Circle Point Expert Witness Consultants for Businesses and Borrowers

The Corporation – A Clinical Diagnosis

bankingwhistleblower — Mon, 09 Nov 2009 03:46:20 +0000

A loyal reader sent this in. Thought it would would be interesting and useful to readers of this blog.

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bankingwhistleblower — Fri, 02 Oct 2009 04:53:23 +0000

7s2f463e5b

Landmark Decision – Massive Relief for Homeowners but Trouble for Banks

bankingwhistleblower — Wed, 23 Sep 2009 20:46:13 +0000

Ellen Brown

Author, “Web of Debt”

Posted: September 21, 2009 03:03 PM

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose -- on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

Eliminating the "Straw Man" Shielding Lenders and Investors from Liability

The development of "electronic" mortgages managed by MERS went hand in hand with the "securitization" of mortgage loans -- chopping them into pieces and selling them off to investors. In the heyday of mortgage securitizations, before investors got wise to their risks, lenders would slice up loans, bundle them into "financial products" called "collateralized debt obligations" (CDOs), ostensibly insure them against default by wrapping them in derivatives called "credit default swaps," and sell them to pension funds, municipal funds, foreign investment funds, and so forth. There were many secured parties, and the pieces kept changing hands; but MERS supposedly kept track of all these changes electronically. MERS would register and record mortgage loans in its name, and it would bring foreclosure actions in its name. MERS not only facilitated the rapid turnover of mortgages and mortgage-backed securities, but it has served as a sort of "corporate shield" that protects investors from claims by borrowers concerning predatory lending practices. California attorney Timothy McCandless describes the problem like this:

[MERS] has reduced transparency in the mortgage market in two ways. First, consumers and their counsel can no longer turn to the public recording systems to learn the identity of the holder of their note. Today, county recording systems are increasingly full of one meaningless name, MERS, repeated over and over again. But more importantly, all across the country, MERS now brings foreclosure proceedings in its own name — even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers’ discovery requests with respect to predatory lending claims and defenses. In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer’s home … So imposing is this opaque corporate wall, that in a “vast” number of foreclosures, MERS actually succeeds in foreclosing without producing the original note — the legal sine qua non of foreclosure — much less documentation that could support predatory lending defenses.

The real parties in interest concealed behind MERS have been made so faceless, however, that there is now no party with standing to foreclose. The Kansas Supreme Court stated that MERS’ relationship “is more akin to that of a straw man than to a party possessing all the rights given a buyer.” The court opined:

By statute, assignment of the mortgage carries with it the assignment of the debt … Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable. The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust. [Citations omitted; emphasis added.]

MERS as straw man lacks standing to foreclose, but so does the original lender, although it was a signatory to the deal. The lender lacks standing because title had to pass to the secured parties for the arrangement to legally qualify as a “security.” The lender has been paid in full and has no further legal interest in the claim. Only the securities holders have skin in the game; but they have no standing to foreclose, because they were not signatories to the original agreement. They cannot satisfy the basic requirement of contract law that a plaintiff suing on a written contract must produce a signed contract proving he is entitled to relief.

The Potential Impact of 60 Million Fatally Flawed Mortgages

The banks arranging these mortgage-backed securities have typically served as trustees for the investors. When the trustees could not present timely written proof of ownership entitling them to foreclose, they would in the past file “lost-note affidavits” with the court; and judges usually let these foreclosures proceed without objection. But in October 2007, an intrepid federal judge in Cleveland put a halt to the practice. U.S. District Court Judge Christopher Boyko ruled that Deutsche Bank had not filed the proper paperwork to establish its right to foreclose on fourteen homes it was suing to repossess as trustee. Judges in many other states then came out with similar rulings.

Following the Boyko decision, in December 2007 attorney Sean Olender suggested in an article in The San Francisco Chronicle that the real reason for the bailout schemes being proposed by then-Treasury Secretary Henry Paulson was not to keep strapped borrowers in their homes so much as to stave off a spate of lawsuits against the banks. Olender wrote:

The sole goal of the [bailout schemes] is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value — right now almost 10 times their market worth. The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
… The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC . . . .

What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back.

Needless to say, however, the banks did not buy back their toxic waste, and no bank officials went to jail. As Olender predicted, in the fall of 2008, massive taxpayer-funded bailouts of Fannie and Freddie were pushed through by Henry Paulson, whose former firm Goldman Sachs was an active player in creating CDOs when he was at its helm as CEO. Paulson also hastily engineered the $85 billion bailout of insurer American International Group (AIG), a major counterparty to Goldmans’ massive holdings of CDOs. The insolvency of AIG was a huge crisis for Goldman, and Goldman was the largest recipient of public funds from the AIG bailout.

