A $7 BILLION loss at JPMorgan? WHEN are our criminal bankers going face some real accountability?

the crap keeps flowing nonstop and these guys keep walking the streets with zero consequences for fraud, malfeasance, mismanagement, lying, and outright theft... meanwhile, you or i could be literally tossed in jail over a minor traffic violation... when is this shit going to cease...?

JPMorgan Fears Traders Obscured Losses in First Quarter

JPMorgan Chase which reported its second-quarter results on Friday, disclosed that the losses on a soured credit bet could mount to more than $7 billion, as the nation’s largest bank indicated that traders may have intentionally tried to conceal the extent of the red ink on the disastrous position.

Amid a swirl of questions about how the traders marked their bets, JPMorgan also said Friday that it would be forced to restate its first-quarter results.

If the trades, made out of the powerful chief investment office unit in London, had been properly valued, the bank said it would have lost $1.4 billion on the position in the first quarter.

Jamie Dimon, the bank’s chief executive who has consistently reassured investors that the losses would be contained, announced that the bank lost $4.4 billion on the botched trade in the second quarter. So far this year, the bank says it has lost $5.8 billion on the trades in credit derivatives.

In a statement, JPMorgan said that “the firm has recently discovered information that raises questions about the integrity of the trader marks and suggests that certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio during the first quarter.”

jamie dimon, crook-in-chief...

Submit To Propeller
Tweet

[Permalink] 0 comments

Robert Scheer on Libor: Modern international bankers form a class of thieves the likes of which the world has never before seen - on a scale that is almost impossible to comprehend

how massive does the fraud have to be, how many trillions of dollars does it have to involve, how many millions of people have to be ripped off, and how many more of these mega-crimes have to surface before these global criminals are stopped, and by stopped, i mean arrested, indicted, convicted and put away...?

robert scheer in truthdig...

The current Libor interest rate scandal, involving hundreds of trillions in international derivatives trade, shows how the really big boys play. And these guys will most likely not do the time because their kind rewrites the law before committing the crime.

Modern international bankers form a class of thieves the likes of which the world has never before seen. Or, indeed, imagined. The scandal over Libor—short for London interbank offered rate—has resulted in a huge fine for Barclays Bank and threatens to ensnare some of the world’s top financiers. It reveals that behind the world’s financial edifice lies a reeking cesspool of unprecedented corruption. The modern-day robber barons pillage with a destructive abandon totally unfettered by law or conscience and on a scale that is almost impossible to comprehend.

here's more from al jazeera...



and here's a longer treatment of the scandal from al jazeera's inside story with economist bill black making a guest appearance...




and, finally, this from current tv's viewpoint...

"Viewpoint" host Eliot Spitzer, Matt Taibbi, Rolling Stone contributing editor, and Dennis Kelleher, president and CEO of Better Markets, analyze the Libor interest rate--rigging scandal engulfing the banking industry.

Barclays CEO Bob Diamond recently resigned after the bank was fined $453 million for its part in the scandal, which involved manipulating the London Interbank Offered Rate (Libor), a key global benchmark for interest rates, by essentially "faking their credit scores," according to Taibbi. And as Taibbi explains, Barclays couldn't have acted alone.

"It can't just be Barclays and the Royal Bank of Scotland. In fact, it can't even be four banks or even five banks," he says. "Really, in the end it's probably going to come out that it's going to be all of them ... involved in this. And that's what's critical for people to understand: that this is a cartel-style corruption."

Kelleher argues that the Libor scandal is proof that the financial industry "is corrupt and rotten to its core." "The same executives [using] the same business model that crashed the entire financial system in '08 are still running these banks," he says.

 

why does accountability and the rule of law only apply to the peasants...?

Submit To Propeller
Tweet

[Permalink] 0 comments

The increasingly corrupt banking industry and the multiple ways the U.S. Government continues to prop it up [UPDATE]

glenn highly recommends the following moyers & company youtube clip and, after watching it, i strongly concur...

If you can find 25 minutes or so this weekend, I can’t recommend highly enough this segment from this week’s Bill Moyers program, with Yves Smith and Matt Taibbi, discussing the increasingly corrupt banking industry and the multiple ways the U.S. Government continues to prop it up.

[UPDATE]

here's a link and a few paragraphs from matt taibbi's rolling stone article from 21 June...

