Mortgage Insurance Companies Seek Money from Former Homeowners to Recover Their Loses from Foreclosures

Homeowners billed for houses lost in foreclosure

January 18, 2015

New England Center for Investigative Reporting - When Guillermo Galindo lost his two-family Revere home to foreclosure in 2009, the soft-spoken Colombian thought he had finally freed himself from the flood of threatening collection letters from his lender and a ballooning, untenable debt.

All of his savings, scraped together over years delivering medicine for local pharmacies, were gone, along with the home he bought in 2005 for $410,000. Devastated, the 54-year-old immigrant, along with his wife and 3-year-old daughter, packed their belongings and moved into a small apartment, hoping to rebuild.

But that hope evaporated in a matter of months, when Galindo received a letter from a lawyer saying he owed $136,547 on the family home he’d left behind.

The lawyer represented a mortgage insurance company that Galindo had paid premiums to for years. He’d never given his insurance policy much thought — it was just something he needed to buy to qualify for a mortgage, since he couldn’t afford a big down payment. He thought it would help him if he got in a bind.

Too late, Galindo realized that the policy protected only the bank, and nothing prevented the insurer from coming after him for losses related to the foreclosure on his former home in Revere.

Americans Are 40% Poorer Today Than They Were in 2007; 44% of Senior Citizens Have Enough Savings to Cover Unexpected Expenses Versus 33% of Millennials

Most Americans are one paycheck away from the street

January 7, 2015

Market Watch - Americans are feeling better about their job security and the economy, but most are theoretically only one paycheck away from the street.

Approximately 62% of Americans have no emergency savings for things such as a $1,000 emergency room visit or a $500 car repair, according to a new survey of 1,000 adults by personal finance website Bankrate.com. Faced with an emergency, they say they would raise the money by reducing spending elsewhere (26%), borrowing from family and/or friends (16%) or using credit cards (12%).

“Emergency savings are not just critical for weathering an emergency, they’re also important for successful homeownership and retirement saving,” says Signe-Mary McKernan, senior fellow and economist at the Urban Institute, a nonprofit organization that focuses on social and economic policy.

The findings are strikingly similar to a U.S. Federal Reserve survey of more than 4,000 adults released last year. “Savings are depleted for many households after the recession,” it found. Among those who had savings prior to 2008, 57% said they’d used up some or all of their savings in the Great Recession and its aftermath. What’s more, only 39% of respondents reported having a “rainy day” fund adequate to cover three months of expenses and only 48% of respondents said that they would completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money.

Why aren’t people saving?

“A lot of people are in debt,” says Andrew Meadows, a San Francisco-based producer of “Broken Eggs,” a documentary about retirement. “Probably the most common types of debt are student loans and costs related to medical issues.” 

He spent seven weeks traveling around the U.S. and interviewed over 100 people about why they haven’t saved enough money. “People are still feeling the heat from the Great Recession.” Some 44% of senior citizens have enough savings to cover unexpected expenses versus 33% of millennials, Bankrate.com found.

On the upside, the Bankrate survey found that 82% of Americans keep a household budget, up from 60% in 2012. Even in the age of the smartphone, most people keep a budget the old-fashioned way, either with a pen and paper (36%) or in their heads (18%). Just 26% of those surveyed say they use a computer program or smartphone app.

“A solid majority of Americans say they have a household budget, which is a good thing. But too few have the ability to cover expenses outside their budget without going into debt or turning to family and friends for help,” said Claes Bell, a banking analyst at Bankrate.com.

But while the jobs market is improving and the Affordable Care Act has given an estimated 15 million people access to medical care, the Great Recession does appear to have taken its toll on Americans’ finances; in fact, they’re 40% poorer today than they were in 2007. The net worth of American families — that is, the difference between the values of their assets, including homes and investments, and liabilities — fell to $81,400 in 2013, down slightly from $82,300 in 2010, but a long way off the $135,700 in 2007, according to a report released last month by the nonprofit think tank Pew Research Center in Washington, D.C.

JPMorgan Chase Paid Witness $9 Billion to Keep Her from Talking

Alayne Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion to keep the public from hearing. Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as "massive criminal securities fraud" in the bank's mortgage operations. Because of a confidentiality agreement, she's kept her mouth shut since then. "My closest family and friends don't know what I've been living with," she says. "Even my brother will only find out for the first time when he sees this interview." Six years after the crisis that cratered the global economy, it's not exactly news that the country's biggest banks stole on a grand scale. That's why the more important part of Fleischmann's story is in the pains Chase and the Justice Department took to silence her. She was blocked at every turn: by asleep-on-the-job regulators like the Securities and Exchange Commission, by a court system that allowed Chase to use its billions to bury her evidence, and, finally, by officials like outgoing Attorney General Eric Holder, the chief architect of the crazily elaborate government policy of surrender, secrecy and cover-up. "Every time I had a chance to talk, something always got in the way," Fleischmann says. This past year she watched as Holder's Justice Department struck a series of historic settlement deals with Chase, Citigroup and Bank of America. The root bargain in these deals was cash for secrecy. The banks paid big fines, without trials or even judges – only secret negotiations that typically ended with the public shown nothing but vague, quasi-official papers called "statements of facts," which were conveniently devoid of anything like actual facts. And now, with Holder about to leave office and his Justice Department reportedly wrapping up its final settlements, the state is effectively putting the finishing touches on what will amount to a sweeping, industry-wide effort to bury the facts of a whole generation of Wall Street corruption.

Rolling Stone: The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare

November 10, 2014

Rolling Stone - Author and journalist Matt Taibbi has returned to writing for Rolling Stone magazine with an article profiling JPMorgan Chase whistleblower Alayne Fleischmann. Taibbi is most acclaimed for his books, Griftopia and more recently, The Divide: American Injustice in the Age of the Wealth Gap. The ACLU of Illinois is pleased to be welcoming Mr. Taibbi as the guest speaker at the first annual ACLU Lunch on April 17, 2015 in Chicago.

The Rolling Stone article reveals what Taibbi refers to as “one of the biggest cases of white-collar crime in American history.” For years, JPMorgan Chase was engaged in a massive scam reselling bad mortgages as above-subprime securities. Taibbi writes about when Fleischmann first became suspicious of the scam:

A few months into her tenure, Fleischmann would later testify in a DOJ deposition, the bank hired a new manager for diligence, the group in charge of reviewing and clearing loans. Fleischmann quickly ran into a problem with this manager, technically one of her superiors. She says he told her and other employees to stop sending him e-mails. The department, it seemed, was wary of putting anything in writing when it came to its mortgage deals.

“If you sent him an e-mail, he would actually come out and yell at you,” she recalls. “The whole point of having a compliance and diligence group is to have policies that are set out clearly in writing. So to have exactly the opposite of that – that was very worrisome.” One former high-ranking federal prosecutor said that if he were taking a criminal case to trial, the information about this e-mail policy would be crucial. “I would begin and end my opening statement with that,” he says. “It shows these people knew what they were doing and were trying not to get caught.”

Read the entire article.

Nearly a Third of Homeowners 65 and Older Had a Mortgage in 2011, Up from 22% in 2001

Many seniors trying to retire with a mortgage

• More and more older homeowners are carrying mortgage debt
• Nearly a third of homeowners 65 and older had a mortgage in 2011, up from 22% in 2001

September 21, 2014

Los Angeles Times - When Tom Greco bought his four-bedroom home three decades ago, he assumed he'd pay off the mortgage before retirement — just as his parents did.

Things didn't work out that way.

Instead, his $4,500 monthly mortgage payments — a consequence of several equity withdraws over the years — became a financial drag.

"It's pretty hard to retire with that," the Irvine attorney, 66, said.

More and more older homeowners are carrying mortgage debt, a burden that threatens to delay their retirement and curtail spending among the massive baby boomer population.

Nearly a third of homeowners 65 and older had a mortgage in 2011, up from 22% in 2001, according to an analysis from the Consumer Financial Protection Bureau, using the latest available data.

The debt burden also grew — with older homeowners owing a median of $79,000 in 2011, compared with an inflation-adjusted $43,400 a decade earlier.

For decades, Americans strove hard to pay off their mortgages before retirement, an aspiration that when achieved was celebrated with mortgage-burning parties.

But for the latest retirees, reaching that goal, if they ever had it, is increasingly less likely.

Baby boomers bought homes later in life, and with smaller down payments, than previous generations, said Stacy Canan, deputy assistant director of the consumer bureau's Office for Older Americans. Many also refinanced during the housing bubble and used cash from their equity withdraws to pay off other debt, take vacations or put children through college.

Surging home prices and low interest rates made that possible.

Then the recession hit. Job losses delayed attempts to pay off mortgages. And many baby boomers took in their adult children after the collapse, refinancing to help their kids weather a brutal job market, said James Wells, a housing counselor with ClearPoint Credit Counseling Solutions.

