Strong message for weak leaders

A New York jury didn’t just acquit a midlevel Citibank executive, they sent a strong, clear message to Washington.

The only question is, how do we get Washington to start listening?

The message came along with a not guilty verdict in the case of a Citibank executive, accused by the SEC of negligence for failing to provide disclosures to clients that his own bank was betting against the complex financial packages that the bank was selling.

Brian Stoker’s lawyer argued that he was just one of many who were doing the same thing in Citibank’s employ.

The attorney argued that it was others, higher up the chain of command at Citibank,  who had committed the misconduct.

Evoking the child’s book, “Where’s Waldo?” the lawyer, John Keker, invited jurors find those hidden characters who were really to blame.

Not only did the jurors acquit Stoker, they wrote an unusual letter to the SEC: “This verdict should not deter the SEC from continuing to investigate the financial industry, review current regulations and modify existing regulations as necessary,” the jurors wrote.

Twenty-three year old juror Travis Dawson told the New York Times: “I’m not saying that Stoker was 100 percent innocent, but given the crazy environment back then it was hard to pin the blame on one person. Stoker structured a deal that his bosses told him to structure, so why didn’t they go after the higher-ups rather than a fall guy?”

And the jury foreman, Beau Brendler, told American Lawyer magazine: ”I would like to see the CEOs of some of these banks in jail or given enormous fines,” he said, “not a lower level employee.”

In a separate case, Citibank has already agreed to pay a fine on the collateralized debt obligations at the heart of the case against Stoker.

While the Justice Department is touting that civil fines for fraud have skyrocketed, the Times reported that prosecutions against individuals, especially those at the top, are rare to nonexistent.

“A lot of people on the street, they’re wondering how a company can commit serious violations of securities laws and yet no individuals seem to be involved and no individual responsibility was assessed,” Sen. Jack Reed, Democrat of Rhode Island and chairman of a subcommittee that oversees securities regulation, said at a recent hearing.

The SEC has been hobbled by 20 years of inadequate funding and a revolving door that delivers SEC lawyers right into jobs with the firms that they’re supposed to be regulating, or with the law firms that represent those firms.

And that’s not the worst of it.

Prosecutors take their cues from the top. The Obama administration, from the president to his treasury secretary, Tim Geithner and his attorney general, Eric Holder, has consistently blamed the 2008 financial collapse on stupidity and greed but said that most of the worst banker conduct was not illegal. President Obama has paid only lip service to holding bankers accountable while doing nothing.

The most recent example is a mortgage fraud task force the president announced in January. It took months to get staff and office and the task force has done little more than issue a couple of subpoenas and some press releases.

So it’s no wonder that the SEC continues to avoid pursuing the financial elite.

Meanwhile, both presidential candidates and the big media continue to ignore the issue of banker accountability.

As Mike Lux has pointed out, in the 2010 exit polls, 37 percent of voters blamed Wall Street for the on-going weak condition of the U.S. economy. Those voters, who are angry at Wall Street and skeptical of government, had voted 2 to 1 for Obama in 2008, but in the midterms, broke 56 to 42 percent Republican. They now view the president as a “Wall Street liberal.” These voters have no illusions about Romney, but  given the choice, they will favor the candidate who promises to lower their taxes and reduce the deficit, according to Lux.

Can our political leaders hear the message that the New York jury is sending? Or has the money that rules our political system completely drowned it out?

Contact your representative and let them know we haven’t forgotten all the promises to hold Wall Street accountable for its misdeeds.

 

 

 

 

 

 

 

 

 

Citibank / Martin Column / Securities and Exchange Commission (SEC) - 08/10/2012

That incredible shrinking foreclosure settlement

I checked in with Citibank the other day to see how they were doing on their promise to reduce principal on loans for qualified underwater borrowers.

The bank had made that promise as part of a highly touted national settlement of foreclosure fraud charges with state attorneys general back in February.

