Kucinich: Federal Reserve Has Captured Control Of Our Government

November 30, 2011

The Raw Story

By Eric W. Dolan

“Does you think Dennis Kucinich secretly supports Ron Paul?” –KTRN

Rep. Dennis Kucinich (D-OH) called for the U.S. Federal Reserve to be reformed after Bloomberg reported the central bank secretly loaned nearly $8 trillion to financial institutions from 2007 to 2009.

Tens of thousands of documents obtained by Bloomberg under the Freedom of Information Act showed that banks reaped an estimated $13 billion in profits thanks to the low-interest loans. JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley accounted for $4.8 billion of that total.

“Remember the great debate we had here over the 700 billion in TARP funds?” he said on the House floor Tuesday. “There was no debate over the 7.7 trillion the Fed gave the banks.”

“Did Congress have a clue?” he continued. “There is another game going on way over our heads, and our constituents are struggling while the banks with the help of the Feds have captured control of our government.”

“Now the rating services are threatening us, if we don’t come up with a deal they’ll downgrade U.S. debt. Could the threat to our national sovereignty be any clearer?”

Kucinich has proposed legislation, called the National Emergency Employment Defense (NEED) Act, that would incorporate the Federal Reserve within the United States Treasury and thereby make it accountable to Congress.

Click here for the full report and video.

Gold’s Fall Amid Yen’s Devaluation is More Evidence of Manipulation

November 1, 2011

Gold and Silver Daily

By John Embry

Well, it was a pretty quiet opening in the gold market in the Far East on their Monday morning. But all that changed the moment that Japan intervened in the currency markets to drive down the value of the yen.

Of course the U.S. dollar skyrocketed…and gold ‘fell’. Once the trading stops were tripped, it fed on itself…and in about two hours, the gold price was down about two percent. A smallish recovery got sold off shortly before 1:00 p.m. Hong Kong time…with the absolute low coming in a spike down shortly after London opened for trading at 8:00 a.m. BST.

From there the gold price made a gradual recovery until Comex trading began at 8:20 a.m. Eastern time…and then traded sideways until 3:00 p.m. in the New York Access Market. Then gold got sold off about ten bucks going into the close of electronic trading at 5:15 p.m. Eastern.

The gold price finished the day at $1,715.10 spot…down $28.30 on the day. Net volume was around 115,000 contracts, with a bit more than half of that volume having been traded by the time that London opened.

Silver, as usual, really got it in the neck…and in about two hours was down over three percent to around $34.25 spot. From that point, every time it made an attempt to break through the $34.50 spot, there was a willing seller at the ready to make sure that didn’t happen.

Silver closed at $34.20 spot…down $1.05 on the day. Surprisingly, silver’s volume was very light…only around 23,000 contracts net…and the other surprising thing was that only 6,000 of those contracts had traded by the London open…about 25% of the total net volume. In gold, more than 50% of Monday’s volume had traded by that time.

I would guess that there weren’t that many longs to liquidate at these prices, as virtually all the tech funds are still twiddling their thumbs waiting for silver to break through it’s 50-day moving average, which it is now further away than ever. And it’s always possible that JPMorgan was aggressively covering it’s 3,000 contract short position that it put on during the prior week’s trading. More on that further down.

Click here for the full report.

Bulldoze: The New Way To Foreclose

August 2nd, 2011

TIME

By: Stephen Gandel

Banks have a new remedy to America’s ailing housing market: Bulldozers.

There are nearly 1.7 million homes in the U.S. in some state of foreclosure. Banks already own some of these homes and will soon have repossessed many more. Many housing economists worry that near constant stream of home sales from banks could keep housing prices down for years to come. But what if some of those homes never hit the market.

