The Obama Administration is making an effort to "name and shame" them, but the vampires in banking and on Wall Street are still busy draining liquidity out of the American financial system.
According to the McClatchy newspapers, "The first report under the Home Affordable Modification Program, involving more than 30 lenders that together collect payments on 85 percent of American mortgages, found an especially dismal performance by two major national banks--Bank of America and Wells Fargo--that received $45 billion and $25 billion, respectively, in taxpayers' bailout money."
From February through July, the bloodsucking banks, too busy padding earnings and paying executive bonuses, started only 9 percent of those eligible for mortgage modifications on the process.
Beyond the Main Street parasites, the wizards of Wall Street are also back doing what they did to wreck the economy, giving themselves huge rewards for speculation that, in a classic definition, combines “private profitability” with “social uselessness.”
As Paul Krugman points out, "Even before the crisis and the bailouts, many financial-industry high-fliers made fortunes through activities that were worthless if not destructive from a social point of view. And they’re still at it."
Even the Wall Street Journal is unnerved by the Citibank trader who raked in $100 million while wheeling and dealing under a government guarantee, with the champions of free markets muttering that "disaster for taxpayers is inevitable when private reward is combined with socialized risk."
It's long past time for Tim Geithner and the Obama economic team to get tough with their former associates in the world of manipulating money for the greed of the few at the expense of the many.
Showing posts with label Bank of America. Show all posts
Showing posts with label Bank of America. Show all posts
Wednesday, August 05, 2009
Friday, July 17, 2009
Wall St. Wins, We Lose, What Else is New?
Juggling money is still America's biggest growth industry, according to the new earnings boom for Goldman Sachs, Citigroup, JP Morgan Chase and Bank of America, who only months ago came to Washington to fill their begging bowls with taxpayer bailout funds.
Cranky Paul Krugman says such news "shows that Wall Street’s bad habits--above all, the system of compensation that helped cause the financial crisis--have not gone away" and "that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely."
Back to business as usual, the big firms are generating huge profits from trading and underwriting securities to make up for the failure of those who are losing jobs to keep up with payments on mortgages and credit cards.
At the same time, the pain is being spread equally to prudent retirees who saved without gambling in the stock market but, thanks to the Fed's concern for Wall Street's ability to keep wheeling and dealing, are earning a fraction of one per cent on their hard-earned money, much of which will now go to keeping up the huge bonuses of those who shuffle it around.
Is this a great country or what?
Cranky Paul Krugman says such news "shows that Wall Street’s bad habits--above all, the system of compensation that helped cause the financial crisis--have not gone away" and "that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely."
Back to business as usual, the big firms are generating huge profits from trading and underwriting securities to make up for the failure of those who are losing jobs to keep up with payments on mortgages and credit cards.
At the same time, the pain is being spread equally to prudent retirees who saved without gambling in the stock market but, thanks to the Fed's concern for Wall Street's ability to keep wheeling and dealing, are earning a fraction of one per cent on their hard-earned money, much of which will now go to keeping up the huge bonuses of those who shuffle it around.
Is this a great country or what?
Wednesday, May 20, 2009
Profits Inevitable As Death and Taxes
Banks getting taxpayer bailouts are also cashing in on the demise of people who work for them or once did.
Today's Wall Street Journal has a tutorial explaining how banks are holding $122.3 billion in life insurance on workers and retirees with themselves as beneficiaries in order to escape taxes, inflate their earnings and to fund bonuses and pension benefits:
"Though not improper, the practice is similar to what is known as 'janitors insurance,' an insurance-on-employees technique that has long been controversial. Critics say the banks' insurance contracts are a way for companies to create tax breaks for funding executive pensions...
"Companies don't use the policies as piggy banks to pay for compensation and benefits. Rather, they benefit from keeping the money in the contracts."
Gains on investments are not only tax free but reported as income each quarter to offset interest on deferred pay owed to executives.
According to the Journal, banks have nearly doubled the amounts of such insurance in the past four years. Bank of America, which has taken $52.5 billion from taxpayers so far, holds an estimated $17.3 billion of such investments in the deaths of employees while Wells Fargo (including its Wachovia acquisition) has a similar amount awaiting future obituaries.
You may not be able to get blood from a stone, but American banks are doing very well with corpses.
Today's Wall Street Journal has a tutorial explaining how banks are holding $122.3 billion in life insurance on workers and retirees with themselves as beneficiaries in order to escape taxes, inflate their earnings and to fund bonuses and pension benefits:
"Though not improper, the practice is similar to what is known as 'janitors insurance,' an insurance-on-employees technique that has long been controversial. Critics say the banks' insurance contracts are a way for companies to create tax breaks for funding executive pensions...
"Companies don't use the policies as piggy banks to pay for compensation and benefits. Rather, they benefit from keeping the money in the contracts."
Gains on investments are not only tax free but reported as income each quarter to offset interest on deferred pay owed to executives.
