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FTR #772 Body Count II: (Collateralized “Death” Obligations)

Dave Emory’s entire life­time of work is avail­able on a flash drive that can be obtained here. (The flash drive includes the anti-fascist books avail­able on this site.)

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Side 1   Side 2

Since this broadcast was made, there have been a number of other suspicious deaths in the financial industry, set forth in this post.

Introduction: One of the surreal, almost hallucinatory financial instruments that were at the center of the 2008 financial collapse were CDO’s–collateralized debt obligations. As a number of legal investigations into mischief apparently committed by major financial institutions on a number of fronts have gained momentum, there has been a rash of suicides linked to the businesses under investigation. Both JP Morgan Chase and Deutsche Bank have been the focal point of more than one of these investigations. Both have experienced the “suicides” of current or former executives within a very short period of time.

These suicides are occurring at a time in which the EU is attempting to shore up European banks after the financial meltdown. (Be sure to examine the comments on the linked post above, as they contain critical supplemental information.) The mortality rate among London based banking executives has been particularly high in recent years. We wonder if the high mortality rate, the ongoing capital troubles and legal investigations plaguing the firms may be related to these deaths. Are we looking at collateralized “death” obligations?

Program Highlights Include:

  • The death of former Deutsche Bank executive William Broeksmit, who was found hanged in London.
  • The alleged suicide of Gabriel Magee, who supposedly jumped from the roof of the JP Morgan building in London.
  • The alleged suicide of Russell Investments executive Mike Dueker, who supposedly killed himself at a time when the company was under investigation.
  • The disappearance of a Wall Street Journal reporter who was looking into financial irregularities in the commodities market. The same story notes the suspicious circumstances of the deaths of Magee and Dueker.
  • The supposed suicide–by nail gun–of an American Title executive at a time when the company was under investigation.
  • Former Deutsche Bank chairman Josef Ackermann’s resignation from the Zurich Insurance Group following the “suicide” of a key aide in August of 2013.
  • As Argentina has attempted to stabilize the foreign exchange holdings of its banks, a very suspicious and lethal fire occurred at a supposedly fire-proof storage facility.
  • Another bitcoin exchange has halted trading, plunging the digital currency in value. Just wait until the bitcoiners start killing each other to steal each others’ bitcoins. This supposed panacea to the world’s financial ills is already exhibiting all of the established financial world’s ills, and some that the mainstream fiscal community has thus far avoided. The bitcoiners may need their own digital currency to kill each other, perhaps named “hitcoin.”

1. A former Deutsche Bank manager was found dead, an apparent suicide. “Ex-Deutsche Bank Man­ager Found Dead in Appar­ent Suicide” by Belinda Gold­smith and Thomas Atkins; Reuters; 1/28/2014.

William Broeksmit, a for­mer senior man­ager at Deutsche Bank with close ties to co-Chief Exec­u­tive Anshu Jain, has been found dead at his home in Lon­don in what appears to have been a suicide. Jain and the bank’s other co-CEO Juer­gen Fitschen announced Broeksmit’s death in an inter­nal mail to Deutsche Bank employees. When asked about the death, London’s Met­ro­pol­i­tan Police issued a state­ment say­ing a 58-year-old man had been found hang­ing at a house in South Kens­ing­ton on Sun­day after­noon and been pro­nounced dead at the scene. Police declared the death non-suspicious. Broeksmit, a U.S. national, was an instru­men­tal founder of Deutsche’s invest­ment bank and one many bankers, includ­ing Jain, who joined Germany’s flag­ship lender from Mer­rill Lynch in the 1990s, when Deutsche launched plans to com­pete on Wall Street. Broeksmit was also a prin­ci­pal actor in Deutsche’s efforts to unwind its riskier posi­tions and to reduce the size of its bal­ance sheet in the wake of the global finan­cial crisis. His death comes at an uncom­fort­able junc­ture for Jain and Fitschen, whose reign has been dogged by poor results and legal trou­bles since they took over from Josef Ack­er­mann in 2012. … The two CEOs are expected to defend their reform record at the bank’s annual news con­fer­ence on Wednes­day. Last week, they revealed that lit­i­ga­tion and restruc­tur­ing costs had pushed Deutsche to a sur­prise loss in the fourth quar­ter of 2013.


Broeksmit, who worked as head of risk and cap­i­tal opti­mi­sa­tion, was viewed as one of Jain’s clos­est allies and a key player in the bank’s attempts to recover fol­low­ing the finan­cial crisis. Jain sought to have Broeksmit join the man­age­ment board as head of risk man­age­ment in 2012. But in a major set­back for both men, Ger­man reg­u­la­tor Bafin blocked the appoint­ment, say­ing Broeksmit lacked expe­ri­ence lead­ing large teams. Bafin was not imme­di­ately avail­able for com­ment. The Bun­des­bank, which also over­sees Deutsche, declined to comment. Broeksmit worked along­side Jain at Mer­rill Lynch before join­ing Deutsche in 1996 as part of group of roughly 100 bankers who, along­side Edson Mitchell, formed the core of Deutsche’s new invest­ment bank­ing business. Mitchell, one the bank’s most pow­er­ful exec­u­tives, died in a plane crash in 2000.

2. A JP Morgan exec allegedly committed suicide at roughly the same time.

“UPDATE 3-JP Morgan IT Executive Plunges to Death at Bank’s London HQ” by Costas Pitas and Laura Noonan; Reuters; 1/28/2014.

A JP Morgan tech executive fell to his death from the U.S. bank’s 33-storey tower in London’s Canary Wharf financial district on Tuesday in what British police said was a “non-suspicious” incident. Police were called to the glass skyscraper at 8:02 GMT, where a 39-year-old man was pronounced dead at the scene after hitting a lower 9th-floor roof. Witnesses said the body remained on the roof for several hours. London police said no arrests had been made and the incident was being treated as non-suspicious at this early stage. A source familiar with the matter confirmed the deceased was Gabriel Magee, a vice president with the JP Morgan’s corporate and investment bank technology arm, who had been an employee since 2004. . . . . . . . Though the details of Tuesday’s incident are still unclear, occasional suicides by people working in London’s big banks have provoked criticism of the demands placed on some financial services workers. A Bank of America exchange manager jumped in front of a train and another man jumped from a seventh-floor restaurant, both in 2012. A German-born intern at Bank of America died of epilepsy last year in London. . . .

3. The chief economist at Russell Investments was found dead, yet another alleged suicide.

“Rus­sell Invest­ments Chief Econ­o­mist Dueker Found Dead” by Zachary Tracer, Noah Buha­yar and Jeff Kearns; Bloomberg; 1/31/2014.

