By Pam Martens: November 28, 2012 Apparently news travels slowly from Gotham to Omaha. When Warren Buffett, the legendary investor and so-called Oracle of Omaha appeared on the Charlie Rose show on PBS Monday evening and praised the idea of Jamie Dimon as the next Treasury Secretary, he sounded less oracle and more out-of-touch cheerleader. Buffett was making the media rounds with Fortune’s Carol Loomis, who has written a glowing  book on Buffett, Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012. When asked by Rose what message it would send if President Obama appointed Jamie Dimon as the next Treasury Secretary, Buffett had this to say: “I think Jamie Dimon actually would be, I think he’d be terrific, because if we did run into problems in markets, I think he would actually be the best person you could have in the job and I think the world leaders … Continue reading →

By Pam Martens: November 27, 2012 Much of the current dysfunction and corruption on Wall Street has been laid at the feet of the repeal of the depression-era investor protection legislation known as the Glass-Steagall Act, which barred investment banks that underwrote securities from mergers with commercial banks taking insured deposits. The merger of Citicorp (parent of Citibank) with Travelers Group in 1998 forced the hand of Congress to pass the Gramm-Leach-Bliley Act in 1999, which repealed the barriers imposed by the Glass-Steagall Act. Committees in both the Senate and House of Representatives have now begun to look beyond the Wall Street carnage of 2008 to the intractable problem of creating jobs in America.  There is concern that the framework of Wall Street is creating structural impediments to job creation.  Those concerns are very real. In November 2009, David Weild and Edward Kim authored a study for the accounting firm, Grant … Continue reading →

By Pam Martens: November 26, 2012  The SEC has announced the departure of its Chair, Mary Schapiro, on December 14.  The laudatory statement from the SEC depicted her chairmanship as follows: “During her tenure, Chairman Schapiro worked to bolster the SEC’s enforcement and examination programs, among others. As a result of a series of reforms, the agency is more adept at pursuing tips and complaints provided by outsiders, better able to identify wrongdoers through vastly upgraded market intelligence capabilities, and more strategic, innovative and risk-focused in the way it inspects financial firms.” To close observers of the SEC, the above statement is pure fiction.  On November 1, Davis Polk, the large corporate law firm, issued a report on the implementation of the Dodd-Frank financial reform legislation, which is under the auspices of the SEC.  The report noted that “As of November 1, 2012, a total of 237 Dodd-Frank rulemaking requirement … Continue reading →

By Pam Martens: November 26, 2012  America doesn’t have a jobs problem; it has an IPO problem.  The lack of jobs can be directly correlated to the misallocation of capital by Wall Street to financial wagers instead of directing the flow of capital into job producing growth industries.  A review of the 201 initial public offerings (IPOs) at the New York Stock Exchange so far this year, shows that 99 were financial wagers on old debt and/or equity instead of new listings of real companies making real products to create real jobs.  The 99 IPOs were closed end mutual funds or ETFs (Exchange Traded Funds).  Another 11 listings were banks or financial firms.  One of the financial firms is KKR Financial Holdings LLC.  This is how it describes itself on its web site: “KFN, is a New York Stock Exchange-listed specialty finance company with expertise in a range of asset classes. … Continue reading →

By Pam Martens: November 21, 2012  As we reported in August, the law firm Kirby McInerney agreed to settle a lawsuit against Citigroup on behalf of shareholders for $590 million over allegations that the firm issued materially false and misleading statements concerning Citigroup’s exposure to losses from collateralized debt obligations and other off-balance-sheet accounting tricks. A careful reading of the 547-page amended complaint reveals a major U.S. financial institution that used every contrivance imaginable to inflate its earnings by gaming the system with high risk leverage, off-balance-sheet gambles it inevitably lost and dysfunctional checks and balances — all while its regulators were asleep at the switch. The deeply researched document, unfortunately, leaves serious questions unanswered: where were the company’s auditors during all of these machinations?  Who were the lawyers writing the prospectuses for these dodgy assets? How did Citigroup’s two chief regulators, the New York Fed and the Office of the Controller … Continue reading →

