23/06/12 13:04
Full Show: How Big Banks Victimize Our Democracy
June 22, 2012
JPMorgan Chase CEO Jamie Dimon’s appearances in the last two weeks before Congressional committees — many members of which received campaign contributions from the megabank — beg the question: For how long and how many ways are average Americans going to pay the price for big bank hubris, with our own government acting as accomplice?
On this week’s Moyers & Company, Rolling Stone editor Matt Taibbi and Yves Smith, creator of the finance and economics blog Naked Capitalism, join Bill to discuss the folly and corruption of both banks and government, and how that tag-team leaves deep wounds in our democracy. Taibbi’s latest piece is “The Scam Wall Street Learned from the Mafia.” Smith is the author of ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.
Meanwhile, for anyone who wants to understand why, in one of the richest nations in the world, so many poor people are teetering on the edge, author and advocate Peter Edelman talks about continuing efforts to fight poverty, and what it will take to keep the needs of poor people on the American political agenda. A former aide to Robert F. Kennedy and faculty director of Georgetown University’s Center on Poverty, Inequality, and Public Policy, Edelman’s new book is So Rich, So Poor: Why It’s So Hard to End Poverty in America.
AMERICA SHOULD BE OUTRAGED!
14/06/12 07:44
DEAR AMERICA: You Should Be Mad As Hell About This [CHARTS]
Library of Congress
In November, Americans will have a chance to speak their minds.
And there's one thing everyone should agree on:
America just isn't working right now.
It's not just Americans who aren't working. It's America itself, a country whose economy once worked for almost everyone, not just the rich.
In the old America, if you worked hard, you had a good chance of moving up.
In the old America, the fruits of people's labors accrued to the whole country, not just the top.
In the old America, there was a strong middle class, and their immense collective purchasing power drove the economy for decades.
No longer.
Over the past couple of decades, the disparity between "the 1%" and everyone else has hit a level not seen since the 1920s. And there is a widespread and growing sense that life here is not fair or right.
If America cannot figure out a way to fix these problems, the country will likely become increasingly polarized and de-stabilized. And if that happens, the recent "Occupy" protests will likely be only the beginning.
The problem in a nutshell is this:
In the never-ending tug-of-war between "labor" and "capital," there has rarely—if ever—been a time when "capital" was so clearly winning.
And that's not just unfair.
It's un-American.
Let's start with the obvious: Unemployment. Three years after the financial crisis, the unemployment rate is still at one of the highest levels since the Great Depression.
St. Louis Fed
A record percentage of unemployed people have been unemployed for longer than 6 months.
St. Louis Fed
Our 8% unemployment rate, by the way, equates to about 13 million Americans—people who want to work but can't find a job.
St. Louis Fed
And when you include people working part-time who want to work full-time, plus some people who haven't looked for a job in a while, unemployment is at 15%
St. Louis Fed
Yes, the number of jobs has started to grow again, and unemployment's coming down slowly. But we still have miles to go. We haven't yet recovered even half of the jobs we lost in the recession.
Put differently, a lower percentage of Americans are working than any time since the early 1980s (And the boom prior to that, by the way, was from women entering the workforce).
St. Louis Fed
So that's the jobs picture. Not pretty.
And now we turn to the other side of this issue ... the Americans for whom life has never been better. The OWNERS.
Corporate profits just hit another all-time high.
St. Louis Fed
Corporate profits as a percent of the economy also just hit an all-time high. Profits are now VASTLY higher than they've been for most of the last half-century.
St. Louis Fed
If corporations are doing so well, everyone who works for them should be doing great, right? Wrong. The folks who are doing well are at the top. CEO pay is now 350X the average worker's, up from 50X from 1960-1985.
G. William Domhoff, UC Santa Cruz
CEO pay has skyrocketed 300% since 1990. Corporate profits have doubled. Average "production worker" pay has increased 4%. The minimum wage has dropped. (All numbers adjusted for inflation).
G. William Domhoff, UC Santa Cruz
After adjusting for inflation, average hourly earnings haven't increased in 50 years.
In short ... while CEOs and shareholders have been cashing in, wages as a percent of the economy have dropped to an all-time low.
