We Bankers Said We’re Sorry — Now Buzz Off

Alain Sherter writes a column called Financial Folly. His latest essay is entitled – Barclays CEO: We Bankers Said We’re Sorry — Now Buzz Off.

New Barclays (BCS) CEO Bob Diamond is tired of apologizing for the economic damage big banks have wrought in recent years. As he told members of Britain’s Parliament during a hearing on possible restrictions on banker pay:

“There was a period of remorse and apology for banks. I think that period is over,” Diamond told the Treasury Select Committee.

“Frankly, the biggest issue is how do we put some of the blame game behind us? There’s been apologies and remorse, now we need to build some confidence,” he added.

Seems to me Diamond, who took over last fall as chief executive at the U.K. banking giant, is skipping a step between expressing regret and rebuilding confidence. Tip of my tongue…. Ah, yes: reform. That includes restricting the kind of compensation that inclines bankers to let it roll. And since we’re nitpicking here, I don’t remember many financial executives exactly hanging their heads in shame over their role in the meltdown.

I don’t recall any real apologies or confessions of wrong doing or regret for what happened.

The general perception of the financial community is that they were profitable before the disaster, they didn’t really need the bailout and what was all the fuss about in the first place?

You may think I am exaggerating or misinformed about that my analysis of the attitude of the banking community. I truly wish I was wrong.

We have a financial class that not only can do no wrong whatever, but have no responsibility for anyone in this country at any time, under any circumstances. In their minds, they are worthy, the rest are not.

Their sense of entitlement is beyond most American’s comprehension.

If I had not heard these things said myself, I would have difficulty believing them.

James Pilant

Foreclosure Judges Fight The Good Fight

Alain Sherter (who I do not write enough about) has a excellent column titled, “How Local Judges are Putting the Feds to Shame In Halting Improper Foreclosures.”

Here’s a selection from it –

Consider this astonishing stat drawn from a WaPo story today: Courts in the area are estimated to be dismissing upwards of 50 percent of foreclosure cases against homeowners because of slipshod — or outright fraudulent — paperwork filed by lenders. Banks are appealing many of these decisions, a sign of just how afraid they are the rulings could embolden courts around the country to follow suit:

In millions of cases across the United States, local judges have wide latitude to impose sanctions on banks, free homeowners from their mortgage debts or allow the companies to proceed with flawed foreclosures. Ultimately, the industry is likely to face a messy scenario — different resolutions by courts in all 50 states.

Sherter puts his finger on what I try to communicate to my classes. Attorneys and Judges are not the Ogres portrayed on television. It is true that are some very, very bad attorneys. I hold them in contempt. But you would be astonished and impressed by the attorneys I’ve met who fight for their clients for little money, sometimes no money. This whole mortgage foreclosure mess would never have come to light, if it weren’t for attorneys working for next to nothing trying to keep people in their home.

He makes another point in both the title and inside the article.

Federal bank regulators are equally intent on keeping the foreclosure assembly line moving. That’s no surprise, given that they’re deeply implicated in the foreclosure mess. For instance, state financial supervisors turned to the OCC in 2007 after JPMorgan Chase (JPM) and Wells Fargo (WFC) stonewalled their investigations into improper foreclosures.

Not content to simply ignore the problem, the OCC actually made it worse. Protecting its authority to oversee national banks, a doctrine known as “preemption,” the agency shooed the state enforcers away. Then it asked the banks to look into the matter.

I said exactly the same thing in one of my posts – If you are waiting for the Obama administration to come your rescue, you are going to be waiting a long time.

James Pilant

Jail Time For False Affidavits? Is It Possible For A Banker To Go To Jail?

Alain Sherter writing for BNET covers many of the angles in the foreclosure mess. In fact, his article is a good general guide to the controversy and the continuing crisis. Nevertheless, I am focusing on one part of that article.

The Following –

In looking into cases of improper foreclosure, federal officials are also raising the heat by exploring whether financial institutions broke the law in filing fraudulent paperwork. Such inquiries are usually left to the states, which usually have jurisdiction in real estate disputes. Since government housing agencies buy and guarantee bank mortgages, however, a criminal investigation could have teeth. And unlike private investors, obviously, the government has enormous power to compel banks to provide evidence of faulty documentation involved in originating and securitizing loans:

“In more than 25 years dealing with major financial crisis issues, I have never seen this many agencies focused on a single issue,” said Andrew Sandler, a lawyer who works on government investigations. “We are beginning to see signs of extensive governmental investigation that may also have criminal law implications.”

