Showing posts with label Banking. Show all posts
Showing posts with label Banking. Show all posts

Tuesday, September 27, 2016

Here's Why Trump's Choice For His Finance Manager Should Make Your Blood Boil

by Nomad

Donald Trump

If you -or somebody you know- happened to be one of the thousands of victims of home foreclosure in the wake of the economic meltdown of 2008, here's why Donald Trump's choice for his finance manager, Steven Mnuchin, is a slap in your face.
In fact, all Americans ought to be furious.


Trump's Wall Street Hypocrisy

Days after locking up the Republican presidential nomination in May, Donald Trump named Steven Mnuchin as his national finance chairman.
The press release states that Mnuchin "has previously worked with Mr. Trump in a business capacity and brings his expertise in finance to what will be an extremely successful fundraising operation for the Republican Party." 

In many ways, it was a bewildering and disturbing choice for a candidate who had consistently portrayed himself - to his angry middle-class supporters- as a bitter foe of Wall Street excesses. 
Indeed, Wall Street once trembled at the possibility of Trump getting the nomination. Months before, in September 2015, one political strategist put it like this :
"He has bought into the populist rhetoric that Wall Street is greedy and makes too much money...He sounds more anti-Wall Street than Elizabeth Warren."
That was, of course, before Trump was officially crowned the Republican nominee. After the GOP nomination was sealed up, Trump surprised everybody by jumping in bed with the very people he had castigated.

Goldman, Sachs in the Mnuchin Bloodline

After all, Mnuchin's connections to Wall Street are practically genetic. His father, Robert E. Mnuchin, spent a greater part of three decades on Wall Street at Goldman, Sachs & Company. He was, in fact, one of the pioneers of the institutional equity trading business in the 1960's. Before his retirement in 1990, Robert Mnuchin was "one of the most important figures in the equities business."
(Incidentally, Investopedia cites a crash in equity trading as major factors in two periods of economic decline, the Great Depression of 1929 and the Great Recession of 2008.)

Wednesday, March 9, 2016

Rising and Falling Fortunes: Rothschild Empire Faces Criminal Investigation in US and France

by Nomad

It might be a name long associated with fabulous wealth and enormous political influence, but the Rothschild Empire has been had its share of humiliations of late.


Hard Times for Billionaire Dynasty

As pioneers of international banking (as well as probably the wealthiest family in the history of the world,) the Rothschilds have been the subject of many a conspiracy theory. The exact amount of their family fortune is undisclosed, but by one conservative estimate, the Rothschild family controls assets worth more than $350 billion when each of their personal fortunes is combined.

The Rothschild dynasty is the el supreme of all family dynasties and went thing go bad there are plenty of people to gloat and plenty more to send their condolences. Ah, the way of the world is such like. 
The family business has apparently been hit hard by the worldwide economic slump. That's not all the problems they have been facing. 

In June of last year, Baron David de Rothschild, chairman of the Rothschild Financial Services Group since 2003, was indicted by French police for his role in a fraud case. The independent investment banking organization which offers financial services to governments, corporations, and individuals worldwide. was charged with "falsely advertising an equity release loan scheme, bought into by more than 130 pensioners between 2005 and 2008."
More than 20 British pensioners in Spain took up legal action against Rothschild’s company after losing their dream properties and thousands of euros.
French investigators claimed that Rothschild’s product, the Credit Select Series Mortgage Loan, was sold to retirees as a legal tax haven, specifically as a mean to reduce the apparent value of their homes for inheritance tax mitigation purposes.

The problem is that it wasn't as legal as Rothschild executives had claimed. The French tax agency ruled that such a scheme was a nothing more than fraud and that Rothschild should be held accountable. Said one of the French prosecutors:
“In short, independently of what happened to the investment, Rothschild advertised a loan aimed at reducing inheritance tax, which is a breach of tax law."
The victims who now stand to lose their homes told the courts that they felt confident of the financial packages, having put their faith in the Rothschild name. In its defense, the investment banking company pointed out that its involvement was limited. It had only provided the loan, and "was not involved in the investment side of the deal, which was carried out by financial intermediaries based in Spain, most of whom were British."

Friday, February 20, 2015

This Day in History: When Bankers and Big Business Betrayed a Nation

 by Nomad

When we look back at this date- February 20- we see it was a critical day in modern history. Eighty-two years ago today,  Hitler made his pitch for campaign financing to the leaders of banking and industry. It turned out to be a smashing success.


