Chalk it up to stupidity

Activist who chalked anti-bank slogans on San Diego sidewalks found not guilty on all charges

Jeff Olson, 40, was charged with scrawling messages with water-soluble chalk on city sidewalks outside Bank of America branches from April to August 2012, including "Shame on B of A," ''No thanks, big banks," and a drawing of an octopus reaching for dollar bills.

"Graffiti remains vandalism in the state of California," the city attorney's office said. "Under the law, there is no First Amendment right to deface property, even if the writing is easily removed, whether the message is aimed at banks or any other person or group. We are, however, sympathetic to the strong public reaction to this case and the jury's message."

The city's own mayor said the case was "stupid". "The case pitted Mayor Bob Filner against City Attorney Jan Goldsmith, who prosecuted the case, and could have sent Olsen to jail for 13 years — one year for each misdemeanor count — and brought a $13,000 fine. The city attorney's office said it offered to reduce the charges to an infraction if Olson agreed to perform community service by cleaning up graffiti but he refused.

Filner called it a "nonsense prosecution" that responded to complaints from Bank of America. "It's washable chalk, it's political slogans," Filner said last week. "We're not even responding to the public's complaint ... I think it's a stupid case. It's costing us money."

Cable to cabal: man up

Vince Cable: 'endemic corruption' in banking

Vince Cable, the Business Secretary, has urged shareholders to "get a stronger grip" on the banks, where "incompetence, corruption and greed have been endemic".

After a week in which a computer glitch at RBS left millions of customers unable to pay bills or move money; rate fixing allegations engulfed Barclays; and the Financial Services Authority reached a settlement with banks over the mis-selling of interest rate hedging products to small business customers, Mr Cable said that we were "faced with a moral quagmire of almost biblical proportions".

Mr Cable added last week's "banking scandals" demolished the myth that the banking crash "was all the fault of a few colourful rogues". "We have been reminded, instead, that the rot was far more widespread. Incompetence, corruption and greed have been endemic in British banking," he wrote in The Observer.

Outlining steps to address "the mess", he said that banks need to be "made safe"; that steps to ringfence investment banking from retail banking needed to be implemented; and that there needed to be "accountability".

"Regulators are a backstop: they don't own banks," Mr Cable added. "The governance at the top of our leading banks has been lamentably weak. No one at the top of Barclays will take responsibility for systemic abuse.

Cable urges shareholders to get 'stronger grip' on banks

Business Secretary Vince Cable has urged shareholders in British banks to “get a stronger grip” on the boards and executives responsible for “systemic abuse”.

He said that nobody at Barclays was prepared to take responsibility for the rate-rigging scandal that has engulfed the company in recent days and that shareholders ought to take action.

“The governance at the top of our leading banks has been shown to be lamentably weak. No one at the top of Barclays will take responsibility for systemic abuse.”

He added: “Shareholders, the owners, have a major responsibility here. I am bringing in legislation to strengthen their control over pay and bonuses, through binding votes, but shareholders have to get a stronger grip on weak boards and out-of-control executives.”

In vain in a similar mood across the Pond:

Banks Conspire to Fleece the Public

Diamons in the rough

Bob Diamond: Barclays falsified Libor to protect bank during financial crisis

Barclays chief executive Bob Diamond has admitted for the first time that the bank made a conscious decision to falsify Libor rates in order to protect the bank at the height of the financial crisis.

“Even taking account of the abnormal market conditions at the height of the financial crisis, and that the motivation was to protect the bank, not to influence the ultimate rate, I accept that the decision to lower submissions was wrong,” he stated.

He said traders attempted to influence the rate in order to benefit their own desks’ trading positions. The bank made the decision in order to protect shareholders’ interests, he said.

Meanwhile, across the pond, in a boomerang sort of way, where Bob Dimon railed against the Volker rule, saying banks already have things under control,

JPMorgan Trading Loss May Reach $9 Billion

When Jamie Dimon, the bank’s chief executive, announced in May that the bank had lost $2 billion in a bet on credit derivatives, he estimated that losses could double within the next few quarters. But the red ink has been mounting in recent weeks, as the bank has been unwinding its positions, according to interviews with current and former traders and executives at the bank who asked not to be named because of investigations into the bank.

In its most basic form, the losing trade, made by the bank’s chief investment office in London, was an intricate position that included a bullish bet on an index of investment-grade corporate debt. That was later combined with a bearish wager on high-yield securities.

The chief investment office — which invests excess deposits for the bank and was created to hedge interest rate risk — brought in more than $4 billion in profits in the last three years, accounting for roughly 10 percent of the bank’s profit during that period.

In testimony before the House Financial Services Committee last week, Mr. Dimon said that the London unit had “embarked on a complex strategy” that exposed the bank to greater risks even though it had been intended to minimize them.

With much of the most volatile slice of the position sold, however, regulators are unsure how deep the reported losses will eventually be. Some expect that the red ink will not exceed $6 billion to $7 billion. To put the size of the loss in perspective, JPMorgan logged a first-quarter profit of $5.4 billion.

Nonetheless, the sharply higher loss totals will feed a debate over how strictly large financial institutions should be regulated and whether some of the behemoth banks are capitalizing on their status as too big to fail to make risky trades.

More than profits are at stake. The growing fallout from the bank’s bad bet threatens to undercut the credibility of Mr. Dimon, who has been fighting major regulatory changes that could curtail the kind of risk-taking that led to the trading losses. The bank chief was considered a deft manager of risk after steering JPMorgan through the financial crisis in far better shape than its rivals.

Investment bank reveals its team of London traders caused more damage than previously thought

The deals were made by a team led by French-born trader Bruno Iksil, nicknamed Voldemort after Harry Potter’s evil nemesis because he was such a ‘scary and powerful’ force in the City.

Isn't that cute.

The running of the bears

Spanish Banks Said to Be Set for Downgrade by Moody’s Today (Update 1)

Moody’s Investors Service is set to downgrade the credit ratings of Spanish banks later today, said two people with knowledge of the situation.

Fitch Calls For Capital Increase As Run On Spanish Banks Continues

Fitch ratings has called for a huge increase in capital reserves at the world’s biggest banks today as the markets reel from the run on Spain’s banks. The agency recommended banks across the world raise a total of $556 billion an increase of 23 percent over what the banks are currently holding.

Fitch made the recommendations on 29 of the world’s systemically important banks. That list includes Goldman Sachs Group, HSBC Holdings plc, Mizuho Financial Group Inc., Bank of America Corp., Societe General S.A., and JPMorgan Chase & Co. Banco Santander S.A., a Spanish banking giant, is among the list of the most important 29 banks. It is not at as much risk from the current run on deposits in the country but suffers from the aura of the crisis.

The increase in the amount of money banks have to hold and simply sit on meant the firms will not be able to earn money on those reserves and will reduce profitability. The other option is leaving the institutions open to failure. It is this tradeoff that will dominate the institutions for the next several years.

After, and in the midst of, such a unique and deep financial crisis it is probable that regulators will swing too far toward stability leaving less room for growth and innovation. It may be some years before a correct balance is restored to the sector but it seems inevitable that right now government interference is going to grow.

State rescue may be beginning of end for Spain's Bankia

Spain's government plans to clean up, downsize and sell Bankia within three years, but the strategy could be short-lived as the bank's capital gap may be larger than the 15 billion euros ($19.1 billion) so far identified, government and financial sources say.

"The bank faces two options," said a financial source with direct knowledge of the bank's situation. "First, to be wound down. Second, to be wound down. The question is how small it will be at the end."

Bankia, Spain's fourth-biggest lender with more than 10 percent of bank deposits, said its clients can be absolutely calm over the deposits they hold, while Spain's Economy Secretary said there had not been an exit of deposit funds.

The government which nationalized Bankia last week after months of uncertainty over its capacity to weather the financial storm.

