Archive for the ‘Madoff’ Category

Obama’s Katrina Moment Is Here Now

March 22, 2009

A CHARMING visit with Jay Leno won’t fix it. A 90 percent tax on bankers’ bonuses won’t fix it. Firing Timothy Geithner won’t fix it. Unless and until Barack Obama addresses the full depth of Americans’ anger with his full arsenal of policy smarts and political gifts, his presidency and, worse, our economy will be paralyzed. It would be foolish to dismiss as hyperbole the stark warning delivered by Paulette Altmaier of Cupertino, Calif., in a letter to the editor published by The Times last week: “President Obama may not realize it yet, but his Katrina moment has arrived.”

By Frank Rich
The New York Times
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Six weeks ago I wrote in this space that the country’s surge of populist rage could devour the president’s best-laid plans, including the essential Act II of the bank rescue, if he didn’t get in front of it. The occasion then was the Tom Daschle firestorm. The White House seemed utterly blindsided by the public’s revulsion at the moneyed insiders’ culture illuminated by Daschle’s post-Senate career. Yet last week’s events suggest that the administration learned nothing from that brush with disaster.

Otherwise it never would have used Lawrence Summers, the chief economic adviser, as a messenger just as the A.I.G. rage was reaching a full boil last weekend. Summers is so tone-deaf that he makes Geithner seem like Bobby Kennedy.

Bob Schieffer of CBS asked Summers the simple question that has haunted the American public since the bailouts began last fall: “Do you know, Dr. Summers, what the banks have done with all of this money that has been funneled to them through these bailouts?” What followed was a monologue of evasion that, translated into English, amounted to: Not really, but you little folk needn’t worry about it.

Yet even as Summers spoke, A.I.G. was belatedly confirming what he would not. It has, in essence, been laundering its $170 billion in taxpayers’ money by paying off its reckless partners in gambling and greed, from Goldman Sachs and Citigroup on Wall Street to Société Générale and Deutsche Bank abroad.

Summers was even more highhanded in addressing the “retention bonuses” handed to the very employees who brokered all those bad bets. After reciting the requisite outrage talking point, he delivered a patronizing lecture to viewers of ABC’s “This Week” on how our “tradition of upholding law” made it impossible to abrogate the bonus agreements. It never occurred to Summers that Americans might know that contracts are renegotiated all the time — most conspicuously of late by the United Automobile Workers, which consented to givebacks as its contribution to the Detroit bailout plan. Nor did he note, for all his supposed reverence for the law, that the A.I.G. unit being rewarded with these bonuses is now under legal investigation by British and American authorities.

Within 24 hours, Summers’s stand was discarded by Obama, who tardily (and impotently) vowed to “pursue every single legal avenue” to block the bonuses. The question is not just why the White House was the last to learn about bonuses that Democratic congressmen had sought hearings about back in December, but why it was so slow to realize that the public’s anger couldn’t be sated by Summers’s legalese or by constant reiteration of the word outrage. By the time Obama acted, even the G.O.P. leader Mitch McConnell was ahead of him in full (if hypocritical) fulmination.

David Axelrod tried to rationalize the lagging response when he told The Washington Post last week that “people are not sitting around their kitchen tables thinking about A.I.G.,” but are instead “thinking about their own jobs.” While that’s technically true, it misses the point. Of course most Americans don’t know how A.I.G. brought the world’s financial system to near-ruin or what credit-default swaps are. They may not even know what A.I.G. stands for. But Americans do make the connection between their fears about their own jobs and their broad understanding of the A.I.G. debacle.

They know that the corporate bosses who may yet lay them off have sometimes been as obscenely overcompensated for failure as Wall Street’s bonus babies. As The Wall Street Journal reported last week, chief executives at businesses as diverse as Texas Instruments and the home builder Hovnanian Enterprises have received millions in bonuses even as their companies’ shares have lost more than half their value.

Since Americans get the big picture of this inequitable system, that grotesque reality dwarfs any fine print. That’s why it doesn’t matter that the disputed bonuses at A.I.G. amount to less than one-tenth of one percent of its bailout. Or that CNBC — with 300,000 viewers on a typical day by Nielsen’s measure — is a relatively minor player in the crash. Or that Edward Liddy had nothing to do with A.I.G.’s collapse, or that John Thain, of the celebrated trash can, arrived after, not before, others wrecked Merrill Lynch.

