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 →

By Pam Martens: January 24, 2013 Two stunning assertions came out of the Martin Smith investigative report on Tuesday evening on the PBS program, Frontline. Titled The Untouchables, producer, writer and correspondent Martin Smith interviews Lanny Breuer, the head of the criminal division of the U.S. Department of Justice, who tells Smith he didn’t prosecute any senior executive of the major Wall Street firms because he couldn’t find a criminal case where he could “prove beyond a reasonable doubt every element of a crime.”  As the public has watched big money settlements and deferred prosecutions at the largest banks, the public has assumed that every available device of the U.S. Department of Justice — the top law enforcement agency in America – was being deployed to root out and prosecute those who collapsed Wall Street in 2008, costing the U.S. taxpayer trillions in bailouts, the economy trillions in lost jobs and home … Continue reading →

By Pam Martens: January 23, 2013 The Washington Post is reporting this afternoon that Lanny Breuer, head of the Criminal Division of the U.S. Department of Justice and the focus of a damaging report by producer Martin Smith for the PBS program, Frontline, that aired last evening, is stepping down from his post. The portion of the program that likely galvanized the White House was the startling report by prosecutors that had worked under Breuer in the criminal division of the DOJ that there wasn’t even a pretense of a real investigation against the major Wall Street firms: no subpoenas, no document reviews, no wiretaps. Following is the verbatim transcript of that portion of the program: NARRATOR: Frontline spoke to two former high-level Justice Department prosecutors who served in the Criminal Division under Lanny Breuer. In their opinion, Breuer was overly fearful of losing. MARTIN SMITH: We spoke to a couple of sources from within the … Continue reading →

By Pam Martens: January 23, 2013  The Untouchables, which aired last evening on the PBS program “Frontline,” builds on the outstanding 2012 series co-produced by Martin Smith and his wife, Marcela Gaviria, Money, Power, and Wall Street. (I highly recommend watching all four episodes of the earlier documentary, then rewatching The Untouchables if you want an epiphany into why Wall Street can’t be tamed.) Smith is producer, writer and correspondent in the latest effort.  Unfortunately, last night’s program sought an answer to an abbreviated question: why has no Wall Street executive been criminally prosecuted for fraud tied to the sale of mortgages. The unabbreviated question and the one that infuriates Americans is: why has no executive of a major Wall Street firm been criminally prosecuted for anything.  If the U.S. Justice Department was serious about doing its job, it has a cornucopia of crimes to pick from: Wall Street CEOs … Continue reading →

By Pam Martens: January 22, 2013  Congressman Edward Markey (D-Massachusetts) sent a letter to the Securities and Exchange Commission (SEC) last week, asking it to use its inherent authority to limit the use of High Frequency Trading. Markey called the practice a “clear and present danger to the stability and safety of our markets” and said “its use should be curtailed immediately.” He noted that Congress had already given the SEC the power to ban this practice. (See full text of letter at link below.)  High Frequency Trading (HFT) is a technique used by sophisticated Wall Street firms and hedge funds using algorithms to buy and sell stocks on exchanges in a fraction of a second, or as Markey put it in his letter, “thousands of times faster than a human can breathe or even think.”  Markey details for the SEC a system that has effectively consumed the marketplace, pushed out … Continue reading →

By Pam Martens: January 21, 2013 The President’s Inaugural address today sounded themes that both conservatives and liberals can applaud. The President said: “…we have never relinquished our skepticism of central authority, nor have we succumbed to the fiction that all society’s ills can be cured through government alone. Our celebration of initiative and enterprise; our insistence on hard work and personal responsibility, are constants in our character.” But the President also added later in the speech: “Our journey is not complete until we find a better way to welcome the striving, hopeful immigrants who still see America as a land of opportunity; until bright young students and engineers are enlisted in our workforce rather than expelled from our country. Our journey is not complete until all our children, from the streets of Detroit to the hills of Appalachia to the quiet lanes of Newtown, know that they are cared … Continue reading →

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 →