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Post from friend of the blog Jerry: Sandy Weill bring back Glass Steegall

An extremely ironic thing happened this week. On CNBC's Squawk Box, the 79-year-old former chairman and CEO of Citigroup (NYS: C) , Sandy Weill, endorsed breaking up the nation's largest banks -- in addition to Citigroup, he was presumably referring to JPMorgan Chase (NYS: JPM) and Bank of America (NYS: BAC) , among others.
"What we should probably do is go and split up investment banking from banking," Weill said. "Have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that's not going to risk the taxpayer dollars, that's not too big to fail." In effect, Weill was calling for a reimposition of the Glass-Steagall Act -- the Depression-era legislation that for 66 years forbade the commingling of investment and commercial banking.

The irony comes from the fact that Weill was the chief architect of Glass-Steagall's repeal in 1999. The year before, Weill had orchestrated the megamerger between Citicorp, a traditional Wall Street bank, and Weill's Travelers Group, a financial conglomerate with concerns in insurance, brokerage, and investment banking. According to Weill at the time, the act's presumed prohibition of the merger was "archaic" and needed to go. It's said that Weill himself even called President Clinton the night before the act's repeal to personally lobby for its demise.

Now, truth be told, while I can't help agreeing with his point, I also can't help wondering what motivated the change of heart. Why now? Why not 10 years ago? Is he eager to get back into banking? Did he miss the national spotlight? Or, dare I ask, is he trying to exact some revenge on his erstwhile protege, Jamie Dimon? It's impossible to say.

What isn't impossible to say is that breaking up the "too big to fail" banks in an orderly manner would move our financial system one step closer to regaining the confidence of investors here and abroad.

Rome wasn't built in a day

To be fair, as my colleague Michael Lewis reminds us, breaking up the banks isn't alone a panacea for future crises or, for that matter, past crises. Michael points to the facts that Bear Stearns and Lehman Brothers were solely investment banks at the time they collapsed, Merrill Lynch only became entangled with Bank of America once the crisis had metastasized, and the biggest recipient of bailout money was an insurance company -- though one could argue that AIG (NYS: AIG) was merely a conduit for its counterparties like Goldman Sachs (NYS: GS) .

But Rome wasn't built in a day, and neither is a competent regulatory infrastructure. Congress worked for years to remedy the failures that caused the Panic of 1929 and ensuing Depression. And what they finally put into place, from the Securities Act of 1933 to the Investment Company Act of 1940, served as the backbone of our capital markets for more than half a century.

That is, until it started to be torn down in the deregulatory fervor of the 1980s and continued -- undisturbed by its progeny, the savings-and-loan crisis -- until four years ago. In 1998, for instance, as I've noted before, Alan Greenspan, then chairman of the Federal Reserve, prevented the Commodities and Futures Trading Commission from regulating a particular type of derivatives known as swaps that would ultimately bring down AIG and play a major role in the 2008 financial crisis. Doing so was "unnecessary," according to Greenspan, because "participants in financial futures markets are predominantly professionals that simply do not require the customer protections that may be needed by the general public." Talk about famous last words.

To get back to the point, acknowledging that the Glass-Steagall Act wouldn't have pre-empted the most recent crisis isn't the same thing as saying that it shouldn't be reinstated. That's throwing the baby out with the bathwater, as its perceived impotence stems rather from the fact that it's only one of many prescriptions necessary to cure a much broader ailment. To steal a phrase from my brilliant colleague Morgan Housel, the financial industry has simply become too big for its britches.

The heart of the matter

It's to be expected that wealthy bankers with vested interests like Jamie Dimon of JPMorgan Chase will squeal about prudent regulatory safeguards like the Volcker Rule, which bans bankers from gambling with the money in your savings account. But the reality is that this type of activity offers little to no value to anyone beyond the bankers themselves. As Federal Reserve Governor Sarah Raskin recently put it, "I view proprietary trading as an activity of low or no real economic value that should not be part of any banking model that has an implicit government backstop."

