Will Alabama Join Michigan in Boycotting Chase?

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Turns out Michiganders aren’t the only ones fed up with JP Morgan Chase. JP Morgan Chase is even preying on Richard Shelby’s constituents. [h/t scribe]

The Alabama state school construction authority has declined to make a payment due to JP Morgan under a derivatives deal until a federal court rules on a state lawsuit seeking to have the contract thrown out. Alabama finance director has said he won’t make or accept any payment under the swap deal: the first contractual payment is due May 1.

[snip]

In October a lawsuit was filed in Montgomery, AL district court saying that a sale of a swaption (option on an interest-rate swap) wasn’t allowed under state law. The deal had been executed in connection with bonds sold by the Alabama Public School and College Authority.

As Zero Hedge asks, "what the hell are Alabama residents doing trading swaptions?"

How about it, Richard Shelby? Ready to close your Chase account in solidarity? Want to sign our petition? Join our Facebook group?

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46 replies
  1. sojourner says:

    I am not a Chase customer in the true sense of the word, but here in Texas our unemployment benefits are paid on a Chase debit card. I have to ask: How in the world did they get that business? I am surprised that it is not handled by a locally-owned (i.e. — within Texas) bank!!

      • solai says:

        Admittedly, I’m late to this issue,(so maybe this has been addressed) but I don’t understand why Granholm stays w/ Chase for the UIB debit card. Seems like the perfect solution to switch banks. What am I missing? An ironclad contract?

  3. MadDog says:

    Tangentially on topic, from The Hill blogsite:

    Frank set to move on derivatives

    Lawmakers are just beginning to consider details of a new systemic regulator to oversee the entire financial system, but the new authority will likely reach into the yet unregulated world of derivatives.

    The Obama administration and leading lawmakers in Congress, including Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, back a proposal to set up a systemic risk regulator to prevent large financial institutions from toppling the broader system. They also support greater restrictions on derivatives now mostly traded simply between parties rather than on a public market…

    …The systemic regulator, which Frank has said could be housed at the Federal Reserve, would also reach into the markets for, among other products, collateralized debt obligations (CDOs), mortgage backed securities (MBS) and special investment vehicles (SIVs)…

    …Treasury Secretary Timothy Geithner supports bringing some derivatives, particularly widely traded forms such as credit default swaps, under a clearinghouse. U.S. commercial banks alone hold some $200 trillion in derivatives, according to the Office of the Comptroller of the Currency. And all but 4 percent of that market is held by five banks that would likely be the focus of a new systemic regulator: JPMorgan Chase & Co., Bank of America, Citigroup, Goldman Sachs and HSBC…

    …Meanwhile, seven banks have formed a new coalition to press for regulations that do not overly burden companies and industrial firms that use credit derivatives to mitigate risk. The Coalition for Business Finance Reform includes JPMorgan, Morgan Stanley, Credit Suisse, Deutsche Bank, Citigroup, Barclays and Goldman Sachs and is working with the Securities Industry and Financial Markets Association, an industry trade association.

    (My Bold)

    As I said yesterday:

    …The nature of the beast, so to speak, is merely biding its time for the regulators and us to close our eyes again so that they may begin once again to pick our pockets and fleece us clean…

    …those same big money guys all want to get right back into that very same card game.

    A modification of that old Roman Coliseum command of “Let the games begin” echoes throughout today’s financial community: “Let the games continue!”

    Sweet Home Alabama!

    • emptywheel says:

      Yup.

      I’m wondering if we’ll ever find out how much JPMorgan has bet against Chrysler in bankruptcy. I suspect that’s the real reason why they’re intransigent on negotiating.

      And when the banks that our own govt partners with are making massive bets against American companies, that’s a really big problem.

      • phred says:

        Yep. It really troubles me that short selling is legal. It ought not to be possible to profit from pushing a company’s stock price down. The uptick rule seems beside the point. Investors should be investing in companies they expect to succeed. If a company fails, it should be due to other market forces than a vested interest by short sellers to pound them into the ground.

        • sad4america says:

          Naked short selling is not good but regular short selling with the uptick rule back in place is good. Why allow all paper money to be lost when a company hits trouble. Why not let people make money on the way down as well???

        • MarkH says:

          At least with short selling there is actual stock involved and if they want to profit or avoid losses they will have to buy it back later.

          It’s entirely different than betting on a company’s downfall.

          I think what happened (perhaps) is that America simply wasn’t producing new businesses for investors to invest in, so they started betting against them with short-selling and even moreso with naked credit default swaps.

          In short, they began rooting for America to fail.

          We sometimes ask, on these political blogs, why do the Republicans hate America. Well, here’s one reason — there’s money to be made by destroying it. It’s sick.

  4. bmaz says:

    And that is why, in addition to regulation, there needs to be public transparency. Public listing so that it is apparent who has what and why.

    • phred says:

      Ssshhhhhh… You don’t want to reveal any state or sovereign secrets there bmaz ; ) Sheesh!

    • cbl2 says:

      a personal note of thanks –

      your comments on the sovereign immunity “hokum” helped talk me down – thankee !

