor who originally came up with the idea of a consumer financial agency, sent a letter on Jan. 20 telling supporters that “the next few weeks will determine whether families will have to play by rules written by the banks and for the banks -- rules that let the industry get away with anything.”

The day before, Ralph Nader penned a note to Connecticut’s lame duck Senator Christopher Dodd, who, much to the glee of business, has reportedly been warming up to the ABA’s idea of keeping the consumer protection function under the wraps of the safety and soundness folks.

Nader told Dodd that a decision to drop the agency would “signal to consumers across the land that you, as chair of the Committee on Banking, Housing and Urban Affairs, have lost touch with Main Street interests.” There could be motivation for Dodd to wean himself away from any populist inclinations. He will be needing a job soon, and it’s probably a safe guess that he won’t be pitching for a five-figure gig with some do-good consumer group.

http://www.bloomberg.com/apps/news?pid=20601039&sid=agIuKtMz.dnQ

Don't let them keep collecting their vig....

Fight Back

If they are "too big to fail" let's help them get smaller and make our national banking system healthier...

If you are tired of the Wall Street bankster bailout program at taxpayers expense but feel helpless to do anything about it then keep reading. If record profits for the big six banks (and big bonuses for the executives there) that took your tax dollars makes you wonder exactly who is in charge then read on. If you get upset about the Goldman Sachs executive retirement plan (become US Treasury Sec and cash out lifetime personal portfolio tax free AND help out your old pals on Wall Street) for Wall Street banksters then get ready to fight back.

http://www.321gold.com/editorials/laborde/laborde012610.html

Only now are we beginning to see the true details of what happened in those days and who played pivotal roles in the act that put American taxpayers on the hook to save AIG.

The New York Fed's Real Crimes

Email disclosures by AIG, responding to subpoenas from the House Oversight Committee, have revealed that the New York Federal Reserve requested that information about the AIG bailout be kept secret as if it were connected to national security.U.S. securities regulators originally treated the New York Federal Reserve’s bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security, according to emails obtained by Reuters.

The request to keep the details secret were made by the New York Federal Reserve — a regulator that helped orchestrate the bailout — and by the giant insurer itself, according to the emails.

http://tinyurl.com/y8l7fzr

Long read but worth it....

AIG: Collusion Of Epic Proportions Between Goldman's US Treasury Branch And Goldman Sachs Proper

http://tinyurl.com/y9uhrmn

Flaws plague foreclosure relief program
Latest effort to save homes having only limited impact

Ten months into the government’s third program in two years to stop a record wave of foreclosures, homeowners, housing counselors, consumer advocates and attorneys working with borrowers report that the latest effort is falling far short of its goal. In many cases, lenders are moving to foreclose even after homeowners get approved for loan modification, housing counselors and attorneys say.

Homeowners face numerous hurdles trying to get their mortgage modified. In some cases, applications are rejected with little or no explanation. It’s impossible to independently verify if a homeowner qualifies because the Treasury has not disclosed the eligibility formula used by lenders — a complex set of calculations that housing counselors and consumer attorneys have dubbed “the black box.” Housing attorneys report that some lenders are ignoring the program’s guidelines altogether and moving to foreclose without properly reviewing mortgages for possible modification.

The HAMP guidelines call on lenders to try to modify every mortgage before moving to foreclosure. But that’s not what’s happening, according to a survey of more than 100 housing attorneys by the National Association of Consumer Advocates.

“Ninety-five percent (of the attorneys surveyed) said that a (mortgage) servicer had attempted to proceed with a foreclosure sale without a proper HAMP review,” said Ellen Taverna, a NACA associate who conducted the survey. Nearly half the housing attorneys said they have represented 10 or more households who had faced a foreclosure without a proper loan review; 14 percent said they have represented 50 or more households in that situation.

http://tinyurl.com/ydulfuj

Bank of America Forecloses on Florida Home… Big Deal. (Oops, Wrong House.)

Charlie and Maria Cardoso pleaded with Bank of America to not foreclose on their home in Florida, but the bank said there was nothing that could be done. So, the bank foreclosed on the property, forced out the tenants, stripped the house, and changed the locks.