Mike Dueker, the chief econ­o­mist at Rus­sell Invest­ments, was found dead at the side of a high­way that leads to the Tacoma Nar­rows Bridge in Wash­ing­ton state, accord­ing to the Pierce County Sheriff’s Depart­ment. He was 50. He may have jumped over a 4-foot (1.2-meter) fence before falling down a 40– to 50-foot embank­ment, Pierce County Detec­tive Ed Troyer said yes­ter­day. He said the death appeared to be a suicide.

Dueker was reported miss­ing on Jan. 29, and a group of friends had been search­ing for him along with law enforce­ment. Troyer said the econ­o­mist was hav­ing prob­lems at work, with­out elab­o­rat­ing. Dueker was in good stand­ing at Rus­sell, said Jen­nifer Tice, a com­pany spokes­woman. She declined to com­ment on Troyer’s state­ment about Dueker’s work issues. “We were deeply sad­dened to learn today of the death,” Tice said in an e-mail yes­ter­day. “He made valu­able con­tri­bu­tions that helped our clients and many of his fel­low associates.” Dueker worked at Seattle-based Rus­sell for five years, and devel­oped a business-cycle index that fore­cast eco­nomic per­for­mance.

 He was pre­vi­ously an assis­tant vice pres­i­dent and research econ­o­mist at the Fed­eral Reserve Bank of St. Louis. He pub­lished dozens of research papers over the past two decades, many on mon­e­tary pol­icy, accord­ing to the St. Louis Fed’s web­site, which ranks him among the top 5 per­cent of econ­o­mists by num­ber of works pub­lished. His most-cited work was a 1997 paper titled “Strength­en­ing the case for the yield curve as a pre­dic­tor of U.S. reces­sions,” pub­lished by the reserve bank while he was a researcher there.

Pol­icy Meetings

Dueker worked at the reserve bank from 1991 to 2008, start­ing as an entry level research econ­o­mist, then advanc­ing to senior econ­o­mist, research offi­cer, and assis­tant vice pres­i­dent, accord­ing to Laura Gir­resch, a spokeswoman. He helped the bank’s pres­i­dent pre­pare for Fed­eral Open Mar­ket Com­mit­tee pol­icy meet­ings and wrote and edited for eco­nomic pub­li­ca­tions, she said. Dueker served as edi­tor of the reserve bank’s research pub­li­ca­tion, Mon­e­tary Trends, and also was an asso­ciate edi­tor of the Jour­nal of Busi­ness and Eco­nomic Sta­tis­tics, Gir­resch said. “He was a val­ued col­league of mine dur­ing my entire tenure at the St. Louis Fed,” said William Poole, who was pres­i­dent of the reserve bank from 1998 to 2008. “Every­one respected his pro­fes­sional skills and good sense.” . . . .

4. A Wall Street Journal reporter disappeared at around the same time. This story notes that the deaths and disappearances are suspicious.

“A Rash of Deaths and a Miss­ing Reporter – With Ties to Wall Street Investigations” by Pam Martens; Wall Street Journal; 2/3/2014.

In a span of four days last week, two cur­rent exec­u­tives and one recently retired top rank­ing exec­u­tive of major finan­cial firms were found dead. Both media and police have been quick to label the deaths as likely sui­cides. Miss­ing from the reports is the salient fact that all three of the finan­cial firms the exec­u­tives worked for are under inves­ti­ga­tion for poten­tially seri­ous finan­cial fraud.

The deaths began on Sun­day, Jan­u­ary 26. Lon­don police reported that William Broeksmit, a top exec­u­tive at Deutsche Bank who had retired in 2013, had been found hanged in his home in the South Kens­ing­ton sec­tion of Lon­don. The day after Broeksmit was pro­nounced dead, Eric Ben-Artzi, a for­mer risk ana­lyst turned whistle­blower at Deutsche Bank, was sched­uled to speak at Auburn Uni­ver­sity in Alabama on his alle­ga­tions that Deutsche had hid $12 bil­lion in losses dur­ing the finan­cial cri­sis with the knowl­edge of senior exec­u­tives. Two other whistle­blow­ers have brought sim­i­lar charges against Deutsche Bank.

Deutsche Bank is also under inves­ti­ga­tion by global reg­u­la­tors for poten­tially rig­ging the for­eign exchange mar­kets – an action sim­i­lar to the charges it set­tled in 2013 over its traders’ involve­ment in the rig­ging of the inter­est rate bench­mark, Libor.

Just two days after Broeksmit’s death, on Tues­day, Jan­u­ary 28, a 39-year old Amer­i­can, Gabriel Magee, a Vice Pres­i­dent at JPMor­gan in Lon­don, plunged to his death from the roof of the 33-story Euro­pean head­quar­ters of JPMor­gan in Canary Wharf. Accord­ing to Magee’s LinkedIn pro­file, he was involved in “Tech­ni­cal archi­tec­ture over­sight for plan­ning, devel­op­ment, and oper­a­tion of sys­tems for fixed income secu­ri­ties and inter­est rate derivatives.”

Magee’s par­ents, Bill and Nell Magee, are not buy­ing the offi­cial story accord­ing to press reports and are plan­ning to travel from the United States to Lon­don to get at the truth. One of their key issues, which should also trou­ble the police, is how an employee obtains access to the rooftop of one of the mostly highly secure build­ings in London. Nell Magee was quoted in the Lon­don Evening Stan­dard say­ing her son was “a happy per­son who was happy with his life.” His friends are equally mys­ti­fied, stat­ing he was in a happy, long-term rela­tion­ship with a girlfriend.

JPMor­gan is under the same global inves­ti­ga­tion for poten­tial involve­ment in rig­ging for­eign exchange rates as is Deutsche Bank. The firm is also said to be under an inves­ti­ga­tion by the U.S. Senate’s Per­ma­nent Sub­com­mit­tee on Inves­ti­ga­tions for its involve­ment in poten­tial mis­con­duct in phys­i­cal com­modi­ties mar­kets in the U.S. and London.

One day after Magee’s death, on Wednes­day, Jan­u­ary 29, 2014, 50-year old Michael (Mike) Dueker, the Chief Econ­o­mist at Rus­sell Invest­ments, is said to have died from a 50-foot fall from a high­way ramp down an embank­ment in Wash­ing­ton state. Again, sui­cide is being pre­sented by media as the likely cause. (Do peo­ple hold­ing Ph.D.s really attempt sui­cide by jump­ing 50 feet?) … Accord­ing to a report in The New York Times in Novem­ber of last year, Rus­sell Invest­ments was one of a num­ber of firms that received sub­poe­nas from New York State reg­u­la­tors who are prob­ing the poten­tial for pay-to-play schemes involv­ing pen­sion funds based in New York. No alle­ga­tions of wrong­do­ing have been made against Rus­sell Invest­ments in the matter.

