The "Money" Quote


Regulators say all 19 banks undergoing the [stress test] exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs “exceptional assistance,” the government, that is, taxpayers, will provide it.

Does anyone believe anything that comes out of the Geithner Treasury Department at this point? I don't. I like Kevin Drum's reaction -- "I'm having a harder and harder time figuring out what's going on as time goes by. If everything is on the up and up, it doesn't make sense. If there are hidden wheels, though, I'm not sure they make sense either. Just what is Treasury up to?"

Speaking for me only

< President Obama Is Right On Afghanistsan | AG Holder Signals No Immediate Efforts to Enact More Gun Control >
  • The Online Magazine with Liberal coverage of crime-related political and injustice news

  • Contribute To TalkLeft

  • Display: Sort:
    Insane kabuki (5.00 / 1) (#1)
    by andgarden on Thu Apr 09, 2009 at 11:44:00 AM EST

    The sooner (5.00 / 1) (#2)
    by Ga6thDem on Thu Apr 09, 2009 at 11:54:06 AM EST
    the Geither plan gets killed the better. Does anybody have an idea as to what kind of votes this thing would get at the moment? Would it pass?

    No subject to legislation (5.00 / 2) (#8)
    by Big Tent Democrat on Thu Apr 09, 2009 at 12:08:44 PM EST
    but rather to acts of dubious legality by the FDIC.

    heh (5.00 / 1) (#3)
    by Turkana on Thu Apr 09, 2009 at 12:01:00 PM EST
    oh, i believe a lot of people believe everything that comes out of geithner's treasury department. you gotta have faith...

    I've been saying this for a while now... (5.00 / 5) (#12)
    by inclusiveheart on Thu Apr 09, 2009 at 12:13:33 PM EST
    The very riskiest part of the Geithner plan is that it requires that people have quite a bit of faith in the market's ability to recover and to recover quickly.  That's a risky play in light of the fact that people lost HUGE sums of money as a result of what really was only faith in the form of exuberance.  Thinking that after being burned they way they have that people will return to having a sense of faith and confidence without also having a really clear picture of what the data is supporting a rosy outlook is kind of a big stretch imo.  That's how his lack of transparency is going to be his undoing.

    and with the same people in charge (5.00 / 3) (#35)
    by Turkana on Thu Apr 09, 2009 at 01:21:27 PM EST
    why would anyone trust them?

    I dunno - but I think he'd do better (5.00 / 1) (#47)
    by inclusiveheart on Thu Apr 09, 2009 at 02:03:19 PM EST
    with charts and graphs than with riddles and oxymorons.

    You don't show up here often enough (5.00 / 1) (#55)
    by Militarytracy on Thu Apr 09, 2009 at 10:50:59 PM EST
    damn it for my taste!!!!  I've always appreciated your voice and intellect.  You'd better start making a show :)

    Use the COP report to set the benchmarks (5.00 / 1) (#4)
    by lambert on Thu Apr 09, 2009 at 12:03:36 PM EST
    Going forward, as it were.

    The criteria are: transparency, assertiveness, accountability, and clarity.


    Roubini (5.00 / 1) (#7)
    by inclusiveheart on Thu Apr 09, 2009 at 12:07:51 PM EST

    April 8 (Bloomberg) -- Bank takeovers worsened the financial crisis by making firms that were already too big even bigger, said Nouriel Roubini, the New York University professor who predicted the financial crisis.

    "The institutions are insolvent," Roubini said...

    I have to agree that all this Treasury communique does for me is question the validity of a passing grade on one of these stress tests.

    So how in hell (5.00 / 1) (#9)
    by Big Tent Democrat on Thu Apr 09, 2009 at 12:09:24 PM EST
    does he explain supporting the Geithner Plan?

    Roubini sees... (none / 0) (#10)
    by santarita on Thu Apr 09, 2009 at 12:12:08 PM EST
    the Geithner Plan as an assist in convincing the banks about the value of their toxic assets.  It then becomes a prelude to take over of some banks.

    I really don't know if I could answer (none / 0) (#26)
    by inclusiveheart on Thu Apr 09, 2009 at 12:47:22 PM EST
    that question with any authority.  It would be interesting to hear what he would say though.

    Like he's going to get anything else? (none / 0) (#39)
    by Militarytracy on Thu Apr 09, 2009 at 01:36:34 PM EST
    I think he has resigned himself to picking through the ashes of the Geithner plan for the precious metals that could remain.  I liken this to when Krugman realized he wasn't going to get a better stimulus bill, so now it was time to talk about what was useful in what he was getting whether it was the best choice for us or not.

    And.......he's probably on the money end of (none / 0) (#40)
    by Militarytracy on Thu Apr 09, 2009 at 01:37:37 PM EST
    something coming out of this trash plan

    The banks are not insolvent. (none / 0) (#57)
    by Green26 on Fri Apr 10, 2009 at 03:13:08 AM EST
    Roubini doesn't know what he's talking about. He must be trying to sell his books and make some money to supplement his academic income.

    I take the word and analysis of the FDIC, Treasury, etc.--over an academic who doesn't have the facts.


    What type of test is this? (5.00 / 1) (#16)
    by AX10 on Thu Apr 09, 2009 at 12:19:24 PM EST
    The criteria has been skewed to give a certain desired result.  "Change We Can Belive In" (TM) indeed.

    Geithner and Obama's hedgefund buddies are going to sink us all.

