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« Inside Job Trailer: 'Merrill Trader Thought He Was Smart' | Main | Las Vegas Real Estate Crash Report - Episode #54 Development At Lake Las Vegas »
Tuesday
Sep062011

Wendy Gramm, Judge Bruce Levine & Criminal Behavior At The CFTC - Attention Eric Holder, Federal Prosecutors

If you haven't heard this story yet, be prepared for a new realm of outrage.  When you read this keep in mind that the CFTC has only 2 judges.

Quietly last month, CFTC Case Judge, George H. Painter, issued a "Notice and Order" announcing his retirement from his position.  In this notice Judge Painter wrote of a conspiracy at the highest levels of the CFTC (within the enforcement division), where a long time judge of 20 years has been working with past CFTC Chairs to rig the enforcement of the law by never (not once in 20 years) finding anyone guilty of market manipulation.  We must be talking about tens of thousands of cases, to put the size of these crimes in scope. 

Here are Judge Painter's words:

"There are two administrative law judges at the Commodity Futures Trading Commission: myself and the Honorable Bruce Levine.  On Judge Levine's first week on the job, nearly twenty years ago, he came into my office and stated that he had promised Wendy Gramm, then Chairwoman of the Commission, that we would never rule in a complainant's favor.  A review of his rulings will confirm that he has fulfilled his vow.  Judge Levine, in the cynical guise of enforcing the rules, forces pro se complaints to run a hostile procedural gauntlet until they lose hope, and either withdraw their complaint or settle for a pittance, regardless of the merits of the case"

"In light of these unfortunate facts, if I simply announced my intention to retire, the seven reparation cases on my docket would be reassigned to the only other administrative law judge of the Commission, Judge Levine.  This I cannot do in good conscience.  Accordingly, I recommend that the Commission request the services of an administrative law judge to be detailed to the Commission from another agency."

His request was granted, and his cases were not assigned to Judge Levine.

Wendy Gramm is a former Enron board member, and former head of the CFTC (1988-1993), and the wife of deregulation neocon Phil Gramm.  Here's what Barry Ritholtz said about Wendy Gramm:

A reminder to those of you who may be unfamiliar with this particular corporate harlot: Gramm was not only the former CFTC chair, but she was an Enron board member and wife of deregulation architect Phill Gramm, who for reasons unknown to decent society, is gainfully employed as a fluffer at UBS, helping to further besmirch the reputation of that bailed out firm.

Nice one, Barry!

Levine Notice - pdf

Judge Painter Retirement Letter, WSJ Article on Judge Lynch

 

 

 

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Reader Comments (27)

Oct 23, 2010 at 12:09 AM | Registered CommenterDailyBail
Oct 23, 2010 at 1:38 AM | Registered CommenterDailyBail
CONGRESS PASSES WIDE-RANGING BILL EASING BANK LAWS
By STEPHEN LABATON
Published: November 05, 1999

WASHINGTON, Nov. 4 — Congress approved landmark legislation today that opens the door for a new era on Wall Street in which commercial banks, securities houses and insurers will find it easier and cheaper to enter one another's businesses.

The measure, considered by many the most important banking legislation in 66 years, was approved in the Senate by a vote of 90 to 8 and in the House tonight by 362 to 57. The bill will now be sent to the president, who is expected to sign it, aides said. It would become one of the most significant achievements this year by the White House and the Republicans leading the 106th Congress.

''Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,'' Treasury Secretary Lawrence H. Summers said. ''This historic legislation will better enable American companies to compete in the new economy.''

The decision to repeal the Glass-Steagall Act of 1933 provoked dire warnings from a handful of dissenters that the deregulation of Wall Street would someday wreak havoc on the nation's financial system. The original idea behind Glass-Steagall was that separation between bankers and brokers would reduce the potential conflicts of interest that were thought to have contributed to the speculative stock frenzy before the Depression.

http://www.nytimes.com/1999/11/05/business/congress-passes-wide-ranging-bill-easing-bank-laws.html
Oct 23, 2010 at 1:39 AM | Registered CommenterDailyBail
Phil Gramm, the former United States senator, often told that story of how his mother acquired his childhood home. Considered something of a risk, she took out a mortgage with relatively high interest rates that he likened to today’s subprime loans.

http://www.nytimes.com/2008/11/17/business/economy/17gramm.html?pagewanted=all

Good read on Phil Gramm...
Oct 23, 2010 at 1:42 AM | Registered CommenterDailyBail
Attention Eric Holder??? Has Obama's buddy Eric done anything with regard to bank fraud aside from foreclosure fraud which is just done for votes and p.r.
Oct 23, 2010 at 1:48 AM | Unregistered CommenterZ
Here is a better one...how to build plans for the Obamanation...first...understand how an unknown gets elected...

http://www.youtube.com/watch?v=K30siX8-9sU

If nothing else, watch the last two minute...
Oct 23, 2010 at 2:17 AM | Unregistered CommenterZ
The cocoons! Tell me there is no oversight commission for the CFTC? Really?

