By Pam Martens: February 7, 2013 U.S. Treasury Secretary, Timothy Geithner Tim Geithner, who recently stepped down as U.S. Treasury Secretary, is moving on. He won’t be getting that big pay day directly from a Wall Street firm that so many expected; but he will be getting that big payday. Geithner has been named a “distinguished fellow” at the Council on Foreign Relations (CFR), a think tank whose Co-Chairman is Robert Rubin, a former U.S.Treasury Secretary under Bill Clinton and the man who played a pivotal role on Citigroup’s Board during the financial crisis. Citigroup collapsed into the arms of the U.S. government with a bailout that exceeded $2.5 trillion, including equity infusions, assets guarantees and loans from the Federal Reserve Bank of New York, which Geithner headed before becoming U.S. Treasury Secretary. The SEC charged Citigroup with lying about its exposure to subprime debt by $39 billion and imposed … Continue reading →

By Pam Martens: February 6, 2013  The Wall Street cartel that has for decades kidnapped the process of nominating anyone who has anything to do with money and high office in the United States (Federal Reserve Chair, New York Fed President, U.S. Treasury Secretary, Chair of the Securities and Exchange Commission (SEC) or its General Counsel) has a powerful spin machine running full throttle to secure the confirmation of Mary Jo White to head the SEC.  Take the headlines and story threads that have been regurgitated throughout the business media since President Obama nominated White on January 24. The spin goes like this: she’s a former Federal prosecutor and she’s tough. Here’s how the widely circulated story by the Associated Press framed the nomination in its lead paragraph:  “President Barack Obama sent his strongest signal yet Thursday that he wants the government to get tougher with Wall Street, appointing a former … Continue reading →

By Pam Martens: February 5, 2013  Late last night, the U.S. Department of Justice filed a civil lawsuit in Los Angeles against the credit rating agency, Standard and Poor’s, over alleged deceptive ratings it gave to debt instruments it rated for large investment banks on Wall Street. The suit charges the deceptive ratings were motivated by a desire to gain more business from the Wall Street firms which pay for the ratings.  Ratings on debt instruments play a pivotal role in helping investors select suitable investments. Ratings of AAA through BBB- are considered investment grade with ratings below that viewed as non-investment grade or junk. And it’s not just individual investors who are impacted by ratings. Banks are legally limited in the amount of non-investment grade securities they can hold and are required to post additional capital when their investment risks rise. When rating agencies assigned AAA ratings to what … Continue reading →

By Pam Martens: February 4, 2013  The U.K. Chancellor of the Exchequer,George Osborne, plans to reform big banks in his country the way farmers keep raccoons out of their corn fields: an electrical fence. Banking reform by soap box and silly ideas has crossed the Atlantic. Osborne delivered a flurry of inspirational words today on his new plans for banking reform in the U.K. Curiously, he delivered his speech at JPMorgan’s back office operation in Bournemouth. Osborne said the site location was to remind everyone how many jobs banking brings to England and specifically mentioned a landscaping business called Stewarts that takes care of JPMorgan’s grounds that he planned to visit later. That was possibly not the best choice of examples since wealth and income inequality has been institutionalized by the lack of banking reform. On this side of the pond the suspicion rises that Chancellor Osborne’s site selection might … Continue reading →

By Pam Martens: February 1, 2013  Wall Street’s Institutionalized Wealth Transfer System Is Preventing Retirement for Millions Gad Levanon, Director of Macroeconomic Research at The Conference Board, and Ben Cheng, a Researcher in the organization’s economics department, have a new report out titled “Trapped on the Worker Treadmill.”  The report finds that of respondents aged 45 to 60, the percent that plans to delay retirement has gone up 20 percent in two years.  This and previous research by Levanon and Cheng made the following findings: In the mid-1990s, roughly 12 percent of workers were 55 and older, compared with 21 percent in 2011. Before the end of this decade more than one in four workers will be 55 or older; Business owners were more likely to delay their retirement than employees; Workers in highly paid occupations, such as managers and professionals, were more likely to delay retirement than workers in … Continue reading →

