The biggest banks and brokers are on pace to award $145 Billion in bonuses for 2009, Up 18% from the year before, according to a WSJ study.

This bonus bonanza is based on two simple factors: Zero % money, courtesy of the Fed, and a massive accounting fraud — one that happens to be legal.

Ask yourself how hard it is for any finance firm to make money — risk free! — when they can borrow from the Federal Reserve at a rate of zero, and then turnaround and “lend” that same cash to the Treasury (buying bonds) at 3% ?

I suspect this was essentially the Bernanke/Paulson plan (now Bernanke/Geithner) all along — to s-l-o-w-l-y recapitalize the banks via the Japanese model. They selected  the easier but less effective Japan option versus than the Swedish model, which forces insolvent institutions to reorganize, write down bad loans, recapitalize the banking sector (which allows banks to start lending again), but punished bondholders and wipes out shareholders.

That is how capitalism is supposed to work. Instead, the socialist bankers saved the banks (and their own asses), rather than the banking system.

What may thwart the massive Fed giveaway is the self-interested institutions, who are not lending, not writing down debt, and capturing the lion share of this wealth via bonuses. Perhaps they realize the true state of their balance sheets, and are making hay while the sun is shining.

On top of this, the recapitalization plan only works if these insolvent institutions get to hide their massive losses from their owners — namely, the shareholders (and in some instances, the taxpayers).

Thanks to the Congressionally mandated FASB rule changes back in March of 2009, Mark-to-Market was replaced with Mark-to-Make-Believe. We do not if these banks are actually profitable (GS), whether they are barely solvent (Chase/JPM), somewhat insolvent (BofA) or totally bankrupt (Citi). Given the lack of transparent accounting, we simply do not, and cannot, know.

Hence, once again we see record bonuses based on huge profits that may not be real. And we won’t find out the truth until the FASB forces accountants to accurately report losses.

Until then, we must accept an unfortunate reality: We have built our recovery upon a financial system, loosely based on fantasy!

>

Source:
Banks Set for Record Pay
STEPHEN GROCER
WSJ, JANUARY 14, 2010

http://online.wsj.com/article/SB10001424052748704281204575003351773983136.html

Category: Bailouts, Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

52 Responses to “Record Bank Bonuses Based On Record Bank Fraud”

  1. Good thing there is a recession on or these people’s bonuses would be obscene……….r

  2. Robespierre says:

    Actually the reason banks are funneling the most amount of money to their own pockets is more ominous than what can be seen with the naked eye. They know what;s on their balance sheet and they know it will eventually blow up (on the taxpayers face). This is probably the last time they can make this kind of money before the fraud unwinds itself. That is why they don’t care about backslash etc.

  3. red_pill says:

    there are times when it’s necessary to become angry as a nation and this is one of those times. the level of corruption is disgusting.

  4. The accounting statements are fantasy. The profits are fantasy. The bonuses are real money. Sounds like a good gig.

  5. wally says:

    I’ve been saying on blogs for three years: the Fed can shovel money out the door but cannot control where it goes after that. That’s the broken link in Bernanke’s academic theories. He assumes the money will go into bank reserves against losses or will be lent into the general economy. Wrong and wrong: NEVER assume. What happens is that those who can take it simply take it.
    Having been shown to be wrong, Bernanke now appears to be denying reality… with which he never had much contact anyway.

  6. [...] Bank Profits: Barry Ritholtz of the Big Picture says record bank and broker pay is engineered. ” How hard is it for any finance firm to make risk free money when they can borrow form the Federal Reserve at zero, and lend that same cash to the Treasury (by buying bonds) at 3%? I suspect this is essentially the Bernanke/Paulson plan (now Bernanke/Geithner) to slowly recapitalize the banks via the Japanese model, rather than force insolvent institutions to reorganize. What may thwart the massive Fed giveaway is the self-interested institutions, who are not lending, and capturing the lions share of this wealth via bonuses.” [...]

