Criminals, Jail Time, and the AIG Bailout / Pass-Through

[WhiskeyGirl]

I was listening to the business news this morning.  Apparently, AIG needed to make those pass-throughs at 100% to foreign banks prevent SOME from facing criminal charges, trials, and jail time in foreign jails.

For some reason, the pass through was made.  Will Americans ever see that money again?

Covering up criminal wrong doing? 

Mortgages didn't go bad over night.  Barney, despite years of red flags, and other intelligence, insisted they were safe.

WFT?  Where is the American criminal investigation? 

Why aren't these folks in jail?  Gitmo?  Economic terrorists?

Someone thought there was a real chance that foreign countries would CONVICT some of CRIMINAL conduct?

So, taxpayers get screwed instead?  Obama is fine with this and continues his march of economic destruction?

[WhiskeyGirl]

Angelides, a former Democratic treasurer of California, questioned Goldman Sachs' Lloyd Blankfein about packaging soured assets into bond-like securities and selling them to investors - even as Goldman Sachs was "shorting" the same securities, or making bets they would fail.  These included risky mortgages that were extended to borrowers with poor credit records and helped cause the home-loan bust.

"It sounds like selling a car with faulty brakes and then buying an insurance policy on that car," Angelides said.

"Whatever we did, it didn't work out well," he said. "We were going to bed every night with more risk than any responsible manager would want to have."

"I know it's become part of the narrative that people knew what was going to happen at any minute," Blankfein said. "We never knew what was happening at any minute."

The commission's vice chairman, former Rep. Bill Thomas, R-Calif., said the inquiry would try "to get to the bottom of what happened and explain it in a way that the American people can understand."

I understand that someone should have gone to jail.  Possibly extradited and sent for foreign justice, maybe France, Germany, or China.

 

"In mortgage underwriting, we somehow missed that home prices don't go up forever," Jamie Dimon, chief executive of JPMorgan Chase & Co., said in response to a question from Commissioner Douglas Holtz-Eaken.

Added John Mack, chairman of Morgan Stanley: "We did eat our cooking and we choked on it."

Did any of these folks have a financial education?  Take a licensing exam?  I seem to recall the traditional requirement for 20% down was due to history of home prices – the buyer needed to have some skin in the game and a reason not to walk away.

Hmmm…where did these folks go to school?

Generations of Americans are stuck with your debt and bile.  Why didn’t Bush, Obama, Federal Reserve and Treasury let these folks go under?  “To big to fail…”

Friends and family in high places?  Job rotation?  Special interests in Congress?  Wall Street?

http://www.cbsnews.com/stories/2010/01/13/business/main6091377.shtml

To big to fail?  Break up, break up, break up…repay taxpayers, go to jail…

Failed fiduciary responsibility all around.

[WhiskeyGirl]

Who are these folks that might have gone to jail?  What evidence of wrongdoing might those foreign banks have had?

Where is the evidence?  Generations of Americans are burdened with debt to keep some mystery people out of foreign prisons?

[WhiskeyGirl]

Some folks received millions and billions in salary and bonus and all they come up with was 'we were bad...please regulate us...we'll tell you how...'?

10 Questions A Financial Inquiry Commission MUST Ask

Here are our top ten questions:

1. AIG: What was your firm’s relationship with AIG? How much exposure did you have to AIG? What information did you publicly disclose about that exposure? Did you think AIG’s CDS strategy was “good business”? Do you think we still would have needed to rescue AIG if its derivatives had been centrally cleared, as some in Congress have proposed?

(WG Note - someone had to decide if business was good or bad - how do you regulate greed?)

2. Disclosure: Were your financial statements during 2005-08 accurate?  What did your officers disclose to your board about your bank’s exposure to the nonprime mortgage markets before 2008? What specific information did you publicly disclose about your exposure to derivatives and nonprime mortgages? When did officers or employees of your firm recognize that there was a serious risk of a housing bubble? What did they recommend, and what changes did the firm implement, in response to the identification of this risk? Why?

