Masters of the Universe category archive

No commerce, no need for commercial real estate:

More than 43 million square feet (4 million square meters) — the equivalent of 15 Empire State Buildings — stood vacant at the end of the third quarter, the most in almost five years, according to CB Richard Ellis Group Inc. San Jose, Sunnyvale and Palo Alto have 11 empty office buildings with about 3 million square feet of the best quality space.

“There is a bubble bursting in much the same way as the residential market burst,” said Jon Haveman, principal at Beacon Economics, a consulting firm in San Rafael, California. “None of those towers will fill up anytime soon.”

Not to mention all the vacant store fronts in your area and mine where little businesses have lost out in Wall Street’s three-card monte.

Afterthought:

The difference between the banksters and Billy Mays was that Billy Mays was honest about being a pitchman; he didn’t call his pitches “financial innovation.”

And, ya know, if you bought something from Billy Mays, it might not have lived up to the hype, but it sure as heck didn’t just disappear–you at least had something left over for the yard sale.

Toxic Asset Re-Issuance Program

Only months after it was started, the U.S. program designed to purge debts of no immediate discernable value from the balance sheets of troubled banks has helped transform the frozen debt into a money-maker as the bonds have rallied. Bank of America Corp. and Citigroup Inc., who received 22 percent of the $418.7 billion American taxpayers loaned to troubled financial institutions, boosted holdings on their trading books of home- loan bonds that lack government guarantees while investors were raising cash for the program, according to Federal Reserve data.

Reuters:

Investigators in Congress, the Securities and Exchange Commission, and the Financial Industry Regulatory Authority are looking at banks’ sales of complicated instruments known as collateralized debt obligations, according to the paper.

It said banks that created these securities, and then bet on their failing, or similar securities failing, include Goldman Sachs, Morgan Stanley, and Deutsche Bank.

Business Week story here.

Detailed explanation here.

Because the job market for persons with resumes of failure is so tight.

It’s like the football coach carousel. They lose somewhere, move on (to spend more time with their families, no doubt), and other teams pick them up and give them raises. Twenty years of this, and they get inducted into the Hall of Fame.

American International Group Inc., the bailed-out insurer, was permitted by the special master for executive pay to give an additional $4.26 million in compensation to an employee who decided not to leave the firm.

Kenneth Feinberg approved a deferred stock grant valued at $3.26 million and an annual long-term incentive award of as much as $1 million, according to a letter today to AIG released by the Treasury Department. The employee, who wasn’t identified in the letter, gets a $450,000 cash salary. The recipient is one of AIG’s top 25 managers and isn’t Chief Executive Officer Robert Benmosche, a Treasury official said.

It is telling that the possibility that the Masters of the Universe might be required to behave responsibly sends share prices down:

Global banking stocks have fallen on concerns that banks will have to maintain significantly more funds in reserve from 2012.

The same thing happened to shares in Jesse James Enterprises, Inc., when Jesse got regulated caught.

I get an early night, sleep a good ten hours, and wake up to seven fewer banks. From the too-small-to-be-bailed dept.:

First Federal Bank of California, Santa Monica, California

Imperial Capital Bank, La Jolla, California

Independent Bankers Bank, Springfield, Illinois

New South Federal Savings Bank, Irondale, Alabama

Citizens State Bank, New Baltimore, Michigan

Peoples First Community Bank, Panama City, Florida

RockBridge Commercial Bank, Atlanta, Georgia

They shoulda stuck to giving away toasters to get business.

Banksters:

The finance industry hasn’t shirked all responsibility for what went wrong. Many companies and industry groups admit playing a role, or at least blame “bad actors” in other corners of the business.

But as a whole, the industry continues to resist important changes – even as key players continue to show why those changes are needed.

Just one example: The Credit Card Act, passed by Congress earlier this year, will soon bar card issuers from raising rates on existing balances under “any time, any reason” clauses or for being a few hours or days late on a payment – a common practice during the last decade.