St. Louis Fed
In other words, in the struggle between "labor" and "capital," capital has basically won. (This man lives in a tent city in Lakewood, New Jersey, about a hundred miles from Wall Street. He would presumably be "labor," except that he lost his job and can't find another one.)
Robert Johnson
Of course, life is great if you're in the top 1% of American wage earners. You're hauling in a bigger percentage of the country's total pre-tax income than you have at any time since the late 1920s. Your share of the national income, in fact, is almost 2X the long-term average!
David Ruccio
And the top 0.1% in America are doing way better than the top 0.1% in other first-world countries.
David Ruccio
It wasn't always this way ... From 1917 to 1981, the bottom 90% of wage earners in this country (blue) captured 69% of the total wage growth. The richest 10%, meanwhile, got 31% of the wage gains.
Economic Policy Institute
Between 1981 and 2008, however, things changed. The richest 10% grabbed 96% of the income gains in those years, leaving only 4% for the bottom 90%.
Economic Policy Institute
And from 1997-2008, things got grossly unfair. ALL of the wage gains went to the top 10%. The wages of the bottom 90%, meanwhile, declined.
Economic Policy Institute
In fact, income inequality has gotten so extreme here that the US now ranks 93rd in the world in "income equality." China's ahead of us. So is India. So is Iran.
G. William Domhoff, UC Santa Cruz
And, by the way, few people would have a problem with inequality if the American Dream were still fully intact—if it were easy to work your way into that top 1%. But, unfortunately, social mobility in this country is also near an all-time low.
So what does all this mean in terms of net worth? Well, for starters, it means that the top 1% of Americans own 42% of the financial wealth in this country. The top 5%, meanwhile, own nearly 70%.
G. William Domhoff, UC Santa Cruz
That's about 60% of the net worth of the country held by the top 5% (left chart).
G. William Domhoff, UC Santa Cruz
And remember that huge debt problem we have—with hundreds of millions of Americans indebted up to their eyeballs? Well, the top 1% doesn't have that problem. They only own 5% of the country's debt.
G. William Domhoff, UC Santa Cruz
And then there are taxes ... It's a great time to make a boatload of money in America, because taxes on the nation's highest-earners are close to the lowest they've ever been.
National Taxpayers Union
The aggregate tax rate for the top 1% is lower than for the next 9%—and not much higher than it is for pretty much everyone else.
G. William Domhoff, UC Santa Cruz
As the nation's richest people often point out, they do pay the lion's share of taxes in the country: The richest 20% pay 64% of the total taxes. (Lower bar). Of course, that's because they also make most of the money. (Top bar).
G. William Domhoff, UC Santa Cruz
And now we come to the type of American corporation that gets—and deserves—a big share of the blame: The banks. Willie Sutton once explained that the reason he robbed banks was because "that's where the money is." The man knew his stuff.
Remember when we bailed out the banks? Remember WHY we bailed them out? We bailed them out, we were told, so that the banks could keep lending to American businesses. Without that lending, we were told, society would collapse ...
So, did the banks keep lending after we bailed them out? No. Bank lending dropped sharply, and it has yet to fully recover.
St. Louis Fed
Real-estate loans are still down ...
St. Louis Fed
Commercial loans are still below their peak.
St. Louis Fed
So, what have banks been doing since 2007 if not lending money to American companies? Lending money to America's government! By buying risk-free Treasury bonds and other government-guaranteed securities.
St. Louis Fed
And, remarkably, the banks have also been collecting interest on money they are NOT lending—the "excess reserves" they have at the Fed. Back in the financial crisis, the Fed decided to help bail out the banks by paying them interest on this money that they're not lending. And they're happily still collecting it. (It's AWESOME to be a bank.)
St. Louis Fed
Meanwhile, of course, the banks are able to borrow money FOR FREE. Because the Fed has slashed rates to basically zero. And the banks have slashed the rates they pay on deposits to basically zero. So they can have all the money they want—for nearly free!
St. Louis Fed
When you can borrow money for nothing, and lend it back to the government risk-free for a few percentage points, you can COIN MONEY. And the banks are doing that. According to Institutional Risk Analytics, the "net interest margin" made by US banks in the first six months of last year was $211 Billion. Nice!
