The very financial product that triggered the GFC – subprime mortgages, aka banks making home loans to people who can’t afford them – is apparently the hot new thing on Wall Street – again.

“Subprime-mortgage securities are rising at an accelerating pace as the U.S. begins to encourage reductions to homeowners’ balances, which may lead to fewer foreclosures and a quicker end to the housing slump….Senior-ranked bonds tied to borrowers with poor credit will mostly benefit after the Treasury Department said for the first time it would seek to cut the size of mortgages, reducing the likelihood that loan modifications will fail, according to JPMorgan Chase & Co., Morgan Stanley and Barclays Plc. (Bloomberg)

According to the Smirking Chimp:

This is how it works: The new program offers incentives to banks and other deep-pocketed investors (in mortgage-backed securities) to slash the principal on underwater mortgages which keeps people from strategic default or foreclosure. Sounds good, right? But here’s the catch: When the mortgage is refinanced, it’s converted into a FHA-backed loan which provides an explicit gov-guarantee. So, for a slight loss on the face-value of the MBS, the investors (ie–investment banks, hedgies, etc) are able to resuscitate their moribund securitizations (MBS) and reap hefty gains. It’s like taking Fido’s steaming pile on the front lawn and turning it into the Hope Diamond. Abracadabra!

Geithner has figured out how to put together a bailout that will cost taxpayers hundreds of billions of dollars without any money actually exchanging hands. The value of the putrid mortgage-paper will soar because of the gov-underwriting, and the ginormous losses won’t be realized until the mortgages start blowing up sometime in the future. That’s when FHA will be put-to-pasture along with fellow-homicide victims, Fannie and Freddie. Pretty clever, eh?

So, the cutthroat speculators and bunko artists who fleeced us all with their dogshit subprimes, have returned for another dip at the public trough. That means taxpayers will get scalped on the same investments a second time. Hey, it’s a double-whammy!

I’m currently reading “The Creature From Jekyll Island” and “Whoops!“, two books about how the U.S. Federal Reserve, Congress, The White House and Wall Street have been working together for nearly a century (The Fed was created in 1910) to fleece the American public. The thing most people don’t understand is that The System is designed to encourage stupid risks which deliver massive profits to a small group of bankers for a decade, then collapse, only to be bailed out by the American public. It’s been going on for a century and isn’t about to stop anytime soon, because Congress and The White House are all on the payroll.

On holidays in Melbourne, having an awesome time showing @fddlgrl all of my favourite haunts. Just have one quick thought to share with you.

We need to stop referring to the “Clinton” administration, the “Bush” administration and the “Obama” administration. We need to start referring to the last 16 years collectively as the “Goldman Sachs” administration.

I was prompted to think of this while reading this post on Crooks and Liars about the TARP bailout. The suggestion is that the bailout isn’t Obama’s fault, because Bush was still in power when it happened. They seem to be forgetting that the US Senate said NO to the original bailout vote, and it wasn’t until Obama took time out of his election campaign to “work Capitol Hill” that the bailout finally passed. I remember him getting the credit for it at the time. So he doesn’t get a pass on that shit.

The point, though, is that the US Treasury, under Clinton, Bush and Obama, has continued to be run by ex-Goldman Sachs executives. So let’s not fool ourselves about who is in power. Goldman were the single largest private investor in Obama’s election campaign. And now they are they have managed to wipe out their competition. As they say here, “Like on the TV program SURVIVOR – the last survivor standing is Goldman Sachs – who receives the grand prize. But in this case it is not just the fame and one million dollar prize. It is infamy with trillions of dollars in rewards.”

The banksters seem to be running things, at least in the USA. A friend of mine who works in finance told me recently how the big four banks in Australia have emerged from the GFC even more arrogant than ever. They managed to buy out most of their competition and now they have an even stronger lock on the marketplace, deciding who gets finance and at what usurious rates. Which is just another reason for all of your to join me on the “Million Bank March” campaign. It’s the only way I can see that we can start to reign them in.

It’s time for all of us to get rid of our credit cards, once and for all.

As if the "Global Financial Crisis" (or, as I like to call it, the "Greedy Fuckers Crisis") hasn’t already taught us that we need to wean ourselves off of this credit-based culture we’ve built for ourselves, then this story should. According to News.com.au, "one in five Australians is a victim of credit card fraud or computer hackers."

More quotes:

"Credit card crime is by far the biggest single fraud issue, with almost 10 per cent of those surveyed falling victim to card theft or skimming."

