politicalowl

Some words of truth remembered by London’s  Financial Times  this morning in  a report  on six banks being fined $5.6bn over rigging of foreign exchange markets. Repeated efforts by traders to manipulate daily fixings of currencies and interest rates as outlined by the regulatory actions announced on Wednesday illustrate the dark underbelly of many of the trading operations run by global banks. Or in the words of one Barclays trader from 2010, who was quoted in a settlement document: “If you ain’t cheating, you ain’t trying.” The thread that runs through three solid years of benchmark rigging cases is the assured way in which traders pushed around the prices of a whole series of financial products. They all seem to have believed they were immune from being rumbled for abusive behaviour.

Earlier this week it was just the National Australia Bank  fessing up  that its UK arm had cheated customers. Today the NAB is among the financial institutions that the Australian Securities and Investment Commission is investigating for charging clients for financial advice that was never given. Not that the update by ASIC named those helping it with its enquiries. The corporate cop still seems strangely diffident about naming and shaming. You have to look elsewhere to discover that it is the wealth arms of the Commonwealth Bank, National Australia Bank, ANZ Bank, Macquarie Group and AMP that is being investigated. Still, I suppose a semi-silent investigation is better than no investigation. The  ASIC statement : ASIC today provided an update on its Wealth Management Project which is focusing on the conduct of the largest financial advice firms. ASIC is investigating multiple instances of licensees charging clients for financial advice, includi...

Every few months now, it seems, another price manipulation scandal emerges. First, it was bank traders fixing Libor, the interbank lending rate, in exchange for steak dinners and bottles of Bollinger. Then, many of the same banks were accused of doing much the same thing to foreign exchange rates. From there, the investigations have spread to traders of precious metals. Critics say the burgeoning probes are proof positive that banks have a cultural problem. Now comes a complaint from the US Commodity Futures Trading Commission that accuses Kraft Foods Group and Mondelez, the sister companies created by the 2012 break-up of Kraft Foods, of manipulating the  price of wheat . According to the CFTC, while still combined as Kraft Foods, the group bought a “huge” wheat futures contract in order to push down the prices of actual wheat for sale in Ohio, near the mill that made flour for the group’s cookies and crackers. While Kraft routinely bought wheat futures contracts as a price h...

Hardline New York regulator Lawsky targets Deutsche Bank over Libor – FT.com . Benjamin Lawsky, the New York regulator known for taking a hard line against overseas banks, has shouldered his way into the long-running Libor scandal, investigating  Deutsche Bank  for alleged manipulation of the benchmark borrowing rate, according to people familiar with the matter. The probe by New York’s  Department of Financial Services  adds to a litany of US regulatory problems for Germany’s largest lender.

Reuters  reports  that President Barack Obama is proposing new rules to protect Americans from being steered into costly retirement investments that produce high commissions for brokers but low returns for investors preparing for retirement. The proposed rules, which the Department of Labor is expected to submit formally in the coming months, will inject political pressure into an already intense debate over brokers’ obligations. They would have an impact on thousands of brokerages, from large players such as Fidelity, Wells Fargo , Charles Schwab  and Raymond James, to smaller, independent shops. Brokers would be held to a higher “fiduciary standard,” requiring them to put their clients’ financial interests ahead of their own. The White House said the proposals target fees and payments that on average lead to a full percentage point lower annual return on retirement savings at a cost to Americans of $17 billion a year. In particular, Obama called for new...

The CCP Research Foundation data shows that rolling conduct costs and provisions for 12 of the most-fined banks in 2009 to 2013 were £166.63bn ($261bn), compared with £154.96bn for 2008 to 2012. Shareholders are understandably starting to complain that they are paying the price for misconduct by executives, often of banks that no longer exist but have instead been taken over. Regulators have some sympathy with this argument, and the UK began consultations in July 2014 on a new senior managers’ regime, which would require executives to certify that they had done everything possible to prevent illegal activity in their bank. Bonuses would be subject to seven-year clawback provisions in the event of misconduct or heavy losses emerging in the bank. The response from the City was very critical … 2014: the year of banks behaving badly  – “Growing geopolitical risk and the rising toll of misconduct fines overshadowed what should have been a year of strengthening economic recovery.” (...

