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Happy (belated) Gramm Leach Bliley Day
By Edward Ericson Jr. | 11/13/2009
Yesterday (Nov. 12) was the 10th anniversary of the signing ceremony for the Gramm Leach Bliley Act. Though hailed at the time as a great breakthrough in financial regulatory reform—headlines predicted the coming time of consumer plenty, big savings on mutual funds, insurance premiums and bank fees—it was never anything more than a scheme to allow CitiGroup, Goldman Sachs, and a few other already huge financial institutions to do whatever they wanted. Given what happened after that ... [MORE]
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AIG Is Getting Its Money Back?!
By Edward Ericson Jr. | 10/29/2009
The Wall Street Journal has an interesting story today explaining that AIG has gotten back several billion dollars in collateral it posted last year against losses in the credit-default swap market. But, most of the "bad" contracts, which now look not-so-bad, were "closed out" by the government bailout, meaning that AIG lost that money forever, which means that the taxpayers have lost that money forever, which means that AIG's counterparties have gained that money forever. As the WSJ reports: ... [MORE]
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Frontline on Derivatives
By Edward Ericson Jr. | 10/21/2009
Watch Frontline's historical retelling of the roots of the financial crisis. Yes, folks, it's derivatives, and Brooksley Born, the former head of the Commodity Futures Trading Commission, fought the good fight, trying to get them regulated and transparent, in 1998. The usual suspects (Rubin, Summers, Greenspan) shot her down. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?" Maryland Public Television has it listed tonight ... [MORE]
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Gaithersburg NonProfit Called Out for Role in Foreclosure Crisis
By Edward Ericson Jr. | 10/20/2009
Gaithersburg-based AmeriDream, Inc. is prominently mentioned in a Huffington Post story looking at seller-funded down payment assistance (DPA) programs for new home buyers. The programs allow home builders to give a three percent down payment to possibly unqualified buyers by laundering it through a nonprofit corporation, which takes a fee for the service. As the HuffPo concludes: Defaulting at up to three times the rate of other FHA loans, they are one reason the housing agency's insurance fund ... [MORE]
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Greenspan Changes His Mind
By Edward Ericson Jr. | 10/15/2009
Alan Greenspan has changed his mind, proving finally that he has one. As Bloomberg reports, Greenspan told the influential crowd at the Council on Foreign Relations yesterday that the too-big-to-fail doctrine must end:"If they're too big to fail, they're too big," Greenspan said today. "In 1911 we broke up Standard Oil—so what happened? The individual parts became more valuable than the whole. Maybe that's what we need to do." This is big news, as two other stories in today's New York Ti ... [MORE]
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More Pay on Wall Street
By Edward Ericson Jr. | 10/14/2009
The Wall Street Journal crunched some numbers and declared that, even though 10 percent of U.S. citizens are out of work while most of the rest are taking pay cuts, the Gilliganesque bunglers in the financial sector are again partying like its 1999, only more so. According to the Journal: Total compensation and benefits at the [23] publicly traded firms anaylized by the Journal are on track to increase 20 percent from last year's $117 billion—and top 2007's $130 billion payout. This year ... [MORE]
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FHA: Another Shoe Dropping
By Edward Ericson Jr. | 10/9/2009
The Federal Housing Administration's boss is saying he'll need no bailout, "absent any catastrophic home-price decline." The New York Times is flashing red on this one, and it's an entertaining read. U.S. Rep. Barney Frank (D-Mass.): A 7-plus percent FHA foreclosure rate is no bad thing: "I don't think it's a bad thing that the bad loans occurred," he said. "It was an effort to keep prices from falling too fast. That's a policy." FHA-which used to make sellers fix houses to exacting standards ... [MORE]
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CitiGroup Says Goodbye to Its $100 Million Man
By Edward Ericson Jr. | 10/9/2009
The New York Times says CitiGroup is selling its secretive oil-trading arm, Phibro, to Occidental Petroleum, apparently to avoid bad publicity. Still no one's questioning the idea that the head guy in a business division that yields $400 million a year is all by himself worth $100 million a year. ... [MORE]
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Krugman Takes Down the Chicago Boys
By Edward Ericson Jr. | 9/3/2009
In a Times Sunday Mag preview Columnist and Princeton Economics Professor Paul Krugman expends a lot of words explaining how the fellow Nobelists at the University of Chicago have been cranky and absurd since, at least, the mid-'70s. The story is headlined, "How Did Economists Get It So Wrong?" The piece has some hilarious lines (mostly quotes and paraphrases of his rivals), such as, "Unemployment is a deliberate decision by workers to take time off" (Edward Prescott of the University of Minnes ... [MORE]
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"The whole system was tilted into pushing people into these subprime loans."
By Edward Ericson Jr. | 9/2/2009
Michael Greenberger, Rock Off Crew, Robert Strupp, and many other Baltimore folks are featured in a video clip viewable on Amy Goodman's Democracy Now! site It's a preview of Leslie and Andrew Cockburn's new documentary, American Casino, which illustrates how credit default swaps and other derivatives sank the economy—and how a few pols (cough, Phil Gramm, cough) gave us out-of-control derivatives—using mostly Baltimore examples. Long vid (20 minutes-plus) but worth a look. ... [MORE]
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Where's Your Money?