So what did Citibank recently do to a swath of its customers? It raised their “regular” rate to 29.99 percent, and then promised them a rebate of 10 percentage points each month if they continue to pay on time. In essence, Citibank devised an end run around the new rules.

Citibank isn’t alone. Recent reports by consumer groups, including one last week by the Center for Responsible Lending, have identified a series of similar devices to game the system even before most of the new rules take effect Feb. 22. The card issuers’ clever lawyers have decided that boosting revenue is more important than honoring the spirit of the new law.

While I was sleeping, these outfits ran aground:

SolutionsBank, Overland Park, Kansas

Valley Capital Bank, NA, Mesa, Arizona

Republic Federal Bank, NA, Miami, Florida

Guess their bonuses won’t be so big this year.

Bloomberg reports that Goldman Sachs will pay the 30 members of its executive committee with “restricted stock options” that won’t show on the books until they vest:

The awards will consist of so-called shares-at-risk that start vesting next year and can’t be sold for five years, the New York-based firm said yesterday. Because the expense isn’t recorded until they vest, the firm avoids incurring an immediate cost, said Robert Willens, founder of Robert Willens LLC, which advises investors on accounting and tax rules.

“That’s just what they needed to make this year look better,” said Willens, a former managing director at Lehman Brothers Holdings Inc. “The first charge won’t be until 2010, so this will definitely reduce their compensation expense. These 30 people make a disproportionate amount of the compensation.”

It keeps the phonuses off the books for a while, while still letting persons get paid obscene amounts for moving piles of money back and forth, while creating nothing.

Aside:

Here’s the other side of phonuses:

I know someone whose retirement was in stock options. This person added real value to the economy by producing real stuff for a company that actually makes things that people want and use every day and, in doing so, she rose to an executive position and retired very nicely cushioned, thank you.

The company from which she retired fell for Wall Street’s financial games, the bubble burst, and her retirement went away. The stock options were for prices higher than the stock itself, so she could not cash them when they matured.

The three-card Monte dealers banksters win as long as they control the deal. The marks lose. And, as far as they are concerned, we are all marks.

Banksters, adding cost, not value:

The “fair and reasonable” price financial advisers recommended to the Metropolitan Water Reclamation District of Greater Chicago for the biggest borrowing in its history cost taxpayers $8 million in unnecessary interest and resulted in a bonanza for bankers and investors, according to trading data and to documents initially withheld from the public.

Another name for this might be “churning and skimming.”

While I was unloading my truck, more banks bit the dust:

First Security National Bank, Norcross, Georgia

The Buckhead Community Bank, Atlanta, Georgia

Another one(s) bites the dust:

Greater Atlantic Bank, Reston, Virginia

Benchmark Bank, Aurora, Illinois

AmTrust Bank, Cleveland, Ohio

The Tattnall Bank, Reidsville, Georgia

Remember, these were the folks who needed to be deregulated because they were never wrong, they were always right.

One of my Facebook friends–someone I actually know a little better than most of them–has just suffered a sudden hearing loss.

The doctor says she needs hearing aids.

Her insurance doesn’t cover hearing aids.

This is not right.

I remember when health insurance companies adopted the HMO model in the late 70s. They promised that, by moving to that method, they could

1. keep costs down
2. keep premiums reasonable, and still
3. make a profit.

The only promise they have delivered is number 3.

They have had their chance and failed.

It really is all about their country club memberships.

Remember that the Brits bailed out RBS the way the States bailed out AIG.

This is bogus, not bonus:

The directors of Royal Bank of Scotland are threatening to resign if the government stops them paying bonuses of £1.5bn to staff in its investment arm.

What’s the big deal?

They did a great job running RBS into the ground. If they walk, they won’t be able to do it again.

Responding to a paper in which an economics professor recommended that “under water” mortgage holders walk away, a spokesman for Fannie Mae was quoted as saying

“there’s a moral dimension to this as homeowners who simply abandon their homes contribute to the destabilization of their neighborhood and community.”

Interestingly, no moral dimension seems to attach to the bankers and mortgage brokers who sold the hinky paper in the first place.

I guess, to have moral dimensions, one must have morals.

