FedUpUSA

Archive for the ‘Citigroup’ Category

They still write fluff pieces in the WSJ trying to convince you that an admission of criminal conduct isn’t actually an admission and thus couldn’t be prosecuted….

A former top U.S. official in charge of investigating the financial crisis said the government has concluded that many inquiries of wrongdoing by financial executives can’t succeed as criminal prosecutions.

“There’s been a realization and a more deliberate targeting by the Department of Justice before we launch criminally on some of these cases” said David Cardona, who was a deputy assistant director at the Federal Bureau of Investigation until he left last month for a job at the Securities and Exchange Commission. The Justice Department has decided it is “better left to regulators” to take civil-enforcement action on those cases, he said.

Uh huh.  Let’s remember that Citi’s former chief risk officer testified under oath before the FCIC, presenting written documentation, that the firm — all the way into the executive suite — was fully aware that 80% of the loans it was writing and selling on in 2007 did not meet quality standards.

Yet they sold them anyway without disclosing this fact to the buyers.

Were this a food quality case where 80% of the meat sold by a slaughterhouse was known to contain contaminants and led to the death and/or sickness of thousands of people, or a steel quality case where 80% of the steel was known to contain imperfections that led to the collapse of a building and the death of thousands, the executives in question would be sitting in the graybar motel and the firm involved would be out of business.

This is not a singular example.  Wachovia, for example, entered a deferred prosecution agreement — a guilty plea, in effect — for money laundering to the tune of hundreds of millions of dollars of funds laundered for Mexican Drug gangs.  Then there’s the Jefferson County Alabama case in which municipal officials and related parties were actually convicted and went to prison and yet nobody from any of the financial firms involved was criminally prosecuted, nor were the firms themselves.

The latter is especially galling since in order to receive a bribe (the base allegation of corruption that was proved to a criminal standard and led to imprisonment) someone else must offer said bribe and the victims of this scheme were the entirety of the citizens of the county who are stilling paying for the corrupt practices involved and have received no restitution nor do they have any hope of it in the future.

While the apologists say that these cases are “hard to prove” this assertion does not pass the smell test — in many of these cases that I have bird-dogged for years now we have sworn testimony as evidence, in others (e.g. the cases outlined in the 60 Minutes piece that I covered the other day) there are actual whistleblowers who have and will testify and in still others there are actual prosecutions of people on the “other side” of the transactions in question that have led to convictions — that is, cases where the required standard of proof has been met!

You are free to come to whatever conclusion you’d like as to the reason for the lack of prosecution of financial firms and the executives running them, but the “mainstream media” apologist game does not stand up to even the most-cursory level of inquiry.

There’s one folks.  Just one.

NEW YORK — A federal judge Wednesday challenged the SEC’s plan to settle a fraud case against Citigroup for $285 million, saying that the deal would recoup only a fraction of investors’ losses and would leave the firm free to proclaim its innocence in private lawsuits over the remaining damages.

The judge used the Citigroup case to mock the SEC’s traditional way of doing business — allowing defendants to settle without admitting or denying wrongdoing.

The unproven allegations, U.S. District Court Judge Jed S. Rakoff said, “are no better than rumor or gossip.”

“Does not the SEC of all agencies have an interest in establishing what the truth is?” Rakoff asked.

Well yes, it should.  But it doesn’t.  And here’s the real problem: This isn’t the first offense.

In fact Citi has already promised not to do it again many years ago.  And yet they did it again.  This is not unique; let’s remember NY Fed board member Kindler

New York-based Pfizer agreed to pay $430 million in criminal fines and civil penalties, and the company’s lawyers assured Loucks and three other prosecutors that Pfizer and its units would stop promoting drugs for unauthorized purposes.

What Loucks, who’s now acting U.S. attorney in Boston, didn’t know until years later was that Pfizer managers were breaking that pledge not to practice so-called off-label marketing even before the ink was dry on their plea.

On the morning of Sept. 2, 2009, another Pfizer unit, Pharmacia & Upjohn, agreed to plead guilty to the same crime. This time, Pfizer executives had been instructing more than 100 salespeople to promote Bextra, a drug approved only for the relief of arthritis and menstrual discomfort, for treatment of acute pains of all kinds.

Yeah.  This disgusting practice is spread all over our financial system along with virtually all other areas of “rich and powerful” firms and individuals.

Claims that this is an “isolated incident” are blatant lies; among financial firms alone out of 19 firms you can count 51 offenses:

Source: http://publicintelligence.net/banks-dont-make-promises/

The problem with such “fines” is that the record demonstrates that they provide no deterrent at all.  As I have repeatedly pointed out if the penalty for robbing a bank was that you had to give back 1/3rd of the loot — and that’s all — the bank would be robbed literally every hour on the hour.

