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Artwork from collapsed investment bank Lehman Brothers and other memorabilia have fetched £1.6m at auction.
link: http://www.bbc.co.uk/news/uk-11440421Artwork from collapsed investment bank Lehman Brothers and other memorabilia have... more
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(Reuters) - Federal Reserve Chairman Ben Bernanke and bank regulator Sheila Bair will testify this week before a panel exploring the causes of the financial crisis.
The Financial Crisis Inquiry Commission, a 10-member Congressionally appointed panel, said on Monday it will hear on Wednesday and Thursday from a slate of regulators and high-profile figures in the crisis, including former Lehman Brothers Chief Executive Dick Fuld and ex-Wachovia CEO Robert Steel.
The two-day hearing will explore the concept of "too big to fail" -- the idea that some institutions are so large and interconnected that they have an implicit government backstop.
The Dodd-Frank Act passed earlier this summer aims to crack down on such a concept by forcing big financial firms to write living wills that regulators would use to dismantle them if they became insolvent.
The FCIC has held a series of public hearings since January, bringing before them major players in the financial crisis and famous figures such as investor Warren Buffett as it chronicles the roots and impact of the crisis in a report due December 15.
On Wednesday, the FCIC will be studying Wachovia, which was acquired by Wells Fargo during the financial meltdown, and Lehman Brothers, which was allowed to collapse, after which credit markets virtually froze.
On Thursday, the panel will be looking at the role of the Fed and the Federal Deposit Insurance Corp in the concept of "too big to fail."
Other witnesses scheduled to testify include New York Fed General Counsel Thomas Baxter, Fed General Counsel Scott Alvarez, and JPMorgan Chief Risk Officer Barry Zubrow.
(Reporting by Karey Wutkowski and Dave Clarke; Editing by Paul Simao)(Reuters) - Federal Reserve Chairman Ben Bernanke and bank regulator Sheila Bair will... more
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The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.
Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.
We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG’s bailout -- deserves further congressional scrutiny.
The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.
That move came a few weeks after the Federal Reserve and Treasury Department propped up AIG in the wake of Lehman Brothers Holdings Inc.’s own mid-September bankruptcy filing.
Saving the System
Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. He maintained during Wednesday’s hearing that the New York bank had to buy the insurance contracts, known as credit default swaps, to keep AIG from failing, which would have threatened the financial system.The idea of secret banking cabals that control the country and global economy are a... more
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March 19 (Bloomberg) -- The Federal Reserve Board must disclose documents identifying financial firms that might have collapsed without the largest U.S. government bailout ever, a federal appeals court said.
The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.
The Fed had argued that disclosure of the documents threatens to stigmatize borrowers and cause them “severe and irreparable competitive injury,” discouraging banks in distress from seeking help. A three-judge panel of the appeals court rejected that argument in a unanimous decision.
The U.S. Freedom of Information Act, or FOIA, “sets forth no basis for the exemption the Board asks us to read into it,” U.S. Circuit Chief Judge Dennis Jacobs wrote in the opinion. “If the Board believes such an exemption would better serve the national interest, it should ask Congress to amend the statute.”
The opinion may not be the final word in the bid for the documents, which was launched by Bloomberg LP, the parent of Bloomberg News, with a November 2008 lawsuit. The Fed may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Court.
Right to Know
If today’s ruling is upheld or not appealed by the Fed, it will have to disclose the requested records. That may lead to “catastrophic” results, including demands for the instant disclosure of banks seeking help from the Fed, resulting in a “death sentence” for such financial institutions, said Chris Kotowski, a bank analyst at Oppenheimer & Co. in New York.
“Whenever the Fed extends funds to a bank, it should be disclosed in private to the Congressional oversight committees, but to release it to the public I think would be a horrific mistake,” Kotowski said in an interview. “It would stigmatize the banks, it would lead to all kinds of second-guessing of the Fed, and I don’t see what public purpose is served by it.”
Senator Bernie Sanders, an Independent from Vermont, said the decision was a “major victory” for U.S. taxpayers.
“This money does not belong to the Federal Reserve,” Sanders said in a statement. “It belongs to the American people, and the American people have a right to know where more than $2 trillion of their money has gone.”
Fed Review
The Fed is reviewing the decision and considering its options for reconsideration or appeal, Fed spokesman David Skidmore said.
“We’re obviously pleased with the court’s decision, which is an important affirmation of the public’s right to know what its government is up to,” said Thomas Golden, a partner at New York-based Willkie Farr & Gallagher LLP and Bloomberg’s outside counsel.
