Bill Black - How the Jumpstart Obama’s Bucket Shops Act is Just Another in a Long Series of Fraud-Promoting Legislation

The Washington Post reports tonight that there is some pushback about the decried-by-anyone-who-knows-bupkis-about-securities-markets-and-isn’t-on-take JOBS Ac, which appears to be certain to be signed into law. Bill Black reminds us that tons of absolutely terrible financial regulation (as in deregulation) over the last 25 years have passed with large margins.

The imminent passage of the fraud-friendly JOBS Act caused me to reflect on the fact that the worst anti-regulatory travesties in the financial sphere have had broad, bipartisan support. The Garn-St Germain Act of 1982, which deregulated savings and loans (S&Ls) and helped drive the debacle, was passed with virtually no opposition. The Texas and California S&L deregulation acts – the two states that “won” the regulatory “race to the bottom” – passed with virtually no opposition. Texas S&L failures caused over 40% of total S&L losses and California failures caused roughly 25% of total losses. In 1984, a majority of the members of the House of Representatives, including Newt Gingrich and most of the leadership of both parties, co-sponsored a resolution calling on us to cease our reregulation of the S&L industry.

The Competitive Equality in Banking Act of 1987 (CEBA) was the product of two cynical political deals. The context was that the Reagan administration refused to allow the Federal Savings and Loan Insurance Corporation (FSLIC) to admit that there was a crisis requiring governmental funds and refused to allow FSLIC to draw any funds on its Treasury credit line. We had spent all but $500 million in the FSLIC fund closing some of the worst S&L control frauds. The S&L industry had over $1 trillion in liabilities and was deeply insolvent, so we were running the insurance fund on fumes and dreading a potential nationwide run. Treasury and FSLIC ginned up a convoluted means of FSLIC receiving the proceeds of a $15 billion (FICO) bond issuance. The repayment of the FICO bonds rested in large part on taking capital and future earnings from the Federal Home Loan Banks (FHLBs). The industry owned the FHLBs, so the S&Ls’ interest in the FHLBs’ capital was treated on their financial statements as an asset. Using the FHLBs’ capital to “defease” the FICO bonds refduced every S&L’s reported capital. The exceptionally powerful S&L trade association (the “League”) opposed the plan. It preferred that the government, rather than the healthier members of the industry, pay to resolve failed S&Ls. Trade associations also do not want to lose members through government closures.

Read More:

http://www.nakedcapitalism.com/2012/03/bill-black-on-how-the-jumpstart-obamas-bucket-shops-act-is-just-another-in-a-long-series-of-fraud-promoting-legislation.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Dekker Dreyer - Do We Need a Stock Exchange?

Occupy Wall Street is now back where the movement began, and there are even more society-shaping questions in the wild then last October. Since the housing market crash decimated our country we’ve been examining our economy from the grassroots level up to far-reaching government initiatives. We’ve seen widespread protests against dubious banks and the financial instruments which have allowed them to plunder the national wealth. But one elephant is still sitting in the middle of the room... no few have been questioning if the very logic of a stock exchange is unhealthy in the long run. Conventional wisdom says stock markets are the best way in history to generate wealth. Some maintain that this wealth does not get redistributed to the public in any significant manner. Arguments against stock markets include the cost of entry and the complexity of the rules governing transactions.

To understand the dysfunctions of the stock market, we must understand what a stock market is. As early as the 1600s the concept of shared corporate interest was cemented in modern Western civilization when the dutch offered ownership stakes in the Dutch East India Company. The basis for collective ownership, however, may have been introduced to Europe as early as the Bronze Age. Sharing risk and resources among many stakeholders is a natural infusion of the most primitive principles of human cooperation. The concept of a publicly participatory stock market, however, is a much more recent invention.

Read More:

http://www.nationofchange.org/do-we-need-stock-exchange-1332680909

Les Leopold - A Single Hedge-Fund Hustler Makes More Than 85,000 Teachers: Why Are Our Priorities So Messed Up?

Why is America’s distribution of income so colossally obscene? You have only to look atForbes' most recent listing of the top 40 hedge fund moguls who sit on top of our income pyramid. Together, their personal income from hedge fund hustling was $12.8 billion in 2011. The top hedge fund guru, Raymond Dalio, the founder of Bridgewater Associates, hauled in $3 billion all for himself, which comes to a whopping $1,442,308 an HOUR, (assuming he worked 40 hours a week for 52 weeks).

It would take the typical U.S. family 29.2 YEARS to earn as much as Mr. Dalio earned in one HOUR.

How much is $3 billion per year?