(WG Note - Forensic accounting audit?  Didn’t anyone notice a problem?  Lack of internal controls?)

3. Pay: What was your bank’s total compensation for officers for each year from 2001 to the present? What were the components of that compensation? Identify and explain where compensation created perverse incentives in the following contexts: your bank, other banks, executive compensation advisory firms, audit firms, appraisers, rating agencies, loan brokers, loan officers? What aspects of compensation produced these perverse incentives? When did employees of your bank become aware of the literature in economics, criminology, and compensation warning of these perverse incentives? What specific actions did the bank take in response? Which elements of your bank’s compensation system create perverse incentives?

4. Ratings: Why do you think the rating agencies gave AAA ratings to toxic CDOs? Did you think CDO credit ratings accurately reflected their credit worthiness? Did employees of your bank ever express concerns internally/publicly about the judgment of the ratings agencies? If so, when was the first time?

(WG Note – Were the employees asleep at the wheel?  Offshore?  Did you have some kind of review process?)

5. Moral hazard: What incentives at your institution helped lead to the financial crisis? What conversations did you have with the Fed regarding your exposure to CDS and other derivatives? What monetary value would you place on the government guarantee of your deposits?

6. Mortgage fraud: Name the three nonprime specialty lenders with the worst reputations for originating fraudulent mortgages. Name the three nonprime specialty lenders with the worst reputations for originating predatory loans. Is there any legitimate business reason why a secured lender would seek to induce appraisers to inflate the value of the secured property? When did employees of your bank become aware that coercion of appraisers to inflate appraised values was becoming common? What action did they take or recommend when they became aware?

(WG Note – Any of your employees notice?  Anyone responsible for analysis of reports?  Trends?  Any internal control?  Anyone responsible for profit?  Just for cashing a check?)

7. Warnings: What were the three most significant specific steps your banks took in response to the FBI’s September 2004 warning that the developing “epidemic” of mortgage fraud would produce a crisis if it were not stemmed? Why do you think the spread on nonprime mortgages fell after this warning, and other warnings? Why did bank loss reserves also fall during this time? What were your bank’s analyses of these risks and the adequacy of loss reserves (industry-wide and at your bank) and how did they change as the markets exhibited these perverse patterns? What did your bank’s officers recommend that the bank do in response to these perverse market conditions and what actions did the bank actually take? Were the industry reactions, and your bank’s reactions, to the warnings adequate?

8. Lobbying: How much has your bank spent on lobbying over the last five years? This year? How many additional personnel has your bank hired full-time or as consultants to lobby the federal government?

9. Crimes: How many criminal referrals has your bank made for mortgage-related frauds in each year beginning in 2002?  How many named your own officers or employees? Does the FBI have adequate resources to investigate such frauds? Explain how an epidemic of mortgage fraud must lead to widespread accounting and securities fraud if the mortgage paper is to be resold.

10. Regulation: Did the passage of the Commodities Futures Modernization Act of 2000 contribute to the crisis? Did the federal regulators’ efforts to preempt state regulation of predatory mortgage lenders contribute to the crisis? Should the Federal Reserve have used its authority under HOEPA to regulate nonprime lending during the financial bubble? Provide any contemporaneous analyses of the role of regulation, deregulation, and desupervision in contributing to the crisis. Did your bank lobby (directly or indirectly through trade associations) in support of deregulatory efforts that contributed to the crisis?

How did they get caught with their pants down?

I didn’t hear the tough questions. 

http://www.businessinsider.com/10-questions-a-financial-inquiry-commission-must-ask-2010-1

No one's afraid of Congress.  I think they would get tougher questions and consequences if they were returning something to the local dollar store for a refund.

jmho

[WhiskeyGirl]

'We didn't know...'

should be -

'We're the zombie / vampire banks of Wall Street and Europe and points known and unknown...'