By Pam Martens: November 20, 2012  If only JPMorgan had been privy to those titillating emails from the Bear Stearns guys packaging the residential mortgage backed securities (RMBS) – the emails calling the bombs they were preparing to unload on investors a “sack of shit,” or “a shit breather,” and urging colleagues to “close this dog.” JPMorgan might not have been so willing to step up to the plate at the beckoning of the New York Fed and acquire Bear Stearns as it teetered toward bankruptcy in March of 2008.  But packaging toxic mortgage backed securities and internally calling them disparaging names while failing to share that view with investors is becoming very old news on Wall Street.  What is shocking news, even to veterans on Wall Street, is that Bear Stearns is alleged, by both the Securities and Exchange Commission and the New York State Attorney General, Eric Schneiderman, to have engaged in … Continue reading →

By Pam Martens: November 19, 2012  Is JPMorgan actually a cartel of lawyers in drag as a bank? You’d think so reading the fine print buried in the firm’s 2011 annual report and the legal disclosures in its hair-raising third quarter report filed with the Securities and Exchange Commission (SEC) on November 5.  According to its own figures, JPMorgan has paid the following sums for litigation expense: $3.8 billion for the nine months of 2012 ending September 30; $4.9 billion in 2011; and $7.4 billion in 2010 for the whopping total of $16.1 billion in 33 months.  There are more than a dozen small countries that have less than that in annual GDP.  How many times have we heard the now enshrined gospel that JPMorgan escaped the 2008 crisis unscathed.  Reading the mountain of lawsuits now filed against the firm, it’s clear why: JPMorgan’s role in the housing collapse has … Continue reading →

By Pam Martens: November 16, 2012 The New York Stock Exchange (NYSE) wants to teach the public financial literacy. It says “Our Financial Literacy Center serves as a credible resource for basic financial education to help people better understand and manage their personal finances.” Is the NYSE a credible source? Right off the bat, I’m not feeling confident when I read: “Only the highest quality companies can choose to list their securities on our exchanges. And once they do, NYSE Euronext plays a unique role in providing deep and liquid markets for the trading of those securities, benefiting all investors, large and small.”  Throughout the years, the NYSE has had to delist numerous companies that have turned out to be frauds or grossly mismanaged. They were not “the highest quality” companies by a long shot. Millions of Americans have lost their life savings believing that if a company trades on the NYSE, it was … Continue reading →

By Pam Martens: November 15, 2012 Throughout the United States there are critical functions that society deems too essential to leave to the vagaries of the profit driven marketplace.  Fire and police departments, public schools, parks, libraries, roads, tunnels and bridges – all paid for with taxpayer dollars and overseen by government.  So why shouldn’t the U.S. have a parallel system of public banks with a public mandate and accountable to the people  – especially at a time of unprecedented corruption in commercial banking under the jackboot of Wall Street. Until the repeal of the Glass-Steagall Act in 1999, it was illegal for Wall Street firms to  own commercial banks.  Commercial banks made loans to consumers and businesses and Wall Street investment banks were assigned the job of allocating capital to worthy business enterprises by underwriting their stock and bond offerings. Today, just five Wall Street firms, JPMorgan Chase & Co., … Continue reading →

By Pam Martens: November 14, 2012 Next month, it will be four years since the decades-long Madoff Ponzi scheme was discovered – not by the SEC which had for years received reams of documents from whistleblower Harry Markopolos outlining what he believed to be a Madoff Ponzi scheme – but by a confession from Madoff himself.  For those who lost every dollar of savings they had accumulated over a lifetime to Madoff’s scheme, one can only imagine the contempt with which they regard the SEC.   Yesterday, New York State Attorney General Eric T. Schneiderman announced a $210 million  settlement with the Ivy Asset Management, LLC, a Bank of New York Mellon subsidiary that advised clients to invest with Bernard Madoff, noting that “when added to future amounts Madoff investors anticipate receiving from the Madoff bankruptcy proceeding, today’s settlement is expected to return all or nearly all the original investment … Continue reading →