Masters of the Universe category archive

One would think that, sooner or later, the FDIC would run out of banks to close.

Doesn’t pay to underestimate all those responsible fiscals out there mastering the universe, I guess.

This week’s crop:

First Community Bank, Taos, New Mexico

FirsTier Bank, Louisville, Colorado

Evergreen State Bank, Stoughton, Wisconsin

The First State Bank, Camargo, Oklahoma

Joanna Weiss of the Boston Globe considers some reasearch:

The study examined corporate behavior of 261 companies, and found a striking correlation between pay inequality and poor treatment of workers. Companies whose CEOs made much more than their average workers — in some cases, the disparity is 400-fold — were more likely to underfund pensions or cut corners on health and safety. Often, the bosses engaged in a cost-benefit analysis, figuring that a fine would be less painful than the profits they stood to make if they got away with it.

Those attitudes, researchers say, stem from the way money translates into power, and power into “moral disengagement.’’ A CEO sees his salary as a measure of his worth, and views his employees as relatively worthless.

“You end up basically thinking of those at the bottom as numbers,’’ said Sreedhari Desai, a Harvard research fellow who co-authored the study. “You feel somehow that they aren’t even worthy of the normal people that you’d meet. They’re disposable.’’

The article is worth one’s while.

And it does seem consistent with observed behavior, does it not?

My friend had cataract surgery yesterday (when seems to have gone very well) so I missed the FDIC’s weekly celebration of responsible fiscals and universe masters.

Don’t look for these responsible fiscals. They ain’t mastering universes no more:

United Western Bank, Denver, Colorado

The Bank of Asheville, Asheville, North Carolina

CommunitySouth Bank & Trust, Easley, South Carolina

Enterprise Banking Company, McDonough, Georgia

The Guardian’s Richard Wolff has another piece on the place where too much is never enough::

The new governor of California announced last week that he proposed to cut about $1.5bn from the largest and arguably the best state system of higher education in the country.

(snip)

Meanwhile, Goldman Sachs pays out $15bn (in bonuses–ed>), alongside the other big banks’ comparable payouts.

Read the whole thing.

Where too much is never enough:

Goldman Sachs has set aside $15.3bn (£9.5bn) to pay its staff in 2010 – an average of $430,000 each – in a move that re-ignites the controversy over City pay and bonuses.

(snip)

The $15.3bn set aside for bonuses and salaries was down 5% on the $16bn for the previous year but did not fall as fast as revenues, which dropped 13% to $39.1bn in 2010.

Don’t get in a stew, but another bank is MIA:

Oglethorpe Bank, Brunswick, Georgia

No doubt it was full of responsible fiscals.

Good news for foreclosures (see the previous posts):

The number of first-time claims for unemployment insurance payments jumped in the first week of 2011 to the highest level since October as more Americans lined up to file following the holidays.

Initial jobless claims rose by 35,000 to 445,000, according to Labor Department data released today. The median estimate in a Bloomberg News survey called for 410,000 filings. The average number of applications over the past four weeks, a less-volatile gauge, increased to 416,500.

Bloomberg:

The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, RealtyTrac Inc. said.

“We will peak in foreclosures and probably bottom out in pricing, and that’s what we need to do in order to begin the recovery,” Rick Sharga, RealtyTrac’s senior vice president, said in an interview at Bloomberg headquarters in New York. “But it’s probably not going to feel good in the process.”

A record 2.87 million properties got notices of default, auction or repossession in 2010, a 2 percent gain from a year earlier, the Irvine, California-based data seller said today in a report. The number climbed even after a plunge in filings in the last part of the year — including a 26 percent drop in December — as lenders came under scrutiny for their practices.

Firing more public employees and cutting more old folks’ pensions are clearly indicated to keep this trend alive.

Writing at Bloomberg, David Pauley dissects Goldman Sachs’s behind-the-scenes trading of Facebook in the “shadow stock marked.” He is skeptical of their valuation:

If you believe the company (Facebook-ed.) is worth $50 billion, take another leap. Using Facebook’s numbers from last week — the best we have in the absence of complete financial reporting — we might guess it made about $500 million for the year. That would mean its shadow market value was about 100 times its earnings. Google’s price-earnings ratio is 25.

Investors with short memories will pay whatever the shadow market and Goldman Sachs, the prospective underwriter, say they should.

Back in 2000, Cisco Systems Inc., then already the dominant company in computer network gear, had a P/E approaching 200. It’s now 15.

There’s another even more down-to-earth problem for the company. Facebook is now seen by analysts as a threat to Google as a gatherer of ad revenue. Who’s to say a few years from now another startup won’t pose a similar threat to Facebook?

Based on Goldman’s past, it could easily be that they are betting against the investors in the shadows. They have done it before.

The “shadow” part of the “stock market” should provoke extreme caution.

Remember, in three-card monte, the marks always lose.

Computers are stupid.

