Daily Archives: July 16, 2015

Warren and Cummings Ask Financial Regulators About Risks to Banks and Taxpayers from Swaps Trading

Washington, DC – Today, United States Senator Elizabeth Warren and Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, sent letters requesting information from federal financial regulators about risks posed to taxpayers after last year’s partial repeal of Section 716 of the Dodd-Frank Act, which had been designed to prevent bailouts to banks and other financial entities with swaps holdings.

“Without this understanding, the country risks moving blindly toward the same financial meltdown that plunged the economy into recession seven years ago,” they wrote. “We believe that if these banks want continued access to federally insured deposit funds, they must be more transparent about the risks they are taking with that money.  If they want to keep secret the risks they are taking, these banks should forfeit access to taxpayer-backed FDIC insurance.  They can have access to taxpayer guarantees or they can keep big secrets, but they can’t do both.”

Earlier this year, Cummings and Warren sent letters requesting information from Bank of America, JPMorgan Chase, Citibank, and Goldman Sachs about how they planned to alter their swaps trading practices following the change to Dodd-Frank, which was included in the 2015 Appropriations legislation passed in December 2014.

The banks did not provide the information necessary to assess and understand the risks taxpayers now face, claiming it was proprietary information that must be withheld from Congress and the public. Click to read the responses from Bank of AmericaJPMorgan ChaseCitibank, and Goldman Sachs.

In today’s letters, Warren and Cummings asked financial regulators to provide the information the banks refused to make available, including the total value of derivatives contracts and swaps derivatives each institution holds for “hedging” and “risk management” purposes, as well as the total value of swaps transactions each institution would have “pushed out” under Section 716 as originally enacted.

Read the full letters sent today here:

Federal Reserve
Office of the Comptroller of the Currency
Commodity Futures Trading Commission
Federal Deposit Insurance Corporation

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Source: http://www.warren.senate.gov/?p=press_release&id=898

Clintons And Foundation Raked In Cash From Banks That Admitted Wrongdoing

Organization Foundation $ (Min.) Speaking Fees $ Total Dollars
Barclays 1,500,000 650,000 2,150,000
Credit Suisse 100,000 0 100,000
Deutsche Bank 500,000 750,000 1,250,000
GE Capital 525,000 225,500 750,500
HSBC 500,000 200,000 700,000
Jefferies LLC 0 425,000 425,000
JP Morgan 350,000 200,000 550,000
Standard Chartered 1,000,000 0 1,000,000
UBS 550,000 1,515,000 2,065,000

IBTimes:

On the campaign trail, Hillary Clinton is selling her version of economic populism, including calls for Wall Street executives who engage in financial wrongdoing to be held accountable more than they have been under President Barack Obama. She has pushed that message hard as she seeks to win support from the Democratic Party’s liberal base, with a speech Monday and a follow-up statement from her campaign the next day.

“Yesterday, Hillary said that when Wall Street executives commit criminal wrongdoing, they deserve to face criminal prosecution. Not a slap on the wrist, not a fine paid by their employers — prosecution,” said an email to supporters from Gary Gensler, a former Goldman Sachs executive-turned-government regulator now serving as a top Clinton campaign official.

Raking In Donations

Clinton’s outrage, though, did not stop her family’s foundation from raking in donations from many of the same banks that secured government fines rather than face full-scale prosecution. The Clinton Foundation has accepted $5 million worth of donations from at least nine financial institutions thatavoided such prosecution — even as they admitted wrongdoing. These include Barclays, HSBC and UBS, all of which entered into agreements with the Justice Department that allowed their employees to avoid criminal charges. The Clintons also personally accepted nearly $4 million in speaking fees from those firms since 2009.

Neither the Hillary Clinton campaign nor Clinton Foundation responded to International Business Times questions about why her family and their foundation accepted money from firms that settled financial fraud cases and avoided the kind of prosecution Clinton now says is needed.

HSBC under investigation by Saudi regulator for its role in a stock listing

HSBC Holdings PLC has come under investigation by regulators in Saudi Arabia for its role in a stock listing that has left investors nursing heavy losses and the bank’s chief executive cleaning up a fresh mess.

Saudi Arabia’s Capital Markets Authority, or CMA, in September suspended HSBC from conducting some asset-management activities and is investigating whether the bank’s Saudi unit inflated the valuation of a construction firm’s listing in 2008, according to three people familiar with the matter.

London-based HSBC’s brush with the regulator in Saudi Arabia, one of the world’s most promising new frontiers for foreign investors, marks another blow to a bank that has seen certain business practices run afoul of global authorities in recent years and its management criticized for a lack of oversight.

Read on.

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.

 Read More

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.