Obama Won’t Appoint Elizabeth Warren Why?

We Already Have Appointed a Woman, What More Do You Want?

Professor Elizabeth Warren

I have to admit truth to truth, Elizabeth Warren would set the consumer raping industry [banks] on its ear, were she appointed as Chair of the Consumer Financial Protection Bureau, IF AND ONLY IF, she actually had any power in the position.  As it stands now, the Consumer Financial Protection Bureau, is under the thumb of the Federal Reserve, which is like putting the fox in charge of the chickens.  Give it 6 months and there will be no Consumer Financial Protection Bureau to speak of.  It’s already starting to happen as we speak.

Enter Robert Gibbs, White House spokesman, on Elizabeth Warren’s potential to be a candidate: “I don’t think any criticism, in any way, by anybody would disqualify her.”  Yet Obama has not nominated her at all.  Gee I wonder why this is?  Could it be the very people, whom he stole money from taxpayers, to bail out, would have a cow?  The powers that be are showing their muscle by Obama not appointing Elizabeth Warren to the position. 

According to the National Journal, the banking industry “privately grumbles that Warren would be their least favorite candidate to head the agency.” Or, as Floyd Norris put it in the New York Times, “whether or not she is named to run the bureau may depend on how willing the president is to anger the banks.”

Warren is one of the best people for the position. Picking her is a no-brainer. Rarely does a president have the opportunity for such a plethora of best people for the job, when it comes to appointing someone to a position.  This position, at this time, being filled by Elizabeth Warren is one of those rare opportunities.  Change huh?

Not only is she one of the country’s foremost experts on bankruptcy law and the multiple ways in which banks trick and trap consumers, she’s been the leading advocate for the creation of the agency, which the banking industry worked night and day to kill. In fact, it was Warren who came up with the idea for the agency in the first place, in a paper she wrote in 2007.

Senators and Congressmen alike are lining up to laud Warren as the best possible choice:

  • Sen. Al Franken: “In my consideration, I think Elizabeth would be the best.”
  • Rep. Barney Frank (chair of the House committee that drafted the financial reform bill): “She’s far and away the best candidate.”
  • Sen. Bernie Sanders: “No one in our nation could do a better job.”
  • Rep. Rosa DeLauro: “In my living room with many members of congress, she predicted what was going to happen several years ago. As she put it in 2007, consumers cannot buy a toaster that has a one in five chance of bursting into flames but they can enter into a mortgage that has the same one in five chance of putting them out onto the street…Professor Warren we cannot, Ma’am, do it without you.”
  • Sen. Jeff Merkley: “I support Elizabeth Warren…She has both the clarity of the need for an agency that has as its top mission protecting citizens against tricks, traps and scams, and she has the ability to articulate that vision. She has the leadership skills and the knowledge of the financial world. She has the full set of requirements to be an effective leader.”
  • Sen. Tom Udall: “Should [the president] decide to nominate her to lead the Bureau, it will be a clear sign that the Bureau will be a champion for the American consumer, will stand up to unscrupulous actors and will not shrink from…fulfilling its mission under pressure.”

Secretary Tim Geithner:

She is an enormously effective advocate for reform. Probably the most effective advocate for consumer protection in the country. She has huge credibility and she played a decisive role in helping make the public case for reform and she was early on this, way ahead of everybody else. – Sunday on ABC’s This Week

If you know about Goldman Sachs Geithner  you know why he has stopped short of endorsing Warren (and, indeed, privately argued against her)?

Critics like Senetor Chris Dodd told NPR’s Diane Rehm:

“The question is, ‘is she confirmable?’ And there’s a serious question about it.” And today he challenged Robert Gibbs’ assertion that Warren is “very confirmable”: “How does he know that?”

With mid-term elections on our doorstep, it’s rather easy to be bold:

“Are the Republicans, when we bring her name up, going to argue that she shouldn’t be confirmed because she’s too tough on the big banks and too tough on the financial industry?” asked Senetor Tom Harkin. “Boy, that’ll get them a lot of votes in November!”

Unfortunately there is a provision in the financial reform bill the president signed into law last week that allows the Treasury Secretary to name someone to head the Consumer Bureau until the Senate confirms a presidential nominee.  There is no way Goldman Sachs Geithner will appoint Warren in the interim.

“The statute gives the Treasury Secretary the obligation to get it done, but doesn’t tell him how to get it done,” says Gail Hillebrand of the Consumers Union. “Consumers have been waiting a long time. The sooner we can get it off the ground the better.”

