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BP Exec Who Led Cleanup Settles On Charges Of Insider Trading

Posted on April 21st, 2014 at 13:50 by Paul Jay in category: Robber Barons, They never learn

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[Quote]:

A former BP executive who led the company’s cleanup of the 2010 Deepwater Horizon oil spill has agreed to pay $224,000 in penalties and restitution in a settlement with the Securities and Exchange Commission for allegedly trading on inside information on the disaster.

SEC regulators say Keith A. Seilhan, 47, a 20-year veteran of BP plc, sold his family’s $1 million portfolio of BP securities after learning that the public estimates of the extent of the Gulf of Mexico spill were grossly underestimated. The regulators say the sale of the stock and options saved Seilhan from more than $100,000 in losses.

Seilhan has agreed to pay a $105,409 civil penalty and the same amount in “ill-gotten gains,” as well as more than $13,000 in prejudgment interest, Reuters says.

Forbes says:

“In his position as Incident Commander [in Houma, La.], Seilhan learned of nonpublic information relating to the seriousness of the disaster, including initial oil flow estimates from the sunken rig that were significantly greater than the public estimate of 5,000 barrels per day. Indeed, those private estimates were between 52,700 and 62,200 barrels per day — a 10x increase than that provided to the public.

“After he learned of this information, Seilhan [liquidated his portfolio.] … By doing so, Seilhan and his family were able to avoid over $100,000 in losses as BP’s share price eventually declined 48%. Later, after BP announced it had successfully capped the well, Seilhan repurchased shares of the BP Stock Fund (composed nearly entirely of BP shares) at a lower basis.”

Mary McNamara, an attorney for Seilhan, said her client wanted to “avoid further distraction and protracted litigation” by settling the matter, according to Reuters.

“Mr. Seilhan is widely respected for his work helping to lead the cleanup and containment efforts in the Gulf of Mexico in 2010,” McNamara added.


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  1. On the bright side, another wicked old basket has popped an artery: Charles Keating has died:

    http://www.economist.com/news/obituary/21600648-charles-keating-moral-crusader-and-financial-snake-oil-salesman-died-march-31st-aged

  2. Sue, I don’t know if we can blame just one for being wicked when the whole bunch are wicked. How do you prosecute just one?

Three Expensive Milliseconds

Posted on April 14th, 2014 at 16:28 by John Sinteur in category: Robber Barons

[Quote]:

Four years ago Chris Christie, the governor of New Jersey, abruptly canceled America’s biggest and arguably most important infrastructure project, a desperately needed new rail tunnel under the Hudson River. Count me among those who blame his presidential ambitions, and believe that he was trying to curry favor with the government- and public-transit-hating Republican base.

Even as one tunnel was being canceled, however, another was nearing completion, as Spread Networks finished boring its way through the Allegheny Mountains of Pennsylvania. Spread’s tunnel was not, however, intended to carry passengers, or even freight; it was for a fiber-optic cable that would shave three milliseconds — three-thousandths of a second — off communication time between the futures markets of Chicago and the stock markets of New York. And the fact that this tunnel was built while the rail tunnel wasn’t tells you a lot about what’s wrong with America today.

Who cares about three milliseconds? The answer is, high-frequency traders, who make money by buying or selling stock a tiny fraction of a second faster than other players. Not surprisingly, Michael Lewis starts his best-selling new book “Flash Boys,” a polemic against high-frequency trading, with the story of the Spread Networks tunnel. But the real moral of the tunnel tale is independent of Mr. Lewis’s polemic.

Think about it. You may or may not buy Mr. Lewis’s depiction of the high-frequency types as villains and those trying to thwart them as heroes. (If you ask me, there are no good guys in this story.) But either way, spending hundreds of millions of dollars to save three milliseconds looks like a huge waste. And that’s part of a much broader picture, in which society is devoting an ever-growing share of its resources to financial wheeling and dealing, while getting little or nothing in return.


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U.S. bank profits hit all-time high

Posted on February 26th, 2014 at 21:52 by John Sinteur in category: Robber Barons

[Quote]:

Not only have the nation’s banks fully recovered from the financial crisis, their bottom lines are now healthier than ever.

On Wednesday, the Federal Deposit Insurance Corp. said profits at U.S. lenders hit an all-time high in 2013. For the year, the nation’s banks made a collective $155 billion. That’s up 10% from a year ago, and it was more than the $148 billion the banks made back in 2006, the last time profits peaked.

For the last three months of 2013, banks made $40.3 billion. That was also an all-time high, and a rebound. Bank profits were down in the second and third quarters of the year.

The FDIC noted a large portion of the bottom line boost, though, came from an accounting maneuver that other regulators have cautioned about.


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  1. I’m not sure that they need to have any reserves to cover future bad loans. I mean, aren’t they highly-regulated state-supported institutions?

    That’s a bit unfair of me, though. Banks are being criticized for not lending out enough of their depositers’ money (hence the profit), but the financial crisis 6-7 years ago was partly caused by too many bad loans. So they presumably conclude that their present loans are less likely to go bad and don’t need to be offset by bad loan provisions.

The Vampire Squid Strikes Again: The Mega Banks’ Most Devious Scam Yet =

Posted on February 22nd, 2014 at 15:17 by John Sinteur in category: Robber Barons

[Quote]:

But banks aren’t just buying stuff, they’re buying whole industrial processes. They’re buying oil that’s still in the ground, the tankers that move it across the sea, the refineries that turn it into fuel, and the pipelines that bring it to your home. Then, just for kicks, they’re also betting on the timing and efficiency of these same industrial processes in the financial markets – buying and selling oil stocks on the stock exchange, oil futures on the futures market, swaps on the swaps market, etc.

Allowing one company to control the supply of crucial physical commodities, and also trade in the financial products that might be related to those markets, is an open invitation to commit mass manipulation. It’s something akin to letting casino owners who take book on NFL games during the week also coach all the teams on Sundays.

The situation has opened a Pandora’s box of horrifying new corruption possibilities, but it’s been hard for the public to notice, since regulators have struggled to put even the slightest dent in Wall Street’s older, more familiar scams. In just the past few years we’ve seen an explosion of scandals – from the multitrillion-dollar Libor saga (major international banks gaming world interest rates), to the more recent foreign-currency-exchange fiasco (many of the same banks suspected of rigging prices in the $5.3-trillion-a-day currency markets), to lesser scandals involving manipulation of interest-rate swaps, and gold and silver prices.

