Defaulting banks - where will it stop?

[Damien Lloyd]

After watching the US housing bubble burst in 2005 I realised that the same thing was imminent in the UK so I took our small wedding fund out of our high interst savings account and bought gold bullion. My fiance was a little distressed at this but I managed to talk her round (for the first time ever :rock. Our savings were meagre to say the least.
Last month with a gas bill that was.. well BLATENT THEFT, Christmas only days away, and news that we were about to become parents. I sold the bullion, paid some bills, paid for Christmas and was left with just a little less cash than I'd originally invested.

I'm the only person I know who is actually better off because of the economic crisis. So what next? Well I bought some shares of a failing and hideously expensive camera retail outlet called Jessops for less than a penny, and sold them again on Monday for over 3p.

This is great. Or it would be if I wasn't expecting my next gas bill to be much higher than the last, my electric bill to be a form of contactless rape, and higher taxes for the next 20 years or so. Add to that the fear over a leaked plan from my employer to get rid of around 50,000 of us this year, The cost and practicality of childcare, and of course the impending sense of general doom that seems to dominate every aspect of life on this little world into which I bring a new victim.

It's not all bad... YET!!!

[Jan Klimkowski]

Smoke, mirrors and big whopping lies:

http://www.boston.com/business/articles/...ny_trades/

As investigators try to untangle the scheme that Bernard L. Madoff hid from investors and regulators for a decade or more, one basic fact is emerging: He may not have been making any trades at all.

A federal agency that regulates brokerage firms says there is no record of Madoff's investment funds placing trades through his brokerage operation. That leaves only two options - either he was placing trades only through other firms, which would be highly unusual, or he was not placing any trades.

"There was no evidence of the Madoff broker-dealer executing trades for the [Madoff] investment adviser," said Herb Perone, spokesman for the regulatory group, the Financial Industry Regulatory Authority. A broker-dealer is any firm that buys and sells securities.

FINRA and its predecessor, the National Association of Securities Dealers, has been examining the records of Madoff's broker-dealer operation, Bernard L. Madoff Investment Securities, every two years since the firm started in 1960. The last exam was in 2007, Perone said.

The finding is one of many facts investigators are poring over as they seek to piece together Madoff's alleged $50 billion Ponzi scheme, according to a lawyer involved in the case. Evidence that Madoff - who made his name as a trader of Nasdaq stocks - did not process any of his investment funds' trades through his own brokerage is a key indicator that he was not making the trades he claimed.

Ordinarily, a firm that owns both an investment advisory business and a broker-dealer, like Merrill Lynch & Co., would place a large portion of trades through its own broker-dealer. That's because a firm wants to earn fees on its own trades if possible. Investment firms must seek "best execution," or the best deal they can get on trades for their customers, so some trades typically will be handled by other firms. But to farm out every trade is almost unheard of.

A Madoff lawyer, Daniel J. Horwitz, declined to comment on Madoff's trading.

If Madoff was making no real trades, the complicated statements he sent out to customers were apparently fiction - and in fact may have been part of his coverup. Statements were often so complicated that investors had to call representatives of the firm for explanations.

One Boston-area customer's November 2008 statement is six pages long and shows a dizzying list of trades. According to the statement, Madoff purchased stocks including Wal-Mart, IBM, and Intel, as well as options on the Standard & Poor's 100 index. The statement also says he bought and sold shares of the Fidelity Spartan US Treasury Money Market - a fund Fidelity Investments said had been renamed back in 2005.

Moreover, Fidelity, the Boston investment firm, says Madoff was not a client of the firm. That is, Madoff's firm did not interact with any part of Fidelity that deals with investment advisers and other intermediaries that ordinarily make investments for their clients through Fidelity.

We are not aware of any investments by Madoff in our funds on behalf of his clients," Fidelity spokeswoman Anne Crowley said.

