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The news isn't all bad.
Er, but wait.
Maybe not not.
BREAKING!
Bank of America Corp. BAC +0.71% is in talks to pay at least $12 billion to settle civil probes by the Justice Department and a number of states into the bank's alleged handling of shoddy mortgages, an amount that could raise the government tab for the bank's precrisis conduct to more than $18 billion, according to people familiar with the negotiations. . . . The North Carolina bank's total tab to end government probes and lawsuits related to its conduct in the runup to the financial crisis is increasingly likely to surpass the record $13 billion that J.P. Morgan Chase JPM +0.41% & Co. paid last year to settle similar allegations, these people said. Bank of America has already struck a $6 billion settlement, by the Justice Department's measure, with the Federal Housing Finance Agency.
. . . The sometimes creative terms of consumer relief mean the bank could find ways to lessen the actual cost of a settlement. For instance, in the J.P. Morgan settlement, the bank agreed to provide at least $1.2 billion in mortgage-principal reduction to customers — but for every dollar of principal reduction granted by the bank in the hardest-hit parts of the country, it will get $1.25 worth of credit toward the settlement. Depending on the details of which mortgages they target for principal reduction, the bank could boost that to as much as $1.43 toward the settlement cost.
Analysts at Sanford C. Bernstein & Co. calculate that Bank of America and its subsidiaries issued $965 billion in private-label, mortgage-backed securities between 2004 and 2008. J.P. Morgan and subsidiaries issued $450 billion.
A significant portion of Bank of America's mortgage-backed securities were made by Countrywide Financial Corp., which it bought in 2008. A major portion of J.P. Morgan's securities were issued by Bear Stearns and Washington Mutual. WMIH -1.08% J.P. Morgan purchased Bear Stearns Cos. and the banking operations of Washington Mutual Inc. in 2008.
Some investors weren't fazed by the size of the potential settlement.
Bill Smead, chief investment officer of Smead Capital Management in Seattle, which owns 2,625,338 Bank of America shares, said "it would only make sense that it would rival or exceed J.P. Morgan's."
"The bad news is all six to eight years old, and the good news is all in the future," he said. "As a long-term stockholder, that's what you want. You want the bad news to be backward-looking and the good news to be forward-looking."
Mr. Smead isn't planning on selling any of the stock his firm owns as a result of the negotiations and said he thought the $5 billion or more that could go toward consumer relief would help stimulate the economy.
_ _ _ _ _ _ _
Don't worry about BOA. They'll be fine. (Fine is, in fact, the word in today's banking criminality.)
You, on the other hand . . . .
Remember hearing about the rather suspicious-seeming cancellation by PBS of its long-planned video entitled "Citizen Koch?"
Here's a delineation of why it was created in the first place and how out of place it came to be on the now mainly Koch-funded PBS (not that the funding doesn't come from other sources as well, just that many little donors can't mke the noise that the bigtime guys do).
Remember when Dubya replaced the President of PBS with a radical conservative?
His actions provided the genesis of what has now become the latest-released movie in any town (and so much more). Is it any wonder that true PBS fans are not flocking to the donations window anymore?
. . . there’s the reason why we’re seeing “Citizen Koch” in theaters more than a year after its debut. Originally to be titled “Citizen Corp” and focused on the aftermath of the Supreme Court’s Citizens United ruling, which allowed virtually unlimited corporate spending on issue campaigns, Deal and Lessin’s movie was intended for PBS broadcast. But the independent production company ITVS, which is funded by public broadcasting money and supplies films for PBS’ “Independent Lens” series, pulled the plug on this project last year for reasons that remain murky. Or at least for reasons that those involved want to remain murky; as Jane Mayer’s New Yorker story about the whole affair suggested, if you follow the money it doesn’t look all that mysterious.
At some point, “Citizen Koch” acquired a new title to go along with its focus on the activities of right-wing energy billionaires Charles and David Koch, who bankrolled (Scott) Walker and a host of other extremist anti-labor Republicans during the 2010 and 2012 election cycles.
David Koch, interestingly enough, is a major donor to public television, and has given an estimated $23 million to PBS and its affiliates over the years. He’s a trustee of WGBH in Boston, and at the time of the “Citizen Koch” brouhaha also sat on the board of WNET in New York. (In fairness, Koch’s philanthropy is visible all over the place. On the day I wrote this story I walked past a New York subway ad for a performance at the David H. Koch Theater in Lincoln Center, home to the New York City Ballet.)
WNET president Neal Shapiro had already gone to extraordinary lengths to placate David Koch after he was unfavorably portrayed in “Park Avenue: Money, Power and the American Dream,” a film by Oscar-winning documentarian Alex Gibney that was broadcast in 2012.
Officials at ITVS have insisted that they pulled the funding for “Citizen Koch” essentially because they didn’t like the film, and not because they got leaned on by Shapiro or the Koch brothers or anybody else. Lessin and Deal saw it differently: “This wasn’t a failed negotiation or a divergence of visions; it was censorship, pure and simple. It’s the very thing our film is about – public servants bowing to pressures, direct or indirect, from high-dollar donors.”