There was just one small, little, tiny, almost insignificant problem… the Cardosa’s owned the home free and clear. Bank of America had no mortgage on the home. They meant to foreclose on a home down the street… the numbers on a court document were wrong. But they went ahead and did it anyway, even after repeatedly being told by the Charlie and Maria Cardosa that they were wrong and that they had no right to throw out their tenants and take their belongings.

http://mandelman.ml-implode.com/2010/01/bank-of-america-forecloses-on-florida-home%E2%80%A6-big-deal-oops-wrong-house/

Political Risk: The Bernanke Nomination and the Return of American Populism

The 2010 elections promise to be the most contentious and significant since the election of Andrew Jackson in 1828. For those of you who missed that particular episode in American history, Jackson was the first American leader who was actually chosen by popular vote and not selected by the nation's founders or their offspring. And one of the key issues which drove the hero of New Orleans into the presidency was popular anger at the central bank.

The 2010 mid-term elections and the general election in 2012 likewise promise to see the unseating of an entrenched elite and the start of an extended period of political instability in America. Below we discuss why a "yes" vote for Ben Bernanke may doom members of the Senate in both parties who are up for re-election to defeat in November.

His confirmation is being managed by Linda Robertson, the former chief lobbyist of Enron. Chairman Bernanke is toxic measured in any political terms and is perceived as more friendly to Wall Street than Main Street by a 2 to 1 margin.

Chairman Bernanke is responsible both for the economy and the bailouts. He has overseen an economy with 10% unemployment and no credit, with massive bonuses for bankers who were rescued at public expense. The high unemployment was inevitable after the boom years of Alan Greenspan, but Chairman Bernanke was also at the Fed during that period. More, Chairman Bernanke is also on record advocating policies that would suppress employment levels rather than increase them.

In a January 26, 2010 letter obtained by The IRA, Issa claims that Bernanke overruled a recommendation by Fed staff that AIG be allowed to declare bankruptcy "just like Lehman Brothers" and instead authorized the bailout of the crippled insurance giant over the objections of Fed staff in Washington. The Fed appears to be withholding these documents from Congress until after the Senate votes on the Bernanke nomination.

http://tinyurl.com/yfsx26d

Servicing Mortgages (Part 1): Underwater Homeowners, Banks and Social Trust

Because of all these problems, the Obama administration decided to start a program called the federal Home Affordable Modification Program (HAMP) last year. Long story short, we subsidize banks who make adjustments to the amount people pay per month. Obama is doing this do this because of the externality of waves of foreclosures, the threat of abandoned neighborhoods and to “nudge” the servicer of the loan, who have a twisted incentive to get paid through fees as things get worse for investors, to do the right thing.

So what has happened? From Analysis of Mortgage Servicing Performance, more than 70% of the modifications resulted in an increase in the loan balance. Not staying the same, and certainly not decreasing, but piling on more principal for the loan (click to enlarge):

I’ve seen a lot of bad things during this financial crisis, but this is the most disgusting thing I’ve seen so far. At a time when one out of four homeowners are underwater, banks are using a mortgage modification program to pile on more debt on these loans. They do this even though it’s well known there's a correlation between the level of being underwater and default.

http://tinyurl.com/yapjoqo

January 26, 2010: Elizabeth Warren

http://www.thedailyshow.com/watch/tue-january-26-2010/elizabeth-warren

Additional Perspectives On The AIG Fiasco

While Tim Geithner may hope the AIG situation is now dead and buried, it is likely anything but, with the recently launched investigation into disclosure fraud by the SIGTARP, and the relentless efforts by Darrell Issa to metaphorically crucify the tax-challenged treasury secretary currently ongoing.

As these noble pursuits continue, we ask two simple questions:

1) In Yesterday's hearings, it became clear that everyone essentially recused themselves of any oversight over the AIG disclosure issue, including Hank Paulson, with most, even Bernanke, claiming they had no control over the counterparty decision-making process. We ask - then who did? Surely someone at the FRBNY had to pull a trigger at some point. Who is that person? And if it is merely Sarah Dahlgren, is there a formal notification that she had obtained proxy power from Tim Geithner, who yesterday disclosed had recused himself only informally to a very select circle of TurboTax-challenged friends.

