dollar just fell off a cliff
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by justdrew » Wed Mar 18, 2009 3:51 pm
by justdrew » Wed Mar 18, 2009 5:16 pm
by Byrne » Fri Mar 20, 2009 6:50 pm
Financial Times (UK) wrote:Watchdog fears market ‘Ponzimonium’
By Javier Blas, Commodities Correspondent
Published: March 20 2009 19:35 | Last updated: March 20 2009 19:35
US federal regulators have warned of a “rampant Ponzimonium” as they disclosed they are investigating “hundreds” of possible scams in the aftermath of the $50bn fraud allegedly perpetrated by Bernard Madoff.
Bart Chilton, a commissioner at the Commodities Futures Trading Commission, the US regulator, said the watchdog was “seeing more of these scams than ever before” in commodities and other futures markets.
Mr Chilton said the CFTC, which patrol commodities and financial futures markets such as derivatives on stocks and foreign exchange, was investigating “hundreds of individuals and entities, many of which were related to Ponzi scams”.
The CFTC has filed charges against 15 alleged Ponzi schemes so far this year, compared with 13 during the whole of 2008. If the rate were sustained, the regulator could end the year filling more than 60 cases, officials said.
US regulators have said they are detecting more scams than before as the publicity surrounding Mr Madoff‘s case prompts some investors to question the credibility of returns.
But this is the first time a senior regulator has publicly put the number of investigation in the “hundreds”.
“The floundering economy has unearthed many of these house-of-card scams,” said Mr Chilton. “In the last month alone we’ve gone after crooks in Pennsylvania, New York, North Carolina, Iowa, Idaho, Texas and Hawaii.”
Mr Chilton did not provide details of the investigations but it is likely the majority of the cases relate to small investments, in the range of a few million dollars to $50m (€37m, £35m). In the latest case, the CFTC this week charged a North Carolina investment company over an alleged $40m Ponzi scheme in foreign exchange trading.
“These frauds combined harmed tens of thousands of hard-working Americans, many of whom thought they were investing properly to save for retirement or even their first home,” said Mr Chilton.
“It is a good thing that folks are double-checking to ensure they aren’t being ripped off by fraudsters,” he said, referring to the increasing number of investors who are tipping off US federal regulators after they have become suspicious.
Copyright The Financial Times Limited 2009
by Trifecta » Mon Mar 23, 2009 4:25 am
by antiaristo » Tue Mar 24, 2009 4:13 pm
Friday, March 20, 2009
What is wrong with the Wall Street culture?
Goldman Sachs put on a little dog and pony show today to explain to the witless public that they had almost no net exposure to AIG and so the bail out of AIG was NOT a de facto bailout of Goldman.
This is how it works. Goldman and AIG had a special business relationship. Goldman bought junk mortgages from fraudulent, predatory lenders and other toxic assets and bundled them into securities to sell to some unsuspecting fool such as a municipal pension fund in Norway . To convince these utter marks that Goldman had some skin in the game, they held on to some of the mortgage exposure. See, if they are good enough for Goldman, they are good enough for your stupid Norwegian backwater. Except, they didn't really keep the exposure on the books. No way! They aren't stupid. They hedged this exposure with AIG. They bought insurance contracts with AIG, the so called credit default swaps (CDSs). So if the shit hits the fan in the mortgage market, Goldman will be OK even if the Norwegians get their cold white asses handed to them.
But then their business partner, AIG, started to look kind of sickly. Whoops. Looks like that hedge might not be reliable. How do we hedge our hedge? At this point there was no one else willing to write a big insurance contract against mortgage defaults since they were already defaulting. No one sells flood insurance during a flood. If AIG goes down, Goldman would as well. How would Goldman get out of this one? By shorting the bejesus out of AIG, that's how! They took out CDSs on AIG that would pay out if AIG went down. That's right. They bet that their business partner would fail so that if they did, on the whole, they would come out OK. So in the end, says Goldman, we couldn't care either way what happened to AIG, the fools getting foreclosed on or those dumb Norwegians. We took responsibility for our company and made sure that we would come out OK regardless what happened. So we are innocent of all these accusations of needing a stealth bailout.
