Daily Archives: March 22, 2016

Italian police open money laundering investigation of broker linked to HSBC

An Italian financial broker working on behalf of HSBC in the Swiss town of Lugano is under investigation for possible money laundering in a probe linked to a wider tax evasion case, an Italian finance police colonel told Reuters.

The officer’s confirmation that an investigation has been opened followed a statement on Tuesday from Turin tax police, saying that police searched the home of the broker in the Northern Italian town of Lecco. It did not name the broker.

The statement said the individual is suspected of being part of a group of a dozen brokers who are alleged to have collected funds from Italian clients, deposited them in anonymous accounts in the Lugano office of HSBC and then transferred them to offshore companies in Panama, Luxembourg and the British Virgin Isles to shield the money from tax authorities.

The other 11 people are not under investigation and no other searches have been carried out, finance police colonel Ivan Bixio told Reuters on Tuesday.

“We are monitoring the situation but have no further comment at this stage,” an HSBC representative told Reuters in an emailed statement.

HSBC no longer has offices in Lugano.

Read on.

Analysts Urge Citigroup Split

Analysts at Keefe Bruyette & Woods on Monday waded into the debate over breaking up the nation’s biggest banks, releasing a report that urgesCitigroup to split up.

In the report, the analysts argue that Citigroup’s stock price is being held back by regulations that require big banks to hold large amounts of capital.

The analysts suggest Citigroup could break up in several ways — by selling part of its Banamex unit in Mexico, splitting its consumer and corporate units in the United States into two companies, or selling its international operations.

Together, the moves could increase Citigroup’s market value by 57 percent, to $198 billion, the analysts estimated.

Read on.

Morgan Stanley penalized for advisor fraud, ducks huge fine

Wealth advisors found guilty in FINRA arbitration after employee’s affair with client.

Morgan Stanley faces a $35 million charge after wealth advisors were found to have engaged in fraud and breached fiduciary duty to an elderly client, according to an arbitration panel appointed by the Financial Industry Regulatory Authority.

Lawyers for Lynnda Speer, widow of Home Shopping Network co-founder Roy Speer, said Florida Morgan Stanley wealth advisors Terry McCoy and Ami Forte were responsible for unauthorized trades on Roy Speer’s account. A FINRA panel on Monday determined that McCoy and Forte were guilty of elder exploitation, breach of fiduciary duty, constructive fraud, negligence and negligent supervision.

Lawyers for Speer’s widow alleged that Forte manipulated the account during a yearslong affair she had with Roy Speer, who died in 2012.

The FINRA panel found for damages of more than $32.8 million and costs of more than $1.5 million, in addition to legal fees in the case, which have yet to be determined.

Read on.

Nixon Aide Reportedly Admitted Drug War Was Meant To Target Black People

Huffington Post:

An eye-opening remark from a former aide to President Richard Nixon pulls back the curtain on the true motivation of the United States’ war on drugs.

John Ehrlichman, who served 18 months in prison for his central role in the Watergate scandal, was Nixon’s chief domestic advisor when the president announced the “war on drugs” in 1971. The administration cited a high death toll and the negative social impacts of drugs to justify expanding federal drug control agencies. Doing so set the scene for decades of socially and economically disastrous policies.

Journalist Dan Baum wrote in the April cover story of Harper’s about how he interviewed Ehrlichman in 1994 while working on a book about drug prohibition. Ehrlichman provided some shockingly honest insight into the motives behind the drug war. From Harper’s:

“You want to know what this was really all about?” he asked with the bluntness of a man who, after public disgrace and a stretch in federal prison, had little left to protect. “The Nixon campaign in 1968, and the Nixon White House after that, had two enemies: the antiwar left and black people. You understand what I’m saying? We knew we couldn’t make it illegal to be either against the war or black, but by getting the public to associate the hippies with marijuana and blacks with heroin, and then criminalizing both heavily, we could disrupt those communities. We could arrest their leaders, raid their homes, break up their meetings, and vilify them night after night on the evening news. Did we know we were lying about the drugs? Of course we did.”