These prominent players are just the handiest camera-ready triggers for the larger rage. Passions are now so hot that even Bernie Madoff’s crimes began to pale as we turned our attention to A.I.G.’s misdeeds, just as A.I.G. will fade when the next malefactor surfaces.

Read the rest:
http://www.nytimes.com/2009/
03/22/opinion/22rich.html?_r=1

Obama, His Outrage in Legal, Political Quicksand Over AIG Bonuses?

March 17, 2009

The only real difference between Bernie Madoff and the management of AIG is that when Bernie Madoff got caught, he pleaded guilty. When AIG got caught, it asked the government for $170 billion.

And it got it. Now the American International Group is going to pay $165 million to its executives as a reward for the fine job they did in duping everybody.

By Roger Simon
Politico
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The Obama administration is officially outraged by this. It is stamping its feet. It is jumping up and down. It is issuing stern statements.

But some are getting ready to pay. Some are getting ready to let the fat cats get fatter.

Larry Summers, director of the president’s National Economic Council, went on ABC’s “This Week With George Stephanopoulos” on Sunday and said the AIG bonuses were “outrageous” but might have to be paid.

“We are a country of law,” he said. “There are contracts. The government cannot just abrogate contracts.”
Baloney. Contracts get abrogated all the time. That’s why there are lawsuits.

It’s not enough for AIG executives to continue to get their huge annual salaries because of a government bailout — they want bonuses, too? Let them sue to get them.

The way the courts work, they should get a ruling within the next century or so.

But while we are waiting, the taxpayers should not stand idle. We should demand the immediate resignation of Edward M. Liddy, the government-appointed chairman of AIG.

Liddy recently wrote a letter to Treasury Secretary Timothy Geithner saying the bonuses must be paid to the AIG executives because, otherwise, their morale might suffer.

“We cannot attract and retain the best and the brightest talent to lead and staff the AIG businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” Liddy wrote.

The best and the brightest? Is this guy serious? As of Sunday, AIG stock had gone down 99 percent over the past year because of these geniuses. But we have to worry they might quit and go elsewhere?

Fine. Let them go. Maybe they can get jobs in Zimbabwe, where kleptocracy is official policy. I think some of them would feel more comfortable there.

Liddy is scheduled to appear at a congressional hearing Wednesday. Actually, I would feel better if he were going on “The Daily Show With Jon Stewart.” That guy really knows how to interrogate.

But I hope our elected representatives get to the heart of the matter with Liddy: Why do Wall Street fat cats believe they operate in a separate world, one where ordinary rules don’t apply and democracy doesn’t work?

Monday afternoon, President Barack Obama accused AIG of “recklessness and greed.”

And he said he is going to “pursue every legal avenue to block these bonuses and make the American taxpayers whole.”

The key phrase, of course, is “every legal avenue.” We do not want our president to act illegally. But I hope he is not going to throw up his hands in helpless outrage if AIG lawyers say the bonuses must be paid.

Read the rest:
http://news.yahoo.com/s/politi
co/20090317/pl_politico/20078

Related:
 Republican Grassley on AIG execs: Quit or suicide

Obama Plans to Charge Wounded Heroes for Treatment
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Obama Wants To “Unclog Blocked Lending Arteries” — Here’s The Problem
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AIG Bonus Caper Demonstrates Obama Administration Weak Thinking
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Stimulus: Way Fewer Jobs Than You Thought
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Why Taxpayers Should Pay the AIG Bonuses; Obama is Dead Wrong On This
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Stimulus: Way Fewer Jobs Than You Thought

 Obama Tells “Turbo Tax” Geither To Get Back AIG Bonus Money; Dumb and Dumber

Obama: Really Want to “Fix Schools”? Try The China Or Singapore Model
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Obama’s War On Banks: Backlash Stirring

Obama using recession to justify largest expansion of federal authority ever; U.S. less safe

From March 13:
Republicans: If You Can’t Agree On Core Values Now, Commit Harakiri

Financial Crisis “Far From Over”

January 21, 2009

Our global financial crisis is a long way from over.

If you feel the need to hang a bunch of investment bankers, Wall Street types, lawyers and CEOs, you are likely having a “normal” reaction to reality.