One thing the bank did not agree to, apparently, was any sense of urgency.

A bank representative told me they had taken a couple of months to get set up and were now in the process of reviewing their borrowers’ files.

He said he thought they would be done by mid-August.

One thing we know for certain: without a tough independent monitor to track what the banks are doing, and not doing, they’ll take their time to produce little help for troubled borrowers.

We know that from the banks’ past poor performance in the administration’s various foreclosure aid programs.

But now state politicians are threatening to grab the cash that banks paid as part of the settlement – money that was supposed to be used to pay monitors to oversee the banks’ compliance with the settlement, along with hiring more housing counselors that could guide homeowners to assistance where it was available and providing legal advice.

At issue is the relatively small amount of cash penalties the banks actually had to turn over in the $25 billion settlement– about $5 billion– with half of that supposed to go to state attorneys general for new foreclosure assistance.

Another $20 billion consists of a dubious and highly complex system of credits given to the banks for taking actions to help homeowners, some of which they were already supposed to be doing.

The national mortgage settlement has always been mainly a PR stunt for the state attorneys general and the Obama administration, to try to make up for their shameful collective failures to protect homeowners from the bankers’ continuing fraud and sloppiness in the foreclosure process, or to hold bankers accountable.

The investigative outfit Pro Publica delved into what they called the “billion-dollar bait and switch,” with states planning to divert $974 million from the settlement to their general funds to cover serious budge deficits arising, ironically, from the Great Recession, which was caused by the bankers’ out of control speculation.

Among those that are looting money that was supposed to be targeted at helping those facing foreclosure are states that have been particularly hard hit by foreclosures, including California and Arizona. Those states got more money from the settlement to compensate for their residents’ victimization by the biggest banks in the foreclosure process.

In California, Governor Jerry Brown now intends to use the state’s $411 million settlement proceeds to help plug a severe budget gap, in particular to pay for existing housing programs, but no new foreclosure assistance initiatives.

You would think diverting the proceeds of a legal settlement would be illegal. But apparently states have the power to raid the settlement funds, having done so in 2003 with fancy financing schemes to get state officials’ hands on funds that were supposed to be targeted for health care costs from a 1998 settlement with tobacco companies, the San Francisco Chronicle reported.

State budget problems brought on by the 2008 financial collapse are enormous, but no more compelling than the continuing failure of our elected officials to grapple with the foreclosure crisis. That failure is now underscored by the hollow ring of the state AGs’ promises, and compounded by governors’ betrayal of  those promises.

 

 

California Attorney General Kamala Harris / Foreclosures / Martin Column - 06/01/2012

Free market follies

Now that the big-time media is wrapping up its commemoration of the 20th anniversary of the Los Angeles riots, it can get back to its real job: bird-dogging celebrities and cheerleading a “jobless recovery.”

It can get back to its regularly scheduled programming, reporting on the sale price of movie stars’ homes while ignoring the persistent and unpleasant economic and political realities in low-income neighborhoods like south Los Angeles where the riots ignited.

But it was a different story at a terrific conference last week at the University of Southern California called “Up From the Ashes,” sponsored by the school’s Program and Regional  Equity.

It focused on how activists responded to the riots, their accomplishments and defeats, sweet victories and bitter frustrations, and the hard work that remains.

While many gave credit to the Los Angeles police for reforming their approach to minority and low-income communities, on other issues the prognosis was far grimmer. By critical economic measures such as unemployment, availability of affordable housing  access to health care, and the percentage of its sons and daughters in prison, low-income Los Angeles is worse off today than it was in 1992.

At the conference, longtime public transit activist Eric Mann pointed out that as in many other things, Los Angeles has been ahead of its time in its starkly contrasting communities of wealth and poverty.

He also tracked the decline of the government as a problem-solver and the rise of the worship of the free market as the panacea for even the most complex issues.

Mann compared the response to the earlier 1967 Watts riots with the response 1992 Los Angeles riots.