"Before, the children could take care of themselves," he said. "Now, not so much."

The number of mortgage-holding households headed by someone 65 or older rose from 3.8 million in 2001 to 6.1 million a decade later, the consumer bureau said.

Rising debt levels also reflect a psychological shift among Americans, financial advisors and economists say.

"People who lived through the Great Depression came out of that period with a great aversion to debt," said Lori Trawinski, director of banking and finance with AARP's Public Policy Institute. "As a culture we have loosened our opinion of debt."

As baby boomers enter retirement age — 10,000 per day, according to one estimate — the decisions that once supported an easier lifestyle could make later years tougher. Some may have to keep working to pay their mortgage, and others will have to cut back on other expenses to retire, the bureau's Canan said.

"People will indeed have to do some juggling of their budgets," she said.

Jacqueline Murphy is doing just that. The former clerical worker for the New York City Police Department retired in March, thinking her pension and Social Security, coupled with a part-time job, would allow her to live comfortably and cover mortgage payments on the Bronx town home she bought for $375,000 during the housing bubble.

But the 63-year-old hasn't yet found a part-time gig, and a large chunk of her income is going to the $2,200-a-month mortgage.

So she's cutting back. She keeps the lights off as much as possible, has cut back on gardening to reduce the water bill, and sometimes gets help from family to buy groceries.

"I thought retirement was going to be wonderful," she said. "Now that I am retired, I am sorry that I did. I am focused on how I am going to make it to next week, how am I going to make it to the next mortgage payment, and I am constantly worried."

Wells, the housing counselor, said those he counsels often didn't budget for reduced retirement income when they refinanced to help their children, fix a car or take a vacation. They were working then, so the payments seemed reasonable.

"They are not really thinking long term at that point," he said.

Greco, the Orange County attorney, said he took a "shortsighted view." Enticed by dropping interest rates, he refinanced his Irvine home four times.

He then used the money from the cash-out refinancings to pay down credit card debt and finance home renovations, including a pool he himself designed.

"A foolish move," he said of the refinancing, but one that many others, including friends, did as well.

A recent study from Harvard University's Joint Center for Housing Studies showed that of mortgage holders ages 65 to 79, nearly half spent 30% or more of their income on housing costs. Of mortgage holders 80 or older, 61% pay that amount on housing.

And the debt carries further risks.

Sudden changes in expenses, such as those stemming from health problems, can expose seniors with mortgages to greater financial peril, the consumer bureau's study said. And if another downturn comes, retirement savings and investments are likely to take a hit, raising the chance of foreclosure.

One option is to downsize.

That's the choice Greco made. In August, he and his wife sold their Irvine house. Next month they plan to move into a Lake Forest condo, knocking down their mortgage payment by thousands of dollars. Even after downsizing, Greco said, he simply can't retire as he wishes. There's the condo mortgage and other debt he must pay.

So instead, he plans to gradually work less and less. He started this month, a day after his 66th birthday, by working half-days on Fridays.

In five years, he hopes to have paid down the condo loan enough to get a reverse mortgage that will allow him to only take on cases that interest him.

Reverse mortgages allow people at least 62 years old to receive payments based on the equity in their homes. But unlike a traditional home equity loan, a reverse mortgage does not require monthly payments. The loan, which is easier to qualify for than a home equity line of credit, doesn't come due until the home is sold or the borrower moves out or dies.

Having to still work is not the ideal situation, Greco said, but retirement will be far easier without the Irvine house as an anchor.

"I needed to get out of that mortgage," he said.

JPMorgan Sued by New York Over Mortgage Securities

New York Attorney General Eric Schneiderman on Monday filed a lawsuit against JPMorgan Chase & Co for fraud over faulty mortgage-backed securities packaged and sold by the former Bear Stearns.The lawsuit alleged a "systematic abandonment of underwriting guidelines" in the selling of home loans that went into securities peddled by Bear Stearns. JPMorgan acquired Bear Stearns in 2008, at the start of the financial crisis. - Reuters, October 2, 2012

NY Attorney General Says More Suits Will Follow JPMorgan

October 2, 2012

Business Week - The New York lawsuit over mortgage-backed securities against JPMorgan Chase & Co. (JPM), the biggest U.S. bank, will serve as a template for suits against other issuers, state Attorney General Eric Schneiderman said. 

Schneiderman alleged that the Bear Stearns business that JPMorgan took over in 2008 deceived mortgage-bond investors about the defective loans backing securities they bought, leading to “monumental losses,” according to a complaint filed yesterday in New York State Supreme Court.

The Bear Stearns mortgage unit packaged $212 billion in mortgage bonds from 2003 through 2006, according to the complaint. Losses on $87 billion of those bonds packaged during just two of those years total $22.5 billion so far, it estimated. Schneiderman said he wants the bank to disgorge all money it obtained in connection with or as a result of the alleged fraud.

“This is a workable template for future actions against issuers of residential mortgage-backed securities that defrauded investors and cost millions of Americans their homes,” Schneiderman said in a statement. “We need real accountability for the illegal and deceptive conduct in the creation of the housing bubble in order to bring justice for New York’s homeowners and investors.”

New York hasn’t fully identified the losses in the JPMorgan case, Schneiderman said at a teleconference today.

State-Federal Group

Schneiderman is the co-chairman of a state-federal group formed to investigate misconduct in the bundling of mortgage loans into securities leading up to the financial crisis. The group includes officials from the U.S. Justice Department, the Securities and Exchange Commission, the FBI and other federal and state officials.

“Defendants systematically failed to fully evaluate the loans, largely ignored the defects that their limited review did uncover, and kept investors in the dark about both the inadequacy of their review procedures and the defects in the underlying loans,” Schneiderman’s office said.

Joe Evangelisti, a JPMorgan spokesman, said the New York- based bank would contest the complaint, which is “entirely about” conduct by Bear Stearns. JPMorgan acquired Bear Stearns in March 2008 after a run on what was then Wall Street’s fifth- largest securities firm.

‘Recycled Claims’

“We’re disappointed that the NYAG decided to pursue its civil action without ever offering us an opportunity to rebut the claims and without developing a full record -- instead relying on recycled claims already made by private plaintiffs,” Evangelisti said in an e-mail.

While Schneiderman said he had not spoken “recently” to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, he said the bank’s lawyers and his office have been holding discussions since a subpoena was issued in June 2011.

“We’ve had quite a lively interchange, shall we say,” Schneiderman said at a press conference at the Justice Department today. He said he is “confident” the group’s work “will result in more cases going forward.”

JPMorgan was among 17 financial firms sued last year by the Federal Housing Finance Agency over losses incurred by Fannie Mae and Freddie Mac on mortgage securities. Others companies that have sued the bank over mortgage securities include Syncora Guarantee Inc., Ambac Assurance Corp., DZ Bank AG, and Stichting Pensioenfonds ABP.

“Fannie Mae and Freddie Mac purchased residential mortgage-backed securities from the defendants and were allegedly misled about the quality of the loans supporting those securities,” FHFA Inspector General Steve Linick said in the statement released by Schneiderman’s office “Actions like this contributed to the financial crisis and those who engaged in such activities should be held accountable.”

Earlier Suits

Schneiderman earlier this year sued JPMorgan, Bank of America Corp. and Wells Fargo & Co. over their use of a mortgage registry known as MERS.

The top subprime MBS issuers in 2006 included Countrywide, now owned by Bank of America, Washington Mutual, absorbed by JPMorgan, and Lehman Brothers Holdings Inc., which emerged from bankruptcy earlier this year, according to a study by the Federal Reserve Bank of New York using 2007 data from Inside Mortgage Finance, a publication that tracks such data. Subprime issuance by just those three banks that year topped $90 billion, according to the publication.

Settlement Estimate

JPMorgan may pay as much as $3 billion if it seeks to settle Schneiderman’s claims, according to an estimate from Charles Peabody, a bank analyst at Portales Partners.

“Litigation costs are likely to remain high for the foreseeable future,” Peabody wrote in a note to clients today. A settlement could be reached for as little as $2 billion, he said. He raised his estimate for JPMorgan’s third-quarter litigation costs to $1.6 billion from $500 million and cut his estimate for the bank’s earnings 17 percent to 95 cents a share.

“Clearly, this higher cost structure, against a still soft revenue picture, is going to put a squeeze on JPMorgan Chase’s operating margins,” Peabody said. JPMorgan said yesterday it will contest the state’s claims.

Bear Stearns Purchase

JPMorgan bought Bear Stearns after the investment bank ran out of cash. The transaction was urged by former Treasury Secretary Henry Paulson, his successor Timothy Geithner, who was head of the Federal Reserve Bank of New York at the time, and Fed Chairman Ben Bernanke. Dimon told the trio that he would only do such an emergency deal if the government was willing to take the risk on the most toxic Bear Stearns assets. The Fed agreed to take over $30 billion of mortgage-related securities to placate him.