Media outlets would have you think this is a Republican Democrat thing, however if you’ve been paying attention to this blog, you know it isn’t.  The democrats are no more beholden to the banks than the Republicans are.  They are all bought and paid for.

Elizabeth Warren vs Tim Geithner

Opposition marketing spin currently being test-marketed is that because Warren is such a zealous advocate for consumers she would somehow be bad for “innovation.” The same innovation that brought us credit default swaps, teaser rates, 600 percent payday loan rates, and that led to widespread foreclosures and bankruptcies. This line of reasoning is akin to saying that we don’t want our police force to be very vigilant, lest it diminish criminal innovation. Warren herself addressed this ludicrous claim in a paper in 2008:

Innovation in financial products has produced incomprehensible terms and sharp practices that have left families at the mercy of those who write the contracts.  This is exactly why the Consumer Financial Protection Bureau was created in the first place. If someone with Warren’s skill set and perspective isn’t named to head it, why even bother creating it? Just so another banking industry shill has a place to cool his heels before adding a few zeros to his salary when he quits and joins the companies he was ostensibly regulating? Given that this is the usual M.O. of how regulatory agencies in Washington work, it’s all the more important to name Warren so she can start the Consumer Bureau off on the right foot — as a true voice for the people.

So which way will Obama go? If he makes his decision on the merits, Elizabeth Warren will be the first head of the Consumer Bureau. If he makes his decision out of fear, she won’t be. For guidance, he should listen carefully to his own words:

All too often — our government made decisions based upon fear rather than foresight, and all too often trimmed facts and evidence to fit ideological predispositions. Instead of strategically applying our power and our principles, we too often set those principles aside as luxuries that we could no longer afford. And in this season of fear, too many of us — Democrats and Republicans; politicians, journalists and citizens — fell silent… if we continue to make decisions from within a climate of fear, we will make more mistakes.

That was Barack Obama in May of last year, talking about the Bush administration’s approach to national security in the wake of 9/11. As he finds himself in a different kind of “season of fear,” will he use his insights as a guide to his decision?

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Federal Reserve Admits to Forcing Banks to Park TARP Funds Instead of Lending It (VIDEO)

Kucinich Is Outraged

In rare footage, we see the Federal Reserve Admit to paying extra interest rates to banks to park TARP funds, over and above what interest rate they could gain from the market by lending them.  The end result?  Banks are forced to park the TARP funds at the expense of businesses, which affects unemployment directly.  Their reasoning?  They want to keep inflation low.

Unemployment is now at 35% among those Americans who make under $20,000 a year.  Making credit unavailable for businesses, knowingly raises unemployment.  They know that businesses will make the only rational decision, lay off more workers.

Video

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Citigroup Failing to Pay Back TARP

Bearish on Citigroup, sell sell sell

Citigroup shares were falling 6% to $3.71 Monday. It will immediately issue $20.5 billion of capital and debt, made up of $17 billion of common stock, with an over-allotment option of $2.55 billion. It also will issue $3.5 billion of tangible equity units. This is to account for $20 billion in TARP repayment. Although it received $45 billion in government aid from the U.S. government’s Troubled Asset Relief Program (TARP). The bank is only paying back $20 billion of the funds because the other $25 billion was converted by the U.S. government into a 34% stake in the bank.

The U.S. Treasury will be selling up to $5 billion of the common stock it holds in a concurrent secondary offering, according to Citigroup. Treasury will sell the remainder of its shares in an orderly fashion over the next six to twelve months.

Citigroup said the repayment of the funds from TARP will result in a pretax loss of about $8 billion, or $5.1 billion after taxes. Citigroup also said it would terminate the loss-sharing agreement with the government and cancel $1.8 billion of the $7.1 billion in trust preferred securities it originally issued to the government. This will result in a pretax loss of $2.1 billion. The bank said ending the loss-sharing agreement will increase Citigroup’s risk-weighted assets by about $144 billion.

The U.S. government had been protecting Citigroup from most losses on more than $300 billion of assets.

“The TARP program was designed to provide assistance until banks were in a position to repay it prudently. We are pleased to be able to repay the U.S. government’s trust preferred securities and to terminate the loss-sharing agreement,” Citigroup CEO Vikram Pandit said in a statement Monday. “We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need.”

Once Citigroup repays the TARP funds and once the loss-sharing agreement ends, the bank said it it will no longer be deemed to be a beneficiary of “exceptional financial assistance” under TARP beginning in 2010, a designation it was trying to shake.

Citigroup has been pushing to pay back funds it received under TARP ever since Bank of America received the OK to pay back the $45 billion it received in bailout aid.

