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Did Citi Get a Sweet Deal? Bank Claims SEC Settlement on One CDO Clears It on All Others

A $285 million SEC settlement appears to wipe the slate clean on Citi’s multi-billion-dollar CDO business.

(Flickr: digiart2001)

In the run-up to the global financial collapse, Citigroup’s bankers worked feverishly to create complex securities. In just one year, 2007, Citi marketed more than $20 billion worth of deals backed by home mortgages to investors around the world, most of which failed spectacularly. Subsequent lawsuits and investigations turned up evidence that the bank knew that some of the products were low quality and, in some instances, had even bet they would fail.

The bank says it has settled all of its potential liability to a key regulator – the Securities and Exchange Commission -- with a $285 million payment that covers a single transaction, Class V Funding III. ProPublica first raised questions about the deal in August 2010.  In announcing a case, the SEC said it had identified one low-level employee, Brian Stoker, as responsible for the bank’s misconduct.

It made no mention of the dozens of similar collateralized debt obligations, or CDOs, Citi sold to investors before the crash.

A bank spokesman said the SEC would not be examining any of those deals. “This means that the SEC has completed its CDO investigation(s) of Citi,’’ the spokesman asserted in an e mail.

"The $285 million settlement resolves only the Class V Funding III CDO, and we will not hesitate to bring further charges where we determine that there has been unlawful conduct," an SEC spokesman said.

Did Citi get a sweet deal? Some observers think so.

"Citibank arranged countless CDOs that were built to fail, but the SEC apparently limited its case to a single CDO where they had particularly vivid and powerful proof,” says Stephen Ascher, a securities litigator at Jenner & Block, which has sued Citibank on various structured finance transactions.

“This represents extreme caution, at best -- and a failure to grapple with the magnitude and harmfulness of the misconduct, at worst."

ProPublica has been investigating the practices of the investment banks in the lead-up to the financial crisis for three years. Our research found a number of Citi CDOs similar to the deal featured in the SEC’s Class V complaint, and more information on Citi’s CDO business has emerged in lawsuits and subsequent investigations. Responsibility for these practices did not begin or end with Mr. Stoker. Among the questions still unanswered: How much did Stoker’s immediate bosses know? What did the heads of Citigroup’s CDO business, fixed income business and trading businesses know about Citi’s CDO dealings?

In the settlement announced this week, the SEC charged Citigroup with misleading its clients in the $1 billion Class V Funding III. The regulator said that the bank failed to disclose that it, rather than a supposedly independent collateral manager, had played a key role in choosing the assets in the deal when the bank marketed it to clients. Citigroup also failed to tell its clients that it retained a short position, or bet against, the CDO it created and sold. In addition to the $285 million fine, the SEC also charged Credit Suisse Alternative Capital, which was supposed to choose the assets that went into the CDO, and a low-level executive at that firm, with securities law violations.

Stoker becomes only the second investment banker after Goldman Sachs’ Fabrice “Fabulous Fab” Tourre to be charged by the SEC in conjunction with the business of creating CDOs, which were at the heart of the financial collapse in the fall of 2008. According to the SEC, Stoker played a leading role in structuring Class V Funding III. Stoker declined to comment. His lawyer has said he is fighting the charges.

The SEC complaint shows that Stoker was regularly communicating with other Citi executives about his actions. One top Citi executive coaches employees in an email that Credit Suisse should tell potential buyers of Class V about how it decided to purchase the assets, even though Citi, not Credit Suisse, was making the calls.   

In October 2006, people from Citi’s trading desk approached Stoker about shorting deals that Citi arranged. Later, in Nov 3, 2006, Stoker’s immediate boss inquired about Class V Funding III. Stoker told his boss that he hoped the deal would go through. He wrote that the Citi trading group had taken a position in the deal. Citi’s trading desk was shorting Class V Funding III, betting that its value would fall. Stoker noted that Citi shouldn’t tell Credit Suisse officials what was going on, and that Credit Suisse had agreed to be the manager of the CDO “even though they don’t get to pick the assets.’’ Less than two weeks later, this executive pressed Stoker to make sure that their group at Citi got “credit” for the profits on the short.

This Citi official, unnamed in the complaint, was not charged by the SEC.

