Attac study says where rescue funds for Greece end up

Πηγή: DW
June 17 2013

The anti-globalization pressure group Attac has published a study indicating that the bulk of the rescue funds made available for Greece have tended to go to help banks. Ordinary people haven't profited much, it said.

More than three quarters of all rescue funds for Greece went directly to banks and rich investors, German daily newspaper "Süddeutsche Zeitung" claimed Monday, quoting a fresh study by the anti-capitalist pressure alliance Attac.

The group said out of the 207 billion euros ($276 billion) earmarked so far by international creditors, 160 billion euros ended up with Greek lenders and investors.

"Political elites have not been trying to rescue the Greek population, but the finance sector," said Lisa Mittendrein from Attac Austria.

According to the calculations made by the pressure group, the government in Athens put 58 billion euros into the domestic bank's recapitalization program. Another 55 billion euros were used to pay back sovereign bonds and 11 billion euros more to buy back accumulated debt.

Berlin not amused

Attac maintained an additional 35 billion euros were spent with a view to sweeten the 2012 debt reduction scheme also known as the Greek haircut for affected insurance companies and investment funds.

The group also said that only a small proportion of the money that actually did reach the Greek state budget could be used do anything meaningful for the population, as 35 billion euros had to be spent on debt servicing for the holders of sovereign bond bills.

"The widespread belief supported by European politicians that the various rescue packages for Greece have helped ordinary people in the country is no longer tenable," Mittendrein commented. Instead, she argued, Greeks have been made to foot the bill in terms of harsh austerity measures with all the known drastic social consequences like record-high unemployment.

The German government rejected the conclusions made by Attac, arguing that Greeks have profited from the government in Athens having more time to implement reforms. Berlin also claimed that all Greeks had profited from saving lenders from bankruptcy.

Banking on Criminality: Drug Money and the Above-the-Law Global Banking Cartel

HSBC executives testify at U.S. Senate (photo courtesy of The Guardian, 17 June 2012)

Πηγή: Boiling Frogs
By Andrew Gavin Marshal
Dec 14 2012

In what the New York Times declared as a “dark day for the rule of law” on December 11, 2012, HSBC, the world’s second largest bank, failed to be indicted for extensive criminal activities in laundering money to and from regimes under sanctions, Mexican drug cartels, and terrorist organizations (including al-Qaeda). While admitting culpability, and with guilt assured, state and federal authorities in the United States decided not to indict the bank “over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.” Instead, HSBC agreed to pay a $1.92 billion settlement.

The fear was that an indictment would be a “death sentence” for HSBC. The U.S. Justice Department, which was prosecuting the case, was told by the U.S. Treasury Department and the Federal Reserve that taking such an “aggressive stance” against HSBC could have negative effects upon the economy. Instead, the bank was to forfeit $1.2 billion and pay $700 million in fines on top of that for violating the Bank Secrecy Act and the Trading with the Enemy Act. In a statement, HSBC’s CEO stated, “We accept responsibility for our past mistakes… We are committed to protecting the integrity of the global financial system. To this end, we will continue to work closely with governments and regulators around the world.” With more than $7 billion in Mexican drug cartel money laundered through HSBC alone, the fine amounts to a slap on the wrist, no more than a cost-benefit analysis of doing business: if the ‘cost’ of laundering billions in drug money is less than the ‘benefit,’ the policy will continue.

As part of the settlement, not one banker at HSBC was to be charged in the case. The New York Times acknowledged that, “the government has bought into the notion that too big to fail is too big to jail.” HSBC joins a list of some of the world’s other largest banks in paying fines for criminal activities, including Credit Suisse, Lloyds, ABN Amro and ING, among others. The U.S. Assistant Attorney General Lanny A. Breuer referred to the settlement as an example of HSBC “being held accountable for stunning failures of oversight.” Lanny Breuer, who heads the Justice Department’s criminal division, which was responsible for prosecuting the case against HSBC, was previously a partner at a law firm (along with the U.S. Attorney General Eric Holder) where they represented a number of major banks and other conglomerates in cases dealing with foreclosure fraud. While Breuer and Holder were partners at Covington & Burling, the firm represented notable clients such as Bank of America, Citigroup, JP Morgan Chase and Wells Fargo, among others. It seems that at the Justice Department, they continue to have the same job: protecting the major banks from being persecuted for criminal behavior.

With a great deal of focus on the $1.9 billion in fines being paid out by HSBC, little mention was made of the fact that HSBC had roughly $2.5 trillion in assets, and earned $22 billion in profits in 2011. But not to worry, HSBC’s executive said that they “accept responsibility for our past mistakes,” and added: “We have said we are profoundly sorry for them, and we do so again.” So not only did the executives of the world’s second largest bank apologize for laundering billions in drug money (along with other crimes), but they apologized… again. Thus, they pay a comparably small fine and face no criminal charges. I wonder if a crack dealer from a ghetto in the United States could avoid criminal prosecution if he were to apologize not once, but twice. Actually, we don’t have to wonder. In May of 2012, as HSBC executives were testifying before the U.S. Senate in Washington D.C., admitting their role in drug money laundering, a poor black man was convicted of peddling 5.5 grams of crack cocaine just across the river from the U.S. Capitol building, and he was given 10 years in prison.

Back in August the bank stated that they had put aside $700 million to pay fines for illegal activities, which conveniently was the exact amount they were fined by the U.S. Justice Department (not including the forfeiture of profits). Lanny Breuer declared the settlement to be “a very just, very real and very powerful result.” Indeed, one could agree that the results are “powerful” and “very real,” in that they provide a legal state-sanctioned decision that big banks will not be persecuted for their vast criminal activities, precisely because they are big banks. The “very real” result of this is that we can guarantee that such criminal behaviour will continue, since the banks will continue to be protected by the state. With news of the settlement, HSBC’s market share price rose by 2.8%, a clear sign that “financial markets” also reward criminal behaviour and the “pervasively polluted” culture at HSBC (in the words of the U.S. Senate report).

Jack Blum, a Washington attorney and former special counsel for the Senate Foreign Relations Committee who specializes in money laundering and financial crimes stated that, “If these people aren’t prosecuted, who will be?” He further asked: “What do you have to do to be prosecuted? They have crossed every bright line in bank compliance. When is there an offense that’s bad enough for a big bank to be prosecuted?” But the Justice Department’s Lanny Breuer explained that his department had to consider “the collateral consequences” of prosecutions: “If you prosecute one of the largest banks in the world, do you risk that people will lose their jobs, other financial institutions and other parties will leave the bank, and there will be some kind of event in the world economy?”

In other words, the U.S. Justice Department decided that big banks are above the law, because if they weren’t, there would be severe consequences for the financial system. And this is not just good news for HSBC, the “favourite” bank of Mexican drug cartels (according to Bloomberg), but it’s good news for all banks. After all, HSBC is not the only bank engaged in laundering drug money and other illegal activities. Back in 2010, Wachovia (now part of Wells Fargo) paid roughly $160 million in fines for laundering some $378.4 billion in drug money. Drug money has also been found to be laundered through other major financial institutions, including Bank of America, Banco Santander, Citigroup, and the banking branch of American Express. Nearly all of the world’s largest banks have been or are currently being investigated for other crimes, including rigging interest rates (in what’s known as the Libor scandal), and other forms of fraud. Among the banks being investigated for criminal activity by U.S. prosecutors are Barclays, Deutsche Bank, Citigroup, JP Morgan Chase, Royal Bank of Scotland, UBS, Bank of America, Bank of Tokyo Mitsubishi, Credit Suisse, Lloyds, Rabobank, Royal Bank of Canada, and Société Générale, among others. Regulators and investigators of the Libor scandal – “the biggest financial scandal ever” – report that the world’s largest banks engage in “organized fraud” and function like a “cartel” or “mafia.”

