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FTR #823 Caution, Banksters at Work, Part 2 (Still More Collateralized “Death” Obligations)

Dave Emory’s entire life­time of work is avail­able on a flash drive that can be obtained here. The new drive is a 32-gigabyte drive that is current as of the programs and articles posted by 10/02/2014. The new drive (available for a tax-deductible contribution of $65.00 or more) contains FTR #812.  (The previous flash drive was current through the end of May of 2012 and contained FTR #748.)

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Side 1   Side 2

Introduction: In FTR #’s 772 and 792, we looked at a rash of suspicious deaths in the banking industry, coinciding with a number of investigations into misdeeds by the institutions at which many of the deceased had been employed.

This program updates that line of inquiry, supplementing the previous broadcasts with discussion of some new, suspicious “suicides,” as well as problems looming on the horizon of the global financial lanscape.

Beginning with a Financial Times story about a social psychology experiment indicating that the banking profession inclines those who work in it toward dishonesty, the broadcast notes the deaths of Deutsche Bank’s Calogero Gambino and Citicorp’s Shawn Miller, both supposed “suicides.”

Both Citigroup and Deutsche Bank are among the financial institutions under investigation for various misdeeds. Deutsche Bank is a target of the New York Fed’s critical eye at the moment.

Adding to anxieties about the future of the financial industry is the dabbling by maj0r investment banks in commodities. A Senate investigation found that those institutions’ exposure to fluctuations in the commodites’ markets placed them–and by extension US–at risk.

Much of the program sets forth a story about a scary fluctuation in the market for U.S. Treasury bills, a financial safe haven of choice in these perilous economic times. From the standpoint of statistical probability, the chances of such an event happening is roughly once in every 1.6 billion years!

Program Highlights Include: Calogero Gambino’s previous work for the SEC; review of the death of Deutsche Bank’s William Broeksmit; comparison of the roles of Broeksmit and Gambino at Deutsche Bank; collation of the endeavors of some of the deceased bankers and activities being investigated by various regulatory bodies; Citigroup’s Shawn Miller’s 911 calls prior to his “suicide;” Shawn Miller’s animated arguments with an unidentified man prior to his “suicide;” rumination about the precipitous decline in the price of oil and its possible impact on investment banks that have engaged in commodities speculation; deleterious effects of the investment banks’ commodities investing,

1. Worth considering is the possibility that the problem is, in the most literal sense of the term, “systemic.”

“Banking Makes You Less Honest, Research Finds” by Clive Cookson; Financial Times; 11/20/2014; p. 3.

Swiss researchers have come up with what they say is compelling scientific evidence that bankers lie for financial gain.

The team at the University of Zurich used game playing experiments to show “that the prevailing culture in the banking industry weakens and undermines the honesty norm, implying that measures to reestablish an honest culture are very important.”

The study, published in the journal Nature, probes the psychology behind what the researchers call ‘a dramatic loss of reputation and a crisis of trust in the financial sector” as a result of rogue trading, rigged interest rates such as Libor and tax evasion scandals. . . . . .

If everyone was completely honest, the proportion of winning tosses across each group would be 50 per cent. The control group came close to this with 51.6 percent.

The treatment group, who had been primed by the preliminary questions to think about banking, reported 58.2 per cent winning tosses–a statistically significant tilt towards dishonesty; the proportion who cheated was estimated at 26 per cent. . . .

2a. Deutsche Bank is in hot water, according to the New York Fed.

“NY Fed Found Serious Problems at Deutsche Bank” by Katherin Jones and Arno Schuetze [Reuters.com]; Yahoo News; 7/23/2014.

The Federal Reserve Bank of New York has found serious problems in Deutsche Bank AG’s U.S. operations, including shoddy financial reporting, weak technology and inadequate auditing and oversight, people close to the matter told Reuters.

In a letter to the German lender’s executives last December, a senior official with the New York Fed described financial reports produced by some of the bank’s U.S. divisions as “low quality, inaccurate and unreliable”, said one of the sources, who is familiar with the letter.

The New York Fed, as the U.S. central bank’s eyes and ears on Wall Street, directly supervises the biggest U.S. and foreign banks, partly through embedded regulators who go to work each day inside the firms.

“The size and breadth of errors strongly suggest that the firm’s entire U.S. regulatory reporting structure requires wide-ranging remedial action,” said the letter, first reported by the Wall Street Journal. (http://on.wsj.com/1r3VIn3)

The New York Fed declined to comment, citing the confidentiality of supervisory activities. The European Central Bank and German financial watchdog Bafin declined to comment.

Deutsche said it was investing 1 billion euros ($1.4 billion) to upgrade its internal systems, including the quality of its reporting, with about 1,300 people working on the improvements. “We have been working diligently to further strengthen our systems and controls,” a spokeswoman said.

The letter is nonetheless a blow to Deutsche Bank co-Chief Executives Juergen Fitschen and Anshu Jain, who have been seeking to transform the lender’s corporate culture amid scandals, investigations and fines following the financial crisis of 2008-2009.

While the New York State Department of Financial Services is looking at Deutsche in relation to issues including possible forex manipulation and Iran sanctions violations, the New York Fed’s concerns are separate and arose from routine examinations by its staff, a source familiar with the matter said. . . .

2b. Did Deutsche Bank’s difficulties–set forth above–have anything to do with the suicide of Calogero Gambino?

“Another Deutsche Banker and Former SEC Enforcement Attorney Commits Suicide” by Tyler Durden; zerohedge.com; 10/26/2014.

Back on January 26, a 58-year-old former senior executive at German investment bank behemoth Deutsche Bank, William Broeksmit, was found dead after hanging himself at his London home, and with that, set off an unprecedented series of banker suicides throughout the year which included former Fed officials and numerous JPMorgan traders.

Following a brief late summer spell in which there was little if any news of bankers taking their lives, as reported previously, the banker suicides returned with a bang when none other than the hedge fund partner of infamous former IMF head Dominique Strauss-Khan, Thierry Leyne, a French-Israeli entrepreneur, was found dead after jumping off the 23rd floor of one of the Yoo towers, a prestigious residential complex in Tel Aviv.

Just a few brief hours later the WSJ reported that yet another Deutsche Bank veteran has committed suicide, and not just anyone but the bank’s associate general counsel, 41 year old Calogero “Charlie” Gambino, who was found on the morning of Oct. 20, having also hung himself by the neck from a stairway banister, which according to the New York Police Department was the cause of death. We assume that any relationship to the famous Italian family carrying that last name is purely accidental. . . .

. . . . As a reminder, the other Deutsche Bank-er who was found dead earlier in the year, William Broeksmit, was involved in the bank’s risk function and advised the firm’s senior leadership; he was “anxious about various authorities investigating areas of the bank where he worked,” according to written evidence from his psychologist, given Tuesday at an inquest at London’s Royal Courts of Justice. And now that an almost identical suicide by hanging has taken place at Europe’s most systemically important bank, and by a person who worked in a nearly identical function – to shield the bank from regulators and prosecutors and cover up its allegedly illegal activities with settlements and fines – is surely bound to raise many questions.

The WSJ reports that Mr. Gambino had been “closely involved in negotiating legal issues for Deutsche Bank, including the prolonged probe into manipulation of the London interbank offered rate, or Libor, and ongoing investigations into manipulation of currencies markets, according to people familiar with his role at the bank.”

He previously was an associate at a private law firm and a regulatory enforcement lawyer from 1997 to 1999, according to his online LinkedIn profile and biographies for conferences where he spoke. But most notably, as his LinkedIn profile below shows, like many other Wall Street revolving door regulators, he started his career at the SEC itself where he worked from 1997 to 1999. . . .

. . . . Going back to the previous suicide by a DB executive, the bank said at the time of the inquest that Mr. Broeksmit “was not under suspicion of wrongdoing in any matter.” At the time of Mr. Broeksmit’s death, Deutsche Bank executives sent a memo to bank staff saying Mr. Broeksmit “was considered by many of his peers to be among the finest minds in the fields of risk and capital management.” Mr. Broeksmit had left a senior role at Deutsche Bank’s investment bank in February 2013, but he remained an adviser until the end of 2013. His most recent title was the investment bank’s head of capital and risk-optimization, which included evaluating risks related to complicated transactions.

A thread connecting Broeksmit to wrongdoing, however, was uncovered earlier this summer when Wall Street on Parade referenced his name in relation to the notorious at the time strategy provided by Deutsche Bank and others to allow hedge funds to avoid paying short-term capital gains taxes known as MAPS (see How RenTec Made More Than $34 Billion In Profits Since 1998: “Fictional Derivatives“)

From Wall Street on Parade:

Broeksmit’s name first emerged in yesterday’s Senate hearing as Senator Carl Levin, Chair of the Subcommittee, was questioning Satish Ramakrishna, the Global Head of Risk and Pricing for Global Prime Finance at Deutsche Bank Securities in New York. Ramakrishna was downplaying his knowledge of conversations about how the scheme was about changing short term gains into long term gains, denying that he had been privy to any conversations on the matter.

Levin than asked: “Did you ever have conversations with a man named Broeksmit?” Ramakrishna conceded that he had and that the fact that the scheme had a tax benefit had emerged in that conversation. Ramakrishna could hardly deny this as Levin had just released a November 7, 2008 transcript of a conversation between Ramakrishna and Broeksmit where the tax benefit had been acknowledged.

Another exhibit released by Levin was an August 25, 2009 email from William Broeksmit to Anshu Jain, with a cc to Ramakrishna, where Broeksmit went into copious detail on exactly what the scheme, internally called MAPS, made possible for the bank and for its client, the Renaissance Technologies hedge fund. (See Email from William Broeksmit to Anshu Jain, Released by the U.S. Senate Permanent Subcommittee on Investigations.)

At one point in the two-page email, Broeksmit reveals the massive risk the bank is taking on, writing: “Size of portfolio tends to be between $8 and $12 billion long and same amount of short. Maximum allowed usage is $16 billion x $16 billion, though this has never been approached.”

Broeksmit goes on to say that most of Deutsche’s money from the scheme “is actually made by lending them specials that we have on inventory and they pay far above the regular rates for that.”

