The SEC Charges New Jersey With Fraud… Oh, and Nothing Happens as a Result
by ilene - August 18th, 2010 10:49 pm
The SEC Charges New Jersey With Fraud… Oh, and Nothing Happens as a Result
Courtesy of Jr. Deputy Accountant
OK now I have officially had enough with this settlement bullsh*t. The state of New Jersey is allowed to lie about pension funding and defraud investors, and isn’t even levied a penalty? That’s not a slap on the wrist, it’s a slap in all of our faces.
Basically all it means for NJ is that they can’t sell these crap bonds anymore. Way to regulate, you lazy, toothless **cks. Now what about the idiots who invested in this crap? Throw them on the pile with the rest of New Jersey’s creditors?
The Securities and Exchange Commission accused the State of New Jersey of securities fraud on Wednesday for telling the bond markets that it was properly funding state workers’ pensions when it was not, The New York Times’s Mary Williams Walsh reports.
As a result, the S.E.C. said in a cease-and-desist order, investors bought more than $26 billion worth of New Jersey’s bonds, without understanding the severity of the state’s financial troubles. New Jersey, the S.E.C. said, has agreed to accept the order, without admitting or denying the finding. The agency did not impose a financial penalty.
Wednesday’s action was the first time the federal agency has accused a state with violating securities laws. The S.E.C.’s powers of enforcement against the states are tightly limited by states’-rights concerns and constitutional law, and it has standing to get involved only when there is a clear-cut case of fraud.
“The State of New Jersey didn’t give its municipal investors a fair shake, withholding and misrepresenting pertinent information about its financial situation,” Robert Khuzami, director of the S.E.C.’s division of enforcement, said in a statement. The cease-and-desist order named only the State of New Jersey, and not the financial institutions that helped it issue the bonds. Its largest bond underwriters during the period in question include Citigroup, JPMorgan Chase, Morgan Stanley, Bank of America, Merrill Lynch, Goldman Sachs and Barclays Capital.
Well who cares, even if they did name banks by name it’s not like they’d actually DO anything about it, right? Maybe they priced in a few million extra when they last settled with EACH of those banks for financial misdeeds.
I don’t feel sorry for the investors, actually, since this is what…
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DiggBank of America Pulls a $10.7 Billion Lehman-Esque Oopsie, Claims No Material Effect
by ilene - July 11th, 2010 8:03 pm
Bank of America Pulls a $10.7 Billion Lehman-Esque Oopsie, Claims No Material Effect
Courtesy of Jr. Deputy Accountant
Oh that’s precious. What sort of money does Bank of America have to claim $10.7 billion in misclassified cash non-material?
Bank of America Corp is beefing up its internal accounting controls after it incorrectly classified as much as $10.7 billion in short-term lending and repurchase deals for mortgage securities as sales, according to a letter filed on Friday with U.S. securities regulators.
The Charlotte, N.C.-based lender said the transactions — spread over a three-year period — were immaterial to Bank of America’s earnings in a May 13 letter to the U.S. Securities and Exchange Commission, which was publicly filed on Friday.
The error was first disclosed in the bank’s first quarter 2010 report, which noted the bank incorrectly accounted for some mortgage-backed securities as sales, rather than repurchase or short-term lending deals.
The first such error occurred on March 31, 2007, totaling $4.5 billion in securities. The largest misclassification was $10.7 billion in securities on September 30, 2008.
"The transactions did not have a material impact on the bank’s earnings or balance sheet," said company spokesman Jerry Dubrowski.
Ahem PricewaterhouseCoopers, do you have something to confess here? Is it not your job to spot these sorts of errors BEFORE you sign off on BofA’s financials? Just curious.
Which Has a Better Ring – The Hexopoly or The Systemic Six?
by ilene - June 28th, 2010 5:17 pm
Which Has a Better Ring – The Hexopoly or The Systemic Six?
Courtesy of Joshua M Brown, The Reformed Broker
The Financial Reform Bill, which I’ve nicknamed The Let’s Not Allow Our Largest Donors To Embarrass Us Again Act of 2010, is not a total failure, but it fails miserably to address perhaps the worst part of the crisis - Too Big To Fail.
The bill doesn’t really address the Hexopoly of Too Big To Fail Banks. I’m also calling theseThe Systemic Six.
The big six banks (Goldie, Morgan, JP, B of A, Wells and Citi) will be limited in their hedge fund investments and trading activity, but not very limited. The interconnectedness, however, is unchanged, and this is the very crux of the matter.
