Masters of the Universe category archive

Bloomberg:

The U.S. Treasury and financial regulators are clashing with each other over how to disclose results from the stress tests of 19 U.S. banks, with some officials concerned at potential damage to weaker institutions.

With a May 4 deadline approaching, there is no set plan for how much information to release, how to categorize the results or who should make the announcements, people familiar with the matter said. While the Office of the Comptroller of the Currency and other regulators want few details about the assessments to be publicized, the Treasury is pushing for broader disclosure.

MarketWatch has more.

More is better than less here. The public needs to know just how badly these Wall Street clowns have screwed up. Certainly, “consumer confidence” is not an issue. Consumers have no confidence.

No purpose other than clown preservation is served by concealing truth.

They are all victims. They had nothing to do with it. It happened when they were in the Hamptons.

After all, who could have predicted . . . .

John Baldoni of HarvardBusinessReview dot org via Bloomberg News:

While it is never pleasant to see anyone lose a job especially in these tough times, I was impressed by the swift resignation of Bob Quick, Britain’s top terrorism expert. (snip description of screw-up) This prompted the government to accelerate a sweep that netted 12 terror suspects. Rather than embarrass his government further, Quick took the fall and resigned the next day.

Contrast Quick’s behavior with that of so many of our senior banking and financial executives who moaned and groaned about not receiving bonuses when their companies had lost billions. Very few offered to resign and some are still in positions of authority, just as many other senior executives in other sectors are, even after their companies have also lost so many billions of investor revenue.

Accountability is fundamental to leadership. As much as every senior leaders knows this, and even preaches it to analysts, too often corporate leaders act as if consequences do not matter to them. They are exempt from accountability. Better to let the underlings fall than the top guy. After all, the CEO is special. . . .

Read it all. From MarketWatch, relentless apologolist for the financial sector:

When lawless pirates captured an American sea captain, the Navy put the hostage first. Now he’s safe, and the hostage-takers are dead or jailed.

When lawless bankers captured the global economy, Geithner put the hostage-takers first. And the hostage-takers are stepping up their demands: Change the accounting rules, guarantee us against any losses from the toxic assets, and rig the stress test so we all come out smelling like roses.

Old-timers may remember with nostalgia the days when it was easy to tell the difference between a major financial institution and a criminal enterprise. Those days are long gone.

Consider, for instance, the indictment unveiled last week against a San Diego street gang on multiple counts of mortgage fraud. According to federal prosecutors, the gang arranged to buy 220 properties for more than $100 million from 2005 to 2008. They overpaid for the properties by taking out liar loans using phony appraisals. They then funneled a kickback to a company controlled by the defendants, the indictment says.

Liar loans? Phony appraisals? Kickbacks? That sounds pretty much like the business model for the mortgage brokerage industry in California during the bubble. Maybe the real complaint is that the mob was muscling in on their territory.

Yes, it is no doubt all the taxpayers’ fault that AIG ran itself into the ground and came begging for a bailout.

Yeah, blame the taxpayers. That’s the ticket. Yeah. Taxpayers.

The outcry over bonuses paid to executives of American International Group likely hurt taxpayers because the unwinding work of its financial products unit was set back by weeks, the unit’s chief told The Wall Street Journal. In an interview in Monday’s paper, Gerry Pasciucco said about 20 out of 370 staff left amid the controversy and remaining staff were so “stunned” that their work slowed down.

Jesus Christ, the unmitigated gall of these folks is sick-making.

Frankly, I don’t see what the fuss is about. These are the people who caused this mess, for Pete’s sake:

There is an air of exodus on Wall Street — and not just among those being fired. As Washington cracks down on compensation and tightens regulation of banks, a brain drain is occurring at some of the biggest ones. They are some of the same banks blamed for setting off the worst downturn since the Depression.

Top bankers have been leaving Goldman Sachs, Morgan Stanley, Citigroup and others in rising numbers to join banks that do not face tighter regulation, including foreign banks, or start-up companies eager to build themselves into tomorrow’s financial powerhouses. Others are leaving because of culture clashes at merging companies, like Bank of America and Merrill Lynch, and still others are simply retiring early.

One more time, not enough assets to cover liabilities.

That is the textbook definition of “bankrupt.”