Addendum, Much Later:

Atrios on the double-standard.

In the world of free country club memberships, well, personal debts carry a moral obligation. Business debts–well, comme ci, comme ca.

The results of Republican economic stewardship malfeasance, left for others to clean up:

The number of troubled banks rose to 552 at the end of September from 416 at the end of June and 305 at the end of March, the FDIC said in its third-quarter report. This is the largest number of banks on its “problem list” since the end of 1993.

The FDIC’s Deposit Insurance Fund, which is used to protect depositors, swung to an $8.2 billion loss in the third quarter, the largest drop since the savings-and-loan crisis of the 1990s. As a result of the loss, the agency was forced to dip into its contigency fund, which has dropped to $30.7 billion from $38.9 billion.

Because there’s a lot of jobs out there for persons who have experience driving companies into the ground:

Advanta Corp., the bankrupt Montgomery County credit-card company with virtually no operating business, owes retail investors $138 million.

Yet the 41 employees left at the Spring House firm who are still being paid (chairman and chief executive Dennis Alter is forgoing his $1 million annual salary during bankruptcy) make an average annual salary of $268,000, according to bankruptcy filings.

(snip)

In a Bankruptcy Court document this month, Advanta said that it needed to keep paying the employees because it “cannot maximize value without their continued support and the historical knowledge, experience and industry relationships.”

Meanwhile, investors are left holding the (empty) bag.

Banks shot:

Commerce Bank of Southwest Florida, Fort Myers, Florida

Thomas Noyes writes at the Guardian (emphasis added):

Time and again, we have given the wizards of Wall Street all they want, and what do we get? Bigger and bigger messes. Time and again, we have been told that an increasingly unfettered financial system will unlock more capital and give us ever-growing prosperity. Instead, we are suffering through the greatest economic crisis since the 1929 crash . . . .

A year ago, Alan Greenspan, the high priest of laissez-faire capitalism, admitted that he was “absolutely, precisely” wrong in thinking that self-interest would protect the financial system from self-inflicted collapse. Yet, the belief that unfettered finance would bring blessings to shareholders and customers alike dies hard.

Instead of wondering which institutions might be too big to fail, it’s time to consider whether the financial behemoths are too big to succeed.

Yesterday’s Fresh Air looks at private equity firms.

The only difference between these folks and the three-card monte guys is the cost of their suits.

From the website:

Private equity firms buy undervalued or underappreciated companies, impose short-term improvements and sell them for a fast profit. Some of the companies they’ve bought include Hertz, La Quinta, Dunkin Donuts, and Toys R Us. Josh Kosman, a private equity expert, says that the way the firms have been able to buy these businesses — through leveraged buyouts — means the majority of the money for the buyout has come from loans that the firms dump on the company they’re supposedly fixing.

Now burdened with debt, many of those companies owned by private equity firms are in danger of defaulting. In a new book, Kosman writes that it’s likely half of the 3,188 American companies bought by private equity firms between 2000 and 2008 could collapse. His book is called The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis.

Follow the link to listen to the show or read the transcript here.

This seems to be a fitting metaphor for the acumen of those financial geniuses who get paid for performance attendance:

Deutsche Bank AG’s Cosmopolitan Resort & Casino complex in Las Vegas, already the most expensive debacle in the city for a single lender, is now two years behind schedule, $2 billion over budget and under water — literally.

Deutsche Bank, the resort’s owner since it foreclosed on developer Ian Bruce Eichner last year, requires 24-hour pumps and containment walls after workers hit an aquifer below the Nevada desert floor. It’s another challenge for a project whose delays and redesigns have sparked lawsuits from condominium buyers and sales agents amid record declines in Las Vegas’s gambling revenue, home prices and hotel-room bookings.

Ya know, I bet that somewhere nearby was a geologist–who doesn’t get bonuses for geologing–who knew about that aquifer and was just waiting to be asked . . . .

But it’s become pretty clear that you can’t tell Masters of the Universe anything. Those bonuses confirm their conviction that they are always right, that they are never wrong.

Pah!