By Pam Martens: June 27, 2012 Frank Partnoy is just out with a new book: Wait: The Art and Science of Delay. Partnoy, now a professor of law and finance at the University of San Diego, is known for speaking the hard hitting truths about Wall Street – in testimony before Congress and in his books.  Partnoy has an insider’s feel for his topics – he worked in the 90s as a derivatives structurer at Morgan Stanley and CS First Boston and wrote the Wall Street classic, F.I.A.S.C.O.: Blood in the Water on Wall Street.  Another great read from Partnoy is Infectious Greed: How Deceit and Risk Corrupted the Financial Markets. His newest book, Wait, is not just about Wall Street, although from the review below it does appear he takes on Jim Cramer’s Mad Money television program.  I’ll be doing an in-depth review in the near future (I’m taking … Continue reading →

By Pam Martens: June 26, 2012  JPMorgan Chase filed a prospectus today for a structured investment linked to Starbucks’ common stock.  Based on the language of the prospectus, it sounds like JPMorgan has not completely unwound itself from its troublesome derivative trades:    “…we may hold certain of our current synthetic credit positions for the longer term and, accordingly, the net income in our Corporate segment will likely be more volatile in future periods than it has been in the past. These and any future losses may lead to heightened regulatory scrutiny and additional regulatory or legal proceedings against us, and may continue to adversely affect our credit ratings and credit spreads and, as a result, the market value of the notes. See our quarterly report on Form 10-Q for the quarter ended March 31, 2012; ‘Risk Factors — Risk Management — JPMorgan Chase’s framework for managing risks may not … Continue reading →

By Pam Martens: June 25, 2012  The U.S. Supreme Court has today shot down a ruling in Montana that overturned the U.S. Supreme Court’s ruling in Citizens United v. FEC, giving corporations unlimited spending in political campaigns.  The high court ruled that Montana must follow the edict of the Citizens United decision.  Twenty-two states had joined Montana in asking the U.S. Supreme Court to reconsider its ruling given all the newly acquired evidence of rampant corruption.   The case was American Tradition Partnership, Inc., fka Western Tradition Partnership, Inc., et al v. Steve Bullock, Attorney General of Montana, et al.  A dissent was written by Justice Breyer, with whom Justices Ginsburg, Sotomayor and Kagan joined. Excerpts from the dissent: “In Citizens United v. Federal Election Commission, the Court concluded that ‘independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption’… I disagree with the Court’s holding … Continue reading →

By Pam Martens: June 25, 2012 Here’s a respite from reading about the serial corruption of the big Wall Street firms.  According to an SEC complaint filed in U.S. District Court in Orlando, Florida,  Gurudeo (Buddy) Persaud is a small time player who ran a Ponzi scheme from 2007 to 2010,  ripping off a widow working two jobs and other trusting souls.  Unlike Madoff, Persaud actually did some trading with a portion of the investors’ money – the amount left over after paying himself lavishly and paying investors promised fixed returns of as much as 18 percent —  until, of course, all the money was gone and new money stopped coming in.  If you recall, Madoff said he was using a split-strike conversion strategy (which turned out to be that he split with the money and investors struck out).  Persaud, according to the SEC complaint, was using strategies culled from … Continue reading →

By Pam Martens: June 24, 2012 On June 21, 2012, SEC Chair Mary Schapiro submitted 14 pages of testimony to the Senate Banking Committee, explaining why she is fingering her worry beads over a potential panic run on money market funds.  It really didn’t require 14 pages of testimony.  Schapiro had just two words in the back of her mind: European banks.  Buried in the copious testimony is this daunting fact: as of May 31, 2012, approximately 30 percent of prime money market fund assets is invested in debt issued by banks based in Europe.  What is a money market fund, really, and why is the SEC worrying about a slice of the market that is supposed to hold the shortest and safest investments?  It’s because the public perception of what a money market fund is and the reality leaves an expanse as big as the Grand Canyon.  In reality, … Continue reading →

