"End of Wall Street Boom" - Must-read history

[JackRiddler]

Huge update of this thread ongoing, with a variety of material. Started on the last page with the news that Justice Department finally decided to sue Standard and Poor's, here:

viewtopic.php?f=8&t=21495&p=493979#p493961

Start there, scroll down, and don't miss the scrapbooking of Cathy O'Neil's column, about a presentation by Bill Black in New York that I also attended.

Also please check out the HSBC Action thread. Here's the latest post in that, about the upcoming Monday 4 March OWS picket at HSBC HQ in New York:

viewtopic.php?f=8&t=36068#p493954

Wombaticus started an excellent compilation very relevant to financial subject, here:

The Humble Pension Fund
viewtopic.php?f=33&t=35981

And what the hell has been going on lately in Iceland? Fuck if I know, but I read an article. Here it is - the author's name is most unfortunate for him, however, and he should probably use his middle initial.

http://www.counterpunch.org/2013/02/04/ ... al-2/print

February 04, 2013

All Hands on Deck!
Iceland’s Revolt Wants to Go Viral

by ANDREW SULLIVAN


Iceland has suffered much like other nations during the global financial crisis, but the Icelanders’ struggle to overcome the disaster has taken on historic dimensions that are relevant to all countries. As the economic collapse began in the fall of 2008, legions of stunned and outraged Icelanders, including a poet and activist named Birgitta Jónsdóttir, started meeting in spontaneous protests and forums. The protests in the capital steadily became larger and more coordinated with kindred groups across the country. Three years before revolutions in the Arab world and mass-protests elsewhere, Birgitta Jónsdóttir and her fellow citizens began to ‘Occupy’ Iceland. The demonstrations were dubbed the ‘Kitchenware Revolution’ because people in the capital banged pots and pans in support of protesters surrounding the Parliament building. Any opposition movement would have been happy with the initial results of the mass-mobilization: the protests essentially blocked the opening of the Parliament in January of 2009, the Prime Minister resigned, his government fell, the Minister of Business Affairs dismissed the head of the Icelandic Financial Supervisory Authority just before submitting his own resignation, a new coalition government was formed, and the new government quickly announced intentions to convene a Constitutional Parliament in order to amend the Constitution. Nevertheless, all of these dramatic events proved to be just the tip of the iceberg. The turmoil has set in motion a period of profound democratic reform in Iceland, and many Icelanders now wish to share their new liberties and innovations with people around the world.

A protracted resistance against an incompetent government and a corrupt financial sector soon evolved into a much broader political awakening. From the beginning of the meltdown, citizens felt betrayed by virtually every social, political, and financial institution they had trusted. In the depths of the crisis, a population that was totally unfamiliar with high unemployment was facing a rate of nearly 10%. Although the mass-demonstrations subsided after the fall of the old government, the dissidents continued to pressure the new government to make deep changes. The previous government had formed a Special Investigative Commission (SIC) to investigate the causes of the financial collapse. The new government supported the SIC in its probe of officials at the highest levels; its findings eventually led to the official condemnation and prosecution of numerous people, including the former Prime Minister. More importantly, however, the new government eventually adopted the public demand that an entirely new Constitution be drafted. In order to drive their agenda forward, the activists decided to give themselves a voice in the new government.

With a shoestring budget, the protesters ran a campaign to elect activists to serve as spokespeople for grassroots movements in the national Parliament. Calling themselves the ‘Citizens Movement,’ four candidates were elected in the spring of 2009. Three members of the original group, including Birgitta Jónsdóttir, eventually broke away to form a separate group, which simply called itself ‘the Movement.’ The activist-politicians announced at the outset that their group would not function as a conventional political party. It would serve, rather, as a nonpartisan parliamentary group, or caucus, with which all Members of Parliament could freely engage. As part of their unique mission, they decided that their political intervention would only continue until the articles of their agenda had been achieved. The body would dissolve itself upon the attainment of its goals. Likewise, if it became clear that it would not be possible to obtain their legislative objectives, the Movement would cease to operate. Almost four years have passed. This spring, new elections will mark the end of the activists’ term in office, and the fate of their agenda remains to be determined.

The road to constitutional reform has been long and full of obstacles from the right-wing Independence Party, which led the previous government. In a recent interview conducted via Skype, MP Birgitta Jónsdóttir provided an insider’s account of the good, the bad, and the ugly concerning the evolution of the current draft of the new Constitution of Iceland. According to the MP, the drafting of a new Constitution “for the people, by the people” of Iceland was one of the four major demands of the “soft, non-violent revolution.” In fact, she says the call was so prevalent that almost every political party initially expressed support. She and her fellow parliamentarians in the Movement were committed to ensuring that the process of re-writing the Constitution would be legitimately democratic and inclusive. She said, “One of the main reasons I am in the Parliament is to give the people the tools so that they can have more responsibility in our democracy.” She has been pleased by the results. Measures have been taken, in spite of repeated opposition from some quarters, to incorporate the direct and substantive participation of ordinary citizens at multiple stages in the process of writing and passing the document. The process, she said, has been “quite beautiful and very much in the spirit of what I hope to see.”

The ongoing process of writing a new Constitution, which started in 2009, has taken much longer than expected. The saga is full of the kind of partisan, judicial wrangling that has plagued numerous elections in the United States in recent years. First, the Parliament formed a parliamentary committee of constitutional experts to review a range of recommendations for reform. The next step was to convene a National Assembly. Around 1,000 citizens were randomly selected from among the population to meet in a stadium for the purpose of discussing what should be in the new Constitution. The conclusions drawn from these dialogues were collected into a database. The next stage of the process was to conduct the election of 25 citizens to serve in a Constitutional Parliament, or Constitutional Assembly. The body was to be charged with drafting the new Constitution, using the findings of the National Assembly as its guideline.

The election of the Constitutional Assembly took place, and all citizens were eligible to run; however, the results were challenged on procedural grounds, with the Independence Party leading the dispute. The accuracy of the results was not in question. MP Jónsdóttir said a special body that included many judges of Iceland’s Supreme Court upheld the utterly unprecedented challenge, thereby invalidating the election. A parliamentary committee on which she served had to address the ruling. As the objections to the election were strictly procedural, the Parliament voted to circumvent the election’s nullification by simply appointing the winners to serve on a Constitutional Council. The new Council would perform the same function as the unrealized Constitutional Assembly.

Following these delays, the Constitutional Council got to work. The open and inclusive nature of the meetings of the Constitutional Council received a lot of international attention and admiration. The body’s meetings were open to the public. Not only were the meetings publicly broadcast. The meetings also received public comments through regular mail, email, and comments on social media accounts. Birgitta Jónsdóttir noted: “No other constitution has been as able to [do] crowd-sourcing as this. Even if it was not 100% crowd-sourcing, it…had [people] deciding which amendments or ideas would be processed.” Through the work of other activists, including colleagues of the Movement, the City of Reykjavík’s government has moved even closer to a more rigorous implementation of crowd-sourcing through its use of an interactive website called ‘Better Reykjavík,’ which is a project of the Citizens Foundation. National and international equivalents of that website are already in development. No one can deny that Iceland’s citizens are gaining rare access and input in the composition of their laws.

Another by-product of the overall reform movement is the expansion of older forms of direct democracy. Once the draft of the new Constitution had been published and submitted to Parliament, six of its proposals were presented to the people in a national referendum. One of the questions even pertained to the future use of national referendums. Before the crisis, Iceland had not held a national referendum since its independence in 1944. Since 2010, three have been held, including two relating to major economic policies. All six proposals in the constitutional referendum were approved by a majority of respondents. Although many found the response unequivocal, members of the Independence Party asserted the results were not truly representative of the majority of citizens. Nevertheless, the draft will now be debated in the legislature.

MP Birgitta Jónsdóttir is very proud of her country’s proposed charter. In her opinion, one of the text’s many virtues is its human language that is very simple for people to understand. She says some of its most beautiful articles relate to freedom of information, access to the internet, and national ownership and guardianship of natural resources. Recalling her experience reading the draft of the new Constitution in the Parliament, she said, “It was so moving. It’s so beautiful to belong to a nation that has this sort of social agreement.”

