Busted: Bankers and The Global Economy

February 22, 2010

Bank of America Fined

Filed under: banking, economy — Tags: , , , , , , , — digitaleconomy @ 10:47 am

A federal judge has reluctantly approved a $150 million settlement with the Securities and Exchange Commission stemming from the bank’s merger with investment firm Merrill Lynch at the height of the financial crisis. In the months before the deal closed, Bank of America failed to disclose that hefty bonus payouts or the mounting losses that eventually led to a second government bailout of $20 billion for Bank of America.

The New York judge admitted that the fine is a slap on the wrist, but was the second settlement that the SEC had cobbled together that he felt was reasonable. While Bank of America had failed to adequately disclose the bonuses and the losses, the judge agreed that circumstances were unclear, uncertain as whether the lack of disclosure resulted from negligence or fraudulent intent.

November 7, 2009

Wall Street Justice Obama Style

corrupt bankers prisonOver and over again, Americans see the same debacle unroll before their eyes, that is, if they are paying any attention. Earlier this year, billions in bonuses were paid to Merrill Lynch executives as the firm was failing. An agreement was made that Bank of America would pick up the pieces of Merrill Lynch with the support of the American taxpayer and later, BofA was bailed out as well. After a dance with the SEC, no wrongdoing was admitted.

After an investigation by the Securities and Exchange Commission, Banking wunderkind JPMorgan agreed to a $722 million settlement. Why? It all rises from a risky derivatives deal that drove Alabama politics to the brink of bankruptcy. As part of the settlement, JPMorgan neither admitted nor denied wrongdoing despite overwhelming evidence that the financial group did actually engage in acute wrongdoing.

What passes for justice on Wall Street? Regulators give a banking institution that they back a fine that taps the corporate bottom line for wrongdoing. The banks are eager to quickly forget the whole thing by paying a modest fine and getting on with business as usual. There is no admission to wrongdoing and business continues. The government gets a fine to pad their already overbloated budgets that the American taxpayer is already floating. We must be stupid because we keep doing the same thing over and over.

No one admits to corruption, much less to making a mistake. Meanwhile, nobody pays back the taxpayer, much less actually pays off a debt of any kind.  Reality is a round robin of funny money, usury and blatant dishonesty. Where is the outrage? Nowhere, because we are too wrapped in our small lives and/or afraid of reprisals or perhaps the boogeyman. Perhaps by our collective refusal to stand up against politicians and bankers, we are admitting that any American would do exactly the same thing; that not one American is any better. What do you say? Probably very little.

January 9, 2009

A TARP Bailout Program for Consumers?

furrowed political brows

furrowed political brows

The failed U.S. TARP bailout program legislated by the EESA last year has been ungoing review by the Obama Ascension Team and the likes of Treasury Secretary-elect Timothy Geithner, former Fed member and sycophant. Furrowed brows and eye bags have become a way of life in politics. Managing the program has become an impossible and failed task. President Obama will be responsible for determining what to do with the remaining unspent TARP funds. The Obama Team is examining ways to expand the government program to generate loans to municipalities, small businesses and consumers.

Many in Congress seem to agree that the existing government program should be revamped rather than refunded. Many elected officials agree that the remaining money should be used to stop the national foreclosure crisis instead of a continuation of current policy where Wall Street firms receive continued assistance to pay bonuses to executives and dividends to shareholders as promoted by the Bush administration.

monopoly-moneyAs if the U.S. needs yet more government agencies, Geithner is considering creating a new bureau within Treasury to oversee the existing TARP funds. Adding oversight personnel to government measures has proved to be a failed premise, especially since any provision lags far behind the need. Any potential for work backs up due to lack of staffing, if staffing is ultimately provided over the long haul. Such provisions are more like a governmental agency employment and monetary ponzi scheme than professional organization. So far, overseeing TARP funds has been a disaster, largely made secret because of banking bailouts.

Meanwhile, banks in Britain are laying off staff while bringing malleable interns into the fold as underpaid and temporary junior staff, a move that could catch on in the United States: a cost-saving and control-oriented corporate move that has been all the rage outside of banking. British banks are counting on business picking up after the recession, rationalizing that young blood needs to be on tap for the occasion. Swiss-owned banks are notorious for this practice.

be an intern

be an intern

Corporate America has caused the economic crisis and now that they have been bailed out with taxpayer money, are seeking to continue to take advantage of people with the damage they have caused. Government seems to back up this thinking, which is ultimately destructive rather than constructive. Self-serving behavior continues unabated in government and corporate life. Now that truly is worldly wisdom at its’ worst. Anyone that chose to run personal finances in the same way wouldn’t last long, hence the benefits of corporate/governmental leveraging and power borrowed from the taxpayer.

Whether the American taxpayer can possibly benefit from all the confusion remains to be seen. ~ E. Manning

October 13, 2008

Is a New Era of Economic Finance on the Way?

Britain taking charge

Britain taking charge

While many nations muddle undecisively about their part in the looming global finance crisis, Britain has increasingly taken bolder and more decisive steps in an effort to stem the tide of ruin. Now Prime Minister Gordon Brown is calling for a new financial accord to refashion banking and finance rules for the modern era. “We must now create the right new financial architecture for the global age.”