In a December 2007 New York Times article titled “The Long and Short of It at Goldman Sachs,” Ben Stein wrote:

For decades now … I have been receiving letters [warning] me about the dangers of a secret government running the world … [T]he closest I have recently seen to such a world-running body would have to be a certain large investment bank, whose alums are routinely Treasury secretaries, high advisers to presidents, and occasionally a governor or United States senator.

The pirates seem to have captured the ship, and until now there has been no one to stop them. But 60 million mortgages with fatal defects in title could give aggrieved homeowners and securities holders the crowbar they need to exert some serious leverage on Congress — serious enough perhaps even to pry the legislature loose from the powerful banking lobbies that now hold it in thrall.

Follow Ellen Brown on Twitter: www.twitter.com/ellenhbrown

Andrew Cuomo Exposes Big Bonuses at Bailed Out Banks

bankingwhistleblower — Fri, 31 Jul 2009 01:30:29 +0000

New York: Citigroup, which got $45 billion in govt. money, paid over $5 billion in bonuses

By Stephen Bernard, AP Business Writer
On Thursday July 30, 2009, 8:40 pm EDT

NEW YORK (AP) — Citigroup Inc., one of the biggest recipients of U.S. government bailout money, gave employees $5.33 billion in bonuses for 2008, New York’s attorney general said Thursday in a report detailing the payouts by nine big banks.

The report from Attorney General Andrew Cuomo’s office focused on 2008 bonuses paid to the initial nine banks that received loans under the government’s Troubled Asset Relief Program (TARP) last fall. Cuomo has joined other government officials in criticizing the banks for paying out big bonuses while accepting taxpayer money.

Comparisons to historical payouts weren’t available, as the banks are not required to disclose the information publicly. They provided 2008 details to Cuomo’s office under subpoena.

Cuomo’s office found that the companies, which also included Bank of America Corp., Merrill Lynch & Co., JPMorgan Chase & Co. and Goldman Sachs Group Inc., awarded nearly 4,800 million-dollar-plus bonuses, with much of the money going to Wall Street investment bankers.

Citigroup, which is now one-third owned by the government as a result of the bailout, gave 738 of its employees bonuses of at least $1 million, even after it lost $18.7 billion during the year, Cuomo’s office said. The bank’s top four recipients received a combined $43.7 million.

The New York-based bank received $45 billion in government money and guarantees to protect it against hundreds of billions of dollars on potential losses from risky investments.

“There is no clear rhyme or reason to the way banks compensate and reward their employees,” Cuomo said in the report, noting banks have not in recent years actually tied pay to performance as they claim when describing their compensation programs. Cuomo added that when banks’ performance deteriorated significantly, “they were bailed out by taxpayers and their employees were still paid well.”

Bank of America, which also received $45 billion in TARP money, paid $3.3 billion in bonuses, with 172 employees receiving at least $1 million and the top four recipients receiving a combined $64 million. Merrill Lynch, which Charlotte, North Carolina-based Bank of America acquired during the credit crisis, paid out $3.6 billion, including a combined $121 million to four top employees.

Bank of America earned $2.56 billion in 2008, while Merrill lost $30.48 billion. Cuomo’s office said Merrill Lynch doled out 696 bonuses of at least $1 million for 2008.

Bank of America has been sharply criticized for its acquisition of Merrill Lynch because of mounting losses at the Wall Street bank and the size of bonuses Merrill paid its employees. Of the $45 billion in bailout funds Bank of America received, $20 billion was to support the acquisition of Merrill. Neither Bank of America nor Citigroup have repaid their TARP loans.

A Bank of America spokesman declined to comment on the report. A spokesman for Citigroup did not return repeated calls for comment.

Banks have said they needed to pay their top performing employees to prevent them from defecting to competitors. Companies that accepted TARP money have faced intense government scrutiny and must now comply with restrictions on compensation, including bonuses.

Because of those restrictions, some banks began shifting how they pay their workers. In June, Citigroup said it would rebalance how it pays employees, by reducing bonuses for some and instead giving them larger salaries. The change does not effect total pay, just the mix in compensation.

President Barack Obama last month named Kenneth Feinberg to oversee compensation given to the 100 highest-paid employees at banks and other firms that received the largest government bailouts, including Citigroup and Bank of America.