Citigroup also said Monday it would issue in January $1.7 billion of common stock equivalents to employees as opposed to cash bonuses they were to receive.

[ special thanks to The Street ]

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Can You Make Money with Citigroup?

Citigroup is no AIG

The question all investors ask themselves is, “can I make a profit.” One company that has had some surprising stories come out of it, profitwise, is Citigroup. Citigroup has been beleaguered with horror stories, culminating in it having to take TARP money. Currently any sound investor that invests in a TARP recipient is trying to flee the sinking ship. However, unlike AIG, citigroup is not in the same boat. There are some great stories of profits being made over at Citigroup.

The latest example is the Kuwait Investment Authority (KIA) – a sovereign wealth fund — that made a $1.1billion profit by selling its stake in Citigroup on Sunday. KIA invested $3 billion in Citigroup in 2008, as the Wall Street lender was reeling from subprime losses. Over the weekend, the KIA converted its preferred shares into common shares and sold them for a profit.

Government of Singapore Investment Corp. earned a $1.6 billion profit on its Citigroup investment in September. The Singapore government fund exchanged $6.88 billion of convertible preferred stock for Citigroup common shares at $3.25 apiece on Sept. 11. Singapore closed this deal in January 2008, which also included a $3 billion investment from former Citigroup CEO Sandy Weill, the State of New Jersey and Saudi Prince Alwaleed Bin Talal. With Citigroup trading this morning at $4.09, these investors are likely to earn a profit, if they sell their shares.

Through TARP we, the U.S. taxpayer, own 34% of Citigroup common shares, and are on track for a big profit. The government converted its preferred shares into common stock at $3.25 a share – at the same price as Singapore conversion. That means the government’s 7.7 billion shares have gained about $3 billion.

Abu Dhabi Investment Authority didn’t fare nearly as well. The Emerite pumped $7.5 billion into Citigroup in 2007, when the bank first began reeling from the credit crisis. Now, Abu Dhabi will soon start purchasing $7.5 billion of Citi shares, but at $31.83 a piece, or about eight times the current market value.

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Bank of America Sued by SEC Over Executive Bonuses

SEC Files Lawsuit Against BofA

At issue here isn’t exactly that Merrill Lynch paid its executives bonuses, but that Bank of America did not reveal this to stock holders. The distinction needs to be made. Earlier this year congress passed legislation banning companies from paying executive bonuses or taxing them 100%. This is in direct contravention of the U.S. Constitution which forbids bills of attainder. They can no more pass such legislation constitutionally, than they can declare black people illegal. Keep this in mind then, this is not about the actual bonus, but more the complete lack of transparency to the stock holders. Furthermore, that legislation was so far reaching as to say that no company could pay bonuses to executives, regardless if the firm ever received federal TARP funds or not. I keep wondering where the supreme court is.

Marshall Front, chairman of Front Barnett Associates investment counseling firm in Chicago, “this is not something that I would worry about as an investor,” Front said. “Ken Lewis should worry about it, but not an investor.”

In a lawsuit filed in Manhattan federal court, the SEC said Bank of America told investors that Merrill Lynch had agreed not to pay year-end performance bonuses or incentive compensation before the Jan. 1, 2009, merger of the firms without Bank of America’s permission.

But, in fact, Bank of America had authorized Merrill Lynch to pay discretionary year-end bonuses, according to the SEC.

Merrill Lynch paid $3.6 billion in bonuses for 2008 despite losing $27.6 billion that year.

“Shareholders were not told about this agreement at the time they voted on the merger,” David Rosenfeld, associate director of the SEC’s New York Regional Office, said in a statement. The SEC said Bank of America misled investors in proxy statements soliciting votes of shareholders on the proposed acquisition of Merrill Lynch.

The agency said the bank had already contractually authorized Merrill to pay up to $5.8 billion in bonuses for 2008.

Members of Congress have expressed outrage over the Bush administration’s involvement in the deal between Bank of America and Merrill Lynch. Some have accused Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson of coercing Lewis to go ahead with acquiring Merrill Lynch despite the investment bank’s deteriorating finances.

The lawsuit was settled for $33 million.

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Toxic Assets: Wait They Were Never Paid Off?

TARP and Toxc Assets

We were told that there was a financial EMERGENCY. We were told that if the bailout, which was defeated at first, did not pass, the U.S. economy would collapse and financial markets would completely shut down, due to:

“toxic assets that were clogging the financial channels”

We were told if they did not receive a bailout immediately that those toxic assets would close the U.S. And, the bailout was to pay off those toxic assets immediately.

