Banks’ Self-Dealing Super-Charged Financial Crisis

[Winehole23]

Banks’ Self-Dealing Super-Charged Financial Crisis (http://www.propublica.org/article/banks-self-dealing-super-charged-financial-crisis)

by Jake Bernstein (http://www.propublica.org/site/author/jake_bernstein/) and Jesse Eisinger (http://www.propublica.org/site/author/jesse_eisinger/)

ProPublica, Yesterday, 10:

Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.

Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:

They created fake demand.

A ProPublica analysis shows for the first time the extent to which banks -- primarily Merrill Lynch, but also Citigroup, UBS and others -- bought their own products and cranked up an assembly line that otherwise should have flagged.

The products they were buying and selling were at the heart of the 2008 meltdown -- collections of mortgage bonds known as collateralized debt obligations, or CDOs.

As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created -- and ultimately provided most of the money for -- new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain (http://www.propublica.org/special/the-cdo-daisy-chain) [1] that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.

Individual instances of these questionable trades have been reported before, but ProPublica's investigation, done in partnership with NPR's Planet Money (http://npr.org/money) [2], shows that by late 2006 they became a common industry practice.

Read more (it's somewhat lengthy) at:

http://www.propublica.org/article/banks-self-dealing-super-charged-financial-crisis

[EVAY]

Read more (it's somewhat lengthy) at:

http://www.propublica.org/article/banks-self-dealing-super-charged-financial-crisis

This was a good article, WH. Thanks for posting it. It does not include too much new info., but it states pretty clearly.

What astonishes me is the utter gall of these financial guys now claiming that they should not have any regulations, and that the financial regulations put in place recently (which were pretty pathetic in lots of respects) are going to hurt the 'recovery'. I mean, it really is brass on their face.

[boutons_deux]

Gall? There was a big CEO meeting this week. The CEOs were bitching about Magic Negro not knowing how to create jobs.

WTF?

Why are these wealthy bastards expecting the govt to create jobs?

Isn't that their job?

Wall St and health insurance companies are really pissed at Magic Negro for even thinking about even weak regulations, and they're buying Repug candidates with almost no attempt buy Dems.

[Wild Cobra]

Gall? There was a big CEO meeting this week. The CEOs were bitching about Magic Negro not knowing how to create jobs.

WTF?

Why are these wealthy bastards expecting the govt to create jobs?

Isn't that their job?

Wall St and health insurance companies are really pissed at Magic Negro for even thinking about even weak regulations, and they're buying Repug candidates with almost no attempt buy Dems.
That's the problem with claiming the administration will create jobs. They are now getting called on their lies.

[Winehole23]

...and they're buying Repug candidates with almost no attempt buy Dems.Overstatement. There are more than a few safe seats for the Dems. They'll spend plenty on the likely winners, (r) or (d).

Last cycle favored the Dems, looks not so favorable this time around. Dem voters are disenchanted, the GOP is energized. The GOP, despite the parlous state of the RNC's finances, is winning the contributions contest.

[Winehole23]

Business blows with the wind. It's not inherently (R) or (D).

[Winehole23]

What astonishes me is the utter gall of these financial guys ...It was there from the very beginning. They had Paulson and Geithner on the other side of the table.

In retrospect, they had it made and they probably knew it. That might explain the brazenness.

[Winehole23]

They almost all survived to kick us in the teeth again.

[Winehole23]

Even Bear Stearns and Lehman, which didn't survive, are still kicking us in the teeth.

[Winehole23]

When the banks ran short did the bad banks receive the due kick in the nuts, or did we? And they're complaining?

[Winehole23]

We socialized their losses before Obama was ever elected. We should own their asses.

Instead, apparently, they own ours.

[admiralsnackbar]

We socialized their losses before Obama was ever elected. We should own their asses.

Instead, apparently, they own ours.

Worse, we gave them spending money to buy up recession-weakened businesses and prime real estate (instead of lending to us...).