  7. Moss says:

    I would call it reverse engineering since the goal is bonus payments and allowing the banksters to make enough off the free money to get their loss reserves up to levels needed. Look at the loss reserves Chase has accrued. Those political hacks who claim that ‘the crisis is over’ and the ‘banks have paid back the TARP’ are so blatantly dishonest and counter productive it makes me sick. They are simply defending the myth that the system is basically sound and by inference supporting the status quo, otherwise known as the Kudlow creed.

  8. FrancoisT says:

    Kind of ironic that in a country that religious, there is no Jesus able to chase the vendors out of the Temple.

    Sigh!

  9. Barry, apologies for going OT, but something pretty stunning is taking place in Massachusetts right now.

    Is this going to set the record for lame duckedness?

  10. b_thunder says:

    the banksters are getting “theirs” while the “gettin’” is good.
    the worst part of this bonus season is bonuses based on fraud are theft by the few of what belongs to all taxpayers and savers, who will have their savings devalued.
    when the Fed window closes (i hope soon) we’ll see who’s still, as Buffett put it, swimming naked. what then? enact clawbacks? will never happen.

  11. Thatguy says:

    “when the Fed window closes”

    LOL that’s a good one. What makes you think this will ever happen before the banksters are able to steal the shirts off our back. We’ll be the ones stripped naked before the Fed lifts a finger.

  12. dead hobo says:

    The real reason that Uncle Stupid is mad at the banks right now and is making scary threats (ha ha say the banks):

    To help stabilize the economy, the Fed decided to secretly pump the markets using printed money. Their intentions were many. One was to lend the appearance of stability and shore up the wealth effect, lowering potential transfer payments and potentially raising tax revenues from capital gains.

    For the banks, this was intended to be a gift of trading capital. They were to use HFT and a blind SEC to pump the markets and make a profit that was to be substantially earmarked for capital. Ben the Bubble was planning to say “We didn’t have to make no stinking zomby banks … we allowed free enterprise to recapitalize the banks without government intervention. I saved the world, thanks to my scholarly understanding of stuff.”

    Well, ha ha on Ben the Bubble, say the Banks. Thanks for the free money. It makes a great bonus for our masterful ability to steal whatever we want but, amazingly, nothing we do is illegal. Let’s do it again. This time we promise to the profits it for capital instead of 2010 bonus money. Really.

    Now Uncle Stupid, in the form of Obama, is getting serious. He is threatening to consider asking Congress to talk about raising taxes on these guys. I bet they’re just pissing in their pants right now (from laughing).

    The Banks whooped Uncle Stupid at his own game (not hard) and now Uncle Stupid mad about looking stupid. This is why Obama is yelping like a pissy pants at the monster he and Ben the Bubble created and fed.

  13. Transor Z says:

    Barry, thank you for all of your efforts getting the word out. You show how the emperor has no clothes day in and day out. Thanks to people like you I honestly believe a lot of Americans are wising up to the systemic lack of integrity that’s been festering for the last few decades.

  14. ToNYC says:

    Let’s not leave out of this treatise that this all depends on the vast demand deposit base sitting quietly by and earning a big fat ZERO on their life savings as they protect it from the liars, thieves, fraudsters and miscreants. Our current Corporatism rather than Capitalism is busily enshrining the Banksters as the new ruling class/royalty and the rabble public is denied personal and financial freedom through ZIRP and synthetic terror. More importantly this depends on the public being afraid. We need to be cloning heroes.
    The current crop of students coming out of higher education with six-figure variable rate statutorily non-defaultable debt with corporate qualification tickets for a bankrupt economy will be the first generation born into the jaws of serfdom.

  15. arcticpup says:

    In response to FrancoisT… we have the Messiah Obama… yet he’s too afraid to throw the wankers out of House and Oval Office in Washington.

    FrancoisT Says:

    January 15th, 2010 at 8:34 am
    Kind of ironic that in a country that religious, there is no Jesus able to chase the vendors out of the Temple.