Paulson also directed Dimon to keep his price offer low to make it clear to the public that shareholders of the defunct firm were being punished for the management errors. That produced a $2.52 per share offer, which Bear Stearns management had no choice but to accept.

Dimon had to raise his offer to $10 a few weeks later because of a legal loophole in documents rushed out initially that gave Bear Stearns shareholders an opportunity to hold out on approving the sale while JPMorgan was left on the hook for potential losses of the smaller rival.

Counterparties Welcomed

“JPMorgan Chase stands behind Bear Stearns,” Dimon said at the time. “Bear Stearns’s clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns’s counterparty risk. We welcome their clients, counterparties and employees to our firm, and we are glad to be their partner.”

Soon after the takeover of Bear Stearns, Dimon grew concerned the public may perceive the deal as a gift to JPMorgan by the government, according to Andrew Ross Sorkin’s 2009 book “Too Big to Fail.” JPMorgan’s communications advisers suggested Dimon explain that the bank was taking on risks of unknown size, Sorkin wrote.

JPMorgan initially said it would set aside $6 billion for potential legal costs and losses that could come from Bear Stearns’s assets. That’s how the firm explained why it paid $1.5 billion for a company that had $11 billion of common equity on its books. In JPMorgan’s annual report at the end of that year, Dimon said all the equity in Bear Stearns had been used up by litigation costs and losses from legacy assets bought from the smaller firm. Because such losses exceeded the equity of the purchased entity, JPMorgan booked losses on its second half income statement related to Bear Stearns, he said in the report.

Geithner’s Urgings

Geithner also had pressed Dimon to consider acquiring Morgan Stanley as Lehman Brothers Holdings Inc. collapsed in 2008, according to Sorkin’s book. While Dimon protested initially, he still held meetings with Morgan Stanley executives for a potential hookup. Morgan Stanley converted to a bank holding company, raised capital and remains independent.

JPMorgan slipped 17 cents, or 0.4 percent, to $40.80 at 12:14 p.m. in New York. The stock had advanced 23 percent this year through yesterday.

New York’s complaint names J.P. Morgan Securities, JPMorgan Chase Bank and JPMorgan’s EMC Mortgage unit as defendants.

‘Systemic Fraud’

Schneiderman said they failed to abide by claims that they were ensuring the quality of loans backing the securities and “routinely overlooked defective loans” identified during due diligence reviews. The misconduct in due diligence and quality control “constituted systemic fraud on thousands of investors,” the attorney general said.

According to the complaint, the current cumulative realized losses on more than 100 subprime and Alt-A securitizations that the defendants sponsored and underwrote in 2006 and 2007 total about $22.5 billion, or about 26 percent of the original balance of about $87 billion.

JPMorgan, with Bear Stearns and Washington Mutual, are facing lawsuits and claims against mortgage-related deals totaling $120 billion, the bank said in a regulatory filing. In the first quarter, JPMorgan had a $2.5 billion pretax expense for additional litigation reserves, mostly mortgage related, a charge that knocked 39 cents a share off its profit. The quarter’s actual litigation expense was $2.7 billion.

Repurchase Liability

As of March 31, the bank estimated its outstanding mortgage repurchase liability at $3.5 billion, an amount already recognized in earnings, according to the quarterly filing. Litigation reserves may need to be increased, although probably not this year, the bank said.

Ex-Bear Stearns hedge-fund managers Ralph Cioffi and Matthew Tannin were acquitted in 2009 in federal court in Brooklyn, New York, of charges they misled investors who lost $1.6 billion on investments tied to subprime mortgages. It was one of only a handful of criminal prosecutions tied to that market.

Julian Tzolov and Eric Butler, two former Credit Suisse Group AG brokers, were convicted in 2010 of a scheme to fraudulently sell subprime securities to corporate clients that cost investors $1.1 billion in losses.
Tzolov and Butler were convicted of falsely telling clients the products were backed by federally guaranteed student loans and were a safe alternative to bank deposits or money market funds.

The case is People of the State of New York (STONY1) v. J.P. Morgan Securities, 451556-2012, New York State Supreme Court (Manhattan).

Read More...

Q3 is the New Banker Bailout; Ron Paul Says They are Weakening the Dollar

New Banker Bailout Disguised As QE3

Latest move represents huge transfer of wealth from the middle class to the elite

September 14, 2012

Infowars.com - While Ben Bernanke’s announcement that the Federal Reserve will embark on an open ended scheme to purchase $40 billion in mortgage-backed securities each month has been touted by the establishment media as the beginning of “QE3″ it is in fact nothing less than another banker bailout in disguise.

While many have rightly attacked the Fed’s policy of printing money as a band aid that does little to solve the economy in the long term, this new move isn’t even about that. The policy announced yesterday will merely see the Fed use taxpayer money to purchase more bad debt in the form of junk mortgage-backed derivative based securities that have been sold over and over again.

This has nothing to do with getting the economy going again and will only serve as yet another huge wealth transfer from the middle class to the elite.

While the fed claims the move will facilitate more lending it will do nothing of the sort. As the China Securities Journal reports today, “QE3 is not likely to result in more loans.”

“The truth is that it isn’t as if banks are hurting for cash to loan out,” writes Michael Snyder. “In fact, right now banks are already sitting on $1.6 trillion in excess reserves. Just like with the first two rounds of quantitative easing, a lot of the money from QE3 will likely end up being put on the shelf.”

Indeed, after the TARP bailout back in 2008, the Federal Reserve paid the big banks to withhold loans, because the bailouts are not about reinvigorating the real economy, they are about propping up the stock market for the rich while the real economy goes to the dogs.

QE1 and QE2 both did absolutely nothing to rescue the economy. Despite a massive injection of quantitative easing over the last four years, the unemployment rate in the United States has barely improved.

In addition, the “wealth gap” between rich and poor has vastly increased. This again illustrates how actions such as the one announced yesterday have nothing to do with helping the little guy get back on his feet and everything to do with the concentration of financial power into fewer hands.

As George Washington’s Blog points out, “This is just another bailout for the big banks. (If the government had instead given money directly to the consumer, we would be out of this economic slump by now).”

“Bernanke claims that the main justification for QE3 is to boost employment. This is slightly ironic, since Bernanke’s policies are largely responsible for creating high unemployment in the first place. The real justification is to try to artificially prop up asset prices. But that approach has been proven to be an absolute failure.”

Indeed, the Federal Reserve admits that its new program will do little to alleviate the suffering of jobless Americans.

“I want to be clear — While I think we can make a meaningful and significant contribution to reducing this problem, we can’t solve it. We don’t have tools that are strong enough to solve the unemployment problem,” Bernanke said yesterday.

The fact that we haven’t seen massive inflation since the start of the Fed’s so-called quantitative easing policies illustrates how the money is not even being pumped back into the economy. The only real inflation has been in the luxury sector because the rich are getting richer and spending more while the poor continue to live on or below the poverty line.

QE3 is merely another massive wealth transfer and a tool of waging economic warfare on the poor and middle class, another manifestation of neo-feudalism to destroy America and have the global bankers pose as the saviors.

The economy is being destroyed by design so that the elite can exploit the fear and chaos caused by the collapse in order to centralize power and control. This can also be seen over in Europe where Jose Manuel Barroso is exploiting the crisis in a bid to turn the EU into a “federation”.

Bernanke’s latest move is merely a continuation of the engineered takeover of the U.S. economy and will achieve nothing aside from enriching the wealthy to an even greater degree while ensuring the rest of us continue to see outliving standards decline on the path to economic serfdom.

Ron Paul Reacts to More Federal Reserve Stimulus

“It should not surprise anybody, but it is still astounding. To me, it is so astounding that it does not collapse the markets. [Bernanke] said, ‘We are in very big trouble. We are going to do something unprecedented and we believe it will not hurt the dollar.’ And yet the stocks, they say ‘we love this stuff.’ But the dollar didn’t do so well today and the real value of the dollar is measured against gold, and gold skyrocketed from its very low to its highest. It means we are weakening the dollar. We are trying to liquidate our debt through inflation. The consequence of what the Fed is doing is a lot more than just CPI. It has to do with malinvestment and people doing the wrong things at the wrong time. Believe me, there is plenty of that. The one thing that Bernanke has not achieved and it frustrates him, I can tell—is he gets no economic growth. He doesn’t do anything with the unemployment numbers. I think the country should have panicked over what theFed is saying that we have lost control and the only thing we have left is massively creating new money out of thin air, which has not worked before, and is not going to work this time.”