Institutional Risk Analytics
And that helped produce $58 billion of profit in the first six months of the year.
Institutional Risk Analytics
And it has helped generate near-record financial sector profits—while the rest of the country struggles with its 8% unemployment rate.
Reuters (Felix Salmon)
And these profits are getting back toward a record as a percentage of all corporate profits.
The Big Picture
Those profits, of course, are AFTER the banks have paid their bankers. And it's still great to be a banker. The average banker in New York City made $361,330 in 2010. Not bad!
New York Times, New York State Comptroller
This average Wall Street salary was 6X the average private-sector salary (which, in turn, is actually lower than the average government salary, but that's a different issue).
New York Times, New York State Comptroller
So it REALLY doesn't suck to be a banker.
So, the 1% is doing great, and the 99% are getting the shaft, but maybe the government's stepping in to help everyone ... by building roads or something?
Flickr/Andrew Oliver
Nope. Public construction spending is falling.
St. Louis Fed
Including on roads ...
St. Louis Fed
and transportation ...
St. Louis Fed
and schools.
St. Louis Fed
In short, America just isn't America anymore.
Wikimedia Commons
So that's what Americans should be mad as hell about.
AR McLin via Flickr
Now here's how to fix it >
Read more: http://www.businessinsider.com/dear-america-you-should-be-mad-as-hell-about-this-charts-2012-6#ixzz1xlcrdy1Z
It will continue until its conclusion.
07/06/12 06:58
[ ...My best source claims a trigger mechanism has been pulled from deep within the USTBond/IRSwap system managed by JPMorgan. The collapse is assured. It cannot be stopped. It will continue until its conclusion. ]
http://news.goldseek.com/GoldenJackass/1339012800.php
By: Jim Willie CB, |
MORE EXPOSER
03/06/12 07:35
SEC: Taking on Big Firms is 'Tempting,' But We Prefer Picking on Little Guys
If you want to see a perfect example of how completely broken our regulatory system is, look no further than a speech that Daniel Gallagher, one of the S.E.C.’s commissioners, recently gave in Denver, Colorado.
It’s a speech whose full lunacy is hard to grasp without some background.
It’s by now been well-established that the S.E.C.’s performance in policing Wall Street before, after, and during the crash has been comically inept. It would be putting it generously to say that the top cop on the financial services beat has demonstrated particular incompetence with regard to investigations of high-profile targets at powerhouse banks and financial companies. A less generous interpretation would be that the agency is simply too afraid, too unwilling, or too corrupt to take on the really dangerous animals in this particular jungle.
The S.E.C.’s failure to make even one case against a high-ranking executive involved in the mass frauds leading to the 2008 crash – compare this to the comparatively much smaller and less serious S&L crisis twenty years earlier, when the government made 1,100 criminal cases and sent 800 bank officials to jail – became so conspicuous that by the end of last year, the “No prosecutions of top figures” idea became an accepted meme in mainstream news media coverage of the economic crisis.
The S.E.C. in recent years has failed in almost every possible way a regulator can fail to police powerful criminals. Failure #1 was that it repeatedly fell down on the job even when alerted to problems at big companies well ahead of time by insiders. Six months before Lehman Brothers collapsed, setting off a chain reaction of losses that crippled the world economy, one of Lehman’s attorneys, Oliver Budde, contacted the S.E.C. to warn them that the firm had understated CEO Dick Fuld's income by more than $200 million; the agency blew him off. There were similar brush-offs of insiders with compelling information in cases involving Moody’s, Chase, and both of the major Ponzi scheme scandals, i.e. the Bernie Madoff and Allen Stanford cases.
The S.E.C.’s attitude toward whistleblowers at powerhouse companies has not just been aloof or indifferent, it’s been downright hostile at times. Whistleblowers commonly report being treated as though they're the criminal. The most notorious example probably involved Peter Sivere, a compliance officer at Chase who years ago went to the S.E.C. to complain that Chase was withholding an incriminating email from the agency, which was investigating an illegal trading practice. When Sivere contacted the S.E.C. with the documents, he asked if he would be eligible for an award; they told him no, and he gave them the documents anyway. Subsequently, Sivere was fired by Chase because, in the words of Chase’s attorneys, Sivere had "sought payment from the SEC to provide documents and information to them.”
