Category Archives: Uncategorized

By Pam Martens: January 21, 2013  This month, U.S. Senators David Vitter (R-La.) and Sherrod Brown (D-Ohio) sent a letter to the Government Accountability Office (GAO) asking the federal watchdog agency to research and report on the economic subsidy that too-big-to-fail banks receive as a result of actual or perceived taxpayer support. Last week, Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas, delivered a speech on the same topic.  While the points made by these gentlemen are both valid and critically important, they fail to take note of four other dangerous subsidies: (1) the market perception that the Washington and Wall Street revolving door has rendered these firms immune from prosecution – even for repeated, illegal cartel behavior;  (2) the ability to spend billions buying back their own stock, effectively propping up their own share price and bad behavior; (3) self-regulation with compromised bodies creating the … Continue reading →

By Pam Martens: January 18, 2013 Only one in five employees in private industry today has a defined benefit pension plan that will pay a fixed amount in retirement. The rest of the private workforce is left to the volatile markets of the 401(k) plan and other savings to supplement their Social Security benefits. Adding to the dilemma, less than half of private industry workers are participating in any form of employer-sponsored plan at any moment in time. This is shaping up as a disaster for the next generation of retirees. A study conducted by the Center for Retirement Research at Boston College using data from the Federal Reserve’s 2010 Survey of Consumer Finances found that the typical household approaching retirement is ill prepared financially. (The Survey of Consumer Finances is conducted every three years and will be updated again this year.) The study found that 401(k)s have been battered … Continue reading →

By Pam Martens: January 17, 2013  Wall Street’s thoroughly discredited self-regulation that has blazed a trail of corruption across much of the securities trading landscape of America, has now given birth to a new brand of hubris – self investigation and self reporting.  Yesterday, JPMorgan released a report from its Board of Directors that found [drum roll] that the Board was not culpable in the London Whale episode, it just needed to tweak a few things going forward. London Whale refers to the blowing up of $6.2 billion of insured deposits at JPMorgan’s commercial bank through reckless trading in derivatives in London.  Likewise, a 132-page Task Force report was released which found CEO Jamie Dimon guilty of no greater sin than being too reliant on information from below. The report said: “As Chief Executive Officer, Mr. Dimon could appropriately rely upon senior managers who directly reported to him to escalate significant … Continue reading →

By Pam Martens: January 16, 2013  With the nation focused on fiscal cliffs, debt ceilings and austerity plans in Washington, the news from Reuters and the Wall Street Journal might get short shrift that Morgan Stanley has decided to hand its most productive traders and investment bankers IOUs instead of cold hard cash tomorrow for their eagerly awaited 2012 bonuses. When giant Wall Street banks begin to hoard cash and voluntarily impose austerity measures on lavishly paid workers, Congress needs to pay attention.  According to Reuters, Morgan Stanley will take up to three years to pay 2012 bonuses. The plan will cover all employees, except retail brokers, who make more than $350,000 in wages and whose bonuses are at least $50,000. Adding more angst, the Wall Street Journal reports the bonuses will consist of half cash and half Morgan Stanley stock. Some traders and investment bankers on Wall Street receive as much as 70 … Continue reading →

By Pam Martens: January 15, 2013  Yesterday, two of JPMorgan Chase’s regulators, the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, released the details of their cease and desist consent orders with the mega bank over its lack of proper risk controls in its Chief Investment Office (CIO).  The lapses have led to $6.2 billion in losses thus far. JPMorgan, for its part, made sure its golden parachutes – outsized payments to departing executives –would not be limited by the consent agreement.  The debacle, known on Wall Street as the London Whale trades, stem from traders in London, particularly Bruno Iksil who is no longer at the bank, engaging in high risk derivatives trading in a thinly traded corporate bond derivatives index. The nickname, “Whale,” derives from the bank making trades so large that it effectively became the market in that index and could not quickly exit the positions.  Congress held … Continue reading →