    Sigh!

  16. Patrick Neid says:

    Without the bailouts none of this would be possible. Attempted perhaps but not possible.

  17. jritzema says:

    Barry – Earning money on the spread to rebuild capital has been part of the last few recoveries. It is similar with what banks were doing in the mid-90s, so be ready for the next bubble. Not sure where it is but it is growing somewhere. Righteous indignation on banks not lending rings hollow when loan demand is very low. Why should businesses want loans to expand when they are uncertain on economic prospects?

    On the investment banking side, unfortunately the i banks earn record profits during times of market volatility. 2009 was a banner year, but when was the last record year? That would be 2000, also a time of volatility. I don’t agree with the bonuses paid but so far politicians just want to make sound bites about how angry they are and not do anything about it.

    On accounting, bank accounting has always been terrible. It is better than it used to be on having to report the FV of loans, but that is not a number that really is a market value as it relies on management assumptions.

  18. Money Mischief says:

    Huge bonuses based on “fraudulent” earnings, after years of record bonuses based on fraudulent earnings and defrauding investors, all aided and abetted by the regulators and the Fed. Kinda gives a whole new meaning to wealth redistribution.

  19. The Curmudgeon says:

    It’s why it is time for a REAL revolution. Not just a made-for-TV/Youtube campaign of empty slogans like “Hope” and “Change can believe in”.

    The financial system must be destroyed, along with the rest of the plutocracy. It is a cancer that will kill us if it is allowed to live.

  20. GetALife says:

    Barry Sez

    <>

    This is an interesting theory.
    Can you please show us via bank balance sheets the proof of this? How about JPM which just reported today?

    Why is there a delay in my comment appearing (this one written at 10:03 AM)?

  21. MayorQuimby says:

    Simple solution: Use cash for everything. No credit = no MBS, no CDOs, no CDS, no securitizations, no nothing. Let them inflate as much as they want. I’ll live with mom or in a doublewide before I let these funsters ruin all our lives any further.

    To HELL with this bs.

  22. Init4good says:

    Ironic that the biggest “socialists” are heading the “private” banking sector…what a joke.

    And the Fin Acct Stds Board (FASB) is centrally controlled….

  23. NJlou says:

    “… Ask yourself how hard it is for any finance firm to make money — risk free! — when they can borrow from the Federal Reserve at a rate of zero, and then turnaround and “lend” that same cash to the Treasury (buying bonds) at 3% ?…

    What are the economic implications of the corrupt bankers and the Fed? Can’t Americans see through this fraud and do something about it? LOL

    In order to lend at 0%, the Fed has to print up worthless dollars (worsening the U.S. liquidity trap because there are no profitable projects for all the worthless dollars) that will soon make Weimar Germany’s hyperinflation circa 1939 look like a grand picnic.

    Second, the government then has to pay the interest on the treasury bonds the insolvent and corrupts banks are purchasing, thus worsening the government deficit.

    You can clearly see how the morons are worsening and compounding the collapse of the imploded domestic economy. There are no asset bubbles left to inflate.

    All the pumped in liquidity is having no effect whatsoever on aggregate demand/GDP as there are no jobs, no income and Americans are being made homeless.

    All the excess debt and excess inventory from all the previously inflated asset bubbles/boom and bust economy must now be flushed out of the system because there is economic growth, the process to take more than a generation.

    Then someone proposed taxing the insolvent banks? LOL. I don’t need to review the implications of that suggestion.

    You can just smell the civil war in the air now as the collapsed domestic economy become more apparent and painful.

  24. DeDude says:

    Hov about this little “Tax-incentive”. If a bank takes Federal reserve dollars and purchase treasuries they will have a special “stimulus” tax of 99% levied on the interest income from their tresuries (up to the amount corresponding to their cheap Fed money). If they give loans out at anything less than treasury rates or loans to any company affiliated or owned by them that invest in treasuries, the same tax apply. Any other financial scheme that serve the purpose of circumventing this law (as judged by a jury) should also be illegal and carry mandatory jail sentences of at least 5 years.

