How can Billion Dollar Fines be Little More Than Water off a Duck’s Back?

indexNew Orleans   I hate to admit it, but to me a billion dollars still seems like a whole lot of money.  Unfortunately, I’m afraid saying so makes me hopelessly hide bound and old school.


            Because the government seems to be passing out billion dollar fines like candy to banks, utility companies, oil companies, automobile manufacturers, and others and it seems to have no discernible impact on their behavior whatsoever.  I’m sure you’ve noticed the same thing.  The government takes a victory lap, a couple of months or maybe a year goes by, and the same corporate culprit is doing the same perp walk to the ATM to pay out another billion dollar fine.  Billion dollar fines seem to have replaced the space on corporate balance sheets where they once wrote “goodwill,” and now it’s an item called “reserve” for a future expenditure for bad behavior.  Cheating consumers has simply become a mundane part of corporate culture.  Rapacious capitalism is no longer an insult, but a rally cry.

            How many gazillions has Bank of America now paid out for example due to the mortgage mess and their acquisition of Countrywide?  It hardly matters it seems as they get ready to pay another $800 million because they couldn’t keep themselves from selling non-existent products to their credit card holders.  One financial institution after another these days from HSBC to storied European banks are lining up to pay huge, billion plus fines for laundering money for Iran and other countries under sanctions by the international community.  JP Morgan Chase, only a few years ago was basking in arrogance with financial folks hanging on Jamie Dimon’s every word, but the number of fines it has paid for cheating and stealing from its customers makes him seem like the boss for a serial criminal mob.  Citicorp is running around in crisis having failed a “stress test,” not because they want to get a good grade on Wall Street it seems, but largely because they may be the only big bank fine payer not able to increase the dividend to their investors, and of course having somehow lost $400 million through their Mexican subsidiary they are claiming fraud, and the government is investigating, what else, but money laundering to drug cartels in that country.

            But speaking of a criminal enterprise, how about Wall Street itself?  I’m more than half-way through Michael Lewis’ new book called Flash Boys, where the real story is about the billions that some companies are making and that all of the big banks are abetting of front-running stock trades through high-frequency trading , which is of course totally illegal,.  And, yes, the FBI is now investigating, and the SEC is embarrassed, and the Attorney-General of New York State is letting subpoenas rain down like tickertape on Wall Street, but all that means is that the outcome of this latest scandal is likely to be, yes, you know, more fines!   An analysis of super-investor Warren Buffet’s portfolio over the last 5 years says he has even underperformed the Standard & Poor’s 500 stock index.  Friends, if he can’t beat the house on Wall Street in the biggest gambling casino in the world, you know on one else has a fair chance.

What’s the answer?  If it’s not fines, is it jail?  Hardly, since the big whales only offer up the small fry to do time. 

It’s time to clean house, but it looks like the walls are so rotten and the foundation is so shot, that it’s gut rehab time, but from top to bottom there doesn’t seem to be anyone willing and able to take on the job.

What a heckuva a mess!  Seems like if we have five dollars we might as well hide it in our shoe and take our chances on street crime, since no one seems able to stop Wall Street crime.


Is it Possible that Judges are Finally Fed Up with Banks Breaking Bad?

FIGHTING-FORECLOSURE-PHOTOToronto   After years of big banks essentially flipping off their customers and borrowers fighting foreclosures in no small measure because banks were more than willing to take the money and run on the government’s bailout, but were heedless of the damage they were doing to their borrowers’ lives and communities, Gretchen Morgenston in the New York Times reported several cases of judges finally being in on the game and being as sick of it as the rest of have been for years.

I particularly loved the case she cited where a judge has ordered Wells Fargo to produce a corporate resolution signed by its CEO and board saying that they have knowledge and approve of the conduct of their lawyers.   Having dealt with the two-faces of Wells Fargo for years in instance after instance where they seem willing to do anything to keep from settling now matter how egregious the bank’s conduct is, I loved the report that the judge raised the issue in that case of the huge gap between the bank’s advertising and their predatory, corporate culture.

In another case she cited a judge who ordered Bank of  America and its services to stop harassing a borrower who had successfully gone to bankruptcy court to clear the debts on their mortgages, though the harassment of the bank’s agents continued nonstop and unabated.   The judge ordered the bank pay the borrowers $10,000 per week until it stopped.   Eventually that family will be able to buy a new house with cash, because the bank doesn’t seem to know how to stop.

Though she didn’t mention it, the fact that the arrogant JP Morgan Chase and its CEO Jamie Dimon also have to come up with billions because they thought they were a law unto themselves is also gratifying.

Maybe the feds and the judges will finally crawl out of the pockets of the bankers and give us some justice. As for the bankers, they best get the message, because they were lucky in this mess not to have to do time, but with their record of misbehavior continuing, it seems like it’s only a matter of luck and timing that more of them are not behind bars, and that’s the fire next time.