The court was asked to decide whether loan records are covered by FOIA. Historically, the type of government documents sought in the case has been protected from public disclosure because they might reveal competitive trade secrets.
The Fed had argued that it could withhold the information under an exemption that allows federal agencies to refuse disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”
Deep Crisis
Oscar Suris, a spokesman for Wells Fargo, JPMorgan spokeswoman Jennifer Zuccarelli, Bank of New York Mellon spokesman Kevin Heine, HSBC spokeswoman Juanita Gutierrez and RBS spokeswoman Linda Harper all declined to comment. Deutsche Bank spokesman Ronald Weichert couldn’t immediately comment. Bank of America declined to comment, Scott Silvestri said. Citigroup spokeswoman Shannon Bell declined to comment. U.S. Bancorp spokesman Steve Dale didn’t return phone and e-mail messages seeking comment.
Bloomberg, majority-owned by New York Mayor Michael Bloomberg, sued after the Fed refused to name the firms it lent to or disclose loan amounts or assets used as collateral under its lending programs. Most of the loans were made in response to the deepest financial crisis since the Great Depression.
Lawyers for Bloomberg argued in court that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money.
“Bloomberg has been trying for almost two years to break down a brick wall of secrecy in order to vindicate the public’s right to learn basic information,” Golden wrote in court filings.
Potential Harm
Banks and the Fed warned that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell- off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued.
Much of the debate at the appeals court argument on Jan. 11 centered on the potential harm to banks if it was revealed that they borrowed from the Fed’s so-called discount window. Matthew Collette, a lawyer for the government, said banks don’t do that unless they have liquidity problems.
FOIA requires federal agencies to make government documents available to the press and public. An exception to the statute protects trade secrets and privileged or confidential financial data. In her Aug. 24 ruling, U.S. District Judge Loretta Preska in New York said the exception didn’t apply because there’s no proof banks would suffer.
Tripartite Test
In its opinion today, the appeals court said that the exception applies only if the agency can satisfy a three-part test. The information must be a trade secret or commercial or financial in character; must be obtained from a person; and must be privileged or confidential, according to the opinion.
The court said that the information sought by Bloomberg was not “obtained from” the borrowing banks. It rejected an alternative argument the individual Federal Reserve Banks are “persons,” for purposes of the law because they would not suffer the kind of harm required under the “privileged and confidential” requirement of the exemption.
In a related case, U.S. District Judge Alvin Hellerstein in New York previously sided with the Fed and refused to order the agency to release Fed documents that Fox News Network sought. The appeals court today returned that case to Hellerstein and told him to order the Fed to conduct further searches for documents and determine whether the documents should be disclosed.
“We are pleased that this information is finally, and rightfully, going to be made available to the American public,” said Kevin Magee, Executive Vice President of Fox Business Network, in a statement.
Balance Sheet Debt
The Fed’s balance sheet debt doubled after lending standards were relaxed following Lehman’s failure on Sept. 15, 2008. That year, the Fed began extending credit directly to companies that weren’t banks for the first time since the 1930s. Total central bank lending exceeded $2 trillion for the first time on Nov. 6, 2008, reaching $2.14 trillion on Sept. 23, 2009.
“It’s gratifying that the court recognizes the considerable interest in knowing what is being done with our tax dollars,” said Lucy Dalglish, executive director of the Reporters Committee for Freedom of the Press in Arlington, Virginia.
“We’ve learned some powerful lessons in the last 18 months that citizens need to pay more attention to what’s going on in the financial world. This decision will make it easier to do that.”
The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).
To contact the reporters on this story: David Glovin in New York at dglovin@bloomberg.net; Bob Van Voris in New York at vanvoris@bloomberg.net.March 19 (Bloomberg) -- The Federal Reserve Board must disclose documents identifying... more
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Matthew Lee, a former Lehman senior vice president, was fired days after questioning the accounting tricks in a letter to his superiors, attorney Erwin Shustak said. Shustak gave a copy of the letter to The Associated Press.
Lehman Brothers Holdings Inc. imploded in September 2008, becoming the biggest corporate bankruptcy in U.S. history. The collapse sent financial markets across the globe into a free-fall and prompted a massive bailout of the U.S. banking system.
In a letter dated May 18, 2008, Lee wrote that he discovered that the bank had been underreporting its debt by about $5 billion at the end of each month. Lee, a 14-year Lehman veteran, wrote that he felt compelled to report the "discrepancies" under the firm's code of ethics, saying he believed they "possibly constitute unethical or unlawful conduct."