Increasingly, it appears banks are turning to demolition teams instead of realtors to rid them of their least valuable repossessed homes. Last month, Bank of America announced plans to demolish 100 foreclosed homes in the Cleveland area. The land is then going to be donated back to the local government authorities. BofA says the recent donations in Cleveland are part of a larger plan to rid itself of its least saleable properties, many of which, according to a company spokesperson, are worth less than $10,000. BofA has already donated 100 homes in Detroit and 150 in Chicago, and may add as many as nine more cities by the end of the year.

And BofA is not alone. A number of banks are ramping up their efforts not just to rid themselves of their unwanted homes, but to fully dispose of them. Fannie Mae has a program to sell houses to local municipalities for around a few hundred dollars. Wells Fargo has donated 800 homes to be demolished since 2009. JPMorgan Chase says it was one of the first banks to begin donating houses it couldn’t sell, or didn’t think were repairable. Since 2008, the JPMorgan has donated or sold at a discount 1,900 houses to city or county officials.

The banks do the deals because once the properties are donated they no longer have to pay taxes or for upkeep. Tax experts say the banks may also be able to get a write off for the donation. That appears to be a better deal than trying to repair some of these homes, which according to a BofA spokesperson are more economical to demolish than fix up. The local governments like these deals because they get free land to develop or use for open space. Cleveland-based Cuyahoga County Land Reuntilization Corp., which inked the deal with BofA, has been one of the most aggressive local government organizations in striking these deals. Housing economists like these deals because they remove homes from the market that would otherwise sell for a low price or not at all, dragging down home prices in general. An oversupply of homes on the market has been once of the big problems plaguing real estate. At the end of June, it would take nine and a half months for the current number of homes on the market to sell. The housing market is considered healthy when supply equals six months of sales. So taking some of these homes off the market for good could remove some of the inventory drag.

The question is whether the banks will ever put up enough housing for demolition to make a difference. The Obama administration says it is working on its own plan to revamp its loan modification program in order to help keep more people in foreclosure in their homes, reducing the number of foreclosed properties on the market. Some areas of the country are looking at how to speed up foreclosures in an effort to return some normality to the market. It’s not clear that any of this will work. Certainly, the idea that we are at the point where banks would be better off knocking down houses that reselling them shows there is still something very wrong with the housing market. But what is clear is that banks and others are at the point where they are ready to try something new to boost the housing market. And that is a good sign for the future.

Click here for the full report from TIME

JP Morgan Chase Says It’s Willing To Pay Class Action Lawsuit – Overcharged for Mortgage

April 27th, 2011

AOL Real Estate

By: Sheree R. Curry

JPMorgan Chase says it is willing to pay a whopping $56 million to settle the class-action lawsuit brought by 6,000 members of the military who accused it of overcharging them on their mortgages and violating the Servicemembers Civil Relief Act. A judge still has to approve the offer.

The case was initially brought by Capt. Jonathon Rowles, who says he was overcharged about $900 per month by Chase, which had him to verify his active duty status every 90 days and to reapply for SCRA status at least once per quarter between December 2007 and March 2010, according to the lawsuit.

The SCRA, signed into law by President George Bush in 2003 to replace a similar 1942 law, helps servicemen and servicewomen with certain financial obligations at home, such as rent or mortgage payments, when they are activated for military duty. For example, there is a 6 percent cap on interest rates, they cannot be evicted or have their lease terminated, and they can receive mortgage relief from their lender.

JPMorgan Chase has now offered to cut the interest rates for those military homeowners who did not see a correct cut initially, and it will give back homes to those who were wrongfully foreclosed upon, as well as forgive their mortgage debt. The lender also will pay $27 million in cash to the 6,000 military personnel who were overcharged on their mortgages while they were on active duty. That comes to about $4,500 per family.

JPMorgan already handed out about $6 million to those overcharged with higher interest rates. Of course, if a military member’s home was already under 6 percent and wasn’t due to increase on an ARM, they didn’t get caught in some of this mess, unless they missed a payment and were being pursued for being delinquent.