So, are we about to see some actual criminal justice? It would be a strange thing indeed to see justice done to those so high in their own estimation.

James Pilant

Narcissistic Mindset in Financial Institutions (via Sonia Jaspal’s RiskBoard)

I exchanged e-mails with Alain Sherter and asked him what he thought about the amazing sense of entitlement among Wall Street executives. Although, he replied very politely and tactfully, there was a certain element of “What planet have you been on?” And he was right, I should have picked up on it a long time ago. Once I did, I encountered more and more examples of this phenomenon. It was astonishing. These individuals who had every advantage from birth could swear on a Bible that every last atom of their success had been earned through their hard labor. They knew that they were the important producers of value in this society and flew in unimaginable higher intellectual circles than the poor ingrates beneath them. They know that everyone who is not in their class is lazy and undeserving. They know that any, down to the tiniest amount, of taxation is a blow to their productive capability, totally unfair, and an unearned charity to the great mass of lazy, unmotivated citizenry.

Sonia Jaspal blogs on this mindset. It’s a fine article. She writes a blog from an extremely well educated background, not an assumed or pretentious academic style, but an educated approach as hard as stone. You know that her evidence is strong and her facts correct.

I recommend the article to your attention.

James Pilant

Financial institutions are again grabbing headlines for the wrong reasons. This time it is because of the foreclosure of mortgages without adequate due diligence.  As Senator Robert Menendez wrote to the heads of JPMorgan Chase and Co, Bank of America Corp and Ally Financial Inc- “It is simply inexcusable that proper oversight proceedings were not in place, especially when dealing with matters as monumental as the seizure of a family’s home.”  Wh … Read More

via Sonia Jaspal's RiskBoard

Alain Sherter Calls It Like It Is!

If you read my blog much, you know that Alain Sherter is one of my favorite writers. Well, he’s hitting one out of the ballpark this time. This is from his article on BNET. It’s called “Foreclosures: Did Wall Street Banks Conspire to Rob Homeowners?” Read! –

Are the financial firms alleged to have fraudulently repossessed people people’s homes more like the gang that couldn’t shoot straight or the mob? That question underlies the spreading foreclosure scandal, and how it is answered could affect any ensuing legal or legislative remedies to resolve the crisis.

Ohio Attorney General Richard Cordray is unequivocal in his assessment. In suing GMAC Mortgage and corporate parent Ally Financial in order to to block it from proceeding with any foreclosures in the state, he characterized the company as preying on vulnerable homeowners “through fraudulent and unfair and deceptive practices.”

Now take a look at the previous article – “Foreclosures: Help for Homeowners Means Hurt for Banks.”

The foreclosure crisis is morphing into a full-blown political crisis — and it’s about time. In Washington, lawmakers are urging the Obama administration to investigate whether financial institutions have broken the law in dealing with borrowers at risk of losing their homes. At the local level, legal officials are pressing lenders to cease foreclosures. …

Several things are happening here. First, the foreclosure epidemic, until recently mostly a subplot in the national economic drama, is now front-page news. Revelations that some of the nation’s biggest financial firms, including JPMorgan Chase (JPM), Bank of America (BAC) and Ally Financial, have “robo-signed” people’s homes away have seen to that. With midterms elections only weeks away, Congress has no choice but to sit up and take notice, if only to cover their backs.

Second, more and more homeowners face eviction. One in seven people with a mortgage is past due or in foreclosure, according to the Center for Responsible Lending, a consumer advocacy group. That’s up from one in eight in 2009 and one in 11 the previous year.

You should follow the links and read the whole articles. Better yet, check every few days to keep up with crisis, you can’t do any better that Sherter’s reporting.

James Pilant

Derivative Napalm

Alain Sherter (BNET)  is on the hunt today. The enemy is New York Democrats seeking to weaken financial regulations at the behest of the that very same financial industry.

In his article Sherter discusses those trying to weaken the bill and notes that –

In defense of preserving the current rules on derivatives Rep. Mike McMahon said:

Wall Street is to New York what cars are to Detroit and corn is to Iowa.

To which Sherter responds –

And derivatives are to the U.S. economy what napalm is to human flesh, but who’s quibbling.

