Bogle: Boost taxes on Wall Street 'gamblers' John Bogle counted himself among the 1% of wealthiest Americans a couple decades ago. You might not guess that today, when you hear the 82-year-old founder of mutual fund company Vanguard rail against economic inequality. He can sound almost like an Occupy Wall Street protester: "Our markets have gone crazy, and there is 200 times as much speculation as there is investing," he says. It has been 15 years since the low-cost investing pioneer stepped down as CEO of Vanguard. It was Bogle who launched the first index mutual fund in 1976. Vanguard Group has since grown into the largest fund company, managing nearly $1.7 trillion in U.S. fund assets. Bogle remains wealthy, but his income is a fraction of what he earned when he ran Vanguard.
He resists a label that applies to most people his age: "I'm so far from retired, it's almost an embarrassment. Here are excerpts from a recent interview with Bogle: Q: What do you think about the ongoing discussion over tax fairness? Bill Black: Green Slime Drives Our Financial Crises. By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives. “Pink slime” just had its fifteen minutes of fame. BPI, the producer of pink slime, calls it “Lean Finely Textured Beef.” BPI’s slogan is “expect a higher standard.” Pink slime was originally limited to dog food, but it has secretly been fed to Americans for a decade. The New York Times revealed the pink slime scandal in a story that ran on December 31, 2009. A few weeks ago, Kit Foshee, a former BPI employee fired for blowing the whistle on pink slime, helped make the secret adulteration of hamburgers with pink slime a scandal.
The infected, odiferous, and bad tasting pink slime (aka, the “higher standard”) secretly added to our burgers for over a decade would be embarrassing to any system that pretends to the label “free enterprise,” but it has special resonance amongst economists. Janet Tavakoli On The "Biggest Fraud In The History Of Capital Markets" "Inside Job" Director Charles Ferguson: Wall Street Has Turned US Into a "Predatory Nation" How to Prevent Other Financial Crises. Excessive risk-taking by banks: A new eReport. Risk-taking by banks played a critical role in the global crisis and Eurozone crisis.
This column introduces a new eReport that focuses on four aspects of excessive risk-taking by banks, highlighting the causes and the cures. The eReport applies the best available theory and data, bringing together the main insights and views that have emerged from the crisis. For many, the global crisis was caused by the interlinked fragilities that arose in the banking and financial sectors; these themselves were created by mindless deregulation and permissive monetary policy. By the late 2000s, the system was so precarious that shocks from many directions could have triggered the economic conflagration we witnessed. The actual trigger was the bursting in fall 2007 of the US housing bubble – a bubble that was created by banks’ excessive risk-taking. A new eReport released today by CEPR – edited by Mathias Dewatripont and Xavier Freixas – explores the origins of excessive risk-taking by banks.
Reference. Too Big to Stop: Why Big Banks Keep Getting Away With Breaking the Law - James Kwak - Business. For the country's biggest financial institutions, it's still worth it to break the law, because the government has no way to make the banks pay for acting illegally Reuters Move along, nothing to see here. That's been the Wall Street line on the financial crisis and the calamitous behavior that caused it, and that strategy has been spectacularly successful. Since Spring 2010, financial institutions' predatory practices have fallen off the front pages of newspapers, replaced by manufactured fears of over-regulation and -- thanks to an assist from the European continent -- an Orwellian belief that government debt lies at the root of our economic problems. The issue in the Goldman case was whether the bank properly disclosed that John Paulson, a hedge fund manager, was involved in the selection of securities for the deal, because he wanted to bet against them.
In short, a settlement like this seems to have exactly zero value as a deterrent. Andrew Haldane · The Doom Loop: Equity and Banking · LRB 23 February 2012. In 1989, the CEOs of the seven largest banks in the US earned an average of $2.8 million, almost a hundred times the annual income of the average US household. In the same year, the CEOs of the largest four UK banks earned £453,000, fifty times average UK household income. These are striking inequalities. Yet by 2007, at the height of the financial sector boom, CEO pay at the largest US banks had risen nearly tenfold to $26 million, more than five hundred times US household income, while among the UK’s largest banks it had risen by an almost identical factor to reach £4.3 million, 230 times UK household income in that year. How do we make sense of these salary increases? The continuing backlash against banking, as evidenced in popular protests on Wall Street and in the City of London, is a response not just to the fact that the world is poorer, as pre-crisis riches have turned to rags, but to the way these riches were privatised, while the rags are being socialised.