  25. Edoc says:

    Don’t forget, this is an irresistible opportunity for Wall Street to stick a finger in the eye of the administration and help Republicans in mid-terms. The more outrageous the bonuses, the more lift the issue will get in the GOP attack-ads. “See, incompetent Democrats don’t know anything about managing the economy!! They threw taxpayer money to their Wall St. cronies and got taken to the cleaners!!”

  26. wunsacon says:

    Rapid credit expansion the past few years marked up all assets. Each time those assets traded hands, the seller paid an inflation tax. The lack of credit expansion implies a shortfall in revenue and thus helps balloon the deficit.

    The establishment wants us to “turn those machines back on”; go back to the way things just were. Otherwise, they’d have to raise taxes or cut spending. Collectively, we’re seemingly incapable of doing either.

  27. Moss says:

    The asset owners have too much at stake to allow a ‘natural’ conclusion to the credit bubble. Listening to people like Steve Forbes, Larry Kudlow, Brian Wesbury, Bernanke, Geithner and any of the banksters only acts to mask the fundamental issues in the financial sector. These people have an inherent vested interest in continuing the boom bust cycles which are now a fundamental aspect of the ‘markets’. The manipulation of interest rates, reserve requirements, accounting rules, regulation enforcement etc. are all geared to ensure the asset holders suffer limited pain and as little permanent damage as possible.

  28. Bokolis says:

    Someone as pragmatic as you surely knows that experiencing pain has never been an option around here, so you could’ve thrown that Swedish option out the MF’n window.

    To play devil’s advocate, mark to market is mark to make-believe in its own right…that crap has become hold to (im)maturity.

    The Japanese option (aside- this is a misnomer. Any Japanese model would have involved Seppuku- they acted how they thought the US would act in that situation. Come to think of it, the US banks probably drew the road map for them) assumes depressed consumer spending, which gives the luxury of virtually no inflation- apart from asset inflation, that is (presently the major difference; you wonder whether the market will catch on or whether it will once again make the Investing 101 mistake of chasing yield). Since this is shaping up to play out as the Great Strath- the jobs that would fuel inflationary spending (befitting ZIRP) likely won’t come back any time in the next 5 years- the banks have time to lick and patch up their wounds.

    Of course, the bonuses show that the banks haven’t learned anything and the mentality hasn’t changed. But, it’s only the first rehab stint. Drug addicts always relapse at least once.

  29. tagyoureit says:

    Wecome to Fantasy Island (the plane! the plane!)

    “FASB forces accountants to accurately report losses”
    “Record bonuses based on real profits.”
    “Interest rates above zero.”
    “Modest inflation”
    “Abundant resources”
    “Reasonable public & private debt levels”
    “Fair, easy to understand tax system”
    “Confidence in a better future”

    Fake it ’til you make it, I guess.

  30. bman says:

    Capitalism, is a bad word. You have to go back to the turn of last century, where labor was deemed an expendable commodity, since that view was held by any kind of majority, however it is still true today as it was then: If you let capitalism run rampant without regulation, You get greedy rich bastards sucking the life out of the poor every day, and saying things like, ‘if you impose fees on us we’ll just have to pass it on to our customers…’

    Tax them 90%, tax them out of existance, once they are barkless trunks standing barren to the sky, then a new spring can begin.

  31. HarryWanger says:

    Excellent post, Barry. I was just explaining this scenario last night to a couple of friends who were clueless about why the banks weren’t lending (gov. excepted).

    I don’t see CNBC much, except during afternoon workouts, and I watched Rick Santelli describe this situation to a seemingly dumbfounded woman on the Fast Money show. It’s amazing how people just don’t get it.