On potential unintended consequences:

“The biggest unintended consequence is what we need is a restoration of confidence. If the Fed is expressing a lack of confidence and they do not know what to do, it does not do anything to restore confidence. People might restrain from doing anything. ‘Interest rates are low. I do not have to buy my house this year. I will wait until next year. It might be a little easier. Prices might come down.’ So people are restrained and it is the opposite of when you expect that housing prices are going up, and you are afraid interest rates are going up. That is why the market rate of interest is so crucial. The rate of interest should give the businessman, the entrepreneurs, the investors and the savers information. But there is no market to interest rates. That is why there is such gross distortion and why we do not have a market economy. We have a rigged economy through central economic planning by central banking. The system is failing, it was doomed to fail and we have to wake up to that fact.”

On whether the Federal Reserve needs discipline:

“Short of getting rid of the Fed, which is not going to come and I wouldn’t do that overnight anyway, I would say that Congress has the authority to say, do not buy debt. Do not buy any debt. The Congress can yell and scream and pander to the people. They can say the deficits are terrible and terrible. But nobody wants to cut overseas spending or food stamps for the poor. They say, ‘we cannot do it without the Fed. The Fed has to buy this debt.’ That is a moral hazard for the politician. If the Fed couldn’t buy the debt, and interest rates would rise all of the sudden the burden would be on the Congress to get their house in order to restore confidence. Even that would panic a lot of people because live within your means? We do not like that. We like this idea that we can give people anything they want for free, so we can get reelected. Well, all of this is coming to an end.”

On whether Bernanke should be pulling back liquidity and raising interest rates right now instead:

“Liquidity should be determined by the market. I don’t think he should raise rates. He should just get out of rigging rates. The system is so biased. It helps the bankers who get free money and then they buy government debt. What about the people who are frightened, they do not like the stock market and they are frugal and want to take care of themselves? What do they get—1% on a CD? That is unfair. It’s bad economics. You want to let the market determine interest rates and let it sort it out. People get so nervous, because we have lived so long with a Keynesian economic model of fixing interest rates and intervening in the market.”

On whether Romney would do the right thing with the Federal Reserve if elected:

“So far, I have not heard that he would, but he has changed his mind before. If he gets to be president, we will keep our fingers crossed.”

Wall Street Executives Unlikely to Face Criminal Charges for Bringing Down the U.S. Economy

Too Big to Jail: Wall Street Executives Unlikely to Face Criminal Charges, Source Says

September 8, 2012

The Huffington Post - A last-ditch effort by federal and state law enforcement authorities to hold Wall Street accountable for nearly bringing down the U.S. economy is unlikely to lead to any criminal charges against big bank executives, according to a source close to the investigation.

Barring a "hail mary pass," said the source, who spoke on the condition of anonymity because the investigation is still ongoing, the members of a task force President Barack Obama formed in January to investigate fraud in the residential mortgage bond industry will instead most likely bring civil lawsuits against some of the banks involved, though it isn't clear when these cases might come.

That means any penalties for those accused of fraud or other misconduct would be measured in dollars, not jail terms.

A spokesman for New York Attorney General Eric Schneiderman, a co-head of the task force and the driving force behind its formation, declined to comment.

Adora Andy, a Department of Justice spokeswoman, said in a statement that "all appropriate remedies, civil and criminal, are on the table."

"As always, if working group members uncover evidence of fraud or other illegal conduct, we will pursue such conduct aggressively," Andy said.

The subprime mortgage bubble popped more than five years ago, triggering a full-fledged economic meltdown. Since then, the question confronting regulators and government prosecutors has been whether the banks that drove the market's expansion simply made terrible business decisions, or committed fraud in order to reap short-term profits.

The Securities and Exchange Commission, in a number of civil lawsuits, has alleged the latter (as a regulatory agency, the SEC cannot bring criminal suits). But with the exception of one failed case against Bear Stearns in 2009, the Department of Justice, which historically would lead any criminal effort, has declined to criminally prosecute those who created the financial instruments built out of toxic mortgage loans.

By pooling investigative resources, it was hoped that the Justice Department, the SEC and a handful of state attorneys general, led by Schneiderman, could accomplish what the agencies had mostly failed to deliver on their own: a sense of justice, however fuzzily defined.

But from the start, the task force -- officially, the Residential Mortgage-Backed Securities Working Group -- has been dogged by critics questioning the seriousness of the effort, and by concerns that the legal timeframe in which investigators must bring cases is coming to a close.

Civil cases, if and when they are filed, could lead to large financial penalties and possibly aid for struggling homeowners. Yet it seems unlikely that such a result will satisfy those whose anger sparked the Occupy Wall Street movement, or even many middle-class Americans who may wonder how, in contrast to other financial crises, this one could end with none of the people who seemingly helped orchestrate it behind bars.

"Without accountability, the unending parade of megabank scandals will inevitably continue," Neil Barofsky, the former watchdog over the $700 billion bank bailout fund and a frequent critic of the Obama administration's response to the financial crisis, recently told The Huffington Post.

How and why the government chose this path will be the subject of debate for years to come. Some say prosecutors lacked resources. Others assert that the complexity of the financial transactions makes it virtually impossible to prove criminal intent in court, where prosecutors must convince a jury of guilt "beyond a reasonable doubt." In a civil action, by contrast, the bar is lower: jurors need only conclude that "a preponderance of evidence" indicates guilt.

One former prosecutor said a simpler human dimension may also be preventing government lawyers from filing criminal charges: the basic fear of losing a big case.

"Losing has a chilling effect, because no one wants to take a spin like that and come out on the short end," said Cliff Stricklin, a former prosecutor who worked on the Enron task force and also successfully prosecuted Qwest Communications chief executive Joseph Nacchio for accounting fraud. (Nacchio is currently serving a seven-year sentence in a federal prison.)

"[Losing a case] makes you wonder if there was indeed a crime, and if so, how you go about proving it," Stricklin said. "It is a signal to the public that either the government is jumping to conclusions or isn't competent."

CATASTROPHE OR CRIME?

Mary Jo White, a former U.S. attorney for the Southern District of New York, adheres mostly to the view that the financial crisis was a catastrophe, but not a crime. Now a prominent defense attorney at the law firm Debevoise & Plimpton, White said she thinks calls from some quarters for more criminal prosecutions are unwarranted.

"The financial crisis was so expensive and so many people were injured that one's instinct is to think that there must have been massive wrongdoing from the top on down," she said.

But criminal cases must be built on compelling evidence, not suppositions, and evidence of broad-based misconduct that would rise to that level doesn't exist, White said.

"I don't think the criticism is fair," White said.

William Black, a law professor at the University of Missouri-Kansas City and a prominent former bank regulator, is in the camp that thinks prosecutors have missed a massive opportunity.

"They don't get the whole concept of looting," he said.

Black, who worked with prosecutors to develop some of the 1,100 criminal cases that emerged from the Savings & Loan crisis of the late 1980s and early 1990s, said that Wall Street accounting fraud flows from a simple recipe: grow by buying high-interest loans, leverage the business by borrowing lots of money and keep next to nothing in reserve against losses.

"You are mathematically guaranteed to report record profits," he said.

But those profits are based on a fiction, he said, one that costs investors when the bank collapses -- and in some cases, can cost taxpayers too.

Financial firms like Goldman Sachs profited tremendously by purchasing loans described widely in the industry as "liar's loans," Black said. These loans were made without the borrower having to prove income, or even that he or she had a job.

"It makes no sense that an honest lender would ever make liar's loans," he said. Nor does it make sense that a sophisticated bank like Goldman, which runs an entire business based on the ability to calculate risk, would purchase such dangerous loans without knowing that they were toxic, he said.

Indeed, the Financial Crisis Inquiry Commission produced evidence last year which suggests that Goldman Sachs traders knew these investments were more dangerous than they were letting on to their customers. Internally, they characterized offerings as "junk" and "monstrosities" even as they offloaded the mortgage bonds onto investors, according to the report.

The SEC came to the same conclusion when investigating whether the bank had misled investors about a product known as Abacus. That probe led to a $550 million settlement in 2010.

Full article here.

The Goal of the Corporate State (the Government and Its Corporate Allies) Is to Have Total Control of Everything

Dow Rises After Strong Corporate Earnings

April 29, 2011

AP – The Dow Jones industrial average rose in early trading Friday after more strong earnings reports from major U.S. companies. Broader indexes were mixed.

Merck & Co., Chevron Corp. and Caterpillar Inc. beat earnings forecasts for the first quarter. All three are among the 30 companies that make up the Dow average.

Goodyear Tire & Rubber Co. rose 12 percent, the most of any company in the Standard & Poor's 500 index, after it set a company sales record and reversed its loss from the first quarter of last year.

Caterpillar, the world's largest maker of mining and construction equipment, rose 3 percent after its earnings rose more than five-fold. The company also raised its sales and profit outlook for the year.