If you want proof that Dems are just as much in the pockets of finance as the GOP, look no further than Geithner, who doesn't even want to prosecute companies for malfeasance because it might seem "untoward." Fucking slimeball.

[Winehole23]

Rogues gallery from the WSJ:

http://graphics.wsj.com/documents/legaltab/?mod=e2tw

[boutons_deux]

Rogues gallery from the WSJ:

http://graphics.wsj.com/documents/legaltab/?mod=e2tw

$110B? pocket change. and some/most/all of the fines are tax deductible, iow, subsidized by taxpayers.

ONE! qtr of profits:

U.S. Bank Profits Near Record Levels

http://si.wsj.net/public/resources/images/MI-CE445A_BANKE_G_20140811142404.jpg


http://online.wsj.com/articles/u-s-banking-industry-profits-racing-to-near-record-levels-1407773976

[Winehole23]

$110B is not nothing, even if it's marginal relative to bank profits.

At the very least, it's a historical black mark: the banks willingly paid historically large fines to avoid court.

[boutons_deux]

$110B is not nothing, even if it's marginal relative to bank profits.

At the very least, it's a historical black mark: the banks willingly paid historically large fines to avoid court.

It's not nothing, but it's "historically" insignificant, simply a cost of doing incredibly enriching, mostly corrupt "business".

[Winehole23]

the trust and confidence of the rest of us isn't nothing either. the ding to reputation will not be fixed quickly.

[Winehole23]

there's not as many dupes out there as you think, boutons.

open eyes everywhere. people can see what's happening.

[Winehole23]

the banks held us up in 2008, in 2014 the USG is shaking them down, little help extended to those actually harmed.

(thank God the courts are still open and normally functioning, for those who can afford it.)

[boutons_deux]

there's not as many dupes out there as you think, boutons.

open eyes everywhere. people can see what's happening.

doesn't matter what "people see". they're DISENFRANCHISED. they don't fucking count.

The financial sector (co-)OWNS all three branches of govt AND the Fed, spent nearly $1B on lobbying in the past several years, and has the Repugs working non-stop to defund if not block any and all financial regulations. Finanicial sector got the Repugs to keep Liz Warren out of the CFPB she designed, and then set up blocks and delays for other CFPB directors, and DEFUNDED CFPB, SEC, IRS, etc.

[boutons_deux]

Mary Jo White was Supposed to Turn Around the S.E.C. She Hasn’t.

Mary Jo White took the helm of the Securities and Exchange Commission amid high hopes that she could turn around the once-proud agency. More than a year into her tenure, she has disappointed a wide swath of would-be allies.

Over the last several weeks, I've been talking to fellow regulators, administration officials, current and former S.E.C. staff members, financial reform advocates and people on Capitol Hill whose opinions of Ms. White's performance range from dissatisfied to infuriated.

Traditionally, the S.E.C. has been seen as something of a regulatory jewel. :lol

"The commission's reputation as tough, independent and public spirited is its lifeblood," said Damon Silvers, the A.F.L.-C.I.O.'s policy director and a specialist in financial regulation. In Mr. Silver's view, George W. Bush's last chairman, Christopher Cox, damaged the morale and effectiveness of the agency, issues that remain unaddressed. If the S.E.C. is seen as no better, or even less effective than
the Treasury and the Fed, he said that "means grave trouble for both the commission and the investing public."

Look, this is not an easy job. Ms. White has struggled with a House of Representatives that is hostile to financial overhaul and is perennially wielding budget cuts. She has also had to deal with a divided and contentious commission, an enormous workload to put into effect Dodd-Frank and other rules and the constant threat of lawsuits challenging any rule that encroaches on Wall Street's prerogatives.

Even so, the chairwoman has made some unnecessary foes while her agency has bungled several significant rules.

etc, etc, etc

http://www.propublica.org/thetrade/item/mary-jo-white-was-supposed-to-turn-around-the-s.e.c.-she-hasnt?utm_source=et&utm_medium=email&utm_campaign=dailynewsletter

[TDMVPDPOY]

banks to big to fail...

if u dont like it, go buy shares into them banks and reap the dividend yields...govt has ur back

[RandomGuy]

the trust and confidence of the rest of us isn't nothing either. the ding to reputation will not be fixed quickly.