Get to power and build your cocoon with the the others. Protect your power, manage your career. Nothing else matters.

It will be so interesting to watch Elizabeth, can she actually withstand the enormity of the pressure to conform?
Oct 23, 2010 at 10:50 AM | Unregistered CommenterOberron4life
This was the right decision from Judge Painter. I also love that quote from Mr. Ritholtz. Sheila Bair and Mary Schapiro deserve a mention as well. See comments here for additional reading: http://dailybail.com/home/cash-for-clunkers-costs-taxpayers-24000-per-vehicle.html
Oct 23, 2010 at 5:50 PM | Unregistered Commenterspideydouble
This just doesn't happen in the legal profession. A retiring judge calling out a sitting colleague? I've never heard of that before, and I've been tuning in to the legal profession in various ways since... a long time ago.

Make no mistake, Judge Painter's letter is a gauntlet in the face of TPTB. Let's see what they do.
Oct 23, 2010 at 6:49 PM | Unregistered CommenterCheyenne
All right, comrades, it's time for bed. Let me tell you the tale of my week before I pass out.

I'm out in front of my office building in Chicago smoking a cigarette and get into it with a new guy on the help line (lots of cpu issues where I work).

C: Can you believe this mortgage shit, these bankers are criminals the way they fuck people out of their homes?

NG: That's right. They made bets on top of bets. They made bets on top of those bets and then made more bets on top of them. I hear it's up to $700 trillion.

Yeah, so awareness is spreading. Like wildfire, in my estimation.

If you think a collapse is on its way, you're right. Question 1 is, slow or fast. I'm betting fast.

Meantime, check this Ennio masterpiece...

http://www.youtube.com/watch?v=oE4MW2HNluw

The other thing to note is this: in the Great Depression, 2 out of 5 banks failed. Now that we know banks are more important than people, it's not difficult to ascertain the outcome here. Wipe out food stamps and we're well on our way. Hmmm.
Oct 23, 2010 at 11:34 PM | Unregistered CommenterCheyenne
There is always an independent grand jury that can act and ought to indict these pieces of crap.
Oct 24, 2010 at 1:30 AM | Unregistered CommenterTim
This story has been covered pretty heavily all over the blogs and some financial media...let's see if anything come of it...i am doubtful we will see an investigation of wendy gramm and judge levine...but Congress really should look into it...
Oct 24, 2010 at 5:35 PM | Registered CommenterDailyBail
DB--

Your prediction is sage. Painter's "order" will receive zero attention on MSM, and thus vanish. However, the trial bar has taken note. It is only a matter of time before the full implications of what lack of standing truly means seeps into the right heads. Attorneys aren't trained to leave money on tables.

Congress is retarded and will do nothing significant--unless to the downside. Ditto the Exec. Wading into Article III judges is another matter altogether, as our Founders had the foresight to give those dudes lifetime appointments. As such, they are on sale far less often.

This game's just gettin started, my man.
Oct 24, 2010 at 6:55 PM | Unregistered CommenterCheyenne
Which Congressional body is charged with overseeing the CFTC? They should know about this. Anyone else willing to write them? Couldn't hurt.

In any case, I nominate Mark McHugh in absentia. He's a pro at this kind of stuff.
http://acrossthestreetnet.wordpress.com/2010/10/21/trick-or-treating-at-the-sec/
http://acrossthestreetnet.wordpress.com/2010/08/27/update-turbo-doesnt-pick-up-his-mail/
http://acrossthestreetnet.wordpress.com/2010/08/22/a-letter-to-tim-geithner-cause-this-is-no-ordinary-bubble/
Oct 24, 2010 at 7:01 PM | Registered CommenterDr. Pitchfork
Dr. P--

Read Judge Painter's words carefully. He says nothing actionable about W. Gramm. He just raises any number of questions about her.
Oct 24, 2010 at 8:12 PM | Unregistered CommenterCheyenne
And Judge Levine? Besides, (LOL) I'm not wanting "action," just a little dog and pony show to shed some light on the cockroaches.
Oct 24, 2010 at 8:32 PM | Registered CommenterDr. Pitchfork
Dr. P--

Levine probably remains unscathed. In that respect, you are correct. This outburst, however, will permeate various bar organizations. I'm not disagreeing with you or anyone else here.

