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Kari Henley: Become A Philanthropist With A Mission

2009-12-06T07:00:00Z

How many of you consider yourselves a philanthropist? The word conjures up super elite icons like Bill Gates, Oprah and Warren Buffet. However, the true definition of philanthropist is "lover of humanity." It is simple kindness. Bottom line, anyone who cares enough about others to give their time, attention and energy IS a philanthropist.

'Tis the season for giving: a few coins into the Salvation Army bucket, cans for the soup kitchen, extra toys for the hospital, or supplies for the troops. Local and national non-profits send out their appeals this time of year to coincide with year end tax deductions. Ever stopped to really think about what charities mean the most to you and why? Often holiday giving is closely tied with guilt or obligation, as many feel they aren't giving enough, and the whole experience is less than Ho-Ho-Ho.

What is the difference between giving money to a cause you barely know, vs. opening your wallet for a friend who can't cover her grocery bills in line, or running a race for your mother who survived breast cancer? The impact is greater when our personal investment is higher.

I had an opportunity to attend a workshop called "Philanthropy with Passion and Purpose" by Bank of America Merrill Lynch -- a proprietary program to help individuals share, learn and discuss how personal values connect to philanthropic mission and actions. Who would think a bank would offer a quasi personal growth workshop? It was a fascinating process, and I was truly inspired.

Claire Costello is the National Foundation Executive for Bank of America Merrill Lynch Philanthropic Management, and explained why having a mission statement for you values and causes is so important. "Figuring out what you are passionate about, helps you give the way you live," she said. "By developing a personal credo for yourself it affects everything; the way you raise your kids, the friends you make, the business deals you conduct, and how you give your money away."

The process begins with an exploration of your values. What guides the decisions you make in life, and what values drive you? Examples of common values include loyalty, independence, honesty, excellence, diversity, community, spirituality, respect, and so on. Grab a piece of paper and jot down three or four personal values that really resonate with you.

Next, think about the issues that catch your attention, stir your passion or call you to action. Is it conservation and the environment, healthcare, education, science & technology, domestic violence or civic engagement? Again, take that sheet of paper and identify a couple of issues that have deep meaning for you.

Finally, the values and causes you have identified are combined into a formative mission statement of your philanthropy -- stating what you stand for, who you want to impact, and how to accomplish it. Think this is easy? It is actually a challenging and profound experience. I highly recommend trying this with your partner, group of close friends, or as a family exercise.

"Once you begin this process, there is a point of no return," said Costello. "Most people are reactive in their giving, and is has little meaning. If you give based on what you care about, there is much greater personal fulfillment." Aligning values and issues creates a powerful incentive to make a difference, and keep making a difference. It also establishes a graceful way to bow out of requests for causes that are not on the list.

For example, if I identified "family and community" as my top values, with "youth education" as top causes, donating to a startup biotech would not be nearly as fulfilling as helping build and support a Read to Grow program, sponsoring a child to go to school in Africa or mentoring a child once a month as the best investments of my time and money.

How can you express your philanthropic mission statement in a depressed economy? Here are three suggestions:

Writing a check is one way. Many of us have money we spend mindlessly -- a pair of shoes here, latte there, dinner out with wine and dessert -- need I go on? If conservation is your key issue, and loyalty is a high value, choose an eco friendly or green cause, and carve out a small amount of money to give to them each month.

The second way is Time. Volunteering is invaluable -- be a coach, mentor, or helping hand to the causes that represent your deepest commitments. A consistent allotment of time helps the organization to know they can count on you, and often becomes a lovely blossom in the daily grind.

The third is through Advocacy. "In tough economic times, we can still make an impact by simply talking about the causes we believe in and raising awareness, whether it is at a book club, meeting or at work," said Costello. "Sharing your passion can potentially enlist a new donor, or a new volunteer."

Next week, I will highlight a few organizations that offer a variety of causes to engage, so get that "Mission Statement of Philanthropy" going this week, and let me know how it goes. If you have one now, I'd love to hear it in the comments below.

Helene Robbins is the Chair of the Community Fund for Women & Girls and a Vice President at Wells Fargo Private Bank, and helped organize the event I attended. She reflected on the deep generosity Americans share, when a cause is dear to our hearts.

"On September 10, 2001, there was no reason to raise millions of dollars for the survivors of 9/11," she said. "The money that poured in, and volunteers that arrived in droves, were for a cause that literally did not exist the day before."

A crisis brings us together. For many out there, this holiday season IS a crisis. Millions are losing their homes, and more Americans are without jobs than ever. Whether it is time, money or advocacy -- give the way you live.

Bank of America TARP Repayment Premature, Analyst Says

2009-12-04T19:13:29Z

A leading bank analyst says the regulators who allowed Bank of America to repay its $45 billion in government bailout funds made a big mistake because the bank may well need that money soon to withstand the next wave of bad loans, the withdrawal of federal subsidies, and the possible reevaluation of assets.

Wall Street celebrated the bank's liberation from onerous conditions that accompanied the bailout funds; government officials crowed that taxpayers made a profit on the deal; the media marveled at the banking sector's swift recovery.

But Christopher Whalen, a bank analyst at Institutional Risk Analytics, says Bank of America's loans continue to sour. Defaults more than tripled from the first quarter to the third; loans more than 90 days delinquent and those so late they're no longer accruing interest have shot up 15 percent, according to an analysis of banking data.

That's because, despite signs of recovery at the macro level, it takes time for homeowners to become delinquent on their mortgages and credit cards after a job loss.

To pay taxpayers back, the firm says it will use about $26 billion in excess cash "at precisely the time when the [Federal Reserve] is withdrawing many forms of subsidies for the largest banks", notes Whalen's IRA Advisory Service report. That cash could be used to guard against future losses.