. . . “what we may be dealing with here may be a form of self-censorship in which officials at ITVS, and maybe at WNET and PBS itself, become wary of the impact of another PBS-distributed film critical of a hugely wealthy and politically active trustee,” one who was reportedly contemplating “a new, very large gift” to public broadcasting . . . . He did not pause to inquire what the term “public broadcasting” means when it depends on the generosity of wealthy private individuals. Reading between the lines, it sounds as if PBS and/or WNET lost a whole bunch of money after the Gibney film, and were anxious to stop the bleeding.
. . . There are more than a few eye-opening moments: I had forgotten the improbable-but-true prank call in which a journalist posing as David Koch phones Scott Walker and discusses the possibility of planting “troublemakers” amid the pro-labor protesters at the Wisconsin Capitol building. It’s not exactly a revelation at this point that Teflon populists like Walker function in political terms as wholly owned subsidiaries of corporations and the ultra-rich, but it’s still disheartening to observe in action.
To me, the most interesting subject of “Citizen Koch” – one the movie never quite articulates – is the perversion of the Republican Party into a thoroughly duplicitous instrument of wealth.
Lessin and Deal spend considerable time in the homes of working-class white Wisconsinites who identify as Republican but felt bewildered and betrayed by Walker’s extreme union-busting tactics, which arguably had much less to do with budget-cutting than with breaking the political power of organized labor.
They also devote a seemingly inordinate amount of attention to Buddy Roemer, the former Louisiana governor who ran a brief and quixotic 2012 Republican presidential campaign that went nowhere. But there’s method to the madness: Roemer’s an appealingly crusty character who refused to take PAC money and ran as what might be called a Teddy Roosevelt Republican, opposed to corporate power and in favor of campaign-finance reform. (This isn’t in the movie, but he did a memorable walk-through of Zuccotti Park during the Occupy Wall Street heyday.)
Many of those Wisconsin small-town Republicans might have loved Roemer, if they’d ever gotten to hear about him. But his version of small-business libertarianism and individualism, once the philosophical bedrock of the GOP, is not permissible within that party today.
One could make the same criticism of the Democratic Party, albeit in a less exaggerated form. It’s increasingly a party of lifestyle liberalism and metropolitan cool: We’ll give you gay marriage if that’s what the brand requires, but Wall Street power and privilege is off limits.
That points toward the real issue behind the “Citizen Koch” saga as well as the movie itself. Whether you feel any sympathy for Buddy Roemer’s Republicanism is not the point. At least it possesses a certain ideological coherence, and is not rooted in a toxic combination of racial panic at the bottom and cancerous piles of money at the top. For all the overheated partisan rhetoric of Washington, we only have the simulacrum of political debate in America, and hardly ever the real thing.
Political debate only happens behind closed doors, where you and I aren’t invited, and anyone who brings up this obvious fact must be exiled or marginalized.
And you know how "regular" Americans hate "cool" or political debates.
If you haven't had a chance to read Tim Geithner's new book yet, you may want to get some background on it first.
I'm a fan of Wall Street on Parade. Go figure.
Too bad they weren't in the reporting biz before 2008.
Fed Chair Bernanke Held 84 Secret Meetings in the Lead Up to the Wall Street Collapse
By Pam Martens and Russ Martens
March 10, 2014
The Federal Reserve Building in Washington, D.C.
It’s been over five years since the collapse of iconic Wall Street firms such as Bear Stearns and Lehman Brothers; the insolvency and bailout of AIG and Citigroup; the receivership of Fannie Mae and Freddie Mac; the shotgun marriage of Bank of America and Merrill Lynch. After a 5-year delay, the Federal Reserve has released the full transcripts of its meetings in 2007 and 2008 – the two key years of the crisis. But for unexplained reasons, the Fed Chairman, Ben Bernanke continues to redact 84 meetings from his appointment calendar that occurred between January 1, 2007 and the pivotal collapse of Bear Stearns on the weekend of March 15-16, 2008.
At first blush, one might think that Bernanke is attempting to protect the image of the Chairman of the Federal Reserve Board of Governors as independent of any political influence or business lobbying. But the mystery of these redactions is deepened by the fact that Bernanke has no problem listing meetings with President Obama, specific members of Congress, representatives of the Bank of England, every major CEO of a Wall Street firm, titans of industry like the heads of Ford Motor, IBM, and British Petroleum, quasi lobbyists like the U.S. Chamber of Commerce. Even the Reverend Jesse Jackson of RainbowPUSH Coalition is listed as meeting with Bernanke.
So just who is left whose identify needs to be secreted away for more than five years? One meeting on Tuesday, September 25, 2007 is so secret that both the meeting participant(s) and the location are redacted.