The pervasive criminality of this “international cartel” is so consistent that one commentator with theGuardian has referred to global banks as “the financial services wing of the drug cartels.” But indeed, where could be a better place for drug cartels to deposit their profits than with a financial cartel? And why would banks give up their pivotal role in the global drug trade? While the pharmaceutical drug industry records annual revenues in the hundreds of billions of dollars (which is nothing to ignore), the global trade in illicit drugs, according to the United Nations Office on Drugs and Crime, amounted to roughly 2.3-5.5% of global GDP, around $2.1 trillion (U.S.) in 2009. That same year, the same United Nations office reported that billions of dollars in drug money saved the major global banks during the financial crisis, as “the only liquid investment capital” pouring into banks. Roughly $325 billion in drug money was absorbed by the financial system in 2009. It is in the interest of banks to continue profiting off of the global drug trade, and now they have been given a full green light by the Obama administration to continue.

Welcome to the world of financial criminality, the “international cartel” of drug money banks and their political protectors. These banks not only launder billions in drug money, finance terrorists and commit massive fraud, but they create massive financial and economic crises, and then our governments give them trillions of dollars in bailouts, again rewarding them for creating crises and committing criminal acts. On top of that, we, the people, are handed the bill for the bailouts and have to pay for them through reduced standards of living by being punished into poverty through ‘austerity measures’ and have our labour, resources, and societies exploited through ‘structural reform’ policies. These criminal banks dominate the global economy, and dictate policies to national political oligarchies. Their greed, power, and parasitic nature knows no bounds.

The fact that the Justice Department refused to prosecute HSBC because of the effects it could have on the financial system should be a clear sign that the financial system does not function for the benefit of people and society as a whole, and thus, that it needs to be dramatically changed, cartels need to be destroyed, banks broken up, criminal behavior punished (not rewarded), and that people should dictate the policies of society, not a small network of international criminal cartel banks.

But then, that would be rational, so naturally it’s not even up for discussion.

# # # #

For a more detailed analysis of the criminal activities of the “international cartel” of banks, which scientists have referred to as a “super-entity”, see: “The Global Banking ‘Super-Entity’ Drug Cartel: The “Free Market” of Finance Capital.”

Biggest banks given extra time on reform

Πηγή: FT
By Brooke Masters
Nov 5 2012

Global financial reform efforts are falling behind schedule, regulators have conceded. They are giving the biggest banks extra time to write so-called “living wills” and acknowledge that fewer than one-third of the big financial centres will have Basel III rules in place on time.

The Financial Stability Board, made up of central bankers and regulators, announced on Monday that “uneven headway” had been made on solving the problem of banks that were seen as “too big to fail”.

28 banks have been assigned higher capital surcharges, many will not meet the end of 2012 deadline for writing living wills – the blueprints for stabilising or shutting them down in a crisis.

The “global systemically important financial institutions” (GSifis) will be given an additional six months to finish their wills, also known as recovery and resolution plans, and peer reviews will take until the end of 2013.

At the same time, the FSB said, only eight of the 27 members of the Basel Committee on Banking Supervision, which writes global bank capital rules, are on track to enshrine the “Basel III” reforms in national law by January even though the rules were supposed to be phased in from then.

“The tasks ahead remain considerable . . . It is crucial that all jurisdictions redouble their efforts to pass legislation that is consistent with the Basel III framework,” Mark Carney, the Canadian central banker who chairs the FSB, wrote to the leaders of the Group of 20 leading economies.

The FSB letter to the G20 also contained updates on some of the other financial reform efforts that were launched in a bid to prevent a repeat of the 2008 global financial crisis, including drives to reduce risk from over-the-counter derivatives and so-called “shadow banks” – financial institutions that extend credit but do not take deposits.

G20 members pledged in 2009 that they would seek to force standardised derivatives into central clearing to make it easier to measure and compensate for the risks of the transactions. The FSB reported that eight of the 25 member countries planned to use incentives – rather than rules – to convince banks and brokers to put their OTC derivatives through clearing. A total of 16 countries already mandate clearing or plan to impose mandates if the incentives fail.

The FSB is expected to announce plans to cut the risks of shadow banks, including proposals affecting money market funds, securities lending and securitisation, later this month.

Why Does the SEC Protect Banks’ Dirty Secrets?

Illustration by Pete Gamlen

Πηγή: Bloomberg
By William D. Cohan
Oct 28 2012

Remember Richard Bowen?

He is the former senior executive at Citigroup Inc. (C) who in November 2007 issued a clarion call to his colleagues and Citi’s board that a major credit-quality problem loomed for the bank.

About William D Cohan

William D. Cohan is the author of the recently released "Money and Power: How Goldman Sachs Came to Rule the World" and the New York Times bestsellers "House of Cards" and "The Last Tycoons."More about William D Cohan

Bowen was the chief underwriter in the business unit that bought some $50 billion annually in home mortgages from third parties that were then bundled up and sold as securities to investors the world over. On Nov. 3 he sent an “urgent” e-mail to executives including Robert Rubin, the former U.S. Treasury secretary who was then chairman of the bank’s executive committee, and Gary Crittenden, the chief financial officer, raising concerns about “breakdowns in internal controls and resulting significant but possibly unrecognized financial losses existing within our organization.”

Bowen wrote that he had been “agonizing for some time” about the problem, especially since his direct superiors at the bank, whom he had warned repeatedly since he first discovered the problem in mid-2006, had done little or nothing to remedy it. What he had discovered was that 60 percent of the home mortgages that Citigroup had bought from third parties, or $30 billion, were “defective,” meaning that they didn’t meet Citigroup’s underwriting criteria. Nevertheless, they were still packaged up -- defects and all -- and sold as securities.

Almost Nothing

You know where this is going. The Citigroup executives did next to nothing. Rubin, who left the company in January 2009, told the federal Financial Crisis Inquiry Commission on April 8, 2010, that “either I or somebody else sent it to the appropriate people, and I do know factually that that was acted on promptly and actions taken in response to it.” Commission Chairman Phil Angelides asked Rubin to follow up with his commission and explain precisely what actions Citigroup took in response to Bowen’s e-mail. A few months later, Rubin’s attorneys sent a letterstating that the “e-mail was subsequently passed on to the appropriate personnel at Citigroup” and that “Citigroup should be able to provide a description of its response to Mr. Bowen’s concerns.” A Nixonian response if ever there was one.

Citigroup’s attorneys, in turn, wrote to the commission in November 2010 that the bank had responded to Bowen’s e-mail by firing “the head of the group” responsible for evaluating the credit quality of the purchased mortgages -- actually, Bowen had done that already -- and by putting in place a bunch of new “processes.” Yet according to a July 2012 article in Bloomberg Markets magazine by Bob Ivry about Sherry Hunt, who worked for Bowen, “There were no noticeable changes in the mortgage machinery as a result of Bowen’s warning.”

By the time of Rubin’s FCIC testimony, of course, Citigroup had been bailed out with $45 billion in cash from the American people, along with another $306 billion in guarantees from the federal government for a pot of the very same toxic home mortgages that Bowen had warned about. Rubin pocketed $126 million in his 10 or so years at the company. Bowen, who was stripped of his responsibilities at Citigroup soon after writing the infamous e-mail, left the company two weeks after Rubin. He now teaches accounting at the University of Texas at Dallas.

Warning Ignored

As horrific as it was for Rubin, Crittenden and others to ignore Bowen’s explicit warning, that’s not the end of the story. As part of blowing the whistle on Citigroup’s bad behavior, Bowen also alerted the Securities and Exchange Commission, the bank’s main regulator, hoping it would thoroughly investigate the “breakdowns of internal controls” and take legal action against those responsible. Before the bailout of Citigroup, he gave the SEC two long depositions and 1,000 or so pages of documents, some of which were taken from the Internet, detailing the extent of Citigroup’s problems and Bowen’s attempts to rectify them. Importantly, he said he also gave his permission for the SEC to release to the public his depositions and the revealing documents.