The political folks who utterly refuse to address this issue – including the so-called “Tea Party” (Joe Walsh anyone?  Or how about Steve Southerland?) are simply pointing out that you are considered peasants and under the boot of an imperious King who grants those in his favor the right to screw you with impunity.

If you continue to support and vote for these jackals on either side of the aisle — if you continue to provide consent of the governed to the government under those terms — then you’re consenting to being screwed.

It’s that simple folks

You want to know why “OWS” is right?  It’s found right here in this sort of so-called “justice” that the SEC is trying to mete out.  And don’t start this crap about it only being “Democrats” that do this sort of thing: The Republican Party controls The House which means it also controls appropriation of funds and could literally close any department or agency that refused to bring actual prosecutions and demand actual jail sentences.

The so-called “Rule of Law” party likes to run pretty commercials, and in fact Herman Cain’s campaign just called me seeking money a few minutes ago.

I told them that I’d give them a donation when hell freezes over, as not only does Judge Rakoff discern that this sort of “settlement” is a sham but so do I, and I’m not funding any more of that crap. 

The “nice girl” on the other end of the phone hung up on me.  Well f$#c you very little Herman, along with the rest of the Republican field.

The Tea Party had every opportunity to stand on exactly this principle and demand handcuffs and real solutions, and in fact Santelli’s Scream was founded on this very principle, as has been my advocacy since I started this publication.  But that foundation — The Rule of Law and equality under the law — was almost-immediately co-opted by pretty-face Palin and others who immediately turned the focus to things that had nothing to do with how our economy got to be where it is.

If the “Tea Party” wishes to avoid being buried by history then it needs to get in front of this issue now and join with the only group of people who are currently out in the street protesting this exact crime.  They need to refuse to go home until the jackals that caused this economic mess are in the dock for their offenses.  This singular focus and the dismantling of the fraudulent edifices that permeate our financial system can be accomplished; what’s more important is that doing so now is infinitely preferable to continuing the Ponzi and winding up with even more damage to be absorbed.  There’s an opportunity here but the time remaining to take advantage of it is fleeting and soon will be gone if not seized.

That existing group, incidentally, is called Occupy Wall Street.

Stunning interview with Citigroup’s CEO, Vikram Pandit.  Now, perhaps he might want to address how he perjured himself in front of Congress….but I digress….  From Bloomberg:

Vikram Pandit, chief executive officer of Citigroup Inc., talks about the financial crisis and the outlook for the bank and its Citi Holdings division, which contains assets marked for sale. He speaks with Charlie Rose at the Securities Industry and Financial Markets Association’s annual meeting in New York.

“When you go back and think about what brought all of this on, it was leverage. We’re still living through the impact of leverage: consumer leverage, bank leverage, government leverage. It seems wonderful to borrow just a little bit more when things are going good, but invariably the history of crises [show] leverage is at the heart of it. We learned it yet again what happens to the world when leverage rises to levels that are unsustainable, and we’re still living through that today in the form of what is going on with the governments, including our own, but not only our own. Certainly we’re all watching what is going on in Europe.”

And here we have Prime #1 example (well, ok, maybe not “Prime #1″, but certainly A Prime example)

The SEC alleges that Citigroup Global Markets structured and marketed a CDO called Class V Funding III and exercised significant influence over the selection of $500 million of the assets included in the CDO portfolio. Citigroup then took a proprietary short position against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup did not disclose to investors its role in the asset selection process or that it took a short position against the assets it helped select.

Citigroup has agreed to settle the SEC’s charges by paying a total of $285 million, which will be returned to investors.

To recap, this is what happened:

• Citigroup put together a CDO (a debt obligation) in which it selected “assets” to put into the transaction specifically for their crappiness.  That is, they chose assets that they expected would decline in value.
• The company then shorted the instrument it created, a position that would lose money if the CDO performed as expected and marketed to investors.  They could only make money if the investor lost their shirt.
• They did not disclose either their selection of the assets in the CDO or that they took the short to the people who were buying it!

As expected and designed the CDO blew up.  The “investors” took a 100% loss; what they bought was valueless as it was a levered instrument and the valuation loss of the underlying assets was sufficient to wipe out their investment.  Citigroup made a lot of money.  The instrument performed exactly as Citigroup intended but they did not tell the people who were buying this thing that they expected they would lose every penny they put in up front.  In fact they intentionally concealed their role in selecting the assets and that they had taken a short position against them!

Now the SEC steps in and they agree to “settle” this case with what amounts to a fine.

