Citigroup agreed on Thursday to pay $75 million to settle federal claims that it failed to disclose vast holdings of subprime mortgage investments that were deteriorating during the financial crisis and ultimately crippled the bank.
The settlement centers on events in the fall of 2007, when Citigroup’s reported losses started to cascade, eventually prompting the federal government to rescue the bank a year later. The case is the first to focus on whether banks adequately disclosed to their shareholders the increasingly precarious state of their finances during the crisis.
It is also the first time the Securities and Exchange Commission has brought charges against high-ranking bank executives over their involvement with subprime mortgage bonds.
The commission singled out two Citigroup executives — Gary L. Crittenden, the former chief financial officer, and Arthur Tildesley Jr., the former head of investor relations — for omitting material information in disclosures to shareholders, according to the complaint.
Mr. Crittenden agreed to pay a $100,000 fine; Mr. Tildesley will pay $80,000.
The generally accepted view of the Deepwater Horizon disaster has focused on the blowout preventer and the non-standard procedures BP conducted just before the explosion and fire. However, most of the damage and the main source of the spill came from the collapse and sinking of the DH platform rather than the initial explosion. A new report by the Center for Public Integrity, based on testimony from people on scene and Coast Guard logs, contains evidence that the platform sunk because of a botched response from the Coast Guard, which failed to coordinate firefighting efforts and to have the proper resources to fight the fire:
The Coast Guard is not supposed to participate in firefighting, but instead assign an expert to coordinate the private firefighting efforts of the rig operator and its contractors. The Coast Guard failed to do so, and the result was an uncoordinated, “general response” effort that mainly relied on salt water to extinguish the fires. That is not the most effective way to fight rig fires; the best way is to use foam, which apparently wasn’t on hand. An expert would have known this, but as CPI’s report of the testimony shows, none was assigned:
The crippling budget cuts President Obama proposed for the Coast Guard also deserve a closer examination. Obama's spending plan reduced the blue water fleet by a full one-third, slashed 1,000 personnel, five cutters, and several aircraft, including helicopters. According to the Center for Public Integrity, the Coast Guard updated its official maritime rescue manual -- advising against firefighting aboard a rig -- just seven months before the Deepwater Horizon explosion. That change in policy came at a time when Adm. Thad Allen warned the budget cuts threatened to turn the Coast Guard into a "hollow force."
The rehearsal dinner is reportedly taking place at the nearby Grasmere, a 525-acre estate boasting a Federal-period manor house with formal gardens, stucco guest cottages and a large stone barn complex. Another area manse rumored to be serving the family over the weekend will be Glenburn, where the Clintons aresaid to be staying over the weekend. Glenburn is the Rhinebeck home of Eric and Andrea Colombel. Andrea Colombel is the daughter of billionaire financier and longtime Clinton supporter George Soros.
CHELSEA CLINTON in full meltdown mode after severe panic attacks - that new hubby will be a cheater.
Panicky bride-to-be Chelsea Clinton is secretly undergoing emergency prenuptial counseling ordered by her mom Hillary, insiders say.
"Chelsea is a nervous wreck as her wedding approaches. She's terrified that she'll disgrace herself and her family," a Clinton told The ENQUIRER.
The 30-year-old former first daughter is set to wed Wall Street-er Marc Mezvinsky in a $1 million dream wedding on July 31 at the Astor Courts, a 50-acre private estate in Rhinebeck, N.Y. But now she's having second thoughts.
"Chelsea never wanted a royal-style with hundreds of guests. Now, she's scared to death she's going to freak out," said the source.
Panicking, in full meltdown mode, Chelsea reached out to her mother Hillary on her top secret emergency number as she met foreign leaders in Europe.
Two Bay Area women were arrested and charged with embezzlement Wednesday after allegedly writing $2.6 million in bonus checks to themselves over a four-year period at a San Francisco software company, prosecutors said.
The investigation started shortly after one of the women, Maria Lourdes B. Dionisio, 46, of Pacifica, filed for unemployment insurance in May after she was fired from the firm for unrelated reasons. Dionisio listed annual pay of nearly $450,000, far above her $63,000 salary, San Francisco District Attorney Kamala Harris said.