"The industrial sector and the manufacturing sector of this country are much stronger than many investors have perceived," said Rob Lutts, president and chief investment officer of Cabot Money Management.

D.R. Horton Inc. also reported a surprisingly strong profit, sending the homebuilder's stock up 2 percent. The company said its profit more than doubled mostly because of a large tax benefit.

The Dow rose 18, or 0.2 percent, to 12,782 in morning trading. The index is on track to have its best month since December. The Standard & Poor's 500 fell less than a point to 1,360. The Nasdaq composite index fell 8, or 0.3 percent, to 2,865.

Microsoft Corp. sank 4 percent. The software maker reported late Thursday that revenues from its Windows operating system fell 4 percent from the same time last year.

Bond prices were flat. The yield on the 10-year Treasury note was unchanged at 3.32 percent from late Thursday.

Merck Q1 Net Income Triples on Lower Costs

April 29, 2011

AP - Merck & Co. on Friday said its first-quarter profit more than tripled as strong sales of key drugs and lower costs from integrating its Schering-Plough acquisition offset sales lost to competition from generic versions of its drugs.

The results beat Wall Street expectations. Merck's stock rose 61 cents in premarket trading to $36.38.

The maker of Singulair for asthma and allergies and Januvia for diabetes says net income was $1.04 billion, or 34 cents per share, up from $299 million, or 9 cents a share, in 2010's first quarter.

Revenue edged up 1 percent to $11.58 billion. That includes several billion dollars from products acquired when Merck bought Schering-Plough Corp. in November 2009 for $49 billion.

Excluding numerous one-time items, net income was $2.86 billion, or 92 cents per share.

Analysts forecast earnings per share of 84 cents and revenue of $11.38 billion. Analysts typically exclude one-time items in their estimates.

The $1.82 billion in net charges included $1.58 billion in merger-related writedowns on the value of assets and research, $126 million in restructuring costs and a $500 million payment to settle arbitration with Johnson & Johnson over rights to two drugs. A year ago, Merck had charges totaling $2.31 billion.

Merck, based in Whitehouse Station, N.J., raised the bottom end of its 2011 adjusted profit forecast by 2 cents, predicting $3.66 to $3.76 per share. Including charges, it expects $2.04 to $2.39 per share this year.

"We're very much committed to growth and we think we're off to a terrific start in the first quarter," Chief Executive Kenneth Frazier told analysts during a conference call. "The steps we are taking are paying off."

Merck shares rose 7 cents to $35.84 in early trading.

Frazier noted the company got double-digit sales growth from key products, "combined with deliberate cost control measures across all areas of the company as we continue to create a more effective and efficient operating model."

Production costs were down 22 percent at $4.06 billion, partly because Merck has sold some of the two companies' factories.

Caterpillar's 1Q Profit Soars, Boosts Forecast

Caterpillar Inc. is the bulldozer manufacturer that President Barack Obama used to help push his $787 billion stimulus plan. Chief Executive Officer Jim Owens, 63, is a member of the president’s Economic Recovery Advisory Board. Obama visited the Peoria, Illinois, headquarters on February 12, 2009, the final day of his campaign to press for Congressional passage. - How’s the stimulus working out for Caterpillar?, Michelle Malkin, April 21, 2009

Caterpillar Inc. of Illinois announced nearly 2,400 layoffs despite President Obama using his home state’s company as an example of a struggling manufacturer that would benefit from his economic stimulus plan and save jobs. The new round of job cuts will span five plants in Illinois, Indiana and Georgia, and follows the January news that Caterpillar would slash 22,000 people from its 112,000-person workforce. Mr. Obama hosted an event in support of his stimulus plan at the company’s Peoria, Ill., headquarters in mid-February, saying the $787 billion stimulus would be “a major step forward on our path to economic recovery.” - Caterpillar slashes jobs despite stimulus, Washington Times, March 17, 2009

April 29, 2011

AP – Heavy equipment maker Caterpillar Inc. said Friday its first-quarter profit soared more than five-fold as a growing economic recovery boosted demand for the company's mining and construction equipment.

The results blew past analysts' expectations and it boosted its outlook for the year. Its shares rose $3.06, or 2.7 percent, to $115.70 in morning trading.

Caterpillar's earnings are a bellwether for the global economy, as it sells the kind of kind of expensive, heavy machinery used for construction, mining and logging.

Its first-quarter profits reflect an industrial sector that is growing again, with most of its sales growth coming from the sale of big machines.

The Peoria, Ill., based company said its net income climbed to a record $1.23 billion, or $1.84 per share, for the quarter ended March 31. That's up from $233 million, or 36 cents per share, a year ago. Revenue rose 57 percent to $12.95 billion from $7.55 billion a year ago.

Analysts had expected earnings of $1.30 a share on revenue of $11.43 billion.

Revenue at Caterpillar's machinery and power systems division surged to $12.29 billion from $7.55 billion during the same period last year.

"We expect that the pace of world economic growth will support continued recovery in the key industries we serve," CEO Doug Oberhelman said in a statement.

Based on its higher-than-expected sales, Caterpillar boosted its 2011 outlook, forecasting revenue between $52 to $54 billion and net income between $6.25 and $6.75 per share. It previously forecast revenue above $50 billion and net income of roughly $6 per share. The company said its projection does not include its recent acquisitions of MWM Holding GmbH or Bucyrus International, Inc. because the deals haven't closed yet.

Caterpillar said its outlook would have been higher if not for the earthquake and tsunami in Japan, which damaged many of its suppliers. Supply disruptions and delays will likely cost the company $300 million on lost sales and $100 million in lost profit.

Flashback: After Laying Off 22,000 U.S. Workers and Then Receiving Stimulus Funds from U.S. Taxpayers, Caterpillar Plans to Install Factory in China

At a Caterpillar Inc. plant in Peoria, Ill., today, President Obama said that his proposed economic stimulus would allow the company's CEO to rehire recently laid-off employees. But the head of the company said he will have to fire more workers before he can rehire anyone who has been let go. Obama has said twice in the past two days that Caterpillar CEO James Owens indicated his company would be able to rehire some of the 20,000 recently laid-off employees. "Yesterday, Jim, the head of Caterpillar, said that if Congress passes our plan, this company will be able to rehire some of the folks who were just laid off," Obama said today in Peoria. But when asked today if the stimulus could do that, Owens said, "I think, realistically, no. The honest reality is we're probably going to have more layoffs before we start hiring again." - CEO Contradicts Obama on Rehiring Employees, ABC News, February 12, 2009

Legislators have been bleeding the next two generations of Americans dry by pouring money into corporations that are building in overseas locations to avoid paying taxes while “those of us making $250,000 less” get to choose our government-run health insurance and ain’t none of us paying one thin dime more according to TPTB. Yeah – that’s a huge run-on sentence, but I am just that upset! - What Stimulus Money Did For Caterpiller- But at What Cost to The American Taxpayer?, The PPJ Gazette, September 29, 2010

September 29, 2010

AFP - Caterpillar, the world's largest manufacturer of construction equipment, will build a factory in China to produce mini hydraulic excavators, the company said in a statement.

Construction will begin in Wujiang, near Shanghai, at the end of 2010 and the facility should be ready in 2012 to begin production of mini excavators of less than eight tons, the company said Tuesday.

Caterpillar did not say how much the project will cost.

It is part of a long-term plan for investments in China that will make Caterpillar one of the leading manufacturers of construction equipment in the country.

"China is the world's largest market for excavators in the below eight ton class, and the development of this new facility will better position Caterpillar to provide our customers in China with solutions that will help them succeed," said Mary Bell, a Caterpillar vice president.

Caterpillar already has a factory in Xuzhou, which is also near Shanghai.

The company, which is headquartered in Peoria, Illinois, had sales and revenue of 32.4 billion dollars in 2009.

Read More...

Big Bank Bailout Payback Bamboozle

Goldman Sachs Earns $1.74 Billion, Easily Tops Forecasts

According to New American's Thomas R. Eddlem in his article titled CFR Corporate Members Get Lion's Share of Bailout Funds, Goldman Sachs received $10 billion TARP, plus a separate Federal Reserve bailout, and more than $13 billion of the allotment to AIG.

October 19, 2010

Associated Press - Goldman Sachs Group Inc.'s earnings easily beat analysts' forecasts again, but the bank saw a big slowdown in trading, its most profitable business.

Net income after paying preferred dividends fell 43 percent from the year-ago period as revenue in the bank's bond, currency and commodities trading division fell sharply.

Goldman Sachs' income fell to $1.74 billion, or $2.98 per share, the bank said Tuesday. It earned $3.03 billion, or $5.25 per share, during the same three-month period last year. Analysts polled by Thomson Reuters predicted earnings of $2.32 per share.

Revenue fell 28 percent to $8.9 billion, but still came in well ahead of the $7.92 billion analysts had forecast. Goldman's shares rose $2.50 to $156.20 in morning trading, despite a broad decline in the stock market.