The freedoms of information, expression, and speech are especially dear to her. She was the main sponsor of a proposal for a parliamentary resolution to pursue a legislative project called the Icelandic Modern Media Initiative (IMMI). Today, she chairs an international organization, the International Modern Media Institute, that evolved out of the IMMI. According to the Institute’s website, the IMMI aims to amend 13 laws to give Iceland the world’s best freedoms of speech and standards of transparency. MP Jónsdóttir hopes her country can become a safe haven for investigative journalists, activists, and whistleblowers from around the globe.

The new Constitution remains imperiled. Jónsdóttir observes: “Now the entire academia and the president…are basically trying to ruin the process.” If the new Constitution is blocked despite the national referendum, she believes there could be another revolution. The articles in the draft that affirm permanent national ownership of natural resources are especially significant for the future of the Icelandic economy. She warned, “this is critical because we are not out of the hands of the IMF or…the financial world.” Therefore, over the next month, she and her fellow citizens will “have to use every available tool, resource, and wit to outsmart the old powers that are trying to destroy this process.”

The stakes remain high in Iceland, as they are high for all the nations that are still reeling from the global financial crisis. Icelanders have every right to say their country has become a historic experiment in modern democracy. They are extending the oldest and most inherently democratic civil liberties to modern communications, and they are exercising democratic rights through new media. In a process marked by an extraordinary degree of participation by common citizens, a new Constitution has been drafted and approved by a national referendum. The draft will now go through the legislature. If it passes, many of the most important articles in the Movement’s agenda will have been accomplished. If it fails, the loss will clearly demonstrate that the Movement’s aims could not be completed within the time frame its members envisioned. Regardless of the outcome, Birgitta Jónsdóttir said the Movement will cease operations. Yet, their work will surely continue. For her part, MP Jónsdóttir will run for re-election as a member of the Icelandic Pirate Party, which she helped to found last fall. Like all Pirate Parties, they are reclaiming rights that are being seized by corporations and governments, such as rights to online privacy and access to the public domain. Given her passionate advocacy of civil liberties, participation in the international movement of Pirate Parties seems like a natural progression of her work. She insists that, contrary to popular belief, Iceland’s struggle to avert financial and political disaster is far from finished. In fact, given the popular democratic ambitions of its people, the modern political transformation of this ancient island nation appears to have just begun.


Andrew Sullivan lives in Middlebury, Vermont. You can follow him on Twitter @absullivan1. He can be reached at absullivan@gmail.com.

[JackRiddler]

And finally, I want to finally close this tab - very interesting article:

http://www.counterpunch.org/2012/10/15/ ... line/print

October 15, 2012

Pols Make Dangerous Pitch of U.S. as Victim
The Myth of U.S. Manufacturing Decline

by JOHN V. WALSH


“We are not making stuff anymore in America,” is the word on the street. “Our industrial base is eroding,” say the academics. In short the decline of domestic U.S. manufacturing is conventional wisdom. The problem is that it is not true – not even close. And this falsehood has important consequences.

Let’s take a look at the facts. Here are the data as the UN has collected them and as put in chart form by John Hunter, on his web site Curious Cat Investing and Economics Blog.



America manufacturing has not been decreasing – it has been increasing. Far from “losing” manufacturing, the U.S. has seen a steady rise for decades- even after the financial crisis of 2008. No other country comes close save for China, which is now slightly ahead. But consider that China has 20% of humanity, and the U.S. has 5%. Not bad for 5%, not bad at all. Note also the position of India, which is often mentioned along with China as a manufacturing powerhouse. No way – and there are profound historical reasons for that given that India was wealthier than China in the late 1940s when both supposedly achieved “independence.” Finally, note that Japan once came close to the U.S. in manufacturing prowess, but then it took a nose dive which some attribute to actions taken by the U.S.

What about jobs, then? Let’s look at the data, just for manufacturing within the U.S., i.e, domestic manufacturing, this time for the entire post WW2 era. These data were put into graphical form by Mark J. Perry, Professor of Economics at the University of Michigan and author of the popular website Carpe Diem:



See also: http://www.bea.gov/iTable/index_industry.cfm and http://research.stlouisfed.org/fred2/series/MANEMP

Since 1947 the U.S. has seen persistent growth in domestic manufacturing and the rate of growth has in fact increased since the rapid growth of China’s manufacturing in the 1990s. Clearly the China-U.S. relationship need not be a win-lose one. Now let’s consider jobs in domestic manufacturing. They increased in the 1960s and remained roughly constant even as total manufacturing increased – until about 2000. Then jobs took a dive even as manufacturing continued to increase right up until the economic crisis of 2008. These data cannot be explained by offshoring. There is only one explanation – automation. This is not to say that “offshoring” has not occurred – only that it cannot explain these data.

Notice that the automation has been gaining momentum in the last decade with a precipitous job loss even before the economic crisis of 2008. (In fact this must have a lot to do with the development of the current economic crisis – but that is another story, which we will deal with another time.)

Let us consider some of the consequences of all this for the present moment in our political life. The presidential campaign has been marked, as usual, by considerable China bashing with considerable emphasis on “loss of our manufacturing base.” Automation is rarely mentioned by the candidates. In the case of Obama, it is quite amazing that this good news about the continued rise in manufacturing does not come up on the campaign trail since this is basically good for American workers.

Why the silence on this matter amongst “progressive” politicians? Two reasons are apparent. First of all, the ability to produce more manufactured wealth (i.e., goods) argues that there should be no crisis of consumption, i.e., aggregate demand, which we see in the current economic downturn. The question then arises as to why the current labor leadership and “progressive” Democrat pols cannot deliver a solution and increase aggregate demand and the number of jobs. One way to do so would be to shorten the hours of labor with no cut in pay*, but that would take a political and economic struggle for which the Democratic pols have no stomach. It is far more acceptable and much easier to bash the Chinese. Second, a strong Malthusian streak in our culture means that people often see things in terms of a shortage of supply and an excess of demand – precisely the opposite of what is happening now and nothing new to those with some exposure to the political economy of Marx.

What about exports? The U.S. is the third largest exporter in the world after China and Germany. Again, not bad for the U.S. with only 5% of the world’s population. And the U.S., like Germany, exports high value-added, high profit items, something to which China aspires but which it is only beginning to do. You may look at T-shirts and shoes and find the “Made in China” label. But the Chinese look at large airliners and cars and see the “Made in America” label. Which is more desirable?

This false view of America’s position in the world in fact quite is quite dangerous. It leads to demonization of China, which paves the way for conflict and even war. And it has not gone unnoticed in China. On top of that, it is a strange view that America has of itself when it is by far the richest planet on the earth and yet it so readily sees itself as a victim. When the nation with the mightiest military on the planet comes to see itself as victim, that is a very bad sign. It is not hard to find historical or present day instances of unscrupulous leaders claiming victimhood to justify aggression. We should be on our guard against this sort of sickness. For a rich and mighty power to play the victim is a perilous business.

*Shortening the hours of labor automatically exerts an upward pressure on wages since it means more workers are necessarily shifting the supply side of things in favor of workers. Classically the shortening of the work day has been seen as a critical way of improving the lot of the working class, a thought which seems lost in contemporary America.

John V. Walsh can be reached at John.Endwar@gmail.com

[seemslikeadream]

02.28.13 - 4:31 PM
Really?
by Abby Zimet


The new Bloomberg Businessweek cover about the housing market suggests greedy shiftless minorities are coming for your money and your houses. Many observers with more sense than the Bloomberg editorial staff have noted that the claim, and the grotesque caricatures accompanying it, are mind-blowingly racist, not to mention entirely inaccurate. Welcome to post-racial America. After the howls of outrage, Bloomberg apologized, sort of.

[FourthBase]

That cover is shockingly racist and anti-poor. But then, almost no one is shocked by a daily televised admonition not to let yourself be contaminated by a family of freeloading, slovenly poor trash. Because hey, they're only ethnic in a vaguely Italian or Polish way. I guess it's okay, as long as the poor you're afraid to rent your sinuses to and catch class-cooties from enjoy white privilege. Actually, that's not okay, either. It's not. (rimshot)

http://www.youtube.com/watch?v=6SCnFDiTkXw

[FourthBase]

http://azizonomics.com/2013/02/28/the-downward-spiral/

In a nutshell, what say ye, you RI members who know your economic/math stuff?

