Disinformation » Banks

‘The Big Short’ Is A Bit Short In Missing The Reasons for The Crisis

Danny Schechter — Tue, 16 Mar 2010 17:24:49 +0000

It’s the number one book in the country. Every day, Michael Lewis’s The Big Short: Inside the Doomsday Machine is getting B I G G E R, no doubt because he is so mediagenic, conversational and likes to laugh with the hosts who interview him about his findings.

On Sunday, he laughed with Steve Kroft on 60 Minutes when the two bantered on about how about stupid it all was and why so many smart people drank the Kool Aid. The story he tells has no hard edges really…it’s about “delusion,” Wall Street deluding us all and then each other.

The idea of delusions feeds a psychological and cultural analysis of bankers cut off from the world, focused on their own pocket books and believing their own hype. It is in this sense Shakespearian—the stuff of drama, not calculation. What a web we weave when first we practice to deceive, to quote Sir Walter Scott.

At one point in the 60 Minutes two part interview purporting to explain the collapse, Lewis drifts off message and calls it all, an “elegant theft.”

Theft is a word we associate with crime, not personal greed or human failings. But that point was left unexplored by 60 Minutes, of course, because if the story is about crime, than we have to move into the arena of facts, not just opinions, insights, hyperbole and personalities.

Ironically, many of the facts that Lewis himself cites comes from an undergraduate college thesis according to the Deal Journal of the Wall Street Journal which calls his book a “yam.” They note that his book credited ““A.K. Barnett-Hart, a Harvard undergraduate who had just written a thesis about the market for sub prime mortgage-backed CDOs that remains more interesting than any single piece of Wall Street research on the subject.”

Perhaps even more interesting than his book?‘

Earlier, Lewis told the Atlantic what his main sources of information is: “Actually, if you were to draw a pie chart of where I get news from, I bet I get a third from whatever people in Berkeley—specifically the parents’ at my kids’ school—are outraged about. I’m surrounded by people who are alive to what’s going on in the world and who are quick to be outraged by it.”

So there he goes again, with emotion and attitude apparently meaning more to him than fact finding.

Lewis has criticized those who criticize Goldman Sachs, according to Bloomberg, writing earlier, “bashing Goldman Sachs is Simply a Game for Fools.”

Which side is he on I would guess, his side? On 60 Minutes, TV’s top news magazine, he was described as a former trader. Not according to Janet Takakoli who runs her own financial firm:

“Imagine my surprise to see him billed as a trader on 60 Minutes, since he was actually a junior salesman, she writes on Huffington Post, “Well-heeled male peacocks strutted the trading floor, and junior salesmen were girlie-men, mere eunuchs serving their pashas.”

She also notes that he was among the “experts” who downplayed the warnings about the very financial crisis that he has suddenly, thanks to validation from CBS and MSNBC, become THE expert on, charging, “he ridiculed their concern of a pending crisis due to the surge in derivatives demand and called it “this year’s case in point.” Then Michael showed how dangerous it is to be a brilliant writer with a poor command of facts and their true meaning”

Financial analysis is not what the media is well equipped to communicate. As a media dissector and editor of Mediachannel, I have followed the reporting of this story closely with many detailed articles and in two books since, even before it became a story back to 2005 when I made my film In Debt We Trust only to be dismissed by some as a doom and gloomer for exposing the subprime mortgage fraud.

I was hoping that Rachel Maddow would challenge his mass delusion theory but she bought right into it also, in her interview. At one point Lewis opined that there was DECEPTION (i.e., lying by the investment world) but that too was not examined as Lewis himself counterpoised two explanations for the disaster, asking, “was it mass delusion or crime?

And then he “answered” his own question or appeared to, by asserting that when you ask the people involved, they say it was delusion.

Duh, Michael? What do you think they would say? Do think they would cop to their own criminality? For them, it was all one big miscalculation, never mind who got hurt, which neither 60 Minutes nor Maddow explored.

Sorry to say, Jon Stewart did no better with his part of Lewis’ all star media mystery tour. He did introduce him as one of the people making big money on the crisis but then jokingly let him ramble on, praising the sometimes weird people who made small fortunes betting against Wall Street. They were his heroes. Again no concern was expressed for the people they cheated—only the idiots who lost money in the” kingdom where the blind man was king.”

Lewis like many non-fiction novelists prefers character-based story telling or “yarns” to more objective analytical investigation. It makes for better narratives, and bigger best sellers. It also gets e interviewers laughing instead of crying. Why? Because there are only smart men doing things that turn out to be stupid, it makes us all feel superior to them even if they had the last laugh on the way to the bank.