Finally, the government is under intense public pressure to reduce the taxpayers' bill by selling the more than 5.4 billion euros worth of stakes the bank holds in major Spanish companies such as Iberdrola and Mapfre.

The Socialist opposition said last week it would back the Bankia takeover on condition public funds would be recovered at some point. Yet public anger at the banks is rising after seven other lenders had to be bailed out by the state at a time when education and health spending are being cut.

The lender's auditor Deloitte identified several gaps in Bankia's accounts and it is still not clear whether its rescue will cost the government more than the 15 billion euros it initially planned to inject.

A senior government source last week estimated the size of the state intervention at up to 10 billion euros.

That would come on top of the conversion of a 4.47 billion euros loan into shares, which will give the state 45 percent of Bankia, with an option to take another 3 percent, and 100 percent of its parent company Banco Financiero y de Ahorros (BFA).

Loaded with bad loans from a decade-long real estate boom, the bank needs to raise about 1.3 billion euros by June to comply with stringent European Banking Authority capital rules.

It also needs to find at least 6 billion euros by the end of the year to comply with two financial reforms presented by Spain's centre-right government in February and last week.

Greeks pull cash out of banks as confidence wanes

Greeks withdrew more than $900 million Monday and another $600 million Tuesday, according to the Greek Central Bank. While deposits have been steadily leaving banks since the start of the country's debt problems in 2009, this week's outpouring of cash reflects a new level of panic, analysts say.

Meanwhile, in Spain, the newspaper El Mundo said customers have withdrawn more than €1 billion ($1.27 billion) since the state took over Bankia, the country's fourth-largest lender, a week ago. Bankia insisted its depositors' money was safe, and the government denied there was a run on the bank.

I'm so sorry

I'm sorry, so sorry
That I was such a fool

JPMorgan reveals $2B trading loss,
CEO Dimon apologizes

I didn't know
Love could be so cruel

the errors are embarrassing

Oh, oh, oh, oh
Uh-oh
Oh, yes

egg on our face

You tell me mistakes
Are part of being young

bout a trader, nicknamed the ‘London Whale'

But that don't right
The wrong that's been done

It could cost us

[Spoken:]
(I'm sorry) I'm sorry
(So sorry) So sorry

one of the kings of Wall Street

Please accept my apology
But love is blind

some people may lose their jobs

And I was too blind to see

a complete tempest in a teapot

Oh, oh, oh, oh
Uh-oh
Oh, yes

he still believes in his arguments
against the Volcker rule

But that don't right
The wrong that's been done

Apologies to Brenda Lee
I'm so sorry

Oh, oh, oh, oh
Uh-oh
Oh, yes

Of oligopolies past and future

Guambat is toward the end of his short annual Sydney sojourn, where the weather has been as cruel as the economy. His attention is more closely directed to the Aussie news, and this item is big on his radar.

The story is about how the so-called "Big Four" or "Four Pillars" or 'bankster cartel' set their interest rates, otherwise referred to as resale price maintenance.

First, it looks at how the group have conducted their little cozy business in the past, then suggests a new strategy, characterized as a lone (pun alert) break-out by one of the four. Guambat is dubious. This is a well orchestrated monkey-see, monkey-pas-de-deu, as well choreographed as Olympic synchronous swimming (if there remains any such thing).

See what you think:

ANZ a wildcard as it leads pack by Anne Knight

ON TUESDAY, leak-proof bunkers were set up to house four senior banking teams. They are, in effect, war rooms where interest rate battle strategies are hatched and various scenarios are accessed and tested. Two are in Melbourne - ANZ and National Australia Bank - and the other two in Sydney's CBD are occupied by teams from Commonwealth Bank and Westpac

The participants comprise the heavyweights of each business, its chief executive, finance director, the head of the retail operations, treasury, marketing and corporate affairs.

The pressure is intense. Each team watches every piece of media coverage - newsflashes, the online updates and reads newspaper commentary. They listen to every utterance from the government - the impromptu press conferences known in the media trade as door stops. But they watch their competitors' moves even more closely.

When the RBA announced a 25 basis point cut to its cash rate at 2.30pm on Tuesday the clock started ticking.

The top dogs in finance and treasury have the task of assessing how much it will cost their bank to pass on the full rate cut and how much they can save by shaving a couple of percentage points off a full cut. In order to play this game of chicken they must also understand how much financial pain/gain will be sustained by the other three.

Inside the bunkers, the marketing and retail services operatives must overlay the financial outcomes against the government backlash, PR fallout and the possibility of customer leakage.

None of the banks wanted to pass on the full 25 basis points, but none wanted to be the first to do so. There is no first mover advantage in this game. It might be unpopular to agree with the banks on this issue, but thanks to the state of offshore credit markets the banks' cost of borrowing has gone up. If they needed to wade into these wholesale markets tomorrow it would be expensive. The scenarios worked through by these war cabinets would have involved a matrix of possibilities.

They even debate whether it should be a Sydney or a Melbourne bank that moves first.

But all understand that to the extent they would fall short of matching the Reserve Bank it would be better to do so as a pack.

NAB would have been desperate to see the others pass on less than 25 basis points, providing it with the excuse to stay with the pack. But nothing this week has gone to script. Within hours of ANZ's move NAB followed, passing on the full 25 basis points.

OK. There you have the description of how the oligopoly past behaves. Now the vision of the oligopoly future, perhaps?

Yesterday at 12.30 ANZ became the first breakaway - it announced a cut of the full 25 basis points. But with the ANZ announcement came an unexpected kicker: in future it will not respond to changes in the Reserve Bank's cash rate but change its variable interest rates on its own timetable, the second Friday of each month. And, more importantly, the movement will reflect changes to its own cost of funds.

This decoupling is all about convincing consumers that the bank's cost of borrowing has little to do with the benchmark rate set by the Reserve Bank. In doing so, ANZ will be less tied to central bank settings and is more likely to move rates up next month if European debt markets remain in a parlous state. It's a clever strategy, albeit probably unpopular. It is also a game-changer.

Most consumers will not understand the significance of ANZ moving away from the Reserve Bank's rate agenda. They will just see a 25-basis-point rate cut as a win.

But the breakaway is sufficiently radical and unexpected that the rest will need to reform their strategies.

It is now a fair bet that the others will fall into line. A new pack has formed and to stay outside it would be dangerous.

Read more: http://www.smh.com.au/business/anz-a-wildcard-as-it-leads-pack-20111208-1olam.html#ixzz1fyhtyPq

If there truly were any competitive instincts in the cartel, the ranks will break with this move. Time will tell. Guambat reckons the rank oligopoly will reform and hold as tight as the one of olde.


FAIRNESS DOCTRINE FOLLOW UP:

Further to above, consider this:

Banks damned if they do and damned if they don't

This week's apparent indecision was in marked contrast to what happened just four weeks ago.

Then, the two biggest banks, the Commonwealth and Westpac, announced within a short period of each other and not long after the RBA's 2.30pm Melbourne Cup day cut they would follow suit and reduce their interest rates

ANZ left it to the next day, leaving National Australia Bank as the odd one out by only passing on part of the rate cut - 0.20 per cent - rather than the full 0.25 per cent.

NAB was vilified, not surprisingly perhaps, given it had sought to make a virtue of being the odd one out by projecting itself as the consumers' friend just a year before with its "breaking up with the big four" home loans campaign.

In little more than a day, NAB had handed back some of its hard-fought PR gains over what appeared, in public at least, to be a miserly amount - just five basis points, or 0.05 of a per cent.

As small as that seemed, it was in fact a significant turning point in what has become a hugely competitive battle for market share

Before last month's shenanigans, NAB had been successful in grabbing market share through the use of a classic retail-style price war. And in doing so, it was prepared to sacrifice some of its profit margin to buy that volume.

But all of this has come at a cost, a factor highlighted in prescient comments made just a week ago in the Herald by banking analyst Brett Le Mesurier of brokers BBY.