"If you want a very tangible example of why the Fed should be taken out of the business of bank supervision, it is precisely the TARP repayment by [Bank of America]," Whalen writes. The Fed supervises Bank of America because it is a bank-holding company. While other regulators supervise units of the firm, the Fed is responsible for the entire corporation. The bank can't repay taxpayers without the Fed's permission.

Whalen argues that bank regulators should force the firm to raise capital now and keep it until the middle of next year when Bank of America's losses are more clear.

"Apparently allowing outgoing CEO Ken Lewis to take a victory lap via TARP repayment is more important to the Fed than ensuring the safety and soundness of [Bank of America]," Whalen writes.

Reached late Friday, a company spokesman said the firm typically doesn't comment on analyst reports.

Whalen notes that large banks may experience higher losses next year from sour loans. In a research note this week, analysts at Goldman Sachs said they expect the unemployment rate to hit 10.75 percent by early 2011, a 0.75 percent increase from the current rate.

It's not just worsening loans, though, that has Whalen concerned. He also points to optimistic real estate valuations on Wall Street, noting that prices have been "greatly helped" by the Federal Reserve. The Fed has purchased some $850 billion worth of mortgage-backed securities since last year.

"Simply put, the Fed has forcibly revalued toxic waste" through its purchases, Whalen said. The true value of the loans on the bank's books are in question.

The Fed is "betting on concluding the bank rescue...in the next year or so," he writes. But the assumption "may not be fully supported by reality on the ground."

Citigroup: The Last U.S.-Owned Bank

2009-12-04T08:09:02Z

A day after Bank of America announced that it would repay its federal bailout money, Citigroup and Mr. Pandit, its chief executive, were left in the uncomfortable position of being the last of the Wall Street giants to remain tethered to the state.

BofA CEO Search To Be Aided By Lifting Of TARP Pay Restrictions

2009-12-03T08:07:10Z

NEW YORK — Bank of America Corp. has been having a tough time finding a new CEO willing to accept the restrictions that came as a condition of bailout funds. But recruitment is sure to be easier now that the bank plans to pay back its $45 billion in aid in just a few days to free itself from government oversight and pay restraints.

The bank said in a statement Wednesday it will use available cash and raise $18.8 billion in capital to repay the money, which it received during the height of the credit crisis last year and after its purchase of Merrill Lynch & Co. earlier this year.

Bank of America to repay TARP, raise cash

2009-12-02T17:37:05Z

NEW YORK — Bank of America Corp. said Wednesday it plans to repay its $45 billion in government bailout funds in the next few days, a move that will help the troubled bank recruit a new CEO.

The bank said in a statement it would use available cash and raise $18.8 billion in capital to repay the money, which it received during the height of the credit crisis last year and after its purchase of Merrill Lynch & Co. earlier this year.

Richard Zombeck: Shaming the Shameless: Why Treasury's Tactics Won't Stop Banks from Misbehaving

2009-12-02T11:30:25Z

August seems to have been the month for scoldings at the Treasury Department. In August we felt the chilling winds of shame blowing across what was left of our economy when Assistant Secretary for Financial Institutions Michael Barr said, "I think we've been disappointed... about [banks'] performance in helping people in a timely fashion with the respect they deserve under difficult circumstances."

On Friday, after four months without progress, Barr said, "The banks are not doing a good enough job. Some of the firms ought to be embarrassed, and they will be."

What did shame get us? We got to hear the CEO of Goldman Sachs, the company not only responsible for this fiasco but also profiting from it. "I'm doing God's work", they tell us in a disgusting display of self adulation.

What's changed, that suddenly shame is going to work on the shameless? Have lenders come to the uncomfortable realization that they caused this mess, were bailed out by the same tax payers they've been kicking to the curb, and now it's time to do the right thing? Doubtful.

What we do hear from banks is that they need time to ramp up their "complicated processes" and staff. Raising interest rates doesn't seem to be a problem. My loan jumped to 9.5% on the exact day they said it would. No delay, no mistakes, no misplaced paperwork, no excuses.

Some executives will have you believe that it is a paperwork problem.

"The documents were confusing. Borrowers did not understand the process wasn't closed until the documents came in," Sanjiv Das, chief executive of Citigroup's mortgage unit, said earlier this month. "Even when the documents came in, they were not always complete."

It's hard to believe that enough Citigroup customers are so confused that the entire lending machine is grinding to a halt. Here are the documents required by HAMP: a request form, a tax form, and a pay stub. That and a stamp to mail the stuff are all you need.

There's more to the problem than administrative delays. These banks are all getting billions of dollars of taxpayer incentives to modify loans, but despite that, they continue to abuse and con homeowners.

OneWest took $814.2 million in taxpayer bailout and was called "inequitable, unconscionable, vexatious and opprobrious" by a Long Island Judge who wiped out a $525,000 loan calling out the bank for "harsh, repugnant, shocking and repulsive" acts.

Bank of America, receiving $6.1 billion in bailout funds, has been blamed for a man's fatal heart attack due to stress, and that's just one story.

Ira Glass, of This American Life, interviewed a Marine back from combat in Iraq, who said dealing with his mortgage was the most stressful thing he's been through. That was Chase, receiving $3.4 billion.

Chase continues to give one woman the run around after putting her through five months of trial payments, according to a The New York Times article.

Ocwen Financial Services, getting $656 million, might be the worst. This supposed poster child of loan modifications is gloating to industry rags about their success. You'd think from some of the press releases that they were single-handedly saving Western civilization. CEO Ronald Farris even went so far as to tell NPR that other banks were coming to them for advice.

