An outstanding discussion, primer and visual lesson on toxic assets, failed banks, the Federal Reserve, HR 1207, auditing the Fed, and you, the f*cked taxpayer. Don’t miss this clip and then send it to someone else. Pay it forward until we have millions of f*cked taxpayers who will at least be informed. Awareness is our only chance.
More green shoots from Dylan Ratigan’s awesome new show. Dylan puts on his Banker hat and swaps a (literal) bag of trash, on-air, for $13.9 Trillion worth of Monopoly money from a guy wearing a "Fed" hat. Dylan then explains why we should support Ron Paul’s Audit of the Fed (HR 1207) and explains in plain and simple terms how we have been screwed by the Fed’s bailout of the banks. This is really good stuff. I can’t help but admire Ratigan for what he’s doing with the new show. From our perspective, it just gets better and better. Here are just two of several choice morsels from this clip:
"The Federal Reserve just extended $14 Trillion of our money, our children’s money, America’s future…and now they don’t want to talk about what’s in the bag. And they did it because the banks created a garbage bag full of bad debts." (4:45)
"I feel as if America has suffered the greatest theft and cover-up — ever, … where banks created a pile of garbage, that they paid themselves billions of dollars in personal compensation, and then stuck the trillions of dollars worth of garbage with the American taxpayer. That, to me, is stealing." (7:05)
Lloyd Blankfein’s Days Are Numbered as Chairman of Goldman Sachs
It’s a testament to the odd world in which we live that when a Wall Street firm pays a $550 million fine by conceding negligence in how it dealt with clients, its stock surges, adding billions of dollars in market value for the firm’s shareholders.
But that’s what’s happening to Goldman Sachs, as it reached its long awaited settlement with the Securities and Exchange Commission over how it sold a basket of mortgage related debt to investors in 2007.
Back when the SEC brought the case, the conventional wisdom on Wall Street and the financial media was that Goldman didn’t have to settle — the case was weak and Goldman is, after all, Goldman.
As I wrote on these pages back then, Goldman would have to settle because: (a) the SEC dug up some real questionable activity; and (b) no Wall Street firm, not even one with the ties to government that Goldman possesses can go to war with its primary regulator.
Now that Goldman has indeed settled, the news is being spun, again mostly by the financial media, that the deal with the SEC was a victory for Goldman’s CEO Lloyd Blankfein, who survived the investigation largely unscathed, paying a measly $550 million to the government (equivalent to a few days trading gains at Goldman) and without having to give up any power, such as relinquishing his role as chairman of the board, as senior executives both inside Goldman and at competing firms believed would be part of any settlement.
Well, if history is any guide, Blankfein may not go tomorrow, or even next month, but sometime in 2011, Blankfein will at the very least no longer be chairman of Goldman, and may also be forced out of the firm altogether.
If you don’t believe me ask former Citigroup CEO Sandy Weill. Like Blankfein, Weill (at least on paper) was a good CEO from an operational standpoint. Following the creation of Citigroup in 1998, shares of the big bank soared. The bank was what’s known as a Wall Street darling for its strong earnings and a surging stock price, and Weill was regarded as the King of Wall Street, having engineered the largest…
Eliot Spitzer and William Black call for an immediate Congressional investigation of Lehman’s accounting deception and the release of relevant emails and internal documents.
In December, we argued the urgent need to make public A.I.G.’s emails and “key internal accounting documents and financial models.” A.I.G.’s schemes were at the center of the economic meltdown. Three months later, a year-long report by court-appointed bank examiner Anton Valukas makes it abundantly clear why such investigations are critical to the recovery of our financial system. Every time someone takes a serious look, a new scandal emerges.
The damning 2,200-page report, released last Friday, examines the reasons behind Lehman’s failure in September 2008. It reveals on and off balance-sheet accounting practices the firm’s managers used to deceive the public about Lehman’s true financial condition. Our investigations have shown for years that accounting is the “weapon of choice” for financial deception. Valukas’s findings reveal how Lehman used $50 billion in “repo” loans to fool investors into thinking that it was on sound financial footing. As our December co-author Frank Partnoy recently explained as part of a major report of the Roosevelt Institute, “Make Markets Be Markets“, such abusive off-balance accounting was and is endemic. It was a major cause of the financial crisis, and it will lead to future crises.
According to emails described in the report, CEO Richard Fuld and other senior Lehman executives were aware of the games being played and yet signed off on quarterly and annual reports. Lehman’s auditor Ernst & Young knew and kept quiet.