"From their [NAB] accounts to September it looked like to me like it was a pure 'price versus volume' trade-off," he said. "So more volume, lower price. And you multiply the two and you end up no better from a growth perspective."

But it wasn't just about the growth or the quality of that bigger market share. It was also about the cost of funding that growth. Put simply, NAB's lower-priced mortgages have been hurting its bottom line since its own cost of borrowing is no cheaper than its rivals.

In fact, the battle in the lending market has been matched by an equally expensive fight for deposits, which has only added to the pressure on profit margins.

Read more: http://www.smh.com.au/business/banks-damned-if-they-do-and-damned-if-they-dont-20111209-1ongv.html#ixzz1g3L5VDWP

As always, be sure to read the whole linked article. Much has been left out here. Guambat is still not wholly convinced that mere marketing wars constitute competition. In the classic sense, competition drives down price, and the Big Four show little ambition to do anything so brash for very long.

The very foundations of the Four Pillars Policy is to avoid the kind of price competition that would yield the kind of creative destruction of any of the existing banks that classic economics finds useful. Bank competition in Australia is more akin to rearranging deck chairs. Which is what oligopolies do.

Banks will be banks, Silly Silly

U.S. sues big banks over mortgage losses

The Federal Housing Finance Agency, which oversees government-seized mortgage firms Fannie Mae and Freddie Mac, is seeking billions of dollars in compensation. The lawsuits were filed in federal court and announced after the close of trading on Friday.

The FHFA argues that, when it came to mortgage securities purchased by Fannie and Freddie during the years leading up to the financial crisis, the banks failed to meet their due-diligence duties under securities law.

Large financial institutions are facing investor lawsuits over problem mortgages as well, though these investors want the big banks to repurchase problem loans they sold them before. FHFA is reportedly seeking reimbursement for losses on securities held by Fannie and Freddie.

The list of defendants is a who-who’s of mortgage finance: Bank of America Corp., Goldman Sachs Group Inc., J.P. Morgan & Chase & Co., Citigroup Inc., Deutsche Bank, Barclays PLC, Nomura Holdings Inc., Morgan Stanley, Ally Financial Inc., Credit Suisse Group Inc., First Horizon National Corp., General Electric Co., the HSBC North America Holdings unit of HSBC Holdings, The Royal Bank of Scotland Group PLC and Société Générale S.A.

There will be a lot of I told you so's and about times over that bit of news.

Robo-Signing Redux: Servicers Still Fabricating Foreclosure Documents

Several dozen documents reviewed by American Banker show that as recently as August some of the largest U.S. banks, including Bank of America Corp., Wells Fargo & Co., Ally Financial Inc., and OneWest Financial Inc., were essentially backdating paperwork necessary to support their right to foreclose.

Some of documents reviewed by American Banker included signatures by current bank employees claiming to represent lenders that no longer exist.

The banks argue that creating such documents is a routine business practice that simply "memorializes" actions that should have occurred years before. Some courts have endorsed that view, but others, such as the Massachusetts Supreme Judicial Court, have found that this amounts to a lack of sufficient evidence and renders foreclosures invalid.

According to a document submitted in a Florida court by Bank of America Corp., bank assistant vice president Sandra Juarez signed a mortgage assignment on July 29 of this year that purported to transfer ownership of a mortgage from New Century Mortgage Corp. to a trustee, Deutsche Bank. Two problems with that: New Century, a subprime lender, went bankrupt in 2007; and the Deutsche Bank trust that purported to hold the loan was created for a securitization completed in 2006 — about five years before Juarez signed it over to the trust. (Bank of America, as the servicer of the loan, was seeking to foreclose on behalf of the trust and its bondholders.)

Most of the pooling and servicing agreements governing securitizations require a complete chain of endorsements.

Banks Continue to Fabricate Documents, Commit Foreclosure Fraud

This is the dirty secret about robo-signing: it’s still happening. So are the forgeries and the document fabrication and the fraud upon state courts. After the scandal erupted last October, the banks promised to fix their operations. They did so by waiting everyone out and engaging in the exact same practices.

And you see, the banks HAVE to fabricate documents. Because they destroyed the private property system through improper and sloppy securitizations and lost or missing mortgage assignments during the bubble years, and as such they cannot prove standing to foreclose without lying. Robo-signing is a crime, but it’s also a cover-up for a much bigger crime, which involves MERS and improper mortgage transfer and securities fraud. The robo-signed, forged, fabricated documents are the smokescreen being used to foreclose and get the real problem off the books. Banks are trying to wriggle off the hook by saying they are merely “memorializing” past actions with the fake documents. Some courts aren’t buying it; the pooling and servicing agreements stipulate that all assignments showing transfers must take place within 60 days, not years later through “memorialized” actions.

Hattip to Barry Ritholtz.

Tsk tsk. Silly silly banks.

The JP Morgan shell game

J.P. Morgan continues to shell out money to keep from going to jail, or at least to avoid the prospect.

J.P. Morgan charged with rigging municipal bond deals

J.P. Morgan Securities rigged bids in at least 93 municipal bond deals in 31 states for eight years beginning in 1997, the Securities and Exchange Commission charged Thursday.

The government said the firm agreed to pay $228.2 million to settle charges

recent enforcement actions have portrayed this seemingly staid corner of the banking world as having been a feasting ground for corrupt financiers.

Thursday’s settlement was another mark against J.P. Morgan Chase, parent of the securities firm.

Last month, J.P. Morgan Securities agreed to pay $153.6 million for allegedly selling investors a complex investment that was secretly designed to help a hedge fund profit at their expense.

In 2006, the SEC charged J.P. Morgan Securities with abuses in the market for another type of investment known as auction-rate securities. In that case, the firm agreed to pay a $1.5 million fine.

J.P. Morgan Securities won the bidding in some transactions because it obtained information from the agents about competing bids, the SEC charged. In other instances, the bidding was rigged in J.P. Morgan’s favor, and in still other deals, J.P. Morgan helped other parties win by deliberately submitting losing bids, the agency said.

“Municipal issuers and investors didn’t stand a chance against the fraudulent strategies [J.P. Morgan Securities] and others used to guarantee profits,” Robert Khuzami, the SEC’s enforcement director, said in a statement.

The firm neither admitted nor denied wrongdoing in its settlement with the SEC. But in its settlement with the Justice Department, it admitted to illegal anti-competitive conduct by former employees. Under its agreement with Justice, the firm avoided prosecution.

“The investigations focused on a small desk that was discontinued and on certain employees who are no longer with the firm,” J.P. Morgan Chase said in a statement. “These employees concealed their conduct from management.”

Management doesn't commit illegal action. Small desks do. But there's no constitutional right to pack a small desk.

Let us help you protect yourself from us

Businesses criticize whistleblower reward plan

The government already pays bounties to whistleblowers for exposing fraud, from tax evasion to Medicare scams and Pentagon procurement abuses.

As part of an overhaul of financial regulation, Congress and President Obama last year demanded a formal reward system at the SEC, which polices Wall Street and punishes fraud against investors. Under the Wall Street regulatory overhaul known as the Dodd-Frank Act, whistleblowers are entitled to rewards of 10 percent to 30 percent of the money they help the SEC recoup through enforcement actions.

The Securities and Exchange Commission is scheduled to vote Wednesday on a far-reaching proposal to combat corporate wrongdoing by paying private employees to join the fight. The bounties could give tipsters a powerful incentive to expose the kind of abuses that have cost investors dearly, from the Enron and WorldCom accounting frauds of a decade ago to the Fannie Mae and Freddie Mac scandals of later years and alleged misrepresentations involving toxic mortgages.

Some business groups have said they are worried that the SEC could be overwhelmed with tips. They say they want to ease the burden on regulators by screening the complaints.

