By Pam Martens: August 27, 2012  If you want to know if the stock market is on solid footing, look at these numbers.  Statistics come from either the Investment Company Institute (ICI) or Morningstar. ICI data references worldwide equity funds; Morningstar references U.S. stock funds.  U.S.-stock funds have shed $214.9 billion overall over the last three years, as of April 30, 2012. (Morningstar) Equity funds worldwide had net outflows of $108 billion in the third quarter of 2011. (ICI)  Equity funds worldwide had net outflows of $70 billion in the fourth quarter of 2011. (ICI)  Equity funds worldwide had net outflows of $8 billion in the first quarter of 2012. (ICI)  U.S. stock outflows were $9.3 billion in April 2012. (Morningstar) Equity funds posted an outflow of $9.77 billion in May 2012. (ICI)  Equity funds posted an outflow of $6.28 billion in June 2012. (ICI)  U.S. stock outflows registered $8.2 billion in July 2012. (Morningstar)  Equity funds … Continue reading →

By Pam Martens: August 25, 2012 If you want a hearty laugh, check out the web page for the SEC’s official whistleblower office.  They’d like us all to know that “Assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal of the Securities and Exchange Commission.” Really? Let’s take a walk down memory lane at what happened to past whistleblowers attempting to promote justice at the SEC. First up is Gary Aguirre, a lawyer and investigator at the SEC who thought the powerful former Morgan Stanley honcho John Mack should receive a subpoena to give testimony about his potential involvement in insider trading. Mack was protected; Aguirre was fired via a phone call while on vacation — just three days after contacting the Office of Special Counsel to discuss the filing of a complaint about the … Continue reading →

By Pam Martens: August 24, 2012  As we’ve mentioned here before, expect to see a lot of anti-consumer news surrounding Wall Street being released in the waning days of August.  Media strategists know two things: drop bombs on Friday so the buzz will hopefully be gone by Monday; or, when possible, wait for the lazy last days of summer when vacations, school shopping, and beach going fill the public’s mind. So it was to be expected that Mary Schapiro, Chair of the SEC, would announce yesterday that she will not proceed with any further reforms on money market funds because “Three Commissioners, constituting a majority of the Commission, have informed me that they will not support a staff proposal to reform the structure of money market funds. The proposed structural reforms were intended to reduce their susceptibility to runs, protect retail investors and lessen the need for future taxpayer bailouts.” If … Continue reading →

By Pam Martens: August 23, 2012  A provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act required that the newly created Consumer Financial Protection Bureau (CFPB) study the use of forced arbitration contracts; not outlaw them, mind you, despite mountainous evidence that they have spawned corporate kangaroo courts; just study them.  Read here and here for an in-depth look at the problem.  At the behest of Wall Street lobbyists, the same tactic was used in Dodd-Frank to deal with the so-called Volcker Rule to rein in abuses by Wall Street firms engaging in proprietary trading for the house – study the issue for years to give Wall Street a free pass to continue ripping the face off the investing public.  The CFPB has posted the comments it received on forced arbitration on their web site.  Along with the usual corporate shills, like the U.S. Chamber of Commerce, there … Continue reading →

By Pam Martens: August 22, 2012 An NBC News/Wall Street Journal poll conducted August 16 – 20 finds that just 12 percent of registered voters approve of the job Congress is doing.  The findings tied with the all time low previously set in October 2008. But the NBC/WSJ poll may even be too generous to Congress.  According to a Gallup poll conducted between February 2 – 5, 2012 and again on August 9 – 12, 2012, just 10 percent of Americans approve of the job Congress is doing.  (The Gallup poll was conducted among a random sampling of adults, not just registered voters as in the NBC/WSJ poll.) The 10 percent approval rating is the lowest number for Congressional approval in the 38 years Gallup has been conducting the poll. The poll findings are compatible with the widespread view by Americans that members of Congress are dependent on corporate money … Continue reading →

