Financial Scams

[Typhoon]

Roll Stone | It's long been suspected that ratings agencies like Moody's and Standard & Poor's helped trigger the meltdown. A new trove of embarrassing documents shows how they did it

Thanks to a mountain of evidence gathered for a pair of major lawsuits, documents that for the most part have never been seen by the general public, we now know that the nation's two top ratings companies, Moody's and S&P, have for many years been shameless tools for the banks, willing to give just about anything a high rating in exchange for cash.

In incriminating e-mail after incriminating e-mail, executives and analysts from these companies are caught admitting their entire business model is crooked.

"Lord help our genuflecting scam . . . this has to be the stupidest place I have worked at," writes one Standard & Poor's executive. "As you know, I had difficulties explaining 'HOW' we got to those numbers since there is no science behind it," confesses a high-ranking S&P analyst. "If we are just going to make it up in order to rate deals, then quants [quantitative analysts] are of precious little value," complains another senior S&P man. "Let's hope we are all wealthy and retired by the time this house of card[s] falters," ruminates one more.

[YMix]

One product stood out head and shoulders against the others. Those of a cynical mind might have queried why the ‘utterly ethical’ Co-Op bank was offering a 15.29% gross yield on your money – almost double the rate available anywhere else, but then wasn’t the Co-Op bank the only bank that was set up to primarily benefit its customers rather than those dastardly bankers? Wasn’t it ultra cautious in who it lent money to, restricting itself to yogurt and lentil eating enterprises such as seven human rights areas, five environmental areas, four international development areas and five animal welfare issues – no need to feel guilty watching those cuddly, furry, Siberian Tigers with the big eyes face extinction, the Co-Op bank proudly announced that it had withheld £1 billion of finance from ‘unethical’ enterprises preferring to support the likes of the Siberian Tiger.

For some reason, they didn’t feel the same need to point out that one of the ‘ethical enterprises’ they were supporting was the wide eyed and nearing extinction, cuddly, furry, Labour Party, to the tune of £3,5 million. A debt that was already ten years old when they made their 15.29% offer, and on which the Labour party had managed to repay a niggardly average £18,000 a year – at no doubt a suitably generous low rate of interest. Since the Labour Party was also simultaneously advertising to its members the magnanimous offer from the Co-Op bank to lend up to £15,000 as an unsecured personal loan at 5.8% – a service which ensured the Labour Party got £75 commission for each supporter who took up this offer, a quick trip round my calculator tells me that if a mere 240 members a year took up the offer, that alone would account for the repayments apparently ‘made’ by the Labour Party.

Anybody else owing £3.5 million to a bank facing collapse would find their house snatched back, their business in tatters, and carefully planted stories in the media detailing their ‘luxurious lifestyle conned out of the bank‘ – but the media have confined themselves to the ‘truthful’ statement that the Labour Party and Trade Unions ‘bank’ with the Co-Op! They do, they do, they keep all their overdrafts with the Co-Op, loyal little customers that they are! No claims of ‘conning’ the bank out of millions where they are concerned.

Now the new City watchdog, the Prudential Regulation Authority (PRA), has discovered a £1/£1.5 billion (no one is quite sure which yet) black hole in the Co-Op’s books, and yet another bank rescue is under way.

Guess who is feeling the pain? Not the Labour Party; not Ed Balls, one of the many MPs proudly sponsored by the Co-Operative Party, the political wing of the Co-Op movement; but the ordinary hard working men and women who invested their money in those PIBs (Permanent Interest Bearing Bonds) at 15.29% to fund their retirement. They cannot demand their money back, can’t withdraw their loan to the Co-Op Bank; all they can do is try to flog their bonds to someone else for whatever they can get, a somewhat forlorn hope – since they are about to take a 30% haircut on their savings!

http://www.annaraccoon.com/politics/wer ... our-party/

[Parodite]

The 1000+ trillion shady, unmonitored and unregulated Derivatives Mega Casino nuclear time bomb is I would say the biggest financial scam in history.

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Good background video. Root cause according to Janet Tavakoli: "Unchecked fraud"

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Financial Oligarchy and the New Robber Barons w/Derivatives Guru Janet Tavakoli

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[Nonc Hilaire]

Tavakoli has a gift for making economics understandable. I haven't heard any new interviews lately, but she has always been proven correct.

