Daily Archives: July 16, 2015

Trader charged with rigging Libor says outcomes were random

Ex-trader Tom Hayes on Thursday told a London court where he is on trial for rigging Libor that his attempts to influence benchmark interest rates had resulted in “random” outcomes that had not benefited his trading positions over time.

The former yen derivatives trader at UBS (>> UBS Group AG)and Citi (>> Citigroup Inc), who denies eight counts of conspiracy to defraud between 2006 and 2010, said he did not know to what extent Libor submitters had been influenced by the requests he made.

“The outcomes over the whole population of data are completely random,” he told Southwark Crown Court.

Read on.

Broken Windows, Broken Banks! It’s time to institute a Wall Street “Zero Tolerance” policy.

In 1995, New York City Mayor Rudy Giuliani, launched a “zero tolerance” policy. NYC had long been out of control, rife with crime. Giuliani knew strong measures were a must if the city were to survive.

“Zero tolerance” was first talked about by James Q. Wilson and George Kelling in a 1982 Atlantic Monthly article. Their theory argued that by targeting minor crimes, “fixing broken windows,” police could reduce the sense of disorder that often led to more serious crimes.

Their theory proposed that left unchecked, disorderly behavior makes communities and cities more “vulnerable to criminal invasion.” They warned, “One unrepaired broken window is a signal that no one cares and so breaking more windows costs nothing.”

For the next 20 years, NYC’s adoption of “zero tolerance” would fundamentally change the behavior of both New Yorkers and the city’s culture. By arresting and jailing rule breakers, NYC became a safe city. Petty lawlessness virtually disappeared

At the same time as “zero tolerance” was adopted, Wall Street was being subjected to little to no scrutiny; the theory being that individual liberty benefits business. Be that as it may, the financial industry took this to mean they could run amok.

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Regards,
Richard

Deutsche Bank under scrutiny for Moscow bribe allegations

Marketwatch:

The New York Department of Financial Services has asked Deustche BankDB, +0.25%   to provide details of a suspected bribe offered to one of its employees in Moscow, the Financial Times reported on Monday. The request comes as the agency continues to investigate whether the German bank made $6 billion of trades for Russian clients as part of a money laundering scheme. The bank disclosed in June that it was conducting its own investigation, one that resulted in the suspension of several Moscow employees. The trades, called mirror trades, allowed Deutsche’s Russian clients to move funds out of the country, possibly illegally. The Financial Times reports that the Russian central bank is also investigating the trades and the German financial regulator, BaFin, as well as the UK’s Financial Conduct Authority and the European Central Bank are also involved.

BaFin is already investigating what was previously reported as potentially criminal individual behavior by Deutsche bank employees related to Libor rate manipulation and lying to the central bank by senior executives. Deutsche paid a record $2.5 billion penalty in April for manipulation of the Libor and Euribor inter-bank rates to U.S. regulators and the UK’s Financial Conduct Authority because the bank tried to mislead regulators and hamper the investigations.

Warren Buffett responds to investigation into predatory lending practices

After a joint investigation by the Center and The Seattle Times, Warren Buffett was called before Berkshire Hathaway shareholders and national media in the spring to explain the lending practices of Clayton Homes, the nation’s largest mobile home manufacturer and lender.

Editors Note: This story is part of joint investigation between the The Center for Public Integrity and The Seattle Times

OMAHA, Neb. — Warren Buffett opened his shareholder meeting Saturday with a vigorous defense of the mobile-home business that he’s helped build into the industry’s most dominant player.

Clayton Homes was the subject of a recent investigation by The Center for Public Integrity and The Seattle Times, which documented how the company has used predatory sales practices, exorbitant fees and home-loan interest rates that can exceed 15 percent. Because Clayton’s mobile homes often dwindle in value, borrowers find themselves trapped, unable to sell or refinance due to the punishing lending terms.

The first question Buffett faced at his annual meeting came from a longtime shareholder in Texas who said he was having “heartburn” about issues raised in the story. The shareholder said he previously viewed Berkshire Hathaway as “an ethical company” but was concerned about Clayton and the company’s weak response to the Center for Public Integrity/Seattle Times.

Buffett responded that the company has been exemplary in providing loans to people who often have poor credit. He said the company has no interest in providing loans that fail, since the company holds the loans on its books.

“I make no apologies whatsoever about Clayton’s lending terms,” Buffett told the crowd of 40,000 that gathered in Omaha.

Most Clayton mobile-home loans are considered “higher-priced” under federal guidelines, and those loans averaged 7 percentage points higher than a typical home loan in 2013, compared with just 3.8 percentage points for other industry lenders, according to an analysis of federal data.

Read on.