As it happens, another book from the 1970s entitled "When Money Dies: the Nightmare of The Weimar Hyper-Inflation" has just been reprinted. Written by former Tory MEP Adam Fergusson -- endorsed by Warren Buffett as a must-read -- it is a vivid account drawn from the diaries of those who lived through the turmoil in Germany, Austria, and Hungary as the empires were broken up.
Near civil war between town and country was a pervasive feature of this break-down in social order. Large mobs of half-starved and vindictive townsmen descended on villages to seize food from farmers accused of hoarding. The diary of one young woman described the scene at her cousin’s farm.
"In the cart I saw three slaughtered pigs. The cowshed was drenched in blood. One cow had been slaughtered where it stood and the meat torn from its bones. The monsters had slit the udder of the finest milch cow, so that she had to be put out of her misery immediately. In the granary, a rag soaked with petrol was still smouldering to show what these beasts had intended," she wrote.
Grand pianos became a currency or sorts as pauperized members of the civil service elites traded the symbols of their old status for a sack of potatoes and a side of bacon. There is a harrowing moment when each middle-class families first starts to undertand that its gilt-edged securities and War Loan will never recover. Irreversible ruin lies ahead. Elderly couples gassed themselves in their apartments.
Foreigners with dollars, pounds, Swiss francs, or Czech crowns lived in opulence. They were hated. "Times made us cynical. Everybody saw an enemy in everybody else," said Erna von Pustau, daughter of a Hamburg fish merchant.
Great numbers of people failed to see it coming. "My relations and friends were stupid. They didn’t understand what inflation meant. Our solicitors were no better. My mother’s bank manager gave her appalling advice," said one well-connected woman.
Not sure what anyone needs to "learn" about the social and economic effects of inflation. The history of Weimar Germany is as much a part of the cultural conversation as Kristallnacht or the League of Nations. In other words, well read people know what's going on. Americans over the age of 40 should have some memory of the Great Inflation, even if it has been wiped from the history books. Profligate governments love inflation, but the voters end up hating it and finally rising up and rebelling against the elites who fanned the inflation. Often you end up with a Hitler or - more likely - Juan Peron taking power; but sometimes you get lucky and the inflation leads to Ronald Reagan. Whichever way it works, the people who start the inflation are never in charge when it ends. That's the real risk of inflation for the elites. Even if they don't say this out loud, they know this deep down.
On the other hand, there's deflation, which central bankers profess to fear, yet often fails to arise. Japan's Lost Decade has been the most compelling deflationary episode in the modern era, one that has played out in real time in the second largest economy in the world with the eyes of journalists, policy makers, economists, and the business world upon them. And yet, no one knows what's going on:
The old bogeyman of deflation has re-emerged as a worry for the U.S. economy. Here's something else to fret about: After studying more than a decade of deflation in Japan, economists have slowly realized they have no idea how it works.
Deflation is usually associated with a Great Depression-like drop in demand. Consumer prices, incomes and asset prices fall. Interest rates go to zero, as low as they can go. As prices and incomes fall, the cost to borrowers of servicing debt does not, sucking life out of the economy and pushing prices down further. A bad situation, in short, gets worse.
In 1932, U.S. consumer prices fell 10% and between 1929 and 1933 they fell 27% in all.
But Japan's experience has looked nothing like this. Rather than being deep, destructive and concentrated in a few years, deflation has been a surprisingly mild, drawn-out affair. Consumer prices have been falling in Japan for 15 years, but never by more than 2% in any single year. Japan's deflation has been a morass, but not the destructive downward spiral many economists predicted. Why? And what does it portend for the rest of the world today?
Economists don't have good answers. "We don't know how deflation works," says Adam Posen, a member of the Bank of England's monetary policy committee who has been studying Japan since 1997. "We don't have a way of rationalizing steady, several-year flat deflation," he says.
How can this be? How can we not even have an idea how deflation works? How can we not know what's happening in Japan, which is hardly a mysterious Hermit Kingdom. Where's Paul Krugman? Where's (fill in famous progressive economist here)? Sounds like a good research topic!
The problem, I suspect, is not that we don't know; but that the elites don't want to know. After all, Japan hasn't just had 20 years of deflation. The deflation began with the bursting of a housing bubble exacerbated by (1) a government which propped up its financial sector, rather than allow insolvent banks to fail and (2) engaged in an epic bout of stimulus spending that left Japan with towering debts. Sound familiar? And none of it has worked. At all. In fact, the only things that worked were the Koizumi Reforms, which sought to privatize government entities like Japan Post, among other things. Privatization of government services worked?? Don't want to say that out loud!