The case of David Bird, the oil mar­kets reporter who had worked at the Wall Street Jour­nal for 20 years and van­ished with­out a trace on the after­noon of Jan­u­ary 11, has this in com­mon with the other three tragedies: his work involves a com­modi­ties mar­ket – oil – which is under inves­ti­ga­tion by the U.S. Senate’s Per­ma­nent Sub­com­mit­tee on Inves­ti­ga­tions for pos­si­ble manip­u­la­tion. The FBI is involved in the Bird investigation.

Bird left his Long Hill, New Jer­sey home on that Sat­ur­day, telling his wife he was going for a walk. An inten­tional dis­ap­pear­ance is incom­pat­i­ble with the fact that he left the house wear­ing a bright red jacket and with­out his life-sustaining med­i­cine he was required to take daily as a result of a liver trans­plant. Despite a con­tin­u­ous search since his dis­ap­pear­ance by hun­dreds of vol­un­teers, local law enforce­ment and the FBI, Bird has not been located.

When a series of tragic events involv­ing one indus­try occur within an 18-day time­frame, the sta­tis­ti­cal prob­a­bil­ity of these events being ran­dom is remote. Accord­ing to a num­ber of media reports, JPMor­gan is con­duct­ing an inter­nal inves­ti­ga­tion of the death of Gabriel Magee. Given that JPMor­gan, Deutsche Bank and Rus­sell Invest­ments are sub­jects them­selves of inves­ti­ga­tions, a more seri­ous, inde­pen­dent look at these deaths is called for.

5a. The day this program was recorded, another financial services executive was found dead, allegedly having committed suicide by shooting himself with a nail gun!

“4th Finan­cial Ser­vices Exec­u­tive Found Dead; ‘From Self-Inflicted Nail-Gun Wounds'” by Tyler Dur­den; zerohedge.com; 02/07/2014.

The ugly rash of finan­cial ser­vices exec­u­tive sui­cides appears to have spread once again. Fol­low­ing the jump­ing deaths of 2 Lon­don bankers and a former-Fed econ­o­mist in the US, The Den­ver Post reports Richard Tal­ley, founder and CEO of Amer­i­can Title, was found dead in his home from self-inflicted wounds — from a nail-gun.

Talley’s com­pany was under inves­ti­ga­tion from insur­ance regulators. Via The Den­ver Post, Richard Tal­ley, 57, and the com­pany he founded in 2001 were under inves­ti­ga­tion by state insur­ance reg­u­la­tors at the time of his death late Tues­day, an agency spokesman con­firmed Thursday. It was unclear how long the inves­ti­ga­tion had been ongo­ing or its pri­mary focus. A coroner’s spokes­woman Thurs­day said Tal­ley was found in his garage by a fam­ily mem­ber who called author­i­ties. They said Tal­ley died from seven or eight self-inflicted wounds from a nail gun fired into his torso and head.

Also unclear is whether Talley’s sui­cide was related to the inves­ti­ga­tion by the Col­orado Divi­sion of Insur­ance, which reg­u­lates title com­pa­nies.

5b. More about the background of the late, unfortunate Mr. Talley:

“Under Inves­ti­ga­tion, Amer­i­can Title CEO Dead in Grisly Sui­cide” by David Migoya; The Den­ver Post; 2/7/2014.

Before com­ing to Col­orado, Tal­ley was a for­mer regional finan­cial offi­cer at Drexel Burn­ham Lam­bert in Chicago, where he met his wife, Cheryl, a vice pres­i­dent at the com­pany. The two mar­ried in 1989.

Tal­ley had formed a num­ber of com­pa­nies, some now defunct, accord­ing to the Col­orado sec­re­tary of state’s office. Among them: Amer­i­can Escrow, Clear Title, Clear Creek Finan­cial Hold­ings, Swift Basin, Sumar, Amer­i­can Real Estate Ser­vices, and the Amer­i­can Alliance of Real Estate Professionals. . . .

6. Former Deutsche Bank chief Josef Ackermann resigned his position with the Zurich Insurance Group following the “suicide” of a key executive of that firm.

“Zurich Chair­man Josef Ack­er­mann Quits over Sui­cide Claims” by Alis­tair Osborne; The Telegraph [UK]; 8/29/2013.

Josef Ack­er­mann, the for­mer chief exec­u­tive of Deutsche Bank, said he was resign­ing because he did not want to “dam­age” the rep­u­ta­tion of the Swiss insurer already reel­ing from the death of Pierre Wauthier.Mr Wau­thier, 53, who was mar­ried with two chil­dren, was found dead at his home in lake­front sub­urb of Zug out­side Zurich. On Tues­day police said he appeared to have taken his own life. In a brief state­ment, Mr Ack­er­mann, 65, said: “The unex­pected death of Pierre Wau­thier has deeply shocked me. I have rea­sons to believe that the fam­ily is of the opin­ion that I should take my share of respon­si­bil­ity, as unfounded as any alle­ga­tions might be.”

His enig­matic remarks, which the insurer declined to clar­ify, sent shock­waves through the finan­cial com­mu­nity as reports sug­gested that Mr Ackermann’s attempt to “shake up” the insurer had put Mr Wau­thier under insuf­fer­able pressure. His widow, Fabi­enne Wau­thier, was also said to have accused Zurich’s man­age­ment of dri­ving her hus­band “into a cor­ner” and that Mr Ackermann’s “tough man­age­ment style” had been a key fac­tor in his death, accord­ing to a Swiss news website.

One for­mer col­league of Mr Wau­thier was quoted say­ing: “Pierre was under a lot of pres­sure because there was a lot more pres­sure from above on the share price, this was an open secret. Wau­thier had effec­tively reached his career ambi­tions, CFO was his dream.” . . . .

7. Following an announcement by the Argentine government concerning foreign exchange tallies held by that country’s banks, a very suspicious fire occurred in a storage facility.

“Argentine Banking System Archives Destroyed By Deadly Fire” by Tyler Durden; zerohedge.com; 2/5/2014.

While we are sure it is a very sad coincidence, on the day when Argentina decrees limits on the FX positions banks can hold and the Argentine Central Bank’s reserves accounting is questioned publically, a massive fire – killing 9 people – has destroyed a warehouse archiving banking system documents.

