Tag: economic crisis

Banks That Bundled Bad Debt Also Bet Against It | NYTimes.com

~ lmehit ~ Leave a comment
Lewis Sachs, left and John Paulson, right

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

Read on to find out how Goldman Sachs created and sold securities – they thought would lose money – to investors.

Underwater and Not Walking Away – Brent T. White – Arizona Legal Studies, The University of Arizona.

~ CBPS ~ 1 Comment

The home financing system in America works because lenders count on your moral belief system, not contracts, to hold you to the deal, while they do not take that same obligation. This one single fact gives lenders the enormous power of humiliation. Brent White has created one of the most cogent and well crafted descriptions of the present storm we’re riding, along with some unusual observations.
Continue reading “Underwater and Not Walking Away – Brent T. White – Arizona Legal Studies, The University of Arizona.” →

Citi Execs Sell Assets to Avoid Pay Czar | Reuters

~ CBPS ~ 1 Comment

The executives at Citibank want to avoid the wall street pay czar so badly, they’re fire selling company assets to raise enough money to pay back the TARP funds:

Citigroup also is ending an agreement with the government that guaranteed a roughly $250 billion portfolio of assets against excessive losses.

The bank sold $17 billion of common shares and another $3.5 billion of bonds that automatically convert into shares in three years.

The bank sold convertible notes that pay a coupon of 7.5 percent a year, and automatically convert to shares at a 25 percent premium to the pricing level in three years.

The bank said on Monday it also plans to issue $1.7 billion of shares to employees, and may sell another $3 billion of trust preferred securities in the first quarter.

Bank of America and Wells Fargo have done the same thing, but they found buyers and Citi didn’t. These banks will crash again, they aren’t doing better, they’ve found even lower ways to be greedy. When they crash again, let them go under.

Read Article.

Bunning Statement on Bernanke: ‘You Are the Definition of a Moral Hazard’ | Real Time Economics – WSJ

~ CBPS ~ Leave a comment

Senator Jim Bunning smokes Ben Bernanke:

Instead of taking that money and lending to consumers and cleaning up their balance sheets, the banks started to pocket record profits and pay out billions of dollars in bonuses. Because you bowed to pressure from the banks and refused to resolve them or force them to clean up their balance sheets and clean out the management, you have created zombie banks that are only enriching their traders and executives.

…you put the printing presses into overdrive to fund the government’s spending and hand out cheap money to your masters on Wall Street, which they use to rake in record profits while ordinary Americans and small businesses can’t even get loans for their everyday needs.

Read This NOW!

A more complete, yet less satisfying description of the hearing can be read here.

Judge blasts bad bank, erases 525G debt | NYPOST.com

~ CBPS ~ Leave a comment
The lucky winner!

The government has been backing up to the back doors of these institutions, unloading truckloads of cash. Many have used the funds to purchase other banks or shore up their balance sheets; few have passed any relief to their customers.  The backlash against them has primarily been debt repudiation (bankruptcy and foreclosure) and now, debt cancellation.

Spinner excoriated OneWest for repeatedly refusing to work out a deal, for misleading him about the dollar amounts at stake in the case, and for its treatment of the couple over months of hearings.

OneWest’s conduct was “inequitable, unconscionable, vexatious and opprobrious,” Spinner wrote.

He canceled the debt because the bank “must be appropriately sanctioned so as to deter it from imposing further mortifying abuse against [the couple].”

The bank is involved in a similar case in California, where it’s trying to foreclose on an 89-year-old woman, despite two court orders telling it to stop.

Read Article.

Different Bus, Same Driver – Harvard ignored warnings about investments | The Boston Globe

~ CBPS ~ Leave a comment

Can you say, "Greed"?

The very thing that the former endowment chiefs had worried about and warned of for so long then came to pass. Amid plunging global markets, Harvard would lose not only 27 percent of its $37 billion endowment in 2008, but $1.8 billion of the general operating cash – or 27 percent of some $6 billion invested. Harvard also would pay $500 million to get out of the interest-rate swaps Summers had entered into, which imploded when rates fell instead of rising. The university would have to issue $1.5 billion in bonds to shore up its cash position, on top of another $1 billion debt sale. And there were layoffs, pay freezes, and deep, university-wide budget cuts.

Read Article.