It would appear that with just months until the regulatory crackdown and Congressional kangaroo circus, Broeksmit knew what was about to pass and being deeply implicated in such a scheme, preferred to take the painless way out.

The question then is just what major regulatory revelation is just over the horizon for Deutsche Bank if yet another banker had to take his life to avoid being cross-examined by Congress under oath? For a hint we go back to another report, this time by the FT, which yesterday noted that Deutsche Bank will set aside just under €1bn towards the numerous legal and regulatory issues it faces in its third quarter results next week, the bank confirmed on Friday.

In a statement made after the close of markets, the Frankfurt-based lender said it expected to publish litigation costs of €894m when it announces its results for the July-September period on October 29.

The extra cash will add to Deutsche’s already sizeable litigation pot, where the bank has yet to be fined in connection with the London interbank rate-rigging scandal.

It is also facing fines from US authorities over alleged mortgage-backed securities misselling and sanctions violations, which have already seen rivals hit with heavy fines.

Deutsche has also warned that damage from global investigations into whether traders attempted to manipulate the foreign-exchange market could have a material impact on the bank.

The extra charge announced on Friday will bring Deutsche’s total litigation reserves to €3.1bn. The bank also has an extra €3.2bn in so-called contingent liabilities for fines that are harder to estimate.

Clearly Deutsche Bank is slowly becoming Europe’s own JPMorgan – a criminal bank whose past is finally catching up to it, and where legal fine after legal fine are only now starting to slam the banking behemoth. We will find out just what the nature of the latest litigation charge is next week when Deutsche Bank reports, but one thing is clear: in addition to mortgage, Libor and FX settlements, one should also add gold. Recall from around the time when the first DB banker hung himself: it was then that Elke Koenig, the president of Germany’s top financial regulator, Bafin, said that in addition to currency rates, manipulation of precious metals “is worse than the Libor-rigging scandal.”

It remains to be seen if Calogero’s death was also related to precious metals rigging although it certainly would not be surprising. What is surprising, is that slowly things are starting to fall apart at the one bank which as we won’t tire of highlighting, has a bigger pyramid of notional derivatives on its balance sheet than even JPMorgan, amounting to 20 times more than the GDP of Germany itself, and where if any internal investigation ever goes to the very top, then Europe itself, and thus the world, would be in jeopardy.

3. Add the name of Citigroup banker Shawn Miller to the list of collateralized “death” obligations.

“Banker, 42, Slashed His Own Throat in Manhattan Bathtub During Drug-and-Booze-Filled Bender: Sources” by Tina Moore, Rocco Parascandola and Bill Hutchinson; New York Daily News; 11/19/2014.

 The death of a Citigroup banker found with his throat slashed in his posh Manhattan pad was being investigated Wednesday as an apparent suicide, sources told the Daily News.

Shawn Miller’s body was found Tuesday afternoon in the bathtub of his Greenwich St. apartment in Lower Manhattan, his throat slashed ear-to-ear.

Cops initially suspected foul play, saying earlier that no weapon was found in the apartment and that Miller, 42, was caught on surveillance video arguing with a male companion in the building’s elevator.

When crime scene investigators moved Miller’s body, they discovered a knife under him, leading them to believe he slashed his own throat and collapsed into the tub on top of the weapon, sources said.

Detectives now suspect Miller killed himself after going on a booze- and drug-fueled bender since at least Monday with a stranger he hooked up with through the classified advertising website Backpage.com, the sources said.

Police found evidence of alcohol and drug use in the apartment, including what appeared to be crystal meth, sources said.

The man who Miller was arguing with in the elevator apparently left the banker’s apartment late Sunday or early Monday, sources. Miller called down to the lobby and asked the doorman not to allow the man back into the building, according to sources.

Detectives found no evidence the man returned to the building and there was no sign of a break-in or struggle in Miller’s apartment, sources said.

Shawn Miller’s body was found Tuesday afternoon in the bathtub of his Greenwich St. apartment in Lower Manhattan.

Records showed that at least two 911 calls were made from Miller’s apartment since Monday. The caller, believed to be Miller, complained about someone outside his building stalking him, sources said.

The body was found at 3:11 p.m. Tuesday after Miller’s boyfriend called and pleaded with the building’s doorman to check on Miller’s welfare, sources said.

Citigroup confirmed Miller’s death in a statement. Miller was managing director of environmental and social risk management and had worked for the financial services firm since 2004.

“We are deeply saddened by this news and our thoughts are with Shawn’s family at this time,” the Citigroup statement reads.

Miller’s LinkedIn profile described him as “a thought leader and pioneer in sustainable finance focused on creating change and building sustainable business through collaboration, engagement and partnership with others.”

He was a 1995 graduate the Maxwell School of Citizenship and Public Affairs at Syracuse University.

4. Speculation in commodities by major banking institutions places the financial system at risk.

“US Blasts Banks’ Commodities Deals” by Gina Chon; Financial Times; 11/20/2014; p. 13. 

 Goldman Sachs, JP Morgan and Morgan Stanley exposed themselves to catastrophic financial risks, environmental disasters and potential market manipulation by investing in oil, metals and power plant businesses, according to a senate report.

The findings of the two-year probe by the Senate investigations subcommittee said that the banks’ involvement in the physical commodities put them in the same vulnerable position as BP, which has been hit with several lawsuits and billions of dollars in fines because of the 2010 Gulf of Mexico oil spill.

“Imagine if BP had been a bank,” said senator John McCain, the senior Republican on the subcommittee. “The liability from the oil spill would have led to its failure, leading to another taxpayer bailout.”

A 2012 Federal Reserve review found four financial groups, including the three in the subcommittee report, had shortfalls of up to $15bn to cover “extreme loss scenarios,” the report said, the Fed is considering restricting banks’ physical commodity activities.

The report also says the banks’ ownership or investments in physical commodity businesses gave them inside knowledge that allowed them to financially benefit through market manipulation or unfair trading advantages. . . .

5. 

“Anatomy of a Market Meltdown”by Tracy Alloway and Michael MacKenzie; Financial Times; 11/18/2014; p. 7.

The Sharp fall in Treasury bond yields on October 15 has drawn comparisons to the ‘flash crash’ in stocks. Regulators and investors are asking if the world’s financial safe haven needs to be shored up.

 

Legend has it that a young man once asked the financier J Pierpont Morgan what the stock market was going to do. “It will fluctuate,” Mr. Pierpont is said to have replied.

Had the young man asked Mr. Pierpont about today’s US Treasury market – where the US government sells trillions of dollars worth of bonds to a wide range of investors – he may have received a very different response.

For decades, the US Treasury market has been a bedrock of global finance. While stock markets are prone to sudden price swings, such episodes in the vast and easily-transacted world of Treasuries have been far rarer – giving the market an exceptional reputation for orderly trading.

That reputation took a big hit last month.

On October 15, the yield on the benchmark 10-year US government bond, which moves inversely to price, plunged 33 basis points to 1.86 per cent before rising to settle at 2.13 per cent. While that may not seem like much, analysts say the move was seven standard deviations away from its intraday norm – meaning it might be expected to occur once every 1.6bn years.

For several minutes, Wall Street stood still as traders watched their screens in disbelief.  Electronic pricing machines, which now play a bigger role than ever in the trading of Treasuries, were halted and orders cancelled by nervous dealers as prices see-sawed.

The events have sparked a financial “whodunit” as investors, traders and regulators seek to understand what happened – and to determine whether October 15 was a unique event or a harbinger of further perilous trading conditions to come.

“We’re all looking for a chief reason because clients want to understand the impetus behind market volatility,’ says Reggie Brown, head of exchange-traded fund trading at Cantor Fitzgerald.

Among US regulators’ concerns is whether a tougher regulatory climate for big banks, coupled with the inexorable rise of electronic trading, has fundamentally altered how the $12.4tn government bond market functions. The answer has profound consequences for the conduct of Federal Reserve policy and how the US funds its national debt.

For the Fed, the resilience of the Treasury market will be a consideration as it begins to raise interest rates. Analysts say the risk of a highly volatile market reaction suggests the central bank will move in measured steps when it begins to raise borrowing costs, which many expect to begin next year.

One worry is that the US Treasury market might have suffered a pronounced loss of support for prices – or “liquidity” in financial parlance – due to changes that have swept over Wall Street including the rise of computer-driven trading.  Some draw parallels with the “flash crash” that hit stock markets in May 2010, which eventually spurred efforts to reform the wider equity market.

James Angel, associate professor at Georgetown University, says the US Treasury market should be regulated in a different way now that it has embraced electronic trading.

“When people use computers to provide prices across markets it [liquidity] can be withdrawn in a heartbeat,” he says.  “How much market liquidity really exists under this type of market structure and what changes should be made are the questions for regulators.”

Unlike other bond markets, US Treasuries are viewed as being open for business for the entire global trading day.  They also enjoy safe-haven status during times of tension.  The immense size of the market means investors can easily express opposing views about the direction of interest rates by buying or selling the government debt.

Any indication that the market can suddenly shut down with little warning raises troubling questions about how the nature of trading has changed in recent years.  Electronic systems are more visible to the whole market, so trades tend to be smaller than those that take place in private telephone conversations between dealers and investors.

A recent gathering of US Treasury officials and key representatives of dealers and investors, known as the Treasury Borrowing Advisory committee, held in a Washington hotel, revealed “a wide variety of views regarding the potential drivers of the intraday volatility” on October 15.  Members of the TBAC include JPMorgan Chase, RBS, Morgan Stanley, BlackRock, Pimco, Citadel, Brevan Howard and other major players in the Treasury market.

A number of US regulatory agencies are looking at last month’s Treasury market mayhem. An official at the Federal Reserve Bank of New York told the Financial Times: “In the course of our normal market monitoring we regularly explore and assess market developments.”

Timothy Massad, chairman of the US Commodity Futures Trading Commission, which regulates interest rate futures trading at the Chicago Mercantile Exchange, said that the agency’s initial view was that the market had functioned reasonably well given the high number of trades.