But those are purely financial schemes. In these new, even scarier kinds of manipulations, banks that own whole chains of physical business interests have been caught rigging prices in those industries. For instance, in just the past two years, fines in excess of $400 million have been levied against both JPMorgan Chase and Barclays for allegedly manipulating the delivery of electricity in several states, including California. In the case of Barclays, which is contesting the fine, regulators claim prices were manipulated to help the bank win financial bets it had made on those same energy markets.

And last summer, The New York Times described how Goldman Sachs was caught systematically delaying the delivery of metals out of a network of warehouses it owned in order to jack up rents and artificially boost prices.


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  1. Inspirational! Hire the best minds and put them all to work on a multi-generational project for the benefit of mankind… :-)

Obama’s top Trans-Pacific Partnership officials were given millions by banks before taking the job

Posted on February 21st, 2014 at 9:49 by John Sinteur in category: Robber Barons

[Quote]:

The top Obama administration officials working on the Trans-Pacific Partnership came to government from investment banks who will benefit immensely from its provisions, which severely curtail countries’ ability to pass laws regulating banks and other corporations. These top advisors, who came from Bank of America and Citigroup, were given multimillion-dollar exit bonuses when they left their employers for government. For example, the US Trade Representative, Michael Froman, was handed $4M from Citigroup as a goodbye gift on his way into his new job.


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  1. But don’t the banks realize there are risks for them too? We all live in the same country. Sorry, I couldn’t resist the snark.

  2. Many large corporations with a strong incentive to influence public policy award bonuses and other incentive pay to executives if they take jobs within the government. CitiGroup, for instance, provides an executive contract that awards additional retirement pay upon leaving to take a “full time high level position with the U.S. government or regulatory body.”

    Look, CitiGroup supports its employees in making the transition to public service by ensuring that the switch to government salaries won’t be too painful. That’s quite generous!

Inside ‘Billionaires Row’: London’s rotting, derelict mansions worth £350m

Posted on February 1st, 2014 at 12:31 by John Sinteur in category: batshitinsane, Robber Barons

[Quote]:

A third of the mansions on the most expensive stretch of London’s “Billionaires Row” are standing empty, including several huge houses that have fallen into ruin after standing almost completely vacant for a quarter of a century.

A Guardian investigation has revealed there are an estimated £350m worth of vacant properties on the most prestigious stretch of The Bishops Avenue in north London, which last year was ranked as the second most expensive street in Britain.

[..]

But he argued against increasing taxes on unoccupied homes, which he said would be an “annoyance” that would make buyers choose Monte Carlo or Milan instead of London.

So there’s a housing shortage in London, and “people with no economic or cultural ties to the city will move out” is supposed to be a threat?

The rich buying enormous houses so they can sit and rot then complaining people might actually want to tax them for it and threatening to take their “buying an enormous house to sit and rot” business elsewhere is such a breathtakingly good metaphor for the state of the world.


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Goldman Sachs

Posted on January 31st, 2014 at 10:27 by John Sinteur in category: Robber Barons

[Quote]:

An estimated 2,500 demonstrators braved the cold and snow this evening to protest against the pending partial sale of state-owned energy provider DONG to US investment firm Goldman Sachs.

Parliament’s Finance Committee is set to vote on the controversial deal tomorrow. If it pass, Goldman Sachs take a 19 percent stake in DONG at a cost of eight billion kroner.

[Quote]:

The partial sale of DONG Energy to Goldman Sachs took a shocking turn this morning after Annette Vilhelmsen, the head of government coalition party Socialistisk Folkeparti (SF), announced that she would step down as head of the party and the party would leave the government coalition.

Vilhelmsen called a meeting this morning after she was unable to obtain a consensus in her party on agreeing to the government’s pending DONG/ Goldman Sachs agreement, which is set to be decided on in parliament later today.

“It’s been a dramatic 24 hours. I must admit that there has been disagreement in the party, at a national level and in the parliament group,” Vilhelmsen said at the press conference at Christiansborg. “I couldn’t gather the party.”

Not only is this Goldman Sachs, the 19 percent they are buying are being sold at almost half of it proper evaluation, there where pension funds that where willing to pay more and Goldman Sachs would have veto right despite only owning 19 percent.

It makes you wonder which politicians they paid.


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  1. The dumbing down of the Danes began when they sent troops to join the coalition forces.

  2. Sounds like a Republican to me. I didn’t know they had any socialists in that party.

Combined wealth of the 85 richest people is equal to that of poorest 3.5 billion

Posted on January 20th, 2014 at 9:11 by John Sinteur in category: Robber Barons

[Quote]:

Global inequality has increased to the extent that the £1 trillion combined wealth of the 85 richest people is equal to that of the poorest 3.5 billion – half of the world’s population – according to a new report from development charity Oxfam.


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  1. Hey, 200 years ago the top 5 (?) royals probably controlled, what, 80% of the land surface of the Earth? Progress!

    Or, hey, the most egalitarian situation was probably before nation states evolved and all the hunter-gatherers were starving equally!

    The inequality wouldn’t matter if the standard of living of the bottom half were actually decent.

  2. No only that, but things have improved markedly the last fifty years or so. We’ve never been better than today.

    And it’s not good enough.

  3. “Those who cannot remember the past are condemned to repeat it.” Just ask Marie Antoinette.

  4. @John: Here’s a thought experiment I’m curious to get a reaction on. In the book business, the top 10 of authors alone make about half a billion dollars per year [1]. Now, I don’t have stats, but I think we can agree that there are very few authors making a million dollars per year, and tens of thousands who write books but never even get published despite the fact that they may be working just as hard.

    Is this unfair? Should there be some redistribution from successful authors to make it possible for poor, unpaid writers to keep doing their job?

    [1] http://www.parade.com/64073/viannguyen/highest-paid-authorsfifty-shades-e-l-james-beats-stephen-king-j-k-rowling/

  5. Yes, it’s just as unfair, technically speaking. Should there be redistribution?

    No.