Analysts have been expecting Goldman's earnings to decline because of slower trading, and have been slashing their estimates in recent weeks. A month ago, analysts' average forecast was for income of $3.05 per share.

Goldman's trading volume fell in the third quarter amid historically low interest rates and waning market volatility. Those low rates benefited Goldman's investment banking division, however, which reported a 24 percent jump in revenue. With borrowing rates so low, many companies were eager to issue new debt.

The decline in Goldman's overall revenue was also tied to a slowdown in stock trading and a weaker return on its investment in Industrial and Commercial Bank of China Ltd. Goldman's stake in the Chinese bank generated just $9 million in revenue during the quarter, down from $344 million during the same quarter last year.

The New York-based bank continued to reduce compensation costs. The bank was strongly criticized during the financial crisis for doling out big paychecks even after it received government aid and while the broader economy suffered.

Goldman set aside $3.83 billion for compensation and benefits during the quarter. It has now set aside $13.12 billion for compensation during the first nine months of the year, a 21 percent drop from the same period last year.

Compensation totaled 43 percent of the company's revenue for the year so far, down from 47 percent last year.

Bank Profits Soar, Lending Falls as Banks Pay Next to Nothing for Funds

August 31, 2010

Huffington Post - Bank profits jumped 21 percent last quarter to nearly $22 billion, the highest level in three years, as banks put away less money to cover future losses, fewer borrowers fell behind on payments and lenders paid the least for their funds in perhaps 50 years, a government report released Tuesday shows.

Lending also dropped by about $96 billion, or 1.3 percent, as borrowers continue to remain skittish about the "slow recovery," Federal Deposit Insurance Corporation Chairman Sheila Bair told reporters Tuesday in Washington.

"Consumers and businesses need to have confidence in the recovery before they will start making decisions on credit," Bair said, according to a transcript of her remarks.

Meanwhile, despite the sector's high profits, challenges remain: home prices are forecast to decline into next year while lenders continue to repossess homes at record rates; the commercial real estate market has yet to hit its nadir; community banks continue to fail; and the number of lenders on the FDIC's confidential "Problem List" continues to grow. Nearly 830 banks are on the list, up from 775 at the end of March, the FDIC's quarterly report shows.

"Without question, the industry still faces challenges," Bair said in a statement. "Earnings remain low by historical standards, and the numbers of unprofitable institutions, problem banks and failures remain high. But the banking sector is gaining strength... most asset quality indicators are moving in the right direction."

It also helps that banks' cost of funds -- the money they pay to garner deposits and other funds that are then used to lend, invest or trade -- dropped to the lowest rate in 26 years of FDIC quarterly records. Banks paid 0.97 percent in interest for their funds, the first time they've paid less than one percent during a quarter since at least 1984, FDIC documents show.

Historical records on commercial banks' cost of funds going back to the inception of the agency in 1934 show that the last time banks paid less than one percent for the year was 1960.

With the main interest rate effectively at 0.19 percent, savers suffer in a low interest-rate environment as banks pay less to attract deposits. The Federal Reserve's policy-making body, the Federal Open Market Committee, has kept the rate at which banks lend to each other for overnight funds between 0 and 0.25 percent since December 2008.

Elsewhere in the FDIC report, the agency noted that two of every three banks reported higher profits compared to last year as firms put away the least amount of money to cover losses since the January-March period of 2008. Money socked away for a rainy day would otherwise be recorded as profit.

Though nearly two of every three banks increased their reserves for potential future losses, large banks cut theirs. Banks put away $40 billion, 40 percent less than during the same period last year, to cover future losses. Those with more than $10 billion in assets recorded $19.9 billion of the industry's $21.6 billion of profit, or more than 92 percent.

Also, lenders wrote off $49 billion in uncollectible loans, a small decline from a year earlier and the first year-over-year decline since 2006. Loan losses are stabilizing, the agency said. Commercial real estate loan charge-offs, though, saw an increase.

Loans delinquent for at least 90 days but not yet written off also declined for the first time in four years, though they increased for banks with less than $1 billion in assets, the agency said.

Loan balances continued their decline, led by real estate construction and development lending which dropped more than eight percent from last quarter, according to the FDIC. Loans to small businesses and farms dropped almost two percent, or more than $13 billion. Loans to large businesses, meanwhile, dropped just 0.4 percent.

Bair noted that community banks "slightly" increased their lending -- "to their credit," she added.

(See: Did the big banks really pay back the billions in bailout money from the U.S. taxpayers?)

Big Bank Bailout Payback Bamboozle

JPMorgan Chase's Profit Jumps 23 Percent in 3Q

JP Morgan Chase received $25 billion from TARP; Morgan Stanley (a spinoff of JP Morgan) received $10 billion.

The Wall Street Journal reported in March 2009 that about $50 billion of the more than $173 billion that U.S. taxpayers poured into AIG since October 2008 has been paid to at least two dozen U.S. and foreign financial institutions, which included Goldman Sachs, Morgan Stanley, Wachovia (now Wells Fargo), and Bank of America; therefore, these four banks received even more BILLIONS in handouts from taxpayers.

October 13, 2010

AP – JPMorgan Chase & Co. said Wednesday that its third-quarter profit jumped 23 percent because the banking giant was able to set aside less money to cover loan losses.

CEO Jamie Dimon did warn that loan losses are still high in both the mortgage and credit card portfolios, but they are no longer rising like they did during the recession. That enabled JPMorgan Chase to set aside $1.55 billion to cover losses in its retail financial services division, less than half the $3.99 billion in loss provisions recorded in the same period a year ago. Loan loss provisions in its credit-card business fell to $1.63 billion from $4.97 billion last year.

Dimon said the bank, the country's second-largest by assets and the first big bank to report quarterly results, expects losses in its credit-card division to fall in the next quarter.

The New York bank earned $4.42 billion, or $1.01 per share. It earned $3.59 billion, or 82 cents, during the same quarter last year.

The results came in well ahead of the 90 cents per share that analysts polled by Thomson Reuters were expecting. Shares rose 3 cents to $40.43 in morning trading Wednesday.

Profit in the investment bank, which has been a big strength for JPMorgan Chase in recent quarters, fell 33 percent. The drop was due mainly to lower fees from underwriting stock offerings.

Debt underwriting picked up sharply, however, as many companies took advantage of historically low interest rates to raise new cash through the bond market instead of through issuing new shares.

Income from trading currencies, bonds and other fixed-income products fell 38 percent during the quarter as interest rates remained low.

JPMorgan Chase and other major banks including Goldman Sachs Group Inc. posted huge trading profits last year as financial markets were recovering from the credit crisis, allowing them to offset losses from defaults on mortgages and credit cards.

Now that investment banking profit is slipping, a pickup in earnings from retail banking is helping JPMorgan Chase. Income from its retail banking division, which had the sharp decline in loan loss provisions, jumped to $907 million from just $7 million during the third quarter last year.

JPMorgan's credit card business earned $735 million in the third quarter after losing $700 million during the third quarter in 2009.

Even though JPMorgan Chase slashed its loss provisions during the quarter, it still holds reserves of 5.1 percent companywide to cover future losses, compared with 5.3 percent during the year-ago quarter.

Report Criticizes TARP Contracts to Fannie and Freddie

October 14, 2010

Reuters – The Treasury Department has relied heavily on private companies and troubled mortgage giants Fannie Mae and Freddie Mac to manage the $700 billion Wall Street bailout, a report released on Thursday said.

The report by the congressional panel overseeing the Troubled Asset Relief Program (TARP), said that the $437 million in Treasury contracts to Fannie Mae, Freddie Mac and private companies to manage critical aspects of the bailout program raised a number of concerns about public oversight and conflicts of interest.

"Treasury may be less likely to expedite meaningful reforms of Fannie Mae and Freddie Mac when it has employed them for combined arrangements of $240.5 million and when these firms agreed to provide their services at cost, receiving no profit from the deals," the report said.

The oversight panel is now headed by Senator Ted Kaufman who took the seat vacated by Elizabeth Warren, who left the panel to oversee the set up of the government's new Consumer Financial Protection Bureau.

When Fannie Mae and Freddie Mac were placed under government conservatorship in late 2008, officials blamed poor credit choices and bad risk management for their losses.

The Treasury contracts to Fannie Mae and Freddie Mac to manage the Treasury Department's foreclosure mitigation program have problems, the report said.

"Both Fannie Mae and Freddie Mac have a history of profound corporate mismanagement," it said. "Further, both companies have fallen short in aspects of their performance, as Fannie Mae recently made a significant data error in reporting on mortgage redefaults and Freddie Mac has had difficulty meeting its assigned deadlines."

Yet the Treasury Department is relying heavily on them, the report said.