And the same thing can be said about the marriage of investment banks and traditional banks. The function of a traditional bank is simple: to allocate capital between borrowers who wish to engage in economically productive activities, such as starting a business or purchasing a home, and depositors who have funds that are otherwise sitting idle. We've deemed this function so valuable, in fact, that we as taxpayers have even assumed the risk of loss by federally insuring depositors. Alternatively, a model that's predicated instead on the fancy buzzwords of investment banking -- market-making, equity underwriting, proprietary trading, and the like -- ignores this core function. And as a result, the latter model shouldn't be entitled to the same type of preferential treatment as traditional banks merely because they're under the same corporate umbrella.

A Fool's take

I can't help applauding Weill's decision to renounce the crowning achievement of his career. For once, maybe even he's looking out for something other than his own net worth -- though I won't truly believe it until he calls the president.

The article Sandy Weill Calls for the Return of Glass-Steagall originally appeared on Fool.com.

Matt Taibbi on Imus the heisting of America by the banks and GE

The Scam Wall Street Learned From the Mafia | Politics News | Rolling Stone

The Scam Wall Street Learned From the Mafia | Politics News | Rolling Stone:

'via Blog this'

Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won't hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you're probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government's massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony "Tony Ducks" Corallo.

But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

In fact, stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. What's more, in the manner of old mob trials, Wall Street's secret machinations were revealed during theCarollo trial through crackling wiretap recordings and the lurid testimony of cooperating witnesses, who came into court with bowed heads, pointing fingers at their accomplices. The new-age gangsters even invented an elaborate code to hide their crimes. Like Elizabethan highway robbers who spoke in thieves' cant, or Italian mobsters who talked about "getting a button man to clip the capo," on tape after tape these Wall Street crooks coughed up phrases like "pull a nickel out" or "get to the right level" or "you're hanging out there" – all code words used to manipulate the interest rates on municipal bonds. The only thing that made this trial different from a typical mob trial was the scale of the crime.

USA v. Carollo involved classic cartel activity: not just one corrupt bank, but many, all acting in careful concert against the public interest. In the years since the economic crash of 2008, we've seen numerous hints that such orchestrated corruption exists. The collapses of Bear Stearns and Lehman Brothers, for instance, both pointed to coordi­nated attacks by powerful banks and hedge funds determined to speed the demise of those firms. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – "an open-and-shut case of anti-competitive behavior," as one former regulator described it.

More recently, a major international investigation has been launched into the manipulation of Libor, the interbank lending index that is used to calculate global interest rates for products worth more than $3 trillion a year. If and when that case is presented to the public at trial – there are several major civil suits in the works here in the States – we may yet find out that the world's most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.

But USA v. Carollo marks the first time we actually got incontrovertible evidence that Wall Street has moved into this cartel-type brand of criminality. It also offered a disgusting glimpse into the enabling and grossly cynical role played by politicians, who took Super Bowl tickets and bribe-stuffed envelopes to look the other way while gangsters raided the public kitty. And though the punishments that were ultimately handed down in the trial – minor convictions of three bit players – felt deeply unsatisfying, it was still a watershed moment in the ongoing story of America's gradual awakening to the realities of financial corruption. In a post-crash era where Wall Street trials almost never make it into court, and even the harshest settlements end with the evidence buried by the government and the offending banks permitted to escape with no admission of wrongdoing, this case finally dragged the whole ugly truth of American finance out into the open – and it was a hell of a show.

Read more: http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620#ixzz1yTEU6EWm

What happens when banks attack

Banks make it look easy

JP Morgan Jamie Dimon gets softball inside from political pals while abused by those on the outside

Euro Zone Agrees To Lend Spain Up To 100 Billion Euros

Euro Zone Agrees To Lend Spain Up To 100 Billion Euros:

'via Blog this'

BRUSSELS/MADRID, June 9 (Reuters) - Euro zone finance ministers agreed on Saturday to lend Spain up to 100 billion euros ($125 billion) to shore up its teetering banks and Madrid said it would specify precisely how much it needs once independent audits report in just over a week.

After a 2-1/2-hour conference call of the 17 finance ministers, which several sources described as heated, the Eurogroup and Madrid said the amount of the bailout would be sufficiently large to banish any doubts.

"The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100 billion euros in total," a Eurogroup statement said.

