News of the finance

Elizabeth Warren, architect of the CFTA and Sheila Bair, FDIC:

The Wall Street Journal todayexplains how Citigroup and other banks tried to game the system by buying assets from themselves, their subsidiaries and their parent companies. It was almost the perfect scam, allowing the banks to transfer most of the remaining risk to taxpayers while keeping the upside for themselves. Losses would be socialized, profits privatized and the public befuddled by the complexity of it all.

According to the Journal it was FDIC chair Bair who saw the scam for what it was and put the kibosh on it. And the banks reacted by suddenly becoming unwilling to sell their assets into the public-private partnership program. If it wasn’t a scam, they didn’t want any part of it.

More people like this, please.

P.S. Let Citi die.

Businesses are paying big bucks to have check payments processed by bank lockbox operations, according to a recent survey by SunGard. Of the 101 companies surveyed, 27% pay $10,000 or more a month for lockbox processing. Among the companies with $1 billion or more in annual revenue, 24% say their lockbox costs total $30,000 or more a month.

A lockbox credits checks to the company’s account, keys in certain information and then sends that data to the company along with images of the checks. But that’s only part of the process. Companies employ a sizable number of people to link the information keyed in by the lockbox with the invoices the company sent out, as well as to resolve errors. Companies with revenues of $1 billion or more have an average of 29.3 full time employees devoted to those tasks, which SunGard estimates results in costs of about $1.4 million a year.

Despite that spending, just 31% of the companies surveyed manage to post payments the day that they’re received, and 28% say it takes them two or more days to post payments. SunGard also says data accuracy remains an issue and creates problems when companies attempt to match payments with invoices. It argues that the accuracy of payment data would improve if lockboxes digitally captured the check and remittance information, instead of keying it in manually.

Link to article:

It is funny that this article was in the paper today because I was telling a friend last night how Madoff got 150 years for the fraud he committed however banks have caused Americans to lose more money in equity than Madoff had stolen yet nothing is being done.

“The Supreme Court on Monday partially overturned federal rules on bank regulation, paving the way for state prosecutors to go after national banks for alleged violations of state fair-lending laws.

The 5-4 decision, written by conservative Justice Antonin Scalia but joined by the court’s four liberal justices, could have broader implications as policy makers attempt to overhaul the rules for financial regulation, particularly as the power struggle between state and federal regulators intensifies. The ruling chips away at 140 years of precedent in federal banking policy.

The decision, in Cuomo v. Clearing House Association, was a surprise victory for consumer groups and state officials because their repeated attempts to challenge the National Bank Act of 1864 have nearly always been rejected in court. The ruling will allow state attorneys general in certain cases to sue any of the country’s 1,500 national banks, including major divisions of Citigroup Inc., Bank of America Corp., J.P. Morgan Chase & Co. and Wells Fargo & Co.”

http://online.wsj.com/article/SB124627465027367747.html#mod=todays_us_page_one 

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The new GMAC, worse than the old GMAC (if that’s possible):

His clients, Dean and Nancy Piercy, owe $380,000 on the loan for their home in Shasta Lake, Calif. A logger, Mr. Piercy has lost work hours, making it hard for them keep up with their $2,048 monthly payment — soon set to rise.

Mr. Wasser has already negotiated a solution: GMAC will accept only $270,000 in repayment, allowing the couple to get a fixed rate mortgage from another bank.

But that suddenly is in disarray. The Piercys have been making their payments, but GMAC has been putting their checks aside, holding the money as “loss mitigation fees,” until their application is completed. It has notified credit bureaus that their loan is more than 90 days delinquent, which has lowered their credit score, disqualifying them for the next mortgage.

Mr. Wasser reaches GMAC’s loss mitigation department. He asks for the delinquency to be removed from their status. But that must be handled by a different department: customer service. He is transferred there, where Jessica picks up the call.

“We are not going to amend,” she says, after a strained back and forth.

How do GMAC executives avoid prison? Bernie Madoff could be running this cold, heartless and corrupt firm.

Can’t wait for the ads featuring derivatives with pr0n background music:

Financial products should be treated like medicines and sold to consumers only when they are certified safe to prevent a repeat of last year’s financial meltdown, the world’s central bankers said on Monday.

Who should we call if our 401(k) doesn’t rise for four years?

Over the past year, two groups have been unfairly scapegoated for our country’s economic problems:  (1) bankers and (2) unions.  In particular, many people have blamed the incentives embedded in bankers’ compensation scheme for the near bankruptcy of the entire industry, which caused the federal government to essentially bailout out the entire banking and capital markets sector.  Many people also blame unions for the down fall of the auto companies.  But I believe both positions are misguided at best and flat out wrong at worst.

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