According to Paul Koches, Executive Vice President, Ocwen has modified 66 percent of its loans to permanent modifications. That's 5,000 loans according to John Prior of HousingWire.com, but according to MortgageOrb.com the number is 3,039, and according a report from The Congressional Oversight Panel last month it's closer to 700. But Koches was also bragging about numbers nearing 60,000 in July, so who knows?

I asked Prior in an e-mail where he was getting his numbers and how he got his information. "Got the numbers from Ocwen in an interview with Koches," was the response.

Really!? He got it from the VP of a company that notoriously rips people off and trusted that information enough to write an article?

I should also mention that NPR never asked Farris for any proof of his claims.

Among Ocwen's loan modifications is my own. The process took 13 months of submitting paperwork no less than 15 times, interviews in The Huffington Post, radio interviews, my blog, and relentless phone calls and e-mails to John Tierney, Barney Frank, and Martha Coakley. We are still upside down on our mortgage by about 40 percent. Ocwen's executives may claim to reduce principals and say nice things like:

We roll up our sleeves; we talk directly with the borrower. We find out what their situation is and we provide counseling and basically a complete underwriting of the delinquent loan, perhaps the way it should have been done at the point of origination. - Paul Koches, Executive V.P.

According to Ocwen CEO Ronald Farris' own secretary, Linda Ludwig, Ocwen never reduces principal, despite what their executives are quoted as saying. They actually increased our principal by $20,000.

Belva Davis, of Michigan, with the help of a local activist group also got a loan modification from Ocwen after a year of negotiating. "The strategy included rallies in front of her house, pickets in front of the house of Wachovia/Wells Fargo administrator and huge numbers of telephone calls and e-mails to Ronald Farris the CEO of Ocwen," according to an article in Houserepos.

Ocwen even brags on their web site about a homeowner they helped by giving her free mortgage payments for a year in this article. Sounds pretty good right? What they don't mention, according to a former Ocwen employee, is that they charged her over $20,000 in foreclosure fees on the back end of the loan for a $52,000 home in Florida.

"I don't think they ever intended to do permanent loan modifications," said Margery Golant, a Florida lawyer who previously worked for Ocwen Financial to The New York Times. "It's a shell game that they're playing."

So really, shame is the tactic du jour? That's it? If you really want to see how homeowners are being treated by banks and servicers or whether the first round of shaming them back in August actually worked, read some of the stories from 20,000 members and homeowners at LoanSafe.org and judge for yourself. And while you're at it, sign their petition telling Congress to get off their ass.

See more at www.shitheadery.com

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BofA Credit Card Terms: Bank To Spell Out New Interest Rates And Fees

2009-11-30T10:05:52Z

NEW YORK (EILEEN AJ CONNELLY - AP) -- Bank of America is sending its credit card customers a one-page letter with a simple explanation of the interest rates and fees they're being charged starting Monday.

While not mandated by the federal credit card reforms to take effect in February, Bank of America's letter reflects the new law's aim at making policies easier for consumers to understand.

The letter is being sent to the bank's 40 million consumer credit card holders. A sample provided to The Associated Press details the interest rates charged on purchases, balance transfers and cash advances. It also spells out all annual, transaction-based and late payment fees. Perhaps most critical, the letter clearly states that interest rates can change if payments are late.

Like its competitors, Bank of America in recent months raised interest rates, cut credit limits and took other actions to change terms before legal reforms restrict its ability to do so. Across the U.S., changes to interest rate and/or credit limits hit about 65 percent of all outstanding credit cards in the past year.

Among the most notable changes made by Bank of America was shifting most credit cards from fixed to variable interest rates, which move in relationship to the prime rate. The new law will prevent banks from changing the fixed rate on existing balances unless the cardholder falls two months behind paying the bill. The bank also began testing annual fees ranging from $29 to $99 on certain cards that previously were not subject to such charges. Some Bank of America cards, such as airline rewards cards, already come with fees.

The letters are intended as a way to keep consumers informed and help improve financial literacy. "No matter what your status is now, you want clarity, you want simplicity and you want to understand what you're signing up for," said Ric Struthers, president of global card services.

The letter states it does not take the place of the consumer's credit card agreement. Struthers noted that those agreements can be up to 40 pages long, much written in legal language that is difficult to comprehend. "I don't think that most people take that and study it," he said.

One important item the letters don't spell out is how long it will take to pay off outstanding balances if only minimum payments are made.

After February, that critical information is required to appear on monthly statements, and will likely shock many consumers. The median balance for U.S. consumers, meaning half owe more and half owe less, is $3,000 according to the Federal Reserve. At an average interest rate of 14.9 percent, it would take more than seven years to pay off a balance that high making only minimum payments.

All told, consumers have cut back their credit use in the last year in response to rising rates and lower credit limits. The Federal Reserve said outstanding revolving credit, which is mostly credit cards, fell 8.5 percent to $889 billion in September from $975.2 billion a year ago.

Janet Tavakoli: Goldman Sachs Responds To The New York Times

2009-11-24T10:06:38Z

Pulitzer Prize-winner Gretchen Morgenson of the New York Times wrote a must read article ("Revisiting a Fed Waltz with AIG," November 21, 2009) on Sunday in which she recaps salient points from the November 17, 2009 report of the Office of the Special Inspector General (Neil Barofsky) for the Troubled Asset Relief Programs, "Factors Affecting Efforts to Limit Payments to AIG Counterparties," and wrote:

On the question of whether this payout was what the report describes as a "backdoor bailout" of A.I.G.'s counterparties, Mr. Barofsky concluded: "The very design of the federal assistance to A.I.G. was that tens of billions of dollars of government money was funneled inexorably and directly to A.I.G.'s counterparties." [T]his was money the banks might not otherwise have received had A.I.G. gone belly-up.

