After making a statement about the situation at the Washington Navy Yard, President Obama marks the anniversary of the financial crisis and the efforts over the last five years to stabilize the economy and get it growing and creating jobs again. September 16, 2013.
Bernard Madoff arrested over alleged $50 billion fraud
By Edith Honan and Dan Wilchins Edith Honan And Dan Wilchins – Fri Dec 12, 12:40 am ET
NEW YORK (Reuters) – Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion "Ponzi scheme" in what may rank among the biggest fraud cases ever.
The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.
Madoff told senior employees of his firm on Wednesday that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme," with estimated investor losses of about $50 billion, according to the U.S. Attorney's criminal complaint against him.
A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors.
On Thursday, two agents for the U.S. Federal Bureau of Investigation entered Madoff's New York apartment.
"There is no innocent explanation," Madoff said, according to the criminal complaint. He told the agents that it was all his fault, and that he "paid investors with money that wasn't there," according to the complaint.
The $50 billion allegedly lost would make the hedge fund one of the biggest frauds in history.
Palin now attends the Wasilla Bible Church. David Brickner, the founder of Jews for Jesus, was a speaker. He told congregants that terrorist attacks on Israel were God's "judgment" of Jews who haven't embraced Christianity. Brickner said, "Judgment is very real and we see it played out on the pages of the newspapers and on the television. When a Palestinian from East Jerusalem took a bulldozer and went plowing through a score of cars, killing numbers of people. Judgment -- you can't miss it." Source Cnn.com
In short, as I said at the beginning, the bill is a vast improvement over the original Treasury proposal. Given the choice between approving or defeating the bill as it stands, I would urge supporting the bill. I do so without illusions. There need be no pretense that it will solve our underlying financial and economic problems. It will not. The purpose, in my view, is to get the financial system and the economy through the year, and into the hands of the next administration. That is a limited purpose, but a legitimate purpose. And it may be the most that can be accomplished for the time being.
This bill does not effectively address the issue of what the taxpayers of our country will actually own after they invest hundreds of billions of dollars in toxic assets. This bill does not effectively address the issue of oversight because the oversight board members have all been hand picked by the Bush administration. This bill does not effectively deal with the issue of foreclosures and addressing that very serious issue, which is impacting millions of low- and moderate-income Americans in the aggressive, effective way that we should be. This bill does not effectively deal with the issue of executive compensation and golden parachutes. Under this bill, the CEOs and the Wall Street insiders will still, with a little bit of imagination, continue to make out like bandits.
This bill does not deal at all with how we got into this crisis in the first place and the need to undo the deregulatory fervor which created trillions of dollars in complicated and unregulated financial instruments such as credit default swaps and hedge funds. This bill does not address the issue that has taken us to where we are today, the concept of too big to fail.
There will be NO addressing of stronger regulatory action on Wall Street down the road. There will be no punitive measures against the speculators who caused this mess in the first place. You will not see any Congressional checks on executive power from the Treasury Department. There is NO later. It doesn't matter if it is McCain or Obama who sits in the White House either.
Once the bailout money jump starts the credit flows between the banks, all of the talk about changing the culture of Wall Street and reigning in the excesses of market capitalism will die away. Finance industry lobbyists will shower members of Congress with un-reported gifts and reported campaign contributions. It's business as usual once again.
I listened to tonights debate while at work...and I have to say, I am mad as Hell. I'm beside myself. I had to reach for my Excedrin (thank Goodness for this wonder drug) before I even got home, to soothe my Migraine.
So now the Bush administration proposes to make the federal guarantee explicit and even to offer taxpayer money to help recapitalize the two banks if needed. Everything has been nationalized -- except the profits and the pay scales of the bank's executives.
That's right. If the guarantees work, private speculators, having driven the stock down, will clean up on the upside. And the bank's CEO's will continue to pocket the multi-million dollar salaries that are de rigueur on Wall Street. Call it Wall Street socialism. Their losses are socialized; their profits are pocketed. You and I will pay for their failures. And if conservatives have their way, their families will pocket their successes, without even having to pay a tax for the transfer of the estates we've helped to create.
