RBS may sue Goldman over Abacus settlement with SEC

It's heartbreaking when old lovers fight like this. Modern separations can be so ugly and so public these days.

Royal Bank of Scotland could be poised to sue Goldman Sachs for hundreds of millions of dollars after the American investment bank paid out $550m (£358m) to settle fraud charges brought by the US Securities and Exchange Commission.

Goldman neither admitted nor denied the SEC's charges. However, as part of the settlement it did admit that it should have told investors in a controversial mortgage derivative known as Abacus that a hedge fund client which helped with the portfolio was betting on it failing.

RBS will receive $100m as part of the settlement but has the option of pursuing Goldman for more after the SEC said the case opened the door for civil claims. Another $150m will be paid to IKB Industrie Bank of Germany, which was the other big loser on the Abacus bond, with the rest going to the US government.

Read More......

British banks cite PWC study that claims $1 trillion in costs if bank reform

If only the study they were promoting wasn't written by the consulting company that does millions upon millions in business with many of the banks who were bailed out during the banking crisis. I guess making that little link wasn't considered important enough to mention. How is it possible to overlook the fact that PWC includes was being paid handsomely by the dysfunctional bankers who caused the global recession?

Maybe someone could ask what PWC was actually doing with those customers who were supposed to have someone checking their books. But again, that industry is as corrupt and rotted as the banks themselves. Shouldn't the public be made aware of these connections? It's disappointing that The Guardian also failed to mention this very important business link in it's article.

The banks, through the British Bankers' Association (BBA), intend to tell the chancellor that when the Bank of England pulls the plug on these liquidity programmes some £400bn will be withdrawn from the UK's banking system. The schemes were put in place to help get money flowing between banks after the credit crunch, but are due to end in 2012.

The banks have also calculated that demands by international banking regulators in Basle that they bolster their capital will require the UK's banking industry to hold an extra £600bn of capital that might otherwise have been deployed as loans to businesses or households.

The banks are drawing on research conducted by PricewaterhouseCoopers, some of which was used to appeal to G20 leaders ahead of last month's meeting to delay regulatory changes, in setting out their concerns to the chancellor. The research claims that two percentage points would be sliced off UK economic growth because of proposed regulations, driving the country into a double-dip recession.

Read More......

EU passes new law that limits bankers to 1/3 of bonus in cash

Something drastic needs to happen to change the current culture within this industry. This may not be enough though it's a decent start. As the world economy starts to falter again, it would be nice to see those in power start thinking more about how to deliver actual change instead of cosmetic change to an industry that continues to cause more problem than benefit. It's about time the bankers thought more about the society that rescued them instead of their precious bonuses that have barely been scratched.

Bankers in Europe will not be allowed to take home more than a third of their bonuses in cash from the start of next year, under planned new rules, a leading EU lawmaker told Reuters on Tuesday.

The new regime, which goes further than American rules agreed on last week, would be the first cap on how bankers are paid and a victory for EU lawmakers who have otherwise become bogged down in efforts to regulate banking.

"The bankers have shown that despite the crisis, they are not able to show self-restraint. This law will do it for them," said Arlene McCarthy, the Labour-party lawmaker who negotiated tougher rules on behalf of parliament with European countries.

Read More......

Report: Some governments may not be able to withstand another banking crash

As necessary as the bank bailouts were, maintaining the exclusive lifestyle of bankers was hardly necessary. If anything, propping up those least in need was rewarding bad behavior setting up this potentially difficult next phase of the economic cycle. In the case of the US, Obama has differed little from the Bush administration in its handling of the banks. Giving the banks a free ride by pushing out global regulation is indeed owned by Obama and the rest of the G20 leaders who failed badly on this issue, again. The Independent:

The BIS has previously said that the ultimate calamity - payments systems freezing and cash machines running out of money - was only narrowly avoided when the US investment bank Lehman Brothers collapsed in 2008. A deeper economic slump was averted by nationalising other banks and making loans amounting to $10trn (£6,620bn).

But the BIS report implies that governments may not be able to repeat such a bailout in the event of a second crisis, which some commentators fear could be triggered by another economic shock.