    This unfairness is not treated equally because it is not a threat to world stability. Income inequality is. As soon as book authors start talking about Marie Antoinette, I will reconsider.

    And yes, I know that is not fair of me.

  6. Only addressing unfairness when it threatens stability seems… cynical?

    I think the thought experiment gets more interesting when you imagine the Writer’s Guild being a democracy that can tax its members’ income. Would they vote to tax the top authors to pay stipends for struggling authors to keep writing?

  7. If being unfair about certain things because the survival of the species is at stake is called cynical, then, yeah, go ahead and call me cynical.

    There’s another problem with your analogy. If a member of the Writer’s Guild disagrees with the taxing decisions of the guild and the way the guild redistributes income between members, there’s always the option of finding a different occupation, writing books isn’t the only game in town. It may not be a practical option in a few cases, and it may also not bring wealth to the defecting member, but the option is real.

    However, when it comes to money, income and wealth, there’s no way to decide to use a different system, current currency systems have no competition. Perhaps we need to colonize a few hundred planets to fix that, but until then, there you are.

    You can stop writing books and start flipping burgers or sweeping floors. It is just about impossible to stop using money.

    If you can’t win because the game is fixed, and there’s no way to stop playing the game, there’s only so much effort you will put into un-fixing the game before you resort to violence.

  8. Some people think this is Fantastic!

  9. RE: cynical — you took that in the opposite direction of the one I expected. It’s not cynical to do this rather than do nothing; it’s cynical (I think) to do but only that necessary to prevent the collapse of civilization rather than more.

    Ah, I forgot to tell you that the Guilds are hard to get into. You can’t just leave your guild and pop over to the janitorial guild. If the guilds let in just anyone, then everyone would run over to the one with the best benefits.

    Sounds more like countries, eh?

    This is where I have my days when I think maybe we should let the Tea Party succeed at strangling the U.S. federal government down to national defense and a few other basics. Then we can move all the rest down to the states and have bigger policy differences between states and have some more experimentation in how different choices work out. But…

  10. Sounds more like countries, eh?

    More than you know. Why is it that capital must be allowed to move around as freely as possible, while people still encounter borders everywhere?

  11. Strange comparison, if you ask me. But OK. Would you personally object to money showing up in your back yard? How about a dozen strangers camping out and making their home there?

  12. Would you personally object to money showing up in your back yard?

    Can I assume you mean quite a lot of money? Not just a fiver? Then yes, I would object, because it is likely to give me huge headaches with money laundering laws and my inability to explain where it came from.

    And those dozen strangers, even if I personally had no objections, would probably quickly run into so many local law ordinances for trying to camp out in my back yard they’d be swiftly kicked out regardless. Now if they’d rented or bought local residences just like everybody else living around here I’d have no trouble at all.

    Free flow of capital does not mean bags of cash dropped in random back yards, just like free flow of people doesn’t mean just setting up tents anywhere.

  13. You’re wiggling out on technicalities rather than engaging in the thought experiment.

    Take as much money as you think you can comfortably launder, and leave the rest for someone else to find. And you evaded the people question with technicalities. It’s not hypothetical. I’ve had homeless people set up camp in my yard before. The only way that runs afoul of ordinances is if I or my neighbor call the police.

    My point was that there’s an asymmetry: people generally welcome cash that arrives. They don’t necessarily welcome strangers, especially when those strangers compete for jobs and housing, or worse, need support to stay alive.

    The restrictions on immigration aren’t a product of evil corporate agenda. Instead, movement of both money and people used to be restricted. Arguments for liberalizing money-flow have won in most places, but arguments for allowing free migration have not. In part, it’s because money is power and gets its way, yes. And in part it’s because the votes don’t exist in any rich democracy to allow free immigration.

  14. I’m not wiggling out of anything, I’m just forcing you to say out loud what you just did say out loud.

    And you’re correct, that is the way it is. And now for the difficult question: how to improve on that situation.

    One way is to make sure the poor people in the world get richer, or at least, less poor.

    So, back to the original article. Apparently you can double the wealth of the poorest half of the world by shooting just 85 people.

    At what point do the needs of the many outweigh the needs of the few?

  15. Well, poor countries *are* getting less poor. Recent evaluations of progress towards the Millennium Goals says that we’re doing well on those. And see, notably: http://annualletter.gatesfoundation.org/. Gates predicts true starvation-level poverty will disappear around mid-century.

    But instead of one-time fixes like you posit, the real question, of course, is how you make structural improvements; how you set up and then direct the economy so it creates enough decent-wage jobs yet also enough entrepreneurial incentive, etc. That’s still the hard question. But I suspect here we’re on territory that we violently agree on.

    Back to this, though:

    Why is it that capital must be allowed to move around as freely as possible, while people still encounter borders everywhere?

    So why would you say this is? And more interestingly, what’s your argument for how it should be and why it should be that way?

  16. And more interestingly, what’s your argument for how it should be and why it should be that way?

    Oh boy, that’s indeed the big one, right? I really with I had a simple, straightforward answer to this. Fuck, I would settle for a complicated difficult answer. I have none. Except perhaps that note that income equality, which is why why started this whole thread, is one of the things standing in the way of a solution, or at least standing in the way of improvement.

    Gates is right, things *are* getting better. And I concur – starvation-level poverty is likely to disappear. But * *hate* that it takes until mid-century. Surely we can do better than that (and I promise I will stop calling you shirley), and ranting about income equality, where 85 people have as much money as 50% of the world population, is part of it, because that is one of the many things that need to change, that needs to be done *better* than we (as in, the world, collectively) are currently doing.

    Of those 85 people, how many, apart from Bill Gates, recognize this? How many are actively working, in whatever way, to improve this idiocy? Let me be generous, and count Warren Buffet as well. Who else?

  17. I think a global end to bank deposit secrecy would help. (Not that deposits would become public, but that governments should get insight into the deposits of their own citizens in foreign banks.)

    But the top 85 richest people are beyond that. Their riches are in corporate ownership; the accrual isn’t largely throwing off income that can be taxed.

    Another thing that could help is an inheritance tax of 100% on assets above (say) $1 million. I’ve never heard a compelling reason why people should leave that kind of wealth to their kids. Hard to implement.