A careful study of where the most heavy concentration of redactions occur suggests two things: (1) Bernanke does not want the public to know that the Fed knew that Citigroup was in severe crisis months before the public became aware and (2) the Fed Chair’s participation in efforts to save Bear Stearns from a bankruptcy filing was more involved than presently known.
As we detailed last week, long before Congress approved and President Bush signed into law the Troubled Asset Relief Program on October 3, 2008, Citigroup had gotten customized relief from the Federal Reserve. For example, on August 20, 2007, the Fed granted Citigroup an exemption that would allow it to funnel up to $25 billion from its FDIC insured depository bank to mortgage-backed securities speculators at its broker-dealer unit. The Fed notes in this letter that the bank “is well capitalized,” a statement that has been called into serious question in hindsight. (Federal Reserve Exemption to Citigroup to Loan to Its Broker-Dealer, August 20, 2007)
But on-the-record calls and meetings between Bernanke and Citigroup officials are scant between its obvious cries for help in August of 2007 and its massive bailout in the fall of 2008, suggesting strongly that many of these redacted meetings occurred with Citigroup executives and personnel.
Then there is the matter of the bank run on Bear Stearns beginning on Monday, March 10, 2008. News and book accounts have put Tim Geithner, President of the New York Fed at the time, as the point man at the Fed during this period of crisis.
But Bernanke’s appointment calendar suggests two things: (1) that the depth of the crisis began on Friday, March 7, 2008 and (2) that Bernanke played a far greater role than previously known.
Bernanke’s calendar for March 7, 2008 shows a full day of appointments blacked out. On Saturday, March 8, Bernanke has an anonymous conference call with unnamed parties. At 11 a.m. the following Monday, March 10, he has a redacted meeting in his office from 11 a.m. to 12 noon. At 2:30 p.m. Bernanke has an unprecedented meeting with Walter Lukken, the Acting Chairman of the Commodity Futures Trading Commission, its Chief of Staff, three of its attorneys, its Director of Market Oversight and the Deputy Director for Market Surveillance.
We’re going to theorize that this meeting might have had something to do with shorting, and potentially naked shorting in the futures market. But Bernanke did not, according to the record, take any of his Fed experts with him. His calendar shows that he went alone to the CFTC offices at Three Lafayette Center in Washington, D.C.
This meeting was followed by a secret meeting from 5 to 6 p.m. in Bernanke’s office with unnamed parties. Beginning at 7:15 p.m. that evening, Bernanke held a 90-minute videoconference with unnamed parties.
The next day, Tuesday, March 11, Bernanke traveled to New York to meet with an interesting assortment of Wall Street CEOs and hedge fund honchos in the dining room at the New York Fed. Robert Rubin of Citigroup was there as was Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan, John Thain of Merrill Lynch and James Gorman of Morgan Stanley. Staff of the New York Fed attended, including Tim Geithner. Noticeably absent from the confab was any representative from Bear Stearns.
By Thursday, March 13, as a full blown run on the liquidity of Bear Stearns took place, there is a 6 inch long black box redaction of everyone the Fed Chairman spoke to or met with from 4:30 p.m. that day.
What we do know is that sometime between Thursday evening and Friday morning, the Fed and JPMorgan hatched a plan to inject liquidity backstopped by the Fed into Bear Stearns. An announcement of the plan to the press early Friday morning was meant to stabilize things. Instead, the stock of Bear Stearns dropped 46 percent that day. By Sunday night, JPMorgan had agreed to take over Bear Stearns with billions in backstop guarantees from the Fed.
Bernanke is now said to be auctioning off his memoirs using the same Washington attorney, Robert Barnett, who landed an $8 million deal for former Fed Chairman Alan Greenspan.
These 84 secret meetings may boost that price. Unfortunately for the American people, what men on the payroll of the U.S. government, earning $199,700 a year and a pension, do during their workday is apparently off limits to public scrutiny.
After I became aware of Geithner's role in the theft from the public assets, I never watched the financial "news" again without the compulsion to throw up.
Another red flag with Geithner, according to Bair, was his proposal for the FDIC to provide all-out support to Citigroup, guaranteeing all of its debt, including its half trillion in foreign deposits.
And this is the guy Obama considers prime material for running the Fed. Ah! The value of that freshman Econ class!
As Citigroup Spun Toward Insolvency in ’07- ’08, Its Regulator Was Dining and Schmoozing With Citi Execs
By Pam Martens and Russ Martens
January 7, 2014
Timothy Geithner Is Sworn in as 75th U.S. Treasury Secretary As His Wife, Carole, Looks On
Before Timothy Geithner became the 75th Secretary of the U.S. Treasury in 2009, he served as the President of the Federal Reserve Bank of New York for five years. The New York Fed is one of Wall Street’s primary regulators. But after leaving his post at the New York Fed, Geithner testified before the U.S. House of Representatives’ Committee on Financial Services on March 26, 2009 that he was not regulating Wall Street as he earned his $400,000 a year with car, driver and private dining room.