Mark Mayo, late of Deutsche Bank, which (according to the story) he exited under a cloud of valuing objectivity too highly, quoted on Bloomberg:

Mayo said in the report that he expects loan losses to increase to 3.5 percent by the end of 2010. Mortgage-related losses are about halfway to their peak, while credit card and consumer losses are only one-third of way to their expected highest levels, Mayo wrote.

The changes to mark-to-market accounting rules will impact banks’ balance sheets by one-third or less and will have no impact on the economics of bank troubles, Mayo wrote. Banks committed the “seven deadly sins” of banking in trying to compensate for lower natural growth rates and will now feel the costs of those actions, Mayo wrote.

It’s not liquidity. It’s solvency.

They do not have enough assets to cover their liabilities.

Like the parrot, they are dead, Dead, DEAD!

Via Atrios.

Wiliam K. Black on Bill Moyers Journal:

That financial calamity, he explained, was brought about not by mishap or accident, but only after a concerted effort to undermine and remove all regulations, allowing a creditor free-for-all that hinged on fraudulent risk ratings for bad loans.

“[T]he way that you do it is to make really bad loans, because they pay better,” he told Moyers. “Then you grow extremely rapidly, in other words, you’re a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there’s going to be a disaster down the road.

“…This stuff, the exotic stuff that you’re talking about was created out of things like liars’ loans, that were known to be extraordinarily bad,” he continued. “And now it was getting triple-A ratings. Now a triple-A rating is supposed to mean there is zero credit risk. So you take something that not only has significant, it has crushing risk. That’s why it’s toxic. And you create this fiction that it has zero risk. That itself, of course, is a fraudulent exercise. And again, there was nobody looking, during the Bush years.

Waiting to get bitten:

The Federal Deposit Insurance Corporation (FDIC) today released a list of orders of administrative enforcement actions taken against banks and individuals in February. No administrative hearings are scheduled.

The FDIC processed a total of 45 orders in February. These included twenty-one cease and desist orders; seven removal and prohibitions; one order modifying section 8(E) order of prohibition; ten civil money penalties; one prompt corrective action; one termination of insurance; one Order Granting Permission to File Application and Approving Application for Consent to Participate in the Affairs of any Insured Depository Institution (Section 19); and three orders terminating orders to cease and desist.

The Los Angeles Times explains as regards the Cali banks listed in the FDIC press release:

The banks — two in Los Angeles County, two in Riverside County, and one each in Stockton and La Jolla — received “cease and desist” orders that spell out publicly what the banks must do, such as boost capital levels, beef up management and rein in risky loans.

Bottom line: It’s not over yet.

Via Atrios.

From Bloomberg:

The changes proposed on March 16 to fair-value, also known as mark-to-market accounting, would allow companies to use “significant judgment” in valuing assets and reduce the amount of writedowns they must take on so-called impaired investments, including mortgage-backed securities. A final vote on the resolutions, which would apply to first-quarter financial statements, is scheduled for April 2.

Later on in the same article:

Citigroup had $1.6 billion of losses last year for so- called Alt-A mortgages, according to the company’s annual report. That loss would be erased with the new FASB rules, Dietrich said.

Bank of America Corp. in Charlotte, North Carolina, reported “income before income taxes” last year of $4.4 billion. The FASB proposal on impaired securities would increase that figure by about $3.5 billion, or the amount of “other- than-temporary” losses that the company recognized,

Now, I’m just a simple country boy–a simple country boy with a webserver, true, but a simple country boy.

It appears to me that, when this stuff is translated in to plain English, it means that companies can use “fair market value” to account for their assets . . .

. . . except when they don’t want to.

Discord amongst the financial superheroes:

(Wilbur) Ross’s American Home Mortgage Servicing Inc. and (Bruce) Rose’s Carrington Capital Management LLC are accusing each other of worsening the recession by devaluing homes and the mortgage bonds that sparked it. In a Stamford, Connecticut, lawsuit, Carrington says American Home hurt its hedge funds’ clients by dumping foreclosed homes tied to its subprime bonds at “fire sale” prices. American Home, which countersued on March 20, says Carrington wants to grab bondholders’ money by blighting communities with vacant homes.