“Let me just add, that’s based on our preliminary look.  New evidence might come to our attention that suggests otherwise.”

When dawn broke on a grey October 15 in New York, traders and investors had plenty of reasons to be nervous.  Concerns over the spread of Ebola and weakening economic activity in Europe and China were weighing heavily – helping to push bond yields lower as investors sought the refuge of US treasuries.

The scuppering of AbbVie’s L32bn [pounds] deal to acquire Shire left many big hedge funds nursing heavy equity losses and may have contributed to the rapid repositioning that would eventually engulf markets.

When US retail sales for September flashed across news screens at 8:30am and confirmed the first monthly decline since January, concern mounted among investors that the US economy could well be softening.  For investors who had positioned themselves for a strengthening economy that would propel the Fed to raise interest rates before 2017, it was a painful reversal of sentiment.  Many had placed record bets on interest rates moving higher via futures contracts listen on the CME.

With many hedge funds and money managers already suffering a poor year, their offside wagers on interest rates and other failing trades now required emergency action.  What subsequently unfolded, according to traders, was a series of massive positions being liquidated and dumped onto the market.

One hedge fund manager recalls being bewildered by subsequent events:  “What on earth was charging through the market to want volume at such a price and why, in response to that catalyst, did the electronic marketplace just take any and all liquidity away?”

By 8:45am, liquidity began noticeably deteriorating, and the process accelerated after 9:30am, according to data from Nanex, a market research firm.  By 9:33am, the yield on the 10-year Treasury had sliced through the critical 2 per cent level, causing many who had bet on rising yields finally to capitulate and close out their negative bets by buying back US government debt and various interest rate futures contracts.

In September, hedge funds had established a record net “short” position in interest rate futures according to CFTC weekly data.  Between the end of September and the week ending October 21, this big bet shrunk from 1.27m contracts to just 217,000 reflecting more than $1tn of notional exposure being cut.

“The elephant tried to squeeze through the keyhole,” says John Brady, managing director at RJ O’Brien, a futures broker in Chicago.

Eric Hunsader, Nanex chief executive, says the scale of the shift in US Treasury prices may have prompted the “market-makers” who usually support trading of the debt to retreat: “The speed of the move was abnormal and trading systems lack historical data for such episodes that can provide them with some guidance.”

When the day drew to a close nearly $1tn worth of cash Treasuries had changed hands, illustrating the intensity of the rush for the exit.  Such huge volumes also show liquidity was available, but was possibly difficult to obtain at prices deemed reasonable by investors on the day and amid rapidly fluctuating markets.

The head of trading at a major dealer-bank says: “Once volatility shows up, you don’t want to make a mistake in a fast market and so you always see dealers pull back from providing prices.’

Compounding such pressures are changes that have transformed Wall Street since the financial crisis, with the big banks who once dominated Treasury trading now under tougher balance sheet constraints thanks to regulation and newfound aversion to risk.

This trend has encouraged greater electronic trading and a migration of experienced traders fro dealers to hedge funds and asset managers, leaving a younger generation of traders manning Treasury desks at big banks.  Many of these have never experienced the gung-ho pre-crisis days when banks were more willing to make bets on the market.

“The appetite to take on a position is lower than it was pre-new regulation,’ says Greg Gurevich, managing partner at Maritime Capital Partners, adding that compensation structures “do not reward the trader to take risk that may ultimately cost the trader his or her job”.

The two main electronic trading venues for US Treasuries are run by Nasdaq’s eSpeed and Icap’s BrokerTec. In recent years these platforms have opened up to a range of broker-dealers and high-frequency traders.  These firms do not underwrite US Treasury debt sales and are often viewed as opportunistic – providing prices when they spot a quick profit and then retreating when trading turns tricky.

Customer orders are now transacted and almost instantaneously hedged, or offset, by computer systems – a type of automation that works well when trading is orderly but rapidly breaks down when the situation changes.  At such moments, turning off the machines becomes a necessity.   This contributed to the downdraft in liquidity on October 15.

“Dealer-banks don’t really position in bonds,’ said one head trader at a large US bank.  “They basically act as a pass-through to places like BrokerTec and eSpeed or match off their client flow.  The market-makers in this new market are not obligated to be there when everyone’s selling.”

The worry is that even the highly dependable US Treasury market may suffer from sudden droughts in liquidity because big banks have been barred from “proprietary” trading.  The “prop traders” could take the other side of huge customer demand to buy or sell bonds.

“If the Street – for balance sheet, risk appetite and regulatory reasons – can’t provide a speed bump between buyers and sellers such as hedge funds and asset managers, then the Treasury market will experience a lot more jumps in trading,” says one trader.

As the market becomes increasingly driven by electronic trading, more rules may be required to help deal with sudden violent swings, similar to the adoption of circuit breakers in stock markets.

Prof Angel says: “The Treasury market is a freewheeling world where trading is not formalized like that of an exchange and where the use of circuit breakers can help steady activity.”  These kind of curbs matter for markets that increasingly trade electronically and also influence other financial areas, such as derivatives and futures.

A broader consequence of last month’s turmoil may be that Fed rate rises will be more likely to take the form of a series of slow steps, rather than big moves that run the risk of sparking turmoil in the bond markets, according to analysts.

For the US Treasury, which is responsible for making sure budget deficits and maturing debt are refinanced smoothly, further episodes of turmoil could well impair the market’s ability to underwrite government debt efficiently, says Michael Cloherty, analyst at RBC Capital Markets.

Mr. Cloherty says the US Treasury market has altered structurally and lacks the depth to absorb easily surprises in Fed policy and changes in market sentiment.  This trend has gathered pace as the central bank has become a major owner of Treasury debt through its emergency bond-buying programme, further limiting liquidity.

He adds that any sign that the Treasury market’s liquidity has declined would cast a shadow over investor confidence – and may ultimately raise the cost of selling government debt.

Says Mr. Cloherty: “Investors know they can trade large amounts of Treasuries and any erosion of confidence in the market’s liquidity has long-term consequences.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discussion

12 comments for “FTR #823 Caution, Banksters at Work, Part 2 (Still More Collateralized “Death” Obligations)”

  1. Shawn Miller’s LinkedIn account is interesting. He seems to have been the Director of Environmental and Social Risk Management, A major environmentalist with International finance corporation (He co-wrote an IFC publication encouraging “public consultation” and worked to establish ties to environmental and human rights groups), and one of the major players in Equator Principles Association, penning the “do’s and don’ts” of the financial industry(they’ve even written a little eulogy for him on their website)http://www.equator-principles.com/index.php/all-news-media/ep-association-news/387 . His clientele are also interesting – “Azerbaijan, Georgia and Turkey to Uganda, Tanzania, Togo and Bangladesh.” We know from the police that Mr Miller was gay, would frequent male chat rooms, and a meeting with one of these individuals may have resulted in his death, but this adds a new angle when we look back at his record and connect him to Uganda and the “kill-all-the-gays” law that saw citigroup and Barclays threatening to pull out of the country if the law was passed. we know from the linkedin that miller was “A thought leader and pioneer in sustainable finance focused on creating change and building sustainable business through collaboration, engagement and partnership with others”, and we know that he was in charge of “a wide variety of industry sectors (oil and gas, mining, infrastructure, power, cement, renewable energy”. Miller had his hands deep not only in the affairs of Africa, but appeared to also have keen interest in sustainability and accountability – two things that banks and industry in Africa don’t want to hear about. Now, look at what Bloomberg has posted “Citigroup Executive Probably Killed Himself, Police Say” http://www.bloomberg.com/news/2014-11-19/citigroup-s-risk-management-executive-shawn-miller-found-dead.html Note, it’s pretty run of the mill reporting until we get to this: After initial reports that he had been murdered due to no weapon being found, “A weapon was found in the apartment, Speechley said. He said he couldn’t confirm a report in the New York Daily News, citing unidentified people, that a knife was found under Miller’s body after it was moved.” That doesn’t sound like a suicide.

    Posted by Nimo | December 5, 2014, 3:13 pm
  2. “While the OCC refused to provide this information, Millan was among a limited group outside of Federal regulators who was in a position to have broad data on the death benefit claims being submitted by multiple banks”. Yes, the keeper of Wall Street’s high-value “dead banker” insurance policy secrets was just stabbed to death:

    Wall Street on Parade
    Slain MassMutual Executive Held Wall Street “Trade Secrets”

    By Pam Martens and Russ Martens: December 8, 2014

    On Thursday, November 20, 2014, the body of 54-year old Melissa Millan, a divorced mother of two school-age children, was found at approximately 8 p.m. along a jogging path running parallel to Iron Horse Boulevard in Simsbury, Connecticut. A motorist had spotted the body and called the police.

    According to the coroner’s report, it was determined that Millan’s death was attributable to a stab wound to the chest with an “edged weapon.” Police ruled the death a homicide, a rarity for this town where residents feel safe enough to routinely jog by themselves on the same path used by Millan.

    Information has now emerged that Millan had access to highly sensitive data on bank profits resulting from the collection of life insurance proceeds from her insurance company employer on the death of bank workers – data that a Federal regulator of banks has characterized as “trade secrets.”

    Millan was a Senior Vice President with Massachusetts Mutual Life Insurance Company (MassMutual) headquartered in Springfield, Massachusetts and a member of its 39-member Senior Management team according to the company’s 2013 annual report. Millan had been with the company since 2001.

    According to Millan’s LinkedIn profile, her work involved the “General management of BOLI” and Executive Group Life, as well as disability insurance businesses and “expansion into worksite and voluntary benefits market.”

    BOLI is shorthand for Bank-Owned Life Insurance, a controversial practice where banks purchase bulk life insurance on the lives of their workers. The death benefit pays to the bank instead of to the family of the deceased. According to industry publications, MassMutual is considered one of the top ten sellers of BOLI in the United States. Its annual reports in recent years have indicated that growth in this area was a significant contributor to its revenue growth.