According to the Journal, banks have nearly doubled the amounts of such insurance in the past four years. Bank of America, which has taken $52.5 billion from taxpayers so far, holds an estimated $17.3 billion of such investments in the deaths of employees while Wells Fargo (including its Wachovia acquisition) has a similar amount awaiting future obituaries.
You may not be able to get blood from a stone, but American banks are doing very well with corpses.
Monday, March 23, 2009
Banks Are Lending--to Their Own
The credit crunch is squeezing American businesses and consumers, except for the directors, top executives and other insiders who have loans from their own banks totaling $41 billion.
We learn this from the Charlotte Observer, which reports: "At Charlotte-based Bank of America, those loans more than doubled last year, to $624.2 million--the biggest dollar jump in the country. The largest of them likely went to three directors or their companies. The surge came during the third quarter as credit markets froze, the government prepared to infuse banks with billions in tax dollars and the board approved the purchase of troubled Merrill Lynch.
"Bank of America ranked fourth on the list of biggest insider lenders. At the top was JPMorgan of New York, which held $1.48 billion in insider loans, mostly by directors or their companies."
This hyperactive insider lending raises all kinds of questions about the true condition of the institutions that are now about to receive another huge bailout by the Administration's plan to get toxic assets off their books.
But it also raises a question about journalism as well. Why does a story of this significance come from a Charlotte reporter, Stella M. Hopkins, part of the McClatchy chain, rather than from the journalistic centers of the financial and political universe in New York and Washington?
The McClatchy papers are in small to medium-sized but fast-growing communities, and they often break stories that the metropolitan behemoths overlook. Old-fashioned journalism seems to be alive and well on Main Street.
We learn this from the Charlotte Observer, which reports: "At Charlotte-based Bank of America, those loans more than doubled last year, to $624.2 million--the biggest dollar jump in the country. The largest of them likely went to three directors or their companies. The surge came during the third quarter as credit markets froze, the government prepared to infuse banks with billions in tax dollars and the board approved the purchase of troubled Merrill Lynch.
"Bank of America ranked fourth on the list of biggest insider lenders. At the top was JPMorgan of New York, which held $1.48 billion in insider loans, mostly by directors or their companies."
This hyperactive insider lending raises all kinds of questions about the true condition of the institutions that are now about to receive another huge bailout by the Administration's plan to get toxic assets off their books.
But it also raises a question about journalism as well. Why does a story of this significance come from a Charlotte reporter, Stella M. Hopkins, part of the McClatchy chain, rather than from the journalistic centers of the financial and political universe in New York and Washington?
The McClatchy papers are in small to medium-sized but fast-growing communities, and they often break stories that the metropolitan behemoths overlook. Old-fashioned journalism seems to be alive and well on Main Street.
Monday, March 02, 2009
The Melting of American Wealth
How did we get so poor so fast? Under the radar of stimulus bills and bailouts, economists are toting up the damage and super-investors like Warren Buffet are still trying to figure out what happened.
Now we learn the economy is shrinking twice as fast as originally thought--at an annualized rate of 6.2 percent in the last three months of 2008 rather than the original estimate of 3.2, making it the worst quarter since 1982.
The downward spiral, reflected in a sinking stock market, has troubled banks taking taxpayer money but hesitating to lend and nervous companies laying off workers (an expected 700,000 job losses in February) leading to deeper consumer cuts in spending that will deprive businesses of revenue and more falling behind on house, car and credit card payments, multiplying losses throughout the financial system.
Looking back at how all this happened, even the Sage of Omaha is blaming himself for doing "some dumb things" but aiming most of his scorn at derivatives devised by “a nerdy-sounding priesthood, using esoteric terms such as beta, gamma, sigma and the like...Beware of geeks bearing formulas.”
With typical Warren Buffet bluntness, he concludes, “Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.”
But Buffet's aw-shucks posture of earthy wisdom is too easy on himself and lesser investors who thrived in a world where manipulating money was the most prized skill of all, at the extremes allowing con artists like Bernard Madoff to bilk so-called savvy investors of billions.
Now, as the government tries to move money into the real world--agricultural subsidies from corporate farms to feeding poor children, students loans from private banks to direct Pell grants--much of the effort is still going into propping up "too big to fail" entities like AIG, the remnants of a financial system that detached itself from reality and shows few signs of finding its way back.
When the stimulus money finally starts flowing into the hands of people who work and make things or help sick people or teach children, that will be a sign that the downward spiral may finally be ending.
Now we learn the economy is shrinking twice as fast as originally thought--at an annualized rate of 6.2 percent in the last three months of 2008 rather than the original estimate of 3.2, making it the worst quarter since 1982.
The downward spiral, reflected in a sinking stock market, has troubled banks taking taxpayer money but hesitating to lend and nervous companies laying off workers (an expected 700,000 job losses in February) leading to deeper consumer cuts in spending that will deprive businesses of revenue and more falling behind on house, car and credit card payments, multiplying losses throughout the financial system.
Looking back at how all this happened, even the Sage of Omaha is blaming himself for doing "some dumb things" but aiming most of his scorn at derivatives devised by “a nerdy-sounding priesthood, using esoteric terms such as beta, gamma, sigma and the like...Beware of geeks bearing formulas.”
