Category Archives: Financial Archive

Lawmakers want perjury probe for Corzine


A group of Republican lawmakers called on Friday for a criminal investigation of Jon Corzine, the head of failed futures broker MF Global, saying he may have committed perjury when speaking before Congress in 2011. Corzine, a Democrat who previously served as New Jersey’s governor and senator, headed MF Global when it collapsed in October 2011 in one of the 10 biggest U.S. bankruptcies.

 

Customers were left reeling when it was discovered that about $1.6 billion was missing from their accounts. That money turned out to have been used as stop gaps, which is illegal and caused public outrage. Corzine maintained during several Congressional hearings that he did not know what happened to the money. But recorded conversations unearthed by MF Global’s regulator showed otherwise, the members of the House of Representatives said. “There is no way Mr. Corzine could have been “stunned” to learn of hundreds of millions of dollars of missing client funds,” they said in the letter to U.S. Attorney General Eric Holder that was dated August 1.

 

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The Payday Playbook: How High Cost Lenders Fight to Stay Legal


As the Rev. Susan McCann stood outside a public library in Springfield, Mo., last year, she did her best to persuade passers-by to sign an initiative to ban high-cost payday loans. But it was difficult to keep her composure, she remembers. A man was shouting in her face. He and several others had been paid to try to prevent people from signing. “Every time I tried to speak to somebody,” she recalls, “they would scream, ‘Liar! Liar! Liar! Don’t listen to her!’”

 

Such confrontations, repeated across the state, exposed something that rarely comes into view so vividly: the high-cost lending industry’s ferocious effort to stay legal and stay in business. Outrage over payday loans, which trap millions of Americans in debt and are the best-known type of high-cost loans, has led to dozens of state laws aimed at stamping out abuses. But the industry has proved extremely resilient. In at least 39 states, lenders offering payday or other loans still charge annual rates of 100 percent or more. Sometimes, rates exceed 1,000 percent.

 

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Energy Markets Are Manipulated


The Federal Energy Regulatory Commission says that JP Morgan has massively manipulated energy markets in  California and the Midwest, obtaining tens of millions of dollars in overpayments from grid operators between September 2010 and June 2011. As shown below, big banks have manipulated virtually every other market as well – both in the financial sector and the real economy – and broken virtually every law on the books.

 

The big banks and government agencies have been conspiring to manipulate commodities prices for decades. The big banks are taking over important aspects of the physical economy, including uranium mining, petroleum products, aluminum, ownership and operation of airports, toll roads, ports, and electricity. And they are using these physical assets to massively manipulate commodities prices … scalping consumers of many billions of dollars each year.

 

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Former Trader Is Found Liable In Fraud Case


Updated, 10:03 p.m. | A former Goldman Sachs trader at the center of a toxic mortgage deal lost a closely watched legal battle on Thursday, giving Wall Street’s top regulator its first significant courtroom victory in a case stemming from the financial crisis. A federal jury found the trader, Fabrice Tourre, liable on six counts of civil securities fraud after a three-week trial in Lower Manhattan. The case had given both sides — the government and Mr. Tourre — a chance to repair their reputations.

 

For the Securities and Exchange Commission, a regulator dogged by its failure to thwart the crisis, the case offered a shot at redemption following one courtroom disappointment after another, including two similar mortgage-related cases that crumbled last year. For Mr. Tourre, 34, who abandoned his trading career to pursue a doctorate in economics and become a teacher, the threat of being barred from Wall Street came second to the black mark on his name.

 

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Larry Summers and Financial Crises: Is He Being Graded on Attendance?


According to Ezra Klein, a major plus in the case for Larry Summers as Fed chair is his experience dealing with financial crises. While it is true that he took a leadership role in dealing with far more crises than Janet Yellen, the other leading contender for the job, it is hard to believe that his record in this area would be a plus if he was being graded by the outcomes.

 

Starting with the Mexican peso crisis in 1994, Summers helped to negotiate a deal that protected big investors in Mexico’s debt, like Goldman Sachs. Mexico suffered a severe downturn in the immediate aftermath of the crisis and has had the slowest per capita GDP growth of any country in Latin America in the two decades since the crisis. That one doesn’t look like much of a success story.  Then we can go to the East Asian financial crisis in 1997. As even the IMF now admits, Summers and the rest of the Committee to Save the World (CSW) largely misdiagnosed the crisis. They saw it as a problem of economies that were badly misbalanced as opposed to being largely an issue of liquidity and confidence. Malaysia broke with the IMF and applied capital controls, which were roundly rejected by Larry Summers, and managed to escape some of the worst effects of the adjustment.  The deal for the East Asian countries was that they had to repay their debts in full. In order to do so, the currencies of the countries in the region plummetted against the dollar and their exports to the U.S. soared.