Naturally, the SEC did nothing to pursue Bowen’s claims before billions of taxpayer dollars were used to rescue Citigroup. But it must abide by the Freedom of Information Act, which allows the public to gain access to documents such as those Bowen provided. It has a horrendous track record of fulfilling FOIA requests in anything like a timely manner. My experience has been that the agency begrudgingly gives out the bare minimum long after I really needed it.

Earlier this year, Bloomberg’s Ivry filed a FOIA request with the SEC to get copies of Bowen’s two depositions and the 1,000 pages of documents. Ivry wanted to know just what Bowen had discovered about Citigroup’s bad behavior in the years leading up to its bailout. Initially, the SEC stonewalled, claiming that the Bowen cache amounted to Citigroup “trade secrets.”

When Ivry finally got his FOIA documents back from the SEC, he was underwhelmed. “It was a discussion about nothing and it was heavily redacted, including Bowen’s name,” Ivry told me via e-mail. Needless to say, he was unable to get any additional insight into what Bowen had uncovered and was unable to inform the rest of us.
Unreleased Documents

When I told Bowen, earlier this week, that the SEC had failed to release his documents and his testimony about Citigroup to Ivry, he was flabbergasted. For legal reasons, Bowen said, he can’t share the information directly, but he fully expected the SEC to make it available to journalists and the public. He also expected the SEC to investigate the wrongdoing.

“I’m outraged, quite frankly,” Bowen told me. “I had been told that once the investigations were concluded that my material would be available to the public via FOIA. And to hear now that the SEC has made the decision that no, it cannot be available, I know nothing about the legal side of this, but quite frankly, I’m totally outraged.”

Last week, I filed my own FOIA request for Bowen’s documents and testimony. On Oct. 22, I received an acknowledgement letter from the agency. My tracking number is 13-00937-FOIA. Trust me, I’ll let you know if the SEC gives me anything more than it gave Ivry. But I won’t be counting on it.

Too Big To Jail: Wall Street Executives Unlikely To Face Criminal Charges, Source Says

New York Attorney General Eric Schneiderman, accompanied by Attorney General Eric Holder, speaks at the Justice Department in Washington, Friday, Jan. 27, 2012, after Holder announced the formation of the Residential Mortgage-Backed Securities Working Group.

Πηγή: Huffington Post
By Ben Hallman
Sept 9 2012

A last-ditch effort by federal and state law enforcement authorities to hold Wall Street accountable for nearly bringing down the U.S. economy is unlikely to lead to any criminal charges against big bank executives, according to a source close to the investigation.

Barring a "hail mary pass," said the source, who spoke on the condition of anonymity because the investigation is still ongoing, the members of a task force President Barack Obama formed in January to investigate fraud in the residential mortgage bond industry will instead most likely bring civil lawsuits against some of the banks involved, though it isn't clear when these cases might come.

That means any penalties for those accused of fraud or other misconduct would be measured in dollars, not jail terms.

A spokesman for New York Attorney General Eric Schneiderman, a co-head of the task force and the driving force behind its formation, declined to comment.

Adora Andy, a Department of Justice spokeswoman, said in a statement that "all appropriate remedies, civil and criminal, are on the table."

"As always, if working group members uncover evidence of fraud or other illegal conduct, we will pursue such conduct aggressively," Andy said.

The subprime mortgage bubble popped more than five years ago, triggering a full-fledged economic meltdown. Since then, the question confronting regulators and government prosecutors has been whether the banks that drove the market's expansion simply made terrible business decisions, or committed fraud in order to reap short-term profits.

The Securities and Exchange Commission, in a number of civil lawsuits, has alleged the latter (as a regulatory agency, the SEC cannot bring criminal suits). But with the exception of one failed case against Bear Stearns in 2009, the Department of Justice, which historically would lead any criminal effort, has declined to criminally prosecute those who created the financial instruments built out of toxic mortgage loans.

By pooling investigative resources, it was hoped that the Justice Department, the SEC and a handful of state attorneys general, led by Schneiderman, could accomplish what the agencies had mostly failed to deliver on their own: a sense of justice, however fuzzily defined.

But from the start, the task force -- officially, the Residential Mortgage-Backed Securities Working Group -- has been dogged by critics questioning the seriousness of the effort, and by concerns that the legal timeframe in which investigators must bring cases is coming to a close.

Civil cases, if and when they are filed, could lead to large financial penalties and possibly aid for struggling homeowners. Yet it seems unlikely that such a result will satisfy those whose anger sparked the Occupy Wall Street movement, or even many middle-class Americans who may wonder how, in contrast to other financial crises, this one could end with none of the people who seemingly helped orchestrate it behind bars.

"Without accountability, the unending parade of megabank scandals will inevitably continue," Neil Barofsky, the former watchdog over the $700 billion bank bailout fund and a frequent critic of the Obama administration's response to the financial crisis, recently told The Huffington Post.

How and why the government chose this path will be the subject of debate for years to come. Some say prosecutors lacked resources. Others assert that the complexity of the financial transactions makes it virtually impossible to prove criminal intent in court, where prosecutors must convince a jury of guilt "beyond a reasonable doubt." In a civil action, by contrast, the bar is lower: jurors need only conclude that "a preponderance of evidence" indicates guilt.

One former prosecutor said a simpler human dimension may also be preventing government lawyers from filing criminal charges: the basic fear of losing a big case.

"Losing has a chilling effect, because no one wants to take a spin like that and come out on the short end," said Cliff Stricklin, a former prosecutor who worked on the Enron task force and also successfully prosecuted Qwest Communications chief executive Joseph Nacchio for accounting fraud. (Nacchio is currently serving a seven-year sentence in a federal prison.)

"[Losing a case] makes you wonder if there was indeed a crime, and if so, how you go about proving it," Stricklin said. "It is a signal to the public that either the government is jumping to conclusions or isn't competent."

CATASTROPHE OR CRIME?

Mary Jo White, a former U.S. attorney for the Southern District of New York, adheres mostly to the view that the financial crisis was a catastrophe, but not a crime. Now a prominent defense attorney at the law firm Debevoise & Plimpton, White said she thinks calls from some quarters for more criminal prosecutions are unwarranted.

"The financial crisis was so expensive and so many people were injured that one's instinct is to think that there must have been massive wrongdoing from the top on down," she said.

But criminal cases must be built on compelling evidence, not suppositions, and evidence of broad-based misconduct that would rise to that level doesn't exist, White said.

"I don't think the criticism is fair," White said.

William Black, a law professor at the University of Missouri-Kansas City and a prominent former bank regulator, is in the camp that thinks prosecutors have missed a massive opportunity.

"They don't get the whole concept of looting," he said.

Black, who worked with prosecutors to develop some of the 1,100 criminal cases that emerged from the Savings & Loan crisis of the late 1980s and early 1990s, said that Wall Street accounting fraud flows from a simple recipe: grow by buying high-interest loans, leverage the business by borrowing lots of money and keep next to nothing in reserve against losses.

"You are mathematically guaranteed to report record profits," he said.

But those profits are based on a fiction, he said, one that costs investors when the bank collapses -- and in some cases, can cost taxpayers too.

Financial firms like Goldman Sachs profited tremendously by purchasing loans described widely in the industry as "liar's loans," Black said. These loans were made without the borrower having to prove income, or even that he or she had a job.

"It makes no sense that an honest lender would ever make liar's loans," he said. Nor does it make sense that a sophisticated bank like Goldman, which runs an entire business based on the ability to calculate risk, would purchase such dangerous loans without knowing that they were toxic, he said.