If Class V Funding III was some outlier, the SEC’s action might make more sense. But it wasn’t.  Citigroup’s CDO operation churned out at least 18 CDOs around the same period. Often they were large CDOs, created with credit default swaps, effectively a bet that a given bond will rise or fall. Most of the CDOs included recycled Citi assets that the bank couldn’t sell. By purchasing pieces of its older deals, Citigroup could complete deals and keep the prices for CDO assets higher than they otherwise would be. Some investors helped picked the assets and then bet against them, facts that Citi didn’t clearly disclose to other investors in the deals.

Closing the book on Citi’s CDO business means the public may never know the true story of Citigroup’s, and Wall Street’s, actions during the financial crisis. One of the largest victims of the CDOs was the bond insurer Ambac. The now-bankrupt firm settled with Citi in 2010, long before it got to the root of the problems with securities Citi convinced it to insure. A shareholder class action lawsuit that is wending its way through the courts has the potential to reveal some details, but often such cases are settled with evidence then sealed from public view.

Among the unresolved questions: What was Citigroup’s role in a series of deals involving Magnetar, an Illinois-based hedge fund that invested in small portions of CDOs and then made big bets against them?  Our investigation showed that Citi put together at least 5 Magnetar CDOs worth $6.5 billion.  Did Citi mislead the investors who lost big on these deals?

Here are some other questions about Citi CDOs created around the time of Class V Funding III:

  • 888 Tactical Fund. A February 2007, $1 billion deal, it had a significant portion of other Citi deals in it. Did the bank have influence over the selection of the assets, as it did in Class V Funding III?
  • Adams Square Funding II. A $1 billion March 2007 deal. The pitch-book to clients for Class V Funding III was adapted almost wholesale from this deal, according to the SEC complaint. Was Citigroup shorting this deal, or adding assets that were selected by others to short the deal? And was that adequately disclosed to clients?
  • Ridgeway Court Funding II. Completed in June 2007, this $3 billion deal contained a mysterious $750 million position in a CDO index. Experts believe that such positions were included for the purposes of shorting the market. Did Citi disclose why it included these assets to the investors in this CDO? As much as 30 percent of the assets in the deal were from unsold Citi CDOs. Was this a dumping ground for decaying assets the bank could not unload, as a lawsuit by Ambac, which was settled, charged?
  • Armitage. This $3 billion March 2007 CDO looked a lot like Ridgeway II. It had a large portion of other CDOs, much of which came from other Citi deals, including $260 million from Adams Square Funding II. Did Citi adequately disclose to investors what they were buying?   
  • Class V Funding IV. A $2 billion June 2007 deal, Citi appears to have done this directly with Ambac. The SEC complaint about Class V Funding III makes it clear that Ambac was unaware of Citi’s position in that deal. Did the bank disclose more to Ambac in this deal?
  • Octonion. This $1 billion March 2007 CDO bought some of Adams Square Funding II. Adams Square II bought a piece of Octonion. A third CDO, Class V Funding III, also bought some of Octonion. Octonion, in turn, bought a piece of Class V Funding III. How did Citi and the collateral managers involved in these deals justify this daisy chain of buying?

Barry Schmittou

Oct. 20, 2011, 2:44 p.m.

Please help to get a Federal or local grand jury to seek prosecution of crimes like these and the politicians and Government officials who protect corporate criminals

Please forward the evidence I’ve filed in Federal Court as seen by pasting :

obamadrugmurdersconnection.blogspot.com

The evidence includes :

(1) Wachovia Bank laundered $378 billion for Mexican drug cartels that are responsible for 35,000 murders. No one was prosecuted !!
(2) Bank of America, American Express Bank International and Western Union also laundered drug money and no one was prosecuted.
(3) AIG, JP Morgan Chase, MetLife, Prudential, Unum, rigged huge bids and no one was prosecuted!!

The next two paragraphs are exact quotes from the Court filing (linked above) that describes identical crimes that are being committed by multiple insurance companies that made huge contributions to Obama and Bush and spend millions lobbying every year :

“Warning President Obama of Mass Suicides, Deaths and Endangerment in Five Different Types of Insurance Caused By Obama’s Campaign Contributors at Multiple Insurance Companies That Ignore Multiple Sclerosis, Brain lesions, Cardiac Conditions of Many Patients, and Cause So Many Suicides of Injured Workers

WFAA – TV in Dallas Texas Wrote :

“a remarkable number of Texans committed suicide because they could no longer endure the pain caused by their injuries and they had been repeatedly turned down for worker’s comp care.”

