Defaulting banks - where will it stop?

[Peter Lemkin]

Monopolistic Too-Big-to-Fail Banks Try to Crush Credit Unions as Competition by Removing Tax Exemption

MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT
Given the steady growth of consumers turning to responsive credit unions for their banking, the oligopolistic banks that brought you the crash of the American economy and made you lend them money to survive are now trying to crush credit unions.
The vehicle being used by the large financial institutions -- many of whom are still engaged in risky and unethical if not illegal actions to remove credit unions as competition is to get their pawns in DC to pass legislation that will remove their tax exemption.
According to a July 6 LA Times article:
The tax exemption is crucial to credit unions, which by law can't raise capital through public stock offerings the way that banks can, said Fred R. Becker Jr., president of the National Assn. of Federal Credit Unions, a trade group with about 3,800 federally chartered members.
"They'll have to convert to banks, which is what the banks want," he said. "Then they'd have, for lack of a better term, a monopoly."
A 2012 economic study commissioned by the trade group found that removing the tax exemption would cost consumers about $10 billion a year through higher fees and interest rates on loans, as well as lower interest rates on savings.
That loss of income would end up costing the federal government $1.5 billion a year in lost tax revenue, the study said.
Why the sudden legislative power play to eliminate credit unions from encroaching on the Monopoly board of the banks/financial institutions that pull the strings in DC? You can find the answer by reading a bit down into the LA Times story:
The [credit union] industry has grown significantly since the 2008 financial crisis, boosted by outrage over Bank of America's 2011 plan to impose a $5 monthly fee for debit card use.
Bank of America ditched the plan after protests from customers, lawmakers and the White House. But the controversy led consumer groups to launch an effort to get customers of big banks to switch to smaller institutions, such as credit unions. And the effort helped.
By the end of March, credit union membership surged to 95.7 million, an increase of 2.7 million from the start of 2012, according to SNL Financial. The growth in those five quarters was more than in the previous 11 quarters combined, the trade publication said.
Navy Federal Credit Union, the nation's largest, increased its membership 10.2% to 4.3 million in the year ended March 31. Such large credit unions, which have ramped up their advertising to lure new members, worry bankers.
If the LA Times article is correct, nearly 1/3 of the US population used a credit union instead of the handful of hybrid bank/financial institutions that call the shots on Wall Street and in the nation's capital on consumer fiscal policy and lending.
Credit unions have traditionally tilted toward banking policies that serve the interests of their members, providing products that are competitively priced and emphasizing service over ill-gotten profit. They are consumer oriented rather than shareholder and CEO compensation (and bonus) driven. That's because, in essence, members of a credit union are its shareholders (although not in a technical legal sense, but in terms of distribution of net revenue.)
So despite the big banks whining about competition from credit unions who actually serve the best financial interests of their customers, the LA Times has a sentence in its piece that gets to the heart of the matter: "Credit unions said the effort to take away their tax exemption was simply an attempt to stifle competition and remove one of the only checks on bank fees for consumers." [Italics inserted by BuzzFlash at Truthout.]
The American Banking Association is backing its legislative assault on credit unions with a blitz of radio and print ads in DC, according to the LA Times. But the credit unions know that what they are up against in this battle for financial consumer rights is how many people in Congress are owned by campaign funds given or raised by the Wall Street banking mafia.
If the credit unions lose this battle, the US Capitol should be redesigned to resemble a Bank of America ATM machine.

[Peter Lemkin]

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Ongoing bank bailouts make mockery of budget talks

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Everything else is chump change, and the Kabuki theater, good-cop,bad-cop routine taking place in Washington right now is one we haveseen before, with only one ending.

The debt ceiling gets raised, and American solvency will be furtherweakened, as a blame game is played out to the music of inanegibberish over how the debacle affects each party's prospects inthe next election.

What will never be written about in the mainstream media is theelephant in the room. The script is carefully designed to keepattention off the real money, the ongoing bail-outs to the bank andfinancial services industry.

Former Special Inspector General for TARP Programs Neil Barofsky,whom journalist Glenn Greenwald once called"easily...one of the most impressive and courageous politicalofficials in Washington," in congressional hearings in 2010unveiled a breathtaking possible projected costto the taxpayers of $23 trillion for the bank and financialservices bail-outs, all told, should "worst-case scenarios...cometo pass in a variety of federal programs."

