Ponzi Nation

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Atrios and others have been having some perverse fun tracking the number and frequency of banks getting eated. But there’s another disturbing trend passing largely unnoticed (save for its more spectacular examples): the number of Ponzi schemes the SEC busts up.

Counting just the schemes the SEC issues a press release on and labels a Ponzi scheme (and using the SEC’s most conservative estimate for the size of the scheme), there have been 19 Ponzi schemes in the last year, amounting to $17,848 million dollars in fraud (Bernie Madoff counts for the bulk of that–$17 billion–and I did not include Stanford’s scheme, since SEC has not used the word "Ponzi" in their public releases on it yet). 

Date   Name Amount (000s)
4/13/09   Maximum Return Investments 23,000
4/9/09   Richard Copeland 35,000
4/8/09   Shawn Merriman 17,000
4/6/09   Overseas China Fund 50,000
4/1/09   Gemini Fund 50,000
3/26/09   Millenium Bank 68,000
3/11/09   Equity Investment Management and Trading 40,000
2/19/09   Billion Coupons 4,400
1/15/09   CRE Capital Corporation 25,000
1/8/09   Joseph Forte 50,000
12/30/08   Creative Capital Consortium 23,000
12/11/08   Madoff 17,000,000
11/12/08   Biltmore Financial 25,000
10/30/08   Bottom Line and Summit 30,000
10/6/08   Norman Hsu 60,000
9/16/08   Cornerstone Capital Management 15,000
9/15/08   PIPE Investments 52,700
8/11/08   Wextrust 255,000
5/2/08   Safevest 25,000
      17,848,100

And in an April 1 press release, the SEC said it had shut down 75 Ponzi schemes in the last two years (it only released a press release for one more Ponzi scheme in that time). In other words, the SEC has actually been shutting down more Ponzi schemes than the number of banks the FDIC eated. 

Now, a lot of those schemes target a particular potentially vulnerable or trusting class of people. (One Ponzi scheme targeted the deaf, for example, and others targeted particular ethnic groups.) 

Even accounting for the ways these schemers have instilled trust among their targets, this is still a big number of Ponzi schemes. Doesn’t anyone look for the tangible product at the end of a money-making scheme anymore?

Dana “Pig Missile” Perino to Do Crisis Communications for AIG?

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Hiring someone who doesn’t know the difference between the Bay of Pigs and the Cuban Missile Crisis to do crisis communications for big evil corporations?

I’ve got a feeling this may end badly. But we might get some laughs along the way.

Elizabeth Warren’s Not Allowed to Know the Super Stress Test Secrets, Either

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I noted the other day that Timmeh (or, according to other coverage of this, Helicopter Ben) told the banks to keep their stress test results to themselves.

Well, apparently, stockholder and taxpayers are not the only ones left out of the secret. So is Congressional Oversight Board Chair Elizabeth Warren. In fact, she’s not even allowed to know the formulas they used to measuring the banks. (h/t My Philosophy at DKos)

Q: Do you have a clear sense of what the overall TARP plan at this point is supposed to do? Are you capable of summarizing what it’s supposed to be doing?

A: No. And neither is Treasury. Treasury has given us multiple contradictory explanations for what it’s trying to accomplish.

There’s a major problem and a minor problem. The minor problem is documentation. I’ve spent four weeks now looking for someone who can give me the details of the stress test so that we can do an independent evaluation of whether the stress test is any good.

We get: "someone will call [you] right back." Only the call doesn’t come.

Then again, I think it’s clear that Timmeh is trying desparately to prevent anyone from assessing whether the stress tests are worth a damn.

Which pretty much tells you what you need to know about them.

Update: Apologies to selise, whose diary on this I just saw.

Yo Ho Yo Ho, It’s The Risk Management Life For Thee

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Image by iairia/Melange

Image by isiria/Melange

Pirates! Arrrr, they’re teh new sharks matey. Scary! And we should rightly be worried about this pirate problem, because CNN, MSNBC and the print have been relentlessly telling us so. First it was the seizure of the quasi American flagged cargo ship Maersk Alabama, and now the pesky pirates have snared an Italian tugboat too.

Sara related some fascinating background on Maersk and its business:

…. part of Public Law 480 requires that food relief from US Agricultural surpluses, be carried in “American Bottoms” — and US Flagged and owned ships, all have union crews. This ship is owned by Moller/Maersk, which is a vast international Danish Company, but which bought an American Shipping Company, and thus is a bi-national corporation. When it carries American Humanitarian Relief Supplies, they must use a ship chartered in the US, US Flagged, and American Crew. Moller/Maersk is perfectly capable of changing the charter, flag, and crew if it is hired to deliver a non-restricted cargo. For instance, this is the Danish Shipping Company that “sold” Ollie North his ship for shipping the anti-tank weapons to Iran back in the middle of Iran Contra — the ship he took back to Denmark and parked once the story broke, and left the crew without paying their wages. Not covered in the US Press at all — the Danes had a nice little trial in a public court on the Island of Fyn, and took public testimony of all the seamen (all Danes) who were unpaid, and out spilled all the cargo’s they had hauled, and all their ports of Call. Not sure whether North ever paid his fines and got right with the Danish Seaman’s court. Moller/Maersk also was the primary contractor hauling arms to Central America back in the Reagan Days. They’ve done covert stuff for CIA for years.