The Court document linked above also has links to official government documents that prove AIG, JP Morgan Chase, MetLife, and Prudential committed multiple frauds. The Feds will not prosecute any of this and the Court denied my request for a Special Prosecutor.

I am trying to get someone on Federal or local grand juries to seek prosecution as seen at :

seekingindictments.blogspot.com

There is some overlap with the overwhelming evidence seen at the links. I’ve had surgery on both eyes but am working on a more succinct version.

I am still shocked by the fact Wachovia Bank laundered $378 billion for Mexican drug cartels that are responsible for 35,000 murders. Obama prosecuted no one !! Bush prosecuted no one at AIG when they rigged huge bids to increase their sales of workers comp policies, while at the same time numerous injured workers committed suicide because they could not get their injuries treated (as seen in the quotes above)

I personally worked at citi and can confirm Stoker had very little say in what happened. There were much more senior people intricately involved in these transactions.

In most cases, transaction structures “evolved” by relaxing the credit quality standards of past deals. IE, they became cheaper & cheaper to issue. Between 2000 and 2007, the deterioration was profound.

So, if you look at a series of deal types, it’s quite interesting to see at what point the “moving parts” decide they don’t want to play anymore. EG, if the arranger self-insures the super senior piece in 2007, you may infer that the banks or other insiders who insured it in 2006 decided the risk wasn’t worth the fees, and only the arranging bank still had the economic incentive to get it off the books at all cost.

This phenomenon can help analysts document how risk knowledge moved through the markets. If outside institutions drop out of a deal, one can only suppose members of the inner circle also know the risks.

The SEC obviously got the wrong # of 0s after the $285. They said ‘M’ when they must have meant ‘B’.

If this single, insignificant fine does clear Citigroup, Obama had better fire the SEC immediately - or the 99% will turn on him - before Monday.

It is unfathomable that the Administration could allow the SEC and DOJ to take such a soft, lazy and cowardly settlement.  Fines such as these will have no deterrent effect whatsoever.  Corporations act through their executives, and humans can be deterred…quite quickly.  Both Fabrice and Stoker should be pursued criminally and face a jail sentence. Then, they should be offered deals in exchange for testimony incriminating bigger fish, and so on, until those ultimately responsible are criminally prosecuted to fullest extent of the law. This Administration must stand and fight in court and in Congress, and be prepared to lose. Win or lose, Americans deserve, expect, and are coming to demand bold, decisive action. The “invisible hand” of the market has long been gloved and padded by golden parachutes, outlandish executive compensation offering generations of luxury, and restricted shareholder rights…..the long arm of the law is all that is left…

Doesn’t it figure: Always seems a ‘low level employee’ gets the blame for everything.  Always seems to be a clerk, or a secretary, or in the case of Abu Ghariab, it was enlisted personnel who got the shaft.  Not one officer was ‘dishonorably discharged,’ or spent any time in the clink.

Peter Anderson

Oct. 21, 2011, 4:15 p.m.

Could you nail down with the SEC the truth of Citi’s quote to ProPublica that the SEC would not be investigating at all any of the dozens of other deals similar to Class V. 

  If true, combined with the decision to only prosecute low man on the totem pole Stoker, there is no other word for that than a coverup in the order of the Watergate investigation that Nixon ordered up from Dean.

  Is the what the President meant when he told the big bankers that he was the only thing standing between them and the pitchforks?

OWS is watching you slimeballs, your day in court is fast approaching

I sure wish someone had mentioned to the commision that they jacked up all our rates andclosed down our credit lines. Scumbags. i can not wait until the classs action - I will be FIRST in line.

My e-book is “Foreclosure Tyranny!  .(JavaScript must be enabled to view this email address)

I don’t disagree with your assessments with the SEC decision to fine CitiGroup an inadequate amount of money.

My question is whether the SEC has the capability to go to court because the Republican Senate has refused to allow enough appointments to handle even the cases before it now.

We do know that Cox and his replacement shredded records they kept of the complaints made during the Bush terms and have ignored investigating almost all of them. Whether true or not, I can believe the stories that some of the SEC workers under Bush spent time looking at Porn instead of doing their job.

Valery Taylor Brown

Oct. 21, 2011, 7:53 p.m.

