Document accidentally released by lawyer shows naked short-selling by investment banks
Matt Taibbi is right that god rarely shines down on us in these matters. I wonder how that lawyer is doing right now? Has he resigned or is he sprucing up his resume?
I am not even going to try to give too many remarks on this. Mr. Taibbi and the Economist has done excellent work in this regard and I will instead link to each article respectably. If you want to read the actual release yourself, click here, pages 14-20 are what both articles are referring too.
Bottom-line is that naked-short selling is illegal, has to stop now and the people who have done this need to be put into jail, this will teach them and others a lesson about the rule of law and why we have them. Making bets on declining stocks is fine but you need to first secure them, creating them out of thin area outside of the normal supply and demand model is plain old fraud, pure and simple.
Rolling Stone’s Article (Matt Taibbi)
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Foreclosure filings drop to five-year low in U.S. recovery
Bloomberg - Foreclosure filings in the U.S. fell to a five-year low last month as lenders sought to avoid seizing property and a housing recovery showed signs of taking hold.
The number of default, auction and seizure notices sent to homeowners in April totaled 188,780, down 14 percent from a year earlier and 5 percent from the previous month, according to RealtyTrac Inc. It was the lowest tally since July 2007, before the onset of the biggest housing crash in seven decades, the Irvine, California-based data seller said today in a report.
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JPMorgan’s trading loss is said to rise at least 50% to surpass $2 billion
I didn’t want to jump all over this story because it seemed to be really hyped up. First I saw headlines that were talking about “a fresh look at banking regulations because of loss”, like we didn’t need to strengthen them after the 2007-08 crisis. As if we all just forget about the trillions of dollars that were sucked out of the market, declining housing prices and major government support to almost any companies that could call themselves a “financial institution”.
I hope our attention span is longer than that.
Now I am reading on CNBC that the $2 billion was just an initial estimate and these positions are not “unwound” and could still materially affect the bottom-line of JP Morgan. At the same time I am hearing of a possible default and exit of Greece in Europe. From what I have read, it looks like these bets are connected to Europe and if they are taking a bath like this, it would be safe to assume they have some exposure to this developing situation. Many experts were stating on the record that the European debt crisis was not over and that all the stop-gap measures the ECB was implementing were not permanent fixes. Could this be the straw that breaks the camels back and starts unforeseen events down the road?
The Federal Reserve did meet today and it seemed to be warming to the possibility of more stimulus to support our “recovery”. Emphasis was added because it still feels like we are still in the same muck as before with gas and food prices becoming more elevated. Gold prices have been soft as of late but it is May so we will need to sit back and see what transpires.
CNBC - The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank.
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Ex-Citigroup CEO Sandy Weill “just wants to move on”
Forbes has an interesting interview with the former top boss at Citigroup. You can read through the interview yourself and make up your own mind. There are a few quotes I would like to respond to directly to give you my opinion on the matter. Frankly, I thank Mr. Weill for not softening the corners and giving it to us straight as to his opinion on of global financial crisis
Quote #1 (with question)
How do you think America’s biggest banks have recovered from the financial crisis?
I think the banks are in very good shape right now. I don’t like the new financial regulations. What bothers me the most is I think that banks could be controlled or managed by having good regulations and by having more transparency. I think this whole concept of fixing ‘too big to fail’ is a problem because when you create an environment where you can’t make a mistake then you’re also creating an environment where nothing good is going to happen.
My Response:
A mistake is different then taking obviously junk residential real estate loans (sub-prime), getting insurance (CDS) from companies without the capital to back up losses, calling it AAA, selling it to anyone who would buy it. Yes there were major mistakes made in this process but even in the policy makers put the perverse incentives in place, the banks had a responsibility as the guardian of capital to not be reckless and to use the old adage, “when the music plays, dance.”
Quote #2 (with question)
But a lot of Americans blame lax regulations and the big banks for the financial crisis. What would you say to them?