[T]his just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

In fact, stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. What's more, in the manner of old mob trials, Wall Street's secret machinations were revealed during the Carollo trial through crackling wiretap recordings and the lurid testimony of cooperating witnesses, who came into court with bowed heads, pointing fingers at their accomplices. The new-age gangsters even invented an elaborate code to hide their crimes. Like Elizabethan highway robbers who spoke in thieves' cant, or Italian mobsters who talked about "getting a button man to clip the capo," on tape after tape these Wall Street crooks coughed up phrases like "pull a nickel out" or "get to the right level" or "you're hanging out there" – all code words used to manipulate the interest rates on municipal bonds. The only thing that made this trial different from a typical mob trial was the scale of the crime.

the scale of corruption is breathtaking...

Submit To Propeller
Tweet

[Permalink] 0 comments

JPMorgan Chase and Jamie Dimon decide on a little derivatives sunshine

bwahahahaha...! long overdue...

from the ft...

JPMorgan Chase announced surprise “significant mark-to-market losses” on credit derivatives in its chief investment office, an opaque unit whose aggressive trades have recently drawn controversy.

The bank said in a regulatory filing that the portfolio at the CIO had “proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed”.

On a hastily convened conference call, Jamie Dimon blamed “errors, sloppiness and bad judgment”.

Separately, JPMorgan said it was on the hook for as much as $4.2bn in excess of reserves for various legal proceedings.

there's been a great deal of abortive effort to uncover the precise extent of the toxic derivatives held by our criminal, too-big-to-fail banks... suddenly, in this surprise announcement, lo and behold, a little sunshine... my hunch is that this is the thin edge of the wedge and that's there a lot more to come...

Submit To Propeller
Tweet

[Permalink] 0 comments

After Goldman, another whistleblower steps forth

this one from jpmorgan chase...

Comment for Public Information Collection 77 FR 8817

From: Z A N
Organization(s):
JPMorgan Chase

Comment No: 57019
Date: 3/14/2012

Comment Text:

Dear CFTC Staff,

Hello, I am a current JPMorgan Chase employee. This is an open letter to all commissioners and regulators. I am emailing you today b/c I know of insider information that will be damning at best for JPMorgan Chase. I have decided to play the role of whistleblower b/c I no longer have faith and belief that what we are doing for society is bringing value to people. I am now under the opinion that we are actually putting hard working Americans unaware of what lays ahead at extreme market risk. This risk is unnecessary and will lead to wide-scale market collapse if not handled properly. With the release of Mr. Smith’s open letter to Goldman, I too would like to set the record straight for JPM as well. I have seen the disruptive behavior of superiors and no longer can say that I look up to employees at the ED/MD level here at JPM. Their smug exuberance and arrogance permeates the air just as pungently as rotting vegetables. They all know too well of the backdoor crony connections they share intimately with elected officials and with other institutions. It is apparent in everything they do, from the meager attempts to manipulate LIBOR, therefore controlling how almost all derivatives are priced to the inherit and fraudulent commodities manipulation. They too may have one day stood for something in the past in the client-employee relationship. Does anyone in today’s market really care about the protection of their client? From the ruthless and scandalous treatment of MF Global client asset funds to the excessive bonuses paid by companies with burgeoning liabilities. Yes, we at JPMorgan that are in the know are fearful of a cascading credit event being triggered in Greece as they have hidden derivatives in excess of $1 Trillion USD. We at JPMorgan own enough of these through counterparty risk and outright prop trading that our entire IB EDG space could be annihilated within a few short days.

[...]

It is rather surprising that what should be well known liabilities on our balance sheet have not erupted into wider scale scrutinization. I call all honest and courageous JPMorgan employees to step up and fight the cronyism and wide-scale manipulation by reporting the truth. We are only helping reality come to light therefore allowing a real valuation of our banking industry which will give investors a chance to properly adjust without being totally wiped out. I will be contacting a lawyer shortly about this matter, as I believe no other whistleblower at JPMorgan has come forward yet. Our deepest secrets lie within the hands of honest employees and can be revealed through honest regulators that are willing to take a look inside one of America's best kept secrets. Please do not allow this to turn into another Enron.

keep 'em coming...

Submit To Propeller
Tweet

[Permalink] 0 comments

Counterpunch: It’s the system that’s toxic. Goldman Sachs merely operates well within the toxicity.

darwin bond-graham posting in counterpunch...

