Malaysia Worst to come in US financial assets to real estate could continue to fall, sparking the collapse of banking systems.

SEC Probes Banks, Funds Over International Bribery Concerns

Citibank to compensate duped investors - The Times of India

Assert Price Collapse

According to the 2011 Global Risks Report, the value of everything from financial assets to real estate could continue to fall, sparking the collapse of banking systems.

Citibank is likely to dip into its global insurance policy to compensate customers defrauded by its wealth manager, Shivraj Puri. The bank on Saturday said that it is working towards a 'fair compensation ' for those who lost money in the fraudulent scheme marketed by Puri.

Citi's payment will, however, be limited to the principal amount investors put in. The amount invested in Puri's scheme is expected to be in the region of Rs 300 crore. In return, the bank would be seeking an assurance from the victims that they will transfer all their rights of recovery to the bank and a promise to assist the bank.

In addition to following the money trail, the bank would also pursue a claim with its insurers. The American bank is understood to have a cover that is globally managed, which, among other things, covers losses due to fraud by employees. According to insurers, claims of this nature are covered by a professional indemnity policy, which is sold as an add-on cover with the bankers' bond.

The Bankers Blanket Bond (BBB) is a comprehensive policy used by banks to transfer operational risk. "Most banks in India have purchased the cover but with very low limits in contrast to other Asian markets where the limits are higher and coverage broader. Many foreign banks have taken reinsurancedriven comprehensive policies in line with their global programs ," said Sanjay Kedia, CEO and country manager, Marsh India, an international insurance broking firm.

In a statement issued here on Saturday, Citi said, "We have since been in contact with our impacted customers and are committed to safeguarding our customers' legitimate interests. During

this interim period, we have been reconciling amounts involved with impacted customers and are now commencing the process of working towards a fair compensation for them."

Sources said that although initial indications were that Puri made wrong bets on index futures and lost all money, they have reasons to believe that he has made bets on both sides of the market and there is a possibility of recovery.

According to an official with a broking house, claims of this nature have been paid internationally by insurance companies to banks under the professional indemnity policy. For instance, there has been a case where a bank was paid $7.5m under the professional indemnity policy for losses suffered by a client who alleged negligence by the bank's asset management division. In another case, the insurance company had paid out $8m for a bank that faced a claim for providing bad advice to a private banking client.

In its statement, Citi said that the process of working out compensation would happen over a period of time. "We would like to thank our customers for their patience and co-operation . We will also continue to support the investigating authorities fully until this matter is resolved and brought to its logical conclusion," it said.

Read more: The U.S. Securities and Exchange Commission is investigating whether banks and private-equity firms violated bribery laws in their dealings with sovereign-wealth funds, The Wall Street Journal reported on Thursday.

The newspaper, citing people familiar with the matter, said the SEC has sent letters of inquiry to as many as 10 companies in the past week.

Among the companies are Citigroup and private-equity firm Blackstone Group , the report said.

One person familiar with a firm that received a letter said it was brief, indicating the investigation was at the early stages, the Journal reported.

Sovereign-wealth funds have in recent years invested in private-equity funds and the biggest Wall Street firms, taking stakes in Citigroup, Merrill Lynch before its acquisition by Bank of America , and Morgan Stanley .

For example, in 2007, China Investment, which manages more than $300 billion, invested in both Morgan Stanley and Blackstone.

An SEC spokesman declined to comment.

hand that stole a loaf of bread. Only these hungry people didn't steal anything, they were told to take the deal, that it was allright. I've built, as a superintendent, thousands, and as a salesperson, have sold hundreds of new homes since 2000. The great majority of my buyers who were able to get a loan easily are still in their homes, making their payments, still benefitting their families and what's left of the economy. However, the banks that initiated so much of the greed are still out their raking in profits.

The Big Money Banks are very well CONNECTED: Many of the current big-bank lobbyists were architects of the too-big-to­-fail banking regime while they were employed in Congress or elsewhere in the federal government­, and they are now drawing lucrative salaries from the banking behemoths they helped create. Now, on a range of issues, the big banks' armies of lobbyists have scored victories that assure the continued existence of Wall Street's casinos, despite the threat they pose to the American economy. •243 lobbyists for six big banks and their trade associatio­ns used to work in the federal government – 202 in Congress, the rest in the White House, Treasury, or at a relevant federal government agency. That's equivalent to 40 revolving-­door lobbyists per bank.iv •This includes 33 chiefs of staff, 54 staffers to the House Financial Services Committee and Senate Banking Committee (or a current member of that committee) and 28 legislativ­e directors.  Many of the revolving-­door lobbyists were key architects of financial deregulato­ry legislatio­n during their time as congressio­nal staffers, including the Financial Services Modernizat­ion (Gramm-Lea­ch-Bliley) Act of 1999 and the Commodity Futures Modernizat­ion Act. •The six big banks and their trade associatio­ns have spent close to $600 million si­nce the first major federal bailout of Bear Stearns in March 2008 on lobbying, trade associatio­n activity and political contributi­ons.  http://www­.truth-out­.org/big-b­ank-takeov­er-how-too­-big-to-fa­ils-army-l­obbyists-h­as-capture­d-washingt­on59479”

It's outrageous the way subprime borrowers swarmed and solicited unsuspecting lenders and camped out in the offices of investment banks to push them to find ways to finance their insatiable need for capital to purchase homes. It's a scandal the way they got in bed with appraisers to get the home values stated at three to five times market value. It's criminal the way they falsified income to push through the mortgage loans. Oh wait... they didn't. [Hat tip to Nomi Prins, author of It Takes a Pillage.]