US citizens with over $100k in a bank need to make arrangements as financial controls are already in place. I believe the limit on individual cash withdrawals is $2k now but I am not sure.

Those with securities held in street name need to move those out of the system using direct registration or certificate delivery. Most brokers will refuse or overcharge horrendously, but http://www.cis.computershare.com/index.htm is reported to be a good group to work with.

[Typhoon]

Need billions in government bailout? Follow these easy steps: 1) Pull a number out of your arse, 2) Laugh about how you will never pay it back, 3) Seriously, stop laughing, 4) Profit

TAPE RECORDINGS from inside doomed Anglo Irish Bank reveal for the first time how the bank's top executives lied to the Government about the true extent of losses at the institution.

The astonishing tapes show senior manager John Bowe, who had been involved in negotiations with the Central Bank, laughing and joking as he tells another senior manager, Peter Fitzgerald, how Anglo was luring the State into giving it billions of euro.

[Parodite]

Tavakoli has a gift for making economics understandable. I haven't heard any new interviews lately, but she has always been proven correct.

I'm very impressed by her. Just one more video, a Q&A interview in 2009 which is again excellent. At the same time the truth is very depressing and the future looks dire.

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[Nonc Hilaire]

We should move Tavakoli to the "Beautiful Women" thread. I'm tempted to open an Italian restaurant just so I can name a pasta course after her.

[Parodite]

We should move Tavakoli to the "Beautiful Women" thread. I'm tempted to open an Italian restaurant just so I can name a pasta course after her.

had similar thoughts..

[Parodite]

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[Parodite]

The repeal of the Glass-Steagall Act

Clinton: "Read my lips, I never had sex with those banks"


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Excellent summary:

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[Mr. Perfect]

Need billions in government bailout? Follow these easy steps: 1) Pull a number out of your arse, 2) Laugh about how you will never pay it back, 3) Seriously, stop laughing, 4) Profit

TAPE RECORDINGS from inside doomed Anglo Irish Bank reveal for the first time how the bank's top executives lied to the Government about the true extent of losses at the institution.

The astonishing tapes show senior manager John Bowe, who had been involved in negotiations with the Central Bank, laughing and joking as he tells another senior manager, Peter Fitzgerald, how Anglo was luring the State into giving it billions of euro.

The unavoidable results of people like yourself and Parodite and your belief system. A little bit of capitalism, a little bit of socialism. Social democracy with a capitalist engine, or however he put it.

[Nonc Hilaire]

Need billions in government bailout? Follow these easy steps: 1) Pull a number out of your arse, 2) Laugh about how you will never pay it back, 3) Seriously, stop laughing, 4) Profit

TAPE RECORDINGS from inside doomed Anglo Irish Bank reveal for the first time how the bank's top executives lied to the Government about the true extent of losses at the institution.

The astonishing tapes show senior manager John Bowe, who had been involved in negotiations with the Central Bank, laughing and joking as he tells another senior manager, Peter Fitzgerald, how Anglo was luring the State into giving it billions of euro.

The unavoidable results of people like yourself and Parodite and your belief system. A little bit of capitalism, a little bit of socialism. Social democracy with a capitalist engine, or however he put it.

Nothing to do with capitalism or socialism. Simple theft, dishonesty, blackmail and bribery. It is the belief system of these financial pirates that is the problem.

[Mr. Perfect]

Actually NH just more proof that people like you are the root cause of our problems. The real reason we are here is because of people like you, parodite, and colonel sun. A little bit of socialism, a little bit of capitalism, "social democracy with a capitalist engine", or IOW the coward's compromise.

As you say deceit and theft are part of the human condition, and the American solution to hedging against this problem, not curing it, but deterring and minimizing the problem was checks and balances. Which have been removed since the creation of the FED, the New Deal, and all manner of Democrat horse$#!t giving the government the power to enable crooks.

