Banksters, Afghan style

Der Spiegel in July: "Billions of dollars are being secreted out of Kabul to help well-connected Afghans buy luxury villas in Dubai."

The Dubai villas are usually registered in the name of those issuing the loans, such as Sherkhan Farnood, deposed chairman of Kabul Bank, who transferred hundreds of millions of dollars from Afghanistan to Dubai in 2009.

In July Farnood boasted :

"Kabul Bank is so flush that it is building a $30 million headquarters, a cluster of shimmering towers of bulletproof glass."

Since yesterday Kabul Bank is more like a clusterfuck of shimmering droves of Afghans making bank withdrawals and the only bulletproof part is the time-honoured bankster strategy of asking the US Treasury for a bailout. Farnood today :

"If we survive Saturday and Sunday, we will be okay," said Farnood, who spoke at his luxury waterfront villa in Dubai shortly after his return to the Persian Gulf emirate from Kabul.

Mahmoud Karzai, brother to President Karzai, third largest shareholder in Kabul Bank and ... wait for it ... proud owner of a Dubai villa :

"America should do something. If the Treasury Department will guarantee that everyone will get their money, maybe that will work," said the president's brother, who rushed to Kabul on Wednesday from Dubai, where he spends most of his time in a Palm Jumeirah villa purchased with Kabul Bank money. "

Quick financial status update on your investment as a shareholder in those Dubai villas :

Canada's aid in Afghanistan will amount to $1.9B over the ten-year period ending in 2011, making Canada one of Afghanistan's largest donors. In the 2008/2009 fiscal year, Canada disbursed approximately $224M but unfortunately the Dubai real estate market collapsed in 2008.

Our banks are better....

So says Stephen Harper and his so-called finance minister, Jim Flaherty.

Better than what?

Canadian banks were a constrained bunch of animals which, had they gotten past the finance minister known as Paul Martin, would have created three Canadian mega-banks and would have failed as spectacularly as any of the fallen in the US they lusted to become.

Banking and government sources both say Martin did his utmost to be diplomatic. He did not want to appear to have made up his mind, given that the federal competition bureau would not deliver its report on the mergers for almost two weeks, but he also wanted to prepare the banker for bad news. Like everything else arising from this year’s ill-fated bank mergers, however, this meeting between two of the most powerful figures in Canadian finance went off the rails fairly fast. For weeks, Cleghorn’s fuse had been growing shorter as his frustration mounted over Canadians’ inability to understand the bankers’ point of view. In response to Martin’s evasiveness, something apparently snapped. Cleghorn asked straight out whether the Royal’s merger with the Bank of Montreal, and the Toronto Dominion Bank’s copycat arrangement with the Canadian Imperial Bank of Commerce, were going to be allowed to proceed. "No," Martin said simply. Cleghorn, according to both banking and federal government sources, said something along the lines of "No, but . . . ?" or "Unless what?" Martin repeated his first answer. "No."

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In one swoop, the finance minister made it clear that government, not business, will decide what shape the country’s banking sector is allowed to take in the years ahead.

Oh, and didn't the banks make it obvious how goddamned furious they were.

But, what Martin had done was to ensure that a single bank failure would not be enough to lay waste to the Canadian economy. The Milton Friedman formula had no place in Canada. Martin was certain that one day, perhaps after he was gone, Canadians would thank him for his stand.

Then came Harper.

Harper handed the reins over to the banks. Luckily he was constrained. There wasn't enough time for the banks to rebuild their old merger deals and Harper, with a minority government, didn't have a lengthy enough forecast lifespan to guarantee the banks enough time to root themselves in a three bank national model. In short, the actuarial tables on Harper's government didn't give the banks enough insurance to prevent a future government from turning any ideas they had back to their former state.

It's a sure bet that had Harper won a majority in his first tenuous arrival in government, Canadians would have been screwed nine ways to Sunday and the effect of the toxic dealings of banks around the world in general would have affected Canada ten times worse than it did.

And then, the meltdown of the century. Banks around the world had been ripped off by the greedy behaviour of those larger than them. That trickled down, credit was cut off and people everywhere started losing their jobs.

Now we are pelted with a constant harangue of Harper telling everyone, including the world, that he commands the world's most stable banking system, and that the Canadian government never bailed out Canadian banks.

Harper and his sock puppets are blatant liars.

Canada did bail out its banks. The difference between the way Canada did it and the methods of any other capitalist democracy is that Canada did it "off book". In other words, it was never a federal budget item. Instead, the charge went against certain Crown Corporations as liabilities.

Sneaky? Yup. Dishonest? Absolutely.

Read this for more.

And you get down on bended knee and thank Paul Martin for saving this country from a certain and long-lasting deep depression.

