Masters of the Universe category archive

Economic man is a rational animal:

A former oil futures broker who went on a weekend drinking binge before blacking out and trading more than 7m barrels of oil has been banned from working in the City (London’s “Wall Street”–ed.) for at least five years by the Financial Services Authority.

Also, pigs, wings.

Michael Silverstein, in the Philadelphia Inquirer, explains how “securitization” works with a down-to-home example.

I can’t excerpt or summarize it. It has to be taken in from beginning to end.

Additional reading (but make sure to read it second). I can isolate a snippet from this one:

A whopping 60 to 65 percent of the world’s dirty money stems from the intentional, illegal manipulation of taxes and of commerce (e.g., falsified pricing, sham transactions), particularly by multinational corporations.

Morgan Stanley settles with Massachusetts AG for facilitating dicey mortgages so it could in turn sell dicey (in)securities (emphasis added):

The deal, the first of its kind in the country with Morgan Stanley, followed an investigation by Coakley’s office into the firm for fueling subprime mortgages written by New Century Financial Corp., a large California lender that went bankrupt in 2007. She said Morgan Stanley knew that New Century was making predatory loans, but continued to provide the lender billions of mortgage dollars by buying the loans to turn them into securities.

Morgan Stanley “uncovered signals pretty early on that the lending practices of New Century were not sound,’’ Coakley said at a press conference yesterday. “Morgan Stanley knew they were making loans designed to fail.’’

The FDIC seems to have waited till late in the evening to start gobbling banks:

Nevada Security Bank, Reno, Nevada

The ratings agencies told investors that all those hinky CDOs and mortgage-backed insecurities were A-double-OK. They were complicit in Wall Street’s successfully convincing investors to buy bags of air.

That house needs to be cleaned, but the House of Representatives is considering eliminating the Franken amendment:

The measure, introduced by Minnesota Democrat Sen. Al Franken and approved by the Senate in May, would create a clearinghouse intermediary to assign credit raters for banks’ structured finance securities. It would have the Securities and Exchange Commission set up a credit-rating agency board, made up mostly of institutional investors, that would pick credit raters for a packaged securities such as mortgage securities issued by a financial institutions.

Franken is seeking to limit conflicts in the existing system, where an institution pays for its rating, and at times, shops for the best rating it can get for the lowest price.

However, late Monday, House leaders, including House Financial Services Committee Chairman Barney Frank, Democrat from Massachusetts, put together an offer to the Senate that would strike that measure and replace it with a House provision that would have the SEC conduct a one-year study to evaluate whether such a board would work and present to Congress recommendations for regulatory or statutory change.

“Long-term studies” and “blue ribbon commissions” are where legislative proposals are sent to die.

My letter to my elected representatives incongruously assembled goes out today.

Bloomberg:

Bankers’ bonuses should be capped at 50 percent of their salary, lawmakers on a European Parliament committee said, as they voted on tougher capital and pay rules for banks.

Directors at banks that received public funds would also have their salaries capped at 500,000 euros ($613,000), and at least 40 percent of any bonus would be deferred for five years, under the measures approved by the assembly’s Economic and Monetary Affairs Committee in Strasbourg, France yesterday.

Waldo Jaquith describes his quest for a mortgage.

The quest for fire was easier and less hazardous.

More banks Blanked yesterday. The financial geniuses have made bank failures so routine we hardly notice them any more.

TierOne Bank, Lincoln, Nebraska

Arcola Homestead Savings Bank, Arcola, Illinois

First National Bank, Rosedale, Missouri

Tom Levenson on why the logic of the galt is lame:

(The) self correcting invisible hands do not work their magic on a resource in which the logic of the commons leads to uncontained exploitation of a resource.

Follow the link and watch the video.

Dean Baker is bird-watching at the Guardian:

The deficit hawks are not concerned about national insolvency; they are not worried about soaring inflation; they are worried about how to take every last penny from ordinary workers and give it to the Wall Street crew. That is what the Tarp was about and this is what the latest crusade to reduce the deficit is all about. Now they want to go after workers’ social security because, as Federal Reserve Board chairman Ben Bernanke said: “That is where the money is.” The fact that workers have paid for these benefits doesn’t matter at all to the Wall Street crew.

