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- Occupy Wall St. Livestream: Day 53 by TheMomCat
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SEC Uses "Because I Said So" Tactic With Judge Rakoff
By Matt Levine, Dealbreaker
07 Nov 2011 at 4:39 PM
The quick background: Citi decided to make a big prop bet against some mortgages, so it structured a synthetic CDO with the exposures it wanted to short and sold it to some dopes, keeping virtually all of the short side of the trade on its books. This was a good idea and Citi made $160mm, but it worked out less well for the dopes. The SEC sued Citi for not telling the dopes certain things, like that it had picked the mortgages involved because of their exceptional badness, and they signed up a $285 million settlement.
(T)hese are very silly words. “Scienter-based violations of the securities laws” just means that GS, unlike Citi, was charged with intentionally stuffing dopes with bad CDOs. True! The SEC charged GS with doing that intentionally, and it only charged Citi with doing the same thing “negligently,” i.e., something a little bit north of “accidentally.” But, like, the SEC just decided to charge it that way – and they don’t explain why. It is sort of unimaginable that anyone could accidentally create a mortgage-backed security filled with loans you know are going to fail so that you can sell it to a client who isn’t aware that you sabotaged it by intentionally picking the misleadingly rated loans most likely to be defaulted upon. Like, you have to pay attention in order to do that. You have to pick the loans, and write stuff down, and tell people about the thing, and convince them to buy the thing. The SEC gamely tries to explain how this could in fact all be due to negligence, but it doesn’t really matter – the point is that GS and Citi did pretty much the same thing, so if it’s negligence for Citi it’s negligence for GS. The only explanation of why Citi gets off easier than GS is “because we chose to let Citi get off easier than GS.”
The real explanation is probably much closer to the one Citi’s lawyers hit upon: that Citi is the all-time league table leader in losing tons of money on CDOs. To a lot of people, Goldman really does look like the evil genius who went heavily net short the housing market and made a ton of money. Citi are just some goofballs who lost a ton of money on a ton of CDOs, and half-accidentally made some money on one CDO. That pattern does sort of make Goldman look like they had a diabolical plan to screw everyone, while Citi’s screwing a few people looks, well, negligent.
It’s just that this is a very bad legal theory. Shorting the housing market to your customers when you have no inside information about particular mortgages, but just did better analysis than them of the macro data, is … it’s kind of unpleasant behavior, maybe, but it’s probably not fraud. Being generally long mortgages but short one particular trade because you’ve secretly cherry-picked it to be the single worst CDO you can conceive of with your somewhat limited imagination, that’s – I mean, that’s stupid, but it’s also a lot closer to actual fraud.
Citigroup, SEC Defend $285 Million CDO Settlement as Fair
By Bob Van Voris and Thom Weidlich, Business Week
November 08, 2011, 12:38 AM EST
Rakoff, who in 2009 rejected a $33 million settlement between the agency and Bank of America Corp., asked Citigroup and the SEC to address nine questions about the proposed settlement. The questions included, “Why should the court impose a judgment in a case in which the SEC alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing?”
The SEC argued that the U.S. Supreme Court has endorsed settlements in which the defendant doesn’t admit liability. If Citigroup had admitted fault in the settlement, that could be used against it by private investors suing the bank, the SEC said.
In its own filing today, Citigroup also said the settlement was fair and asked the judge to consider the impact on its shareholders of “any outcome other than a negotiated ‘no admit, no deny’ settlement.”
Promises Made, and Remade, by Firms in S.E.C. Fraud Cases
By EDWARD WYATT, The New York Times
Published: November 7, 2011
Citigroup’s main brokerage subsidiary, its predecessors or its parent company agreed not to violate the very same antifraud statute in July 2010. And in May 2006. Also as far as back as March 2005 and April 2000.
Citigroup has a lot of company in this regard on Wall Street. According to a New York Times analysis, nearly all of the biggest financial companies – Goldman Sachs, Morgan Stanley, JP Morgan Chase and Bank of America among them – have settled fraud cases by promising that they would never again violate an antifraud law, only to have the S.E.C. conclude they did it again a few years later.
A Times analysis of enforcement actions during the past 15 years found at least 51 cases in which the S.E.C. concluded that Wall Street firms had broken anti-fraud laws they had agreed never to breach. The 51 cases spanned 19 different firms.
Senator Carl Levin, a Michigan Democrat who is chairman of the Senate permanent subcommittee on investigations and has led several inquiries into Wall Street, said the S.E.C.’s method of settling fraud cases, is “a symbol of weak enforcement. It doesn’t do much in the way of deterrence, and it doesn’t do much in the way of punishment, I don’t think.”
Barbara Roper, director of investor protection for the Consumer Federation of America, said, “You can look at the record and see that it clearly suggests this is not deterring repeat offenses. You have to at least raise the question if other alternatives might be more effective.”