[...]
The examiner, Anton Valukas, discovered that Lehman put together complex transactions that allowed the firm to sell "toxic," mostly mortgage-backed, securities at the end of a quarter — wiping them off its balance sheet when regulators and shareholders were examining it — and then quickly buy them back.
His report doesn't conclude whether executives violated securities laws. It does say that the executives' decision not to disclose the effects of its business judgments appears to be sufficient evidence to support the awarding of civil damages in a trial.
http://news.yahoo.com/s/ap/20100319/ap_on_bi_ge/us_lehman_brothers_whistleblowerMatthew Lee, a former Lehman senior vice president, was fired days after questioning... more
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By Zach Carter, Media Consortium blogger
Senate Banking Committee Chairman Chris Dodd (D-CT) unveiled his latest financial reform proposal on Monday, and the stakes for the new legislation couldn’t be higher. After consumer groups raised a major ruckus, Dodd has dropped one of his most egregious concessions to the bank lobby—cutting enforcement authority from the proposed Consumer Financial Protection Agency (CFPA). That’s good news: Without a major regulatory overhaul, the U.S. economy’s destructive boom and bust cycle will start all over again.
We’ve been down this road before. The Enron fiasco should have served as a wake-up call for policymakers, but instead, the weak federal response to Enron’s major fraud helped pave the way for the current economic slump.
What does Enron have to do with the crisis?
As Megan Carpentier emphasizes for The Washington Independent, one of the key “reforms” Congress enacted in the Enron aftermath was a law requiring every CEO to sign-off on their company’s accounting statements—but it has accomplished almost nothing.
Enron collapsed due to accounting fraud. Its executives weren’t stupid or careless—they made their money by engaging in deliberate and coordinated acts of illegal deception. But CEOs of companies like Enron had always been able to deny that they knew about the shenanigans that were playing out in their accounting departments. By forcing CEOs to sign off on their accounting statements, Congress was attempting to “deny them plausible deniability,” as Carpentier puts it.
But accounting fraud has plagued the U.S. economy, even after the Enron scandal. It also plays a major role in the Wall Street crisis. A recent court report from Lehman Brothers’ bankruptcy examiner reveals that the company arranged a series of complicated transactions to hide $50 billion in debt, making Lehman appear healthier than it was. By hiding this debt, Lehman was able to make bigger bets on the mortgage market. The defense issued by Lehman CEO Richard Fuld? He apparently didn’t know the accounting hijinks were happening
An epidemic of fraud
Most U.S. policymakers are still having a hard time coming to grips with the fact that our financial system is rife with fraud at almost every level. Writing for AlterNet, Joe Costello reports on a recent Roosevelt Institute conference featuring several major economic luminaries. Costello argues that some of Wall Street’s biggest problems were driven by run-of-the-mill fraud. And a key vehicle for this fraud, Costello notes, was the derivatives market—the same market that allowed Enron to perpetrate its own frauds. Many of the scams aren’t even particularly new or creative. They’re simply the same cons that helped usher in the Great Depression.
“If we’re going to get our economy up and running again, the first thing we’re going to have to do is end the fraud,” Costello writes.
Protecting Whistleblowers
But astonishingly, even after the worst financial crisis in history, bigwig bankers have been able to avoid fraud charges and investigations. Even when the Justice Department went after Swiss banking Giant UBS for a massive tax evasion scheme, they let the company’s U.S. executives off the hook and instead jailed the very whistleblower who told the government about the fraud.
The whistleblower, Bradley Birkenfeld, is by no means innocent of wrongdoing—he even smuggled diamonds in a toothpaste container for a wealthy UBS client. But as Corbin Hiarr notes for Mother Jones, jailing the man who blows the whistle sends exactly the wrong message to anybody in Big Finance who recognizes a problem. Not only will your employer come at you with everything it has, but the government you aid will actually send you to prison. The fraudsters you finger get to retire to the Caymans.
This is part of the reason that successful financial reform is not just what the rules are, but who gets to enforce them. There were many reasonable rules against predatory lending that bank regulators at the Federal Reserve and the Office of the Comptroller of the Currency (OCC) could have used to thwart the financial crisis early on, but neither agency was interested in doing so. They were more concerned with short-term banking profits, and up until 2007, sketchy accounting was allowing banks to book big gains on the subprime market.