I'm merely pointing out that this is such an egregious outburst that either Groton responds or is proved a coward. Place your bets.

When we find out the latter, it is game on in the courts. We're in a depression. Think it doesn't touch lawyers? Think again. This clusterfuck is just what the doctor ordered.
Oct 24, 2010 at 9:24 PM | Unregistered CommenterCheyenne
Nice.
Oct 24, 2010 at 9:38 PM | Registered CommenterDr. Pitchfork
pitch...i called the house gov't oversight committee this morning about this story...they of course hadn't heard of it...well, now they know...i asked about jurisdiction and didn't get a good answer...it's probably 2 or 3 diff committees who could take up the case...i'll bet it slips through the Congressional cracks...but will have big impact on bar groups as cheyenne explained...
Oct 25, 2010 at 4:01 PM | Registered CommenterDailyBail
Nice job, DB! I'll send it out to them via email. (Squeaky wheel...). They really should know about and this seems like the kind of thing Issa would want to look into in any case.
Oct 25, 2010 at 4:13 PM | Registered CommenterDr. Pitchfork
The CFTC and Wendy Gramm are in violation of Title 18 U.S.C. 1501-1525.

Here is a website (linked by Lexus Nexis) detailing all of the legitimate subprime cases erroneously tossed out by judges (not even a chance to be heard by a jury)
Special thanks to Jon Eisenberg for providing a copy of his article.

http://www.dandodiary.com/2010/06/articles/subprime-litigation/an-updated-analysis-of-subprime-securities-suit-dismissal-motions/
http://www.dandodiary.com/2008/06/articles/subprime-litigation/the-list-subprime-lawsuit-dismissals-and-denials/index.html
http://www.skadden.com/content/Publications/Publications1962_0.pdf

Wendy Gramm and the CFTC are in violation of Title 18 U.S.C. 1501-1525
Obstruction of justice is the impediment of governmental activities. There are a host of federal criminal laws that prohibit obstructions of justice. The six most general outlaw obstruction of judicial proceedings (18 U.S.C. 1503), witness tampering (18 U.S.C. 1512), witness retaliation (18 U.S.C. 1513), obstruction of Congressional or administrative proceedings (18 U.S.C. 1505), conspiracy to defraud the United States (18 U.S.C. 371), and contempt (a creature of statute, rule and
common law)."
http://www.fas.org/sgp/crs/misc/RL34303.pdf

Traditionally, obtaining or extorting money illegally or carrying on illegal business activities, usually by Organized Crime . A pattern of illegal activity carried out as part of an enterprise that is owned or controlled by those who are engaged in the illegal activity. The latter definition derives from the federal Racketeer Influenced and Corruption Organizations Act (RICO), a set of laws (18 U.S.C.A. § 1961 et seq. [1970]) specifically designed to punish racketeering by business enterprises.
http://legal-dictionary.thefreedictionary.com/Racketeering


I KNOW hedgefund managersthat tried to report the sale of UNCOLLATERALIZED "collateralized" debt obligations by subprime dealers to the Commodities Futures Trading Commission (CFTC). They "never picked up their phone" to take the complaints. Financial institutions are competative, they need to make their clients money as well as protect it; and their business. So it is in the best interest of institutions to report grievances if they want to retain their clients.
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/19/AR2010101907216.html

per a 2000 WSJ article...
"Seeking WSJ's Dec 2000 article: December 2000 Wall Street Journal story by Michael Schroeder titled, “If you got a beef with a futures broker, This Judge Isn’t for You—In Eight Years at the CFTC, Levine Has Never Ruled In Favor of an Investor” that details Levine’s penchant for favoring brokers over investors seeking reparations."

There have been perfectly legitimate cases against the subprime dealers of fraud by investors, etc. that were dismissed by the judges, erroneously citing the Securities Act of 1933 (which was enacted to protect investors).

Prevalence of Subprime Securities Class Actions Cornerstone Research's review of 2008 securities class actions reported that.
In 2008, nearly one-third of the companies in Although total new filings dropped in the first half of 2009, the rate of securities class actions against companies in the financial sector of the S&P 500 was over five times the rate for companies in the next highest sued sector. become an important source for information on securities class actions, reports that every subprime securities class action against a financial firm.
http://www.skadden.com/content/Publications/Publications1962_0.pdf

Kevin LaCroix, whose blog has approximately 200 subprime and other credit crisis-related securities class actions have been filed since February 2007.

