by ilene - March 21st, 2011 9:44 pm
Courtesy of The Daily Bail
Video – The Fed has 5 days to release all data.
March 21 (Bloomberg) — The Federal Reserve must disclose details of emergency loans it made to banks in 2008, after the U.S. Supreme Court rejected an industry appeal that aimed to shield the records from public view. The justices today left intact a court order that gives the Fed five days to release the records, sought by Bloomberg.
A huge win for transparency.
Statement from Matthew Winkler, editor in chief of Bloomberg News:
As a financial crisis developed in 2007, "The Federal Reserve forgot that it is the central bank for the people of the United States and not a private academy where decisions of great importance may be withheld from public scrutiny. The Fed must be accountable to Congress, especially in disclosing what it does with the people’s money."
“The board will fully comply with the court’s decision and is preparing to make the information available,” said David Skidmore, a spokesman for the Fed.
The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s unprecedented $3.5 trillion effort to stem the 2008 financial panic.
“I can’t recall that the Fed was ever sued and forced to release information” in its 98-year history, said Allan H. Meltzer, the author of three books on the U.S central bank and a professor at Carnegie Mellon University in Pittsburgh.
by ilene - January 4th, 2011 4:56 pm
To Err is Human, To Disclose Divine.
Green Mountain Coffee Roasters (NASDAQ: GMCR) is currently under the scrutiny of the Securities and Exchange Commission (SEC) and is facing numerous class action lawsuits alleging securities fraud. In particular, plaintiffs are alleging false and misleading disclosures in violation of federal securities laws.
One troubling issue is that when Green Mountain initially disclosed an accounting error concerning its K-Cup margin percentages, it claimed that the error was “immaterial.” Material and immaterial errors are treated differently. If an accounting error is immaterial, a public company is required to correct it by making a one-time cumulative adjustment to earnings in the latest quarter. If an accounting error is material, a public company is required to notify investors that its previous financial reports cannot be relied on and that it will restate its affected financial reports to correct that error.
On Monday, September 20, 2010, the SEC notified Green Mountain Coffee Roasters that it was conducting an informal inquiry. It requested information concerning “revenue recognition practices and the Company’s relationship with one of its fulfillment vendors.” Eight days later, on September 28, 2010, Green Mountain surprised investors by disclosing news of the SEC inquiry in an 8-K filing. In that 8-K report, Green Mountain also disclosed that it discovered an "immaterial accounting error" affecting financial reports issued from 2007 to June 26, 2010:
In connection with the preparation of its financial results for its fourth fiscal quarter, the Company’s management discovered an immaterial accounting error relating to the margin percentage it had been using to eliminate the inter-company markup in its K-Cup inventory balance residing at its Keurig business unit. Management discovered that the gross margin percentage used to eliminate the inter-company markup resulted in a lower margin applied to the Keurig ending inventory balance effectively overstating consolidated inventory and understating cost of sales. Management determined that the accounting error arose during fiscal 2007 and analyzed the quantitative impact from that point forward to June 26, 2010.
As of June 26, 2010, there is a cumulative $7.6 million overstatement of pre-tax income. Net of tax, the cumulative error resulted in a $4.4 million overstatement of net income or a $0.03 cumulative impact on earnings
by ilene - October 11th, 2010 8:18 pm
How big is the foreclosure mess? Big. Here’s WB7′s perspective.
THE MIDDLE GAME QUAGMIRE
After a bad opening, there is hope for the middle game. After a bad middle game, there is hope for the endgame. But once you are in the endgame, the moment of truth has arrived. – Edmar Mednis (Grandmaster)
I have one central thought of where this fraudclosure fiasco could lead, and this is why everyone should watch very carefully how the various players move their pieces in this subprime middle game.
Up until now, the banks have been making sweeping statements that this all reflects a "technical" glitch in foreclosure processes.
Well, having a posse of State AGs band together to commence a joint investigation is no longer a minor "technical" glitch. Allegations of masses of forged signatures, falsified or fabricated notarized documents, back dating etc., if true, collectively amount to an institutional pattern of criminal behavior. Having the Justice Department announce it is opening a preliminary investigation raises the stakes even higher.
Being forced to suspend all foreclosures has obvious "material" economic consequences to the CDO note holders.
But having title companies pull out of the residential real estate market because they no longer trust the veracity of bank provided documents presages claims by mortgagors who lost their properties as well as the subsequent purchasers of same. The only way to conclusively cure that kind of problem is to get waivers, and releases from the various claimants wherever they may be or pass retroactive curative laws or laws doing things like creating a bailout fund to indemnify those who are injured (yikes!). You cannot simply say this is immaterial, sprinkle in the word MERS and hope this will all go away.
