Yves:
Now this sort of misrepresentation is a securities law violation, but since the regulators presumably winked and nodded and it would be hard to prove damages, no bank executive will be held to account.
http://www.nakedcapitalism.com/...
Remember those stress tests done by Obama's Treasury Department in the early months of 2009, just two months after their "single neediest day" when they needed more than a trillion dollars just to make it through the day? Within two months they were supposed to come up with extra capital, if necessary, or cede an ownership stake to the government. They claimed that among the 19 biggest banks, there was only a $75 billion dollar capital shortfall. And the stress tests were supposed to project an economic scenario for the subsequent two years, in other words, until 2011. They were then given seven months to come up with that capital through various methods, one of which was "ditching loans or securities through the government's Public-Private Investment Program (PPIP)." And some of the bank executives complained through the whole process.
This has been covered up for three years. These banks were insolvent but Bush bailed them out and then Obama covered up their insolvency and continued to bail them out, help them take toxic assets off their books, signed a feckless financial regulation bill and then to this day presides over regulations agencies that are being lobbied to make this bill even more of a toothless failure. Not to mention the fact that during the transition period when some of this was happening, Obama was well plugged in. Bush essentially disappeared after the election. He was happy to dump all of this one on someone else and may have been the lamest lame duck ever.
If this was an individual or any other business, they would have to declare bankruptcy, they would lose everything. If it was a mortgage you would lose your home. But the banks were saved and they did not even have to give up their bonuses and they continued to rip everyone off.
It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
http://www.bloomberg.com/...
The savvy businessman, Jamie Dimon, told the world that his bank had only used the Fed to encourage others to do the same. Bernanke, during that same time frame in 2009, said the Fed only loaned to "sound institutions". Members of Congress on the Financial Services committee like Judd Gregg and Barney Frank, in a position to know the most, claim they didn't know. Many lawmakers quoted in the Bloomberg article claim that if they had known that while they were working on the TARP legislation, the banks were tapping the Fed (and for a long time after that) they would have pushed for tougher financial regulations and perhaps for breaking up the banks. But so many people have lied about this and worked to cover it up, so who knows if they are telling the truth? I think the odds of that are slim.
Lawmakers knew none of this.
They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages.
http://www.bloomberg.com/...
The banks did high stakes gambling to haul in obscene amounts of fees and profits. They set up dogs, losing propositions, and sold them to their customers for profit, then bet against their customers and when the dogs failed as expected.
They pushed credit lines and crappy mortgages and refinance after refinance after refinance deals out to the public in a frenzied manner for years. They didn't much care who you were, they were shoving money in front of everyone's faces, day after day after day for years.
They packaged them into complex instruments that the ratings agencies rubberstamped as AAA investment grade and sold them to everyone, even the most careful institutional investors who can only buy super safe products. Sometimes, the ratings agencies could not even look at the underlying mortgages that had been packaged, but they were pushed and threatened by their superiors to stamp them with a AAA rating anyway, so that they could be sold to pension funds, university endowments and other investors who could not be swindled without the AAA rating. In one case, an email was leaked by a member of a mortgage/structured investment department of a ratings agency which showed that they were told by a supervisor to provide a AAA rating without ever having examined even one mortgage in the package because the "tape" of documentation for the underlying mortgages was not even available.
Meanwhile, the ratings agencies profits soared. Everyone's profits soared in the housing industry, but especially those at the top who facilitated the whole thing. Ratings agencies employees who would not participate in the corruption were pushed out. The ratings agencies tried to claim that their opinions deserve free speech protection and therefore they are not liable. A recent decision shows that this is not going well for them in federal court.
Underneath, they were junk, some percentage of junk mixed in with safer investments, and they knew they were junk. But they raked in obscene amounts of money during the packaging and selling process. They made money on the way up. They made money on the way down. And they were raking in unprecedented profits doing other fraudulent things too. Some were installing advanced computer systems and they arranged the sequence of the trades for their own account such that they were frontrunning.
They were given years to try to win back their gambling losses. The already too big banks got even bigger, if you can imagine that. They used the virtually free Fed money to cover up their failures and to make more profits. Who would not enjoy getting free money (at the taxpayers' risk) to use to make more profits? But only a very small percentage of taxpayers get that luxury. The rest of us just take the risk and get nothing in return for it.
