In the first of a series of articles, which could easily become the-rest-of-my-life’s work, I will be examining high-profile lawsuits and indictments, such as—what’s happening with the federal lawsuit against Robert Rubin for insider trading—and others.
On December 4, 2008, the New York Post reported: "A new Citigroup scandal is engulfing Robert Rubin and his former disciple Chuck Prince for their roles in an alleged [CDO-related] Ponzi-style scheme that's now choking world banking. [The two] are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths.” However—and here’s the indictable offense (worldwide Ponzi scheme, although worthy, is unlikely to be one)—before Citi's stock collapsed, Rubin and other top insiders cashed out of more than $150 million in "suspicious stock sales" according to the lawsuit filed on behalf of investors.
On December 11, 2008, this item was picked up by an online news service out of Phoenix, phxnews.com. The only other comment was mine for BlownMortgage.com: Growth Industry 2009: Criminal and Constitutional Law, on December 23, 2008. Not only did these three publications have the scoop, but apparently there was nothing left to be said.
And then . . . on January 9, 2009, Citi announced that Robert E. Rubin retired as Senior Counselor effective that day and he would not stand for re-election as Director. Mr. Rubin would continue to serve as a Director until his current term expired at Citi’s next Annual Meeting. Hadn’t he been on the short list for Treasury Secretary as well?
On that very same day, WSJ’s MarketWatch asked readers: “How will people remember the Robert Rubin era at Citigroup? Right now, the smart money is on "a nightmare." For all of his supposed prowess in financial markets, the former Goldman Sachs Group Inc. banker and U.S. Treasury Secretary presided over an era of scandal and risk overload during his nine years as a director and consultant at Citigroup . . . which ended “after a humiliating 18 months that has seen Citi oust Weill-successor Charles Prince, take $83 billion in writedowns, raise $36 billion in investor cash, take $40 billion from taxpayers, and get the government to backstop more than $250 billion in risky assets on its balance sheet . . . and a 90% decline in stock price.” And keep in mind that this article was dated January 9th. Today is January 21st so the bailout numbers are higher and the stock price lower.
Anyway, it sounds like they could be on to something.
Then, on January 13, 2009, David Weidner wrote a piece about Rubin for MarketWatch pointing out that during Rubin’s time as Treasury Secretary, he and then Fed Chairman Alan Greenspan “oversaw the most sweeping deregulation movement in the history of Wall Street, the pinnacle of which was the elimination of Depression-era laws that made it illegal for a company to have both commercial banking and investment banking on a large scale.” This allowed the merger of Citicorp with Travelers insurance in 1998. Only one year later, Rubin left the Treasury and became Director and Senior Counselor of Citigroup. “There, he made $150 million (not including stock options) and, depending on whose account you believe, was either a tireless worker or a once-a-month visitor to the corporate headquarters.” Weidner sums up with “Robert Rubin is out at Citigroup Inc., and it only cost about $300 billion in committed taxpayer money.” ***Worldwide Ponzi scheme strikes me as tireless worker, but then Weidner doesn't seem to know about the federal suit.***
One more try. Googled the story again today; you’d think by now someone must be on to it. And there it was, on January 16, 2009, an article on Bloomberg by Michael Lewis, author of Liar’s Poker. ***Now you’re talking, he’s the insider’s whistle blower.*** No, it turns out Rubin has published his memoirs and Lewis wrote a book review, although no book title was given. In a very poorly written piece, BTW, Lewis says, Rubin is “an acute and decent man . . . and . . . the world's a better place for having him in it.”
If you say so, Michael.
Friday, January 23, 2009
Thursday, January 8, 2009
Darwin Didn't Say Quite What You Think He Did (1)
(Readers, this is a mess. If you would like to see the article with the pictures and their captions, pls. email me for a copy marygwendungan@hotmail.com)
What Darwin actually said was a lot more inspirational considering where we are now. “It is not the strongest of the species that survives, or the most intelligent that survives. It is the one that is the most adaptable to change.” ***sigh, my hero***
Although I have never worked in retail anything, some of my best friends are retail customers and a few have asked for my opinion on others’ advice, most recently Suze Orman’s.