[seemslikeadream]

Occupy The SEC Files Lawsuit Against Wall Street Regulators For Failure To Implement The Law
2013/03/01
By Rika Christensen

Occupy Wall Street’s inner circle, a group known as Occupy the SEC, has filed a lawsuit in federal court that names, well, every federal regulator of Wall Street that currently serves. The list includes everyone from Ben Bernanke, chairman of the SEC’s board of governors, to Acting Treasury Secretary Neal Wolin, to Martin Gruenberg, chairman of the FDIC. The current chairperson of the SEC, Elisse Walter, is also included.

Occupy the SEC brings to the attention of the court the fact that federal regulators have yet to enact the Volcker Rule, the part of the Dodd-Frank financial reform law that’s supposed to prohibit most types of proprietary trading. According to the lawsuit, the regulators of Wall Street were required to implement the Volcker Rule within nine months of the completion of a study by the Financial Stabilization Oversight Council, and that it has now been two years since that study was completed.





They may have an ally in the Senate, though it’s not known whether Elizabeth Warren (D-MA) would sign on or even just support such a lawsuit. However, in mid-February, she aggressively questioned regulators as to why they had not prosecuted any of the “too big to fail” banks, and flat-out asked when the last time was that any of them had taken a big bank to trial. The regulators at the hearing were unable to provide a real answer to that question.

Section II, paragraph 19 of Occupy the SEC’s lawsuit states:

“For instance, in April of 2012 it was reported that the Chief Investment Office (CIO) at the London office of JPMorgan Chase bank had utilized deposited funds, like those of Plaintiffs, to invest in extremely risky, speculative credit default swap indices (derivatives of derivatives). Further, it has recently been reported that other traders at JPMorgan actually bet against the CIO office, virtually guaranteeing that some division within the bank would suffer losses. The latest estimates reveal that the bank suffered approximately $6 billion in trading losses from the CIO debacle.” [SOURCE]

We are still paying for the top 10 “too big to fail” institutions on Wall Street. According to a Feb. 2013 op-ed on Bloomberg, when accounting for the lowered interest that these banks get on the government’s implied guarantee of a bailout, the total that we ultimately pay falls right around $83 billion. That’s about the amount of the sequester, which goes into effect at midnight, and is also the vast majority of their profits. In fact, the research noted by Bloomberg’s editorial staff shows that the banks would probably just break even without these savings, making the savings a gift from us to their shareholders.

While JPMorgan Chase’s CEO Jamie Dimon insisted that these losses didn’t cost the taxpayers anything, what he meant was that the Treasury didn’t have to write him a check using taxpayer dollars to bail the bank out from under that kind of a loss. But the perceived government safety net does cost the people, to the tune of $10 billion just for JPMorgan Chase alone. Bloomberg-Businessweek published an explanation of what’s known as the Merton model, and explains how this model shows the price of guaranteeing corporate debt. Two PhD candidates from Germany presented findings on their application of the Merton model to the credit-swap defaults that the big banks like to engage in. These act as insurance policies against default, and appear to lower a bank’s risk as a borrower, saving that bank money.

Their study shows that banks’ debt holders know that, even after a default, their money will be protected via the government’s corporate safety net. Dodd-Frank was supposed to end corporate bailouts and thus, end the confidence of debt-holders that these institutions are not a risk, thereby raising the cost of their loans. While it might seem like a bad idea to make loans more expensive for the banks, on the other side of things, the government’s implied guarantee of a bailout costs holders of U.S. Treasury bonds by making things more risky.

When Treasury bonds are riskier investments, the cost of borrowing goes up. That is how regular U.S. citizens are funding the banks.

The entire Occupy movement is made up of regular citizens for the purpose of protesting the crony-capitalism that the U.S. increasingly practices, and in protest to the plutocracy that we have become. It should not be up to regular citizens to police big corporations, including those on Wall Street. They should not have to take regulators to court. But the regulators have failed to do their job, costing the little people billions of dollars. At least someone has the gumption to do something about it.

[JackRiddler]

Indeed shocking. After the crash, the Republicans tried the big lie of portraying it as the fault of lazy borrowers taking loans the banks were forced to make by idealistic liberal laws. That view didn't take hold. This is the same, but a) preemptive, in advance of the next housing crash that's going to happen for much the same reasons as the last and b) really shorn of any codewords ("Fannie and Freddie," "Community Reinvestment Act.") The hate is pure.

Good coverage:

http://m.theatlanticcities.com/housing/ ... ards/4835/

Thanks to Matt Yglesias, we've been staring at this recent Bloomberg Businessweek cover for most of the morning, and we still can't decide what's most offensive about it: the caricature of the busty, sassy Latina, the barefooted black man waving cash out his window, that woman in the upstairs left-hand corner who looks about as dim-witted as her dog?

The whole scene is rightly enraging the Internet today (the cover was first floated on Feb. 21, but sometimes Twitter's metabolism is strangely slow). Businessweek is selling this scene above the headline "The Great American Housing Rebound," by which the magazine seems to be suggesting that free-spending minorities who should never have been given mortgages during the last housing bubble are now at it again, pumping their houses for straight cash.

This suggestion is particularly problematic given the actual history of the last housing crash, as the Columbia Journalism Review writes today:

Compounding the first-glance problem with the image is the fact that race has been a key backdrop to the subprime crisis.

The narrative of the crash on the right has been the blame-minority-borrowers line, sometimes via dog whistle, often via bullhorn.

It’s a narrative that has, not coincidentally, dovetailed with “Obamaphone” baloney, the ACORN pseudo-scandal, and Southern politicians calling the first black president “food-stamp president,” and is meant to take the focus off the ultimate culprits: mortgage lenders with no scruples and the Wall Street banks who financed them.

The last housing crash, as we've written before, was characterized by a kind of reverse-redlining that disproportionately targeted minorities – a reality to which Businessweek's cover seems entirely tone-deaf. But the most perplexing part of the whole affair is the fact that the magazine's cover – and the story insinuated by it – bears no relation to the actual article contained inside (which has a notably less sexy headline online: "A Phoenix Housing Boom Forms, in Hint of U.S. Recovery"). That piece makes no mention of the racial dynamics of the housing market, or the role of predatory lending.

[/quote]

Minor point, "that woman in the upstairs left-hand corner who looks about as dim-witted as her dog" is also readable as a Latina. So it's all blacks and hispanics.

And the actual article indeed bears no relation, making it all the more obvious that the cover is a stand-alone propaganda operation. Although the accompanying picture sure says a lot about how insane the "recovery" already is. More dead sprawl to sell in Phoenix, hell yeah!

http://www.businessweek.com/articles/20 ... ecovery#p3

A Phoenix Housing Boom Forms, in Hint of U.S. Recovery
By Susan Berfield on February 21, 2013

Orr, the Nate Silver of Phoenix real estate, saw the warning signs of the collapse earlier than most. He first noticed in April 2005 that the number of homes for sale had shot up. In September of that year he decided to sell his own home, purchased in 2002 for $521,336. He received two bids in the first two days, and sold it for $940,000. By early 2006, the market began to slide. He says prices are about back to where they were a decade ago. “Now people feel it’s safe to buy a home again. Everyone thinks it’s a good time to buy,” he says.

The Flipper
In the plaza in front of the Maricopa County Courthouse in downtown Phoenix, foreclosed houses are auctioned off every day at 10:00, noon, 12:30, and 2:00. For much of the downturn, a couple of hundred homes were sold in a day. Now 60 might be available. A dozen or so people show up daily; some work for bidding companies, which came into being in 2008 to scout out properties (potential buyers can’t go inside) and send representatives to the auctions for investors and flippers.

One essential, and controversial, element of the housing recovery is foreclosures. Nationwide, 5 million people have lost their homes since 2006, says RealtyTrac, an online marketplace for foreclosed properties. Arizona uses a nonjudicial foreclosure process, which means foreclosures don’t go through the court system. That’s allowed banks and other lenders to sell homes quickly, often to investors who plan to manage them as rentals. It’s good for the housing market, a boon for investors, but it can seem abrupt and unpredictable to homeowners. In metropolitan Phoenix, foreclosures were down 78 percent in January from their high in 2010, according to RealtyTrac. The decline is also a result of an improving economy, and maybe better household management, which is enabling people to keep up with their mortgage payments.
STORY:
The Alleged Housing Scam That's Targeting Vets and Seniors

Some of those at the courthouse one recent afternoon have appeared in the reality show Property Wars, which is about Phoenix and is in its second season on the Discovery Channel. It’s a fairly civil war today. No one is shouting or pushing; they all know each other by now. A half-dozen homes are auctioned off between 12:30 and 1:00; each winner hands over a $10,000 cashier’s check, and everyone heads off to lunch.