Sorry, The Big Short seems short—short of a serious consideration of what really drove the financial crisis and the reason that 82% of the American people recently said they want a crack down on Wall Street, not a chance to feel sorry for the “delusions” of its masters of the universe. They want a jail out—not a bailout.

On the very day of Rachel’s fawning, but well intentioned interview, United States Senator Ed Kaufman of Delaware, the state that provides a sanctuary for most US corporations and credit card companies, made a speech which got at the heart of the matter.

Senator Kaufman did not get lost in the vague clouds of “delusion.” He was more down to earth arguing.

“Fraud and potential criminal conduct were at the heart of the financial crisis”

Let me repeat and capitalize this brave Senatorial assertion: “FRAUD AND POTENTIAL CRIMINAL CONDUCT WERE AT THE HEART OF THE FINANICAL CRISIS/”

The Senator goes on: “Americans could draw at least three lessons from the (Lehman) report: that we must “undo the damage caused by decades of deregulation;” that the United States must “concentrate law enforcement and regulatory resources on restoring the rule of law to Wall Street;” and that Congress must help regulators and other gatekeepers “by providing clear, enforceable ‘rules of the road’ wherever possible.”

Unfortunately, says Kaufman, “I’m concerned that the revelations about Lehman Brothers are just the tip of the iceberg. We have no reason to believe that the conduct detailed last week is somehow isolated or unique. Indeed, this sort of behavior is hardly novel.”

Now, it so happens that I have been making a similar argument in my own book The Crime Of Our Time, and film Plunder: The Crime of Our Time. But I am not a former Wall Streeter or best selling author or a US Senator. So my work and the work of many other “outsiders” are still unknown.

The media prefers to seek the truth from the very people who either caused the crisis or who were in media perches that ignored it.

The point is that many people, many very qualified who have arguing the crime thesis—some in my film—have not so far had the benefit of the prime time exposure even though the American people believe it even was the media downplays it.

Will that change? Only if the people don’t believe the hype and demand the truth!

News Dissector Danny Schechter’s film and book will be released in April by Disinformation. For more information, Plunderthecrimeofourtime.com.

Goldman Sachs CEO’s Giant, Nuclear-Powered Testicles

majestic — Mon, 22 Feb 2010 22:32:51 +0000

As described by the inimitable Matt Taibbi, for Rolling Stone:

On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America’s pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman’s role in precipitating the global financial crisis.

The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a “bailout tax” on banks. Maybe this wasn’t the right time for Goldman to be throwing its annual Roman bonus orgy.

Not to worry, Blankfein reassured employees. “In a year that proved to have no shortage of story lines,” he said, “I believe very strongly that performance is the ultimate narrative.”

Translation: We made a shitload of money last year because we’re so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.

Goldman wasn’t alone. The nation’s six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. “What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?” asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.

Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America’s populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit…

[continues at Rolling Stone]

Bank of America Forecloses on Home with No Mortgage

Raymond — Thu, 18 Feb 2010 16:21:34 +0000

I think the family’s lawyer in this case has it right when he says that this can only be explained by “the arrogance of the bank.” View the source article for updates.

From Examiner.com:

Maria and Charlie Cardoso, who reside in Massachusetts, had been renting out the Spring Hill, Florida home they purchased in 2005 with cash. However, Bank of America, who had no connection to the property, took it anyway, ignoring complaints by the Cardoso’s that they had the wrong house.

The couple has filed a 1.5 million dollar lawsuit in Bristol County Massachusetts District Court, and is demanding a jury trail.

[Read more at Examiner.com]

Americans United For Change Goes After Wall Street ‘Casinos’ With TV Ad

Ralph Bernardo — Wed, 17 Feb 2010 09:25:49 +0000

From Americans United For Change:

Americans United for Change and American Family Voices unveiled a new television ad today as part of a ramped up coalitional effort urging Congress to pass President Obama’s financial regulatory reform plan to make Wall Street more transparent and accountable and prevent another financial crisis. The new ad comes as Citi, one of the largest recipients of taxpayer dollars, revealed how Wall Street is fully back to business as usual by announcing plans to create “the first derivatives intended to pay out in the event of a financial crisis.”