Whether Goldman Sachs is or isn’t an organization gripped by a toxic culture isn’t all that important when one considers the destructive impact that derivatives have had, and continue to have upon society. Capitalism as it functions today is completely dependent upon derivatives. Interest rates swaps are the single largest type of derivative, measured by notional amount, because they achieve an integration of different national, regional, and sectoral financial markets into one global financial system. It’s in the genetics of the project of financial globalization, fueled by derivatives, that the real problem lies, not in the internal culture of Goldman Sachs, or the illegal behaviors of some bankers across many firms. The real crime lies in perfectly legal and legitimated activities whereby a few powerful corporations design a system that puts the welfare of the world’s vast majority at grave risk. It’s the system that’s toxic. Goldman Sachs merely operates well within the toxicity.

repeating myself - which i am wont to do - it's absolutely the system...

Submit To Propeller
Tweet

[Permalink] 0 comments

The S.E.C.’s policy of settling cases by allowing a company to neither admit nor deny the agency’s allegations does not satisfy the law

wow...! a judge that thinks we should be following the rule of law...! how quaint...!

Federal Judge Blocks Citigroup’s Mortgage Settlement With S.E.C.

A federal judge in New York on Monday threw out a settlement between the Securities and Exchange Commission and Citigroup over a 2007 mortgage derivatives deal, saying that the S.E.C.’s policy of settling cases by allowing a company to neither admit nor deny the agency’s allegations did not satisfy the law.

The judge, Judge Jed S. Rakoff of the Federal District Court in Manhattan, ruled that the S.E.C.’s $28 million settlement, announced last month, is “neither fair, nor adequate, nor in the public interest” because it does not provide the court with evidence on which to judge the settlement.

The ruling could throw the S.E.C.’s enforcement efforts into chaos, because a majority of the fraud and other cases that the agency brings against Wall Street firms are settled out of court, most often with a condition that the defendant does not admit that it violated the law while also promising not to deny it.

this is a biggie, methinks...

Submit To Propeller
Tweet

[Permalink] 0 comments

Common equity in Bank of America is either worthless or very close to it and now Greece could be the tipping point

from rt...

European leaders reach a deal on the debt but if politicians decide there is no "credit event" and credit default swaps don't get paid -- it could leave large US banks "naked," according to independent analyst Reggie Middleton of Boom Bust blog. It could be a tipping point for Bank of America which he believes is insolvent and seeing pressure from all sides.

yeah, well, eurozone leaders THOUGHT they had reached a deal on greek debt...

reuters...

Greece risks meltdown after bailout vote bombshell

The Greek government faced possible collapse on Tuesday as ruling party lawmakers demanded Prime Minister George Papandreou resign for throwing the nation's euro membership into jeopardy with a shock call for a referendum.

Caught unawares by his high-risk gamble, the leaders of France and Germany summoned Papandreou to crisis talks in Cannes on Wednesday to push for a quick implehttp://www.blogger.com/img/blank.gifmentation of Greece's new bailout deal ahead of a summit of the G20 major world economies.

The euro and global stocks were pummeled on financial markets after the Greek move threw into question the survival of crucial efforts to contain the euro zone's sovereign debt crisis.

how very interesting - and perhaps even democratic - that papandreou actually thinks the citizens of greece should have a say...

a commentator, writing in spiegel, agrees with papandreou...

Papandreou Is Right to Let the Greeks Decide

It must be said right at the beginning: The Greeks will, for a change, decide for themselves how they and their country will move forward.

They have had no real opportunity to do so for quite some time. For about a year and a half, this once proud country has been under foreign administration; it is de facto no longer a sovereign state. The government's most important task has been dragging the austerity programs and structural reforms though parliament and implementing them. These are dictated by the strict troika of the EU Commission, the European Central Bank (ECB) and the International Monetary Fund. Otherwise there will be no more bailout money, and the country would go bankrupt.

To no longer be the master of their own finances, to be begging for money and ready to do almost anything for it -- this is as humiliating for penniless states as it is for poor people. It injures the soul, stirs up anger and creates desperation. Knowing that the situation is also largely self-inflicted only makes things worse.

That the Greek Premier Georgios Papandreou wants to consult his people on the financial restructuring of the country seems like an act of desperation appropriate to the dramatic principle of 'committing suicide in fear of death.' The voters will decide whether to endorse the decisions made in Brussels or not.

[...]

Until the referendum in Greece, there will be an intense debate about the two alternatives: Brutal rehabilitation within the euro zone or state bankruptcy with a reintroduction of the drachma.

