Iceland Arrests Bankers

[Vulcanl]

pp,

This issue is way too important to be allowed to devolve into pettiness.  The fact of the matter is that the Financial Services industry has wielded/continues to wield enormous power, it has not acted responsibly (indeed it has caused great harm to many innocents), and bankerman's noxious post is proof positive that bankers continue to see things as 'business as usual.'

To point this out with facts is not being jealous by any stretch of the imagination. 

I have made my case in this thread:

http://www.expatsingapore.com/forum/index.php/topic,54370.0.html

Since the time that I locked that thread nothing much has changed.....proposed regulation has been watered down, huge bonuses (that reward bad behavior) have been paid, and these f***holes actually have the nerve to take the tack that 'it's time to change the subject.' 

Honest people of good will should not allow any such thing to happen.

[Dr. Phil]

Many of these bankers clearly have committed fraud with impunity. It appears governments nodded in approval. But today the main UK banks are reported to have made huge profits mainly in Asia markets; not from high street banking, so the games continue.

In USA and UK there is a great deal of unemployment and social decay and it is increasing with no reversal in sight. Only government sanctioned ideas exist on how to improve the situation.

The answer is very clear. End Free Trade Agreements which benefit a few privileged MNCs and re-claim jobs, lives, communities, nations.

The US government is fretting in the event the muslim brothers gain power in Egypt by a democratic vote. Hello? Is democracy defined by a corrupt US preference or the people?
 
In the west, governments must start to act sensibly, else we can expect civil disorder. Strikes in UK, mindless cold-blooded assassinations of police officers already reported in USA. Society will disintegrate because the only realistic common-sense remedy is denied. Unemployment will not be tolerated.

We elect our government to take good care of our interests first and not those of a small clique whether multi-national or any other ruling elite as exists in Libya and Egypt.

In UK real protest has been neutered by an all-pervading political correctness which has the same oppressive effect on civil liberties as existed in Germany in 30's.

[alex456]

pp,

This issue is way too important to be allowed to devolve into pettiness.  The fact of the matter is that the Financial Services industry has wielded/continues to wield enormous power, it has not acted responsibly (indeed it has caused great harm to many innocents), and bankerman's noxious post is proof positive that bankers continue to see things as 'business as usual.'

To point this out with facts is not being jealous by any stretch of the imagination. 

I have made my case in this thread:

*****************************************************************

Since the time that I locked that thread nothing much has changed.....proposed regulation has been watered down, huge bonuses (that reward bad behavior) have been paid, and these f***holes actually have the nerve to take the tack that 'it's time to change the subject.' 

Honest people of good will should not allow any such thing to happen.

Look, Vulcan or f***hole, can I call you that instead, it does seem apt. Whatever you should be called, can you at least justify some of the mush you have come out with. for example, the bit about bonuses. You say huge bonuses have been paid out as a reward for bad behaviour. So, can you give an example of that, I mean an example of a big bonus that was rewarded for some kind of bad behavior. I presume you must have some examples? or are you just inventing things again? I could also ask for a bit of justification for the rest of your silly claims but lets start with the bonuses as that appears to be the source of your raging jealousy.

[Vulcanl]

alex456,

You need to read this thread - thoroughly: 

http://www.expatsingapore.com/forum/index.php/topic,54370.0.html

Specific examples of bad behavior:

*Jefferson county, Alabama
*Grandmothers in California whose electric costs were being manipulated by Enron traders
*Goldman Sachs (Greek swap deal, AIG, special product created for John Paulson by Fab Tourre)

There are many more, those are just three. 

I don't invent anything...all of my statements (as ALWAYS) are backed by facts.

[alex456]

alex456,

You need to read this thread - thoroughly: 

*************************************************************

Specific examples of bad behavior:

*Jefferson county, Alabama
*Grandmothers in California whose electric costs were being manipulated by Enron traders
*Goldman Sachs (Greek swap deal, AIG, special product created for John Paulson by Fab Tourre)

There are many more, those are just three. 

I don't invent anything...all of my statements (as ALWAYS) are backed by facts.

Lordy lordy, I would have thought it was obvious I was asking for this year, as you were talking about banks getting back to business as usual. Wow, you are a bit slow aren't you!

So, give me recent examples please.