In my world the government would never have the power to insure or bail out. In Endo's world corporations would never be powerful enough to effect the economy. Problem solved. This level of thievery isn't even possible in our worlds. However in the world people like yourself have created the structure for near limitless thievery was made possible. A government that can print money and give to thieves for mutual benefit indefinitely just be emailing each other. The problem is you. And paradote and colonel sun and others. The moderates. The middle. This is a beast created by people like you.

[Nonc Hilaire]

That's me, alright. Creating the structure for international thievery

So Mr. P., have you gotten your wealth out of this corrupt system or are you waiting for the bail-in?

[Mr. Perfect]

That's me, alright. Creating the structure for international thievery

Acknowledging you are the problem is an important first step.

So Mr. P., have you gotten your wealth out of this corrupt system or are you waiting for the bail-in?

I have a number of income sources.

[Parodite]

Mr. P.: No. I actually agree with you re the fed, the things you identified as detrimental government interference. I want small/minimal government like you do. I am anti-Euro. But you don't understand, or for whatever reason decide to ignore the other evil-doers in this sad story; the mafiosi in the financial industry that bribed and bought politics in the USA. I have posted some stuff here lately, but since you didn't decide to discuss it in any meaningful way I'll leave it at this.

If it is all the fault of people like me who want a minimal but properly regulated and monitored free market and financial industry, and who then don't mind to organize charity via the tax system where it remains necessary and can still be effective.. then I will just say you are a gold diggah, addicted to derivative gambling and very afraid his source of income is on the brink of collapse. Sure you will have your private fenced off safe haven and guns, food and water stored in some container or bunker and ready to kill democrats who caused it all who may come at your door begging for a bit of water for their starving kids. Don't try to remember Jesus.

[Mr. Perfect]

Thanks for the post, it made your errors more transparent.

I think in your mind, you have the best of intentions. You may actually have the best of intentions. However the things you listed require a government with enough power that it attracts evil people to use it for purposes other than what you listed. That is your fundamental error, what the kids call "unintended consequences". You create a power structure for one thing that quickly gets used for something else. The freedom solution is to not build the power structure.

The mafioso, the Harvard Democrats, were bankrupt when the Government passed TARP. There was no bribing, they had no money to bribe with.

Derivatives are just insurance products P, nothing objectionable going on there.

[Parodite]

Thanks for the post, it made your errors more transparent.

I think in your mind, you have the best of intentions. You may actually have the best of intentions. However the things you listed require a government with enough power that it attracts evil people to use it for purposes other than what you listed. That is your fundamental error, what the kids call "unintended consequences". You create a power structure for one thing that quickly gets used for something else. The freedom solution is to not build the power structure.

There are always power structures available to be used, abused. You could totally deregulate traffic for instance. No maximum speeds, no policing, no legal arm. So much more to deregulate... Food production! Things would taste so much better with quality guaranteed! Ask the Chinese how to produce proper baby milk.

Power vacuums in the name of freedom are quickly filled with all kinds of evil people taking control to their own advantage, with very bloody and unintended consequences for many others.

[Nonc Hilaire]

Thanks for the post, it made your errors more transparent.

I think in your mind, you have the best of intentions. You may actually have the best of intentions. However the things you listed require a government with enough power that it attracts evil people to use it for purposes other than what you listed. That is your fundamental error, what the kids call "unintended consequences". You create a power structure for one thing that quickly gets used for something else. The freedom solution is to not build the power structure.

There are always power structures available to be used, abused. You could totally deregulate traffic for instance. No maximum speeds, no policing, no legal arm. So much more to deregulate... Food production! Things would taste so much better with quality guaranteed! Ask the Chinese how to produce proper baby milk.

Power vacuums in the name of freedom are quickly filled with all kinds of evil people taking control to their own advantage, with very bloody and unintended consequences for many others.

The proper essence of regulation is proclamation of honesty. Honesty is a prerequisite for trust, and without trust trade is not possible. The simple fact is some people will lie if they can profit by it, so they need to be excluded.

[Parodite]

There are always power structures available to be used, abused. You could totally deregulate traffic for instance. No maximum speeds, no policing, no legal arm. So much more to deregulate... Food production! Things would taste so much better with quality guaranteed! Ask the Chinese how to produce proper baby milk.

