FedUpUSA

They just never stop, do they?

MANY people became rightfully upset about bailouts given to big banks during the mortgage crisis. But it turns out that they are still going on, if more quietly, through the back door.

The existence of one such secret deal, struck in July between the Federal Reserve Bank of New York and Bank of America, came to light just last week in court filings.

…

Still, last week’s details of the undisclosed settlement between the New York Fed and Bank of America are remarkable. Not only do the filings show the New York Fed helping to thwart another institution’s fraud case against the bank, they also reveal that the New York Fed agreed to give away what may be billions of dollars in potential legal claims.

And how much political hay have your seen about this, or disclosure for that matter?  Zero, right?

When did this happen?  Last July.

When was it disclosed?  Last Wednesday.

Who authorized what looks like a $7 billion gift to Bank of America?  Who knows.

Here’s the real scandal in all this: It appears that The Fed effectively released Bank of America from these claims for zero in compensation — that is, they got nothing in return for it.

The problem with these sorts of deals isn’t necessarily that they happen at all.  It’s that they happen with zero disclosure up front and debate, and then are presented as an “accomplished fact” later on and the people who get reamed by it have no recourse.

Just as with our “Just US” system has allowed financial institutions to commit myriad and sundry felonies for as little as $35 each and sometimes less, we have civil claims being released without any compensation at all — claims that do belong to someone, and funds that (if the conduct is proved) are owed to someone.

It is very difficult to argue that the citizens of the nation should obey the law when those who are wealthy, powerful and well-connected can simply ignore that very same law, knowing they can pay a trivial fine — or none at all – when they get caught.

Many Americans probably think the Dodd-Frank financial reform law will protect taxpayers from future bailouts. Wrong. In fact, Dodd-Frank actually widened the federal safety net for big institutions. Under that law, eight more giants were granted the right to tap the Federal Reserve for funding when the next crisis hits. At the same time, those eight may avoid Dodd-Frank measures that govern how we’re supposed to wind down institutions that get into trouble.

In other words, these lucky eight got the best of both worlds: access to the Fed’s money and no penalty for failure.

Which institutions hit this jackpot? Clearinghouses. These are large, powerful institutions that clear or settle options, bond and derivatives trades. They include the Chicago Mercantile Exchange, the Intercontinental Exchange and the Options Clearing Corporation. All were designated as systemically important financial market utilities under Title VIII of Dodd-Frank. People often refer to these institutions as utilities, but that’s not quite right. Many of these enterprises run lucrative businesses, have shareholders and reward their executives handsomely. Last year, the CME Group, the parent company of the Chicago Mercantile Exchange, generated almost $3.3 billion in revenue. Its chief executive, Craig S. Donohue, received $3.9 million in compensation and held an additional $10 million worth of equity awards outstanding, according to the company’s proxy statement.

Make no mistake: these institutions are stretching the federal safety net. The Chicago Merc clears derivatives contracts with a notional value in the trillions of dollars. I.C.E. clears most of the credit default swaps in the United States — billions of dollars a day, on paper. No wonder they are considered major players in our financial system.

But placing them at the bailout trough is wrong, according to Sheila Bair, the former head of the Federal Deposit Insurance Corporation. In a recently published book, Ms. Bair wrote that top officials at the Treasury and the Fed, over the objections of the F.D.I.C., pushed to gain access for the clearinghouses to Fed lending.

The clearinghouses “were drooling at the prospect of having access to loans from the Fed,” she wrote. “I thought it was a terrible precedent and still do. It was the first time in the history of the Fed that any entity besides an insured bank could borrow from the discount window.” .

“The Treasury’s and the Fed’s reasoning was that since another part of Dodd-Frank was trying to encourage more activity to move to clearinghouses, we should provide some liquidity support to them,” she said in an interview last week. “Our argument back was, if you have an event beyond their control with systemwide consequences, then you have the ability to lend on a generally available basis. What they wanted was the ability to lend to individual clearinghouses.”

The clearinghouses have considerable clout in Washington. From the beginning of 2010 through this year, the CME Group has spent $6 million lobbying, according to the Center for Responsive Politics.

Did these players push for special treatment while avoiding other aspects of Dodd-Frank? Representatives of the Chicago Mercantile Exchange and the Options Clearing Corporation say no, noting that access to the Fed meant they would also be overseen by the central bank, in addition to the Securities and Exchange Commission or the Commodities Futures Trading Commission.

But the Fed’s involvement is not likely to be intrusive, because Dodd-Frank directed it to take a back seat to a financial utility’s primary regulator, either the S.E.C. or the C.F.T.C.

The CME said that it did not support Dodd-Frank’s designation of clearinghouses as systemically important, but once it received the designation, it believed the Fed should provide access to emergency lending. The O.C.C. echoed this point.

Whatever the case, the CME Group has argued that it should be exempt from the orderly liquidation authority set up under Dodd-Frank. This authority was designed to unwind complex and interconnected financial firms that could threaten the financial system if they failed. The law appointed the F.D.I.C. as receiver to resolve teetering entities. That authority is supposed to end the problem of institutions that are too big to be allowed to fail and also to hold their managers accountable.