Despite the warnings, the G20 nations significantly eased the pressure on banks this week by delaying the introduction of tougher rules on the amount of capital they must hold to deal with potential crises. The new regulations were planned for the end of this year but are not now due until 2012. Countries will also be given far more leeway inhow the rules must be applied. Critics say this amounts to a watering down of the reforms needed to stave off the sort of disaster the BIS fears.

The BIS alsowarned that the "fragility" of public and private balance sheets in the UK,France, Germany, Spain and the US "severely limits the scope for fiscal policy intervention if another bailout is needed". It added: "The side effects of the financial and macro-economic supportmeasures, combined with the unresolved vulnerabilities of the financial sector,threaten to short-circuit the recovery; the reforms necessary to improve the resilience of the financial system [have] yet to be completed.

Read More......

Banks survive global regulations at G20 summit

Nothing pays back quite as much as a heavy dose of lobbying and good friends inside world governments. Will they be as powerful after the next round of banker layoffs begins? Probably. Even after causing the global recession and in their weakened state, they remain as powerful as ever.

Giant banks, while bracing for a wave of tougher regulation in Washington, will not have to face a new set of global rules on capital and liquidity anytime soon.

The world’s biggest economies have been developing rules that would require banks to hold more capital and be better equipped to absorb losses when financial conditions sour. But it became clear on Sunday at the meeting of the Group of 20 countries that it could be years before they take effect.

The rules are to be finished at the next G-20 leaders’ summit talks, in Seoul, South Korea, in November.

While the participants here said they aimed to adopt the rules by the end of 2012, they cautioned that the standards would be “phased in over a time frame that is consistent with sustained recovery and limits market disruption.”

Read More......

Final deal reached on Wall Street reform legislation

The House/Senate conference committee on the Wall Street reform legislation wrapped up its work early this morning. They've got a bill, which will be sent to the House and Senate floors for final action next week:

A 20-hour marathon by members of a House-Senate conference committee to complete work on toughened financial regulations culminated at 5:39 a.m. Friday in agreements on the two most contentious portions of the financial regulatory overhaul and a host of other provisions. On a party-line vote, the House conferees voted 20-11 to approve the bill; the Senate conferees voted 7-5 to approve.

Members of the conference committee approved proposals to restrict trading by banks for their own benefit and requiring banks and their parent companies to segregate much of their derivatives activities into a separately capitalized subsidiary.

The agreements were reached after hours of negotiations, most of it behind closed doors and outside the public forum of the conference committee discussions. The approvals cleared the way for both houses of Congress to vote on the full financial regulatory bill next week.

The bill has been the subject of furious and expensive lobbying efforts by businesses and financial trade groups in recent months. While those efforts produced some specific exceptions to new regulations, by and large the bill’s financial regulations not only remained strong but in some cases gained strength as public outrage grew at the excesses that fueled the financial meltdown of 2008.

I expect we'll get some other perspectives on the legislation from key players later today. Read More......

Banks to hit consumers again with more fees

Because bailing them out wasn't enough. They want even more. Again. The banks keep doing this because they know they can get away with it thanks to good friends in Congress. In their world, enough is never enough even if you just saved their life and exclusive lifestyle.

Bank of America and other U.S. banks may introduce new fees on basic services and eliminate free checking to replace revenue lost to new banking regulations, the Wall Street Journal said.

The move is expected to hurt retail clients who could be asked to pay new monthly maintenance fees on the most basic accounts that do not generate a lot of activity, the paper said.

To avoid a fee, customers will have to maintain certain account balances or frequently use other banking services, such as credit and debit cards, automated teller machines and online accounts, the Journal said.

Read More......

More than 90 banks miss TARP payments

Congratulations Team Obama. By continuing the Bush/Paulson policies, you've contributed to this mess and now you own it. The mega banks are getting stronger which means too big to fail is ever a larger problem with the select few. As I posted recently six mega banks made enormous profits last year while the remaining nine hundred and eighty lost money. Well done. The genius Larry Summers must be proud.