As The Washington Post reports, the fire at the Iron Mountain warehouse (which purportedly had multiple protections against fire, including advanced systems that can detect and quench flames without damaging important documents) took hours to control and the sprawling building appeared to be ruined. The cause of the fire wasn’t immediately clear – though we suggest smelling Fernandez’ hands… We noted yesterday that there are major questions over Argentina’s reserve honesty…

While first print is preliminary and subject to revision, the size of recent discrepancies have no precedent. This suggest that the government may be attempting to manage expectations by temporarily fudging the “estimate ” of reserve numbers (first print) while not compromising “actual” final reported numbers.

If this is so, it is a dangerous game to play and one likely to back-fire. During a balance of payments crisis – as Argentina is undergoing – such manipulation of official statistics (and one so critical for market sentiment) is detrimental to the needed confidence building around the transition in the FX regime.

And today the government decrees limits on FX holdings for the banks… Argentina’s central bank published resolution late yesterday on website limiting fx position for banks to 30% of assets. Banks will have to limit fx futures contracts to 10% of assets: resolution Banks must comply with resolution by April 30 And then this happens…

Via WaPo, Nine first-responders were killed, seven others injured and two were missing as they battled a fire of unknown origin that destroyed an archive of bank documents in Argentina’s capital on Wednesday. The fire at the Iron Mountain warehouse took hours to control… The destroyed archives included documents stored for Argentina’s banking industry, said Buenos Aires security minister Guillermo Montenegro.

The cause of the fire wasn’t immediately clear. Boston-based Iron Mountain manages, stores and protects information for more than 156,000 companies and organizations in 36 countries. Its Argentina subsidiary advertises that its facilities have multiple protections against fire, including advanced systems that can detect and quench flames without damaging important documents. . . . “There are cameras in the area, and these videos will be added to the judicial investigation, to clear up the motive of the fire and collapse,” Montenegro told the Diarios y Noticias agency.

7. New York State is beginning its own investigation into the manipulation of the Foreign Exchange market–a $5 trillion a day operation.

“New York’s Top Financial Regulator Investigates Currency Trading” by Chad Bray; The New York Times; 2/5/2014.

The business of trading currencies is in a state of flux as top executives leave and traders are suspended or fired in the face of investigations into potential manipulation of the $5 trillion-a-day foreign exchange market. The latest regulator to start an inquiry into whether more than a dozen banks manipulated the price of foreign currencies is New York State’s top financial regulator, Benjamin M. Lawsky. . . .

8. Another bitcoin exchange has halted trading, plunging the digital currency in value. Just wait until the bitcoiners start killing each other to steal each others’ bitcoins. This supposed panacea to the world’s financial ills is already exhibiting all of the established financial world’s ills, and some that the mainstream fiscal community has thus far avoided. The bitcoiners may need their own digital currency to kill each other, perhaps named “hitcoin.”

 “Bitcoin Value Plunges as Mt. Vox Exchange Halts Activity” by Carter Dougherty; bloomberg.com; 2/7/2014.

Bitcoin plunged more than 8 percent today after a Tokyo-based exchange halted withdrawals of the digital currency, citing technical malfunction. Mt. Gox, a popular exchange for dollar-based trades, said in a blog post it needed to “temporarily pause on all withdrawal requests to obtain a clear technical view of the currency processes.” It promised an “update” — not a reopening — on Monday, Feb. 10, Japan time. . . .



7 comments for “FTR #772 Body Count II: (Collateralized “Death” Obligations)”

  1. Bitcoin’s latest crisis just took a turn for the weird today. MtGox is giving more info on why it shut down operations. The cause: some sort of bug that creates “malleability” errors that make it possible for incorrect transaction data to be registered on the master ledger and in theory allows for the much feared double-spending attack. Uh oh:

    Bitcoin price plunges: Mt. Gox suspends withdrawals, says flaw in protocol allows fraud
    By Tim Hornyak, IDG News Service

    Feb 10, 2014 6:24 AM

    Bitcoin software has a bug that allows fraud, Tokyo-based bitcoin exchange Mt. Gox said Monday. The news was followed by a new fall in the value of the digital currency.

    Mt. Gox said it will continue its suspension of bitcoin transfers from wallets it holds to external bitcoin addresses, announced Friday, while it works to resolve the problem.

    Conversions of bitcoins to conventional currencies and bitcoin transfers to other Mt. Gox addresses are not affected.

    “A bug in the bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur,” Mt. Gox said in a statement.

    “Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent. MtGox is working with the Bitcoin core development team and others to mitigate this issue.”

    The flaw, called “transaction malleability,” is already known to some of the core Bitcoin software developers, Mt. Gox said. It allows a third party to alter the hash associated with a freshly issued transaction without invalidating its signature, resulting in two similar transactions, only one of which can ultimately be validated and included in the log of Bitcoin transactions called the blockchain.

    An attacker with access to sufficient computing power could ensure that the modified transaction is included, and the original rejected. With current Bitcoin applications, it is easy to determine that the original transaction failed, but much less obvious that a modified transaction succeeded, Mt. Gox said.

    “This means that an individual could request bitcoins from an exchange or wallet service, alter the resulting transaction’s hash before inclusion in the blockchain, then contact the issuing service while claiming the transaction did not proceed,” the exchange warned.

    Mt. Gox had said its investigation had been triggered by “unusual activity” detected in its Bitcoin wallets.

    It added that the problem is not limited to the exchange, and affects all transactions in which bitcoins are sent to a third party.

    The company did not immediately respond to calls or emails requesting further information..

    The digital currency fell as low as $535 late Monday Japan time before recovering to $636.37 at press time, according to CoinDesk, which publishes an average of the prices at several coin exchanges. It had been trading around $850 for much of last week before diving to $750 on Friday.

    And here’s where it goes from “uh oh!” to “huh?”: Bitcoin’s developers are claiming that, yes, this is a problem. But it’s a problem that they’ve been aware of since 2011 with simple software work-arounds that MtGox should have implemented but never did for whatever reason. So bitcoin trading at MtGox was apparently halted due to suspicious transactions that were caused by a flaw that the bitcoin developers insist doesn’t really matter because it would have been insane for MtGox not to have fixed this bug by now:

    Business Insider
    Bitcoin Developer: Yes, There’s A Flaw In Bitcoin But It Shouldn’t Have Brought Down MtGox
    Rob Wile

    Feb. 10, 2014, 9:23 AM

    Bitcoin prices are down big this morning as MtGox, a major Bitcoin exchange, announced it was continuing to suspended withdrawals denominated in Bitcoin while it addressed a technical glitch.

    In its statement this morning, the exchange explained why it has been forced to do so.