Indeed, the Financial Crisis Inquiry Commission produced evidence last year which suggests that Goldman Sachs traders knew these investments were more dangerous than they were letting on to their customers. Internally, they characterized offerings as "junk" and "monstrosities" even as they offloaded the mortgage bonds onto investors, according to the report.

The SEC came to the same conclusion when investigating whether the bank had misled investors about a product known as Abacus. That probe led to a $550 million settlement in 2010.

The SEC has won $2.2 billion in penalties stemming from financial crisis-related cases, though it has been dogged by complaints -- most notably from federal judge Jed Rakoff -- that its fines are too small and that it doesn't target individuals often enough. An SEC spokesman declined comment.

Still, the agency's efforts to pursue financial crisis fraud far outstrip those of the Justice Department.

The government's lone criminal case related to the creation of complex mortgage investments came in 2009, when a federal jury declined to convict two former Bear Stearns hedge fund managers accused of lying to investors about the soundness of the securities they were selling.

Last month, the Justice Department announced that it had dropped a probe of Goldman Sachs, launched after the Senate’s Permanent Subcommittee on Investigations found that the bank sold investments "in ways that created conflicts of interest with the firm’s clients and at times led to the bank's profiting from the same products that caused substantial losses for its clients.”

There was "not a viable basis" to bring criminal charges against the bank or its employees, the Justice Department said in a statement explaining its decision.

LAST CHANCE FOR PROSECUTORS

Obama's multi-agency mortgage task force was supposed to succeed where previous investigations had failed.

"This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans," Obama said in his State of the Union address in January.

The goal of the new unit was to drill down into the sophisticated financial instruments the banks created to package and sell mortgages in a search for fraud. But the group was met with skepticism from many legal experts, who wondered how this effort would be any different from previous investigations.

The group got off to a rocky start. Three months after its formation, it had failed even to secure office space. In May, Schneiderman told the Wall Street Journal that he wanted more resources and wished that investigators at his partner agencies would pick up the pace.

According to the Justice Department, the investigation is now in full swing.

More than 200 investigators are on the job, "devoting significant resources to investigate and prosecute misconduct by financial institutions in the origination and securitization of mortgages," the agency said in a statement.

The DOJ has issued 30 civil subpoenas in the past four months, it said, and the SEC has issued more than 300 -- though that number includes pre-existing investigations.

The New York attorney general's office, HuffPost previously reported, is now investigating several major institutions.

But if none of these cases yield a criminal indictment, who, if anyone, is to blame?

Schneiderman, though he never promised criminal cases, is likely to attract some criticism for the lack of prosecutions due to his aggressive advocacy for the task force. Last year, Schneiderman led an insurgency against a robo-signing settlement shaping up between state attorneys general and five large banks. His goal, he said, was to preserve his ability to continue an investigation he had opened in the spring into possible fraud that led to the housing bubble and crash.

The states leading the negotiations dispute that Schneiderman's ability to continue his investigation was ever in doubt. Nevertheless, his initial opposition to what became a $25 billion deal led directly to the creation of the task force

Schneiderman co-leads the task force, along with Robert Khuzami, the enforcement director of the SEC; Lanny Breuer, the head of the criminal division at the Justice Department; Stuart Delery, the head of Justice's civil division; and John Walsh, the U.S. Attorney for the District of Colorado.

Though each of these entities are sharing documents and resources, it is up to the individual agencies to file charges.

The biggest challenge for Schneiderman, who took office in January 2011, was the ticking clock. Most mortgage bonds were packaged and sold in 2006 or earlier, and the statute of of limitations on most types of fraud cases is five years from the commission of the alleged wrongdoing.

It is possible to extract "tolling" agreements from a business or individual under investigation that effectively extends the allotted time in which to bring a case, in exchange for more lenient treatment. But Schneiderman would have had to enact tolling agreements in very short order after taking office. It isn't clear whether a bank or an individual would accept such an agreement in a criminal case if they knew the statute of limitations was about to run out.

It is also true that while the New York attorney general's office has the authority to bring criminal fraud cases, it historically almost never does. Like the SEC, the office instead typically files lawsuits with the expectation of wringing a settlement -- and political bragging points -- out of a Wall Street firm. It's part of the recipe that both Andrew Cuomo and Eliot Spitzer used to pave their way to a governorship.

Instead, the attorney general's office typically defers to the Department of Justice, which has a large team of experts parked in the U.S. attorney's office just a few blocks away in lower Manhattan. But instead of taking on Wall Street's top executives, that office has focused on alternate cases -- such as the recent prosecution of hedge fund king Raj Rajaratnam, who was convicted of insider trading.

Stricklin, now in private practice at the Bryan Cave law firm in Denver, said that he doesn't know whether there was criminal conduct in the run-up to the financial crisis.

"The truth is more complicated than can be explained in sound bites," he said.

But he has seen, he said, a decline in the talent level of those working white-collar cases at agencies like the Federal Bureau of Investigation and the Justice Department, which over the past decade have diverted some of the most talented people over to counterterrorism.

"The government needs to decide if it is really going to tackle white-collar crime or not, and if so it needs to allocate resources," he said.

Otherwise, the result will be fewer cases, and more losses, Stricklin said.

"It always matters to bring solid criminal cases where you are holding people accountable," he said. "But the worst signal is not to do nothing, but to do something partway."

Speculating Banks Profit as World's Poorest Go Hungry

Nearly a billion people are already too poor to feed themselves, so any long-term food spike is guaranteed to trap millions more who are now just “getting by,” says Oxfam.

Πηγή: Common Dreams
Sept 3 2012

Goldman Sachs, Morgan Stanley among those accused of reaping financial harvest from growing food crisis.

Reports over the weekend saw some of the world's most powerful financial institutions accused of profiteering on the backs of the world's poorest people and those most vulnerable to the wild price fluctuations caused by over-rampant speculation on the price of food commodities like wheat, soy beans, and corn.

Nearly a billion people are already too poor to feed themselves, so any long-term food spike is guaranteed to trap millions more who are now just “getting by,” says Oxfam."Barclays is the UK bank with the greatest involvement in food commodity trading and is one of the three biggest global players, along with the US banking giants Goldman Sachs and Morgan Stanley," reported the UK's Independent, citing research from the World Development Movement.

Christine Haigh, policy and campaigns officer at the WDM and one of the analysts behind the research, said the behavior of the banks "risks fuelling a speculative bubble and contributing to hunger and poverty for millions of the world's poorest people."

As droughts have devastated grain crops in major agricultural strongholds like the US and India this year, experts warn of a food crisis taking shape across the globe. The accusations of 'profiteering' by groups like WDM and Oxfam International, however, transcend the price changes due to external conditions like drought or farmers who use commodity indexes to protect the price of their crops, and speak to the greed and recklessness of investors who create volatile trading conditions by speculating on the future prices of such commodities with no regard for the harm it does to real people.

"Fragile populations around the world, living on or near the poverty line, will be dragged under by price spikes and volatility," said Oxfam in a recent statement. "Nearly a billion people are already too poor to feed themselves, so any long-term food spike is guaranteed to trap millions more who are now just 'getting by'."

The World Development Movement report estimates that Barclays made as much as $840 million from its "food speculative activities" over the course of 2010 and 2011. Barclays made much more from food speculation in 2010, as the prices of agricultural commodities were rising, and a smaller sum in 2011 as prices fell.

As the Independent reported: "The extent of just one bank's involvement in agricultural markets will add to concerns that food speculation could help push basic prices so high that they trigger a wave of riots in the world's poorest countries, as staples drift out of their populations' reach."

Oxfam's private sector adviser, Rob Nash, said: "The food market is becoming a playground for investors rather than a market place for farmers. The trend of big investors betting on food prices is transforming food into a financial asset while exacerbating the risk of price spikes that hit the poor hardest."

And the Independent adds:

The revenues that Barclays and other banks make from trading in everything from wheat and corn to coffee and cocoa, are expected to increase this year, with prices once again on the rise. Corn prices have risen by 45 per cent since the start of June, with wheat jumping by 30 per cent.