If words were daggers, McMahon would look like a pin cushion.

Read the article. It’s rage, reason and satire, you don’t see that much. Not many people can write like that. It should be appreciated.

James Alan Pilant

Ethics Roundup – Blogs 6/11/10

Chris MacDonald considers the ethical elements of what is owed the shareholders of British Petroleum. His conclusion is dramatic. (And I think giving the comments a read is a good idea on this one.)

Lauren Bloom takes on the question of Helen Thomas and what should have happened in the light of her remarks. She wants to know why Hearst Corporation didn’t provide any help for her in the crisis. (I was surprised to discover that my opinion in the matter was identical with Ms. Bloom’s.)

Alain Sherter is on fire today, at first, angry, satirical, and then he segues into a discussion of what constitutes a sophisticated investor and then he gets indignant and angry again. It’s the kind of writing I expect from him. Sherter is extremely knowledgeable about the world of finance, outraged at the unprosecuted and protected bandits of our economy and dismayed by the public’s lack of concern, the government’s craven inability to act and the docility and foolishness of beltway comedians who call themselves journalists. If a few hundred people shared his convictions and ability, wall street would be a different place.

Alain Sherter at BNET

When re-organizing my favorites to tighten up my review of important sites, I lost Alain Sherter who is not only one of my favorite authors but an extremely adept analyst of the often arcane financial dealings of Wall Street. He is back on my list with considerable regret on my part for having left him off for a week and a half. His post today is cautionary tale of corporate value amid changing fortunes and different styles of leadership. He concludes that leaders should stick with what they do best.

Ethics Round Up – June 2nd 2010


The invaluable Alain Sherter writing on B Net discusses the rating agencies.

Loren Steffy from the Houston Chronicle discusses the costs of the current off shore oil ban in the gulf. (I freely admit this article does not seem ethics based but Loren Steffy’s content is heavily ethics laden, and I lay good odds he’s working up a good head of steam to smack down some wrong doing in a column.)

Chris MacDonald has a new one today discussing the many ethical facets of international trade. (I’ll probably be writing more about this one, but he included a pdf article about “adversarial ethics in business” and I think I should work through it before making a comment.)

Bob Allen writing in the Associated Baptist Press tells of Robert Parham’s contention that the gulf spill is a moral issue. (I went and took a look at Robert Parham’s Baptist Center for Ethics. Once I get a good feel for the organization I will write about it.)

Jon Talton’s blood is up at the Seattle Times with very few kind words for the President. He’s writing about Warren Buffett and rating agencies but I think the most important thing in the article is his opinion about the President’s policies.

Jay Hancock of the Baltimore Sun discusses the Great Recession and mental depression. (Hancock is more of a consumer advocate than an ethicist.)

Edward Lotterman writing for TwinCities.com covers the subject of professional sports and monopolization with a definite ethical tone and (speaking as a lawyer) an excellent grasp of the legal issues.

David Moon writing for Knoxville.biz points out with tongue in cheek that corporate annual reports make good fiction reading. But more than funny there are some good insights here.

Jeffrey Seglin on his blog, The Right Thing, discusses the ethics of underpaying a newspaper box. (This guy’s internet foot print is bigger than an elephant’s.)

A little video on Aristotle’s ethical views –

Exempt Energy Companies From New Derivatives Rules?

Alain Sherter warns that such an exemption (in negotiation in Congress) is fraught with risk. While energy companies can use derivatives to even out pricing or limit their risk they can also (like Enron) get into what is essentially gambling.

James Pilant

From the article

Concerns that energy companies want to dodge proposed restrictions on derivatives can be summarized in two words: Andrew Hall. He’s the star trader who stood to collect a $100 million bonus from Citigroup (C) until controversy over the windfall forced the banking giant to send Hall packing, along with his lucrative energy brokerage unit — straight into the arms of Occidental Petroleum (OXY).

The 2009 deal wasn’t merely the result of mounting political heat on Wall Street, however. It also underscored a trend in which financial firms and a range of companies use derivatives, leverage and other tools of modern finance to place bets on grain, gold, crude oil and other commodities. If energy companies once used derivatives strictly to hedge against price, currency or interest-rate changes, now they see these securities as a way to boost profits. But at what risk? As one equity analyst said of Occidental after it acquired the Citi subsidiary, called Phibro:

They never gambled before, and now they own the casino.

Sherter has a definite way of putting things.