    It said it had “detected unusual activity on its Bitcoin wallets and performed investigations during the past weeks. This confirmed the presence of transactions which need to be examined more closely.”

    In doing so, they found that transactions from its wallets were subject to “malleability” errors. This made it possible for incorrect transaction data to be registered on Bitcoin’s master transaction ledger, the Blockchain. In theory, this makes it possible for theft or double spending to occur — something Bitcoin was supposed to be designed to prevent. The exchange did not say whether either had in fact occurred.

    MtGox goes on to say that the glitch is a flaw in the Bitcoin protocol itself, and that it had “discussed [incorporating a fix] with the Bitcoin core developers and will allow Bitcoin withdrawals again once it has been approved and standardized.”

    But Bitcoin developers are disputing how severe that flaw is.

    In an IM chat with BI, Bitcoin developer Greg Maxwell, who correctly identified MtGox’s hiccup on reddit before MtGox acknowledged the problem, says he and co-developer Pieter Wuille spoke with MtGox chief Mark Karpeles over the weekend. Maxwell says he “had no idea, and really still have no idea what they’d be waiting on us [Bitcoin developers] for.” He added that they had discussed changing part of the Bitcoin protocol to address the issue, but that he was “not aware of any reason that MtGox’s withdraws would need to be gated on that.”

    BI reached out to Karpeles on the Internet Relay Chat, recommended by two Bitcoin experts as the best way to reach him, but did not receive a response.

    We also reached out to BitStamp, which is now the world’s largest dollar-traded exchange, to see whether they were concerned at all by the malleability issue. CEO Nejc Kodric replied via email that they are not commenting on the situation. “We hope that MtGox solves their technical issues as soon as possible,” he said.

    Maxwell said urgently addressing the issue is “neither necessary nor sufficient” for preventing theft in the case of cancellations or reissues, and that while Bitcoin wallet programs do not handle malleability well, it is not a serious issue.

    “Issues like this— ones where I basically consider them non-interesting issues— are the hardest to respond to. When there is a normal severe problem there is always a proposed plan of attack, workarounds, etc. In this case ‘meh’. I can see some people are very concerned about Bitcoin itself and not just MtGox. ‘There really is nothing to worry about in this case’ is not likely to help them feel better, but it’s really the best and most … correct advice I can give here.”

    There’s a much more detailed explanation here for why this bug isn’t something that should be impacting the entire bitcoin network. The gist of it is this is only a problem associated with the use of “transaction” ids in the bitcoin protocol because that id can be changed by 3rd parties (this is where the “malleability” comes in). But the use of transactions ids is optional because another combination of variables that aren’t subject to the same “malleability” issue can also serve as a unique transaction identifier. So basically, it sounds like MtGox failed to update their internal software to avoid the use of the transaction ids and, upon discovering the “suspicious transactions” and freezing its exchange last week, MtGox shut down the exchange and then publicly declared that bitcoin was vulnerable to a double-spending attacks via a fairly simple exploit that could have been avoided if MtGox had simply updated its software. So it doesn’t appear that a new exploit was discovered in bitcoin’s protocol. Instead, we learned that MtGox – one of the biggest and oldest bitcoin exchanges – was still leaving itself vulnerable to an known, easily avoidable bug years after it was discovered. And, more importantly, we discovered this issue only because MtGox discovered that individuals have been utilizing that double-spending bug against MtGox for who knows how long, costing MtGox who knows how many bitcoins. MtGox’s internal ledger is apparently a total mess and that’s why they had to freeze the accounts.

    So this news isn’t exactly quite doom for bitcoin. But one of the biggest exchanges might be going down from a self-inflicted coding wound so it’s not trivial either. Instead, it’s a reminder that, for all the claims that “bitcoin runs on math!“, bitcoin is actually run on math, hope, hype, horrible economic theories, and sometimes, shockingly insecure code that no one ever bothered to update.

    Posted by Pterrafractyl | February 10, 2014, 5:48 pm
  2. One more for JP Morgan. No cause of death reported yet

    Ryan Crane, JPMorgan Equities Trading Executive, Dies at 37
    By Hugh Son Feb 13, 2014 10:16 AM CT

    Ryan Crane, a JPMorgan (JPM) Chase & Co. employee who in a 14-year career at the New York-based bank rose to executive director of a unit that trades blocks of stocks for clients, has died. He was 37.

    He died on Feb. 3 at his Stamford, Connecticut, home, according to the website of Leo P. Gallagher & Son Funeral Home in Greenwich, Connecticut. The cause of death will be determined when a toxicology report is completed in about six weeks, said a spokeswoman for the state’s chief medical examiner.

    Crane started at JPMorgan in equities trading after graduating from Harvard University in 1999, according to his profile on the LinkedIn Corp. website. Following promotions, he worked as an executive director, or a rank above vice president and below managing director, in the bank’s Americas Program Trading group. Program traders handle transactions in baskets of at least 15 stocks, often for mutual-fund clients seeking to rebalance index-linked portfolios.

    “Ryan was a beloved colleague who will be dearly missed,” Justin Perras, a JPMorgan spokesman, said in an e-mailed statement. “Our thoughts and sympathy are with his family and friends.”

    Ryan Henry Crane was born on Jan. 8, 1977, to Mary Jo and Lex Crane. He grew up in Long Valley, New Jersey, and in 1995 graduated from the Delbarton School in Morristown, New Jersey, where he was recognized as Scholar-Athlete of the Year as a senior and named to the All-American Lacrosse Team.

    At Harvard, in Cambridge, Massachusetts, he earned a letter in lacrosse and a bachelor’s degree in European history.

    Also, a chief municipal debt analyst at Morgan Stanley has suddenly died:

    John Ruiz, Morgan Stanley Municipal Debt Analyst, Dies at 53
    By Laurence Arnold Feb 12, 2014 6:54 PM CT

    John Ruiz, a municipal debt analyst who recently delivered a presentation on Puerto Rico for Morgan Stanley (MS), one of the biggest underwriters of the island’s debt, has died. He was 53.

    He died suddenly on Feb. 4 at his home in Edgewater, New Jersey, according to his brother, James Ruiz. He had returned the day before from a business trip to Florida.

    An executive director at New York-based Morgan Stanley since 2010, Ruiz developed expertise in the public finances of the areas he covered, which earlier in his career included California and Florida.

    For Morgan Stanley, Ruiz co-wrote a presentation on Puerto Rico at the firm’s Global Distressed Debt Conference last October in New York City.

    “The commonwealth’s economy entered recession in 2006 and is currently struggling to gain traction given its heavy dependence on the manufacturing and government sectors, which have been contracting for several years and face significant challenges moving forward,” according to the presentation by Ruiz and Ryan Brady, a vice president.