It will demonstrate that it is not about the choice between hell and paradise. Both paths will be difficult and grueling. Each citizen must decide for themselves what they believe to be the better choice. They will consider whether they want to risk their assets with an exit from the common currency -- savings would be worth hardly anything in a return to the drachma.

But at least every Greek gets to decide, and can no longer complain about their government bowing to international demands. And even if the Greeks ultimately say no, and in the worst case scenario the country leaves the euro zone, the consequences seem less dicey than they did a year ago.

let the chips fall where they may... at least the greeks can once again lay claim to being a sovereign state rather than a wholly-owned subsidiary of the global banksters...

Submit To Propeller
Tweet

[Permalink] 2 comments

Another goddam bailout

worth posting in full...

david dayen posting at firedoglake...

Bank of America announced a way for them to make it look like they made a $6.2 billion profit in the last quarter. The “profit” came mostly from an accounting trick and the sale of their stake in a Chinese bank, part of their downsizing strategy. But they had lower revenue and income in their credit card, real estate and investment banking businesses, which is pretty much their entire business. If you add up the accounting gains totaling $6.2 billion and the net on the sale of the bank, you’d see that the bank lost $1.4 billion last quarter.

The market shrugged off the gimmicks, and at this point BofA is up 10% on the day. But I think that actually has a lot more to do with this:

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

This has been described as another bailout, and it’s not hard to see why. The derivatives go into the insured institution, protecting the counter-parties, and they would be paid off in the event of a failure. Notice that the counter-parties themselves are managing the process, requesting that their bets get implicit government backing. The notional value on these derivatives trades is $75 trillion, with a T. This includes their European derivatives exposure. And according to Bloomberg, JPMorgan Chase has already done this.

When the FDIC is screaming bloody murder and the Federal Reserve reassures that an action is perfectly legitimate and should cause no concern, watch your wallet.

i am so utterly sick of money being thrown at goddam, worthless, too-big-to-fail banks... it's enough to gag a maggot... this is the shit the ows folks (and me) are pissed about...

Submit To Propeller
Tweet

[Permalink] 0 comments

And we're surprised by this how...?

the only surprising thing is that it's a lead story in the nyt...

A Secretive Banking Elite Rules Trading in Derivatives

Submit To Propeller
Tweet

[Permalink] 0 comments

Celebrating and profiting from the tragedy of common folks, a tragedy they helped create, is just business as usual for the banksters

if you read this wapo article carefully, it sounds like goldman was only "seeking to protect itself if prices collapsed," "a routine part of its business"... in other words, goldman was just doing what any good business would do, developing and executing a prudent business strategy...

As the U.S. housing market began its epic fall nearly three years ago, top executives at Wall Street powerhouse Goldman Sachs cheered the large financial gains the firm stood to make on certain bets it had placed, according to newly released documents.

The documents show that the firm's executives were celebrating earlier investments calculated to benefit if housing prices fell, a Senate investigative committee found. In an e-mail sent in the fall of 2007, for example, Goldman executive Donald Mullen predicted a windfall because credit-rating companies had downgraded mortgage-related investments, which caused losses for investors.

"Sounds like we will make some serious money," Mullen wrote.

Lawmakers said the internal e-mails, released Saturday by the Senate Permanent Subcommittee on Investigations, contradict what they said are Goldman's assertions that the bank was not trying to profit from the decline of the housing market in 2007 and was merely seeking to protect itself if prices collapsed.

Goldman admits it had reduced its exposure to the overheated U.S. property market and had sought to limit possible losses through a strategy that would make money if home prices fell. It says such "hedging" is a routine part of its business and is intended to moderate risk to the firm, an especially vital function when markets shift violently, as they did in 2008.

at least zachary goldfarb, the by-lined reporter, had the graciousness to "suggest" the following...

The findings of the Senate panel also come as Goldman is facing a fraud suit, filed earlier this month by the Securities and Exchange Commission, alleging that the bank misled its clients by selling them a mortgage investment that was secretly designed to fail. Senate investigators this weekend were interviewing Goldman Vice President Fabrice Tourre, who is implicated in the fraud suit and will testify Tuesday.

The Senate panel's findings do not touch directly on the fraud suit but suggest that Goldman's alleged behavior in that case was indicative of a larger pattern of duplicitous conduct on the eve of the economy's collapse.

"Investment banks such as Goldman Sachs . . . were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis," said Carl M. Levin (D-Mich.), chairman of the Senate panel. "They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities and sold them to investors, magnifying and spreading risk throughout the financial system and all too often betting against the instruments they sold and profiting at the expense of their clients."

the real story, the one that desperately needs to be carefully researched and put before the american people, is how our super-rich elites and their wholly-owned servants, the banksters, have shamelessly manipulated the american and global economies for many, many years to serve their own greed... when are we going to get THAT story...?