Crime pays = 25-cents on the dollar. Do the research; that’s always the penalty.

What am I, stupid…?

Royce Herndon

Oct. 21, 2011, 8:52 p.m.

Citicorp has a tawdry history that goes way back. John J. McCloy, as chairman of the company (then known as National City Bank), was one of three primary funders of Adolph Hitler and his National Socialist Workers (Nazi) Party in an effort to stem the rising tide of Communism.  Ironically, according to Woodrow Wilson’s writings, the bulk of US money that went to Russia during its Bolshevik revolution had gone to support the communist interests.

Prior to all that, Frank A. Vanderflip, soon to become president of National City Bank, was one of the seven men who secretly met in 1910 at J. P. Morgan’s Jekyll Island retreat to formulate the plan for creating the Federal Reserve.

Sadly, it seems to be a pedigree some people are proud to claim.
A pledge of allegiance to personal power and profit, the rest of us be damned.

Crash2Parties

Oct. 21, 2011, 9:52 p.m.

Gee, what else was packaged into derivatives that hasn’t yet crashed?  Student loans are one I’d take a close look at as another investment product “designed to fail”...then of course there’s the current food futures…

Same story, new day! The banks servicing the loans they don’t even have titles to, among a gazillion other illegal, business practices, aren’t even applying the mortgage payments the borrowers ether send in, or the servicing bank withdraws themselves, as in my nightmare. I have the late notices I received from my bank, including a demand for late fees, stating my mortgage is delinquent. The only delinquency was the bank losing our money for three months straight, then going in circles about where it could have gone and still have not located any of it. Millions of people have been getting their money and homes stolen from them for at least the last 4-5 years. The SEC, the regulators, and the whole government have been informed about all of this, and they have done ZERO. All our money they have taken, will only be giving them a lifetime and legacy of humiliation and disgust! Hope it was worth it boys, and we will be there to take it back.

The truth - the inescapable truth - is that banking with one of the big banks is aiding and abetting an ongoing criminal enterprise, which is a RICO violation.

Move your money.

This article validates the 99% and what they are picketing about. It also points out exactly the opposite of what the GOP says about the Dodd Frank Bill and the importance to reinstate rules and regulations to prevent the banks from foisting these hidden risk upon the buyer (they are the Bernie Madoff’s). Be aware that Greepspan had the same philosophy as Wall Street, just read = Age Of Turbulence, Greenspans Bubbles, 13 Bankers, Griftopia, Pigs at the Trough and more. See “The Warning” about the CFTC and Brooksley Born or ENRON special on CNCB this past spring.
Why don’t they want Elizabeth Warren in Washington, D.C.? Greenspan help design laws to protect these banks that changed the way Banks were, no longer the holder of monies and local mortgages. No! That wasn’t enough, greed took over, they need to be able to invest, but that in and of itself would not have been bad if they had actually backed up/insured their risk. Instead they even set about to bet against those who bought these investments that they would loose….why?  Because they knew the risk were bad to begin with they were not AAA rated, so at best were B or C rated. They knew this because they paid off the Raters of these investments like Standard and Poor’s, Reuters etc.
Where is the honesty. They have robbed the American people, actually the world, given themselves huge Bonuses, bought up whatever they thought would bolster their bottom line and continued to receive more funds from the FED basically for free while everyone’s home values are in the toilet. Then we have people saying that the likes of Jamie Diamon pay/compensation estimated at $20.8 million and $17 million in restricted stock and options per the Vanity fair article about Elizabeth Warren-http://www.vanityfair.com/politics/features/2011/11/elizabeth-warren-201111#gotopage2- and mayor Bloomberg basically saying Diamon is all that. So what are we?? We are the one’s paying these salaries basically. 
This really came to the forefront under G.W. Bushes’ administration, companies were being run into the ground and yet CEO’s were taking CHUNKS of MONIES out of these companies. Look at Goldman Sachs‘, Lloyd Blankfein’s compensation or what Hedge Fund manages make while betting that everyone else will go into the toilet. How is this legal and who set this up?  The connection between Wall Street and D>C> needs to stop. Congress is suppose to be working to prevent this along with the FED and SEC. From my side of the equation they are all in it together and if that proves to be true they ALL, who are connected to this either directly or indirectly need to go to jail…just like Bernie Madoff.

“OCCUPY THE SEC”

George W. Drance

Oct. 23, 2011, 2:30 p.m.