However, his oversight does not include reviewing bonus payments tied to 2008. He can only review plans starting with 2009 compensation. Companies have until Aug. 13 to submit compensation plans to Feinberg.

Asked about the attorney general’s report, White House press secretary Robert Gibbs said he had not seen it.

“I think the president continues to believe that the American people don’t begrudge people making money for what they do as long as … we’re not basically incentivizing wild risk-taking that somebody else picks up the tab for,” Gibbs said.

Rep. Edolphus Towns, chairman of the House Oversight and Government Reform Committee, said Cuomo’s report was appalling.

“This egregious behavior proves that Wall Street still doesn’t get that times have changed and the old way of paying executives is long gone,” said Towns.

JPMorgan Chase and Goldman Sachs, which are considered among the healthiest banks and that have already repaid TARP funds they received, paid out the most bonuses of more than $1 million.

Goldman gave 953 workers bonuses of at least $1 million, with its four most highly compensated employees receiving a combined total of nearly $46 million. JPMorgan gave 1,626 employees at least $1 million, and its top four recipients received a combined $74.8 million. The two banks each gave more than 200 employees bonuses in excess of $3 million.

JPMorgan spokesman Tom Kelly said the bank took TARP money “at the government’s request, even though we didn’t need it, because it was good for the overall financial system, and we paid it back as soon as we were allowed to.”

JPMorgan repaid the $25 billion in TARP money it received last month. Goldman repaid the $10 billion it received.

A Goldman Sachs spokesman did not return repeated calls for comment.

The government launched the bailout program at the peak of the credit crisis last fall, shortly after investment bank Lehman Brothers Holdings Inc. failed and insurer American International Group Inc. only survived with the support of the government.

Democratic lawmakers say excessive salaries and bonuses encouraged risk-taking on Wall Street and contributed to the financial crisis.

They are pushing legislation, expected to pass the House on Friday, that would ban “incentive-based” pay that regulators determine could threaten the economy or viability of the institution. Regulators would be given 270 days after the bill is enacted to hash out the details.

Bank of New York Mellon, Morgan Stanley, State Street Corp. and Wells Fargo & Co. were the other four banks that initially received bailout money. All but Wells Fargo, which received $25 billion and paid out $977.5 million in bonuses, repaid their loans last month.

Spokespeople from Morgan Stanley and Wells Fargo declined to comment on the attorney general’s report. Spokespeople for BNY Mellon and State Street were not immediately available to comment.

AP Business Writer Ieva M. Augstums in Charlotte, North Carolina and Associated Press Writers Darlene Superville and Anne Flaherty in Washington contributed to this report.

Copyright © 2009 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten, or redistributed without the prior written authority of The Associated Press.

Comerica Bank Sued Regarding a $50,000,000 Ponzi Scheme

bankingwhistleblower — Sat, 25 Jul 2009 15:59:01 +0000

July 23, 2009

BANKING: Bank accused of scheme aid

Comerica Inc., the Dallas-based lender that took $2.25 billion from the U.S. bank rescue fund, was accused in a lawsuit of aiding a $50-million Ponzi scheme.

The bank helped the scheme that ended in October 2002 by allowing Four Star Financial Services LLC to hide money from creditors to make it appear it was solvent, according to the complaint filed July 20 in federal court in San Jose, Calif.

“Four Star would not have been able to operate the Four Star Ponzi scheme but for the active and knowing cooperation and assistance of Comerica,” according to the complaint filed by Four Star investors, who say they were defrauded of $50 million.

Wendy Walker, a spokeswoman for Comerica, didn’t return a call seeking comment.
Similar ponzi case below:

Associated Press – San Francisco Chronicle Settlement reached in investor-related Ponzi scheme 2004-09-15

Former bankers for EarthLink co-founder Reed Slatkin have agreed to pay $26.5 million to settle a lawsuit alleging that they helped him appear to be an investment advisor while he operated a multi-million dollar Ponzi scheme.

Attorneys involved in the 2-year-old lawsuit said the last of the documents were being signed Monday but still must be approved by U.S. District Judge Margaret Morrow in Los Angeles. The recovery would be the largest yet for investors in what Slatkin has admitted was a fraud that began in the mid-1980s and was revealed in 2001.