Submit To Propeller
Tweet

[Permalink] 0 comments

Woo-hoo...! Goldman Sachs accused of fraud

holy shit...! an actual whiff of accountability...!

Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail.

The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers.

a good sign...

Submit To Propeller
Tweet

[Permalink] 0 comments

The NYT's Floyd Norris is stunned that people are still pessimistic about the "recovery"

i don't know what alternate universe floyd norris lives in... he seems to think that those of us who think the economy still sucks are misguided...

The American economy appears to be in a cyclical recovery that is gaining strength. Firms have begun to hire and consumer spending seems to be accelerating.

That is what usually happens after particularly sharp recessions, so it is surprising that many commentators, whether economists or politicians, seem to doubt that such a thing could possibly be happening.

Usually you can depend on the White House to view the economy with the most rose-tinted glasses available. But it was not until last week, after a strong employment report, that President Obama started to sound a little optimistic.

“The tough measures that we took — measures that were necessary even though sometimes they were unpopular — have broken this slide and are helping us to climb out of this recession,” he said in a speech at a factory making battery components in North Carolina.

Note, however, that he seemed to believe the country remained in recession. It is virtually certain that is not accurate, as least as will be determined by the arbiters of recession at the National Bureau of Economic Research. “The recession is over,” one of those arbiters, Jeffrey Frankel of Harvard, wrote this week.

But the White House is unwilling to make that claim.

Why is good news being received with such doubt? Why is “new normal” the currently popular economic phrase, signifying that growth will be subpar for an extended period, and that the old normal is no longer something to be expected?

floyd norris is a tool...

meanwhile, one in every 418 housing units (for a total of 2,082,945) in the u.s. received a foreclosure notice in the month of february 2010...



and over a QUADRILLION dollars worth of toxic derivatives remain off the books...

Today five US banks according to data in the just-released Federal Office of Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activity, hold 96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default.

The five are, in declining order of importance: JPMorgan Chase which holds a staggering $88 trillion in derivatives (€66 trillion!). Morgan Chase is followed by Bank of America with $38 trillion in derivatives, and Citibank with $32 trillion. Number four in the derivatives sweepstakes is Goldman Sachs with a ‘mere’ $30 trillion in derivatives. Number five, the merged Wells Fargo-Wachovia Bank, drops dramatically in size to $5 trillion. Number six, Britain’s HSBC Bank USA has $3.7 trillion.

if and when those derivatives are declared and posted at their market value, the economic house of cards could and should collapse entirely...

Submit To Propeller
Tweet

[Permalink] 0 comments

Want to know if our financial elites are truly evil...? Read this...

truly appalling in its cynicism and potential for economic destruction, all the while making our super-rich even richer...

Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin.

Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers.

These contracts, known as credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit.

“It’s like buying fire insurance on your neighbor’s house — you create an incentive to burn down the house,” said Philip Gisdakis, head of credit strategy at UniCredit in Munich.

As Greece’s financial condition has worsened, undermining the euro, the role of Goldman Sachs and other major banks in masking the true extent of the country’s problems has drawn criticism from European leaders. But even before that issue became apparent, a little-known company backed by Goldman, JP Morgan Chase and about a dozen other banks had created an index that enabled market players to bet on whether Greece and other European nations would go bust.

Last September, the company, the Markit Group of London, introduced the iTraxx SovX Western Europe index, which is based on such swaps and let traders gamble on Greece shortly before the crisis. Such derivatives have assumed an outsize role in Europe’s debt crisis, as traders focus on their daily gyrations.

A result, some traders say, is a vicious circle. As banks and others rush into these swaps, the cost of insuring Greece’s debt rises. Alarmed by that bearish signal, bond investors then shun Greek bonds, making it harder for the country to borrow. That, in turn, adds to the anxiety — and the whole thing starts over again.

this is a perfect example of the moral and ethical bankruptcy of the current global financial system... there is simply nothing to check the inexorable slide into unfettered greed where money and profits trump all other considerations... as long as the super-rich elites are getting their daily fix of more and more and more money, nothing - absolutely NOTHING - else matters...

