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Big banks were told to make 'collapse' plans

U.S. regulators directed five of the country's biggest banks to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help. Reuters reports that the two-year-old program, which has been largely secret until now, is in addition to the "living wills" the banks crafted to help regulators dismantle them if they actually do fail. According to documents obtained by Reuters, the Federal Reserve and the U.S. Office of the Comptroller of the Currency first directed Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), Goldman Sachs Group Inc. (NYSE: GS), Morgan Stanley (NYSE: MS) and JPMorgan Chase & Co. (NYSE: JPM>) to come up with these "recovery plans" in May 2010<source>

The report said the regulators told the banks to consider drastic efforts to prevent failure in times of distress, including selling off businesses, finding other funding sources if regular borrowing markets shut them out and reducing risk. The plans must be feasible to execute within three to six months, and banks were to "make no assumption of extraordinary support from the public sector," the report said.Spokespeople for the five banks and the Fed declined to comment.
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The banks' chief risk officers, and in the case of Citigroup, Chief Executive Vikram Pandit, received letters in May 2010 

instructing them on what to include in the recovery plans. The requests stemmed from January 2010 crisis management meetings held by regulators. The letters sent to the five banks were nearly identical. Each plan was to address severe financial stress at the firm, as well as "general financial instability." The plans should be capable of being executed ideally within three months, but no longer than six months, the documents said. The plans should "make appropriate assumptions as to the valuations of assets and off-balance sheet positions," the documents said. Recovery plans have been mentioned in public before, but only in passing. In testimony to Congress in July 2010, Fed Governor Daniel Tarullo said the "largest internationally active U.S. banking organizations" were working on recovery plans. The initiative stemmed from work led by the Financial Stability Board, a body that coordinates the work of international financial regulators, he said. In a presentation in March, JPMorgan Chase said it had a recovery plan in place and said it was ordered by regulators. The presentation was organized by Harvard Law School and was closed to the media at the time, but is available online. Goals of the Orderly Liquidation Authority (OLA) PDF

Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs

Wall Street's Bailout Hustle
Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash. On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.  The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years.

 

NO Oversight and Accountability - MORE more tax payer funded bailouts - still too big to fail The difference? Lobbiests.
The legislation is the result of one year's worth of partisan bickering but did it actually change anything? The bill, doesn't address the major problems that caused the financial crisis. Proprietary trading, specualtion in the derivatives markets measures, Too big to fail, measures were all severely weakened. Wall Street walked away again.

Standard & Poor's, Moody's Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales, each said in statements in recent days. Each says it fears being exposed to new legal liability created by the landmark Dodd-Frank financial reform law. Once the bill is signed into law, advice by the services will be considered "expert" if used in formal documents filed with the Securities and Exchange Commission. That definition would make them legally liable for their work, meaning that it will be easier to sue an firm if a bond doesn't perform up to the stated rating.

Goldman reveals where bailout cash went

Goldman Sacs The Great American Bubble Machine Matt Taibbi
The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.
Who is in the Obama administration, from Goldman Sachs?
MATT TAIBBI: Well, the number two guy at the Treasury, Mark Patterson, is a former Goldman Sachs employee. You know, there are people in the Obama administration who are very close to Robert Rubin, who used to be a head of Goldman Sachs. Timothy Geithner is a former Rubin aide, and he's the head of the Treasury. The head of the Commodity Futures Trading Commission, Gary Gensler—they're the people who regulate commodities—he's a former Goldman Sachs banker.

Goldman Sachs Settles Civil Fraud Case for $550M Less Than It Reportedly Expected, and With No Admission of Criminal Wrongdoing to resolve a civil fraud lawsuit over selling a mortgage investment that was established to fail. While the SEC hailed the $550 million settlement as the largest in Wall Street history, many outside analysts questioned why the government didn't demand more. Investors responded favorably as Goldman Sachs shares jumped by five percent in late trading, adding far more to the firm's market value than the amount it will have to pay in the settlement. We speak to Matt Taibbi of Rolling Stone. [includes rush transcript]

AMY GOODMAN: I mean, it is stunning. As the Times put it, "News of the settlement sent Goldman's shares 5 percent higher in after-hours trading, adding far more to the firm's market value than the amount it will have to pay in the settlement."

MATT TAIBBI: You know, going back twenty years, almost every time we have an instance where a very powerful bank is caught doing something, you know, unethical or immoral, the procedure tends to be a fine which is much less than the profits they generated using that activity, followed by no admission of criminal wrongdoing. And, of course, nobody ever goes to jail. And the most famous example of that was the so-called global settlement, after the internet stock bubble, in which, you know, a variety of offenses involved with the tech bubble were sort of lumped together by then-Attorney General Spitzer, and although some companies took a big hit—Citigroup had to pay $400 million—it was much less than all these guys made during the stock bubble. And so, the important fact here is that these companies know that even if they get caught, the worst-case scenario, they're going to pay a fraction of the money they make doing this stuff, and that's why they're continually emboldened to do it.

Related stories

SEC Charges Goldman Sachs With Fraud in Civil Suit. While there is nothing in the law that makes lying about the quality of your products illegal -- that's already illegal -- what the bill does in a number of areas would make the scheme less likely to work and more likely to be detected.

President Obama appointed Edward Tufte (and others) to serve on the Recovery Independent Advisory Panel. " I will be serving on the Recovery Independent Advisory Panel. This Panel advises The Recovery Accountability and Transparency Board, whose job is to track and explain $787 billion in recovery stimulus funds..."

 

Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs

Wall Street's Bailout Hustle
Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash

Financial-Literacy