Citi was saved to prevent it from dragging Wells down, Wachovia, Merrill, Morgan were all "assisted" to prevent Goldman and JPMorgan Chase from going down, and on and on. We were told that the dominoes were already falling after Lehman and so emergency measures (bailouts) were necessary.
And for arguments sake, let’s say this was true at the time or was the best option to prevent the Depression. OK, fine. But so why doesn’t the new legislation address that and seek a change for the fact that these six banks (and others) can cause such a massive chain reaction? It’s a shocking gap in the provisions of the bill.
And don’t even get me started on the Fannie and Freddie omission (consider those cans kicked down the road). If Finance Reform were a wedding, Fannie and Freddie would be placed at the farthest table from the action, over by the kitchen doors like the ugly cousins of the banks that they truly are.
Oh well, maybe we’ll get it right after the next economic evisceration. For now, The Hexopoly orThe Systemic Six are here to stay.
****
Picture credit MTTS (h/t Jr. Deputy Accountant)
Derivatives “Reform” or “Let’s Just Pretend It Isn’t a Problem but Act Like We Fixed It” ?
by ilene - June 24th, 2010 2:01 am
Derivatives "Reform" or "Let’s Just Pretend It Isn’t a Problem but Act Like We Fixed It"?
Courtesy of Jr. Deputy Accountant
[click on images/tables to enlarge]
Pic credit: MTTS
A-ha! I f**king love "reform" in this country. God bless America!
Three of the five U.S. banks that dominate swaps trading already perform most transactions outside their depository institutions and would face minimal disruption from a congressional proposal to reorder the derivatives business, financial statements and banking records show.
JPMorgan Chase & Co. and Citigroup Inc. would be hit hardest by the proposal, crafted by Arkansas Senator Blanche Lincoln, to wall off swaps desks from commercial banks. JPMorgan had 98 percent of its $142 billion in current value derivatives holdings inside its bank in the first quarter of this year while Citigroup had 89 percent of $112 billion, the records show.
Morgan Stanley and Goldman Sachs Group Inc., each of which entered the commercial banking business in 2008 in the midst of the financial crisis, would be less affected. Morgan Stanley kept just over 1 percent of its $86 billion in derivatives holdings in its bank in the first quarter, and Goldman Sachs Group’s held 32 percent of its $104 billion. Bank of America Corp., which absorbed broker-dealer Merrill Lynch in 2009, had 33 percent of its $115 billion in its bank.
Now might be a good time to introduce a handy chart that shows the latest OCC data on derivatives exposure, or, more specifically, shows the concentration of said derivatives exposure among FIVE banks. You know, that would be the five banks that Blanche Lincoln might have wanted to target with this "reform" plan of hers. Just sayin, cue chart:
And let’s see, just who are those five banks?
JP Morgan, Bank of America, Goldman Sachs, Citi, and Wells Fargo eh? Well four out of five ain’t bad except that fifth is a b#*ch, how on Earth does Goldman get to weasel out of this?
From the OCC report:
The report shows that the notional amount of derivatives held by insured U.S. commercial banks increased by $8.5 trillion (or 4.2 percent) in the fourth quarter to $212.8 trillion. Interest rate contracts increased $7 trillion to $179.6 trillion, while credit derivatives increased 8 percent to $14 trillion.
The report also
…
Bank Of America To Stop Charging 31,200% Interest
by ilene - March 10th, 2010 12:24 pm
Karl asks why do we let Congress and the Federal Reserve continue their reign of assault against us. - Ilene
Bank Of America To Stop Charging 31,200% Interest
Courtesy of Karl Denninger at The Market Ticker
No, that’s not a misprint.
Let’s say you went to Starbucks and bought a $5 Latte. You swiped your debit card and didn’t have the $5 in your account.
Bank of America would charge you a roughly $30 overdraft fee, amounting to 600% of your purchase for a loan of that $5 for as little as one day. That’s bad enough.
Let’s assume you paid that overdraft fee (and the $5) in one week. There are 52 weeks in a year and the bad news is that when computing the annual percentage rate you must divide the interest charged by the percentage of a year you held the money to get the APR. Thus, 31,200% interest on an "annualized" basis, assuming you pay it in one week (it’s 218,400% if you pay it off the next morning!)
The bank will soon stop doing this, and in fact is mandated to do so without getting permission first for each transaction, as of June 1st.
The question that should be asked is why we should have to wait until June 19th for new accounts, or August 1st for existing accounts, never mind why this sort of outrageous behavior has been permitted in the first place.