With typical Warren Buffet bluntness, he concludes, “Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.”
But Buffet's aw-shucks posture of earthy wisdom is too easy on himself and lesser investors who thrived in a world where manipulating money was the most prized skill of all, at the extremes allowing con artists like Bernard Madoff to bilk so-called savvy investors of billions.
Now, as the government tries to move money into the real world--agricultural subsidies from corporate farms to feeding poor children, students loans from private banks to direct Pell grants--much of the effort is still going into propping up "too big to fail" entities like AIG, the remnants of a financial system that detached itself from reality and shows few signs of finding its way back.
When the stimulus money finally starts flowing into the hands of people who work and make things or help sick people or teach children, that will be a sign that the downward spiral may finally be ending.
Sunday, January 25, 2009
Taking Over the Banks
Call it "partial" or "temporary," the momentum for nationalizing US banks is growing across the political and economic spectrum.
President Obama, Paul Krugman writes, is "going to have to decide how bold to be in his moves to sustain the financial system, where the outlook has deteriorated so drastically that a surprising number of economists, not all of them especially liberal, now argue that resolving the crisis will require the temporary nationalization of some major banks."
This follows George Soros' call for "partially nationalizing" banks, a step that "would clear the air and restart the economy."
In today's New York Times, business columnist Joe Nocera recalls the Resolution Trust Corporation, which took over and sold bad assets during the S. & L. crisis of the 1980s, quoting Tim Ryan, who helped direct the response to that fiasco:
"Did the S.& L. crisis cost the taxpayers money? You bet it did--some $130 billion. But, said Mr. Ryan, 'it would have been triple that' without the R.T.C...
"But to carry out this kind of program, the government has to be in control of insolvent banks...Then it can do the same thing the Office of Thrift Supervision did in the early 1990s: close down the worst, sell others to healthier institutions and recapitalize the strongest. You can shovel capital into banks until you’re blue in the face and they are not going to lend so long as they have toxic assets on their books. They are going to hold onto their capital, fearing new losses."
As the Obama Administration prepares to tighten regulation across the financial system with stricter rules for hedge funds, credit rating agencies and mortgage brokers, and more oversight of derivatives and credit default swaps, the banks remain at the heart of the problem.
At some point--and it had better be soon--pouring taxpayer money into the maws of Citicorp, Bank of America et al will have to be accompanied by enough control to get them lending again instead of just fattening balance sheets, merging and paying themselves obscene bonuses.
It will be more complex than FDR's brief bank holiday in 1933, but something dramatic is on the horizon.
Update: On the Sunday talk show circuit this morning, House Speaker Nancy Pelosi actually used the N word. “If we are strengthening them," she said about the bailouts, "then the American people should get some of the upside of that strengthening. Some people call that nationalization."
“I’m not talking about total ownership,” she quickly added. “Would we have ever thought we would see the day when we’d be using that terminology? ‘Nationalization of the banks?'”
Yes, and not a moment too soon.
President Obama, Paul Krugman writes, is "going to have to decide how bold to be in his moves to sustain the financial system, where the outlook has deteriorated so drastically that a surprising number of economists, not all of them especially liberal, now argue that resolving the crisis will require the temporary nationalization of some major banks."
This follows George Soros' call for "partially nationalizing" banks, a step that "would clear the air and restart the economy."
In today's New York Times, business columnist Joe Nocera recalls the Resolution Trust Corporation, which took over and sold bad assets during the S. & L. crisis of the 1980s, quoting Tim Ryan, who helped direct the response to that fiasco:
"Did the S.& L. crisis cost the taxpayers money? You bet it did--some $130 billion. But, said Mr. Ryan, 'it would have been triple that' without the R.T.C...
"But to carry out this kind of program, the government has to be in control of insolvent banks...Then it can do the same thing the Office of Thrift Supervision did in the early 1990s: close down the worst, sell others to healthier institutions and recapitalize the strongest. You can shovel capital into banks until you’re blue in the face and they are not going to lend so long as they have toxic assets on their books. They are going to hold onto their capital, fearing new losses."
As the Obama Administration prepares to tighten regulation across the financial system with stricter rules for hedge funds, credit rating agencies and mortgage brokers, and more oversight of derivatives and credit default swaps, the banks remain at the heart of the problem.
At some point--and it had better be soon--pouring taxpayer money into the maws of Citicorp, Bank of America et al will have to be accompanied by enough control to get them lending again instead of just fattening balance sheets, merging and paying themselves obscene bonuses.
It will be more complex than FDR's brief bank holiday in 1933, but something dramatic is on the horizon.
Update: On the Sunday talk show circuit this morning, House Speaker Nancy Pelosi actually used the N word. “If we are strengthening them," she said about the bailouts, "then the American people should get some of the upside of that strengthening. Some people call that nationalization."
“I’m not talking about total ownership,” she quickly added. “Would we have ever thought we would see the day when we’d be using that terminology? ‘Nationalization of the banks?'”
Yes, and not a moment too soon.
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