FedUpUSA

Archive for the ‘Citigroup’ Category

So Where Are The Cops Again?

Gee, what have I been talking about for a couple of years now?

WASHINGTON — A set of confidential federal audits accuse the nation’s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans, four officials briefed on the findings told The Huffington Post.

No, really?

And if you remember, I and others have talked about FHA guaranteed loan performance not being exactly honestly reported either…..

The resulting reports read like veritable indictments of major lenders, the sources said. State officials are now wielding the documents as leverage in their ongoing talks with mortgage companies aimed at forcing the firms to agree to pay fines to resolve allegations of routine violations in their handling of foreclosures.

Oh yeah, fines.  Rip people off, pay a fine.  We’re just going to continue what we’ve been doing, right?  Make it perfectly ok – a business practice.  Commit 100 felonies, get caught committing 10 of them and say “Oh gee, I’m sorry, here have that back.”

But you get to keep the fruits of the other ninety!

Justice officials will soon meet with the largest servicers and walk them through the allegations and potential liability each of them face, the sources said.

I’ll believe it when I see filed charges.

Rather than punishing banks for misdeeds, the administration is now focused on helping troubled borrowers in the hope that it will stanch the flood of foreclosures and increase consumer confidence, officials involved in the negotiations said.

Right – breaking the law is just fine if you’re a bankster.

You know damn well the government isn’t going to do jack about this, and you also know damn well that the State AGs will kneel before the banskters rather than sue or prosecute as well.

It’s all they’d done thus far.

We’re all rendered nothing more than maids servicing these jackasses – by force – in their expensive hotel suites.

The Market-Ticker

 Credit: AP Photo / Elaine Thompson

Zero Hedge has long claimed that the best stories of Wall Street fraud and corruption come from disenchanted former insiders of the very firms that in 2010 were paid a record $135 billion in compensation. And while we spend day after day chronicling what to other more normal banana republics would seem to be unprecedented criminal activity south of Canal street (and let’s not forget the Park Ave corridor), we are always delighted when an ex-insider discovers their conscience and discloses all the massive fraud they and their coworkers engaged in “once upon a time” especially on Over the Counter desks – the same place where firms such as Goldman Sachs dominate all trading. Today’s story from Omar Rosen on Citigroup’s corporate derivatives team is just such a blatant example. If America had anything even remotely resembling a fair and honest enforcement arm in its regulatory body, this disclosure would be enough to shut down the entire Citigroup derivatives team. As it stands, the firm will probably not even have to pay a fine, without either having to admit or denying guilt.

From Omar Rosen, via The Boston Review

Legerdemath

In the spring of 2000, I began a three-year stint on Citigroup’s corporate-derivatives team. I was just months past my twentieth birthday, with no work experience to speak of, in a world beyond my imagination. As my boss summed me up after a day of interviews, I was “fucking unpolished.”

The credit-derivatives group, then just three or four people I sat next to, soon spawned an ever-expanding team managing ever-more complex creations: credit-default swaps, collateralized debt obligations, and the myriad other structures built with black boxes and shrouded by acronyms. Meanwhile, my group continued to peddle mostly the forbears of these recent menaces, the more mundane interest-rate swaps and Treasury-rate locks. The newer derivatives, though hardly identical to their predecessors, nonetheless evolved in similar environments, were likewise designed to manipulate risk, and were also customized on a trade-by-trade basis.

Our clients were non-financial corporations, the Deltas and Verizons of the world, which relied on us for advice and education. Our directive was “to help companies decrease and manage their risks.” Often we did just that. And often we advised clients to execute trades solely because they presented opportunities for us to profit. In either case, whenever possible we used our superior knowledge to manipulate the pricing of the trade in our favor.

I never heard this arrangement described as a conflict of interest. I learned to think we were simply smarter than the client. For unsophisticated clients, being smarter meant quoting padded rates. For the rest, a bit of “legerdemath” was required. Most brazenly, we taught clients phony math that involved settling Treasury-rate locks by referencing Treasury yields rather than prices.

If a client requested verification of our pricing, we volunteered to fax a time-stamped printout of market data from when the trade was executed. One person talked to the client on the phone while another stood by the computer and repeatedly hit print. The printouts were sorted, and the one showing the most profitable rate for the bank was faxed to the client, regardless of which rate was actually transacted. If a rate for the client’s specific trade was not on the printout, we might create rigged conversion spreadsheets for them to use in conjunction with the printout.