 

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Private equity's secret bailout is ending


When you ask private equity executives about the financial crisis, they are quick to tell you that it wasn’t their fault. And that they didn’t receive a bailout.

 

The first part is undeniably true. Private equity firms didn’t originate subprime mortgages, nor did they teeter on the brink of self-induced insolvency. The second part is a bit more complicated, and it’s only getting more so as the Federal Reserve orchestrates a rise in long-term interest rates.

 

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A-Rod And Major League Baseball Headed For Legal Collision


Major League Baseball really wants Alex Rodriguez to go away. So much so that the league is reportedly looking beyond the PED policy it agreed to with the players and toward the wide latitude of the collective bargaining agreement as its avenue of suspension.

 

Suspending him through the collective bargaining agreement rather than through the drug rules would allow MLB to keep Rodriguez off the field through any appeals process. The commissioner’s office could conceivably point to the CBA and suspend A-Rod for conduct that’s “materially detrimental to the best interests of baseball,” which could include, among other things, a “violation of federal, state or local law.” Examples could include A-Rod’s possible impeding of baseball’s investigation or recruiting other athletes to the Biogenesis lab, the source of his and other players’ troubles.

 

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Bouncing A Check Or Being Slightly Overdrawn Enough To Get You Banned From The Banking System Forever


That is, if you are poor enough. Institutions like Bank of America, Citibank and Wells Fargo say that tapping into the vast repositories of information helps them weed out risky customers and combat fraud — a mounting threat for banks. But consumer advocates and state authorities say the use of the databases disproportionately affects lower-income Americans, who tend to live paycheck to paycheck, making them more likely to incur negative marks after relatively minor banking missteps like overdrawing accounts, amassing fees or bouncing checks.

 

When the databases were created more than 20 years ago, they were intended to help banks guard against serial fraud artists, like those accused of writing bogus checks. Since then, though, the databases have ensnared millions of low-income Americans, according to interviews with financial counselors, consumer lawyers and more than two dozen low-income people in California, Illinois, Florida, New York and Washington…. “Hundreds of thousands of Americans are being shut out for relatively small mistakes,” Mr. Mintz said.

 

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Bear Stearns mortgage executives have plum jobs on Wall Street


Before Lehman crashed, there was “The Bear.” Bear Stearns, once the nation’s fifth-largest investment bank, had been a fixture on Wall Street since 1923 and had survived the crash of 1929 without laying off any employees. But in 2008, its customers and creditors didn’t much care about its storied history. They were worried that the billions of dollars of mortgage-backed securities on its books weren’t worth what the company claimed. En masse, they stopped doing business with Bear.

 

Within a few days, on Monday, March 17, Bear was gone — subsumed into JPMorgan Chase & Co. with the help of the Federal Reserve for a price that was approximately the value of its shiny new Madison Avenue office tower alone. Bear Stearns failed largely because it had spent the previous five years gorging on subprime mortgages in what appeared to be an ever-rising housing market. When home prices started falling and those loans started to go bad, Bear’s creditors got scared and pulled their money out of the investment bank.

 

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The Commodities Market: A Big Bank Love Story


The Fed loosened rules to allow banks to buy commodities, driving up everyday prices for consumers. Who the next chair is matters if these kinds of practices are ever to be stopped. Who becomes the next Federal Reserve chair matters, not only because of the implications for economic and monetary policy, but because the Fed remains one of the nation’s chief financial regulators. There are dozens of policies, some we don’t even know about, over which the Fed wields critical influence. While the past year has seen a small but important shift toward tighter controls, particularly on the largest Wall Street institutions, all of that could change if President Barack Obama selects another deregulator in the Greenspan tradition.

 

A perfect example of the Fed’s centrality to the financial regulatory space came last week, when a Senate hearing focused on an unseemly practice that the Fed perpetuated and has the power to stop. As reported in The New York Times and elsewhere, large investment banks like Goldman Sachs have purchased warehousing facilities for aluminum and shuffled the product from one facility to another. When a purchaser buys the metal, it finds it takes much longer—up to 18 months in some cases—to satisfy their order. Buyers pay rent on the storage in the meantime, but Goldman makes its real money, in this case, on trading in aluminum futures.

 

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