Argentina Seizes the Central Bank

Raymond — Tue, 09 Feb 2010 02:27:01 +0000

From WSJ:

After a month of wrangling, Argentine President Cristina Kirchner succeeded in sacking central bank President Martin Redrado last week. In his place she named Mercedes Marcó del Pont, a Yale-trained economist who has expressed the view that central bank autonomy ought to be limited.

The opposition howled at the news. Felipe Sola, former governor of Provincia de Buenos Aires, warned that the new bank president “is going to do what the executive decides and they are going to modify the bank charter to justify her doing what the executive tells her.”

Of course that would seem to be the point. Mr. Redrado was fired because he refused to turn over $6.6 billion in bank reserves to Mrs. Kirchner, who wants to pay foreign creditors but doesn’t want to use treasury revenues. Ms. Marcó del Pont, if she wants to keep her job, will follow the orders of the president.

Mrs. Kirchner is not the first politician to covet the wealth available from the monetary authority. Closer to home, there is Barack Obama, who didn’t back Ben Bernanke’s controversial second term as head of the Federal Reserve out of magnanimity. Mr. Bernanke kept his job because he has shown a willingness to finance Mr. Obama’s big-government agenda.

[Read more at WSJ]

Secret Banking Cabal Emerges From AIG Shadows

majestic — Fri, 29 Jan 2010 16:51:55 +0000

David Reilly sounds like he’s about to join the anti-New World Order crowd, writing in a surprising venue—bankers’ staple news source Bloomberg News:

The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.

Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny.

The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.

That move came a few weeks after the Federal Reserve and Treasury Department propped up AIG in the wake of Lehman Brothers Holdings Inc.’s own mid-September bankruptcy filing.

Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. He maintained during Wednesday’s hearing that the New York bank had to buy the insurance contracts, known as credit default swaps, to keep AIG from failing, which would have threatened the financial system.

The hearing before the House Committee on Oversight and Government Reform also focused on what many in Congress believe was the New York Fed’s subsequent attempt to cover up buyout details and who benefited.

By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve…

Bankers Destroy $7 For Every $1 They Earn

JacobSloan — Fri, 22 Jan 2010 18:28:18 +0000

BBC News reports on a study analyzing the true societal value of different occupations. In many cases, it seems one’s salary is inversely proportional to the value one generates for society as a whole:

The research, carried out by think tank the New Economics Foundation, says hospital cleaners create £10 of value for every £1 they are paid.

[Meanwhile,] leading bankers are a drain on the country because of the damage they caused to the global economy…They reportedly destroy £7 of value for every £1 they earn.

By devising schemes to cut the amount of money available to the government, tax accountants destroy £47 in value for every pound they generate.

‘Freefall’ Excerpt: Too Late To Fix The Biggest Banking Blunder In History?

majestic — Tue, 19 Jan 2010 19:39:41 +0000

Rogue economist Joseph Stiglitz has a new book out, Freefall: America, Free Markets, and the Sinking of the World Economy, excerpted here by the Huffington Post:

The entire series of efforts to rescue the banking system were so flawed, partly because those who were somewhat responsible for the mess–as advocates of deregulation, as failed regulators, or as investment bankers–were put in charge of the repair. Perhaps not surprisingly, they all employed the same logic that had gotten the financial sector into trouble to get it out of it. The financial sector had engaged in highly leveraged, non-transparent transactions, many off balance sheet; it had believed that one could create value by moving assets around and repackaging them. The approach to getting the country out of the mess was based on the same “principles.” Toxic assets were shifted from banks to the government–but that didn’t make them any less toxic. Off-balance sheet and non-transparent guarantees became a regular feature of the Treasury, Federal Deposit Insurance Corporation, and Federal Reserve. High leverage (open and hidden) became a feature of public institutions as well as private.

Worse still were the implications for governance. The Constitution gives Congress the power to control spending. But the Federal Reserve was undertaking actions knowing full well that if the collateral that it was taking on proved bad, the taxpayer would bail it out. Whether the actions were legal or not is not the issue: they were a deliberate attempt to circumvent Congress, because they knew that the American people would be reluctant to approve more largesse for those who had caused so much harm and behaved so badly.