Power vacuums in the name of freedom are quickly filled with all kinds of evil people taking control to their own advantage, with very bloody and unintended consequences for many others.

The proper essence of regulation is proclamation of honesty. Honesty is a prerequisite for trust, and without trust trade is not possible. The simple fact is some people will lie if they can profit by it, so they need to be excluded.

That's very succinctly said and true.

Lying as a tool used to profit is what thieves do. They will never ring your door bell announcing they are about to loot your house. This is also precisely why the thieves in the financial industry love "deregulation". It is not that they love deregulation for the sake of a healthy, open and free market... they need it for their thievery if it enables them to do the things they do in the dark without others noticing it.

[noddy]

There are always power structures available to be used, abused. You could totally deregulate traffic for instance. No maximum speeds, no policing, no legal arm. So much more to deregulate... Food production! Things would taste so much better with quality guaranteed! Ask the Chinese how to produce proper baby milk.

Power vacuums in the name of freedom are quickly filled with all kinds of evil people taking control to their own advantage, with very bloody and unintended consequences for many others.

The proper essence of regulation is proclamation of honesty. Honesty is a prerequisite for trust, and without trust trade is not possible. The simple fact is some people will lie if they can profit by it, so they need to be excluded.

That's very succinctly said and true.

Lying as a tool used to profit is what thieves do. They will never ring your door bell announcing they are about to loot your house. This is also precisely why the thieves in the financial industry love "deregulation". It is not that they love deregulation for the sake of a healthy, open and free market... they need it for their thievery if it enables them to do the things they do in the dark without others noticing it.

all nice as words, lovely words.

the trouble is that area of grey between putting poison in baby food versus busting kids for selling homemade lemonade without all the appropriate food handling licenses.

the line in the sand needs to go somewhere.

gets even funnier when you move onto the alternative view of this argument in which the government proscribed preservatives,additives and GMOS's are themselves the poisons and the traditional unprocessed farm versions are declared illegal like fresh milk, cheeses.breads or meats.

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as for the topic - financial scams and regulation/deregulation im still firmly in the belief that the existence of bodgy operators and bad investments is an aspect of life and as such the real worry and the real problem of our highly debt leveraged modern society is that these things can be so horrific in effect.

we absolutely should not be in such a fragile state that a scam can bring us to our knees - an economically rational society would have boring safety nets of savings and low risk investments to counter balance the riskier high return stuff and not be so exposed to the booms and busts of international finance games.


its scary just how stupid you get treated when you mention things like savings and low risk,low return buffers against badtimes - they are declared non productive wastes of money in this post modern lunacy.

in the current mindset savings are economic sabotage, its just maddness..

[Parodite]

the trouble is that area of grey between putting poison in baby food versus busting kids for selling homemade lemonade without all the appropriate food handling licenses.

the line in the sand needs to go somewhere.

Yes, and because everything keeps changing the line needs regular adjustments. Nothing static or perfect. That's where we have heaven for.

gets even funnier when you move onto the alternative view of this argument in which the government proscribed preservatives,additives and GMOS's are themselves the poisons and the traditional unprocessed farm versions are declared illegal like fresh milk, cheeses.breads or meats.

Governments need to be monitored as well. And in ways the people think necessary via a working democratic process.

---

as for the topic - financial scams and regulation/deregulation im still firmly in the belief that the existence of bodgy operators and bad investments is an aspect of life and as such the real worry and the real problem of our highly debt leveraged modern society is that these things can be so horrific in effect.

Activities that became too disruptive can be dealt with via same process of monitoring, redrawing of lines in the sand via a bottum-up democratic process. Checks and balances. It just appears that now and in the case of those financial scams and coups, very few people are convinced they can do something about using the normal bottum-up democratic process. The crookies love that. But it is not true.

we absolutely should not be in such a fragile state that a scam can bring us to our knees - an economically rational society would have boring safety nets of savings and low risk investments to counter balance the riskier high return stuff and not be so exposed to the booms and busts of international finance games.

I agree, but me thinks what you say is only half the way to deal with it. If consumers and even governments behave prudently and as you suggest, it is still possible scams can bring the system to its knees. It can be an assault on the pillars of stability and cause a systemic failure.