Other sources of profit lay in details that clients thought were merely procedural but in actuality affected pricing as well. Once, a client called after his interest-rate swap was completed and asked to change a method of counting days. Unbeknownst to him, this change should have lowered his rate. I made the requested change but kept his rate the same, allowing us to realize unwarranted profit. This was standard practice. My coworkers knew what I had done, as did the traders, as did the people who booked trades. I even tallied the “restructuring” as an achievement in a letter angling for a higher bonus.

When the media discuss a lack of transparency in the pricing of over-the-counter derivatives, they suggest a murky world, where things happen in shadows. This imagery is poorly chosen. “Things” don’t happen in the dark, but in well-lit trading floors like ours. Engaging in these practices was just part of our day-to-day activities, as natural as picking up one’s dry-cleaning. After all, in an open room three-quarters of the size of a football field, with hundreds of people working and mingling, how could anything be wrong?

Last year a friend in the credit-card division of one of the major banks told me that his group had received an award. “Great news,” I thought. He then explained that the group had managed to increase the rates charged on the bank’s entire portfolio of credit cards before regulation limiting such increases took effect. Does this sound like an industry that is learning?

And if Citi was doing it, you can bet that Goldman, JPM, Morgan Stanley, Merrill Lynch, UBS, Credit Suisse, Bank of America, and everyone else was doing it… all in the “privacy” of their own prop/flow trader-commingled, football field-sized trading floors.

ZeroHedge

SIGTARP: Citibank Was About To Fail, But How About Now?

Maybe.

The U.S. Securities and Exchange Commission’s internal watchdog is reviewing an allegation that Robert Khuzami, the agency’s top enforcement official, gave preferential treatment to Citigroup Inc. executives in the agency’s $75 million settlement with the firm in July.

Inspector General H. David Kotz opened the probe after a request from U.S. Senator Charles Grassley, an Iowa Republican, who forwarded an unsigned letter making the allegation. Khuzami told his staff to soften claims against two executives after conferring with a lawyer representing the bank, according to the letter. Jon Diat, a Citigroup spokesman, declined to comment.

Oh really? 

After “conferring”?  Is this in the public record somewhere?  What this “conference” was about, perhaps a set of minutes of said meeting?

According to the letter, the SEC’s staff was prepared to file fraud claims against both individuals. Khuzami ordered his staff to drop the claims after holding a “secret conversation, without telling the staff, with a prominent defense lawyer who is a good friend” of his and “who was counsel for the company, not the individuals affected,” according to a copy of the letter reviewed by Bloomberg News.

Oh I see.  That sounds somewhat like the sort of “preference” that the OTS gave IndyMac bank, when they decided to backdate some deposits, and one of the OTS folks working with them actively allowed it.

Why was that so important?  Because the same person had done so during the S&L crisis, and kept his job after that incident!

Oh, and incidentally, Grassley promised an “investigation” of that too. 

What came of it?  Nothing.

Zerohedge has managed to dig up some financial disclosures from this “gentlemen” that make quite a damning case – and implicate possible malfeasance (or worse) in other cases related to banks – especially Deutsche Bank.

Of course given the proclivity of our government and it’s so-called “regulators” to permit theft from the public in plain sight of the police, much like my experience in NY City more than a decade ago when drug peddlers were attempting to sell me narcotics within five feet of a uniformed city police officer, I have absolutely zero confidence that anything approaching an indictment and prosecution will be forthcoming.

The message?

Steal anything that’s not nailed down – the SEC doesn’t give a damn and neither does Congress, despite all the strum and furor they claim when the press – including bloggers like myself and Zerohedge, dig up the facts.

From NEW YORK (CNNMoney.com)

– The Federal Reserve made $9 trillion in overnight loans to major banks and Wall Street firms during the financial crisis, according to newly revealed data released Wednesday.

Well, except for the public was told that this would be limited to $700 Billion, remember?

Sen. Bernie Sanders, the Vermont independent who had authored the provision of the financial reform law that required Wednesday’s disclosure, called the data that was released incredible and jaw-dropping.

“The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution,” Sanders said.

I’d call it more than ‘jawdropping’ – I’d call it theft.