FINRA arbitration abuse by the numbers

Dan Solin offers a disturbing inside view of FINRA arbitration. Given that it is binding, mandatory pre-dispute arbitration controlled by the industry being sued, it is not surprising that the table is tilted dramatically in favor of the financial industries and brokers. Here's an excerpt from Solin's article:

If you have an account with a retail broker, or are employed by one, you signed an agreement requiring you to submit all disputes to mandatory arbitration administered by FINRA. The idea of requiring investors and employees to arbitrate disputes before a tribunal appointed by the very industry being sued is deeply troubling. Because it deprives American citizens of their constitutional rights to access to the courtroom and trial by a jury of their peers, it has neither the appearance nor the reality of impartiality. Among others, Itestified before Congress and urged it to enact legislation prohibiting mandatory arbitration clauses as being fundamentally unfair.

A study I co-authored of more than 14,000 FINRA arbitration awards over a ten-year period found that investors with significant claims suing major brokerage firms could expect to recover only 12 percent of the amount claimed. It is not surprising that many investors required to submit to this process perceive it to be biased against them.

Note the $60,000 attorney fee award assessed against the man filing the arbitration claim described by Solin. Can you imagine many sane people exposing themselves to that sort of risk, especially when it is a rare court that would step in to reverse such an injustice? That's what happened in the case Solin describes, but you'll need to look long and hard to find other cases where a court disturbs a FINRA arbitrator's decision.

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Goldman Sachs resignation

At the New York Times, Greg Smith, a Goldman Sachs employee explains his recent resignation:

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all. It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
Fair enough,  but it seems as though Greg Smith hung around, participating in this system he portrays as unethical, long enough to accrue a substantial nest egg.  It would certainly seem that he could have made a financial killing in ten years at Goldman Sachs.   Nonetheless, I applaud his article because he could have simply left Goldman without writing the article, which would deny us the benefit of his observations. Then again, the article does seem like cheap talk for one who might be seeking to "repair" his career before moving to whatever comes next.    You could just imagine people looking at Smith suspiciously when he admits that he once worked for Goldman Sachs, at which point he would pull out this NYT article, turning an opportunist into a hero with a bit of deft writing.   I want to believe that the author is gallant, but my gut won't allow me to do so.   Nonetheless, I appreciate his insights.

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Matt Taibbi gives an update on the predatory activities of Bank of America

Rolling Stone's Matt Taibbi is not shy when it comes to hitting back at Bank of America:

They're in deep trouble, but they won't die, because our current president, like the last one, apparently believes it's better to project a false image of financial soundness than to allow one of our oligarchic banks to collapse under the weight of its own corruption. Last year, the Federal Reserve allowed Bank of America to move a huge portfolio of dangerous bets into a side of the company that happens to be FDIC-insured, putting all of us on the hook for as much as $55 trillion in irresponsible gambles. Then, in February, the Justice Department's so-called foreclosure settlement, which will supposedly provide $26 billion in relief for ripped-off homeowners, actually rewarded the bank with a legal waiver that will allow it to escape untold billions in lawsuits. And this month the Fed will release the results of its annual stress test, in which the bank will once again be permitted to perpetuate its fiction of solvency by grossly overrating the mountains of toxic loans on its books. At this point, the rescue effort is so sweeping and elaborate that it goes far beyond simply gouging the tax dollars of millions of struggling families, many of whom have already been ripped off by the bank – it's making the government, and by extension all of us, full-blown accomplices to the fraud.

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The alleged wackiness of Dennis Kucinich

Rep. Dennis Kucinich recently lost his race to return as a Congressional representative of Ohio. The blame for his loss sits largely at the door of the cowardly news media, which would rather make a cartoon of Kucinich than give serious heed to his well-formulated arguments. At Salon.com, Glenn Greenwald also laments the way the establishment media has treated Dennis Kucinich. Greenwald argues that the media blithely painted him as wacky because of Kucinich's friendship with Shirley McLaine (who believes in reincarnation). The media loves to report that (according to McLaine) Kucinich once "claimed to have an encounter with a UFO." For these "sins," the establishment media advises that we are not to take any of Kucinich's political positions seriously. Greenwald dismantles this insanity in two stages. First, he compares the alleged beliefs of Kucinich with the purported beliefs of most politicians, which the news media gives a free ride:

[Are any of Kucinich's beliefs] any more strange than the litany of beliefs which the world’s major religions require? Is Barack Obama “wacky” because he claims to believe that Jesus turned water into wine, rose from the dead and will soon welcome him to heaven? Is Chuck Schumer bizarre because he seems to believe that there’s some big fatherly figure sitting in the sky who spewed fire and brimstone at those who broke the laws he sent down on some stones and now hovers over him judging his every move? Is Harry Reid a weirdo because he apparently venerates as divine the “visions” of a man who had dozens of wives, including some already married to other men? Neither the Prospect nor the Post would ever dare mock as “wacky” the belief in invisible judgmental father-figures in the sky or that rendition of life-after-death gospel because those belief systems have been deemed acceptable by establishment circles.
Step two of the analysis is to step back to see the political views of Kucinich that have been ridiculed by the mainstream media: [More . . . ]

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How a law student could have failed a property law class in 1994

Imagine the following law school exam question asked in a property law class in 1994, prior to securitization, when the laws of Missouri were substantially the same as they are today regarding real estate transaction recording, foreclosures and unlawful detainer proceedings: Joe buys a house from Bank A. Bank A…

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