More than 90 U.S. banks and thrifts missed making a May 17 payment to the U.S. government under its main bank bailout program, signaling a rising number of lenders are struggling to meet their obligations.

The statistics, compiled by SNL Financial from U.S. Treasury data, showed 91 banks and thrifts skipped the May dividend payment under the Troubled Asset Relief Program, or TARP. It was the first missed payment for 23 of the banks; for the others, it was at least their second miss.

The number of banks missing their TARP payments rose for the third straight quarter. In February, 74 banks deferred their payments; 55 deferred last November.

Read More......

UK bank commission suggesting 'profound reform'

This looks like it has potential. If you had the opportunity to invest your paycheck with a bank that was a guaranteed safe haven, wouldn't you take it? It's not as though the risk-taking banks are making it that financially interesting. Sure, maybe the interest might be a bit lower but how much did the others really pay anyway?

Risk-free "safe haven" accounts guaranteed by the government should be set up as part of a "profound reform of the banking system", a report says.

The cross-party Future of Banking Commission wants improvements in saver protection and restructuring of banks.

It was set up to put the interests of society at the heart of any reforms.

Other suggestions include the creation of an ethical culture in financial services, which would see banks stop paying commissions to front-line staff.

Read More......

Senior Federal Reserve official slams financial reform

Churning out more of the same policies that brought us to this crisis in the first place is not the answer. Any sane person has to agree that the financial system needed to be rescued to prevent an even worse crisis but strengthening an elite few while leaving nearly 1,000 banks in trouble is not progress. It's no wonder Goldman and the other mega banks think they own the US. They do. The financial reform only papers over the problem, setting the stage for the next problem which will be even more costly. More from the Fed's Richard Fisher via the Huffington Post.

This is most definitely not a market outcome.

"Based on these considerations, coupled with studies suggesting severe limits to economies of scale in banking, it seems that mostly as a result of public policy -- and not the competitive marketplace -- ever larger banks have come to dominate the financial landscape. And, absent fundamental reform, they will continue to do so. As a result of public policy, big banks have become indestructible. And as a result of public policy, the industrial organization of banking is slanted toward bigness."

This is an unfair, nontransparent, and dangerous taxpayer subsidy at work.

"Big banks that took on high risks and generated unsustainable losses received a public benefit: TBTF ["too big to fail"] support. As a result, more conservative banks were denied the market share that would have been theirs if mismanaged big banks had been allowed to go out of business. In essence, conservative banks faced publicly backed competition."

Read More......

Bank of America tries to take away yet another house

Documents? We don't need no stinkin' documents. Seize the house! Who cares that the problem has happened once or twice or more? Bank of America is above the law. They are the law.

Nancy Willmes paid cash for her Tuolumne home in 2001. So she was quite surprised when Bank of America send her a notice of default on the property in February.

"I honestly felt like Bank of America was trying to steal my property," Willmes said.

She contacted Bank of America to try to find out why the bank believed it could foreclose on property she had purchased outright.

Willmes has chain-of-ownership records, which show Bank of America had sold the property to Fannie Mae years earlier. Fannie Mae foreclosed on the previous owner, and Willmes purchased the property with cash from Fannie Mae.

But Willmes said Bank of America did not care about the documentation.

Read More......

Citi and Bank of America 'incorrectly' hid billions of debt

To be fair to BofA and Citi, it's a mistake that could have happened to anyone who had massive teams of lawyers and accountants. Gosh, some people are such nitpickers. Funny how those two banks were among the hardest hit during the crisis but that was surely a simple coincidence. It could have happened to anyone and was surely an accident since intentional hiding of debt would be a violation of SEC rules. CNBC:

Bank of America and Citigroup incorrectly accounted for billions of dollars in debt over the past three years, according to a report from the Wall Street Journal.

The report highlights a form of corporate borrowing increasingly under scrutiny since the financial crisis began. The loans, known as "repos," or short-term repurchase agreements, allow banks to increase the amount of risk they can take in securities trading.