While there were instances of fraud by borrowers, the key drivers of our housing crisis were fraud perpetrated by mortgage lenders and securities fraud -- by some of our most revered financial institutions -- that provided money to fuel fraudulent mortgage lending.

After the largest bank bailout in world history, we have a national epidemic of foreclosure fraud. In cases where foreclosures are being delayed, banks are walking away from abandoned homes and sticking local taxpayers with the bill to clean up the mess they left behind.

Yet, as Arianna Huffington points out in her latest book, banks continue to find ways to get Americans to subsidize problems that the banks themselves were chiefly responsible for creating. Consumers struggle to keep up with payments as the unemployment rate rises along with food and energy prices, and loan resets kick in:

When they don't, banks, trying to offset losses in other areas, turn around, hike interest rates, and impose all manner of fees and penalties--all of which makes it less likely consumers will be able to pay off mounting debts.

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream Pp. 77 & 78.

GSAMP: Garbage Sold at Mythical Prices

In 2007, the state of Ohio kicked the California-based New Century mortgage lending carpetbaggers out of the state and barred New Century from doing business after despicable practices. A complaint of alleged fraud on the part of Goldman Sachs detailed its close relationships with Countrywide, New Century, and Fremont. The complaint showed Goldman knew of "an accelerating meltdown for subprime lenders such as New Century and Fremont." Despite known serious loan problems, Goldman continued to securitize the loans and sell them in packages of residential mortgage backed securities.

Suspect deals like GSAMP-2006 S3; $494 million of securities bought by institutional investors in April 2006 were created and distributed by Goldman Sachs Alternative Mortgage Products (GSAMP).

Fortune's Allan Sloan and Doris Burke followed the deal as its value slid ever downward as well as the fudgy way the deal's deteriorating value seemed to be overstated by the trustee's report:

More than a third of the loans were on homes in California, then a superhot market, now a frigid one. Defaults and rating downgrades began almost immediately. In July 2008, the last piece of the issue originally rated below AAA defaulted -- it stopped making interest payments. Now every month's report by the issue's trustee, Deutsche Bank, shows that the old AAAs -- now rated D by S&P and Ca by Moody's [junk ratings] -- continue to rot out.

As of Oct. 26, date of the most recent available trustee's report, only $79.6 million of mortgages were left, supporting $159.9 million of bonds...But even worse, those mortgages aren't worth anything like their $79.6 million of face value, according to ABSNet Loan HomeVal...As of Sept. 26 -- a slightly different date from what we're using above -- ABSNet valued the remaining mortgages in our issue at a tad above 20% their face value. Now, watch this math. If the mortgages are worth 20% of their face value and each dollar of mortgages supports more than $2 of bonds, it means that the remaining bonds are worth maybe 10% of face value.

"Junk mortgages: It just gets worse, " by Allan Sloan and Doris Burke, Fortune, December 1, 2009.

"Countrywide Broke the Law"

In above mentioned complaint against Goldman Sachs, allegations of suspect practices from mortgage lenders, including Countrywide, now owned by Bank of America, were revealed. According to a former Countrywide employee:

"approximately 90% of all reduced documentation loans [also known as "liars' loans] sold out of a Chicago office had inflated incomes, and one of Countrywide's [mortgage brokerage arms] routinely doubled the amount of the potential borrower's income...so that borrowers could qualify for loans they could not afford."

When Countrywide's employees received documents verifying income that showed the borrower couldn't afford the mortgage and didn't qualify for a loan, they simply ignored it and "the loan was re-submitted as a stated income loan with an inflated income figure so as to facilitate the approval of the loan." In other words, the former Countrywide employee said that brokers, not borrowers, engaged in massive fraud to push loans through the system and earn commissions.

Illinois Attorney General Lisa Madigan told First Business Morning News: "Countrywide broke the law, homeowners did not."

Pump and Dump

The same banks that supplied money -- and in some cases now own -- suspect mortgage lenders also packaged up and sold those loans to investors. These banks also own or owned "servicers" that are supposed to act as stewards for investors. But if servicers cannot recover foreclosure costs combined with the costs of maintaining and reselling the house, they often abandon the property. After pumping up appraisals and falsifying borrowers' income on applications, banks are walking away. Once again, American taxpayers will foot the bill:

In Chicago, the mortgage servicers and trustees most often associated with the [abandoned] properties are Bank of America, with 314 properties; Wells Fargo (234), U.S. Bank (185), Deutsche Bank (178), and JPMorgan Chase (165).

"More banks walking away from homes, adding to housing crisis," by Mary Ellen Podmolik, Chicago Tribune, January 13, 2011. (Source of data on homes apparently abandoned in the foreclosure process is a new local study by the Woodstock Instititue.)

Despite evidence of widespread interconnected mortgage lending, securitization, and foreclosure wrong-doing and fraud, there are no meaningful felony indictments. Arianna Huffington suggests a solution and a long and difficult road ahead:

The most effective way of fixing the multitude of problems facing America is through the democratic process, but the democratic process itself is badly broken. That is why the first step toward stopping our relentless transformation into Third World America has to be breaking the choke hold that special interest money has on our politicians.