  32. “That is how capitalism is supposed to work” … under honest circumstances. I watched 1984 (again) the other night and kept thinking about how we call our system a capitalist democracy, when in function it is a socialist economy for corporations governed by representatives which are legally bribed (i.e., lobbying) and members of a political duopoly (Repubs/Dems).

    Good thing we can cover those complexities under something as simple as a flag. The human brain is still evolving.

    Great piece, Barry!

  33. SINGER says:

    This is merely the sequel to :

    OWNERSHIP OF LAND CONSTITUTING USA BASED UPON EUROPEANS SLAUGHTER OF NATIVE AMERICANS…

  34. The Curmudgeon says:

    Reckoning from the comments, it is more or less agreed. It is now time for blood.

  35. bsneath says:

    Every dollar not issued as a bonus constitutes a dollar of additional capital that is retained by the banks and that will drive $10 to $12 of new loans (and higher profits) in the future.

    It seems they are more intent on eating their “seed corn” rather than planning for the long-term survival & profitability of their firms. Thus is the moral hazard of “mark to fiction”.

  36. DeDude says:

    “It seems they are more intent on eating their “seed corn” rather than planning for the long-term ”

    Yes and I am afraid that Robespierre @ 8:01 may have gotten to the reason for such seemingly irrational behavior. If you know the drought is coming it makes no sense to plant the corn rather than just eat it or stick it away some safe place in the Caymans. This would suggest that mark to fantasy is a lot bigger of a fraud than we feared.

  37. fusionbaby says:

    I think this is a powerful thing to do. It will have huge impact if many buy red stampers and start doing this. The continuation of a growing, popular, peaceful revolt. Let’s advertise our frustration, disgust and demand for positive change and reform to the government and the whole US population. US dollars… what a great marketing vehicle to get the message out. It will assist in getting other Americans educated and aware of what is going on (“Hey Joe, look at this… what is this ‘End the Fed’ all about?”).

    Read the suggestion in the two blogs below. Spread it around.

    http://globaleconomicanalysis.blogspot.com/2010/01/audit-fed-and-got-gold-stamp-messages.html

    http://globaleconomicanalysis.blogspot.com/2010/01/bernanke-makes-like-squid-sprays-clouds.html

  38. Darkness says:

    And why shouldn’t they raid the coffers while they can? Apparently, clawback by pitchfork and torch are off the table, otherwise they would have been put to use already.

  39. DeDude says:

    fusionbaby; but it would seem like we would run out of red ink before they run out of green.

  40. [...] Links 1/15/2010 Posted by Steven Russolillo on January 15, 2010 Banks, Earnings, Economy, Internet, Media, Newspaper Industry, Technology, Washington – It’s no coincidence the biggest banks are on pace to pay record bonuses. “How hard is it for any finance firm to make risk free money when they can borrow form the Federal Reserve at zero, and lend that same cash to the Treasury (by buying bonds) at 3%?” Barry Ritholtz ponders. [...]

  41. Darkness says:

    Is this going to set the record for lame duckedness?

    This is the same Brown who in a talk at a high school called out students by name in an obscenity-laden tirade because some of them had posted mean things about him on facebook?

    Something about legislatures and scraping the bottom of the barrel (no matter the party). No wonder things are always so effed up.

  42. JustinTheSkeptic says:

    I agree but how more socialist can you get than Sweden? Are we not in somekind of transition to a lesser U.S. and a greater World? Something that doesn’t reach Franklin’s “divided we fall, together we stand,” motto but a place where the different pieces of the world realize the benefits of belonging?

  43. foxmuldar says:

    While Obama keeps trashing the banks and their bonuses. I don’t hear him bad mouthing the same folks in his cabinet like Bernanke and Geithner, and Paulson who were all part of the banking collapse. It was Barney Frank and his co-horts in Washington that pressured Freddie and Fannie and the banks to give mortgages to folks would never should have got them. The Bailout of AIG is bigger then any bank bonuses. I don’t blame the people for complaining about the banks bonuses, but I think Obama’s ranting on about them is just a way to cover his ass and his fat cat cabinet from taking the heat over what will end up being a potential collapse of the financial system. Im speaking of the deal that Obama gave to Freddie and Fannie over the holidays when few were paying attention. Total backing of the government for all of Freddie and Fannie’s outstanding mortages. Were talking perhaps a Trillion or more in failed mortagages. That backing means Fred and Fan can take the losses knowing that we the tax payers will be left holding the bag.

