Contents

2011

The banksters who crashed the world

 

Darcy Flynn decided to blow the whistle.

According to Flynn, who was responsible for helping to manage the commission's records

 the SEC has been destroying records of preliminary investigations since at least 1993.

2011 The SEC Covering Up Wall Street Crimes

Somewhere along the line, those at the SEC responsible for policing America's banks fell and hit their head on a big pile of Wall Street's money – a blow from which the agency has never recovered. Much has been made over the government's glaring failure to police Wall Street; federal and state prosecutors have yet to put a single senior Wall Street executive behind bars for any of the many well-documented crimes related to the financial crisis.

Then in 2011 Darcy Flynn decided to blow the whistle. According to Flynn, who was responsible for helping to manage the commission's records, the SEC has been destroying records of preliminary investigations since at least 1993 

The list of institutions that received the most money from the Federal Reservecan be found on page 131 of the GAO Audit and are as follows..

Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all places

View the 266-page GAO audit of the Federal Reserve (July 21st, 2011):

Secret Fed Loans Gave Banks Undisclosed $13B ~ By Bob Ivry, Bradley Keoun and Phil Kuntz 11/27/11
Congress gave banks 13 billion in income

Summary: The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011. The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
$7.77 Trillion was the amount of money the central bank parceled out which was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
Taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”
Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.

JPMorgan Joins Goldman Keeping Italy Debt Risk in Dark 11/15/11

JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS), among the world's biggest traders of credit derivatives, disclosed to shareholders that they have sold protection on more than $5 trillion of debt globally.
Just don't ask them how much of that was issued by Greece, Italy, Ireland, Portugal and Spain, known as the GIIPS. As concerns mount that those countries may not be creditworthy, investors are being kept in the dark about how much risk U.S. banks face from a default. Firms including Goldman Sachs and JPMorgan don't provide a full picture of potential losses and gains in such a scenario, giving only net numbers or excluding some derivatives altogether.
"If you don't have to, generally people don't see the advantage to doing it," said Richard Lindsey, a former director of market regulation at the U.S. Securities and Exchange Commission who worked at Bear Stearns Cos. from 1999 through 2006. "On the other hand, if there were a run on Goldman Sachs tomorrow because the rumor was that they had exposure to Greece, you'd see them produce those numbers."

November 30, 2011

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.

 

JPMorgan to settle fraud charges Jun. 21, 2011

JPMorgan Chase will pay only $153.6 million - a drop in the bucket which means NOTHING TO THEM to settle civil fraud charges over misleading investors into purchasing complex mortgage securities just before the housing market collapsed. As part of the settlement, investors who were harmed will receive all of their money back, the Securities and Exchange Commission announced Tuesday. JPMorgan also agreed to improve the way it reviews and approves mortgage securities transactions. The bank neither admitted nor denied wrongdoing under the settlement. Regulators have been investigating a number of major banks and more charges are expected. The SEC also charged Edward Steffelin, who headed the team at an investment firm involved in the selection of mortgage securities. The SEC said in a lawsuit filed in federal court in Manhattan that JPMorgan allowed the Magnetar Capital hedge fund to improperly choose assets for a big mortgage securities deal. JPMorgan failed to disclose to investors that Magnetar played a big role in choosing the securities and stood to benefit if they defaulted, the SEC said.

9/2011 The Quarterly report from the Office Of the Currency Comptroller 

The top 4 banks in the U.S. now account for a massively disproportionate amount of the derivative risk in the financial system.
The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure.
Specifically, of the $250 trillion in gross national amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion).
As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that's your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1 as they have to risk ever more in the derivatives market to generate that incremental penny of return. [SNIP]

