Former Bank of America CEO Ken Lewis Charged with Fraud; It’s Only a Start

Written by: Michael Shedlock

On April 24, I wrote Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis.

You will be pleased to read Ex-BofA chief Lewis charged with fraud.

New York Attorney General Andrew Cuomo said Thursday it was bringing civil charges against senior Bank of America (BAC) executives, including former company CEO Ken Lewis, for their role in the company’s controversial purchase of Merrill Lynch.

Cuomo’s office, which has been aggressively pursuing an investigation into the merger and subsequent bonuses paid to former Merrill employees, said it was charging Lewis and Bank of America’s former chief financial officer Joe Price with fraud.

The lawsuit contends that the bank’s management team understated the losses at Merrill in order to get shareholders to approve the deal, then subsequently overstated the firm’s willingness to terminate the merger to regulators weeks later in order to get $20 billion of additional aid from the federal government.

Full Article

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Enough With The Government Cover-Ups

Edward Harrison, 01.12.10, 04:20 PM EST

What really happened to AIG and other bankrupt firms.

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It has come to light recently that American International Group withheld important information about its dealings with financial counterparties in the lead-up to its collapse and bailout by the Federal Reserve. What is most troubling about this episode is that it was officials at the Federal Reserve Bank of New York–not AIG–who seem to have orchestrated the secretive and potentially illegal activities. Moreover, the actions by the regulator were uncovered only through an investigation conducted on behalf of the House Oversight and Government Reform Committee. Were it not for the doggedness of the committee’s ranking Republican member, Darrell Issa of California, the public would be none the wiser.

Is this what it has come to in America: Public officials making policy via cover-ups, secret deals and government coercion? It seems so. If we don’t demand a full investigation into this type of behavior and criminal prosecution where appropriate, we should expect more of the same in the future.
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Is The U.S. Economy Being Tanked By Mistake or By Intent? by Bill Sardi

Is The U.S. Economy Being Tanked By Mistake or By Intent?

by Bill Sardi

Recently by Bill Sardi: Who Is Left Holding the Bag on US Debt?

The government wants Americans to believe the greatest economic collapse in history was the result of ineptness and mistakes yet still have confidence in their financial institutions.

Should American bankers be let off the hook because they self-declare, before an investigational panel, that the failure of their newly invented risk swaps and other highly leveraged investment schemes was simply due to “mistakes”? Not malfeasance – just every-day mistakes? Bankers just fell asleep at the helm at a critical juncture in American history. Is that what we are being led to believe?

Oh well, it’s just 18 million American homes that now lay empty in the wake of unprecedented foreclosures, and the bankers have collected obscene bonuses for reckless lending of their depositors’ money. It’s like the captain and crew of a ship saying, not to worry, twenty-percent of the passengers were lost overboard, but this was due to unavoidable mistakes, and then being rewarded with bonuses when they reach port.


FULL ARTICLE

THE ATLANTIC: The Quiet Coup

FACTSNEWS- MUST READ! Lengthly, we will only post the first paragraph.

Full Article

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

ONE THING YOU learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card.

The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.

Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.

But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.

No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.

In Russia, for instance, the private sector is now in serious trouble because, over the past five years or so, it borrowed at least $490 billion from global banks and investors on the assumption that the country’s energy sector could support a permanent increase in consumption throughout the economy. As Russia’s oligarchs spent this capital, acquiring other companies and embarking on ambitious investment plans that generated jobs, their importance to the political elite increased. Growing political support meant better access to lucrative contracts, tax breaks, and subsidies. And foreign investors could not have been more pleased; all other things being equal, they prefer to lend money to people who have the implicit backing of their national governments, even if that backing gives off the faint whiff of corruption.

But inevitably, emerging-market oligarchs get carried away; they waste money and build massive business empires on a mountain of debt. Local banks, sometimes pressured by the government, become too willing to extend credit to the elite and to those who depend on them. Overborrowing always ends badly, whether for an individual, a company, or a country. Sooner or later, credit conditions become tighter and no one will lend you money on anything close to affordable terms. Full Article

Federal Reserve Bank is financial system’s new “uber-regulator” – USATODAY

Excerpt from USATODAY.com

President Obama unveiled a stem-to-stern overhaul of financial industry regulation Wednesday, promising dramatic changes for banks, consumers, hedge funds and even the inner workings of the Federal Reserve. The ambitious proposal is designed to strengthen a ramshackle system of government oversight that failed to either prevent or mitigate the current financial crisis.

The new regulatory blueprint would “protect America’s consumers and our economy from the devastating breakdown that we’ve witnessed in recent years,” Obama said.

The sweeping proposal marks an emphatic end to an era during which top policymakers, notably including then-Fed chairman Alan Greenspan, celebrated the ability of market participants to largely police themselves.

FN- Did you read that double speak? They say bad government regulation caused the crisis. Now Greenspan is celebrating because they now “self-regulate”? We went from bad regulation to NO regulation? How does he pull this off?

Increased powers for Fed

Among the most controversial elements are expanded powers granted the Fed. The central bank, which controls the nation’s money supply and supervises the banks, would become the financial system’s uber-regulator. The Fed missed the housing and credit bubbles while they were inflating, badly underestimated their costs when they did pop and already has a full plate, critics say. With the Fed already engaged in numerous unconventional interventions in financial markets, some worry that adding a new role could backfire. (FN- You think?)

“I’d rather that the Fed stick to its knitting of conducting monetary policy and be the lender of last resort, as opposed to take on the role of supervision of individual institutions. … In this role, the Fed will be thrust into the center of controversy,” said Hal Scott, a professor at Harvard Law School and director of the influential Committee on Capital Markets Regulation, a private-sector body.

But administration officials say they carefully considered alternatives before opting to task the Fed. Countries that place key supervision authority outside the central bank don’t operate well in crisis situations, Geithner said.

“I do not believe there’s a plausible alternative that would create the necessary degree of confidence, accountability, responsibility and authority for protecting us against some of the risks we faced in this crisis,” he said. (FN- Giving ALL the power to the Fed to “protect us”, thanks Geithner)

A key target of the plan: financial institutions so large and interconnected, their failure could ricochet around the economy with catastrophic results. These “systemically important’ companies would be subject to more scrutiny and would need to hold more capital in reserve than under current standards. The government also would win new authority to handle “the orderly resolution” of them if they suffer fatal wounds.

“After this crisis, it’s clear that there are a number of financial institutions that are capable of being the domino that causes the rest of the financial system to fall over,” said Douglas Elliott, a former JPMorgan investment banker.

But some worry that investors will view any financial institution the government labels “systemically important” as effectively government-backed. (FN-Reread this line carefully)

That could enable such firms to borrow at lower interest rates, since they would seem better credit risks than smaller rivals not vital to the financial system, says the Brookings Institution’s Martin Baily, who chaired President Clinton’s Council of Economic Advisers.

FN- Spread the word, the Federal Reserve is becoming the all powerful all knowing body in the world. The US has NO CHECKS AND BALANCES left because the Federal Reserve has the final say in all monetary and financial matters. Mind you, the banks that back the Federal Reserve are SECRET. We have a SECRET group of people controlling the inner workings of our so-called “free market”. Give me a break. Support TX Rep. Ron Paul’s bill to AUDIT THE FED. It now has an astonishing 234 co-sponsors. Whether you support it or not, it is very likely to pass. The Federal Reserve’s inner workings will be exposed, this they say will “destroy the Fed”. Get involved and READ!!!