It is now nearly 6 months to a year later. Guess what?

NO TOXIC ASSETS HAVE EVER BEEN PAID OFF

If you have a brain, rattling around in your skull, that statement right there should floor you. If you have a conscious, that statement right there should infuriate you. If you have one scintilla of integrity, that statement right there incense you.

How could we have been so hood winked into thinking we needed this IMMEDIATE bailout to remove toxic assets off the books, which they were going to pay off the very next day, and a year later, not one has been paid off.

Let me also point out that: toxic assets = foreclosed mortgage. So literally, your house would have been paid off. [if you were in that category]

The TARP report came out and revealed that no toxic assets have been removed off the books. In fact, all small banks and small financial institutions, who were the ones that actually carried the toxic asset to begin with, not JP Morgan, not AIG, not Goldman Sachs, were the ones the TARP money should have gone to and that they disproportionately are the major carriers of commercial loans that will be defaulted on. They categorized the small banks as the actual holders of the loans, i.e. the papers.

These toxic assets that are “clogging” the system has a price tag, on the surface of over one trillion dollars. However, per MSNBC, they admit that it is “deeply troubling” that they don’t know the real number. It could be, as one of my previous reports says, as much as $500 trillion. That is a staggering number, but you must realize that, it includes the ridiculous credit default swaps.

This Just In

The U.S. treasury secretary is considering expanding bailout funds to remove toxic assets.

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Taylor Bean & Whitaker South East Banks Are All Closing

The Taylor Bean & Whitaker Story

Taylor Bean and Whitaker at death’s door, as the Ocala-based mortgage giant that was raided by the FBI, has closed its doors and sent all its employees home, August 3, 2009. Coincidentally, the same thing happened to Colonial Bank. Federal agents descended onto Taylor, Bean & Whitaker Morgage Corp. at the Platinum Financial Center and Platinum Community Bank Monday morning August 3, 2009.

TBW Chairman Lee Farkas said, “We closed the business.” Employees received an e-mail announcing that the company was ceasing all loan-origination operations. Less than an hour later, dozens of employees carrying their belongings streamed from the building, many with tears welling in their eyes. “Regrettably, TBW will not be able to close or fund any mortgage loans currently pending in its pipeline,” the e-mail to employees reads. “TBW is cooperating with each of the Agencies with respect to its servicing operations and expects to continue to service mortgage loans as it restructures its business in the wake of these events. We understand that this could have a significant impact on our valued employees, customers and counterparties, and are very disappointed that a less drastic option is unavailable.”

The FHA, the government mortgage insurer, suspended Taylor Bean, its third-largest lender, citing possible fraud. It’s “distinctly possible this is going to be the end of Taylor Bean,” said David Lykken, managing partner at consultant Mortgage Banking Solutions in Austin, Texas. The FHA said in a written statement Tuesday that Taylor Bean (TBW) failed to submit its required annual financial report and failed to inform the FHA that TBW’s independent auditors ended their examination of the company when they found “certain irregular transactions that raised concerns of fraud.” In addition to the loan suspension, the FHA is also recommending that two top TBW officials be temporarily banned from doing mortgage business with the federal government. The FHA alleges that TBW President Ray Bowman and TBW CEO Paul Allen submitted false or misleading documents to the U.S. Department of Housing and Urban Development.

The agency’s decision follows a failed attempt by Taylor Bean to lead an investor group that would pay $300 million for a controlling stake in Colonial BancGroup Inc., one of its own lenders. Agents bearing federal warrants searched Colonial’s Orlando offices, and the Ocala Star-Banner reported a similar search at Taylor Bean.

Mortgage brokers and their clients with applications at Taylor Bean will be hard hit because “most of the quality shops have stopped dealing with brokers,” Moskowitz said. The number of contracts to buy previously owned homes in the U.S. rose in June for a fifth straight month, climbing 3.6 percent and exceeding economists’ forecasts, the National Association of Realtors said. “They’re a big player in Florida and this is bound to have a detrimental effect, especially the loans sitting in their pipeline that haven’t closed,” Valerie Saunders, president of the Tallahassee-based Florida Association of Mortgage Brokers, said in an interview. Potential homebuyers who are unable to fund loans through Taylor Bean will have to try to switch lenders, potentially adding time and cost to their purchase, Saunders said. She doesn’t have any buyers seeking mortgages from the company. The importance of FHA loans to the housing market after retreats by banks and private mortgage insurers is “Capital-H huge,” Lykken said. “It’s so huge it’s not even funny.”