[YMix]

Wall Street Rips Off 'The Sting'
By Matt Taibbi
POSTED: July 9, 12:55 PM ET

Hilarious corruption story hit the news wires this week. It's actually a two-part joke.

Part one is that Thomson Reuters got slapped in the face by New York State Attorney General Eric Schneiderman for its absurd practice of selling early access to the results of the consumer confidence survey it conducts each month in conjunction with the University of Michigan.

It turns out that in recent times, if you paid them an extra subscription fee of a few thousand dollars a month, Thomson Reuters would allow you access to the Consumer Confidence data a full two seconds earlier than the rest of its subscribers – at 9:54:58 a.m., as opposed to 9:55:00 exactly.

Thomson Reuters suspended the activity at the request of Schneiderman, who released a statement about this humorously brazen effort at the systematic sale of inside information. From the L.A. Times:

The consumer confidence data can move financial markets, and Scheiderman's office said "that two-second advantage is more than enough time for these traders to take unfair advantage of their early access to this information as they execute enormous volumes of trades in the blink of an eye."

“The securities markets should be a level playing field for all investors and the early release of market-moving survey data undermines fair play in the markets,” Schneiderman said Monday.

The two-second head start allows high-speed traders to plunge into the markets en masse and retreat all the way back again before most of the world sees this market-altering economic data. From a CNN report a few weeks ago:

In the milliseconds before the survey is released to other paying clients at 9:55 a.m. ET, trading volumes can soar up to 20 times their normal levels. By 9:54:59 a.m. ET, long after computers have acted on the number, volumes have already returned to normal.

[...]

There's a reason why high-frequency trading is such a lucrative business. With the tiniest head start on market-moving data, computerized traders can make giant piles of money. And as others have reported, the Thomson Reuters consumer confidence survey isn't the only economic data mine to which traders can buy early access.

Deutsche Borse sells access to its Chicago Business Barometer three minutes early to anyone willing the relatively modest sum of 2,000 Euros a year.

Meanwhile, the Institute for Supply Management teamed up with Thomson Reuters to also sell a kind of enhanced access to the results to a monthly survey of purchasing managers (which measures both manufacturing and non-manufacturing industries). The ISM releases the data to everyone at 10:00 a.m. once a month, but those who pay extra get the data in a form that's a few ticks easier for computer trading algorithms to read and digest.

It's bad enough that this goes on out in the open, but part two of this joke is that nobody's ashamed of it in the slightest. In fact, Thomson Reuters threw the P.R.-office version of a hissy fit today after Schneiderman closed shop on their neat little revenue stream. The firm refused to permanently end the practice and defiantly insisted upon their right to sell data to whomever they want, whenever they want. From a news release:

Thomson Reuters strongly believes that news and information companies can legally distribute non-governmental data and exclusive news through services provided to fee-paying subscribers . . .

It is widely understood that news and information companies compete for exclusive news and differentiated content to help their customers make better informed trading and investment decisions . . .

[YMix]

Well, there's some more news about the "good bank" – Chase is about to pay yet another ginormous settlement for cheating and stealing from the public. According to the Wall Street Journal, the Federal Energy Regulatory Commission (FERC) will fine Chase "close to $1 billion" for manipulating energy prices in Enron-esque fashion in Michigan and California. The story is interesting in itself – and we'll write more about it later – but for now, it's just the fact of yet another massive settlement for this bank that's so interesting.

In the three-year period between 2009-2012, Chase paid out over $16 billion in litigation costs. Noted financial analyst Josh Rosner of Graham Fisher slammed Chase in a report earlier this year, pointing out that these settlements and legal costs represented a staggering 12% of Chase's net revenue during this time. There couldn't possibly be a clearer demonstration of the modern banking model, in which companies break rules/laws as a matter of course, and simply pay fines as a cost – a significant cost – of doing business.