Ms. Orman’s seminal work "The Dangers of doing nothing in 2009", Costco Connection Magazine January 9, 2009, is available now without charge at the checkout counter. In it she recommends loading up on stocks to be positioned to ride the wave up, which she’s sure is coming, along with the spaceship, I guess.
IMO, her recommendation is irresponsible. However, she's not alone in advising retail customers to stay in stocks, the large brokerage departments (as you remember, all the big ones went bankrupt, were absorbed by banks, or restructured and became banks themselves to get on-going bailout money) are making the same recommendation for 2009. As a matter of fact, it was their recommendation for 2008 too. And this advice was repeated throughout the year so persuasively and with such wrong-headed confidence that I’d cringe at their humiliation if I thought they felt any.
Here's how their advice worked out: (chart of full-year Dow 2008 from Bloomberg)
We see that the market finished the year up off November lows. This could be due to a bear market rally, the fourth wave up according to Elliott Wave Theory, or some other technical pattern that will correct soon. Or, according to retail brokers and advisers, it's because the bottom is in and stocks are about to zoom up because . . . because of what? . . . because corporate profits are about to soar. ***right***
Also, note that each time there’s been a substantial uptick, it’s off lower highs.
Apparently, the Fed and Treasury would like to bail out every entity listed on any of the exchanges, in addition to the foreign banks and central banks they've been slipping money to under the table. They can't save them all, for one, and for two, the money they're giving away has to be paid back at some point. None of this benefits the economy, corporate prospects, or the stock market. After each multi-billion dollar bailout, the stock market stabilizes briefly then resumes its decline. So, stocks will continue trending lower and if prices don’t fall fast enough to reflect reality, the markets will settle things up and crash.
For investors who thought they were well diversified by owning foreign stocks, here's what happened to their portfolios:
Go to Darwin 2 pls.
What Darwin actually said was a lot more inspirational considering where we are now. “It is not the strongest of the species that survives, or the most intelligent that survives. It is the one that is the most adaptable to change.” ***sigh, my hero***
Although I have never worked in retail anything, some of my best friends are retail customers and a few have asked for my opinion on others’ advice, most recently Suze Orman’s.
Ms. Orman’s seminal work "The Dangers of doing nothing in 2009", Costco Connection Magazine January 9, 2009, is available now without charge at the checkout counter. In it she recommends loading up on stocks to be positioned to ride the wave up, which she’s sure is coming, along with the spaceship, I guess.
IMO, her recommendation is irresponsible. However, she's not alone in advising retail customers to stay in stocks, the large brokerage departments (as you remember, all the big ones went bankrupt, were absorbed by banks, or restructured and became banks themselves to get on-going bailout money) are making the same recommendation for 2009. As a matter of fact, it was their recommendation for 2008 too. And this advice was repeated throughout the year so persuasively and with such wrong-headed confidence that I’d cringe at their humiliation if I thought they felt any.
Here's how their advice worked out: (chart of full-year Dow 2008 from Bloomberg)
We see that the market finished the year up off November lows. This could be due to a bear market rally, the fourth wave up according to Elliott Wave Theory, or some other technical pattern that will correct soon. Or, according to retail brokers and advisers, it's because the bottom is in and stocks are about to zoom up because . . . because of what? . . . because corporate profits are about to soar. ***right***
Also, note that each time there’s been a substantial uptick, it’s off lower highs.
Apparently, the Fed and Treasury would like to bail out every entity listed on any of the exchanges, in addition to the foreign banks and central banks they've been slipping money to under the table. They can't save them all, for one, and for two, the money they're giving away has to be paid back at some point. None of this benefits the economy, corporate prospects, or the stock market. After each multi-billion dollar bailout, the stock market stabilizes briefly then resumes its decline. So, stocks will continue trending lower and if prices don’t fall fast enough to reflect reality, the markets will settle things up and crash.