Timothy Geithner's interaction with the New York Times, first in his role as President of the FRBNY and later as Treasury Secretary, seems to be that of a bailout enabler and a PR spin doctor for Goldman Sachs. Based on the Sunday article's revelations, I would not characterize his behavior as that of "a good man in a storm;" he seems a mere water-boy:

According to an e-mail message that Goldman sent to the New York Fed at the time
[September of '08], Mr. Geithner talked about the article with Mr. Viniar, Goldman's chief financial officer, before calling me. When Mr. Geithner called, he said that Goldman had no exposure to an A.I.G. collapse and that the article had left an incorrect impression about that. When I asked Mr. Geithner if he, as head of the regulatory agency overseeing Goldman, had closely examined the firm's hedges, he said he had not. Mr. Geithner told me on Friday that he spoke with Mr. Viniar that day to ensure that Goldman's hedges were adequate. And, notwithstanding the inspector general's findings, he said he still believes Goldman was hedged."

Prior to the article's publication, Goldman Sachs responded to Ms. Morgenson's questions about the Barofsky report via an email from its spokesman Lucas van Praag. The entire exchange can be found here "Goldman's Response to Questions About A.I.G.," November 22, 2009.

Did Goldman Sachs dissemble and equivocate in its responses to the New York Times?

Based on these responses answer is yes. Treasury Secretary Geithner may wish to keep that in mind the next time he looks to Goldman Sachs for his answers.

Mr. van Praag states "Starting in the mid-90s, we bought credit default swaps from AIG to protect our firm from the risk of a decline in the value of risk we had assumed on behalf some of our clients, (i.e. assets to which we had exposure)." Near the end of his email he again mentions "CDOs from our clients" (emphasis added).

His email never once mentions that the problematic CDOs requiring collateral calls from A.I.G. that precipitated its liquidity problems, the one's referenced in the report, seem to be chiefly 2004/5/6 vintage CDOs. Goldman underwrote the Abacus CDOs on its own list, and Goldman also underwrote CDOs that featured prominently and in large portion on the lists of French Banks SocGen and Calyon as well as Bank of Montreal and Wachovia that also hedged this risk using CDSs with AIG.

When responding about whether or not Goldman would have trouble collecting on its hedges in the event of an A.I.G. collapse as Barofsky's report indicates, Mr. van Praag wrote that Barofsky's report stated a collapse "'might have made it difficult for Goldman Sachs to collect on the credit protection it had purchased' (emphasis added by Mr. van Praag) -- however, it might not, and it is our belief that it ultimately would not have done so."

For a firm that trumpets its risk management, Goldman seemed to present only one scenario on September 16, 2008. Lehman had just gone bankrupt, Bank of America had just agreed to takeover Merrill Lynch, and banks were starved for liquidity just like A.I.G. The banks' TARP bailout had not yet occurred. I suggest that Goldman may be self-deluding with its claim to be stellar risk managers here: "I Retract My Apology and Call for More Regulation of Goldman Sachs."

Mr. van Praag notes that Barofsky's report said had AIG not been rescued, Goldman would have had to bear the risk of further declines in the CDOs that it transferred to Maiden Lane III. He retorts "This is accurate in concept; however, Goldman Sachs has significant experience in adeptly managing this form of market risk."

I previously noted how "adeptly" Goldman Sachs manages its risk: "Goldman's Undisclosed Role in AIG's Distress". How did that work out for the global markets? Fed Chairman Ben Bernanke told Congress on March 24, 2009: "Conceivably, [AIG's] failure could have resulted in a 1930's-style global financial and economic meltdown, with catastrophic implications.

Mr. van Praag also wrote: "It is worth noting that we participated in the transfer of assets to the Maiden Lane III vehicle at the request of the New York Federal Reserve." I agree this is especially worth noting given that Stephen Friedman, a sitting board member of Goldman Sachs (and former Chairman and CEO) owned shares of Goldman Sachs and was Chairman of the FRBNY (he resigned in May 2009 after his ties were questioned), and given the degree of capture Timothy Geithner, then President of the FRBNY demonstrated in his seeming lack of curiosity about Goldman's hedges as mentioned above.

Ms. Morgenson also asked for some perspective about Goldman CEO Lloyd Blankfein's apology for Goldman's practices and its contribution to the credit crisis. She asked why Blankfein said Goldman "participated in things that were clearly wrong and have reason to regret."

Mr. van Praag responded:

Lloyd has expressed regret in various different forums, including a speech to the Council of Institutional Investors in April and one at the Handelsblatt Conference in September. He has stated that the financial services industry collectively neglected to raise enough questions about whether some of the trends and practices that became commonplace really served the public's long-term interests. In particular, the industry let the growth and complexity in some new instruments outstrip their economic and social utility as well as the operational capacity to manage them.

Of special note is Goldman's admission that these products have outstripped "their economic and social utility and operational capacity to manage them." (emphasis added) That statement is apt for many subsequent trading activities as well. But as risk managers, Goldman is dodging its responsibility in its representation that these products merely outstripped management "operational capacity."

Goldman's risk management ability was not up to the task, and its ability is not up to the task of managing the systemic risk of its now gigantic CDS operations in the wake of the demise and hobbling of many of its competitors. Operational capacity is one part of the problem. The other problem is that in Goldman's responses to the New York Times, a bunch of operators tried to gaslight the press.

Fed Said to Ask Stress-Tested Banks to Submit TARP Repayment Plans

2009-11-24T01:54:42Z

The Federal Reserve asked nine of the U.S. banks that were part of this year's stress tests to submit plans for repaying the government's capital injections, a person familiar with the situation said.