Another Robert Khuzami wrist-slap as “punishment” going back to his very first ruling that the judge laughed out of his court. Is he “their” man at the SEC? How did he get his job? Connect the dots…

Crash2Parties, student loans are “federally guaranteed,” meaning they can’t fail.  Under the Bush administration, student loans are also exempt from bankruptcy claims, thereby reducing the burden on the poor, beleaguered Federal government and sweetheart banks.

My guess hasn’t changed much over the years.  The next hit is going to be commercial real estate.  As people continue to move around, it’s going to be harder for the local steakhouse or theater to stay open, and when one Main Street business goes, it usually takes a couple of neighbors with it (the rocker venue feeds the bars, the bars feed the service stations, for example).  I know in my neighborhood, a lot of people are pouring money into the local downtown area in hopes of preventing a complete collapse.  It seems to be working, but barely.

Mickey L Smith

Oct. 24, 2011, 8:15 p.m.

You want the names of the people behind the curtain, read this and you will want to get as far from the people as possible. http://www.armstrongeconomics.com/writings/10/22/2011. This comes from Zurich and it poses a danger to all freedoms in this nation.

These type of stuff has been going on for decades, how many presidents & governors are quilty of helping the primary dealers thru the ESF wash trillions of drug money thru wall street & the bankers bank, the BIS.

I would say more, but what I just gave you to read tells it all. Do something about it.!

{The bank says it has settled all of its potential liability to a key regulator – the Securities and Exchange Commission—with a $285 million payment that covers a single transaction, Class V Funding III. ProPublica first raised questions about the deal in August 2010. }

That may be what they like to think.

Let’s see the text agreement signed by both parties to verify the wording that exonerates them on all other purchases of this nature.

If it’s there, then the SEC head lawyer on this deal is looking for a juicy-job at CitiBank.

Wouldn’t surprise anyone ... if a bankster could set up such illicit “financial engineering” then a lawyer can easily forget all pretense of representing (whilst his client is the SEC) the interests of the American public.

Yes, such a mentality is the depth of immorality to which we have fallen.

Has your organization looked into how the FDA and Pharmaceutical companies control cancer treatments “approved” versus natural treatments that work but can’t be openly discussed because of the money that would be lost by medical institutions and the pharmacies?
Suzanne Somers’ book “KNOCKOUT” is a good place to start.  It is not just Cancer treatments but GMO’s, Aspartame (according to info I have been told, Aspartame wasn’t approved by the FDA for 10 years until the composition of the FDA was changed for one year, they passed this sweetener, and the next year the whole Board was new because most of the previous board members had been hired by the Pharmaceutical companies).  It seems like everything is about BIG Government, Big Money, and not about We The People!

The Aspartame story is even uglier than that. While CEO of Searle in 1981, Donald Rumsfeld told his employees that he would “call in all his markers” and that, no matter what, he would get Aspartame approved that year (per former Searle salesperson Patty Wood Allot). They were so confident of getting this done, they had already built a Nutrasweet factory and had $9 million in inventory on hand. Soon thereafter, Rumsfeld was on Reagan’s transition team, and one day after the inauguration, Dr. Arthur Hull Hayes was appointed FDA Commissioner. Hayes first approved Aspartame only as a powdered additive. Then, just before he left in 1983 to take a PR job with the chief PR firm for both Monsanto and Searle, he approved it for use in all carbonated beverages. He died in February of last year without ever publicly commenting on any of this.
The revolving door to hell just keeps spinning.

Barry Schmittou

Oct. 27, 2011, 2:43 p.m.

You or someone you know will be on a Federal or local Grand Jury soon. Please save this !!

Someday there must be prosecutions for the $378 billion dollars that Wachovia Bank laundered for the murderous Mexican drug cartels, and all the other corporate crimes that Obama and Bush have protected.

The Justice For All Act of 2004 is another option. Any citizen can file them in Federal Court.I will be filing some of those in the future regarding all the evidence seen at my links posted in comments on ProPublica.

Additionally, citizens can request an appearance before Grand Juries in some states including Tennessee. I appeared before the Davidson County Grand Jury in 2004.

( It takes repeated efforts !! )

Within one minute I knew the Grand Jury foreman would not seek justice. They refused to investigate.