They just do what they are told, but they do it really really fast.

If they are operated by incompetents, they automate incompetence.

Case in point (emphasis added):

Grandma writes Christmas checks in red ink. Recipients deposit checks at ATM. ATM scan reports checks as blank because scanner is not seeing red. Bank closes account for fraud. Consequently automated payroll deposits are rejected and checks bounce.

No human being ever looks at checks.

Bank branch and customer service claim that they are powerless to fix the problem.

Newspaper intervenes. Between efforts of customer and newspaper, problem is finally resolved in customer’s favor.

Stupid is as stupid does. Q. E. D.

In a blow to the banking industry which sent bank stocks downward, the Massachusetts Supreme Judicial Court has ruled that, when banks bring cases for foreclosures, actual evidence must be presented:

The state Supreme Judicial Court today upheld a judge’s decision saying two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were transferred into two mortgage-backed trusts without the recipients’ being named.

Wall Street bankers are stunned that what they say may not go and pledge large temper tantrums and whiny-fests until they get their way. Also, campaign contributions.

In other news, the FDIC shut down another bank: First Commercial Bank of Florida, Orlando, Florida. Sources indicate that actual evidence was involved.

Updates when if more banks bite the dust today.

Updated:

Another one bites the dust, leaving behind a legacy of universe-mastery:

Legacy Bank, Scottsdale, Arizona

Discussing a proposal in Massachusetts to mandate mediation in foreclosure cases, Davd Abromowitz explains how short-term incentives militate against mortgate mediation:

Most servicers work for investors who own pools of mortgages. The complicated agreements governing how servicers handle their work compensate foreclosure more than mediation. It takes more time, knowledge, and staffing for a servicer to process modifications than it does to call up lawyers and start a foreclosure.

And while foreclosure may yield less money for investors in the long run when all the costs are factored in, many of the foreclosure costs come “off the top’’ from the foreclosure sale, and are not borne by the servicer making the decisions.

In short, the mortgage pooling system that was set up to encourage private money to flow into mortgages and make them cheaper for consumers is now a virtual doomsday machine for the economy, pushing the process to foreclose on homes instead of modify loans.

In other words, kicking persons into the street is easier and more profitable than keeping them off the street.

Low-hanging fruit and all that.

The cries of the bonus babies will be deafening if this actually happens. In bankster lingo, “pay for performance” is a synonym for “gimme gimme gimme.”

Regulators (The international Basel Committee on Banking Supervision–ed.) have called for the size of bonuses to be linked to success. “Bonuses should diminish or disappear in the event of poor firm, divisional or business unit performance,” the Financial Stability Forum said in a set of principles in 2009. The organization, which brought together regulators from some industrialized nations, was replaced last year by the Financial Stability Board.

The requirement to disclose whether bonuses are reduced in line with performance is “probably the most important point” in the proposals, Lannoo said. “Now they should explain, if the performance of a bank is not what it should be, how they would adjust remuneration.”

Dr. Gerry Mander explains:

Dear Dr Mander

I am a trader in the City, wealthy by virtue of persistent endeavour and minded to dismiss all festivity as humbug. But on Christmas Eve I was visited by three spirits of the season past, present and yet-to-be. I was reminded of the kind heart I once possessed and alerted to the ill consequences of my hardened manner. I resolved to soften it forthwith and on Christmas Day bestowed great charity on a clerk in my employment. But, the thing is, I’m due a fat bonus in the new year and quite fancy a new carriage. And maybe a winter break in the colonies. Is there a way to redeem my soul without giving all my money away?

E Scrooge

Dear Mr Scrooge

It was once considered easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven. But the criteria have recently been relaxed. Instead of sustained commitment to collective solidarity we now have the “Big Society”, which means that by giving Tiny Tim a bit of turkey at Christmas you have cleansed your conscience and are free to go back to business as usual.

Follow the link for more advice from Dr. Mander.

A follow-up to this post:

What Atrios said.

Bank of America is wondering if it will be in the next installment of Wikileaks, Pay Attention to the Men Behind the Curtains. McClatchy reports:

Julian Assange, the anti-secrecy organization’s founder, has said he is preparing a “megaleak” about a large bank, leading to speculation the Charlotte bank is the target. On Monday, he told the Times of London that he had enough information to make the bosses of a major bank resign.

Meanwhile, Bank of America has cut off payments intended for WikiLeaks, spurring the group to tell customers to stop doing business with the bank. Other financial institutions that have foiled payments have faced cyberspace attacks from WikiLeaks supporters, but so far the bank doesn’t appear to be suffering ill effects.

Analysts say it’s possible WikiLeaks could stir up new trouble for the nation’s biggest bank, perhaps exposing more problems in the mortgage arena or reviving questions about its Merrill Lynch acquisition. It’s also possible the revelations cause little harm or that WikiLeaks bypasses the bank altogether.

Whatever it is, it can’t be much worse than this.