JPMorgan officials said three months ago that one of the bank’s units had made errors in the handling of mortgages covered by the Servicemembers Civil Relief Act. The lender will also contribute $15 million to a fund to go toward additional damages.

Click here for the full report from AOL Real Estate

Stocks Rise More Than 2% In First Days Of September

September 1, 2010

CNBC

by Abby Schultz

Stocks surged the first trading day of September after a report showed U.S. manufacturing has surprising strength, and after news of strength in the global economy. The markets also shrugged off news of a decline in auto sales.

The Dow Jones Industrial Average rose more than 240 points. All 30 Dow components were higher, led by Caterpillar [CAT  68.0601  2.9001  (+4.45%)], Bank of America [BAC  13.05  0.59  (+4.74%)], and General Electric [GE  15.01  0.53  (+3.66%)].

The S&P 500 and Nasdaq were also higher. All key S&P 500 sectors rose, led by industrials, energy and consumer discretionary stocks.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell more than 6 percent, below 25.

The mood in the market was brighter Wednesday after a glum August, and a day after the Dow eked out a 5 point gain. In a piece of good news, the Institute for Supply Management’s monthly manufacturing index for August came in at 56.3, much better than the expected drop to 52.5 for August. The July reading was 55.5.

Stocks were already higher before the manufacturing report following news of a rebound in Chinese manufacturing. The Chinese data, coupled with positive economic reports out of Australia, India and Germany, confirmed “global demand remains intact,” said Quincy Krosby, market strategist at Prudential Financial.

The market also likely gained support from a first-of-the-month influx of buying, which is typical, Krosby said. The key, she added, will be if Wednesday’s gains are driven by strong volume, unlike what has been seen throughout the summer when volume picked up on the downside and decreased on the upside.

August auto sales at Ford[F  11.624  0.339  (+3%)] fell 7.1 percent year-over-year, more than the 4.1 percent decline expected. Earlier Wednesday, General Motors reported its August sales fell 7 percent year-over-year, the automaker reported Wednesday morning. Analysts expected a drop-off, given that August 2009 saw accelerated sales from the “cash for clunkers” program.

Apple [AAPL  250.8741  7.7741  (+3.2%)] has scheduled a media event at 1 p.m. where it is expected to unveil the newest versions of the iPod, and possibly new features for Apple TV. The Financial Times reports that Sony [SNE  28.84  0.85  (+3.04%)], meanwhile, will launch a new music and video download service designed to challenge Apple, as it holds its own media event in Berlin.

Elsewhere among technology stocks, Amazon.com [AMZN  130.48  5.65  (+4.53%)] is reportedly entering the business of delivering TV over the Internet, according to a report in The Wall Street Journal.

In other news, shares of Burger King Holdings [BKC  18.865  2.415  (+14.68%)] spiked after news the fast-food chain is considering a possible sale and has been holding talks with potential buyers, according to reports.

Rivals Jack-in-the-Box [JACK  20.99  0.81  (+4.01%)], Chipotle [CMG  158.051  7.221  (+4.79%)] and Brinker International [EAT  16.5899  0.8399  (+5.33%)] are all higher.

Many retailers surged Wednesday after news that state sales-tax holidays and back-to-school buying boosted sales. The report by SpendingPulse, an information service by MasterCard Advisors, was less optimistic about the future, noting consumers remain cautious.

Abercrombie [ANF  36.2896  1.6896  (+4.88%)], Polo Ralph Lauren [RL  78.51  2.77  (+3.66%)], and Macy’s [M  20.16  0.75  (+3.86%)] were all up significantly.

Shares of Saks [SKS  7.41  -0.49  (-6.2%)], however, were lower a day after the luxury retailer rose more than 14 percent on unconfirmed takoever talk. Meanwhile, JP Morgan downgraded Saks to “neutral.”