Bank Of America CEO Search: Why No One Wants The Job

2009-11-23T12:58:52Z

Apparently, no one wants to be CEO of the nation's largest bank. The protracted search for a new Bank of America CEO may last until 2010, reports Bloomberg.

In fact, the delay may force embattled CEO Ken Lewis to hold off on his retirement, or the bank may name an interim CEO. But the position does not seem to be high on any Wall Streeter's list. Bloomberg reports:

Bank of America faces pressure to pick someone in a short period who's acceptable to regulators and whose pay would be low enough to win approval from Treasury Department paymaster Kenneth Feinberg, the people said. Politics also has influenced the choice at the biggest U.S. bank, the people said. House Oversight Committee Chairman Edolphus Towns said last week Brian Moynihan, one of two internal candidates, may lack the needed leadership.

That's narrowing the field and giving the board "an incredibly tough job," said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. "For people who have choices, it's hard to figure out why someone would take this job."

But who are the potential candidates? Well, we know the irascible AIG CEO Robert Benmosche has already whined about running a company overseen by Obama's pay czar Kenneth Feinberg.

From Bank of America's hometown, comes the possibility that newly-departed GMAC head, Alvaro de Molina could actually be the bank's next leader. Here's WSOC-TV: "UNC Charlotte finance professor Tony Plath told Channel 9 Eyewitness News Monday night, 'We know he lives in Charlotte. He's partial to Charlotte. He would be likely to keep the headquarters here so, all in all, it's been a good day for Charlotte. Let's see how this plays out.'"

According to some very unsubstantiated rumors, the Business Insider suggested that former New Jersey Governor -- and Goldman Sachs chief -- John Corzine could step in for Lewis.

For his part, the ubiquitous Wall Street analyst Dick Bove said last week that Lewis may even stay on as the bank's CEO. The Charlotte Business Journal got a hold of a recent letter Bove wrote to his clients: "Approximately one week ago, in a fit of pique with the demonstrated incompetence of the Bank of America Board of Directors to select a new CEO, I argued that Ken Lewis should be brought back. At that time, it was simply a stated wish. Now I am beginning to believe that Mr. Lewis could in fact be back."

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'Geezer Bandit' Sought By FBI For San Diego Bank Robberies

2009-11-18T14:51:05Z

SAN DIEGO — FBI officials say an elderly, thin, gray-haired man nicknamed the "Geezer Bandit" is responsible for holding up five San Diego-area banks since summer.

Investigators say the man appears to be in his 70s. Officials say that in the most recent robbery Monday, he approached a Bank of America teller in La Jolla, displayed a handgun and asked for cash. He fled on foot.

Wall Street Profits On Pace For Record, Industry Recovering 'Faster Than Expected': NY State Comptroller

2009-11-18T07:41:33Z

It took Wall Street just one year to make its way back to record profits.

According to a report released Tuesday by the comptroller of New York State, Thomas P. DiNapoli, Wall Street is turning around "much faster than expected" and is on pace to pull in record earnings this year.

New York City's four largest investment firms -- Goldman Sachs, JPMorgan Chase, Merrill Lynch and Morgan Stanley -- earned $22.5 billion in the first nine months of 2009. Wall Street's earnings, should they remain steady for the rest of the year, could lead some firms to eclipse 2007's record profits.

From DiNapoli's report:

"The national economy is slowly improving, but Wall Street has recovered much faster than anyone had envisioned. Profitability is on track to exceed 2006 levels, which was a banner year for the industry. Strong profits have been driven by low
interest rates, which reduce the cost of doing business.

Compensation is also increasing faster than expected, leading to expectations of higher bonuses. The federal government, which spent trillions of dollars to support the financial sector, has taken steps that may restrict cash bonuses and defer compensation to future years in an effort to reduce excessive risk-taking and reward long-term performance. While these initiatives may reduce personal income tax collections in the short term, New York State and New York City could benefit from increased stability in the financial sector. industry added 3,600 jobs in September 2009.)"

The six largest bank holding companies in the U.S. dedicated $112 billion to compensation during the first nine months of the year, the report noted. Even Merrill Lynch, which lost $41 billion in the first nine months 2008, is expected to pay out sizable bonuses this year.

Deeper in the report are some indications of the disparity between Wall Street's ability to generate cash for its employees and its ability to create jobs and stimulate the larger economy. Though each new job on Wall Street creates two additional jobs in other industries in New York City, pay for bankers and traders may still be out of whack. "The securities industry accounted for 24 percent of the wages paid in New York City in 2008, even though the industry accounted for only 5 percent of the jobs," the report stated.

The average securities industry salary in 2008 was $382,130, down from a peak of $401,500 in 2007. (Keep in mind that the median income in America was approximately $50,000 in 2007.)

The average securities industry salary in New York was more than six times greater than in other industries. And since 2003 salaries in other industries in New York have grown just 20.4 percent, while Wall Street pay has jumped 73 percent.

"Consumers are still finding difficultly accessing the credit markets," DiNapoli's report states, while commercial credit has declined by 52 percent since its peak in July 2007.

READ the entire report:

wall_street_report_2009 -

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BofA, Merrill Deal: Republicans And Democrats Square Off Over Government's Role

2009-11-17T15:02:29Z

WASHINGTON — A senior House Democrat says the government didn't force Bank of America to take over Merrill Lynch, but a bank board member said much pressure was applied and Republicans charged that a committee inquiry was covering up the role of an Obama administration official.

"The government pushed us hard to do this deal," Bank of America director Charles "Chad" Gifford said after persistent questioning by lawmakers at a hearing Tuesday.

