Wednesday, November 26, 2008

Subsidizing Criminal Capitalism

Why are we bailing these guys out with taxpayers money while they are guilty of being criminal capitalists. Of course hidden in their bad loan charges will be the costs of criminal charges as well. And in order to offset your criminal charges you can use loosy goosy accounting standards to cook the books. Wait a minute isn't that how we got into this mess in the first place? And there is still no real transparency in the operations of Canada's banks. A profit is still a profit and CEO stock options have not been cut back.

Canada Bails out its banks to the tune of over $1650 for every man women and child. Oh, and ATM fees are going up.

Ottawa to buy $50B in mortgages, hopes to spur loans

Royal Bank of Canada agrees to $10.7M settlement
The Justice Department said Tuesday that RBC Mortgage Co., a subsidiary of the Royal Bank of Canada, has agreed to pay the U.S. more than $10.7 million to settle allegations that the company falsified loan documentation.The Justice Department said the allegations concerned 219 federally insured loans for mortgages submitted to the Federal Housing Administration of the Department of Housing and Urban Development between 2001 and 2005.
CHICAGO - A Canadian bank holding company that purchased a former mortgage company in Rockford will pay the U.S. nearly $11 million to settle claims over bad loans. RBC Mortgage, formerly known as Prism Mortgage, had a lending office in Rockford. Three RBC Mortgage loan officers and 22 other people were convicted of knowlingly setting up 219 loans that failed in the Rockford and Freeport areas between February 2001 and April 2004. Each loan resulted in foreclosure causing financial loss to the government.
Bank of America, Royal Bank of Canada to bail out holders of auction-rate securities
Bank of America Corp. and Royal Bank of Canada will bail out customers stuck with $10.3 billion in auction-rate securities and pay fines to settle state and federal claims that they misled investors in selling the products. Bank of America will buy back $4.5 billion of the securities and pay a $50-million fine in agreements with the Securities and Exchange Commission and New York Atty. Gen. Andrew Cuomo that "closely mirror" a deal last month with Massachusetts. The bank will help clients dispose of an additional $5 billion, the SEC said. Royal Bank of Canada said it agreed to buy $850 million of the debt and pay a $9.8-million fine.Companies including Citigroup Inc., UBS and Merrill Lynch & Co. have agreed to repurchase more than $50 billion in debt to settle claims they touted the instruments as safe, cash-like investments.
RBC takes $1.6B hit on bad loans
RBC said it was avoiding even bigger charges by taking advantage of new looser accounting standards to reclassify impaired assets so the losses would not have to be acknowledged.
Charges cut profit, but RBC expects to make $1.1B in Q4
Gordon Nixon • Born, Jan. 25, 1957, Montreal • Chief executive officer, Royal Bank of Canada (TSX: RY)Years at company: 21 • Age: 51
2007 Earns $8,767,229 in compensation and bonus. Realizes gain of $29,033,072 on exercised stock options. “I think the industry, all of us, anticipated the ability of the markets to recover from those events and to move out of it much more quickly than it has actually happened,” Nixon says. “I think we’ve misjudged the severity of the liquidity crisis.”