Executives are named as defendants in almost "litigation against the firms closest to the ongoing subprime/liquidity crisis was the dominant force in federal class action securities litigation in 2008" and that financial firms represented 46% of the $856 billion maximum dollar loss attributed to securities class action filings in 2008. the financial sector of the S&P 500 were sued in securities class actions, which was nearly five times the rate for the next highest sued sector of the S&P 500.
EVIDENCE OF BANK/SUBPRIME FRAUD:

FRAUD IN SUBPRIMES- the writing is on the wall. Who are they kidding trying to cover it up? Are Americans THAT stupid or unaware? (you deserve the government you get)

Goldman Sachs pleaded innocence and the public officials pleaded ignorance. To sum up the subprime scandal, the subprimes were sold as naked positions and probably not disclosed that way to their investors.
REPO 105-EVIDENCE OF FRAUD
The subprime dealers wrote naked (uncollateralized) subprimes which is a very risky position, just like writing naked call options. The Repo 105 issue Lehman Brothers' trial proves that the collateral was not with the subprime dealers but at another bank when these subprimes were sold to investors. (the SFAS 140 made this legal, Sarbanes Oxley allowed this loophole to exist). If you don't understand what REPO 105 is, Paddy Hirsch from Market place videos does an excellent job of explaining it. http://www.youtube.com/watch?v=Tr8qPmyW5Yw
Here's another article on the REPO 105.
http://dealbook.blogs.nytimes.com/2010/03/12/in-lehmans-demise-some-shades-of-enron/

THE NUMBERS DON'T MAKE SENSE- EVIDENCE OF FRAUD
The subprime market is valued at $600 trillion. The PPP of the world is "only" $70 trillion? $600 trillion probably does not exist yet on the Planet Earth, there is definately not enough bonds to collateralize that many subprimes. Infact, to get this many subprimes, the subprime writer would have to sell several subprimes that were supposed to be collateralized by the same bond.

If someone wrote a "naked" (uncollateralized) call option, the CBOE and their respective brokerage would not allow this unless they had enough experience and net worth to cover themselves because this trade is considered high risk. And yes the lack of collateral is definately disclosed.

So why did I bother mentioning the block in court cases?

TARP WAS UNNECESSARY!!!
First, let's discuss what would've happened if the courts were to rule in the plaintiff's (subprime investor's) favor.
Since taxpayers will be gouged for TARP, we all need to understand the relationship between hedge fund investors, subprime dealers and ARM borrowers.
When these ARM borrowers foreclose, isn't the house the unintended property of these hedge fund investors?


Please allow me to elaborate. The Subprime Dealers (Countrywide, Wamu, Bear Stearns, etc..) sold subprime derivatives to subprime investors (most investors were at hedge funds) to come up with financial inventory/capital to sell ARMs with. These subprimes were known as "collateralized" debt obligations (CDO's), "collaterlized" mortgages obligations (CMO's) or Mortgage Backed Securities (MBS). Every financial instrument is a loan that is collateralized to secure the value of a loan. A mortgage is bank loan to borrower secured/collateralized with a house, an auto loan is a bank loan to borrower secured/collateralized with a car. A stock is an investor's loan to a company secured/collateralized by ownership of a company.

A DERIVATIVE is simply any financial instrument that is collateralized/secured by another financial instrument.
ie. Options are collatearlized by 100 shares of underlying stock. Subprimes are collateralized by a bond. Futures are collateralized by commodities.

-How derivatives work:
If any option seller writes a "naked" or uncollatearlized call option, according to the SEC/CBOE/Brokerage, it's considered risky(unlimited). They can't open the position unless they have $25,000 in net worth and the highest option approval rating. If the trade falls through, the buyer of the call can go after the writer for everything they have.
If a subprime dealer (ie. Countrywide) writes a "naked" or uncollateralized subprime, the same exact thing happens and they take the same unlimited risk.

Since they did not collateralize the subprime with a bond, THE SUBPRIME INVESTORS ARE ENTITLED TO GO AFTER THE SUBPRIME DEALERS FOR EVERYTHING THEY OWN (including the foreclosures). That's how the courts should have ruled, except that the courts are blocked thanks to the corruption that is the CFTC and Wendy Gramm. The subprime investors should have 100% control over the foreclosures. Period.