Quelle Surprise! Taxpayers Will Be Paying for Part of Mortgage Settlement. The whole purpose of a settlement is that a party pays damages to rid themselves of liability, and the amount they pay (and “pay” can include the cost of reforming their conduct) is less than what they expect to suffer if they were sued and lost the case (otherwise, it would make more sense for them to fight). But in the topsy-turvy world of cream for the banks, crumbs for the rest of us, we have, in the words of Scott Simon, head of the mortgage business at bond fund manager Pimco, in an interview with MoneyNews, lots of victims paying for banks’ misdeeds: “A lot of the principal reductions would have happened on their loans anyway, and they’re using other people’s money to pay for a ton of this.
Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load…“Think about this, you tell your kid, ‘You did something bad, I’m going to fine you $10, but if you can steal $22 from your mom, you can pay me with that.’” Repairing the Damage of “Fraud as a Business Model” "Too Big to Jail" by Simon Johnson. Exit from comment view mode. Click to hide this space WASHINGTON, DC – Among the fundamental principles of any functioning justice system is the following: Don’t lie to a judge or falsify documents submitted to a court, or you will go to jail.
Breaking an oath to tell the truth is perjury, and lying in official documents is both perjury and fraud. These are serious criminal offenses, but apparently not if you are at the heart of America’s financial system. On the contrary, key individuals there appear to be well compensated for their crimes. As Dennis Kelleher of Better Markets has argued, the recent so-called “robo-signing” settlement – in which five large banks “settled” their legal liability for carrying out fraudulent foreclosures on mortgages – is a complete sell-out to the financial industry.
First, there was no serious criminal prosecution – meaning that no one will be charged with a felony, and no one will go to jail. Even the terminology used to frame the discussion is wrong. "Fraud As a Business Model" There were many factors that contributed to our recent financial bubble: deregulation, cheap money from the Fed, failure to enforce remaining regulations, crony capitalism, hubris, speculation, leverage, and fraud among other problems. While fraud wasn't the only issue, it was and is a significant contributor to the credit bubble. Restraining fraud is a necessary but not sufficient condition for a sound financial system. Congressional investigations in recent years have put ample evidence of fraud in the public domain. To illustrate just one type of malicious mischief, Senator Carl Levin (D. Arianna Huffington pointed out that the financial system is rigged and that offenders get off lightly: Until the Securities and Exchange Commission sued Goldman Sachs for fraud in April of 2010, it was easy to forget that we have a regulatory agency designed to protect the public from the pillaging of corporate America.
On Friday, September 2, 2011, The U.S. Why No Financial Crisis Prosecutions? Ex-Justice Official Says It’s Just too Hard. It’s an issue we and others [1] have noted again [2] and again [3]: Years after the financial crisis, there have still been no prosecutions of top executives at the major players in the financial crisis [4]. Why’s that? Well, according to a now-departed Justice Department official who used to be in charge of investigating such matters, the Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task [5]. David Cardona, who recently left the FBI for a job at the Securities and Exchange Commission, told the Wall Street Journal that bringing financial wrongdoing to account is “better left to regulators,” who can bring civil cases.
Civil cases, of course, can produce penalties from the banks -- as well as promises to be on better behavior [6] -- but don’t put any executives behind bars. Here’s the Journal: While at the FBI, Mr. “I get it. That might come as a surprise to U.S. Should Some Bankers Be Prosecuted? by Jeff Madrick and Frank Partnoy. Wall Street and the Financial Crisis: Anatomy of a Financial Collapse by the Majority and Minority Staff, Permanent Subcommittee on Investigations, US Senate 639 pp., available at hsgac.senate.gov Money and Power: How Goldman Sachs Came to Rule the World by William D. Doubleday, 658 pp., $30.50 Report of the Business Standards Committee Goldman Sachs 63 pp., available at www.GoldmanSachs.com/BusinessStandards Private financial firms overwhelmingly created the conditions that led to catastrophe. Bank Fraud Prosecution Continues to Drop under Obama.