At the 2009 hearing, in response to a question from Congressman Ron Paul, Geithner said:
“That was a very thoughtful set of questions. I just want to correct one thing. I have never been a regulator, for better or worse. And I think you are right to say that we have to be very skeptical that regulation can solve all these problems. We have parts of the system which are overwhelmed by regulation … It wasn’t the absence of regulation that was a problem. It was, despite the presence of regulation, you got huge risks built up.”
When Geithner says, “for better or worse,” I think most Americans would agree that Geithner’s failure to know that he was a regulator at an institution he headed for half a decade that employed hundreds of bank examiners was probably worse for the country, not better, given that he oversaw the greatest financial collapse since the Great Depression and the most expensive taxpayer bailout in the history of finance.
In written testimony before the same hearing, Geithner added that “We can’t allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints.” And yet, Geithner’s appointment calendar suggests that this is exactly what Citigroup did as Geithner accommodated it as willingly as a concierge at one of those exclusive Manhattan hotels.
According to Geithner’s appointment calendar for 2007 and 2008 (available online courtesy of an article the New York Times published in 2009), Geithner excelled in hobnobbing, despite the appearance of outrageous conflicts of interest. He was the Relationship Manager In Chief as he managed his own relationship with Citigroup into a job offer to be its CEO.
During 2007 and 2008, Citigroup entered an intractable death spiral owing to a decade of obscene executive pay, off balance sheet debt, toxic assets and mismanagement of its unwieldy disparate business lines. Instead of functioning as the tough cop on the beat in regulating Citigroup, Geithner hobnobbed, holding 29 breakfasts, lunches, dinners and other meetings with Citigroup executives.
When Sandy Weill stepped down from Citigroup in 2006, SEC filings show he still owned over 16.5 million shares of the company’s stock, in addition to the $264 million he had sold back to the company in 2003. As the company teetered toward insolvency in the 2007-2008 period, Weill had a vested interest not to see his stock position wiped out by a government receivership of Citigroup. The very last thing Geithner, as Citigroup’s regulator, should have been doing was meeting privately with Weill.
On January 25, 2007, Geithner not only hosted Weill to lunch at the New York Fed, but Geithner brought his teenage daughter to the lunch. Geithner’s appointment calendar shows Elise Geithner, his daughter, sharing his chauffeured car to work with her father and then joining him at lunch with Sandy Weill. In case you’re wondering, Take Your Daughters and Sons to Work Day was April 26 that year, not the day of this luncheon. A few months later, on May 17, 2007, Geithner joined Weill for breakfast at the expensive Four Seasons.
Another troubling aspect of Geithner’s obliviousness to the arms-length role expected of regulators and the firms they regulate. Geithner met privately, without other Fed staff, with top Citigroup execs and traveled to Citigroup’s corporate headquarters in Manhattan on most occasions to meet with them. His one on one meetings included Robert Rubin, former U.S. Treasury Secretary and Chair of the Citigroup Executive Committee; Charles “Chuck” Prince, CEO; Gary Crittenden, CFO (who would be later charged by the SEC for grossly understating Citigroup’s subprime exposure in October 2007); Sir Win Bischoff, Board Chairman; Vikram Pandit, who became CEO after the departure of Prince; Lewis Kaden, Vice Chairman; and Tom Maheras, co-head of Citigroup’s investment bank.
If Geithner did not believe he was a regulator, why was he meeting with these individuals on a private basis? Two troubling answers come readily to mind.
In an article by Jo Becker and Gretchen Morgenson published by the New York Times on April 26, 2009, Geithner admits that Sandy Weill spoke with him about becoming Citigroup’s CEO after Prince resigned following multi-billion dollar losses in late 2007. Were Geithner’s many trips to Citigroup actually job auditions? Geithner turned down the job offer and went on to become U.S. Treasury Secretary in 2009 where his advocacy for Citigroup’s survival played a far more important role than he could have as its CEO.
The other troubling possibility is that Geithner did not take other staff with him from the New York Fed because he was strategizing with Citigroup on how to resolve their massive financial problems. Indeed, on April 7, 2008, Geithner’s appointment calendar shows that a meeting was convened at the New York Fed and given the title: “Citigroup Strategy, Structure & Personnel Issues.” The meeting was attended by Geithner, Citigroup CEO Vikram Pandit, Citigroup Vice Chairman Lewis Kaden, and several staffers at the New York Fed. The meeting was held after hours, from 5:30 to 6:30 p.m.
Strategizing on a company’s structure and personnel issues does not sound like the job of a regulator but the job of a competent CEO and Board of Directors.
While all of this wining, dining and strategizing was going on between Geithner and Citigroup, the company was melting away and showing an insatiable appetite for taxpayer support. On October 28, 2008, Citigroup received $25 billion in Troubled Asset Relief Program (TARP) funds. On November 17, 2008, the company announced it was terminating 52,000 workers. Four days later, its stock closed at $3.77, a loss of 60 percent of its market value in one week. Its market cap was worth less than the government had invested just three weeks prior.
