Tag: Investment banks

MF Global

Someone is going to prison:

MF Global, the failed securities firm led by former Goldman Sachs chief Jon Corzine, admitted using clients’ money as its financial troubles mounted, a federal official says.

An MF Global executive admitted that to federal regulators in a phone call early Monday after regulators discovered money missing from clients’ accounts, according to an official familiar with the conversation.

The official spoke on condition of anonymity because he wasn’t authorized to discuss an investigation by federal regulators.

Government rules require securities firms to keep clients’ money and company money in separate accounts. Violations can result in civil penalties

Dipping into client funds is *the* big no-no in the financial world. But it seems like they were treating their clients the way Corzine treated the New Jersey taxpayers. It will be interesting to see just how far this goes up. And even scarier is this: did MF Global go rogue? Or are/were other banks doing the same thing? If the latter, this could get extremely ugly extremely fast.

The OWS folks might get their wish after all.

And Burn the Banks Down

Part two of my posts on housing and banking.

If you want to know why I have some shred of sympathy for OWS despite some of their repugnant behavior (that Kos link is priceless, BTW), here is the reason:

Liberal protesters “occupying” Wall Street hate the big banks, which they see as the engine of capitalism. But conservatives ought to hate the big banks because they are the enemies of capitalism.

In addition to the Fannie/Freddie conforming loan increase I blogged about below, Bank of America moved $55 trillion in derivatives to an arm that is backed by the FDIC. We, the taxpayer, are now on the hook for their speculative bullshit. I’m no fan of Glass-Steagle but … Jesus, can’t we do something about that?

But it gets even worse:

A Government Accountability Office report highlighted plenty of conflicts of interest at the Federal Reserve. New York Fed official Stephen Friedman was on the board of Goldman Sachs and actively buying up shares of Goldman while the Fed moved to give Goldman special access to its lending windows.

JP Morgan CEO Jamie Dimon sat on the New York Fed’s board while the Fed was pouring billions of bailout dollars into JP Morgan and granting JP Morgan special regulatory exceptions.

How is this not a crime? How is not corruption that so many in the regulatory agencies have now found six- and seven-figure jobs in the very industry they refused to crack down on? Maybe there is no technical law being violated. But can we not pass a law requiring public officials to stay out of industries they regulate for at least five years? Can we not at least shame these corrupt douchebags for their repellent behavior?

The banking industry is a bigger problem than ever, not withstanding the sack of shit called Dodd-Frank. As John Huntsman recently pointed out, the taxpayers’ exposure on the big banks has only increase since the crisis. The “too big to fail” banks control more of the industry than ever before, having used TARP mainly to buy other banks. And as Russ Roberts points out, we made sure that banks and their cronies got 100% of their money out of the financial crisis. Many avoided having to taking losses at all on the financial crisis they gleefully participated in and made tens of millions off.

Look at those links I just put up. Russ Roberts is anti-Keynesian free market economist. John Huntsman is a fiscally conservative Republican. Tim Carney is a libertarian. These are not dirty hippies saying “fight the power”. All three are free market believers who are saying what OWS is saying — enough is enough.

Now OWS and the Left are wrong on what do about the banks. Forgiving student loan debt would hurt the banks, but it massively unfair to people who paid for their own education. Forcing banks to write down mortgage principal is another bad idea that would either require a gigantic violation of contract law or, effectively, the government bailing out the banks again on their bad mortgage debt. Maybe Matt Yglesias is right that we need to change the way banks account for their gains and losses, but that’s a long-term fix.

Break the big banks up. “Too big too fail” is too big to exist. The right time to do this was when they came begging to us for TARP. But we can’t afford for another financial bubble to blow up in our faces. This time, it will be even worse. This time, it may break the whole damned system.

I’d say this is one of those time when the free market has failed, but it’s not. It’s one of those times when the unfree market has failed. TARP and regulatory capture created these monster banks from corruption and influence-peddling. It’s time we turned the clock back on that.