Some charitable foundations for which Madoff managed reflect heavy trading in their tax filings, trading that may never have happened. For instance, in the Carl & Ruth Shapiro Family Foundation's 2007 tax filing, there was $452 million of trading on $324 million of assets. And for the Sidney R. Rabb Charitable Trust, the foundation of the Goldberg family that owned the Stop & Shop supermarkets, a 2006 tax filing shows $102 million of trading on $20 million of assets. Madoff managed part of the Rabb trust.

Investors with Madoff appear to have asked few questions of the man who sent them statements professing to have earned double-digit profits year in and year out. The Securities and Exchange Commission, too, did not ask questions, despite having been warned by a whistle-blower numerous times that Madoff was running a Ponzi scheme - using the most recent investors' money to pay off earlier investors.

Regulators are investigating whether Madoff's business associates knew he was potentially making up customer statements. One associate, Robert Jaffe, who recruited Boston-area investors, so far has not appeared to provide testimony to Secretary of State William F. Galvin, despite being subpoenaed to do so.

Yesterday, Galvin's office filed a complaint in Massachusetts Superior Court to compel Jaffe to appear. Jaffe, who lives in Weston and Palm Beach, Fla., failed to appear for a hearing Tuesday. His spokesman said Jaffe was ill and that his lawyers had informed state officials he would not appear. The regulators said they were rebuffed in an offer to travel to Palm Beach, where Jaffe spends the winter, to take his deposition, according to the complaint.

The regulators allege Jaffe "has attempted and may further attempt to delay, hinder or avoid appearing," and set a new hearing of Jan. 21 in Boston, at 10 a.m.

Jaffe's lawyer, Stanley S. Arkin, called the allegation that Jaffe was avoiding the hearing "baloney." He said of the complaint, "We will deal with this lawsuit, as we deal with any lawsuit, by defending it appropriately."

Madoff, meanwhile, will remain in his apartment while he awaits trial. A judge yesterday denied prosecutors' efforts to send him to jail for violating his bail agreement. Madoff had sent jewelry to relatives, breaking the terms of his bail conditions. But the judge ruled he is not a flight risk.

[Jan Klimkowski]

After watching the US housing bubble burst in 2005 I realised that the same thing was imminent in the UK so I took our small wedding fund out of our high interst savings account and bought gold bullion.

........

Last month with a gas bill that was.. well BLATENT THEFT, Christmas only days away, and news that we were about to become parents. I sold the bullion, paid some bills, paid for Christmas and was left with just a little less cash than I'd originally invested.

You did well to sell that gold whilst They still let you.

In the last Depression, They confiscated all gold held by private citizens, under - yes, you couldn't make up this shit - the Trading With The Enemy Act, with a forced sale to, yes, the Federal Reserve:

http://en.wikipedia.org/wiki/Gold_confiscation

Unless (or probably even if) They print, we're experiencing debt destruction and deflation. Even if They let us keep our gold, it's not much use because in a deflationary environment you need things you can eat or shoot with. :beerglass:

[David Guyatt]

After watching the US housing bubble burst in 2005 I realised that the same thing was imminent in the UK so I took our small wedding fund out of our high interst savings account and bought gold bullion.

Damien, was it "physical metal" you bought or paper gold like gold bullion ETF's? I understand that it is virtually impossible to get delivery of physical metal, even coins like Krugerrands, and most buyers end up owning paper instead. Only the truly wealthy can afford physical metal and they are piling into it in droves as the expectation of defaults of the US dollar and even feasibly Sterling in the next few months are seriously being talked about. This obviously is pushing the price up and up.

Just nosey is all...

[David Guyatt]

Smoke, mirrors and big whopping lies:

http://www.boston.com/business/articles/...ny_trades/

As investigators try to untangle the scheme that Bernard L. Madoff hid from investors and regulators for a decade or more, one basic fact is emerging: He may not have been making any trades at all.