    Banks as well as other types of corporations enjoy major tax benefits through the use of this type of insurance. The cash buildup in the policies contribute to annual earnings on a tax-free basis while the death benefit is received free of Federal income tax when the employee eventually dies. Even if the worker is no longer employed at the bank, it can still collect the death benefit. Banks owning BOLI routinely conduct “death sweeps” of public records using former employees’ Social Security numbers to determine if a former employee has died. It then submits a claim request for payment of the death benefit to the insurance company.

    Four of Wall Street’s largest banks are the largest owners of BOLI according to December 31, 2013 data from the Federal Financial Institutions Examination Council (FFIEC), holding a combined total of $68.1 billion. The four banks’ individual BOLI assets are as follows as of the end of last year:

    Bank of America $22.7 billion

    Wells Fargo 18.7 billion

    JPMorgan Chase 17.9 billion

    Citigroup 8.8 billion

    The BOLI assets, however, support a far greater amount of life insurance coverage in force on the workers’ lives – potentially as much as a ten to one ratio – meaning that just these four banks could be holding $681 billion on the lives of their current and past employees.

    Since details on the number of workers insured and the annual amounts that big Wall Street banks report as profits on the death of their current and former workers are closely guarded secrets, in March of this year Wall Street On Parade wrote to the regulator of national banks, the Office of the Comptroller of the Currency (OCC), asking for BOLI information under the Freedom of Information Act.

    Because JPMorgan Chase has experienced a number of tragic deaths among young workers in their 30s this year, we asked the OCC for the number of deaths from 2008 through March 21, 2014 on which JPMorgan Chase collected death benefits; the total face amount of BOLI life insurance in force at JPMorgan; the total number of former and current employees of JPMorgan Chase who are insured under these policies; and any peer studies showing the same data comparing JPMorgan Chase with Bank of America, Wells Fargo and Citigroup.

    The OCC responded to our request on April 18, 2014, advising that they did have documents responsive to our request but that all documents were going to be withheld because they were “privileged or contains trade secrets, or commercial or financial information, furnished in confidence, that relates to the business, personal, or financial affairs of any person,” or relate to “a record contained in or related to an examination.” (See OCC Response to Wall Street On Parade’s Request for Banker Death Information).

    It is noteworthy that JPMorgan Chase, Bank of America, Wells Fargo and Citigroup are all publicly traded companies with shareholders. Under securities law, shareholders have a right to material information on how the company is making its profits. An investor who wants to own the shares of a well-run bank whose business model is to make prudent loans to businesses or loans to responsible retail customers, should have a right to know how much of a bank’s profits are coming from the unseemly practice of collecting death benefits on its workers.

    While the OCC refused to provide this information, Millan was among a limited group outside of Federal regulators who was in a position to have broad data on the death benefit claims being submitted by multiple banks. Having data across multiple banks could have facilitated the type of peer review studies we had requested from the OCC – trade secrets that Wall Street does not want to allow into the sunshine.

    On December 4, Simsbury Police Chief Peter Ingvertsen held a press conference to provide the press and public with updates on the case. He said friends, family and co-workers have been interviewed and that the public has come forward with information.

    A reporter at the press conference indicated that she had spoken with sources and learned that Millan had not been robbed nor was it a sexual assault. She asked the police chief if he had other reasons to believe it was not a random crime. Police Chief Ingvertsen said it had not yet been determined if this was or was not a random crime.

    Posted by Pterrafractyl | December 8, 2014, 12:21 pm
  3. http://news.yahoo.com/u-hedge-fund-founder-thomas-gilbert-shot-dead-025633565–sector.html

    The son of a hedge fund founder who was shot to death in his New York apartment over the weekend was questioned on Monday in connection with the incident, police said.

    Thomas Gilbert, 70, founder of the Wainscott Capital Partners Fund, was found shot once in the head Sunday afternoon in the bedroom of his Manhattan apartment, police said.

    His son was being questioned but there was no word on whether any charges had been filed as of Monday afternoon, police said.

    The son was identified in local media as 30-year-old Thomas Gilbert Jr.

    Police said a .40-caliber handgun was recovered at the scene of the shooting, on Manhattan’s affluent East Side.

    The elder Gilbert, a graduate of Princeton University and Harvard Business School, founded Wainscott in 2011 and was the fund’s chief investment officer, according to a profile on its website.

    Gilbert also was a co-founder of Syzygy Therapeutics, a private equity biotech asset acquisition fund that he left to form Wainscott, the profile said.

    Wainscott returned 10.48 percent in the first 11 months of 2014, lagging the S&P 500’s roughly 12 percent gain and far short of its 43.92 percent return in 2013, according to a source with access to the fund’s performance figures.

    Posted by Tiffany Sunderson | January 5, 2015, 4:36 pm
  4. Worth noting…

    CBS News
    Body of missing AIG executive Omar Meza found in pond
    By Crimesider Staff CBS News
    January 16, 2015, 12:45 PM

    PALM DESERT, Calif. – The body of missing AIG executive Omar Meza was found floating in a pond near the 18th hole of the J.W. Marriott Desert Springs Resort on Thursday afternoon, reports CBS affiliate KESQ.

    Dive teams and search dogs with the Riverside County Sheriff’s Department scoured ponds and searched the grounds at the resort for several days after the 33-year-old vice-president for AIG Financial Distributors was last seen there on January 8 at about 11 p.m.

    ..

    Meza was reportedly in town for a work conference. His wife said he travels to the area every other month for work and knows the area well, but that he may have be suffering from long-term effects of a serious car crash in 2014.

    KESQ reports that coworkers said they last saw Meza leaving an Indian Wells restaurant Thursday night. Meza told an Uber car service driver he wanted to go to the Marriott on Cook Street.

    “We spoke on the phone. He was going to be heading to his hotel room,” said his wife Diane.

    He was actually staying at a smaller Marriott Residence Inn on Cook Street, but he got dropped off at the wrong hotel.

    Diane Meza said she spoke to her husband around 11:20 p.m. on Jan. 8, as he left that night’s dinner with colleagues; he said he would call her when he returned to his room but never did.

    Meza was reported missing after he failed to show up for meetings on Friday Jan. 9. Police found Meza’s jacket folded neatly on J.W.’s golf course, and his wallet.

    Posted by Pterrafractyl | January 16, 2015, 11:43 am
  5. “Another New York-area JPMorgan Chase employee is dead in an apparent murder-suicide, but experts cautioned against calling it a trend”:

    CNBC
    Second apparent murder-suicide hits JPMorgan
    Lawrence Delevingne | @ldelevingne
    Tuesday, 10 Feb 2015 | 2:01 PM ET

    Another New York-area JPMorgan Chase employee is dead in an apparent murder-suicide, but experts cautioned against calling it a trend.

    The bodies of Michael and Iran Pars Tabacchi—newlywed parents of a young boy—were discovered Friday in Closter, New Jersey. Iran, the wife, was stabbed once and strangled. The husband, Michael, died of a self-inflicted knife wound, according to Bergen County prosecutor John Molinelli. The couple’s toddler was not harmed.

    Michael, 27, was a back-office employee in the bank’s asset custody unit, according to his LinkedIn profile. He worked for JPMorgan since 2009.

    “I am very good and creative with data manipulation and reporting and can leverage my business knowledge to provide senior managers what is needed before asked to do so,” his profile states.

    The Tabacchi suicide isn’t the only one by a JPMorgan employee lately, as NJ.com noted recently. Another murder-suicide occurred in nearby Jefferson Township in July, when police said Julian Knott shot his wife Alita before killing himself. In February 2014, the New York Post noted three other mysterious deaths of JPMorgan bankers over just three weeks.

    But experts cautioned that the deaths weren’t part of an obvious trend, even if parts of working on Wall Street make employees more prone to suicide.

    “A few similar tragedies doesn’t necessarily make them statistically significant for JPMorgan. Ugly events get played up in the media partially because the public likes to hate on bankers,” said Denise Shull, a psychological consultant to investment professionals at The ReThink Group in New York.

    “Still, that disdain for those who work on Wall Street can’t help people suffering from other psychological stressors,” Shull added. “It’s highly unlikely to be the cause but being a societal target could surely contribute to the feelings of hopelessness that in turn push people over the mental edge.”

    A spokesman for JPMorgan declined to comment. The bank has 260,000 employees worldwide, according to its website.

    Alexandra Michel, who teaches at the University of Pennsylvania’s Graduate School of Education, said bank employees are much more likely to become depressed after four or five years of intense work. She also said back-office employees sometimes had an inferiority complex because their hard work did not earn the same power and prestige as front-office workers, such as investment bankers.

    “In the back office you work at lot and you don’t have status,” Michel said. “We know from research that a lack of status induces helplessness and exacerbates stress.”

    Michael Santoro, a professor of business ethics at Rutgers Business School, cautioned against drawing any conclusions from the latest suicide.

    “We have no way of knowing what is behind this and what role if any his working at a bank had to do with what happened,” Santoro said.

    Note these two points:


    “A few similar tragedies doesn’t necessarily make them statistically significant for JPMorgan. Ugly events get played up in the media partially because the public likes to hate on bankers,” said Denise Shull, a psychological consultant to investment professionals at The ReThink Group in New York.

    Still, that disdain for those who work on Wall Street can’t help people suffering from other psychological stressors,” Shull added. “It’s highly unlikely to be the cause but being a societal target could surely contribute to the feelings of hopelessness that in turn push people over the mental edge.

    Alexandra Michel, who teaches at the University of Pennsylvania’s Graduate School of Education, said bank employees are much more likely to become depressed after four or five years of intense work. She also said back-office employees sometimes had an inferiority complex because their hard work did not earn the same power and prestige as front-office workers, such as investment bankers.

    “In the back office you work at lot and you don’t have status,” Michel said. “We know from research that a lack of status induces helplessness and exacerbates stress.”

    Assuming this really was a murder-suicide (note the guy stabbed himself to death), since none of that anti-bankster ire is directed at the overworked back-office workers with no real power, would a public education campaign that makes it clear that all that ire is directed at their bosses help cut down that the untimely deaths? It would be like an “It gets better” campaign, but for back-office bankers! Although, since it doesn’t actually “get better” the longer they stay in the business, that could be a problem. Maybe Wall Street shouldn’t be so psycho instead.