  5. MadDog says:

    I’m still trying to get my head around the fact that 96 fookin’ percent of all credit default swaps:

    “…is held by five banks that would likely be the focus of a new systemic regulator: JPMorgan Chase & Co., Bank of America, Citigroup, Goldman Sachs and HSBC…”

    Jiminy fookin’ crickets! Talk about vultures betting on companies to die!

    And in conjunction with what phred was saying in # 6 above, these five banks were selling America’s…even the fookin’ world’s economies, short!

    • MadDog says:

      I know, I know, the bankster business-weenies will just say they were being “prudent” and just taking out insurance against the possibility that their investments/loans would go belly-up.

      And that is the “perception” they endeavor mightily to make us believe.

      But instead, if one deconstructs what they are actually saying/doing, it reminds me of those Gerber Baby Life Insurance commercials! You know, the one where they entice parents to play some roulette with their children’s lives:

      “Place your bet that your child will die and win $50,000 dollars if they do!”

      Every time I see that commercial, the perception I have is: “Fookin’ monsterous, just fookin’ monsterous!”

      To my mind, the banksters see the the world as just one big freebie boondoggle trip to the casinos, and the chips are us.

      • phred says:

        Prudent, my foot. By taking out such, ahem, insurance, they create a financial incentive for failure. Show some commitment people, invest in a company because you expect it to succeed. Do your frickin’ due diligence to ensure it is a good long term investment. And vest yourselves in the long term health of the company to give yourselves the motivation to PAY ATTENTION to what the officers and boards are doing.

        Wall Street has become nothing more than a bunch of high roller gambling addicts. Fine. They can go to Vegas. Meanwhile, keep your filthy compulsive fingers off my 401k.

        • Hmmm says:

          They’re amoral, like sharks, making the most of the rules of the game they inhabit, including inter alia using their economic power to change those rules to their still further advantage. Rage is kind of beside the point, except for the extra energy it brings, since they’ll always be amoral and we’ll never change that. We just need to use this energy to fix the damn rules so they can’t ever hurt anybody else like this again as they go on and on playing their amoral games. Put a sandbox around ‘em, take the sharpest instruments away, make ‘em check their weapons at the door.

    • Hmmm says:

      So let’s just frickin’ temporary-receivership all five of ‘em and tear up the CDS contracts before we resell the shares out again. And in the meantime establish a mandatory public CDS exchange so we never have any more secret CDSs.

      Also: Clawbacks. Massive clawbacks.

        • Hmmm says:

          Well, the interesting thing is that there’s a council with the power to adjudicate CDS disputes. Who knew? That means there was a mechanism that could have been used to make (to pick a prominent recent example) the AIG counterparties take less than 100%, had AIG decided to contest it. So, since the USG controls AIG, why didn’t we frickin’ contest it?

      • MadDog says:

        If there were a national referedum on the issue, it would receive almost unanimous support.

        Alas, in a representative government such as ours, the peasants only get a say on Election day. The rest of the time the bribees our representatives represent the bribers moneypot.

        “Money talks…and we walk!”

        • Hmmm says:

          I was rather hoping we’d finally managed to move past the ol’ “accountability moment” model.

  6. MadDog says:

    One thing that has bothered me (among a zillion other things *g*) about this whole financial universe imploding, is where were the fookin’ accountancy firms who were responsible for audits required by the annual 10K reports?

    Unlike with Enron, where Arthur Andersen was literally extinguished as a corporate entity, it seems many of the Big Eight Five Four remaining accountancy firms have mostly been flying underneath the radar on the financial universe implosion.

    And yet, for the very same reasons as with Enron, these very same accountancy firms attested to the financial well-being, credit-worthiness, and legality of all of these bankster machinations which have caused the financial universe implosion.

    The only squeek heard thusfar on this issue seems to be with AIG’s accountancy firm PricewaterhouseCoopers.

    Otherwise, the silence is deafening.

    • Hmmm says:

      And who was paying those accountants? Here, let’s role-play. (I hope you’ve seen the first Pirates of the Carribean movie.)

      Accountant: “Hold up there, you! It’s a shilling to tie up your boat in the dock. And I shall need to know your name.”

      Client: “What do you say to three shillings, and we forget the name?”

      Accountant: “…Welcome to Port Royal, Mr. Smith.”

      I think that about sums it up…

    • MarkH says:

      That’s a great point (about accounting firms not making a sound). I suspect the reason they’re the big ones is they’ve learned to play the game: stay quiet, take the money, give firms good reports.

      Same as the asset rating agencies!

  7. emptywheel says:

    The overhaul, dubbed the “Big Bang” because it’s considered a cataclysmic shift for the market, aims to bring a fresh set of standards to existing and new trades.

    No ,it’s called Big Bang bc these fuckers think they’re god.

    • MadDog says:

      Or MOTU (Masters Of The Universe).

      Shorter MOTU: “We created the Big Bankg. We created the Universe. We are doGs! Bow to your masters! Bow! Wow!”