Meanwhile, Caterpillar is surging after news it is expanding manufacturing capacity in Brazil. Leading the industrial sector Wednesday is Cummins [CMI  79.80  5.39  (+7.24%)], which is up more than 7 percent. An official with General Electric [GE  15.015  0.535  (+3.69%)], meanwhile, said the conglomerate could spend as much as $30 billion on acquisitions within two to three years. Shares of GE, the parent company of CNBC, were up more than 3 percent.

Among financial stocks, up more than 3 percent as a group, Bank of America rose more than 4 percent after a federal judge approved a settlement with the Securities and Exchange Commission. The SEC was concerned with bonuses paid to Merrill Lynch employees before BofA’s purchase of the investment bank in January 2009.

Citigroup [C  3.81  0.101  (+2.72%)] and JP Morgan [JPM  37.29  0.93  (+2.56%)] were also up significantly.

In earnings news, shares of Heinz [HNZ  46.16  -0.08  (-0.17%)] were slightly lower following news the maker of ketchup and Ore-Ida French fries earned more than expected thanks to strong sales in emerging markets. Heinz is expecting to reports earnings of 75 cents a share, better than the 73 cents forecasted by analysts polled by Thomson Reuters.

On the economic front, construction spending, meanwhile, slumped 1.0 percent in July to $805.2 billion, the lowest level in 10 years, the Commerce Department reported. Figures for June were revised to an 0.8 percent fall, instead of the 0.1 percent gain previously reported.

Earlier Wednesday, the Mortgage Bankers Association reported applications for home purchassing and refinancing rose last week amid the lowest interest rates since 1990.

A report from ADP and Macroeconomic Advisors showed the private sector lost 10,000 jobs from July to August largely due to a drop of 40,000 jobs in the goods-producing sector. The news was offset somewhat by a separate report from Challenger, Gray & Christmas showing that planned layoffs hit a 10-year low in the month.

Click here to read the full report

Economy Caught In Depression, Not Recession

August 25, 2010

CNBC

by Jeff Cox

Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression, Gluskin Sheff economist David Rosenberg said Tuesday.

Writing in his daily briefing to investors, Rosenberg said the Great Depression also had its high points, with a series of positive GDP reports and sharp stock market gains.

But then as now, those signs of recovery were unsustainable and only provided a false sense of stability, said Rosenberg.

Rosenberg calls current economic conditions “a depression, and not just some garden-variety recession,” and notes that any good news both during the initial 1929-33 recession and the one that began in 2008 triggered “euphoric response.”

“Such is human nature and nobody can be blamed for trying to be optimistic; however, in the money management business, we have a fiduciary responsibility to be as realistic as possible about the outlook for the economy and the market at all times,” he said.

The 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent, sending the stock market to a 50 percent rally in early 1930 as investors thought the worst had passed.

“False premise,” Rosenberg said. “And guess what? We may well be reliving history here. If you’re keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%.”

Rosenberg’s warning comes as a slew of major analysts—Goldman Sachs and JPMorgan among them—have slashed GDP projections for 2010 to the 1.5 to 2 percent range.

Chicago Federal Reserve President Charles Evans said in a speech Tuesday that the risk of a double-dip recession has escalated. He said government programs to help distressed homeowners have been ineffective and aren’t helping the pivotal housing sector recover.

The dour outlooks come on the same day that the National Association of Realtors said home sales reached a 15-year low in June, dousing hopes that the industry had reached a bottoming point.

Rosenberg points out that the “overall economic malaise” has come despite aggressive efforts by the Federal Reserve to stimulate the economy through rate cuts. The central bank itself has scaled back its economic projections, has held steady on its balance sheet, and could be announcing another round of quantitative easing measures at its Jackson Hole summit this week.

“How’s that for a reality check,” Rosenberg said. “It’s not too late, by the way, to shift course if you have stayed long this market.”

Click here to read the full report

Goldman Sachs Admits Bailout Cash Went To Offshore Banks

July 26, 2010

USA Today

By Karen Mracek and Thomas Beaumont, Des Moines Register

Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.

Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”

He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

Grassley said he was reserving judgment on the appropriateness of U.S. taxpayer money ending up overseas until he learns more about the 32 entities.

Goldman Sachs (GS) received $5.55 billion from the government in fall of 2008 as payment for then-worthless securities it held in AIG. Goldman had already hedged its risk that the securities would go bad. It had entered into agreements to spread the risk with the 32 entities named in Friday’s report.

Overall, Goldman Sachs received a $12.9 billion payout from the government’s bailout of AIG, which was at one time the world’s largest insurance company.

Goldman Sachs also revealed to the Senate Finance Committee that it would have received $2.3 billion if AIG had gone under. Other large financial institutions, such as Citibank, JPMorgan Chase and Morgan Stanley, sold Goldman Sachs protection in the case of AIG’s collapse. Those institutions did not have to pay Goldman Sachs after the government stepped in with tax money.

Shouldn’t Goldman Sachs be expected to collect from those institutions “before they collect the taxpayers’ dollars?” Grassley asked. “It’s a little bit like a farmer, if you got crop insurance, you shouldn’t be getting disaster aid.”

Goldman had not disclosed the names of the counterparties it paid in late 2008 until Friday, despite repeated requests from Elizabeth Warren, chairwoman of the Congressional Oversight Panel.

“I think we didn’t get the information because they consider it very embarrassing,” Grassley said, “and they ought to consider it very embarrassing.”

The initial $85 billion to bail out AIG was supplemented by an additional $49.1 billion from the Troubled Asset Relief Program, known as TARP, as well as additional funds from the Federal Reserve. AIG’s debt to U.S. taxpayers totals $133.3 billion outstanding.

“The only thing I can tell you is that people have the right to know, and the Fed and the public’s business ought to be more public,” Grassley said.

The list of companies receiving money includes a few familiar foreign banks, such as the Royal Bank of Scotland and Barclays.

DZ AG Deutsche Zantrake Genossenschaftz Bank, a German cooperative banking group, received $1.2 billion, more than a quarter of the money Goldman paid out.

Warren, in testimony Wednesday, said that the rescue of AIG “distorted the marketplace by turning AIG’s risky bets into fully guaranteed transactions. Instead of forcing AIG and its counterparties to bear the costs of the company’s failure, the government shifted those costs in full onto taxpayers.”

Grassley stressed the importance of transparency in the marketplace, as well as in the government’s actions.

“Just like the government, markets need more transparency, and consequently this is some of that transparency because we’ve got to rebuild confidence to make the markets work properly,” Grassley said.

AIG received the bailout of $85 billion at the discretion of the Federal Reserve Bank of New York, which was led at the time by Timothy Geithner. He now is U.S. treasury secretary.

“I think it proves that he knew a lot more at the time than he told,” Grassley said. “And he surely knew where this money was going to go. If he didn’t, he should have known before they let the money out of their bank up there.”

An attempt to reach Geithner Friday night through the White House public information office was unsuccessful.

Grassley has for years pushed to give the Government Accountability Office more oversight of the Federal Reserve.

U.S. Rep. Bruce Braley, a Waterloo Democrat, said he would propose that the House subcommittee on oversight and investigations convene hearings on the need for more Federal Reserve oversight. Braley is a member of the subcommittee.

Braley said of Geithner, “I would assume he would be someone we would want to hear from because he would have firsthand knowledge.”

Braley also noted that the AIG bailout was negotiated under President George W. Bush, a Republican.

He said he was confident that the financial regulatory reform bill signed by President Obama this week would help provide better oversight than the AIG bailout included.

“There was no regulatory framework in place,” Braley said. “We had to put something in place to begin reining them in. I’m confident they will begin to be able to do that.

Click Here For Full Report

Goldman Sachs Admits Bailout Cash Went To Offshore Banks

July 26, 2010

USA Today

By Karen Mracek and Thomas Beaumont, Des Moines Register

Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.

Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”

He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

Grassley said he was reserving judgment on the appropriateness of U.S. taxpayer money ending up overseas until he learns more about the 32 entities.

Goldman Sachs (GS) received $5.55 billion from the government in fall of 2008 as payment for then-worthless securities it held in AIG. Goldman had already hedged its risk that the securities would go bad. It had entered into agreements to spread the risk with the 32 entities named in Friday’s report.

Overall, Goldman Sachs received a $12.9 billion payout from the government’s bailout of AIG, which was at one time the world’s largest insurance company.

Goldman Sachs also revealed to the Senate Finance Committee that it would have received $2.3 billion if AIG had gone under. Other large financial institutions, such as Citibank, JPMorgan Chase and Morgan Stanley, sold Goldman Sachs protection in the case of AIG’s collapse. Those institutions did not have to pay Goldman Sachs after the government stepped in with tax money.

Shouldn’t Goldman Sachs be expected to collect from those institutions “before they collect the taxpayers’ dollars?” Grassley asked. “It’s a little bit like a farmer, if you got crop insurance, you shouldn’t be getting disaster aid.”

Goldman had not disclosed the names of the counterparties it paid in late 2008 until Friday, despite repeated requests from Elizabeth Warren, chairwoman of the Congressional Oversight Panel.

“I think we didn’t get the information because they consider it very embarrassing,” Grassley said, “and they ought to consider it very embarrassing.”

The initial $85 billion to bail out AIG was supplemented by an additional $49.1 billion from the Troubled Asset Relief Program, known as TARP, as well as additional funds from the Federal Reserve. AIG’s debt to U.S. taxpayers totals $133.3 billion outstanding.

“The only thing I can tell you is that people have the right to know, and the Fed and the public’s business ought to be more public,” Grassley said.

The list of companies receiving money includes a few familiar foreign banks, such as the Royal Bank of Scotland and Barclays.

DZ AG Deutsche Zantrake Genossenschaftz Bank, a German cooperative banking group, received $1.2 billion, more than a quarter of the money Goldman paid out.

Warren, in testimony Wednesday, said that the rescue of AIG “distorted the marketplace by turning AIG’s risky bets into fully guaranteed transactions. Instead of forcing AIG and its counterparties to bear the costs of the company’s failure, the government shifted those costs in full onto taxpayers.”

Grassley stressed the importance of transparency in the marketplace, as well as in the government’s actions.

“Just like the government, markets need more transparency, and consequently this is some of that transparency because we’ve got to rebuild confidence to make the markets work properly,” Grassley said.

AIG received the bailout of $85 billion at the discretion of the Federal Reserve Bank of New York, which was led at the time by Timothy Geithner. He now is U.S. treasury secretary.

“I think it proves that he knew a lot more at the time than he told,” Grassley said. “And he surely knew where this money was going to go. If he didn’t, he should have known before they let the money out of their bank up there.”

An attempt to reach Geithner Friday night through the White House public information office was unsuccessful.

Grassley has for years pushed to give the Government Accountability Office more oversight of the Federal Reserve.

U.S. Rep. Bruce Braley, a Waterloo Democrat, said he would propose that the House subcommittee on oversight and investigations convene hearings on the need for more Federal Reserve oversight. Braley is a member of the subcommittee.

Braley said of Geithner, “I would assume he would be someone we would want to hear from because he would have firsthand knowledge.”

Braley also noted that the AIG bailout was negotiated under President George W. Bush, a Republican.

He said he was confident that the financial regulatory reform bill signed by President Obama this week would help provide better oversight than the AIG bailout included.

“There was no regulatory framework in place,” Braley said. “We had to put something in place to begin reining them in. I’m confident they will begin to be able to do that.

Click Here For Full Reportv

Goldman Sachs Admits Bailout Cash Went To Offshore Banks

July 26, 2010

USA Today

By Karen Mracek and Thomas Beaumont, Des Moines Register

Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.

Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”

He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

Grassley said he was reserving judgment on the appropriateness of U.S. taxpayer money ending up overseas until he learns more about the 32 entities.

Goldman Sachs (GS) received $5.55 billion from the government in fall of 2008 as payment for then-worthless securities it held in AIG. Goldman had already hedged its risk that the securities would go bad. It had entered into agreements to spread the risk with the 32 entities named in Friday’s report.

Overall, Goldman Sachs received a $12.9 billion payout from the government’s bailout of AIG, which was at one time the world’s largest insurance company.

Goldman Sachs also revealed to the Senate Finance Committee that it would have received $2.3 billion if AIG had gone under. Other large financial institutions, such as Citibank, JPMorgan Chase and Morgan Stanley, sold Goldman Sachs protection in the case of AIG’s collapse. Those institutions did not have to pay Goldman Sachs after the government stepped in with tax money.

Shouldn’t Goldman Sachs be expected to collect from those institutions “before they collect the taxpayers’ dollars?” Grassley asked. “It’s a little bit like a farmer, if you got crop insurance, you shouldn’t be getting disaster aid.”

Goldman had not disclosed the names of the counterparties it paid in late 2008 until Friday, despite repeated requests from Elizabeth Warren, chairwoman of the Congressional Oversight Panel.

“I think we didn’t get the information because they consider it very embarrassing,” Grassley said, “and they ought to consider it very embarrassing.”

The initial $85 billion to bail out AIG was supplemented by an additional $49.1 billion from the Troubled Asset Relief Program, known as TARP, as well as additional funds from the Federal Reserve. AIG’s debt to U.S. taxpayers totals $133.3 billion outstanding.

“The only thing I can tell you is that people have the right to know, and the Fed and the public’s business ought to be more public,” Grassley said.

The list of companies receiving money includes a few familiar foreign banks, such as the Royal Bank of Scotland and Barclays.

DZ AG Deutsche Zantrake Genossenschaftz Bank, a German cooperative banking group, received $1.2 billion, more than a quarter of the money Goldman paid out.

Warren, in testimony Wednesday, said that the rescue of AIG “distorted the marketplace by turning AIG’s risky bets into fully guaranteed transactions. Instead of forcing AIG and its counterparties to bear the costs of the company’s failure, the government shifted those costs in full onto taxpayers.”

Grassley stressed the importance of transparency in the marketplace, as well as in the government’s actions.

“Just like the government, markets need more transparency, and consequently this is some of that transparency because we’ve got to rebuild confidence to make the markets work properly,” Grassley said.

AIG received the bailout of $85 billion at the discretion of the Federal Reserve Bank of New York, which was led at the time by Timothy Geithner. He now is U.S. treasury secretary.

“I think it proves that he knew a lot more at the time than he told,” Grassley said. “And he surely knew where this money was going to go. If he didn’t, he should have known before they let the money out of their bank up there.”

An attempt to reach Geithner Friday night through the White House public information office was unsuccessful.

Grassley has for years pushed to give the Government Accountability Office more oversight of the Federal Reserve.

U.S. Rep. Bruce Braley, a Waterloo Democrat, said he would propose that the House subcommittee on oversight and investigations convene hearings on the need for more Federal Reserve oversight. Braley is a member of the subcommittee.

Braley said of Geithner, “I would assume he would be someone we would want to hear from because he would have firsthand knowledge.”

Braley also noted that the AIG bailout was negotiated under President George W. Bush, a Republican.

He said he was confident that the financial regulatory reform bill signed by President Obama this week would help provide better oversight than the AIG bailout included.

“There was no regulatory framework in place,” Braley said. “We had to put something in place to begin reining them in. I’m confident they will begin to be able to do that.

Click Here For Full Report

JPMorgan, 77% Rise In Profit

July 15, 2010

Yahoo Finance

By: Stevenson Jacobs

JPMorgan Chase & Co. said Thursday its second-quarter net income soared 77 percent to $4.8 billion as a slowdown in losses from failed loans helped offset a difficult spring in trading and investment banking.