Bloomberg looked at the Fed loans and bank reporting during this period of time and estimated how much they profited from the Fed loans. They figured that 23% of the net income of the six big banks came as a gift from the Fed, courtesy of the US taxpayers. $4.8 billion free dollars. When looking at all of the banks for which there was data, the number is even bigger. $13 billion free dollars.
While this was happening and afterward, what did the banks do? They lobbied and strong armed so that Dodd-Frank would be a paper tiger and they continue now, in the detailed regulation process, to try to defang it even more. And they are winning. We have a president who, to this day, doesn't admit that they pulled off a major heist and got away with it. He tells the nation that what they did was not moral but not necessarily illegal. But then, we understand why he would say something like that. Something about cover ups and crimes, and all that.
The banks continue to do the same things that they did to get into this mess. The president of the Federal Reserve in Dallas goes as far as to say that the situation with the big banks is "un-American".
This is my conclusion:
I would argue that covering up the bank insolvencies was Obama's most significant achievement during his presidency so far and it is the reason why, despite their groanings about how he occasionally used the words "fat cats" and other less than flattering adjectives for the out of control banks that took down our economy, they will continue to give obscene amounts of money to him for his reelection campaign.
Banks knew during his 2008 Hope and Change campaign that they were going down and that were going to pull off the biggest heist in American history. They knew this for at least a year before the official crash. They needed to have a man in the White House who would install a fixer in the Treasury Department and keep Bernanke in place.
In the big organization chart, where is the Treasury Department? Where are the regulatory agencies? Who appoints the Chairman of the Federal Reserve? Who chose a JP Morgan executive as Chief of Staff? Who chose the other Wall Street guys in the Executive branch? And who is at the top of that big Executive branch organization chart?
This cover up required a lot of the right kinds of players to be in place. Hell, they still need them in place because they are still in deep shit. Note that Bernanke was kept around and Geithner, Obama's most important economic advisor (Good Gawd) was asked to stay even though he has been a complete and utter failure and is considered to be Wall Street's inside man. But failure is relative depending on which perspective you are coming from. For Wall Street and the 1% he has been a smashing success. Four more years! We're not finished with the heist and the fixing.
Look what is happening right now with the Euro crisis. Some say that this dwarfs the 2008 meltdown. US Banks have exposure. How much exposure? Who is at risk?
US Banks Exposed to European Crisis, But They’re Not Saying How Much
The problem for the United States is that there’s no understanding of how much exposure US financial firms have to the expected fallout, especially if there’s a default event.
[ ... ]
Fitch, the ratings agency, put out a report on US bank risk to the European crisis, and stocks tumbled as a result. In this age of global interconnectedness, and considering that at the root, this is a banking crisis in Europe, there’s no way to really avoid that risk, no matter what the risk officers say.
Heh, Fitch. A ratings agency.
JPMorgan Joins Goldman Keeping Italy Derivatives Risk in Dark
Biggest Fear’
“I think the biggest fear is the numbers are so large that even though they offset, it would maybe shock people,” said Ralph Cole, a senior vice president in research at Ferguson Wellman Inc. in Portland, Oregon, which manages $2.8 billion including JPMorgan stock. “Maybe they don’t think that disclosure will be treated fairly or understood well.”
Still, “they need to give us a good reason why we shouldn’t see that,” he said. “More disclosure is better, and you can see that in their valuations right now.”
Bank of America, Citigroup, Goldman Sachs and Morgan Stanley have each fallen more than 40 percent this year, while JPMorgan has dropped 23 percent. Each of the lenders trades at least 24 percent below book value, indicating investors are questioning the assets on the firms’ balance sheets.
Lloyd C. Blankfein, 57, Goldman Sachs’s chairman and chief executive officer, said in an interview with the Financial Crisis Inquiry Commission staff last year that the amount of the firm’s derivatives trades shouldn’t be a cause for alarm.
And what is happening with the Dodd-Frank regulation on derivatives right now? Well first, what has happened since the last catastrophe? Clearly nothing significant because the banks continue to do the same thing. And what is happening today with the great savior that was called Dodd-Frank financial regulation?
Volcker argued vigorously that since a functioning commercial banking system is essential to the stability of the entire financial system, for banks to engage in high-risk speculation created an unacceptable level of systemic risk.[6] He also argued that the vast increase in the use of derivatives, designed to mitigate risk in the system, had produced exactly the opposite effect.[7]
http://en.wikipedia.org/...