A federal agency that regulates brokerage firms says there is no record of Madoff's investment funds placing trades through his brokerage operation. That leaves only two options - either he was placing trades only through other firms, which would be highly unusual, or he was not placing any trades.

"There was no evidence of the Madoff broker-dealer executing trades for the [Madoff] investment adviser," said Herb Perone, spokesman for the regulatory group, the Financial Industry Regulatory Authority. A broker-dealer is any firm that buys and sells securities.

Snip...

In the light of this, I now wonder if Madoff could've been running a laundry operation? The big name banks who placed money with him are usually very strict on Due Diligence to avoid this exact sort of thing happening. Something here doesn't appear to add up - albeit that crookedness in the banking community is now business as usual.

[Jan Klimkowski]

In the light of this, I now wonder if Madoff could've been running a laundry operation? The big name banks who placed money with him are usually very strict on Due Diligence to avoid this exact sort of thing happening. Something here doesn't appear to add up - albeit that crookedness in the banking community is now business as usual.

Bingo!

A very astute observation, Mr Guyatt. :top:

Which makes the nature of some of his known "investors" intriguing. Lots of "clever" people invested in, say, Carlyle funds because they believed that all that insider dirty money would make above-average profits and be "safe".

The moral may be that when the spooks get into black money trouble, They'll screw anybody.

Because I'm being lazy, here is wiki's list of "known" affected investors derived from MSM financial press sources. I offer it as a starter for ten only, not as anything resembling a definitive list:

Largest stake-holders

According to The Wall Street Journal[101] the investors with the largest potential losses include:

* Fairfield Greenwich Advisors, $7.50 billion
* Tremont Capital Management, $3.30 billion
* Banco Santander, $2.87 billion
* Bank Medici, $2.10 billion
* Ascot Partners, $1.80 billion
* Access International Advisors, $1.40 billion
* Fortis, $1.35 billion
* Union Bancaire Privée, $1.00 billion
* HSBC, $1.00 billion

The potential losses of these nine investors total $22.32 billion.

Other investors, with potential losses between $100 million and $1 billion include:

* Natixis SA
* Carl J. Shapiro (a 95-year-old Boston philanthropist)
* Royal Bank of Scotland Group PLC
* BNP Paribas
* BBVA
* Man Group PLC
* Reichmuth & Co.
* Nomura Holdings
* Aozora Bank[102]
* Maxam Capital Management
* EIM SA
* AXA SA

The potential losses of these investors total $4.02 billion.

Nine West shoes co-founder Jerome Fisher is rumored to have lost $150 million with Madoff. [103]

Twenty-three investors with potential losses of $500,000 to $100 million were also listed, with total potential losses of $540 million. They included Bramdean Alternatives run by Nicola Horlick, for example. The grand total potential losses in the Wall Street Journal table is $26.9 billion.

On December 24, 2008, Bloomberg News listed financial losses related to Madoff's fraud totaling $36 billion, which may include double counting from investors in feeder funds.[104][105] A partial list of Madoff's victims from the Bloomberg report includes US Senator Frank Lautenberg's charitable foundation, the Horowitz Association at $800 million, $696 million in losses to Notz, Stucki & Cie, up to $614 million to Natixis SA, BNP Paribas SA at up to $478.2 million, $400 million in losses to Fix Asset Management, $302 million in losses to Nomura Holdings Inc., and $110 million to Yeshiva University.[104]

Some investors have amended their initial estimates of losses to include only their original investment, since the profits Madoff reported to them which they were including were most likely fraudulent. Yeshiva University, for instance, said its actual incurred loss was its invested $14.5 million, not the $110 million initially estimated, which included alleged profits reported to the university by Madoff.[106]

http://en.wikipedia.org/wiki/Madoff#Affected_clients

[Jan Klimkowski]

Nothing to see here, move along... leep:

Government Regulators Aided IndyMac Cover-Up, Maybe Others
Darrel Dochow May Not Be the Only Official Who Helped Banks Hide Financial Problems

A brewing fraud scandal at the Treasury Department may be worse than officials originally thought.