  44. bruerr says:

    Study of the S&P500 chart comparisons, with private notes
    often omitted by market enthusiasts … tinyurl.com/yeyoxld

    This second report was pulled down from one of the Morgan’s private servers:
    spx comparison_retrace Deluxe Edition price 1200US, for high net worth clients only.pdf
    http://tr.im/Jvj6

  45. John D says:

    From what I have read so far, it seems that everybody is sick and tired of business as usual. The big question is : what can we do about it. Not that I have the answer but we could discuss this forever and it will not make a bit of difference.
    I could be wrong but most of the american people have a pretty good idea of the rampant greed and corruption lurking at every corner. Yet nothing changes. We are like sheep going to slaughter. The government is obviously either incompetent or corrupt. The money always seems to end up in the pockets of the wealthy and powerful, so I don’t think that they are that incompetent.
    Any ideas?

  46. holulu says:

    I am speechless.

    This is HR 4173, “‘The Wall Street Reform and Consumer Protection Act of 2009.

    http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/111_hr_finsrv_4173_full.pdf

    On Section 1701 (ADDITIONAL IMPROVEMENTS FOR FINANCIAL CRISIS MANAGEMENT.) starts on page 436 and on subsection C (FINANCIAL CRISIS MANAGEMENT) talks about unusual and exigent circumstances. Page 437 says “Upon making any determination under this paragraph, with the consent of the Secretary of the Treasury, the Financial Stability Oversight Council shall promptly submit a notice of such determination to the Congress. The amounts made on available under this subsection shall not exceed $4,000,000,000,000.”

    Basically this bill allows future $4 Trillion back stop to WallStreet casino.

  47. DeDude says:

    $4 Trillion, or 8 or 12 is fine with me. Whatever it takes to prevent US from turning into Zimbabwe is well worth the money in a $14 Trillion/year economy. But it has to be absolutely crystal clear that the shareholders lose all their money on the spot, and that only after government have gotten all its money back (with a nice little 5% profit) will the bonds be turned into shares; and then the bondholders can recover whatever they are able to. Furthermore, the governments authority to take over any financial company bigger than $10 billion the minute it can no longer prove its solvency, must be crystal clear. Those are the details that really matter with respect to backstopping our economy and its financial system. Even more important is to make sure the bastards cannot gamble beyond the point where they can backstop themselves.

  48. cognos says:

    This is a sad, ill-informed post.

    First, the average coupon interest on marketable US treasury securities is about 2.6%. Current avg YTM is far lower… more like 2%.

    http://www.treasurydirect.gov/govt/rates/pd/avg/avg.htm

    Second, one reason for this (and common misconception) is the long-end only represents <25% of all external borrowing (about $8T x 25% = $2T) and most of that is held by pensions, insurance companies and soverigns for the long-term.

    Put 1 and 2 together and "investing in USTs" would earn banks very little versus Fed 0% spreads, since bills and notes are averaging <1%.

    Third, this is not at all the way banks function (I used to read and prepare a major I-banks bal sht). There are many better sources of cash then the actual Fed. The LIBOR inter-bank market is currently at 25 bps… so this is not much different than Fed Funds. So banks can borrow this rate if they are willing to expand. Further, major money center banks (C, JPM, BAC) are just that… money center souces of fund through their massive deposit franchises. They tend to be net LIBOR lenders. They dont need the Fed for cash.

