Tavakoli: ProPublica’s “Untold” Magnetar Story Creates Excuses for Wall St and Washington

Stacy Summary: Another great piece from Janet Tavakoli.

FYI:  For our next episode of Keiser Report to air tomorrow, we were actually scheduled to interview one of the authors of the ProPublica piece that Tavakoli refers to in her article.  That is until he bailed on us with what I thought seemed a bit of a lame excuse (after first asking for links to our previous episodes, he said his editors, who I since learned are ex-WSJ, said he was too busy). Anyway, the curious nature of their declining us access to their investigative team inspired me to do some research on them. And I learned that ProPublica is financed by Herbert and Marion Sandler who used to own Golden West Financial / World Savings Bank, a savings and loan that they sold in October 2006 to Wachovia for $24.3 billion.  The sale to Wachovia included $122 billion of adjustable rate mortgages held by Golden West.  According to this article from 2008, “Home prices began to crumble once Wachovia took over, and now the bank [Wachovia] is in such deep trouble that it has agreed to be sold to Wells Fargo for nearly 90 percent below the company’s stock price at the time of the Golden West takeover.”  Also at the same time, NBC’s “Saturday Night Live” broadcast a skit deriding the Sandlers as predatory lenders who had duped unsophisticated borrowers and Wachovia, too.  The skit was subsequently pulled, but this site has it here (from 5.00 minutes).

Kind of interesting that an investigation they financed now stands accused of providing excuses for Wall Street and Washington.

40 comments on “Tavakoli: ProPublica’s “Untold” Magnetar Story Creates Excuses for Wall St and Washington
  1. nama rama says:

    well well!

  2. Danny says:

    Didn’t that guy know NOT to stand-up Stacy Herbert!

  3. Photoception says:

    Making fun of Bawney Fwank is too easy.

  4. kass says:

    Danny’s right. Not smart of ‘em to give Stacy a reason to start out-investigating the investigators.
    You never know what’s gonna crawl out once you start shining a light in dark corners.

    Way to go, Stacy!

  5. R. Cain says:

    @ Photoception

    i actually love to listen to Bahney Fwank because he is a MASTER BS/doubletalk artist.

  6. frances snoot says:

    US regulators want OTC derivatives regulated:

    “Kirby points to the discussions about improving the price transparency of OTC derivatives trading. “In 2010, the second installment of the Markets in Financial Instruments Directive (MiFID II) will re-open the discussions in Europe, and the US regulators have already made it clear, through the Committee on Capital Markets Regulation’s plan for regulatory reform, that they want to move OTC trading on exchange,” he says. “The clearing side in the US is more of a done deal compared with Europe, but OTC electronic trading is still a hot debate in both territories.””

    http://www.incisivemedia.com/public/showPage.html?page=872981

  7. frances snoot says:

    http://www.capmktsreg.org/

    http://www.capmktsreg.org/pdfs/10-Mar-4_Committee_Derivatives_Letter.pdf

    “Subject to general principles established in legislation regarding standardization and liquidity, the Committee believes the Federal Reserve rather than market participants or CCPs should ultimately determine what types of contracts are centrally cleared. It would be inappropriate to leave the decision to CCPs, because CCPs are largely controlled by dealers and dealers may have too little incentive to opt for central clearing if it results in a narrowing of their spreads. On the other hand, the Federal Reserve should undertake a cost-benefit analysis before deciding to require clearing of a new category of contracts beyond what CCPs are themselves offering to clear. Any such action should be subject to the same standards of review and challenge as any other similar regulatory action under existing law.”

    Federal Reserve=Our Monetary Authority (g20)

    http://www.g20.org/147.aspx

  8. frances snoot says:

    Bloomberg regarding the Committee (or should that be THE COMMITTEE):

    http://www.bloomberg.com/apps/news?pid=20601103&sid=aHKD17tURbfk&refer=news

  9. frances snoot says:

    @R.Cain:
    Senator Gregg is opposed to the committee recommendations, not Barney:

    http://www.fosters.com/apps/pbcs.dll/article?AID=/20100418/GJOPINION_0102/704189937/-1/FOSOPINION

    He brings up the issue of liquidity.

    hahahaha

  10. frances snoot says:

    Global liquidity as stanchly regulated as through the eye of a needle (exceptions for the sovereigns, of course). Tiers of advantage based on liquid access.

  11. frances snoot says:

    “With regard to the highly complex over-the-counter derivatives market, the language included in the Dodd bill will restrict economic growth and innovation. Senator Reed and I continue to work on a provision aimed at addressing the role that over-the counter derivatives played in causing the financial crisis, while acknowledging the diversity of derivatives and the valuable role these risk management instruments play for industries throughout our economy. I am hopeful that we are able to reach a bipartisan agreement on the derivatives title before regulatory reform legislation is considered on the Senate floor.”

    http://gregg.senate.gov/news/press/release/?id=3845D103-7E13-465E-BAD7-55C2674428E1

    dodd the clod

  12. Yankee says:

    AND they got a pulitzer!