    Posted by Pterrafractyl | February 12, 2015, 4:04 pm
  6. This isn’t exactly finance related (although it does involve a state auditor), but note that the Missouri GOP just experienced a “WTF”-style untimely death of its own:
    “Just 13 minutes before police got an emergency call from his home, Schweich had a phone conversation with The Associated Press about his plans to go public that afternoon with allegations that the head of the Missouri Republican Party had made anti-Semitic comments about him.” And then he shot himself. Apparently:

    Missouri Candidate for Governor Dies of ‘Apparent Suicide’
    Associated Press
    First published February 26th 2015, 9:58 pm

    Missouri Auditor Tom Schweich, who had recently launched a Republican campaign for governor, fatally shot himself Thursday in what police described as an “apparent suicide” — just minutes after inviting reporters to his suburban St. Louis home for an interview.

    Schweich’s death stunned many of Missouri’s top elected officials, who described him as a “brilliant” and “devoted” public servant with an “unblemished record” in office. Just 13 minutes before police got an emergency call from his home, Schweich had a phone conversation with The Associated Press about his plans to go public that afternoon with allegations that the head of the Missouri Republican Party had made anti-Semitic comments about him.

    The state GOP chairman denied doing so in an interview later Thursday. Chairman John Hancock said “it’s plausible that I would have told somebody that Tom was Jewish because I thought he was, but I wouldn’t have said it in a derogatory or demeaning fashion.”

    Schweich, 54, had Jewish ancestry but attended an Episcopal church. Spokesman Spence Jackson said his boss had recently appeared upset about the comments people were supposedly making about his religious faith and about a recent radio ad describing Schweich as “a weak candidate for governor” who “could be easily confused for the deputy sheriff of Mayberry” and could “be manipulated.”

    Schweich had been in office since January 2011 and had easily won election in November to a second, four-year term. He announced last month that he would seek the Republican nomination for governor. Murphy told NBC station KSDK that he didn’t believe Schweich was under any type of investigation.

    Posted by Pterrafractyl | February 26, 2015, 9:19 pm
  7. More on the “apparent suicide” of Tom Schweich: The audio of a voicemail he left to the St. Louis Post-Dispatch has been released. The voicemail recording was made seven minutes before he was found by his wife shot in the head. She reportedly heard him making phone calls and then heard a gun shot and called 9/11. There’s a lot more on his background in the article, including his reputation has an anti-corruption crusader and how cracking down on corruption in the state capital was the signature theme of his gubernatorial campaign:

    St. Louis Post-Dispatch
    Auditor Schweich had called seeking an interview just before his death
    2/27/2015
    By Kevin McDermott, Virginia Young

    ST. LOUIS • Tom Schweich, Missouri’s Republican state auditor and a leading contender for the governor’s office in next year’s election, died Thursday after apparently shooting himself in his Clayton home.

    The sudden death of the second-term auditor shocked and saddened the state’s political establishment and roiled the race for governor barely a month after it began.

    “What we know at this point suggests an apparent suicide,” Clayton Police Chief Kevin Murphy told reporters in a news conference Thursday afternoon. He said there was “nothing to support anything other than that at this point,” and said Schweich died from a single gunshot wound.

    Murphy said he didn’t know whether Schweich left a note. The chief said an autopsy and investigation are pending.

    Earlier in the day, a police source told the Post-Dispatch that Schweich’s wife was in another room of their house when she heard her husband making phone calls, followed by a gunshot. Schweich had been shot in the head, the source said.

    A 911 call was made from Schweich’s home at 9:48 a.m., seven minutes after Schweich had left a voicemail requesting an interview with a Post-Dispatch reporter.

    Schweich was taken to Barnes-Jewish Hospital where he was pronounced dead, Murphy said.

    The Post-Dispatch interview, which was also to include an Associated Press reporter, was set at his Clayton home for later in the day.

    The subject of the interview, according to Schweich’s comments to the Post-Dispatch’s editorial page editor, was Schweich’s belief that a top state GOP official had spread false information about him.

    Listen: The voicemail left for the Post-Dispatch

    ‘SO MUCH TALENT’

    Schweich, 54, had a cadre of mentors and supporters in his gubernatorial run that included former U.S. Sens. John Danforth and Jim Talent, both Missouri Republicans, and friend and wealthy campaign contributor Sam Fox, the former U.S. ambassador to Belgium.

    “I was never so surprised in my entire life to find out this happened,” Fox told the Post-Dispatch Thursday. “This guy was brilliant. This guy was unique. He had so much talent.”

    Fox said he had scheduled a fundraiser at his house for Schweich. “He was raising money,” Fox said. “The money was pouring in.”

    He said Schweich had not expressed any signs of personal or professional turmoil.

    “None whatsoever,” Fox said. “Not to me nor to any friends that I’m aware.”

    Schweich was re-elected last November to a second term as auditor. Under the Missouri constitution, the governor has the power to fill vacancies of statewide officers.

    Schweich announced last month that he would seek the Republican nomination for governor in 2016 — a race that had already fostered unusually bitter in-party conflict despite the primary being more than a year away.

    Schweich, known for his intensity and ambition, had positioned himself in the gubernatorial campaign as a tenacious crime-fighting reformer, based on his aggressive audits of public officials throughout Missouri.

    Last weekend, at the Missouri GOP’s annual Reagan-Lincoln Days convention in Kansas City, he cheerfully joked with reporters as he scooped ice cream for conventioneers. He also gave an impassioned, rousing speech that whipped up the hundreds of attendees and prompted another official on stage to joke that Schweich had had too much coffee.

    When Schweich announced his gubernatorial campaign, he promised to attack corruption in the state Capitol. He said his main Republican primary opponent, former Missouri House Speaker Catherine Hanaway, was “bought and paid for” by megadonor Rex Sinquefield because Hanaway had received about $1 million in political donations from Sinquefield.

    Schweich’s critics struck back. Last week, a political action committee called Citizens for Fairness in Missouri aired a radio ad saying that Schweich could be “easily confused for the deputy sheriff of Mayberry.” The ad, which mimicked the voice of the main character from the dark political drama “House of Cards,” called Schweich a weak candidate whom Democrats would “squash like a bug” if he won the GOP nomination.

    Earlier this week, former Navy SEAL Eric Greitens confirmed he was considering jumping into the Republican primary as well.

    On Tuesday morning, Schweich confided in Post-Dispatch Editorial Page Editor Tony Messenger that he believed that John Hancock, the newly elected chairman of the Missouri Republican Party, had spread disinformation about Schweich’s religion. That topic was what Schweich wanted to discuss with reporters for the Post-Dispatch and the Associated Press Thursday.

    In several conversations via text and phone in the days leading up to Thursday morning, Schweich told Messenger that Hancock mentioned to people in passing that Schweich was Jewish. Schweich wasn’t Jewish. He was a member of the Church of St. Michael & St. George, an Episcopal congregation in Clayton.

    Schweich told Messenger he believed the mentions of his faith heritage were intended to harm him politically in a gubernatorial primary in which many Republican voters are evangelical Christians. He said his grandfather was Jewish, and that he was “very proud of his connection to the Jewish faith.”

    “He said his grandfather taught him to never allow any anti-Semitism go unpunished, no matter how slight,” Messenger said a written statement.

    Schweich told Messenger that he attempted to ask Sen. Roy Blunt to intervene but was unable to speak with him. Schweich said he had lunch with Blunt’s son, lobbyist Andy Blunt, according to Messenger’s account.

    Blunt’s spokeswoman, Amber Marchand, said the senator was very saddened by the loss. She confirmed the two spoke on several occasions the weekend prior but did not disclose the details of those private discussions.

    Karen Aroesty, regional director of the Anti-Defamation League, said Schweich had contacted her, as well, earlier in the week concerning alleged anti-Semitism. She said she was waiting for Schweich to comment publicly on the issue before deciding whether to issue a statement.

    “My understanding from the conversation was that that was going to be the focus, but I don’t know any more than that,” Aroesty said.

    Hancock said Thursday that he may have said to someone last year that Schweich was Jewish, “but I certainly would not have said it in a derogatory manner.”

    “I have been a public figure for nearly 30 years,” Hancock said. “No one has ever accused me of bigotry in any shape, manner or form.”

    Hancock said he did not have a “specific recollection of telling anybody that Schweich was Jewish,” but he may have used it as a description, similar to saying, “I’m Presbyterian and somebody else is Catholic.” Hancock said that at the time, he thought Schweich was Jewish.

    Hancock said he and Schweich discussed the matter on the telephone last November. “He told me he was aware I had made anti-Semitic remarks and I told him it was not true,” Hancock said.

    This week, Hancock said he heard that Schweich intended to hold a news conference in Jefferson City to accuse Hancock of making an anti-Semitic remark to a specific person. Hancock said that rumored incident — which he declined to detail — was “demonstrably untrue.”

    “To set the record straight,” Hancock said, he and his wife traveled to Jefferson City on Tuesday to attend the news conference, which they had expected to take place that afternoon. That news conference never took place.

    “This whole thing doesn’t make any sense,” Hancock said. “Three months of allegations about me that are not true don’t make any sense. Suicide doesn’t make any sense. It is a tragedy.”

    Hancock, a political consultant, also said that while he has done research for Hanaway’s campaign in the past, he has “never spoken to a donor on behalf of Catherine Hanaway.”

    Schweich graduated from Clayton High School, Yale University and the Harvard University School of Law. He served as an intern for then-U.S. Sen. John Danforth, R-Mo., and later joined Danforth at the Bryan Cave law firm downtown, where Schweich became a partner. Schweich long had been close politically to Danforth.

    When Danforth led the federal investigation in 1999 into the mass deaths at the Branch Davidian compound at Waco, Texas, he chose Schweich for chief of staff. He also worked with Danforth during the former senator’s service in 2004-05 as American ambassador to the United Nations, then with the U.S. State Department as a top official with the Bureau of International Narcotics and Law Enforcement.

    Schweich returned to Clayton and to Bryan Cave in 2008, and was a visiting professor and “ambassador in residence” at Washington University.