After the earlier riots, the McCone Commission, which had been appointed to investigate, predicted that if poverty and housing issues weren’t addressed, the city would erupt again.

While the War on Poverty initially resulted in some government attention to those problems, it wasn’t sustained. Antipoverty programs dried up as politicians embraced their new philosophy that demonized government as the problem and idealizing the private sector as the solution.

After the 1992 riots, the recovery was left in private hands, specifically to the Orange County-based former baseball commissioner who had organized the 1984 Los Angeles Olympics, Peter Ueberroth. While Ueberroth obtained promises for corporate funding for recovery for south Los Angeles, Ueberroth and his corporate colleagues were clueless about the community they were trying to help and the social issues they were wading into. As a result they failed to delivery any real economic benefit or social change. Government also failed to come through with any serious programs, leaving the community stranded once again.

Any gains came, not from corporate or government benevolence, but from determined efforts from the grass-roots, within the community.

Listening at the conference with ears attuned to the 2008 financial collapse and its aftermath, I heard a direct link between the “let the free market fix it” response the 1992 Los Angeles riots and the run-up to the economic meltdown.

The media and the politicians saw the geniuses who ran the big financial firms as not being unable to do wrong, with no need for the traditional oversight put in place after bank speculation led to the Great Depression. This led to the bipartisanship repeal of the 1933 Glass-Steagall Act, which had kept federally-guaranteed banks from engaging in other risky financial businesses, as well as the dismantling of the remaining regulatory structure.

Despite the massive failures of the free market to either regulate itself or solve social problems, we’re still in thrall to this faulty philosophy that the free market should largely be left alone to take on tasks for which it is clearly not equipped.

One of the biggest reasons for this is that the media has itself been so lax in holding the champions of the free market, like Ueberroth and the too big to fail bank bankers, accountable for the consequences of their missteps, broken promises, and failures, preferring instead to cheer them on in their folly.

Martin Column - 05/01/2012

The President Aims For the Skyboxes

I keep telling myself I’m going to stop picking on President Obama and his administration because I don’t want to sound like a broken record.

One reader even suggested I might even be giving comfort to the Republicans.

Which, believe me, is not my intention.

But then the president and his people do something so clueless it seems to demand attention.

The latest example is the news that his campaign is contemplating moving the final extravaganza of the Democratic Party convention this summer in Charlotte, Bank of America’s corporate headquarters, to a stadium named for the country’s largest too big to fail bailed out bank.

You know, the one that wanted to charge its customers to use their debit cards, before the huge public outcry stopped them. Even the president slammed the bank’s debit card debacle. I wrote about some of the bank’s numerous other fiascoes here.

Now, the president and his campaign need to switch to the B of A stadium, according to the president’s people, because they need more luxury skyboxes for their big-money donors.

Remember when President Obama stirred the nation on election night in 2008? Speaking before a crowd of 240,000 in a public park in Chicago as well as a huge televised audience, Obama assured the country that “change had come to America.”

In 2008, the president spoke in Grant Park, which has been public space since the 1840s. Bank of America Park is an NFL stadium, home of the Carolina Panthers. They sell the naming rights for millions of dollars a year.  Local residents call it the BofA, or the Vault. Before the name belonged to Bank of America it belonged to the cell phone company Ericsson.

Imagine what a different impression the speech would have made if the president gave it surrounded by advertisements for the country’s banks.

We might have been better prepared for his economic policies if he had. The president has gone from shooting for the stars that night in Grant Park to aiming for the skyboxes.

I’m sure the president’s people will make sure that there are no actual advertisements on display while he speaks. But the symbolism, or optics, couldn’t be more powerful.

If the president and his party want to perform a public service, they should arrange to have the amount Bank of America, has contributed to each of the presidential candidates and their parties up on the scoreboard, along with the amount of bailout money, low-interest loans and loan buyouts the bank received from taxpayers.