1. That’s as much as 60,673 typical U.S. families earn: Just think about that for a moment. One person earns as much as 60,000 hard-working, middle-class families.

2. That’s enough to hire 85,911 entry level teachers: While we’re laying off teachers right and left to close budgets that were destroyed by the Wall Street crash, Wall Street’s top hedge fund manager earns as much in one year as tens of thousands of entry level teachers who on average earn $34,920 a year. That what we get for failing to rein in Wall Street.

Read More:

http://www.alternet.org/story/154671/a_single_hedge-fund_hustler_makes_more_than_85%2C000_teachers%3A_why_are_our_priorities_so_messed_up

Surviving the cashless cataclysm

In Sweden, just 3% of the economy is powered by coins and paper money. Public buses don’t accept cash, churches have installed card readers to take donations, and there are even some bank branches that refuse to take your money, opting instead to deal with electronic transfers only.

The European average is 9%, and in the US, the credit card motherland, the percentage is still more than twice that of Sweden: 7%. If you stop and think about it, though, none of these figures are particularly surprising. With the rise of credit cards and store cards (and card readers everywhere), PayPal, online shopping, iTunes, Netflix, and app stores, cash is feeling more outmoded by the day. When was the last time you used an ATM, anyway?

The trend is very clear: Cash is on its way out. It might take another 10 or 20 years for Sweden to get there, and longer for the US and other economies, but eventually so few businesses will accept cash that it will be relegated to jangling jars and cruddy sofa crevices. Governments will have no choice but to halt the fresh minting of coins and printing of bills, and eventually non-electronic money will dry up all together.

Read More:

http://www.extremetech.com/extreme/122819-surviving-the-cashless-cataclysm

Christopher Brauchli - Goldman's Lust for Gold

It was just an unfortunate coincidence that the two events came within a couple of weeks of each other. The first was a legal opinion by Chancellor Leo Strine of the Court of Chancery in Delaware in the case of In re El Paso Shareholder Litigation and the second an op-ed piece in the New York Times by Greg Smith, a former employee of Goldman Sachs and Co. The events and attitudes described in the court opinion and the op-ed piece could apply to many investment banks since they are all in the business of making money and sometimes that interferes with doing what’s right. In the case about which the judge wrote, money came between doing what’s right and what Goldman did. In the op-ed piece we were told how money corrupted Goldman’s corporate culture.

In October 2011 Kinder Morgan Inc. made a 2.1 billion bid for El Paso Corp and retained Goldman to advise it on the deal. Goldman was not only expert in advising on these kinds of transactions but, in this case, had a particular interest in how it was structured. It not only owned 19 percent of Kinder Morgan but also controlled two seats on that company’s board of directors. Goldman realized that some people might think that an insurmountable conflict of interest since the less El Paso was paid the better the deal was for Kinder Morgan and, since it was a 19 percent owner of Kinder Morgan, a better deal for Goldman. Accordingly, Goldman advised El Paso to bring in an independent advisor so that Goldman’s financial interest in having a low price set for El Paso would not taint the deal. Morgan Stanley was retained by El Paso. This was a brilliant solution except for a couple of things that were articulated by Chancellor Strine when ruling in the shareholder suit. In his ruling Chancellor Strine commented on Goldman’s attempts to solve its conflict of interest problem by observing, as Goldman apparently had not, that Goldman continued to “intervene and advise El Paso on strategic alternatives. . . .” He then said that what was even more egregious was that Goldman achieved “a remarkable feat: giving the new investment bank an incentive to favor the Merger by making sure that this bank (Morgan Stanley)only got paid if El Paso adopted the strategic option of selling to Kinder Morgan.” In case any one didn’t understand the foregoing the Chancellor added: “In other words, the conflict-cleansing bank [Morgan Stanley] only got paid if the option Goldman’s financial incentives gave it a reason to prefer was the one chosen.” In short, either the Goldman deal went through or Morgan Stanley got no money.

Read More:

http://www.commondreams.org/view/2012/03/24-8?print

Jake Blumgart - Wells Fargo and Other Megabanks Don't Care About Your Business -- So Move Your Money!

Last month banking goliath Wells Fargo, the big bank with most branches nationwide, announced another round of fees on basic checking accounts. Customers in six states will have to pay $7 a month if they receive paper statements, $5 if they get them online. The fees can be waived if the customer direct-deposits more than $500 a month, or maintains a balance of $1,500.