Toronto Domion Bank Ex-Commerce Bank CEO to pay $4 mln to settle probe
WASHINGTON, Nov 17 (Reuters) - Vernon Hill, former chief executive of Commerce Bancorp Inc, agreed to pay $4 million to settle allegations of unsafe banking practices, regulators said on Monday.
Commerce forced Hill out in June 2007 after regulators complained about dealings between the bank and partnerships controlled by Hill as well as an architectural design firm run by Hill's wife, Shirley.
Under the settlement with the U.S. Office of the Comptroller of the Currency (OCC),
Hill must also pay $4 million to TD Bank, which acquired Commerce in March. But the iconoclastic banker incurred no fines or prohibitions in the settlement, paving the way for the launch of Metro Bank, a new venture based on the Commerce model of service and convenience. Meanwhile, a U.S. District Court judge in Camden issued an injunction Tuesday forbidding Hill to use materials reflecting Commerce signage and colors at a banking conference in Orlando, Fla. The injunction was sought by TD Bank, whose Canadian parent bank acquired Cherry Hill-based Commerce in March for $8.5 billion. The OCC said Hill failed to comply with sound corporate governance principles related to real estate purchases, leases and joint real estate development transactions involving Commerce that financially benefited him.The bank announced in August 2007 that Hill would receive an $11 million severance payment, subject to regulatory approval. After resigning, Hill started a private investment group that will invest in financial industry stocks. This past summer, he doled out $6 million to become and investor and consultant in Philadelphia’s Republic First Bancorp, which announced last week that it would be acquired by former Commerce affiliate Pennsylvania Commerce Bancorp of Harrisburg, Pa., for $109 million.
TD's capital ratio fell significantly on Nov. 1 under global banking rules, Basel II, that require it to change the way it counts its stake in TD Ameritrade. The decision to issue equity is a dramatic about-face for Mr. Clark, who told analysts on a conference call just Thursday that “raising common equity would be extremely difficult” at the moment. He signalled that the bank would rather increase its capital levels using other methods, such as issuing preferred shares. As a result, the bank had to count 50 per cent of its $4.6-billion stake in TD Ameritrade in its ratio. “That meant we immediately lost $2.3-billion of Tier 1 capital, and that's what brought our Tier 1 capital ratio down,” Mr. Clark said. TD had already raised $1.25-billion of Tier 1 capital during the quarter, Mr. Mihelic noted.TD still has room to issue “more than a couple billion dollars of preferred shares under the rules,” Mr. Clark said.The decision to issue common shares was made yesterday afternoon, because markets improved since Thursday and investors were signalling they wanted a higher capital ratio, he said. TD last week disclosed a surprising $350-million after-tax writedown from credit losses and further investment declines that will not show up in results because of new accounting rules.

Bank of Montreal Rogue gas trader admits to fraud A disgraced natural gas trader at the centre of Bank of Montreal's $853 million commodity trading scandal has pleaded guilty to intentionally mismarking his trading book in a "criminal scheme" to pad his bonus, Manhattan's district attorney announced yesterday ... The charges stem from a joint investigation by the U.S. Attorney's Office for the Southern District of New York and the New York Office of the FBI into Bank of Montreal's natural gas trading losses, which topped $850 million
BMO net rises 24%; dividend is frozen
BMO's high yield should set off warning bells Globe and Mail
First, those results weren't as good as they looked. The headlines say earnings were up 22 per cent to $1.06 a share. Nice, but considering, for example, that the tax rate was not low, not zero but negative, you have to take that with a grain of salt. Reclassifying assets as available for sale added $123-million to the bottom line. Only a very recent rule change allowed that - thank you regulators. Trading revenues were abnormally high too. And here's another reason: no one understands how a modern bank works. During yesterday's conference call, analysts were scratching their heads trying to understand the repercussions of the Apex commercial paper trust, which the bank sponsors; BMO has about $1.6-billion on the line there. If the investments and its attendant risks are hard for professional and experienced analysts to follow, they're practically incomprehensible for the average retail investor - and even some professional investors - to understand as they salivate over a juicy yield.
Bank of Montreal profit climbs The Gazette (Montreal)
Quarterly profit rose 24 per cent at the Bank of Montreal, helped by tax recoveries, higher profit at its Canadian retail banking unit and new accounting rules,
Bank of Montreal Profit Rises on Consumer Banking
Bank of Montreal, Canada’s fourth- biggest bank, said higher revenue from consumer banking helped boost fourth-quarter profit by 24 percent from a year ago, when it had debt writedowns and trading losses. Canadian consumer-banking profit rose 20 percent to C$344 million from a year earlier as personal loans rose 21 percent and it added more mortgages. Commercial loans and credit-card revenue also rose from a year earlier. Investment-banking profit soared to C$285 million from C$46 million a year earlier, when the firm had C$275 million in losses from trading, bad bets on natural-gas options contracts and writedowns on debt investments.
BMO head urges Ottawa to act decisively
Bank chiefs on Bay Street are urging Ottawa to commit to making a major injection of cash into the economy to help stem a rising tide of bad loans, after internal bank figures showed Canadians were increasingly struggling to make payments on money they've borrowed. Bill Downe, chief executive of BMO Financial, said strong and timely fiscal stimulus was needed from government, arguing it would be "positive for employment" and facilitate "constructive investment," while reviving growth for banks.