On November 23, 2008, Citigroup had to be completely propped up by the government with another TARP infusion of $20 billion and asset guarantees on $306 billion of securities held by Citigroup. In addition, by 2010, the Government Accountability Office would report that it had soaked up over $2 trillion in below market-rate loans from the bailout lending programs – most of which were operated by the New York Fed.
Geithner, who is . . . writing his own memoir on the era and has announced he is joining the Wall Street firm Warburg Pincus as President, was not held in high esteem in three major books written about his handling of the Wall Street crisis. In Ron Suskind’s Confidence Men, Geithner is said to have ignored a direct order from President Obama to wind down Citigroup. In Neil Barofsky’s Bailout, Geithner is portrayed as heartless in his assessment of the Home Affordable Modification Program (HAMP), viewing it as a way to “foam the runways” for the banks, slowing down the foreclosure stream so the banks could stay afloat, with no sincere intention of helping struggling families stay in their homes.
But no one was harsher on Geithner than former FDIC Chair during the crisis, Sheila Bair, in her book, Bull by the Horns. Bair believes that Citigroup’s two main regulators, John Dugan (a former bank lobbyist) at the Office of the Comptroller of the Currency and Geithner, as President of the New York Fed, were not being forthright on Citigroup’s real condition. In the book, Bair explains Citigroup’s situation in 2008 as follows:
“By November, the supposedly solvent Citi was back on the ropes, in need of another government handout. The market didn’t buy the OCC’s and NY Fed’s strategy of making it look as though Citi was as healthy as the other commercial banks. Citi had not had a profitable quarter since the second quarter of 2007. Its losses were not attributable to uncontrollable ‘market conditions’; they were attributable to weak management, high levels of leverage, and excessive risk taking.
It had major losses driven by their exposures to a virtual hit list of high-risk lending; subprime mortgages, ‘Alt-A’ mortgages, ‘designer’ credit cards, leveraged loans, and poorly underwritten commercial real estate. It had loaded up on exotic CDOs and auction-rate securities. It was taking losses on credit default swaps entered into with weak counterparties, and it had relied on unstable volatile funding – a lot of short-term loans and foreign deposits. If you wanted to make a definitive list of all the bad practices that had led to the crisis, all you had to do was look at Citi’s financial strategies … What’s more, virtually no meaningful supervisory measures had been taken against the bank by either the OCC or the NY Fed … Instead, the OCC and the NY Fed stood by as that sick bank continued to pay major dividends and pretended that it was healthy.”
Another red flag with Geithner, according to Bair, was his proposal for the FDIC to provide all out support to Citigroup, guaranteeing all of its debt, including its half trillion in foreign deposits. Bair refused to permit this. With Geithner’s 29 meet-and-greets with Citigroup, one has to wonder just who whispered this idea into Geithner’s ear.
The FDIC did agree to guarantee Citigroup’s issuance of new debt, providing it was used for lending to help stimulate the economy. What the FDIC examiners found was that “Citi was using the program to pay dividends to preferred shareholders, to support its securities dealer operations, and, through accounting tricks, to make it look as if funds raised through TLGP [Temporary Liquidity Guarantee Program] debt were actually raising capital for Citi’s insured bank.”
Last October, Carmen Segarra, a bank examiner and lawyer employed at the New York Fed, filed a lawsuit alleging that Relationship Managers at the New York Fed attempted to intimidate her into changing her critical review of another Wall Street firm. When she refused, she says she was fired. There is now enough hard evidence to warrant a full scale Congressional investigation of the New York Fed’s fitness to continue as Wall Street’s regulator.
Fed Nominee Stanley Fischer Has a Citigroup Problem
By Pam Martens
March 4, 2014
Stanley Fischer, Former Vice Chairman of Citigroup, Nominated to Serve as Vice Chairman of the Federal Reserve Board of Governors
Last evening, the U.S. Senate Banking Committee made the unexpected announcement that it was postponing the confirmation hearing of Stanley Fischer to serve as Vice Chairman of the Federal Reserve Board of Governors. Two other Fed nominees were to be vetted today. The hearing had been scheduled for 10 a.m. this morning in the Dirksen Senate Office Building. No reason was given for the postponement.
There are surely some veteran lawyers at the Securities and Exchange Commission (SEC) hoping the nomination of Fischer has been scuttled. The thought that Stanley Fischer, a former Vice Chairman of the serially corrupt Citigroup, could become Vice Chairman of the Federal Reserve, a regulator of mega banks like Citigroup, is not a source of comfort. Fischer was nominated for the post by President Obama, whose devotion to failing up on Wall Street regularly sets new heights.
As if as on cue, news broke just yesterday that Federal prosecutors have issued grand jury subpoenas to Citigroup in a money-laundering investigation, a topic with which the bank is intimately familiar.