“Companies are far better equipped to assess complaints in the context of their particular business and to ‘separate the wheat from the chaff,’ ” two major Wall Street groups, the Financial Services Roundtable and the American Bankers Association, said in a December letter to the SEC.

The article includes mention of many of the pushbacks wanted by industry, which, on the whole, strip the regulations of most efficacy, in Guambat's opinion.

Regulators sit on fence, banks get whitewashed

U.S. says lenders must pay for wrongful foreclosures

The federal government on Wednesday ordered the nation's largest banks and mortgage servicers to identify and compensate borrowers whose homes were taken in wrongful foreclosures.

In Palm Beach County, 51,518 foreclosures were filed during that period.

Shari Olefson, a Fort Lauderdale attorney who represents banks, called the orders "fluff" and questioned how long it would take to determine wrongdoing in individual foreclosures.

"I don't know what 'improperly foreclosed on' means because at the end of the day, if someone isn't paying their mortgage, they should be foreclosed on," said Olefson, who wrote the 2009 book Foreclosure Nation: Mortgaging the American Dream. "If you're in default, it's proper to foreclose on you."

But homeowner advocates criticized the much-anticipated agreements Wednesday, saying they impose no financial penalties and are vague about what kind of foreclosure practices would garner reparations and what those reparations would be.

"This is a huge whitewash to shut everyone up and continue the status quo," said Palm Beach County homeowner advocate Lisa Epstein, who writes a blog called Foreclosure Hamlet. "The end result will be a lot of frustrated people requesting restitution that will probably be denied."

Mortgage Lenders Get A Slap On The Wrist

... bank regulators attempted to punish the banks for such practices today but I’m not so sure they succeeded.

The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision announced today a settlement with the 14 largest U.S. mortgage servicers including Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, and Wells Fargo.

The settlement doesn’t fine the banks for any of the wrongdoing but instead lists ways they need to improve their mortgage and foreclosure proceedings.I’ll stop there with the banker bashing that Dimon hates so much and instead take a minute to bash the OCC for getting in bed with the banks.

When you have to tell a bank not to purposely confuse borrowers and to communicate with them instead of keeping them in the dark about what you’re really doing to their mortgage something is wrong. No. Something is up.

Last month, a state financial regulator testified before the House Oversight Committee about his efforts with state attorneys general to gather data from subprime servicers. In his testimony, the regulator revealed that the data fell short of its potential to reveal foreclosure problems because the Office of the Comptroller of the Currency forbade national banks from providing loss mitigation data to the states.

(Check out Matt Stoller’s piece about the OCC cover up: Comptroller of the Currency Orders National Banks to Cover Up Foreclosure Scandal)

Now, a month later, the OCC and other regulators have basically announced that the foreclosure problems weren’t that bad,and that the bank can figure out how to resolve the residual problems on their own. The banks, I’m sure, couldn’t agree more.

Analysis: U.S. banks still face big foreclosure risks

In March, the OCC and other bank regulators bolted from a joint effort by the 50 states' attorneys general and multiple federal agencies to reach a "global" settlement with the servicers on terms tougher than those favored by the OCC.

OCC spokesman Robert Garsson said there had not been any intent to undercut the other regulators, or protect the banks at the expense of consumers. Referring to the banks' practices in servicing mortgages, he said, "From our perspective there's a process that's broken and needs to be fixed. Our enforcement orders will accomplish that."

In reality, within their states, the attorneys general have stronger powers than federal regulators to prosecute wrongdoing involving foreclosures. Foreclosures mainly are governed by state, not federal law. And the attorneys general have authority under state law to bring both criminal and civil cases for violations such as submitting false affidavits, creating false mortgage assignments, and forging signatures.

They also can bring lawsuits in state courts demanding restitution to homeowners and new requirements -- potentially stricter than those imposed by the OCC -- for handling foreclosures and loan modifications. Attorneys general in Florida and New York already have investigations well under way, and have subpoenaed law firms that handle large numbers of foreclosures for the major banks.

Federal bankruptcy courts oversee foreclosures for homeowners who are in bankruptcy. The U.S. Trustees Office, an arm of the Justice Department that oversees the integrity of the bankruptcy courts, has launched actions in bankruptcy courts around the country alleging that representatives of the banks committed fraud on the courts by knowingly submitting forged and fraudulent documents.

The U.S. Trustees office is working with local federal prosecutors in some areas, potentially leading to a series of criminal prosecutions.

Investor trusts that purchased securitized mortgages have filed large numbers of lawsuits against the banks, alleging that they never actually turned over to them the mortgages that they had bought. The suits claim that the banks never provided the documents legally required to turn over ownership.

A rapidly increasing number of state courts and federal bankruptcy judges around the country have begun to routinely throw out foreclosure cases when the banks cannot produce authentic documents showing who owns the mortgages. The courts' actions have slowed or halted foreclosures in areas subject to those rulings. RealtyTrac, which publishes foreclosure statistics, said the court decisions were largely responsible for a 27 percent decline in foreclosures from a year earlier.

U.S. judge to sanction LPS for lying to court

A federal bankruptcy judge in New Orleans said she will impose sanctions on Lender Processing Services, after concluding that the mortgage servicing company deliberately committed fraud on the court in a foreclosure case, by giving false testimony and submitting a "sham" affidavit.

The judge granted a motion by the U.S. Trustee's Office for sanctions, and said she would decide on financial and other penalties against LPS later, after holding a hearing.

Her opinion in the bankruptcy of Ron and LaRhonda Wilson, also sharply criticized the entire mortgage servicing industry.

"One too many times, this Court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry," she wrote.

Related reading:

In Financial Crisis, a Dearth of Prosecutions Raises Alarms

Why Isn't Wall Street in Jail?

That which doesn't kill Wall St. makes it stronger

Paul B. Farrell, that irascible old coot, is at it again.

Commentary: Too late to jail bank CEOs; only revolution will succeed

Just three years after Wall Street’s crooks “brought down the world’s economy” Goldman’s Blankfein and his buddies are paying record bonuses, and laughing at us.

Seriously, think about it folks: Since the 2008 meltdown magazines and newspapers have analyzed the 2008 crash to death. It really is old news, history. Journalists churned out book after book: “Greenspan’s Bubbles,” “House of Cards,” “Trillion Dollar Meltdown,” “13 Bankers,” “Dumb Money,” “Bailout Nation,” “All the Devils Are Here,” “The Big Short,” “Too Big to Fail,” “The Failure of Capitalism,” “This Time is Different,” “And Then the Roof Caved In,” on and on, ad nauseum. All talk, no action, and no effect.

Get it? With every book, every editorial, every expose the past three years, Wall Street bankers actually grew stronger, got richer, more arrogant, bolder on bonuses, impervious to attacks, even taunting us, like the dictators Mubarak, Ben Ali and Gadhafi, confident they could do no wrong, confident no one would rebel. Jail? Our moment to act is long past. We blinked.

I hope that whetted your appetite. The rest is classic. So classic, Guambat wonders if ever Mr. Farrell was a long-haired type, or is just now getting around to being long harried.

Fannie closes doors on foreclosure law firms

Foreclosure law firm lays off nearly half of its staff, after losing Fannie Mae

A Hollywood [Florida] law firm that processes thousands of foreclosures for major lenders laid off almost half of its 568 employees Monday, days after the government-owned mortgage giant Fannie Mae pulled its files from the practice.

Monday's layoffs echoed the massive job cuts that the law office of David J. Stern and public-traded affiliate DJSP Enterprises instituted after Fannie Mae and Freddie Mac, the other federal mortgage guarantor, dumped them. Fannie and Freddie comprised the bulk of Stern's business. About 700 Stern employees lost their jobs, according to regulatory filings.

Lawyer held in contempt over 'fraud' in foreclosure filing

Miami-Dade Circuit Judge Maxine Cohen Lando expressed her displeasure Friday in a case that involved a property in Homestead with a $265,134 foreclosure judgment issued in July.