Investigators probing how Treasury regulators allowed a bank to falsify financial records hiding its ill health have found at least three other instances of similar apparent fraud, sources tell ABC News.

In at least one instance, investigators say, banking regulators actually approached the bank with the suggestion of falsifying deposit dates to satisfy banking rules -- even if it disguised the bank's health to the public.

Treasury Department Inspector General Eric Thorson announced in November his office would probe how a Savings and Loan overseer allowed the IndyMac bank to essentially cook its books, making it appear in government filings that the bank had more deposits than it really did. But Thorson's aides now say IndyMac wasn't the only institution to get such cozy assistance from the official who should have been the cop on the beat.


Former bank regulator Darrel Dochow evades ABC News' questions about the Treasury Department Inspector General's investigation into allegations he allowed IndyMac to cook its books when he worked at the Office of Thrift Supervision.
(ABC News)


The federal government took over IndyMac in July, after the bank's stock price plummeted to just pennies a share when it was revealed the bank had financial troubles due to defaulted mortgages and subprime loans, costing taxpayers over $9 billion.

Darrel Dochow, the West Coast regional director at the Office of Thrift Supervision who allowed IndyMac to backdate its deposits, has been removed from his position but he remains on the government payroll while the Inspector General's Office investigates the allegations against him. Investigators say Dochow, who reportedly earns $230,000 a year, allowed IndyMac to register an $18 million capital injection it received in May in a report describing the bank's financial condition in the end of March.

"They [IndyMac] were able to maintain their well-capitalized threshold and continue to use broker deposits to make loans," said Marla Freedman, an assistant Inspector General at Treasury. "Basically, while the institution was having financial difficulty, it kept the public from knowing earlier than it otherwise should have or would have."

Critics Point to Cozy Relationship Between Banks and Regulators

In order to backdate the filings, IndyMac sought and received permission from Dochow, according to Freedman.

"That struck us as very unusual," said Freedman. "Typically transactions are to be recorded in the period in which they occur, not afterwards. So it was very unusual."

One former regulator says Dochow's actions illustrate the cozy relationship between banks and government regulators.

"He did nothing to protect taxpayers in losses," former federal bank regulator William Black told ABC News. "Instead of correcting it [Dochow] made it worse by increasing the accounting fraud."

Meanwhile, IndyMac customers who lost their savings are demanding answers and are further infuriated after learning Dochow was also the regulator in 1989 who oversaw the failed Lincoln Savings and Loan, a scandal that sent its CEO Charles Keating to prison.

"He's the person that claimed that he looked into Charles Keating's eyes and knew that Charles Keating was a good guy and therefore ignored all of the professional staff that told him that Keating was a fraud, and he produced the worst failure of the Savings and Loan Crisis at $3.4 billion. Now he's managed more than triple that," said Black, now an economics professor at the University of Missouri in Kansas City, Missouri.

Following the Lincoln scandal, Dochow was demoted and placed into a relatively obscure office, but later, inexplicably was brought back into the Office of Thrift Supervision.

Dochow declined to answer questions from ABC News.

IndyMac Customers Furious

After Ronnie Lopez was killed in Iraq, his mother Elaine invested the $37,000 she received in life insurance at IndyMac. She lost all of it.

"I was hysterical," she told ABC News. "I literally thought I was going to kill myself that day, because I felt so bad that I had let him down. I remember going to his grave and telling him "don't worry, I'm going to get that money back', and I feel like he was saying 'hey mom, don't let them take that. I did the ultimate for that'."

A group of angry investors has started a website, demanding answers on the extent of Dochow's actions.

"It's just the strife and anger," said IndyMac customer Lisa Marshall. "That this Dochow person is still employed, it's unbelievable, it's shocking."

While Dochow could end up losing his job, neither he nor his colleagues are expected to go to prison.