One year later I added evidence from the Memphis Commercial Appeal, and with the help of a perfect media storm I filed an ethics complaint that caused State Wide headlines and TV coverage and led to the indictment and conviction of Ford.

Here’s a quote from WSMV TV in 2006 :

“Schmittou’s ethics complaint is what led the state to turn the case over to the attorney general’s office and ultimately to a federal grand jury ending in today’s indictment.”

It takes tremendous repeated efforts to get any sign of justice. You will get on the nerves of many. You can’t let that stop you when so many lives are being destroyed.

There are so many crimes being openly committed the evidence will quickly overwhelm the huge majority of people.

Many are not interested until the crimes endanger them, but they do not understand that every average citizen and every living being in the world are in great danger because of the heartless greed that possesses the leaders of the world.

Most people including Christians falsely believe there is nothing they can do to stop huge injustices. I think we are probably all trained to believe that.

The Bible confirms the need to stop injustices including Jeremiah 22:3 :

“Thus says the Lord: Do justice and righteousness, and deliver from the hand of the oppressor him who has been robbed. And do no wrong or violence to the resident alien, the fatherless, and the widow, nor shed innocent blood in this place.”

Some (who may be connected to the criminals) will discourage you and/or attack you, especially if you mention God.

They don’t understand that when you lose everything to corporate crimes you see that God is all we really have, and if we are blessed through him we also have the love of family and friends.

I repeatedly post evidence here because I pray individual citizens on Grand Juries will seek indictments since the Feds are protecting the crimes.

As mentioned you or someone you know will be on a Federal or local Grand Jury soon. If you want much more evidence please see contact me at the email address seen at the very end of treasonevidence.blogspot.com

I know more citizens who will also come forward with case evidence if a Grand Jury requests it.

A Grand Jury can also reach me by contacting the U.S. Attorney Jerry Martin in Nashville. He and Obama received certified copies of my Court filing that is seen at :

obamadrugmurdersconnection.blogspot.com

Obama’s DOL and DOJ Directors also have my contact information.

They read my communications and sometimes respond, but never take action, even though they are very aware that doctors’ paid by MetLife ignored :

(a) Ms. Jacquelyn Addis’s Multiple Sclerosis,

(b) A foot that new mother Joanne Vick broke in five places,

(c) Cardiac conditions of many patients,

(d) And repeatedly endangered psychological patients to the point that U.S. District Judge Richard Enslen wrote :

“Metlife and its henchmen should appreciate that such conduct may itself precipitate the suicide death of a person who has placed implicit trust in their organization. This record is an open indictment of MetLife’s practices and treatment of the mentally-ill and long-term disability benefits.”

** Quotes from numerous Judges that Obama"s DOL and DOJ Directors have ignored are seen by pasting :

deadlyorganizedcrimes.blogspot.com

Even though my complaint in 2005 led to State Senator Ford’s conviction, I believe it’s likely the U.S. Attorney and Local D.A.s will try to block prosecution of Government officials that is submitted by Grand Jury members, but I pray someday a real Grand Jury full of honest citizens will achieve prosecution of the officials who protect corporate crimes that are destroying the lives of hundreds of millions of people in the world !!

I pray many of the Propublica readers and commenters or someone they know will be on a Grand Jury soon !!

No surprise that we the people do not trust government to protect our interests, Citi unloads all of its bad assets by packaging them off to investors after putting lipstick on the pig. They should be shut down, sold off and all of the perpetrators including the numerous traders involved jailed.

It seems only two people are now investigating this Wall Street criminality . That is in New York state and Delaware state. Shame on the rest of the people who are supposed to be investigating them at SEC and if politicians are dragging their feet, register your anger with your votes

This ongoing behavior by the Obama Administration creates one of the biggest conundrums of voting in 2012.  Regarding the too big to fail banks, Obama is doing virtually nothing to prosecute these criminals and the Republicans will make it even worse for all of us.

@max:  You have to have “prosecutable” evidence of a crime, something that is very difficult to gather.

Especially when Wall Street thought ahead because Wall Street is and was full of people every bit as greedy as Lou Pearlman and Bernie Madoff - but smart enough to buy “deregulation” from the Republicans and Clinton.

Deregulation changed the gamel instead of banking’s and Wall Street’s limits being “You can go here, and no further.”, they became “You can do whatever you want, as long as there is not a currently existing law that explicitly forbids it.”  To prosecute, you must have evidence of a law being broken...that latter is the missing link, thanks to the Republicans - and Clinton.