    I’ve fantasized in the past about making the top income tax bracket proportional to the level of unemployment, or inversely proportional to the income in the bottom quintile of the population. Hey rich people, if the poor aren’t doing well, we’re going to take it out of your income. Get cracking with that job creation!

    But… back on the claimed problem. Take people like Gates, Ellison, and Bezos. Ignore for a moment that you may object to some of the business practices that made Microsoft big. These guys are on the list because they built hugely successful companies. Their wealth is partly virtual–in shares that aren’t liquid assets. Are their riches part of the wealth inequality problem?

    It’s not even clear to me that you can say that it’s a problem because the money is stagnant (not being spent, not circulating). The money’s invested, it’s not in a savings account.

    I think what I come back around to, again, is that it’s not clear to me that the riches at the top are the problem. The problem is generating enough decent jobs for the bottom half.

  18. I think what I come back around to, again, is that it’s not clear to me that the riches at the top are the problem. The problem is generating enough decent jobs for the bottom half.

    Yes, they are the problem. Take, for example, the dividend Walmart gave to their share holders. If they had cut that in half, the company could have given ALL their employees a salary that would have taken them off all government support such as food stamps. This is a perfect example of one family getting money they don’t need at the expense of thousands of others.

  19. So many possible responses. :)

    I do see your point about Wal-Mart. The company seems to be structurally profitable, and 48% of it is owned by the Waltons who therefore rake in half the dividends. It’s within their means to pay their employees better or provide them health insurance. The same can be said for Apple–they’re very profitable, and it’s within their means to make working conditions at Foxconn less stressful.

    But…

    First off, people getting money they don’t need… that’s a low bar. You and I have plenty of money we don’t need. What’s the test for whether that money should somehow be diverted?

    Second, the Wal-Mart wage situation isn’t taking money away from that bottom 50% of Earth’s poorest. Any & all Wal-Mart employees are above the world’s median income and wealth. And paying them more won’t do squat for that bottom 50%. The bottom 50% are that poor because there’s nothing vaguely like a Wal-Mart job within 100km of them. (OK, I exaggerate. But probably true for the bottom 10%.)

    Your point may be that this is a pattern that happens everywhere and in any given place keeps the poor poor and makes the rich richer. Except if you read Gates’ letter, you know that’s not true. Globally, the poor are getting less poor. And a good number of people in China and India are better and better off because the evil corporations got to move jobs over there. Without a profit motive, they’d never have bothered. Without allowing more wealth disparity inside China, it would not have happened either.

    Tricky, I think.

    Would it work to complement the minimum wage with a minimum profit sharing law? (i.e. X% of corporate profits have to be paid out to workers or folded into the next year’s salaries, not proportional to current salary but proportional to hours worked or somesuch.) You’d have to prevent outsourcing/restructuring with shell companies.

    (Mexico apparently has a 10% profit sharing law.)

    Finally, some interesting commentary from a variety of angles, collected by Andrew Sullivan.

  20. Comment seen on David Brin’s feed: “You, personally, almost certainly own more than the bottom 1.7 billion people on Earth — you should feel really, really bad about that and give half of what you own to those 1.7B.”

    This isn’t a random pot-shot. There’s something on the order of 1 billion people living on $1-2 a day. That’s a subsistence level where you don’t own anything of any value. Each of us here owns more than that bottom BILLION people on earth do together.

  21. This isn’t a random pot-shot

    No, but it is a distraction from the basic point. If you want to solve ALL income disparity he’s right, but that’s not the goal. Solving TOO BIG income disparity is. It’s like saying a middle level manager at a large company makes more than the tea lady, so therefore we shouldn’t talk about the multimillion dollar bonus that the CEO got.

  22. That’s just a matter of spin. The question exactly is What’s too big?, and your only answer is “I know it when I see it”.

  23. No, I am merely pointing at things where I think it is too big. What is acceptable for a society is not for me to decide, so that’s about all I can do.

Boris Johnson invokes Thatcher spirit with greed is good speech

Posted on November 30th, 2013 at 16:07 by Sueyourdeveloper in category: Robber Barons

Quote

Boris Johnson has launched a bold bid to claim the mantle of Margaret Thatcher by declaring that inequality is essential to fostering “the spirit of envy” and hailed greed as a “valuable spur to economic activity”. In an attempt to shore up his support on the Tory right, as he positions himself as the natural successor to David Cameron, the London mayor called for the “Gordon Gekkos of London” to display their greed to promote economic growth…

In highly provocative remarks, Johnson mocked the 16% “of our species” with an IQ below 85 as he called for more to be done to help the 2% of the population who have an IQ above 130. 

The lovely Boris, 49, in the most difficult decision of his life, decides he’ll say nice things to rich people.


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Comments:

  1. He looks like the Mad Hatter.

  2. He makes Mayor Rob Ford look fat and unattractive. But we all do.

  3. Actually, it’s Rob Ford who makes Rob Ford look fat and unattractive…

Nobody Should Shed a Tear for JP Morgan Chase

Posted on October 26th, 2013 at 19:28 by John Sinteur in category: Robber Barons

[Quote]:

A lot of people all over the world are having opinions now about the ostensibly gigantic $13 billion settlement Jamie Dimon and JP Morgan Chase have entered into with the government.

The general consensus from most observers in the finance sector is that this superficially high-dollar settlement – worth about half a year’s profits for Chase – is an unconscionable Marxist appropriation. It’s been called a “robbery” and a “shakedown,” in which red Obama and his evil henchman Eric Holder confiscated cash from a successful bank, as The Wall Street Journal wrote, “for no other reason than because they can and because they want to appease their left-wing populist allies.”

[..]

This is Madoff all over again, only on a much huger scale. Ten years from now, bet on it, the Wall Street Journal will be denouncing everyone from Eric Holder to Lanny Breuer to the SEC and DOJ officials in the Bush administration for failing to protect investors from predatory companies like Bear Stearns, Washington Mutual and their parent, JP Morgan Chase.

Right now, however, these papers are still stuck in the denial phase, which is to be expected, I suppose. But it doesn’t mean we have to take these ridiculous editorials about Chase’s victimhood seriously.