Spain said it wanted aid for its banks but would not specify the precise amount until two independent consultancies - Oliver Wyman and Roland Berger - deliver their assessment of the banking sector's capital needs some time before June 21.

"The Spanish government declares its intention to request European financing for the recapitalisation of the Spanish banks that need it," Economy Minister Luis de Guindos told a news conference in Madrid.

Should Fed Intervene in Spanish Bond Market?

European Central Bank using crisis to dismantle the pension system in Europe.

i hate banks. An excellent video though I don't mind Ernie Banks either.

Clay Bennett the bank rescue plan

It is just so great to have an intellectual who treats the American people like they have a brain

Daily Kos: Massachusetts Democrats seeking information on Scott Brown and JPMorgan Chase

Daily Kos: Massachusetts Democrats seeking information on Scott Brown and JPMorgan Chase:

'via Blog this'

Massachusetts' Senator from JP Morgan

After his upset election in January 2009, he became the key vote on the bill and leveraged that position to extract big concessions favored by banks, who had given generously to his campaign. First, Brown forced Democrats to strip from the bill a $19 billion bank tax. He also successfully pushed to water down a key reform -- the so-called 'Volcker rule' -- that was aimed at preventing banks from making risky trades with dollars backed by the government. The carve out helped large mutual funds in his state. In fact, Brown initially opposed the entire Wall Street reform bill and threatened to join the Republican filibuster of the legislation, which would have prevented it from even getting an up-or-down vote on the Senate floor. Meanwhile, as 'Brown and his Senate staff were working both publicly and behind the scenes to scuttle' these reforms, the senator took in $140,000 from financial firms -- 400 percent more than the average received by other GOP senators over the same time period -- according to the Boston Globe. A ThinkProgress analysis revealed that during his campaign, banks and their allies gave Brown's campaign huge 11th hour contributions and helped with a significant get-out-the-vote effort. He was also supported by outside groups friendly to Wall Street like the Club for Growth. Overall, the financial industry is Brown's second largest contributor." [ThinkProgress, "After Helping Banks Water Down Dodd-Frank, Scott Brown Tries To Claim He's A Wall Street Reformer," 9/13/11]

original post here:  http://www.progressmass.org/press/conservatives-scott-brown-and-chris-christie-share-washington-republican-values-not-massachusetts-va.html

Also a potential issue: When Brown got all those donations from JPMorgan Chase, it coincided perfectly with when Chase officials were pressing Federal Reserve officials for a loophole in Dodd-Frank provisions meant to limit risky trading.

All of which smells slightly fishy to the Massachusetts Democratic Party, which has filed a Freedom of Information Act request with six government agencies, seeking to find out whether Brown was involved in helping JPMorgan Chase with its lobbying.

In a news release, the party said that Mr. Brown’s re-election campaign had received at least 30 contributions in February from employees of JPMorgan and the company’s federal political action committee. The New York Times reported last week that JPMorgan executives had met with Federal Reserve officials that month to express concerns about the restrictions on banks’ proprietary trading—known as Volcker Rule—that were called for in the Dodd-Frank financial regulation law.

The Times reported that the company had lobbied over months for loose restrictions that would allow banks to make big bets in their portfolios, including some of the types of trading that led to the $2 billion loss that JPMorgan reported last week. (According to people with knowledge of the losses, that figure is now reported to be at least $3 billion.)

One of only senators out there: Wall St. and Congress: Who Regulates Who?

Elizabeth Warren has taken a ton of money from Boston. Scott Brown from Manhattan. That isn't even in Massachusetts.

LP - Wall Street's senator from Massachusetts. Or as Scott Brown's adds say he's independent. He's independent if you happen to own a bank.

Must see: C Hedges: A Spring Capitalism Corps Globalized Elite W Street OWS US Bud...

Washington is an apendage of the Main Street. The Occupy has felt the full wrath of the power elite. The elite's is to severe Occupy from the whole.

Boston to Corporations and the 1%: Pay Your Taxes!

Jeffrey Sachs on Wall Street bankers - the Guardian

Germany and Europe's Path to the 19th Century

Bank Bailouts Explained

This is a hoot.