Why we need a CFPA
That’s why all the way back in June of 2009, President Barack Obama proposed establishing a CFPA focused exclusively on defending consumers against banks. With no concerns for bank profitability, CFPA regulators could go after unfair practices and fraud because they were wrong, regardless of what they did for bank balance sheets.
The proposal was watered down significantly in the House, as Kai Wright notes for The Nation, and just a week ago it appeared that Dodd was ready to completely torpedo the new regulator in an effort to craft bipartisan support for a so-called “reform” bill.
He’s backed off since then, but without strong enforcement authority, nothing is gained—the same corrupt regulators will simply continue to look the other way. But Dodd would still house the new agency at the Federal Reserve. Dodd insists the Fed would have no authority over the CPFA, but if that were the case, why would he introduce the provision at all?
“Reform in name alone will be useless to both consumers and politicians,” writes Wright.
Strong financial reform is overwhelmingly popular. While it’s good to see Dodd backing away from some of the gifts he’d previously proposed to bank lobbyists, progressives must keep the pressure high to ensure that financial reform is strengthened as it moves through the Senate.
It’s easy for a corrupt lawmaker to vote against a weak bill: He can always plead that the bill wasn’t good enough and be right. But serious, popular reform is not so easy to oppose. If Dodd and the Democratic leadership make the politicians backed by the bank lobby—that’s literally every Republican, plus a handful of conservative Democrats—stand up and vote against a good bill, many of them will have to choose between their lobbyist friends and their political future.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.By Zach Carter, Media Consortium blogger
Senate Banking Committee Chairman Chris... more
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If this doesn’t convince you that the Timothy Geithner knew about the securities shenanigans that were going on at Lehman, than I don’t know what will.
Keep in mind, that Geithner ran Lehman through 3 “stress tests” prior to bankruptcy; all of which Lehman failed, and yet, nothing was done. Anton R. Valukas–the examiner who wrote the 2,200 page investigative-report which was released on Thursday– has provided plenty of information detailing Lehman’s “materially misleading” accounting and “actionable balance sheet manipulation.”
In other words, they cooked the books.
more at link...
End the Fed.If this doesn’t convince you that the Timothy Geithner knew about the securities... more
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A report into the collapse of Lehman Brothers criticises senior executives and auditor Ernst & Young for serious lapses that led to the firm's collapse.A report into the collapse of Lehman Brothers criticises senior executives and auditor... more
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suzane
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As an American journalist in Japan, Jake Adelstein uncovered a world unknown to many of the Japanese public, let alone to foreigners: the world of organized crime. For 12 years, he investigated for Japan's largest newspaper, the Yomiuri Shinbun.
In his final story, Adelstein went toe-to-toe with one of the country's most notorious crime bosses, a discovery that led to death threats for him and his family — death threats that have yet to be lifted. His new memoir about his experiences is called Tokyo Vice: An American Reporter on the Police Beat in Japan.
After leaving the paper in 2005, Adelstein was chief investigator for a U.S. State Department-sponsored study of human trafficking in Japan. Today he is considered one of the foremost experts on organized crime in Japan, and works as a writer and consultant in Japan and the United States.
Adelstein is also the public relations director for the Washington, D.C.-based Polaris Project Japan, which combats human trafficking and the exploitation of women and children in the sex trade. He joins Terry Gross to talk about that work, his book and the organized-crime landscape in Japan.
http://www.npr.org/templates/story/story.php?storyId=120237244As an American journalist in Japan, Jake Adelstein uncovered a world unknown to many... more
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Commissions are often created to defer tough decisions; to forge a consensus around a hard solution to a genuine problem; and, rarely, actually to delve into underlying facts. The Angelides commission (http://www.nytimes.com/2009/07/16/business/16inquiry.html?_r=1), officially chartered by Congress this summer as the Financial Crisis Inquiry Commission, has the chance to be that third kind of commission, gathering the missing empirical data on fundamental questions that can guide future decision-making.
We already know an awful lot more about what happened last year than we did in 1932, when the legendary Pecora commission(http://en.wikipedia.org/wiki/Pecora_Commission) was created to investigate the Wall Street crash. We know the fundamental violations of sound banking practice and regulatory failures that brought us to the precipice. Yet there are still critical areas that would benefit from the commission's detailed analysis: four structural issues that have not yet received adequate attention and one particular transaction that is still highly ambiguous.Commissions are often created to defer tough decisions; to forge a consensus around a... more
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A senior administration official said on Sunday that after extensive consultations with Treasury Department officials, Representative Barney Frank, the chairman of the House Financial Services Committee, would introduce legislation as early as this week. The measure would make it easier for the government to seize control of troubled financial institutions, throw out management, wipe out the shareholders and change the terms of existing loans held by the institution.A senior administration official said on Sunday that after extensive consultations... more
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On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst.