The settling defendants included Union Bank of California and Bank of Orange County. Other defendants were Imperial Management Inc., the former trust division of Imperial Bancorp, an Inglewood bank acquired in 2000 by Comerica Inc., and Mary Catherine Leider, a former vice president in Imperial’s trust division who handled accounts for some Slatkin investors

Bankers for Slatkin Agree to Settle Suit

By E. Scott Reckard, Times Staff Writer

September 14, 2004

Reed Slatkin’s former bankers have agreed to pay $26.5 million to settle a lawsuit contending that they helped him appear to be a legitimate investment advisor while he ran a $593-million Ponzi scheme, attorneys in the case said Monday.

The recovery would be by far the largest yet for investors in what Slatkin, a co-founder of EarthLink Inc., has admitted was a fraud that began in the mid-1980s and was unmasked in 2001. In the scheme, Slatkin paid off some of his investors with money raised from newer clients.

The last of the documents settling the 2-year-old suit against the bankers were being signed Monday, lawyers said. The deal also must be approved by U.S. District Judge Margaret Morrow in Los Angeles.

The settling defendants included Union Bank of California and Bank of Orange County. Other defendants were Imperial Management Inc., the former trust division of Imperial Bancorp, an Inglewood bank acquired in 2000 by Comerica Inc., and Mary Catherine Leider, a former vice president in Imperial’s trust division who handled accounts for some Slatkin investors.

The settlement documents didn’t disclose how much each of the defendants and their insurers were to provide toward the $26.5 million.

None of the defendants admitted wrongdoing.

The lawsuit accused Union, Bank of Orange County, Imperial and Comerica Inc. of participating in fraud by providing Slatkin with credit and overdraft protection, allowing him to commingle personal and investor funds and lending their names and prestige to his operations. Leider was accused of accepting financial favors from Slatkin in return for steering business his way.

Comerica, which was dismissed as a defendant this year (see separate settlement below), declined to comment, as did attorneys for Imperial Management, Leider and Bank of Orange County, a division of Sacramento-based Placer Sierra Bancshares.

Union Bank spokeswoman Joanne Curran said her San Francisco-based company inherited Slatkin investor accounts when it bought Imperial’s trust business in 1999.

“Our goal throughout this process has been to compensate our customers for their loss,” Curran said.

Slatkin, whose clientele included a number of prominent actors, models and other celebrities, pleaded guilty to fraud, conspiracy and money laundering and is serving a 14-year federal prison term in Taft, Calif.

A group of the largest Slatkin investors and their lawyers at the Kirkland & Ellis legal firm are to receive about $15.5 million of the proposed settlement, according to K&E attorney R. Alexander Pilmer.

An additional $11 million will be set aside to cover losses and legal costs for hundreds of additional investors who gave Slatkin more money than they received back in alleged earnings, according to the settlement agreement being circulated for approval.

In a separate settlement Feb. 27, Comerica, Union, Imperial and Bank of Orange County previously agreed to return about $1 million in fees that Slatkin had paid them to handle his personal and business accounts.

Slatkin raised a total of $593 million from investors and recycled much of that back to them in what he claimed were investment returns. But when his fraud was revealed, his investors came up short by more than $200 million.

Efforts to reclaim losses have included “fraudulent transfer” lawsuits against investors who came out ahead, including actors Peter Coyote and Joe Pantoliano, as well as liquidation of Slatkin’s assets.

The proposed settlement of $26.5 million with the banks, reached after several days of mediation by a retired judge, “would be by far the single largest recovery for the creditors,” Wynne said.

Racism in Banking: Stories from the front lines of the banking industry

bankingwhistleblower — Sun, 03 May 2009 21:01:23 +0000

Coming soon.

The market matrix – Backroom deals in the securities market exposed.

bankingwhistleblower — Thu, 30 Apr 2009 01:23:36 +0000

Should small investors jump back into the stock market like the pundits are advising? Is the efficient market theory really valid? Are you afraid you will miss the next bull market? Should you focus on top down or bottom up strategies? If you really want to know how Wall Street works behind the scenes, you will need this article. We will explain the most important stock market metric; a metric that insiders don’t want you to focus on. Coming Soon.

By: bankingwhistleblower@inbox.com

Fleecing the public 101 – Blowing the whistle on the American Banker Association (ABA)

bankingwhistleblower — Thu, 30 Apr 2009 01:06:50 +0000

Coming in the near future we will expose how the American Banker Association ABA corrupts our political system and picks all of our pockets. We will look at the ABA’s own documents and member only publications to explain how these masters of deceit pull it off.

We’ll explore the Encyclopedia of Scams to compare banking methods to historical cons that the ABA and its members have used to fleece the American public out of trillions. Hide your wallets because the fleecing has only just begun!