Geithner Singled Out In TARP Watchdog Neil Barofsky's Scathing Report On AIG Bailout

2009-11-16T21:36:44Z

A brutal report issued Monday by a government watchdog holds Timothy Geithner -- then the head of the Federal Reserve Bank of New York and now the nation's Treasury Secretary -- responsible for overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs.

The authoritative new narrative describes how, while bailing out insurance giant AIG last fall, a team led by Geithner failed nearly every step of the way.

Instead of bargaining with AIG's numerous counterparties to resolve its billions of dollars in souring derivatives contracts, Geithner's team ended up paying top dollar for toxic assets -- "an amount far above their market value at the time," the report notes.

"There is no question that the effect of FRBNY's decisions -- indeed, the very design of the federal assistance to AIG -- was that tens of billions of dollars of Government money was funneled inexorably and directly to AIG's counterparties," the Office of the Special Inspector General for the Troubled Asset Relief Program said.

Wall Street firms like Goldman Sachs, Merrill Lynch and Wachovia got full value for their derivatives contracts with AIG, and taxpayers got the bill. In total, $27.1 billion of public money was transferred to companies that did business with AIG.

Throughout the bailout of AIG, the report says, the New York Fed failed to develop appropriate contingency plans; failed to properly assess the impact of its decisions; and generally engaged in negotiation strategies that were doomed to fail.

Then, after Geithner's team paid off AIG's counterparties on Wall Street, it imposed "onerous" terms on the troubled insurer, the report says.

"[T]he decision to acquire a controlling interest in one of the world's most complex and most troubled corporations was done with almost no independent consideration of the terms of the transaction or the impact that those terms might have on the future of AIG," the report finds.

Geithner, now the nation's chief financial officer, just didn't bargain hard enough with Wall Street's biggest companies, the report concludes:

[T]he refusal of FRBNY and the Federal Reserve to use their considerable leverage as the primary regulators for several of the counterparties, including the emphasis that their participation in the negotiations was purely "voluntary," made the possibility of obtaining concessions from those counterparties extremely remote. While there can be no doubt that a regulators' inherent leverage over a regulated entity must be used appropriately, and could in certain circumstances be abused, in other instances in this financial crisis regulators (including the Federal Reserve) have used overtly coercive language to convince financial institutions to take or forego certain actions. As SIGTARP reported in its audit of the initial Capital Purchase Program investments, for example, Treasury and the Federal Reserve were fully prepared to use their leverage as regulators to compel the nine largest financial institutions (including some of AIG's counterparties) to accept $125 billion of TARP funding and to pressure Bank of America to conclude its merger with Merrill Lynch. Similarly, it has been widely reported that the Government, while arguably acting on behalf of General Motors and Chrysler, took an active role in negotiating substantial concessions from the creditors of those companies.

Meanwhile, the Fed was attempting to keep the details of AIG's counterparties hidden from public view -- another big mistake, according to the report:

The now familiar argument from Government officials about the dire consequences of basic transparency, as advocated by the Federal Reserve...once again simply does not withstand scrutiny. Federal Reserve officials initially refused to disclose the identities of the counterparties or the details of the payments, warning that disclosure of the names would undermine AIG's stability, the privacy and business interests of the counterparties, and the stability of the markets.

After public and Congressional pressure, AIG disclosed the identities. Notwithstanding the Federal Reserve's warnings, the sky did not fall; there is no indication that AIG's disclosure undermined the stability of AIG or the market or damaged legitimate interests of the counterparties. The lesson that should be learned -- one that has been made apparent time after time in the Government's response to the financial crisis -- is that the default position, whenever Government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with Government funds.

While SIGTARP acknowledges that there might be circumstances in which the public's right to know what its Government is doing should be circumscribed, those instances should be very few and very far between.

READ the full report:

SIGTARP Report Nov 16 -

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Huffington Post Business Editor Ryan McCarthy also contributed to this report.

Derivatives Reform: 'Tricky Exceptions' Leave Market Unchecked: The Nation

2009-11-13T10:18:48Z

The Obama administration promised to reform the financial system and make it safe for the rest of us, but recent Congressional action is more likely to reset the fuse for another explosive calamity. The time bomb in this case is that arcane financial instrument known as derivatives--the hedging devices that the big banks sell to investors, corporations and other banks to reduce risk or evade the requirements to hold adequate capital on their books.

Neil Barofsky, TARP Watchdog: Bailout Will 'Almost Certainly' Result In Loss For Taxpayers

2009-11-12T17:48:26Z

Nov. 12 (Bloomberg) -- Neil Barofsky, the federal watchdog for the $700 billion financial industry bailout, said the program will "almost certainly" result in a loss to U.S. taxpayers.

Lesley Stern: How to Live on $0 a Day: Assuaging Rage, One Prick at a Time

2009-11-12T10:53:50Z

If you've lived your life believing that hard work, ethics, observing the golden rule and fiscal responsibility will be rewarded, you're probably a little ticked off right now. Okay, you're probably roiling with rage (especially if you stopped taking your anti-depressants because your insurance company canceled you for being depressed).

A lot of that anger comes from a sense of betrayal and helplessness at seeing people who broke every law of decency living high on the hog while the rest of us are hard pressed to afford a swine flu shot (if we could find one).

The logical recourse is to seek justice. You've appealed to their non-existent sense of decency. You've written your elected officials, attorney general, chamber of commerce and better business bureau. Clearly, you can't afford a lawyer. Crank calls and Internet heckling bring no relief. And while sending offenders cat poop in the mail is satisfying, the postage is costly--there are no bulk media rates for mass poop mailings (which REALLY pisses you off). And try as you might, you can't seem to get your friends interested in storming Wall Street or the Capitol because pitchforks are too expensive.