  13. While we can all applaud Ms. Tavakoli’s efforts to keep Goldman sleaze from being covered up, she has used the term “synthetic CDOs” in the way less knowledgeable types (which she surely is not) — usually reporters and news readers — use the term “naked” options/shorts. These words are intended to stir up readers’ suspicions, but in fact, the synthetic creation of CDOs was done, presumably, because the supply of “real” CDOs meeting the criteria of Goldman, Magnetar et al. was too small to meet institutional demand. As much was true of equity put options before they became listed on every stock in the late 1970s. Before that time, each exchange had only five stocks on which puts could be bought. But that didn’t stop market-makers from creating and selling synthetic puts.

    Concerning demand for CDOs outstripping the supply, a symptom much broader than the one Ms. Tavakoli has written about is the frenetic hustling of re-fi packages by mortgage brokers. Besieged with offers of cheap loans, homeowners must have wondered why the lenders were being so “nice.” But because the outcome appeared to be a win for all parties involved, and because the final product helped satisfy all-but-insatiable demand from institutional portfolio managers in need of triple-A yields to cover the entire curve, home-equity loans burgeoned far beyond the level of “organic” demand. Blame the feather merchants if you want, but there is no getting around the fact that we were all complicitous, since the operators downstream of Goldman never had to twist our arms to make us borrow.

  14. harry_w says:

    @ frances,

    13 responses so far, 6 of them from you, but I can’t see how any of them are relevant to the thread [tagged: magnetar · propublica · sandler · tavakoli].

    It’s quite remarkable really.

  15. Tom Usher says:

    Hello Stacy and All,

    “At…Golden West…selling option ARMs for two decades, deferred interest made up about 59.6% of the bank’s earnings in the first half of 2006. ‘It’s not the loan that’s the problem,’ says Herbert M. Sandler, CEO of World Savings Bank, parent of Golden West. ‘The problem is with the quality of the underwriting.'” http://www.businessweek.com/magazine/content/06_37/b4000001.htm

    However, he went along with the market to stay in business but sold before the bust. Was that shrewd or unethical or both?

    Peace

    Tom Usher

  16. ronron says:

    @Harry. snoots cool. nobody gives a fuck. you being nobody. ;-)

  17. frances snoot says:

    @Harry:
    Thank-you. I like to know I’m consistent.

  18. frances snoot says:

    ronron:
    I’m afraid I’m not ‘cool’. I don’t do hip. I never say ‘like, whatever’. And I seem to provoke hives in Harry.

    Harry, try this:

    http://saltmagazine.typepad.com/photos/uncategorized/2007/07/09/gold_bond_triple_action_medicated_b.jpg

  19. ronron says:

    @Snoot. ok, cool with me.

  20. Creative Destruction says:

    @ Stacey

    Simon Johnson is fighting the good fight. Seen him on various sources lately. Maybe he can jibber jabber with Maxtrodamus.

  21. frances snoot says:

    ronron:
    These guys look cool, huh?

    http://law.hku.hk/aiifl/images/Jan6bigDSC00002_JPG.jpg

  22. harry_w says:

    @ frances,

    Thank-you. I like to know I’m consistent.

    Irrelevant actually. I was just checking.

  23. frances snoot says:

    I’m not sure concerning your perspective on relevance, Harry. You adorn yourself from your lookout in the middle of the pond on the lilypad.

  24. ronron says:

    @Snoot. don’t get smart with me. ;-)

  25. Youri Carma says:

    @Rick Ackerman

    “but there is no getting around the fact that we were all complicitous, since the operators downstream of Goldman never had to twist our arms to make us borrow.”

    That’s bogus reasoning cause when I buy a medicine cause my doctor told me so but I get sick cause the pharmaceutical producer screwed up I cannot say” Oh nobody twisted my arm” it’s plain BS.

    We shoul be able to trust the system and a normal citizen never can find out what these arsenists cooked up for us behind the screen. The whole tripple A product sceme was a scam so don’t come to me with “oh nobody twisted my arm”

    Information is deliberately hold back from customers. I worked years in live ensurance so I know that it’s done. Governments have to push with regulations to keep insurance companies and banks on the right track cause they are only have money on their minds not the customer per se.

  26. harry_w says:

    @ frances,

    I’m not sure concerning your perspective on relevance, Harry…

    I said the thread is tagged: magnetar · propublica · sandler · tavakoli.

    Relevant to those subjects.

    You adorn yourself from your lookout in the middle of the pond on the lilypad.

    That sounds very grandiose, but it’s perfectly senseless. You indulge yourself.

  27. frances snoot says:

    “Tavakoli: ProPublica’s “Untold” Magnetar Story Creates Excuses for Wall St and Washington”

    title:
    http://www.thefreedictionary.com/title

    2.A general or descriptive heading, as of a book chapter.

    My assumption being that the title indicated a desire to converse concerning the ‘excuses’ being made by Wallstreet and Washington concerning derivatives (not limited to the domain magnetar · propublica · sandler · tavakoli.)

