I've spent all day reporting out what happened with the FEMA/Citibank money, and only a tiny bit of that reporting is going to make it onto axios dot com, so I'll share what I know here.
Basically, there was a point at which the NYC Comptroller, for reasons I'm a bit unclear about, *thought* that the money arrived in the account via Fedwire, which is irreversible. But that's not the case, in fact it arrived via ACH on Feb 4, and those transactions are reversible within 5 business days, which is what happened: The fifth business day after Feb 4 was Feb 11, and that's when the transaction was reversed. If Elon had waited one more day, he couldn't have done what he did.
That said, Lander is probably correct that this was not a legal move. There are only very narrow reasons that are acceptable under the NACHA rules for reversing a transaction -- things like duplicate payments or literally sending it to the wrong account. "I don't think this money was properly appropriated" is nowhere near an adequate reason under 31 CFR § 210.6(f). So if you want to make the case that this is massive government overreach, I would totally agree with you.
On the other hand, Citibank was really not involved in this at all, and didn't get forced to do anything. The money just left the account automagically, much as it arrived, and Citi was just as surprised as anyone else. In that sense the $80 million is very very different from the $20 billion, which is going to have to be actively returned to the government *by someone*, if it is returned at all. (And that is what would have had to have happened if the FEMA money arrived by Fedwire, which it didn't.)
Thank you - had just been talking to someone who was speculating based on timing that something like this had happened when your comment arrived. I've updated post prominently to include this - if there is a link to the Axios story, would be great to have it.
I am wondering about how much auto and how much magic there was, because AIUI (from looking at https://www.moderntreasury.com/learn/ach-reversals and https://www.nacha.org/rules/reversals-and-enforcement ) the receiving bank has to either accept or "return an improper" reversal and has two days to do so. Also, the reversal request has to stipulate the reason (which has to be one of the standard cases, which don't even include fraud)
It is not out of the run of things that Citi has automated systems to handle its ACH reversals and so no human being looked at the instruction, but if I've read these documents right then either someone filled in an invalid reason (which is $500k of clearing house penalties and frankly looks a lot like fraud to me), or Citi's systems don't check the reasons properly.
Something like this would plausibly explain Citibank's reticence - "we let this go through because we don't systematically check ACH reversals even when they involve $80 million" or "second-guessing the Federal government felt like more than some low level transactionchecker's job was worth" or "it went up through the system but someone senior decided that it was too toxic to touch" are all less toxic than direct help in clawing back, but they're all extremely embarrassing in their own particular ways.
I was under the impression the ACH settlement window used to be longer but now it is more like 2 days. Doesn't really affect the overall point but am I misunderstanding?
Thank you for this! For those of us who have jobs, kids, etc. keeping us too busy to figure out a good way to write this letter to our financial institutions, would you or someone be kind enough to provide an outline/template to use?
2015 Treasury FinCEN Tells us that Trump had little concern with the stability of our financial institutions - violations and prior fines date back to 2003 - not sure if 2015 $10M fine was paid. Taj declared bankruptcy.
"Trump Taj Mahal received many warnings about its deficiencies," said FinCEN Director Jennifer Shasky Calvery. "Like all casinos in this country, Trump Taj Mahal has a duty to help protect our financial system from being exploited by criminals, terrorists, and other bad actors. Far from meeting these expectations, poor compliance practices, over many years, left the casino and our financial system unacceptably exposed."
Trump Taj Mahal admitted that it failed to implement and maintain an effective AML program; failed to report suspicious transactions; failed to properly file required currency transaction reports; and failed to keep appropriate records as required by the BSA. Notably, Trump Taj Mahal had ample notice of these deficiencies as many of the violations from 2012 and 2010 were discovered in previous examinations.
Banks hate to lose money parked with them in both big and small accounts, IRAs , CDs, etc. Moving money is easy to do. We can let our banks know. Thanks for this.
Undermining confidence in the banking system will increase the relative attractiveness of blockchain-based cryptocurrencies, whose transactions cannot be reversed.
Trump’s campaign received much support from the crypto world, while he has promised to make the US the “crypto capital of the planet” (and Musk is much involved in it too).
So it’s perhaps understandable at some level that if Trump wishes to weaponise — and in turn destabilise — the banking system, it makes a double win: target his enemies, and boost the relative viability of crypto.