But prior violations are plentiful. For example, Bank of America’s securities unit has agreed four times since 2005 not to violate a major antifraud statute, and another four times not to violate a separate law. Merrill Lynch, which Bank of America acquired in 2008, has separately agreed not to violate the same two statutes seven times since 1999.
Of the 19 companies that the Times found by the S.E.C. to be repeat offenders over the last 15 years, 16 declined to comment. They read like a Wall Street who’s who: American International Group, Ameriprise, Bank of America, Bear Stearns, Columbia Management, Deutsche Asset Management, Credit Suisse, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, Putnam Investments, Raymond James, RBC Dain Rauscher, UBS and Wells Fargo/Wachovia.
In 2005, Bank of America was one of several companies singled out for allowing professional traders to buy or sell a mutual fund at the previous day’s closing price, when it was clear the next day that the overall market or particular stocks were going to move either up or down sharply, guaranteeing a big short-term gain or avoiding a significant loss.
In its settlement, Bank of America neither admitted nor denied the conduct, but agreed to pay a $125 million fine and to put $250 million into a fund to repay investors. The company also agreed never to violate the major antifraud statutes.
Two years later, in 2007, Bank of America was accused by the S.E.C. of fraud by using its supposedly independent research analysts to bolster its investment banking activities from 1999 to 2001. In the settlement, Bank of America without admitting or denying its guilt, paid a $16 million fine and promised, once again, not to violate the law.
But two years later, in 2009, the S.E.C. again accused Bank of America of defrauding investors, saying that in 2007-8, the bank sold $4.5 billion of highly risky auction-rate securities by promising buyers that they were as safe as money market funds. They weren’t, and this time Bank of America agreed to be “permanently enjoined” from violating the same section of the law it had previously agreed not to break.
In fact, the company had already violated that promise, according to the S.E.C when it was accused last year of rigging bids in the municipal securities market from 1998 through 2002. To settle the charges, Bank of America paid no penalty, but refunded investors $25 million in profits plus $11 million in interest. And, the bank promised again never to violate the same law.
(h/t Blue Texan)
Van Jones AWOL at Tarsands Action Once Again, But Calls for Mass Civil Unrest if Obama Approves Keystone XL Pipeline
By: Jane Hamsher, Firedog Lake
Monday November 7, 2011 10:10 am
Van Jones was conspicuously absent when we were getting arrested at the White House that day in September (Overheard in the paddy wagon: “Where’s Van Jones? You think he would want to be here.”) He couldn’t come yesterday either, but he sent along a rather unequivocal condemnation of President Obama for even considering approval of the Keystone XL pipeline, calling for people to respond with mass civil disobedience if he does.
That affirmation is good to hear. There shouldn’t have been anything to keep him from lifting a pen and signing onto the October 4 letter from environmental leaders protesting the questionable relationship between Hillary Clinton and other State Department officials with Trans Canada and the process that they are using to determine approval of the pipeline. But 12,500 people is a lot more than 65, and it’s hard for a leading environmentalist to retain any street cred within the community and remain silent on this.
Regardless of whatever political calculus is happening behind the scenes, I was impressed by the unequivocal tone of the Jones’ email. It can’t sit well with the White House, because the President is clearly looking for a way to approve the pipeline. Calling for mass civil unrest if Obama does so will not only inflame Jones’s rabid right-wing critics (of which he has many), but it may be something he actually has to follow through on.
After Obama threw him under the bus, Van could have done many things. He chose to join the Center for American Progress, the think-tank whose job it is to slap the “good liberal seal of approval” on decidedly non-progressive things the White House wants to do, like perpetuating the War in Afghanistan. (CAP recently told Politico that environmentalists will be satisfied if Obama simply punts on the piepline until after the election, because “people who are concerned about this will feel he has been listening to them.”)
And he also recently launched his Rebuild the Dream organization, which clearly hopes to be on the receiving end of the massive Democratic 2012 election money gravy train. Maybe it just wasn’t flowing fast enough, and this was a warning shot. But now Van has put himself on the line, and even if Obama does punt, the Keystone XL pipeline will nonetheless continue to be a front-burner election issue with the young people Obama must turn out in 2012 – people with whom Jones has quite a bit of influence.
I just don’t think we live in a world where the oil companies don’t ultimately get their way, and some route for the pipeline isn’t approved. I look forward to participating in civil disobedience with Van Jones to protest construction of the Keystone XL pipeline, regardless of who is residing at 1600 Pennsylvania Avenue when it happens.
“I don’t know how to fix this but I know it’s wrong.” ~ Unknown Author
Occupy Wall Street NYC now has a web site for its General Assembly with up dates and information. Very informative and user friendly. It has information about events, a bulletin board, groups and minutes of the GA meetings.
Scott Campbell, a participant in the Occupy Oakland movement, describes the unprovoked police attack that left him severely wounded. “There was absolutely no warning whatsoever,” says Campbell.