So, if you feel like giving all your money to the Wall Street gang, then you should take the deficit hawks seriously. But, if you think that people who are not Wall Street millionaires have rights too, then get out the pitchforks and send the deficit hawks and their economist accomplices running.

When their deeds prove their theories wrong, it confirms that they were right all along.

This is called “The Great Circle of Ideation.”

Note: “Ideation” is done by persons too important to think.

Three in one, or one in three, or something. In any event, masters of the universe no more no more.

Bank of Florida – Tampa Bay, Tampa, Florida

Bank of Florida – Southwest, Naples, Florida

Bank of Florida – Southeast, Fort Lauderdale, Florida

More dust, more biters:

Sun West Bank, Las Vegas, Nevada

Granite Community Bank, NA, Granite Bay, California

Looks like only one Master of the Universe gets atomized this week:

Pinehurst Bank, St. Paul, Minnesota

Of course, the Mr. Bigs are still at it.

Cartoon via Kiko’s House.

Like this is going to make a difference.

StevenD at the Booman Tribune reports on bid rigging by Wall Street:

It was a classic kickback scheme. Localities relied upon “financial advisory firms” to help them obtain the best rates on guaranteed investment contracts or GIC’s. GIC’s are essentially the equivalent of Certificates of Deposit for small governments, except they involve millions and sometimes billions of dollars.

Unfortunately for them the firms they relied upon as their advisers to get the best deals on the GIC’s they were purchasing were in league with Bank of America, JP Morgan, Cititcorp, Lehman Bros. and a multitude of other banks to rig the bids so that the local municipalities etc. got lower interest rates than the market rate for the GIC’s which they assumed had been bid to acquire the highest interest rates available. The money from these sales of below market rate GIC’s was pocketed by the banks after paying the “adviser” kickbacks ranging from $4,500 to $475,000 per deal.

Read the whole thing.

I missed the unemployment figures yesterday (they were more of the same); I was hanging a ceiling fan. Hanging it wasn’t difficult, but it was given to me used and I didn’t have a wiring diagram. That lead to 45 minutes of hooking up the bare leads to an extension cord to figure out what goes where.

It’s a guy thing: the best way to figure stuff out is to take a chance on blowing something up.

Speaking of blowing stuff up, the FDIC has started its regular Friday game of playing Pac-Man with banks. One power pill gobbled up so far:

Satilla Community Bank, St. Marys, Georgia

Later:

Midwest Bank & Trust Company, Elmwood Park, Illinois

Southwest Community Bank, Springfield, Missouri

New Liberty Bank, Plymouth, Michigan

Alex Beam at the Boston Globe illustrates one of those “MBA oaths” that seem to be fashionable amongst B-schools. A nugget:

Pledge:

I will manage my enterprise with loyalty and care, and will not advance my personal interests at the expense of my enterprise or society.

Illustration:

“Bret Grebow, a 28-year-old fund manager, bought a new $160,000 Lamborghini Gallardo as a treat and regularly traveled with his girlfriend between his New York office and a home in Highland Beach, Fla., on a private jet. . . . Grebow eventually pled guilty to defrauding investors of more than $7 million while helping to operate a Ponzi scheme. . .’’ Gregory Zuckerman, “The Greatest Trade Ever’’

Offered without comment:

More than a year and a half after Iceland’s major banks failed, all but sinking the country’s economy, police have begun rounding up a number of top bankers while other former executives and owners face a two-billion-dollar lawsuit.

Last week, I read an article which quoted a financial type as saying that Ponzi schemes make up a much higher percentage of private investment plans than anyone would likely suspect. Indeed, the persons quoted pretty much said that, if it’s a private scheme, it’s more likely to be a Ponzi scheme than not.

I didn’t write about it and now I can’t find it. I did find a similar story from USA Today.

A story in this morning’s Philadelphia Inquirer brought it to mind: A well-respected local investment counselor with a large clientele amongst friends and family passed away. Nobody can find any of the investments he counseled:

No one knows what happened to the money managed by Garfield, named by Philadelphia magazine last year as one of the region’s top 100 financial planners. His clients hope to recoup their losses, but it doesn’t appear there’s much left, their attorneys say.