Barclays makes most of its "food-speculation" revenues by setting up and managing commodity funds that invest money from pension funds, insurance companies and wealthy individuals in a variety of agricultural products in return for fees and commissions. The bank claims not to invest its own money in such commodities.

Since deregulation allowed the creation of such funds in 2000, institutions such as Barclays have collectively channelled an astonishing $200bn (£126bn) of investment cash into agricultural commodities, according to the US Commodity Futures Trading Commission.

A New Run On The Banks? Spaniards Pulling Cash Out At Record Rates

Spanish unemployment climbed to 24.4 percent of the workforce, the government said.

Πηγή: IBT
By OLIVER TREE
August 18 2012

Spanish consumers are pulling their cash out of banks at record levels, according to figures released on Tuesday.

Private sector deposits fell by nearly 5 percent in July to €1.509, the Telegraph reported, citing European Central Bank data, as public confidence in the banking system reached all-time lows amid a worsening economic situation.

The news comes after bond markets continued to hammer the debt-ridden euro zone nations Spain and Italy last week.

On Friday, the interest rate on a 10-year loan to the Spanish government briefly topped 6 percent -- a level that forced Greece into a default earlier this year, despite massive financial support from international sources -- before settling back to 5.96 percent.

"The pick-up in yields is a clear negative headline for Spain," Jo Tomkins, an analyst at 4Cast, a consulting firm, told the New YorkTimes. "The country is facing a double-whammy of low growth and tough austerity, and [there are] doubts that it will be able to hit already optimistic deficit targets."

The surge in bond yields was followed by a two-notch credit downgrade by Standard & Poor's, which slashed the country's rating to BBB + on worries about the government's exposure to the nation's ailing banks. The current reduced rating is still considered to be investment grade.

The yield on Spain's two-year notes surged to the highest level in 18 years, Bloomberg News said.

Meanwhile, Spanish unemployment climbed to 24.4 percent of the workforce, the government said.

Italy's cost of borrowing was close behind its western neighbor: The yield on a 10-year note rose Friday to 5.84 percent from 5.24 percent.

"These ... results certainly came at a price which, in turn, leaves a question mark over how long Italy will be able to finance itself at levels that can be deemed sustainable," Richard McGuire, senior fixed income strategist at Rabobank, told the Wall Street Journal.

Iceland Was Right, We Were Wrong: The IMF

Πηγή: The Street
By Jeff Nielson
August 15 2012

VANCOUVER (Silver Gold Bull) -- For approximately three years, our governments, the banking cabal, and the Corporate Media have assured us that they knew the appropriate approach for fixing the economies that they had previously crippled with their own mismanagement. We were told that the key was to stomp on the Little People with "austerity" in order to continue making full interest payments to the Bond Parasites -- at any/all costs.

Following three years of this continuous, uninterrupted failure, Greece has already defaulted on 75% of its debts, and its economy is totally destroyed. The UK, Spain and Italy are all plummeting downward in suicide-spirals, where the more austerity these sadistic governments inflict upon their own people theworse their debt/deficit problems get. Ireland and Portugal are nearly in the same position.

Now in what may be the greatest economic "mea culpa" in history, we have the media admitting that this government/banking/propaganda-machine troika has been wrong all along. They have been forced to acknowledge that Iceland's approach to economic triage was the correct approach right from the beginning.

What was Iceland's approach? To do the exact opposite of everything the bankers running our own economies told us to do. The bankers (naturally) told us that we needed to bail out the criminal Big Banks, at taxpayer expense (they were Too Big To Fail). Iceland gave the banksters nothing.

The bankers told us that no amount of suffering (for the Little People) was too great in order to make sure that the Bond Parasites got paid at 100 cents on the dollar. Iceland told the Bond Parasites they would get what was left over, after the people had been taken care of (by their own government).

The bankers told us that our governments could no longer afford the same education, health care and pension systems which our parents had taken for granted. Iceland told the bankers that what the country could no longer afford was to continue to be blood-sucked by the worst financial criminals in the history of our species. Now, after three-plus years of this absolute dichotomy in economic policymaking, a clear picture has emerged (despite the best efforts of the propaganda machine to hide the truth).

In typical fashion, the moment that the Corporate Media is forced to admit that it has been serially misinforming us for the past several years; the Revisionists are immediately deployed to rewrite history, as shown in this Bloomberg Businessweek excerpt:
...the island's approach to its rescue led to a "surprisingly" strong recovery, the International Monetary Fund's mission chief to the country said.

In fact, from the moment the Crash of '08 was orchestrated and our morally bankrupt governments began executing the plans of the bankers, I have written that the only rational strategy was to put People before Parasites. While I wouldn't expect national policymakers to take their cues from my writing, when I wrote out my economic prescriptions for our economies I didn't base my views on compassion, or simply "doing the right thing."

Rather, I have consistently argued that it was a matter of simple arithmetic and the most-elementary principles of economics that "the Iceland approach" was the only strategy which could possibly succeed. When Plutarch wrote 2,000 years ago "an imbalance between rich and poor is the oldest and most fatal ailment of all Republics," he was not parroting socialist dogma (1,500 years before the birth of Socialism).

Plutarch was simply expressing the First Principle of economics; something on which all of the modern capitalist economists who followed in his footsteps have based their own theories. When modern economists produce their own jargon, such as the Marginal Propensity to Consume; it is squarely based on the wisdom of Plutarch: that an economy will always be healthier with its wealth in the hands of the poor and the Middle Class instead of being hoarded by rich misers (and gamblers).

So when the Bloomberg Revisionists attempt to convince us that Iceland's strong (and real) economic recovery was a "surprise"; this could only be true if none of our governments, noneof the bankers and none of the media's precious "experts" understood the most-elementary principles of arithmetic and economics. Is this the message the media wants to convey?

What is even more disingenuous here is the congratulatory tone in this exercise in Revisionism, since nothing could be further from the truth. As I detailed in a four-part series one year ago, the campaign of "economic rape" perpetrated against the governments of Europe over the past two and half years (in particular) has been expressly designed to take away "the Iceland option" for Europe's other governments.

One of the reasons for Iceland being able to escape the choke-hold of the Western banking cabal is that its economy (and its people) still retained enough residual prosperity to tough it out -- as the banking cabal tried to strangle Iceland's economy as retribution for rejecting their Debt Slavery.

Thus, austerity has been nothing less than a deliberate campaign to destroy these European economies so that the Slaves would be too economically weak to be able to sever their own choke-holds. Mission accomplished!

One can only assume that neither the Corporate Media nor their Banker Masters would have allowed this clear acknowledgment that Iceland was right and we were wrong to appear within its own pages, unless it felt secure in the knowledge that all the remaining Debt Slaves had been crippled beyond their capacity to ever escape this economic oppression.

Indeed, for evidence of this we need only look to Greece: the one other European nation where there had been "rumblings" (i.e. riots) aimed at toppling the Traitor Government that served the banking cabal. After two elections, the combination of fear and propaganda bullied the long-suffering Greek people into choosing another Traitor Government -- which had expressly pledged itself to reinforcing the bonds of economic slavery. When the Slaves vote for slavery, the Slave Masters can afford to gloat.

Here, the purpose of this Bloomberg propaganda was not to praise Iceland's government (when both the bankers and Corporate Media despise Iceland with all of their considerable malice). Rather, the goal of this disinformation was to manufacture a new Big Lie.

Instead of the Truth: that from Day 1 Iceland's approach was the only possible strategy which could have succeeded, while our own governments chose a strategy intended to fail; we get the Big Lie. Our Traitor Governments were acting honestly and honourably; and Iceland's success and our failure was yet another "surprise which no one could have predicted."