    February 26, 2009 NYT article... (5.00 / 1) (#18)
    by Addison on Thu Apr 09, 2009 at 12:23:42 PM EST
    Well, the fact that "passing" banks might get more bailout money isn't new. From the 2/26/09 NYT article:
    If federal banking regulators conclude that a bank would not have enough capital [when/if the economy gets worse], the bank would have to raise the extra money within six months or get it from the government in exchange for ceding a potentially big ownership stake.

    The idea of a bank "passing" or "failing" the test seems to have always been merely a political label on a process that was never designed to actually pass or fail banks. Therefore a discussion on whether these banks actually "passed" or "failed" is a dead end. To "pass" here means to complete.

    In a telephone conference call with reporters, officials from the Fed and Office of the Comptroller of the Currency said there would be no simple measure for "passing" or "failing" a test, and provided only vague descriptions of how they would interpret the results.

    So. I think the issue here is (a) that the "real" purpose of the stress test was political theater and to see how much bailout money the banks could realistically absorb into their gullets over the course of 2009, and (b) when the administration stated before that they might seeks a "potentially big ownership stake," does that actually mean anything at all? Is there any precedent for it meaning anything?

    Bad political theater in fact (5.00 / 1) (#21)
    by Big Tent Democrat on Thu Apr 09, 2009 at 12:27:03 PM EST
    I expected better kabuki, as andgarden puts it.

    Considering we even got the stage directions... (5.00 / 1) (#22)
    by Addison on Thu Apr 09, 2009 at 12:27:56 PM EST
    ...two months before the performance I have to agree.

    Here's the question (none / 0) (#23)
    by Big Tent Democrat on Thu Apr 09, 2009 at 12:34:29 PM EST
    is the "Geithner Plan" REALLY the Geithner Plan? As Peggy Lee sang (I know you are too young to know what I am talking about) "Is that all there is?"

    LOL I am not too old to remember, sadly (5.00 / 1) (#38)
    by Amiss on Thu Apr 09, 2009 at 01:32:31 PM EST
    even my grandchildren will not ever forget this economy and what it has done to everyone's (as in the common man, woman and child) hopes and dreams for a better life.

    There is a Peggy Lee/Patsy Cline... (none / 0) (#37)
    by Addison on Thu Apr 09, 2009 at 01:29:56 PM EST
    ...mixtape I made in my car's CD player RIGHT NOW. I assume that if that is, in fact, all there is you would prefer not to keep dancing with the Secretary.

    We might not find out if there's more until the bank stocks start tanking again. Geithner would not want to be blamed for stopping a rally -- however ephemeral, however small -- by unveiling a new policy (even if it was a better one).


    Where did anyone ever get (2.50 / 2) (#28)
    by ChiTownMike on Thu Apr 09, 2009 at 12:54:18 PM EST
    the idea that these tests were pass or fail tests in the first place? I don't thing the government ever said that.

    These tests are measuring whether further capitalization is needed to withstand further contracting of the economy. According to the article the goal is to attract private investment in the banks through the selling of stock and to have the banks sell their bad assets at what the market will  pay according to Geithner.

    The criteria of the tests is pretty tough imo.


    Tough? (5.00 / 2) (#36)
    by trillian on Thu Apr 09, 2009 at 01:28:05 PM EST
    Not according to Yves Smith...

    The whole point of this charade exercise was to show the big banks weren't terminal but still needed dough, and I am sure it will prove to be lots of dough before we are done. But they now have the Good Housekeeping seal, so the chump taxpayer can breathe easy that the authorities are taking prudent measures to make sure his money is being shepherded wisely.

    If you believe that, I have a bridge I'd like to sell you.

    We said from the beginning the stress tests were a complete sham. Just look at the numbers. 200 examiners for 19 banks? When Citi nearly went under in the early 1990s, it took 160 examiners to go over its US commercial real estate portfolio (and even then then the bodies were deployed against dodgy deals in Texas and the Southwest). This is a garbage in, garbage out exercise. The banks used their own risk models to make the assessment, for instance, the very same risk models that caused this mess. And there was no examination of the underlying loan files....

    200 examiners for 19 banks? (2.00 / 2) (#44)
    by ChiTownMike on Thu Apr 09, 2009 at 01:46:00 PM EST
    Come on. When are you guys going to quit reading every "opinion" out there from people with an agenda?

    Sure maybe it tool it took 160 examiners to go over Citi's US commercial real estate portfolio, maybe not. Well guess what? The stress test is not going over the entire commercial real estate portfolio of any bank. So this guy is comparing apples to oranges. As soon as I read non-relevant comparisons like that I quit reading because it sends up a big red flag that the person will say any ridiculous thing to try to further their agenda.

    Try reading the linked to article that tells what the stress tests actually measure.


    You obviously have no idea.. (5.00 / 1) (#45)
    by trillian on Thu Apr 09, 2009 at 01:56:44 PM EST
    ....who Yves Smith is.

    I read his bio (2.00 / 2) (#50)
    by ChiTownMike on Thu Apr 09, 2009 at 03:22:45 PM EST
    Makes no difference who he is or who he thinks he is.

    What matters is what he wrote. Apples to oranges. It could be Albert Einstein and he if wrote stuff like that it would still be crap. Smith wrote an irrelevant comparison to try to make a case that he obviously could not make with a fair comparison or he would have.