I would say there is enough blame to go around. I think that the financial industry made some mistakes that created issues, our government made mistakes that created issues, the regulators made mistakes that created issues. People made mistakes that created issues.
Lots of people were at fault. I think we want to move on. There comes a time when you stop punishing people and ask how do we build this back in a way that’s going to be safer for the future? We should concentrate on the future and positive thinking.
My Response:
I agree with the last part on having a future bias and positive thinking. BUT To say we need to “stop punishing people” would only make sense if we were actually punishing people. Think to yourself after the largest financial crisis in the history of the planet, who has been punished that had a major influence on the crisis while it was building up??? Not only have we not punished much of anyone, all the major banks have settle out of courts without guilt on pretty much textbook fraud and or misrepresentations. We also have drug our feet so long that the statue of limitations have run out on many of these potential cases. Mr. Weill, don’t worry, we have moved on technically. After the S&L crisis have read about of at least 700 people (conservative estimate) that went to jail because of that fraud.
Here it the full interview, post comments to weigh in to agree or not and I will approve them so we can see where people stand on these opinions.
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Fed says banks eased loan terms as demand increased in 1st Quarter
Well you already should know what I would, I’ll say it anyways.
Not sure that EASING, lending standards is the best course of action when demand increases. That is close to what got us in our last crisis. When we lower lending standards on home loans, guess what, demand increase for the cheaper credit. Now I do have faith in the banks that this easing in the lending standard probably was not anywhere as drastic then the 2001-2007 time-frame but I am just saying, this logic they laid out in the article is at least different enough, that is got me to read it and write on here.
Please, bankers and risk officers everywhere, lets not repeat the same trap again. Our recovery will be long and slow and this is a good sign of a healthy, real and sustainable recovery. We don’t need cheap money right now. What we need is more good ideas and businesses to invest in so we can create the jobs that we need in America. Ok, all done.
Bloomberg: U.S. banks saw increased demand for lending in the first quarter and made loans easier to get, according to a Federal Reserve survey.
“Domestic banks generally reported having eased their lending standards and having experienced stronger demand over the past three months,” the Fed said today in Washington in its quarterly survey of senior loan officers. It said the number of banks reporting eased standards and improved demand, rather than the reverse, was “modest.”
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Debt: The First 5,000 Years by David Graeber, a conversation
I have just finished his book (Debt: The First 5,000 Years) on a history of debt and this is a subject that I have been intellectually exploring for almost a decade now. Having read many booking on theories on the nature of money, wealth and banking. I have a coffee table book called “The origins of value”, yes I know, just what you want to see on a coffee table. When I heard about this book, I realized that I didn’t have a history book on debt so I had to grab a copy and read.
Wow, is what I have to say after reading through it. He really hit at some very interesting and quite core points. I will be re-reading the book soon because I need to contempt these concepts some more and I have a few books that have now been elevated on my reading list so I can read some more facts and opinions. Here is a nice video with the author talking about the book and its concepts. I believe he really hit a “home run” with this book and if you see the amount of notes and the bibliography, you can tell he did his homework. I will end with my mind is not made up yet but he has been very persuasive so it has now put the ball back in my court to accept or contradict, he has set the bar high so I will see what I can come up with and write some thoughts in a later post.
Video:
Direct Link (Youtube)
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Jim Grant on RT’s “Capital Account” discussing monetary policy
Granted RT (Russia Today) has its own slant and take on geo-politics. With that aside, they have been much more “hard-hitting” on tackling economic issues and asking questions that sadly, the American mainstream media fail to ask. It is a sad account on our part. RT has really upgraded their status with getting such an esteemed guest such as Jim Grant of “Grant’s Interest Rate Observer“. It is an usually long interview (almost 30 mins) with a guest that has so much say. He even mentioned how he enjoy being able to convey complete thoughts during this interview.
Hopefully RT will kick start more media outlets to take these economic mis-steps and crimes more serious and start digging deep to get answers and ask questions that have been cast aside because they are not popular topics. Enjoy the Video.
Video:
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