What really amazes me is that they thought this would somehow convince people to leave them alone. See, we didn't need a bailout. We already bet that AIG would fail. In fact we bet that all of you would fail. We have no exposure to any of you. We are betting against Norway as we speak. Pretty sure they are going down. We should know since we are the ones that sold them all this garbage.
This culture of Wall Street is now about forming business relationships and then making sure you have no "exposure" to the fate of these partners. That is, business relationships are now like some disease that you are get "exposed to". Prudent business policy now is to actively bet against your business partner's very survival so that if they go down, you come out just fine. What kind of culture are we breeding on Wall Street. It is everyone for themselves. No one trusts anyone. No one is willing to form normal business relationships where you and your partner are truly in the same boat. Goldman's meeting today displayed this more clearly than I have seen before. The amazing thing is that didn't even consider that what they were admitting to was worse than what they were trying to defend their company against.
In the biggest joke of all, Cassano's wheeling and dealing was regulated by the Office of Thrift Supervision, an agency that would prove to be defiantly uninterested in keeping watch over his operations. How a behemoth like AIG came to be regulated by the little-known and relatively small OTS is yet another triumph of the deregulatory instinct. Under another law passed in 1999, certain kinds of holding companies could choose the OTS as their regulator, provided they owned one or more thrifts (better known as savings-and-loans). Because the OTS was viewed as more compliant than the Fed or the Securities and Exchange Commission, companies rushed to reclassify themselves as thrifts. In 1999, AIG purchased a thrift in Delaware and managed to get approval for OTS regulation of its entire operation.
Making matters even more hilarious, AIGFP — a London-based subsidiary of an American insurance company — ought to have been regulated by one of Europe's more stringent regulators, like Britain's Financial Services Authority. But the OTS managed to convince the Europeans that it had the muscle to regulate these giant companies. By 2007, the EU had conferred legitimacy to OTS supervision of three mammoth firms — GE, AIG and Ameriprise.
That same year, as the subprime crisis was exploding, the Government Accountability Office criticized the OTS, noting a "disparity between the size of the agency and the diverse firms it oversees." Among other things, the GAO report noted that the entire OTS had only one insurance specialist on staff — and this despite the fact that it was the primary regulator for the world's largest insurer!
"There's this notion that the regulators couldn't do anything to stop AIG," says a government official who was present during the bailout. "That's bullshit. What you have to understand is that these regulators have ultimate power. They can send you a letter and say, 'You don't exist anymore,' and that's basically that. They don't even really need due process. The OTS could have said, 'We're going to pull your charter; we're going to pull your license; we're going to sue you.' And getting sued by your primary regulator is the kiss of death."
When AIG finally blew up, the OTS regulator ostensibly in charge of overseeing the insurance giant — a guy named C.K. Lee — basically admitted that he had blown it. His mistake, Lee said, was that he believed all those credit swaps in Cassano's portfolio were "fairly benign products." Why? Because the company told him so. "The judgment the company was making was that there was no big credit risk," he explained. (Lee now works as Midwest region director of the OTS; the agency declined to make him available for an interview.)
by chiggerbit » Tue Mar 24, 2009 10:09 pm
by ninakat » Tue Mar 24, 2009 10:48 pm
by slimmouse » Tue Mar 24, 2009 10:58 pm
by Luposapien » Wed Mar 25, 2009 3:48 pm
[url=http://www.boston.com/news/nation/washington/articles/2009/03/11/now_needy_fdic_collected_little_in_premiums/?page=full?ref=fp1]Now-needy FDIC collected little in premiums
With fund going strong, banks didn't pay for decade[/url]
By Michael Kranish
Globe Staff / March 11, 2009
WASHINGTON - The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.
The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts.
Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.
To possibly reduce the fee increase, the FDIC has asked Congress for the temporary authority to borrow as much as $500 billion from the US Treasury - up from the current $30 billion limit - in case the number of bank failures increases even more dramatically. If Congress approves the measure, to borrow more than $100 billion, the FDIC would still need permission from the Federal Reserve, the Treasury Department, and the White House.
As of Dec. 31, the FDIC had $18.9 billion in its insurance fund - down from $52.4 billion a year earlier - in addition to $22 billion that it has set aside for pending bank failures. The agency has projected it will need $65 billion to take over failed banks through 2013.
