Corporate Impunity, Shareholder Farce

062314-nabors-industries-ignores-shareholder-votes-cartoonNew Orleans   I love these big, fat whoopers that the big corporate whoops stand and piously tell about working for their little shareholders, pensioners, and old ladies in Des Moines, especially because it is crystal clear that if they don’t treat these publicly owned companies as private preserves, they are only accountable to the big hedge funds and institutional investors. This is the season when they start rolling out their annual reports on performance over the last fiscal year and pretending that there is some kind of shareholder “democracy.” What a hoot!

It’s the season when shareholders get to try to vote and be heard. An interesting article the other day went through the list of some of big companies where CEOs and directors routinely ignore the votes of the stockholders. Not surprisingly Oracle, the computer and software company, was listed as a prime example where its CEO and big shareholder, Larry Ellison, always among the ten richest billionaires in the world, and often a leading figure on any lists of overpaid executives, is the big dog. Shareholders there have voted multiple times against the compensation program and the inflated pay packages, but their votes are ignored so the good times can roll.

The myth is more important than the reality when Wall Street pretends they are accountable to shareholders. It’s another example of democratic farce before tragedy. Meanwhile conservatives wonder why “little” shareholders have left the market. In some ways the answer is simple: casinos have now created more gambling options closer to home than Wall Street.

Not that they really care.

Simple things like a company’s annual reports, a rare piece of business journalism requiring special skills for the initiated to plow through the numbers hidden in the marketing and promotion, is no longer required to be sent to individual holders. Instead they get a notice that tells them that the report is done and the annual meeting is coming, but if they really, really want a copy, they can go on a website and see if they can request one, and just maybe it will be sent along. I bet we can almost count on one hand the number of people who will go to the trouble. Meanwhile, they want the shareholder to vote for their slate of directors and follow the directors’ instructions on other ballot issues.

Actually Vegas probably does a better job at regulating gambling than the SEC does. In Vegas it’s important for the punter to believe that there is a fair deal and that the game is not fixed by the house. With computer trading, Wall Street machinations, and kid glove regulation by the SEC, no one will ever pretend that Mom and Pop little shareholders with a couple of shares of stock where they used to work isn’t playing in a rigged game that always favors the big houses.

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The Wall Street Journal Thinks Hillary is Too Close to Wall Street!

Wall-Street--Lower-Manhattan-53049New Orleans   Did the sun just rise in the west? Is down up and up now down? Did hell just freeze over? What’s up with the world?

Why do I wonder?

Simply put when the rightwing editorial page of the Rupert Murdock owned Wall Street Journal makes the case that Hillary Clinton is too close to Wall Street something is definitely topsy-turvy in the world as we know it. This is a classic case of the exception proving the rule. Normally, the editorial page of the Journal is the national equivalent of the society page in your local daily paper: a must miss feature! They run a hater nation page there with a heavy-handed Republican bias, and if their editorials are just snide and snippy, instead of hurtful and malicious, it counts as a good day.

All this is very worrisome, because if the Wall Street Journal thinks that Hillary Clinton is too close to Wall Street, where they butter their bread, then what are the rest of us to think? One can try to pry facts off of someone’s shoes, but it’s hard to get something that seems like gospel out of your head.

The Journal used the recent New Hampshire debate before the upcoming primary as the platform for their question about the $675,000 Mrs. Clinton had received from the financial giant Goldman Sachs.

“Host (CNN) Anderson Cooper asked her whether she really had to be paid $675,000 for giving three speeches. ‘Well, I don’t know. That’s what they offered,’ said Mrs. Clinton – to much audience laughter. She then tried the argument that every Secretary of State does it, and then settled on the unbelievable claim that at the time she took the money she didn’t know she would be running for President again. Mr. Cooper was so startled he asked her to repeat the point.”