You have more faith in the public's memory than I do.

If we had any guts and didn't have Congress and the Republican party on its knees worshipping the campaign contributions of the banking lobby blathering on about free markets as cover for naked self-interest, we MIGHT get some sane solution to the systemic risk posed by these hyper-huge banks.

Until they impose some pretty punitive capital requirements based on size (progressive scale) to force them to get smaller and act responsibly, all the fines in the world can, and are, simply priced into the cost of making canyonfuls of cash.

[Wild Cobra]

It's the democrats in bed with the banks.

[TDMVPDPOY]

down here they are thinkn of allowing players to provide 60seconds approved home loans over the internet....lol talk about making it easier to get finance...

must let that boom prices going...

[101A]

You have more faith in the public's memory than I do.

If we had any guts and didn't have Congress and the Republican party on its knees worshipping the campaign contributions of the banking lobby blathering on about free markets as cover for naked self-interest, we MIGHT get some sane solution to the systemic risk posed by these hyper-huge banks.

Until they impose some pretty punitive capital requirements based on size (progressive scale) to force them to get smaller and act responsibly, all the fines in the world can, and are, simply priced into the cost of making canyonfuls of cash.

They spread it around pretty good:

http://www.opensecrets.org/industries/recips.php?ind=F

[boutons_deux]

"pretty punitive capital requirements"

nah, they can't do that, Congress WON'T do it

SEC, etc needs send some top people, not just eg Fabulous Fabrice, to jail for a long time.

but SEC is part of Wall St, staffed by Wall Streeters with an eye on the revolving door.

Finance OWNS Exec and Legislature. that aint't NEVER gonna change. aka, America is fucked and unfuckable.

[Winehole23]

You have more faith in the public's memory than I do.

If we had any guts and didn't have Congress and the Republican party on its knees worshipping the campaign contributions of the banking lobby blathering on about free markets as cover for naked self-interest, we MIGHT get some sane solution to the systemic risk posed by these hyper-huge banks.

Until they impose some pretty punitive capital requirements based on size (progressive scale) to force them to get smaller and act responsibly, all the fines in the world can, and are, simply priced into the cost of making canyonfuls of cash.Prosecution and discovery would've the better route.

Wm. D Cohan of the NYT:


That Mr. Holder prefers large settlements to prosecutions is no surprise to anyone familiar with the so-called Holder Doctrine, which stems from his now-famous June 1999 memorandum — when he was deputy attorney general — that included the thought that big financial settlements may be preferable to criminal convictions because a criminal conviction often carries severe unintended consequences, like loss of jobs and the inability to continue as a going concern. (See Andersen, Arthur, for instance.)


That Mr. Holder, as attorney general, is following through on an idea that he proposed as a subordinate 15 years ago does not make his behavior any less infuriating. The fact is that by settling with the big Wall Street banks for billions of dollars — money that comes out of their shareholders’ pockets — Mr. Holder is allowing them to avoid the sunshine that Louis Brandeis wrote 100 years ago was the best disinfectant. Instead of shining the bright light on wrongdoing that took place at the Wall Street banks, Mr. Holder’s settlements allow them to cover it up permanently. http://dealbook.nytimes.com/2014/08/19/sound-and-fury-in-bank-settlements-still-signifying-nothing/?_php=true&_type=blogs&smid=fb-share&_r=0

[boutons_deux]

Prosecution and discovery would've the better route.

Wm. D Cohan of the NYT:

http://dealbook.nytimes.com/2014/08/19/sound-and-fury-in-bank-settlements-still-signifying-nothing/?_php=true&_type=blogs&smid=fb-share&_r=0

Holder was the guy who pushed Clinton to pardon Marc Rich. Apparently no one knows where Holder's suggestion came from

[Winehole23]

Holder's a piece of work.