    Four, to put it all together… the current confusion in banking is simple:
    – Do we want them to lend more? (This means lower capital ratios, higher leverage, higher earnings)
    – Or do we want them to be smaller, earn less, and have greater equity cushion?

    If we want the second case… which is highly regulated, highly capitalized, smaller banks… then we need to have the govt support the formation and capitalization of 5-10 new banks probably in concert with former senior banking exec and the financial PE firms (JC Flowers, Ripplewood, etc). Actually the govt has been actively denying applications to form new banks — bc the FDIC / Shelia Bair are incompetent.

    I would argue that we actually want the first case — just lever up the current banks, tell them to lend, tell them capital ratio are too-high. Its ironic, but we REALLY NEED counter-cyclical regulation. At and after the "bottoms" capitalism will take care of itself… on the big upswings we need regulators to help people be conservative with lower leverage and l-t reserves. (Think about it… 1-yr ago, regulators should've been telling banks to "lever-up", "buy paper", "take risk").

  49. foxmuldar says:

    “Ask yourself how hard it is for any finance firm to make money — risk free! — when they can borrow from the Federal Reserve at a rate of zero, and then turnaround and “lend” that same cash to the Treasury (buying bonds) at 3% ?”

    Not only did the banks get such a sweeetheart deal from the Fed, but right after they got bailed out, they doubled the interest rates on many of their credit card holders, or upped the monthly minimums from 1% or 2% to 5% or more. Imagine your monthly minimum going from say $200 to $500. But thats what many banks did. So not only were they stealing from the taxpayers, they were also swindling their customers who prior to the crash, were loading their customers up on more and more credit.

    And yes, I’m sure they see whats ahead. The second wave of housing and commercial property forclosures. 60 minutes did a segment on the coming second wave of forclosures not long ago. Buyers were sucked into taking those teaser rate mortgages with little or no money down. Interest only payments for the first year or two. But now the rates are changing. Suddenly that 1% or 2% rate is edging up to 3%, 4% or higher. Your once $800 a month mortgage payment is suddenly $1500 or $2000. Even those with the lower $800 are forclosing already once they lose their jobs. And the dumb tax payer is going to pick up the bill for all those forclosures.

    Damn I sure hope Scott Brown kicks some Socialist butt on Tuesday. Another Poll just released has brown up by 3 points. http://www.americanresearchgroup.com/ If the Messiah shows up to campaign for Brown, I’d expect to see Brown’s lead move higher.

  50. [...] “Record Bank Bonuses Based On Record Bank Fraud“, Barry Ritholtz, 15 January 2010 [...]

  51. bruerr says:

    @John D Says:

    … The big question is : what can we do about it. … most of the American people have a pretty good idea of the rampant greed and corruption lurking at every corner. Yet nothing changes. We are like sheep going to slaughter. The government is obviously either incompetent or corrupt. The money always seems to end up in the pockets of the wealthy and powerful, so I don’t think that they are that incompetent. Any ideas?

    John D. I have some ideas. We need a forum or central place to present ideas and solutions. Rule out bad ideas and try to develop a strategy to turn out the abuse and get the corruption prosecuted (rather than overlooked).

    This is not a light discussion if it is to be genuinely faced and resolved. We need a place to discuss this. If you are serious in the question: What can we do about it. …Any ideas … post here again on this thread. (Invitation is open to anyone who wants to look at this strategically.)

    -=-=-=-

    @Barry:

    From the topic (linked here), “…This bonus bonanza is based on two simple factors: Zero % money, courtesy of the Fed, and a massive accounting fraud — one that happens to be legal.”

    While I agree with the premise, I do NOT agree in the legality of the activity. Do you mind me asking what in your perspective or what points in law, do you draw on, to make the activity legal? Can you provide basic support in the idea that it is legal? Understand I seek this from academic perspective trying to understand how you arrive at the end point, that it is legal what we are witnessing?

    Thanks in advance.

  52. [...] Barry Ritholtz – Record Bank Bonuses Based On Record Bank Fraud [...]