Let's not bank on the banks
Given this risk and the serious economic consequences of the banking crisis, it may be appropriate that premiere events at the Air Canada Centre are becoming notable for the scarcity of bank executives, who earn up to 500 times more than arena staff. Mark Carney, governor of the Bank of Canada, said yesterday he had been somewhat troubled by the nature of his conversations with chief executives during the last five years. He suggested in a BBC interview that bank chiefs should perhaps have spent more time reviewing their loan portfolios and less time thinking about the "opera or the ski slopes."
Carney signals more rate cuts
In a sign that the global credit crisis is seeping across Canada's borders, Bank of Canada Governor Mark Carney warned yesterday that the country "has been importantly affected by global events" and hinted that another interest rate cut may be in the offing. Pointing to "a tightening in credit conditions," Carney said in a speech to the Canada-United Kingdom Chamber of Commerce in London that "the risks to growth and inflation in Canada identified (in October) appear to have shifted to the downside." He said the crisis has essentially ended for Canada's banks, and short of a complete global market failure, he expects financial and credit markets to improve in Canada
Canada Purchases C$1.05 Billion of Non-Mortgage Debt (Update1)
By Alexandre Deslongchamps and Greg Quinn
Nov. 24 (Bloomberg) -- The Bank of Canada bought C$1.05 billion ($839 million) of securities from investors, less than the C$2 billion it offered to purchase, in an effort to restore normal trading in credit markets.
The central bank will hold the non-mortgage loan portfolio assets as collateral for 28-day loans. The bank has offered to buy C$8 billion or more of such securities by Dec. 9.
Bank of Canada Governor
Mark Carney and Finance Minister Jim Flaherty said last week in separate speeches that they will take whatever steps are needed to shore up the economy and help mitigate the global credit crisis. The central bank has another program under which it will inject up to C$35 billion into the financial system this year through loans to major bond dealers.
Tomorrow, the Bank of Canada will offer loans of C$6 billion to major bond dealers, instead of the minimum of C$4 billion it announced on Nov. 3. On Nov. 27, the central bank will
sell C$1.45 billion of treasury bills, to offset the increased value of assets on its books from its special loans

Sympathy slight for banking blues
The Royal Bank of Canada (RBC), for instance, announced yesterday that its estimated profits for the last three months plunged a frightful $200 million from a year ago. That left the nation's largest bank with a paltry profit of only $1.1 billion -- for its worst quarter of the year.
Putting it another way for those of us who can't quite fathom a billion of anything, the so-called credit crisis engulfing the globe has reduced the Royal to making a little over $12 million a day, including weekends when its branches aren't even open for business. One can only imagine the terminal indigestion all this must be causing in the bank's executive dining room these days.
Only a year ago, the Royal was boasting "a record-busting profit of almost $5.5 billion (for 2007), achieving the highest annual income ever for a Canadian bank despite global capital-market turmoil that has engulfed the entire industry." The Royal, for instance, reports a tidy $330-million increase in revenues over the past three months from an improved credit spread.

Turns out that while most public and media attention has been focused on the near-collapse of the financial system in the U.S. and overseas, the highly regulated Canadian big banks have escaped relatively unscathed. No matter. Nothing like a good global banking scare to sneak through a bit of consumer gouging here at home.
It started in the middle of the recent federal election when the Bank of Canada unexpectedly cut its key lending rate by a full half-percentage point after the first wave of the market meltdown.
The move was intended precisely to get the Canadian banks to cut their lending rates to consumers and businesses in an effort to keep the economy rolling.
But a funny thing happened on the way to the banks -- they decided to cut their rates by only a quarter-point, and keep the rest.
This was not an isolated bit of banking robbery.
According to Bank of Canada figures, its key lending rate has declined 45 per cent from a year ago, from 4.5 per cent to 2.5 per cent. But the prime business rate that banks lend money to their best commercial customers has only dropped 33 per cent -- from six per cent to four per cent.
But no one is getting burned more than consumers and, in particular, homeowners.
In the year that the central bank rate has dropped 45 per cent, the banks have passed along to consumers a tiny fraction of the savings.
For example, according to the Bank of Canada, the average five-year conventional mortgage that was 7.39 per cent a year ago, was being offered to homeowners in October at 7.20 per cent.
Even the average one-year mortgage dropped barely 12 per cent in the year, from an average 7.2 per cent to only 6.35 per cent in October.
All of which clearly helps to explain why Stephen Harper's government has generously provided the big banks with $75 billion of public money with which to further gouge, um, the same public. Finance Minister Jim Flaherty said the move would help average Canadians by "making consumer and mortgage loans more affordable."

Casino Capitalism
Money Laundering Canadian Style
Bank Theft
Credit Card Fraud
The Cone of Silence Bank Presidents and the RCMP
RBC Centre
Greedy Banks
BMO More ATM's Less People
A Day in the Life of Corporate Criminals

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