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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.
Spotted over at the Pragmatic Capitalist was this interview with Chris Whalen of Institutional Risk Analytics in which he talks about the sorry shape of the banking industry a full two years after the worst of the financial crisis.
A related presentation can be found here – the crisis is far from over…
Robert Reich talks about the new U.S. economy and his new book Aftershock, a condition that he expects us to be “wallowing” in for some time to come.
As you might expect, there are more than just a few political overtones here from the former Clinton White House Labor Secretary, but he does make some very good points about how drastically income inequality has changed in recent decades and about the increasingly popular view that “government and business are in cahoots”.
The piece on 60 Minutes last night about high frequency trading should be a real wake up call for anyone not already familiar with the story line of computer power outpacing society’s ability to handle it without unintended (and perhaps very bad) consequences.
A complete transcript and related material can be found in this story at CBS, all of which points to the Unabomber probably being correct in one element of his otherwise wacky “manifesto’ in the Power Principle, where individuals strive for achievement using ever more powerful technology with no regard for its impact on the world.
[There hasn't been much news - good or bad - about the reverse mortgage business or, if there has been, it hasn't crossed my computer screen. In one of the very few consumer lending growth sectors for banks - where the fees are high and the alternatives for seniors are few - it seems that banks are going about their business in loaning more and more money to the dwindling numbers of homeowners that still have equity (and high medical bills). From June 25th, 2007 comes this look at the business of reverse mortgages.]
ooo
Cash-strapped seniors are now “sitting on vast amounts of untapped equity” and something has got to be done about it!
Enter legions of helpful bankers and Wall Street firms anxious to help facilitate the equity extraction for upwards of four percent before the homeowner sees a penny, all in the name of perpetuating an economic model that looks more and more like Bizarro World.
As the subprime debacle shows no sign of slowing down and credit begins to tighten for traditional mortgage products (a few years too late), the banking industry has set its sights on the next hot growth sector – reverse mortgages.
It looks like it’s still possible that Orangelo Mozilo might still don an orange jumpsuit someday as Reuters reports that the SEC’s case against the founder of Countrywide Financial (gobbled up by Bank of America during the financial crisis) will soon go to trial.
In one of the highest profile enforcement actions to arise out of the recent financial collapse, the SEC accused Mozilo, former Countrywide President David Sambol and former Chief Financial Officer Eric Sieracki of failing to disclose the true state of Countrywide’s deteriorating mortgage portfolio.Regulators also contend Mozilo made millions by dumping Countrywide stock before the truth emerged.
Attorneys for the defendants have denied any wrongdoing, and argued in court filings that Countrywide was upfront about the risks of its mortgages.
But U.S. District Judge John Walter refused to resolve the case in Mozilo’s favor on Thursday, ruling that the SEC had raised enough factual issues for it to be decided by a jury, according to court documents.
The SEC presented evidence that Mozilo’s stock sales in 2006 and 2007 were “significantly out-of-line with his prior trading plans or practices,” Walter wrote. Thus a jury can decide whether Mozilo acted on inside information, Walter ruled, adding that Mozilo netted over $140 million from those transactions.
Anyone interested in some graphical representations of the orange man’s stock sales can visit Google Images to find a few charts created by yours truly a year or two ago when the sales were in progress. Also see, this search at the old blog for all kinds of ump lumpa related material, Angelo Mozilo is a Moron atop the list.
It seems that, as we venture further into the post-2008 crash financial world, the word “zombie” is popping up more and more, two sightings to be found in just a cursory scan of the news this morning, zombie buildings in Spain as reported by the Wall Street Journal and this commentary about zombie banks by Jonathan Weil at Bloomberg.
Zombie Banks Have Us Right Where They Want Us
…
Here’s the kind of thing that passes for free enterprise now. Last month a fellow named Michael Carpenter, who is the chief executive officer of Ally Financial, got on a conference call with securities analysts and gushed with delight about the $3.5 billion price that General Motors had just agreed to pay for the subprime auto lender AmeriCredit. Based on that transaction, he proclaimed, Ally might be worth $30 billion.
GM, which owns a 6.7 percent stake in Ally, is Ally’s former parent.
“I love the AmeriCredit deal,” said Carpenter, whom some might remember from his days as the head of the securities firm Kidder Peabody. “I don’t have any doubt about our ability to repay the U.S. Treasury. So I think it’s great.”
The federal government so far has spent $17.2 billion to bail out Ally, the lender formerly known as GMAC Inc. Taxpayers hold a 56.3 percent stake in the company, which says it may hold an initial public offering next year if it can’t find a buyer.
What a spectacle. Here you had the CEO of a thrice-bailed- out zombie bank, drooling over how much a government-owned carmaker was going to pay for a publicly traded subprime lender, and using this price as a yardstick for his own bank’s paper worth. In a sane world, Ally would have been liquidated already. Any capital it’s able to raise is money that otherwise might go to more deserving enterprises.
Weil goes on to lament the propping up of the housing market, savers being punished with low interest rates, and how we need to throw the bums in Washington out.
By Tim Iacono, Since 2005
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