Barofsky is a former federal prosecutor and now a professor of lawat NYU who famously butted heads withSecretary of the Treasury Timothy Geithner, and the rest of thefinancial political establishment. Needless to say he was forcedout of his job.

"TARP is just the best known program in an array of more than 30overseen by Treasury Department and Federal Reserve that have paidout or put aside money to bail out financial firms and inject moneyinto the markets," says Mother JonesMagazine, which goes on to list of bewildering array of loansand loan guarantees, most of which will never, and can never, bepaid back.

Just as important as the Kabuki theater is the carefully nurturedillusion that the bank bail-outs got paid back. These usually referonly to TARP, and even that didn't get paidback.

Even the low figures for the total cost of the bail-outs,$12 trillion to $14trillion, are three times the size of an entire US budget. Themoney gets paid out month after month, well-hidden in the mostarcane, inaccessible reaches of the US budget.

It is not easy to find, and it is not meant to be.

Most people associate a figure of $700 billion to the bail-outs,but that is only TARP. Bloomberg News notes:"it turns out that that $700 billion is just a small part of a muchlarger pool of money that has gone into propping up our nation'sfinancial system. And most of that taxpayer money hasn't had muchpublic scrutiny at all."

How did the US taxpayer get on the hook for such unimaginableamounts, which, in current dollars, is morethan all the wars the US has ever fought, the Moon landings,and the New Deal, combined? It's not that hard conceptually. Thinkof going to Vegas with your grandmother's money and losing it all.Now you are "too big to fail." But, so enormous is your greed, youdon't just want back what you rolled into town with in your moneybelt. You want what you were up for awhile at the roulette table.That could be anything.

These sums mean the US taxpayer will be in hock for generations,and that is the entire point. Since now we owe the bankers' debts,all other programs, from military to welfare, are squeezed againstthis, and it never disappears. We can pay them today, or we can paythem tomorrow. But we are going to keep paying them, and raisingthe debt ceiling to do it. If we don't they crash the economy, toshow they are "too big to fail."

Worse, if that can be imagined, the bail-outs only made the problemworse.

Barofsky wrote in Bloomberg News:

"The top banks are 23 percent larger than they were before thecrisis. They now hold more than $8.5 trillion in assets, theequivalent of 56 percent of gross domestic product, up from 43percent just five years ago. The risk in our banking system isremarkably concentrated in these banks, which now control 52percent of all industry assets, up from 17 percent four decadesago. There is broad recognition that Dodd-Frank hasn't solved theproblem it was meant to address -- the power and influence of banksdeemed too big to fail."

Barofsky told Gawker.com:

"The incentives are all still in place for the TBTF banks toaccumulate dangerous amounts of risk in the quest for short-termprofits with the assurance that if their bets do not pay off, they(and most importantly from the perspective of market discipline)and their counterparties/creditors) [sic] will be bailed out by thegov't. Combine that with a lack of accountability forbad/fraudulent behavior, and you have a toxic cocktail that willbring about another crisis. Regulatory reform did nothing to changethose incentives."

Bloomberg News' Bob Ivrey in fact reportsthat, as of as late as May of this year, investors were back inVegas and happily doubling down on the big money tables, andbetting on more bail-outs, and the "too big to fail" strategy.

In other words, as Barofsky told an online audience at Gawker.comin a free-wheeling exchange withparticipants: "We're pretty f*cked."

There is another solution, tried to fortuitous effect in Iceland.The government took ever the banks, minimized the pain, andstarted arresting the bankerswho caused the problem, instead of bailing themout. Recent reports show Iceland outperforming the rest of theEU and its economy buzzing along nicely.

Barofsky wrote in Bloomberg: "The American people should berevolted by a financial system that rewards failure and protectsthose who drove it to the point of collapse and will undoubtedly doso again."

So cynical is the "budget crisis," manufactured by both parties,that World War II veterans who stormed Normandy have been made intopawns at war memorials.

The choice for America is clear. Either wake up, and knock thepoliticians of both parties' heads together next year at the ballotbox, or consign ourselves to Barosfky's F-bomb analysis.

Neil Barofsky is author of the book "Bailout:How Washington Abandoned Main Street While Rescuing WallStreet."