    I considered it advantageous to the dialogue concerning Washington’s excuses (not limited to the domain magnetar · propublica · sandler · tavakoli.) to include the (strong) advice (dictates) coming from the Committee on Capital Markets Regulation.

    It seems the press is creating realities that are detached from the general discourse: hence my referral to the pond and the lily pads.

    Lovely and interesting, but sadly irrelevant to the agenda at hand regarding the G20/sovereign goals prior to the ‘multilateral’ exchange system function.

    Harry’s inclusion was a fixated afront at Snoot: as usual. One wonders why. It would seem Harry is irrelevant, and Not Snoot.

  28. frances snoot says:

    “Blame the feather merchants if you want, but there is no getting around the fact that we were all complicitous, since the operators downstream of Goldman never had to twist our arms to make us borrow.”

    Who is we?

  29. Wow, the Propublica piece is akin to a Deep Capture piece… multiple chapters…
    http://www.propublica.org/feature/all-the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble

    I like this part from Pro-publica article referred to:
    Nearly all of those approached by ProPublica declined to talk on the record, fearing their careers would be hurt if they spoke publicly.
    :lol:
    HOW IRONIC, no?

    In reading the Pro-Publica article, they reference this video that explains CDOs quite simply (along with the 2nd derivative of the MBSs)
    http://marketplace.publicradio.org/display/web/2008/10/03/whiteboard_crisis_explainer_uncorking_cdos/

    Overall, though, this is just a winding piece about deals Magnetar made… (maybe the other chapters will be more interesting???)

  30. Oh hell…

    That Propublica link WAS the whole article…
    hmmm…

    I wonder why Stacy wanted one of the authours on the show???
    Ahhhh I just did a little check myself… the only authour who worked at WSJ was Jesse Eisinger…. So that’s who they were trying to get on the show?

    :lol:
    This vid explains the SEC vs Goldmung shitpile nicely, using an analogy of a bookie, a gambler, and a beastly NAG…
    http://vimeo.com/10992677

  31. Happy Dick says:

    @bagof donuts

    Thank You for posting the SEC/Goldman link

  32. 60 Minutes did a report on the Sandlers/World Savings last year

    http://www.cbsnews.com/stories/2009/02/13/60minutes/main4801309.shtml

    It appears they weren’t as clean as they seem…
    BUT, they sure knew WHEN to sell the business…
    right at the top…

  33. :lol:

    I was just reading the SEC filing that talks about the Merger with Wachovia, and they expected World Savings to grow at 12% in earnings THROUGH TO 2009 !!!!
    http://www.secinfo.com/dsVsf.v6Ns.htm#bupf

    Another strange thing I noticed, is that at one point, the Sandlers owned 20% of the outstanding shares, but by the time of merger, they only owned 10%???
    Were they doing a lot of inside selling on the way to the top??? Or were the shares that heavily diluted???
    That was rather prescient of them, and would explain why they were considered “underpaid” CEOs… at least directly…
    :twisted:

  34. Going through the C-Span records, I found an appearance by Marion Sandler at Clinton’s Economic Conference, Dec 14 1992, and he praises her as being part of “an S&L that actually worked in the 80’s… didn’t cost the taxpayers a dime”
    :lol:
    go to 47:30 just before she starts speaking…
    http://www.c-spanvideo.org/program/36064-1
    She is mainly talking about “entitlements” and getting rid of them…
    except for basic ones…
    hmmm nothing too scandalous there, I suppose…

    Actually, this whole video is fairly interesting in the parallels of the discussion then and now…

  35. Max Power says:

    The evil American imperialist JT was also on CBC TV, a TV network MK has never ever been interviewed by as far as I know :

    http://www.cbc.ca/video/#/News/Money/ID=1473248390

  36. Financial Meth Labs
    :lol: Tavakoli was trained as a Chemical Engineer, no?
    I wonder if she watches Breaking Bad ?

  37. Sherri Young says:

    @ Rick Ackerman

    “Blame the feather merchants if you want, but there is no getting around the fact that we were all complicitous, since the operators downstream of Goldman never had to twist our arms to make us borrow.”

    Sorry, but I did not fall into debt and neither did plenty of others. Don’t you see that the “we’re all guilty” mantra came about right after the one about “those people” (inferring African-Americans) who lied and cheated on their loan applications and caused this havoc…failed? It’s an effort to deflect blame from the bankers and their buddies. Remember: the loan officer is supposed to be the adult in the room. Sloppy underwriting is bad enough, but fraud is outright criminal.

    If you were imprudent, blame yourself. Please do not attempt to extend that blame to all of society. Some of us are not deserving of inclusion. Let the corrupt actors have the spotlight.

  38. Pez says:

    I 2nd the caption in the SNL skit for the Sandlers (Swindlers)! If you like Frank’s voice you’ll love “mumbles” Menino the Mayor of Boston.

Access The Max Keiser Podcast
Weekly Downloads, live Q & A Session and exclusive video posts from Max and Stacy

Subscribe Learn More
Buy Gold Online
Watch the latest Keiser Reports: