Tag: Bail Out

Still Bailing Out the Banks

Cross posted from The Stars Hollow Gazette

Nearly a year ago Rolling Stone contributing editor, Matt Taibbi wrote about how the Bank of America had defrauded everyone yet the US government kept bailing it out. They got a slap on the wrist and a paltry $$137 million fine for bilking needy schools and cities all the while plotting to rig global interest rates. In that same article from March 29th, 2012, Matt noted that BoA was still failing, yet they were still being bailed out. Why? The government’s excuse then and still is that they are too big to fail and too big too jail.

This was not fixed by Dodd-Frank and the promise to investigate the mortgage fraud and hold the banks accountable for bringing down the housing market and the economy along with it never materialize.

On Saturday in her New York Times article Gretchen Morgenson revealed that, we, the American taxpayer, are still bailing out Bank of America in secret deals :

That the New York Fed would shower favors on a big financial institution may not surprise. It has long shielded large banks from assertive regulation and increased capital requirements.

Still, last week’s details of the undisclosed settlement between the New York Fed and Bank of America are remarkable. Not only do the filings show the New York Fed helping to thwart another institution’s fraud case against the bank, they also reveal that the New York Fed agreed to give away what may be billions of dollars in potential legal claims.

Here’s the skinny: Late last Wednesday, the New York Fed said in a court filing that in July it had released Bank of America from all legal claims arising from losses in some mortgage-backed securities the Fed received when the government bailed out the American International Group in 2008. One surprise in the filing, which was part of a case brought by A.I.G., was that the New York Fed let Bank of America off the hook even as A.I.G. was seeking to recover $7 billion in losses on those very mortgage securities.

It gets better.

What did the New York Fed get from Bank of America in this settlement? Some $43 million, it seems, from a small dispute the New York Fed had with the bank on two of the mortgage securities. At the same time, and for no compensation, it released Bank of America from all other legal claims.

[…] To anyone interested in holding banks accountable for mortgage improprieties, the Fed’s actions are bewildering. If the Fed intended that Maiden Lane II own the right to sue Bank of America for fraud, why didn’t it pursue such a potentially rich claim on behalf of taxpayers? The Fed made $2.8 billion on the Maiden Lane II deal, but the recovery from Bank of America could have been much greater. Why did it instead release Bank of America from these liabilities and supply declarations that seem to support the bank in its case against A.I.G.?

The New York Fed would not discuss this matter, citing the litigation. But taxpayers, who might have benefited had the New York Fed brought fraud claims, deserve answers to these questions.

[…] A New York Fed spokesman said it supported the settlement because it would generate significant value without potentially high litigation costs.

Let’s recap: For zero compensation, the New York Fed released Bank of America from what may be sizable legal claims, knowing that A.I.G. was trying to recover on those claims.

If they’re too big to fail, to big to jail then these banks should be too big to exist.

Video from K Street Protest

cross-posted from Sum of Change

Yesterday, despite the persistant rain, thousands of people showed up on K Street in Washington, DC to protest the actions and lobbying efforts of big banks and to demand economic justice. The Washington Post is comparing the anger to what we have seen at Teaparty protests.

–Mark Freeman, foreclosure victim and SEIU member

Derivatives: An Investment on Nothing!

Warren Buffet gave a prophetic pronouncement back in 2003 about the Derivatives market, seeing the exponential dangers of this “paper-thin” type of investment.

Buffet did not mince words. He called them “financial weapons of mass destruction“:

Buffett warns on investment ‘time bomb’

BBC – 4 March, 2003

The derivatives market has exploded in recent years, with investment banks selling billions of dollars worth of these investments to clients as a way to off-load or manage market risk.

But Mr Buffett argues that such highly complex financial instruments are time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system.

[…]

Some derivatives contracts, Mr Buffett says, appear to have been devised by “madmen”.  […]

http://news.bbc.co.uk/2/hi/bus…

With Derivatives, you can Bet on anything — Even the Weather!

