Senate Panel Says J.P. Morgan Misled Regulators and Investors, Ignored Risks in Big Trades

Comment from thebrackpipe.com:  More douchebaggery from one of America’s biggest banks.  Now, does J.P. Morgan snatch ‘supreme douche’ status from Goldman Sachs?  You be the judge.

Article below by Dan Fitzpatrick, Scott Patterson and Gregory Zuckerman of the WSJ:

J.P. Morgan Chase & Co. brushed off internal warnings and misled regulators and investors about the scope of losses on its “London whale” trades last year, according to a scathing Senate report.

One risk gauge at the largest U.S. bank projected in February 2012 that the firm could lose $6.3 billion on the trades.  But the warning was dismissed by a key risk manager as “garbage,” according to the 301-page report by the Senate’s Permanent Subcommittee on Investigations.  The New York company’s trading losses ultimately exceeded $6 billion.

The report, the product of more than 50 interviews and a review of 90,000 documents, found that the bank ignored alarms triggered weeks and in some cases months before Chief Executive James Dimon dismissed concerns about them as a “tempest in a teapot” on an April 13, 2012, earnings conference call.  “While we have repeatedly acknowledged mistakes, our senior management acted in good faith and never had any intent to mislead anyone,” J.P. Morgan said Thursday.

The Senate effort is the first comprehensive account of an episode that has hit the company’s reputation for risk management, which once was viewed as the best on Wall Street.  J.P. Morgan’s board halved Mr. Dimon’s 2012 pay following the trading losses, even as the company posted a record profit of $21.3 billion.

In an unrelated move, on Thursday the Federal Reserve cited the company for weaknesses in its capital planning and said J.P. Morgan would have to resubmit this year a plan to expand its share buyback and raise its dividend.

Senate investigators “found a trading operation that piled on risk, ignored limits on risk taking, hid losses, dodged oversight and misinformed the public,” said Sen. Carl Levin (D., Mich.), head of the subcommittee, in a press briefing Thursday.

The panel’s report, which includes 1,654 footnotes, details several episodes previously reported by The Wall Street Journal—including the doubts and reservations of the J.P. Morgan trader nicknamed the “London whale” and pressure exerted on him to boost valuations on the losing positions.

The report shows that traders at the bank’s Chief Investment Office were highly paid.   Former Chief Investment Officer Ina Drew was paid a combined $29 million for 2010 and 2011.  Achilles Macris, the trader in charge of the unit’s Europe operations, pulled in $31.75 million over the two years, and Bruno Iksil, nicknamed for his large trading positions, made $14.1 million.

On Friday, several J.P. Morgan officials who oversaw the trades, including Ms. Drew, will testify before the Senate panel.  While Mr. Dimon won’t testify, Mr. Levin said at the Thursday press briefing that the subcommittee might hold additional hearings.

The panel will also question officials with the Office of the Comptroller of the Currency, the bank’s front-line regulator, including its head, Thomas Curry.

Sen. John McCain (R., Ariz.), ranking member of the subcommittee, said the firm “misled investors and the American taxpayer,” calling the losses a “massive failure not only by J.P. Morgan but also by the federal government.”

An OCC spokesman said in a statement Thursday that the regulator recognizes “shortcomings” in its supervision and is taking “steps to improve our supervisory process.”

The Chief Investment Office, which manages the bank’s excess cash, was a little known profit center that pulled off winning trades through the financial crisis and into 2011.

But then a group of traders in its London office, which included Mr. Iksil, started building a complicated position in indexes that track the health of a group of companies.  That bet morphed into a hard-to-unwind position that led to losses starting in January 2012.

In mid-March 2012, Mr. Iksil called the positions “more and more monstrous” and referred to the values the company had booked them at as “idiotic,” according to recorded conversations released by the panel.  Another trader told Mr. Iksil that the outcome of the trading would be “a big fiasco” and “big drama when, in fact, everybody should have…seen it coming a long time ago.”

Later in March, Mr. Iksil became despondent as the losses mounted.  “It is over/it is hopeless now…I tell you, they are going to trash/destroy us,” he says in one message to a colleague.  Ms. Drew also became alarmed as she learned that the size of the positions was growing.  “Ina is freaking,” said one risk manager, referring to Ms. Drew.