For investors who thought they were well diversified by owning foreign stocks, here's what happened to their portfolios:
Go to Darwin 2 pls.
Darwin (2)
We see that the market finished the year up off November lows. This could be due to a bear market rally, the fourth wave up according to Elliott Wave Theory, or some other technical pattern that will correct soon. Or, according to retail brokers and advisers, it's because the bottom is in and stocks are about to zoom up because . . . because of what? . . . because corporate profits are about to soar. ***right***
Also, note that each time there’s been a substantial uptick, it’s off lower highs.
Apparently, the Fed and Treasury would like to bail out every entity listed on any of the exchanges, in addition to the foreign banks and central banks they've been slipping money to under the table. They can't save them all, for one, and for two, the money they're giving away has to be paid back at some point. None of this benefits the economy, corporate prospects, or the stock market. After each multi-billion dollar bailout, the stock market stabilizes briefly then resumes its decline. So, stocks will continue trending lower and if prices don’t fall fast enough to reflect reality, the markets will settle things up and crash.
For investors who thought they were well diversified by owning foreign stocks, here's what happened to their portfolios:
2008: The year in markets (WSJ)
U.S. indexes
Dow Jones Industrial Average -34%
S&P 500 -38%
Nasdaq -40%
Dow Jones Financials -55%
Amex Oil Index -38%
International indexes
Germany DAX -40%
FTSE 100 -31%
Japan Nikkei 225 -42%
China Shanghai Composite -65%
Mexico IPC -24%
Brazil Bovespa -41%
Currencies/commodities
Gold +5.5%
Crude -54%
Dollar index +6%
Pound vs. dollar -28%
Dollar vs. yen -18%
Also, note that each time there’s been a substantial uptick, it’s off lower highs.
Apparently, the Fed and Treasury would like to bail out every entity listed on any of the exchanges, in addition to the foreign banks and central banks they've been slipping money to under the table. They can't save them all, for one, and for two, the money they're giving away has to be paid back at some point. None of this benefits the economy, corporate prospects, or the stock market. After each multi-billion dollar bailout, the stock market stabilizes briefly then resumes its decline. So, stocks will continue trending lower and if prices don’t fall fast enough to reflect reality, the markets will settle things up and crash.
For investors who thought they were well diversified by owning foreign stocks, here's what happened to their portfolios:
2008: The year in markets (WSJ)
U.S. indexes
Dow Jones Industrial Average -34%
S&P 500 -38%
Nasdaq -40%
Dow Jones Financials -55%
Amex Oil Index -38%
International indexes
Germany DAX -40%
FTSE 100 -31%
Japan Nikkei 225 -42%
China Shanghai Composite -65%
Mexico IPC -24%
Brazil Bovespa -41%
Currencies/commodities
Gold +5.5%
Crude -54%
Dollar index +6%
Pound vs. dollar -28%
Dollar vs. yen -18%
Darwin Didn't Say (3)
Это масло тупоумное.
(It’s the oil, stupid.)
OMG, the humanity . . . I mean, would you look at those skid marks.
(It’s the oil, stupid.)
OMG, the humanity . . . I mean, would you look at those skid marks.
This is the worst performance since the first depression and reflects a very unhealthy world economy. There is no beneficial event of sufficient magnitude within the realm of imagination that could turn this around anytime soon.
The stock market is not the place to be.
Tuesday, December 23, 2008
Growth Industry 2009: Criminal and Constitutional Law
It’s going to be all lawsuits all the time, as filings and indictments come fast and furious after January 20. In fact, a number are in the works already.
From the perspective of Wall St. crime, it will be interesting to see what Elliot Spitzer and Rudy Giuliani do. Keeping his hand in by writing for Slate, Spitzer’s wounded and has nothing to lose. Giuliani has got to smell blood and a loyal-to-the-point-of-absurdity Republican he is not.