But what's even crazier is that the bet paid.
At the close of business that afternoon, Bear Stearns was trading at $62.97. At that point, whoever made the gamble owned the right to sell huge bundles of Bear stock, at $30 and $25, on or before March 20th. In order for the bet to pay, Bear would have to fall harder and faster than any Wall Street brokerage in history.
The very next day, March 12th, Bear went into free fall. By the end of the week, the firm had lost virtually all of its cash and was clinging to promises of state aid; by the weekend, it was being knocked to its knees by the Fed and the Treasury, and forced at the barrel of a shotgun to sell itself to JPMorgan Chase (which had been given $29 billion in public money to marry its hunchbacked new bride) at the humiliating price of … $2 a share. Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. This trader was either the luckiest guy in the world, the smartest son of a bitch ever or…
Or what? That this was a brazen case of insider manipulation was so obvious that even Sen. Chris Dodd, chairman of the pillow-soft-touch Senate Banking Committee, couldn't help but remark on it a few weeks later, when questioning Christopher Cox, the then-chief of the Securities and Exchange Commission. "I would hope that you're looking at this," Dodd said. "This kind of spike must have triggered some sort of bells and whistles at the SEC. This goes beyond rumors."
Cox nodded sternly and promised, yes, he would look into it. What actually happened is another matter. Although the SEC issued more than 50 subpoenas to Wall Street firms, it has yet to identify the mysterious trader who somehow seemed to know in advance that one of the five largest investment banks in America was going to completely tank in a matter of days. "I've seen the SEC send agents overseas in a simple insider-trading case to investigate profits of maybe $2,000," says Brent Baker, a former senior counsel for the commission. "But they did nothing to stop this."
much more at link....On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of... more
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Discusssing what happened to displaced Lehman employees, with Avi Yashchin, Cleanedison president and CNBC's Erin Burnett.Discusssing what happened to displaced Lehman employees, with Avi Yashchin,... more
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It was one year ago that the financial world found out Lehman Brothers wasn't going to survive...
(Coombs, B., 2009, September 14)It was one year ago that the financial world found out Lehman Brothers wasn't... more
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"President Barack Obama is going to Wall Street on the first anniversary of the Lehman Brothers collapse to outline financial changes to avert a future crisis like the one that sent the global economy into a tailspin.
Obama has called on Congress to pass a sweeping overhaul of how financial institutions behave but has seen slower-than-sought action. Administration officials said the president will use Lehman Brothers as a starting point to again decry a hands-off approach from Washington that enabled irresponsible lending that sent the nation's largest financial institutions to the brink of collapse and the larger economy to the edge.""President Barack Obama is going to Wall Street on the first anniversary of the... more
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BY BOB ANDELMAN
CNBC anchor and reporter David Faber is my guest today. He’s the author of a new book, And Then the Roof Caved In: How Wall Street's Greed and Stupidity Brought Capitalism to Its Knees.
I’m very excited for David and his new book, but first we have some old business to cover.
He won’t remember this, but we met at the business channel’s Fort Lee, New Jersey, headquarters back in 2001 when I started writing a book called CNBC Profit Drivers. David was supposed to write the introduction.
AUDIO EXCERPT: "September 14, 2008--it was clear to me we were in the midst of something I'd never seen. You could take the three stories that occurred on that evening: AIG about to go bankrupt; Lehman Brothers going bankrupt; and Merrill Lynch being sold to Bank of America—each of those would have represented one of the bigger stories of a decade in terms of business news and they were all happening on the same night! There was nothing ever like it and there never will be anything like it."
The book was finished but never published—it was cancelled the week after 9-11—but you can read it in its entirety at profitdrivers.net. But it’s still missing an official CNBC introduction.
Now that I got that off my chest, let’s talk about And Then the Roof Caved In.BY BOB ANDELMAN
CNBC anchor and reporter David Faber is my guest today. He’s... more
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We should fly the flags half mast on the anniversary of the day Lehman Brothers died ...
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You think it's the right time to cash out some old Yellow Cake Uranium.....?
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Short selling hedge funds lit the spark that led to the global economic meltdown. Now they want to help craft the laws Congress will pass to fix our broken regulatory system. That's insane.Short selling hedge funds lit the spark that led to the global economic meltdown. Now... more
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