A few more notes on the deal. This latest settlement reportedly came about when CEO Jamie Dimon picked up the phone and called a high-ranking lieutenant of Attorney General Holder, who was about to hold a press conference announcing civil charges against the bank. The Justice Department meekly took the call, canceled the presser, and worked out this hideous deal, instead of doing the right thing and blowing off the self-important Wall Street hotshot long used to resolving meddlesome issues with the gift of his personal attention.

Only on Wall Street does the target of a massive federal investigation pick up the telephone and call up the prosecutor expecting to make the thing go away – and only in recent American history would such a tactic actually work.

Considering the scale of the offenses involved (one could make the argument that Bear Stearns and Washington Mutual by themselves did enough damage and cranked out enough toxic loans to cause the 2008 crash) the state could have taken the hardest of hard lines. Instead, they once again took a big fat check to walk away.


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Banks and tax evasion: The fall-out from Falciani

Posted on October 21st, 2013 at 9:23 by John Sinteur in category: Robber Barons

[Quote]:

A 41-YEAR-OLD native of Monaco increasingly looks to be to banking what Edward Snowden is to American surveillance. In 2008 Hervé Falciani walked out of the Geneva branch of HSBC where he’d worked for three years, clutching five CD-Roms containing data on tens of thousands of account holders. The theft has lobbed a bomb into Europe’s private-banking market, spawning raids and tax-evasion investigations across the continent. In the latest, 90 Belgian agents swooped on the homes of two dozen HSBC clients this week, including several diamond dealers in Antwerp.Mr Falciani went on the run when the Swiss charged him with data theft. After moving to Spain he was jailed, but freed after a judge denied a Swiss extradition request. At one point, he claims, he was kidnapped by Mossad agents who wanted a peek at the client names. He has now taken refuge in France, where the government has offered him protection in return for assisting in its hunt for tax dodgers.


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  1. Ooh, this heart-throb should totally be played by Johnny Depp in the movie…

JPMorgan in $4 billion deal with U.S. housing agency

Posted on October 18th, 2013 at 23:54 by John Sinteur in category: Robber Barons

[Quote]:

JPMorgan Chase & Co (JPM.N) has reached a tentative $4 billion deal with the U.S. Federal Housing Finance Agency to settle claims that the bank misled government-sponsored mortgage agencies about the quality of mortgages it sold them during the housing boom, the Wall Street Journal reported on its website on Friday.

The deal is for less than the $6 billion the agency initially sought, the Journal said, citing people close to the discussions.

Even the full $6b would not have been much of an incentive never to do this again.


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  1. Settlement = Legal bribery.

  2. I saw headlines about a $13 bln settlement.

  3. It turns out the $4B is relief for struggling homeowners, and on top of that there’s a $9B fine.

    And that $13B is less than half of their last year profits so I still doubt is is much of an incentive to ever do this again.

  4. Happened to see this mentioned elsewhere with a link to a WSJ editorial which pointed out that the acts being punished were by Bear Stearns and other banks that were absorbed by JP Morgan at the government’s request. They (WSJ) were apoplectic that nice JPM which had obliged and adopted the struggling banks was now on the hook for their misdeeds. Hmmm.

JP Morgan is spending more on fines and lawyers than on employee salaries

Posted on October 12th, 2013 at 15:58 by John Sinteur in category: Robber Barons

[Quote]:

JP Morgan devoted $9.3 billion to legal expenses last quarter, driving its net loss of $380 million. Its legal troubles took up 39% of its total revenue in the same period, by far the company’s largest single expense.

+

That’s right: The largest bank in the United States spends more money fighting and paying off legal and regulatory challenges than it does paying its staff, buying securities or paying rent on its 5,600 Chase retail bank branches.

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What does your largest expense say about your business? Ideally, the biggest cost should get at the heart of what the firm does. Goldman Sachs’ largest expense was compensation and benefits for its (in)famous talent. Apple’s largest expense in its most recent quarterly report was on sales, largely new stores and employees. General Motors’ largest expense is building cars.

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For the first time, the bank revealed its total expenditures on legal costs. Since 2010, JP Morgan has devoted $31 billion to legal problems, spending $8 billion on settlements and reserving $23 billion for future costs. That’s almost half of its net earnings ($57.5 billion) in the same period, keeping in mind some of those reserves can be returned to stockholders if settlements and legal fees turn out to be less than expected


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  1. Clearly any fines etc. aren’t working and should be increased.

Traders may have gotten last week’s Fed news 7 milliseconds early

Posted on September 25th, 2013 at 9:09 by John Sinteur in category: Robber Barons

[Quote]:

Markets swung rapidly on the 2 p.m. announcement last Wednesday, with stocks, bonds, and the price of gold all skyrocketing. Somebody placed massive orders for gold futures contracts betting on exactly that outcome within a millisecond or two of 2 p.m. that day — before the seven milliseconds had passed that would allow the transmission of the information from the Fed’s “lock-up” of media organizations who get an early look at the data and the arrival of that information at Chicago’s futures markets (that’s the time it takes the data to travel at the speed of light. A millisecond is a thousandth of a second). CNBC’s Eamon Javers, citing market analysis firm Nanex, estimates that $600 million in assets could have changed hands in that fleeting moment.

There would seem to be three possibilities: 1) Some trader was extraordinarily lucky, placing a massive bet just before a major announcement that would make that bet highly profitable. 2) There was a leak, either by a media organization with early access to the data or even someone at the Fed. Or 3) The laws of physics have been violated as the information traveled from Washington to Chicago faster than the speed of light.

You can see why Option 2 looks the most plausible.

Presumably there will be a hard look into what exactly happened, and in particular whether some technical glitch allowed some high frequency trading firm to get the data a few milliseconds early, or some unethical behavior. But in the meantime, there’s another useful lesson out of the whole episode.

It is the reality of how much trading activity, particularly of the ultra-high-frequency variety is really a dead weight loss for society.


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Nokia Admits Giving Misleading Information About Elop’s Compensation

Posted on September 24th, 2013 at 19:35 by John Sinteur in category: Robber Barons

[Quote]:

Nokia’s board of directors seems caught in a tragicomedy of epic proportions. The latest twist is Finland’s largest newspaper claiming that Nokia made a false statement about CEO’s bonus package last Friday. Pressed by Finnish and international media last week, chairman Siilasmaa had claimed then that the bonus structure of Stephen Elop’s contract in 2010 was “essentially the same” as the one the previous CEO had received. But the largest daily of the country, “Helsingin Sanomat”, decided to dig into SEC filings to investigate the matter. By early Tuesday morning, the newspaper had uncovered evidence that Nokia’s board had made fundamental changes in Elop’s contract compared to his predecessors.