We saw precisely the same Revisionism following the Crash of '08 itself, where the mainstream media trotted out all their expert-shills to tell us they had been "surprised" by this economic event; while those within the precious metals sector had been predicting precisely such a cataclysm, in ever more-assertive terms, for several years.

The real message here for readers is that when an economic strategy of People before Parasites succeeds that there is nothing the least-bit "surprising" about this. As with all the remainder of the world around us, promoting the health of Parasites is only good for the Parasites themselves.

Spiral of banks warns of financial meltdown

Πηγή: New Scientist
By Andy Coghlan
August 2 2012

Call it the financial meltdown forecaster. The team of economists who last year demonstrated that a small number of companies wield disproportional power over the global economy has now produced a simple visual tool that can monitor financial stability in real-time.

Like a weather forecast, DebtRank could monitor global financial activity for telltale signs of impending disaster. Its designers say it could anticipate and so help prevent global economic crises like the events of 2008, from which the world is still reeling.

Importantly, it's not just size that matters when it comes to how much risk a troubled bank poses to the financial system. Even a relatively small loss at a firm intimately connected to many other banks could cause a ripple effect that threatens the whole system.
High stakes

To test DebtRank, Stefano Battiston of the Swiss Federal Institute in Zurich used previously confidential data on the 2008 crisis gathered by the US Federal Reserve. The analysis identifies a number of firms that were particularly precarious: had just one of those defaulted on its obligations, it could have resulted in the depletion of more than 70 per cent of the wealth in the entire network. During the crisis, coordinated – and very expensive – intervention prevented such an outcome.

Regulators like Andy Haldane at the Bank of England have called for tools that would provide regulators with a clearer understanding of the state of the global financial system in real time.

DebtRank is an answer to such calls. Battiston says that armed with tools like this, regulators could theoretically spot potential problems as they occur and intervene before the entire system is at risk of collapses. They could also model the impacts of interventions ahead of time, allowing them to experiment until an optimal solution is decided upon.
1000 days

The previously confidential data included detailed daily balance sheets for 407 institutions that between them received bailout funds worth $1.2 trillion from the Federal Reserve. The data covers 1000 days from before, during and after the peak of the crisis, from August 2007 to June 2010.

Battiston and his colleagues focused on the 22 banks that collectively received three-quarters of that bailout money, and which turned out to be intimately linked to one another in a closely-knit network. Almost all were members of the "super-entity" found at the heart of the global economy by last year's study.

From the data, Battiston and his colleagues calculated a daily DebtRank value, ranging from 0 to 1, for each bank. The value reflects the likelihood that a bank will default, and how much this would damage the creditworthiness of other banks and companies in the network.
Spiral to collapse

A DebtRank value of 0 means that if a bank defaults, it poses no risk whatsoever to other members of the network. Theoretically, if a bank with a value of 1 were to fail, it would obliterate the economic value of the entire network.

Battiston represents DebtRank values pictorially within a spiral. Companies ranked 0 sit on the outside of the spiral, and a company ranked 1 would occupy dead centre. As a company's DebtRank value rises, it moves steadily towards the centre of the spiral, posing ever greater threats to the entire system as it does so.

Representations of the 22 companies before and at the peak of the crisis show visually how valuable the tool could be to regulators. In August 2007, well before the crisis, all 22 banks sit around the edge of the spiral (see image 1), with DebtRank values averaging just 0.08. By the crisis, the average had risen to 0.52, sending banks plunging towards the centre (see image 2).

Image 1

In August 2007, well before the financial crisis, all 22 banks sat safely around the edge of the spiral

Image 2

As the 2008 crisis arrived, many of the banks had plunged towards the centre of the spiral, where greater risk lies

At that point, several of the individual institutions could have wiped out more than 70 per cent of the total value of the network on their own, had they failed.

The model also demonstrated how shocks to the system can be rapidly propagated between the closely connected banks. If all 22 simultaneously suffered a 10 per cent loss in the value of their assets, as was seen in the sub-prime mortgage crisis, the losses to the entire network could have caused a the system to crash.
Confidentiality hurdle

Battiston says that his team is collaborating with the European Central Bank and a selection of national banks in Europe to experiment with DebtRank and other systems designed to avoid financial meltdown. To create DebtRank registers, regulators would need to receive daily or weekly updates of all transactions, debt profiles, detailed balance sheets and other assets.

The problem, he says, is that most global financial transactions are confidential, and any regulation that does occur is only at national level. "The police are local, but the transactions international," he says. "There's no authority keeping track at international level," he says.

If such a system was installed globally, the data the regulator receives could be kept confidential, and highly-connected banks at risk of defaulting could be spotted early and warned privately to fix the situation, to solve the problem without panicking the markets.

The study is a good proof of principle and its methodology looks promising, says Simone Giansante at the University of Bath in the UK. Though he cautions that Battiston's study has only looked at two types of transactions, and says a more comprehensive tool would be better – assuming the researchers could obtain the relevant data.

Time to Nationalise the Big Banks

Πηγή: SEJ
By GEORGE IRVIN
July 19 2012

In the past 30 years a great number of utilities in the developed world have been privatised. That trend seems likely to be reversed. Why? Because the ideology which drove the project—in particular, the notion that the private sector is always more efficient than the public sector—is collapsing. Effective public ownership is being reconsidered not just for the banking sector, but in rail transport, in water and power provision, in communications—in short, in a range of industries where large scale privatisation and deregulation over the past decades has been tried … and found wanting.

Banking provides the most dramatic example. Deregulation and demutualisation, particularly in the USA and Britain, led to a near-meltdown of the financial system in 2008 and, in consequence, a major and on-going recession—-in Britain, one longer than that of the 1930s. Willem Buiter, chief economist at Citi, argued in favour of taking the biggest banks into public ownership in 2009. Although there was a period of recovery after 2009, recession seems to be returning—and with it ominous signs of another financial and economic crisis, a ‘perfect storm’ potentially far more serious than that of four years ago.

After the banks were bailed out in in 2008, there was much talk of regulation. Today, new revelations and scandals (eg, Barclays’ fixing of LIBOR, HSBC’s money laundering) have again raised the issue of regulation and public ownership. While it is true that in the UK, the public owns two of the largest banks (RBS and Lloyds) and that Labour wants to set up a British Investment Bank, in reality almost nothing has been done to take effective control of the largest banks.

The simple truth is that the financial sector is too big and powerful to regulate effectively. In the US the sector’s ‘lobbying power’—the problem of regulatory capture —is now acknowledged on both the political left and right. And even if the biggest banks are broken up, as Professor Gar Alpervitz of the University of Maryland argues, it is likely that they will come back in even more concentrated form.

Britain is less transparent than the US, but few can deny the baleful influence of the City of London in emasculating the 2011 Vickers Report. Instead of calling for the physical separation of commercial and investment banking, Vickers called for ‘ring-fencing’—and then, only by 2019.

Typically, the argument against publicly-run banks is that they are inefficient; ie, that ‘civil servants cannot run banks’. But the key issue is not one of public efficiency—there are many well-run publicly owned or mutualised banks in the world. The issue is of private efficiency.

Can we afford not to take the largest players into public ownership, particularly if there is another financial crisis? The big private banks have cost the taxpayer trillions and brought about economic depression, resulting in a massive loss in output and jobs throughout the OECD. By speculating against sovereign bonds, private banks are a major player in the current Eurozone crisis. One might add, too, that these same banks have been a major driver of growing inequality: the culture of bankers’ bonuses has worsened since 2008!

Note that it is not being argued here that all banks should be publicly owned. But if banking scandals multiply, if the advanced economies continue to stagnate, if jobs are scarce and unemployment grows—and particularly, if the taxpayer is asked once more to bailout the banks in the wake of another financial crash—then it is a near certainty that within a decade, the largest banks will become public utilities.