"The news will be an embarrassment to the banks, who repeatedly claim that their systems are secure."

The banks make BILLIONS and BILLIONS of profits every year and they STILL can’t stop credit card fraud. Why? Because they don’t care. It would cost more to fix it than it does to pay out the claims. It’s the same reason they can’t develop an e-banking system that doesn’t look like it was made my monkeys in 1993. THEY DON’T CARE ABOUT YOU. They care about profits, not people, not customers – PROFIT. That’s why their customer satisfaction scores are in the toilet.

Credit cards are just another way that the banks, corporations and the government manages to keep us up to our eyeballs in debt. They know that human nature means that if you CAN spend it, you WILL – eventually. And then they have you by the balls. And if you’re living on debt, you’re easy to manipulate. You can’t afford to quit your job – so they can screw you down a little bit more. You can’t afford to lose your job – so you put "the economy" ahead of other issues, like "the survival of the species" when you vote in elections. You dance to their tune.

Let’s get a campaign going to get a million people to cut up their credit cards this year. Along with my other campaign to get a million people to walk away from the "big four" banks and take their banking to a smaller, member-owned credit union.

Let’s take control of our destiny people.

UPDATE: Check out @mrshlee! He already decided to cut his up! (video)

I wonder how closely the names on this report map to the Bilderberg Group?

A recent analysis of the 2007 financial markets of 48 countries has revealed that the world’s finances are in the hands of just a few mutual funds, banks, and corporations. This is the first clear picture of the global concentration of financial power, and point out the worldwide financial system’s vulnerability as it stood on the brink of the current economic crisis.

A pair of physicists at the Swiss Federal Institute of Technology in Zurich did a physics-based analysis of the world economy as it looked in early 2007. Stefano Battiston and James Glattfelder extracted the information from the tangled yarn that links 24,877 stocks and 106,141 shareholding entities in 48 countries, revealing what they called the “backbone” of each country’s financial market. These backbones represented the owners of 80 percent of a country’s market capital, yet consisted of remarkably few shareholders.

The most pared-down backbones exist in Anglo-Saxon countries, including the U.S., Australia, and the U.K. Paradoxically; these same countries are considered by economists to have the most widely-held stocks in the world, with ownership of companies tending to be spread out among many investors. But while each American company may link to many owners, Glattfelder and Battiston’s analysis found that the owners varied little from stock to stock, meaning that comparatively few hands are holding the reins of the entire market.

via Research – ISNS.

A post from Arianna Huffington worth reading. US_based figures but the same principle applies here. 

Following on from yesterday’s story about Goldman Sachs as the root of all evil, today we get the information that:

Nine banks that received government aid money paid out bonuses of nearly $33 billion last year — including more than $1 million apiece to nearly 5,000 employees — despite huge losses that plunged the U.S. into economic turmoil. … The nine firms in the report had combined 2008 losses of nearly $100 billion.

(Source: WSJ)

And if you think things are going to change, don’t be deluded. Here’s what the Obama White House had to say:

"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," said White House Spokesman Robert Gibbs.

What happened to Obama’s feigned outrage last year before the election? It’s all gone, baby. It disappeared to the same place as his promises about Gitmo, prison camps, climate change and health care.

If the NBA has a salary cap, why can’t American corporations? One of the key problems with capitalism is the open-ended nature of the upside. It breeds unlimited greed. Surely we can combine the good aspects of capitalism – eg incentives for creativity and effort – but restrict the upsides? I know we have tiered taxation, which effectively acts as a way of channeling some of that upside back into the system, but it doesn’t stop companies and individuals trying to bleed the economy for as much money as they can get their hands on, despite the negative consequences.

It still seems to me that we need another system, one that limits the greed but retains the incentives. 

I recently moved from Westpac to CUA. This guy pulled $190,000 out of Westpac (in $20 bills) and moved to a Building Society. I want to see ONE MILLION Australians pull their money out of the "Big Four" banks and move to either a smaller bank or credit society this year. We have the power to shape corporate behaviour, but we need to start using our power with focus and intelligence.

My guests today help me explore some of the alternatives to the “Big Four” banks in Australia. Let’s say that you, like me, want to completely disassociate yourself from the Big Four – where do you turn? Are there alternatives in Australia?

Yes, say my guests:

Andrew Hadley, COO, Credit Union Australia
Tony Beck, Group Manager, Corporate Affairs, ME Bank (Members Equity)

They both belong to organisations that can provide all of the same services that you get from your bank – and they will do it with less fees and with much more customer service. Why? Both organisations are owned by their members instead of shareholders. In CUA’s case, they are owned by their customers. In ME’s case, they are owned by a group of superannuation firms which, in turn, are owned by their members.