Bank of England to probe whether staff helped rig money auctions – FT.com . The Bank of England has opened a formal investigation into whether its officials knew of – and even facilitated – the possible manipulation of auctions designed to inject money into the credit markets to alleviate the financial crisis. The probe, which started in the summer, has been revealed just a week after the UK central bank published a report that criticised its own response to the foreign exchange rigging scandal. Lord Grabiner QC, a senior British advocate who led the separate forex inquiry, has been asked by the BoE to head the new investigation. He is to probe whether a series of money-market auctions held by the central bank in late 2007 and early 2008 were rigged, and whether officials were party to any manipulation, according to people familiar with the issue.

Readers of my  Ticket Clippers  postings  will not be surprised by this latest piece of academic research. A new study by Alain Cohn, Ernst Fehr, and Michel Maréchal from the Department of Economics at the University of Zurich shows that bank employees are in principle not more dishonest than their colleagues in other industries. The findings indicate, however, that the business culture in the banking sector implicitly favors dishonest behavior. The scientists recruited approximately 200 bank employees, 128 from a large international bank and 80 from other banks. Each person was then randomly assigned to one of two experimental conditions. In the experimental group, the participants were reminded of their occupational role and the associated behavioral norms with appropriate questions. In contrast, the subjects in the control group were reminded of their non-occupational role in their leisure time and the associated norms. Subsequently, all participants completed ...

BBC News – HSBC’s private banking arm accused of tax fraud by Belgium . Authorities in Brussels have charged HSBC’s private banking arm, which is based in Switzerland, with helping wealthy Belgians to avoid taxes. Prosecutors allege that hundreds of clients – including diamond dealers in Antwerp – moved money to offshore tax havens with the help of the bank. … Prosecutor Michel Claise accused HSBC of “fraud, money laundering, criminal association and illegal exercise of the profession of financial intermediary”.

Paul Mason, economics editor for Britain’s Channel Four, explains why he’s sick of standing outside RBS’s headquarters talking about banks doing something wrong.

Brisbane’s G20 meeting of world leaders is shaping up to be remembered as the time when the belief that the world’s largest banks were Too Big To Fail finally ended. Bank of England Governor Mark Carney foreshadowed the impending change at the weekend. Mr Carney said the bosses of the big banks behind the 2008 crash should have paid more for their errors, such as handing back severance packages and spending time in jail. The failure to inflict real punishment in both Britain and America had left the global economy exposed to the same risks as it was six years ago, he said. London’s Daily Telegraph reported: “They got away with their compensation packages, they got away without sanction,” Mr Carney told the International Monetary Fund’s annual meeting in Washington. “Maybe they were not at the best tables in society after that, but they’re still at the best golf courses. That has to change.” The Bank has proposed that senior bankers face prison if their organisation...

The Justice Department is preparing a fresh round of attacks on the world’s biggest banks, again questioning Wall Street’s role in a broad array of financial markets. With evidence mounting that a number of foreign and American banks colluded to alter the price of foreign currencies, the largest and least regulated financial market, prosecutors are aiming to file charges against at least one bank by the end of the year, according to interviews with lawyers briefed on the matter. Ultimately, several banks are expected to plead guilty. via  Big Banks Face Another Round of U.S. Charges – NYTimes.com .

On this little blog of mine I have been featuring stories on what I describe as ticket clippers for many months now. One of the continuing themes of many of them is the way that while banks keep getting hit with huge fines, the bankers that run them have almost always avoided being charged with any offences. It really is a depressing story of how money talks when it comes to the criminal justice system. I recommend you browse through my ticket clipper archive and also read a couple of recent postings on  Bloomberg View. The Reasons Bankers Weren’t Busted – Bloomberg View . Here Bloomberg View columnist Barry Ritholtz, who has been following the absence of legal prosecutions since 2008 and posted on that subject more than 500 times, reviews the events of the financial crisis showing that the law was broken repeatedly by bankers. Political access and lobbying go part way toward explaining the absence of prosecutions and, therefore, the lack of convic...