Shipping, even through troubled waters like those near Somalia, is big business. Isn’t everything these days? Which brings me to the knee jerk question, one I am sure many have asked, of why these big global business ships do not simply arm themselves sufficiently to repel the rag tag Somali pirates? Seriously, the Maersk Alabama is 508 feet long and staffed by a trained and unionized crew, why can’t they fight off these pirates with AK-47s in rinky dink junks and skiffs? Insurance and regulatory liability concerns; and, it turns out, that appears to be a pretty valid explanation. Read more →

Geithner to Banks: “Ix-Nay on the Solvency-Inay”

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I suppose, if Wells Fargo boasted wildly in its earnings report that it not only made a profit, but passed its stress test with flying colors, and Bank of America and Citi remained silent about the results of their stress tests in their earnings report, then we all might conclude that Bank of America and Citi had fared rather poorly on their tests.

As opposed to all of us concluding that Bank of America and Citi failed their no-fail stress test based on the FDIC want ads and the way Geithner has been wandering around saying "Shhhhhhh!" all week.

Still. Isn’t it bad form for the Treasury Department to order financial institutions to hide data about their financial health on their earnings reports? (h/t Stephen)

The U.S. Treasury Department is asking banks not to mention the regulatory "stress tests" as part of their first-quarter earnings results, according to a source familiar with government discussions.

If I were a BoA or Citi stockholder, I’d be finalizing my suit against Geithner right now to avoid the rush.

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?

America Strikes Back at Pirates … with Unions!!

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Remember how a union flight crew, union ferry crews, and union first-responders pulled off the incredible rescue back in January? Those union employees had gotten a lot of their safety training because of their union.

Well, those darn unions are at it with the heroics again. This time, it’s in vanquishing pirates.

American crew members aboard a U.S.-flagged ship have regained control of the vessel hijacked by pirates off the coast of Somalia Wednesday, FOX News confirms.

Defense Department officials confirmed that one pirate is in custody. A U.S. official said the status of the other pirates is unknown but they were reported to "be in the water."

"All the crew members are trained in security detail in how to deal with piracy," Maersk CEO John Reinhart told reporters. "As merchant vessels we do not carry arms. We have ways to push back, but we do not carry arms."

[snip]

At least 12 of the Americans aboard the Maersk Alabama are members of the Seafarers International Union, spokesman Jordan Biscardo said.

I had dinner one night last year with members of the SIU; they told me that ships sailing under US flags are the union crews. And as MoJo has confirmed, it appears that union membership is a big part of the reason these men were able to retake their ship.

And as I just heard on Fox News (and confirmed with the SIU), crew members of the Maersk Alabama received anti-piracy training from (where else?) their union.

If this serial heroism keeps up, businesses are going to be clamoring for unions to keep their operations safe. 

Typo fixed per wohjr.

About those [Stress] Test Results

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Peterr had a great post this morning reading some troubling tea leaves at the bottom of Citi’s and Bank of America’s tea cups.

My, the little things you notice when you peruse the job listings at the FDIC website. There are a lot of them to scroll through, but a couple of them caught my eye.

[snip]

Further down the list of positions comes a posting for two Senior Large Financial Institution Specialists, one in the New York office and the other in Charlotte, North Carolina.

Hmmm . . . large institutions, New York and Charlotte?

Can you say "Citibank" and "B of A"? Sure you can.

Speaking of New York, they are also looking for a new Chief, Examination Support and Risk Analysis Section who would be based in either New York or DC. Again, from the major duties section of the posting, the first three are these:

Serves as technical advisor on a broad range of risk management issues particularly regarding the analysis and supervision of large, complex financial institutions.

Reviews and evaluates studies, reports, and proposals prepared by staff members, financial organizations and other government agencies as these relate to large, complex financial institutions.

Directs the monitoring and supervision of large, complex financial institutions to protect the deposit insurance fund.

I’d be getting a little nervous right about now, if I had a corner office at Citibank and saw these two job postings. And if I noticed that the FDIC is also looking for two more of those Senior Large Financial Institution Specialists in their DC office, I’d be getting more than a little nervous. (As if I didn’t already have some banking nightmares to deal with.)