During Fischer’s stint at Citigroup, from February 2002 through April 2005, he “amassed a personal fortune of between $14.6 million and $56.3 million” according to Bloomberg News. During that same period, Citigroup was repeatedly charged with fraud and embarked on its own exotic financial shenanigans that would end up collapsing the firm in 2008.
On April 28, 2003, the SEC charged that the investment banking business of Citigroup, Salomon Smith Barney, issued “fraudulent” research on telecommunications companies to promote its investment banking business. Jack Grubman, the company’s star telecom analyst, was the point man in the fraud according to the SEC and Citigroup rewarded him handsomely for it. The SEC noted in its complaint that “between 1999 and August 2002, when he left the firm, Grubman’s total compensation exceeded $67.5 million.”
Grubman was forced out of Citigroup in August 2002, while Fischer served on its Board. The New York Times noted dryly in an editorial at the time:
“Critics of Jack Grubman’s last deal, his $32 million severance package, are missing the big picture. Sure, most of the companies whose stock the fabled Wall Street telecom analyst bullishly plugged have gone bankrupt. But look at it this way: While investors lost $2 trillion in the implosion of the sector, his employer, Citigroup, made $1 billion in fees from the feverish dealmaking he helped arrange. It is no wonder the financial giant felt moved to show its appreciation, even as it forced him out.”
Exactly three months after the SEC’s complaint involving fraudulent research at Citigroup, the SEC charged Citigroup with aiding and abetting the Enron fraud, writing on July 28, 2003 that the company designed complex financial structures to help Enron “(1) inflate reported cash flow from operating activities; (2) underreport cash flow from financing activities; and (3) underreport debt.”
It should have been easy for any Wall Street regulator to deduce from Citigroup’s shady deals for Enron and Worldcom that it was highly likely it was not accurately reporting its own debt exposure. But that didn’t happen.
Citigroup collapsed in 2008 and is only alive today because the U.S. government pumped in $45 billion in equity, made $300 billion in asset guarantees, and the Fed chipped in over $2 trillion in below market rate loans to the listing shipwreck.
In August 2012, the law firm Kirby McInerney settled a shareholders’ lawsuit against Citigroup for $590 million. The 547-page amended complaint depicts a financial institution that gamed the system with high risk leverage, off-balance-sheet gambles it inevitably lost and dysfunctional checks and balances — all while its Board and regulators were asleep at the switch.
The lawyers at Kirby McInerney wrote:
“As plaintiffs’ investigation of Citigroup’s subprime CDOs [Collateralized Debt Obligations] demonstrates, Citigroup’s 2004-2007 subprime CDOs produced tens of billions of dollars of super senior tranches – and, effectively, Citigroup never sold (except with its money-back guarantees) a single one. The essence of an underwriter’s function is to sell the securities it underwrites. Citigroup’s inability/failure to accomplish any such sales was an alarming but unheeded red flag as to the value and liquidity of these instruments. The difficulty in selling these super senior tranches was of Citigroup’s own making: it had stripped yield from these super seniors in order to make the junior tranches more marketable. These super seniors thus became, effectively, all risk and no reward.”
During 2004 and 2005, Citigroup sold $25 billion of CDO commercial paper super senior tranches with a guarantee to repurchase them all, at full price, if collateral concerns ever disrupted the rollover of the commercial paper. In addition to a fee of $375 million for the underwriting, it received $50 million annually for that money-back guarantee. This permitted Citigroup to hide its exposure off its books while boosting revenues by $50 million a year.
In addition, Citigroup created seven off-balance-sheet Structured Investment Vehicles (SIVs), totaling $100 billion. Citigroup used “Enron-like accounting” to disclaim any exposure to the SIVs which did not appear in its public financial statements. This allowed the firm to avoid capital charges and reserves while enjoying income of at least $100 million per year from the SIVs.
The lawsuit noted that:
“In November and December 2007, Citigroup admitted that the purported ‘off balance sheet’ aspect of its SIVS was and had always been a fiction. With the stroke of a pen, approximately $50 billion of SIV liabilities (and the lesser value of the impaired assets purportedly collateralizing those liabilities) were transferred from ‘off’ Citigroup’s balance sheet to ‘on.’ Once there, they immediately degraded it. Citigroup’s capitalization was further weakened, its credit ratings were cut immediately, and billions of dollars of write-downs ensued.” Citigroup’s share price collapsed into the low single digits.
Sandy Weill, the Chairman and CEO who was at the helm of Citigroup when Fischer was there, stepped down as Chairman in 2006 after making over $1 billion in compensation during his tenure. Robert Rubin, former U.S. Treasury Secretary, who also served on Citigroup’s board, received over $120 million in compensation during his tenure from 1999 to 2009.
Fischer, who holds dual citizenship with Israel, is a former governor of the Bank of Israel. He served as First Deputy Managing Director of the International Monetary Fund from 1994 to 2001 and Chief Economist at the World Bank from 1988 to 1990. From 1973 to 1994 he taught economics at the Massachusetts Institute of Technology (MIT).