    Morgan Stanley, in conjunction with Barclays Plc and RBC Capital Markets, is working with Puerto Rico on what may be a record sale of junk-rated municipal bonds to refinance debt and raise cash, Bloomberg News reported this week. Morgan Stanley was the biggest underwriter of the U.S. commonwealth’s debt last year as of November.

    ‘Dug Deep’

    “On credits like Jefferson County and Puerto Rico, he dug deep and got to all of the important credit aspects of our issuer base very quickly,” J.R. McDermott, a Morgan Stanley managing director, said about Ruiz, according to the Bond Buyer.

    Ruiz worked on the Jefferson County municipal debt deal? Presumably it was on the post-bankruptcy dealings when Morgan Stanley was involved. The pre-bankruptcy dealings of Jefferson County’s debt were mostly conducted by JP Morgan, and they weren’t something you would publicly celebrate.

    Posted by Pterrafractyl | February 13, 2014, 10:58 am
  3. Things are getting so bad for the bankers, I am wishing them a long life and good health. Scary.

    Posted by GK | February 13, 2014, 10:23 pm
  4. right-wing garbage rag decides snarky suicide summary is all the news they deem fit to print:


    String of suicides rocking financial world baffles experts

    By Michael Gray

    March 18, 2014 | 2:27pm

    The financial world has been rattled by a rash of apparent suicides, with some of the best and brightest among the finance workers who have taken their lives since the start of the year.

    A majority of the eight suicides of 2014 have been very public demonstrations, which has suicide-prevention experts puzzled.

    “Jumping is much less common as a method for suicide in general, so I am struck by the number that have occurred in recent months in this industry,” said Dr. Christine Moutier, chief medical officer of the American Foundation for Suicide Prevention.

    Moutier also discounts the location of the act as being the driver behind the reason for the suicide.

    “The suicide-research literature doesn’t help very much with the question of why the method of these suicides is so out in the open,” she added.

    MARCH 12: Kenneth Bellando, 28, an investment banker at Levy Capital, was found dead on the sidewalk outside his building on Manhattan’s East Side, after allegedly jumping from the sixth-story roof, sources said.

    MARCH 11: Edmund (Eddie) Reilly, 47, a trader at Midtown’s Vertical Group, jumped in front of an LIRR train near the Syosset, NY, train station.

    FEB. 28:  Autumn Radtke, CEO of First Meta, a cyber-currency exchange firm, was found dead outside her Singapore apartment. The 28-year-old American jumped from a 25-story building, authorities said.

    FEB. 18: Li Junjie, a 33-year-old JPMorgan finance pro, leaped to his death from the roof of the company’s 30-story Hong Kong office tower, authorities said.

     FEB. 3: Ryan Henry Crane, 37, a JPMorgan executive director who worked in New York, was found dead inside his Stamford, Conn., home. A cause of death in Crane’s case has yet to be determined as authorities await a toxicology report, a spokesperson for the Stamford Police Department said.

    JAN. 31: Mike Dueker, 50, chief economist at Russell Investments and a former Federal Reserve bank economist, was found dead at the side of a road that leads to the Tacoma Narrows Bridge in Washington state after jumping a fence and falling down an embankment, according to the Pierce County Sheriff’s Department.

     JAN. 28: Gabriel Magee, 39, a vice president with JPMorgan’s corporate and investment bank technology arm in the UK, jumped to his death from the roof of the bank’s 33-story Canary Wharf tower in London.

    JAN. 26: William Broeksmit, 58, a former senior risk manager at Deutsche Bank, was found hanged in a house in South Kensington, according to London police.

    Posted by participo | March 18, 2014, 3:10 pm
  5. Remember the FBI’s $170 million “Virtual Case File” records system that didn’t actually work? This might be one of those days when the FBI wishes it still had one of those. It depends on what’s on those documents it doesn’t want to release:

    Houston Chronicle
    Judge orders FBI to explain withholding records of alleged Occupy Houston assassination plot
    By Carol Christian | March 18, 2014

    A federal judge has ordered the FBI to explain why it withheld some information requested by a graduate student for his research on a plot to assassinate Occupy Houston protest leaders.

    Ryan Noah Shapiro, a doctoral student at Massachusetts Institute of Technology in Cambridge, Mass., filed a lawsuit April 29, 2013, against the U.S. Department of Justice in the U.S. District Court in Washington, D.C.

    U.S. District Judge Rosemary M. Collyer issued her order, with an accompanying memo, on March 12.

    The FBI, as part of the Department of Justice, controls the records Shapiro wanted for his study of “conflicts at the nexus of American national security, law enforcement and political dissent,” the plaintiff’s complaint stated.

    Houston was among hundreds of U.S. cities where protesters occupied outdoor spaces as part of the Occupy Movement that started in New York’s Zucotti Park on Sept. 17, 2011.

    “The movement has sought to expose how the wealthiest 1 percent of society promulgates an unfair global economy that harms people and destroys communities worldwide,” the complaint stated.

    Shapiro said in his complaint that the existence of an assassination plot against Occupy Houston’s leaders became known through the FBI’s earlier release of information in response to a Freedom of Information Act request.

    “According to one of the released records, … [REDACTED] planned to gather intelligence against the leaders of the protest groups and obtain photographs, then formulate a plan to kill the leadership via suppressed sniper rifles…,” Shapiro stated in his complaint.

    Shapiro requested additional information from the FBI in January 2013.

    In response to Shapiro’s request, the FBI identified 17 pages of records and turned over five partial pages while entirely withholding 12 pages, according to court records.

    Shapiro filed the suit because, his complaint stated, the FBI’s search was inadequate and failed to produce relevant records, and the agency improperly invoked certain exemptions as reasons not to disclose information.

    In July, the FBI filed a motion to either dismiss the suit or request summary judgment. The judge granted the motion in part and denied it in part.

    In its motion to dismiss, the FBI stated that it maintained its records pursuant to its “general investigative authority” and its “lead role in investigating terrorism and in the collection of terrorism threat information.”

    But the agency failed to supply facts supporting its belief that the Occupy protesters might have been engaged in terroristic or other criminal activity, the judge’s memo stated.

    The judge ordered the FBI to explain its basis for withholding information under Exemption 7, which protects records compiled for law enforcement purposes.

    “To the extent that FBI believes it cannot be more specific without revealing the very information it wishes to protect, it may request an in camera (in judge’s chambers) review of the documents,” Collyer said.