As for the examples you mentioned, no doubt there have been some cases, probably small minorities, but even in these cases such as Goldman the jury is still out, its not clear cut at all in that case.

By the way, Enron wasn't a bank! And are you claiming Enron specifically targeted those grannies? Lol, you are funny Vulcan, at least you give us all a good chuckle.
 
By the way, have you ever actually met a banker in your whole life?

[dm+cc]

Banks are announcing bonuses. Good times are here again!

[Vulcanl]

"...So, give me recent examples please..."

OK Alex,  sure - why not.  Let's start with the fact that the industry has been lobbying for watered-down post-crisis regulation and basically gotten everything they've wanted.  Or how about Q1 of 2010 where Goldman Sachs reported a full quarter of NO DOWN TRADING DAYS, and they chalked up to great performance on their part when in fact it was simply the fed on the other side of their trades (a fact not disclosed until the Fed was forced to by the US Congress much later in the year).  Then most recently there's the bullshit Facebook deal that Goldman attempted to get around SEC regulations pertaining to private placements on. 

"...As for the examples you mentioned, no doubt there have been some cases, probably small minorities, but even in these cases such as Goldman the jury is still out, its not clear cut at all in that case..."

BULLSHIT.  This is behavior that is pervasive and endemic in the industry.  Read my 'Front Office' thread

"...aree you claiming Enron specifically targeted those grannies?..."

I don't have to claim...it is a matter of public record.  They caught the scumbags on tape bragging about it!!!  Read my 'Front Office' thread

[That's because]

Banks are announcing bonuses. Good times are here again!

people put money into the banks and they then take all kinds of risks. Nothing to lose when they are insolvent, governments will bail them out.

And in good times now, they get paid bonuses.

In bad times they only get laid off and need not pay back their bonuses and losses.

A good deal indeed.

[Vulcanl]

Alex,

Here is a piece from today's NY Times summarizing the contents of the FCIC report.  The fact that no 'new' allegations of wrongdoing have not come to light since the GFC is not important.  What is critical is the fact that bankers have not changed their ways.  We are headed directly for another crisis:

New York Times
January 29, 2011
A Bank Crisis Whodunit, With Laughs and Tears

By GRETCHEN MORGENSON

TRULY startling revelations were few in the voluminous report, published last Thursday by the Financial Crisis Inquiry Commission on the origins of the financial panic. This is hardly a shock, given the flood-the-zone coverage and analysis of the crisis since it erupted four years ago.

Yet the report still makes for compelling reading because so little has changed as a result of the debacle, in both banking and in its regulation. Providing chapter and verse, for example, on the bumbling and siloed management at the nation’s largest banks is enlightening, in that many of these institutions are even bigger than they were before. With too-big-to-fail institutions now larger than ever, we are almost certain to go through another episode like 2008 in the not-too-distant future.

For those who might find the report’s 633 pages a bit daunting for a weekend read, we offer a Cliffs Notes version.

Let’s begin with the Federal Reserve, the most powerful of financial regulators. The report’s most important public service comes in its recitation of how top Fed officials, both in Washington and in New York, fiddled while the financial system smoldered and then burned. It is disturbing indeed that this institution, defiantly inert and uninterested in reining in the mortgage mania, received even greater regulatory powers under the Dodd-Frank law that was supposed to reform our system.

The report shows how the Fed refused to exert its authority on predatory lending. On Page 94, we learn that from 2000 to 2006, it referred a grand total of three institutions to prosecutors for possible fair-lending violations in mortgages.

The Fed “succumbed to the climate of the times,” its general counsel, Scott G. Alvarez, told commission investigators. It is hard for a supervisor to challenge banks when they are highly profitable, other officials said. Richard Spillenkothen, head of supervision at the Fed until 2006, attributed its reluctance to “a desire not to inject an element of contentiousness into what was felt to be a constructive or equable relationship with management.”

Is it any shock, then, that neither the Federal Reserve Bank of New York nor the Office of the Comptroller of the Currency, a partner in regulatory inadequacy, saw that the S.S. Citigroup was headed for the shoals? This depressing case is chronicled in depth in the report.

In testimony last September, Ben S. Bernanke, the chairman of the Federal Reserve Board, said that his organization “has moved vigorously to address identified problems.”