I wonder all the time how these men (mainly) can go home every night to their families with the burden on their psyches of what they spend the day ensuring.
And a not-the-last look at a topic that's been covered several times previously at your evil-eye Pottersville blog with very little analytical reporting other than this, without any truly illuminating international coverage since March.
A Closer Look at Young Worker Deaths at JPMorgan Chase
By Pam Martens and Russ Martens
March 3, 2014
In the past three months, at least eight JPMorgan Chase employees, aged 22 to 39, have passed away, including the three highly publicized, suspicious deaths of Gabriel Magee, Ryan Crane and a young man the media is now calling Dennis Li.
The eight deaths are likely a small fraction of the actual number of JPMorgan employees in this age cohort who died during December 2013 and January and February of this year. Wall Street On Parade was able to locate this small sampling from online funeral home notices in the U.S., thus the sampling does not include deaths where a notice was not posted online or deaths in the 59 foreign countries where JPMorgan Chase has employees, other than the death of Magee and Li which occurred in London and Hong Kong, respectively.
As detailed with names, ages and job titles below, one death of a 34-year old male was ruled a heart attack. (According to U.S. studies, heart attacks occur among people in their 30s at a rate of .5 percent — a rarity, whereas heart attacks among people aged 80 and older occur at a rate of 19.5 percent.) One 35-year old woman died of cancer. Two deaths, a 30-year old woman and a 34-year old male, did not list a cause and Wall Street On Parade was not able to locate a source to confirm the cause. [See updated information below.] A 22-year old male died from injuries sustained from a fall from a collapsing fourth-floor fire escape on an apartment building in Philadelphia. Ryan Crane, 37-years old, died at his home in Stamford, Connecticut. His death occurred exactly one month ago today and there is still no word from the Chief Medical Examiner as to the cause. Results are expected soon.
JPMorgan Chase employs 260,000 workers in 60 countries, including the United States. Obviously, there will be deaths among its workers and these should be consistent with statistics for the working population as a whole. Statistics that are inconsistent suggest one of two things: foul play or excessive stress in the workplace. That leads us to the deaths of Gabriel Magee and the man now identified as Dennis Li.
Magee, a happy, vibrant 39 year old technology Vice President, was purported by JPMorgan to have jumped from the 33-story rooftop of the firm’s European headquarters in the Canary Wharf section of London on January 28. Magee had emailed his girlfriend the evening before that he was wrapping up things at work and would be home shortly. When he did not arrive, she called the police and local hospitals. Magee’s body was found the next morning on a 9th-floor rooftop that juts out from the JPMorgan building and is accessible by stairs from the 8th level.
London newspapers initially reported as fact that thousands of commuters had seen Magee fall. The police have yet to identify even one witness who observed the fall. According to a police source, police responded at approximately 8:02 a.m. on January 28 after Magee’s colleagues looked out of their windows on upper floors, noticed the body and called the police. Iain Dey, Deputy Business Editor of the Sunday Times in London, appeared to confirm that view when he wrote: “Gabriel Magee’s body lay for several hours before it was found at 8am last Tuesday.” A coroner’s inquest to determine the cause of Magee’s death is scheduled for May 15.
Dennis Li’s (a/k/a Dennis Li Junjie, a/k/a Dennis Lee) fall from the 30-story Chater House in Hong Kong was equally suspicious. Days went by with newspapers attempting to guess the man’s name and job at JPMorgan. The South China Morning Post published three articles calling the man an “investment banker” and suggesting that the high pressure of this job may have led to the purported suicide. JPMorgan appeared to have given out the information that the man was an investment banker as New York Post reporter Michael Gray wrote that: “A 33-year-old JPMorgan investment banker leaped to his death Tuesday from the roof of the bank’s 30-story Hong Kong office, according to a bank spokesperson.”
An investment banker is indeed involved in a high-pressure job involving long hours. An investment banker puts deals together: mergers and acquisitions; initial public offerings of stocks; secondary offerings of stocks or bonds; or public financing, among other duties.
But according to The Standard newspaper in Hong Kong, Dennis Li was an accounting major who worked in the finance office at JPMorgan. (That’s about as remote from being an investment banker as one can get.) I emailed The Standard and asked the nature of their source. The English-language newspaper promptly responded indicating it was a police source.
The Standard’s police source appears to have been far more reliable than the South China Morning Post’s source or the initial JPMorgan source providing information to the New York Post. After many days of requesting the man’s name and job title from JPMorgan directly, on February 22 I received a response from Joe Evangelisti, a Managing Director and spokesperson for JPMorgan, who would only say: “Our HK team communicated with reporters late last week on this. Here’s the Bloomberg story.” The Bloomberg story confirmed that Li worked in the finance department. I asked Evangelisti for the actual news release from JPMorgan and received no response.