At the risk of speaking ill of the dead, what good was Lehman Brothers, anyway? And if Merrill Lynch was so bullish on America, why is it that, despite the torrent of foreign investment that flowed in to Lehman, Merrill and their Wall Street peers over the past half-decade, so few jobs were created in America during that period of "recovery"?
During the late, lamented Wall Street boom, America's leading investment institutions were plenty bullish on China's economy, on exotic financial devices built atop millions of bad loans, and, above all -- judging by the unprecedented amount of wealth they showered on the Street -- on themselves. The last thing our financial community was bullish on was America -- that is, the America where the vast majority of Americans live and work.
So, ladies and gentlemen, how does it feel to be the new owner of those two big and banged-up mortgage companies, Fannie Mae and Freddie Mac? Not exactly the kind of real estate you were looking to buy, you say? Felt you had swallowed enough garbage after the Bear Stearns bailout tapped you for $29 billion?
Make no mistake: we, the American taxpayers, are amassing quite a portfolio of flotsam and jetsam in the mortgage bust. It certainly brings new meaning to the notion of an ownership society, doesn’t it?
To be sure, the terms of the Mac ’n’ Mae rescue deal are still sinking in. And it will be years before we know how much taxpayers will have to pay for the privilege of backing these out-of-control entities. But in the meantime, here are some of the joys that ownership in Mac ’n’ Mae might bring.
The proud new owners — the taxpayers — could be asked to cover such niceties as the pay packages awarded to the chief executives, Daniel H. Mudd at Fannie Mae and Richard F. Syron at Freddie Mac, as they exit the accident scene. Estimates for what these arrangements might cost: $24 million in severance, retirement benefits and deferred compensation for both men.
That’s not all. When the inevitable shareholder lawsuits are filed against Mac ’n’ Mae’s executives, who professed until the bitter end that their companies were in fine financial shape, who might cover the costs of defending those suits?
Why, you and I, the taxpayers, silly.
The undoing of that New Deal regulatory regime, and its replacement, largely under Republican administrations (although Glass-Steagall was repealed on Clinton's watch), with what some have called the "socialization of risk" has contributed in a major way to the mess we're in today. Beginning most emphatically with the massive bail-out of the savings and loan industry in the late 1980s, Washington committed itself, at least under conditions of acute crisis, to off-loading the risks taken by major financial institutions, no matter how irrationally speculative and wasteful, onto the backs of the American taxpaying public.
Despite free market/anti-big-government rhetoric, real-life Washington has tacitly acknowledged the degree to which our national economy has become dependent on the financial sector (Finance, Insurance, and Real Estate -- or FIRE). It will do whatever it takes to keep it afloat.
By ANDREW ROSS SORKIN, BEN WHITE and JENNY ANDERSON
Published: September 14, 2008
In one of the most extraordinary days in Wall Street’s history, Merrill Lynch is near an 11th-hour deal with Bank of America to avert a deepening financial crisis while another storied securities firm, Lehman Brothers, hurtled toward liquidation, according to people briefed on the deal.
The dramatic turn of events was prompted by the cataclysm of losses that has shaken the American financial industry over the last 14 months.
The moves came after a weekend of frantic negotiations between federal officials and Wall Street executives over how to avert a downward spiral in the markets. Questions still remain about how the market will react and whether other firms may still falter like A.I.G., the large insurer, and Washington Mutual, both of whose stocks fell precipitously last week.
Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry’s reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear.
The weekend’s once unthinkable outcome came after a series of emergency meetings at the Federal Reserve building in downtown Manhattan in which the fate of Lehman hung in the balance. In the meeting Federal Reserve officials and the leaders of major financial institutions were trying to complete a plan to rescue the stricken investment bank.
But as the weekend unfolded, Barclays and Bank of America, which had both considered buying all or part of Lehman, decided that they could not reach a deal without financial support from the federal government or other banks.
As a result, people briefed on the matter said late Sunday that Lehman Brothers would file for bankruptcy protection, in the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago.
Bear Stearns Closes in on Deal
To Sell Itself to J.P. Morgan
By DENNIS K. BERMAN, SUSANNE CRAIG and KATE KELLY
March 16, 2008 5:56 p.m.