If there was room, the party could display the names of its top donors.

If the BofA donations were displayed today, you might wonder why the president didn’t find somebody else’s stadium to give his speech from.

So far, the bank has forked over $126,500 to Romney and a measly $39,024 to the president.

But don’t cry for the president and his party. I’m sure they’ll more than make up the difference in the skyboxes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank of America (BoA) / Martin Column / President Barack Obama - 01/13/2012

The Bank Occupy Couldn't Live Without

Bank of America seems determined to keep providing fuel to keep the Occupy movement going strong.

You probably recall the bank’s plan to soak its customers by charging them to use their debit cards, which was withdrawn after a torrent of bad press.

Clearly, all is not happy in Bank of Americaland, where the stock has dropped about 50 percent from 2010 levels. Despite being propped up by millions in taxpayer help as well as by Warren Buffet, the bank remains in so much trouble that in September, the bank announced plans to lay off 40,000 employees, mainly in its consumer division.

Who needs those consumers anyway?

It’s not just the bank’s lowly employees that are losing their jobs. A couple of top executives are leaving too, but the bank made sure to cushion the pain of their leaving with millions of dollars in severance and benefits.

The bank was also forced to cut back one of its most prized activities last year, spending a paltry $2.2 million on lobbying last year, down from nearly $5 million before the financial collapse.

You may not have heard about the bank’s latest effort to keep the protestors busy. They’ve decided to put the squeeze on another bunch of customers, this time small-businesses.

Several small-business owners told the Los Angeles Times is now forcing them to pay their balances in full, instead of on a monthly basis, as they used to. This change, the business owners say, could wipe them out.

Meanwhile, a firm that helps small businesses get loans calls Bank of America’s level of small-business lending “a disgrace for the largest bank in the country”.

Ami Kassar, CEO and founder of MultiFunding, says Bank of America ranks 6,128 out of 6,800 based on its small-business lending.

Three years after the financial collapse, Wall Street is still a dysfunctional mess, providing little help for Main Street. Meanwhile, our political leaders, for the most part, show no inclination to correct the mistakes that have gotten us here.

 

 

Bank of America (BoA) / Martin Column - 01/05/2012

Bold Lite

Maybe President Obama's jobs plan will succeed in making congressional Republicans look bad before the 2012 election, especially if they reject it and demonize it as another socialist plot.

But even in the unlikely event that the congressional Republicans pass it whole, would the president's $440 billion grab bag offer significant solutions to Main Street’s most pressing problems – reducing the unemployment rate and halting the foreclosure crisis?

Probably not.

It’s true that the president and his administration did not dig the deep economic hole the country is in. And the president deserves some credit for stepping out of Washington’s deficit obsession bubble just long enough to recognize that nothing the government has done so far has been enough to lift those outside Wall Street out of that hole – the worst economic downturn since the Great Depression.

But throughout his administration, and again last night, he has not offered big enough shovels, to dig us out of it.

As Paul Krugman [who labels the plan “a lot better than nothing”] points out, the collapse of the housing bubble blew a  $1 trillion a year hole in the economy, a hole that last night’s jobs plan won’t come close to filling.

But a comparison of the jobs plan’s $440 billion price tag with the unsuccessful $16 trillion bank bailout suggests its relative timidity. Remember that the federal government handed over that money to the bankers with no strings attached and no questions asked.

While the administration likes to tout the bank bailout’s success by bragging that most of the money has been repaid, by its most important measure – ensuring that the banking system helped restore the Main Street economy - it remains a costly failure.

Still you have to at least acknowledge that the bank bailout was a bold scheme. The same can’t be said for the American Jobs Act, which as the president stressed, was a collection of non-controversial proposals that even corporate Republicans have endorsed in the past.

Call it Obama’s “bold lite.”