Guido on the corner typically will charge you something obscene like 500% interest over the course of a year.
The banksters put Guido to shame.
How much do the banksters make off this? Some $1.77 billion annually, at last count. None of which, I might add,…
How The FDIC Is Killing Short Sales: The Story Of OneWest, IndyMac & Taxpayer Funded Sweetheart Deals
by ilene - February 13th, 2010 2:44 am
You may have seen this video before as it’s been on Zero Hedge and here at the Favorites, but the text below is from The Daily Bail and includes a little more description of the how the deal works. If this is true, it is truly outrageous. – Ilene
How The FDIC Is Killing Short Sales: The Story Of OneWest, IndyMac & Taxpayer Funded Sweetheart Deals (VIDEO)
Listen to the deal OneWest Bank got from the FDIC to take over failed and seized Indymac. Don’t forget who is fundng the FDIC these days — taxpayers. Sheila’s been out of capital for months, so the bill comes to all of us now. An absolute don’t miss clip. Then do your best to spread it elsewhere.
The IndyMac Slap In Our Face >>
—--
Background reading:
Is The FDIC Killing Short Sales?
As some of you already know, I blogged recently about being interviewed recently by our local NBC news affiliate. To read the blog, click here. Basically, IndyMac Bank (now OneWest Bank), is holding one of my clients hostage, demanding a $75k promissory note, or they will proceed to foreclosure. For the life of me, I couldn’t figure out why they were doing this. The BPO came in at the contract price of $275k, with a net to IndyMac of $241k. What advantage could there possibly be for them to proceed to foreclosure?
Yesterday, I figured it out. You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009. Guess who the investors are behind OneWest? George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire).
Now, listen to the deal they got from the FDIC….
Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts). They purchased all current HELOCS at 58% of Par Value!!!
Next, in order to "sweeten the pot", the FDIC stepped…
Full Suit By Andrew Cuomo Against Ken Lewis And Joe Price
by ilene - February 4th, 2010 1:29 pm
Full Suit By Andrew Cuomo Against Ken Lewis And Joe Price
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Courtesy of Zero Hedge
Highlights from the suit:
By early December 2008, Bank of America’s top management, including its CEO Ken Lewis and CFO Joseph Price, had two choices: they could tell the Bank’s shareholders about the huge material losses at Merrill since the merger proxy was filed, or they could hide them. Bank management chose to hide the information. In particular, Bank management failed to disclose that by December 5, 2008, the day Bank of America shareholders voted to approve the merger with Merrill Lynch, Merrill had incurred actual pretax losses of more than $16 billion. Bank management also knew at this time that additional losses were forthcoming and that Merrill had become a shadow of the company Bank of America had described in its Proxy Statement and other public statements advocating the merger. The Bank’s management thus left the Bank’s shareholders in the dark about fundamental changes at Merrill that were obviously important to their voting decision. These disclosure failures violated New York’s Martin Act.
Having obtained shareholder approval for the deal, Lewis then misled federal regulators by telling them that because 50% of Merrill’s tangible equity had disappeared, the Bank could not complete the merger without an extraordinary taxpayer bailout. Lewis went onto say how the Bank needed to “fill the hole” left by the unprecedented losses, which contradicted his public statements to the effect that the Bank would not need additional capital. Remarkably, between the time that the shareholders had approved the deal and the time that Lewis sought a taxpayer bailout, Merrill’s actual losses had only increased another $1.4 billion. The Bank’s management has not and cannot explain why they did not disclose to the Bank’s shareholders losses so great that, absent a historic taxpayer bailout, they threatened the Bank’s very existence.
On November 13, when Price knew of at least approximately $5 billion in after tax losses, Bank of America’s General Counsel, Timothy Mayopoulos, and lawyers from its outside law firm, Wachtell, Lipton, Rosen & Katz, determined the Bank should disclose the losses. The lawyers discussed the date of the disclosure, the manner of the disclosure, who would draft the disclosure, and that Price would approach Merrill CEO John Thain about the disclosure. Shortly thereafter, however, the decision was reversed, Wachtell’s role was marginalized, and the Bank made its
…
NY AG Cuomo Announces Fraud Charges Against Bank Of America For Merrill Lynch Merger
by ilene - February 4th, 2010 12:10 pm
NY AG Cuomo Announces Fraud Charges Against Bank Of America For Merrill Lynch Merger (BAC)
Courtesy of Joe Weisenthal and Lawrence Delevingne at Clusterstock
Today, Andrew Cuomo announced fraud charges against Bank of America and top executives over the Merrill Lynch merger debacle.
