Daily Archives: September 11, 2015


Deutsche Bank AG received a temporary exemption that allows asset managers affiliated with a South Korean subsidiary to continue serving retirement plans even if employees at the subsidiary are convicted of stock market manipulation.

The DOL granted the nine-month prohibited transaction exemption because without it, retirement plans and individual retirement accounts with assets managed by qualified professional asset managers affiliated with Deutsche Securities Korea Co. (DSK) “may incur substantial costs in being forced to liquidate and reinvest their portfolios, and hire new investment managers on short notice,” the department said in a notice issued Sept. 3.

A conviction against DSK was expected on or about Sept. 3 in Seoul Central District Court, South Korea. The company would be held liable for the alleged spot- and futures-linked market price manipulation under Korea’s criminal vicarious liability provision, the DOL said when the exemption was proposed Aug. 21.

Read on.

Deutsche Bank Considering Closing Operations in Some Countries

LONDON— Deutsche Bank AG is considering sweeping changes that could include scaling back or closing operations in some countries, as well as overhauling the bank’s executive ranks, according to people familiar with the matter.

The German lender’s 19-member supervisory board is discussing those options as part of a broader array of possible strategic shifts as they meet at an annual gathering in the Bavarian Alps today and into the weekend, the people said.

The outcome of the discussions will mark the first major moves by Deutsche Bank’s new chief executive, John Cryan, who is looking to cut costs, boost profitability and help the bank recover from a series of regulatory missteps. Executives have promised to deliver adetailed strategy update to the public by the end of October.

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Recent Federal Student Loans Look A Lot Like Subprime Mortgages

Federal student loans made in recent years resemble the toxic subprime mortgage loans that helped cause the Great Recession, new data show.

Rather than paying down their balances after leaving school, borrowers with recent federal student loans are experiencing an increase in debt as they fail to make enough payments to offset the accumulating interest on their loans.

The situation parallels subprime mortgages before the financial crisis, when lenders gave borrowers loans they couldn’t afford by allowing them to make payments that didn’t actually reduce their balances.

But while borrowers with toxic subprime loans largely defaulted and lost their homes as their lenders recorded losses, borrowers with federal student loans are likely to have their suffering drawn out for years thanks to a stagnant economy in which wages are barely rising, and existing law and Education Department practices that make it nearly impossible for struggling borrowers to discharge their debt in bankruptcy.

Read on.

Big banks in $1.865 billion swaps price-fixing settlement

Twelve major banks have reached a $1.865 billion settlement to resolve investor claims that they conspired to fix prices and limit competition in the market for credit default swaps, a lawyer for the investors said on Friday.

The settlement in principle was disclosed at a hearing before U.S. District Judge Denise Cote in Manhattan.

“We think it’s historic,” Daniel Brockett, the investors’ lawyer, said in an interview. “It’s one of the largest antitrust class-action settlements, and an extraordinary result for the class.”

The defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc, HSBC Holdings Plc, JPMorgan Chase & Co, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG.

Other defendants are the International Swaps and Derivatives Association and Markit Ltd, which provides credit derivative pricing services.

Read on.

DOJ’s new focus on individual prosecutions may be response to judicial challenges


The Justice Department’s memo to its prosecutors suggests they make more effort to hold individuals at corporations accountable. That move may be a response to, as reported on Monday in The Wall Street Journal, a federal appeals court’s consideration whether judges can quash the agency’s corporate prosecution agreements if the judges think the deals are too lenient. David Dayen, in an OpEd in the Guardian last November, said the Justice Department has been using non-prosecution and deferred prosecution agreements more than ever to extract big fines and the promise of change without having to single out any particular executive for the wrongdoing. Of the DoJ’s 283 deferred prosecution agreements since 2000, half have come since 2010, according to a working paper quoted. Dayen quotes Lanny Breuer, former head of the DoJ’s criminal division under former Attorney General Eric Holder, admitting that deferred prosecution agreements have become a “mainstay of white-collar criminal law enforcement.” The agreements put the company on probation, with the promise of never committing a crime again, under threat of renewed prosecutions. That rarely happens even for the most chronic repeat offenders.

An added footnote: Remember, during Eric Holder’s 2013 testimony before the Senate Judiciary Committee when he said:
“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy.”

Which is why there were so many deferred prosecution agreements and record fines (which is tax writeoffs for the banks) with the banksters and DOJ and not criminal charges against the bank execs.

Opinion: Justice Dept. cracking down on white-collar crime? Don’t believe the hype

Don’t worry. I’m not buying the beans either…

Without forcing guilty companies to plead guilty, corrupt culture will keep churning out corrupt individuals

If you ask, corporate criminal defense attorneys will tell you — as they have told me — the one thing their corporate clients want to avoid when facing off against the federal government is an admission of wrongdoing — to have to plead guilty to the crimes they have committed.