Lando said the so-called original note and original mortgage were filed months after the bank said those documents were lost.

"That in itself is a fraud upon the court," Lando wrote in an order to show cause as to why she should not hold Ben-Ezra & Katz attorneys in contempt.

But, she added, the action "pales in comparison" to the fact that the mortgage and note are to a different property in Lehigh Acres, and that the documents are improperly signed and notarized. Lando said her verbal contempt finding on Friday would be followed by a written order.

The judge dismissed the foreclosure case and banned the lender from refiling it.

See, The Ball and Chain of Title

Support Our Troops? Nah, screw 'em

There is a US Federal law that offers certain legal protections to military personnel and their families against the usual rude intrusions of civilian life. It's called the The Servicemembers' Civil Relief Act. See this and this.

The Big Banks, which the troops seemingly protect don't always return the favor, or care about the law -- until, that is, they get caught. This is true, or so it seems, about JP Morgan and BofA, from the looks of these stories:

New Program to Help Military Homeowners, Bank of America Announces

I received an email last month from Sgt. Keith Oliver – a soldier currently deployed in Iraq. He told me that after Bank of America had reduced his payments for two years the bank suddenly came back and said he owed about $19,000 or else he would face foreclosure.

He kept calling the bank to explain he was deployed but Oliver said he bounced from one department to another until finally he contacted us at “GMA” to ask for help.

When we called Bank of America it quickly realized the error and fixed the situation with Oliver.

Bank of America announced this morning on “GMA” that it will help members of the military who have trouble meeting their mortgage payments by creating a new program to assist those active duty soldiers.

“What we’re going to do is set up a program of our own that allows us to reduce their principal if they get in trouble, extend their payments, bring their rates down,” Larry DiRita, a spokesman for Bank of America, said.

“Our goal is, look, if you are a military person, you are deployed, you don’t need to be worrying about your house. If you do find yourself in a distressed situation let us know and we will start working with you right away,” he told me.

Chase spends $2M to fix errors on military mortgages

Marine Capt. Jonathon Rowles, now assigned to South Korea, alleges Chase committed a number of violations, including failing to give the proper effective date of the interest rate reduction, repeatedly requiring him to re-apply for protections, and trying to collect on inaccurate account balances.

Rowles alleged that Chase Home Finance, a subsidiary of JPMorgan Chase, failed to reduce his interest rate to 6% on the effective date of his active-duty status and required him to re-apply for protections no less than four times a year after that. He also alleges that starting in April 2009, Chase tried to collect "an inaccurate account balance" resulting from "its own systemic errors in servicing the loan," according to the lawsuit, filed July 6 in U.S. District Court in Beaufort, S.C.

Chase has advertised itself as a military-friendly bank since at least 2005, when it began touting its Home Finance Military Mortgage program, which offers a discount on closing costs in home purchases or refinancing for military members and retirees.

Bank ends student loan deferrals for troops, then reverses decision

the bank was contacted by the wife of a soldier serving in Afghanistan, and she was told the bank decided in December to stop allowing active-duty troops to delay paying their student loans.

"They informed me that they are no longer deferring private student loans for active duty military personnel," said Kerri Napoli, whose husband, Army Pfc. Andrew Napoli, is now serving near Kandahar.

After repeated conversations with Chase, Napoli says she told the bank last month that she had contacted NBC News. The next day, she says, the bank told her it would grant her husband an exception to the new policy and defer his loan.

The bank also has had second thoughts about ending a program aimed at helping U.S. troops with their family finances. After NBC News contacted the bank about why it had stopped allowing deferred payments, a Chase official said that decision was being reversed and the program would be reinstated.

J.P. Morgan Apologizes for Military Foreclosures

A J.P. Morgan Chase & Co. executive, at a U.S. House hearing Wednesday, apologized for wrongly foreclosing on military families and overcharging thousands for mortgages, as lawmakers weigh whether new legislation is needed to help prevent military personnel from losing their homes and getting hit with high interest rates.

She said the company is embarrassed over the matter, and apologized for the bank's errors.

But lawmakers didn't sound satisfied. In a heated exchange, California Rep. Bob Filner, the top Democrat on the panel, made it clear he doesn't think an apology is enough.

"You broke the law. How are we going to hold you accountable?" Rep. Filner said. "Everything is impersonal. Nobody is ever responsible and yet these people's lives are turned upside down. You can't just apologize...and then, this is over."

Chase initially found it overcharged at least 4,000 military personnel in active service and took the homes of 14. However, Chase's testimony Wednesday shows the firm has now found more problems--it said it overcharged 4,500 active-duty military members and wrongly foreclosed on 18.

Lawmakers at the hearing voiced concern that Chase, a company that received funds from the government's 2008 financial-industry government rescue program, would have made such errors. They were also concerned that the problem could be rampant, with other banks overcharging military personnel and threatening to take their homes just as the federal government is trying to combat the nation's foreclosure crisis.

Banks reminded on military personnel protections

Holly Petraeus, wife of Gen. David H. Petraeus, the top American military commander in Afghanistan, pointed the firms to the Servicemembers Civil Relief Act, which limits the interest rates that banks can charge those in the military and prevents them from foreclosing on homes of active duty service members without a judge's expressed authorization and a formal hearing where the homeowner is represented.

The recently-tapped head of military issues for the new Consumer Financial Protection Bureau, sent a letter to the nation's 25 largest banks Tuesday urging them to comply "with important legal protections for military personnel."

Elizabeth Warren, the Harvard law professor helping to set up the new consumer watchdog, appointed Petraeus to the post early last month.

Chase's people are trying to spin the story down a few notches. Forget the harassment and foreclosures. There really isn't all that much money at issue here, is their subliminal message, reported the the WSJ article noted above:

Stephanie Mudick, executive vice president of J.P. Morgan's office of consumer practices, told the House Committee on Veterans' Affairs the bank has so far sent the 4,500 overcharged service members $2.4 million including interest, and the median payment has been $70 plus interest.

Chump change.

Chumps, indeed.

Massachusetts Supreme Ct upholds law, banks quiver

Guambat has been one of the smallest of very many voices discussting the securitization of real estate mortgages.

Banks very merrily and purposefully just disregarded the law of real property, setting up their own rules which they determined were above the law. They're feeling a bit insecure about their security just about now.

Indeed, Fox News would seem to have you believe that the nasty courts were just being unsportsman like to the banks:

Court Deals Blow to Banks in Foreclosure Case

Banks were dealt a big blow on Friday after a Massachusetts top court ruled Wells Fargo didn't have the right to foreclose on a pair of homes because they securitized and repackaged the mortgages.

The ruling could impact the broader financial industry because virtually all banks slice mortgages up and sell them back to investors.

First, understand what's happened. The courts are not saying that peoples' debts are invalid. This is not about the debt. The courts are saying banks cannot just take peoples' properties from them to recover the debt.

This is about property law, not creditor rights. And the banks simply ignored the property law. In a land of laws, that's a risky thing for anyone to do. Of course, banks have had it all so one sided for so long they seem to have overlooked the notion.

A more level-headed Fox scribe at the WSJ put it this way:

In the ruling, the court said, "We agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure. As a result, they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties, and their requests for a declaration of clear title were properly denied."

A blog post in the Washington Post has done a very useful service in providing a link to the Massachusetts Court's Decision, and in discussing it:

After examining the paperwork filed by the banks, a lower court judge, the Massachusetts Land Court's Keith C. Long, said he had determined that the mortgage "note" that proves who the owner is had not been properly transferred when the banks auctioned off houses.

Long's decision hits on one of the most sensitive issues related to how mortgages were securitized: something called "endorsements in blank." In the rush to aggregate and sell and then resell mortgages, many of the mortgages documents were transferred without explicitly naming who the note was being sold to.

The financial services industry has argued that this practice is legally valid but Long ruled, "These blank mortgage assignments were never recorded and they were not legally recordable."

