Tag Archives: wall street

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.


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.