Everything else is possible.

Pay huge fines? No problem.
Accept a monitor to report back to the government? Bring it on, especially if the company gets to approve the monitor.

Turn over executives responsible for the crimes? Under the bus they go.

But no guilty pleas for the corporate parent.

That’s why people who follow corporate crime prosecutions closely are taking the release of a memo from the Justice Department that will implement new policies to go after individual corporate executives with a grain of salt.

Read on.

Goldman Sachs Fears “Government Shutdown” Is Looming As Lew Urges Congress “Raise Debt Limit ASAP”

The banksters always thinking about themselves!!! Doing God’s work!

With Treasury Secretary Jack Lew sending a letter to Congress this evening demanding they raise the debt limit as soon as possible, warning that cash balances have dropped below the “minimum target,” it is perhaps less than surprising that Goldman Sachs is warning that a government shutdown at the end of the month has become much more likely over the last several weeks. While out-months in VIX (beyond the prospective shutdown) remain elevated, Goldman finds a silver-lining claiming that the effect of a potential shutdown on financial markets and the real economy would probably be modest if it did occur. We shall see…

As Goldman explains…

  • While it is a close call, we still think it is slightly more likely that Congress will avoid a shutdown and pass spending legislation just before the current funding expires on September 30.
  • More importantly, while the risk of a shutdown is real and the outcome of the political debate is hard to predict, the effect of a potential shutdown on financial markets and the real economy would probably be modest if it did occur. Unlike 2013, a shutdown in October would be unrelated to raising the debt limit, and it would probably also be shorter in duration. If so, it would probably have little effect on output or personal income, though it could dent confidence.

Read on.

Wall Street CEO Charged for Reverse Mergers

(CN) – New York Global Group founder Benjamin Wey was arrested Thursday morning and charged with securities fraud in connection with reverse mergers, the government said.
Manhattan U.S. Attorney Preet Bharara announced the unsealing of an indictment against Way and his Swiss banker Seref Dogan Erbek. Erbek remains at large, according to Bharara’s office.
Wey, 43, is accused of illegally making tens of millions of dollars through reverse merger transactions between Chinese companies and U.S. shell companies by manipulating stock prices.
Reverse mergers involve private companies acquiring an ownership majority in a public shell company before merging the two entities. Wey violated federal securities laws by not disclosing his ownership of more than five perfect of stock in the new companies, according to the indictment.
“Ben Wey fashioned himself a master of industry, but as alleged, he was merely a master of manipulation,” Bharara said in a statement. “The indictment charges that Wey used reverse merger transactions between Chinese companies and U.S. shell companies to illegally conceal his ownership interest and then, with the help of his alleged co-conspirator, manipulated the market so that he could sell his interest at artificially inflated prices.”
Wey manipulated stock prices by causing two Manhattan brokers to solicit their customers to buy stock in the merged entities while at the same time discouraging customers to sell those stocks, thereby artificially maintaining the share prices, according to a government press release.

Read on.

Forensic accounting in #FannieGate gets audited


A few months ago, HousingWire delved into a detailedforensic accounting report that looked at the complex legerdemain that went into the federal government putting the GSEs in conservatorship.

It revealed some head-scratching accounting and some three-card Monte-style mathematics. For starters, they said, Treasury justified the conservatorship of the GSEs via accounting gimmicks since they faced no liquidity issue at the time of the crisis and recession. They noted that Fannie Mae’s Cash Net Income, adjusted for non-cash items, was positive throughout entire crisis and recession.

Fannie Mae disclosed they held $36.3 billion cash in the bank on Sept. 30, 2008 with a maximum exposure of roughly $6 billion per quarter. That was enough liquidity to survive over 18 months, assuming it didn’t bring in another dime.

The full 27-page report, which can be read here, was from two activist investors involved in the FannieGate controversy with extensive legal and business backgrounds, Adam Spittler CPA, MS and Mike Ciklin JD, MBA, MRE.

Now, an independent audit of that report certifies that, yes, their findings are pretty much right in the center of the bulls-eye.

Evans Bank settles with New York over redlining

The State of New York announced Thursday that it reached a settlement with Evans Bank (EVBN) over allegations of unlawful discriminatory mortgage practices, also called redlining.

New York sued Evans Bank last year, accusing the bank of “systematically” denying its mortgages and services to African-Americans in the Buffalo metro area.

According to the lawsuit, Evans Bank allegedly created a map of its lending area, which included most of the city of Buffalo, but excluded the predominately African-American neighborhoods on Buffalo’s East Side.

Read on.