According to changes implemented in 2010, Elop was entitled to immediate share price performance bonus in case of a “change of control” situation… such as selling of Nokia’s handset division. Curiously, his predecessor Kallasvuo had no such clause in his contract. This adjustment meant that unlike previous CEOs, Elop was facing an instant, massive windfall should the following sequence happen to take place:

- Nokia’s share price drops steeply as the company drifts close to cash flow crisis under Elop.

- Elop sells the company’s handset unit to Microsoft under pressure to raise cash

- The share price rebounds sharply, though remains far below where it was when Elop joined the company.

Should this unlikely chain of events ever occur, Elop would be entitled to an accelerated, $25M payoff.


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Heads They Win, Tails We Lose

Posted on September 15th, 2013 at 18:08 by John Sinteur in category: Robber Barons

[Quote]:

Many years ago MIT’s Andy Lo made a simple point (weirdly, I haven’t been able to track down the paper) about the distortion of incentives inherent in financial-industry compensation. Suppose you’re a hedge fund manager, getting 2 and 20 — fees of 2 percent of investors’ money, plus 20 percent of profits. What you want to do is load up on as much leverage as possible, and make high-risk, high return investments. This more or less guarantees that your fund will eventually go bust — but in the meantime you’ll have raked in huge personal earnings, and can walk away filthy rich from the wreckage.

But surely, you say, investors will see through this strategy. They can’t consistently be that stupid or naive, can they?

Hahahaha.


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16 Major Firms May Have Received Early Data From Thomson Reuters

Posted on September 6th, 2013 at 8:53 by John Sinteur in category: Robber Barons

[Quote]:

Rolling Stone has since learned that a whistleblower complaint has been filed to the SEC identifying 16 of the world’s biggest banks and hedge funds as the allegedly even-earlier recipients of this key economic data. The complaint alleges that this select group of customers received the data anywhere from 10 minutes to an hour ahead of the rest of the markets.

The identity of these 16 firms has not been made public yet, but sources describe the firms as major financial institutions, many of them well-known to the general public. Their inclusion in this case would significantly expand the scope of the scandal.

Contacted by Rolling Stone today, the SEC declined to comment on the status of the case.


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Comments:

  1. Oh, so it’s unfair for some high frequency traders to receive info early, but it’s OK that they have HFT capabilities in the first place that aren’t available to the general public? What-evah!

Bank CEO Buys Condo With TARP Money

Posted on August 28th, 2013 at 17:45 by John Sinteur in category: Robber Barons

[Quote]:

Euku

Darryl Layne Woods, the former CEO of a Missouri bank, admitted in court yesterday to using financial crisis bailout funds to purchase a luxury waterfront condo in Florida, Dealbook’s Peter Lattman reports.

In November 2008, Woods, 48, who was the head of Mainstreet Bank and the bank’s holding company Calvert Financial Corporation, applied for TARP money on behalf of his bank, a press release states.

In January 2009, his bank received $1,037,000. A month later, he used $381,487 of it to buy a place in Fort Myers, Florida.

He pleaded guilty to misleading federal investigators about how he used the TARP money.


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Spanish police arrest ex-JPMorgan trader wanted in US on fraud charges

Posted on August 27th, 2013 at 21:23 by John Sinteur in category: Robber Barons

[Quote]:

A former JPMorgan Chase & Co. trader wanted by the United States for allegedly falsifying bank records to cover up $6 billion in trading losses was arrested in Madrid Tuesday, Spanish police said.

A statement said Spaniard Javier Martin-Artajo, 49, was arrested after he presented himself to police in Madrid, who had located and asked him to turn himself in.


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The Confidential Memo at the Heart of the Global Financial Crisis

Posted on August 23rd, 2013 at 10:04 by John Sinteur in category: Robber Barons

[Quote]:

When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn’t believe it. The Memo confirmed every conspiracy freak’s fantasy: that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet. When you see 26.3 percent unemployment in Spain, desperation and hunger in Greece, riots in Indonesia and Detroit in bankruptcy, go back to this End Game memo, the genesis of the blood and tears.


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Comments:

  1. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

    – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

    History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.

    -James Madison

    If congress has the right under the Constitution to issue paper money, it was given them to use themselves, not to be delegated to individuals or corporations.

    -Andrew Jackson

    Issue of currency should be lodged with the government and be protected from domination by Wall Street. We are opposed to…provisions [which] would place our currency and credit system in private hands.

    – Theodore Roosevelt

    I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.

    -Woodrow Wilson

    The real truth of the matter is,as you and I know, that a financial element in the large centers has owned the government ever since the days of Andrew Jackson…

    -Franklin D. Roosevelt

    “Money plays the largest part in determining the course of history.”

    Karl Marx writing in the Communist Manifesto (1848).

    “The bank hath benefit of interest on all moneys which it creates out of nothing.”

    William Paterson, founder of the Bank of England in 1694, then a privately owned bank

    “It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.”

    Henry Ford, founder of the Ford Motor Company.

    “The modern banking system manufactures money out of nothing. The process is, perhaps, the most astounding piece of sleight of hand that was ever invented. Banks can in fact inflate, mint and un-mint the modern ledger-entry currency.”

    Major L L B Angus.

    “Let me issue and control a nation’s money and I care not who writes the laws.”

    Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

    Hegel was right when he said that we learn from history that man can never learn anything from history.

    George Bernard Shaw

  2. Educate the disaffected in the ways of non violent protest and execute on a global scale. It will be unstoppable.

  3. It’s a complicated problem of slavery, addiction, predation and waste. People need livable wages, instead they live on credit. They need affordable housing, instead they get massive mortgages for maxi-pads. Sigh…now you’ve got me off on a rant again!

Ex-JPMorgan traders charged in $6.2bn ‘London Whale’ case

Posted on August 15th, 2013 at 21:36 by John Sinteur in category: Robber Barons

[Quote]:

Former JPMorgan Chase traders Javier Martin-Artajo and Julien Grout were charged by US federal prosecutors for manipulating bank records and understating losses in the $6.2 billion ‘London Whale’ financial debacle of 2012.