The charges are civil, but Cuomo says there are pending criminal investigations.
Here’s the full release:
ATTORNEY GENERAL CUOMO FILES FRAUD CHARGES AGAINST BANK OF AMERICA, FORMER CEO KENNETH LEWIS, AND FORMER CFO JOSEPH PRICE
Suit Alleges Bank of America’s Top Management Hid Skyrocketing Losses at Merrill Lynch
Bank of America Management Manipulated Federal Government into Granting Massive Taxpayer Bailout
NEW YORK, NY (February 4, 2010) – Attorney General Andrew M. Cuomo,
joined by Special Inspector General for the Troubled Asset Relief
Program Neil Barofsky, today announced a lawsuit against Bank of
America, its former CEO Kenneth D. Lewis, and its former CFO Joseph L.
Price for duping shareholders and the federal government in order to
complete a merger with Merrill Lynch. According to the lawsuit, Bank of
America’s management intentionally failed to disclose massive losses
at Merrill so that shareholders would vote to approve the merger. Once
the deal was approved, Bank of America’s management manipulated the
federal government into saving the deal with billions in taxpayer funds
by falsely claiming that they would back out of the deal without bailout
funds.
“This merger is a classic example of how the actions of our
nation’s largest financial institutions led to the near-collapse of
our financial system,” said Attorney General Cuomo. “Bank of
America, through its top management, engaged in a concerted effort to
deceive shareholders and American taxpayers at large. This was an
arrogant scheme hatched by the bank’s top executives who believed they
could play by their own set of rules. In the end, they committed an
enormous fraud and American taxpayers ended up paying billions for Bank
of America’s misdeeds.”
“The events surrounding the Bank of America/Merrill Lynch merger and
the United States Government’s investment in Bank of America through
the Troubled Asset Relief Program are an important part of the history
of the financial crisis,” said Special Inspector General Neil
Barofsky. “Attorney General Cuomo and his staff, working hand…
Italy Seizes Bank of America Assets In Derivatives Fraud Probe
by ilene - February 3rd, 2010 7:15 pm
Italy Seizes Bank of America Assets In Derivatives Fraud Probe
Courtesy of Jesse’s Café Américain
"more than 519 municipalities that face 990 million euros in derivatives losses"
As the quote indicates, its a big problem, and Bank of America is not the only bank involved. But they are a big player, and actively using derivatives to ‘rip customer’s faces off’ as they saying goes.
Why does this happen? Bank of America just announced they will be paying, on average, a $400,000 bonus per employee for this year past. Any fines or penalities that are incurred from offenses are treated as a cost of doing business.
Crime does pay in the short term. Especially if you can buy off the government and co-op the regulators of a major developed nation. When someone succumbs to fraud, there is a tendency to blame the victim. The purpose of the law is to protect the weak. Perhaps they could have been more vigilant, but this in no way diminishes the guilt of the perpetrator, and the likelihood that this is something they have been doing in many places over a period of time, with a growing level of sophistication.
People argue that if a nation sets rules for banks, they will just move offshore and keep doing business in any way that they please. This is intended to undermine any reforms and the rule of law.
It is possible to ban a company from doing business in your nation if it engages in unlawful practices. As noted here previously, Citi was engaging in trading practices in Europe and Japan that put them on the receiving end of bans for fraud.
Globalization is used as a rationale for stripping nations of their sovereign rights, and the people from their ability to rule and protect themselves in accord with their own beliefs and preferences.
Why people accept this nonsense when it applies to the financial sector is amazing. Well perhaps not, given the force of a steady propaganda that has been promoting it for the past twenty years.
The truth is ugly when you see it in plain black and white. The US is a relative safe haven for multinational corporations that engage in various forms of fraud and market manipulation around the world, like modern day privateers. It appears unable…
Senator Bob Corker Needs to Be Updated on His Bank Failure History
by ilene - February 2nd, 2010 7:08 pm
Senator Bob Corker Needs to Be Updated on His Bank Failure History
Courtesy of Reggie Middleton
Senator Corker challenged Mr. Volcker’s stance in today’s congressional hearings on the Volcker Rule by saying that no financial holding company that had a commercial bank failed while performing proprietary trading. It appears as if Mr. Corker may have received his information from the banking lobby, and did not do his own homework.
Let’s reference the largest commercial bank/thrift failure of all:
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(