Many governments in Europe has agreed to follow Britain’s lead by recapitalizing banks and guaranteeing interbank lending. The G-8, of which Britain is a part, are in the planning stages for a meeting soon. “We must now reform the international financial system around agreed principles of transparency, integrity, responsibility, good housekeeping and co-operation across borders.”

Under the British plan, banks that are rescued with taxpayer money will be forced to cease bonuses that have encouraged excessive risk-taking in the past as well as terminating dividends to shareholders. The down side to the bank rescues is that there is currently no incentive for investment and little hope for immediate growth, both hallmarks of the “for profit” market.

While bailing out bankers will sustain the economies for the time being, the end result will be recession coupled with nasty inflation and economic stagnation in some countries if moves are not made to bolster job creation, wages and check price increases. So far, because of credit dependence, nations can expect stymied growth, triggering more defaults and a continuation of tightening lending terms. Nations have been hesitant to guarantee interbank lending because of the trust factor. The pressure is on as the global goal becomes the prevention of a global economic depression.

U.S. economic growth next year will be the weakest since 1954, with unemployment expected to rise to 8.5 percent.

Large corporations are increasingly under the economic gun. American automakers are considering mergers and General Electric is considering a bank charter to provide better funding. Bank lending remains locked down despite flooding the market with monetary credit and interest rate reductions. A continued lockdown will likely result in the depression that scrambling governments are seeking to avoid. Indications are that we are in a global vicious circle of economic decline. The alternative is breaking the cycle. Who is going to break the cycle and how?

British money manager Paul Niven remarked, “We have now entered a new era for global banking. In return for taxpayers’ money, the state will gain a level of control over their governance, pay, and lending practices.” Is Niven’s statement a reality or the work of wishful fiction?

Could the world have the beginnings of a new global banking order or is this move simply an action involving separate economic nationalization of banking and finance to preserve the current financial structure? Perhaps we will know once clearer heads rule the roost. Bible prophecy indicates a new global system that portends to usher in a new era of security. Is there any stock to that? What say you? ~ E. Manning

September 29, 2008

A Bailout Draft Without Details

government efficiency

government efficiency

Once the new Wall Street bailout legislation was released to the public by Congress, pundits and citizens alike plowed into the house.gov website. Sunday afternoon, presumably because of high traffic, the website was not accessible for many. In the late evening only a summary file was available. The actual legislation file was not viewable, duly noted with the stately notice “the file is damaged and could not be repaired.” So much for getting any real news direct from the source or the media. Other “helpful” media links merely directed John Q. Public to the same official document with the same result. Does anyone have a copy of the draft legislation? Heaven forbid that such a thing was intentional. Perhaps Chinese hackers are to blame.

The summary of the Emergency Economic Stabilization Act of 2008 was short on details, in which unquestionably the devil resides. The old news is that $700 billion will be designated to the Secretary of the U.S. Treasury for buy bad mortgage securities. The recent Republican contribution “allows” companies to insure troubled assets.

The legislation requires the Treasury to modify the troubled loans involved in the failed securities to allow some Americans to keep their homes. This process has been widely discussed for more than six months with little real result or prospect of streamlining the process. How will the U.S. Treasury manage such a large job and save homeowners in foreclosure from losing their homes? “Wherever possible” is the key word of the day, insuring that very little will be done by the Treasury. Instead, homeowners have hope through improving the HOPE for Homeowners program through HUD. The idea, once again, is to help more families to keep their homes. Once again, we are classicly short on details or provisional government motivation.

can of worms?

can of worms?

Part 3 highlights taxpayer protection with idea that taxpayers should not be expected to pay for Wall Street’s mistakes. This statement prevents a tea party. As a bonus for being bailed out, warrants will insure that taxpayers will benefit from future growth enjoyed as a result of participation in the program. Interestingly, the draft legislation intends that the President is responsible to submit legislation to cover losses to taxpayers resulting from the program.

Part 4 covers windfalls or golden parachutes for executives. They won’t walk away with millions in bonuses. Companies are projected to lose “certain tax benefits” and may be required to limit executive pay. Unearned bonuses must be returned. What determines “unearned” and the resulting enforcement is a huge question mark.

Finally, the federal government assures strong oversight in the draft legislation. Financial provisions indicate that the U.S. Treasury will not receive the funds at one time, starting with $250 billion, and followed up by the president as funds are needed. The Treasury is required to issue a report every sixty days. EESA establishes an Oversight Board that cannot act in an arbitrary manner and includes a special Inspector General to secure against fraud, waste and abuse.

Obviously, the legislation has good points and seems to take plenty of precautions. The reality is that the liquidity crisis is an accounting crisis bolstered by destructive decisions and pandering politics. More troubling is that trusting the government to properly handle legislation once it has passed has become a large question mark based on past performance. Trust has to be built and the nation is short on that right now. The morally-bankrupt weak-kneed Congress wants to restore that trust. Just considering that the nation must elect a Senator to be President is enough to give one pause to think. ~ E. Manning

Read First Amendment of rejected Congressional Bailout 

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