The banks had appealed Long's decision, arguing that they had clear title to the properties. But on Friday, Massachusetts Supreme Court Justice Ralph D. Gants wrote that the court agreed that the banks "failed to make the required showing that they were the holders of the mortgages at the time of foreclosure."

The link that was provided is here.

The Decision noted that this was hardly a trifling technical error. It was a massive error committed in a situation where the banks were given powers of significant proportion over other people's property without any judicial oversight. The conflicts of interest are obvious, and in need of obvious integrity, which the banks lack. In the more solemn words of the Court, the Justice said,

"Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, we adhere to the familiar rule that "one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void."

One of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose.

Any effort to foreclose by a party lacking "jurisdiction and authority" to carry out a foreclosure under these statutes is void.

For the plaintiffs to obtain the judicial declaration of clear title that they seek, they had to prove their authority to foreclose under the power of sale and show their compliance with the requirements on which this authority rests.

Like a sale of land itself, the assignment of a mortgage is a conveyance of an interest in land that requires a writing signed by the grantor.

Where, as here, mortgage loans are pooled together in a trust and converted into mortgage-backed securities, the underlying promissory notes serve as financial instruments generating a potential income stream for investors, but the mortgages securing these notes are still legal title to someone's home or farm and must be treated as such.

Where a plaintiff files a complaint asking for a declaration of clear title after a mortgage foreclosure, a judge is entitled to ask for proof that the foreclosing entity was the mortgage holder at the time of the notice of sale and foreclosure, or was one of the parties authorized to foreclose under G.L. c. 183, § 21, and G.L. c. 244, § 14. A plaintiff that cannot make this modest showing cannot justly proclaim that it was unfairly denied a declaration of clear title.

We have long held that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment.

the plaintiffs contend that, because they held the mortgage note, they had a sufficient financial interest in the mortgage to allow them to foreclose. In Massachusetts, where a note has been assigned but there is no written assignment of the mortgage underlying the note, the assignment of the note does not carry with it the assignment of the mortgage.

the plaintiffs initially argued that postsale assignments were sufficient to establish their authority to foreclose, and now argue that these assignments are sufficient when taken in conjunction with the evidence of a presale assignment. They argue that the use of postsale assignments was customary in the industry

To the extent that the plaintiffs rely on this title standard for the proposition that an entity that does not hold a mortgage may foreclose on a property, and then cure the cloud on title by a later assignment of a mortgage, their reliance is misplaced because this proposition is contrary to G.L. c. 183, § 21, and G.L. c. 244, § 14.

If the plaintiffs did not have their assignments to the Ibanez and LaRace mortgages at the time of the publication of the notices and the sales, they lacked authority to foreclose under G.L. c. 183, § 21, and G.L. c. 244, § 14, and their published claims to be the present holders of the mortgages were false.

Because an assignment of a mortgage is a transfer of legal title, it becomes effective with respect to the power of sale only on the transfer; it cannot become effective before the transfer.

A valid assignment of a mortgage gives the holder of that mortgage the statutory power to sell after a default regardless whether the assignment has been recorded. Where the earlier assignment is not in recordable form or bears some defect, a written assignment executed after foreclosure that confirms the earlier assignment may be properly recorded. A confirmatory assignment, however, cannot confirm an assignment that was not validly made earlier or backdate an assignment being made for the first time.

In this case, based on the record before the judge, the plaintiffs failed to prove that they obtained valid written assignments of the Ibanez and LaRace mortgages before their foreclosures, so the postforeclosure assignments were not confirmatory of earlier valid assignments.

Finally, we reject the plaintiffs' request that our ruling be prospective in its application. A prospective ruling is only appropriate, in limited circumstances, when we make a significant change in the common law. We have not done so here.

The legal principles and requirements we set forth are well established in our case law and our statutes. All that has changed is the plaintiffs' apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.

The banks have tried to make the claim that the deficiencies were merely "technical", but they did a very heavy make-over on some very fundamental property law principles when they tried to pull this little caper. These cases were about taking title to land, not about suing on a debt.

The banks are great ones when it comes to making so many technical conditions to entrap others or baffle regulators or sneak through purposefully designed holes in legislation. When they trip up themselves in their own technical contrivances, they should bear the risk they created.

Bank robbers

Brett Arends looks back, in disgust, on 2010, at the Great Bank Heist:

The great bank heist of 2010

They dodged the bullet of real reform, probably for all time. They bounced back to post huge profits, helped by legal theft from the middle class. They completed their takeover of both political parties — and bought themselves a new Congress even more pliable than the old one.

Middle-class America is flattened, devastated and broke. The bankers that caused it all have escaped punishment. They’re raking in huge profits. Oh, and the tax cuts just got extended for high earners, too!

In 2010, Wall Street’s year, Schwarzman’s only real sin was getting caught flaunting his contempt for the nation.

Far worse went on behind closed doors.

Consider the Dodd-Frank reform act — all 2,300 pages of it. Sure, it fills in a few regulatory gaps, ends a couple of the more gratuitous abuses. You have to throw a few scraps to the masses.

But most of the reforms are meaningless. New rule books and committees. Bah. They’re like half-built fences. Anyone can just walk around them.

Meanwhile, missing from this giant “reform” bill was any actual, serious reform like threatening crooked bankers with real jail time. Or ending the “other people’s money” racket of securitization, or smashing “too big to fail” megabanks into smaller firms that can never again threaten the republic.

Instead we’ve enshrined “too big to fail” as national policy. A standing taxpayer guarantee to the biggest banks. What a deal!

It’s amazing when you think about it.

Look at the chaos and catastrophe these guys have left in their wake. One middle-aged man in five is out of work. Tens of millions of families have been financially wiped out. The national debt has nearly doubled.

If inner-city gangs had done this to America, we’d have martial law. If Arabs had done it, we’d have launched another war.

Wall Street bankers? They’ve walked away scot free. And they’re actually being rewarded.

By keeping short-term interest rates near zero, the Fed is basically robbing your grandmother, and other hard-working savers, and giving to Wall Street. The banks

borrow from us for free, and then lend us back our own money at interest by purchasing Treasury bonds.

And in a perfect circle of cynicism, the beneficiaries of bailouts are now spending some of their loot lobbying our Congress to overrule us on reform.

The commercial banks and investment firms spent a total of $118 million lobbying just in 2010, according to the Center for Responsive Politics.

That included $4 million spent directly by Citigroup Inc., nearly $3 million by Bank of America Corp., $3.5 million by Goldman Sachs Group Inc. and $2.8 million by Schwarzman’s Blackstone.

This is in addition to the vast campaign contributions the top brass at these firms have lavished on pliable congressman, and indirect political lobbying through trade bodies like the American Bankers Association.

But it’s unfair to give the bankers all the credit for subverting democracy.

They couldn’t have done it without the Democrats.

Wall Street has spent years capturing the party establishment.

Think of the lavish campaign checks. The lucrative hedge fund “adviser” jobs. The pervasive influence of pinstriped “progressives” like Larry Summers and Bob Rubin.

This was the year the investment paid off. Big time.

the Democrats would have got a lot more credit — and contributions — from the rest of America if they’d stood up to Wall Street.

Sucking up to Wall Street didn’t help them anyway. Wall Street still turned Republican. The American Bankers Association, J.P. Morgan Chase & Co, Citigroup, Bank of America, even Goldman Sachs: This time around, more than half their donations went to the GOP.

Most Americans don’t realize it, but this talk of a “grassroots” and “anti-establishment” election was a bunch of hooey. What really happened was that Wall Street has just bought itself a new, even more compliant Congress.

The new Republicans are already fawning over the bankers. They’re promising to stop the restrictions on (ahem) “financial innovation.” Congressman Spencer Bachus — the next chairman of the House Financial Services Committee — actually said “Washington and the regulators are there to serve the banks.” Let the good times roll!