Let’s start with . . .
Criminal Law
There’s a big one pending of the type that made the reputations of Spitzer and Giuliani in their US Attorney days—Insider Trading! As you remember, Giuliani’s high-profile conviction was Ivan Boesky and Spitzer’s was Martha Stewart. (No disrespect intended. What comes to mind when you think of Spitzer . . . let me qualify that, during his days as a US Attorney?)
Conveniently domiciled in their former district, Robert Rubin—former co-Chairman of Goldman Sachs, former Treasury Secretary under Clinton and on the board of, counsel to and briefly Chairman of Citigroup— was on the short list to be Treasury Secretary again. What happened?
When you want the low down, the New York Post is the paper of record. On December 4 it reported: "A new Citigroup scandal is engulfing Robert Rubin and his former disciple Chuck Prince for their roles in an alleged [CDO-related] Ponzi-style scheme that's now choking world banking. [The two] are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths.” However—and here’s the indictable offense—before Citi's stock collapsed, Rubin and other top insiders cashed out of more than $150 million in "suspicious stock sales" according to the lawsuit filed on behalf of investors. They never know when to stop, do they.
An Astounding Conflict of Interest
The disposition of this case is going to set quite a precedent. Apparently, stealing investors’ money is a crime.
Bernard Madoff, former head of the NASDAQ, surrendered to the FBI on December 11, after having been turned in by his sons Mark and Andrew for running a several-decades-long Ponzi scheme. Investors have been wiped out to the tune of $50 billion. What makes this case interesting is not only Madoff’s insider status, but that Mary Schapiro, nominee for SEC Chairman, has recently announced the appointment of Mark Madoff to a prominent role with the security-industry oversight agency. And there’s more.
According to the FBI, the SEC and other regulatory bodies received several written complaints about Madoff over the years, which were never pursued. It now has been learned that “Ms Schapiro, currently chief executive of the Financial Industry Regulatory Authority (Finra), employed (son) Mark Madoff to serve on the board of the National Adjudicatory Council — the division that reviews disciplinary decisions made by Finra,” according to the UK TimesOnline on December 18.
Madoff père is currently confined to his Park Avenue apartment awaiting trial.
Strange Treatment of Small Fry
This next case is small in terms of money—what’s a few hundred mil these days—but has an interesting twist. In another action by federal prosecutors of the Southern District of New York, they have arrested attorney Marc Dreir for stealing at least $380 million in “a brazen swindle of some of New York’s savviest investors by one of New York’s more accomplished lawyers,” as reported in the New York Times on December 14. Another $35 million is missing from escrow accounts at his 250-member law firm.
Why this case stands out is that the accused is actually in jail being held without bail. Can you believe it. He must be really dangerous. Or he lives in New Jersey.
Constitutional Law
This should be getting more ink, imo.
On December 10, the WSJ reported that the Fed “is considering issuing its own debt for the first time . . . which . . . would provide the central bank with more flexibility to tackle the financial crisis.”
Ordinarily, when short of cash the Fed turns to the Treasury. The Treasury can no longer fund the Fed because of its own massive borrowings set for 2009 and debt limits imposed by congress.
Issuing debt is not in the Fed’s charter. According to the Constitution as it is currently written, only congress through the Treasury has the power to borrow against the credit of the United States. What’s proposed by the Fed would give it extra-legal authority to exceed the debt ceiling set by congress. It also would usurp powers of congress and the Treasury and transfer them to the Fed, which is a private entity owned by member banks.
Paul Volker would be turning in his grave if he were dead.
mg
From the perspective of Wall St. crime, it will be interesting to see what Elliot Spitzer and Rudy Giuliani do. Keeping his hand in by writing for Slate, Spitzer’s wounded and has nothing to lose. Giuliani has got to smell blood and a loyal-to-the-point-of-absurdity Republican he is not.
Let’s start with . . .