  • How the Bankers Plundered Great American Newspapers.
    http://www.nytimes.com/2011/06/20/business/media/20carr.html?_r=1
    Analyst Jieun Choi, exposed JPMorgan Chase, but Citibank and Bank of America took part.
    "There is wide speculation that [Tribune] might have so much debt that all of its assets aren't gonna cover the debt in case of (knock-knock) you know what," she wrote to a colleague, in a not very veiled reference to bankruptcy. "Well that's what we are saying, too. But we're doing this 'cause it's enough to cover our bank debt. So, lesson learned from this deal: our (here I mean JPM's) business strategy for TRB but probably not only limited to TRB is 'hit and run.' " She then went on to explain just how far a bank will go to "suck $$$ out of the (dying or dead?) client's pocket" in terms that are too graphic to be repeated here or most anywhere else.
    Mr. O'Shea said in a phone call that he "was stunned by how this small group of powerful bankers, all of whom seemed to know each other, lined up to get Mr. Zell's business. Like him, they didn't know much about the news business, but they were basically doing billion dollar loans with a wink and nod."
  • 150 Billion Tax Shell Game, More than 150 U.S. companies, including Coca Cola and Intel
  • Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?

 

2012 

 

2012

ETHICS? NO NO NO

Goldman Sachs

2012 Robert Pickel, chief executive of the International Swaps and Derivatives Association
While the stock market is cluster fucked around centralized exchanges that mainly trade equities of domestic firms, the swaps market is made up of thousands of individual contracts negotiated between international companies and banks. Yet the $648 trillion market has no international regulator. Swaps can be used by companies to hedge risks or make bets associated with fluctuating values like the cost of fuel or the possibility of a company defaulting on its bonds. In the fall of 2009, world leaders agreed to make swaps safer and more transparent. The Group of 20 leaders got together in Pittsburgh, reflected on how well they had contained the financial crisis and vowed to "not allow a return to banking as usual. Long-awaited international rules to tighten the oversight of complex derivatives likely won't be in place by year-end because regulators are squabbling about the details. The self-imposed deadline is widely expected to come and go with no agreement and no firm target date for completing an overhaul of oversight of the swaps market.

Goldman Sachs top staff received £2.7m pay deal on average in 2012

£2m: average pay award for JP Morgan's top staff in 2012 revealed​
Fresh evidence of the pay deals on offer in the City has emerged, with the biggest US bank, JPMorgan Chase & Co, revealing it gave more than 100 of its top staff in London an average of £2m each in 2012. The disclosure comes after Goldman Sachs said its high flyers received £2.7m on average – up 50% on the year before – adding to anger about bankers' bonuses. The banks are required to provide the information about their operations in the UK to comply with an EU rule introduced after the 2008 banking crisis. Banks must give details of the pay of "code staff", those deemed to be taking and managing risk for their organisations. The details of the pay awards come as new rules from Brussels come into force to restrict top bankers' bonuses to one times their salary – or twice, with the approval of shareholders. Sharon Bowles, the MEP who chairs the European parliament's economic and monetary affairs committee, said the move was intended to change the culture of banking."The bankers' bonus cap is part of building a much-needed culture change, putting an end to the sort of short-termism and excessive risk-taking that led to the financial crisis," she said.  The latest information from JP Morgan – filed just as 2013 was ending, to meet the deadline – shows it had 126 code staff in 2012 who received £41m in "fixed remuneration", such as salaries, and another £222m in "variable remuneration", such as bonuses, half of which was paid in shares that have to be held for two years. The payments were down on the £2.2m average from 2011 . They were made after the bank reported record net income of $21bn for 2012, despite the losses caused by the so-called London Whale trading scandal, for which the bank has faced action from regulators on both sides of the Atlantic. It has paid fines totalling $920m (£555m) to regulators in the US and the Financial Conduct Authority in the UK as a result of the affair, which the bank's boss, Jamie Dimon, originally dismissed as a tempest in a teapot.

