Masters of the Universe category archive

Too much is not enough.

In Germany, a bank goes under and gets taken over by another bank. The new bank decides not the reward employees of the failed bank for their failure with bonuses.

Now bankers from the failed bank are suing for their bonuses.

Commerzbank faces lawsuits filed by more than a hundred bankers over unpaid compensation following its January 2009 takeover of Dresdner. The bank, Germany’s second-largest, said last month it isn’t paying investment bankers bonuses for 2009 after a net loss of 4.5 billion euros.

Dresdner “was entitled to take the actions it did in relation to Dresdner Kleinwort employees’ discretionary bonuses in light of the market deterioration in the investment bank’s performance,” according to a spokesman at Commerzbank, who declined to be identified citing company policy. “The bank will be defending any claims vigorously in the courts.”

You can’t make this stuff up.

Like flies:

Four more banks gone, nada, kaput.

Details on how mastery of the universe at the link.

Warren Buffett on the banksters:

“It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price — one not reimbursable by the companies they’ve damaged nor by insurance. CEOs and, in many cases, directors have long benefited from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well,” he wrote.

While I was offline and then occupied with migrating the site, I lost track of the banksters.

I see that they are still showing their mastery of the universe by going out of business.

One down so far this week:

Carson River Community Bank, Reno, Nevada

And two:

Rainier Pacific Bank, Tacoma, Washington

There is a certain delightful irony in this. There’s a line forming at the returns desk (emphasis added):

Big lenders including Bank of America, J.P. Morgan Chase and Wells Fargo may be forced to repurchase troubled home loans from insurers and mortgage-finance giants like Freddie Mac that had agreed to take on risks associated with those assets during the real estate boom.

The banks are setting aside more reserves to cover the potential costs of such repurchases, cutting into earnings.

The trend is also pitting big lenders, insurers and mortgage-finance institutions against each other. That’s a big change from the previous decade, when they worked together to fuel the housing boom by originating, insuring and securitizing mortgages in record amounts.

Christopher Whalen, managing director of research firm Institutional Risk Analytics, offered up a colorful metaphor for the unfolding situation.

“The wave of loan repurchase demands on securitization sponsors is the next area of fun in the zombie dance party, namely the part where different zombies start to eat each other,” Whalen wrote in a note to clients Tuesday.

Pay for attendance.

Bank of America Corp., the nation’s largest lender, will pay investment-banking employees bonuses of about $4.4 billion for last year, or an average of $400,000 each, a person close to the bank said.

As much as 95 percent will be paid in stock vesting over about three years, the person said. Those receiving the smallest bonuses will get about half their compensation in cash, paid later this month, the person said. The unit accounts for 10,000 people, or 4 percent of the bank’s 283,000 workers.

Also, fight club.

In honor of my birthday, the FDIC shutdown a bunch of banks:

American Marine Bank, Bainbridge Island, Washington

First Regional Bank, Los Angeles, California

Community Bank & Trust, Cornelia, Georgia

Marshall Bank, Hallock, Minnesota

Florida Community Bank, Immokalee, Florida

First National Bank of Georgia, Carrollton, Georgia

Via Dmitri.

The house always wins in three card monte:

Wall Street is marketing derivatives last seen before credit markets froze in 2007 as the record bond rally prompts investors to take more risks to boost returns.

Bank of America Corp. and Morgan Stanley are encouraging clients to buy swaps that pay higher yields for speculating on the extent of losses in corporate defaults. Trading in credit- default swap indexes rose in the fourth quarter for the first time since 2008, according to Depository Trust & Clearing Corp. data. Federal Reserve data show leverage, or borrowed money, is rising in capital markets.

Aside: Read this. Read it all the way to the end.

Bonuses in the billions. Words fail me.

Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.’s investment bank slashed their compensation in the fourth quarter, responding to political pressure that will probably persist as details of bonuses for their top executives emerge in coming weeks.

The three Wall Street firms set aside $39.9 billion for pay in 2009, below the 2007 record of $44.7 billion. The total fell short of the $46.1 billion five analysts expected this month and is almost $10 billion less than what some analysts estimated in October.

More banks blanked:

Columbia River Bank, The Dalles, Oregon

Evergreen Bank, Seattle, Washington

Charter Bank, Santa Fe, New Mexico

Bank of Leeton, Leeton, Missouri

The failed bank table in the FDIC database is getting pretty full.

Premier American Bank, Miami, Florida

Tidbit:

Of course, I would like the banks to embrace this sense of mutual responsibility. So far, though, they have ferociously fought financial reform. The industry has even joined forces with the opposition party to launch a massive lobbying campaign against common-sense rules to protect consumers and prevent another crisis.

While East Coaster slept it, banks decrepit.

The defrocked:

Barnes Banking Company, Kaysville, Utah

St. Stephen State Bank, Saint Stephen, Minnesota

Town Community Bank & Trust, Antioch, Illinois

They want unrestricted use of the car and someone else to pay the car insurance.

The Obama administration wants the biggest banks to pay more taxes – and to make more loans.

The president says that’s not a contradiction. If the biggest banks can afford thousands of million-dollar manager salaries and “obscene” trader bonuses, he figures they can afford a $10-billion-a-year tax on bank investments to defray the cost of the 2008 bank bailouts.

Addendum:

Read Paul Krugman’s column.

AKA both ends against the middle. From McClatchy:

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

(snip)

“The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion,” said Laurence Kotlikoff, a Boston University economics professor who’s proposed a massive overhaul of the nation’s banks. “This is fraud and should be prosecuted.”

But, but, . . it can’t be wrong if really really rich persons did it. Can it?

MarketWatch:

Responding to concerns about record payouts to Wall Street bankers, New York Attorney General Andrew Cuomo on Monday said he is asking eight of the largest U.S. banks that received bank-bailout dollars for information about their pay and bonus packages for 2009.

Cuomo said he is seeking the data from Bank of America Corp., Bank of New York Mellon Corp.,
Citigroup Inc., Goldman Sachs Group Inc. , J.P. Morgan Chase & Co., Morgan Stanley, State Street Corp. and Wells Fargo & Co.

These institutions received federal dollars as part of the U.S. government’s $700 billion bank-bailout program, known as the Troubled Asset Relief Program. They have since repaid the bailout funds.

If you follow the link, be sure to sample the comments.

God forbid that investors should know who screwed up how bad:

Bloomberg argues that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money. Banks and the Fed warn that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell-off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued. The lower court agreed with Bloomberg.

“The question is at what point does the government get so involved in the life of the institution that the public has a right to know?” said Charles Davis, executive director of the National Freedom of Information Coalition at the University of Missouri in Columbia. Davis isn’t involved in the lawsuit.

The ruling by the three-judge appeals panel may not come for months and is unlikely to be the final word. The loser may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Court, said Anne Weismann, chief lawyer for Citizens for Responsibility and Ethics, a Washington advocacy group that supports Bloomberg’s lawsuit.

The Christmas holidays are over and the FDIC is at it again.

One less bank on the horizon:

Horizon Bank, Bellingham, Washington