    In 2010, in his first bid for public office, Schweich unseated incumbent state auditor Susan Montee, a Democrat. He breezed to re-election last November, receiving 73 percent of the vote against two minor-party challengers. The Democrats did not run a candidate against him.

    Posted by Pterrafractyl | February 28, 2015, 4:16 am
  8. Given the possible role the Libor manipulation investigation of Deutsche Bank allegedly played in the death of senior Deutsche Bank executive William Broeskmit, it’s worth noting that Deutsche Bank settled with the US today with a $2.5 billion fine. Also, as usual, no one was criminally charged:

    The New York Times
    Deutsche Bank to Pay $2.5 Billion Fine to Settle Rate-Rigging Case

    By BEN PROTESS and JACK EWINGAPRIL 23, 2015

    They called each other “dude,” “mate” and “amigo,” suggesting a certain innocence to their friendship. And yet at the center of their dispatches, United States and British authorities say, was actually a collusive effort to manipulate worldwide interest rates.

    “I’m begging u, don’t forget me,” one Deutsche Bank trader wrote in an online chat to an employee at a rival bank, seeking to influence rates. “Pleassssssssssssssseeeeeeeeee … I’m on my knees …”

    The messages captured the scheme at Deutsche Bank, which on Thursday became the latest big bank to settle accusations that it manipulated interest rates that underpin trillions of dollars in mortgages, student loans and other debt.

    To settle the case, the bank agreed to pay $2.5 billion in penalties, a record for the interest rate cases, which have already stung the likes of Barclays and UBS. Deutsche Bank — Germany’s largest financial institution and, at least for now, a problem child in the eyes of regulators — also agreed to accept a criminal guilty plea for the British subsidiary at the center of the case. It is the most significant banking unit to accept a criminal plea in the long-running investigation into the manipulation of the London interbank offered rate, or Libor.

    While the deals require Deutsche Bank to dismiss certain employees, no one at the bank has been criminally charged, though in at least one previous Libor case, prosecutors charged individuals after reaching a settlement with the bank itself. “Today’s resolution of the Libor investigation with Deutsche Bank is in some respects the most significant one yet,” said Leslie R. Caldwell, head of the Justice Department’s criminal division, which handled the case along with authorities in Washington, London and New York, where the state’s financial regulator, Benjamin M. Lawsky, joined a Libor settlement for the first time.

    The case spotlighted the collusive elements of Wall Street trading desks, where rival banks have occasionally joined forces to manipulate financial benchmarks. It also foreshadows looming actions against banks suspected of teaming up to manipulate the price of foreign currencies, people briefed on the matter said, with the Justice Department planning to announce guilty pleas from at least four banks — Barclays, JPMorgan Chase, Citigroup and the Royal Bank of Scotland — by next month.

    “Financial markets function properly only if customers and competing banks have confidence that they are untainted by fraud and collusion,” said William J. Baer, the head of the Justice Department’s antitrust unit, adding that “the unprecedented size of the penalty” demonstrates just “how far from that bedrock principle Deutsche Bank and its traders strayed.”

    As the foreign exchange negotiations heat up, the Libor cases are drawing to a close. In the final chapter of the case, the authorities will continue to scrutinize three American banks — JPMorgan, Citigroup and Bank of America — though it is unclear whether those investigations will result in criminal cases.

    The settlement is something of a mixed bag for Deutsche Bank.

    In agreeing to the deals, the bank closes a sordid chapter in its history. But the terms announced on Thursday will be costly to shareholders, and could do further damage to the bank’s already battered reputation.

    “We deeply regret this matter but are pleased to have resolved it,” Jürgen Fitschen and Anshu Jain, the co-chief executives of Deutsche Bank, said in a a statement on Thursday. “The bank accepts the findings of the regulators.”

    The size of the fine is particularly hard to swallow for the bank, which had hoped to pay less than $2 billion, one of the people briefed on the matter said. And while the deals will provide some closure to Deutsche Bank, they will not end the bank’s legal problems. It is also ensnared in the foreign exchange investigation. And it is suspected of violating United States sanctions against countries like Iran.

    The size of the Libor fine, which eclipsed the $1.5 billion UBS agreed to pay in 2012, reflected in part the breadth of wrongdoing that the authorities uncovered. The authorities also denounced the bank for lax oversight of traders and a failure to respond to warning signs of misconduct. The bank, the authorities said, also dragged its feet in providing information, taking two years to provide audio recordings requested by investigators and accidentally destroying some evidence.

    The wrongdoing at Deutsche Bank lasted from 2005 to 2011 and touched employees in London, Frankfurt, New York and Tokyo, the authorities said.

    “Markets do not just manipulate themselves,” Mr. Lawsky said in a statement. “It takes deliberate wrongdoing by individuals.”

    Manipulation of Libor, an average of how much banks say they would pay to borrow from one another, struck a nerve with government authorities. As a benchmark for trillions of dollars in credit-card loans and other financial instruments, Libor is a cornerstone of the financial marketplace.

    “Today’s action against Deutsche Bank reflects the C.F.T.C.’s unwavering commitment to protect the integrity of critical, global financial benchmarks from profit-driven traders,” Aitan Goelman, the head of the trading commission’s enforcement division, said in a statement.

    Besides serving as a guidepost to set rates, the benchmarks are a barometer of the broader health of the financial system. If banks are paying more to borrow from one another, it can be a sign that they are unstable, a concern at the heart of the message in which the Deutsche Bank trader begged a competitor to submit a lower rate.

    Other times, Deutsche Bank employees would use their submissions to push reference rates up or down to suit their own financial needs. In 2005, a Deutsche Bank trader contacted a colleague who was making rate submissions, to ask, “can we have a high 6mth libor today pls?” The colleague replied, “sure dude, where wld you like it mate?”

    Inside Deutsche Bank, there was widespread recognition of the problem, the authorities said.

    In 2009, for example, a Deutsche Bank vice president wrote to a trader that the Tokyo interbank rate “is a corrupt fixing and D.B. is part of it!”

    Beyond the issue of basic justice, part of the reason the lack of banker prosecutions in recent years is so ominous is that the option the public seems to generally prefer during a major financial crisis, just letting the banks implode to teach the banksters a lesson and shrink them down to size, also has the potential side effect of hurting a lot more than just the banksters. That’s why jailing. criminal bankers is such a critical tool: it allows the public to bailout the banks, if necessary, without bailing out the the banksters in the process and slapping them with a ‘cost of doing business‘ fine.

    Plus, it’s not like jailing the banksters is unprecendented. Tick…tick…tick…tick…

    Posted by Pterrafractyl | April 23, 2015, 8:19 pm
  9. Here’s a reminder that at least the non-super-suspicious apparent suicides in the financial sector in recent years really could easily be suicides. Why? Because even if you find yourself drunk on Wall Street’s wealth and power you’re still probably miserably drunk on chronic sleep deprivation too and have been so for a long, long time:

    The Guardian
    Goldman Sachs restricts intern workday to 17 hours in wake of burnout death

    The benevolent firm introduced new work hours for summer interns after Bank of America Merrill Lynch intern died from seizure induced by all-nighters

    Rupert Neate in New York

    Wednesday 17 June 2015 17.32 EDT

    Go home before midnight, and don’t come back before 7am. Goldman Sachs – one of Wall Street’s toughest firms – has told interns they have got to work hard, but not too hard.

    The new rules, introduced for this summer’s crop of investment banking interns, have been introduced “to improve the overall work experience of our interns”, a Goldman Sachs spokesman said. All of its summer interns across the world were informed of the new working hours rule on their first day in the office earlier this month.

    Wall Street’s shift to caring capitalism comes in the wake of the death of a 21-year-old Bank of America Merrill Lynch intern who had regularly pulled all-nighters in a desperate bid to impress his bosses.

    Moritz Erhardt was found dead in the shower at his London accommodation after working 72 hours straight. An inquest found he died of an epileptic seizure that could have been a triggered by his long working hours.

    Yes, you read that correctly: 17 hour days are supposed to the new kinder, gentler expectations for Goldman Sachs’s summer interns. And it doesn’t get any better from there.

    So now that Goldman Sachs has graciously relaxed its culture of self-mutilation a bit, hopefully at least some of the next generation of banksters will be somewhat less brain-damaged than the current crop. It’s progress. Not remotely enough progress to indicate any real sanity or humanity in Goldman Sachs’s leadership, but still progress.

    Posted by Pterrafractyl | June 24, 2015, 4:57 pm
  10. Regarding the alleged suicides of Deutsche Bank lawyer Calogero “Charlie” Gambino and Deutsche Bank manager William Broeksmit, first recall Gambino’s close proximity to the Libor-rigging legal negotiations and note William Broeksmit’s close ties to Deutsche Bank’s recently resigned former co-CEO, Anshu Jain as well as Broeksmit’s name coming up in relation to the Libor investigation and his growing anxiety over the various probes facing the bank.

    With that in mind, here’s an update on the investigation into the role of Deutsche Bank’s upper management in the Libor scandal:

    First, note that, back in December 2014, Germany’s financial regulator, BaFin, absolved Deutsche Bank’s upper management of any involvement or awareness of the Libor-rigging:

    Reuters
    Bafin exonerates Deutsche Bank’s Jain in Libor probe: Handelsblatt
    Sun Dec 7, 2014 3:49pm EST

    FRANKFURT (Reuters) – German financial watchdog Bafin has found that Deutsche Bank co-Chief Executive Anshu Jain was neither aware nor part of possible attempts at the German lender to manipulate interest rates, German newspaper Handelsblatt reported.

    After a two-year investigation, Bafin concluded there was no evidence the bank’s board members participated in or knew about any possible interest rate manipulation efforts, the German business daily said, citing unnamed financial sources.

    Deutsche Bank and Bafin declined to comment on the report.

    Investigations into the possible abuse of reference rates such as the London interbank offered rate (Libor) or foreign exchange fixings have dogged banks since a post-financial crisis regulatory backlash against the sector.

    Deutsche Bank said it was cooperating with regulators and conducting its own probe into the possible manipulation of Libor, a benchmark against which some $450 trillion of financial products from derivatives to home loans are priced worldwide.