 

2013

THEY LIED TO PASS THE BAILOUT
Today what few remember about the bailouts is that we had to approve them. It wasn't like Paulson could just go out and unilaterally commit trillions of public dollars to rescue Goldman Sachs and Citigroup from their own stupidity and bad management (although the government ended up doing just that, later on). Much as with a declaration of war, a similarly extreme and expensive commitment of public resources, Paulson needed at least a film of congressional approval. And much like the Iraq War resolution, which was only secured after George W. Bush ludicrously warned that Saddam was planning to send drones to spray poison over New York City, the bailouts were pushed through Congress with a series of threats and promises that ranged from the merely ridiculous to the outright deceptive. At one meeting to discuss the original bailout bill – at 11 a.m. on September 18th, 2008 – Paulson actually told members of Congress that $5.5 trillion in wealth would disappear by 2 p.m. that day unless the government took immediate action, and that the world economy would collapse "within 24 hours."
To be fair, Paulson started out by trying to tell the truth in his own ham-headed, narcissistic way. His first TARP proposal was a three-page absurdity pulled straight from a Beavis and Butt-Head episode – it was basically Paulson saying, "Can you, like, give me some money?" Sen. Sherrod Brown, a Democrat from Ohio, remembers a call with Paulson and Federal Reserve chairman Ben Bernanke. "We need $700 billion," they told Brown, "and we need it in three days." What's more, the plan stipulated, Paulson could spend the money however he pleased, without review "by any court of law or any administrative agency." [snip]
http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104

1/4/2013 Secrets and Lies of the Bailout By Matt Taibbi

The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come. It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you'd think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we've been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right? Wrong.
It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyper concentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.
- How Wall Street Killed Financial Reform
But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue. Money wasn't the only thing the government gave Wall Street – it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. "It is," says former bailout Inspector General Neil Barofsky, "the ultimate bait-and-switch."
The bailout deceptions came early, late and in between. There were lies told in the first moments of their inception, and others still being told four years later. The lies, in fact, were the most important mechanisms of the bailout. The only reason investors haven't run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed. Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it.

2013 David Stockman's piece in Sunday's New York Times:

Basically we could have allowed JP Morgan to fail without any problems but they controlled the Fed so they made sure they were bailed out. Here is a great 5 minute video where David Stockman is interviewed. It provides the historical backdrop of Ronald Reagan and the "deficits don’t matter" Republican ideology. 

 

Fed Seen Paying Banks $77 Billion By Mark Thornton Monday, April 15th, 2013

Interest payments to banks (for money held on account wit the Fed) could rise from $1 billion in 2012 to $77 billion in 2016. Link to Bloomberg article. "Essentially the Fed paid the banks $4 billion last year, which is about $12 per American," David Howden, a professor of economics at Saint Louis University’s campus in Madrid, Spain, said in an e-mail. Howden analyzed interest on reserve payments so far for the Ludwig von Mises Institute, named for an Austrian free-market economist and philosopher. 

"If your bank called you up and said you have a new service fee of $12 because they screwed up in the crisis, you’d be livid, but that is basically what they are doing and no one knows about it." William C. Dudley, president of the New York Fed, has said interest payments on excess reserves are "not a subsidy to the banks."

​9/25/13 Bad bank of the day, RBS edition By Felix Salmon 

[... the behavior of RBS, one of the largest banks in the world, after the financial crisis, and after it was effectively nationalized by the UK government.]

There are broader lessons here, too, for anybody thinking about splitting troubled banks up into a good-bank / bad-bank structure. The problem with bad banks, which inherit troubled assets and try to wind them down with the minimum of losses, is that they can’t make money from lifetime relationships: their lifetime is by its nature highly limited. And so they have every incentive to treat their borrowers very badly, even when, as in this case, the bank is state-owned.

 

10/23/13 Bank of America bought Countywide knowing it had problems and put millions aside if needed.

Now Bank of America's Countrywide found guilty of mortgage fraud BoA liable for up to $848m in damages after Countrywide found guilty of selling bad loans to Fannie Mae and Freddie Mac. What’s the real cost of a financial crisis? Apparently, it depends on who’s paying.  If you’re Jamie Dimon, the CEO of JP Morgan Chase, or Brian Moynihan, the CEO of Bank of America, it’s a price your $2tn bank can easily afford to make trouble go away.  If you’re a homeowner, it’s a price that has rendered your past five years a struggle of financial anxiety. If you’re an American, it’s a price that has resulted in a recession and recovery characterized by historically high poverty – with 42 million Americans on food.

 

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