The Valukas report also exposes the dysfunctional relationship between the country’s main regulatory bodies and the systemically dangerous institutions (SDIs) they are supposed to be policing. The NY Fed, the regulatory agency led by then FRBNY President Geithner, has a clear statutory mission to promote the safety and soundness of the banking system and compliance with the law. Yet it stood by while Lehman deceived the public through a scheme that FRBNY officials likened to a “three card monte routine” (p. 1470). The report states:
“The FRBNY discounted the value of Lehman’s pool to account for these collateral transfers. However, the FRBNY did not request that Lehman exclude this collateral from its reported liquidity pool. In the…
Specifically, if I read him correctly, Felix is annoyed that:
1) I have a job that in a just world would belong to a normal out-of-work journalist who hasn’t been at the center of a huge financial scandal, and
2) I have not explained every last detail of my scandalous background in my Business Insider bio, which states merely that, at the end of my Wall Street career, I was "keelhauled by then-Attorney General Eliot Spitzer over conflicts of interest between research and banking."
Well, it is no fun to annoy the king of financial bloggers, so let me address these points, starting with the second one.
In the 7 years since I settled the widely publicized civil securities-fraud complaint brought against me by Eliot Spitzer and the SEC, I have contributed commentary to more than a dozen news organizations, including Slate, Fortune, NPR, MSNBC, CNN, FT, the BBC, The Atlantic, Forbes, The New York Times, Bloomberg, EuroMoney, Yahoo (I’m a host of their finance show, TechTicker), and CNBC. When appropriate, I have gone to great lengths to detail every last bit of what had happened, so the readers, viewers, and listeners of these organizations would know exactly who they were dealing with (cue scary music).
In the early years, I also launched my own blog, Internet Outsider, in which I addressed what had happened in as much detail as I was able to. (Thanks to various legal agreements, I have never been able to discuss the allegations publicly. Eventually, when there’s not a soul left on earth who gives a damn, I’ll be able to tell my side of the story. My grandchildren will love it!)
Two years ago, when we launched Business Insider, I again frequently discussed what had happened to me, lest there were any readers who had not already gotten sick of my story. This effort was made easier by the help of the folks who posted Eliot Spitzer’s press release in the comments whenever I said something they disagreed with. Whenever possible, I responded to readers’ questions about
RealClearMarkets has an interesting interview with Charlie Gasparino regarding his new book "The Sellout." There seems to be a consensus forming that something has gone seriously wrong with the US republic, and that the Obama administration is failing to address it, failing badly.
One has to wonder what it will take to give Washington a wakeup call. It seems that, when confronted by white collar crime, people lose all the perspective which they have when it comes to fighting crime and injustice. "It won’t work, it can’t be done, they will just come back and do it again."
Well, duh. If you make it worth their while, administer wristslap justice at worst, and let all the top dogs openly flout the law, of course they will be back. What the US needs is the reincarnation of Melvin Purvis with a minor in finance. I would put Eliot Spitzer in charge of the SEC with the right resources and let him rip through Wall Street like the wrath of God, and make the bankers howl.
But that probably won’t happen, because there is too much dirt, too many scandals on both sides of the aisle for this crew to administer its oath to uphold the Constitution.
Here is an excerpt from the interview:
"I don’t know when it’s going to happen, but if history is any guide, it has to happen again--the "it" being another financial crash. Of course, it won’t happen tomorrow or next week, or maybe not even two years from now. But when the memory of 2008 wears off, and mark my words it will wear off, excessive risk taking will be back in a form that evades all these alleged regulatory controls that have been established. Regulation can never cure the disease of excessive risk.
The only thing that can cure it is tough love--allowing firms to fail. That doesn’t mean I wanted the Fed and the Treasury to walk away last year. That would have meant Armageddon. But they should have walked away before that, when the systemic risk was smaller and the damage would have been limited. 1998 would have been a great place to start. Let Long Term Capital Management fail; let Lehman, and as I show in my book, possibly Merrill to fail,
If street thugs were to hold up a convenience store and drive off with $1 million, it would be national news. But when a venerable Boston bank rips off California’s two largest pension funds for $56 million, it’s business-as-usual — at least to the anchors of CNBC.
State Street Bank — the world’s largest servicer of pensions — systematically ripped off CalPERS and CalSTRS over a period of eight years. It did this by adding a tiny surcharge on foreign currency trades. But this adds up, especially considering that some $35 billion in 42,000 transactions were traded by these funds since 2001.