      • readerOfTeaLeaves says:

        Yes, but Holy Shit!! did you read that Bloomberg article EW links to??
        Here’s what made me do a double-take:

        Alabama in October filed a lawsuit in U.S. District Court in Montgomery, Alabama, saying that the sale of a so-called swaption, an option on an interest-rate swap, wasn’t allowed under state law. The deal was executed in connection with bonds sold by the Alabama Public School and College Authority.

        JPMorgan spokesman Brian Marchiony declined to comment.

        Derivative deals that local governments entered into with Wall Street banks backfired last year, saddling cities, states and school districts with skyrocketing bond payments and large fees to break the contracts. The contracts were purchased by governments seeking to save money on their financing costs.[italics mine]

        Anyone know whether that was before, or after, Spitzer was ‘outed’ for soliciting the prostitute?
        So if you want to hold America by the balls, do ‘derivative’ deals with every city, state, school district, water district, and road fund.

        Which really makes all the yammering by Inhofe and the rest about ‘national security’ starkly, almost pathetically, beside the point. Time for me to replay some video of DNI Blair stating that ‘financial instability is a national security issue’. Hell, yes it is!
        Why in the name of heaven that fool Inhofe can’t connect those dots escapes me — maybe when he was head of Quaker Life he didn’t realize that ‘insurance’ can be used for fraudulent purposes, but if he didn’t figure that out then WTF was he doing heading up an insurance company?
        (Jeebuz!)

        These megaFinanceBankSecuritizer outfits send that money through the Cayman’s and who only knows where else.

        Sorry, but until someone can prove me wrong, I’ve got a sick tightening in the pit of my stomach that some drug cartel in Tijuana is getting rich off ’swaption’ interest rates.

        • klynn says:

          Have you gone to this site?

          Your comment:

          Sorry, but until someone can prove me wrong, I’ve got a sick tightening in the pit of my stomach that some drug cartel in Tijuana is getting rich off ’swaption’ interest rates.

          caught my attention.

    • phred says:

      Who can blame them when Timmy et al., keep bringing baskets and platters and chests laden with treasures and sumptuous treats to lay at the foot of the altar in the banksters shrine? Meanwhile telling the rest of us to avert our gaze from the dazzling brilliance of the banking gods…

      Revolting. Well, at least I like to consider it ; )

  8. pdaly says:

    Love the video and the sharp scissors.

    Thinking this website should sell similar pairs for the Chase boycott.

    • emptywheel says:

      LOL

      Julielyn, who is working on the Cut to the Chase campaign (Not sure it’s called that, but I’m now calling it that) cut her own Chase card up on YouTube today. She totally flubbed it. And she gut herself.

      So really, those sharp scissors are critical to the task.

      (At which point it is only fair for me to admit that mr. ew and I broke the shredder when we filmed mine. We WERE going to shred the damn thing, but it never looked very good.)

  9. MadDog says:

    And totally OT, anyone want to guess which Bush/Cheney Administration case AG Holder will reverse the government’s State Secrets privilege invocation as he told Katie “But I’m a Cheerleader!” Couric in her interview:

    Couric: Having said that, do you believe the state secrets doctrine was abused by the Bush administration?

    Holder: Well, I’m in the process of looking – that is being reviewed now. And so, I’ll see what the result of that – review is. And as I said, try to share the results of that review with the American people.

    Couric: What’s your gut though?

    Holder: Well, I don’t know. On the basis of the two, three cases that we’ve had to review so far – I think that the invocation of the doctrine was correct. We – we reversed – are in the process of looking at one case. But I think we’re likely to reverse it.

  10. Lindy says:

    I rather doubt Senator Shelby will join Michigan in solidarity, EW, seeing as how they were one of his biggest campaign donor in the 2008 cycle.

  13. klynn says:

    I was just noticing the Chase ad promotional:

    “Chase. We’ll pick up the tab.”

    The country responds, “Yeah? Really!?!Great!Let’s do it!”

    All those cards just got cut up…some promo.

  14. cbl2 says:

    As Zero Hedge asks, “what the hell are Alabama residents doing trading swaptions?”

    NYT yesterday – they weren’t just ‘doing’ trading swaptions, they were probably “tutored” in the fine art by the snake oil salesmen

    atrios has been warning about this shite for some now

  15. RobNYNY1957 says:

    As Zero Hedge asks, “what the hell are Alabama residents doing trading swaptions?”

    Probably hedging interest rate risks on bonds they issue. What’s wrong with that?

    • Blub says:

      moral of the story: don’t issue fancy-featured bonds with multi-modal puts, built in swaptions or whatever esoteric form of windowdressing i-bankers like to con clients into putting on such things.

  16. punaise says:

    Oh Alabama
    The devil fools
    with the best laid plan.
    Swing low Alabama
    You got spare change
    You got to feel strange
    And now the moment
    is all that it meant.

    Alabama, you got
    the weight on your shoulders
    That’s breaking your back.
    Your Cadillac
    has got a wheel in the ditch
    And a wheel on the track

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