The U.S. government did something worse than trying to re-create the financial system of the past: It strengthened the too-big-to-fail banks; it introduced a new concept–too-big-to-be- financially-resolved; it worsened the problems of moral hazard; it burdened future generations with a legacy of debt; it cast a pallor of the risk of inflation over the U.S. dollar; and it strengthened many Americans’ doubts about the fundamental fairness of the system. Central bankers, like all humans, are fallible. Some observers argue for simple, rule-based approaches to policy (like monetarism and inflation targeting) because they reduce the potential for human fallibility. The belief that markets can take care of themselves and therefore government should not intrude has resulted in the largest intervention in the market by government in history; the result of following excessively simple rules was that the Fed had to take discretionary actions beyond those taken by any central bank in history. It had to make life and death decisions for each bank without even the guidance of a clear set of principles…

[continues at the Huffington Post]

Bill Maher: Stop the Abuse — It’s Time to Break Up With Your Big Bank

Ralph Bernardo — Sun, 17 Jan 2010 20:50:09 +0000

Bill Maher via the Huffington Post:

Hello, I’d like to take a moment to address the millions and millions of you all across America who are currently stuck in an abusive relationship.

Now I know what some of you are thinking: Who is Bill Maher to give me relationship advice?

But that doesn’t mean I don’t know a dysfunctional relationship when I see one. Especially when it’s staring me right in the face.

You know who you are. Those of you staying in a relationship long after it’s turned bad. Sticking around despite the abuse — even as it’s gotten worse and worse over the years. Sticking around only because it seems easier than breaking up — and besides, where else are you going to go?

That’s right, I’m talking to all of you that keep doing your banking at the giant, too big to fail, Wall Street banks that brought our economy to the brink of disaster, were rescued by trillions of dollars of our taxpayer money, then paid us back by using that money to hire lobbyists to convince our lawmakers in Washington to kill financial reform.

Banks Set To Record Pay Their People

Aaron Dames — Sun, 17 Jan 2010 02:18:36 +0000

Stephen Grocer writes in the Wall Street Journal:

Major U.S. banks and securities firms are on pace to pay their people about $145 billion for 2009, a record sum that indicates how compensation is climbing despite fury over Wall Street’s pay culture.

An analysis by the Wall Street Journal shows that executives, traders, investment bankers, money managers and others at 38 top financial companies can expect to earn nearly 18% more than they did in 2008—and slightly more than in the record year of 2007. The conclusions are based on an examination of securities filings for the first nine months of 2009 and revenue estimates through year-end.

The rapid comeback of pay on Wall Street, which will be on display as companies report fourth-quarter results starting with J.P. Morgan Chase & Co. on Friday, has exposed the industry to a broadening mix of proposed crackdowns, including a 10-year, $90 billion bank tax described for the first time Thursday by President Barack Obama

In detailing the tax, Mr. Obama aimed some sharp words at bankers.

“I’d urge you to cover the costs of the [financial] rescue not by sticking it to your shareholders or your customers or fellow citizens with the bill, but by rolling back bonuses for top earners,” Mr. Obama said.

Move Your Money Out Of The Mega-Banks

JacobSloan — Mon, 11 Jan 2010 16:17:42 +0000

The Huffington Post urges readers to move their savings and checking accounts out of Citibank, JP Morgan Chase, and Bank of America, and into smaller, independent banks. I think it’s an inspired idea:

America’s Main Street community banks — the vast majority of which avoided the banquet of greed and corruption that created the toxic economic swamp we are still fighting to get ourselves out of — are struggling.

Why don’t we take our money out of these big banks and put them into community banks? What would happen if lots of people around America decided to do the same thing?

Santa Bank Robbery

JacobSloan — Sat, 26 Dec 2009 17:21:23 +0000

Authorities in Nashville are reporting that a man dressed as Santa Claus committed a gunpoint bank robbery on Christmas Eve. A witness says that Santa was “actually jovial, which was scary. He explained that he was robbing the bank because Santa had to pay his elves.”

There have been a number of infamous crimes in U.S. history involving Santa Claus; perhaps the worst occurred when a “Santa” shot dead six people during a bank robbery in Texas in 1927.

Drug Money Rescued The World’s Banks

JacobSloan — Mon, 21 Dec 2009 17:39:39 +0000

Who were the heroes who brought the United States and the rest of the world away from the brink of financial catastrophe this past year? Time person-of-the-year Ben Bernanke and co.? Nope, more like the Mexican Mafia. From the Guardian:

Drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, [says] the United Nations’ drugs and crime tzar.

Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organized crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn of drugs profits was absorbed into the economic system as a result.

This will raise questions about crime’s influence on the economic system at times of crisis.

The Vampire Banks Are Back: Will There Ever Be Meaningful Financial Reform?