Bonus! Reginald Stackhouse is having similar thoughts. Looking back at the failure in the mid-1980s of the Northland bank and the Canadian Commercial Bank he makes this point:

... another example of corporations being capitalistic on their way up, but socialistic on their way down. If they could be smug about individual responsibility in good times, they were not too proud to become welfare cases in hard times.

Mr. Dithers may have saved the Canadian banks

Reach way back, a decade or so, and recall the battle that suddenly erupted when the Royal Bank of Canada announced that it was merging with the Bank of Montreal. It's not that then RBC chairman John Cleghorn asked whether he could merge his federally chartered and regulated bank with the federally chartered and regulated Bank of Montreal. He simply let it be known that it was going to happen.

There was something of an "I say, old boy, you won't stand in the way of things we know are perfectly logical and much too complicated for the plebes and you government types," attachment to the pronouncement given that no Canadian chartered bank could actually do such a thing without the permission of the federal government.

Then federal finance minister, Paul Martin, was having none of it. And it may be that his reaction and decision to rein in the merger-hungry chartered banks set a tone which would save Canadian banks from future disaster.

In one swoop, the finance minister made it clear that government, not business, will decide what shape the country’s banking sector is allowed to take in the years ahead.

Martin's decision had nothing to do with the current financial wreckage in specific terms but it did send a message: Banks will continue to toe the regulatory line and that line will be drawn by government.

Indeed, Canadian banks, through their investment arms, were dealing in US subprime mortgaged-backed bad paper in varying degrees, but their core banking practices had to meet the requirements of the Bank Act and that may well have saved them, and us, from an unmitigated disaster. While Canadian bankers drooled over the idea that they could make tons of money if only they didn't have to bear the burden of excess government regulation, (which bankers claim is politically driven rather than a means to protect financial consumers,) US and European banks were enjoying increased de-regulation, something Canadian bankers point at as putting Canadian banks in an uncompetitive position.

What the Canadian chartered bankers don't tell you, however, is that the position they hold, (and have held,) in the Canadian market is somewhat unique. Unlike some of the regulated US banks they point at (well, used to point at) longingly, Canadian federally chartered banks are already branched. Many US banks were confined by state regulations which denied them opportunities across state boundaries. De-regulation in the US allowed consumer banks to merge and branch in several states, something Canadian banks already enjoyed. What Canadian chartered bankers won't point at is that during the height of the US bank merger-fest, many of those banks were grossly under-capitalized and some were carrying paper which would turn out to be worth less than the cost of the ink on the page.

It should come as no surprize then that suddenly the so-called over-regulated Canadian banking system is the envy of the global consumer banking sector and considered one of the most stable in the world. In fact, when Canadian banks have attracted the attention of the editor of Newsweek International, Fareed Zakaria, you might say they're a force to be reckoned with because they're so well regulated.

Canadian banks are well capitalized and poised to take advantage of opportunities that American and European banks cannot seize. The Toronto Dominion Bank, for example, was the 15th-largest bank in North America one year ago. Now it is the fifth-largest. It hasn't grown in size; the others have all shrunk.

So what accounts for the genius of the Canadians? Common sense. Over the past 15 years, as the United States and Europe loosened regulations on their financial industries, the Canadians refused to follow suit, seeing the old rules as useful shock absorbers. Canadian banks are typically leveraged at 18 to 1—compared with U.S. banks at 26 to 1 and European banks at a frightening 61 to 1. Partly this reflects Canada's more risk-averse business culture, but it is also a product of old-fashioned rules on banking.

Old-fashioned rules. Although I don't suppose any of the chairs of Canada's chartered banks will be sending any "thank you" notes out to Paul Martin any time soon.

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If you need to do a historical catch up, try these:

Blake, Cassels & Graydon, LLP

Susan Munroe

MacLean's Magazine

Fair Enough . . . .

From Reuters today:

IRS to start economic stimulus payments May 2
Mon Mar 17, 2008 1:05pm EDT

WASHINGTON (Reuters) - The Internal Revenue Service said on Monday it would begin sending out the first of more than 130 million economic stimulus payments on May 2 and expects to complete the first round of payments by early July.

The IRS said the payments -- tax rebates of about $600 for most middle-income individuals and $1,200 for middle-income couples -- will be sent out in the order of the last two digits of the taxpayer's Social Security number. Taxpayers must file a 2007 tax return in order to receive a payment.

Let's see now.

The average Joe Schmoe gets $600.

The hedge funds, banks, lending institutions, financiers, etc., will no doubt get bailed out to the tune of billion$ or even trillion$ for their pie-in-the-sky shenanigans. Plus the CEO's of same keep their outrageous salaries,bonuses and options.

