Another Citigroup Scandal: Business as Usual for Wall Street

Yet another scandal was announced Monday regarding Citigroup (C). Last week, Citi announced it was temporarily suspending its mortgage securitization unit – after management “discovered” that it had never stopped buying and packaging fraudulent mortgages (i.e. mortgages lacking appraisal and/or income documentation). I suppose we should applaud management for its 'vigilance' – after all, it's only been two years since the U.S. mortgage Ponzi-scheme was revealed to the world.

This week, the Japanese government ordered Citigroup to cease “marketing of banking services to individuals for a month”, after the Japanese government discovered there were “inadequate internal controls” in place to prevent money-laundering.

With Citigroup having been effectively “nationalized”, one would hope that the Obama regime would ensure this was the one Wall Street bank which would have cleaned up its fraudulent operations. Apparently, these career-criminals are so conditioned to ignore the legality of their actions that there is no way to stop them from immediately lapsing into their fraudulent “business model” the moment that no one is watching.

It highlights the fact that nothing has been done to eliminate the “culture of crime” which saturates Wall Street – and Washington (see “U.S. bank-fraud SYSTEMIC and INTENTIONAL – William Black”). The U.S. is now a country where a former, senior banking regulator (a true “expert”) openly accuses his entire government and the entire banking sector of conspiring to perpetrate a multi-trillion dollar fraud – and it draws nothing more than a yawn from Americans.

Thus, there are two problems here. The first problem is that U.S. banking oligarchs (and their political servants) see laws as nothing more than inconvenient rules, to be avoided whenever possible – just like paying taxes.

The second problem is an American public which isn't simply apathetic, but is apparently completely indifferent to its government and its financial sector. Decades of saturation-level corruption have totally numbed Americans to the fact they have the most corrupt system of any industrialized economy in the world.

What is important to note here is that when Citi management discovered its mortgage securitization unit was still engaging in openly fraudulent behavior, it did not disband the unit, and there are no reports of anyone even being fired. All the company did was suspend the unit for two weeks – just long enough to apply a coat of whitewash.

With this fraud-division responsible for half of Citi's mortgage business, the only consideration was to fumigate the stench – and then put them back to work. These criminals represent the “talent” which Citi claims is so indispensable to its operations that they should be paid huge bonuses, for breaking laws and generating countless billions in losses.

The other point to note here is the deafening silence of the U.S. government. Two new scandals erupt in Citigroup only a week apart, and no one in the U.S. government even has a comment to make about this.

This should have been the proverbial “straw that broke the camel's back”, and resulted in the U.S. government immediately “taking out the trash” (i.e. firing the entire management group at Citi). Where is the leadership? Where is the integrity? Where is the competence?

The third missing ingredient here is media criticism. Surely after the largest mass-fraud in history was exposed (i.e. the U.S. housing bubble and corresponding mortgage Ponzi-scheme), the media would be jumping all over such scandals – just like they do when a celebrity stumbles. This is guaranteed ratings (and advertising dollars) in the U.S. market.

However, U.S. “media” outlets are too busy spreading propaganda to report news. Today, Wall Street mouthpieces like Bloomberg were once again pointing toward a “bottom” in the U.S. housing market (see “Home price declines in 20 U.S. cities eased in April”). The 'reason' for today's optimism? U.S. housing prices are only falling three times as fast as during the worst year of the Great Depression. Bloomberg calls this “moderation”.

These weekly calls of a “bottom” in the U.S. housing market continue to occur despite the fact it is 100% certain that the U.S. housing market will continue plummeting downward for many years to come (see “The Distressing news about Distressed U.S. properties”).

Once again, the overall message here is clear: it's “business as usual” for Wall Street.

Disclosure: I hold no position in Citigroup.

Comments

[YHC - FTSE:]

Superb commentary, Jeff. Whilst it is not exactly insightful since most of these distressing facts have already been covered, you have a knack of bringing together seemingly disparate but pertinent observations to a coherent essay to make a powerful argument.

There is a running theme with data manipulation, equities pulse trends, laughably false media/government announcements, and public apathy. The (false) premise that the equity markets and the financial institutions are the only pillars of the Western economy is so ingrained, and so practiced, that it is difficult to wean people away from its promises of creating wealth. It is not a surprise then to witness people defending bad decisions, defending bad data, and spinning the worst of unethical acts into a pragmatic art form of deceit.