That’s obviously simplistic, as crypto is far from being in a position to substitute, and loss of trust in the US banking system could presumably cause all sorts of economic fallout.
As a general rule, the person to complain to in any corporation is the PR officer. They have to have a public contact, so they can deal with the media. Write your complaint, explain that it will be going on your social media, stating number of followers if it's impressive, and ask for comment.
1. Shell corporations are people according to "Citizens United". They will write letters on behalf of their owners.
2. It's a numbers game. If millions of customers get in on it, it would be like threatening a major boycott of sorts. And yes, the banks would indeed fear it - if enough people got involved.
3. Fear is what's required, whether fear of profit loss, legal action or a fusillade of ammunition.
I hope we'll have more choices too. But we have to start somewhere.
I am not a government agency, so it seems that the dialogue about clawing back huge sums of money might not apply; I am just one person. However, I am one person who receives *two* government-issued payments every month, one from Social Security, and one from the OPM as payment for retiring after 30 years of service to the FAA.
Maybe *that* is how they will “cut” SS benefits and “reduce” federal expenditures.
I will write my banks, thank you. If they do not take appropriate steps I will pull out my funds ... and move them where? Can we get a list of institutions who have taken the steps outlined here?
The banks may be able to take court action. In many countries a stakeholder, eg a bank, who’s in the middle of a tug of war can apply to the court for directions. In this way the money is frozen while the court decides and the bank is protected from suit when it pays pursuant to court order.
Hi Henry --
I've spent all day reporting out what happened with the FEMA/Citibank money, and only a tiny bit of that reporting is going to make it onto axios dot com, so I'll share what I know here.
Basically, there was a point at which the NYC Comptroller, for reasons I'm a bit unclear about, *thought* that the money arrived in the account via Fedwire, which is irreversible. But that's not the case, in fact it arrived via ACH on Feb 4, and those transactions are reversible within 5 business days, which is what happened: The fifth business day after Feb 4 was Feb 11, and that's when the transaction was reversed. If Elon had waited one more day, he couldn't have done what he did.
That said, Lander is probably correct that this was not a legal move. There are only very narrow reasons that are acceptable under the NACHA rules for reversing a transaction -- things like duplicate payments or literally sending it to the wrong account. "I don't think this money was properly appropriated" is nowhere near an adequate reason under 31 CFR § 210.6(f). So if you want to make the case that this is massive government overreach, I would totally agree with you.
On the other hand, Citibank was really not involved in this at all, and didn't get forced to do anything. The money just left the account automagically, much as it arrived, and Citi was just as surprised as anyone else. In that sense the $80 million is very very different from the $20 billion, which is going to have to be actively returned to the government *by someone*, if it is returned at all. (And that is what would have had to have happened if the FEMA money arrived by Fedwire, which it didn't.)
Happy to answer questions if you have any!
-felix
Thank you - had just been talking to someone who was speculating based on timing that something like this had happened when your comment arrived. I've updated post prominently to include this - if there is a link to the Axios story, would be great to have it.
"had just been speaking to someone speculating"
Good grief
I am wondering about how much auto and how much magic there was, because AIUI (from looking at https://www.moderntreasury.com/learn/ach-reversals and https://www.nacha.org/rules/reversals-and-enforcement ) the receiving bank has to either accept or "return an improper" reversal and has two days to do so. Also, the reversal request has to stipulate the reason (which has to be one of the standard cases, which don't even include fraud)
It is not out of the run of things that Citi has automated systems to handle its ACH reversals and so no human being looked at the instruction, but if I've read these documents right then either someone filled in an invalid reason (which is $500k of clearing house penalties and frankly looks a lot like fraud to me), or Citi's systems don't check the reasons properly.
Something like this would plausibly explain Citibank's reticence - "we let this go through because we don't systematically check ACH reversals even when they involve $80 million" or "second-guessing the Federal government felt like more than some low level transactionchecker's job was worth" or "it went up through the system but someone senior decided that it was too toxic to touch" are all less toxic than direct help in clawing back, but they're all extremely embarrassing in their own particular ways.
Also, now looks from Felix as though Citibank would have had to approve the clawback? https://bsky.app/profile/felixsalmon.com/post/3li4arq4p3c2w
That link doesn't say what you claim it says
And people ask me why I've always refused to use direct deposit. This is why.
