Bankers’ Law and other short notes

The long-standing corrupt relationship between Wall Street, the SEC, and the Fed is starting to draw the attention it deserves. More on this next week, but here’s the short version of the recent major developments.

1.Last Monday, a federal judge refused to sign off on a settlement between the Securities Exchange Commission and Citigroup. As Judge Rakoff summarized the suit’s charge: “Citigroup created a fund that allowed it to dump some dubious assets on misinformed investors.” Citigroup made $160 million while the investors lost $700 million.

The SEC had negotiated a settlement under which Citi would pay a $285 million fine, but admit no wrongdoing. No one would go to jail and the settlement would be useless to investors suing to get their money back. The judge ruled that as long as the underlying facts of the case were still in dispute, he had no way to know whether the agreement was in the public interest or not. So the case is headed to trial.

If this ruling becomes an example to other judges, the implications are huge.

2. Massachusetts has filed suit against several major banks for wrongful foreclosures. The NYT says this diminishes the likelihood of a sweetheart deal “comprehensive settlement between the banks and federal and state officials to resolve foreclosure improprieties.”

3. It turns out that TARP was only a small part of the Wall Street bailout. The Federal Reserve also provided big banks with trillions in loans for essentially no interest. By investing that money — often in risk-free treasury bonds — the banks made $13 billion. There’s no meritocratic justification; anybody could have made that $13 billion. It’s better to laugh than cry, so I’ll let Jon Stewart tell the story:

Vodpod videos no longer available.

4. Finally, this doesn’t count as a major development, but one incensed Georgia judge’s rejection of a motion to dismiss a wrongful-foreclosure case makes good reading:

Clearly, U.S. Bank cannot take the [government’s] money, contract with our government to provide a service to the taxpayer, violate that agreement, and then say that no one on earth can sue them for it. That is not the law in Georgia.

Another story that I hope to have more time and space for next week: The National Defense Authorization Act authorizes the indefinite detention of “terrorists” without trial, possibly including American citizens. President Obama still has an opportunity to veto this, and he should.

It took me two weeks to realize I had missed National Feel-Like-an-Idiot Day. On Nov. 21, the New York Times released its list of the 100 notable books of 2011. I’ve read two.

Miniver Cheevy is concerned about his friends who have contracted Ron Paul Fever. This post is intended as a cure.

Fox Business Channel’s Eric Bolling watches the Muppet movie and comes away with this question: “Is liberal Hollywood using class warfare to brainwash our kids?” His guest blames Occupy Wall Street on the indoctrination today’s young adults got from Captain Planet.

Meanwhile, the New York Post describes Happy Feet 2 as “kiddie Karl Marx“.

TPM calls it a sign that the Perry campaign is “on the rocks”, but I find this new Rick Perry ad kind of endearing. The yeah-I-forget-things-but-so-what message might well appeal to the elderly, who are a disproportionate part of the Republican electorate.

So much for Herman Cain. He continues to deny that he harassed or had affairs with any of the women who accused him. But eventually it must have dawned on him that what he had already admitted was damning enough: He repeatedly gave money to a woman his wife had never heard of.

Here’s what makes me nervous: Whenever conservatives accuse liberals of doing something (no matter how ridiculous or unjustified the accusation is) you can be sure they’ll do it “back” to us at the first opportunity. Now they’re saying liberals recruited women to make fake sexual harassment charges against Cain. So that’s bound to happen to a Democrat — if not in 2012, 2014 at the latest.

The Romney campaign’s so-what response to the observation that its anti-Obama commercial is dishonest prompts NYT’s Thomas Edsall to give a recent history of legal-but-corrupt political practices, illustrating the pattern: “What was once considered sleazy becomes the norm.”

When an inexperienced farmer signs a complicated gas-drilling lease with a company that does this every day, who is likely to get the advantage? According to the NYT, gas leases often say more than the farmers realize.

Finally, I want to use the occasion of Barney Frank’s retirement announcement to once again denounce the zombie lie that somehow government regulations caused the housing bubble and the subsequent meltdown.

AlterNet’s Joshua Holland covers the details, but it comes down to two points:

1. “No bank was ever ‘forced’ – or coerced or incentivized by the government in any way – to make a bad loan.”

2. Forget “bad” loans, subprime loans, and so on — the entire mortgage market was only $1.4 trillion. If that was really the problem, TARP could easily have solved it by buying half of all the mortgages in the country.

No, the problem was the $140 trillion of unregulated financial instruments that Wall Street created out of those mortgages. Barney had nothing to do with that.

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  • David Wiegleb  On December 5, 2011 at 4:05 pm

    Another excellent Sift. I plan to add the Graeber book “Debt” to our store shelves.

    One small correction: As outrageous as the proposed Citi penalty was, it was “$285 million” rather than “$285”.

  • weeklysift  On December 5, 2011 at 11:06 pm

    Fixed it. What’s a missing “million” or two?

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