Category Archives: Banking industry

Quelle Surprise! OCC Confirms that Big Banks are Badly Managed, Lack Adequate Risk Management Controls

American Banker has an article up that is astonishing in that it tells us that the main regulator of national banks, the OCC, has confirmed one of our ongoing complaints: that the controls at the biggest banks are inexcusably weak. The OCC is the last place you’d expect to hear this from; historically it’s been a major enabler of banks playing fast and loose with the rules. And the implication is that bank execs should be wearing orange jumpsuits rather than getting multi-million pay packages.

Neil Barofsky: Too Big to Jail – Our Banking System’s Latest Disgrace

By Neil Barofsky, former Special Inspector General for the Troubled Assets Relief Program, currently a senior fellow at the NYU School of Law and the author of Bailout. Cross posted from The New Republic with author permission

You can be forgiven if you watched the Department of Justice’s announcement yesterday of a $1.92 billion settlement with HSBC with a sense of disappointment–and déjà vu.

Is Obama Getting Rid of the FHFA’s Ed DeMarco to Bail Out the Banks?

Believe it or not, sometimes I’m not cynical enough.

Basel III: Dead on Arrival?

In my last post on Basel III, I suggested that we would soon see a silly game played out over the coming months whereby banks on either side of the Atlantic would alternate in securing more and more concessions on Basel III until the whole thing became manifestly pointless and got sidelined.

In fact it is all happening rather faster than that.

Deutsche Bank Didn’t “Ignore” Losses of LSS Trade, It Went Through the Mother of All Canadian Restructurings

A default position among what passes for finance cognoscenti in the blogosphere is to argue that media stories pointing up bank improprieties are making a mountain out of a molehill. The form of the argument is usually, “If you only understood XYZ technical issue, this is not such a big deal.” Now that isn’t to say that position is wrong; we’ve more than occasionally made just that type of argument. But if you are going to go that route, it’s incumbent on you to take account of the relevant background; otherwise, whether you intend to or not, your argument can wind up being the equivalent of “Look, over there!”

We’ve seen this type of diversion-as-argumentation take place on the brewing Deutsche Bank scandal over losses that three separate whistleblowers allege that that bank hid from investors during the crisis. Matt Levine and Felix Salmon say, to use Levine’s turn of phrase, that all the German bank did was ignore the losses until they went away. That is a misrepresentation of what actually happened.

HSBC to Pay $1.9 Billion Fine for Money Laundering

It seems the Federal Government has finally woken up and is making a show of being serious about one type of bank misbehavior, that of money laundering. The striking element about the agreementwith various Federal agencies and the Department of Justice is that nearly $1.3 billion of the $1.9 million fine comes in the form of a deferred prosecution agreement.

Former Belgian Central Banker on Why the Money System is a Taboo Topic

Lively and provocative. Do yourself a favor and watch it. Hat tip Richard Smith via creditplumber.

Barbara Roper Weighs in on the SEC Vacancy

Matt Stoller is a fellow at the Roosevelt Institute. You can follow him at http://www.twitter.com/matthewstoller.

In the comments of my last post on the SEC nomination issue, director of investor protection for the Consumer Federation of America, Barbara Roper, laid out a rationale for different choices at the SEC. R

Matt Stoller: Why It’s Worth Fighting Over Who Runs the SEC

Matt Stoller is a fellow at the Roosevelt Institute. You can follow him at http://www.twitter.com/matthewstoller

I’ve been trying to figure out what is going on with the Securities and Exchange Commission for the past month or so, because it is the biggest weakness in our regulatory apparatus. In an interview with Neil Barofsky at Salon, he says that he would take the SEC job if offered. His plan for reform would involve rearranging enforcement priorities at the agency, and reexamine the policy whereby the SEC does not bring cases against corporations but settles without forcing an admission of guilt on particular facts.

This policy has turned the SEC into an agency that issues parking tickets.

Econ4 Video on the Housing and Foreclosure Crisis (With Your Humble Blogger in a Supporting Role)

Econ4, which is a group of reform minded economists (that may sound like an oxymoron but it isn’t) is presenting a series of videos on major topics where it believes our policies are seriously out of whack. Their latest release is on housing and foreclosures. Your humble blogger is a participant.

Citi Cuts 11,000 Jobs Rather Than Lower Pay, Illustrating Rentier Capitalism in Operation

Citi is a particularly blatant example of a way of operating that has become endemic in American business: when things get tough, throw as many employees as possible under the bus, and use that to maintain or even increase the pay of the top echelon.

Abigail Field: HousingWire Propaganda Part II – The Irresponsible Borrower Myth, Harry & Louise Style

By Abigail Field, a lawyer and writer. Cross posted from Reality Check

Showalter pushes the ‘it’s not the mod terms, it’s the bad borrower’ idea with far more than just a “Living Large” headline. He invents two couples, pitched as archetypes of good and evil, probably hoping to copy the policy-killing success of Harry and Louise. But this invocation of the irresponsible borrower myth is particularly egregious–both borrowers are trying to be responsible in the face of insolvency.

Time to Fire the SEC’s Khuzami: Fails to Act on Whistleblower Tips Under Dodd Frank Program

As we’ve detailed in numerous posts, the performance of SEC enforcement chief Robert Khuzami has been abysmal. It was bad enough that the SEC was weak before the crisis. But the fact that the agency hasn’t upped its game in the wake of the biggest financial markets debacle in history is a colossal fail. And as we’ve pointed out, there’s good reason Khuzami has engaged in (at best) entering into settlements with banks that judge Jed Rakoff described as mere “cost of doing business” level punishments. Any serious pursuit into the conduct at the heart of the crisis would have implicated him. He was General Counsel for the Americas for Deutsche Bank, and its senior trader Greg Lippmann was patient zero of toxic CDOs, so Khuzami was directly responsible for the failure to rein him in (specifically, note that Khuzami sued Goldman over one of 27 Abacus CDOs but did not sue Deutsche over a similar Deutsche Bank CDO program called Start).

The latest revelation makes it clear that the new head of the SEC needs to replace Khuzami.

Paying Dexia’s Debts: The Risks of Globalized Finance

American readers may tell themselves that the failures and stresses of European banks are Europe’s problem. That’s a simplistic view. Major European banks are significant lenders in the US, particularly to corporations. And European banks also fed heavily at the trough of US rescue facilities, as did the bank in case study, Dexia.

Dexia is a classic example of a not very sophisticated bank deciding to get into the big leagues and coming to ruin.