“Bidding is much less stressful these days,” says Alex Montoya, 23, who’s been buying homes at the courthouse for the past two years as an employee of one of those bidding services, PostedProperties.com. He was on Property Wars last season. During the 12:30 auction, he bought two homes for about $550,000 altogether. On average, he says, he buys between 50 and 75 houses a month and pays about $125,000 for each.

One of his clients is Brandon Hunt, who’s been flipping houses since mid-2008, when he was 28 and bankrolled with $600,000 from his father-in-law. Since then he’s bought and flipped about 60 houses a year and has made some $4 million. If Hunt has one regret, it’s that he didn’t start his own bidding company. Instead, he pays a $2,000 commission for every home he wins.
STORY:
Investors Turn Atlanta’s Foreclosed Homes Into Rentals

He’s learned to approach the business like a homebuilder: standardize. “We use the same granite for all the countertops, the same fixtures, the same cabinets, the same flagstone for the patios. We know what the remodeling is going to cost and how long it will take,” he says. To figure out which houses to bid for, Hunt had a computer algorithm created that filters data on all of the homes up for auction or available through a short sale, which is when a homeowner owes more on the mortgage than the house is worth and works with the lender to get what he can.

That’s how Hunt found a 1,484-square-foot house built in 1983 in Scottsdale and listed as a short sale. The owners had paid $310,000 in 2006. Hunt got it for $192,500 in October and sold it in December, usually a slow time, for $256,000. If it were on the market now, he says he could get an additional $10,000. “One of the things I learned early is not to get greedy,” he says. “You make your margin and move. That’s the key to flipping—move fast.”

Etc. Etc.

.

[The Consul]

And of course the lazy, money grubbing minority parasites have a pit bull to sick on whitey.

[seemslikeadream]

Why Is Obama Taking Orders From A Secretive Billionaire?
Tuesday, 05 March 2013 15:16
By Thom Hartmann, The Thom Hartmann Show | Op-Ed

Peter Peterson, founder and chairman of Peter G. Peterson Foundation. (Photo: Lingjing Bao / Talk Radio News)
Move over Koch brothers. Get out of the way Shelly Adelson. There’s another billionaire in town, and he’s doing all he can to privatize Social Security and Medicare programs.
Say hello to Pete Peterson.
Petersen is a Wall Street billionaire, who, according to The Center for Media and Democracy’s SourceWatch.Org, almost exclusively uses his wealth to back numerous organizations and public relations campaigns whose primary goals are to slash government funding to Social Security, Medicare and Medicaid.
According to SourceWatch’s PetersonPyramid.org, in 2007, after making a fortune off of the public offering of a Wall Street private equity firm, Peterson pledged to spend a staggering $1 billion of his personal wealth to “fix America’s key fiscal-sustainability problems.”
A vast portion of that $1 billion is going to a shadowy astroturf supergroup campaign known as “The Campaign to Fix the Debt”. But don’t let the fairly innocuous title fool you.
As SourceWatch’s PetersonPyramid.org points out, in reality, the “Campaign to Fix the Debt” is just the latest effort by Peterson and a bunch of his billionaire friends and corporate cronies to cut away at Social Security and Medicare, all in the name of fixing America’s “debt problem”.
While “Fix the Debt” was started in the summer of 2012, before its launch Peterson was already funding organizations like the “Committee for a Responsible Federal Budget” and the “New America Foundation.” As PetersonPyramid.org notes, both of these organizations have the same goals of ultimately privatizing the Social Security and Medicare programs that millions of Americans rely on to survive.
Peterson also gave millions to support the Simpson-Bowles commission according to PetersonPyramid.org, a commission who’s proposed “solution” to fixing our debt includes massive austerity-type cuts to this nation’s social-safety-net programs. In fact, Erskine Bowles is a co-founder of the “Fix The Debt” program Peterson is funding, so it’s no surprise that the recent Simpson-Bowles Catfood Commission 2.0 plan included even more devastating cuts to Social Security and Medicaid.
Much like the many tentacles of the Kochtopus, “Fix the Debt” is more than just one campaign. As SourceWatch’s PetersonPyramid,org brilliantly points out, “Fix the Debt” is like a well-organized machine, made up of PR firms, corporate CEO’s, partner organizations, and so-called “state chapters.” Progressives argue that if the so-called “Fix the Debt” goals are reached, it will worsen the gap between the wealthy elite in America and everyone else.
But here’s the real kicker. Peterson and his “Fix the Debt” campaign have made it into the halls of The White House.
Many of the CEO’s involved with the “Fix the Debt” campaign are the heads of some of America’s largest corporations, and many have testified on Capitol Hill and met with President Obama directly during discussions on the economy and the national debt.
And then there are the corporations themselves that are involved in the campaign. The list of backers is a virtual Who’s Who of corporate greed and corruption, including big banks like Bank of America, Goldman Sachs and JPMorgan Chase.
Besides defunding Social Security and Medicare, PetersonPyramid.org shows how “Fix the Debt” may also be a front for exploiting a corporate tax loophole to its fullest potential. Many of the corporations involved with “Fix the Debt” pay a negative tax rate – instead of paying taxes, they get government money back – which is a major reason why we have such a large federal deficit right now.
These corporations are pushing for a “globally competitive” tax structure that Citizens for Tax Justice says would increase the US debt by $1 trillion over the next decade, and would also encourage the offshoring of U.S jobs. While exploiting a corporate tax loophole isn’t a direct goal of “Fix the Debt,” the proposed “globally competitive” tax structure would bring in $134 billion for at least 63 corporations involved with “Fix the Debt,” according to a report by the Institute for Policy Studies.
And, of course, if Social Security is privatized, guess who takes over? Wall Street takes over. The same Wall Street where Peterson made his money, and where his buddies are salivating over the $2.7 trillion Social Security trust fund.
So what’s the bottom line to all of this?
Pete Peterson and his strong efforts to privatize Social Security and Medicare are working. Average Americans have no idea that Social Security is just fine, and has a $2.7 trillion surplus. Instead, in part because of all the PR and advertising and hired talking heads from Peterson's various front groups, Americans – particularly young Americans – are more likely than not to doubt Social Security will survive as long as they will.
This perception that the social safety net in this country is failing is helping turn America into a feudalistic state. Like in Dickens' 19th Century England, the wealthy elite increasingly control everything, and the working class is forced to live off of billionaire scraps.
Every day that the “Fix the Debt” and other Pete Peterson efforts succeed at destroying Americans' faith in our own government, We The People lose.
To learn more about Peterson and his campaign, and his millionaire CEO buddies, go to www.petersonPyramid.org. And spread the word. Our national wealth, our national retirement and social safety net programs, should not be handed off to Wall Street.

[Luther Blissett]

Isn't American manufacturing growth driven at least in some small part by fast / junk / frozen food "manufacturing"? Do I have that wrong? I believe the "Food" and part of the "Other" section in this chart account for these industries:

[JackRiddler]

http://www.marketwatch.com/Story/story/ ... 2128040CF6

March 7, 2013, 12:39 p.m. EST
Holder admits megabanks are ‘too big to jail’

Commentary: Congress must act, because Justice Dept. won’t

By Darrell Delamaide

WASHINGTON (MarketWatch) — Attorney General Eric Holder, the top U.S. law-enforcement official, finally admitted this week that bank executives truly are above the law and may commit crimes with virtual impunity.

Appearing before the Senate Judiciary Committee, Holder acknowledged under questioning by Republican Chuck Grassley of Iowa, the ranking member, that the megabanks are too big to jail. “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them,” Holder said.

Attorney General Eric Holder tells the Senate that the biggest banks have a get-out-of-jail-free card.

He continued: “When we are hit with indications that if you do prosecute — if you do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.”

Holder went on to suggest that, until Congress does something about it, the size of these banks will preclude bringing them to justice.

“I think it has an inhibiting influence, impact, on our ability to bring resolutions that I think would be more appropriate,” Holder said. “I think that’s something that we — you all — need to consider.”

While maintaining that the Justice Department has been “appropriately aggressive” in pursuing fraud at the banks, Holder conceded that levying a fine that is a small percentage of profit is far less effective in scaring bank executives into obeying the law than putting some individuals in jail.