By Pam Martens: January 31, 2013 Protesters Outside 15 Central Park West, the Residence of Lloyd Blankfein, CEO of Goldman Sachs Yesterday, the Bureau of Economic Analysis (BEA) released its report for the fourth quarter gross domestic product (GDP), representing the output of goods and services produced in the U.S. and the most keenly watched measure of the vitality of the U.S. economy. The BEA data, which is subject to revision, showed a decrease of 0.1 percent in the annual GDP rate, versus an increase of 3.1 percent in the third quarter of 2012.  Most economists were shocked by the decline, which was impacted by a 22.2 percent decrease in the government’s spending on national defense versus its third quarter increase in spending on that segment by 12.9 percent.  But the most worrisome part of the report is the revelation that the BEA assumed an additional $41.4 billion went into the pockets … Continue reading →

By Pam Martens: January 30, 2013 I was browsing the Wall Street Journal’s web site last night and found this interesting take on the Dow Jones Industrial Average’s flirtation with 14,000 – a number it last saw in October of 2007. “Small investors are jumping back into the stock market after abandoning it during the financial crisis, and their return is a big reason why the Dow is pushing toward an all-time high.” The article was prominently placed at the very top of the left hand column under the headline “Individual Investors Aid Stock Surge.” On January 25 of this year, the New York Times proclaimed a “flood” of new money from individual investors: “Millions of people all but abandoned the market after the 2008 financial crisis, but now individual investors are pouring more money than they have in years into stock mutual funds. The flood, prompted by fading economic … Continue reading →

By Pam Martens: January 29, 2013  Somebody is right and somebody is wrong when it comes to whether Tim Geithner, the man who stepped down as U.S. Treasury Secretary on Friday, is a crony capitalist covering the backs of his corporate pals, their failed companies, and their obscene pay or is an American hero.  President Obama is in the good guy camp, using the January 10 occasion of his nomination of Jack Lew to replace Geithner as Treasury Secretary to say: “When the history books are written, Tim Geithner is going to go down as one of our finest secretaries of the Treasury.”  The President’s assessment stands in stark contrast to that of a growing list of informed insiders, some of whom are already writing those history books.  Neil Barofsky, former Special Inspector General for the Troubled Asset Relief Program (TARP), had a devastating take on Geithner in his 2012 book … Continue reading →

By Pam Martens: January 28, 2013 There has been much ado by media and public interest groups about Jack Lew’s time spent at Citigroup and whether that renders him unfit to be President Obama’s nominee to head the U.S. Treasury Department. Lew sat on Citigroup’s management committee and in his last position at the firm in 2008, he was Chief Operating Officer at Citi Alternative Investments (CAI), the unit that housed a trifecta of toxic speculation, including proprietary trading, hedge funds that were imploding, and the Structured Investment Vehicles (SIVs) that housed $50 billion in subprime debt – an amount that Citigroup understated in financial reports to the SEC and public by $39 billion. It was the SIVs in Lew’s division that toppled Citigroup into the arms of the U.S. taxpayer. Lew only joined Citigroup in June of 2006. The company had set its course for disaster eight years earlier … Continue reading →

By Pam Martens: January 25, 2013  Working on Wall Street for over two decades, I often heard financial advisors tell their clients that a good rule of thumb to determine how much of their investment money to put into stocks was to subtract their age from 100 and put the difference in stocks.  For example, if your age is 54, subtract 54 from 100 and put the difference, 46 percent, of your investable money into stocks. If your age is 30, by this formula 70 percent of your funds would go into the stock market.  The overall theory is sensible: the older you are, the less risk you should take because you will not have enough earning years left to replace lost funds.  The high percentages recommended, however, felt like a formula cooked up by Wall Street to coax more money into the market. As with most things peddled on Wall Street, I never bought into this nonsense. … Continue reading →