I was under the impression the ACH settlement window used to be longer but now it is more like 2 days. Doesn't really affect the overall point but am I misunderstanding?
If he can ignore the laws and the constitution, the banks and other agencies can ignore him. Show some ovaries!!!!! Make them sue.
I have to give you an LOL for that "ovaries" reference.
Yes!!! Overies are very WOKE and DEI!!!
Thank you for this! For those of us who have jobs, kids, etc. keeping us too busy to figure out a good way to write this letter to our financial institutions, would you or someone be kind enough to provide an outline/template to use?
Contact chief legal officers. Search for press releases to find email formats. Plug in the name of said CLO.
Or use a stamp and mail to the HQ address. Will get noticed far more than an email which may go to junk if the address is incorrect.
Made a little helper: https://claude.site/artifacts/2b07f270-615b-43ef-a8d4-b2e05532be20
Awesomeness
2015 Treasury FinCEN Tells us that Trump had little concern with the stability of our financial institutions - violations and prior fines date back to 2003 - not sure if 2015 $10M fine was paid. Taj declared bankruptcy.
"Trump Taj Mahal received many warnings about its deficiencies," said FinCEN Director Jennifer Shasky Calvery. "Like all casinos in this country, Trump Taj Mahal has a duty to help protect our financial system from being exploited by criminals, terrorists, and other bad actors. Far from meeting these expectations, poor compliance practices, over many years, left the casino and our financial system unacceptably exposed."
Trump Taj Mahal admitted that it failed to implement and maintain an effective AML program; failed to report suspicious transactions; failed to properly file required currency transaction reports; and failed to keep appropriate records as required by the BSA. Notably, Trump Taj Mahal had ample notice of these deficiencies as many of the violations from 2012 and 2010 were discovered in previous examinations.
His violations go back to long before 2003. All the way back into the early '70's.
Banks hate to lose money parked with them in both big and small accounts, IRAs , CDs, etc. Moving money is easy to do. We can let our banks know. Thanks for this.
Gives a whole new meaning to the phrase "paypal mafia."
Undermining confidence in the banking system will increase the relative attractiveness of blockchain-based cryptocurrencies, whose transactions cannot be reversed.
Trump’s campaign received much support from the crypto world, while he has promised to make the US the “crypto capital of the planet” (and Musk is much involved in it too).
So it’s perhaps understandable at some level that if Trump wishes to weaponise — and in turn destabilise — the banking system, it makes a double win: target his enemies, and boost the relative viability of crypto.
That’s obviously simplistic, as crypto is far from being in a position to substitute, and loss of trust in the US banking system could presumably cause all sorts of economic fallout.
Did you see El Salvador stopped allowing bitcoin as legal tender?
As a general rule, the person to complain to in any corporation is the PR officer. They have to have a public contact, so they can deal with the media. Write your complaint, explain that it will be going on your social media, stating number of followers if it's impressive, and ask for comment.
Are shell corporations (with money) people too? Will they write letters on behalf of human beings?
So, we're asking banks to fear us more than they fear the government regulators?
Fear is what will lead us to constitutional stability and social prosperity?
I'm hoping we have more choices.
1. Shell corporations are people according to "Citizens United". They will write letters on behalf of their owners.
2. It's a numbers game. If millions of customers get in on it, it would be like threatening a major boycott of sorts. And yes, the banks would indeed fear it - if enough people got involved.
3. Fear is what's required, whether fear of profit loss, legal action or a fusillade of ammunition.
I hope we'll have more choices too. But we have to start somewhere.
Damn.
This makes me wonder.
I am not a government agency, so it seems that the dialogue about clawing back huge sums of money might not apply; I am just one person. However, I am one person who receives *two* government-issued payments every month, one from Social Security, and one from the OPM as payment for retiring after 30 years of service to the FAA.
Maybe *that* is how they will “cut” SS benefits and “reduce” federal expenditures.
I will write my banks, thank you. If they do not take appropriate steps I will pull out my funds ... and move them where? Can we get a list of institutions who have taken the steps outlined here?
In your most recent book you talk about former Citibank president, Walter wriston at length. What do you think he would think about what is happening?
The banks may be able to take court action. In many countries a stakeholder, eg a bank, who’s in the middle of a tug of war can apply to the court for directions. In this way the money is frozen while the court decides and the bank is protected from suit when it pays pursuant to court order.