“You are right, senator,” Holder replied to another question from Grassley. “The greatest deterrent effect is to prosecute the individuals in the corporations that are responsible for those decisions.”

Grassley and Sen. Sherrod Brown, an Ohio Democrat, have been pushing the Justice Department on the issue and have asked for the names of the outside “experts” officials say advised them that it would threaten financial stability to prosecute big banks. Read letter from Brown and Grassley to Holder at Senate.gov.

Outgoing Bank of England Gov. Mervyn King says Royal Bank of Scotland, which the U.K. government has an 82% stake in, should be split into a good and a bad bank. Will the government follow King's recommendation?

In a Congress marked by polarization and intransigence, this pursuit of answers as to why banks have not been punished for the widespread abuses that led to a near-collapse of the financial system five years ago has remained truly bipartisan.

Brown, chairman of the Senate subcommittee on financial institutions and consumer protection, announced last week that he and Sen. David Vitter, a Louisiana Republican, will be crafting legislation addressing the too-big-to-fail issue.

The two senators pushed through a bill last year mandating the Government Accountability Office study the economic benefit to the big banks from the market’s perception that they are, in fact, too big to fail.

While Grassley and Brown rightly zero in on the shadowy “experts” cited by both Holder and former Assistant Attorney General Lanny Breuer as providing advice on the impact of indicting big banks, the lawmakers need look no further than ex–Treasury Secretary Timothy Geithner to see where Justice is getting its guidance.

In what has become known as the “Geithner doctrine,” documented by numerous eyewitnesses to the administration’s deliberations on the financial crisis, the former Treasury chief consistently advocated preservation of the banks as the paramount objective in any measure.

As a result, as Democratic Sen. Elizabeth Warren of Massachusetts noted in a statement following Holder’s testimony Wednesday: “It has been almost five years since the financial crisis, but the big banks are still too big to fail … and are still not being held fully accountable for breaking the law.”

At a hearing last week, Warren took Federal Reserve Chairman Ben Bernanke to task for the “subsidy” reaped by the big banks from the perception that they are too big to fail, which a study by Bloomberg evaluated at $83 billion.

Bernanke countered that any benefit was a result of market perceptions, but he became less convincing as he argued that the perception was inaccurate because the Fed would not bail out the banks again.

While Holder may have been too quick to let himself off the hook regarding criminal prosecutions, he was right that it will be up to Congress to rein in the banks, since it has clearly been beyond the capability of President Barack Obama and his administration.

But Holder has perhaps done us all a favor by openly admitting that, until Congress does act, banks will remain too big to jail. The issue will no longer be an arcane matter for “experts” to decide but a question for the nation of how serious we are about preserving the rule of law.

Copyright © 2013 MarketWatch, Inc. All rights reserved.

[JackRiddler]

Oh, for fuck's sake. They've been doing secret settlements!

Current FDIC Acting Chairman: Martin Gruenberg.

(Do they pretend the money landed in the FDIC accounts by magic? Do they launder it through another agency, perhaps?)

http://www.latimes.com/business/la-fi-f ... 1291.story

In major policy shift, scores of FDIC settlements go unannounced

Since the mortgage meltdown, the FDIC has opted to settle cases while helping banks avoid bad press, rather than trumpeting punitive actions as a deterrent to others.

By E. Scott Reckard, Los Angeles Times

4:05 AM PDT, March 11, 2013

Three years ago, the Federal Deposit Insurance Corp. collected $54 million from Deutsche Bank in a settlement over unsound loans that contributed to a spectacular California bank failure.

The deal might have made big headlines, given that the bad loans contributed to the largest payout in FDIC history, $13 billion. But the government cut a deal with the bank's lawyers to keep it quiet: a "no press release" clause that required the FDIC never to mention the deal "except in response to a specific inquiry."

The FDIC has handled scores of settlements the same way since the mortgage meltdown, a major policy shift from previous crises, when the FDIC trumpeted punitive actions against banks as a deterrent to others.

Since 2007, 471 U.S. banks have failed, nearly depleting the FDIC deposit-insurance fund with $92.5 billion in losses. Rather than sue, the agency has typically preferred to settle for a fraction of the losses while helping the banks avoid bad press.

Under the Freedom of Information Act, The Times obtained more than 1,600 pages of FDIC settlements, made from 2007 through this year with former bank insiders and others accused of wrongdoing. The agreements constitute a catalog of fraud and negligence: reckless loans to homeowners and builders; falsified documents; inflated appraisals; lender refusals to buy back bad loans.

Defendants benefit by settling because they can avoid admitting guilt and limit the damages they might face in court. The FDIC benefits by collecting money without the hassle and expense of litigation. The no-press-release arrangements help close those deals.

Deutsche Bank, now the world's largest, settled to resolve claims that subsidiary MortgageIT sold shaky loans to Pasadena-based IndyMac Bank, which imploded under the weight of risky mortgages and construction loans. The IndyMac failure — considered one of the early events that helped usher in the 2008 financial meltdown — caused a scene reminiscent of the grim bank failures of the 1930s, with panicked depositors lining up outside branches trying to reclaim their money.

Overall, the FDIC collected $787 million in settlements by pressing civil claims related to bank failures from 2007 through 2012 — a fraction of its total losses.

FDIC spokesman David Barr said the agency always tries to settle failed-bank cases before filing lawsuits and that it announces settlements only when damage payments are large and media interest intense. He declined to discuss the legal strategy behind the Deutsche Bank deal and other no-press-release agreements. A Deutsche Bank spokeswoman declined to comment.

Critics fault the government for going easy on banks in the aftermath of the financial crisis. At a Feb. 14 hearing, Sen. Elizabeth Warren (D-Mass.), founder of the Consumer Financial Protection Bureau, criticized FDIC Chairman Martin J. Gruenberg along with other bank regulators for their reluctance to make examples of Wall Street firms by taking them to trial.

Seeking to recover deposit-insurance losses, the FDIC has dealt mainly with smaller institutions that failed, unlike the big banks that were bailed out.

Attorneys who have represented bank officials and the FDIC said regulators are now far likelier to settle cases before filing lawsuits than after the last spate of failures, when more than 2,300 institutions collapsed in the 1980s and early 1990s, bankrupting a fund that insured savings and loan deposits. That crisis grew out of Reagan-era deregulation, which allowed thrifts already hurting from 1970s inflation to make riskier investments, including commercial real estate deals that soured en masse during the second half of the 1980s.

Critics describe the FDIC's current practice of low-profile deal-making as a major departure from the S&L crisis.

"In the old days, the regulators made it a point to embarrass everyone, to call attention to their role in bank failures," said former bank examiner Richard Newsom, who specialized in insider-abuse cases for the FDIC in the aftermath of the S&L debacle. The goal was simple: "to make other bankers scared."

Newsom said he couldn't understand the shift, unless the agency doesn't "want people to know how little they are settling for."

The FDIC should disclose as much as it can, said Lauren Saunders, managing attorney at the National Consumer Law Center in Washington. "Transparency is always better, and serves as a deterrent to future misconduct."

Barr says attorneys representing the FDIC make clear to the defendants that, although it will not publicize settlements, it also cannot legally keep them secret.

The ban on secret settlements was a provision in one of the laws passed after the S&L crisis. Although the measure doesn't require the FDIC to call attention to settlements, nondisclosure agreements like that with Deutsche Bank violate "the spirit of the law," said Sausalito, Calif., attorney Bart Dzivi, a former Senate Banking Committee aide who drafted the provision.

Many of the FDIC settlements reviewed by The Times are small, but others required larger payments from prominent lenders. Quicken Loans and GMAC's Residential Capital unit, for example, separately agreed to pay $6.5 million and $7.5 million, respectively, over soured loans they had sold to IndyMac.

A ResCap spokeswoman declined to comment. Quicken Loans spokeswoman Paula Silver expressed surprise that the settlement became public, saying officials at the lender had believed that would not occur. "Quicken Loans and the FDIC entered into a 'confidential' agreement nearly three and a half years ago which clearly states that no party admits liability nor wrongdoing," Silver said in a statement.

At least 10 undisclosed settlements involved officers and directors accused of contributing to the collapse of their own banks. Those include 11 insiders at Downey Savings & Loan in Newport Beach who paid a total of about $32 million, most of it covered by corporate insurance policies. In the Downey case, the FDIC announced last year that four of the insiders had agreed to be banished from banking, including Maurice L. McAlister, Downey's co-founder, who died Feb. 13.