Sivere had to scratch his head and wonder how his bosses knew about the award request , until it dawned on him: the S.E.C. had ratted him out to Chase! It subsequently came out that the S.E.C. official who’d narked on Sivere was George Demos, who more recently was seen running for Congress in New York.
Since the S.E.C. couldn’t make cases even when insiders handed them to them, it followed that the agency fared even worse when asked to deduce problems by mere analysis and review, which brings us to failure #2: the agency was spectacularly inept at detecting marketplace problems that should have been obvious to anyone with access to a federal regulator’s investigatory tools. It came out after the crash, for instance, that the SEC repeatedly ignored warnings of excessive risk-taking at companies like Bear Stearns; they even censored an IG report to conceal, among other things, their history of non-action.
More notoriously, the SEC stood by and did nothing even after the FBI publicly warned that the incidence of so-called “liar’s loans” – mortgage applications in which income levels and other information were not verified – was “epidemic” and could cause an “economic crisis.” The SEC could have walked into any major mortgage lender’s office anytime in the five years prior to the 2008 crash and in one afternoon’s worth of interviews learned that fraud in the mortgage markets was out of control, but instead they allowed companies like Countrywide and Long Beach to proliferate and pump the economy full of millions of bad loans, nearly destroying the economy.
Failure #3 is that even after the fact, they have so far failed to make cases against even the most obvious targets, from the Deutsche Bank executives who knowingly sold billions in risky mortgages they knew were “pigs,” to the Lehman bankers who hid liabilities and cooked the books in the infamous “Repo 105” case, to the creeps at Barclays who, in what one Wall Street attorney I spoke to described as “the biggest bank robbery in the history of the world,” siphoned off billions of dollars from the rotting hulk of Lehman Brothers just before that company’s collapse. In that deal, executives at Lehman and Barclays essentially sold Lehman assets and operations to Barclays at fractions of their real cost – and some of the Lehman executives involved went to work for Barclays right after Lehman collapsed. Lehman’s creditors unsuccessfully tried to get Barclays to pay back over $11 billion.
Failure #4: one company after another was allowed to settle serious criminal charges without having to admit wrongdoing. Failure #5: in those settlements, the S.E.C.continually allowed companies to avoid having to disclose the exact nature of their crimes, which not only shielded those firms from litigation, but kept the general public, which might otherwise have been warned away from doing business with those firms, in the dark about crucial information. “Truth is confined to secretive, fearful whispers,” federal judge Jed Rakoff complained, talking about the settlements. Failure #6: companies have been allowed to settle cheap on the promise that they would never commit the same crimes again, only to do exactly that – and be allowed by the S.E.C. to get off with the same promise! The Times made a list of firms that got the “Just promise you’ll never do it again, again” treatment:
They read like a Wall Street who’s who: American International Group, Ameriprise, Bank of America, Bear Stearns, Columbia Management, Deutsche Asset Management, Credit Suisse, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, Putnam Investments, Raymond James, RBC Dain Rauscher, UBS and Wells Fargo/Wachovia.
All of this is important background for the speech given in Denver on April 13 by S.E.C. commissioner Gallagher. The commissioner was trying to explain the S.E.C.’s thought process in how it decides to allocate its relatively meager resources. The key thing, Gallagher explained, was to make sure that when you send Enforcement staff on a case, you should make sure there’s actually crime there to fight:
It is critically important that our enforcement program be extremely efficient… Recognizing that it is unrealistic to imagine we will ever achieve a one-to-one correspondence between incidents of misfeasance and SEC Enforcement staff, we’d better plan to do everything we can to increase our hit-rate per investigation opened, and should commit our staff resources carefully, which is to say, consciously.
Sounds reasonable, although this does also sound a little odd; how is securing a good "hit rate" in finding crime a problem in an era where even an $11 billion robbery isn’t high enough in the in-box to warrant a criminal investigation? For most of the last ten years, you could walk into any major bank in America and find whole departments committed to the practice of writing false, robosigned affidavits. We’re not talking about crime that is hidden in a line item, or has to be deduced by checking and re-checking the numbers of dozens of accounts: we’re talking about groups of flesh-and-blood human beings, sitting there in plain view with huge stacks of folders on their desks, openly committing fraud and perjury. Walk in any direction in lower Manhattan with a badge, you're going to hit a fraud case whether you want to or not.