BUT back a few years, as regulators were coddling bank managers, some executives were busily telling their investors that everything was just dandy. On Page 248, we learn about dire events at Countrywide Financial, the subprime lender.

On Aug. 2, 2007, Countrywide’s access to crucial market financing dried up; commercial paper investors would not buy its obligations, the report quoted Angelo R. Mozilo, the company chief executive, as saying. But Eric P. Sieracki, the company’s chief financial officer, said in a statement that day that Countrywide had plenty of liquidity and had experienced “no disruption in financing its ongoing daily operations, including placement of commercial paper.”

This rather interesting take on reality prompted Moody’s to reaffirm the company’s A3 debt rating. Two weeks later, Countrywide drew down all of its $11.5 billion in credit lines, signaling extreme distress to the markets. The stock plunged; a few months later the lender was taken over in distress by Bank of America.

Mr. Sieracki declined to comment, but his lawyer said on Friday that the Aug. 2 statement was accurate at the time Mr. Sieracki made it.

On Page 264, the report lays out Citigroup’s silence about the ticking time bombs it had shoved off its balance sheet but that would soon have to be repatriated, generating enormous losses. A spokeswoman for Citigroup said that it was a different company today, and that it had overhauled its risk management and bolstered its financial strength.

We already know, of course, that our government moved mountains to help the banks during the crisis. But the report adds to our understanding of events by describing how the Treasury Department changed the tax code to benefit banks acquiring weaker institutions. Never mind that the Constitution allows only Congress to write tax rules.

I.R.S. Notice 2008-83 came out of nowhere on Sept. 30, 2008, the report noted on Page 371. It removed existing limits on the use of tax losses that could be taken by a bank when it acquired a troubled institution. The change appeared just as Citigroup was mounting its $1-a-share bid for Wachovia. (The beleaguered bank was headed by Robert K. Steel, a former under secretary of domestic finance at Treasury who had left his post two months earlier. “Secretary Paulson had recused himself from the decision because of his ties to Steel,” the report said, “but other members of Treasury had ‘vigorously advocated’ saving Wachovia.”)

Two days after the tax change, Wells Fargo topped Citi’s proposal by offering $7 a share. The change in the code had made such a deal more economical for Wells because it could reduce its taxable income by $3 billion in the first year after acquiring Wachovia. Previously, Wells could have reduced its income by just $1 billion in Year 1.

“They were changing the rules on the fly to the apparent advantage of banks who wanted to get something for nothing out of this crisis,” said Janet Tavakoli, president of Tavakoli Structured Finance in Chicago. “Why aren’t people being questioned and held accountable for that?”

As it turned out, Wells did not benefit from the code change because it had no taxable income to offset, the report said. I.R.S. Notice 2008-83 was repealed in 2009.

For those of you who’ve wondered why there have been so few prosecutions of mortgage fraud during this epidemic, your answer is on Page 164. “The terrible thing that happened,” said William K. Black, a former fraud investigator in the savings-and-loan crisis who is a professor at the University of Missouri-Kansas City School of Law, “was that the F.B.I. got virtually no assistance from the regulators, the banking regulators and the thrift regulators.”

Finally, if it’s comic relief you’re after, turn to Page 105 for an interview with Angelo R. Mozilo, former chief executive of Countrywide Financial, a lender that profited by roping unsuspecting borrowers into poisonous loans.

Mr. Mozilo, the commission said, described his company as having “prevented social unrest” by providing loans to 25 million borrowers, many of them members of minority groups. Never mind that throngs of these loans have resulted in foreclosures and evictions. “Countrywide was one of the greatest companies in the history of this country,” Mr. Mozilo maintained, “and probably made more difference to society, to the integrity of our society, than any company in the history of America.”

You cannot make this stuff up.

Do further bailouts lie ahead? Neil Barofsky, special inspector general for the Troubled Asset Relief Program, seems to think so. When the government stepped in to save Citigroup in 2008, “it did more than reassure troubled markets — it encouraged high-risk behavior by insulating risk-takers from the consequences of failure,” he said in his report to Congress last week.

“Unless and until an institution such as Citigroup is either broken up, so that it is no longer a threat to the financial system, or a structure is put in place to assure that it will be left to suffer the full consequences of its own folly,” he said, “the prospect of more bailouts will potentially fuel more bad behavior with potentially disastrous results.”