But the announcement mentioned nothing about the payments or sanctions against the seven other former insiders. Out of the $32 million, McAlister was required to pay $1.93 million out of his own pocket, with the other insiders paying a combined $1.75 million. Insurers that provided coverage for civil wrongdoing by officers and directors paid the remaining $28.4 million.

The FDIC also has resolved certain claims involving IndyMac, including a $1.4-million settlement in May 2011 with the thrift's former president, Richard Wohl. The agreement, filed as part of a complex corporate bankruptcy case, had gone unreported until December, when the agency provided it to The Times in response to questions.

The FDIC has recently stepped up the number of lawsuits against bank insiders. Century City attorney Jeffrey A. Tisdale, whose firm represents bankers, said the trend reflects insurers pushing back against FDIC demands that they settle claims for the policy maximum.

Insurers for bank directors and officers are saying, "We really are not an ATM machine for you, the FDIC," Tisdale said.

The FDIC also may have been emboldened by success in a rare case it took to trial, according to a recent report from consulting firm Cornerstone Research.

The trial led to a Dec. 7 federal jury verdict in Los Angeles ordering three former IndyMac executives to pay $168.8 million for what the FDIC said was reckless approval of 23 loans to developers and home builders who never repaid them. It was the highest award possible in the case.

Another FDIC lawsuit, seeking $600 million from former IndyMac Chairman and Chief Executive Michael Perry, was resolved for a fraction of the claim Dec. 14. Perry agreed to pay $1 million himself, allowed the FDIC to pursue an additional $11 million from insurers and agreed to be banned from the industry.

The news was first announced in emails sent to news organizations — not by the FDIC, but by Perry's defense attorneys, who considered the outcome a victory.

scott.reckard@latimes.com

Copyright © 2013, Los Angeles Times

http://www.huffingtonpost.com/2013/03/11/fdic-settlements-no-press-release_n_2854846.html?view=print&comm_ref=false

March 11, 2013
business
Edition: U.S.
FDIC Secretly Settling Bank Cases For Years With 'No Press Release' Clause: Report

The Huffington Post | By Mark Gongloff Posted: 03/11/2013 4:55 pm EDT | Updated: 03/11/2013 4:55 pm EDT


At the request of rule-breaking bankers, a top U.S. regulator has for years settled bank cases in secret, raising the bar on just how far regulators are willing to go to help the industry they regulate.

The Federal Deposit Insurance Corp., which insures bank deposits in the U.S. and shuts down failing banks, has since 2007 repeatedly settled charges of banker wrongdoing by agreeing to "no press release" clauses that keep the settlements a secret, the Los Angeles Times reports.

In one particularly glaring example, Deutsche Bank agreed to pay $54 million to quietly settle charges that its New York mortgage-banking subsidiary, MortgageIT, sold bad loans to another mortgage bank, Independent National Mortgage Corporation, a/k/a "IndyMac." IndyMac collapsed under the weight of bad mortgage loans in July 2008, a notable milestone in the financial crisis.

In exchange for the settlement, the FDIC agreed not to announce the deal unless it was asked about it, the LAT writes. That was just one of "scores" of such settlements the LAT discovered through a Freedom of Information Act request that turned up 1,600 pages of documents.

The FDIC would not comment to the LAT about the no-press-release clauses, but a spokesman did say that it announces settlements "when damage payments are large and media interest intense." And many of the settlements turned up by the FOIA request were indeed fairly small. That does not explain the non-announcement of the Deutsche Bank settlement, which was relatively large and would probably have attracted some media interest.

The no-disclosure clauses might have helped the FDIC settle cases more easily, saving it the expense of going to trial. But so far the agency has been able to recover only $787 million of the $92.5 billion lost to bank collapses between 2007 and 2012, according to the LAT. Those bank failures were often helped along by the banker misbehavior flagged in the FOIA documents, which the LAT calls "a catalog of fraud and negligence: reckless loans to homeowners and builders; falsified documents; inflated appraisals; lender refusals to buy back bad loans."

The revelation comes just days after U.S. Attorney General Eric Holder admitted publicly that some banks are simply too big to prosecute without hurting the broader economy. Instead, U.S. regulators have repeatedly doled out wrist slaps to major banks over allegations such as money laundering, mortgage fraud and foreclosure fraud, while declining to file criminal charges against either banks or individual bankers.

Regulators are also cracking under heavy banker pressure when it comes to implementing Dodd-Frank financial reform laws. The "Volcker Rule" that tells banks they can't gamble with their own money has been repeatedly delayed, and could soon be delayed again, the Wall Street Journal recently reported.

* Copyright © 2013 TheHuffingtonPost.com, Inc. |

[seemslikeadream]

Live-Blogging the Senate Hearing on J.P. Morgan Chase and the Infamous "London Whale" Episode

Read more: http://www.rollingstone.com/politics/bl ... z2NcVbrGmE
Follow us: @rollingstone on Twitter | RollingStone on Facebook

Beginning at 9:30 a.m. tomorrow, I'm going to be live-blogging a hearing held by Senator Carl Levin's Permanent Subcommittee on Investigations – the best crew of high-end detectives this side of The Wire, in my opinion – who will be grilling J.P. Morgan Chase executives and high-ranking federal regulators in a get-together entitled, "J.P. Morgan Chase "Whale" Trades: A Case History Of Derivatives Risks And Abuses." This follows this afternoon's release of a brutal 301-page report commissioned by Levin and Republican John McCain by the same name.

The Subcommittee investigators, largely the same crew who unraveled financial scandals surrounding infamous Goldman Sachs trades like Abacus and Timberwolf, and also took on HSBC's trans-global money-laundering activities in an extraordinarily detailed report issued last summer, have now taken aim at the heart of the Too-Big-To-Fail issue through its examination of the much-publicized catastrophic derivative trades made by its amusingly-nicknamed "London Whale" trader, Bruno Iksil, last year.

Most ordinary people dimly remember the London Whale episode now, and even at the time struggled to understand even the vaguest contours of the story while mainstream reporters (including people like myself) were trying with all their might to make sense of it from afar. What most people got out of that story was that J.P. Morgan Chase somehow lost buttloads of money through some sort of impossibly complex derivative trade – billions, though nobody could ever settle on an exact number – and that this was somehow a very bad thing that required the attention of the federal government, although even that part of it was a bit of a mystery to most ordinary people.

Gangster Bankers: Too Big to Jail

Why should we care if a private bank, or more to the point a private banker like Chase CEO Jamie Dimon, loses a few billion here and there? What business is it of ours? And why did we have to have congressional hearings about it last year? The whole thing certainly seemed a big mystery to Dimon himself, who dragged himself to Washington and spent the entire time rolling his eyes and snorting at Senators' questions, clearly put out that he even had to be there.

This new report by the Permanent Subcommittee answers the question of why the public needed to be involved in that episode. What the report describes is an epic breakdown in the supervision of so-called "Too Big to Fail" banks. The report confirms everyone's worst fears about what goes on behind closed doors at such companies, in the various financial sausage-factories that comprise their profit-making operations.

If the information in the report is correct, Chase followed the behavioral model of every corrupt/failing hedge fund this side of Bernie Madoff and Sam Israel, only it did it on a much more enormous scale and did it with federally-insured deposits. The fund used (in part) federally-insured money to create, in essence, a kind of super high-risk hedge fund that gambled on credit derivatives, and just like Sam Israel did with his Bayou fund, when it got in trouble, it resorted to fudging its numbers in order to disguise the fact that it was losing money hand over fist.

Chase for years hid the very existence of this operation from banking regulators and lied about the purpose of the fund (saying it was purely a hedging operation when it stopped being a hedge and instead became a wild directional gamble), and it also changed the way it calculated the fund's value once it started to lose hundreds of millions of dollars. Even worse, the bank's own internal auditors signed off on the phoney-baloney accounting of this Synthetic Credit Portfolio (SCP), at one point allowing it to claim $719 million in losses when the real number was closer to $1.2 billion.

How did they do this? In the years leading up to January of 2012, Chase used a standard, plain-vanilla method to price the derivative instruments in its portfolio. The method was known as "mid-market pricing": if on any given day you had a range of offers for a certain instrument – the "bid-ask" range – "mid-market pricing" just meant splitting the difference and calling the value the numerical middle in that range.