Bear Stearns Cos. was closing in on a deal Sunday afternoon to sell itself to J.P. Morgan Chase & Co., as worries deepened that the financial crisis of confidence could spread if Bear failed to find a buyer by Monday morning.
People familiar with the discussions said all sides were pushing hard to complete an agreement before financial markets in Asia open for Monday trading. "None of these things is done until they're done," Treasury Department spokeswoman Michele Davis said Sunday afternoon. "But I think everyone's expectation is sometime in the early evening hopefully" the deal will be done.
Terms of the deal were still being hammered out Sunday afternoon. Reflecting the dire situation at Bear, the company is likely to fetch considerably less on a per-share basis than its stock price of $30 in New York Stock Exchange composite trading Friday at 4 p.m. Last year, the shares hit $170.
One stumbling point appeared to be the amount of risk that J.P. Morgan would absorb in any type of transaction. While J.P. Morgan is eager to snap up some of Bear Stearns assets -- such as its prime brokerage business that caters to hedge funds -- Chief Executive Officer James Dimon was reluctant to pursue the deal without certain assurances that would protect his firm's exposure, said people familiar with the matter.
Despite the emergency funding from J.P. Morgan and the Federal Reserve that was announced Friday and gives Bear access to cash for an initial period of 28 days, the clock is ticking against the 85-year-old company. Regulators, bankers and investors are concerned that the firm could plummet even further when markets open Monday. A continued exodus by parties that Bear trades with could even cause the investment bank to collapse.
Federal regulators also are trying to prevent Bear's crisis from mushrooming into a systemic threat to the stability of financial markets and other securities firm, for which confidence is essential to their ongoing operations. Unwinding Bear also would be a nightmare because it trades with nearly every firm on Wall Street.
Deal in the Works To Freeze Rates on Subprime Loans
By David Cho
Washington Post Staff Writer
Saturday, December 1, 2007; Page A01
Mortgage rates for homeowners with spotty credit histories would be temporarily frozen under a nearly completed agreement between top Bush administration officials and a broad alliance of Wall Street's biggest banks, mortgage investors, nonprofits and consumer groups.
The plan, which could be announced next week, is designed to prevent soaring mortgage delinquencies from escalating into a full-blown foreclosure crisis that would threaten the broader economy, according to several people involved in or familiar with the discussions.
The agreement focuses on aiding many of the 2 million credit-challenged, or subprime, borrowers who, at the peak of the real estate boom in 2005 and 2006, bought houses with mortgages that offered low teaser rates that rise after the first two or three years of the loan. By the end of next year, about 500,000 people are expected to lose their homes because they cannot meet the new, higher monthly payments, federal housing officials said.
Homeowners could apply to freeze their rates or refinance their loans quickly under the deal being worked out by Treasury officials; the Hope Now Alliance, a broad coalition of consumer counseling groups, investors, nonprofits such as Homeownership Preservation Foundation; and lenders such as Citigroup, Wells Fargo, and Countrywide Financial.
Important details still need to be worked out, but the proposal gained traction yesterday in Washington and on Wall Street, where the stocks of nearly every mortgage-related firm rose sharply after reports about the deal surfaced. Shares of Countrywide, the nation's largest mortgage lender, soared 16 percent, as investors hoped the plan would smooth out the credit crunch and return normality to the lending business.
A potential sticking point is determining which homeowners would qualify for the help and how much they would have to pay to refinance or freeze their loans, several sources close to the discussion said.
Barry Glassman, a senior vice president at Cassaday and Co., a financial planner in McLean, said any plan that bails out only a segment of homeowners would raise questions of fairness.
"The big challenge will be figuring out who this affects and who gets this help," he said. "Where do we cut it off? Who's the person next in line that doesn't get the bail out? That's the most difficult question."
Those involved in the deal said alliance members were aware that some homeowners, no matter how much aid they receive, might never be able to afford their homes. They also do not want to help real estate speculators. The aim would be to reach homeowners who, with lower interest rates, could keep up their monthly payments.
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