The CDO note holders will have potential claims stemming from the interruption of non-performing loan processing. Think breaches of the trust servicing agreements and allegations of "gross negligence or willful misconduct", the latter being magical legal hurdle in these types of agreements. However, the much…
by ilene - August 23rd, 2010 12:37 am
"HE WHO LOSES WEALTH LOSES MUCH; HE WHO LOSES A FRIEND LOSES MORE; BUT HE THAT LOSES COURAGE LOSES ALL." MIGUEL DE CERVANTES
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The Icelandic Chamber of Commerce commissioned ex-Fed Governor Mishkin to write a glowing report on their economy, even while the country was being destroyed from within by a rogue banking system and a corrupt regulatory regime.
by ilene - January 16th, 2010 1:49 pm
Courtesy of Karl Denninger at The Market Ticker
by ilene - September 19th, 2009 6:33 pm
Bloomberg News editor-in-chief Matt Winkler wrote an Op-Ed in the Wall Street Journal yesterday explaining why he is after the Federal Reserve to come clean about its secret lending program during the height of the financial crisis.
Bloomberg has filed a lawsuit against the Federal Reserve to force the Fed to reveal the name of the banks it lent money to in this operation, something I first blogged about last November. Last month, Bloomberg won its case in District Court. The Fed is now considering whether to appeal.
At issue is transparency in our financial system. In the Op-Ed, Winkler puts it thus:
The law doesn’t allow the government to get away with secrecy based on a mere claim that some sort of damage would result if it released the information in question. To prevail, the Fed must "provide evidence that if the requested information is disclosed, competitive harm would be ‘imminent,’" Judge Preska wrote. The Fed must show that competitors would use against a bank the fact that it received federal dollars—that running to the government trough for sustenance would become a competitive disadvantage.
That isn’t an easy test, and with hundreds of billions poured into financial institutions, it shouldn’t be. What’s more, the Fed didn’t come close to meeting this test. All it offered in court were sworn statements from Fed employees speculating that borrowers might be labeled as losers. They said nothing about how competing banks might use the information.
The issue at stake here is understanding the financial crisis and its aftermath. The information Bloomberg is seeking is vital to that, and it belongs to all Americans. Bloomberg isn’t alone in saying so. Dow Jones, the New York Times, the Associated Press, Gannett Newspapers, Hearst, Advance Publications, and the Reporters Committee for Freedom of the Press have all expressed support for Bloomberg’s efforts and may join a friend-of-the-court brief if the decision is appealed.
Below is a Bloomberg News video in which Winkler discusses the case with Betty Liu. In his opening remarks, Winkler says the Fed was taking on an unprecedented role and that this requires transparency.
I agree because the Fed has been politicized through these actions. Its independence is now threatened because of it as the Federal Reserve Transparency Act of 2009 attests.
by ilene - August 28th, 2009 9:36 pm
Karl, on the Fed’s quest for secrecy – a few legal arguments…
Courtesy of Karl Denninger at The Market Ticker
Henry Blodget writes an interesting piece over at Businessinsider in which he cites Paul Kasriel of Northern Trust:
Today, we have federal deposit insurance Therefore, the probabilities and magnitude of depositor runs on banks are much reduced compared with 1933. Yet, we can see “runs” by stockholders and other creditors of banks if there is a suspicion of financial problems. If the Fed is required to publish the names of financial institutions to which it has extended credit and this publication induces financial institutions to refrain from borrowing from the Fed, one can only speculate if this would be the tinder for another liquidity conflagration in the coming months.
How about a little honesty from commentators in the mainstream media?
"Liquidity conflagrations" happen when people discover they have been lied to.
Anyone remember Bear Stearns? "We’re well capitalized" on CNBC? "Everything is fine"? Cramer’s pumping of them on his show as "safe"?
Market participants in fact knew everything was not fine. There were statements flying around (that turned out to be true) that some counter-parties had begun refusing to novate deals with Bear.
It was the discovery of the lie that caused the run on Bear Stearns and its ultimate collapse.
Likewise with Lehman. Remember Dick Fuld’s "I’m gonna burn the shorts" comment, again, on CNBC and elsewhere in the National Media?
The truth got out: they were having liquidity problems. Once again, as soon as people discerned that they were being lied to, Lehman’s fate was sealed.
The problem The Fed has is that as the supposed "risk regulator" for the American Banking System it has absolutely refused to do its job of prudential regulation and still is. Instead of demanding that its member banks hold capital against all unsecured lending it has "blessed" models rather than markets. But at the same time it has declared "haircuts" against collateral that make clear that so-called "face value", or "par", is a farce.
by ilene - August 25th, 2009 6:49 am
Courtesy of Karl Denninger at The Market Ticker