The big banks sent hundreds of thousands of letters from fake debt collection firms to ‘intimidate’ customers. HSBC, Barclays, Santander and RBS/NatWest admit using the trick on families deep in the red. The letters misleadingly suggest that law firms and outside debt collectors are being called in. The admissions, which follow a campaign by the Daily Mail to highlight the scandal, came in a series of letters released last night by MPs. In one of them, the chief executive of Barclays confessed the bank had used a number of ‘debt collection brands’. Appearing to acknowledge intimidation, Antony Jenkins said the letters were meant to indicate to customers ‘an escalation in the seriousness of the situation’. RBS chief Ross McEwan said the bogus letters ‘reflected what had become a common industry practice in a sector that had come to put its own interests above those of its customers’.

The Chinese financial system is developing in the normal capitalist way.

Instead of all that boring stuff about will the Senate or won’t it, this is the story that should be on page one this morning: Australian Super chief executive Ian Silk raises an issue of importance to all Australians forced to contribute to compulsory superannuation schemes. Too many people working in financial services, Mr Silk points out, are using the compulsory retirement savings system to enrich themselves rather than look after members’ money. This is an issue that Labor should be making central to its re-election policies. NOTE: Find an assortment of other ticket clipping stories about the finance industry  HERE .

Another day and another ruling against a bank for fraudulent practices. A New York judge has ruled that Bank of America’s Countrywide business must pay the US government $1.3bn for selling defective home loans. Former Countrywide executive Rebecca Mairone must also pay $1m. A  BBC report  says Countrywide was found guilty of selling bad loans, as part of a programme called “hustle”, to US mortgage giants Fannie Mae and Freddie Mac in 2007. Bank of America has spent nearly $40bn on legal matters relating to the housing market collapse, and the bank is expected to announce a multi-billion dollar settlement with US regulators over similar charges in the coming weeks. The “hustle” suit came about after Edward O’Donnell, a former Countrywide executive, issued a whistleblower complaint alleging fraud. Mr O’Donnell said a programme Countrywide instituted in 2007 known internally as the “high-speed swim lane” (also known as “HSSL” or “hustle”) did not properly scre...

It seems appropriate somehow that the Japanese financial giant Nomura chose Sicily for what Italian police allege was a  175 million euros fraud. According to police Colonel Francesco Mazzotta, four Nomura employees from back in 2000 to 2006 are under investigation, along with three other people, for using complex financial products to defraud the regional government of Sicily in the years leading up to the financial crisis. Bloomberg   reports  that Italy’s financial police have seized bank accounts and credit valued at 98 million euros from Nomura, along with 6 million euros in property, shares and cash belonging to the seven suspects. The amount represents the profit the bank allegedly made from the trades, police said. Nomura created three derivatives contracts to restructure Sicily’s debt that wound up costing the region 60 million euros, police said. Sicily also lost 115 million euros on the securitization, or bundling, of health-c...

London’s  Daily Mail  reports this morning  that the clamour grows as the Bank of England chief says Lloyds traders ‘clearly broke the law’. In summary: Mark Carney says Lloyds staff involved may be guilty of ‘criminal conduct’ Bank ripped off Treasury during financial crisis with creditworthiness lies It gained access to tens of billions from Government at favourable rates MP says public don’t understand why rogue bankers haven’t been jailed The Mail  was not alone in taking a hard line on banking practices. That daily bible of the financial community  The Financial Times  reported how Lloyds Banking Group  has been criticised for  “highly reprehensible” behaviour  by the Bank of England after it became the first lender to be fined for rigging rates to cut the cost of a financial crisis rescue scheme, effectively costing the taxpayer millions of pounds.

A deal to resolve a U.S. regulator’s claims against Goldman Sachs Group Inc over mortgage-backed securities sold to Fannie Mae and Freddie Mac leading up to the financial crisis could cost the bank between $800 million and $1.25 billion, according to a person familiar with the matter. The person said Goldman Sachs is discussing a settlement with the Federal Housing Finance Agency (FHFA), which filed 18 lawsuits against Goldman and other banks in 2011 over about $200 billion in mortgage-backed securities that later went sour. Goldman Sachs and the FHFA declined to comment on Saturday. via  Goldman mortgage deal with federal agency could reach $1.25 billion: source | Reuters . In other ticket clipping news, Reuters reports that according to a Swiss newspaper about 80 of the 106 Swiss  banks  that signed up for a deal with U.S. tax authorities could be fined less than they had feared for their role in helping wealthy Americans cheat on their taxes, but must widen ...