It was the greatest heist in history. The bankers pulled it off under everyone’s nose.

As the old punchline goes, Rudolph the Red knows a reign, dear.

Pulling, not pushing, on strings

RBA expected rates top-up: borrowing costs

The minutes show policymakers expected banks to move by more than the official hike, and that they will factor borrowing costs for households in future decisions.

Of course the RBA did. Whose hand is up whose puppet?

The Four Pillar policy was enacted, so we are told, to keep the existing Big Four from devouring each other and thereby lessen competition. See the discussion of The 'four pillars' policy in this Senate report.

But they've worked so conveniently together that it has ended up as a bulwark against new entrants, especially foreign ones, with the typical moral hazard consequence. The feared duopoly is now the fearsome oligopoly of four.

Survey calls banks' bluff on rates rises

Analysis of regulatory figures by the Australia Institute has found banks' interest expenses have risen less than the RBA's interest rate rises over the last 12 months.

Banks have claimed that their costs have been rising by more than the official rate increases, saying they have had to lift rates above the official moves to recoup those higher costs.

A senior research fellow at the institute, David Richardson, says it has not found any evidence to support their claim.

"Their profits unambiguously have gone up, there's no doubt about that, and it looks like they've been exploiting the lack of competition as a result of the GFC," he said.

But the Australian Bankers' Association says the research is completely fabricated.

ABA chief executive Stephen Munchenberg says the RBA debunked the claim yesterday when it released minutes saying the banks' cost of funding was rising.

Why Australian Banks Need More Competition by Kris Sayce on 10 March 2009

It is taking a very long bow to suggest that because Australia maintained a ‘Four Pillars’ banking policy that has somehow saved the local banks from oblivion. In the world of cause and effect ‘Four Pillars’ is nowhere to be seen. It is a mere coincidence.

What the ‘Four Pillars’ policy has ensured is that customers are subjected to a government mandated banking cartel. This cartel has allowed them to get away with charging customers high fees. We don’t have a problem if a bank wants to charge fees, in fact we would have a problem if the government tried to legislate against it.

That is why a completely free market is necessary to make sure that companies do not have the opportunity to take advantage of a distorted market. In a market without distortions, customers would have more competition and would have greater choice to move to a bank that didn’t charge high fees. Now, there is very little choice.

So, if the ‘Four Pillars’ policy was abandoned, what effect would it have on the Australian banking industry.

For a start, they would compete with each other for customers. Would this necessarily mean the banks would take more risks? Mr. Macfarlane clearly believes the two are connected. Why competition in the banking system should be treated differently to competition in any other industry is hard to fathom.

Guambat remembers when, in the 1990's, the Australian Big Four, despite the Pillar Policy, were on their knees.

Westpac in particular was doomed, which was when Mr Packer came a courtin' and scooped it up on the cheap, then years later, doing another Bondy, he sold it back to the market.

The Four Pillars did nothing to prevent bank instability then and it is only a coincidence that it existed side by side with the Australian economy's dodge of the banking crisis bullet more recently.

It was not stable banking that saved the Australian economy over the last couple of years, it was a stable of earthly assets that China needed. Which is also why the Australian housing market does not resemble the US or London residential markets:

(Image via Barry)

RELATED:

Aussie banks too big to flail

Australia play bait and switch; no pillar talk

Australia play bait and switch; no pillar talk

The usual suspects are all out talking around the real issue of bank oligopoly written into the 4 pillar policy.

They believe that if you can just tweak a fee or two here or there, they'll have you bouncing from pillar to post, with no real damage done to their bulwark. Fees are easy to adjust here or there. But competition: now that's a curly one.

So toss a few exit fees on the barby, and she'll be right, mate.

Terry McCrann: Bank shopping beware

It looks so obvious. And easy. Abolish, reduce or limit so-called 'exit fees'. What you pay to terminate your mortgage early. But usually payable, only very early, like in the first four years of a mortgage.

So if there's only a low exit fee, or better still no exit fee, people will be -- literally -- free to move.

First little problem. If there are no longer exit fees, there will be -- or should be -- entry fees. Because that's exactly what an exit fee is -- a deferred entry fee.

In the good old days, you paid up-front when you got your home loan for the costs of establishing -- and yes, there are costs to a bank in agreeing to a home loan and setting up -- a mortgage.

Then along came the non-banks, and as a competitive lure, they offered low or zero establishment charges, which would be recouped in the interest paid each year over the life of the loan.

Except if a borrower paid the loan out early: hence very big exit fees. Which the banks then followed in order to remain competitive. [Yes, he said "competitive". Guambat can't believe it. Oligopolistic, really.]

So if you abolish exit fees, you might well undermine the very competition that this whole exercise is supposed to be trying to achieve.

There's not much point doing it, if you enable people to switch from one big bank only to another big bank.

Yes the CBA has just made $6 billion. But that's on $666 billion of assets. It and indeed all the banks make less than 1 of profit on every dollar of assets.

They don't have a lot of margin for error. The one thing worse than a bank making too much profit is one making not enough.

Crucially, it's not just about the banks. The tougher we make it for the banks, the even tougher we would make it for the non-banks.

So the tougher we make it for the big banks, we are likely to create less competition from the non-banks and even the few remaining smaller banks.

This is a much bigger and more complicated issue than simply attacking bank fees and charges. Which is why we need a much broader inquiry into banks and the financial system.

In particular, how to take costs out of the system. How to create real competition.

But wait -- Did Guambat just hear a call for real competition??

Naw, g'wan. Couldn't na bin. He just wants to take costs out of the system. Like pay and perks and what. Never happen. Tell 'em he's dreamin'.

Aussie banks too big to flail

The US government has a policy that its big banks are too big to fail. And how has that worked out?

The Australian banks have a clear, legislated policy with the same result. The Australian bank policy is referred to as the "Four Pillar" policy. The policy has, among its many intended and unintended consequences, given the Big Four unassailable power to dictate the course of micro and macro economic direction.

The effect of the policy is to assure that the oligopoly of the National Australian Bank (NAB), Westpac (WBC), the Commonwealth Bank (CBA) and the Australia-New Zealand Bank (ANZ) brook no interference from foreign competition, or political inference either for that matter, and are large enough at home to prevent any upstarts from starting to grow up. It suggests, underneath the political grandstanding, the true strangle hold that a few families have long held over the economic destiny of the country, for good and for bad.

And it should be mentioned that this policy is the long-lasting child of "both sides" of the political spectrum, the liberal Labor and the conservative Liberal.

Governments had a hand in banks' gouging

Many years ago those of us of the ''old left'' said it was not wise to deregulate the banking industry (''The bank that stopped a nation'', November 3).

Then Paul Keating and John Howard sold the Commonwealth Bank. We of the ''old left'' said this, too, was not wise.

Competition from a government-owned bank acted as a deterrent to private banks ripping off their clients by outrageous interest rises and ''fees'', unscrupulous practices to con people into taking on credit responsibilities they could not afford and mean-spirited foreclosures.

We were told we were silly for thinking that. Banks were now benevolent and kindly institutions. They would cherish their clients.

And how is that working out?

Reserve Bank of Australia lifts official interest rate, Commonwealth Bank moves higher than RBA

THE Commonwealth Bank has lifted its standard variable mortgage rate by 0.45 percentage points.

It is almost double the increase in the Reserve Bank's official cash rate.

Industry analysts say rival banks are likely to follow the CBA's lead.

Australia's Banks Find Winning Means Losing as Swan Condemns `Cash Grab'

Commonwealth Bank, Westpac Banking Corp., National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. -- dubbed the “four pillars” after a law preventing takeovers among them -- accounted for 87 percent of the home lending market in September, up from 76 percent three years ago.

Westpac, Australia’s second-largest bank, yesterday said profit in the six months to Sept. 30 almost tripled from a year earlier, while ANZ Bank said last week that earnings in the period surged 69 percent and National Australia, the biggest lender to companies, posted a cash profit gain of 32 percent. Combined profit at the lenders reached a record.