All in all, it looks to me like somebody thinks the FDIC needs some senior folks to deal with eating Very Big Banks — and to judge by the closing dates on these job postings and this little teaser from the Wall Street Journal, they think they need them fast.

The teaser he linked to describes the problem of what to do with the results of the stress tests investigating–among others–BoA and Citi.

Top federal bank regulators plan to meet early this week to discuss how to analyze the results of stress tests being conducted on the country’s 19 largest banks, people familiar with the matter said.

Only, it seems like those bank regulators have decided to punt, at least until we get past earnings season.

Read more →

How JP Morgan Chase Plans to Profit Off the 300,000 People It’s Forcing to Lose Their Jobs

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picture-96.thumbnail.pngAs I pointed out Saturday and yesterday, JP Morgan Chase is reportedly pushing Chrysler into bankruptcy. And as I explained yesterday, that will mean 300,000 people will lose their jobs.

So who will be left to bank with Chase in Michigan, you might ask, after JP Morgan Chase forces so many people out of work?

Well, as klynn pointed out, JP Morgan Chase has figured out a way to profit off all the unemployed people it is creating in Michigan. Chase, you see, provides Michigan’s unemployment insurance debit cards. 

And the services can end up being pretty expensive for beneficiaries. Here’s what Chase charges (and will be able to charge those that it causes to lose their job) for use of their debit card.

More than two withdrawals in a 2-week pay period: $1.50 each

Non-Chase withdrawals: $1.50 each

More than one bank teller withdrawal in a pay period:  $4.00 each

Transaction denied for insufficient funds at POS, ATM, or teller: $1.50 each

More than one ATM balance inquiry in a pay period: $1.00 for each

Statement delivered by regular mail: 95¢ per statement

Granted, if an unemployed person manages their meager finances well and has Internet access (those inquiries are free), they probably can get by on one weekly withdrawal. But if someone loses track of their spending or doesn’t have Internet access or likes dealing with human beings, these fees are going to start to take a huge bite out of what little they get.

Though debit card users can spend all they want in stores. As with Chase customers normally, Chase loves when you use your debit card at stores, because they get a bigger fee from merchants (back in the day when we still banked at Chase, that’s what the Chase guy told me) than if you use a credit card.  They’re profiting coming and going.

Now granted, for a company that already has gotten $25 billion from taxpayers (or $83 dollars from every man, woman, and child in this country), even $5 a month in fees from the 300,000 people JP Morgan Chase is pushing into unemployment is chump change–a mere $18 million a year. 

But don’t imagine for a minute that JP Morgan Chase hasn’t already lined up a way to profit from the unemployment it is causing in Michigan. 

Save American Jobs: Close Your Chase Account

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It’s time we started pressuring the banksters in the only language they understand: their pocket-books. If they begin to lose customers who refuse to let their money be used to gamble away American jobs and taxpayer money, then they might start thinking about the good of the country for a change.

So mr. emptywheel and I took that step today. We closed our Chase accounts (which, because mr. ew recently took a buy-out, was a not-insignificant amount) and put that money into a credit union that’s supporting Michigan, not trying to bankrupt it. 

Here’s how I explained to the Chase people why we were closing our accounts.

I’m closing my Chase accounts because JP Morgan Chase has placed its corporate interests above the jobs and health care of the people of my community, unlike other banks that continue to invest in rebuilding Michigan.

JP Morgan Chase insists on putting Chrysler into bankruptcy

On Saturday, the Wall Street Journal reported that JP Morgan is “resisting government pressure to swap” its Chrysler debt for equity in a restructured Chrysler. But if JP Morgan refuses this swap, then Chrysler will be forced into bankruptcy within a month.

According to the Wall Street Journal, JP Morgan prefers bankruptcy because, “billions of dollars of government debt and the UAW retiree health-care obligation [would] be wiped out before the secured lenders [JP Morgan and other big banks] lose anything.” In other words, JP Morgan wants to force Chrysler into bankruptcy so it would get repaid before all other creditors—including Chrysler retirees and US taxpayers.

JP Morgan Chase has already gotten billions from US taxpayers

Such cynical economic considerations might be understandable coming from other banks.  But JP Morgan Chase has already received $25 billion in TARP funds from American taxpayers. And the taxpayer bailout of AIG ensured JP Morgan Chase got $1.2 .4 billion [corrected] in its AIG deals paid off at full value.

With all that taxpayers have already given to JP Morgan Chase, isn’t it time JP Morgan Chase started to give back to the communities it serves?

JP Morgan Chase’s actions will mean hundreds of thousands lose their jobs and healthcare

Instead, JP Morgan Chase’s corporate single-mindedness threatens to put 40,000 Chrysler workers in Michigan out of a job, along with 150,000 Chrysler dealer employees and tens of thousand workers at Chrysler’s suppliers.

Read more →