By: bankingwhistleblower@inbox.com

As Credit Markets Froze, Banks Loaned Millions to Insiders

bankingwhistleblower — Sat, 25 Apr 2009 01:19:43 +0000

Sunday March 22, 2009

by: Stella M. Hopkins – Visit article original @ The Charlotte Observer

Charlotte, North Carolina – Banks nationwide hold $41 billion in loans to directors, top executives and other insiders, a portfolio that experts say should be stripped of secrecy.

Insider lending to directors is particularly troublesome because it could cloud the judgment of people charged with protecting shareholders and overseeing bank management, the experts say.

At Charlotte-based Bank of America, those loans more than doubled last year, to $624.2 million – the biggest dollar jump in the country. The largest of them likely went to three directors or their companies. The surge came during the third quarter as credit markets froze, the government prepared to infuse banks with billions in tax dollars and the board approved the purchase of troubled Merrill Lynch.

Bank of America ranked fourth on the list of biggest insider lenders. At the top was JPMorgan of New York, which held $1.48 billion in insider loans, mostly by directors or their companies.

At No. 2, Charlotte-based Wachovia, which was sold to Wells Fargo of San Francisco at the end of 2008, finished the year with $747 million in insider loans. All of the loans were held by the bank’s directors or their companies, with just five holding the largest.

Ranking third on the list was M&I Marshall & Ilsley of Milwaukee, with $644.4 million, and Chicago’s Northern Trust was at No. 5 with $524.5 million.

Insider loans, ranging from home mortgages to multimillion-dollar lines of credit for big companies, are legal but are largely shrouded from public scrutiny.

Banks don’t have to explain increased insider lending. They don’t have to disclose individual loan amounts or terms for any insiders, including executives. Directors and their businesses, often the largest insider borrowers, are completely shielded. Directors must approve insider loans greater than $500,000, so they sometimes vote on loans for each other or the executives they oversee.

Insider favoritism is against the law. Bankers and regulators say the loans are subject to greater scrutiny to ensure insiders aren’t getting better terms and are creditworthy.

But top corporate governance experts contend that insider lending carries serious potential for conflict of interest among bank officials and must be stripped of secrecy. They argue that lending to directors, the watchdogs of management, must be revealed so shareholders can gauge their independence. And disclosure should be paramount for banks receiving government aid, said Ed Lawrence, a University of Missouri-St. Louis finance professor and co-author of a 1989 study that was a rare look at insider lending.

Seven of the 10 banks with the largest insider loans received a total of more than $50 billion in the banking bailout late last year, banks’ federal filings show.

“It’s good for the public to know … where the money is going,” Lawrence said. “When you start taking public money, we hold them to a much higher standard.”

The majority of the nation’s 8,000-plus banks make insider loans, some very small. At the end of last year, banks had $41 billion of insider loans, up 5.7 percent from a year earlier, according to the filings.

Insider loans accounted for less than 2 percent of the banks’ assets, amounts that are generally unlikely to seriously damage banks if the loans go sour. The loans tend to make up a larger percentage of business for smaller banks.

Not all large banks are big insider lenders. Wells Fargo, for example, was about the size of Wachovia before the San Francisco bank swooped up the wounded Charlotte institution late last year. Wells ended last year with $20 million of insider loans, a fraction of Wachovia’s $747 million. Neither bank would discuss the disparity.

Most publicly traded companies were banned from making insider loans in 2002, part of the regulatory rush following the collapse of Enron and other accounting scandals.

But banks were excluded from the ban, partly because they’re in the business of lending and also because the loans have been subject to extensive regulation for more than 25 years.

The loans were blamed for bank problems during the nation’s S&L crisis. Lawrence and others have linked insider lending to bank failures. In December, the chairman of a large Irish bank resigned after revelations he had $109 million of secretive insider loans. In January, the government seized the Dublin bank.

“Studies of bank failures have found that insider abuse, including excessive or poor quality loans made … is often a contributing factor to the failure,” says the “Insider Activities” handbook from the Comptroller of the Currency, the lead regulator for big national banks.

Banks can be hurt by even the perception of insider favoritism, the guide says.

“We don’t have a difficulty with insider loans when they’re properly written and extended,” said Ray Grace, the North Carolina deputy banking commissioner who heads bank supervision for state-chartered firms. “It makes a certain amount of sense that a director or bank officer take that business to their own bank rather than shop it to a competitor.”

A key requirement is that insider loans be on the same terms as those to similar outsiders.