    Presumably the “[Redacted]” person in the documents in question wasn’t someone in the FBI (that could get awkward). So…who might have been interested in bumping off Occupy Wall Street’s leadership?

    Posted by Pterrafractyl | March 19, 2014, 5:22 pm
  6. This article reveals that the Federal Reserve’s downgrade of Deutsche Bank took place about a year earlier (6/1/2018) and was not made public because their U.S. operations failed the Fed’s stress tests for three consecutive years (2015, 2016, and 2017). This was after multiple Fed enforcement actions for perceived lax controls tied to MONEY LAUNDERING, currency trading, and Volcker-rule trading restrictions. Deutsche Bank has also paid billions of dollars to settle allegations stemming from U.S. Justice Department investigations. The article alleges that the Fed repeatedly cited concerns about the bank’s controls around measuring financial exposure to clients and valuing collateral that backed loans.

    Portions of the Fed’s criticisms suggested to Deutsche Bank executives they needed to pull back on so-called repo financing—short-term lending typically based on securities-repurchase agreements—to hedge-fund clients and other banks. The Fed also reupped its criticism of Deutsche Bank’s financial documentation. Examiners expressed frustration at what they described as the bank’s inability to calculate, at the end of any given day, its exposures to what banks and other clients it had in specific jurisdictions, and over what duration, some of the people said.

    One question I have always have had is why does right wing literature always have such an anti-Federal Reserve bias in their conspiracy theories. Could it be that they are a force in opposition to those behind the Deutsche Bank?


    Deutsche Bank’s U.S. Operations Deemed

    Rare censure last year has influenced lender’s moves to reduce risk taking and required the bank to seek approval for U.S. hiring decisions

    Troubled by Fed
    Wall Street Journal, June 1, 2018

    The Federal Reserve has designated Deutsche Bank AG’s sprawling U.S. business as being in a “troubled condition,” a rare censure for a major financial institution that has contributed to constraints on its operations, according to people familiar with the matter.

    The Fed’s downgrade, which took place about a year ago, is secret and hadn’t previously been made public. The “troubled condition” status—one of the lowest designations employed by the Fed—has influenced the bank’s moves to reduce risk-taking in areas including trading and lending to customers.
    It also means the bank has had to clear decisions about hiring and firing senior U.S. managers with Fed overseers. Even reassigning job duties and making severance payments for certain employees require Fed approval, the people said.

    The punitive action by the Fed, the bank’s primary U.S. regulator, has rippled through Deutsche Bank’s relationships with other regulators, including the Federal Deposit Insurance Corp., which has pressured the lender to improve controls and oversight, people familiar with those relationships said.
    Deutsche Bank shares fell as much as 8% Thursday on Germany’s Xetra exchange, to €9.07 ($10.61). That was their lowest intraday price since September 2016, when they were trading at the lowest levels in decades.

    The shares closed down 7.2% in Frankfurt, at €9.16, their lowest close on the Xetra exchange, according to data going back to 1991.

    The cost to insure €10 million ($11.7 million) in Deutsche Bank bonds for five years rose roughly 19% Thursday to about €190,000 annually, according to data from IHS Markit. That is up from €73,000 at the start of the year.

    Meantime, the price of the bank’s dollar-denominated bonds due 2032 fell 1.7% Thursday to about 85 cents on the dollar, according to data from MarketAxess. They traded for 99 cents on the dollar at the start of the year.

    Early Friday, Standard & Poor’s Ratings Services downgraded Deutsche Bank’s long-term credit rating one notch to BBB+, from A-, citing “execution risks” in a “deeper restructuring of the business model than we previously expected.” S&P said the outlook is stable.

    “We appreciate S&P’s statement that ‘management is taking tough actions to cut the cost base and refocus the business in order to address the bank’s currently weak profitability,’” the bank said in response.

    The U.S. system for rating banks is called “Camels,” which stands for capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk. A bank’s top-line rating, from 1 to 5, takes into account all those categories. The best rating is “1.” Troubled banks are rated either “4” or “5.” Scores aren’t made public.

    A downgrade by the Fed has also landed the bank’s FDIC-insured subsidiary, Deutsche Bank Trust Company Americas, on the FDIC’s “Problem Banks” list of at-risk institutions, according to people familiar with the matter. The FDIC doesn’t detail the membership of the list but does say how many banks are on it and the combined value of their assets. The list’s asset total rose $42.5 billion in the first quarter; Deutsche Bank Trust Company Americas, the bank’s well-capitalized American deposit-taking unit, had $42.1 billion in assets as of March 31, according to regulatory filings.

    Banks are added to the list after they receive a “4” or “5” overall rating from their primary regulator.
    How those banks fare later shows how they do sometimes recover from harsh ratings.

    Of the 1,783 institutions designated “problem banks” between January 2008 and March 2017, 854 recovered and shed the label, 523 failed, 294 merged and 112 remained in problem status, the agency said in its history of the financial crisis. A Fed spokesman declined to comment, as did an FDIC spokesman.

    A Deutsche Bank spokeswoman said the bank doesn’t discuss “specific regulatory feedback.” She said that Deutsche Bank AG, the German parent company, “is very well capitalized and has significant liquidity reserves.” The relevant U.S. subsidiaries, she said, are “DB USA Corp, Deutsche Bank Trust Corporation, and Deutsche Bank Trust Company Americas, our principal U.S. banking subsidiary, which has a very robust balance sheet as disclosed in our annual and quarterly regulatory filings.”

    The bank spokeswoman added: “We have previously indicated that our regulators have identified various areas for improvement relating to our control environment and infrastructure. We are highly focused on addressing identified weaknesses in our U.S. operations.”

    The problems that spurred the downgrade, and the complexity it injected into daily decision making and long-term planning, help frame one of Deutsche Bank’s biggest challenges. The bank is struggling to curtail costs and risks in the huge American market where, according to the bank’s executives, it must be present to maintain its global reach.

    But obstacles to making money in the U.S. have become tougher as Deutsche Bank has piled up legal settlements and raced to improve outdated technology. The added scrutiny that comes with the Fed’s “troubled” label brings headaches that most other banks don’t have to contend with.

    For Deutsche Bank, the effects of disappointing the Fed continue to reverberate in recent decisions under new Chief Executive Christian Sewing to pull back from certain kinds of lending and trading activities, some people close to the bank said.

    Mr. Sewing was named CEO in early April with the ouster of John Cryan after three consecutive full-year losses. The new boss said last week Deutsche Bank will cut thousands of jobs and reiterated plans to reduce the lender’s global equities business and other investment-banking activities.
    Groundwork for the risk pullback was laid last year as Deutsche Bank’s performance lagged. Fed supervisors grew exasperated with its shortcomings in systems and controls and the slow pace of improvements, people familiar with internal discussions said.