By Pam Martens: January 14, 2013 It has been previously reported that President Obama’s Treasury Secretary nominee, Jacob (Jack) Lew, earned millions in salary and bonus from Citigroup in the brief two and one half years he worked there. That should not come as a surprise to anyone.  Former Treasury Secretary Robert Rubin left his post as Treasury Secretary in 1999 to join Citigroup and was paid $120 million over the next eight years for non-management work. Citigroup is the mega bank the Securities and Exchange Commission charged with lying about its financial condition while Lew worked there in an executive position.  Citigroup went from lying about its finances in 2007 to cumulatively requiring over $2.51 trillion in Federal Reserve loans, TARP capital and Federal asset guarantees to remain afloat during the financial crisis. During Lew’s stint at Citigroup, July 2006 through early 2009, Citigroup lost 85 percent of its … Continue reading →

By Pam Martens: January 11, 2013  If you were among the breathless throng of PBS viewers awaiting the first episode of the third season of Downton Abbey last Sunday evening, and you are a cautious investor, you were no doubt horrified at how the Earl of Grantham had tossed his wife’s fortune and the financial security of his family into a solitary stock now set to file bankruptcy.  Downton Abbey is the British television series written by Julian Fellowes that has become an international sensation. The first season began in the years leading up to World War I. We have now moved along to 1920 in the fictional country estate, Downton Abbey, of the Crawley family, headed by the Earl and Countess of Grantham.  This should be the most joyful time in the Earl of Grantham’s life. His palatial home, which had been turned into a military hospital during the … Continue reading →

By Pam Martens: January 10, 2013  As expected, shortly after 1:30 today the President appeared at a press conference to nominate his Chief of Staff and former budget director, Jacob (Jack) Lew as U.S. Treasury Secretary.  Lew will face a Senate Confirmation process before he can assume the post. Outgoing Treasury Secretary, Timothy (Tim) Geithner, was present for the nomination and was lavishly praised by the President.  The President’s remarks revealed no hint that the U.S. Treasury, which auctions the government’s U.S. Treasury bills, notes and bonds through Wall Street firms, is dealing with one of the most intractable periods of corruption on Wall Street this nation has ever witnessed. As one of numerous examples coming to light of continuing frauds, a global cartel of banks, including at least two of Wall Street’s largest banks according to affidavits, have fleeced cities and municipalities across the country by rigging the benchmark … Continue reading →

By Pam Martens: January 10, 2013  Jacob (Jack) Lew, currently serving as President Obama’s Chief of Staff, is slated to be nominated by the President this afternoon for one of the most critical posts in the country – Secretary of the U.S. Treasury.  The Treasury department played a central role in the 2008 to 2010 bailout of Wall Street and it would play an equally central role should there be another financial collapse.  Having a deep background in understanding the trail of deregulation that led to tens of trillions of dollars in highly leveraged, off balance sheet derivatives trading over the counter beyond the view of regulators should be the number one priority for a Treasury Secretary.  Understanding how those derivatives ended up threatening insured deposit banks because of the repeal of the Glass-Steagall Act should be requisite knowledge.  Without that understanding, the post will be held by a man … Continue reading →

By Pam Martens: January 9, 2013 On Monday, the Obama administration gave the press the following stories to convey to their readers: the nomination of former Republican Senator Chuck Hagel for Secretary of Defense; the nomination of John Brennan as Director of the CIA; $20 billion in foreclosure settlements with 11 banks with scant details provided; and the appointment of Geoffrey Aronow as the General Counsel of the SEC. On a heavy news day, corporate business media frequently travel as a herd of elephants with their trunks wrapped securely around the tail of the fellow in front.  Thus, when it came to reporting the new top lawyer at the SEC, corporate business media led with the fact that Aronow had been the former head of enforcement at another regulator – the Commodity Futures Trading Commission (CFTC). As it turns out, Aronow’s days at the CFTC consisted of a four-year post from 1995 … Continue reading →