Judge Issues Scathing Rebuke of DOJ and Law Firm, Paul Weiss

Judge Issues Scathing Rebuke of DOJ and Law Firm, Paul Weiss By Pam Martens and Russ Martens: May 7, 2019 

If you needed more proof that the United States is heading in the direction of a dystopian authoritarian state, it arrived last Thursday, May 2, when the Chief Judge for the U.S. District Court for the Southern District of New York wrote a decision finding that the U.S. Justice Department had outsourced a criminal investigation to the target of the investigation – Deutsche Bank – and Deutsche Bank’s outside law firm, Paul, Weiss, Rifkind, Wharton & Garrison. Making the matter all the more interesting, the Chief Judge who wrote the decision, Colleen McMahon, formerly worked for Paul Weiss for 19 years, rising to the rank of partner. She remains, according to this profile, close friends with a number of former and current Paul Weiss lawyers.

more [http://wallstreetonparade.com/2019/05/judge-issues-scathing-rebuke-of-doj-and-law-firm-paul-weiss/]

Meet the Lawyer Who Gets Citigroup Out of Fraud Charges

By Pam Martens: September 6, 2012  

The following is Part II of an investigative series on Citigroup and fraud. Read Part I here:

It’s one of the few things predictable on Wall Street; an immutable signature on the reply briefs whenever Citigroup is charged with fraud – and that is quite often.

Brad Karp, a partner at the 737-attorney-strong Wall Street law firm, Paul, Weiss, Rifkind, Wharton & Garrison LLP, has been Citigroup’s go-to guy for fraud allegations since the company was born out of the too-big-too-fail merger of Travelers Group insurance, its myriad Wall Street investment banks, brokerage units, and Citicorp, parent of Citibank.

When the London-based private equity firm, Terra Firma, claimed it had been lied to and defrauded by Citigroup, making it overpay for the purchase of EMI, a British music label, in 2007, Karp and colleagues wrung an 8-0 decision from the jury in favor of Citigroup. Karp was also on hand to witness victory when the trustee for the bankrupt Italian dairy giant, Parmalat, charged Citigroup with fraud. Then there were fraud charges connected to Citigroup’s involvement in the collapse of WorldCom and Enron – along with auction rate securities, rigged stock research and understating its exposure to subprime debt by $39 billion. Karp, Karp, and more Karp. […]

more [http://wallstreetonparade.com/meet-the-lawyer-who-gets-citigroup-out-of-fraud-charges/]

Sullivan & Cromwell’s Rodge Cohen: The Untold Story of the Fed’s $29 Trillion Bailout By Pam Martens and Russ Martens: May 2, 2019 ~

http://wallstreetonparade.com/2019/05/sullivan-cromwells-rodge-cohen-the-untold-story-of-the-feds-29-trillion-bailout/

There is a little noticed audio tape of an interview conducted on August 5, 2010 by investigators for the Financial Crisis Inquiry Commission (FCIC), a body convened under the Fraud Enforcement Recovery Act of 2009 to investigate the 2008 financial collapse on Wall Street. The interview is with Rodgin (Rodge) Cohen, Senior Chairman of Sullivan & Cromwell, the preeminent go-to lawyer on Wall Street.

Cohen makes a number of eyebrow-raising admissions during his interview. First, in response to a question, Cohen concedes that he was personally involved in the amendment contained in the Federal Deposit Insurance Corporation Improvement Act (FDICIA) that changed the Fed’s emergency lending powers under Section 13(3) of the Federal Reserve Act.

That one-sentence amendment to Section 13(3) was interpreted by the Federal Reserve from December 2007 to mid-2010 as giving it carte blanche to shovel $29 trillion in cumulative loans for as long as 2-1/2 years to Wall Street banks, broker-dealers, investment banks, hedge funds and foreign global banks, backstopped in many cases by dodgy collateral. In one of the Fed’s lending programs, the Primary Dealer Credit Facility (PDCF), it made revolving loans totaling $8.95 trillion, a significant portion of which was based on accepting stocks and junk bonds as collateral at a time when the prices of both were in freefall. (See chart below.)

Reuters Drops a Bombshell: The Big Short Doomsday Machine Is Back

By Pam Martens and Russ Martens: April 29, 2019 ~

In what can only be described as a new low in defining deviancy down on Wall Street, Thomson Reuters’ International Financing Review (IFR) reported this past weekend that some of the biggest names on Wall Street have returned to creating and/or trading synthetic collateralized debt obligations (Synthetic CDOs).

The products were a major factor in bringing the U.S. financial system to the brink of failure in 2008. Synthetic CDOs also resulted in hundreds of millions of dollars in fines and reputational damage to these same Wall Street behemoths as investigators found that the firms were allowing hedge funds to pick “crap” subprime mortgage bonds to stuff in the CDOs in order to make windfall profits for the hedge fund, which shorted (bet against) the CDOs. The Wall Street firms had full knowledge of what the hedge funds were doing but, nonetheless, peddled the investments as sound to unsuspecting investors. In some instances, the same Wall Street firm that was selling the product as a good investment to public pension funds, school districts, churches and insurance companies, was also making short bets itself against the CDO. In at least one case involving Goldman Sachs, it placed a 10 to 1 short bet on failure of its own product.