"Fannie Mae alone currently has 600 employees working to fulfill its TARP commitments," the report said. "By comparison, Treasury has only 220 staffers working on all TARP programs combined."

Other contracts went to law firms, investment management firms and audit companies, the report said.

"The nature of these firms' relationship to the financial system inevitably gives rise to a wide range of potential conflict issues," the report said. "Treasury should develop an independent mechanism for monitoring conflicts that makes it less reliant on contractors and agents for information."

The report also found fault with Treasury's outreach to award contracts to small businesses.

"In one case, Treasury awarded a contract to a 'small disadvantaged business,' which in turn delegated roughly 80 percent of the contract to a 'large business,'" it said.

But Treasury failed to reach out to find qualified minority-owned businesses to participate in TARP contracts.

Treasury spokesman Mark Paustenbach defended the Treasury's use of outside contractors, who helped it act more quickly to stabilize financial markets during the financial crisis of late 2008 and early 2009.

"Treasury's demand for skills, resources and expertise was urgent and we quickly needed qualified assistance," he said in a statement. "At the same time, our contracting process remains open and transparent."

The authority to make new government investments in financial firms under TARP expired at the beginning of the month. The Treasury Department has said that what started out as a $700 billion program to stop a financial panic in the fall of 2008 will ultimately cost around $30 billion after selling off its stake in American International Group.

Big Bank Bailout Payback Bamboozle

34 Banks Fail to Pay TARP Dividends

October 8, 2009

Blogging Stocks - 34 banks opted not to pay their quarterly dividends to the Treasury Department in August -- that's up from the 19 deadbeats for the month of May.

The biggest offenders were American International Group (NYSE: AIG), CIT Group Inc. (NYSE: CIT), First Bancorp (NASDAQ: FBNC) , Sterling Financial Corporation (NASDAQ: STSA), and UCBH Holdings, Inc. (NASDAQ: UCBH).

The Treasury Department provided the USA Today with a pretty condescending explanation:

"For some banks, it may be prudent to exercise their right not to pay dividends in a particular month, and we respect their right to do so. To draw any broader conclusions about the state of the banking sector from one month is highly premature and speculative."

Right: Just because banks aren't paying back the money they have an obligation to pay back doesn't mean there's a problem. Yeah, OK -- And my name is Ken Lewis and I'm "phenomenally good."

Critics charge that the Treasury Department was overly rosy in the predictions it made when it started doling out money. The banks that got TARP money supposedly passed stress tests and were deemed "healthy". But if they're healthy, why can't they pay their bills?

Of course, admitting that there is a problem would mean that the Treasury Department would have to admit making a mistake.

So instead we get absurd statements that explain to us dullards why "just because someone can't pay us they money they said they would, that doesn't mean they have financial problems."

Grayson Calls on American Public to ‘Unmask the Fed’

October 15, 2009

Raw Story - Florida Democrat U.S. Rep. Alan Grayson wants Americans to help him block Congress from confirming the Chairman of the Federal Reserve to his second term unless he hands over documents relating to the bailouts of financial institutions, including the rescue of Bear Stearns.

In the "Unmask the Fed" campaign, Grayson calls on constituents to sign petitions demanding that Fed Chairman Ben Bernanke "come clean" before senators re-confirm his appointment to the helm of the Federal Reserve.

Grayson wants access to the Bear Stearns rescue paperwork as well as the details of which financial institutions received $1.2 trillion in bailout money, how much each institution received, and what was promised in return. He's also seeking Fed documents that discuss the Bank of America/Merrill Lynch merger, transcripts of Open Market Meeting minutes, and the terms and conditions of Fed transactions not reflected in balance sheets from the past three years.

"[T]he Senate should know who got the $2 trillion the Federal Reserve has lent out over the last two years," the petition reads. "Only then will the Senate be able to judge whether he should keep his job."

Grayson and Texas Republican Rep. Ron Paul sent Sen. Chris Dodd, who chairs the Senate Banking Committee, a letter last week asking him to postpone Bernanke's re-confirmation hearings until the public has access to more information about the Federal Reserve.

"Without such an understanding, it is impossible to know whether Chairman Bernanke is fit to serve another term and fulfill the Federal Reserve's dual mandate to ensure price stability and full employment," the letter to Dodd read.

It continued: "Today, big banks are being bailed out and have a substantially lower cost of capital through an implicit government backstop even as Americans themselves are seeing their pay cut."

There are separate bills that would authorize an audit of the Federal Reserve that are picking up speed in both the House and the Senate, with bi-partisan support in both chambers. Paul sponsors the House version of that legislation, and Vermont Sen. Bernie Sanders is behind the Senate measure.

"The Federal Reserve has got to understand that this money does not belong to the Federal Reserve. It belongs to the American people," Sanders told Raw Story in an email from his spokesman. "As long as the Federal Reserve is allowed to keep the information on their loans secret, we will never know the true financial condition of the banking system."

Big Bank Bailout Payback Bamboozle

The Big Bank Bailout Payback Bamboozle

June 14, 2009

Mother Jones - Last week was a milestone for US treasury secretary Tim Geithner. He finally got to play the hero. The morning of June 9, Treasury notified 10 financial institutions, including JPMorgan Chase, Goldman Sachs, Morgan Stanley, US Bancorp, and Capital One Financial, that they were "eligible to complete the repayment process" for the capital they received under the Troubled Assets Relief Program (TARP).

In other words, they would be allowed to pay back $68.3 billion. Even though they really owe $229.7 billion. That we know of.

But Geithner didn't mention that last bit.

Instead, he professed that "these repayments are an encouraging sign of financial repair," with the caveat that "we still have work to do."

The "we" he refers to is himself and Wall Street, both of whom are getting a good deal out of this fractional payback scheme. The agreement frees the banks from restrictions on executive pay or, worse, their general practices, but it still allows them to keep the cash they've received through non-TARP venues like the FDIC Temporary Liquidity Guarantee Program— or the massive sums the banks recovered from AIG (thanks to its own federal bailout) to cover their losses on credit derivatives. Not to mention any cash provided by the mother of all cheap loan programs—the Federal Reserve.

Geithner, for his part, gets to convey the message that things are looking up.

"These repayments follow a period in which many banks have successfully raised equity capital from private investors," stated the press release. "Also, for the first time in many months, these banks have issued long-term debt that is not guaranteed by the government."

Well, of course certain banks have raised some money on their own: Firms have a tendency to look a whole lot better when they're backed by government capital and have cheap federal loans sitting on their books. Private investors notice that sort of thing. But more troubling than the misplaced praise is the fine print that accompanied the announcement:

"These repayments," the department noted, "help to reduce Treasury's borrowing and national debt. The repayments also increase Treasury's cushion to respond to any future financial instability that might otherwise jeopardize economic recovery."

This statement belies some accounting sleight of hand.

First off, it conveniently ignores the fact that TARP accounts for a fraction—about $700 billion—of the government's $13 trillion banking stabilization scheme. At some point, investors are going to balk at buying up federal debt (Treasury bonds), thereby forcing the government to pay higher interest rates, which will wipe out much of the TARP payback benefit. The second sentence is more ominous: It suggests that if banks need that money back, it'll be waiting for them right there at the Treasury Department.

On the day of his announcement, Geithner acknowledged to the Senate Appropriations Committee that "while we see some initial signs of economic improvement and the financial system is beginning to heal, our country faces very substantial economic and financial challenges." Indeed, the banking sector has not gotten substantially better lately. According to a report compiled by the Investigative Reporting Workshop and MSNBC, the number of delinquent or defaulting bank loans grew by 22 percent during the first quarter of 2009—six out of ten banks were, in fact, even less prepared to absorb further losses than they had been during the last, abysmal quarter of 2008.

While the treasury secretary conveyed to the senators some understanding of the plight of the rest of us, this show was all about Treasury and the banking sector. Geithner praised the government for pulling off stress tests of the 19 largest financial institutions last month.

"The clarity and transparency provided by the tests," he said, "has helped improve market confidence in the banks, making it possible for them to collectively raise nearly $90 billion through private equity offerings, bond issuances without government guarantees and sales of business units."

But Tim's not playing it straight. The fact that most of these banks passed their stress tests would only have mattered if the tests had any value. As I discussed when the tests were first unveiled, these tests were designed in tandem with the banks, the evaluations were provided by the banks, and some of the assumptions they were based upon—such as where unemployment would be—had been exceeded before the test results were released.

In fact, the stress tests have little to do with anything, but two other sources of capital for banks do. The main one is the Fed, which loans money to banks at stupidly low rates through a variety of facilities and loan-guarantee programs that total $7.9 trillion. In return, the banks can post as collateral an assortment of complex assets that no one but the Fed has any record of.