And given Japan's experience, isn't deflation preferable to inflation? Japan is still, after all of its troubles, the second largest economy in the world. Japan has remained a wealthy, productive society. Its heavy industries have remained prosperous and innovative (indeed some have obtained a real global reach). They're building robots, for God's sake! Most important, Japan has not suffered the economic and social upheaval that accompanies inflation. This is not to say that Japan's deflation has been a picnic. The Japanese equivalents to Generation X have had their prospects stunted to help "pay" for the profligacy of earlier decades. Jobs are not as permanent or as plentiful as they once were. But, this is not as troubling as a bout of inflation destroying the yen. At least, it shouldn't be.
I'm not going to pretend to understand what monetary policy is better than the other. But it sure is curious that inflation seems to be the default preference for the elites, and the only restraint is their knowledge that the beginning of major inflation would also be the end for them.
Let’s accept as a point of fact that some African-American farmers were unfairly denied loans by racists in the USDA during the Clinton and Reagan administrations. I’m not casting any aspersions on the validity of the original lawsuit, nor on the courts’ rulings in the case.
But ponder the numbers.
• There are approximately 40,000 African-American farmers in the country.
• Of that 40,000, not all of them have gotten into financial trouble. Some have successful farms.
• Of those who had financial trouble, not all of them sought out loans. Some tried to stay afloat on their own.
• Of those who sought out loans, not all of them sought out loans from the USDA. Some got loans from banks or friends.
• Of those who sought out loans from the USDA, not all of them were denied loans. Some got the loans as requested.
• Of those who were denied loans, not all of them were denied due to discriminatory racial practices.
In the end, a total much much smaller than 40,000 could legitimately claim to be victims of discrimination.
As shown above, it was originally estimated to be no more than 2,000 possible total plaintiffs.
Somehow, that number quickly swelled to 16,000 wronged claimants.
And now, as of February, the government has announced it plans to hand out at least $50,000 each to over 70,000 more claimants, over and above the original 16,000.
That means that the U.S. may be recompensing at least 86,000 African-American farmers for past racial discrimination. But how could that possibly be true if there are only 39,697 African-American farmers in existence nationwide? And if only some subset of them ever applied for a loan and were then unfairly denied a loan?
Federal prosecutors handling an investigation into cheating in professional cycling have subpoenaed documents from an arbitration case that sought to prove that Lance Armstrong used performance-enhancing drugs.
The documents contain depositions from former teammates and associates of the seven-time Tour de France champion during a period when a promotions company was trying to prove that Mr. Armstrong employed banned drugs and practices—known as doping—during his cycling career.
Jeffrey Tillotson, the attorney who represented the company, SCA Promotions Inc., in the arbitration hearings, said it received a subpoena for the records on July 16. He is preparing to send the files to the federal prosecutors in Los Angeles who are handling the investigation, he said.
Mr. Armstrong has repeatedly denied doping allegations and has not been charged with any wrongdoing.
Using performing-enhancing techniques in sports is generally not against the law in the U.S. But federal prosecutors could make the case that Mr. Armstrong defrauded investors by accepting sponsorship dollars with the understanding that he would not use the drugs, if they prove that he doped.
Mr. Obama continued to swing for Mr. Giannoulias right through the news that the Giannoulias's Broadway Bank had loaned millions to Michael "Jaws" Giorango, a convicted bookmaker, as well as other crime figures. He stuck with him through the news that some of this money had been disbursed when Mr. Giannoulias was the bank's senior loan officer
His primary opponent, David Hoffman, resurrected the mob story line, leading to new details about Mr. Giannoulias's lending history. He's been under fire for mismanaging the state's college savings program. The Blagojevich trial has rekindled interest in the Senate nominee's older brother, Demetris, who was pushed for a state board position by convicted Obama fund-raiser Tony Rezko. Mr. Blagojevich appointed him in 2004, and then reappointed him a year later, 33 days after Mr. Giannoulias's father donated $10,000 to the Blago campaign.
Then in April federal regulators seized Broadway Bank. Records showed the bank's lending profile changed sharply after Mr. Giannoulias came on full-time in 2002. His lending department doubled down on the risky real estate loans that helped shred the housing market; Broadway piled up losses. Mr. Giannoulias prospered.