"This is criminal with the small 'c'," said Black. "No one within the regulatory ranks may go to jail, but they have done the worst possible disservice to the taxpayers of America."

Maddy Sauer contributed to this report.

http://abcnews.go.com/Blotter/Economy/st...365&page=1

[Magda Hassan]

I don't know that the other banks are doing anything different sice they all acted like greedy fools to get into this situation.



Bank of America: Bad for America
Posted by ZP Heller, Brave New Films at 3:41 PM on January 15, 2009.





Bank of America is spending like a drunken sailor, but not on anything that will serve as a life raft for our drowning economy. The largest bank in the US received a whopping $25 billion in bailout funds from our government, but has invested $7 billion in an overseas bank and dropped another $10 million on DC lobbyists.
It gets much much worse. The company employs 247,000 workers, but won't foot the bill for their healthcare, worth an estimated $50 million that's coming out of public funds (on top of the bailout). And since the government wrote Bank of America a $25 billion check, the company announced plans to layoff 35,000 workers over the next three years -- a record for the financial industry. These are workers whose median salary was only about $23,000 to begin with. Meanwhile, the company is still flying their executives around on a fleet of nine corporate jets worth over $200 million alone.
To say nothing of Bank of America's predatory lending practices, the fact that they own Countrywide, the company responsible for the subprime crisis, or that they are dead set against federal legislation that would help mortgage borrowers avoid foreclosure. And oh yeah, the Wall Street Journal just reported the Treasury is planning to give Bank of America billions more!
With such flagrant corporate greed, it's no wonder the SEIU is up in arms. My only question is, why aren't the rest of us?


In a national day of action today, the SEIU took on Bank of America at their headquarters in New York, Los Angeles, Chicago, Boston, Charlotte. Mac D'Alessandro, the SEIU's political director for the New England area, told me that about 100 people braved the bitter cold on Boston's Federal Street to pass out flyers to employees and passersby, who, for the first time D'Alessandro could recall, eagerly accepted them. When the group attempted to present Bank of America with a giant STOP PAYMENT check, however, they were cordoned off by police. "The biggest shock though," said D'Alessandro, "was that no one from corporate bothered to come down and accept the check."
Bank of America might have bounced the SEIU's novelty check today, but the SEIU certainly won't be thwarted. Today's action was part of a much broader campaign to mobilize activists around the country and pressure Bank of America to use its bailout billions properly. And you can join by telling Bank of America to help its workers and fix the economy or kindly give its bailout back.

[Peter Lemkin]

Isn't THAT disgusting!!! The 'ethics' of American Business are anti-ethics!! Greed has become the norm and the 'degree' one needs to 'rise' to the 'top' [along with connections]. A system such as this can NOT be reformed; it must be removed and replaced. I fear Americans are not 'up' to that - and won't be until there is nothing left to save. In answer to the question in the thread header, I don't think it will stop - not until every dollar has been stolen from the average and poor - by the ultra-rich! Sadly. It is now happening at light-speed. I'd give the Nation and many others a few years, tops, on the economic front.

[Damien Lloyd]

"Damien, was it "physical metal" you bought or paper gold like gold bullion ETF's? I understand that it is virtually impossible to get delivery of physical metal, even coins like Krugerrands, and most buyers end up owning paper instead. Only the truly wealthy can afford physical metal and they are piling into it in droves as the expectation of defaults of the US dollar and even feasibly Sterling in the next few months are seriously being talked about. This obviously is pushing the price up and up.

Just nosey is all... "


I owned the gold, but never saw it. www.bullionvault.com I can assure you I was extremely unsure about this site at first. But did a little research and gave it a go, I'd also recommend it to anyone. Of course as a british based company I have no idea what would happen if the British government tried to steal the gold the way the federal reserve did. I've been told that keeping it in a zurich vault would protect it but I have no idea if it's true. I'm waiting for a price correction before jumping back in. Have a look at the site and tell me what you think.