Banks can also borrow cheaply if they have an FDIC guarantee—and then use that cheap money to do things like pay TARP back, which explains why their stocks have gone up. The government opened this door on October 14, 2008, with the FDIC's Temporary Liquidity Guarantee Program. The idea was that it would prompt banks to start lending to their customers again. But that didn't happen. Instead, cunning institutions used the new program to raise cheap capital for their own needs. By changing its status to a bank holding company, Goldman Sachs was able to secure $29 billion of that FDIC-backed debt; Morgan Stanley raised nearly $24 billion.

The banks paying back the TARP funds aren't doing any better than their peers. In the first quarter of 2009, JPMorgan Chase's troubled asset ratio—the ratio of bad loans to the cash a bank has set aside to cover them—increased by nearly 16 percent, US Bancorp's by 21 percent, and Capital One's by 17 percent, numbers that put them in the same ballpark as many banks that are holding their TARP money.

In the meantime, average Americans, who don't have a $13 trillion federal insurance policy to fall back upon, have fared poorly. Over the past three months, unemployment has hopped a full point, to 9.4 percent—nearly double what it was one year earlier. For the third straight month, home foreclosures have broken the 300,000 mark, with the defaults reaching well into the prime loan turf, and home prices are still falling.

Considering the true size of the bailout, the continued loan deterioration, and the weakness in the overall economy and job market, the economic signs simply aren't that positive. For Geithner to pretend that a few banks paying back federal money with other federal money is an encouraging sign is to miss all of them.

The Bailout Propaganda Begins

September 1, 2009

Matt Taibbi - It was inevitable that the same people who pushed through the multi-trillion-dollar bailout of Wall Street would come out later on and tell us what a great idea theirs turned out to be, in retrospect and under the light of evidentiary examination. And we’re getting that now, with a pair of reports, the above one in the New York Times and another in the Financial Times, telling us the bailout is working because the government has made some money on TARP. They came to this conclusion by quoting Fed officials, who apparently calculated how much interest the Fed earned on TARP investments above what it would have earned on T-bills. The amount so far, according to these worthy gentlemen: $14 billion.

This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme — more on that in a moment — the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven’t retired their obligations yet, it’s crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless.

The other reason for that is that it’s only a tiny sliver of the whole bailout picture. The real burden carried by the government and the Fed comes from the various anonymous bailout facilities — the TALF, the PPIP, the Maiden Lanes, and so on. The losses from the Fed’s purchase of distressed/crap Bear Stearns assets (Maiden Lane I) and AIG assets (MaidenLanes II and III) alone were as recently as late July calculated in the $8.6 billion range, and even that number is very conservative. Then there’s the trillion or so dollars that the Fed used on buying up mortgage-backed securities and Treasuries; we don’t know what their market value is now. And there are untold trillions more the Fed has loaned out in the last 18 months and which we are not likely to find out much about, unless the recent court ruling green-lighting Bloomberg’s FOIA request for those records actually goes through.

In light of all this, the Fed’s decision to brag publicly about a few loans that are actually performing is sort of scary — it speaks to a level of intellectual desperation and magical-thinking unusual even for a banker in the subprime/MBS era. Don’t be surprised if you hear more of this sort of thing in the coming years.

More Bogus Bailout Reporting: “As Big Banks Repay Bailout Money, U.S. Sees a Profit”

August 31, 2009

Naked Capitalism - CClearly, the spin is in. As a post earlier today discusses, the Financial Times is running a story that claims that the Fed made money on its rescue programs, then slips in all the tidbits in the body of the article to let discerning readers know that the reporter understands that the analysis is utter rubbish while looking like it is not crossing the Fed.

In a simply remarkable coincidence of timing, the New York Times running a story with the very same message, namely that bailouts are good for taxpayers because the Treasury has made money on the TARP.

If you believe that, I have a bridge in Brooklyn I’d like to sell you. The fact that we have such patent garbage running as a front page New York Times story says either the reporter and his editors lack the ability to think critically (or find sources who could do that for them) or that we have a controlled press. Given that subscriber-driven Bloomberg has even fallen in line, I am inclined to the latter view, but I am still curious as to how this has been achieved. Is this the price of access journalism, or is something more pernicious at work?

Now to the intellectually bankrupt New York Times story. Here is how it determined the TARP was making money:

The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times.

Help me. Credit 101 is that your best borrowers repay first (unless you gave them overly generous terms, of course, then they might hang on to the proceeds). A quick but not conclusive search suggests that only a small portion of the TARP has been retired, so it is wildly premature to declare victory.

In fact, another source looked at the TARP as of June and estimated that it had lost $148 billion, and had lowered loss total as a result of the repayments. Now bank stocks have rallied since then, but the biggest contributors to the red ink, namely AIG and Citigroup, are not in any better shape fundamentally than they were then. Indeed, the fact that new AIG CEO Robert Benmosche has in a remarkable show of hubris, effectively told the US taxpayer to stuff it, AIG has the dough and is in no particular hurry to return it, nor does it care what the public or Treasury wants, its demands are unreasonable. I wouldn’t hold my breath about having the loans repaid.

Moreover, the piece contains a huge canard:

But the real profit came as banks were permitted to buy back the so-called warrants, whose low fixed price provided a windfall for the government as the shares of the companies soared

Roger Ehrenberg already dispatched this goofy idea with admirable zeal:

The US taxpayer has been systematically looted out of hundreds of billions of dollars….Goldman Sachs is posting record earnings and will invariably be preparing to pay record bonuses, not nine months after the firm was in mortal danger? Whether anyone will admit it or not, without the AIG (read: Wall Street and European bank) bail-out and the FDIC issuance guarantees, neither Goldman nor any other bulge bracket firm lacking stable base of core deposits would be alive and breathing today.

Goldman is a great firm with a stellar culture, and in most circumstances it’s risk management and funding practices have been second to none. Except when the crisis hit. It stood with the rest of Wall Street as a firm with longer-dated, less liquid assets funded with extremely short-dated liabilities….In exchange for giving the firm life (TARP, FDIC guarantees, synthetic bail-out via AIG, etc.), the US Treasury (and the US taxpayer by extension) got some warrants on $10 billion of TARP capital injected into the firm….. Lloyd Blankfein smartly paid the full $1.1 billion requested. He looked like a hero for doing so, a true US patriot repaying the US Government in full for its lifeline, thanking the US taxpayer in the process. $1.1 billion… $1.1 billion…Hmm…something doesn’t seem right. You know why it doesn’t seem right? BECAUSE THE US TREASURY MIS-PRICED THE FREAKING OPTION.

There is not a Wall Street derivatives trader on the planet that would have done the US Government deal on an arms-length basis. Nothing remotely close. Goldman’s equity could have done a digital, dis-continuous move towards zero if it couldn’t finance its balance sheet overnight. Remember Bear Stearns? Lehman Brothers? These things happened. Goldman, though clearly a stronger institution, was facing a crisis of confidence that pervaded the market. Lenders weren’t discriminating back in November 2008. If you didn’t have term credit, you certainly weren’t getting any new lines or getting any rolls, either. So what is the cost of an option to insure a $1 trillion balance sheet and hundreds of billions in off-balance sheet liabilities teetering on the brink? Let’s just say that it is a tad north of $1.1 billion in premium. And the $10 billion TARP figure? It’s a joke. Take into account the AIG payments, the FDIC guarantees and the value of the markets knowing that the US Government won’t let you go down under any circumstances. $1.1 billion in option premium? How about 20x that, perhaps more. But no, this is not the way it went down….

But no, if you subscribe to the world according to the New York Times, you’d think we the long suffering taxpayer got a really good deal. By extension, we should be really happy if financial firms throw themselves off the cliff again en masse, since that will give us all the opportunity to make even more money by rescuing them!

• Tracking the Bailout
• Bailout: Follow the Money
• Bank of America to Get Billions More in Bailout Funds from Treasury
• GM Announces It Will Pay Back Gov’t Loan … With Gov’t Money
• GM's Phony Bailout Payback
• Why haven't Wells Fargo, Bank of America, Citi paid U.S. back?
• Citigroup and Well Fargo to repay $45 billion in bailout money
• Where has the Bailout Money Gone? Good Billions After Bad
• Watchdog panel: US bailout money ended up in overseas banks
• The Bailout of Big American Banks Has Cost Trillions More Than We've Been Told
• Where Bailout Money Goes to Die - As of July 28, 2009, 34 companies have returned about $72 billion in TARP funds to the government, according to a bailout tracker maintained by journalism site ProPublica.
• Goldman and JP Morgan Poised to Pay Back Taxpayers - JP Morgan feels comfortable they have convinced both the Treasury and Fed that they should be allowed to repay the money along with the first group of banks. According to sources, Goldman appears to be furthest along in getting final approval to repay the $10 billion loan; JP Morgan would have to repay $25 billion.
• Wall Street's Bailout Hustle - Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy -- they're re-creating the conditions for another crash