Submit To Propeller
Tweet

[Permalink] 2 comments

Nouriel Roubini throws a little cold water on the premature celebration of the big banks "passing" the stress test

roubini points out a fact that's also occurred to me, namely, that of COURSE some of these godzilla banks are passing the stress test after the u.s. has thrown gazillions of dollars at them... shit... i'd be looking pretty good too if somebody showered me with money and then made a judgment call about the strength of my bank account...

According to preliminary results leaked to the New York Times, all 19 banks with assets above $100 billion that are subject to the Treasury’s ‘stress test’ are bound to pass the test. The official results are due by the end of April but the upbeat mood in the banking sector was already reflected in the 30% stock price rally in the run up to the Q1 earnings season. The major three commercial banks had already noted that they were profitable in the first two months of the year, and Wells Fargo announced that it expects to post a record net income of $3 billion when it reports results on April 22 (with combined net charge-offs of $3.3 billion for both Wells and Wachovia from $6.1 billion in the fourth quarter). Meanwhile, Goldman Sachs reported larger than expected Q1 earnings (ex December loss due to earnings calendar move) while at the same time raising fresh capital through a $5 billion stock sale in order to pay back the $10 billion in TARP money received last year.

A look below the surface reveals some caveats to this positive picture. As Nouriel Roubini points out in a recent writing: “In brief, banks are benefitting from close to zero borrowing costs and fewer competitors; they are benefitting from a massive transfer of wealth from savers to borrowers given a dozen different government bailout and subsidy programs for the financial system; they are not properly provisioning/reserving for massive future loan losses; they are not properly marking down current losses from loans in delinquency; they are using the recent mark-to-market accounting changes by FASB to inflate the value of many assets; they are using a number of accounting tricks to minimize reported losses and maximize reported earnings; the Treasury is using a stress scenario for the stress tests that is not a true stress scenario as actual data are already running worse than the worst case scenario.”

Other commentators also point to the fact that many of these banks were among the main recipients of AIG bailout funds in previous months, e.g. Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion), according to New York Times data. The firms involved dismiss this factor as immaterial for Q1 earnings. Nevertheless, the GAO noted in a report at the end of March that Treasury should require that AIG seek additional concessions from employees and existing derivatives counterparties.

i refer interested readers to the post from hernando de soto about toxic derivatives i put up just the other day...

Submit To Propeller
Tweet

[Permalink] 0 comments

Between $596 trillion and $1.2 QUADRILLION worth of derivatives outstanding...! Talk about a TIME BOMB...!

this la times opinion piece carries a headline that says it all...

Global Meltdown Rule No. 1: Do the math
We can't start fixing things until we can get a handle on the toxic assets behind the financial crisis.

Economist Hernando de Soto is the author of the "The Other Path" and "The Mystery of Capital." He has helped carry out property-reform programs for heads of state in about 20 countries.

[I]magine how I have felt watching my role models go to war over weapons of mass destruction that they never actually assessed, or now, watching them wage a losing war against derivatives -- which both Warren Buffet and George Soros have called "financial weapons of mass destruction" -- without locating or counting them either.

And, man, do those financial instruments need measuring: pooled, packaged and traded around the world, they are now the principal reason for today's massive credit contraction. The fear among financial institutions that potential borrowers and users of credit and capital could be burdened with so many nonperforming derivatives that they would be unable to repay their loans and protect their investments has plunged the global economy into a recession.

The Securities and Exchange Commission estimates that derivative paper is worth $596 trillion (10 times the value of total world production), while studies at the Bank for International Settlements in Basel, Switzerland, conclude that it could be twice as much -- $1.2 quadrillion. And exactly how many of those derivatives are actually nonperforming and would have to be surgically removed to stop their toxicity from spreading and destroying trust among creditors and investors? Nobody knows that for sure either. U.S. Treasury Secretary Timothy F. Geithner has set aside $1 trillion to assist in buying those toxic assets, but the SEC has guesstimated that there might be upward of $3 trillion worth.

[...]

If you want to get credit flowing again, you must restore trust in paper as soon as possible. And that means measuring the assets, recording them, finding and purging those that are toxic and preventing future debasement of the paper -- in essence, submitting it to property law just like all the other assets that we own and value.

Before we can get out of this recession, we need to concede that we just don't have the right information. At present, the world of derivatives is devoid of useful facts and a structure from which we can extract the meaning, knowledge and confidence required to end the credit crunch.

i have neither the background or the intelligence to comment intelligently on the arcane world of financial instruments, but i know solid wisdom when i read it...

Submit To Propeller
Tweet

[Permalink] 0 comments