Introduction To Weather Derivatives

by Felix Carabello, Associate Director, Environmental Products, Chicago Mercantile Exchange

Weather: Risky Business

It is estimated that nearly 20% of the U.S. economy is directly affected by the weather, and that the profitability and revenues of virtually every industry – agriculture, energy, entertainment, construction, travel and others – depend to a great extent on the vagaries of temperature. […]

In a 1998 testimony to Congress, former commerce secretary William Daley stated, “Weather is not just an environmental issue; it is a major economic factor. At least $1 trillion of our economy is weather-sensitive.”

[…]

If there were only some way, to “Hedge that Bet” — against the ever present risk of Foul Weather.

No WorriesWhere there’s a Market Risk, there’s always a Wall Street Way!

Obligations of Debt — Collateralized

How does your Obligation to make your Mortgage Payments, turn into some unseen Investor’s “Income Stream”?

Easy — thanks to Derivatives and CDO’s (Collateralized Debt Obligation).

For the mere Price of Admission, those unseen Investor’s get to divvy up your Mortgage Payments, among themselves — long as they “promise to pay off” that Debt, WHEN, for whatever reason, you are no longer able to make those Obligatory Payments …

Piece of Cake!

Geesh … WHAT could ever go wrong with this picture?

Banksters get Tagged in the UK, Only to Flee to, Guess Where?

Finally a Representative body, that knows WHO they work for …

Class war breaks out in the U.K.

The Labor government announces a tax on exorbitantly-paid bankers. American populists gnash their teeth in envy

By Andrew Leonard, Dec 9, 2009

Unsurprising headline of the year: “U.S. Probably Will Avoid Matching U.K. 50 percent Bonus Tax.”

Alistair Darling, the U.K. Chancellor of the Exchequer, announced the tax — aimed squarely at overpaid bankers

[…]

From Bloomberg:

“There are some banks who still believe their priority is to pay substantial bonuses,” Darling said in Parliament. “I am giving them a choice. They can use their profits to build up their capital base. If they insist on paying substantial rewards, I am determined to claw money back for the taxpayer.”

Paul Krugman says the move is “entirely reasonable.” Justin Fox asks, “why the heck not?” Felix Salmon says “well done.”

But don’t expect a repeat across the pond.

http://www.salon.com/technolog…

Interesting … maybe the People CAN Fight back?

Ratigan reviews Frontline’s Warning, labels Wall Street as Legalized Gambling

If you missed Dylan Ratigan’s interview today with Senator Maria Cantwell (D-WA) — well you missed a lot!

They spell out in stark relief the very REAL need for serious Wall Street Regulation — NOW!   (and still!)

Or we risk a repeat of the same Bubble-driven collapse of Trillion Dollar Derivative Bets, that occur in the dark, beyond the reach — or even the Watch — of any Govt Regulator, or even the Public scrutinity.

Nothing has changed, they can STILL Gamble Trillions in Derivatives, and let US the Taxpayers pick up the Tab, whenever their Bets GO Bad!

Link to MSNBC Clip to the Ratigan Cantwell Interview

Definitely a “Must See”, in my opinion.

So much so, I transcribed much of it, to help peak your interest …  

FRONTLINE Presents: The Warning (on the economic meltdown)

FRONTLINE INVESTIGATES THE ROOTS OF THE FINANCIAL CRISIS

FRONTLINE Presents

The Warning

Tuesday, October 20, 2009, at 9 P.M. ET on PBS

In the devastating aftermath of the economic meltdown, FRONTLINE sifts through the ashes for clues about why it happened and examines critical moments when it might have gone much differently.

In The Warning, airing Tuesday, Oct. 20, 2009, at 9 P.M. ET on PBS (check local listings), veteran FRONTLINE producer Michael Kirk (Inside the Meltdown, Breaking the Bank) unearths the hidden history of the nation’s worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multi-trillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

http://www.pbs.org/wgbh/pages/…