George Irvin is a Research Professor at the University of London (SOAS) and author of 'Super Rich: the Growth of Inequality in Britain and the United States', Cambridge, Polity Press, 2008.

Special Report: Clandestine loans were used to fortify Greek bank

A woman walks out of a Piraeus bank branch in central Athens in this May 30, 2012

Πηγή: Reuters
By Stephen Grey and Nikolas Leontopoulos
July 16 2012

The chairman of one of Greece's largest banks and his family took out loans totaling more than 100 million euros to finance an undisclosed stake in the bank, according to audit documents seen by Reuters.

Offshore companies owned by Michael Sallas and his two children paid for shares in the Piraeus Bank, the country's fourth-biggest, by borrowing money from a rival bank.

Together the shares make the Sallas family the largest shareholder in Piraeus, with a combined stake of over 6 percent. The purchase of these shares has not been declared to the Athens stock exchange by Piraeus.

The loans to Sallas, who was executive chairman of Piraeus Bank until last month and remains its non-executive chairman, raise new questions about the stability and supervision of the Greek financial system at a time when European taxpayers and the International Monetary Fund are bailing out its banks with more than 30 billion euros.

The IMF had no comment on the issue, and a spokesman for the Bank of Greece declined to comment on Sallas's holdings in Piraeus, citing banking confidentiality guidelines. "Our supervision department cannot comment on specific prudential data available or actions taken with regard to any specific bank as such information is confidential," he said.

According to audit reports seen by Reuters, most of the money borrowed by companies linked to Sallas was used to buy shares in a Piraeus Bank rights issue in January 2011. The issue was designed to strengthen Piraeus's capital base.

The disclosure highlights concerns that Greek banks have been borrowing money from each other and using it to meet recapitalization requirements, but not making that clear.

"This (the Greek financial system) is a closed circuit, operating as a system of power with no transparency and effective supervision," said Louka Katseli, professor of economics at the University of Athens and former Greek minister of economy. "Through triangle deals between banks, businessmen and other banks, capitalization requirements were fulfilled without new money injected."

Piraeus Bank and Sallas declined to answer specific questions for this story, but offered an interview later this month. On Sunday Sallas issued a statement to the Greek media attacking Reuters and accusing the news agency of "slandering" and "undermining" the bank.

"It is not the first time that I or Piraeus Bank have been the target of attacks," the statement said. "What should be of concern to all of us in the present situation is the safety and the further strengthening of our banking system."

Reuters Global Editor for Ethics and Standards Alix M. Freedman said: "Our coverage of Piraeus and of the Greek banking system has been accurate and fair to every person and institution involved."

In April, a Reuters investigation found that Piraeus had failed to tell shareholders it had rented expensive properties from a network of private companies run by the Sallas family. The bank has sued Reuters for defamation over the story, claiming 50 million euros in damages.

Reuters has also reported allegations of mismanagement at the Proton Bank and at a Cyprus-based bank formerly known as the Marfin Popular Bank that operates in Greece. Proton's former president and major shareholder, Lavrentis Lavrentiadis, has vigorously denied allegations that he used the bank to loan himself and associates hundreds of millions of euros.

Andreas Vgenopoulos, former chairman of Marfin Popular Bank, now renamed Cyprus Popular Bank, has denied conflicts of interest alleged by a Greek parliamentary inquiry and Cypriot lawmakers.

It was Marfin's largest then Greek subsidiary, the Marfin-Egnatia Bank (MEB), that issued the loans to the Sallas family. According to two audit reports on Marfin, the loans were ranked among its riskiest exposures, judged both by their shortfall in collateral, which is mainly Piraeus shares, and risk of future losses to the bank.

The two audit reports, from January and May this year, were shown to Reuters by separate and unconnected sources. They were authenticated in interviews with banking sources and officials in Greece and Cyprus.

Internal Marfin auditors said executives at MEB had "failed to act in the best interests of the bank" by granting successive loans to Sallas to buy his own bank shares. By 2011 his investment in those shares, the auditors found, had "dire prospects" and had been made through special purpose vehicles and with no personal guarantees.

The auditors wrote: "Worth noting is that loan approval took place at a time when it was all but clear that the outlook for the Greek banking sector and by extension for Piraeus stock was deeply negative." The loans were issued "when our Bank was already in a precarious liquidity situation".

SHARE PURCHASES

According to the records, Sallas first obtained a loan agreement from MEB in May 2009. A facility for up to 150 million euros was signed off by the Marfin group's Vgenopoulos, then executive vice-chairman. A spokesman for Vgenopoulos and Efthymios Bouloutas, the bank's chief executive at the time, declined to comment on the loans due to "banking secrecy legal obligations."

By January last year, according to the first audit report, MEB loans to Sallas companies amounted to 48 million euros. But that month, "another 65 million was used" to purchase shares in Piraeus's 800-million-euro rights issue.

The Sallas family bought their shares via three separate Cyprus-based companies, according to both audit reports. The purchase brought the family's total loans to 113 million euros, secured on collateral estimated to be worth less than 30 million euros, based on Piraeus's recent share price.

The three Cyprus-based companies are Shent Enterprises, which is owned by Sallas and which has 45 million euros in outstanding loans to MEB; Benidver Enterprises, which has 22 million in loans; and KAEO Enterprises, which has 46 million in loans.

Records at Cyprus' corporate registry show that both Benidver and KAEO were owned by Michael Sallas personally until a month before Piraeus's rights issue.

Ownership was switched to two Greek companies linked to the family and in turn owned by a single Cyprus company called Avecmac, whose shareholders are anonymous. But MEB audit documents from 2012 seen by Reuters record Benidver as owned by Sallas' daughter Myrto and KAEO as owned by Sallas' son George.

Avecmac, contacted through its representative in Cyprus, did not respond to requests for comment. Myrto Sallas declined to comment; George Sallas could not be reached.

FAMILY HOLDINGS

Exactly how many shares Sallas and his family bought in Piraeus last January, and in whose name they were registered, is not clear.

Some indication comes from the number of Piraeus shares pledged by the Sallas companies as collateral for the loans. Those rose by 62 million after the rights issue, bringing the total number of Piraeus shares pledged as collateral to more than 66 million, or around 6 percent of ordinary stock in the bank.

In filings to the stock exchange and in other declarations, Sallas has said he owns around 16 million shares in his name, as well as a total of around 16 million purchased through Shent Enterprises. He has declared no share purchases by his children.

Under Greek and European law, any holding in a public company of more than 5 per cent should be announced publicly. Greek law also requires all company executives "and persons closely associated with them" to make all share transactions public.

Marfin's auditors, according to their report, regard loans to Sallas and his family as "connected."

But Kostas Botopoulos, chairman of Greece's Capital Market Commission, which regulates the country's public companies, said the decision of who to define as a "person closely associated" was "considered on an ad hoc basis." There is no specific ruling on whether a spouse or children would fall in that category, he said.

Piraeus Bank released a statement saying the bank would not answer the detailed questions sent to Sallas and the bank due to "civil and criminal cases" between Piraeus and Reuters, and between the bank and a former Piraeus employee "charged with serious crimes." Piraeus has previously said the former employee had defamed the bank.

"The Bank will refute the allegations in court," the statement said. "To do otherwise would clearly be in contempt of the proceedings. In the interest of transparency, to defend its reputation and reassure its shareholders, the Bank has provided the Bank of Greece with all the relevant information."

CAPITAL BASE

The loans to investors in the Piraeus rights issue highlight a bigger concern in the Greek banking sector. Piraeus issued more shares last year to strengthen its capital base, enabling it to score higher in European bank stress tests.

The successful issue, Sallas said at the time, showed "a sign of confidence in Piraeus Bank, the Greek banking system and of course the prospects of the Greek economy."

But Sallas did not make public the loans he and other shareholders had taken out to help make the rights issue a success.