Like this guy:

When his (Andrew N. Yao–ed.) Delaware-based student loan company went under in 2002, leaving an estimated $500 million crater, it was a road map of things to come nationally on a billion-dollar scale with subprime mortgages in place of the subprime student loans.

Only, instead of getting a federal government bailout, Andrew Yao’s story ends today with his reporting to federal prison to begin serving a six-year sentence on a dozen charges including bankruptcy fraud, wire fraud and making false statements.

The demise of Student Finance Corp. in Newark and the subsequent federal prosecution of Yao, its president and sole shareholder, was a cautionary tale that no one realized or understood was the shape of things to come.

Another quote from the article, from the pictures on the sidebar:

James Butkiewicz, professor of economics at the University of Delaware, says initiating loans and almost immediately selling them off created an incentive for companies to make as many loans as possible, no matter how bad, because someone else would be taking the risk

I tend to believe this, the Occam’s Razor of conspiracy theories:

Never attribute to conspiracy what can be explained by stupidity.

Rolling Stone has another take:

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.

The whole article is worth it. It’s sprinkled with gems like this:

AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror.

H/T Alison for the link.

Addendum:

TPMMuckraker has a history of AIG Financial Products.

D-Day takes a look at the corporate bonus culture:

The decoupling of risk and profit is the issue here. Corporate titans never rise and fall on the merit of their superior intellect, and there has been a great shift to mke sure profits, both personal and corporate, are kept in private hands, while the risk is socialized. When times are flush nobody really cares about or at least pays attention to this; when the same people who wrecked the economy feel entitled to their ungodly profits, people get understandably upset.

The reasoning in the corporate boardrooms is actually pretty simpleminded:

1. I am the CEO/CFO/whatever.

2. I therefore must be a Master of the Universe.

3. I therefore am entitled to All that I Can Get.

They believe this reasoning even as the facts–all those arrows slanting downward to the right on all those charts–the facts of the business show that they couldn’t tie someone in a game of tic-tac-toe without phenomenal luck and chicanery.

Those who complain about an “entitlement society” are looking in the wrong direction. The sense of entitlement is not walking on the streets, not pumping gas in service stations nor building product in factories, not helping customers on the sales floor, not in the Bushie breadlines.

The sense of entitlement is in empty suits in fancy offices on the top floors of all those buildings in the center of town.

AIG’s Edward Liddy mealy-mouths at the Guardian.

Doesn’t any suit have the guts to say, “We (or ‘I’) screwed up,” instead of the holy-moly-we-were-somehow-innocent-victims-of-some-faceless-entity formulation, “Mistakes were made”?

Try saying “mistakes were made” to the traffic cop the next time one pulls you over and asks, “Do you know why I pulled you over?”

Rarely do we seem to see someone in public life who takes responsibility.

Not just idiots. Irresponsible self-excusing idiots powerless to stop the sweeping forces of incompetence and destruction which they unleash.

Barney Frank calls out the crapola (via TPM):

Furrfu.

By Mad Kane:

Dear boss, where’s my bonus and raise?
I expect lots of cash — no delays.
Though my work surely sucks,
I deserve all those bucks.
Ain’t it great that incompetence pays?

The other weekend, I was in a hotel while taking care of some business down at the farm. It was one of those hotels with a complimentary breakfast–you know, cereal dispensed from fruit juice dispensers, cold boiled eggs, and pseudo-bagels.

(I say “pseudo-bagels” because they were cinnamon-raisin bagels. Cinnamon-raisin “bagels” are not bagels. They are cookies.)

The news was on (I didn’t even know that the Today Show had osmosed to Saturday mornings!) discussing the Wall Street Wankers. The subject matter broke down the usual quiet of such breakfast rooms, where the guests tend to murmur apologies to each other for being in the way at the coffee pot, eat in silence, read the MacDonalds of newspapers USA Today, or converse quietly with their families or traveling parties at their tables.

The eight or ten guests were talking loudly and enthusiastically amongst themselves, discussing the news and offering theories.

Then one comment brought the diners to agreement:

The whole damn lot of them would look good in orange.

This just gets more surreal (emphasis added):

AIG, which has taken taxpayer funded bailouts totaling $173 billion, has also budgeted $57 million in “retention” pay for employees who will be dismissed, according to a March 2 filing to the Securities and Exchange Commission.