    The lender has paid at least 5.6 billion euros ($6.9 billion) in the past two years in fines and settlements and expects to pay around 3 billion euros more this year.

    Note that Deutsche Bank was fined an additional $2.5 billion from US and UK authorities for its Libor-rigging behavior and that was just one of the big investigations that bank is facing (although no one went to jail). We have yet to find out what the German regulators are going to do, but they concluded their Libor investigation in May and reportedly had a harsh report in the pipeline in June. According to people that saw the report, top managers top managers were not directly implicated, but were responsible for structural deficiencies at the lender. In other words, they managers let the guilty low-level hellions run wild. The bankster CEO version of “guilty”:

    Fri Jun 12, 2015 7:26pm IST
    German watchdog’s Libor report rebukes Deutsche Bank – source
    FRANKFURT, June 12

    Germany’s financial watchdog Bafin heavily criticises Deutsche Bank in its report into attempts to manipulate inter-bank interest rates such as Libor, a person familiar with the report’s conclusions said.

    The report criticises organisational failings and insufficient controls at Germany’s largest lender, as well as sluggishness in clearing up the problems, the person said.

    Top managers were not directly implicated in the manipulation of the interest rates, used as benchmarks for trillions of dollars in financial contracts, but were responsible for structural deficiencies at the lender, the person added.

    Bafin said in May it had completed its report and was awaiting Deutsche Bank’s response before considering any necessary consequences. It did not give any details of the report at that time.

    Deutsche Bank agreed in April to pay $2.5 billion to U.S. and British authorities for manipulation of Libor.

    Bafin’s report also criticises co-chief executive Anshu Jain, personnel head Stephan Leithner, former chief executive Josef Ackermann and former board member Hermann-Josef Lamberti, the person familiar with its conclusions said, echoing a report in German magazine Der Spiegel on Friday.

    Deutsche Bank has said it was “categorically false” that pressure from regulators was a factor in the decision announced on Sunday by Jain and co-CEO Juergen Fitschen to step down early.

    “Deutsche Bank has said it was “categorically false” that pressure from regulators was a factor in the decision announced on Sunday by Jain and co-CEO Juergen Fitschen to step down early.” LOL.

    So a not very pleasant report was heading Deutsche Bank’s way, but at least the senior management was still largely absolved by Germany’s financial regulators. Largely, but not necessarily entirely, since investigators are now reopening the investigation, and taking another look at Jain:

    Reuter
    German regulator says Deutsche Bank CEO Anshu Jain misled Bundesbank – FT
    FRANKFURT

    Sat Jun 27, 2015 8:35am IST

    Deutsche Bank’s co-chief executive Anshu Jain may have “knowingly made inaccurate statements” to Germany’s Bundesbank during investigations into manipulation of the inter-bank rate setting process, the Financial Times reported online, citing a confidential report from German regulator BaFin.

    BaFin declined to comment.

    Deutsche Bank told Reuters it disputed the allegation that Anshu Jain misled the Bundesbank.

    Earlier this month, a source told Reuters that Germany’s financial watchdog Bafin heavily criticised Deutsche Bank in its report investigating attempts to manipulate inter-bank interest rates such as Libor.

    The German regulator has been investigating Deutsche Bank and the role it played during the financial crisis when a global inter-bank lending rate mechanism was being manipulated.

    BaFin recommends that Deutsche Bank should face “special banking supervisory measures” as a result, the Financial Times reported, quoting the BaFin report.

    Jain, who resigned his position as CEO effective June 30, is accused of having “knowingly made inaccurate statements” in a 2012 interview with the German central bank, the Financial Times said.

    Jain is alleged to have told the central bank he had no knowledge of rumours of possible rigging in 2008, but contemporaneous e-mails about a meeting on the subject were forwarded to him at the time, the Financial Times said.

    Deutsche Bank on Friday said, “The BaFin report confirms our findings that no present or former member of Deutsche Bank’s Management Board or Group Executive Committee instructed employees to manipulate intra-bank offered rates (IBOR) submissions or was aware of any attempted manipulations prior to June 2011 when certain misconduct first came to light during the Bank’s investigation of this matter.”

    In a statement, Deutsche Bank said, “Mr Jain disputes as baseless the allegation that he misled the Bundesbank in his 2012 interview. He understood Bundesbank’s question about when he first learned of rumours of possible IBOR rigging to mean rigging at Deutsche Bank itself which he learned of in 2011, not rigging in the marketplace which was publicly reported on in 2008.”

    Deutsche further said that report also addresses concerns about control related issues, a number of which have since been rectified and others of which the bank was still working to improve.

    “As we have not yet responded to the BaFin report as part of the regulatory process, we believe it would be inappropriate to comment further publicly at this time,” Deutsche Bank said.

    From the report, the Financial Times quotes BaFin’s lead banking supervisor who is quoted Frauke Menke, lead banking supervisory as saying, “I have been astonished to learn […] that the suggestion is that the audit by BaFin supposedly resulted in clearing the senior management of DB, especially Mr Jain, and that supposedly no banking supervisory measures are expected,” Menke was quoted as saying in the report.

    “I expressly want to point out that this is not correct,” the Financial Times said, quoting Menke in the report.

    So there are clear suspicions that ex-CEO Anshu Jain received some emails about the Libor-rigging self-declared “cartel”. But he somehow forgot about that when chatting with investigators. And continues to deny the allegations.

    At the same time, let’s hope that BaFin’s banking supervisor, Frauke Menke, was genuinely “astonished to learn astonished to learn […] that the suggestion is that the audit by BaFin supposedly resulted in clearing the senior management of DB, especially Mr Jain, and that supposedly no banking supervisory measures are expected,” and there isn’t a round of regulatory ass-covering going on for German regulators going easy on Deutsche Bank.

    Either way, at the end of the day, for a bank as big as Deutsche Bank, if it’s just a big fine, that’s not really all that big of a deal since, as Deutsche Bank was reminded of back in April with its $2.5 billion Libor fine, your bank can get one of the biggest fines in history for rigging one of the key global interest rates for the firm’s profit and no onegoes to jail. You might die suddenly, from either the stress alone or with ‘assistance’, but you won’t go to jail.

    Bankster justice is fickle justice.

    Posted by Pterrafractyl | June 29, 2015, 9:45 pm
  11. Germany’s financial regulator, BaFin, wrote a scathing report about the conduct of half a dozen current Deutsche Bank executives in the Libor investigations, according to a confidential report. The accusations included failing to stop the manipulation or telling regulators and generally describes a badly broken corporate culture. Fittingly, it looks like that corporate culture of corruption is going to end up being the fall guy too:

    The Wall Street Journal
    Germany Blasts Deutsche Bank Executives Over Culture
    Confidential BaFin report criticizes bank for keeping quiet about attempted Libor manipulation

    By David Enrich,
    Jenny Strasburg and Eyk Henning
    Updated July 16, 2015 7:29 p.m. ET

    German regulators accused a half-dozen current Deutsche Bank AG executives of failing to stop or tell regulators about years of attempted market manipulation, according to a confidential report reviewed by The Wall Street Journal that portrays the German bank as suffering from a badly broken corporate culture.

    BaFin, the German financial watchdog, sent the report to Deutsche Bank’s management board May 11, less than a month before the German lender unexpectedly announced that its co-chief executives, Anshu Jain and Jürgen Fitschen, planned to resign. Deutsche Bank officials said in June that the resignations weren’t the result of regulatory pressure.

    Mr. Jain, whose resignation took effect June 30 and who is still employed by Deutsche Bank as a consultant, is singled out for especially harsh criticism in the letter, for allegedly providing inadequate leadership and failing to stop manipulation of the London interbank offered rate, or Libor, and other market benchmarks. Mr. Fitschen isn’t criticized in the report.

    Four current members of the bank’s management board, as well as two other senior executives, also are sharply criticized by BaFin for negligent oversight and selective or inaccurate disclosures to regulators that were investigating market manipulation. The letter was sent by BaFin’s top supervisor of large banks, Frauke Menke, to Deutsche Bank’s eight-person committee of top executives. The letter was originally written in German; the Journal reviewed a 37-page English translation done by representatives of the bank.

    The BaFin letter represents an unusual, sweeping rebuke of the upper management of one of the world’s largest banks, years after the company started trying to clean up its culture following the financial crisis. The letter, portions of which were previously reported by the Financial Times, warns that Deutsche Bank potentially faces future regulatory penalties for the problems uncovered. It follows stinging criticism of Deutsche Bank’s U.S. financial systems by the Federal Reserve in late 2013.

    Deutsche Bank strongly disputes BaFin’s criticisms, while saying in a statement that it expresses “deep regret for the wrongdoing that occurred” and saying that the bank has improved its internal procedures. The bank said that “the report includes statements that are taken out of context. It would be unwarranted to infer conclusions about the conduct of the bank or any individuals at this stage, especially because their detailed responses are submitted privately out of respect for the regulatory process.” Mr. Jain “disputes as baseless” allegations that he misled regulators, the bank said.

    BaFin, which has the power to oust executives and to issue written reports criticizing them, but not to impose large financial penalties, declined to comment on the Deutsche Bank letter.

    Two of the current executives reprimanded in the letter, General Counsel Richard Walker and Chief Risk Officer Stuart Lewis, hold senior global roles in which they are responsible for ensuring that Deutsche Bank complies with the law and avoids excessive risk-taking that could cause losses or reputational damage.

    BaFin accused Messrs. Walker and Lewis of failing to take seriously information requests from U.S. regulators when they were investigating manipulation of key interest-rate benchmarks, and it said they sometimes misled BaFin about regulatory investigations or employees’ involvement in questionable behavior. The BaFin report said Mr. Lewis’s incorrect statement was “not on purpose.”

    “It appears to me that this is a manifestation of…culture that is possibly still characteristic to your bank, i.e. to prefer hiding, covering up or entirely negating problems instead of addressing them openly and actively in order to prevent similar issues in the future,” Ms. Menke wrote in relation to Mr. Walker.

    A Deutsche Bank spokesman described the allegations against Mr. Walker as “unfounded” and said he has written a detailed response to BaFin. Mr. Lewis didn’t respond to requests for comment. On his behalf, a spokesman referred to the bank’s statement.