Writing for IFR, Christopher Whittall reports that “Trading volumes in synthetic collateralised debt obligations linked to credit indexes are up 40% this year, according to JP Morgan, after topping US$200bn in 2018 on the back of three years of double-digit growth. Meanwhile, analysts predict more than US$100bn in sales of bespoke synthetic CDOs in 2019 following an estimated US$80bn of issuance last year.” […]

READ MORE

http://wallstreetonparade.com/2019/04/reuters-drops-a-bombshell-the-big-short-doomsday-machine-is-back/

 

Here’s Why Wall Street Bank CEOs Started to Sweat Yesterday about Today’s House Hearing

Here’s Why Wall Street Bank CEOs Started to Sweat Yesterday about Today’s House Hearing

By Pam Martens and Russ Martens: April 10, 2019

http://wallstreetonparade.com/2019/04/heres-why-wall-street-bank-ceos-started-to-sweat-yesterday-about-todays-house-hearing/

At 8:00 a.m. yesterday, Politico’s Ben White and Aubree Eliza Weaver dropped the news nugget that the nonprofit watchdog, Better Markets, would be releasing one day ahead of today’s House hearing with the CEOs of the largest banks on Wall Street a report titled: “The RAP Sheet for Wall Street’s Biggest Banks’ Crime Spree,” which promised to detail, for the first time, “that of the more than $29 trillion in total bailouts, the six biggest banks in the country (Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo) received more than $8.2 trillion, or nearly one-third of the total bailouts provided to the entire financial system.”

Wall Street On Parade has been reporting since 2012 that of the secret $16 trillion bailout loans made at almost zero interest rates by the Federal Reserve during the financial crisis, a handful of mega banks on Wall Street received the lion’s share. (See here and here.)

But what Better Markets has done in its new report is to combine the Fed’s largess with that of TARP (Troubled Asset Relief Program) and support provided by the Federal Deposit Insurance Corporation and other guarantee programs. It comes up with the following:

“At least $29 trillion was lent, spent, pledged, committed, loaned, guaranteed, and otherwise used or made available to bailout the financial system during the 2008 financial crash. The American people were told that this unprecedented rescue was necessary because, if the gigantic financial institutions, mostly on Wall Street, failed and went bankrupt (like every other unsuccessful private business in America), then they would take down the entire financial system, which would take down the U.S. economy, wreaking havoc on Main Street families.

“This has actually been true since the 1930s for traditional commercial and retail banks, primarily because they provide essential financial services like checking and savings accounts as well as loans to individuals and businesses small, medium, and large.  That is the fuel for the American economy, standard of living, and overall prosperity, which is why those banks are insured by the FDIC and backed by the taxpayers.  In addition, those banks were guaranteed because the odds of their failure were minimized—and taxpayers were protected—by numerous banking regulators who policed their activities to promote safe and sound banking practices, making bailouts less likely.

“However, the $29 trillion in bailouts from the Fed, FDIC, and other regulators (in addition to the $700 billion taxpayer dollars made available under the TARP program) were not only or even primarily provided to those regulated banks that take deposits and make loans. Instead, those bailouts were extended to virtually all financial institutions, including those engaging in the most dangerous, high-risk activities that actually caused the financial crash.

Thus, for decades gigantic nonbank financial institutions like Goldman Sachs, Morgan Stanley, AIG, money market funds, and many more were allowed to maximize private profits with little or no regulation, but when their activities triggered the crash, they nonetheless were bailed out.

“This was a stunning violation of the most basic rule of capitalism, applicable to virtually every other business in America:  Failure leads to bankruptcy.”

Now that the researchers have really gotten readers’ blood boiling about the crony regulators and the secret trillions in bailouts, Better Markets delivers the gut punch.

Despite all of that taxpayer support, the mega banks that received it not only continued their crime spree but upped their game. The researchers write:

“In fact, they have engaged in—and continue to engage in—a crime spree that spans the violation of almost every law and rule imaginable.

Taking the breadth and depth of their illegal conduct as a whole, the six biggest banks in the country look like criminal enterprises with RAP sheets that would make most career criminals green with envy.

That was the case not just before the 2008 crash, but also during and after the crash and their lifesaving bailouts…

In fact, the number of cases against the banks has actually increased relative to the pre-crash era.”

Better Markets then proceeds to detail the ghastly RAP sheets of each of the six mega banks. (Read the full report here.)

Against that backdrop, the CEOs of seven of these mega banks will take their seats at a hearing at 9:00 a.m. this morning before the House Financial Services Committee. You can expect to see a lot of their lawyers in the seats behind them.

 CEOs of 7 mega banks challenged by House committee In one of the tensest moments of the hearing, the chief executive of JPMorgan Chase acknowledged his bank benefited from slavery.

In 2005, JPMorgan Chase acknowledged that two of its banking predecessors had received thousands of slaves as collateral before the Civil War and that the bank had also owned hundreds.

Sen. Elizabeth Warren (D-Mass.), a fierce industry critic, has made executive accountability — including making it easier to jail chief executives — one of the central themes of her presidential campaign.

https://www.washingtonpost.com/business/2019/04/10/ceos-mega-banks-will-testify-before-house-committee-heres-what-expect/

Slime ball Fed proposes easing post-crisis rules for slime ball big banks buddies
The proposal comes as the Trump administration continues to look for ways to curtail the regulatory burden faced by the banking industry, a decade after the global financial crisis. The industry has complained many of the strictest rules are too cumbersome and costly.