On the similar theme, Tyler's Essay: seekingalpha.com/artic... and many others tell a very sorry tale indeed.

Many thanks.

Jul 01 07:47 AM

[think befor...:]

Get a life!

Jul 01 08:19 AM

[Zeppelin:]

The Media is in these corrupt Banks Pocket, that is why they don't report this stuff.
You are right about the American Public being Numb to this news also.
Everything is too much of a Hassle in Life, just let the Government Deal with it, is the General Attitude.
Complacency Sucks!!!

Jul 01 08:35 AM

[TheOracle:]

Agree with poster above.

The American Taxpayers are getting a great return on their TARP investment - almost 2 Billion in seven months (www.nypost.com/seven/0...) - so stop feeling sorry for yourself.

I am not going to sit here and justify what other people are doing, but I certainly think you should get a life and stop bad mouthing Citigroup. I know (for whatever reason) you are upset by headlines, but try to realize that there are hundreds of thousands of regular employees whose lives are wrapped up in Citi, and your slander destroys them.

Why don't you write about something that will actually benefit your readers.

Jul 01 08:36 AM

[Troy Ounce:]

The American taxpayer only wants their 401(k) repaired to the original levels. That's all. Corruption like this one or the recent bonus pay out by Goldman Sachs, (which is also the biggest ever AND funded by the US tax payer) is just collateral damage.

Jul 01 08:47 AM

[fireball:]

mornin' jeff
sometimes it seems a little hopeless. we just have to remember that there are a few thousand of these control freak criminals and over 300million citizens. they do control the hired guns, police, agencies and armed forces but these guys are mostly good americans too. maybe the sleeping giant is yawning and waking up a little. we just have to keep kicking at it and trying to wake it up. at least a few seem to be rubbing the sleep from their eyes. it is difficult to get the sheeple to look up away from the daily life, the tv, and the soma. i wonder how many americans are dosed daily with a perscription or alcohol.
i see 4 peaceful efforts. remove funds from the mega banks (starve the beast was an article 8 or 10 days back), legally reduce taxes as much as possible, work on a constitutional party for restoration of legal government, and utilize the soapbox (which you are doing).
men who seek power are not fit to weild it. the good leader realisis that he is entering a period of servitude. those are paraphrased sentiments that i have heard often.
in this time we use things like citi and aig to profit as money is a weapon.

Jul 01 08:57 AM

[Jeff Nielson:]

Well, judging from the comments, we must have a couple of Citigroup shareholders in our midst. Gluttons for punishment!

Remember in 2008 (when these corporate panhandlers were mooching over $10 TRILLION in hand-outs, loans and guarantees), how all the banksters acknowledged (in very contrite language) they would have to "change their ways"?

Nothing has changed. They are as crooked as ever, and all of their pre-crisis arrogance is also back.

Fireball, I sincerely hope you're right - that the oligarchs can be deposed peacefully. I just don't see that happening as long as the current two-party dictatorship exists.

Jul 01 09:41 AM

[Graham and ...:]

Which is why C needs to be broken up.


On Jul 01 09:41 AM Jeff Nielson wrote:

> Well, judging from the comments, we must have a couple of Citigroup
> shareholders in our midst. Gluttons for punishment!
>
> Remember in 2008 (when these corporate panhandlers were mooching
> over $10 TRILLION in hand-outs, loans and guarantees), how all the
> banksters acknowledged (in very contrite language) they would have
> to "change their ways"?
>
> Nothing has changed. They are as crooked as ever, and all of their
> pre-crisis arrogance is also back.
>
> Fireball, I sincerely hope you're right - that the oligarchs can
> be deposed peacefully. I just don't see that happening as long as
> the current two-party dictatorship exists.

Jul 01 09:44 AM

[User 313794:]

Does this guy really look like someone you would take financial advice from? And in case no one mentiond it yet - nice doo.

Jul 01 10:02 AM

[Troy Ounce:]

The American taxpayer only wants their 401(k) repaired to the original levels. That's all. Corruption like this one or the recent bonus pay out by Goldman Sachs, (which is also the biggest ever AND funded by the US tax payer) is just collateral damage.