By Pam Martens: June 24, 2012 Spencer Bachus is the Chair of the U.S. House of Representatives’ Financial Services Committee.  That’s the body that oversees Wall Street.  Given the corruption and hubris of Wall Street, one would think that this Committee would treat financial reform seriously. But the first thing one sees when visiting the web site of this Committee is a highly politicized slide show bashing the duly passed Dodd-Frank financial reform legislation and the Democrats. While it’s true that Dodd-Frank lacked adequate teeth to reform Wall Street, the Republicans don’t want to strengthen the legislation, they want to further deregulate Wall Street. This slide show is a brazen misuse of a taxpayer-funded web site and yet another striking example of why Congress ranks so low in public esteem.

  By Pam Martens: June 22, 2012  Moody’s had barely published its ratings downgrades of the big banks on Wall Street before their public relations flaks hurled an avalanche of insults at Moody’s.  Citigroup was the most vitriolic of the pack, calling Moody’s “arbitrary,” “backward looking,” and “opaque.”  This from a company managed by a former hedge fund manager whose stock would be trading at $2.79 (intraday) had it not done a 1 for 10 reverse split and who previously hid tens of billions off its balance sheet in Structured Investment Vehicles (SIVs).  In fact, Citigroup wouldn’t even exist today had the taxpayer not bailed it out with $45 billion in TARP funds, over $300 billion in guarantees, and trillions in secret loans from the Fed. But Citi said in its press release: “In our view, investors and clients should make their own decisions and not rely on ratings — … Continue reading →

By Pam Martens: June 22, 2012  On June 25 and June 26, 1998, the Federal Reserve held hearings at the Federal Reserve Bank of New York on allowing Travelers Group, which owned an insurance firm (Travelers), investment bank (Salomon Brothers) and brokerage firm (Smith Barney) to merge with a bank holding FDIC insured deposits (Citicorp/Citibank). Despite solid testimony that this merger was illegal, the Fed approved the merger and Citigroup was born. Sandy Weill, head of Travelers, and Jamie Dimon, his first lieutenant (now Chairman and CEO of the risk-management-challenged JPMorgan Chase) were the brains behind the Travelers/Citicorp deal and made a fortune from it.  That merger forced all of Citigroup’s main competitors to do similar deals in order to compete, setting in motion today’s too big to fail financial chaos. Why didn’t the Fed listen to the testimony?  Why didn’t the Fed follow the law? Here’s a sampling of … Continue reading →

By Pam Martens: June 21, 2012 On this week’s Moyers & Company, Rolling Stone writer and blogger, Matt Taibbi, and Yves Smith, creator of the finance and economics blog Naked Capitalism, discuss the nexus between Wall Street and Washington and how that’s killing democracy in the U.S. Moyers will also interview Peter Edelman, who discusses what it will take to keep the needs of poor people on the American political agenda. Edelman’s new book is So Rich, So Poor: Why It’s So Hard to End Poverty in America. Watch a preview here along with a time schedule for your local PBS. In the preview you’ll hear Taibbi say “vast criminality” — Smith links CEOs and corruption — Edelman says “screwed.”  That ably sums up where we are.

By Pam Martens: June 20, 2012 The Senate Banking Committee’s subcommittee on Securities, Insurance, and Investment held a hearing from 9:30 a.m. to 11:30 a.m. this morning on a matter of national urgency: the failing process of bringing new companies to market, otherwise known as Initial Public Offerings or IPOs. The hearing was titled: “Examining the IPO Process: Is It Working for Ordinary Investors?” A more appropriate title would have been: “The Senate Hearing Process: Is It Working for the American People?” Out of an 18-member subcommittee, one Senator showed up for the hearing, Senator Jack Reed, Democrat from Rhode Island.  Calls and emails to the press offices of the other members of the subcommittee turned up only one explanation (thus far) for this embarrassing slight to the panelists and to a subject that goes to the heart of creating jobs in America and to restoring confidence in the markets … Continue reading →