    I read a so called prominent economist in an article that said Continental Illinois only took a "few years" to get out of receivership. What, he could not name the actual number of years? I wonder why? Because the ten years that it actually took sounds much worse than a "few years"?

    The same so called prominent economist said that WaMu was sold to another bank right away - receivership was easy. Of course he never mentioned that the government never actually ran WaMu and that they negotiated a sell even before seizing it on a Friday and flipping it for practically nothing to another bank on Monday. But to read him receiverships are easy and painless. What a crock. The guy hid facts to try to make his case look good.

    And because of Smith and this other guy, whose name I have wiped clean from my memory because he has no credibility, I have quit listening to people who have an agenda. Once they have an agenda then you can't believe what they say and/or your can't trust that they are telling the whole story. Why waste your time?


    Indeed (5.00 / 3) (#46)
    by Big Tent Democrat on Thu Apr 09, 2009 at 02:01:15 PM EST
    "The stress test is not going over the entire commercial real estate portfolio of any bank."

    That what inspires our "confidence."


    The questions are (none / 0) (#51)
    by ChiTownMike on Thu Apr 09, 2009 at 03:32:17 PM EST
    #1 - is it even necessary for what is trying to be accomplished, which is determining adequate capital? Probably not. Although the stress tests do make mortgage default assumptions which are not under estimated it appears.

    #2 - can you even unwind a RE portfolio today given that the majority of holdings are probably in CDO's which would take many years to get to the bottom of? The answer to that is no.

    So if you are asking for a confidence builder that entails something that really isn't necessary and probably could not be done anyway them that is hardly a fair test for for the confidence yu want to see.

    I think it is fair to expect confidence in the system. But one must be realistic in what they are asking for. No straw.


    It only isn't necessary... (5.00 / 1) (#52)
    by trillian on Thu Apr 09, 2009 at 04:24:05 PM EST
    .... if you are not interested in knowing just how under water they really are.....which appears the case

    They should be looking at the loan tapes.  That's where the real evidence is.  


    It seems you have no (none / 0) (#76)
    by ChiTownMike on Sat Apr 11, 2009 at 10:32:28 AM EST
    idea how impossible it would be short term to unwind these assets to see what they hold.

    Interesting questions (5.00 / 1) (#54)
    by Steve M on Thu Apr 09, 2009 at 07:38:50 PM EST
    Can I determine whether a bank is adequately capitalized without determining how much exposure it has from its holdings?  Can I determine the degree of exposure without investigating those holdings in depth?  Gee, I'm thinking not!

    Well if you could come up with (none / 0) (#77)
    by ChiTownMike on Sat Apr 11, 2009 at 10:38:58 AM EST
    a more credible and realistic way of doing that than the stress tests are doing I imagine you would have posted it.

    Whenever Treasury, the regulators, the banks (none / 0) (#58)
    by Green26 on Fri Apr 10, 2009 at 03:16:02 AM EST
    say something that some of commentators don't like, then they resort to calling it a sham or fraud.

    You seem to believe (none / 0) (#62)
    by reslez on Fri Apr 10, 2009 at 07:14:38 AM EST
    the bailout process has not been highly politicized. You seem to believe Treasury et al. are not shaping their statements with a view to market reaction and public sentiment. Forgive me for saying so, but this is a remarkably naïve view.

    Every step of the several bailout plans has been designed to thwart transparency and preserve the appearance of bank soundness at any cost. There is too much money at stake to accept anything anyone says at face value.


    You are dead wrong if (none / 0) (#64)
    by Green26 on Fri Apr 10, 2009 at 11:15:11 AM EST
    you think the big banks, Big 5 accounting firms, US regulators and Geithner are lying about the banks meeting capital requirements.

    They would all be subject to civil and criminal penalties if that were true.

    Look at the financial statements of the banks. Look at the call reports of the banks. Do you even know what call reports are? Look at the Management's Discussion and Analysis of the financial institutions.

    Everything has not been designed to thwart transparency. What a silly statement. There has been significant transparency. It may not be as much as you want, but there has still been plenty of it.


    ChiTown, you are a voice of reason (none / 0) (#60)
    by Green26 on Fri Apr 10, 2009 at 03:24:00 AM EST
    in this sea of amateur banking and economic experts.

    I've seen too much Enroning and Ponzi schemes (none / 0) (#65)
    by of1000Kings on Fri Apr 10, 2009 at 06:00:58 PM EST
    to totally take what the FDIC, the Banks and Fed say at face value...

    if they've studied the books of the big banks in depth (not just the numbers the banks give them) then that info should be available (in some way, if not easily)...

    the info about where the bailout loans went should also be available...

    I'll be happy just as long as some of the huge banks and holding companies are broken up...seems that the final point..these companies being too big got us into this mess, so we won't be fully out of it until the big holding companies are fully broken...


    Please, I hope you're not equating (none / 0) (#68)
    by Green26 on Fri Apr 10, 2009 at 08:42:54 PM EST
    the financial crisis to Enron and Ponzi schemes. Enron involved some significant fraud. Ponzi schemes are all fraud.

    And please don't try to tell us about fraud with the banks--without giving the specifics of the fraud.


    if there is fraud...and maybe there isn't... (none / 0) (#71)
    by of1000Kings on Fri Apr 10, 2009 at 11:05:43 PM EST
    obviously I have no access to the real numbers (not just financial reports)...