BUT in a letter to the F.D.I.C. a few months after Dodd-Frank became law, the CME Group asked the F.D.I.C. to confirm that the exchange wouldn’t fall under that authority’s jurisdiction. It is not a financial company as defined by the law, the CME contended, and therefore should not be subject to the resolution process.

The F.D.I.C. has not confirmed the C.M.E.’s view on the matter. But it seems to be gaining traction among other regulators. At an Aug. 2012 presentation last August on resolving financial market utilities, Robert S. Steigerwald of the Federal Reserve Bank of Chicago noted that it was unclear whether a financial utility such as the Chicago Merc would have to be wound down as required under Dodd-Frank.

So these large and systemically important financial utilities that together trade and clear trillions of dollars in transactions appear to have won the daily double — access to federal money, without the accountability.

“Dodd-Frank should have been all about contracting the safety net,” Ms. Bair said last week.  “But this was a huge and unprecedented expansion of the safety net that provided expressed government support for for-profit entities. These financial market utilities are the new government-sponsored enterprises.”

A version of this article appeared in print on November 4, 2012, on page BU1 of the New York edition with the headline: One Safety Net That Needs To Shrink.

Gretchen Morgenson -  Capitalism Without Failure

My God, the Senator got a lobotomy at the Hanoi Hilton!

Thanks to the Federal Reserve, JPMorgan Chase CEO Jamie Dimon, and the Obama administration, the U.S. economy is “bleeding,” John McCain, the Republican Senator from Arizona and former presidential candidate, told CNBC.

…

“I don’t owe Mr. Dimon anything,” McCain said. “Mr. Dimon has done very well as have major financial institutions, and the American people are very unhappy and dissatisfied with it, as they should be.”

….

“I’d have to think about it. … But I’m very unhappy with his {Ed: Bernanke’s} performance and what’s happened to the economy when he’s announced all these measures and all the easy money. Who gets the benefit of the easy money? The big businesses on Wall Street.”

So who was responsible for the beginning of all these hand-outs, “easy money” policies and games in the latest Congress?

Why that would be John McCain!

Does nobody remember that McCain suspended his campaign in 2008 to push through TARP?  Does nobody remember that it was John McCain who was one of the chief apologists for the financial system through the entire process?  Does nobody remember that it was John McCain who’s campaign chiefs told me to my face that they knew damn well that the entire problem was one of greed — in 2008?

McCain would probably prefer that my correspondence and the record be forgotten, but I’m not going to let him get away with that.  You’re a dangerous, mendacious jackass John McCain — a man without principle, a man who ran a campaign fully-aware of the theft and fraud in the financial system yet you refused to speak against it, and what’s worse, you failed as a legislator to do a damn thing about it since.

It’s one thing to be ignorant of what’s going on and make a mistake in judgment as a consequence.  We all make errors as humans, and we all have limitations in our understanding.  I’m ok with that.

But this wasn’t an error; your own people at the highest level of your campaign were well-aware of the theft and fraud that was being put forward by the banksters.  Your own people admitted this to me, to my face, in person.  Your campaign didn’t want to hear it, didn’t want to do anything about it, and refused to stand and demand that the financial rape of our nation stop.

I predicted that refusal would cost you the election, and it did.  But you didn’t even learn from that loss; you have instead gone onward through the previous four years and not lifted one damn finger to put a stop to this crap.  Instead, you have participated in the continued rape of the public by these very same Banksters.  You have participated in the continuation of the Education Bubble (S. Amendment 2153), you have endorsed greater dependency on food stamps (S 3220), you love frankenfood (yeah, I know, not really fiscally related – S Amdt 2108), you didn’t vote on disapproval of expansion of the debt limit by the President (HJ Res 98), you voted for more tax cuts (S Amdt 1465) which weren’t paid for after failing to vote on the original reduction (S 1931), you votedfor the CR in September 26th of 2011 (which was directly responsible for the deficit spending, HR 2608), and more (HJ Res 48, HR 1, etc)

Now, with the wall clearly in front of us exactly as you were warned in 2008 by repeated communications by myself and others you suddenly want to claim to have gotten “religion.”

I’m not buying it nor do I accept any crap about this all being Obama’s fault, as Congress is the one with the purse strings.  Not one thin dime can be spent without both Houses of Congress passing a bill, irrespective of what the President wants.

You, along with your cohorts, can end the deficit spending tomorrow by simply refusing to pass any spending bill that is not in absolute balance, without exception. 

If this shuts down the government and everything it does, so be it.  Yeah, you’ll get blamed.  But if you really believe what you were saying on CNBS, that this is really about an existential threat to our nation (and it is), then this is what must happen, and it must happen now, because for each day the deficit spending continues irrespective of by how much it continues the amount of pain that must be endured to restore balance goes up.

There is no way to evade the arithmetic.  You may not like it, others may not like it, and Congress may not want to face it, but desire has nothing to do with it.

This is arithmetic, not wishes, dreams, and the delusional desires of a Senator.