Category Archives: Regulations and regulators

Another MF Global? Customer Accounts Frozen at Futures Broker PFGBest (Updated)

Another blow to what credibility is left in the futures brokerage business in the US may have come in the form of the failure of midsized commodities and foreign exchange broker PFGBest, which claimed to have roughly $400 million in customer assets. Although details are sketchy, the firm was may have been falsifying bank records; the founder of the firm tried but failed to kill himself.

Customer accounts were put on hold today and the firm is being liquidated. Per the Wall Street Journal (hat tip Deontos):

Eurozone Banking Union: Who Pays for Past Mistakes?

By Daniel Gros, Director of the Centre for European Policy Studies, Brussels. Cross posted from VoxEU

The EZ crisis – born as a debt crisis (Greece) – has grown up into a banking crisis (Ireland, Cyprus, Spain, …). This column argues that Spain is symptomatic of larger banking problems, so the EU Summit decisions on banking union are welcome and critical to any long-term solution. Yet someone must pay for Spanish bank losses. Spanish politics is shielding Spanish creditors, European politics is shielding EZ taxpayers, so the Spanish government will pay – and in doing so may go the way of Ireland. This crisis is far from over.

Former Senior Barclays Staffer Charges Diamond with Lying to MPs in Select Committee Testimony

It’s hardly surprising to think that Barclay’s CEO Bob Diamond shaded the truth more than a tad in his Parliamentary testimony earlier this week. Recall that he said the manipulation was the doing of 14 traders, and in context, he was clearly saying only those 14, their immediate supervisors, and the lax compliance types were at fault out of all of Barclays. The FSA’s letter to Barclays shows that to be untrue. It clearly says “at least” 14 traders were involved, as well as various “submitters” which were in a completely different unit operationally.

The Independent has posted an interview with a former senior executive who calls out Diamond for his biggest howler, that he had no idea that anything untoward was happening until about two weeks ago.

Yes, Virginia, the Real Action in the Libor Scandal Was in the Derivatives

As the Libor scandal has given an outlet for long-simmering anger against wanker bankers in the UK, there have been some efforts in the media to puzzle out who might have won or lost from the manipulations, as well as arguments that they were as “victimless” or helped people (as in reporting an artificially low Libor during the crisis led to lower interest rate resets on adjustable rate loans pegged to Libor; what’s not to like about that?)

What we have so far is a lot of drunk under the streetlight behavior…

Quelle Surprise! GAO Finds Foreclosure “Request a Review” Materials Too Complicated for a Lot of Borrowers

Readers may remember that one of the outcomes of the robosigning scandal was that mortgage servicers entered into consent decrees with the OCC and other regulators in early 2011.

One component of the OCC program was “independent” foreclosure reviews that would be offered to borrowers to determine if they had been harmed by a foreclosure and provide restitution. The servicers were required to do “outreach” to borrowers who might have suffered to give them the opportunity to request a review. You have to understand that this was never a good faith effort, even though HUD secretary Donovan trumpeted these assessments as an important part of “social justice.”

Bob Diamond Performs “Je Ne Regrette Rien”

As much as I would have liked to have seen the Bob Diamond testimony before Parliament yesterday (a previously booked flight ruled that out), I should probably consider myself lucky. Comments by readers and tooth-gnashing reports from the British press indicate that Diamond is an apt student of the well honed CEO practice of shirking responsibility and shameless denials. Those strategies go a long way in stymieing efforts to get insight, at least in the setting of a legislative grilling. Some of it is the time constraints on each interviewer: they can only go so long before they have to turn the mike over to a colleague. I’d love to see a real prosecutor, with the luxury of time and the ability to do serious discovery before deposing executives, go after some of these fearless leaders.

The most theatrical moment of the day appears to have been when MP John Mann went full bore into Diamond.

Insider Report on Big Pharma’s Corrupt Marketing and Phony Science

Francois T pointed to a post at the blog Health Care Renewal that summarizes an important insider report at the British Medical Journal on how much so-called medical research is of dubious validity, and performed to give talking points for marketing rather than to improve the lives of patients.

The reports on the corruption is big Pharma “research” are so rife that this account hardly qualifies as news. For fun, I dug up the notes from a 2004 study in which I interviewed some experts on drug company marketing. The reason? Even then, it was seen as the most effective, and a big financial services client was keen to see what techniques they could adopt from it. Even then, it was clear “research” was seen as key to effective selling. Per one interviewee, on sales reps:

How the Fannie and Freddie Could, But Won’t, Cut the Housing Gordian Knot

The ongoing, still unresolved issue of the mortgage mess is that irresponsible, unaccountable, self-serving “agents” called servicers manage foreclosures and mortgage modifications. Pretty much anyone who has looked at the problem argues that mortgage modifications to viable borrowers would lead to lower losses to investors and less damage to the housing markets than the Mellonite “Liquidate real estate” program in place now.

The reason we seem unable to get off this destructive path is servicers are paid to foreclose, and not to modify, hence they have set themselves up pretty much only to foreclose.

Mirabile Dictu! Barclays CEO Bob Diamond Resigns Over Libor Scandal (Updated)

Wow, this resignation took place a mere day before the Treasury select committee hearings on Wednesday. The Wall Street Journal bizarrely sent a news alert out announcing the resignation, yet it links to a front page story that is out of date, saying that Diamond “resisted pressure to resign” and has “no plans to leave. FT Alphaville, natch, already has the resignation announcement from the board posted, which clearly shows that Diamond has resigned with “immediate effect” and that the departing chairman, Marcus Aigus, will lead the search for his replacement.

Why the EU Summit Decisions may Destabilise Government Bond Markets

By Paul De Grauwe, Professor of international economics, University of Leuven, member of the Group of Economic Policy Analysis, advising the EU Commission President Manuel Barroso, and former member of the Belgian parliament. Cross posted from VoxEU

Among the questions still remaining since last week’s summit of European leaders is whether the new measures will stabilise government bond markets. This column’s answer is ‘no’.

Quelle Surprise! State Legislatures Aren’t Buying Bogus Mortgage Settlement

The Obama Administration’s full-bore effort to push a bank-favoring mortgage “settlement” over the line earlier this year has led to a rearguard action that appears to have caught the mortgage industrial complex and its allies flatfooted.