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The Wall Street Money Machine

Fed Shrugged Off Warnings, Let Banks Pay Shareholders Billions
ProPublica | Jesse Eisinger | 03/02/12

"We strongly encourage" that the Fed "delay any dividends or compensation increases until they can show" that their earnings are strong and their assets sound, she wrote. Given the continued uncertainty in the markets, "we do not believe it is the right time to allow transactions that will weaken their capital and liquidity positions." Four months later, the Federal Reserve rejected Bair's appeal.

In March 2011, the Federal Reserve green-lighted most of the top 19 financial institutions to deliver tens of billions of dollars to shareholders, including many of their own top executives. The 19 paid out $33 billion in the first nine months of 2011 in dividends and stock buy-backs. Read more

The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going
ProPublica | Jesse Eisinger and Jake Bernstein | 04/09/10

Update June 21, 2011: JP Morgan Chase has agreed to pay a $154 million penalty [1] to settle SEC charges that the bank misled investors about a complex mortgage-securities deal during the waning days of the housing boom. The SEC charged that JP Morgan neglected to tell investors that the hedge fund Magnetar helped create the deal and was betting against it. This story was the first to detail Magnetar's role.

Update October 29, 2010: This story has been corrected in response to a recent letter from Magnetar. Read their letter, along with our response [2].

In late 2005, the booming U.S. housing market seemed to be slowing. The Federal Reserve had begun raising interest rates. Subprime mortgage company shares were falling. Investors began to balk at buying complex mortgage securities. The housing bubble, which had propelled a historic growth in home prices, seemed poised to deflate. And if it had, the great financial crisis of 2008, which produced the Great Recession of 2008-09, might have come sooner and been less severe. Read more

The Wall Street Money Machine
ProPublica | Jake Bernstein and Jesse Eisinger | 08/26/10

As investors left the market in the run-up to the meltdown, Wall Street created fake demand, increasing their bonuses -- and ultimately making the crisis worse. Read more

In HBO's 'Too Big to Fail,' the Heroes Are Really Zeroes
ProPublica | Jesse Eisinger and Jake Bernstein | 05/25/11

HBO's "Too Big To Fail" ... Ostensibly it's a story of their success against all odds. Michael Kinsley, reviewing the movie in the New York Times, labeled Hank Paulson [1] the "hero" of the account.

Except that the movie actually depicts something entirely different: failure upon failure. "Too Big To Fail" The Movie isn't the story of how the Three Musketeers saved the global economy. It's a story of how the three didn't see the financial crisis coming; hadn't prepared for it; made mistake after mistake as it was cresting; and then, in their moment of triumph, made their most colossal blunder of all. ... Read more

Did The Fed Help Banks While Ignoring The Risks?
NPR | Jesse Eisinger | 03/06/12

Even though banks passed the Fed's "stress test," Eisinger tells Fresh Air's Terry Gross, many regulators and Fed employees believed that the banks were not as strong as the tests might indicate. "This was a very generous decision for the banks," Eisinger says. "They were able to pay millions to shareholders amid huge uncertainties." Read more

NPR | Fresh Air | Did The Fed Help Banks While Ignoring The Risks? (03/06/12) [20:51]

How Some Made Millions Betting Against The Market
NPR, Fresh Air | Jesse Eisenger | 05/02/11

In 2006 and 2007, several banks and hedge funds realized what was happening to the U.S. economy while it was happening -- and then made vast fortunes by betting against the markets. "Lots of bankers knew that things were in trouble, and they went on -- they did it anyway," says ProPublica reporter Jesse Eisenger. "Some of them did it because they could bet against it. Some of them did it because they could make fees by helping clients who were betting against it. And some of them did it just to keep the machine doing it and make huge bonuses." Read more

NPR | Fresh Air | How Some Made Millions Betting Against The Market (05/02/11) [35:26]

After Financial Ruin, Plotting America's 'Comeback'
NPR, Fresh Air | David Walker | date

"Yes, we can do what is necessary to create a better future," says David M. Walker, the former comptroller general of the United States. But he says it's going to take some work, and soon.

"We're on an imprudent and irresponsible path," Walker tells Terry Gross. "We must start making tough choices, sooner rather than later, and before we pass a tipping point."

Walker, who also led the U.S. Government Accountability Office for almost 10 years, says that despite the many current economic pressures that America faces -- war, recession, bailout -- our recent budget deficits may pale in comparison to the economic disaster that looms if we don't take action. Read more

NPR | Fresh Air | After Financial Ruin, Plotting America's 'Comeback' (09/10/10) [26:53]

A Bank's Best Customer: Its Own CDOs
ProPublica | Jesse Eisenger | 03/10/10

In the last two years of the boom, CDOs created by one bank commonly purchased slices of other CDOs created by the same bank. Market leader Merrill Lynch outpaced its competitors. Nearly half of all of its CDOs bought significant portions of other Merrill CDOs. Read more

03.07.2012. 10:46

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