In a blow to Wall Street and America’s largest bank by assets, prosecutors filed charges against Martin-Artajo, 49, a former London-based managing director and trading supervisor, and Grout, 35, an ex-trader at the London office.

The two charged men, whose arrest warrants were issued August 9, haven’t been located by authorities. Grout, a French national, is reportedly in France, and Martin-Artajo is reportedly on a planned holiday, according to statements from their respective lawfirms.


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Unsealed court-settlement documents reveal banks stole $trillions’ worth of houses

Posted on August 13th, 2013 at 12:30 by John Sinteur in category: Robber Barons

[Quote]:

Back in 2012, the major US banks settled a federal mortgage-fraud lawsuit for $95,000,000. The suit was filed by Lynn Szymoniak, a white-collar fraud specialist, whose own house had been fraudulently foreclosed-upon. When the feds settled with the banks, the evidence detailing the scope of their fraud was sealed, but as of last week, those docs are unsealed, and Szymoniak is shouting them from the hills. The banks precipitated the subprime crash by “securitizing” mortgages — turning mortgages into bonds that could be sold to people looking for investment income — and the securitization process involved transferring title for homes several times over. This title-transfer has a formal legal procedure, and in the absence of that procedure, no sale had taken place. See where this is going?

The banks screwed up the title transfers. A lot. They sold bonds backed by houses they didn’t own. When it came time to foreclose on those homes, they realized that they didn’t actually own them, and so they committed felony after felony, forging the necessary documentation. They stole houses, by the neighborhood-load, and got away with it. The $1B settlement sounded like a big deal, back when the evidence was sealed. Now that Szymoniak’s gotten it into the public eye, it’s clear that $1B was a tiny slap on the wrist: the banks stole trillions of dollars’ worth of houses from you and people like you, paid less than one percent in fines, and got to keep the homes.


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Comments:

  1. Want to commit crime and get away with it? There are currently several good choices:

    1. Get elected to federal office.
    2. Become a “law enforcement” officer.
    3. Become a bank executive.
    4. Work for the TLA agencies such as the NSA/CIA/DOJ/DHS/DEA, et al.

    Me, I vote for #3 – the pay is a LOT better than the others, though if you are elected to Congress (#1), you can usually land a cushy position with #3 when you leave office…

BART’s Tax Shelters

Posted on August 5th, 2013 at 9:39 by John Sinteur in category: Robber Barons

[Quote]:

Remember when BART helped a few giant multi-national corporations establish lucrative tax shelters?

You probably don’t. It hasn’t been written about much in the press. The type of deal BART agreed to has gotten some attention, but even so, most people are unfamiliar with the scheme and how it works. BART’s tax shelter deals almost cost the transit agency $40 million in 2009 when the financial sector was melting down. One of the agreements withered and BART lost $5.5 million. Few people know this.

So what sketchy tax shelters am I talking about? They’re called lease-in, lease-out, or LILO agreements. BART calls them lease, leaseback agreements in their financial reports.

In a LILO deal a public transit agency like BART leases its trains or train operating equipment to a private corporation for some extended period of time. The corporation immediately turns around and leases the property back to BART. The terms of the lease are incredibly complicated and circuitous. I wont go into details here. It’s the kind of creative accounting and contract law that vast financial disasters are made from, and it’s mind-numbing in detail.

Why would BART ever do this you ask?

The most immediate answer is because it provided up front cash payments to BART which the agency then capitalized over a period of future years. This had the effect of easing BART’s budgetary strains, and providing BART with more borrowing capacity. It was the closest thing to free money the agency had ever been offered besides its cut of the regional sales tax, and it could be gotten without political pain, without appealing to voters for a bigger trim of retail sales. And BART wouldn’t need to confront the big real estate corporations in San Francisco and Oakland that have benefitted so much from the system. Million of dollars could be generated out of a shuffle of paperwork and a fictitious transfer of capital through a circular lease agreement.

Of course there’s no such thing as free money. The money that BART obtained from the deals was cut from the profits that BART’s private financial partners were making through the LILO agreements. These profits came not out of any productive investment activities or new efficiencies, for the LILO deal didn’t meaningfully transfer or redeploy ownership of BART’s assets, nor did it redeploy the lease payments into any other economic activity. Rather, the profits were harvested from federal tax deductions claimed by the private corporations leasing and then subleasing BART’s trains and equipment. It was, in the words of Senator Charles Grassley, “a good old fashioned tax fraud.”

Of course BART would never characterize it that way. Nor will the financial corporations that have been the instigators of these deals.


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Latvia resists US call to extradite ‘virus maker’

Posted on August 4th, 2013 at 14:02 by John Sinteur in category: Robber Barons

[Quote]:

Latvia is resisting calls to extradite a man the US alleges wrote a computer virus used to steal millions.

In January, Latvian Deniss Calovskis was named by the US as one of the creators of the Gozi virus.

Latvian courts have twice rejected US extradition requests and its foreign minister has now backed their stance.

In a statement, he said the potential jail term Mr Calovskis faced was too severe for the crimes he is alleged to have committed.

[..]

They ran a “modern-day bank robbery ring, that required neither a gun or a mask”, said US attorney Preet Bharara in January.

[..]

Mr Rinkevics said the US sought a jail term for Mr Calovskis that exceeded 60 years.
Continue reading the main story
“Start Quote

In my view, such a penalty is disproportionate to the amount, and so far no-one has been able to conclusively dispel my fears that it might be otherwise”

Latvian minister Edgars Rinkevics

While he could not take a view on whether Mr Calovskis broke the law or not, the jail term amounted to an effective life sentence, he wrote.

“In my view, such a penalty is disproportionate to the amount, and so far no-one has been able to conclusively dispel my fears that it might be otherwise,” he said.

