Posts filed under “Crony Capitalists”

The Daily Show on Goldman Sachs’ Aluminum Manipulation

Hilarious:

Goldman Sachs bets on the future price of aluminum while simultaneously goosing the future price of aluminum by creating a supply bottleneck in its aluminum warehouse.

John Oliver’s Arcane Details of Boron-Group Metals Pricing Update

(05:13)

Category: Commodities, Crony Capitalists, Federal Reserve, Video

Executive Pay by the Numbers

Click for full list Source: NYT

Category: Crony Capitalists, Wages & Income

Proposal for New Hedge Fund Fee Structure: 1% + 33% of Alpha

One of my pet peeves is the way that insiders — whether corporate CEOs, hedge fund managers, or elected politicos — capture compensation (or credit) for normal cyclical gains they had little or nothing to do with. This is the approach favored by the Crony Capitalists — those people pretending to be free market participants,…Read More

Category: Crony Capitalists, Hedge Funds, Investing, Really, really bad calls

Sizing Up CEO Pay

Click for ginormous graphic Source: WSJ

Category: Crony Capitalists

Jeffrey Sachs’ Speech on Wall Street Corruption

Columbia Economist Dr. Jeffrey Sachs speaks candidly about corruption in the United States: from Washington DC and Wall Street, including the entire financial/banking system

Category: Bailouts, Crony Capitalists, Legal, Video

GSE Investigation Into Force-Placed Insurance (finally)

Fannie & Freddie have finally begun to investigate the self-dealing and often fraudulent practice of Force-Placed Insurance. Both the New York State Insurance Regulator and the Consumer Financial Protection Bureau have been way ahead of the GSEs on this.

For those of you who may be unfamiliar with Force-Placed Insurance, it is an optional bank insurance product that sometimes gets forcibly jammed down the throats of home owners and mortgage investors at grossly inflated prices. As Jeff Horowitz detailed in 2010 (Losses from Force-Placed Insurance Are Beginning to Rankle Investors), most of the fees, commissions and revenues from this “product” went straight back to the banks holding the related mortgage, typically to wholly owned subsidiaries.

It was an abusive practice, and in quite a few instances, the additional costs actually tipped homeowners into foreclosure.

Here’s the WSJ:

“The Federal Housing Finance Agency, which regulates mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) plans to file a notice Tuesday to ban lucrative fees and commissions paid by insurers to banks on so-called force-placed insurance . . .

Forced policies have boomed in the wake of the housing bust, as many homeowners struggled to keep up with mortgage payments. Some borrowers may try to save money by dropping the original standard coverage, only to be hit by policies with premiums that are typically at least twice as expensive as voluntary insurance, and sometimes cost as much as 10 times more. Nearly six million such policies have been written since 2009, insurance industry data indicate. Consumers are free at any point to replace a force-placed policy with one of their own choosing.”

The Consumer Financial Protection Bureau has issued new rules on this, but the real action seems to be the variety of civil suits from investors; additionally, New York State just reached a settlement with forced-placed insurer Assurant, including a $14 million penalty, and a long list of practice changes (after the jump). If it were up to me, I would have insisted on profit disgorgement and jail time for the CEO (But I am “unreasonable”).

Hopefully, this is the first of many . . .

 

 

Previously:
Latest Mortgage Scandal: Force-Placed Insurance (November 10th, 2010)

Rule of Law: Banker Criminality Demands Prosecution (May 20th, 2011)

A modern Pecora Commission could right Wall Street wrongs (February 5th, 2012)

Sources:
U.S. Cracks Down on ‘Forced’ Insurance
ALAN ZIBEL And LESLIE SCISM
WSJ, March 25, 2013
http://online.wsj.com/article/SB10001424127887323466204578382603826452198.html

Losses from Force-Placed Insurance Are Beginning to Rankle Investors
Jeff Horwitz
Amaerican Banker, NOV 9, 2010
http://www.americanbanker.com/issues/175_216/losses-from-forced-place-insurance-1028475-1.html

Read More

Category: Bailouts, Crony Capitalists, Foreclosures, Legal, Real Estate, Really, really bad calls

Implementing the Volcker Rule via the FDIC

There has been much commentary (see this as a smart example) on the scathing Senate hearings on JPM and the London Whale last week. I wanted to take a moment to throw out a few ideas that relate to JPM’s embarrassing moment int he spotlight (again). The TBTF giant banks want to eat their cakes…Read More

Category: Bailouts, Corporate Management, Credit, Crony Capitalists, Regulation

The Bankers’ New Clothes

The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It

This book is next up in my queue. It looks to be a primer on why big, highly leveraged banks are bad for the economy.

The reviews are outstanding; full chapter 9 after the jump. The book’s site is here; Amazon page here.

 

Reviews:

More than four years after the financial meltdown devastated the economy, our banking system remains resistant to reform and riddled with risk. The Bankers’ New Clothes challenges us to question the status quo and to think anew about the transformative changes in banking that are needed to serve the public interest. This work should spur a long-overdue debate on real banking reform.”

-Phil Angelides, chairman of the Financial Crisis Inquiry Commission

The Bankers’ New Clothes underscores that there is perhaps no reform more important and central to a stable financial system than capping the ability of financial institutions to take excessive risks using other people’s money.

-Sheila C. Bair, former chair of FDIC and author of Bull by the Horns

The Bankers’ New Clothes accomplishes the near impossible by translating the arcane world of banking regulation into plain English. In doing so, it exposes as false the self-serving arguments against meaningful financial reform advanced by Wall Street executives and the captured politicians who serve their interests. This revelatory must-read shreds bankers’ scare tactics while offering commonsense reforms that would protect the general public from unending cycles of boom, bust, and bailout.

-Neil Barofsky, author of Bailout

Bankers have sold us a story that their risky practices are the necessary cost of a dynamic system. Admati and Hellwig expose this as a misguided and dangerous lie, and show how banks can be made more stable–if less profitable for the bankers themselves–without sacrificing economic growth. This brilliant book demystifies banking for everyone and explains what is really going on. Investors, policymakers, and all citizens owe it to themselves to listen.

-Simon Johnson, coauthor of 13 Bankers

A clearheaded antidote to the ill-advised snap reactions to the financial crisis, The Bankers’ New Clothes carefully counteracts arguments that the banking system is now more secure. With direct and rigorous analysis, Admati and Hellwig lay bare the ongoing misinformation about modern banks, and show what remains wrong with banking. This book is the voice shouting that the bankers are still not wearing any clothes. We should listen.

-Frank Partnoy, author of Infectious Greed

I like this book. The Bankers’ New Clothes explains in plain language why banking reform is still incomplete, contrary to what lobbyists, politicians, and even some regulators tell us.

-Paul Volcker, former chairman of the U.S. Federal Reserve and the U.S. Economic Recovery Advisory Board

 

Full chapter after the jump . . .

 

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Category: Bailouts, Books, Crony Capitalists

Hoenig: A Strong Voice Against Big Banks

The Times’s Louise Story talks to Thomas Hoenig, the vice chairman of the Federal Deposit Insurance Corporation, who says he is not alone in calling for a breakup of banks too large to regulate. The five that need to be shrunk JPM, Wells Fargo, Goldman Sachs, Citigroup, Morgan Stanley (Bank of America was not mentioned int his interview buy was discussed previously):

 

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Category: Bailouts, Crony Capitalists, Regulation, Video

JP Morgan Chase: Out of Control (Complete Rosner Report)

Category: Corporate Management, Credit, Crony Capitalists, Legal, Think Tank