But in the beginning of 2012, Chase started to lose lots of money on the derivatives in its SCP, and just decided to change its valuations, that they weren't in the business of doing "mids" anymore. One executive thought the "market was irrational." As the Subcommittee concluded:

By the end of January, the CIO had stopped valuing two sets of credit index instruments on the SCP's books, the CDX IG9 7-year and the CDX IG9 10-year, near the midpoint price and had substituted instead noticeably more favorable prices.

If you can fight through the jargon, what this basically means is that Chase decided to go into the fiction business and invent a new way to value its crazy-ass derivative bets, using, among other things, a computerized model the company designed itself called "P&L predict" which subjectively calculated the value of the entire fund toward the end of every business day.

If this all sounds familiar, it's because it's the same story we've heard over and over again in the financial-scandal era, from Enron to WorldCom to Lehman Brothers – when the going gets tough, and huge companies start to lose money, they change their own accounting methodologies to hide their screw-ups, passing the buck over and over again until the mess explodes into the public's lap. The difference is that Chase is a much bigger and more dangerous company to be engaging in this kind of behavior.

An even scarier section of the report regards the reaction of the Office of the Comptroller of the Currency, or OCC, the primary government regulator of Chase. The report exposes two huge problems here. One, Chase consistently hid crucial information from the OCC, including the sort of massive increases in risk the OCC was created precisely to monitor. Two, even when the bank didn't hide stuff, the OCC was either too slow or too disinterested to take notice of potential problems. From the report:

During 2011, for example, the notional size of the SCP grew tenfold from about $4 billion to $51 billion, but the bank never informed the OCC of the increase. At the same time, the bank did file risk reports

with the OCC disclosing that the CIO repeatedly breached the its stress limits in the first half of 2011, triggering them eight times, on occasion for weeks at a stretch, but the OCC failed to follow up with the bank.

In other words, Chase added nearly $50 billion in risk and failed to mention the fact to the OCC – but the OCC also failed to bat an eyelid when Chase breached its stress limits eight times in a space of six months, often for weeks at a time. Do you feel safer now?

This episode proves what everyone already implicitly understands about these gigantic banking institutions: that their accounting is often little more than a monstrous black box within which any sort of mischief can and probably is being hidden from shareholders, counterparties, and the public, which has a direct interest in the health of these banks because (a) their enormous size makes them systemically important, i.e. we'd all be screwed if any of them collapsed, and (b) they are the supposedly cautious and conservative guardians of billions in federally-insured deposits.

The Senate investigators highlighted a frightening metaphor to explain what they found out about Chase's response to its burgeoning accounting disaster last winter and spring:

The head of the CIO's London office, Achilles Macris, once compared managing the Synthetic Credit Portfolio, with its massive, complex, moving parts, to flying an airplane. The OCC Examiner-in-Charge at JPMorgan Chase told the Subcommittee that if the Synthetic Credit Portfolio were an airplane, then the risk metrics were the flight instruments. In the first quarter of 2012, those flight instruments began flashing red and sounding alarms, but rather than change course, JPMorgan Chase personnel disregarded, discounted, or questioned the accuracy of the instruments instead.

Investigators took note of this and then, sensibly, wondered if Chase was the only bank ignoring all those flashy lights:

The bank's actions not only exposed the many risk management deficiencies at JPMorgan Chase, but also raise systemic concerns about how many other financial institutions may be disregarding risk indicators and manipulating models to artificially lower risk results and capital requirements.

Anyway, officials from Chase and the OCC are being dragged in tomorrow to answer some heavy questions about all of this. Expect a lot of double-talk, sweaty foreheads, pompous "You just don't understand because you don't make enough money" excuses, and other sordid behaviors. Tune in here for updates.

In the meantime, kudos to Senator Levin and to his Republican partner in this investigation, John McCain, for taking on this topic. Increasingly, key voices in the upper chamber like these two, plus Ohio's Sherrod Brown, Iowa's Chuck Grassley, Oregon's Jeff Merkley, Vermont's Bernie Sanders and others are starting to act genuinely worried about the Too Big to Fail issue. Their determination to keep it in the public eye is, to me, a signal that a consensus is forming behind the scenes on the Hill.



Read more: http://www.rollingstone.com/politics/bl ... z2NcWOPOT1
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11:10 a.m. These early witnesses are being smart, somberly nodding and agreeing with Levin every time he asks a question like, "Weren't you all being raving, irresponsible douchebags when you ignored these warnings of huge losses last year?" Example: when Levin asks current risk chief Ashley Bacon if someone should have investigated all these breaches in risk limits last year, Bacon lowers his head and says, "Yes, Senator." Big stylistic difference from the Goldman hearings, where the Goldman guys couldn't resist letting their know-it-all attitudes leak out. Weiland has come close a few times, but otherwise, we've seen none of that.

11:16 a.m. Break in the action. New witnesses will be coming on. Two guys just below Dimon in the Chase food chain will be coming on, co-Chief Executive Officer Michael Cavanaugh and Vice Chairman Douglas Braunstein. Unlike Drew and Weiland, they won't be falling on any swords I think.



Read more: http://www.rollingstone.com/politics/bl ... z2NcdzM1WO
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Jamie Dimon Email Directly Ties JPMorgan CEO To $6.2 Billion Fiasco
Posted: 03/15/2013 11:34 am EDT | Updated: 03/15/2013 2:00 pm EDT

Jamie Dimon’s email response was direct and to the point. “I approve,” he wrote to an oversight body within his enormous bank, JPMorgan Chase, thereby giving his blessing to an increase in the amount of risk the institution could shoulder. He also approved a change in the way a key trading unit was assessing threats of trouble in its then-burgeoning portfolio.

That email -- released late Thursday as part of a 300-page Senate report probing how and why Dimon’s bank managed to lose $6.2 billion on derivatives trading -- now appears to tie the chief executive directly to the disastrous decision-making at issue.

The trading occurred in the London offices of a bank unit known as the chief investment office, which was officially tasked with hedging against losses in JPMorgan's broader positions. The Senate report portrays the CIO as a locus of reckless speculation, asserting that executives with oversight ordered the manipulation of a key risk model to make its activities appear conservative.

According to the report, for four days beginning on January 20, 2012, the CIO’s trading exceeded the bank’s own acceptable risk measures by one metric. But the bank did not conduct an internal review. Instead, JPMorgan temporarily raised its risk limits. Then, on January 27, the CIO tweaked its very measure of risk: The change immediately cut in half the CIO's supposed risk, pushing it well below the bank's limit.

According the report, this effective manipulation enabled the CIO to triple the size of the portfolio that eventually produced its headline-grabbing derivatives losses in the first three months of 2012.

The email trail included in the report suggests that responsibility for this change goes all the way up to Dimon.

On January 23, the risk management group emailed the chief executive to ask for the authority to temporarily raise the bank’s overall risk limit. The same email informed Dimon that the CIO "has developed an improved" risk model that would cut the CIO's measurement of risk by nearly half. Dimon wrote back to approve the change, according to the report.


By May 10, amid media disclosures about the extent of the losses emanating from the CIO, JPMorgan forced the trading unit to revert to its old risk model, according to the report. That same day, when Dimon was asked on a call with investors and analysts why JPMorgan had changed its risk model in the first place, he simply said: "There are constant changes and updates to models, always trying to get them better than they were before. That is an ongoing procedure."

[JackRiddler]

At http://alternativebanking.nycga.net, Cathy O'Neil with a hell of a round-up of recent news stories. Everything's happening fast! (On this board someone's sure to be pissed off about the inclusion of "Occupy the NRA"?)

http://alternativebanking.nycga.net/?p=717

March 17th meeting topics and announcements

Hey guys,

Holy crap a lot has happened in the past week. We can't possibly talk about all the juicy details, but you know we'll try!!

We're meeting tomorrow, as usual, at Columbia University in Room 409/410/411 (whichever is open to us) of the International Affairs Building at 118th and Amsterdam (go into the building on 118th and go up the half-staircase directly in front of you past the elevators, and turn left twice into a side hallway). If you don't know how we roll, details can be found here.

Let's meet early tomorrow, at 2:00 in Room 409, to discuss May Day plans.

Announcements:

Strike Debt is in the news.

Occupy the NRA is having a protest on Monday.

Dallas Fed President Richard Fisher is still our hero: watch him call the TBTF situation "crony capitalism".