If you're quivering with rage just thinking about it, it's time to take action. I've discovered a way to calm my ire and achieve a semblance of inner peace without costly aids like therapists, tranquilizers, a masseuse or weapons.

Whether your anger is directed at a TARP recipient harassing you for an overdue $69, a vile CEO, pundit or politician, someone who screwed you over, the neighbor's dog, or the waiter who lied when he told you the chef's special chicken was all white meat, my methods ensure that all bad behavior is met with swift and decisive punishment (finally!). I can't tell you how much better you'll feel. Here's how it works:

Wall Street Bank Lobby Faces 'Live Ammo' As Lawmakers Ponder Breaking Up Big Banks

2009-11-12T08:03:07Z

Nov. 12 (Bloomberg) -- Seven Wall Street lobbyists trooped to Capitol Hill on Nov. 9, hoping to convince Representative Paul Kanjorski's staff that his plan to dismantle large financial firms was a bad idea.

They walked out with a sobering conclusion, according to the accounts of two attendees who requested anonymity because the meeting was private. Not only was Kanjorski serious, he planned to offer the legislation as early as next week -- and it just might pass.

Chicago Spire Saga Continues: Developer Countersues Bank of America

2009-11-11T20:04:41Z

The developer of the Chicago Spire has filed a countersuit against Bank of America Corp., alleging that the bank intentionally charged too much interest in two loans related to the project.

Credit Card Fees: 10 Ways Credit Card Companies Are Still Ripping You Off

2009-11-11T09:44:18Z

Credit card companies are already finding new ways to get rich at your expense, all while racing to increase penalties and other charges before February, when the new rules go into effect.

Goldman Sachs CEO Lloyd Blankfein: Our Employees Are Among The Most Productive In The World

2009-11-11T07:46:29Z

For those concerned about how Goldman Sachs is set to bring in record-breaking profits while the broader economy remains downright stalled, there is one simple explanation: Goldman employees are just more productive than you.

In another comment that will likely provoke even more Goldman Sachs outrage, CEO Lloyd Blankfein appeared at a industry conference on Tuesday and defended his company's performance, reports the Financial Times. Blankfein's words come on the heels of his recent claim that Goldman Sachs is doing "God's work."

Here's the FT:

"I often hear references to higher compensation at Goldman," said Mr Blankfein. "What people fail to mention is that net income generated per head is a multiple of our peer average. The people of Goldman Sachs are among the most productive in the world."

Blankfein went on to say that Goldman's earnings are significantly higher than other financial companies in the Fortune 500, and that, per employee, his firm is far more profitable than companies even in other categories.

Leaving aside the small matter of the benefits Goldman Sachs received from the bailout -- and the advantages that it receives from being classified as a bank-holding company -- this statement is somewhat misleading.

For one, comparing Goldman Sachs to retail banking operations -- banks that actually, well, lend -- isn't quite a fair comparison. Not only do retail banks have, by necessity, far more employees than investment banks (Bank of America has over 281,000 employees, while Goldman Sachs has roughly 31,000), but traditional retail banking is also generally less profitable. This year, Goldman's earnings have been dominated by its trading activities.

Yet, as Bloomberg pointed out, Blankfein argued yesterday that Goldman shouldn't be confused with "too big to fail" banks. Here's Bloomberg:

"Our business is very complex, and I won't deny that, but it's far, far simpler than most of the competitors," Blankfein, 55, said today at a conference in New York sponsored by Bank of America Corp. "I wonder myself how some of these things get managed."

Blankfein seems to want it both ways. He wants to argue that Goldman Sachs is more profitable than other financial firms, but he also doesn't want to be compared to, well, other financial firms.

Whether he's boasting that his firm does "God's work," or simply touting the excellence of his employees, Blankfein still seems to be out of step with public sentiment. At the Business Insider, Henry Blodget's advice seems wise:

Just say, "We were fortunate enough to have had an extraordinary year. I am grateful to our employees, shareholders, and the U.S. government for helping us through one of the most challenging periods in the firm's history."

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Proposals In House Would Curb 'Too Big To Fail' Banks, Firms

2009-11-09T23:26:17Z

Democrats are advancing proposals in Congress designed to limit the size and complexity of financial companies so that any collapse wouldn't damage the broader economy, a sign that lawmakers are responding to anti-Wall Street sentiment by toughening the administration's rewrite of finance rules.

Bank Lending Down Despite Massive Bailouts And Increasing Regulations

2009-11-09T14:37:40Z

While financial institutions including Citigroup Inc. and Bank of America Corp. have received more than $200 billion in capital from the government, they are limiting loans at a time of mounting unemployment, rising company bankruptcies and increasing regulatory oversight. Commercial and industrial lending has dropped 17 percent since October 2008, according to Federal Reserve data.

Arianna Huffington: Why It's Wrong When Wrongdoers Are Allowed to Admit No Wrongdoing

2009-11-09T10:55:53Z

"The struggle of man against power is the struggle of memory against forgetting."

So wrote Milan Kundera in The Book of Laughter and Forgetting. It is one of my favorite quotes and it popped into my head as I was reading about last week's settlement between JPMorgan and the SEC in which the banking giant agreed to pay a $25 million penalty and cancel $647 million in fees owed by Alabama's Jefferson County as the result of a complicated derivatives deal that blew up in the county's face.

As part of the settlement, JPMorgan neither admitted nor denied wrongdoing -- despite ample evidence that it had engaged in plenty of wrongdoing. Things like paying off local officials with millions to win no-bid contracts worth billions and convincing county officials to switch from fixed-rate bonds to bonds hedged with risky derivatives -- a switch that has driven Jefferson County to the brink of bankruptcy. "We have been victimized by our creditors," said a county official.