Jul 01 10:04 AM

[Troy Ounce:]

The American taxpayer only wants their 401(k) repaired to the original levels. That's all. Corruption like this one or the recent bonus pay out by Goldman Sachs, (which is also the biggest ever AND funded by the US tax payer) is just collateral damage.

Jul 01 10:04 AM

[fireball:]

jeff
got to exhaust all reasonable approaches first.

Jul 01 11:31 AM

[Slimsum:]

You get 5 stars for this article Jeff. Reading over the comments, seems like employees and Citi dedicated staff are making negative remarks. Slander the employee's? Heck, anyone of them that knows of this type of thing going on is just as much a crook as the heads of the company. The only thing I disagree with you on is that the number one and number two problems you write should be changed. Public apathy towards this sinful banking should be the worst problem. And everyone, keep your eyes and ears open for how hard the banking industry is going to fight to keep from having one entity formed to protect us, the consumers. They will do everything in their power, including the use of more dollars than the average reader will see in many lifetimes to wield power and leverage to control the vote in congress to make sure that WE THE PEOPLE are not protected as we could be by our own government. One little agency to make sure mortgages are written in readable language, one agency to make sure that credit card rates are run up un-reasonably, one agency to be on our side instead of the functions being split, as they are now, between four to seven different government agencies. Now that is a fight I am going to follow in the coming months. Are our elected officials going to do right by us and form the Consumer Protection Agency? Or are they going to kiss the banking industry once again. Oh, and by the way, in all this TARP payback, where is our interest and warrants? Are we getting full value? Last I heard, the banks were complaining that they didn't want to have to stand by the contract. That the 'interest rate' was too high? Humm, haven't I heard that same comment from many of the same bank(s) customers? Give em hell Jeff.

Edward S.

Jul 01 12:04 PM

[Ouch$:]

Jeff wrote a very interesting article. I lost my divide on the "C", common, and preferred shares. Government has control of the bank and they will never give up. Citi has to get rid of the toxic accounts as fast as they come into the loan departments.

Because Barney Frank is forcing bad loans on the banking system through Fannie & Freddie. Change the Congress then we can correct the banking system.

Jul 01 12:32 PM

[5142152-337:]

Terrific piece, Jeff. THANKS!

Yes, there are a couple of Citibank employees reading/responding to your TRUTHS!

Remember, the truth HURTS!

Hey Jeff, what is with the Canadian Mint? They LOST a few million bucks in GOLD?????
What's your take on those folks? Are they learning from those south of the border???

Jul 01 01:52 PM

[WayneinOregon:]

Hi Jeff, great article. I'm at a total loss as to why there aren't man;y more articles like yours being published, exposing this type of malfeasance and outright criminality that has been commonplace for many years and continues unabated.

I was wondering if you've considered writing an article about the various types of manipulations going on in some of our "free" markets. Seems there would be plenty of fodder for this type of article as well. -- Good work.

Jul 01 02:27 PM

[PJ0706:]

Reality, no one went to jail, no one was prosecuted and our President effectively gave a pardon to all when he stated that we need to look forward, not back. WRONG, we need to punish those who cheated us, if only to send a message to those who remain behind that this type of activity will not be tolerated!

Jul 02 08:54 AM

[dragonpaw:]

Remember; 50+% voted for what we now gotz.
They ain't happy with the last guy; given time (and a little prozac[or whatever the cupboard may bear]); they will be unhappy with the present 'puppet(s)'.
Problem is: can the US survive 'til all the bastards are thrown out?
Methinks not.......where to run and hide till the next revolution??

Jul 02 09:13 PM

[Madacasto:]

The real crime is the fact that these banks (not just Citigroup, just about all publicly traded banks on the planet) were acting within the bounds of the law. Fraud is an inherently illegal act. Why are CEO's not being paraded in shackles??? Because voted and appointed officials permitted what these companies were doing. The banks did not commit fraud and your use of the term is inaccurate. You might as well scream at the hot dog vendor for selling what you consider an unhealthy food item. It's a simple fact. No need for the academic explanation, thank you.

Jul 08 01:08 PM