[David Guyatt]

Barofsky told Gawker.com:

"The incentives are all still in place for the TBTF banks toaccumulate dangerous amounts of risk in the quest for short-termprofits with the assurance that if their bets do not pay off, they(and most importantly from the perspective of market discipline)and their counterparties/creditors) [sic] will be bailed out by thegov't. Combine that with a lack of accountability forbad/fraudulent behavior, and you have a toxic cocktail that willbring about another crisis. Regulatory reform did nothing to changethose incentives."

Bloomberg News' Bob Ivrey in fact reportsthat, as of as late as May of this year, investors were back inVegas and happily doubling down on the big money tables, andbetting on more bail-outs, and the "too big to fail" strategy.

In other words, as Barofsky told an online audience at Gawker.comin a free-wheeling exchange withparticipants: "We're pretty f*cked."

I suppose this shouldn't come as a surprise. The days of "prudent" banking has long since passed. The genie is out of the bottle and can't be put back in without a complete change in the ruling creed of the US and the west.

Why should bankers care if the casino in which they play might go bust again? That's not their problem. All they want are their share of the chips and free access to to the tables. The bottom line is that it's not their money they're playing with - it's other people's money, from which they can leverage out their own personal fortunes, so why care?

The big danger for me, is if and when the reserve currency status of the dollar comes to a close - and I think it is certain it's a when rather an if. That will be the economic end to the US, when the time arrives for all those chips to be paid. It will be an equivalent of a nuclear explosion in NYC and Washington.

[Peter Presland]

.... Why should bankers care if the casino in which they play might go bust again? That's not their problem. All they want are their share of the chips and free access to to the tables. The bottom line is that it's not their money they're playing with - it's other people's money, from which they can leverage out their own personal fortunes, so why care?

Precisely.

The big danger for me, is if and when the reserve currency status of the dollar comes to a close - and I think it is certain it's a when rather an if. That will be the economic end to the US, when the time arrives for all those chips to be paid. It will be an equivalent of a nuclear explosion in NYC and Washington.

... Which is PRECISELY why our connected Deep Establishments will do absolutely anything they judge may prevent - or at least delay - that happening. The big question for me is: when will the current perception of a commonality of interest among those Establishments fragment into the behaviour of rats on a sinking ship? - because sure as hell that is what we are inevitably faced with.

[David Guyatt]

... Which is PRECISELY why our connected Deep Establishments will do absolutely anything they judge may prevent - or at least delay - that happening.

I couldn't agree more Peter. The real fear I have is that "they" would rather see the world go down in flames than hand over the game t someone else. And the double fear is that they have the means to achieve that end.

Human ingenuity will not get us out of this black spiral.

We can only hope for an Act of God to do it for us.

[David Guyatt]

From The Slog:

GLOBAL LOOTING: MORGAN OF WALL ST PASSES ITS COST OF GUILT ONTO MAIN ST

BY JOHN WARD OCTOBER 21, 2013 JAMIE DIMON NOT COLLARED JP MORGAN FINED $13BN JP MORGAN INTRODUCES HIGHER COSTS FOR SMALL BUSINESSESMORGAN BOARD SETS ASIDE $39BN THE CAPITAL CONTROLS THAT NEVER WERE

The real story of the capital controls that never were

Wonder if Main Street sees it the same way as Wall Street….

Below is a direct quote (with my emphasis) from a recent Market Oracle:
When an economy is excessively over-indebted and disinflationary factors force central banks to cut overnight interest rates to as close to zero as possible, central bank policy is powerless to further move inflation or growth metrics. The periods between 1927 and 1939 in the U.S. (and elsewhere), and from 1989 to the present in Japan, are clear examples of the impotence of central bank policy actions during periods of over-indebtedness.
Four considerations suggest the Fed will continue to be unsuccessful in engineering increasing growth and higher inflation with their continuation of the current program of Large Scale Asset Purchases (LSAP):

• First, the Fed's forecasts have consistently been too optimistic, which indicates that their knowledge of how LSAP operates is flawed. LSAP obviously is not working in the way they had hoped, and they are unable to make needed course corrections.
  
• Second, debt levels in the U.S. are so excessive that monetary policy's traditional transmission mechanism is broken.
  
• Third, recent scholarly studies, all employing different rigorous analytical methods, indicate LSAP is ineffective.
  