JPMorgan released a statement that it was "pleased to have reached a settlement with the SEC," and acted as if it was practically a disinterested party: "The charges relate principally to municipal transactions that occurred six and seven years ago. JPMorgan has since discontinued that business, and the employees in question are no longer employed by the firm."

So no wrongdoing admitted, and time to move on to the next lucrative money-printing scheme. How tidy. This is what passes for justice on Wall Street these days. If you commit a petty crime and hammer out a plea bargain, you'll have to admit wrongdoing as part of the agreement. But put on a suit and commit a billion dollar crime and you won't even have to admit you did anything wrong. It'll be as if it never happened. Which, of course, makes it much more likely that it will happen again.

We saw the same dynamic played out earlier this year in the legal saga surrounding the $3.6 billion in bonuses that was awarded to Merrill Lynch executives just before the failing firm was acquired by Bank of America (with a lot of help from American taxpayers, who bailed out BofA with $45 billion).

It appears that Bank of America executives failed to inform their shareholders that, as part of the acquisition, they were going to give billions to the executives who had been at the helm while Merrill lost $27 billion in 2008. Had the shareholders been told, the news would more than likely have put a crimp in the hastily arranged deal.

Many thought the matter was closed back in August when the SEC reached a settlement with Bank of America in which the banking giant would pay a $33 million fine but -- you guessed it -- admit no wrongdoing.

Of course, lots of wrong was done in that case too -- something that was implicit in the bank's willingness to pay the multimillion-dollar fine. Specific people had made very specific decisions surrounding the Merrill Lynch bonuses -- including not informing their shareholders.

But, instead of going after them, regulators went after the company, gave it a minor ding to its bottom line, and were ready to forget the whole thing.

Last year, the total of amount of fines levied by the SEC was the lowest since the corporate scandals of 2002 led to stricter enforcement regulations. So while the financial system was on a fast track to near-collapse, the SEC was taking its hand off the brake. And the perpetrators of that near-collapse are being allowed to avoid accountability. When crimes are uncovered then resolved with no acknowledgment that a crime was ever committed, that's a recipe for anarchy -- not for a healthy democracy.

It's really not that complicated: if you do the crime, you do the time. But the people who run the show like to make it seem like it is very complicated -- all the better to obscure the simple moral principle of right and wrong. Why should it matter whether you commit your crimes in a fancy boardroom or on the street? If you were reaping the (often enormous) benefits of your crime, why don't you have to admit wrongdoing when you're caught, and pay a commensurate -- not a token -- penalty?

As it happens, there are some heroes out there who have noticed that the ambiguous way our laws are being enforced has diverged from the unambiguous morality the laws are based on.

In the Bank of America case, the hero is U.S. District Court Judge Jed Rakoff. Instead of rubber-stamping the BofA/SEC settlement as everybody expected, Judge Rakoff refused to sign off on the deal, which he called a breach of "justice and morality" that "suggests a rather cynical relationship between the parties."

And Judge Rakoff demanded to know who exactly were the executives who knew about the bonuses and decided not to disclose them. Instead of a faceless company, shouldn't the culpability, Rakoff asked at a hearing, be on "the individuals who were responsible?"

But rather than naming those responsible, Bank of America claimed it was all the fault of its lawyers -- an excuse that, shockingly, the SEC bought, saying the fact that the bank's executives had relied on legal advice would present "substantial obstacles" to prosecution.

Judge Rakoff wasn't buying it -- he saw the slippery slope that thinking would lead to: "It would seem that all a corporate officer who has produced a false proxy statement need offer by way of defense is that he or she relied on counsel," he said.

Rakoff has a history of actually applying the law. Back in 2003, he rejected a settlement with WorldCom because the fine was too low.

When he first became a judge, prosecution used to focus more on individuals instead of companies. "The feeling then," he said, "was if a crime had been committed, it was important to discover who the persons were who made the wrongful decisions."

Judge Rakoff's display of spine appears to have rubbed off on the SEC, which now says it will aggressively pursue its case, taking Bank of America to trial. And there have been other ripple effects: after initially stonewalling a congressional committee looking into the Merrill acquisition, the bank agreed in September to hand over some, but not all, of the documents the committee had requested. And in October, it agreed to turn over to the SEC and the New York Attorney General's office documents revealing the legal advice it received regarding the Merrill deal -- an unusual waiving of attorney-client privilege. What's more, Brian Moynihan, the bank's onetime general counsel and a contender to succeed departing CEO Ken Lewis, will testify before the House Oversight Committee next week about his role in the Merrill takeover.

Of course, it's not just our "too big to fail" banks that have been allowed to do wrong without having to admit to any wrongdoing. The pharmaceutical industry and health insurance companies have been doing the "pay the fine but admit nothing" dance for years -- chalking up the millions (and sometimes billions) they have been fined as the cost of doing business.

But with the banking, drug, and insurance industries all finding themselves at a crossroads, now is a very good time to revoke the Get Out of Jail Free card those at the helm of these companies have been given for far too long.

We all know that there was a great deal of wrongdoing that led to the near-collapse of our financial system and to our badly broken health care system. The first step to reforming each of them is to acknowledge that wrongdoing -- and to seek the real punishment of the wrongdoers.

Federal Reserve-Led Regulation Opposed By Lawmakers From Both Parties

2009-11-09T09:21:09Z

An unusual alliance of conservatives and liberals is pushing to break up or downsize banks deemed "too big to fail," rather than create a new regulatory regime led by the Federal Reserve to try to keep them from getting into trouble again.