SAC and the $614 million insider trading penalty. Can we do a complete top-down cost-benefit analysis of fraud on Wall Street now? Just how profitable is criminality when we think about it as a business plan?

Cyprus is being bailed out by its people. They're removing money out of savings accounts, kind of like a negative FDIC guarantee. That might encourage people to remove their money from banks. More likely it will encourage rich people to put their money in Switzerland.

Expand Social Security instead of contracting it, says Barro twice.

The 401K experiment in the US is over, and people are removing money from their 401K's in huge numbers. Are we finally hearing sanity emerge?

JP Morgan's whale loss is bolstering calls to end TBTF. They blamed bad VaR models and insufficient risk limits but since they manipulated both, fixing them won't help. It's also useful to think about fear of losing money versus greed in the context of the whale loss.

The CFPB is looking into private college loan practices.

Liz Warren is saying it like it is on Republican attempts to defang the agency.

Please send me other topics. See you all tomorrow!

Love,
Cathy

p.s. it will be St. Patrick's day tomorrow. I expect people to be dressed and to behave accordingly.

[JackRiddler]

IRELAND

This copy is for your personal, non-commercial use only.

March 18, 2013

The Destruction of Savings and Pensions
Ireland’s Home Mortgage Crisis: No Debt Relief

by CAOIMHGHIN Ó CROIDHEÁIN

We are living in a society where the combination of fractional-reserve banking (lending out multiples of deposits) helped along by quantitative easing (printing almost unlimited quantities of money) based on fiat currencies (money without intrinsic value) has created exponential growth for the world’s financial elites. This led to unprecedented bubbles in the property market as banks made it easy for people to borrow more money than they would have been allowed in the past when a conservative banker guideline for a home buyer was to have a two to two and a half times mortgage-to-salary ratio.

In contrast to these methods for almost unlimited sources of (false) wealth conjured up by financial elites, workers (borrowers) have only one source – wages – which are going into decline due to government cutbacks and increased taxes. Yet despite this obvious anomaly, whereby the banks get bailouts with even more money, borrowers are expected to pay back, and in full, under threat of repossession, every single cent of the flawed money lent to them to pay exorbitant house prices inflated by excessive lending in the first place.

According to David Hall, Director, Irish Mortgage Holders Organisation:

‘The Irish mortgages crisis, now into its sixth year, is still raging beyond any control of the authorities. Per latest figures from the Central Bank of Ireland, 186,785 mortgages (including BTL) in Ireland are at risk (in arrears, restructured or in repossession), accounting for an unprecedented 25.3% of all mortgage accounts still outstanding.’

Hall goes on to state that ‘with some 650,000-750,000 estimated people residing in the households with the principal residence in mortgages difficulties, we are witnessing a wholesale destruction of savings, pensions and wealth of several generations of Irish people.’

As if that wasn’t bad enough the government is introducing property charges from 1st July. Media discussion of these issues revolve around valuations of properties and not around the huge amounts of tax already paid to the government when the houses were purchased or the fairness of such a tax on properties which were bought during the bank-inflated boom, delusionally misnamed yet commonly known as the ‘Celtic Tiger’.

Media pundits, sounding like poodles discussing the length of their leashes, have not questioned the ethics of forcing people to pay back such huge sums of money under the rubric that allowing people to write-down a portion of the debt would cause a ‘moral hazard’ (as if the initial lending spree was itself moral). Similarly, there is little discussion of the property tax deferral option for low income persons, a sinister move, which implies, (like with the hard line taken on mortgage repayments) that exemption is not an option any more for low wage earners but only more accumulated debt (with interest) to be paid sometime in the future- further impoverishing those least able to pay.

Adding insult to injury, the Department of Finance secretary general John Moran spoke recently of an “unnaturally low level of repossessions” and that ‘homeowners could not expect the taxpayer to subsidise them to remain in a house “that is beyond their means”.’ It is interesting to note that ‘their means’ didn’t seem to matter at all when it came to lending out the huge amounts of money at the outset.

Credite posteri - Believe it, future generations (Horace).

Caoimhghin Ó Croidheáin is a prominent Irish artist who has exhibited widely around Ireland. His work consists of paintings based on cityscapes of Dublin, Irish history and geopolitical themes (http://gaelart.net/). His blog of critical writing based on cinema, art and politics along with research on a database of Realist and Social Realist art from around the world can be viewed country by country at http://gaelart.blogspot.ie/.

CYPRUS

(Thanks to SLAD for posting.)

7 Things You Need to Know About the Shocking Cyprus Bailout Crisis That Has Everyone Freaked Out
Fears of bank runs, a Lehman-like collapse, and widespread panic are building.
March 17, 2013 |

In a small island nation far, far away, the financial shit is hitting the fan. A new bailout package in the euro zone comes with terms that are causing a tsunami of anxiety across Europe and beyond. Here’s what’s happening and why it matters.

1. What the heck is going on?

Since 2008, the Greek economy has gone from bad to worse. As Greece’s economy collapsed, the European and Greek banks that held the nation’s debts should have been told to eat their losses, write off the debts, and replace their managements. Instead, the European Union stepped in to engineer one bailout after another. The prices for the bailouts were high: austerity policies that didn’t work. The result everywhere is that national income has fallen steeply, while the countries fall further into debt.

Cypriot banks got into trouble from their exposure to neighboring Greece. Finance ministers from euro countries and representatives from the IMF and the European Central Bank came up with a radical plan for a bailout to Cyprus’ banks: In exchange for €10 billion ($13 billion) in rescue money, creditors would impose a one-time tax of 6.75 percent on all bank deposits under €100,000 ($131,000) and 9.9 percent over that amount, while Cyprus cut government spending and raised revenues. The decision to make depositors pay was a stunning departure from past EU-led bailouts.

On Saturday, freaked-out bank customers rushed to ATMs to withdraw as much of their cash as possible. The Cyprus government announced a bank holiday on Monday (a national holiday) and temporarily halted all electronic bank transfers. The bank holiday has now been extended until Tuesday.

The Cypriot Parliament was originally supposed to meet on Sunday to vote on the deal, but the vote has been postponed until Monday. Cypriot officials fear a full-on bank run once lenders reopen their doors.

2. Where would the money go?

Money obtained through the one-time tax would go to recapitalize Cyprus banks and service the country's debt.

3. Who would get hit by this deal?

Bank owners, unsurprisingly, are not being asked to pay into the package. Bank depositors are. This number includes ordinary Cypriots, British pensioners, and others who have their money in the banks, including a large number of wealthy Russian and Middle Eastern depositors. The depositors have been promised bank shares in exchange for the money that gets grabbed. But, um, who wants shares in banks that are in the financial toilet? Exactly no one. There has also been chatter that depositors will be given some kind of interest in bonds from gas fields presumably controlled by Cyprus.

4. Who wants the bailout?

The European Central Bank, the IMF, and the EU are the ones pushing this deal. Cyprus Prime Minister Nicos Anastasiades says he doesn’t like the deal and claims to be trying to soften it so that depositors with small accounts don’t get hit so hard.

5. Who opposes it?

Depositors hate the deal, obviously. Most of the population of Cyprus correctly believes they are being asked to pay for the sins of the banks. Well, “forced” is a better term, because no one’s really asking. According to the Wall Street Journal, one incensed resident of the town of Limassol parked a backhoe in front of a local bank to express the widespread sentiment about the deal.

6. What’s at stake?

Unfortunately, this is going to be ugly any way you slice it. On Monday, if Cyprus’ Parliament says no to the deal, there will be chaos because everybody will think the banks are belly up and there will be a bank run. That could be something like Lehman Brothers, meaning chain bankruptcies and panic throughout Europe.

On the other hand, if Parliament takes the deal, then a rescue will happen, but under terms that put everyone at risk. The message will be out that depositors in the euro zone can get hit and people in Italy, Spain and Greece will be particularly freaked out. The possibility of a bank run in those countries will grow.

7. How will America be impacted?

International banks like Bank of America and JPMorgan Chase are part of global networks. But deposits in American banks up to $250,000 are insured by the Federal Deposit Insurance Corporation. While banks pay something for their ordinary participation in this program, ultimately it is Uncle Sam – meaning you and me – who are on the hook when the FDIC needs backstopping. So our too-big-to-fail banks look set to profit from the federal government they love to denounce, as anxious depositors around the world move money into insured US banks.

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