The FHA Story

In June, applications for loans backed by the FHA or Department of Veterans Affairs represented 35.9 percent of all submissions for refinancing or home purchases, the highest share since 1990, according to the Mortgage Bankers Association. The agency insures mortgages with down payments as low as 3.5 percent, and doesn’t have minimum credit-score requirements.

FHA mortgages represent about half of all new loans for home purchases, up from about 10 percent at the start of 2008, as borrowers with low down payments or poor credit get turned down for other financing, according to a Bank of America Corp. report last month. Taylor Bean, based in Ocala, Florida, does business across the U.S. through loan brokers and other lenders. It ranked 12th among U.S. mortgage originators in the first half of this year with $17 billion of loans, or 1.7 percent of the total, according to industry newsletter Inside Mortgage Finance. Among FHA lenders, TBW ranked third largest in May.

Taylor Bean has bought FHA mortgages from other lenders still on probation because they had just signed up with the agency, Lykken said. Few other lenders will accept those loans, and Taylor Bean is known for being less strict in underwriting both FHA and so-called conventional mortgages, which can be sold to government-support mortgage-finance companies Freddie Mac and Fannie Mae, he said. “I’ve heard it said it’s good that we have Taylor Bean there because no one else will buy these loans,” Lykken said. “To say they’re a bottom-feeder may be too strong a statement, but that’s how they’re viewed in a lot of cases.”

Brad German, a spokesman for McLean, Virginia-based Freddie Mac, declined to comment. Brian Faith, a spokesman for Fannie Mae, said his Washington-based company hasn’t done business with Taylor Bean “for some time.”

Colonial Bancgroup Story

Colonial Bankcgroup, the ailing Alabama bank, said there is “substantial doubt” it can survive after posting a fifth straight quarterly loss and canceling a sale to an investor group.
The second-quarter net loss widened to $606 million, or $3.02 a share, from $8.96 million, or 5 cents, a year earlier when there were fewer shares outstanding, the bank said yesterday. An agreement to sell a 75 percent stake for a $300 million capital investment fell through when it failed to win regulatory approval.

Colonial, with $26 billion in assets and 355 branches, is one of “the larger U.S. banks with obvious financial problems,” said Ralph “Chip” MacDonald, a Jones Day lawyer in Atlanta. Colonial’s losses in the past five quarters total more than $1.6 billion, mostly from defaults on loans to Florida builders and developers. The bank hasn’t met capital requirements to receive U.S. rescue funds.

“I’m sure Colonial would have liked to have had a shot to get additional funding” through the U.S. Troubled Asset Relief Program (TARP), said Jim Barth, a former chief economist at the Office of Thrift Supervision and a professor of finance at Auburn University in Alabama. “Colonial was considered one of the stronger smaller regional banks a few short years ago, but now it appears to be desperate in raising capital.”

Colonial canceled the proposed $300 million investment by a group led by Taylor Bean & Whitaker Mortgage Corp., an independent lender in Ocala, Florida. Taylor Bean had assembled about 30 mortgage companies to take a 75 percent stake in Colonial, one of the largest U.S. companies extending credit to smaller home lenders.

Christopher Sharpley, deputy special inspector general for the Treasury program, would not comment on why the bank, the Colonial BancGroup, Florida’s sixth-largest bank, and the mortgage lender, Taylor, Bean & Whitaker, based in Ocala, Fla., were being investigated. But the inquiry appears to reveal the largest case by far being investigated by the bailout inspector general, given that about $550 million in bailout money is involved.

Banking experts said the investigation seemed related to an arrangement set up by the Treasury Department that required Colonial to obtain at least $300 million in private investment before being granted a bailout. The goal, regulators said, was to raise the bank’s risk-based capital ratio to 12 percent by Sept. 30, to offset losses from loans tied mainly to real estate in Florida.

In April, the company announced that Taylor, Bean & Whitaker, with other investors, would provide the $300 million infusion. But on Friday, Colonial reported in its quarterly report that the deal was mutually terminated because regulatory approval could not be obtained.

Stanley D. Smith, a finance professor at the University of Central Florida in Orlando, said that Colonial was one of several southeastern banks that came into Florida during the building boom, only to regret it later. As of June 31, some 88 percent of Colonial’s loans were in real estate, Mr.. Smith said, a high value that helps explain the bank’s losses.

Colonial has signed orders with federal and state banking regulators that require the bank to deal with liquidity and its allowance for loan losses and seek approval for management changes. Colonial is among the largest warehouse lenders, providing money that independent mortgage companies use to make home loans. It is Alabama’s second-largest bank after Regions Financial Corp.

– AP news