Busted: Bankers and The Global Economy

January 27, 2011

U.S. Mortgage Crisis Tensions Build

A commission was appointed to look into misconduct regarding the national mortgage and banking crisis, signed into being by President Obama on May 20, 2009. The 10-member panel is after any person that may have violated the laws of the United States in relation to the crisis. The scuttlebutt is that a number of financial industry figures and corporations have been found lacking and are being referred for prosecution. All of this portends to make quite a bit of news in the near future.

The media has been working hard at divining any sources of information. The New York Times claims to have obtained a copy of a 576-page report, concluding that the financial disaster was avoidable while laying blame on federal regulators for the failure to act on knowledge of shoddy mortgage lending and reckless risk taking. Keep in mind that at least some of these shoddy practices continue behind the scenes, building on a proliferating number of foreclosures in the United States.

The idea that politicians hope to project is that the financial crisis is being resolved. The truth is that the national financial crisis is just getting underway.

August 8, 2008

Bankers Seek to Buy Out Uncle Sam on Fraud

Regulators have been investigating Wall Street firms for their role in the sales and marketing of auction-rate investments.

Wall Street agreed to buy back more than $17 billion in securities that they fraudulently sold to retail customers paving the way for other banks and brokerage firms to do the same.

Merrill Lynch jumped ahead of regulator investigatory scrutiny, announcing that they will buy back about $10 billion in auction-rate investments that it sold to retail investors.

Citigroup reached a settled with state and federal regulators, agreeing to buy back about $7.3 billion of auction-rate securities that it sold to retail customers. As recompense for misconduct, Citigroup will pay a $100 million fine for its misconduct. The securities are essentially worthless, even though the buyers were told that the securities were safe and easy to cash in.

Even Bank of America is under attack with subpoenas related to securities sales. Taking on responsibility of bank instruments in bank bailouts has likely posed an additional headache.

At this time, institutional investors are still out in the cold, but both firms claim to be working on a resolution on problems with institutional investors in the hopes of avoiding more heat and gaining brownie points from the federal government. A rush of settlements are expected in the next few months as Wall Street aims to absolve itself.

Regulators are starting to pile on in a sort of informational and investigational bankers bloodletting. The Securities and Exchange Commission has elected to stay out the recent penalties as they expect to weigh in on their own investigation. From all appearance, Wall Street’s troubles have only just begun. Bankers know their guilt. Can they distract the investigations to avoid the embarassment as the propensity of their fraud is exposed to the nation? Seeking to buy out authorities may be seen as an easy way out as the financial onslaught on Wall Street and for banking in general continues.

August 4, 2008

U.S.: What Banking Fraud Means to Depositors

There have been a number of bank failures and the recent accumulation is increasing in pace. The FDIC sees many bank failures down the road. If you are uncertain why banks should fail, you are at the right place. “Busted: Bankers” highlights corruption and fraud in the global banking industry without the restrictions of mainstream media and politics.

The public word is that regulators are bracing for 100-200 bank failures over the next 12-24 months. If the FDIC is anywhere near right, the United States has what could be considered to be an alarming increase in the number of U.S. commercial bank failures. This debacle, despite props from the Federal Reserve, has been caused by creative banking instruments and outright fraudulent activities in the name of profits for bankers and investors. The resulting contraction of the housing market and credit squeeze on a global basis are of their making, a hefty portion at taxpayer expense.

FDIC insurance is the ultimate standard for protecting the assets of banking depositors in the United States. The FDIC has raised their mandatory banking insurance rates to cover the expected expense of bailout. The government claims that the FDIC has ample resources. While this reality is debatable if several shoes drop at once, the U.S. federal government backs the FDIC. Deposits that meet requirements under the $100,000 account limit are fully protected, as good as the government that backs them.

How do you protect your money and keep that money in a safe bank? To begin, always look for the FDIC logo at your bank branch. If you are using online services or a bank, look for the logo as well. However, don’t assume that the FDIC label is accurate in the name of safety and healthy skepticism.

Simply go to the fdic.gov and locate “bank find“. In this way, you can be certain that the bank that you selected is FDIC insured. The FDIC also has a list of bank rating agencies on its Web site that can evaluate the financial stability of a bank. To get a free evaluation, check out bankrate.com, remembering where your loyalty lies. Banking information is generally set up to secure confidence. The information you are given is designed to that end. However, regardless of bank strength, FDIC insurance will secure compliant deposits. That is what you really need to know about.

As an individual, personal deposits are insured up to $100,000 in an FDIC-insured institution, including savings, checking, certificates of deposit and money market accounts. This assumes that your accounts are non-brokered. When you register with the bank directly, make sure that your deposits are non-brokered and will reside with the institution instead of being handled by a third-party. This will ensure your financial safety.

While banking fraud has meant plenty as far as creating a troubled economy, as a depositor, you are fully protected with FDIC insurance. The protection is as good as the government protection that is trusted in, which in essence, comes straight out of taxpayer pockets. Bank runs and panic aren’t a necessary part of your reactions.

In the meantime, investing and spending with a certain amount of prudence is importance. If you are involved in large financial transactions, plan ahead without waiting until the last moment. Some depositors with IndyMac put off dealing with large transactions until the last moment, putting a financial kink in meeting their obligations. The problems could have been prevented by securing a cashier’s check a few days ahead instead of at the last minute. A good rule of thumb is to avoid putting off anything that you can do today, especially where your financial life is concerned. ~ E. Manning

June 30, 2008

Good News for Cheated Homeowners?