    I just have questions about improper accounting for loan loss reserves (using the value of MBS and CDS's as reserves, for one), impairment of asset values, and overvaluation of loan values as well as foreclosure properties (again improper accounting of loss reserves)...

    I've also heard of some banks under-reporting defaults or having inadequate disclosures of credit risks...

    Also, if the major holding group owns a bank and an investment institution that relationship definitely needs to be picked through precisely.  Too much chance for fraud in that relationship with the advent of MBS's and CDS's....

    some insider trading inquiries would also be very interesting regarding the giant conglomerates that hold different types of financial institutions...

    I would back off my view and just say that I'm not accusing, I just have a lot of questions that no one seems to have answers to yet, and the way things are going probably never will..


    I could probably find you a ton (none / 0) (#72)
    by of1000Kings on Fri Apr 10, 2009 at 11:09:10 PM EST
    of stories about bankers committing fraud, and if you don't believe it happens then I guess I'll have to do that...

    it's not like they are immune to the disease...


    Let's hear your examples of banker (none / 0) (#73)
    by Green26 on Fri Apr 10, 2009 at 11:44:10 PM EST
    fraud. Sorry, I just don't believe you. In particular, please even give one example of banker fraud that contributed in even a tiny way to the banking crisis.

    Obviously, I'm not talking about things as small as house loan origination fraud.


    The accountants for the banks (none / 0) (#74)
    by Green26 on Fri Apr 10, 2009 at 11:52:03 PM EST
    have been, and are being, very conservative. Write downs of assets and loan loss reserves have been done very conservatively for the last couple years.

    What you have alluded to is just not true.

    While it could turn out that write downs or loan loss reserves are not adequate, that would be only because the recession and housing decline continue to be longer than deeper than expected.

    I just plain don't believe that any major bank is under-reporting defaults or not disclosing credit risks. In fact, they banks and their disclosure lawyers are probably overly conservative on these points.

    Do you even know what this means? If so, please explain. "Too much chance for fraud in that relationship with the advent of MBS's and CDS's...."

    You're welcome to your questions, but I can tell you don't know what you're talking about.


    you're right... (none / 0) (#75)
    by of1000Kings on Sat Apr 11, 2009 at 02:37:06 AM EST
    but still, I can't deny what William Black stated, and I'm not sure that you can either (but I'd be happy if you would, it would make me feel a lot safer if mister William Black is debunked...

    were these guys dealing with 'liar loans' or is William Black just trying to sell books...can't say that I'm the person to answer that, and the only people that can work in the business or have ties to the business, therefore their 'unbiased' word is about as valuable as William Blacks....

    We just need to go through the same process that was taken after the great depression:  an in depth review of how we came to be in the situation we are in....(it didn't just happen, how could THE BEST AND THE BRIGHTEST IN THE WORLD who made 300M a year not understand economics and what would happen--that wouldn't say a lot for the rest of us)

    After the depression it was determined that banks/lending companies and investment companies should not be owned by the same holding company...and yet somehow that changed, and we see what happened....if that isn't fraud then it should be...

    As long as that process is taken, and the people who got is into this mess are accounted for so that things don't happen like this again (which they will, because our country is controlled by the financial industry, that of no tangible product) then I'll be at least a bit satisfied...

    but with so many people saying that we just have to look forward I'm starting to wonder if anyone has any smarts; in order to figure out how to go forward on a path don't you first have to figure out how you got onto the path and how far along the path you are (but hey, the BEST AND THE BRIGHTEST just aren't smart enough to figure this stuff out, so we should just let it go)...

    and if you want evidence that BANKSTERS are capable of fraud I guess I'll have to bring out a few links of what I assume are your fellow friends..but I just assumed that was common knowledge (then again, maybe only hedge fund managers and those in AIG and other insurance companies, as well as mortgage brokers and such had activities that were fraudulent, not the 'just doing what's best for America' bankers...

    Are you asking for links to news about Banksters frauding people out of 10's of millions of dollars?


    here are just a few examples (none / 0) (#78)
    by of1000Kings on Sat Apr 11, 2009 at 02:07:23 PM EST
    of Bankster fraud:

    The Justice Department is investigating [1] banks UBS, Credit Suisse and HSBC. There is a separate investigation [2] involving Deutsche Bank, which got wrapped up in a tax shelter scheme orchestrated by a then-employee of Bank One, which was later acquired by JP Morgan Chase. That scheme was called Homer and is estimated to have cost taxpayers [3] about $100 million.

    Investigators probing how Treasury regulators allowed a bank to falsify financial records hiding its ill health have found at least three other instances of similar apparent fraud, sources tell ABC News.

    In at least one instance, investigators say, banking regulators actually approached the bank with the suggestion of falsifying deposit dates to satisfy banking rules -- even if it disguised the bank's health to the public.

    Treasury Department Inspector General Eric Thorson announced in November his office would probe how a Savings and Loan overseer allowed the IndyMac bank to essentially cook its books, making it appear in government filings that the bank had more deposits than it really did. But Thorson's aides now say IndyMac wasn't the only institution to get such cozy assistance from the official who should have been the cop on the beat.

    The federal government took over IndyMac in July, after the bank's stock price plummeted to just pennies a share when it was revealed the bank had financial troubles due to defaulted mortgages and subprime loans, costing taxpayers over $9 billion.