Criminal Law
There’s a big one pending of the type that made the reputations of Spitzer and Giuliani in their US Attorney days—Insider Trading! As you remember, Giuliani’s high-profile conviction was Ivan Boesky and Spitzer’s was Martha Stewart. (No disrespect intended. What comes to mind when you think of Spitzer . . . let me qualify that, during his days as a US Attorney?)
Conveniently domiciled in their former district, Robert Rubin—former co-Chairman of Goldman Sachs, former Treasury Secretary under Clinton and on the board of, counsel to and briefly Chairman of Citigroup— was on the short list to be Treasury Secretary again. What happened?
When you want the low down, the New York Post is the paper of record. On December 4 it reported: "A new Citigroup scandal is engulfing Robert Rubin and his former disciple Chuck Prince for their roles in an alleged [CDO-related] Ponzi-style scheme that's now choking world banking. [The two] are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths.” However—and here’s the indictable offense—before Citi's stock collapsed, Rubin and other top insiders cashed out of more than $150 million in "suspicious stock sales" according to the lawsuit filed on behalf of investors. They never know when to stop, do they.
An Astounding Conflict of Interest
The disposition of this case is going to set quite a precedent. Apparently, stealing investors’ money is a crime.
Bernard Madoff, former head of the NASDAQ, surrendered to the FBI on December 11, after having been turned in by his sons Mark and Andrew for running a several-decades-long Ponzi scheme. Investors have been wiped out to the tune of $50 billion. What makes this case interesting is not only Madoff’s insider status, but that Mary Schapiro, nominee for SEC Chairman, has recently announced the appointment of Mark Madoff to a prominent role with the security-industry oversight agency. And there’s more.
According to the FBI, the SEC and other regulatory bodies received several written complaints about Madoff over the years, which were never pursued. It now has been learned that “Ms Schapiro, currently chief executive of the Financial Industry Regulatory Authority (Finra), employed (son) Mark Madoff to serve on the board of the National Adjudicatory Council — the division that reviews disciplinary decisions made by Finra,” according to the UK TimesOnline on December 18.
Madoff père is currently confined to his Park Avenue apartment awaiting trial.
Strange Treatment of Small Fry
This next case is small in terms of money—what’s a few hundred mil these days—but has an interesting twist. In another action by federal prosecutors of the Southern District of New York, they have arrested attorney Marc Dreir for stealing at least $380 million in “a brazen swindle of some of New York’s savviest investors by one of New York’s more accomplished lawyers,” as reported in the New York Times on December 14. Another $35 million is missing from escrow accounts at his 250-member law firm.
Why this case stands out is that the accused is actually in jail being held without bail. Can you believe it. He must be really dangerous. Or he lives in New Jersey.
Constitutional Law
This should be getting more ink, imo.
On December 10, the WSJ reported that the Fed “is considering issuing its own debt for the first time . . . which . . . would provide the central bank with more flexibility to tackle the financial crisis.”
Ordinarily, when short of cash the Fed turns to the Treasury. The Treasury can no longer fund the Fed because of its own massive borrowings set for 2009 and debt limits imposed by congress.
Issuing debt is not in the Fed’s charter. According to the Constitution as it is currently written, only congress through the Treasury has the power to borrow against the credit of the United States. What’s proposed by the Fed would give it extra-legal authority to exceed the debt ceiling set by congress. It also would usurp powers of congress and the Treasury and transfer them to the Fed, which is a private entity owned by member banks.
Paul Volker would be turning in his grave if he were dead.
mg
Thursday, December 4, 2008
Five Useful Websites in these Hard Times
Today's article isn't about the Fed, unless you think it's responsible for all our problems, as many do.
We’re in for some really tough times. Prepare as though a major hurricane, a war even, is coming your way. It is.