The lenders have benefited from an economy that skirted the worst worldwide recession since World War II and government guarantees on deposits and debt issues introduced by Treasurer Swan at the height of global financial crisis.

Banks, rates and regulations: who's in charge here?

It's hard to imagine an issue that better shows up the piss and wind of our politics than banking and interest rates.

The Great Truth That Dare Not Speak It's Name here is the mildly unsettling thought the governments in unprepossessing backwaters like Australia can do increasingly little to bring influence to bear on the tides that wash through their economies. Yesterday was an extraordinary example. The RBA pulls at perhaps its most direct monetary policy lever and one of the key organisations it was seeking to influence jumps above and beyond the Reserve's mark due to fundamentally unrelated international market factors.

The political necessity is of course to maintain the impression of Being In Charge. To do otherwise would invite some awkward questions. And so we will bluster on for days and weeks now with talk of regulation and improved competition and inquiries. At the end of the day you have to think that the gorillas in the room will do pretty much as they please.

And what are we going to do? Bluster presumably, and then pay up.

The most telling response to the CBA rise yesterday? That bank's shares bounced on the back of it. That's the only commentary that matters.

Hypocrisy rules bank bashing

WAYNE Swan personally granted more market power to Ralph Norris and Gail Kelly.

Now, less than two years later, he is expressing concern about bank competition.

The whole argument is, frankly, deeply concerning when considering the sheer hypocrisy on display.

When CBA wanted approval to increase its market share in Western Australia to 46 per cent via the BankWest deal two years ago, Swan said yes and so did the ACCC.

When Gail Kelly wanted the green light to increase her share of the national market and NSW market to 20 and 25 per cent, respectively, the same competition defenders gave her the big tick the very same year.

Swan is clearly playing for time on the Norris attack on rates and should step carefully with the aim of only acting in defence of competition.

Banks can do more to allow customers to swap accounts but despite the rhetoric are sitting on their hands.

Now re-read that carefully. It contains the very implicit illusion that the guaranteed oligopoly of the Big Four is some kind of competition, when it is more like the arrangement of deck chairs on the Titanic. Swap accounts amongst them? A fool's game.

Switching banks: what it could cost

Yesterday the Reserve Bank lifted interest rates 0.25 percentage points, surprising consumers who had been expecting rates to be kept on hold. The Commonwealth Bank moved immediately to raise their rate by 0.45 points.

Citywide Lending director Rodny Ghalie said the big banks effectively took turns taking the public perception hit, alternating who would up their rates first.

Still too hard to change banks: survey

Most people still find it too hard to change banks despite federal government attempts to improve competition, consumer group Choice says.

A Newspoll survey, conducted for Choice, found that 80 per cent of respondents had never considered switching banks, even though legislation had theoretically made that process easier.

"The main reason for that is it's just too much hassle," Choice spokesman Richard Lloyd told ABC Radio on Thursday.

"Probably even worse, people just don't think it's worth their while."

Switching banks too much effort for most, poll finds

NEARLY 80 per cent of Australians have not thought about switching banks because of the effort involved and fear it would not make any difference anyway, a poll shows.

Choice's Richard Lloyd said customers lacked confidence in the banks' ability and willingness to compete.

Guambat's experiences over many years with various of the Big Four lead him to the conclusion that, at the end of the day, it's all much of a muchness. Once the banks gave up relationship banking and folded the CBA into the Four Pillars club, there was no longer anything between them.

And why should the banks compete? Really compete.

Why, when the Four Pillars policy guarantees complacency amongst them and freedom of fear from others?

The issue in Australia is not over the lack of control of their bankers over world economics and financing costs, it's about how the domestic banks can stick it to Australian consumers, passing through every last cent of that cost without regard to foreign competing banks who may be willing to share some of that cost for the business.

And, you don't think the Four Pillar policy is a blank check underwriting the Big Four? Go back and read the article above that said, "the most telling response to the CBA rise yesterday? That bank's shares bounced on the back of it. That's the only commentary that matters."

The Countrywide Legacy: The BofA Put

Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages

A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.

“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview.

If the issues aren’t fixed within 60 days, BNY Mellon should declare Countrywide in default on its servicing contracts, Patrick said.

The initiative covered by the letter sent to Bank of America and BNY Mellon yesterday is separate from the effort coordinated through Dallas lawyer Talcott Franklin, Patrick said. That firm is coordinating action for a larger group of mortgage-bond investors holding more than $500 billion of the debt.

PIMCO, BlackRock, and NY Fed Ask BofA to Repurchase Mortgage Bonds

With investors of this stature looking to force a bank as significant as Bank of America to buy back bonds, you can expect a tidal wave to begin. Other mortgage bond investors will almost certainly begin to follow suit. Other banks will also likely be the target of similar demands. If banks refuse, then lawsuits will likely follow.

How big banks helped to greece the wheels of commerce

Banks Shared Clients’ Profits, but Not Losses

Here is the deal: Pension funds and mutual funds lend some of their stocks and bonds to Wall Street, in return for cash that banks like JPMorgan then invest. If the trades do well, the bank takes a cut of the profits. If the trades do poorly, the funds absorb all of the losses.

The strategy is called securities lending. Mr. Evangelisti said, all of the investments had been permitted under guidelines negotiated with the bank’s clients. JPMorgan, he said, did not take undue risks.

In addition to losing money for New Orleans workers and others, securities lending also played a central role in the near-collapse of the American International Group. Through securities lending, pensions and mutual funds borrow money to make trades, adding to the risks within the financial system.

Despite such troubles, the securities lending business has rebounded after plummeting during the crisis. Today shares with a combined value of $2.3 trillion are out on loan, according to SunGard, which provides technology services to financial companies. In 2007, before the bubble burst, the total on loan was worth $2.5 trillion.

The quick revival of securities lending raises concerns about whether banks and their pension customers have learned any lessons.

“What happened was the banks got greedy and they looked at the return they were getting on the collateral and said, ‘Why don’t we go further with this?’ ” said Steve Niss, the managing partner at the NFS Consulting Group, an executive search firm specializing in investment management. “But the clients got greedy right along with the banks.”

The banks did not do it on their own. What we have is fund managers and bank managers playing with other people's money. The can half-rightly point fingers at each other as they try to duck responsibility for their own distractions. But the fingers end up pointing in the eyes of the beholding fund beneficiaries.

Who wins and who loses? The people who saved. Who's accountable? Dunno.

And it's not just the savings funds managers. It's other managers of people's money, right down the Main Street from the savers who live there.

Looting Main Street (with a shadow copy posted here.)

The sewer bill, in fact, is what cost Pack and her co-workers their jobs. In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 — but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase. The result was a monstrous pile of borrowed money that the county used to build, in essence, the world's grandest toilet — "the Taj Mahal of sewer-treatment plants" is how one county worker put it.

What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human shit into billions of dollars of profit for Wall Street — and misery for people like Lisa Pack.

The original cost estimates for the new sewer system were as low as $250 million. But in a wondrous demonstration of the possibilities of small-town graft and contract-padding, the price tag quickly swelled to more than $3 billion.

County commissioners were literally pocketing wads of cash from builders and engineers and other contractors eager to get in on the project, while the county was forced to borrow obscene sums to pay for the rapidly spiraling costs.

Jefferson County, in effect, became one giant, TV-stealing, unemployed drug addict who borrowed a million dollars to buy the mother of all McMansions — and just as it did during the housing bubble, Wall Street made a business of keeping the crook in his house. As one county commissioner put it, "We're like a guy making $50,000 a year with a million-dollar mortgage."

These [bankers] aren't number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money.

"It's not high finance," says Taylor, the former bond regulator. "It's low finance." And even if the regulators manage to catch up with them billions of dollars later, the banks just pay a small fine and move on to the next scam.