On November 23rd, the Congressional Deficit Reduction Super-Committee will meet to decide on whether or not to keep Obama’s extension to the Bush tax-cuts – which only benefit the richest 1% of Americans in any kind of significant way. Luckily, a group of OWS’ers are embarking on a two-week march from Liberty Plaza to the Whitehouse to let the committee know what the 99% think about these cuts. Join the march to make sure these tax cuts for the richest 1% of Americans are allowed to die!
The 20 mile a day/2 week march from Liberty Square to DC is set to leave this Wednesday, November 9 at noon. On Wednesday we’ll be leaving Liberty Square and marching to the New York Waterway/Hudson River Ferry and onward to Elizabeth, NJ. This is our ﬁrst stop. Everyone is welcome to join this two week march. If you’d like to participate, but can’t commit for two weeks you’re welcome to join us for the day or help send us off!
This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.
Find the past “On This Day in History” here.
November 8 is the 312th day of the year (313th in leap years) in the Gregorian calendar. There are 53 days remaining until the end of the year.
On this day in 1793 the Louvre opens as a public museum. After more than two centuries as a royal palace, the Louvre is opened as a public museum in Paris by the French revolutionary government. Today, the Louvre’s collection is one of the richest in the world, with artwork and artifacts representative of 11,000 years of human civilization and culture.
The Musée du Louvre or officially Grand Louvre – in English the Louvre Museum or simply the Louvre – is one of the world’s largest museums, the most visited art museum in the world and a historic monument. It is a central landmark of Paris and located on the Right Bank of the Seine in the 1st arrondissement (district). Nearly 35,000 objects from prehistory to the 19th century are exhibited over an area of 60,600 square metres (652,300 square feet).
The museum is housed in the Louvre Palace (Palais du Louvre) which began as a fortress built in the late 12th century under Philip II. Remnants of the fortress are still visible. The building was extended many times to form the present Louvre Palace. In 1682, Louis XIV chose the Palace of Versailles for his household, leaving the Louvre primarily as a place to display the royal collection, including, from 1692, a collection of antique sculpture. In 1692, the building was occupied by the Académie des Inscriptions et Belles Lettres and the Académie Royale de Peinture et de Sculpture, which in 1699 held the first of a series of salons. The Académie
remained at the Louvre for 100 years. During the French Revolution, the National Assembly decreed that the Louvre should be used as a museum, to display the nation’s masterpieces.
The museum opened on 10 August 1793 with an exhibition of 537 paintings, the majority of the works being confiscated church and royal property. Because of structural problems with the building, the museum was closed in 1796 until 1801. The size of the collection increased under Napoleon when the museum was renamed the Musée Napoleon. After his defeat at Waterloo, many works seized by Napoleon’s armies were returned to their original owners. The collection was further increased during the reigns of Louis XVIII and Charles X, and during the Second French Empire the museum gained 20,000 pieces. Holdings have grown steadily through donations and gifts since the Third Republic, except during the two World Wars. As of 2008, the collection is divided among eight curatorial departments: Egyptian Antiquities; Near Eastern Antiquities; Greek, Etruscan, and Roman Antiquities; Islamic Art; Sculpture; Decorative Arts; Paintings; Prints and Drawings.
I don’t think it’s the job of sites like this one to tell you how to vote, or even that you should. This is simply a reminder that like many I will be headed to the polls to register my sentiments with my elected “Representatives” most of whom I hope will be unemployed by tomorrow.
Cross posted from The Stars Hollow Gazette
One of the editorials that was featured today in Punting the Pundits addressed the lack of choices for the office of President of the United States that voters are facing. The author, Hadley Freeman, called the Republican field “farcically unelectable”. Barack Obama may well have made a Faustian pact considering that if faced with a reasonable opponent from the GOP, he most assuredly would be leaving office on January 20, 2013.
But then there is that word: “reasonable”.
Rachel Maddow gave her take on two of more absurd candidates, Rick Perry and Herman Cain:
Best case scenario, that dude’s hammered. Worst case scenario, that is Perry sober and every time we’vee seen him previously, he was hammered
And then there is Mitt Romney and as Heather at Crooks and Liars points out:
I could not do a better job of summing this speech up if I tried, so I’ll just refer everyone to this post by Stephen D. Foster Jr. at Addicting Info — Mitt Romney Vows To Privatize Medicare, Raise The Retirement Age, And Fire Thousands Of Government Workers
Overall, Romney’s plan is heartless, gutless, unimaginative, and caters to the extreme right wing, the wealthy, and to corporations. It’s a blueprint for making America fail and wiping out the middle class and should automatically disqualify him from holding any office. It kills the voice of the American people and destroys the programs we hold most dear. If a Republican wins the election next year, it will be perilous for the United States and the American people. Their policies have been destructive for thirty years, and now they want apocalypse.
As Ms. Freeman said, “That sound you heard on the breeze? That was the sound of Obama laughing.“