Raymond — Fri, 27 Nov 2009 20:28:30 +0000

From Alternet:

There are more than 15 million people unemployed and almost 2 million people set to lose their homes to foreclosure this year. But there is good news: the Wall Street banks are as profitable as ever and set to give out record bonuses this year. The taxpayer bailouts worked.

Congress is now debating a financial reform bill that is supposed to prevent this sort of disaster from ever happening again. Leaders in Congress are promising us tough measures that will put an end to “too big to fail” institutions and the other implicit and explicit subsidies that allow the Wall Street crew to get incredibly wealthy at our expense.

It’s still an open question as to whether this reform effort will just be a pointless source of greenhouse gas emissions. If the goal were to fix the financial system, then the process would not be difficult. But the halls of Congress are infested with financial industry lobbyists. As a result, the bills being put forward are written like the adjustable rate subprime mortgages that helped get us into this mess. The wording often leads to bills that do the exact opposite of the stated meaning.

For example, the wording of a section of the House Financial Services committee bill that was intended to regulate derivatives trading included an “end user” exemption. This exemption would have given Enron a green light to carry on its shady dealings in over-the-counter transactions out of sight of any regulators.

[Read more at Alternet]

Switzerland To Turn Over Secret Bank Account Names

JacobSloan — Mon, 23 Nov 2009 16:40:27 +0000

The Wall Street Journal reports that the Swiss government will be revealing to the U.S. government the names of all U.S. taxpayers holding Swiss bank accounts with balances greater than 1 million Swiss francs ($993,000).

The IRS is chomping at the bit: for decades, rich Americans have hidden money tax-free in secret Swiss bank accounts. Up to October 15, the IRS briefly offered a “Voluntary Disclosure” Program for all offshore account holders with undeclared income, giving people a chance to come clean and face reduced penalties. The program experienced a tsunami of applicants towards the final deadline, receiving about 14,700 confessions, far greater than expected.

Now the amnesty period is up.

Bank Robbery Notes for the Unarmed

disinfogreg — Tue, 03 Nov 2009 23:50:34 +0000

Banknotes is a fascinating collection of the actual notes and security camera images used during unarmed robberies. There seems to be a strange correlation of polite language and unsuccessful attempts. Crime pays, but it doesn’t pay to be nice!

I have a gun in my bag.
Give me $5,000 please.
Thanks a bunch.

male, 20, Metro Bank, Wyomissing Hills, PA
UNSUCCESSFUL

Pay Your Bills on Time? There’s a Fee for That.

klintron — Wed, 21 Oct 2009 16:58:16 +0000

In an attempt to squeeze more revenue out of consumers who don’t rack up much debt, Citigroup, Bank of America, and other credit card companies are adding new fees. According to USA Today credit card users are being hit with new “inactivity fees” and fees for not putting enough debt on your credit cards. Consumers thinking about canceling their cards face taking a hit to their credit scores for closing an account.

Other consumers may have no choice – Citibank has been closing some credit card accounts without reason or warning, damaging their customers credit ratings.

I cut-up my credit cards last night.

Bailed-Out Banks Still Making Billions Off Derivatives: What “Everyone” Said Fueled the Financial Crisis…

Ralph Bernardo — Tue, 29 Sep 2009 05:02:07 +0000

Anyone think Gordon Gekko would be saying this today? On second thought, he probably would…

The Huffington Post reports:

Derivatives is one of the dirty words of the financial crisis. Though these often-risky bets were blamed by many for helping fuel the credit crunch and the downfall of Lehman Brothers and AIG, it seems that Wall Street has yet to learn its lesson.

U.S. commercial banks earned $5.2 billion trading derivatives in the second quarter of 2009, a 225 percent increase from the same period last year, according to the Treasury Department.

More than 1,100 banks now trade in derivatives, a 14 percent increase from last year. Four banks control the market: JPMorgan Chase, Goldman Sachs, Bank of America and Citibank account for 94 percent of the total derivatives reported to be held by U.S. commercial banks, according to national bank regulator the Office of the Comptroller of the Currency.

The credit risk posed by derivatives in the banking system now stands at $555 billion, a 37 percent increase from 2008. “By any standard these [credit] exposures remain very high,” Kathryn E. Dick, the OCC’s deputy comptroller for credit and market risk, said in a statement.

The complex financial instruments, which take the form of futures, forwards, options and swaps, derive their value from an underlying investment or commodity such as currency rates, oil futures and interest rates. They are designed to reduce the risk of loss for one party from the underlying asset.