2) Why did the Fed not guarantee AIG's assets ahead of the firm's implosion. Surely, the realization, which as everyone trumpets these days, that AIG's failure would have destroyed the world should have been known to at least one person in authority? And as all know, the collateral call toxic spiral commenced only once AIG was formally downgraded by the rating agencies. Well, had the AIG had the formal guarantee of the Federal Reserve, which is implicitly a guarantee by the U.S., then AIG would not have been downgraded in the first place, and no collateral calls would be forthcoming. Of course, Goldman would end up owning CDOs that as Janet Tavakoli points out, and contrary to what the Fed claims, are now worth at best pennies on the dollar. Furthermore, Goldman's AIG CDS would immediately have become worthless, with Goldman unable to sell them in the open market for a profit of billions of dollars, yet the firm would continue extracting collateral as per its prior arrangement with AIG, in essence not impairing Goldman at all. And had AIG not started down the downgrade spiral, then numerous other adverse consequences of the nationalization of the insurance company would not have transpired. While it would not have saved America's financial system, it would have made the descent more manageable. Yet with Goldman having benefited massively from the elimination of a vast swath of competitors, one wonders if the guarantee track may have been considered and subsequently denied, under the wise tutelage of 85 Broad advisors. We suggest Senator Issa and Neil Barofsky focus very closely on any email released as part of the disclosure process that highlight the Fed's reasoning as to why AIG should not receive a guarantee, and what the nature of such reasoning may have been.

http://tinyurl.com/yetxb37

Good deal if you can get it...

Secret Deals Involving No One; AIG Coverup Conspiracy Unravels
Strange Conspiracy Involving No One

* Geithner recused himself although there is no record of it.
* Paulson knows nothing about it and was not in the loop
* Bernanke either does not remember and/or was not involved.

Amazingly this conspiracy involves no one. It is a historic event. Hundred billion dollar bailout decisions just happened. No one made them, no one was responsible for them, and no one was in the loop, yet all those not involved agree the process must be kept secret.

http://tinyurl.com/ygds4md

31 January 2010
Front-Running the Markets And the Sickness Unto Death

From James Rickards, The Frog, The Scorpion, and Goldman Sachs:

"Now consider another example of data mining, not done by retail firms, but by giant investment banks such as Goldman Sachs. These banks have thousands of customers transacting in trillions of dollars in stocks, bonds, commodities and foreign exchange daily. By using systems with anodyne names like SecDB, Goldman not only sees the transaction flows but some of the outright positions and whether they are bullish or bearish. Data mining techniques are just as effective for this market information as they are for Google, Amazon, Wal-Mart and others. It’s not necessary to access individual accounts to be useful. The data can be aggregated so that the bank can look at positions on a portfolio basis without knowing the name of each customer.

How does it continue? Like the bailout of AIG, the stewards of the public trust are choosing to turn a blind eye. The politicians are the beneficiaries of huge campaign contributions. The regulators are overwhelmed, and desirous of Wall Street positions.

http://jessescrossroadscafe.blogspot.com/2010/01/front-running-markets.html

Check To Obama: Lloyd To Get $100 Million Bonus

“This is Lloyd thumbing his nose at Obama,” said a banker at one of Goldman’s rivals.

If indeed the bonus number is correct, this is a slap not only in the face of the president, of Volcker, not to mention the other clowns in the economic advisory circle, but all of America's taxpayers.
http://tinyurl.com/y9uqvmq

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Foreclosures are typically listed for below the market value, which is already much lower than the investor-induced bubble-peak. Each new foreclosure closed sale brings the market values down, which leads the next foreclosure to be listed even lower. There is a HUGH inventory of foreclosures down here.
Don't listen to the other Realtors who have an obvious conflict of interest in trying to pump up the market. If you don't need to buy a house now, wait. Wait until the shadow inventory of foreclosed homes starts to decrease. It will decrease when the unemployment rate comes down, when a regular 3/2 middle class home is priced so that the median income for a family of four ($58,100 in Broward) can afford them