So both organisations exist to provide good service – not solely for the sake of returning profits to shareholders. And, judging by their NPS scores, it makes a difference.

Do you want an independent media?

Today’s music is by:

Rick Estrin & The Nightcats
“U B U” (mp3)
from “Twisted”
(Alligator Records)

Buy at Amazon

According to this story in the Washington Post, the banksters are going to try to create sneakier ways to make you spend too much money and find yourself being hit with newly created fees in order to prop up their revenues. Expect the same thing to happen in Australia.

I’ve been talking about why we hate banks. It might be because they hate us!

Some insight into the way banks work from Dilbert creator Scott Adams (who says he was working at a bank when Dilbert was born):

Banks and credit card companies make a lot of money from late fees. They have a naked interest in keeping their service as inconvenient as possible.

Makes sense, right? Except that it’s another example of good profits vs bad profits (as Jen Storey explained on my last banking podcast). This rational might increase bank profits in the short term, but in the long term it pisses us off. That doesn’t matter too much to the existing bank executives, as their bonuses are based on THIS year’s profits and not the long term future of the bank. They are incented to have a short term outlook. The bank execs also know that we don’t have much choice. Except that we DO. That’s why I set up an account with a credit union last week (CUA). I’ll be shutting down my bank accounts over the next month and moving everything over to CUA – a credit union is owned by its MEMBERS and not SHARE HOLDERS, so it has an incentive to provide good service, not to maximize profits at the expense of service.

Read the rest of Scott’s blog post here.

Interesting… 2 weeks ago I started a big campaign to get people to vent their anger about banks via Twitter and what story did News.com run today?

"Bank Customers Deposit Their Anger On The Internet".

Of course, News.com didn’t mention my stories. Coincidence?

Hey folks, apparently I screwed up the track alignment in show 381 (about banks) so there is a fair amount of overlapping of voices. (Thanks to Anthony Voevodin for letting me know!)
I’ve re-edited the show and fixed it up, and I’m attaching it here.

By the way folks, don’t forget – if you are looking for an easy way to listen to the G’Day World archives (all 381 episodes!), and you’ve got iTunes installed, go to our page on iTunes. While you’re there, give the show a quick review!

Continuing our theme about banks this week, a friend sent me a link to the ChangeThis site which has a manifesto from Douglas Rushkoff. Here are a couple of excerpts:

“As the financial institutions we have come to rely on appear to topple under their own weight, it’s only natural that we rush to support them. These are the banks, investment groups, and insurance firms to which we have outsourced our savings, financing, and investing. They fund our businesses and lend most of our currency into existence. Were we just a bit more aware of how this dependency developed, however, as well as what it costs us in the long run, we might choose instead to exploit their temporary vulnerability toward very different ends. Indeed, if we had our wits about us, we would seek to put our biggest banks out of our misery, for good.”

"The failure of giant banking is less a crisis  than it is an opportunity to rediscover the long lost art of local commerce."

Download the manifesto.

The Commonwealth Bank announced that it is raising interest rates by 10 base points (which is 0.1% to the rest of us). Deputy prime minister Julia Gillard called CBA “selfish” and Community services minister Jenny Macklin said mortgage holders had every reason to be furious with the Commonwealth Bank.

Remember that this bank used to be owned by the Government until it was privatized by the ALP under Paul Keating.

Commonwealth Bank announced on 11 February 2009 a net profit after tax of $2,573 million for the half year ended 31 December 2008. This represents an increase of 9 percent on the prior comparative period.

However it has a Net Promoter Score of -40. MINUS 40! Companies obtain their Net Promoter Score by asking customers a single question on a 0 to 10 rating scale: “How likely is it that you would recommend our company to a friend or colleague?”Based on their responses, customers can be categorized into one of three groups: Promoters (9-10 rating), Passives (7-8 rating), and Detractors (0-6 rating). The percentage of Detractors is then subtracted from the percentage of Promoters to obtain a Net Promoter score.

According to the NPS site, “Banking had an average NPS of approximately 15%.”

Now, I’ve had a few people say “but their shareholders are happy”. Sure. For now. What’s important to understand, though, is the concept of “Good and Bad Profits” (as Jen Storey mentioned on last week’s banking show).

To quote again from the NPS site:

The right goal for a company is to deliver customer experiences of such high quality that customers recognize the value in the relationship and become Promoters. These Promoters generate good profits and fuel true growth. They become, in effect, part of a company’s marketing department, not only increasing their own purchases but also providing enthusiastic referrals.