The strong results offered hope that loan losses at the nation’s big banks may have peaked in the first half of 2010, a critical step before banks can become stronger and boost lending to consumers and small businesses.

JPMorgan Chase, the first of the big banks to report earnings for the April-June period, easily surpassed analysts’ expectations as it earned $1.09 a share, up 28 cents a share from a year earlier. Analysts had forecast a profit of 67 cents per share in the just-ended quarter. Net revenue, however, fell nearly 8 percent from a year ago to $25.6 billion.

JPMorgan Chase has been one of the strongest banks as it weathered the financial crisis and recession, so its performance shouldn’t necessarily be taken as a sign of how well other banks did during the quarter. Many financial companies don’t have such big investment banking operations, which includes trading of stocks and bonds. That has allowed JPMorgan, the nation’s largest bank by assets, to make up for losses in its consumer lending division.

Yet it was a sharp drop in loan losses, not an increase in trading profits, that helped JPMorgan the most in the last quarter. The bank set aside $3.36 billion to cover bad loans, down 65 percent from a year ago and 52 percent from the first quarter. The improvements mean the bank is seeing fewer delinquencies in its lending business, though JPMorgan Chief Executive Jamie Dimon said loan losses overall “remain at extremely high levels.”

“It is too early to say how much improvement we will see from here,” Dimon said of declining loan losses. Bankers have been cautious throughout the aftermath of the 2008 financial crisis when reporting progess in their loan businesses. Economists and investors are looking to those loan loss levels as an indicator of how well the economic recovery is faring.

Dimon also warned of possible “unintended consequences” to the bank’s business from the financial regulatory overhaul awaiting congressional approval. The new rules would require banks to hold more capital and would restrict their trading of risky but lucrative securities like derivatives.

Notably, Dimon was less upbeat about the future than he was when announcing first-quarter results. At that time, the CEO said the economy was showing “clear and broad-based improvements” that should result in a “strong recovery.”

A more cautious Dimon on Thursday called improvements in the bank’s mortgage lending unit encouraging but he stopped short of predicting a return to pre-financialcrisis conditions.

“Obviously, we hope it improves,” Dimon said.

In the second quarter, a big drop in the stock market hurt JPMorgan’s investment banking unit. Revenue fell 6 percent from a year ago to $1.4 billion as the bank earned smaller fees on financing for stock and bond offerings and advising on corporate dealmaking.

The Standard & Poor’s 500, considered the best measure of how stocks have fared, fell 11.9 percent from April through June, its worst showing since the financial crisis devastated stocks in the fourth quarter of 2008. All the banks with big trading operations are expected to report a drop in their income from those businesses.

But a drop in loan losses helped the bank make up for the slowdown in investment banking. Revenue in the consumer lending unit jumped 10 percent from a year ago to $2 billion as the bank saw fewer loan losses across its major consumer businesses including mortgages, credit cards and student loans. However, JPMorgan Chase did report an increase in losses from commercial real estate loans, which have lagged consumer mortgages as they’ve gone into default.

Investors initially bought on the results but later eased sold JPMorgan along with many other stocks in response to more bad economic news. The stock fell 82 cents, or 2 percent, to $39.51.

The lukewarm reaction may also reflect the uncertainty facing JPMorgan and other banks, including how the regulatory overhaul will affect profits and whether the economy continues to recover or falls back into recession.

Most analysts say the new banking rules on everything from capital levels to credit cards and trading of risky securities won’t dramatically affect revenue as some in the industry had feared. But they caution that it could take years before the full impact of the legislation is known.

Speaking to analysts, Dimon said the bank can work within the new rules but declined to quantify the potential impact to its business.

“We want to make sure we can service our clients (under the new rules), and we think we’ll be able to,” Dimon said. “Will it have some affect on revenue and margins? Yeah, probably.”

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