If you’re caught with an ounce of cocaine, the chances are good you’re going to jail. Evidently, if you launder nearly $1 billion for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night.
“The greatest triumph of the banking industry wasn’t ATMs or even depositing a check via the camera of your mobile phone,” notes Barry Ritholtz, a money manager and author of Bailout Nation. “It was convincing Treasury and Justice Department officials that prosecuting bankers for their crimes would destabilize the global economy.”
– Barry Ritholtz, quoted by Daniel Gross in “Why Do Banks Get Away With Murder?” (via Quotation of the Day Mailing List)
The Federal government again botches an effort to hold banks to account for faulty mortgages and foreclosures. Read the whole mess here.
Excerpt:
Federal banking regulators are trumpeting an $8.5 billion settlement this week with 10 banks as quick justice for aggrieved homeowners, but the deal is actually a way to quietly paper over a deeply flawed review of foreclosed loans across America, according to current and former regulators and consultants.
To avoid criticism as the review stalled and consultants collected more than $1 billion in fees, the regulators, led by the Office of the Comptroller of the Currency, abandoned the effort after examining a sliver of nearly four million loans in foreclosure, the regulators and consultants said.
Because they have no idea how many borrowers were harmed, the regulators are spreading the cash payments over all 3.8 million borrowers — whether there was evidence of harm or not. As a result, many victims of foreclosure abuses like bungled loan modifications, deficient paperwork, excessive fees and wrongful evictions will most likely get less money.
The banks have been (and continue to be) given enormous aid (directly and indirectly) by the Federal government including the Federal Reserve. Meanwhile, homeowners were lured into abusive mortgages and are facing abusive and destructive foreclosure actions. As usual, under both republican and democratic presidents recently, real aid flows to the wealthy.
As another example, consider the bank-favorable rules promulgated this week to regulate new mortgages.
Matt Taibbi updates us on what happened since the bailout. It is not good.
Excerpt:
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, hyperconcentrated 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.
Read the entire article for the sickening details.
The richest Americans are a bunch of cry-babies, moaning and complaining that the President doesn’t like them. So writes Chrystia Freeland, in the current issue of The New Yorker.
The article is a must-read and it is stunning to read how the ultra-rich in America complain that they are not loved, and in fact are being victimized by the President.
Excerpt:
The President, in [Leon] Cooperman’s view, draws political support from those who are dependent on government. Last October, in a question-and-answer session at a Thomson Reuters event, Cooperman said, “Our problem, frankly, is as long as the President remains anti-wealth, anti-business, anti-energy, anti-private-aviation, he will never get the business community behind him. The problem and the complication is the forty or fifty per cent of the country on the dole that support him.”
Framing the political debate as job creators on one side and the President and the fifty per cent of Americans who are supported by the state on the other was striking at the time. It has become even more so since Mitt Romney was secretly recorded at a closed-door fund-raiser in Florida, in May, saying that forty-seven per cent of Americans don’t pay income taxes, are “dependent on the government,” and will vote for President Obama “no matter what.”
Romney’s comment has been widely criticized as a mistake that could cost him the election, with even Republicans accusing their candidate of incompetence. Cooperman’s statement six months earlier shows that Romney’s forty-seven-per-cent remark wasn’t an undisciplined slip by a gaffe-prone politician but, instead, the assertion of a view that is widely held by people of Romney’s class.
Update: And check out this op-ed parody written by Steven Pearlstein in the Washington Post:
I am a job creator and I am entitled.
I am entitled to complain about the economy even when my stock price, my portfolio and my profits are at record levels.
I am entitled to a healthy and well-educated workforce, a modern and efficient transportation system and protection for my person and property, just as I am entitled to demonize the government workers who provide them.
I am entitled to complain bitterly about taxes that are always too high, even when they are at record lows.
I am entitled to a judicial system that efficiently enforces contracts and legal obligations on customers, suppliers and employees but does not afford them the same right in return.
This country does in fact have a serious deficit problem. But the reality is that the deficit was caused by two wars – unpaid for. It was caused by huge tax breaks for the wealthiest people in this country. It was caused by a recession as a result of the greed, recklessness and illegal behavior on Wall Street. And if those are the causes of the deficit, I will be damned if we’re going to balance the budget on the backs of the elderly, the sick, the children, and the poor. That’s wrong.