By Edward Ericson Jr. | 8/25/2009
Good news today as Bloomberg News won its federal lawsuit to find out which giant corporations the Federal Reserve lavished big money on, and how much. It's pretty outrageous that it took a nine-month legal battle to get this basic information, but that's life in a democracy, right? Of course, in addition to its money-printing, interest-rate-setting superpowers, the Federal Reserve also gets the same due process as the taxpayers. So there isn't any actual information available just yet. Bu ... [MORE]
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Taylor Bean Told to Cease and Desist, Suspend Foreclosure Activity on All Remaining Loans
By Edward Ericson Jr. | 8/25/2009
(via Ocala Star-Banner; HT Robb Strupp)Florida-based Taylor, Bean and Whittaker, formerly the nation's 12th-largest loan originator and servicer, has filed for bankruptcy reorganization amid new sanctions by the Florida Office of Financial Regulation, the Ocala [Florida] Star-Banner reports: In a news released issued Monday, TBW said it believes the investigations surrounding the closing of Colonial Bank brought federal regulators to its doorstep, which left the company unable to continue opera ... [MORE]
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UPDATE: Colonial BancGroup, Taylor Bean and Freddie Mac-who could have seen this coming?
By Edward Ericson Jr. | 8/10/2009
Aug. 7: Colonial BancGroup announces governmental actions. Seems that on "August 6, 2009, it was informed by the U.S. Department of Justice that it is the target of a federal criminal investigation relating to the Company's mortgage warehouse lending division and related alleged accounting irregularities." And furthermore: On August 5, 2009, the Alabama State Banking Department provided notice to Colonial Bank that the Alabama State Banking Board will meet on August 12, 2009, at which time Colon ... [MORE]
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AIG Makes Profit, Fannie & Freddie Lose Billions
By Edward Ericson Jr. | 8/7/2009
AIG reported a $1.8 billion quarterly profit as Maurice "Hank" Greenberg, the company's former long-time über boss, paid $15 million to the SEC to settle (unrelated) fraud charges. Quoth the WSJ: Shares were up 18% at $26.49 around midday Friday after the New York insurer and financial services company reported a surprising $1.82 billion profit for the second quarter, compared with a year-earlier $5.36 billion loss. The stock was already up 71% this week amid optimism ahead of the qua ... [MORE]
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Taylor Bean, TARP, the FDIC and You
By Edward Ericson Jr. | 8/5/2009
Strange doings over the last few days in Central Florida have put about 10,000 Maryland homeowners in doubt about where to send their mortgage checks. But the real trouble is much bigger than that. Here's a rundown on who, what, where, how, and maybe why: 1. Because of bad mortgage lending, mostly in Florida, Colonial Bank of Montgomery, Ala., is insolvent in all but name. 2. Colonial is a $25 billion bank, specializing in "warehouse lines" for mortgage brokers and other non-bank mortgage orig ... [MORE]
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High Frequency Trading Update
By Edward Ericson Jr. | 8/4/2009
The Wall Street Journal reports that the Securities and Exchange Commission is investigating "Flash Trading," one small way the rich get richer at the expense of everyone else. That should keep them away from the big issues. But at least Paul Krugman is with me on the connection between Goldman's stock-market manipulation and Citi's oil-market manipulation. ... [MORE]
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Speed Shills
By Edward Ericson Jr. | 7/24/2009
The New York Times has front page expose today on "the hot new thing on Wall Street," a powerful, computerized speed advantage that reaps billions for the select few: It is called high-frequency trading-and it is suddenly one of the most talked-about and mysterious forces in the markets. Indeed, the story is itself written in a way that mystifies machine trading. The main points seem to be that some players-Goldman Sachs (natch) among them-have very fast computers that submit and cancel trades ... [MORE]
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Mortgage Fraud Pays
By Edward Ericson Jr. | 7/23/2009
The Sarasota Herald Tribune has done a story we'd like to see (or do, if we had the time and money) here in Maryland and around the country, though it's arguably three years late. (HT CR). The series, a year in the making, analyzed 19 million transactions looking for signs of mortgage fraud. To make things conservative (too conservative, according to one of their experts), the paper deemed suspicious only deals in which a house sold twice in 90 days or less, increasing in price by at least 30 p ... [MORE]
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Anti-social Security
By Edward Ericson Jr. | 7/21/2009
The Wall Street Journal (pay site) has an interesting line today on an old and growing problem—the widening gap between the folks at the top of the income pyramid and the rest of us. Turns out the pay gap is part of what threatens Social Security.To recap for those who have not been paying attention for the past two generations: in the United States, workers at the bottom two or three quintiles have seen their wages stagnate (or decline) since the early 1970s, while those in the top quinti ... [MORE]
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How Lies=Bonuses
By Edward Ericson Jr. | 7/17/2009
So, in a week where Goldman Sachs reported mega billions in quarterly "earnings" and even CitiGroup squeezed out $4 billion, I have to direct your attention to the Columbia Journalism Review's "The Audit" blog where, for several months, some of the best business reporting has been compiled. Today the prolific Ryan Chittum posts on the "Ugly Numbers on Toxic Asset Prices," following National Mortgage News (with a hat tip to the excellent Naked Capitalism) on Wells Fargo's recent sale of some of i ... [MORE]
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