[alex456]

"...So, give me recent examples please..."

OK Alex,  sure - why not.  Let's start with the fact that the industry has been lobbying for watered-down post-crisis regulation and basically gotten everything they've wanted.  Or how about Q1 of 2010 where Goldman Sachs reported a full quarter of NO DOWN TRADING DAYS, and they chalked up to great performance on their part when in fact it was simply the fed on the other side of their trades (a fact not disclosed until the Fed was forced to by the US Congress much later in the year).  Then most recently there's the bullshit Facebook deal that Goldman attempted to get around SEC regulations pertaining to private placements on. 

"...As for the examples you mentioned, no doubt there have been some cases, probably small minorities, but even in these cases such as Goldman the jury is still out, its not clear cut at all in that case..."

BULLSHIT.  This is behavior that is pervasive and endemic in the industry.  Read my 'Front Office' thread

"...aree you claiming Enron specifically targeted those grannies?..."

I don't have to claim...it is a matter of public record.  They caught the scumbags on tape bragging about it!!!  Read my 'Front Office' thread

No, no, no. You are leaping to the conclusions you want to reach, not relating fact or making logical arguments at all.

Regarding Goldman's and the Paulson case the jury IS still out on that one and it isn't the case that there was any deliberate deception. Wait for the judgement please. No rules were broken and certainly nothing of a criminal nature. perhaps the rules of disclosure should have been tighter but the rules as of that moment were not broken.

And this Facebook thing, they did nothing wrong at all, just changed their minds when they realised they may come up against SEC regulations!

As far as the Fed taking the other side of Goldman's trades, that may nor may not have been the case, nobody knows, certainly not you. But so what if that had happened, it was still legitimate business! Where was the bad behavior?

But more to the point, you have yet to show evidence of bonuses that have been paid based on "bad behavior". Lets see a specific example and I mean from this year, not quotes from last year's tabloids.

And regarding Enron, people say all kinds of things in jest and some may sound callous but there is no way Enron as a firm set out to manipulate the prices being paid by grandmothers. That doesn't mean Enron didn't effect prices and thus everybody would have been effected, but that wouldn't have been personal to grandmothers!

Really, less parrot fashion quoting of cheap tabloid nonsense, more fact and logic please.

[Vulcanl]

Alex,

You have obviously not read my 'Front Office' Thread.  Everything I have stated is substantiated there...go back and read it.  I will not repeat myself.

[Vulcanl]

Alex,

Can you honestly tell me that paying bonuses for doing this kind of work is deserved?  As I have stated, what they have already done is not enough - and as bankerman has admitted, they really are in the end looking to finish the job (of once and for all destroying our Western civilization):


Wall Street Rocket Scientists Revive CDOs in Derivatives Battle
2011-01-28 00:01:00.10 GMT

By Simon Clark and Elisa Martinuzzi

Jan. 28 (Bloomberg) -- Three years after collateralized debt obligations helped trigger the worst financial crisis in 70 years, Wall Street’s math wizards are exploring how to use them to deflect rules intended to prevent the next crisis.

     Credit Suisse Group AG traders are testing a risk model that may help them reduce capital charges imposed by the Basel Committee on Banking Supervision on derivative products. Claudio Albanese, a quantitative economist who is advising the lender on the plan, says it could also help banks to limit one of their biggest risks by allowing them to offload through a CDO the risk that one of their trading partners, or counterparties, defaults.
Critics say such CDOs could trigger a new crisis.

     “In theory, it’s a great idea -- just like the CDOs of subprime debt that caused the financial crisis,” said Richard Werner, professor of international banking at the University of Southampton, England, and a former Bear Stearns Cos. fund manager. “If the bankers are already thinking of how to get around the Basel rules, then that shows nothing has changed.”

     Albanese’s plan shows how banks are likely to try and mitigate rules that impose higher capital requirements on their operations and threaten profit, according to Charles Freeland, a former deputy secretary general of the Basel Committee. The Basel rules may cut the return on equity by more than half for some derivatives, forcing some banks to stop arranging those types of transactions, according to Kian Abouhossein, a banking analyst at JPMorgan Chase & Co. in London.

                        ‘Arbitrage Them’

     “The tougher the rules are, the more the incentive there is for bankers to arbitrage them,” Freeland said in a telephone interview. “That’s what bankers do.”