Fannie Mae, Freddie Mac finally set to reduce mortgage balances

WSJ: FHFA approves principal reduction plan

After years of speculation and equivocation, Fannie Mae and Freddie Mac will begin to cut the mortgage balances for a number of homeowners later this year, according to a report from The Wall Street Journal.

The Wall Street Journal report, written by Joe Light, states that the Federal Housing Finance Agency recently approved a plan for the government-sponsored enterprises to engage in principal reduction on a large scale for the first time since the housing crisis.

For years their leaders claimed this would never happen. They all said the GSEs were in conservatorship, not receivership, and so a reduction in asset values would be counterintuitive to that status.

Perhaps this is why the scale of the reduction program is not as significant as some might expect, as Light reports.

From the WSJ:

Fewer than 50,000 “underwater” homeowners, who owe more than their homes are worth and are already behind in their mortgage payments, will likely be eligible, people familiar with the matter said.

Fannie and Freddie—which don’t make mortgages but rather buy them from lenders and wrap them into guaranteed securities—would also forgive principal only in cases where they determine the companies would lose less money with that option than foreclosure or other foreclosure-prevention methods. In addition, the new program will likely be limited to mortgages whose outstanding principal balance is under a certain dollar amount, people familiar with the matter said.

Read on.

Trump responds to Brussels attack by insulting the ‘city’ of Belgium — and calling for torture

belgium

Ahem, Mr. Trump actually, Belgium is a country not a city….Brussels is a city.

Speaking on the TODAY Show, Trump, the GOP front-runner, spoke to the hosts by phone about the suicide bombings in the Belgian capital that left dozens dead and hundreds injured.

rump was asked what he would do to get information out of Salah Abdeslam, the chief suspect in the terror attacks on Paris last year. He was captured by Belgian police earlier this week.

“Frankly, waterboarding, if it was up to me, and if we change the laws or have the laws, waterboarding would be fine,” Trump said. “We work within laws. They don’t work within laws. They have no laws. The waterboarding would be fine and if they could expand the laws I would do a lot more than waterboarding.”

Many experts say torture, which is illegal, yields unreliable information.

When host Matt Lauer pointed out that the Belgian justice system is handling Abdeslam, Trump went on to say he believed Abdeslam should be turned over to military custody by Belgian police.

“That’s okay, I mean he’s being held by whoever. Let the military take him over, they have to get their act together,” Trump said. He continued to bash Belgium. “Belgium is no longer Belgium. Belgium is not the Belgium that you and I knew, Matt, from 20 years ago, which was one of the most beautiful cities and one of the safest cities in the world. Belgium is a horror show right now.”

Read on.

Looking Back at Lehman’s Collapse With the Woman Who Fell Farthest

Erin Callan’s new memoir recalls the steep price she paid to become Lehman’s CFO just in time for the financial crisis.

As the financial system was teetering and about to collapse, Erin Callan had a prescient exchange with one of her colleagues at Lehman Brothers. It was Nov. 29, 2007, and news that the co-president of Morgan Stanley, Zoe Cruz, had just been fired after her firm took a $3.7 billion loss on subprime mortgage securities was flashing across TV screens all over Lehman’s trading floor. Joe Gregory, the chief operating officer of Lehman, popped into Callan’s office. “Did you see the Morgan Stanley news?” Gregory asked. “The news about Zoe?” Callan, who was about to take over as Lehman’s chief financial officer, was distressed. Cruz was one of the highest-ranking women on Wall Street. Without her, Callan would be left standing nearly alone as a female atop a male-dominated industry, like a weather vane attached to a roof that may or may not have been sound. The parallels with Cruz’s situation were obvious.

“Zoe’s destiny was my possible destiny,” Callan writes in a new memoir published Monday. “Her story was similar to my story in a big picture way.”

Callan wrote her book, Full Circle: A Memoir of Leaning In Too Far and the Journey Back, to try to share the lessons she learned—painfully and publicly—about the dangers of prioritizing one’s career ahead of everything else. She now sees that her total obsession with work and achievement came at the expense of everything else in her life, including meaningful personal relationships. Lehman turned out to be at the center of the financial crisis and ultimately filed for bankruptcy in September 2008. Callan had left the company months before, but she was still shamed and humiliated, her face appearing like a mug shot on newspapers across the country.

Read on.