    William B. Harrison Jr., Chairman of the Board, J.P. Morgan Chase & Co., USA: The bank provided Enron with an abusive tax shelter known as Slapshot designed to "save" Enron more $120 million in taxes and earn the bank $5 million in fees. The U.S. Senate Permanent Subcommittee on Investigations said in 2002 that Slapshot relied on a phony $1 billion loan arranged and financed by J.P. Morgan Chase and concealed within a complex collection of loans, stock swaps, and structured finance transactions designed to prevent tax authorities from finding out what was going on. The subcommittee had to subpoena hundreds of boxes of documents, read thousands of emails, conduct numerous interviews, and spend months unraveling how that tax shelter worked.

    Public Eye Awards Public Eye Awards 2009 Public Eye Awards 2008 Public Eye Awards 2007 Public Eye Awards 2006 Nominations Positive Award WEF-Watchletter Public Eye Awards 2005 Public Eye on Davos 2004 Public Eye on Davos 2003 Public Eye on Davos 2002 Public Eye on Davos 2001 Public Eye on Davos 2000

    Online Donation

    bestview gmbh
    back printable version e-mail this

    Bankers at WEF bite their tongues concerning tax evasion  (28.01.06)
    The Tax Justice Network was not invited to attend the World Economic Forum, and our request for credentials was denied. I wondered why, since the issue we raise - corporate tax evasion - is of great interest to WEF's main audience, corporate CEOs. I imagined what I might say to those CEOs if I was given a badge and bumped into them in hallways and cocktail parties. It's always better if you know some specifics about a company, so I did a little research, focusing on the prominent bankers which WEF says are here this year. And then I realized why the Tax Justice Network wasn't invited. There are some things the bankers at WEF don't want to talk about.

    Charles Prince, Chief Executive Officer, Citigroup, USA: Citigroup is winner of this year's Public Eye on Davos award, nominated by TJN for excelling in socially irresponsible behavior by engaging in tax evasion and facilitating tax evasion by its clients. A report, "Citigroup: a culture and history of tax evasion," is at www.taxjustice.net. It details the European Parking Scandal of 1975-1980; laundering money for Pinochet; the use of private banking accounts to hide and launder the money of Raúl Salinas, brother of the former Mexican president; Gabon dictator Omar Bongo; the sons of the late Nigerian dictator Sani Abacha and others; the Argentine offshore bank scam of the 1990s, plus a secret videotape wherein a Buenos Aires Citibanker offers to launder a "businessman's" profits. And more. Mr. Prince was invited but chose not to accept his award in person.

    He had a lot of competition among bankers at WEF for the prize. For example:

    William B. Harrison Jr., Chairman of the Board, J.P. Morgan Chase & Co., USA: The bank provided Enron with an abusive tax shelter known as Slapshot designed to "save" Enron more $120 million in taxes and earn the bank $5 million in fees. The U.S. Senate Permanent Subcommittee on Investigations said in 2002 that Slapshot relied on a phony $1 billion loan arranged and financed by J.P. Morgan Chase and concealed within a complex collection of loans, stock swaps, and structured finance transactions designed to prevent tax authorities from finding out what was going on. The subcommittee had to subpoena hundreds of boxes of documents, read thousands of emails, conduct numerous interviews, and spend months unraveling how that tax shelter worked.

    Oswald J. Grebel, Chief Executive Officer, and Walter B. Kielholz, Chairman of the Board, Credit Suisse, Switzerland: A Credit Suisse subsidiary, Banque Leu in Geneva, was used by the clique of Mikhail Khodorkovsy, the convicted Russian tax cheat, to move hundreds of millions of dollars in money skimmed from his companies through transfer pricing as well as to facilitate insider trading in Yukos and other Russian stocks through shell companies in the Channel Islands and elsewhere. According to Elena Collongues-Popova, who was working for Khodorkovsky associate Alexei Golubovich, "More than $300 million was forwarded by various Golubovich-connected shell companies to the Swiss [Credit Suisse and BNP Paribas] bank accounts in 1998."

    Credit Suisse was condemned by the country's banking commission for accepting in its Private Bank $214 million in suspect funds from the family of Nigerian dictator Sani Abacha. Credit Suisse, of course, is famous for protecting the loot of dictators, among them Ferdinand Marcos of the Philippines. According to Marie-Gabrielle Koller, a former attorney with accounting firm KPMG in Zurich, after Marcos was overthrown in 1986, KPMG secretly transferred $400 million from Credit Suisse Zurich to a Liechtenstein trust on the ex-dictator's behalf. The money has never been found.

    Marcel Ospel Chairman, UBS AG, Switzerland: UBS runs the world's largest private bank, catering to the super-rich. UBS in 1997 and 1998 provided credit lines totaling several billion Swiss francs for 100 to 150 abusive tax shelters sold to KPMG clients according to the U.S. Senate Permanent Subcommittee on Investigations. It found UBS documentation that repeatedly described the transactions as motivated by tax considerations. One, entitled "U.S. Capital Loss Scheme - UBS `redemption trades,' said: "The essence of the UBS redemption trade is the creation of a capital loss for U.S. tax purposes which may be used by a U.S. tax resident to off-set any capital gains tax liability to which it would otherwise be subject." the UBS document explains the "Economic Rationale" for redemption transactions to be: "Tax benefit for client," Another UBS document states: "The motivation for this structure is tax optimization for U.S. tax residents who are enjoying capital gains that are subject to U.S. tax. The structure creates a capital loss from a U.S. tax point of view (but not from an economic point of view) which may be offset against existing capital gains." UBS knew this was an illegal tax shelter.

    if you're trying to convince me that this industry, which has been mired in fraud at least since I've been born (S&L bailout was as a result of fraud) isn't capable of fraud then you won't convince me, I'm sorry....

    here alone is a report of the Fed working with a bank to falsify documents--something connected with our current crisis...