Both BofA and Citigroup disclosed in filings with the Securities and Exchange Commission that they have over the last three years accidentally classified some repos as sales when they should have been classified as borrowings, the newspaper reported. The amounts involved were small for the banks, though they totaled billions.

Read More......

Ben Nelson, other Senators, have never used an ATM - that's why they don't support capping ATM fees

While I'm sure many of them haven't, I suspect their opposition to capping the fees you pay at the ATM is based on the banking lobby having bought them off.

As for the fees, they're about as absurd as paying 10 cents for a text message. In today's day and age, it costs next to nothing to send information electronically. Thus the reason phone calls, non-cell calls, cost virtually nothing. Does it really cost a bank $3.00 to have me withdraw some money from their ATM? You'd think the federal government would have a compelling interest to NOT have every single bank in the country be required to put their own ATMs on every street corner, like the way print newspaper stands are lined up on the corners of big cities. I just can't get over the feeling that the banks are charing usury fees, and using us. Read More......

IMF proposing global bank tax

Start the clock to see how long it will take before the Republicans will rally around their friends on Wall Street. Socialism for CEOs is what the GOP is all about.

Leaked in advance of the fund's meeting this weekend, the blueprint emerged as the investment bank Goldman Sachs released better than expected first quarter revenues and admitted its bonus and pay pool had reached $5.5bn (£3.3bn) in the first three months of 2010.

The anticipated study called for a financial stability contribution (FSC), which should be paid by all financial institutions, not just banks, and used to bail out weak and failing firms. It would initially be paid at a flat rate but eventually be tailored to suit institutions' size and riskiness.

While banks had been braced for the FSC plan, they were caught unawares by the proposal for a financial activities tax (FAT), which would be based on the profits and the pay structure of the firms.

Read More......

SEC reviewing accounting practices at largest banks

It's hard not to be impressed with Mary Schapiro. The focus on the shameless behavior by Wall Street is definitely appreciated.

The Securities and Exchange Commission is examining whether any of the 19 largest U.S. banks are using an accounting trick that a bankruptcy examiner has said led to the collapse of Lehman Brothers, SEC Chairman Mary Schapiro said Tuesday.

Schapiro testified at a congressional hearing that the SEC is scrutinizing Lehman's use of the accounting move, known as Repo 105, that allowed it to mask its weakness before it failed. She said the agency has sent letters to the 19 banks, seeking information about any such transactions.

Read More......

IMF warning on 'too big to fail' banks

Time may indeed be running out, but the GOP is ready, able and willing to defend those banks at all costs. Lobbyists of the world, unite!

In its half-yearly health check on the financial sector, the Washington-based fund said there was an urgent need for international co-operation to tackle the systemic risks posed by banks deemed "too big to fail".

"The future financial regulatory reform agenda is still a work in progress, but will need to move forward with at least the main ingredients soon", the IMF said in its Global Financial Stability Review. "The window of opportunity for dealing with too-important-to-fail institutions may be closing and should not be squandered, all the more so because some of these institutions have become bigger and more dominant than before the crisis erupted.

"Policymakers need to give serious thought about what makes these institutions systemically important and how risks to the financial system can be mitigated."

Read More......

Massachusetts to remove money from banks to protest credit card charges

We should see more of this both at the state level as well as the federal level. If banks don't want to go along with fair play, fine. That means they lose out on hundreds of millions of dollars that will now go elsewhere. That is how the market works or at least how it should work. Washington Post:

State Treasurer Timothy Cahill said the state has removed Bank of America, Citi and Wells Fargo from a list of institutions approved for new state investments. Massachusetts, which is the only state to make such a move, is also beginning to divest $243 million in funds held at those banks, though the process could take up to six months.

"We want to bring some fairness into the issue," said Cahill, who is running for governor. "I don't think what we're asking is . . . out of line."

The announcement -- made at a raucous rally on Capitol Hill organized by the Metro Industrial Areas Foundation, a network of religious and citizen advocacy groups -- is part of a wave of consumer backlash over the banking industry's role in the worst financial crisis since the Great Depression. Congress has enacted sweeping credit card reforms that limit how and when issuers can raise rates and is in the midst of debating the creation of an agency dedicated to protecting consumer rights.

