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 →

By Pam Martens: January 8, 2013  Monday was settlement day on Wall Street.  The four largest Wall Street banks and a handful of smaller ones tossed $20 billion at their various regulators and slid home free without going to jail over egregious foreclosure abuses that have ravaged the nation and left millions of families in desperate straits.  News of big settlements with Wall Street are typically dumped on Friday to ensure the news is old hat by Monday morning.  But these two big settlements, totaling over $20 billion, came at the beginning of the news week, adding the curiosity element as to why Wall Street actually wanted to create buzz around the settlements.  It didn’t take long to figure that out: the buzz was to help prop up bank shares on the premise that the worst of the past misdeeds are now behind the banks. The regulators eagerly boarded this … Continue reading →

By Pam Martens: January 7, 2013 The insipid regulators of Wall Street’s biggest and most dangerous banks are recklessly caving in to outrageous demands to roll back or water down protections designed to prevent another 2008-style financial collapse.  And the cave-ins are happening in some of the most critical areas of promised financial reform. The latest Wall Street giveaway was announced this past Sunday evening when Mervyn King, Governor of the Bank of England, announced that the new global banking rules on capital adequacy and liquidity, known as Basel III, will not go into effect in January 2015 as promised, but will be phased in over four years and not become fully effective until January 1, 2019.  In addition, the rules themselves have been watered down to allow more risky assets, like mortgage backed securities — which caused many of the problems in 2008 — to count toward emergency liquidity requirements rather … Continue reading →

By Pam Martens: January 4, 2013  According to the Financial Industry Regulatory Authority (FINRA), there are 635,315 licensed securities representatives doling out investment advice throughout the United States.  And yet, according to multiple studies, financial illiteracy continues to reign supreme.  Is there a connection between the fast-talking, jargon-spewing, commission-focused salesmen on Wall Street and the sad state of basic investment knowledge in America?   My personal experience over two decades on Wall Street suggests that the number of licensed representatives who will take the time to educate their clients and play an integral, long-term, supportive role in helping clients build a secure retirement program is the exception – certainly not the rule. The characteristics that Wall Street typically seeks in its brokers were accurately summed up in a 1990s Merrill Lynch training film wherein licensed broker, Michael Stamenson, tells rookie brokers that success requires “the tenacity of a rattlesnake, the heart of … Continue reading →