Sounds fair enough . . . .

(Cross-posted from Moving to Vancouver)

Blowback! Be careful what you wish for.

Heh. Northman's Fury picked up on a good one.

It seems the Bush administration's new (and grossly punitive) bankruptcy laws are having an effect the US banks never counted on.

``Be careful what you wish for,'' Westbrook said. ``They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures.''

Washington Mutual, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. spent $25 million in 2004 and 2005 lobbying for a legislative agenda that included changes in bankruptcy laws to protect credit card profits, according to the Center for Responsive Politics, a non-partisan Washington group that tracks political donations.

The banks are still paying for that decision. The surge in foreclosures has cut the value of securities backed by mortgages and led to more than $40 billion of writedowns for U.S. financial institutions. It also reached to the top echelons of the financial services industry.

Compassionate conservatism gets a bite on its greedy ass.

Making financial war on soldiers' widows

This is appalling. In fact, it's more than that.

Widows of Canadian soldiers killed in Afghanistan are tied up in a confusing fight of their own with banks that have delayed payment of their mortgages or claim they're not covered by insurance at all because their husbands died in combat.

Several women say they've been told by their financial institutions the mortgage insurance they've spent years paying into does not apply because their spouses died while at war.

Really?!! Because the banks, and their insurance companies are pulling a "war clause" argument.

Maureen Gillam, whose husband Sgt. Craig Gillam was killed last October in a rocket attack near Kandahar, said she received a letter just days ago stating she could not benefit from her mortgage insurance because of a so-called act of war clause.

[...]

"The policy under which insurance was issued with Home Loans Canada states that the insurer does not pay any benefit if death is due to war," the letter reads. "Given the circumstances of the late Mr. Gillam's death . . . we regret that we are unable to pay the benefits for this claim."

However, hours after a reporter questioned Manulife about the issue, the bank suddenly reversed its position and determined it would pay the entirety of the mortgage.

"Manulife has decided that it will make an extra contractual payment of the amount of insurance that would have been payable if there had been no exclusion clause," Manulife spokesman Tom Nunn stated in an e-mail.

Nunn said the bank is not changing its overall policy, but could review special cases like Gillam's to determine if the exclusion should be waived.

Yes, they can. All of them can. And they should be doing it without question and without hesitation.

Given what the banks and financial institutions in this country put down in the way of profits, paying out the home-buyer's insurance claims for Canadian service members killed in action has no material effect on their bottom line. It is absolutely fucking insignificant.

This is reprehensible behaviour on the part of the banks and their insurance underwriters. It's sleazy, cheap and mean-spirited. This shouldn't be happening - at all. An insurance company or a bank trying to squeeze the surviving dependents of our troops killed in combat is a demonstration of the level of detachment corporate Canada has from the Afghanistan mission.

They don't care. Their job is the preservation of the bottom line. And they'll invoke a phony "war clause" even if there isn't one.

Kendra Mellish, whose husband Warrant Officer Frank Mellish died last September in a firefight in Afghanistan's Panjwaii district, said she was initially told she would likely not be able to collect on her mortgage insurance because of a war exclusion clause.

She pursued the issue with officials at the Bank of Montreal, who issued the policy near her home at New Brunswick's Canadian Forces Base Gagetown, and was told they'd look into it.

While awaiting an answer, Mellish, who has two children under the age of 15, was forced to continue paying her mortgage. Four months later, she says the bank revealed it had no such exclusion clause and would begin payments.

Four months? How many lawyers had to read that?

War clauses in insurance policies are garbage in the first place. There could be a huge debate as to what actually constitutes an act of war in this case. But, that really doesn't matter. Despite the fact that Canada is not legally at war with anybody, the banks are flying their true colours and it isn't supporting the troops.

The Canadian Forces isn't blameless in this episode. Pre-deployment screenings should include financial and insurance arrangements of everyone being sent overseas and if a "war clause" shows up in a policy it should be stroked. Period. If the insurance company refuses to do so, then they should be identified as an unreliable supplier of financial protection to the entire Canadian Forces.

This is little more than making war on the troops after they've been killed.

If you feel like complaining directly here are some people you should contact:

Tony Comper, CEO BMO here
Real Raymond CEO National Bank here
Gerald T McCaughy CEO CIBC here
W. Edmund Clark CEO TD Bank here
Richard E. Waugh CEO ScotiaBank here
Dominic D'Alessandro CEO ManuLife here

To their credit the Royal Bank of Canada, which normally has a "war clause" in their mortgage protection insurance removed the clause late last year for any CF members killed in combat in Afghanistan. Now they need to remove it completely.

If our troops are fighting for "Canadian values", the big banks need to learn the meaning of the term.