But we still need to get behind the wheel and solve our economic ills.  And, in this commentators mind, a bunch of government spending isn’t the cure (it never has sufficed before).

But there still should be justice for the guilty.  Didn’t Enron’s Key Lay get the electric chair?
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Get the rope.  Get Clint Eastwood.  Then let’s get Madoff!

But the problems have to be solved.  Bailouts of banks buys the mortgages and other debt that has lost value, little value and nobody will buy.  So the U.S. has to buy this debt.

There are also some 5 million “home owners” that will default on their morgages unless they get relief.

Accused swindler Bernard Madoff exits the Manhattan federal ... 
Accused swindler Bernard Madoff exits the Manhattan federal court house in New York January 14, 2009.(Brendan McDermid/Reuters)

The truth is, there may be some jail time passed out but the real problem is systemic which needs a lot of long-term fixing….

Headlines from London January 21, 2009:

“Banking Crisis May Last a Decade”

“Only Two London-Listed Banks By End of 2009”
…the government is now the largest, or only, shareholder in Lloyds/HBOS, RBS and Northern Rock and it seems highly likely that HSBC and Standard Chartered will be the only UK-quoted bank shares by the end of 2009.
http://www.telegraph.co.uk/finance/personalfinance/inv
esting/shares/4298704/Fundamentalist-View-There-wil
l-be-only-two-London-listed-banks-left-by-the-end-of-2009.html

*********************

By Philip Johnston
Telegraph (London)

Before the internet age, it was a rite of passage, a feeling that you had finally grown up and were considered responsible and trustworthy. As children, many of us might have had savings accounts or a few pounds in a building society deposited by an ageing aunt.

But to get one’s first cheque book was something special. Mine had the words National Westminster Bank written on the front, an imprimatur that could hardly have sounded more rock solid and British to the core, a guarantee of probity and quiet competence.

In those days, banks were forbidding places; there were no open plan offices. A visit to the bank manager, especially for an impecunious student trying to explain a £20 overdraft, was a terrifying experience conducted in a sternly avuncular manner from behind a large desk.

We are right to ben angry with the bankers

Fred Goodwin, former chief executive, Royal Bank of Scotland Photo: REUTERS

We all knew that such a world had disappeared. But it was none the less astonishing to wake on Monday morning to discover that the Royal Bank of Scotland – my bank, or at least the NatWest bit of it – had posted the biggest loss in British corporate history.

Nor did it take long for the shock to give way to fury. Charles Dickens captured the feeling well after the collapse of Merdle’s bank in Little Dorrit: “The air was laden with a heavy muttering of the name of Merdle, coupled with every form of execration.”

Well, there were a few execrations in my own household and doubtless in many others across the country. Both curses and questions. How could this have happened?

How is it possible to rack up a loss of £28 billion and yet be worth just £8 billion?

What happened to the RBS share of the £37 billion shelled out by taxpayers last October to recapitalise the banking system? What possessed the executives of RBS to buy a Dutch financial institution for way over the odds even as the Northern Rock fiasco was unfolding?

Beyond the sheer incredulity, there is anger that the people responsible have cushioned themselves financially against the privations that their recklessness will induce in millions of others.

The people at the top may lose their jobs, but they have already paid themselves so much in bonuses and struck such lucrative pension deals that they can retire in luxury while the rest of us face penury.

Extraordinarily, the vast bonuses were paid for what at the time was hailed as success but now turns out to be abject failure. Do they get returned, along with the knighthoods and gongs?

For those of us who did not know what a derivative was until a few months ago and had only a vague idea that Sir Fred Goodwin was “something in the City”, these are revelatory times.

It was evident from the steady flow of letters offering to lend money and urging us to take out new credit cards (all of which went into the bin in our house) that the banks were on a credit binge and that many people were being tempted to join in.

But surely, we all thought, they must know what they are doing. Even the near-collapse of Northern Rock after the first run on a bank since the mid-19th century, seemed like an isolated example of a badly run institution that had been led to the edge by incompetent and foolhardy executives and had to be rescued by the Government.

At the time, some cynical observers suggested that if it had been Southern Rock based in Guildford, it would have been allowed to go to the wall. But it was a big employer and an iconic institution in Labour’s north-east heartland, so it had to be saved. But at least it was one-off, wasn’t it? The other banks could not possibly be in the same leaky boat.