So when two whistle-blowers filed suit under seal in April 2008, attorneys from my office immediately investigated — examining hundreds of thousands of pages of documents, interviewing witnesses and subpoenaing records.
They found in the course of an 18-month investigation that State Street was contractually obligated to give CalPERS and CalSTRS the "interbank rate" at the precise time of the trade. Instead, State Street consistently charged at or near the highest rate of the day, even if the interbank rate was lower at the time of trade. And traders concealed the fraud by deliberately failing to include time stamp data in its reports, so that the pension funds could not determine the true execution costs.
When the suit was filed, we notified the media and held a press conference — to bring the fraud to light and to deter other financial traders from considering similar action. This is a routine part of prosecuting important corporate fraud cases.
But, in a commentary post today, CNBC anchor Michelle Caruso-Cabrera sneered at California’s effort to recover $200 million in damages and penalties, using a made-up quote from Elliot Spitzer to call it "quaint."
This follows an interview Tuesday that was straight out of the Daily Show. CNBC invited me on to talk about the case, and then Caruso-Cabrera asked why I would come on the air to talk about it.
Her co-anchors seemed to have no problem with the rip-off ("as long as they quoted you a dollar…
Eliot Spitzer was kind enough to sit down with me on TechTicker last week. This was the second time I had ever met him--the first being not when he was pulverizing me as Attorney General, but later, when I was writing for Slate Magazine and he was running for Governor. It was the first time I’d ever talked to him about any of this stuff.
It was a very interesting half-hour to say the least. We’ll post a couple of clips here…
As many of you know, my career as a top-ranked Wall Street research analyst ended in 2002, when a then-little-known New York Attorney General named Eliot Spitzer accused me and my firm (Merrill Lynch) of producing bogus research to curry favor with banking clients.
Merrill denied and then settled the charges, but Spitzer’s allegations resonated with furious investors who had lost their shirts in the market crash. Spitzer soon expanded his research investigation to other firms, eventually forcing the industry into a "Global Settlement" that changed the longstanding relationship between bankers and research analysts. I, meanwhile, got tossed out of the securities industry.
For Spitzer, the research investigation was the first of many. Over the next few years, as the newly crowned ‘Sheriff of Wall Street’, he launched similarly aggressive investigations into mutual funds, insurance, and other industries, often exposing shady practices that had come to be regarded as business as usual.
By 2003, when I was taking the first steps toward rebuilding my shattered reputation--writing commentary for Slate, The Atlantic, and other publications--Eliot Spitzer’s fame and success had soared. In 2004, he was re-elected as Attorney General. In 2006, he was elected Governor of New York in a landslide. By 2007, he was frequently mentioned as a possible future presidential candidate.
Meanwhile, by the spring of last year, thanks to the generous second chance many people had given me, I was beginning to rebuild some credibility. TechTicker was doing well, The Business Insider was growing rapidly, and Valleywag had even taken to referring to me as "the disgraced analyst everyone listens to."
Then, one day, I got a note from a New York Times reporter saying I should check out the lead story about Eliot Spitzer that had just hit their front page. I checked it out--and my
In a wide-ranging discussion of the bank bailouts on MSNBC’s Morning Meeting, host Dylan Ratigan described the process by which the Federal Reserve exchanged $13.9 trillion of bad bank debt for cash that it gave to the struggling banks.
Spitzer — who built a reputation as “the Sheriff of Wall Street” for his zealous prosecutions of corporate crime as New York’s attorney-general and then resigned as the state’s governor over revelations he had paid for prostitutes — seemed to agree with Ratigan that the bank bailout amounts to “America’s greatest theft and cover-up ever.”
Advocating in favor of a House bill to audit the Federal Reserve, Spitzer said: “The Federal Reserve has benefited for decades from the notion that it is quasi-autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left.
“The reality is the Fed has blown it. Time and time again, they blew it. Bubble after bubble, they failed to understand what they were doing to the economy.
Bernanke Goes On Media Blitz
Bernanke is mindful of the fact that he has done a horrible job. In an attempt to change perceptions, Bernanke has gone on a media blitz attempting to whitewash the Fed’s failures, while seeking still more power for the Fed.
Bernanke stepped up his advertising campaign this weekend in a town hall meeting on public TV. The show will air this week in three installments on PBS’ "The NewsHour with Jim Lehrer."
Jim Lehrer invited questions and comments in advance. Here is the question/comment that I submitted.