Yes, it was bolder than what the president has suggested since the original $700 billion stimulus. It includes $240 billion of tax cuts and about $200 billion in infrastructure spending and aid to local governments, along with regulatory review, a vague housing scheme, plus a significant new round of budget cuts to pay for it, including unspecified threats to Medicare.

According to an estimate by Economic Policy Institute, the new plan, if passed whole, would create 2.6 million new jobs over the next several years and prevent the loss of another 1.6 million jobs.

That’s not chopped liver – but the country is still staggering under the weight of persistent 9 percent unemployment, with 14 million Americans unemployed, another 8.8 million working part-time but seeking fulltime work, and another 2.6 million who don’t show up in unemployment numbers because they’ve given up looking for work. In addition, we face a continuing foreclosure crisis and the threat of future budget cuts.

While I hope that the congressional Republicans don’t just decide to block the proposal, experience suggests that they are stuck on that strategy as a way to undermine the president. Will “a lot better than nothing” be good enough to help millions of Americans for whom the recovery has only been a mirage? Or is the president setting himself up, and the rest of us, for another round of dashed hopes and failure?

Uncategorized - 09/10/2011

Missing the Message

It’s absolutely clear that the Republicans mean to work with the big banks to block any financial reform, no matter how watered down, by any political means necessary.

The Republicans have opposed the president’s nominees in committee. As far as the Consumer Financial Protection Agency, they oppose not only the popular consumer champion Elizabeth Warren to be its chief, they will oppose anyone President Obama nominates. The Republicans have made their intentions clear – they want to gut the agency before it’s born.

Meanwhile the bank lobbyists have gone to work on the regulators who are writing the actual rules to implement last year’s financial reforms, and have effectively stalled the process in its tracks.

To make sure that no one is missing the message, J.P. Morgan Chase chief Jamie Dimon went on the offensive this week, publicly stating that excessive financial regulation was weakening the economic recovery. Without offering specifics, Dimon told Fed chair Ben Bernanke at a bankers’ conference, “I have a great fear someone’s going to try to write a book in 20 years, and the book is going to talk about all the things that we did in the middle of the crisis to actually slow down recovery.”

While the bankers have been working feverishly behind the scenes to further water down the weak Dodd-Frank version of financial reform, Dimon’s statements are the most aggressive public challenge yet to any attempts to rein in the big banks.

What’s unclear is why the president is not meeting this assault on one of his proudest achievements (Wall Street reform) head on, despite the Republicans’ and bankers’ clear signals that they have no intention to compromise. Rather than mounting a strong public case for Warren, for example, the White House continues to float alternative, less qualified, nominees. Obama seems to be laboring under the illusion that there is somebody else who satisfy the Republicans. What’s baffling is that he has no reason to think so: the Republicans haven’t exactly been ambiguous. The bankers are also taking off the gloves, with only a few lonely voices in Washington to make the case for stronger reform.

When will our president get the message?

 

 

Around the Web / Consumer Financial Protection Agency / Financial Reform Legislation / Martin Column / President Barack Obama - 06/10/2011

Will Afghan Bailout Trump U.S. Homeowners?

At least you know where the Tea Party stands. If it’s a government program, they want to end it.

The Democrats are murkier. They propose tepid solutions to serious problems like the foreclosure crisis, then when their programs don’t work it, ends up reinforcing the Tea Party’s arguments that government doesn’t work.

So the Tea Party-driven Republicans come along and want to whack the Obama administration’s failed foreclosure prevention scheme known as the Home Affordable Modification program. They would probably want to whack it even if it was working, but that’s another subject.

The Tea Party doesn’t offer anything in its place. Homeowners are pretty much on their own at the mercy of the banks.

So much for the American Dream.

Many people have pointed out that the HAMP program is something between an abject failure and a scam that rips off already beleaguered homeowners.

The Obama administration doesn’t offer so much of an argument in its defense as a hapless shrug. In this video, Treasury Secretary Timothy Geithner acknowledges that the foreclosure prevention program amounts to a “tragic, terrible mess.”