For sheer curiosity's sake, I thought I'd list, in capsule form, some of the capers Chase has been caught up in in recent years:

• They were fined $153 million for the infamous "Magnetar" fund case, another scam in which a bank allowed a hedge fund to create a "born-to-lose" mortgage portfolio to bet against. Very similar to the Abacus case that's at the heart of the ongoing "Fabulous Fab" trial;

• Chase paid $228 million for its role in the egregious municipal bond bid-rigging case we wrote about in Rolling Stone in 2011;

• Chase paid $297 million to the SEC last November for fraud involving mortgage-backed securities;

• Chase paid $75 million in cash and generously agreed to forego $647 million in fines in the Jefferson County, Alabama mess, in which a small-town pol was bribed into green-lighting a series of deadly swap deals;

• In two separate orders this spring, Chase was reprimanded by the OCC and the Fed for money-laundering behaviors similar to the infamous HSBC case, and also for regulatory failures and fraud in the London Whale episode. There was a separate FBI investigation into the London Whale probe in which they allegedly lied to customers and investors about the loss;

• They're under investigation for allegedly failing to disclose Bernie Madoff's trading activities to authorities;

• They were one of 13 banks asked to pay up in this year's $9.3 billion robosigning settlement;

• They were one of four banks last year to settle for a total of $394 million with the OCC for improper mortgage servicing practices;

• They were ordered by the CFTC to pay $20 million last year for improper segregation of customer funds (this was part of the Lehman investigation). The CFTC also fined Chase $600,000 last year for violating position limits in the cotton markets;

• Last year, Chase paid a $45 million settlement to the federal government for improperly racking up fees for veterans in mortgage refinancings. Hey, if you're going to steal from everyone, you can't leave out those veterans overseas!

• In 2010, Chase paid $25 million to the state of Florida for selling unregistered bonds to a state-run municipal money-market fund;

• The bank last year was convicted in Europe along with several other banks for fraudulent sales of derivatives to the city of Milan. A total of about $120 million was seized from Chase and three other banks.

There have been so many settlements with so many agencies around the world (I'm in a hurry and can't get to Chase's messes in Britain, Japan and elsewhere) that they're almost impossible to count. Some papers are reporting that Chase is being investigated by as many as eight different agencies in the U.S. alone.

There are some other civil actions left out, too, like the $110 million class-action settlement for improper charging of overdraft fees, or their part in the gigantic $6 billion settlement completed last year involving Visa, MasterCard and other credit card providers for manipulating card service rates. And states like California have only just begun crawling up Chase's backside for its role in the lunatic filing of erroneous credit card collection lawsuits, a scam outed by whistleblower Linda Almonte.

Chase is turning into the Zelig of the corruption era. In virtually every corruption scandal, the bank is in the background somewhere. The HSBC money-laundering mess? Chase was reprimanded for similar abuses. The Madoff story? They're under investigation there. MF Global? As banker to Jon Corzine's notorious firm, they were part of a $546 million settlement to return money to MF Global's outraged customers. Jefferson County? That was them. And again, you might have heard of Abacus, but Magnetar was just as bad. Not that anyone's counting or anything.

http://www.rollingstone.com/politics/bl ... t-20130718

It occurred to me that any individual with such a long rap sheet would be seen as a threat to society and possibly be put away for the rest of his life. The banks (and other companies), on the other hand...

[Typhoon]

Rolling Stone | The College-Loan Scandal

But the main question is, how is the idea that the government might make profits on defaulted loans even up for debate? The answer lies in the uniquely blood-draining legal framework in which federal student loans are issued. First of all, a high percentage of student borrowers enter into their loans having no idea that they're signing up for a relationship as unbreakable as herpes. Not only has Congress almost completely stripped students of their right to disgorge their debts through bankruptcy (amazing, when one considers that even gamblers can declare bankruptcy!), it has also restricted the students' ability to refinance loans. Even Truth in Lending Act requirements – which normally require lenders to fully disclose future costs to would-be customers – don't cover certain student loans. That student lenders can escape from such requirements is especially pernicious, given that their pool of borrowers are typically one step removed from being children, but the law goes further than that and tacitly permits lenders to deceive their teenage clients.

"Student-loan debt collectors have power that would make a mobster envious" is how Sen. Elizabeth Warren put it. Collectors can garnish everything from wages to tax returns to Social Security payments to, yes, disability checks. Debtors can also be barred from the military, lose professional licenses and suffer other consequences no private lender could possibly throw at a borrower.