Read More......

WaMu's former chief risk officer contradicts ex-CEO on warnings

So again, blaming the old boy, 'clubby' attitudes may not have necessarily been completely wrong, but the real problem was bad business practices. The ex-CEO and many others cashed in and never looked back. Getting away with that sounds pretty clubby to me. LA Times:

James G. Vanasek, who was WaMu's chief risk officer from 1999 to 2005, told a Senate committee that "at times borrowers were coached to fill out applications with overstated incomes or net worth adjusted to meet the minimum underwriting policy requirements."

Asked if he ever warned top executives of his concerns, Vanasek replied, "Constantly."

"I stood in front of thousands of senior Washington Mutual managers and executives at an annual management retreat in 2004 and countered the senior-executive speaker ahead of me on the program who was rallying the troops with the company's advertising tag line, 'The Power of Yes,' " he said.

"The implication of this statement was that Washington Mutual would find some way to make a loan. The tag line symbolized the management attitude about mortgage lending more clearly than anything that I can tell you," Vanasek said.

Read More......

On behalf of their Wall Street funders, GOPers launch misleading, distorted attack on Wall Street reform

Over the past couple days, GOP Minority Leader Mitch McConnell has appeared on the Senate floor to express his outrage over the pending Wall Street reform legislation. Chris Harris from Media Matters explained succinctly yesterday that McConnell's outrage is tied to financial contributions from those Wall Street bankers. No big surprise:

In return for obstructing Democratic legislation to hold Wall Street CEOs accountable, Republican lawmakers are pressing bankers for financial help heading into the November elections.

FoxBusiness.com reported that Senate Minority Leader Mitch McConnell (R-KY) and National Republican Senatorial Committee chairman John Cornyn (R-TX) had a "private meeting" with "25 Wall Street executives, many of them hedge fund managers." After listening to "numerous complaints the executives have with the bill," the GOP lawmakers reportedly assured the bankers that Republicans would be their ally in the fight. After discussing likely Republican electoral gains this November, "McConnell and Cornyn made it clear they need Wall Street's help."

A day after the story broke about McConnell's "private meeting" with Wall Street bigwigs, he stormed onto the Senate floor to spout false attacks on Democratic efforts to hold those bankers accountable. The timing was no coincidence.

But, you really don't need to listen to McConnell or any other GOPers rants against the reform bill. All you need to do is read Frank Luntz's memo to GOPers titled, The Language of Financial Reform, which can be found here.

It's uncanny how closely McConnell's latest speeches(here and here) mirror what Luntz suggested. It's like Luntz is the ventriloquist and McConnell is his dummy. I pulled several examples of "words that work" from the Luntz document and compared it to McConnell's speeches from yesterday and today:

Luntz: If there is one thing we can all agree on, it’s that the bad decisions and harmful policies by Washington bureaucrats that in many ways led to the economic crash must never be repeated.

McConnell: But if there’s one thing Americans agree on when it comes to financial reform, it’s this: never again should taxpayers be expected to bail out Wall Street from its own mistakes. We cannot allow endless taxpayer-funded bailouts for big Wall Street banks.

Luntz: Taxpayer-funded bailouts reward bad behavior. Taxpayers should not be held responsible for the failure of big business any longer. If a business is going to fail, not matter how big, let it fail.

McConnell:The American people have been telling us for nearly two years that any solution must do one thing — it must put an end to taxpayer funded bailouts for Wall Street banks. This bill not only allows for taxpayer-funded bailouts of Wall Street banks; it institutionalizes them.

Luntz: “The legislation is filled with lobbyist loopholes that exclude certain wealthy, powerful industries from regulations.”

McConnell: So a new government board based in Washington would determine which institutions would qualify for special treatment — giving unaccountable bureaucrats and self-appointed wisemen in Washington even more power to protect, promote, or punish companies at whim.

“These favored firms would then have a funding advantage over their competitors, leading to outsized profits and the extension of enormous additional bailout risk for taxpayers even beyond the largest banks.