I know some other folks worthy of jail sentence who are still running a “modern-day bank robbery ring, that required neither a gun or a mask”…


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Comments:

  1. Yeah. Maybe if we gave our bank executives similar sentences for the frauds and robbery they have perpetrated on the world they might reconsider… That and $5 will get you a nice cuppa coffee at Starbucks. :rolleyes:

US regulators ‘find evidence’ of banks fixing derivative rates

Posted on August 4th, 2013 at 9:53 by John Sinteur in category: Robber Barons

[Quote]:

The Commodity Futures Trading Commission (CFTC) is probing 15 banks over allegations that they instructed brokers to carry out trades that would move ISDAfix, the leading benchmark rate for interest rate swaps.

Pension funds and companies who invest in interest rate derivatives often deal with banks to insure against big movements in the ISDAfix rate or to speculate on changes to interest rate swaps

ISDAfix is published each morning after banks submit bids for swaps via Icap, the inter-dealer broker, in a number of currencies. The CFTC has been investigating suggestions that the banks deliberately moved the rate in order to profit on these deals.

Given the hundreds of trillions of dollars worth of interest rate derivatives trades that occur annually, even the slightest manipulation can have a substantial effect. The CFTC, which started to investigate ISDAfix after last summer’s Libor scandal has now been handed emails and phone call recordings that show the rate was deliberately moved, according to Bloomberg.

Barclays has reportedly handed the CFTC information, while employees at Icap and Citigroup have also been questioned. In its interim results statement yesterday, Royal Bank of Scotland also said it was co-operating with authorities regarding the investigation.

Man, we are going to slap their wrists so hard.


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Comments:

  1. Settlement….

How complex are corporate structures?

Posted on August 3rd, 2013 at 9:10 by John Sinteur in category: Robber Barons

[Quote]:

Visualisations of corporate ownership for six banks: Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, JP Morgan and Wells Fargo.


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Ex-Goldman Sachs trader Fabrice Tourre liable in $1bn fraud

Posted on August 2nd, 2013 at 10:21 by John Sinteur in category: Robber Barons

[Quote]:

A New York jury has found former Goldman Sachs trader Fabrice Tourre liable for fraud in a complex mortgage deal that cost investors $1bn (£661m).

Jurors concluded that the trader, who nicknamed himself “Fabulous Fab”, had misled investors in the run up to the global financial crisis in 2008.

Complex mortgage investments played a significant role in the crisis.

Mr Tourre was found liable in six of the seven fraud claims brought by US financial regulators.

He was accused by the Securities and Exchange Commission (SEC) of misleading investors about investments linked to subprime mortgages that he knew would fail.

Because the case is civil rather than criminal, he faces possible fines and a ban from the financial services industry.


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Family mistakenly locked out of home even though mortgage payments current

Posted on July 25th, 2013 at 16:40 by John Sinteur in category: Robber Barons

[Quote]:

Michael, who is father of three and husband, asked RTV6 not publish his last name.

His family has lived at 11889 Esty Way for 10 years until April, when they decided to move to a bigger home and rent out their townhouse.

Michael found a tenant, but he was forced to refund the money when their townhouse was locked and the utilities were turned off.

“Our lender changed the locks on us,” Michael said.

A notice was left on the Esty Way townhouse from Safeguard Properties , a company that works with mortgage lenders in securing homes being returned to the banks.

Safeguard’s posting alerted the family that, “all persons entering this property (must) provide an explanation of their visit, sign and date the form.”

Michael was locked out, even though his bank statements show he is current with his mortgage and his loan doesn’t mature until 2033.

[..]

“The woman told me — this is something that I will never forget, honestly — she told me that they were the mortgage company, and if they wanted to change your locks, they could,” Davis said.


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Comments:

  1. And if you have money deposited in that bank, you can change their locks too.

Art as Alternative Investment Creates Storage Business Tax Haven

Posted on July 25th, 2013 at 9:32 by John Sinteur in category: Robber Barons

[Quote]:

Anyone hoping to get into the walk-in lock boxes of this very special Swiss tax haven must first surmount a number of hurdles. At the first door, an employee has to type the right combination of numbers into a small screen. The next hurdle is a large steel barrier that has to be rotated counter-clockwise until it snaps into place, followed by a heavy steel door that resembles a submarine bulkhead. Behind it is a drab corridor with doors on both sides. Only the renters have keys to these doors.

The employee of Geneva Free Ports & Warehouses Ltd. remains discreetly in the background while the owners of the locked-up treasures count their gold bars or examine their collection of paintings being stored in the warehouse.

The Nahmad dynasty of art dealers reportedly has 300 Picassos in storage in Geneva. Countless Degas, Monets and Rothkos are also stored on the inhospitable premises. The estimated value of the works is in the billions. Hardly any museum can boast such a valuable collection.

Those who use the warehouse are genuinely wealthy. According to the Capgemini World Wealth Report, there were 12 million millionaires in the world last year, with combined assets of $46.2 trillion (€35 trillion), or 10 percent more than in the previous year.


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Athens County Woman Wants Possessions Back After Bank Tried To Repossess Wrong House

Posted on July 24th, 2013 at 14:34 by John Sinteur in category: Robber Barons

[Quote]:

An Athens County woman is looking to get her belongings back after a bank incorrectly broke into her house and took them.

Katie Barnett says that the First National Bank in Wellston foreclosed on her house, even though it was not her bank.

“They repossessed my house on accident, thinking it was the house across the street,” Barnett said.

Barnett, who had been away from the house for about two weeks, said she had to crawl through the window of her own house in order to get in after she used her own key that did not work.

Some of the items in her house had been hauled away, others were sold, given away and trashed.

It turns out the bank sent someone to repossess the house located across the street from Barnett’s house, but by mistake broke into hers instead.

“They told me that the GPS led them to my house,” Barnett said. “My grass hadn’t been mowed and they just assumed.”

She called the McArthur Police about the incident, but weeks later, the chief announced the case was closed.

Barnett said that according to the bank president, this was the first time something like this has happened.

She presented him with an $18,000 estimate to replace the losses, but the president refused to pay.

Nice to have to police to help you when your stuff is nicked…. “Someone stole your home and all your shit? Sorry call back when you have a real crime to report, like someone smoking a joint.”


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Comments:

  1. I not only think she should sue the bank but also sue the police department for failure to act on a crime.

  2. I think they’re too big to sue now too. It would probably take her 5 years to get her money.

  3. Perhaps the only good thing about the legal system in the U.S. is that there are lots of hungry lawyers to help such people – for a price.


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