Ouch! The Journal then piles on by following that very expensive blow with some cheaper shots, claiming that Clinton’s deal reflected the working détente between Democrats and Wall Street where the big Demo-dogs take their money, then mega-mouth attacks on them in public, while letting them get away with, well, everything let’s hope, but murder, in private. The Journal wants to believe that has to do with Wall Street trying to muscle out competition from elsewhere, but the rest of us worry, especially in light of the riches and ruin of recent years, that it is really about having them march in the constant favor parade whose big and small floats pave the way to even more of their riches at the expense of the rest of us.

The kicker comes at the end as they wrote,

“When asked on CNN if she regretted her income windfall from Goldman, Mrs. Clinton replied, ‘No, I don’t, because, you know, I don’t feel that I paid any price for it and I am very clear about what I will do and they’re on notice.’ Mrs. Clinton is the one on notice that there is a political price to be paid for it…And because everyone knows why Goldman paid her $675,000.”

This isn’t a shouting match about emails that amount to making a mountain out of a molehill, but something a lot more serious, and these answers really aren’t enough to make any of us comfortable, even the Wall Street Journal.

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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.

            Why?

            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.

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How Much Puff versus Pay in Proposed JP Morgan Chase Settlement?

JPMorgan-Trading_Loss-0ca37-1705New Orleans   My goodness, hysteria has broken out among the financial chattering class with the news of a $13 billion proposed settlement between JP Morgan Chase and the Justice Department and Federal Housing Finance Agency over the bank’s handling of the mortgage crisis.  The lead editorial in the Wall Street Journal claimed variously that parts of the settlement might let “the feds pass out the money to consumers or their favorite advocacy group…” making “the fact that this is a political shakedown and wealth distribution scheme even clearer.  Perhaps the Administration will have the checks arrive in swing Congressional districts right before the 2014 election.”   Further this rabid, foaming at the mouth editorialist draws the lesson that this “is how government has used the crisis to exert political control over even the most powerful private financial companies. The real lords of American finance are Attorney General Eric Holder, Treasury chief Jack Lew and their boss in the White House.”

            Wow!  All, I can really say to all of that is:   I wish!

            The truth is that no one has much of any idea how this settlement will be paid, and unfortunately in the wake of recent settlements, I have to wonder how much of this will be real money paid versus credit for fixing the bank’s own balance sheet that should have been done years ago. 

            All any of us really know is that $4 billion is to settle charges with FHFA for the bank’s bundling of garbage loans sold to Freddie Mac and Fannie Mae, $4 billion is for homeowner relief ostensibly, and $5 billion is fines for misconduct.  We already know from the recent monitor’s report that Justice there settled for credits for the bank’s cashing out 2nd mortgages, refinancing underwater loans, and short sales, all of which I would argue were paybacks to the bank itself rather than efforts to keep people in their homes.   Contrary to the crazy folks in the editorial department of the Journal, is there any real reason to believe that Justice has cut a better deal this time than last? 

            Sadly, when the real details are out, 8 of the 13 billion may end up in a form of financial shaming for sure, but basically a fancy recycling program of the banks’ billions back into the their own bank accounts.  

            Cheers to the fact that Attorney General Holder would not give them a “get out of jail” card or whisk away the criminal investigations for their activity in California, but seriously does anyone really think that this late in the game that level of accountability is coming?   I doubt it seriously, and Chase is saying it is confident that that won’t happen.  

            In short, this is “about time” good news, and let’s hope it does scare Wall Street a bit, but this is likely no watershed for homeowners nor any real distribution of justice for the millions who have lost their homes.  


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Another Billion in Subprime Losses for Wells Fargo and Ocwen

New Orleans   A billion here, a billion there, and the next thing you know, you’re talking about real money.  This is another line on the headstone of the subprime mortgage industry that was such a key player in the Great Recession.  News that investors took another unexpected loss of a billion bucks in these tranches of ill begotten, broker finagled, often predatory loans batched together in toxic stews for suckers, was such nothing news that it hardly made the C-section of the Wall Street Journal.   For me it was old home week from five and six years ago and a blast from the past.