In all, according to loans disclosed so far, nearly one-fifth of the new capital in Piraeus was raised with financing from other Greek banks - including another 20 million euros or so loaned by MEB to investors, and 70 million euros loaned by the Proton Bank. The Proton loans went through offshore companies in tax havens such as the Cayman Islands.

Proton has since been nationalized after Greece's money-laundering authority alleged fraud and embezzlement in cases unrelated to Piraeus or MEB.

According to several European banking and accounting experts, if banks loan money to finance major stakes in other banks, then the industry's regulator, in this case the Bank of Greece, should deduct the same amount from the capital the lending bank claims to hold.

Dr Peter Hahn, a fellow at London's Cass Business School and an adviser to the UK Financial Services Authority, said that a loan scheme whose only means of repayment was shares in another bank should, under international rules, be treated as if the lending bank was directly purchasing shares in the other bank. "The equity in the lending bank would otherwise be supporting risk of loss in both banks," he said.

Hans-Peter Burghof, a professor of banking and finance at the University of Hohenheim, Germany, said that billions of euros had been given to the Greek banking system without adequate supervision of the sector. "It's our money and it has been given without controls. It's a disaster," he said.

If banks lent to finance each other's shares, he said, then "this way you can produce as much equity as you like and make banks as big as you like. It is not real equity." He likened it to "a kind of Ponzi scheme."

Burghof said that, whether deemed to be covered by regulations or not, if bank equity was raised in this way, the banks and companies involved should be treated as a consolidated whole. "If the regulator finds out (about loans from one bank to finance share purchases in another), he should discount this equity," he said.

The European Banking Authority, which is meant to safeguard the stability of the financial system and transparency of markets, generally agreed with that analysis, though a spokeswoman said there may be exceptions in the case, say, of a "financial assistance operation".

There is no indication in their financial statements that either Proton or Marfin made deductions in their capital levels after their loans for Piraeus shares.

In a statement the Bank of Greece said it does not ordinarily require capital deductions from banks that lend money for the purchase of shares in other unconnected banks.

"European Union law does not prohibit granting loans to an entity (person or organization) in order to participate in a share capital increase of another credit institution," the bank said. Such a deduction from regulatory capital would only take place if a bank granted loans to buy its own shares, it said.

It added that the disclosure of major stakes (over 5%) in a public company was "indeed a requirement on the stakeholder". But this was policed by the Capital Market Commission, not the Bank of Greece.

The CMC said that shareholders, in calculating whether they hold 5% or more, should aggregate holdings if they have an agreement to act together.

US Government asks judge to approve landmark settlement over banks’ foreclosure practices

Flashback: Last year, some mortgage lenders and government officials took action after discovering that many mortgage documents were mishandled.

Πηγή: Washington Post
By Brady Dennis
March 12 2012

Government officials on Monday asked a federal judge to approve a landmark settlement with some of the nation’s largest banks over flawed and fraudulent foreclosure practices, more than a month after they announced the $26 billion deal with fanfare at the Justice Department.

The 99-page complaint filed in a D.C. federal court details the “pattern of unfair and deceptive practices” perpetrated by banks in the wake of the housing bust. Among them: filing false and misleading court affidavits, charging excessive and improper fees to borrowers, keeping abysmal records, frequently losing paperwork, breaking promises to homeowners trying to modify their loans, employing staffers with little or no training and improperly foreclosing on active-duty military members.

Officials filed separate and lengthy settlement terms with the five banks involved — Bank of America, JPMorgan Chase, Wells Fargo, Ally Financial and Citigroup — that document the penalties each must pay, how that money will be distributed, how new mortgage servicing standards will be enforced and the extent of the legal releases the firms will receive as part of the deal.

Though the dollar amounts differ, the agreements with each bank are largely the same. One exception is a side deal in which Bank of America agreed to reduce loan balances for as many as 200,000 borrowers who owe more than their homes are worth. The average amount of those so-called principal reductions is expected to be more than $100,000, and it will reduce the amount of penalties the firm owes by about $850 million.

Monday’s filing came after nearly 17 months of negotiations between state and federal officials and the nation’s largest banks. Those talks began in late 2010 after widespread outrage over news that banks were using forged and shoddy paperwork to churn through massive numbers of foreclosures, a practice that became known as “robo-signing.” Forty-nine states ultimately signed onto the deal; Oklahoma crafted a separate settlement.

The settlement is intended to help troubled homeowners by requiring the banks to reduce the amount some borrowers owe on their mortgages, lower interest rates for others and pay restitution to homeowners who suffered mortgage-related abuses. It also will force lenders to overhaul their mortgage-servicing practices, including revamping how they interact with struggling mortgage holders and barring them from trying to foreclose on borrowers while simultaneously negotiating mortgage modifications.

Under the terms of the deal, banks would have three years to complete principal writedowns, refinancings and other relief. The settlement includes incentives for actions taken within the first 12 months.

The deal also includes about $17 billion that would fund a range of foreclosure-prevention measures, the majority of which would go toward lowering the loan balance for borrowers who owe more than their homes are worth. Other provisions would provide $3 billion for lowering interest rates for homeowners who are current on their loans. In addition, as many as 750,000 borrowers who lost their homes to foreclosure since 2008 would be eligible for payouts of about $2,000 each.

About $2.5 billion would go directly to the states. Those funds are intended to pay for housing and foreclosure-prevention efforts such as counseling, mediation and legal assistance. But officials in a couple states, notably Wisconsin and Missouri, have said they plan divert some of their funds to help plug budget shortfalls.

All five banks also agreed to provide broad relief to military servicemembers who were harmed by mortgage-related misdeeds. For example, in cases where federal officials determine that a bank improperly foreclosed on a servicemember, the firm will be required to pay that homeowner $116,785 or more, plus any lost equity in the property.

Monday’s filing also details the powers former North Carolina banking supervisor Joseph Smith will have in his role as a full-time overseer and enforcer of the agreement. The banks must submit to quarterly reviews and will face penalties if they fall short of the standards established by the settlement.

The deal gives banks a broad release from legal liability over robo-signing practices and a swath of other transgressions, such as their lax underwriting practices and their failure to properly modify loans for homeowners who qualified for adjustments.

It leaves open the door for other types of future litigation, including fair-housing and fair-lending violations, as well as civil rights claims. It doesn’t bar individuals from joining class-action lawsuits or prevent private investors from seeking damages, and it preserves the possibility for future lawsuits over related the way in which banks bundled and sold mortgages, a process called securitization.

Well before Monday’s settlement filing, a common criticism of the deal has been that it is unlikely to have a broad effect on the sagging housing market, given the scope of the problems that remain. Government officials who crafted the deal acknowledge that the final sum will reach only a fraction of homeowners across the country whose homes are collectively worth $750 billion less than what is owed on their mortgages.

But they have insisted it will provide much-needed relief to certain homeowners and represents a meaningful step in halting the shoddy foreclosure practices of recent years and in nudging the housing market toward firmer footing.

In fact, banks have faced a barrage of public and private lawsuits and investigations in recent years, with more likely on the way. Groups ranging from large investors to the Federal Housing Finance Agency have filed suit against the firms, alleging a range of mortgage-related misdeed and seeking billions of dollars in damages.

Earlier this year, President Obama also announced a new effort to expand investigations into abusive lending and securitization practices, and soon after, Attorney General Eric H. Holder Jr. said the Justice Department had issued civil subpoenas to 11 financial institutions. In addition, numerous state attorneys general have launched other investigations, filed their own lawsuits and issues subpoenas of their own.

With the landmark settlement on the brink of completion, officials say they now hope that additional banks will soon sign onto similar agreements and adopt the new mortgage-servicing standards outlined in the deal.

Homeowners interested in learning more about eligibility requirements for aid or finding contact information for the banks and government agencies involved can visit www.nationalmortgagesettlement.com.