But fine, Gallagher’s point is taken: when you commit resources, you want to make sure you get hits. So what’s the solution? He goes on, cheerfully employing a jockish metaphor:
Experience teaches us, for example, that fraud tends to proliferate in smaller entities that may lack highly developed compliance programs. It also means thinking carefully about what we might, borrowing again from the world of sports, call “shot selection.” It can be tempting to tangle with prominent institutions. But chasing headlines and solving problems are two different things. The question is what will do most good – where our focus should be. And the record seems to suggest that we can do most to protect smaller, unsophisticated investors by focusing more attention on smaller entities...
Just so we’re clear about what we’re talking about here: the S.E.C., rather than go after serial violators like Bank of America and Chase, proposes that the best place to find crime is in small-cap companies, because that’s where fraud “proliferates.”
In the last year or so I’ve heard from several attorneys who represent smaller clients who tell me they’re flabbergasted, watching the S.E.C. give the Chases, Goldmans, and Citigroups free ride after free ride while their pockmarked little clients at fledgling public companies get served the whole regulatory meal for minor disclosure violations – even cases that simply involve bad paperwork, where money isn’t even stolen. If you’re a little tech startup and there’s a $100,000 problem in your books, you can expect the full Princess Bride torture machine treatment, with multiple agents assigned to your case, serious criminal penalties, asset seizures, etc.
Want an example of the S.E.C.’s idea of “shot selection”? Every year, a parade of itty-bitty failed public companies lets their paperwork lapse. Dead little companies sitting in the bureaucratic atmosphere doing nothing at all are a major threat to national security, of course, so the S.E.C. flies in to the rescue and feverishly revokes their registrations.
These actions are called “12(j) registration revocations,” and the beauty of them, from the S.E.C.’s point of view, is that it can list each one of those revocations as a separate enforcement action, when it goes before Congress at the end of every year to brag about all the good work it’s done.
Therefore toward the end of every calendar year, you’ll see a rush of these 12(j) revocations. In 2011, about one out of every six S.E.C. enforcement actions – 121 out of 735 – involved these delinquent filings. In the stats they submit to Congress, they list these cases right next to things like market manipulation, insider trading, and financial fraud. “The S.E.C. Enforcement staff takes 10 minutes and shoots a zombie company in the head and then has the guts to call it enforcement,” is how one attorney put it to me.
Just days after 60 Minutes ran its piece last year about the epidemic of unprosecuted fraud on Wall Street, the S.E.C. charged into action. Take a look at the dates on these two documents. While Chase’s "London Whale" was preparing to play billion-dollar faro with federally-insured money and MF Global was still struggling to find its "misplaced" $1.6 billion in customer money, the S.E.C. was gallantly taking on the likes of A.J. Ross Logistics, Inc., Status Game Corp., and Fightersoft Multimedia Corporation. And bragging to Congress about its conquests. It's as clear a case of juking the stats as you'll ever see.
Apparently, this is a better use of the S.E.C.’s time than giving in to the "temptation" of taking on prominent institutions. Anyway, if you want insight into why nothing’s been done to clean up Wall Street, look no further. Why tangle with Goldman and Chase, when you can take on a dead video game startup?
Read more: http://www.rollingstone.com/politics/blogs/taibblog/sec-taking-on-big-firms-is-tempting-but-we-prefer-whaling-on-little-guys-20120530#ixzz1wjHOeI5p
UBS Fined $12 Million Over Short-Selling
25/05/12 10:51
October 25, 2011, 2:36 pm Investment Banking | Legal/Regulatory
UBS Fined $12 Million Over Short-Selling
By BEN PROTESS
Gianluca Colla/Bloomberg News
3:00 p.m. | Updated
UBS agreed on Tuesday to pay $12 million to settle accusations that it failed to oversee millions of short-sale trades over the last five years.
The Financial Industry Regulatory Authority accused the embattled Swiss bank of a “systemic supervisory failure.” The fine is among the stiffer penalties recently paid to Firna, Wall Street’s self-regulator.