Of course Wells Fargo, now the country’s largest mortgage lender, and Ocwen Financial from West Palm Beach, now the nation’s largest servicer of subprime loans are finger pointing at each other for who blew billion of course, but it is such déjà vu all over again, that it brought smiles to my face since it was such a “man bites dog” story.  These investment pools are part of what banks have been hiding behind for years to avoid real loan modification programs that would prevent home foreclosures, and this new billion bust is an argument between the devils about how they stirred the brew and treated loans that were modified and altered the payment schedule to reduce the monthly payments while trying to hold on to the pretend value of the home.

Where did the Wall Street garbage come from?  Well, a bunch of it was from Irving, Texas-based American Home Mortgage that would never really agree to meet with us during that period, and then capsized in 2007 after New Century fell, and ironically was picked up by IndyMac bank, which also is little more than a bad memory.  The rest of the mess came from Option One Mortgage which was one of the Orange, California subprimes in the heyday and was owned then by H& R Block, and brought down its CEO along with other mayhem.  They met with us frequently, but were the corporate equivalent of the teenager in the family who was out of control by the parents.

Seeing Ocwen and Wells Fargo fighting over responsibility for a billion dollar loss is also juicy because these two have become the twin faces of the current problems for homeowners.  Ocwen is reportedly under current investigations by a host of regulators for how it is dealing with beleaguered borrowers and Wells Fargo seems to be settling one suit after another proving discrimination in its lending, maintenance, and general business involving African-Americans and Latinos.

None of this is funny, but at least when investors finally get burned by these boys the same way that homeowners have been continually burned, we can be reminded again that the arc of justice is long, but true.

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TXU Case Study in Speculation Hurting Consumers and Embarrassing Environmentalists

Memphis   Who wants to read another story about Wall Street hustlers and the funny money going south and then jumping through more hoops to try to save their butts in bankruptcy court?  Well in this case the answer is “Me!” when it comes to the wheeling-and-dealing involving TXU, the struggling Texas power company. 

            The bottom line is that the Wall Street folks that took TXU from being a major power company in Texas to being a financial plaything are trying to go to bankruptcy court in order to get rid of $32 billion worth of debt while managing to continue to hold ownership of the outfit.  The gang of KKR, TPG, Goldman Sachs and others are trying to bail themselves out of a disaster they made of the Texas utility operations on a bad bet that presumed natural gas prices would go up and that they would get away with charging more for electricity.

            This is one of those, “I told you so” moments, since ACORN in Texas had been pretty much all alone with precious few friends in opposing this crazy merger in the first place since we were arguing that we, as Texas utility bill payers were going to end up paying for this craziness.  Stacked against us on the other side, if you have a long memory, were a lot of big time environmentalists, like the Natural Resource Defense Council and the like who were lined up for this wild buyout for a couple of reasons.

            The buyers, included Bill Bondurant, who was on the board and a donor to some of the enviro national groups, and a mega-rich principal of TPG.  To get the environmentalists on their side they promised that if they made it through the Texas regulatory process with their help, they would shelve plans to build some of the coal fired plants that had been on TXU’s wish list.  I say “wish list,” because it was obvious to us, and I would have thought the DC enviro honchos, that the offer to not build some of the new plants was gratuitous anyway.  They didn’t have the money and they didn’t have the demand.  Regardless in 2007 as this deal was red hot, Texas ACORN was busing folks into Austin to protest its approval while the enviros were cutting the backroom deals in DC with the Wall Streeters, all of which were premised on us paying the bills at the end of the day.  We won some delays, but we were steamrolled.

            What goes around comes around, and they lost their shirts.  There’s some justice there, but somehow I’m not sure that Texas utility consumers won’t still end up paying for this big time.

Audio Blog on Texas Utility

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