    The comments are part of a “Senior Management Review” that takes up more than half of BaFin’s report and addresses alleged shortcomings of 11 current or former Deutsche Bank executives. The letter is based in part on a review conducted by accounting and consulting firm Ernst & Young into the bank’s handling of the Libor investigation. Deutsche Bank paid $2.5 billion in April to settle U.S. and British Libor-rigging allegations. It admitted wrongdoing.

    Another executive, Deutsche Bank’s European CEO, Stephan Leithner, is faulted for alleged “incorrect attestation” of facts related to traders’ roles in multiple benchmark-rigging investigations. Mr. Leithner didn’t respond to requests for comment. Michele Faissola, the bank’s head of asset and wealth management and a longtime confidant of Mr. Jain’s, also is criticized for allegedly withholding information from regulators and for “stubbornly maintaining the status quo” of the bank’s Libor processes, despite what BaFin says was mounting evidence of suspicious behavior. Mr. Faissola has written to BaFin disputing the regulator’s findings, said a person familiar with the matter.

    “The misconduct for which Mr. Faissola is accountable, which relates primarily to the omission of investigation measures and the failure to remedy procedural deficiencies, must be classified as serious,” BaFin wrote.

    The regulator also questioned whether it is plausible that neither Mr. Faissola nor Mr. Jain knew about Libor-rigging while it was occurring, as the bank has claimed. “Not convincing” was BaFin’s description of Mr. Jain’s explanations for why the bank didn’t take action sooner than it did to rein in problematic behavior.

    Stefan Krause, Deutsche Bank’s former finance chief, who remains a top executive at the bank, is faulted by BaFin for allegedly failing to address increasingly obvious problems at the bank and for overseeing internal investigations that lacked rigor or independence. Henry Ritchotte, the bank’s chief operating officer, who also is responsible for the bank’s internal technology, faces criticism for presiding over Deutsche Bank systems that allowed improper behavior to take place on a wide scale.

    The bank spokesman said Mr. Ritchotte inherited management of many technology systems when he became chief operating officer in 2012 and that he has been working to upgrade them. On Mr. Krause’s behalf, a spokesman referred to the bank’s statement.

    The report describes extraordinary efforts by senior executives including Mr. Jain, in some cases going back to 2007, to protect and reward star traders despite internal warnings that their outsize profits could be the result of collusion with other employees or banks.

    In spring 2008, after front-page Wall Street Journal articles raised questions about Libor’s reliability, Deutsche Bank officials internally discussed whether the benchmark might be manipulated, according to BaFin. Nearly five years later, in February 2013, Mr. Leithner sent an email to Mr. Jain and Deutsche Bank spokesman Michael Golden noting that “it would be better” if 2008 discussions about Libor “were not mentioned to the press because otherwise the question would be raised about why nobody at DB had reacted at that time,” according to the BaFin report.

    The Deutsche Bank spokesman said Mr. Leithner didn’t feel that the bank needed to publicly talk about five-year-old issues in 2013.

    The report raises new questions about the flurry of management and strategic changes that took place in the weeks before Messrs. Jain and Fitschen handed in their resignations.

    BaFin may not have the power to issue large financial penalties for banks in Germany, but that doesn’t mean the agency isn’t a source of revenue. Just look at the comedy gold it created this time:


    Deutsche Bank strongly disputes BaFin’s criticisms, while saying in a statement that it expresses “deep regret for the wrongdoing that occurred” and saying that the bank has improved its internal procedures. The bank said that “the report includes statements that are taken out of context. It would be unwarranted to infer conclusions about the conduct of the bank or any individuals at this stage, especially because their detailed responses are submitted privately out of respect for the regulatory process.” Mr. Jain “disputes as baseless” allegations that he misled regulators, the bank said.

    BaFin, which has the power to oust executives and to issue written reports criticizing them, but not to impose large financial penalties, declined to comment on the Deutsche Bank letter.

    Two of the current executives reprimanded in the letter, General Counsel Richard Walker and Chief Risk Officer Stuart Lewis, hold senior global roles in which they are responsible for ensuring that Deutsche Bank complies with the law and avoids excessive risk-taking that could cause losses or reputational damage.

    BaFin accused Messrs. Walker and Lewis of failing to take seriously information requests from U.S. regulators when they were investigating manipulation of key interest-rate benchmarks, and it said they sometimes misled BaFin about regulatory investigations or employees’ involvement in questionable behavior. The BaFin report said Mr. Lewis’s incorrect statement was “not on purpose.”

    “It appears to me that this is a manifestation of…culture that is possibly still characteristic to your bank, i.e. to prefer hiding, covering up or entirely negating problems instead of addressing them openly and actively in order to prevent similar issues in the future,” Ms. Menke wrote in relation to Mr. Walker.

    Yes, it’s very serious that the Deutsche Bank executives that would have been overseeing the departments associated with executing the Libor manipulation cartel were misleading US investigators. Of course, they didn’t do it on purpose. They were a victim of Deutsche Bank’s culture!

    So did Deutsche Bank’s leadership learn its lesson? Well, yes and no: Yes, they assert, they learned their lessons and deeply regret their wrongdoing. But they also strongly dispute the criticisms about past wrongdoings and a culture of corruption. At least, they dispute our ability to make any inferences about any of Deutsche Bank’s individuals…at this stage:


    Deutsche Bank strongly disputes BaFin’s criticisms, while saying in a statement that it expresses “deep regret for the wrongdoing that occurred” and saying that the bank has improved its internal procedures. The bank said that “the report includes statements that are taken out of context. It would be unwarranted to infer conclusions about the conduct of the bank or any individuals at this stage, especially because their detailed responses are submitted privately out of respect for the regulatory process.” Mr. Jain “disputes as baseless” allegations that he misled regulators, the bank said.

    So, according to Deutsche Bank, it sounds like we have to wait a while before we can determine whether or not Deutsche Bank’s executives were innocently suffering under a culture of corruption because such conclusions were based on detailed responses given to investigators that should be kept private out of respect for the regulator process. And they strongly dispute that any of that culture of corruption remains. The executives remain, for the most part, but the culture of corruption is all gone…according to the executives.

    BaFin seems somewhat less than convinced and since BaFin can issue large fines and pretty much the only thing it can do is press for punishment for individuals, that basically means Deutsche Bank is going to get off almost entirely from German regulators without punishment for the Libor rigging unless BaFin punishes those executives personallyy.

    So maybe, just maybe, a banker will actually go to jail! Or something personal. After all, the mega-fines that just hit shareholders and normally shield the executives aren’t an option in this case! So that’s all something to watch.

    And in other news…

    Posted by Pterrafractyl | July 21, 2015, 9:18 am
  12. A former Deutsche Bank trader, Timothy Parietti, reportedly pleaded guilty in a Manhattan federal court back in May to conspiring with other bank employees to manipulate the the Libor. A week later, two other Deutsche Bank traders were indicted by the Justice Department and at least one of those indicted traders and not pleaded. Whether or not Paretti’s guilty plea results in convictions for these other two traders remains to be seen, but consider the recent medical history of traders facing legal scrutiny, especially Deutsche Bank traders, it’s a safe bet that all three traders should probably avoid tall buildings for the time being:

    Reuters

    Ex-Deutsche Bank trader pleaded guilty in U.S. to Libor scheme: records

    NEW YORK | By Nate Raymond

    Wed Jun 22, 2016 12:49pm EDT

    U.S. prosecutors have secured a guilty plea from a second former Deutsche Bank AG trader for conspiring to manipulate Libor, the benchmark interest rate at the center of global investigations of various banks, court records show.

    Timothy Parietti, a 50-year-old former managing director of Deutsche Bank’s New York money market derivatives trading desk, pleaded guilty on May 26 in Manhattan federal court to conspiring to commit wire fraud and bank fraud, records unsealed on Wednesday showed.

    According to a transcript, Parietti admitted that from 2006 to 2008, he participated in a scheme with other bank employees to manipulate Libor so that trades he made on financial instruments linked to the benchmark might be more profitable.

    “At the time, I knew that this practice was dishonest. I participated in this dishonest practice and I accept responsibility for my role,” Parietti said. “I’m sorry for my conduct.”

    The plea, pursuant to a cooperation agreement, was followed on June 2 by the U.S. Justice Department unveiling an indictment against two other former Deutsche Bank traders, Matthew Connolly of New Jersey and Gavin Campbell Black of London.

    Both cases followed the earlier guilty plea in October of a former senior trader at Deutsche Bank, Michael Curtler of London. The bank agreed in April 2015 to pay $2.5 billion to resolve related U.S. and U.K. probes.

    Larry Krantz, Parietti’s lawyer, declined comment, as did a spokeswoman for Deutsche Bank. A Justice Department spokesman had no immediate comment.

    Libor is based on what banks say they believe they would pay if they borrowed from other banks. The rate underpins trillions of dollars of financial products globally from mortgages to credit card loans.

    U.S. and European authorities have been probing whether banks attempted to manipulate the rate to benefit their own trading positions.

    Those investigations have resulted in roughly $9 billion in sanctions worldwide against financial institutions, and 16 people being charged by the Justice Department.

    According to charging papers, from 2005 to 2011 Parietti and others engaged in a scheme to manipulate Libor, which was tied to the profitability of derivative trades in which they had a financial interest.

    In charging Connolly and Black, prosecutors said that at least eight other people, including Curtler, were involved in the scheme to submit false estimates for some Libor rates in order to manipulate it.

    Connolly has pleaded not guilty. Black’s attorney has previously declined comment.

    “In charging Connolly and Black, prosecutors said that at least eight other people, including Curtler, were involved in the scheme to submit false estimates for some Libor rates in order to manipulate it.”
    Keep in mind that prosecutors are saying that the scheme includes at least either other people. There could be more. Perhaps a lot more when you consider the scope of the Libor scam.

    So, yeah, Mr Parietti and the other two indicted traders should definitely stay very far away from tall buildings.

    Posted by Pterrafractyl | June 23, 2016, 1:57 pm

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