By contrast, companies can boost short-term profits by exploiting customer relationships, raising prices when they can get away with it, or cutting back on services to save costs and boost margins. Those practices boost bad profits by extracting value from customers at the expense of loyalty, creating Detractors. Companies can not achieve long-term sustained growth on the basis of bad profits.

Which basically translates like this:

If you screw people over to make more money, it will catch up with you sooner or later.

Congratulations on the -40 score Commonwealth Bank. You must be really proud.

UPDATE: The original audio for this show had a problem (overlapping tracks) so I’ve re-uploaded it here.

We hate banks. (see my recent poll) It’s true. You know it. I know it. The only people who don’t seem to know it are the banks themselves. Although, I suspect they DO know it – they just don’t care. They’ve had an effective oligopoly for so long they think they can just say and do whatever they want and we’ll just sit here and take it.

Well I’m not taking it anymore. I’m going to do a series of shows exploring why we hate banks so much and what the alternatives are. We have a voice. Let’s use it to change things.

Today on the show I interview three people – Jen Storey from Online Banking Review, Mike Jarocki from Credit Card Finder, and Owen Davies, Group Manager, Corporate Affairs, Bendigo Bank, the bank that Aussies seem to actually like a bit.

Show sponsor:

Today I’m recording a podcast about why people hate banks so much – and what we can do about it.

I’m interviewing a range of people about banks, independent commentators as well as bank representatives.

This all started with a twtpoll I started last night about which bank is the least evil.

We all know that banks are one of the major causes of the Global Financial Crisis. It’s time we did something about them.

Here’s a list of information and twitter comments I’ve gathered while preparing for the show:

All of the major banks in Australia have MAJOR negative customer satisfaction scores.

Bank fees rose by 8% last year to nearly $12 billion

There is absolutely no reason for bank fees of any kind to exist. Banks borrow our money and charge us for the privilege. Banks already make a metric fuckton of money just by HAVING our hard earned savings in their possession. (@ryanbooker)

without the govt guarantee, i would not be depositing w bendigobank. Nice guys, crap risk management. (@bernardk)

Have found St George to be best bank I have used in AU but I still get best service from UK banks despite being here 15 yrs (@marksmithers)

all banks are evil! $12 billion made from penalty fees in 2008 (@jeremycabral)

Fascinating explanation on YouTube by Argentinian analyst Adrian Salbuchi on what the financial collapse is all about. He suggests that the entire financial system is "extreme capitalism" and a giant Ponzi scheme which will end in another global world war, the same way that the depression of the 30s was ended.

Part 1

Part 2

Salbuchi goes on to explain the "new world orders" that we’ve already seen arise over the last century that were engineered out of WWI and WWII and the next "new world order", a world government. I’m a fan or having a world government – if it’s a legitimate democracy – but his explanation is quite dystopian, an unelected, unofficial world government run by private corporations and, in particular, a small handful of think tanks and lobby groups. Hey – isn’t that the world we already have? Yes – and that seems to be his point. Salbuchi says there is no conspiracy theory involved – all of the players are out in the open.

Part 1

Part 2

Bill Moyers spoke with U.S. Senator Dick Durbin (D-IL) about campaign finance reform and the prospects of Congress passing legislation to help struggling homeowners avoid foreclosure against intense opposition from banks and credit unions.

A very interesting show and worth listening to.

I’ll admit that, until now, I’ve never wondered much about where money comes from. However, after watching this video, I am totally fascinated by the concepts it explores. I can’t vouch for the accuracy of the content or how it applies in Australia, but nevertheless, it’s a terrific video that everyone should watch.

The basic premise of the video is that the monetary system we have in the West is a complete fraud and totally unstable as it is built on the foundation that money is created by the banking system through issuing debt. When they agree to loan you (or a corporation or a government) money, they literally create that money out of nowhere. Watch and learn more. I’ll no doubt be talking about this during next week’s live show which will feature @brad_fidler talking about the origins of – and possible alternatives to – capitalism.

The video was created by Paul Grignon and I was pointed to it by @lelaissezfaireisover.

Money as Debt from RoneTyne on Vimeo.

Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout.

I love the term they are using for bankers who deliberately defraud society – “banksters”. Black says the entire financial system is one big ponzi scheme, making Bernie Madoff looking like an amateur and fall guy for the larger crime which involved the entire financial system and governments who allowed them to go unregulated.

Watch.