On this day in 1933, the Nazi party arranged a secret meeting between Adolf Hitler and 20 to 25 industrialists at the official residence of Hermann Wilhelm Göring, the minister of the interior in Hitler's government, 

The aim of this secret meeting was to allocate campaign financing for the Nazi party in the crucial upcoming elections. 

A German economist, banker, liberal politician Hjalmar Horace Greeley Schacht acted as a liaison/host for the event. As a fierce critic of his country's post-World War I reparation obligations, Schacht became a supporter of Adolf Hitler and his Nazi Party. He served in Hitler's government as President of the Reichsbank and Minister of Economics. 

Until his fall from grace in 1937, Schacht proved to be a useful tool for the regime and its rise to absolute power.

Tuesday, May 20, 2014

Swiss Bank Pleads Guilty to Felony Conspiracy with American Tax Dodgers

Syndicated news with introduction by Nomad 

Swiss banking giant Credit Suisse has admitted that it conspired to help some US clients avoid paying taxes. It has agreed to pay over $2.5 billion and to cooperate with investigations. 
This would make the Swiss company the largest bank in 20 years to plead guilty to criminal charges.
  

As much as I think this is a good- and long overdue- step, imposing a fine on Swiss banks for helping Americans hide their wealth is a little like punishing dogs for peeing on fire hydrants. It's what they do. There's nothing very "brazen" about either case. 

Perhaps the only surprising aspect of this news is that the US government found the wherewithal to actually do anything about it. As Forbes describes the news, the IRS took on Swiss banking and it won. According to that article, IRS is the big winner in this plea bargain arrangement.
Plus, the IRS earns dividends in the form of account holders applying for amnesty. And for the IRS, it isn’t just Switzerland, but everywhere now that FATCA has expanded U.S. tentacles almost worldwide. Attorney General Eric Holder wins big too, getting the benefit of a guilty plea. He can’t be accused of letting another big bank off the hook for being too big to fail.
The U.S. Treasury and New York State both make out well. Credit Suisse will pay nearly $1.8 billion to the Justice Department, $100 to the Federal Reserve, and a whopping $715 million to New York’s Department of Financial Services.
With FATCA approaching its launching date, some would see this in a little less cheery light. The US, they'd say, is simply attempting to assert its control over all international banks. 
Amid all this back slapping, and at a time when Putin is threatening to renew a Cold War, what is left unsaid is that the long-term consequences may be hard to calculate.


Credit Suisse guilty on US felony charge, pays $2.6 bn (via AFP)
Credit Suisse pleaded guilty and was fined $2.6 billion for helping Americans avoid taxes, the first time in 20 years a major bank has been punished on US criminal charges. US authorities said the "brazen" Swiss bank, one of the world's largest wealth…

Saturday, March 10, 2012

LIFE Magazine Examines Wall Street and Banking in 1946


by Nomad
In light of the announcement by JP Morgan CEO Jamie Dimon that his firm has lost $2 billion investing in derivatives, I thought I'd take this opportunity to re-post this article, originally published in my general blog, Nomadic View.
The most amazing thing about a casual look through the back pages of LIFE magazine is how relevant the articles can sometimes be. For example, take the January 7 1946 issue about Wall street "the Citadel to US Capitalism."

One of the side articles details the more conservative approach to banking following the world war and its origins. The story provides quite an education in the varied aspects of banking.
On Wall Street there are two principal kinds of bankers: Commercial bankers and investment bankers. The commercial banks, such as Chase and National City, make loans, accept deposits, finance foreign credits, buy government and state bonds. They also usually have a trust department which executes wills and acts as trustee. The investment bankers, such as Morgan Stanley and Kuhn, Loeb underwrite and distribute new security issues for corporations. They also have a brokerage department which buys and sells securities.

The Banking Act of 1933 made it illegal for one firm to act both as a commercial act and investment banking house. Until then, the two were often combined. In his triumphant days, J.P. Morgan, a banker, merged railroads and steel companies into nationwide corporations. In the 1920s, Wall Street made idols of men like Charlie Mitchell, chairman of National City Bank, who was also the greatest securities salesman in history and an adroit market manipulator. The 1929 crash exposed the dangers of these dual functions, With one hand, banks were taking deposits. With the other, they were financing new securities. When the business they were promoting failed, the depositors, security holder and the bank itself were in trouble.

Today the very nature of Wall street bankers has changed. In place of the speculators and market manipulator there are sound, deliberate investors who by choice as well as by law are more interested in government bonds than in a flier in market.
The Banking Act of 1933, also known as the Glass-Steagall Act, introduced banking reform and safeguards on deposits following the crash of 1929. Many of the provisions were also designed to reduce the amount of wild market speculation which was thought to be contributing factor to the collapse.