But hey, the administration says, it’s better than nothing.

Meanwhile, the foreclosures continue while authorities investigate massive fraud by the banks in the foreclosure process.

This is not a debate calculated to offer much confidence that our public officials can deal effectively with the problems that afflict those of us who live in the reality-based community.

I was reflecting on this tawdry spectacle while reading about the latest developments in the latest “too big to fail” bank bailout to strike at U.S. taxpayers – this one in Kabul, Afghanistan. My colleague Harvey Rosenfield warned about this brewing fiasco several weeks ago.

Apparently the wildly corrupt officials and their cronies used the bank as their private piggy bank, and the bank’s imminent collapse is now a greater threat to Afghanistan’s security than the Taliban.

As recently as last September, officials were offering assurances that U.S. taxpayers would not have to pay for a bailout. Now apparently if we don’t cough up $1 billion the war and the country will be lost and all the previous billions we’ve squandered there will have been wasted.

So we can’t afford a dime to help homeowners in this country but we must spend $1 billion to bail out the Afghans.

I don’t expect the Democrats to put up much of a fight against such an outrage.

I hope the Tea Party stands strong on this one.

 

 

 

Around the Web / Foreclosures / Martin Column / Outrage / Too Big To Fail - 03/02/2011

Obama Strikes Out

That didn’t take long.

Just a couple of days after the New York Times reported that Wall Street was unhappy with the return on its massive investment in the Democratic Party; President Obama softens his rhetoric on the big bankers. He told Business Week he didn’t “begrudge” bailed-out too big to fail bankers their bonuses, benignly comparing them to all the top baseball players who earn fat salaries yet don’t make it to the World Series.

“That’s part of the free-market system,” Obama opined.

Obama knows some of the bankers personally, he tells Business Week, and finds them “savvy businessmen.”

Before the bankers complained publicly about their lack of return on campaign contributions to Obama and the Democrats, the president had recently been trying out a tougher stance: suggesting “too big to fail” banks, their risky behavior and the fat bonuses that fuel it should be reined in.

President Obama has been consistently inconsistent in the fight over financial reform. He’ll make strong proposals one day (judicial cram-downs to help homeowners in foreclosure, for example) and then leave them to die without his support in Congress under withering assault by bank lobbyists. He’ll blast the bankers’ bonuses one day and cozy up to them the next. It was less than a month ago that the president labeled the bonuses “obscene” and pledged to tax them.

By contrast, the bankers have been relentless and shrewd in their fight to delay, confuse, stymie and water down attempts at reform. They have fought in the back rooms, in the media and the floors of Congress, using checkbooks and rhetoric.

The president is spot on, however, when he refers to the remaining big bankers as savvy. After they wrecked the economy, they didn’t waste the financial crisis. They’ve come back bigger and stronger than ever, with fewer competitors, with a firm grasp on a steady pipeline of cash from the federal treasury.

For a more clear-eyed view of the bankers, what they’ve been up to and what they have to do, we have Elizabeth Warren, the Harvard Law professor and congressionally appointed bailout monitor. “This generation of Wall Street CEOs could be the ones to forfeit America’s trust,” she wrote Monday in the Wall Street Journal [no link]. “When the history of the Great Recession is written, they can be singled out as the bonus babies who were so short-sighted that they put the economy at risk and contributed to the destruction of their own companies. Or they can acknowledge how Americans’ trust has been lost and take the first steps to earn it back.”

With his wish-washy approach, the president is in his own real danger of losing America’s trust as a champion of reform. Making lame comparisons between ruthless bank CEOS and clueless overpaid athletes doesn’t help the president’s credibility any.

Even the analysts on ESPN Sports Center know that.

Contact the president yourself and let him know what you think of the bailed-out bankers’ bonuses.

Executive Pay / Martin Column / Too Big To Fail / Uncategorized - 02/10/2010