Here are a few practical websites to help you prepare:
This site has a List of 100 Things that will Disappear. What makes it better than some of the others with the same list is that it also has forum comments suggesting other items that should be included. http://goldismoney.info/forums/showthread.php?t=2738
What if my bank fails? Both the Chairman of the Federal Reserve, Ben Bernanke, and the Chairwoman of the FDIC, Sheila Bail have warned that there will be more bank failures. This site, http://www.bankingquestions.com/bankfailures/bankfailures.html provides answers to questions about your various bank accounts. This information will change from time to time depending on who or what is being bailed out.
Why beat around the bush: we're in a severe recession and will soon be in a depression. Here’s a great blog by a young father and husband in Argentina. He’s been living through economic collapse and hyperinflation for several years and has great day-to-day living advice. http://ferfal.blogspot.com/
So far this year more than 1.5 million people have lost their jobs. This site addresses your emotional and physical health, as well as answering questions related to searching for a job. http://www.careerplanner.com
If you have lost your health insurance or expect to, this site, www.insure.com answers questions about all sorts of insurance in addition to health.
We’re in for some really tough times. Prepare as though a major hurricane, a war even, is coming your way. It is.
Here are a few practical websites to help you prepare:
This site has a List of 100 Things that will Disappear. What makes it better than some of the others with the same list is that it also has forum comments suggesting other items that should be included. http://goldismoney.info/forums/showthread.php?t=2738
What if my bank fails? Both the Chairman of the Federal Reserve, Ben Bernanke, and the Chairwoman of the FDIC, Sheila Bail have warned that there will be more bank failures. This site, http://www.bankingquestions.com/bankfailures/bankfailures.html provides answers to questions about your various bank accounts. This information will change from time to time depending on who or what is being bailed out.
Why beat around the bush: we're in a severe recession and will soon be in a depression. Here’s a great blog by a young father and husband in Argentina. He’s been living through economic collapse and hyperinflation for several years and has great day-to-day living advice. http://ferfal.blogspot.com/
So far this year more than 1.5 million people have lost their jobs. This site addresses your emotional and physical health, as well as answering questions related to searching for a job. http://www.careerplanner.com
If you have lost your health insurance or expect to, this site, www.insure.com answers questions about all sorts of insurance in addition to health.
Monday, December 1, 2008
Startling News from the Fed and Economic Wrecks from Around the World
The derivatives time bomb that Warren Buffet warned about several years ago has exploded. Here’s how it’s playing out around the world.
From the US:
The Fed:
“Federal Reserve chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market's collapse.” ***Is this possible? Not his admission of having been wrong, but that he really didn’t know? I knew. Since you’re reading BlownMortgage you knew too*** ''I and others were mistaken early on in saying that the subprime crisis would be contained,'' Bernanke says in an article in the December 1 issue of The New Yorker magazine. The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,'' he said in the piece titled ''Anatomy of a Meltdown.''
***Actually no, it wasn’t hard to predict at all. One thing has followed the other in—guess what—predictable fashion. The blogosphere has been plotting the course of the meltdown with stunning precision for a few years***
Almost as an aside, as of early this week, the Fed has now spent, guaranteed or promised about $8.5 trillion. This is up from $4.3 trillion on November 19, which was up from $3.8 trillion on October 31. And now we know that this spending is based on the judgment of someone who thought subprime could be contained.
From the US:
The Fed:
“Federal Reserve chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market's collapse.” ***Is this possible? Not his admission of having been wrong, but that he really didn’t know? I knew. Since you’re reading BlownMortgage you knew too*** ''I and others were mistaken early on in saying that the subprime crisis would be contained,'' Bernanke says in an article in the December 1 issue of The New Yorker magazine. The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,'' he said in the piece titled ''Anatomy of a Meltdown.''
***Actually no, it wasn’t hard to predict at all. One thing has followed the other in—guess what—predictable fashion. The blogosphere has been plotting the course of the meltdown with stunning precision for a few years***
Almost as an aside, as of early this week, the Fed has now spent, guaranteed or promised about $8.5 trillion. This is up from $4.3 trillion on November 19, which was up from $3.8 trillion on October 31. And now we know that this spending is based on the judgment of someone who thought subprime could be contained.
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