Luntz: Taxpayer-funded bailouts reward bad behavior. Taxpayers should not be held responsible for the failure of big business any longer. If a business is going to fail, not matter how big, let it fail.

McConnell: We need to end the worst abuses on Wall Street without forcing the taxpayer to pick up the tab. That’s what Republicans are fighting for in this debate. The taxpayers have paid a high enough price already. We’re not going to expose them to even more pain down the road. The way to solve this problem is to let the people who make the mistakes pay for them. We won’t solve this problem until the biggest banks are allowed to fail.”

According to Luntz, these are the "words to use" so expect to hear a lot of them from Republicans as the Senate begins the debate:

ACCOUNTABILITY, TRANSPARENCY & OVERSIGHT, LOBBYIST LOOPHOLES, ENFORCEMENT OF CURRENT LAWS, BUREAUCRATS, WASTEFUL WASHINGTON, SPENDING, NEVER AGAIN, GOVERNMENT FAILURES AND INCOMPETENCE, LET’S HELP SMALL BUSINESSES, BIG BANK BAILOUT, BILL BLOATED BUREACRACY, FINE PRINT, UNINTENDED CONSEQUENCES, SPECIAL INTERESTS, HARD WORKING TAXPAYERS, ANOTHER WASHINGTON AGENCY, UNLIMITED REGUATORY POWERS, DEVIL IS IN THE DETAILS, RED TAPE

These are words meant to distort, obfuscate and confuse.

Anyone who thinks this is a "bank bailout bill" should be asking why Wall Street is fighting so hard -- and paying so much -- to defeat it. The Wall Street Bankers are willing to invest so heavily in the GOPers because GOPers will kill reform for them. And, the Wall Street bankers are getting panicky because the it looks like the Senate could pass real reform soon.

Let's not forget, the GOPers and Wall Street teamed up to destroy the economy back in 2007-2008. They're hoping for a repeat. It's a question of whether the American people will be stupid enough to fall for it this time.

Obama and the Senate Democrats need to shut down the Wall Street bankers and the GOPers whose votes they're buying. Read More......

WaMu ex-CEO: bank wasn't 'clubby' enough to be saved

To a degree, I hear what he's saying. As I've mentioned before it does seem strange that despite everything we witnessed from the "too big to fail" crowd, they've walked away from the crisis pretty much unscathed. Sure the bonuses were trimmed a little, but hardly back to what their value should be compared to every other industry. If anything, those banks are now even larger, so the "too big to fail" issue is more of a problem today than it was before the crisis.

One of the few targeted companies in the crisis fallout has been run by a brown-skinned CEO who had created his own company that is small compared to the big players. The losses there were in the low tens-of-millions which is a lot until you compare that to the established players on Wall Street and their losses. There's obviously something seriously wrong with the law if the old boy network of Wall Street can protect you from such a global failure. But hey, that's why "respected" politicians retire and become lobbyists. They get to write the law to give their deep pocketed friends a free ride. So as easy as the laws are today, imagine what the former political leaders are doing to the Wall Street reform. Now *that* is clubby.

To that end, the ex-CEO of Washington Mutual may have a point. But then again, I didn't hear him complaining much about the $25 million he made in the final year as the bank fell apart. How "severe" were the feds with the bank in reality? Did he pay back the tens of millions that he made on bad deals that had little hope of ever surviving? He should be kissing the ground and thanking those "clubby" folks for helping to write easy laws that keeps people like him out of prison for running such a mess of a company.

The panel's 18-month investigation found that WaMu's lending operations were rife with fraud and that management failed to stem the deception despite internal probes.

Killinger rejected that conclusion. He argued that even before the crisis struck with force, the government treated WaMu unfairly. He noted it was excluded from a list of large financial firms whose stock couldn't be sold short under a temporary government ban in July 2008.

In short-selling, traders bet a stock price will drop and use borrowed shares to profit from any decline.

"For those that were part of the inner circle and were 'too clubby to fail,' the benefits were obvious," Killinger said. "For those outside of the club, the penalty was severe."

Read More......