I.e., the mess on Wall Street and in banking is not this Administration or Obama’s fault, and if you have been paying attention at all you will have noticed that the current crop of Republicans blocks or guts every attempt at fixing the wrongs they inflicted upon America with deregulation.

Again, the Republicans’ fault…not Obama’s.

Rephrased:  The Republicans are all about “loopholes”; that baloney they spout about “the free market” should be what weeds out those whose behavior inflicts harm upon the American people and the national interest is just that: baloney.

You give a Republican a loophole, and they’ll drive a truck through it, minimally.  Give them enough power, and they’ll squeeze the country through it:  Read this:

archives.hud.gov/remarks/martinez/speeches/presremarks.cfm

With deregulation, Fannie Mae and Freddie Mac - and their mandate to make it possible for more Americans to participate in “the American Dream” - became giant loopholes…and a Goldman Sachs-filled White House worked hand in hand with the Republicans and a Republican Administration to ensure that the right people - the right’s people - could take advantage of those loopholes.

Read the speech at that link…see the Republicans laying the groundwork for a gigantic scam and the downfall of millions of Americans in their own words.  Observe that the date of that speech is June 18th of 2002, which I consider to be the official launch of the mortgage-backed securities pyramid scam.

lolll…ibsteve2u’s short course in modern American history - a.k.a. “How America was Steered into the Abyss”:

The Republicans used forced oil addiction to shatter our economy and make “flood-up/trickle-down” economics palatable; with the aforementioned “voodoo economics”, they unleashed greed; the scent of all of the money that could now be kept</a> if only you could steer it into your hands brought neoliberal/“Blue Dog” Democrats aboard; the two groups then <i>combined to inflict deregulation upon America (going after the homes and savings of the American people) and inequitable free trade (going after the jobs of the American people).

And here we are.

Is Obama a Republican or a neoliberal Democrat?  It is impossible for me to judge, for his actions are necessarily shaped to conform with the reality of a corrupt Congress which is thick with Republicans and neoliberal Democrats.  I do not know if I am seeing Obama, or seeing the Republicans and neoliberal Democrats through him.  My conclusion is the first thing that needs to be done is pest control:  Get rid of any member of Congress who stinks of Republican, Libertarian, or neoliberal Democrat.

Rebuilding America’s foundation cannot efficiently/profitably be begun while those worms are still eating away at it.

After the S&L crisis 1,852 people were prosecuted and 1,072 went to prison.  The big difference now is the legal damage done during the 2nd Clinton term which gutted Glass-Steagell and dereregulated derivatives trading.  In other words, they would not have pulled these stunts if they thought they would be prosecuted.  That said, Lloyd Blankfein lying to Congress several times, and the thousands of e-mails the feds collected from several TBTF banks showing deliberate short selling to con investors is a start.  Use that and go after them.  It will at least expose the weakness in current law to cynical voters and the need to clean out the rats in Congress who oppose stronger banking laws.  Doing nothing is a cowardly cop out and a disservice to the young people freezing their asses off in the OWS movement.

Tom O said:
“Doesn’t it figure: Always seems a ‘low level employee’ gets the blame for everything.  Always seems to be a clerk, or a secretary, or in the case of Abu Ghariab, it was enlisted personnel who got the shaft.  Not one officer was ‘dishonorably discharged,’ or spent any time in the clink.”

Yes. The same executives who will eagerly hog all the glory for any positive development in their bank’s share price will just as readily claim they had no idea what was going on when something goes wrong. That leaves only two options: incompetent glory hogs or liars? Either way, no justification for excessive compensation: regardless of motives their skill is obviously not on par with their assumptions.

Obama better start prosecuting these damn banks himself, through the justice dept., the SEC is WORTHLESS

This article is part of an ongoing investigation:
The Wall Street Money Machine

The Wall Street Money Machine

Enticed by profits and bonuses, Wall Street took advantage of complicated mortgage-based instruments to reap billions, only to exacerbate the eventual crash.

The Story So Far

As the housing market started to fade, bankers and hedge funds scrambled for ways to maintain the lavish bonuses and profits they had become so accustomed to, repackaging mortgages in complex securities called collateralized debt obligations. The booming CDO market masked how weak the housing market was, and exacerbated its collapse.

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