Since the South China Morning Post (SCMP) had spent days spinning a very different version of facts, Wall Street On Parade emailed Evangelisti and asked why he didn’t correct the story, writing:
“Have you asked the SCMP to correct their reporting? They’ve raised suicide fears in three articles in the minds of parents and wives married to investment bankers when this young man was an accountant.”
No response was forthcoming and the articles remain uncorrected.
Using data from the New York City Department of Health, the Wall Street Journal reported in 2010 that during 2008, the year that tens of thousands of Wall Street workers were fired and century old Wall Street firms collapsed, there were “473 people who committed suicide in the city in 2008, the most recent year for which statistics are available, 93, just under 20%, did so by leaping to their deaths.” This is in a city filled with skyscrapers similar to London and Hong Kong.
New York City, including its boroughs, has a population of approximately 8 million. The 93 deaths resulting from leaping from skyscrapers represents .000011625 of the population. That makes the two purported suicides within weeks of each other at JPMorgan Chase, with a workforce population of 260,000, a statistical improbability and worthy of a meaningful police or FBI investigation, given the ongoing criminal investigations involving JPMorgan in the Bernie Madoff matter, Libor and Foreign Exchange rate rigging.
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Timeline of JPMorgan worker deaths, ages 22 to 39, during December 2013, January and February 2014:
Audrey Raishein Beale (Yon) died on December 4, 2013 at age 35 in Katy, Texas. Beale, according to her obituary, was employed as a certified senior underwriter at the Houston, Texas branch of the JPMorgan Chase Bank at the time of her death. Beale was reported to have died of cancer.
Joseph M. Ambrosio, age 34, of Sayreville, New Jersey, passed away on December 7, 2013 at Raritan Bay Medical Center, Perth Amboy, New Jersey. He was employed as a Financial Analyst for J.P. Morgan Chase in Menlo Park. The cause of death was not given. Update: On March 18, 2014, Wall Street On Parade learned from an immediate member of the family that Joseph M. Ambrosio died suddenly from Acute Respiratory Syndrome.
Jason Alan Salais, 34 years old, died December 15, 2013 outside a Walgreens in Pearland, Texas. A family member confirmed that the cause of death was a heart attack. According to the LinkedIn profile for Salais, he was engaged in Client Technology Service “L3 Operate Support” and previously “FXO Operate L2 Support” at JPMorgan. Prior to joining JPMorgan in 2008, Salais had worked as a Client Software Technician at SunGard and a UNIX Systems Analyst at Logix Communications.
Albert Suh, 22 years old, died on January 12, 2014. The police reported that emergency medical workers arrived at the John C. Bell apartment building in Philadelphia where a fire escape platform had collapsed with Suh and two female friends. Suh was taken to Hahnemann Hospital, where he was listed in critical condition. He was pronounced dead at 5:43 a.m. Sunday, January 12. The two friends were reported injured but to have survived. Suh’s LinkedIn profile shows that he worked as an Analyst at JPMorgan from June 2013 to his death in January. Prior to that he interned from June 2012 through August 2012 as an analyst at AXA Advisors.
Ashley Dawn Stone, 30, of DeBary, Florida, passed away Sunday, January 19, 2014, at St. Joseph’s Hospital in Tampa, Florida. Stone was employed by JP Morgan Chase Bank in Lake Mary, Florida. A cause of death was not listed. Update: On March 5, 2014 an immediate family member of Ashley Dawn Stone called Wall Street On Parade to advise that their loved one had died following heart surgery.
Gabriel Magee, 39, died on January 28, 2014. Magee was discovered at approximately 8:02 a.m. lying on a 9th level rooftop at the Canary Wharf European headquarters of JPMorgan Chase at 25 Bank Street, London. His specific area of specialty at JPMorgan was “Technical architecture oversight for planning, development, and operation of systems for fixed income securities and interest rate derivatives.”
Ryan Crane, age 37, died February 3, 2014, at his home in Stamford, Connecticut. The Chief Medical Examiner’s office is still in the process of determining a cause of death. Crane was an Executive Director involved in trading at JPMorgan’s New York office. Crane’s death on February 3 was not reported by any major media until February 13, ten days later, when Bloomberg News ran a brief story.
Dennis Li (Junjie), 33 years old, died February 18, 2014 as a result of a purported fall from the 30-story Chater House office building in Hong Kong where JPMorgan occupied the upper floors. Li is reported to have been an accounting major who worked in the finance department of the bank.
Related Articles:
A Rash of Deaths and a Missing Reporter — With Ties to Wall Street Investigations
Suspicious Death of JPMorgan Vice President, Gabriel Magee, Under Investigation in London
JPMorgan Vice President’s Death in London Shines a Light on the Bank’s Close Ties to the CIA
As Bank Deaths Continue to Shock, Documents Reveal JPMorgan Has Been Patenting Death Derivatives
JPMorgan and Madoff Were Facilitating Nesting Dolls-Style Frauds
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