In a lawsuit in California, U.S. District Judge Lynn Adelman ruled that the Chevy Chase Bank had violated the Truth in Lending Act or TILA, and that thousands of other Chevy Chase borrowers could file suits or conduct a class action lawsuit.

The Truth in Lending Act, a 1968 federal law designed to protect consumers against lending fraud by requiring clear disclosure of loan terms and costs, lets consumers seek rescission, or termination, of a loan and the return of all interest and fees when a lender is found in violation.

The judge also found that cheated borrowers could force the bank (more…)

June 3, 2008

Bernanke: Investor Profiteering Runs Amok

Ben Bernanke, Federal Reserve chief did an economic assessment for the International Monetary Conference is Barcelona, Spain. In his speech, he cleverly outlined, but separated the causes of the global financial crisis so as to not create any blame or responsibility. He outlined:
1. The U.S. housing boom,
2. A credit boom created by innovative lenders and investors,
3. unprecedented growth in developing and emerging market economies.

Bernanke spent an entire paragraph on blaming emerging nations, resulting in additional deficit in the industrial countries like the United States. Nowhere does Bernanke mention the burgeoning national debt of the United States, a huge flotsam of borrowed credit that continues to hold citizens of the United States and their children prisoner.

Bernanke noted “an increased appetite for risk-taking–a “reaching for yield”–stimulated some financial innovations and lending practices that proved imprudent or otherwise questionable. Regulators identified some of these issues in real time; for example, federal banking regulators issued new guidance on nontraditional mortgage lending and on commercial real estate lending.”

Strangely, bureaucrats of all kinds always suggest the panacea of additional regulation. The United States is full of endless rules, both effective and ineffective. How regulations are enforced or if regulations are enforced determines the effect. Yet, you will never hear of this truth. Lawlessness begets more lawlessness, not structure.

Bernanke rightly states that the housing boom came to an end because housing became unaffordable. Even creative financing could no longer sustain or bolster the market which was artificially inflated by “creative financing”.

Bernanke mentioned that “highly-rated corporations retain good access to credit, but credit conditions generally remain restrictive in areas related to residential or commercial real estate.” Highly-rated corporations, including corporate multinationals have achieved independence from national sovereignty and are largely unencumbered by financial credit access, much like the central bankers of the world. Multinationals can simply pick their deal from any country in the world. They are above, at least for the moment, the plight of economically strapped nations and are tied directly any nation of choice as it suits them.

Bernanke also notes that inflation remains high, but he fails to state the truth about how high inflation really is. TNTalk! notes that food price inflation is at 45% in the last nine months. That is a cruel inflation rate that most economists fail to deal with, let alone talk about. The Fed and U.S. federal government repeated fail to come clean by admitting theft by inflation.

Bernanke also points at futures commodity markets as the cause of price instability. “A rough stabilization of commodity prices, even at high levels, would result in a relatively rapid moderation of inflation, consistent with the projections of Federal Reserve governors and Reserve Bank presidents for 2009 and 2010… Another significant upside risk to inflation is that high headline inflation (perhaps referring to hyperinflation), if sustained, might lead the public to expect higher long-term inflation rates, an expectation that could ultimately become self-confirming.”

The paper tiger is unable to suggest a way to lessen the effect of profiteers in commodity markets. It would seem that investor profiteering is running the world amok.

March 25, 2008

Mortgage-Lovin’ Enron MLM Blues

Filed under: banking, investment, money — Tags: , , , , , , , , , , , , — digitaleconomy @ 12:00 am

securities2.jpgFederal regulators and government policies have clearly overcome any chance of market discipline or natural market correction in the mortgage market. A long-overdue correction in the United States mortgage sector began to rear its’ head last summer. If you’ve been listening, you know this well by now. What is happening with mortgage financing could be compared to Bush’s last financial crisis, the dot.com bust. America survived that financial bubble, although that bubble affected business and investors only. Like todays’ crisis, the production of income was secondary to complicated financial constructs which obfuscated the real mortgage business. The securities invented by the mortgage banking industry aren’t in reality a legitimate investment. Remember when Enron invented entire energy-investment markets that ultimately dealt in nothing but hype?

Turning mortgages into securities has been a great deal for early lenders, much like a wonderful multi-level marketing scheme. The directives market went gangbusters. The desire for non-stop heady profits has put the world where it is. The guys that joined the game later on (more…)

January 26, 2008

British Fed Criticized for Lack of Intervention

The British regulatory agency, FSA said it would release the conclusions of an internal review in March regarding the Northern Rock bank run last year. The evidence shows widespread neglect and disregard for established procedure.

“As we have already acknowledged publicly, there were clearly supervisory failings in relation to Northern Rock and we are already addressing these,” it said in a statement.

The lawmakers also criticized Bank of England Governor Mervyn King for failing to act in August when the European Central Bank made extra funds available in an attempt to stop credit markets from freezing up. King had told the committee last year that he had felt it would be wrong to intervene to bail out banks from their riskier investments, but the committee said it was unconvinced. “In our view, the lack of confidence in the money markets was a practical problem and the Bank of England should have adopted a more proactive response,” he said.

The Herald Tribune 1/26/08

British Fed Chairman Mervyn King is correct. It not the job of the Federal Reserve Bank to step in autonomously to inject funds into the national banking system. Obviously, the British banking regulators have been asleep at the wheel and are frustrated at the position they find themselves in. When a bank fails, the government takes appropriate measures and absorbs the loss within the system as the primary solution. ~ E.M.

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