    I just have to assume that we are arguing two different points, as we both seem to be smart people and otherwise I don't understand where the disconnect would be...


    Thanks. (none / 0) (#79)
    by Green26 on Sat Apr 11, 2009 at 03:56:23 PM EST
    An investigation doesn't mean that anything was done wrong, nor does it mean there has been any fraud. Note that fraud is not mentioned.

    Banks linked to abusive tax shelters didn't cause any of the financial crisis. Completely different subject. The several banks/companies involved with abusive tax shelters made money; they didn't lose money (until they, or at least UBS, got fined).

    Several of your examples involve bank regulators as much as banks. Even IndyMac involves a regulator. This one looks like it may involve fraud of the type you originally mentioned. I'm not familiar with the situation.

    The stuff at the bottom of your post is all tax abuse stuff. Most of it involves foreign banks, and it looks like it was done through their operations outside of the US.

    Except perhaps for IndyMac, it doesn't appear to me that any of these things had anything to do with the current financial crisis.

    Of course, there are bad apples in banks and many companies. There is some amount of fraud and dishonesty all over.

    As I thought, you cited virtually nothing about fraud related to the current financial crisis. In the future, I suspect there'll be some examples in that area too. While it will get press, I doubt that it will be shown to have been widespread.


    Well, I am definitely failing (5.00 / 4) (#24)
    by Anne on Thu Apr 09, 2009 at 12:36:48 PM EST
     the stress test, if anyone cares; I find it very stressful to read articles like the linked one, an article that makes me think that the fix is in, and that the worst thing that could happen to any of these banks is that they might have to take more federal money.  

    I know I am probably misreading or misunderstanding some of what is in the article, but when I read that the banks were being asked to project their future income, all I could think was, how is this different from borrowers getting to tell lenders how much money they were making so they could get the big loans?  Except that in this case, if the banks are wrong, all that it seems will happen is they can just get more money.

    Is the article supposed to be giving the impression that this is all just a silly exercise, a formality that won't drill down too far into the banks for serious problems to be obvious?  Or is it a ham-handed way of reassuring us that, of course, all the banks are going to pass, because the banks are fundamentally sound.

    I wish I had even a shred of confidence in the whole process, but I don't; frankly, that's pretty stressful.

    So, why isn't the Sherman Anti-Trust Act being (5.00 / 3) (#30)
    by SeeEmDee on Thu Apr 09, 2009 at 01:01:26 PM EST
    dusted off and used? Part of the reason for all the problems was that the megabanks got too big (...for their britches) and began making insane moves. They should be broken into smaller, more manageable ones. And preferably not managed by the same crowd that started the mess.

    But then, that might inconvenience the Lords of Fractional Banking, i.e. the private banks that make up the Fed Reserve...the same private banks that started the mess...the same private banks whose directorship then are now presently staffing most of Obama's top fiscal advisory posts.

    Given the revolving door nature of industry with government regulatory bodies, harboring suspicions regarding any ulterior motives these people may have is certainly excusable.

    The big banks' market shares aren't even (none / 0) (#59)
    by Green26 on Fri Apr 10, 2009 at 03:18:23 AM EST
    close to running afoul with antitrust monopoly guidelines.

    Where's the anti-competitiveness that the antitrust laws designed to fend against?


    Irrelevant. (none / 0) (#61)
    by reslez on Fri Apr 10, 2009 at 06:59:14 AM EST
    Any corporation which exists by sufferance of the US taxpayer is subject to our rules. Only political will is necessary for their destruction: such a small thing, easily found in an election year.

    Regulator approval required to create the megabanks could have easily prevented them. The large banks constitute a cartel which has reduced competition and harmed consumers. That's all that's necessary under Sherman. And continuing cash infusions by government are a subsidy against which smaller banks are unable to compete.


    Banking statutes/regs are completely (none / 0) (#63)
    by Green26 on Fri Apr 10, 2009 at 11:01:41 AM EST
    different than the antitrust laws. Apples and oranges. I trust that you know the difference, despite what you posted.

    What's your evidence for this statement:

    "The large banks constitute a cartel which has reduced competition and harmed consumers."


    uhmmm, the current crisis (none / 0) (#66)
    by of1000Kings on Fri Apr 10, 2009 at 06:04:53 PM EST
    is about all the evidence I need...

    there are a handful of industries that now need to be looked at to find companies that might be too big to fail...considering that is what we've heard so much lately, and that is what we need to guard against if we take what we've been told at face value...


    Nope, 1,000. (none / 0) (#69)
    by Green26 on Fri Apr 10, 2009 at 08:46:05 PM EST
    That's not good enough.

    How about some real evidence. The views of people who don't understand business, banks or the financial crisis are not enough.