     In derivative trades such as interest-rate swaps, a bank agrees with a client to exchange payments, allowing one to pay a fixed interest rate and receive a floating rate and the other the reverse. Banks charge the client for the risk it might default and be unable to meet its obligations over the life of the agreement.

     The collapse of New York-based Lehman Brothers Holdings Inc. in 2008 sent shockwaves through the financial system, forcing banks that traded with it, its counterparties, to write down investments. That led regulators and lenders to review how they account for and manage the risk of counterparty defaults to mitigate the potential for one shock to trigger another.

     In December 2009, Basel regulators introduced a capital charge for mark-to-market losses caused by the deterioration of the creditworthiness of a counterparty, known as a credit valuation adjustment, or CVA. The CVA rises as the likelihood of a firm defaulting mounts, eroding the profitability of a trade for a bank. The Committee proposed the charge because, it said, mark-to-market adjustments caused two-thirds of counterparty credit risk losses, while actual defaults caused a third.

                        Capital Charges

     The new capital charge, which banks must implement by 2013, may force banks to put aside at least two to three times more capital than under the earlier rules, said Jon Gregory, a partner at Solum Financial Partners LLP, a London-based financial advisory firm, based on estimates he helped to draft for banks.

     “Regulation impacts what we do in a very profound way: it determines how expensive it is to do various types of trading businesses,” said Anton Merlushkin, a New York-based managing director at Credit Suisse’s fixed income division who Albanese is working with. “Banks are looking at innovative ways of hedging their exposures, and one way is to buy insurance or trade products that offset their counterparty risk exposure.”

                            CDO Plans

     Securitizations such as CDOs are “one of the potential channels” that could lead to products that allow banks to trade counterparty risk, Merlushkin said.

     Frank Iacono, a former Morgan Stanley credit derivatives banker who’s now a partner at Riverside Risk Advisors LLC in New York, says he’s considering creating products that let banks trade their counterparty default risk. Ex-Citigroup Inc. banker Shankar Mukherjee is trying to get a credit rating that would allow his firm, Novarum Group LLC, to sell contingent credit default swaps, a form of insurance, to lenders. His contingent credit default swaps would allow the buyer to recoup the actual loss on a derivative when a counterparty defaults.

     “These transactions, in their general form, will look more attractive post-Basel III,” said David Murphy, London-based head of risk and reporting at the International Swaps and Derivatives Association, which represents more than 800 organizations active in the derivatives market. “Because of the higher capital charge Basel III will impose, there will be more benefit from hedging the risk and hence freeing up capital.”

                      Regulator ‘Attuned’

     Regulators said they will carefully scrutinize banks’ attempts to remove risk from their balance sheets.

     “The committee will be very attuned to capital-arbitrage schemes that do not entail a true reduction of the risk exposure,” Stefan Walter, secretary general of the Basel committee, said in an e-mailed response to questions.

     The Basel rules are transforming traders’ interest in rules and risk, elevating the role of risk officers. One measure of risk traders are focusing on is value at risk, or VaR, a gauge of the average amount the bank could lose on any given day. At Deutsche Bank in London, traders never used to seek out risk manager Adolfo Montoro for information.

     “I was always chasing the traders to ask what kind of strategy they are going to do,” Montoro said at a November debate on the Basel rules at Bloomberg’s London office. “Now, we sit at the same table with traders. They want to know how we model risk. They’re not just asking, ‘What’s the VaR today?’

They want to know the number: ‘If I put this trade, what will be the impact?’”

                      ‘Ahead of the Game’

     Albanese, 48, is using financial mathematics and computers to help banks calculate their net exposure to counterparties.  Credit Suisse, Switzerland’s second-biggest bank, is working with Albanese to see whether his approach can be used to measure risk, said Merlushkin, who heads the bank’s interest-rate quantitative strategies group and is responsible for quantitative modeling for the fixed-income unit’s counterparty credit risk management desk.

     “I rate Claudio very highly,” he said. “Claudio’s work is driven by a desire to look at alternatives, to have efficient tools to do internal risk management, and to be fully compliant and ahead of the game in terms of what regulators want.”