In fact the SEC press release claims that Citigroup knew damn well what they were “selling” was fraudulently misrepresented to the customers:

According to the SEC’s complaints, the Class V III transaction closed on Feb. 28, 2007. One experienced CDO trader characterized the Class V III portfolio in an e-mail as “dogsh!t” and “possibly the best short EVER!” An experienced collateral manager commented that “the portfolio is horrible.” On Nov. 7, 2007, a credit rating agency downgraded every tranche of Class V III, and on Nov. 19, 2007, Class V III was declared to be in an Event of Default. The approximately 15 investors in the Class V III transaction lost virtually their entire investments while Citigroup received fees of approximately $34 million for structuring and marketing the transaction and additionally realized net profits of at least $126 million from its short position.

Where are the handcuffs for the obvious false statements?  This “transaction” was a clear (and successful) attempt to simply rob people.

If you or I do something like this through some fraudulent edifice we go to prison.  But when a big national bank does it, we simply order them to a pay a fine when they get caught.

This makes stealing a simple business proposition: Since you will not get caught all of the time, there is no reason not to steal.  Any time you do not get caught you get to keep all the loot.  When you get caught you negotiate to return some of the loot.

AND WE WONDER WHY INSTITUTION ENGAGE IN THIS SORT OF BLATANT RIPOFF?

Ps: Oh yeah, there’s this pesky statute of limitations problem too.  Anyone note the dates?  Just draw it out until you can’t prosecute – on purpose.  This is nothing more or less than an organized looting operation with the full participation of the government in stealing from the victims.

Well now Moody’s has gone and done it.

They just hit BAC, C and WFC with downgrades, saying that the government is “more likely” to allow a large bank to fail if they get in trouble.

This belies the truth, which is that the government doesn’t have the capacity to bail out a trillion-dollar boondoggle any more.  There’s no way to get another TARP through Congress and there’s no back-door way to fund it either.

So Moody’s is correct, in a round-about sort of fashion.  Let’s not conflate desire with capacity, eh?

The entire banking sector took an instant dive on that, with BAC now down more than 5% and Wells, which was up, back to even.

Bank of America’s insular, CEO-blowing board needs to do some firing in the executive suite.  May I suggest a Howitzer for the means of that “firing”?

Frankly I’m not sure it matters at this point.  Countrywide was a monstrous mistake, and a very expensive one on top of it. Tangelo should have been peeled in 2008 if not before rather than riding off into the sunset with a civil penalty that Bank of America paid a huge chunk of. Nobody seems to care much about the fact that all of these banks have been implicated in various schemes and frauds related to foreclosures – not that this is new, of course, in that they did the same thing on the way up with appraisals and similar, blacklisting honest appraisers and essentially demanding overvaluations to “support” their reckless lending.

Now let’s add to that: Nevada is apparently preparing to criminally charge some of these institutions.  That’s not sue, it’s prosecute.  We don’t yet know who the targets are but this will mark the first actual criminal indictments of note should they actually appear.  For my part I’m not going to believe it until I see it, considering how overdue such an action is in the context of anything even lightly-related to the concept of ”justice.”

Are we finally going to “Stop the looting and start prosecuting”?  Hope springs eternal.

Here’s the rub, when you get down to it:  Every one of these institutions should have been a zero in 2008 and the executives should have been brought up on indictments.  As such the alleged “value” in these firms is nothing more than government support for the same sort of business model as Full Tilt Poker is accused of – that is, claiming value in assets that does not in fact exist, relying on the belief that everyone will not show up and demand their money at the same time.  Proof of this is readily available every day in the market in that these firms are selling at a fraction of their claimed book value; if there was anyone who believed that the accounting was honest they’d instantly buy the firm in question as that would be fastest and most-certain money ever made in M&A.

That it hasn’t happened is all the proof you need that the accounting is absolute and utter crap.

Oh Mr. Buffett?  How’s your position in BAC working out?

Maybe….

Mr. Schneiderman will hold meetings with executives of several major banks, including Bank of America Corp., Morgan Stanley and Goldman Sachs, according to people familiar with the investigation. He intends to discuss securitization of mortgage loans and other mortgage practices and has requested related documents from the firms, these people said. The meetings over securitization are expected to happen in the coming week.

Oh come on, there’s nothing wrong that happened here.  I mean, it’s not like a former executive of one of the big banks testified that by 2007 80% of the loans they were making didn’t meet quality standards but they sold them anyway, right?

“In mid-2006, I discovered that over 60 percent of these mortgages purchased and sold were defective,” Bowen testified on April 7 before the Financial Crisis Inquiry Commission created by Congress. “Defective mortgages increased during 2007 to over 80 percent of production.”

Oh wait…. one of them did….

The Market-Ticker