    Well we're aren't racing any ponies now at all (5.00 / 2) (#33)
    by Militarytracy on Thu Apr 09, 2009 at 01:12:29 PM EST
    except for a paltry sum remaining in our Roths so that they stay open.  Everybody says....but it'll come back.....it'll come back and you won't be in from the first moment it starts to get better so you'll miss out on something.....sheesh.  To hell with this sort of thinking.  It's about accountability.  They've lost the priviledge of using our money, end of discussion.  Somebody has to do what they can to demand some accountability and that somebody now seems to have to be me, so I did it.

    Gee I just read what I wrote (5.00 / 1) (#43)
    by Militarytracy on Thu Apr 09, 2009 at 01:44:44 PM EST
    I'm really not drinking, I swear.

    If you were drinking, MT (5.00 / 3) (#48)
    by caseyOR on Thu Apr 09, 2009 at 02:03:35 PM EST
    it would certainly be understandable. And I'd join you.

    So you are (none / 0) (#5)
    by JThomas on Thu Apr 09, 2009 at 12:05:26 PM EST
    absolutely convinced that the Treasury dept will lie and mislead the public on these stress test results?

    You are convinced that Obama would allow them to lie about the banks passing these tests and put his whole presidency on the line to do this?

    The whole report is not out yet so I am withholding judgement on this,but you are saying there is absolutely no possibility that Obama would be truthful on these stress test results?

    Personally, I hope these banks are solvent. It would be better for everyone if their demise was exxagerated.

    I would not be surprised if they could be solvent but operations of some could be impaired by not meeting regulatory required capital levels...which would require an infusion of capital,either private or public.

    But I am not ready to declare anything yet, the results are not official.

    Truthful is the wrong word (5.00 / 1) (#6)
    by Big Tent Democrat on Thu Apr 09, 2009 at 12:07:44 PM EST
    ACCURATE is the better word.

    I do not trust them to be accurate.


    BTW (none / 0) (#13)
    by Big Tent Democrat on Thu Apr 09, 2009 at 12:16:42 PM EST
    "Grading On A Deadman's Curve" was my alternate title but I thought I would wait for the actual stress test results for that one.

    Get it? (5.00 / 5) (#14)
    by Big Tent Democrat on Thu Apr 09, 2009 at 12:17:43 PM EST
    "Zombie Banks?" Deadman's Curve?

    Sheesh, tough crowd.


    Here's a "heh" for the tough crowd (5.00 / 3) (#17)
    by inclusiveheart on Thu Apr 09, 2009 at 12:22:14 PM EST

    Sounds like you read the entire (3.00 / 1) (#25)
    by ChiTownMike on Thu Apr 09, 2009 at 12:42:24 PM EST
    article. It really is a mixed bag of reporting. A mix of good news/bad news, mostly speculation.

    With Wells Fargo first-quarter earnings of $3 billion and Cit and Chase predicted to show earnings at least things in the banking sector are on the upswing. Wal-Mart also showed some growth in sales which is encouraging in that the public sentiment may be stabilizing and set for so at least slow growth upwards.

    If the banks can continue to show quarterly profits and the economy continues signs of having reached the bottom and crawling back up then we can grow our way out of this mess.


    I really should not be so shocked (5.00 / 1) (#56)
    by reslez on Fri Apr 10, 2009 at 01:46:45 AM EST
    when I see people who view reports of bank profits as a sign the economy is turning around.

    The economy is not turning around. As is typical of downturns, we are experiencing a temporary uptick. During the GD the bear market was interrupted several times by 20% rallies. In my opinion we are experiencing something similar. Housing is nowhere near bottom and the economy is hemorrhaging 700k jobs a month. In this environment Wal-Mart's strength is a black flag: consumers are cutting to the bone.

    Any "profits" reported by the banks are laughable and illusory. These profits have been ginned up under the most ludicrous accounting standards imaginable. The banks are functioning solely due to Treasury's largess and extraordinary measures taken by the Federal Reserve. AIG's $66 billion quarterly loss was a passthrough straight to bank income statements. As I observed previously the banks are chockful of CEOs who have agreed not to accept compensation unless their company turns a profit. Hence, profits will magically appear. There is a very strong motivation to convince the public the bailout is working. Alas.

    A zombie that shuffles down the street by the frantic exertion of voodoo doctors is not displaying signs of life.


    Soros: Obama "Lost a Great Opportunity" (none / 0) (#11)
    by Saul on Thu Apr 09, 2009 at 12:13:16 PM EST
    To Fix The Banks

    Here is link

    Yes, these banks will not fail. (none / 0) (#15)
    by jeffinalabama on Thu Apr 09, 2009 at 12:18:56 PM EST
    But if they don't succeed, then we'll give them more money, and re-test at a later time...

    The Warren Report ... (none / 0) (#19)
    by santarita on Thu Apr 09, 2009 at 12:25:06 PM EST
    suggests to me that Treasury, the Fed and Obama are dealing with a political problem.  The Warren April Report was not a consensus report - it was opposed by Sununu - in other words - Republicans.

    Here is my guess as to what is happening:  It may be that the lack of political consensus constrains the options.  They are doing what they are doing, in part, to bypass Congress where they will face principled and unprincipled opposition.  At present, I still think that they are proceeding on a path that will result in reducing some large banks to smaller banks and perhaps conservatorship and liquidation.  But they need to build a political consensus and a consensus among some large stakeholders.  Little by little they are building a case - the stress tests and the PPIP are part of that case.

    The Warren Report suggests that the Obama Administration is probably proceeding correctly given its underlying assumptions about the nature of the problems at the banks.  Of course, the underlying assumptions may not be correct.  