It was watered down with the help of Scott Brown. And during the regulations process, it is being essentially destroyed.
Since the passage of the Financial Reform Bill, many banks and financial firms have indicated that they don't expect The Volcker Rule to have a significant impact on their profits.[19]
[ ... ]
Regulators presented a proposed form of the Volcker Rule for public comment on October 11, 2011, which was approved by the SEC, The Federal Reserve, The Office of the Comptroller of the Currency and the FDIC.[24] The proposed regulations were immediately criticized by banking groups as being too costly to implement, and by reform advocates for being weak and filled with loopholes.[25][26]
http://en.wikipedia.org/...
From Dodd-Frank to Dud: How Financial Reform May Be Going Wrong
The response from Julie Williams, the chief counsel of the Office of the Comptroller of the Currency, was startling, according to people familiar with the conversations. Williams insisted new rules were unnecessary since this type of trading did not play a major role in the financial meltdown.
[ ... ]
Government officials -- including Williams and the OCC -- are inserting exemptions as they formulate rules to enforce the law. Some regulators, facing severe budget constraints, caution that they may not be able to carry out some of its key provisions. Foes of the law in Congress, and even some former friends, are voicing concern that aspects of the law could erode American competitiveness. Wall Street is mounting a determined lobbying campaign to blunt provisions it failed to defeat on the floors of the House and Senate.
[ ... ]
"It was doomed at the outset and nothing can possibly salvage it. We might even have been better off without it," said Arthur Levitt, a former chairman of the Securities and Exchange Commission.
And yet, whenever President Obama is asked about the financial crisis or the banks, his answer always involves touting the Dodd-Frank bill. When asked about accountability, he told us that what they did was not moral but not necessarily illegal. He repeatedly talks about how Dodd-Frank will prevent another situation where taxpayers have to bail out the banks again. All of this is dishonest nonsense.
People have been furious, beyond furious about this situation for three years. And now people are on the streets across the nation and around the world. The criminals who caused this are still thriving and comfortable, the government officials who participated, enabled and covered up are still comfortable, scot free, and the people who were ruined, and the people who are completely justified in their anger and demand for change are treated like the criminals, beaten up by our militarized police force.
And our President says nothing about that. Nor does it look like he or his administration intend to hold the real criminals accountable. Because after having bailed them out and covered this up, they too are at risk. However, all of the politicians will gladly take huge amounts of Wall Street money for their reelections. Again. Where does this stop?
Dodd-Frank’s Derivatives Reforms: Clear as Mud
When the architects of the Dodd-Frank regulatory overhaul flinched from the most effective solution — breaking up the banks so that none would be too big to drag down the financial system — they forced regulators of the derivatives market into a cumbersome and potentially dangerous workaround.
Those regulators are feverishly making lots of important, arcane rulings that are being followed only by insiders. They are replacing an opaque system prone to failures with a new, huge Rube Goldberg-like system that may reduce global financial risk. Or it may not. Nobody knows, not least the regulators themselves.
[ ... ]
Derivatives trading is dominated by the likes of JPMorgan, Goldman Sachs and Deutsche Bank. We now have a financial system where the failure of one megabank can jeopardize the world financial system, and having clearinghouses run by only the “too big to fail” firms merely replicates that fundamental problem.
Cloaked in secrecy again. Cloaked in complexity again. Does this feel like deja vu? I thought that Dodd-Frank guaranteed that taxpayers would never have to bail out these banks to our great detriment again? We're not finished bailing them out from the last time. They were allowed to continue their destructive practices and reap obscene profits and here we are again. This time, we're in much worse shape. The American people, that is. The 1% who paid no price for it last time and in fact thrived and continue to thrive, are doing fine. But the rest of us are not. And the rest of us are the ones who always have to pay the price. You can't get blood out of a stone.
How will they get out of this one? Who will pay? You know the answer to that.
Knowing all that you know, who would you expect these guys to be coming after?
And they are not. They are coming after the people who expose the lies and the crimes and the ones who protest. And essentially none of the people who you voted for to represent you are doing anything about it. All the while they cover up for and enable the real criminals.
Occupy Wall Street Arrests: 4,792
Bankster Arrests: 0
Whose side are they on?
"Everybody lied like crazy."
Banks got bailed out. We got sold out.
Truer words were never spoken.
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