“The fine reflected broad gaps in their compliance system,” J. Bradley Bennett, Finra’s enforcement chief, said in an interview. “I think it’s very significant.”
UBS neither admitted nor denied the accusations. In a statement, the bank said it was “pleased to have resolved this matter,” noting that “all issues identified by Finra and UBS have been remediated.”
Still, the case is another black eye for UBS, which recently was hit with a major unexpected expense. On Tuesday, the bank said its profit plummeted 39 percent in the third quarter after a rogue trader drained the bank of $2.3 billion. UBS now plans to cut costs, in part, by shedding 3,500 jobs.
UBS also faces broader compliance woes. The bank said Tuesday that it had notified the Securities and Exchange Commission about potential problems with its internal controls.
Finra’s case against UBS Securities, an American brokerage arm of the giant Swiss firm, centers on short-selling, in which investors bet that the price of a security will decline. Short-selling allows investors to unload securities without owning them, provided that the investors ultimately borrow the security when it comes time to deliver.
UBS, Finra said, allowed its own employees — and some of the bank’s hedge fund clients — to sell short without verifying that the traders could actually produce the underlying shares. The bank also misidentified several short trades as “long.” The problem was widespread, touching equities trading across the firm.
In a statement, Finra criticized UBS for violating securities rules that require brokerage firms, before placing a short-sale order, to have “reasonable” belief the shares will be delivered.
The rules were adopted, Mr. Bennett said in the statement, “in order to prevent potentially abusive naked short-selling,” adding that “the duration, scope and volume of UBS’s locate and order-marking violations created a potential for harm to the integrity of the market.”
While the rules began in 2005, it was not until 2009 that UBS updated its compliance system after Finra raised questions about its short-sale practices. Even then, the problems continued until late 2010.
Finra is investigating other banks for possibly failing to comply with the rules.
UBS Fined $12 Million Over Short-Selling
By BEN PROTESS
Gianluca Colla/Bloomberg News
3:00 p.m. | Updated
UBS agreed on Tuesday to pay $12 million to settle accusations that it failed to oversee millions of short-sale trades over the last five years.
The Financial Industry Regulatory Authority accused the embattled Swiss bank of a “systemic supervisory failure.” The fine is among the stiffer penalties recently paid to Firna, Wall Street’s self-regulator.
“The fine reflected broad gaps in their compliance system,” J. Bradley Bennett, Finra’s enforcement chief, said in an interview. “I think it’s very significant.”
UBS neither admitted nor denied the accusations. In a statement, the bank said it was “pleased to have resolved this matter,” noting that “all issues identified by Finra and UBS have been remediated.”
Still, the case is another black eye for UBS, which recently was hit with a major unexpected expense. On Tuesday, the bank said its profit plummeted 39 percent in the third quarter after a rogue trader drained the bank of $2.3 billion. UBS now plans to cut costs, in part, by shedding 3,500 jobs.
UBS also faces broader compliance woes. The bank said Tuesday that it had notified the Securities and Exchange Commission about potential problems with its internal controls.
Finra’s case against UBS Securities, an American brokerage arm of the giant Swiss firm, centers on short-selling, in which investors bet that the price of a security will decline. Short-selling allows investors to unload securities without owning them, provided that the investors ultimately borrow the security when it comes time to deliver.
UBS, Finra said, allowed its own employees — and some of the bank’s hedge fund clients — to sell short without verifying that the traders could actually produce the underlying shares. The bank also misidentified several short trades as “long.” The problem was widespread, touching equities trading across the firm.
In a statement, Finra criticized UBS for violating securities rules that require brokerage firms, before placing a short-sale order, to have “reasonable” belief the shares will be delivered.
The rules were adopted, Mr. Bennett said in the statement, “in order to prevent potentially abusive naked short-selling,” adding that “the duration, scope and volume of UBS’s locate and order-marking violations created a potential for harm to the integrity of the market.”
While the rules began in 2005, it was not until 2009 that UBS updated its compliance system after Finra raised questions about its short-sale practices. Even then, the problems continued until late 2010.
Finra is investigating other banks for possibly failing to comply with the rules.