• Fourth, the velocity of money has slumped, and that trend will continuewhich deprives the Fed of the ability to have a measurable influence on aggregate economic activity and is an alternative way of confirming the validity of the aforementioned academic studies.'
  

Unusually for me given the source, I agree with every word of it. So too do St Andrews Investments, and most of the wealth managers with whom I confer. The US continues to head for certain default because the underlying problem is not being addressed….and the banks are still out of control.
Taking that last point, read this from the Daily Telegraph at the weekend with, again, my emphasis:
JP Morgan, America's biggest bank, has reached a $13bn deal with US regulators to settle claims that it mis-sold bundles of toxic mortgage debt to investors in the build up to the financial crisis. The latest deal with JP Morgan was reportedly thrashed out on Friday on a call between Mr Dimon, the bank's top lawyer Stephen Cutler, US Attorney General Eric Holder and his deputy Tony West. Mr Dimon had previously offered $11bn and was asking for a "non-prosecution agreement" that would end any criminal investigations.However, on Friday, he accepted the higher sum and dropped his main condition.
In dropping his main condition, Dimon has been forced to accept a massive set-aside thought by some to be upwards of $39 billion. Obviously, the bloke felt he had no choice.
This is probably because JP Morgan made false statements and omitted material facts in selling $33bn of mortgage bonds to S&L houses Fannie and Freddie between 2005 and 2007 the height of the toxic mortgage boom in the US when even unemployed citizens with no deposit were offered large home loans. It was a deliberate attempt to dump toxic crap onto banks favoured by less well-off Americans….a way, if you like, of getting John and Jane Doe to pay for Morgan's own greed-fuelled and suicidal attempts to hit targets.
Yet somehow, once again no collars are to be felt. Mr Dimon is up there with Bernie Madoff in terms of knowingly defrauding hundreds of thousands of people. But he is too big to jail: he is not in the dock, he is not even being investigated yet. Worse still, the bugger is already on the case of passing the cost of Justice on to Main Street America.
Here's how, in looking for a Washington conspiracy, the blogosphere got it wrong last week.
Two days before Friday's grubby deal, Zero Hedge et al went big with the story that Morgan was introducing capital controls. Looked at more closely, however, the story doesn't stack up. What the Pirate is doing sucks (as usual) but it has in my view nothing to do with CCs.
Consider: the new $50,000 limit on monthly cash activity is only being imposed on small business current accounts. And if SMEs do want that increased, they'll have to pay for it.
Consider: as of last Friday, the bank's business banking website shows that international transfers arestill available - but businesses will have to pay for them.
Getting the picture yet? For their mates in the big multinational sector, Morgan's price increases will be either zero or a fleabite on the backside. For SMEs, they'll be a left-hook to the jaw.
As far as I can see, there are no capital controls here. What we're seeing, as usual, is the cost of previous crookery in mis-selling to blue-collar and middle America being passed on to that very same group. Might is Right, and the small must fail. The cancer of our age.
The Feds will obviously realise this. And you'd sort of expect a supposedly left of centre Democrat US President to stop it in some way. Forget it: as I've insisted from Day One, there is no beef in the Black Dude's sandwich, and no cojones downstairs in the trouser department.

[Peter Lemkin]

A federal judge in Manhattan who oversaw a recent fraud trial against Bank of America has criticized the Obama administration for failing to prosecute a single high-level executive over the financial crisis. In a speech this week, Judge Jed Rakoff honed in on Attorney General Eric Holder's statement that it is difficult to prosecute banks when it seems doing so could hurt the economy. Judge Rakoff said, "To a federal judge, who takes an oath to apply the law equally to rich and to poor, this excuse sometimes labeled the 'too big to jail' excuse is disturbing, frankly, in what it says about the department's apparent disregard for equality under the law." Judge Rakoff noted Holder was referring to the prosecution of institutions, adding that when it comes to prosecuting CEOs "the excuse becomes entirely irrelevant." Last week, New York Federal Reserve president William Dudley also criticized the big banks, saying some have an "apparent lack of respect for law, regulation and the public trust."

[Peter Lemkin]

In the latest potential financial scandal, the United States is investigating the actions of a group of traders at the world's largest banks. Nicknamed "the cartel," the traders allegedly shared information in online chat rooms in a bid to manipulate the price of foreign currencies. Attorney General Eric Holder told The New York Times, "The manipulation we've seen so far may be just the tip of the iceberg."