Wells Fargo customers in Georgia, Delaware, Connecticut, New Jersey, New York, and Pennsylvania will be hit beginning in May, and the bank expects to expand it across the country in the coming months. While this fee is more narrowly targeted than the across-the-board debit card fees Bank of America attempted to enact last fall (until it backed down in the face of a wrathful public), it is part of a nationwide trend wherein Big Banks relentlessly penalize consumers for basic services. The banking industry, as Lynn Parramore noted on AlterNet, has become an oligopoly, with big players colluding to extract fees from customers, whether or not there is any justification for doing so.

Read More:

http://www.alternet.org/story/154605/wells_fargo_and_other_megabanks_don%27t_care_about_your_business_--_so_move_your_money%21

Robert Weissman - Special Weapons for Fighting Giants

The last few years have seen a series of corporate catastrophes, for which the perpetrator companies have escaped any meaningful accountability. Big banks and giant Wall Street firms tricked and ripped off homeowners and investors, and crashed the national and global economy. BP’s reckless operations poisoned the Gulf of Mexico in one of the worst oil disasters in history. Massey Energy’s cost-cutting led to the Upper Big Branch coal mine collapse that killed 29 workers.

There have been virtually no criminal prosecutions for Wall Street wrongdoing related to the crash, and precious few civil actions. Criminal charges are likely to be filed against BP, but the company already has been granted new permits to drill for oil in the Gulf. Massey Energy—now owned by Alpha Natural Resources—was forced to pay $200 million in penalties but avoided any criminal prosecution.

This history notwithstanding, We the People, and our government representatives, do have the power to hold companies accountable for the wrongs they commit. The challenge is to mobilize sufficient political pressure to demand that available tools be used and new mechanisms of accountability be created.

Read More:

http://www.yesmagazine.org/issues/9-strategies-to-end-corporate-rule/special-weapons-for-fighting-giants

Jim Hightower - Banker Hubris Knows No Bounds

Have you heard about the earthquake that has shaken Wall Street to its very core? Well, brace yourself, for this really is a shocker: Bonus payments are down.

Yes, the exorbitant bonus checks pocketed each year by the Goldman Sachers, Citigropers and other financial tinkerers have been cut by about 25 percent this year, and — oh! — you should hear the Wall Streeters moaning the hard-times, down-and-out banker blues.

"It's a disaster," sobbed one. "The entire construct of compensation has changed."

Many Americans, of course, will say ... "Good! About time!" And it is difficult in these times of middle-class collapse and rising poverty to get teary-eyed over a few financial swells getting a trim. But, come on, Wall Street bankers are human, too (aren't they?) — so open your hearts to their pain.

A hedge-fund manager, for example, says he'll now have to strain to pay his $7,500 annual dues to remain a member of the Trump National Golf Club in Westchester. Plus, he worries about food, health care and boarding. Not for him and his family, but for his two dogs — he's been laying out $17,000 a year for upkeep of his labradoodle and bichon frise, including around $5,000 to hire a dog-walker to take them out each day. He might resort to walking them himself a couple times a week.

Read More:

http://www.creators.com/opinion/jim-hightower/banker-hubris-knows-no-bounds.html

Matt Stoller - GAO: Almost Half of Bailed Banks Repaid the Government With Money “From Other Federal Programs”

The Government Accountability Office continues its subtle war on the talking point used by Treasury that “TARP made money”. Here’s the GAO, with a report out today.

As of January 31, 2012, 341 institutions had exited CPP, almost half by repaying CPP with funds from other federal programs. Institutions continue to exit CPP, but the number of institutions missing scheduled dividend or interest payments has increased.

Much of the government-supplied TARP funding (to small banks) was replaced by the Small Business Lending Fund passed in 2010, which Republicans called “TARP 2.0″.  The larger banks, however, where much of the bank-based credit creation in the economy takes place, didn’t use this program.  Instead, they got an implicit subsidy of between $6B and $300B a year from the widespread belief that the government will not let their bondholders lose money.

Read More:

http://www.nakedcapitalism.com/2012/03/gao-almost-half-of-bailed-banks-repaid-the-government-with-money-from-other-federal-programs.html

Bank of America: Maximizing Profits Off the Backs of Struggling Homeowners

A complaint unsealed in court yesterday from a whistleblower alleges that Bank of America defrauded the federal Home Affordable Modification Program (HAMP), designed to help homeowners facing foreclosure, by preventing "scores of eligible homeowners" from receiving loan modifications in order to prevent losses while at the same time receiving benefits for being part of the HAMP program.

Reuters reports today: 

The complaint unsealed Wednesday was filed by whistleblower Gregory Mackler, a Colorado resident who said he worked alongside Bank of America executives while an employee at Urban Lending Solutions, a company to which Bank of America contracted some of its HAMP work.

Read More:

http://www.commondreams.org/headline/2012/03/08-2