    Heh (5.00 / 1) (#20)
    by Big Tent Democrat on Thu Apr 09, 2009 at 12:26:14 PM EST
    The Geithner Plan does not require consensus from anybody.

    Ah, but it does once they (5.00 / 1) (#31)
    by inclusiveheart on Thu Apr 09, 2009 at 01:01:47 PM EST
    run out of TARP money and need more.

    I think the only reason that we've seen this story today is because of the Warren Report.

    Well, that and the fact that Pelosi implied in an interview last night that Geithner may not understand the depth of this crisis.

    They've now scheduled meeting at th White House tommorrow with Treasury to discuss the stress tests according to one news item I came across.

    Stress Test Meeting

    Congressional support may well be an issue if they have to inject more capital.

    Of course, this report on the coming report in my opinion probably only complicates things for them with Congress because of the congnitive dissonance it creates, but I think they're feeling the heat.


    Maybe Congress... (5.00 / 1) (#32)
    by santarita on Thu Apr 09, 2009 at 01:03:42 PM EST
    will get around to doing their job and representing the people in the dialogue with the Obama Administration.

    That's just crazy talk. (5.00 / 2) (#34)
    by jbindc on Thu Apr 09, 2009 at 01:12:31 PM EST
    In other words (5.00 / 2) (#41)
    by Amiss on Thu Apr 09, 2009 at 01:40:51 PM EST
    they have scheduled a meeting to whip Nancy et al into shape and go along in lock step with Geithner and Obama with a smile on their faces while they sell us down the river. Frankly I am getting tired of paddling upstream  while they are in their speedboats going downstream and pushing me underwater to boot.

    They've now scheduled meeting at the White House tommorrow with Treasury to discuss the stress tests according to one news item I came across.

    I'm reading that their aim in (none / 0) (#49)
    by inclusiveheart on Thu Apr 09, 2009 at 02:06:54 PM EST
    conducting these stress tests was to figure out how much more money they're going to need.

    The Speaker of the House is of course an important player if they have go back to Congress.


    It Will Require... (none / 0) (#27)
    by santarita on Thu Apr 09, 2009 at 12:53:16 PM EST
    consensus at a certain point, I think.  If Geithner and Bernake are not right in their assumptions then more drastic measures will be required.  And those drastic measures (like debt holders taking less than 100 cents on the dollar) will require consensus.  

    I hope Congress reads and understands the Warren Report and asks some tough questions of Geithner when he appears before Congress next.  If one subscribes to the theory that Wall Street has some key senators and reps enthralled then some groundwork has to be laid before the right steps can be taken.  

    I am still in the wait and see mode.  I do think that Geithner and Summers may be too close to Wall Street to be able to see a different approach.  But I also think that they are smart enough to realize when Plan A is not working.


    Well (none / 0) (#29)
    by Big Tent Democrat on Thu Apr 09, 2009 at 12:56:35 PM EST
    that's not the Geithner Plan. That's some other plan.

    I think they have a political problem (5.00 / 3) (#42)
    by joanneleon on Thu Apr 09, 2009 at 01:42:43 PM EST
    and a financial problem.  As Simon Johnson says, the root of the problem is too much political power in the financial industry.

    We have insolvent banks who refuse to admit that they are insolvent.

    We have a government who has put huge amounts of money into these banks with little effect.  We have a government who made the wrong decisions and who are unwilling to admit that and change course.

    So they need to do all kinds of things to convince everyone that the banks are solvent and that their programs are good and that they made good decisions.  None of those things are true.

    First, they let them do all kinds of maneuvering like converting to holding companies, buying up other banks, etc.  Now they will give them new "fair value" accounting rule and do away with mark to market.  They'll protect them from short selling with the reestablishment of the uptick rule.  They'll clean up their balance sheets for them by facilitating auctions for their toxic assets and taking nearly all the risks.   They'll help them keep their secrets.  Then they'll do the bogus stress tests and tell us the banks are all solvent.  And if that doesn't work, they'll pour yet more money into them.

    Who could ask for more?


    Nothing has changed! (none / 0) (#53)
    by ChiTownDenny on Thu Apr 09, 2009 at 05:48:04 PM EST
    YIKES!  The proposed "stress tests" were designed to address capital.  If a bank operating co. was deemed to be deficient in reserves due to continuing asset deteioration, the bank would need to raise additional capital; pulblic or private funds would be allocated.


    Now, with the facts, let the lynching continue!

    but if a bank passes a 'stress test' (none / 0) (#67)
    by of1000Kings on Fri Apr 10, 2009 at 06:10:30 PM EST
    shouldn't that mean that the company doesn't need any more capitalization?

    if the company needs more capitalization, then that would fail my stress test...

    it may not be what it means, but if a bank receives money after the stress tests are over then that will say to me that the bank in question is quite questionable without the support of the American people...

    obviously that's probably not what the Fed will say...


    This is at least a credible question. (none / 0) (#70)
    by Green26 on Fri Apr 10, 2009 at 08:52:31 PM EST
    I don't know the answer. However, having the capital to survive a further and prolonged downturn in the economy and survive a continuing decline in housing prices is not the same has having enough capital to increase lending.

    Remember that lots of financial institutions--I believe 149--got TARP funds. However, many of those companies are perfectly healthy, and profitable, and didn't and don't have capital or solvency problems.

    The answer to your question is certainly worth pursuing.