By Pam Martens: August 21, 2012  As we look back on the charred remains of Wall Street, it is becoming clear that the full story of its self implosion is based on more than just corruption and over-leveraging. A closer look shows that much of what Wall Street has peddled was based on artificial demand created by its own artifices.  The dot.com bubble could not have happened without the fake research reports Wall Street was pumping out daily, combined with forcing clients to buy at increasing prices (laddering) to get in on hot deals.  The demand for auction rate securities collapsed once it became clear that Wall Street had been propping up that market.  There was no demand for side-stepping the county registry of deeds with Wall Street’s MERS creation.  That artifice was simply to streamline the peddling of collateralized debt obligations (CDOs) to investors who thought they were buying a AAA … Continue reading →

By Pam Martens: August 20, 2012 Given the growing public perception that U.S. Attorney General Eric Holder is unwilling to prosecute the worst miscreants on Wall Street, one would think his former Wall Street powerhouse law firm would be laying low.  On the contrary, Covington and Burling, where Attorney General Holder previously served as partner and former lobbyist for Global Crossing, is bragging about the competitive advantages its close ties to the Justice Department offer its clients.  The company writes as follows under the subheading, “Our Competitive Advantages.”  “Covington is one of the few firms in the world with lawyers who recently held senior positions in both the US Department of Justice (“DOJ”) and UK Serious Fraud Office (“SFO”). Both Eric Holder, the U.S. Attorney General, and Lanny Breuer, the Assistant Attorney General for the Criminal Division (which has principal responsibility in DOJ for enforcing the FCPA [Foreign Corrupt Practices Act] … Continue reading →

By Pam Martens: August 18, 2012 Yesterday, at 1:29 p.m., the following headline appeared at the on-line Wall Street Journal: “Morgan Stanley Distributes Facebook IPO Profits.”  The headline was curious, because at 11 a.m. Facebook was trading at 19 bucks a share, exactly half its initial public offering (IPO) price in May. (The stock closed at $19.05, a nickel beyond half its IPO price of $38.)  The article was written by Lynn Cowan, an outstanding veteran Wall Street reporter.  Cowan writes the “IPO Outlook” column for the Wall Street Journal, graduated magna cum laude from Montclair State University and received a Master’s degree in journalism from Columbia University.   If Cowan says Morgan Stanley had profits to distribute, she must be on to something.  As it turns out, the profits, according to Cowan, were a whopping $100 million or thereabouts and were not fees or commissions from the IPO underwriting but … Continue reading →

By Pam Martens: August 17, 2012  Keeping with the decades long practice of dumping news that might be unsettling to the public during the late days of summer, when more of the populace is on vacation or generally not paying attention, we’ve learned recently that Goldman Sachs will not be prosecuted by the U.S. Justice Department for its CDO deals and, most likely, neither will Jon Corzine for misplacing $1.6 billion dollars of MF Global’s money. Add those to the lack of prosecutions of top dogs at AIG, Citigroup, Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac, and a practice and pattern emerges.  These firms, after all, were simply engaging in the time-honored pastime of honing their skills as Masters of the Universe.  That pastime is very much respected by the law firm of Covington and Burling, which has such an active revolving door to the U.S. Justice Department that … Continue reading →

By Pam Martens: August 16, 2012  According to news reports yesterday, New York State Attorney General Eric Schneiderman has been cranking out the subpoenas to Wall Street’s largest banks over allegations of an international bank cartel rigging Libor interest rates.  Libor is the benchmark rate used to set many consumer loans, like credit card, student loans, and adjustable rate mortgages.  It is also the primary rate used by Wall Street banks in setting rates on interest rate swaps. Both New York State and New York City have a boatload of those deals that are bleeding red ink. (Read how other municipalities around the country are being drained by these deals.)  According to a December 2011 report by Michael Stewart of United NY, JPMorgan Chase is the counterparty to most of the interest rate swaps for New York City; the MTA currently has sixteen active swap agreements with JPMorgan Chase, Citigroup/Citibank, UBS, AIG, … Continue reading →