– Bernie Sanders, U.S. Senator (I-VT), Senate Budget Committee, Nov. 18, 2011. (via The Quotation of the Day Mailing List)
(via Boing Boing)
Well Fargo foreclosed on a home in Twentynine Palms, California. The home had no mortgage on it. And Wells Fargo not only foreclosed on the home, they sent a crew that trashed it. Wells claims to be “deeply sorry.” Yeah, right.
As a point of reference, do you know how much Wells Fargo received in bailout money from taxpayers?
Wells Fargo hit the jackpot. It was one of the first banks to get bailout funds – the biggest amount awarded in a single shot: $25 billion tax dollars.
More from CBSLA.com.
The problem with banks is that they tend to blow up on a regular basis. That’s because bankers are playing with other people’s money (OPM). They consistently abuse the privilege and shirk their fiduciary responsibilities. Whenever they get into trouble, government regulators scramble to bail them out first and then scramble to regulate them more strictly. Without fail, the bankers respond to tougher rules by using some of the OPM to hire financial engineers and political lobbyists to figure out ways around the new regulations.
In my opinion, banks are the Achilles’ heel of capitalism. They really do need to be regulated like utilities if their liabilities are either explicitly or implicitly guaranteed by the government, i.e., by taxpayers. Banks should be permitted to earn a very low utility-like stable return. Bankers should receive compensation in the middle of the pay scale for government employees, somewhere between the pay of a postal worker and the head of the FDIC. It should be the capital markets, hedge funds, and private-equity investors that provide credit to risky borrowers instead of the banks.
– Edward Yardeni in this week’s Barron’s via The Big Picture.
Here.
And also this, but note that the language is NSFW:
This is one of the best descriptions of the LIBOR scandal currently engulfing Barclays.
(via The Big Picture)
Image via Wikipedia
A very senior Goldman official announced today why he is resigning. Worth a full read.
Excerpt:
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
Well, we can hope.
But there does seem to be a fundamental change going on. The full article is a must read.
The crash four years ago was shocking enough to the financial class. But what is happening on Wall Street now is even more terrifying. No doubt the economy itself—the crisis in Europe, the effects of the tsunami in Japan, America’s sputtering recovery—has played a large part in the financial industry’s struggles. But even the most stubborn economies improve eventually. The bigger issues are structural. The Dodd-Frank financial-reform act, much maligned, has already begun to change the shape of the financial system—even before a number of its major provisions are proposed to go into full effect this coming July. Banks are working hard to interpret Dodd-Frank’s provisions in a way most favorable to them—and repealing Dodd-Frank is a key piece of Mitt Romney’s campaign platform.
To comply with the looming regulations, banks have begun stripping themselves of the pistons that powered their profits: leverage and proprietary trading. In the wake of the crash, Morgan Stanley and Goldman Sachs converted to bank holding companies to tap the “discount window,” the Fed’s pipeline of cheap funds that gave the banks an emergency source of liquidity. That move seemed smart then, but the stricter standards required of banks have now left them boxed in.
The truth about events in Europe from David McWilliams of Punk Economics. Europe’s economy is increasingly run for the benefit of banks, with strong support from France and Germany, countries whose banks have large exposure to European sovereign debt.
(via Zero Hedge)
Check out this example of what reporting should be. We so rarely see this kind of persistence in questioning bureaucrats in this country. We need more.
Update: The New York Times has details on what this fight is all about.
Disdain for the uber-rich was unthinkable until —
It wasn’t the crash of 2008 that led to their fall from grace, nor exposure of the greed and stupidity that required a massive public rescue. It was their graceless reaction to the bailouts: no apologies, remorse or gratitude — even faked; just more arrogance, bonuses, takeovers, foreclosures. Wall Street begged to be occupied. The Unrepentant Financier could have been Time’s Person [of the Year].
- Rick Salutin, The decline of deference, Toronto Star, Thursday, Dec. 29, 2011.[via Quotation of the Day Mailing List]