The discovery that they were sinking too has been more than a shock; it has been a betrayal. Their recklessness has bordered on the criminal. One figure from the Bank of England’s financial stability report last October exemplifies the enormity of their folly. In 2000, the amount of money held on deposit in British banks and the amount they were lending was roughly comparable.

Last year, they were lending £700 billion more than they were receiving. This was the mother of all bubbles, yet the bank bosses kept inflating it, egged on by the Government, the Bank of England, the so-called regulators and, let’s be frank, by those of us who borrowed way beyond our means.

In its report, the Bank said: “The seeds of this boom can be traced back to the development of financial and trade imbalances among the major economies over the past decade. Increased borrowing in a number of developed countries was in part financed with inflows of foreign capital, leading to greater integration in international capital markets. Benign economic conditions helped anchor expectations of continued stability. This, along with rising asset prices and low global real interest rates, boosted the demand for and supply of credit in a number of developed economies.

It added: “Over time, banks took on progressively more credit risk by lending to, for example, households with high loan to income ratios, leveraged buy-out firms and, in the United States, to the sub-prime sector.”

Read the rest:
http://www.telegraph.co.uk/finance/financetop
ics/financialcrisis/4301285/We-have-every-ri
ght-to-be-angry-with-the-bankers.html

Anti-Semitism floods Internet after Madoff scandal

December 20, 2008

Anti-Jewish commentary is flooding the Internet in the wake of Bernard Madoff’s arrest on charges of masterminding one of the biggest Wall Street frauds in history, campaigners said Friday.

The Anti-Defamation League (ADL) said there had been “an outpouring of anti-Semitic comments on mainstream and extremist Web sites.”

Bernard L. Madoff, the Chairman of Madoff Investment Securities, ... 
Bernard L. Madoff, the Chairman of Madoff Investment Securities, is seen speaking in 2007.(Philoctetes Center/Handout/Reuters)

Madoff, 70, is Jewish and a prominent member of the powerful US Jewish community. He is alleged to have defrauded investors, including a number of Jewish-related charities, of some 50 billion dollars.

“Site users have posted comments ranging from deeply offensive stereotypical statements about Jews and money — with some suggesting that only Jews could perpetrate a fraud on such a scale — to conspiracy theories about Jews stealing money to benefit Israel,” the ADL said in a statement.

“Jews are always a convenient scapegoat in times of crisis, but the Madoff scandal and the fact that so many of the defrauded investors are Jewish has created a perfect storm for the anti-Semites,” said Abraham Foxman, ADL national director.

“Nowadays, the first place Jew-haters will go is to the Internet, where they can give voice to their hateful ideas without fear of repercussions.”

Related:
Madoff’s $50 Billion Scam Included Buying Influence in Washington

Madoff’s $50 Billion Scam Included Buying Influence in Washington

December 16, 2008

Within a day of the Dec. 11 arrest of Wall Street financier Bernard L. Madoff, his Washington lobbyists were scrambling to sever all ties to a man who’s been accused of a $50 billion fraud and who may go down in history as the largest financial scam artist ever.

The lobbying firm Dow Lohnes Government Strategies filed paperwork on Dec. 12, terminating its lobbying contract with Bernard L. Madoff Investment Securities. That ended more than 10 years of Madoff lobbying in Washington, in which his investment firm spent more than $400,000 to influence the federal government.

By Eamon Javers, Lisa Lerer
Politico

Bernard L. Madoff, the Chairman of Madoff Investment Securities, ... 
Bernard L. Madoff, the Chairman of Madoff Investment Securities, is seen speaking in 2007.(Philoctetes Center/Handout/Reuters)

But lobbying is just a piece of Madoff’s influence in Washington. His family has contributed nearly $400,000 to political committees. And his niece, Shana Madoff Swanson, who serves as a compliance attorney at his firm, is married to a former high-ranking Securities and Exchange Commission official, Eric Swanson.

Swanson was the assistant director in the SEC’s Office of Compliance Inspections and Examinations’ market oversight unit in Washington. According to his biography, Swanson “supervised and conducted inspections and examinations that involved a wide range of issues including best execution, order handling, insider trading [and] market manipulation.”

The SEC has come under criticism for not following up on tips….

Read the rest:
http://news.yahoo.com/s/politico/20081216/pl_politico/16608