    Deutsche Bank’s U.S. operations have drawn regulatory ire for years. They received a rebuke from the Federal Reserve Bank of New York in 2014 about repeated financial-reporting failures and lack of follow-through on promised fixes.

    Deutsche Bank U.S. operations failed the Fed’s stress tests in 2015 and 2016 and in 2017 were the subject of multiple Fed enforcement actions for perceived lax controls tied to currency trading, money laundering and Volcker-rule trading restrictions. Deutsche Bank has also paid billions of dollars to settle allegations stemming from U.S. Justice Department investigations.

    Last year, the Fed repeatedly cited concerns privately to the bank about its controls around measuring financial exposure to clients and valuing collateral that backed loans, according to people close to the bank.

    Portions of the Fed’s criticisms suggested to Deutsche Bank executives they needed to pull back on so-called repo financing—short-term lending typically based on securities-repurchase agreements—to hedge-fund clients and other banks. Within the investment bank last year, some executives privately complained that repo exposures were less risky than the Fed depicted them, spurring debate over how much to dial back, some of the people with knowledge of internal discussions said.

    The Fed also reupped its criticism of Deutsche Bank’s financial documentation. Examiners expressed frustration at what they described as the bank’s inability to calculate, at the end of any given day, its exposures to what banks and other clients it had in specific jurisdictions, and over what duration, some of the people said.

    Posted by Mary Benton | June 2, 2018, 11:47 am
  7. This June 1, 2018 Reuters article reports that the S&P cut Deutsche Bank rating and questioned its plan to return to profitability. Credit ratings are crucial for banks, whose perceived health is important in winning business, and Deutsche Bank is a big issuer of debt whose cost is highly reliant on them.

    The S&P report said “We see significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop, and we think that, relative to peers, Deutsche Bank will remain a negative outlier for some time,”

    The article also indicates that Deutsche Bank’s hybrid debt instruments that would be vulnerable if the bank got into serious financial trouble.

    Deutsche Bank’s Chief Executive Christian Sewing
    verified that a series of enforcement actions by the U.S. Federal Reserve were principally related to weaknesses in internal controls and infrastructure.

    On a separate note, the article mentions that Australian prosecutors were preparing criminal cartel charges against Deutsche, as well as the country’s third-largest bank and Citigroup, regarding an issuance of $2.3 billion.


    Deutsche Bank gets ECB, key investor support as S&P questions strategy

    Douglas Busvine, Edward Taylor
    Reuters June 1, 2018

    FRANKFURT (Reuters) – Deutsche Bank, the ECB and its biggest investor sought to reassure shareholders and staff of its financial strength on Friday after S&P cut its rating and questioned its plan to return to profitability.

    Shares in Deutsche Bank closed at an all-time low on Thursday as past misadventures in high-risk investment banking haunted new Chief Executive Christian Sewing’s attempt to refocus on its more staid corporate banking roots.

    A source familiar with the thinking of the European Central Bank (ECB), which regulates Deutsche Bank, and its top shareholder HNA Group Co Ltd [HNAIRC.UL] of China, separately said they backed management’s strategy of retrenchment.

    This followed a report on Thursday that the U.S. regulator viewed the lender as “troubled” last year, and on Friday a Standard & Poor’s credit rating downgrade to BBB+ from A-.

    Deutsche Bank shares were up 3.7 percent at 1235 GMT, although the cost of insuring against default .

    Meanwhile in Australia, federal prosecutors were preparing criminal cartel charges against Deutsche, as well as the country’s third-largest bank and Citigroup, over a $2.3 billion share issue. All deny wrongdoing.

    Sewing, a Deutsche Bank ‘lifer’ appointed in April after the removal of former CEO John Cryan, said in a letter to staff: “At group level, our financial strength is beyond doubt”.

    But the newsflow was “not good”, Sewing added as S&P questioned his ability to get Deutsche Bank back to profit after three years of losses by scaling back its global investment bank and refocusing on Europe and Germany. “We see significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop, and we think that, relative to peers, Deutsche Bank will remain a negative outlier for some time,” S&P said

    Credit ratings are crucial for banks, whose perceived health is important in winning business, and Deutsche Bank is a big issuer of debt whose cost is highly reliant on them.

    S&P had rated Deutsche Bank’s long-term credit at A-, on negative credit watch. That was one or two notches below most European competitors, with Switzerland’s UBS rated A+ with a stable outlook.

    Sewing also addressed U.S. regulatory concerns following the Wall Street Journal report that said the Federal Reserve had designated Deutsche Bank’s operations as in a “troubled condition”.

    The WSJ report had sent Deutsche Bank’s shares down 7 percent to their lowest closing level, valuing it at $22 billion.

    Although Deutsche Bank’s senior debt has held up well, its junior and hybrid debt instruments that would be vulnerable if the bank got into serious financial trouble have underperformed.

    Deutsche Bank’s 1.75 billion euro contingent convertible (CoCo) bond with a 6 percent coupon saw its cash price hit a 15-month low of 89.735 cent on the euro on Thursday, translating to a yield of 9.24 percent.

    It has since recovered to a cash price of 93.167 and a yield of 8.1 percent; still nearly double this year’s low in January.

    Sewing said Deutsche Bank’s credit and market risk levels had rarely been so low, speculation it was exposed to political uncertainty in Italy was unfounded, and funding plans for this year were well advanced.

    Deutsche Bank was also well positioned to react to excessive moves in debt markets, Sewing said, adding that a series of enforcement actions by the U.S. Federal Reserve were principally related to weaknesses in internal controls and infrastructure.

    “We have made progress in remediating them over the past year,” he wrote. “We’re not yet where we want to be, but we are steadily getting there.” And a source familiar with the ECB’s thinking made it clear that Deutsche Bank had made “good progress” in its efforts to address regulatory concerns.

    “The bank now has a tighter management team, good capital and liquidity, and supervisors are reassured by the plans they see,” the source said in a rare comment on an individual bank.

    Chinese investor HNA Group Co Ltd [HNAIRC.UL], which controls an 8 percent stake in Deutsche Bank, said it supported its management and strategy. “HNA remains committed to Deutsche Bank’s long-term success and looks forward to continuing to work with the management team in support of that goal,” a spokesman for HNA said.

    A German government spokesman declined to comment on Deutsche Bank on Friday.

    Additional reporting by Andreas Framke and Abhinav Ramnarayan; Editing by Alexander Smith

    Posted by Mary Benton | June 2, 2018, 12:17 pm

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