TARP wouldn't be necessary to make this exchange. The politicians/taxpayers/banks should not have a say in how these foreclosures are handled. This should be directly between the investor and the borrower (without the failed banks).
The subprime investor should be free to do as they please with that property...ie. use a property manager, rent it out, negotiate terms on how the borrower can keep the house, etc.

The banks purposely exposed themselves, they lose. If a call writer loses his shirt, nobody bails him/her out. Nobody should bail out the subprime dealers. They KNEW what they were doing.

This would eliminate the need for TARP.

Also TARP wasn't necessary to make the banks liquid.
http://www.heritage.org/research/reports/2008/11/tarp-and-the-treasury-time-to-allow-markets-to-work
http://mises.org/daily/4218

Now we all know that Goldman Sachs was behind Greece's debt troubles! The subprime scandal that could've been PREVENTED was the cause of Greece and other municipality defaults through trades of their interest rate swaps.
Back in March 2010, Gary Gensler (former Goldmanite and head of the CFTC) argued that "Derivative Reform would have dissuated Greece"
http://www.bloomberg.com/apps/news?pid=20601087&sid=a9hBzeyd2pLQ&pos=6.
http://www.nytimes.com/2010/02/14/business/global/14debt.html?hp
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aufmSRtDn0gg
TARP recipients/subprime dealers played the Interest Rate Swap game too, with munis in Los Angeles and Philadelphia:
http://online.wsj.com/article/SB10001424052748703775504575135930211329798.html

For those of us who understand, the collapse of the real estate market and the subprime market was inevitable. These bankers KNEW how the market was going to turn out (Goldman Sachs bet against itself). During foreclosures and high unemployment, municipalities lose revenue. Which makes their ratings go down. When the bond ratings go down, yields go up to give buyers incentive to hold onto that debt. How many city workers lost their jobs as a result of the subprime collapse?

So the banks created the problem, then banked on the rewards for tricking people out of their money.
Let's look at the figures.
To "liquidate" the banks:
-TARP=$700 BILLION
-Quantitative Easing= $30 TRILLION (The devaluation of the dollar is going to cost us in reduced tax brackets for real rates, oil imports and the cost of food.) http://www.investinganswers.com/education/primer-quantitative-easing-what-it-and-will-it-save-economy-1941
-Maiden Lane (to buy up these toxic assets)-$150 BILLION
Maiden Lane I=$30 billion
Maiden Lane II&III=$120 billion
-PPIP (to enable banks to make ARM loans to realtors to speculate in Real Estate Market)=$40 BILLON
Maiden Lane and PPIP cost us $200 billion? Plus whatever else we lose on TARP & QE.
This "bailout" and "economic recovery" is too expensive. Especially considering that we need to cut taxes and restrictions to enable investments in wealth creation and to balance trade in lieu of globalization. Nobody is batting on behalf of the U.S.
Oct 30, 2010 at 5:16 PM | Unregistered Commenterbella75
This warms my heart.
Mar 4, 2011 at 2:19 AM | Unregistered Commenterspideydouble
"Attention Eric Holder, Federal Prosecutors"

Are you kidding? Holder is likely to nominate Wendy Gramm for the position of "Special Czarina in charge of the Gulags".
Mar 4, 2011 at 2:19 PM | Unregistered CommenterMichael Travis
She is small potatoes...we all know who the real crooks are in this mess...ya know, the ones who walked off with $billions and $billions and we paid for it...When was the last time you heard the word "clawback"?

Caveat: Have Gary Gensler and Tim Massad ever been in the same room together? Same guy? Hmmmm.
Mar 4, 2011 at 5:53 PM | Unregistered Commenterjosie
OK,The holiday's over. Now everyone here can go ahead PISS ME OFF. !<?"{$^)*&+!<+% ROFLMAO
Sep 6, 2011 at 6:55 PM | Unregistered CommenterTR
I have to ask: "why is this here under the heading that it's going to piss anyone off? It's old news, and we already know the Holder isn't going to do a damn thing about it. The corruption of the whole legal system in the government is so deep, that short of some alien space craft hovering over the Capital & sucking the whole lot of them then transporting them to alpha centauri, we are all doomed until the "tar, feathers, pitchforks are brought to bare in mass. Time to wake up people, that is if you're able to tear yourselves away from the couch, wallyworld hi fructose corn syrup drips in your veins, faux news channel, tea partyites, because until you do, then you are just as the Bush/Cheney B.S. preached, you are with them, against us, meaning you are aiding & abetting the enemy of your country. Food for thought.
Sep 7, 2011 at 6:35 PM | Unregistered CommenterNorman

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