But if the FDIC suddenly had to take over a giant bank such as Citigroup or Bank of America, the fund would be drained "in a flash," said Cornelius Hurley, director of the Boston University law school's Morin Center for Banking and Financial Law.
Last week, FDIC chairwoman Sheila Bair wrote to Senate Banking Committee chairman Christopher Dodd, a Connecticut Democrat, that her agency could need more money because the existing fund "provides a thin margin of error" given the government's responsibility "to cover unforeseen losses." The March 5 letter, provided to the Globe, said the additional borrowing authority is necessary to "leave no doubt" that the FDIC can "fulfill the government's commitment to protect insured depositors against loss."
Bair said yesterday that the agency's failure to collect premiums from most banks "was surprising to me and of concern." As a Treasury Department official in 2001, she said, she testified on Capitol Hill about the need to impose the fees, but nothing happened. Congress did not grant the authority for the fees until 2006, just weeks before Bair took over the FDIC. She then used that authority to impose the fees over the objections of some within the banking industry.
"That is five years of very healthy good times in banking that could have been used to build up the reserve," Bair, a former professor at the University of Massachusetts at Amherst, said in an interview. "That is how we find ourselves where we are today. An important lesson going forward is we need to be building up these funds in good times so you can draw down upon them in bad times."
Hurley agreed with Bair's analysis of the FDIC's dilemma. "Typically you would build up a reserve during the halcyon days to protect yourselves during a recession," he said, calling the decision to stop collecting most premiums "a political one" that was pushed by banks and not based on strict accounting principles.
But James Chessen, chief economist of the American Bankers Association, said that it made sense at the time to stop collecting most premiums because "the fund became so large that interest income on the fund was covering the premiums for almost a decade." There were relatively few bank failures and no projection of the current economic collapse, he said.
"Obviously hindsight is 20-20," Chessen said.
House Financial Services Committee chairman Barney Frank agreed that officials believed at the time that the good times would last and that bank failures would not be a problem.
"We had this period where we had no failures," the Massachusetts Democrat said in an interview yesterday. "The banks were saying, 'Don't charge us anything.' " [Wonder if this would work with my auto insurance. I haven't had to file a claim in years...]
Last October, to help restore confidence during the financial meltdown, Congress and then-President Bush agreed to raise the insured amount from $100,000 to $250,000 per depositor until Dec. 31, 2009. A small portion of the new fees on banks will go toward supporting that increase.
The FDIC has never failed to make good on its promise to pay for the insured deposits when a bank fails, and officials said that will not change. The fund ran short of money during the savings and loan crisis of the 1980s, prompting the agency to increase fees to make up for the shortfall.
Then, a booming economy left banks flush with cash, and by 1996 the insurance fund was considered so large that it could grow through interest payments and fees charged only to banks with high credit risk. Congress agreed that premiums didn't need to be collected if the fund was sustained at a level that was considered safe. Thus, about 95 percent of banks paid no premiums from 1996 to 2006, including some new ones that did not have to pay a premium, the FDIC said.
Congress mandates that the insurance fund must stay between 1.15 percent and 1.5 percent of all insured deposits. The reserve ratio on Dec. 31 was 0.40 percent, down from 1.22 percent at the end of 2007. The FDIC has increased premiums to increase the reserve ratio, as well as proposing a one-time emergency assessment that could raise as much as $15 billion.
by rrapt » Wed Mar 25, 2009 7:37 pm
by freemason9 » Wed Mar 25, 2009 10:43 pm
by chiggerbit » Wed Mar 25, 2009 11:02 pm
The Obama administration is doing the only thing possible to avoid a complete economic collapse.
by smiths » Thu Mar 26, 2009 1:19 am
by Brentos » Fri Mar 27, 2009 8:43 pm
freemason9 wrote:This thing ain't funny, folks, and bitching about the economic policies of a scrambling federal government doesn't help anyone. The Obama administration is doing the only thing possible to avoid a complete economic collapse. And he is right in doing so, because allowing it to happen is inconceivable; the fabric of modern society is unstable as it is, and you would surely be shocked at just how "uncomfortable" the world will become if this doesn't work.
Wish him luck, and don't bother preparing for the worst. There is no way to prepare for it.
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