The Glass-Steagall Act passed after an ambitious former New York prosecutor, collected enough popular support for stronger regulation by bringing bank officials before the Senate Banking and Currency Committee to answer for the role in the crash.

In addition to the Banking Act of 1933, the Bank Holding Company Act was passed in 1956 and extended the restrictions on banks. According to this, bank holding companies owning two or more banks could no longer engage in non-banking activity and could not buy banks in another state.

Altogether, an impressive bit of banking regulation. The Banking Act of 1933 reduced the amount of free-wheeling risk-taking- with depositor's assets, I mean. And the Bank Holding Company Act clearly defined the role of banks and kept bank holding companies from becoming "too big to fail."

And you know something? It actually worked. Nations, which adopted such regulations and stuck to them when the rest of the world began to de-regulate, such as China and Turkey, have emerged from the latest crash, jolted but not devastated.

Another Fine Mess
So what happened? How did we come back in a full circle? Through a careful whittling away of the legislation through intensive and sustained lobbying by special interest groups, starting as far back as 1980 with the Depository Institutions Deregulation and Monetary Control Act.

This allowed banks to merge. Subsequent decisions by the Federal Reserve Board in 1986 and 1987, after the Board heard proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions, further undermined the regulatory effects of the the Banking Act of 1933. 
For a full account of the various steps, see HERE. (The link is very enlightening)

The record shows a Federal Reserve Board, at the very least, flawed by its willingness to accept the demands of institutions to circumvent the laws were designed to regulate and control precisely those sectors.

Finally- perhaps inevitably- the Banking Act of 1933 was repealed in 1999 by the Gramm-Leach-Bliley Act. The legislation was signed into law by President Bill Clinton on November 12, 1999. (The role that Senator Phil Gramm played in this dismantling of regulatory protection has been cover extensively in another post.)

From there, it was a slow predictable march to the sorry mess of 2009.

Greed is Good?
What on earth could have persuaded, sensible people with all the wisdom a chastising experience as the Great Depression, to lift restrictions and to deregulate and repeal? The only answer seems to be the temptation of tremendous profits that de-regulation allowed financial institutions. In short, greed.

Much to their credit, Republican Senator McCain of Arizona and Democratic Senator Cantwell of Washington made a proposal for a return to the Glass-Steagall Act, specifically the distinction between commercial and investment banking. Ironically this regulation rollback to the 1930s is being called "Obama's banking reform", making it sound untested and potentially risky when a stronger case of risk by deregulation of the banking industry in the 1980s could- and should- have been made at that time.

Despite the crisis of 2008, banks, which have continued to rake in vast profits, have been strongly opposed to a return to the restrains of the Banking Act of 1933. Not surprising, is it?
As The New York Times reports:
The outlines of the Volcker Rule, one of the flagship provisions of the sweeping financial regulatory overhaul passed last year, will begin to take shape this week as regulators propose rules to limit the ability of most banks and Wall Street firms to use their own funds to buy and sell stocks, corporate bonds and derivatives.
For more information about the Volcker Rule, NYT gives a concise explanation of the reform.  
Wall Street will simply have to choose between being a source of dependable investment or a free-wheeling casino, but, it is a shame that we have to learn these lessons twice.

Update:
Mitt Romney has gone on record as wanting to repeal much of the reform legislation that President Obama and Congress enacted in light of the financial crisis of 2008. The Boston Globe reported in August of 2011:
Republican presidential candidate Mitt Romney has sharpened his critique of the financial regulatory overhaul signed by President Obama.

In response to the financial meltdown, Obama and Congress passed the Dodd-Frank bill, Wall Street reform legislation that enacted consumer protections, reformed some derivatives trading, and imposed new regulations on mortgage lenders and hedge funds.
In the past, Romney has criticized the bill for creating uncertainty in the financial industry and causing bankers and the financial service employees to pull back.
The lobbyist for the banking industry worked hard at watering down the legislation in any case and as a result, left many loopholes for financial institution to skate around regulations and oversight. 
From TalkingPointsMemo:
Dimon claims that the investment in question wouldn’t have violated the rule had it been in effect — he says the bets JPM made were meant to hedge against potential losses in other investments. But finance experts have cast doubt on that claim, and Dimon himself admitted that the incident will provide ammunition for the Volcker Rule supporters.
Politically, the latest financial disaster could create more doubt in the minds of the voters that the Republicans (in the form of Mitt Romney) is a little too eager to win the support of Big Banks and Wall Street and are setting up a repeat of the 2008 meltdown of the economy. 
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