     Albanese, an Italian with a doctorate in mathematical physics from the Swiss Federal Institute of Technology in Zurich, has formerly worked at Morgan Stanley and provided advice to firms including Bloomberg LP, the parent of Bloomberg News. He says his model of counterparty risk could be used to create a company that would provide counterparty default insurance to many banks. Banks would structure a CDO and investors would buy tranches of it, Albanese said.

                       ‘Main New Product’

     “This CDO of counterparty exposures is the main new product in derivatives I have heard about in two years,” said Damiano Brigo, a former bank quant analyst who is now professor of financial mathematics at King’s College in London and co- author of “Interest Rate Models: Theory and Practice.”

“Nobody else is putting anything daring on the table at the moment in terms of new products, understandably enough.”

     Credit Suisse and competitors including Deutsche Bank and Goldman Sachs Group Inc. already use central desks on their trading floors to provide insurance for their counterparty risk.
The teams manage the exposure to other firms through a CVA.

     Albanese says that Basel III’s requirement to use CVA as a measure of counterparty risk is “flawed” because it can’t distinguish between a scenario in which one counterparty defaults and another where all counterparties default at once.

Banks didn’t have computers powerful enough to assess the risks accurately when the first Basel rules were created in the 1980s, Albanese said. Modern computers can now do this, he said.

                          ‘Poor Choice’

     “The only justification for such a poor choice of metric is that the current status of technology does not allow one to do any better,” he said. “Better risk management means you can do more with less capital.”

     Albanese outlined his risk model and insurance plan in an article entitled “Coherent Global Market Simulations and Securitization Measures for Counterparty Credit Risk” in the January edition of Quantitative Finance, a trade journal. Co- author Toufik Bellaj is a Credit Suisse employee, and co-author Guillaume Gimonet is a former employee. The report contains a disclaimer saying that the views expressed in it don’t necessarily represent those of Credit Suisse.

     Credit Suisse may decide to implement Albanese’s risk model in the next six months, Merlushkin said. “The pilot of Claudio’s model is proving interesting and helpful,” he said.

                          Industry Move

     Merlushkin also said the attempt to design a product to trade counterparty credit risk is “an active conversation within our business.”

     “It’s likely that the industry will come up with a range of instruments that will help banks to be more effective and efficient in offsetting exposures including the counterparty exposure,” Merlushkin said.

     Under Albanese’s proposal for a CDO of counterparty credit risk, investors would be able to buy different tranches with ratings tied to their riskiness. Once the banks sell on counterparty risk, they wouldn’t have to hold capital against it. Albanese declined to say by how much his plan could reduce the need for capital.

    It may be “more challenging” for a CDO composed only of bank counterparty risk to get a high credit rating, compared to a more diversified CDO, Standard and Poor’s credit analyst Lapo Guadagnuolo said in an e-mail. “As we have seen recently, the banking sector in particular has shown higher levels of correlation,” he said. “Concentration and correlation are factors that play an important role in our analysis of CDOs.”

                          AIG Warning

     Francesco Meucci, a Moody’s spokesman in London, declined to comment on the proposal.

     “You can already see that you would have to prevent banks from investing in the CDOs, otherwise you aren’t transferring the risk away from the banks,” said Werner, citing New York- based insurer American International Group Inc.’s rescue in the financial crisis. “AIG was in theory taking a lot of risk from banks by insuring their trades, but when AIG failed it caused havoc in the banking system and required a taxpayer bailout.”

[lol_at_vulcan]

Vulcan, are you really as dumb as you seem.

Its oibvious the statements of this "bankerman" were designed to wind up yout guy as you are so sensitive and jealous about the baner thing.

But also, you keep askig peopkle to read your thread but you aren't some kind of offical reference, your thread is just your opinion, nothing more. Why don;t you just adress the points made in a logical way, not a constantly subjective way where  each time you jump to th conclusn the baners are all evil blah blah blah.

My guess is ther must be somethign personal in all this. Were you ever rejected when you tried to work in a bank and you have a complex about that? or did you work for a bank and find you werent good enough to excel etc or got fired? Whatever, your eccentric views and rants just suggest something else going on, something of a more psychological nature..

[ridiculous thread]

Bankerman is obviously nothing but a WUM and playing it brilliantly

Vulcan is ironically a banker.

[Vulcanl]

"...Vulcan is ironically a banker..."

I'd rather be a whore turning tricks on Desker Road.  At least that would be honest work.