[David Guyatt]

In the latest potential financial scandal, the United States is investigating the actions of a group of traders at the world's largest banks. Nicknamed "the cartel," the traders allegedly shared information in online chat rooms in a bid to manipulate the price of foreign currencies. Attorney General Eric Holder told The New York Times, "The manipulation we've seen so far may be just the tip of the iceberg."

What a load of lawyer bollocks. It's always the "tip of the iceberg" - never the iceberg itself that gets convicted and jailed.

As if Holder has never heard of "dark pools".

You'd have to life in saintly isolation not to know that all markets are regularly manipulated by those who are involved in it.

[David Guyatt]

What does a defaulted bank rescued by the government do to get back into a "healthy" state?

The latest wheeze comers from the majority government owned RBS.

According to the news today, RBS engineered successful and viable businesses it had a relationship with, into a situation of default, whereby it could place the firm into a special category and, thereafter, hugely hike up lending rates and bank charges, turning the viable business into a wreck. The bank then could effectively buy the wrecked business assets at knock down prices - some as low as 30 pence on the pound - and then sell those assets for a vast profit.

All's fair in love and profiteering...

24 November 2013Last updated at 10:50 ETShare this page

Vince Cable sends report on RBS conduct to watchdogs




Lawrence Tomlinson: "The treatment that some of these companies have had is horrendous"

Business Secretary Vince Cable has referred a report about how RBS dealt with small business to City regulators.
RBS put some "good and viable" businesses into default so it could make more profit, it is claimed in a report by government adviser Lawrence Tomlinson released on Monday.
The findings have been sent to the Financial Conduct Authority and the Prudential Regulation Authority.
RBS said it was already committed to an investigation into customer treatment.
The allegations centre on the bank's Global Restructuring Group (GRG) lending division, which specialises in handling loans seen as being more risky.
The Tomlinson report says that putting a business into the GRG generates revenue for the bank through fees, increased profit margins and the purchase of devalued assets by their property division, West Register.
The practice of removing a bad debt from a bank's books is not an unreasonable one, particularly as major lenders have been trying to move away from riskier assets.
But Mr Tomlinson told the BBC that there is a perception among small businesses that they are being "purposefully distressed" in order to get them into the GRG, which even if wrong, should be addressed by RBS.
'Really disturbing'Mr Tomlinson acted independently of government in producing the report, and did not set out to look solely at RBS.
But he said what he had uncovered through talking to businesses had put RBS and its GRG into focus.
He also said conversations with affected businesses had made a big impact on him.
"I feel really sick sometimes. It is really disturbing," he said.
"It is ruining people's businesses for sure, and in some cases having a huge impact on their personal lives too, even leading to family breakdown."
The bank said in a statement: "In the boom years leading up to the financial crisis, the over-heated property development market became a major threat to the UK economy.
Continue reading the main story"Start Quote

GRG successfully turns around most of the businesses it works with"

RBS
"RBS did more than its fair share to fuel this and commercial property lending was one of the key drivers of our near collapse as valuations rapidly plummeted.
"Facing up to these mistakes has been a difficult, but essential part of making RBS a safe and strong bank once again."
Mr Cable said: "Some of these allegations are very serious and I am waiting for an urgent response as to what actions have been taken.
"I am however confident that the new management of RBS is aware of this history and is determined to turn RBS into a bank that will support the growth of small and medium sized businesses."
ActionThe shadow business secretary, Chuka Umunna, said: "The claims made by Lawrence Tomlinson against RBS' Global Restructuring Group are extremely serious indeed.
"To artificially distress otherwise successful businesses in order to seize their assets and profit would be utterly scandalous and deplorable. It's right that the FCA [Financial Conduct Authority] and PRA [Prudential Regulation Authority] look into the claims as a matter of urgency."
BBC business correspondent Joe Lynam says that if it is shown that RBS deliberately put viable companies out of business, it could open the bank to extensive legal action.
The 81% state-owned bank's report into its own lending practices to small and medium sized companies by the former Bank of England deputy Governor Sir Andrew Large will also be published on Monday.
RBS's new chief executive Ross McEwan has already said this report will make for uncomfortable reading, but promised to implement its findings in full

From BBC News