Given that you failed miserably to see what was coming, how can giving the Fed more regulatory power possibly fix anything? I have a better idea, let’s get rid of the Fed totally along with its micro-mismanagement of interest rates that repetitively blows bubbles of
Quote: "Power alters the basic neurological processes in the brain and inhibits those parts of the brain that would allow a person to show restraint. It allows them to systematically ignore the consequences of their actions." Adam Galinsky, Kellogg School of Management.
It is too bad Eliot could not have exercised better judgement, knowing that he would be targeted by the powers on Wall Street and Washington when he took them on. See the quote at the top of this blog for the most likely reason.
That he was exposed in his scandal by an intense Federal investigation speaks to the depth of the corruption of Washington under Bush, and even now, by the financial powers.
He is right of course, and everything that the Obama Administration is doing on the economic front is a sham.
There is a ‘new regulatory spirit’ and the Democrats under the skillful hand of Larry Summers and Barney Frank seek to channel it into irrelevancy.
July 14 (Bloomberg) — Eliot Spitzer, the former New York governor and attorney general, said U.S. banks made a “bloody fortune” while receiving taxpayer money without a proven benefit to the wider economy.
Politicians understand the “populist rage” with excesses in the financial industry and in this case the “public is right,” said Spitzer in a Bloomberg Television interview today. “We have saved financial services, we have not created a single job. We are still bleeding jobs.”
As New York attorney general, Spitzer was known as “the sheriff of Wall Street.” He changed business practices and collected billions of dollars in settlements from financial corporations such as Merrill Lynch & Co., American International Group Inc. and Marsh & McLennan Cos. He later became governor, resigning in March 2008 after he was identified as a client of the Emperors Club VIP, a high-priced prostitution ring.
Spitzer said new rules proposed by President Barack Obama’s administration are irrelevant because regulators failed to enforce existing regulations.
“Regulatory agencies already had the power to do everything they needed to do,” he said. “They just affirmatively chose not to do it.”
“You don’t need new regs to do it, you just need the will to do
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
One reason we know voters will embrace populism is that they already have. It’s what they thought they were getting with Obama. In 2008 Obama said he’d bail out homeowners, not just banks. He vowed to fight for a public option, raise the minimum wage and clean up Washington. He called whistle-blowers heroes and said he’d bar lobbyists from his staff. He was critical of drones and wary of the use of force to advance American interests. He spoke eloquently of the thr...
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I have discussed for some time that there are a couple of inherent misunderstandings about the Federal Reserve's ending of the current large-scale asset purchase program (LSAP), or more affectionately known as Quantitative Easing (QE). The first is "tapering is not tightening" and the second is "interest rates will rise." Let me explain.
The Federal Reserve has been running extremely "accommodative" monetary policies since the end 2008. The two primary goals of the Federal Reserve have been to artificially suppress interest rates and boost asset prices in "hopes" that an organic economic recovery would take root. As I quoted in "How E...
As usual, the Conference Board and all the major media press release repeaters put a positive spin on the highest reading of Consumer Confidence (aka the Con Con Con) since October 2007. None of the media echo chamber reports pointed out that October 2007 was the beginning of the worst bear market in US stocks since 1973-74. So I thought it important that the issue be given a little perspective (as I did recently with the Thompson Rhoiders Michigan Con Index).
First things first, the Con Con Con is an amalgamation of the results of two survey questions presented to “consumers” (aka real people). One question asks...
Shares in packaged foods producer Kellogg Co. (Ticker: K) are in positive territory on Monday afternoon, trading up by roughly 0.20% at $65.48 as of 2:20 p.m. ET. Options volume on the stock is well above average levels today, with around 12,500 contracts traded on the name versus an average daily reading of around 1,700 contracts. Most of the volume is concentrated in September expiry calls, perhaps ahead of the company’s second-quarter earnings report set for release ahead of the opening bell on Thursday. Time and sales data suggests traders are snapping up calls at the Sep 67.5, 70.0 and 72.5 strikes. Volume is heaviest in the Sep 72.5 strike calls, with around 4,600 contracts traded against sizable open interest of approximately 11,800 contracts. It looks like traders paid an average premium of $0.37 per contrac...
Once again, stocks have shown some inkling of weakness. But every other time for almost three years running, the bears have failed to pile on and get a real correction in gear. Will this time be different? Bulls are almost daring them to try it, putting forth their best Dirty Harry impression: “Go ahead, make my day.” Despite weak or neutral charts and moderately bullish (at best) sector rankings, the trend is definitely on the side of the bulls, not to mention the bears’ neurotic skittishness about emerging into the sunlight.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, incl...
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We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about."
All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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