“This is a highly scrutinized area, so usually any problems would be caught early,” said Mindy West, a Federal Deposit Insurance Corp. chief whose job includes crafting instructions for bank examiners.

Large banks, such as Bank of America, have regulatory officials on site. Smaller banks are typically examined every 12 to 18 months. Regulatory officials request insider loan details for review prior to their regular bank examinations, West said. The FDIC has regulatory authority over about 5,100 banks.

New loans and increases in existing loans are especially likely to be scrutinized, West said. And a loan balance that doubled would probably trigger a second look.

Longtime governance expert Charles Elson doesn’t advocate banning insider loans, although he was startled the loans can run into hundreds of millions. But, he said, banks need to make full disclosure, revealing names, amounts and terms. He is especially concerned about disclosure for loans to directors and their interests.

“Management, who can dictate the terms of the loan, are being overseen by the director who is a beneficiary,” said Elson, who is director of the University of Delaware’s Weinberg Center for Corporate Governance. “It compromises the director’s ability to be objective.”

As borrowers, directors might be less rigorous when evaluating the CEO or other executives, he said. They might be unwilling to buck management when approving deals.

Wachovia’s board approved its 2006 acquisition of mortgage lender Golden West Financial, a vote that ultimately helped push the bank near collapse. Shortly before that approval, the bank had $1.47 billion in insider lending. Fifteen borrowers held the largest loans. Banks aren’t required to disclose details of past lending so there’s no way to identify those borrowers.

At the end of 2008, all of the bank’s $747 million in insider loans were held by directors or their companies, said Julia Bernard, a spokeswoman for Wells Fargo, which bought Wachovia last year. Five borrowers held the largest loans. Bernard said most of the loans were made before 2008.

Wachovia’s former chairman and longtime director, Lanty Smith, did not respond to two calls for comment.

Nell Minow, co-founder of The Corporate Library, said directors should take their business elsewhere if they aren’t comfortable with disclosure.

“Do you want them as directors or do you want them as customers?” she said. “To the extent there’s even the perception of conflict of interest, it’s very important for them to be very transparent.”

Top 10 Insider Lenders

JPMorgan Chase, New York, $1.48 billion

Wachovia, Charlotte, N.C., $747 million

M&I Marshall & Ilsley, Milwaukee, $644.4 million

Bank of America, Charlotte, $624.2 million

Northern Trust, Chicago, $523.5 million

Union Bank, San Francisco, $499.3 million

BB&T, Winston-Salem, N.C., $493.8 million

Commerce Bank, Kansas City, Mo., $467.9 million

Regions Bank, Birmingham, Ala., $444.3 million

Comerica Bank, Dallas, $391.5 million

(Note: Wells Fargo, based in San Francisco, bought Wachovia on Dec. 31.)

Republished for research purposes under the fair use doctrine. Reproduction for profit is strictly prohibited.

Quotes from Historical Figures Who Exposed the Banking Industry’s Dirty Laundry

bankingwhistleblower — Sat, 25 Apr 2009 00:59:27 +0000

“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.

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. -President James Madison

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. -President 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… -President Franklin D. Roosevelt November 21, 1933).

When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” - Napoleon Bonaparte, Emperor of France, 1815.

“The death of Lincoln was a disaster for Christendom. There was no man in the United States great enough to wear his boots and the bankers went anew to grab the riches. I fear that foreign bankers with their craftiness and tortuous tricks will entirely control the exuberant riches of America and use it to systematically corrupt civilization.” - Otto von Bismark (1815-1898), German Chancellor, after the Lincoln assassination.

“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” - John Kenneth Galbraith (1908- ).

“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. “The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” The Rothschild brothers of London writing to associates in New York, 1863.
Have we ever counted the human cost of empowering an industry of financial thieves? Can we even count the number of wars in history where bankers financed both sides of the conflict for profit? Millions of human lives sacrificed for the greedy, money lust of a small class of elite criminal insiders, a politically connected, legalized cartel of thieves who create money by fiat to lend to masses of people for the profit of a select few. Profits that are hidden and siphoned offshore into hidden confidential “offshore trusts” and shell corporations which are beyond the grasp of any government or regulatory agency? When their wholesale thievery can’t exploit us anymore, they collapse the money supply by freezing credit, confiscating collateral and throwing families into the street as they feast on the tax dollars of the same people they have victimized. An timeless truth is that “the best way to rob a bank is to own one”. – Circle Point LLC – December 2008 and William K. Black – April 2005.