Finance/Insurance/Real Estate: Lobbying, 2011. Total for Finance, Insurance & Real Estate: $488,656,400Total Number of Clients Reported: 957Total Number of Lobbyists Reported: 2,441 View our complete Lobbying profile for Finance/Insurance/Real Estate Industries in this Sector: Search for an industry: Feel free to distribute or cite this material, but please credit the Center for Responsive Politics. For permission to reprint for commercial uses, such as textbooks, contact the Center. Citigroup Whistle-Blower Says Bank’s ‘Brute Force’ Hid Bad Loans From U.S. Four years after rotten mortgages helped trigger a global financial crisis, Sherry Hunt said her Citigroup Inc. quality-control team was still finding flaws in new loans that included altered tax forms, straw buyers and borrowers who listed fictitious employers.
Instead of reporting the defects to the Federal Housing Administration, the bank saddled the agency with losses by falsely declaring the loans fit for its federal insurance program, according to a complaint filed yesterday by the U.S. Attorney’s Office in Manhattan. Citigroup agreed to pay $158.3 million to settle the claims, and admitted that it certified loans for FHA backing that didn’t qualify.
Hunt, who filed a sealed lawsuit against New York-based Citigroup in August that the government joined, will collect $31 million of that sum -- before taxes and attorney’s fees -- as a whistle-blower, she said in an interview yesterday. Inspector General The inspector general for the U.S. ‘Beating Us Up’ Mark C. Improvements Undertaken. Goldman Wins New York Fed Auction for A.I.G. Assets.
ReutersRobert Benmosche, chief of American International Group. 8:43 p.m. | Updated Goldman Sachs is picking up some of the pieces from the wreckage of the American International Group. On Wednesday, the Federal Reserve Bank of New York announced that it had sold assets with a face value of $6.2 billion to Goldman, which trumped four other investment banks for the securities. The auction — the second such sale this year — signals the renewed interest in mortgage-related investments and other risky securities at the center of the financial crisis.
In recent months, banks, hedge funds and other big investors have been snapping up the bonds, betting on a rebound in their prices. “There’s a saying: there are no bad bonds, there are just bad prices,” said Evan Lorenz, an analyst at Grant’s Interest Rate Observer. “If you can get them at the right price, you can make a good amount.” In all, the government pumped more than $182 billion into A.I.G. to help stabilize the broader financial system. The $7 trillion secret loan program: The government and big banks should be punished for deceiving the public about their hush-hush bailout scheme. Photograph by Jupiterimages/ Getty Images. Imagine you walked into a bank, applied for a personal line of credit, and filled out all the paperwork claiming to have no debts and an income of $200,000 per year. The bank, based on these representations, extended you the line of credit.
Then, three years later, after fighting disclosure all the way, you were forced by a court to tell the truth: At the time you made the statements to the bank, you actually were unemployed, you had a $1 million mortgage on your house on which you had failed to make payments for six months, and you hadn’t paid even the minimum on your credit-card bills for three months. Do you think the bank would just say: Never mind, don’t worry about it? Of course not. Whether or not you had paid back the personal line of credit, three FBI agents would be at your door within hours. Yet this is exactly what the major American banks have done to the public. So what to do? 7.77 trillion in secret Federal Reserve loans to banks? I have been looking into the claim recently made by any number of internet sites (for example, here’s one of the many hundreds, if you insist on a link) that the Federal Reserve made $7.77 trillion in secret loans to banks.
The claim is outrageously inaccurate, as I explain below. Let me begin with some accounting basics. Suppose that at the start of January I make a 3-month loan of $100 to person A and a 1-month loan of $100 to person B. At the start of February, person B rolls it over into a new 1-month loan, and does so again at the beginning of March. The correct answer, of course, is that I lent $100 to person A and I lent $100 to person B.
This is a very elementary point in economics or accounting. On the other hand, if your goal is to come up with a number that sounds really big, you’ll be excited to learn that I also lent $100 to person C in the form of a series of daily loans. So where in particular did people come up with this $7.77 trillion figure? More on those secret Federal Reserve loans to banks. Secret Fed Loans Gave Banks Undisclosed $13B.