Another Deal Coming for the Bankers, Unlikely to Benefit Consumers

Dauphine Island       New reports have finally trickled out on a “last and final” deal between government regulators and the nation’s big banks over their irresponsible, immoral fleecing of consumers around home mortgages leaving millions as foreclosure victims.  Nothing about this settlement sounds really good for consumers particularly.  The whole thing smacks of end of the year, desk cleaning for government bureaucrats and bank lawyers looking to end the year with a big payday.

Take for example these snippets that have emerged on the deal so far:

  • Negotiations were top secret with word only coming out recently.
  • Cost of the paperwork trying to establish how banks fleeced consumers is mired in huge time sucking cost overruns (about 20 hours per loan file), and the estimated multi-year delays from these dilatory and expensive bank reviews could drag out for years.
  • Regulators proposed a $15 billion settlement on all outstanding matters, which would be cheap at 5 times that price, and the terms are already down to a potential $10 billion dollar deal.

You want to know more?  Are you sure?

All 14 of the major banks are reportedly ready to sign.  Let me tell you something for certain.  The only thing all 14 major banks would ever be ready to all sign is the list for a free lunch!    This all has the feeling of a velvet pillowcase being pulled over all of our heads so that the banks can get back to business without this in the background.  Was it only a week or two ago that we read the report that the banks are ticking off the Federal Reserve officials because they are profiteering on interest rates and refusing to move them down to the level allowed by the cheap money policy of the Reserve?  This settlement can be paid out of the margins of what they are fleecing on new loans right now!

What’s the money for?  According the Times report without them saying so, it’s “same ‘ol, same ‘ol.”  Almost $4 billion would be used as a pittance for people who have already lost their homes because of all of this chicanery.  The other $6 billion would be used to pad the balance sheets of the banks in the same way as past settlements:

Under the terms of the settlement being negotiated, $6 billion would come from banks to be used for relief for homeowners, including reducing their principal, helping them refinance and donating abandoned homes, the people said.

All of those things the banks should be doing on their own, and simply uses the money pitched in by the 14 banks to spread out losses on their balance sheets, transfers the money back to them in fact, and claiming “all the way to the bank” that they are helping their victims.

Hard to see any justice in this, but the point from the government and bankers seems to be to at least put us all out of the misery of continuing to read about it or foolishly hope that there will ever be any real relief or justice at the end of this fiasco.


Sweatshop Inspection Plan and Demanding Continued Mortgage Cleanup

New Orleans   Sweatshops:   Talking about a new garment industry inspection and morintoring plan that makes more sense, here is one from labor that is being readied for launch in Bangladesh.  At this point it is an “if and when” agreement though signed by only two groups, PVH, owner of Hilfiger and Calvin Klein brands, and Tchibo, a German retailer.  All documents indicate that Walmart and Gap have been persistently adamant in refusing to pay the cost of factory upgrades that would prevent catastrophes like the recent fire tragedies from being repeated.  To make this work at least two more companies have to sign on, and to really deal with this issue in Bangladesh, we need more than that. We also need this plan to move across the industry into other countries.

Here is the information from the Times editorial:

What’s needed is an independent and robust inspection system that is legally enforceable and run by safety professionals. A group of international and Bangladeshi labor organizations have been working on such an effort, but they have been able to get only two companies — the PVH Corporation, which owns the Tommy Hilfiger and Calvin Klein brands, and the German retailer Tchibo — to agree to it. The proposal would provide for an independent chief inspector who would oversee detailed and periodic inspections, based on internationally recognized fire-safety standards, of factories that make a majority of the clothes bought by the companies that sign the agreement.

The companies would bear the costs of improvements through higher prices for clothes and grants to workers who miss workdays because of renovations. The cost of the inspection program to each company would vary by the firm’s size, but it would be capped at $500,000 a year. Most important, the contract would be legally binding and could be enforced through arbitration and the courts in the companies’ home countries.

The labor groups and the two companies have agreed that their system will go into effect only when two more major clothing businesses sign on so that more factories could be covered. More brands should step up and embrace this effort.   While this approach advanced by the labor groups is not perfect — for example, it applies only to Bangladesh and ends after two years — it provides a solid foundation for meaningful improvements.

Punishment without Relief

The big banks (Chase, Wells, Bank of America, Citi, etc) that brought us the mortgage scandals that are still crippling too much of the economy and leaving millions underwater or in danger of foreclosure, are being collectively sued for fraud at a level that may pass one trillion dollars, and currently, if they lose it the courts, would carry a $300 billion price tag.  While the government, led by Treasury and followed in lapdog fashion by HUD, continues to do next to nothing to provide either leadership or relief from the banks, private lawyers and state attorneys general continue to jump into the mess.  It would be nice to see justice here, but the families need relief and mercy even more!