Ms. Drew and lawyers for Messrs. Iksil and Macris couldn’t be reached for comment.

J.P. Morgan has acknowledged in its own reports on the trading fiasco that some expressed concerns about the portfolio as early as January 2012 and traders placed inaccurate values on certain positions as they debated the size of the losses in late March and early April.

But the Senate report alleges that traders began hiding these losses as early as January 2012 and the bank didn’t have a problem with how the positions were being treated.  A May 10 internal assessment from the bank’s controller concluded that the pricing decisions were “consistent with industry practices.”

J.P. Morgan has acknowledged it didn’t have the necessary limits in place to catch the mounting problems.

But the Senate panel concludes J.P. Morgan disregarded multiple warnings.  Of the five big risk measures that are tracked almost continuously at the bank, all five were breached during the first three months of 2012.  From Jan. 1 through April 30, the measures were breached more than 330 times.

In February 2012, a warning system known as the Comprehensive Risk Measure showed the portfolio could incur a yearly loss of $6.3 billion, the report said.  Peter Weiland, who at the time was a top risk executive called the $6.3 billion estimate “garbage” in an email to one trader.  But the head of the bank’s model risk group, C.S. Venkatakrishnan, defended the model and attributed the sizable figure to the additional positions taken in the portfolio.  He communicated that in an email to Ms. Drew and chief risk officer John Hogan, among others.

On April 10, when the total losses in the portfolio climbed above $1 billion for the first time due to a one day loss of $412 million, Chief Financial Officer Douglas Braunstein said to Mr. Hogan in an email: “A bit more than we thought.”

Mr. Hogan replied: “Lovely.”

The OCC told the panel that J.P. Morgan provided “material misrepresentations” about the size of the losses and denied the positions had been valued unfairly despite disputes with counterparties about prices assigned to certain positions.  Mr. Dimon was aware of the disputes, the panel’s report said.

Gangster Bankers: Too Big to Jail

Article below by Matt Taibbi:

The deal was announced quietly, just before the holidays, almost like the government was hoping people were too busy hanging stockings by the fireplace to notice.  Flooring politicians, lawyers and investigators all over the world, the U.S. Justice Department granted a total walk to executives of the British-based bank HSBC for the largest drug-and-terrorism money-laundering case ever.  Yes, they issued a fine – $1.9 billion, or about five weeks’ profit – but they didn’t extract so much as one dollar or one day in jail from any individual, despite a decade of stupefying abuses.

People may have outrage fatigue about Wall Street, and more stories about billionaire greedheads getting away with more stealing often cease to amaze.  But the HSBC case went miles beyond the usual paper-pushing, keypad-punching­ sort-of crime, committed by geeks in ties, normally associated­ with Wall Street.  In this case, the bank literally got away with murder – well, aiding and abetting it, anyway.

For at least half a decade, the storied British colonial banking power helped to wash hundreds of millions of dollars for drug mobs, including Mexico’s Sinaloa drug cartel, suspected in tens of thousands of murders just in the past 10 years – people so totally evil, jokes former New York Attorney General Eliot Spitzer, that “they make the guys on Wall Street look good.”  The bank also moved money for organizations linked to Al Qaeda and Hezbollah, and for Russian gangsters; helped countries like Iran, the Sudan and North Korea evade sanctions; and, in between helping murderers and terrorists and rogue states, aided countless common tax cheats in hiding their cash.

“They violated every goddamn law in the book,” says Jack Blum, an attorney and former Senate investigator who headed a major bribery investigation against Lockheed in the 1970s that led to the passage of the Foreign Corrupt Practices Act.  “They took every imaginable form of illegal and illicit business.”

That nobody from the bank went to jail or paid a dollar in individual fines is nothing new in this era of financial crisis.  What is different about this settlement is that the Justice Department, for the first time, admitted why it decided to go soft on this particular kind of criminal.  It was worried that anything more than a wrist slap for HSBC might undermine the world economy.  “Had the U.S. authorities decided to press criminal charges,” said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, “HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized.”

It was the dawn of a new era. In the years just after 9/11, even being breathed on by a suspected terrorist could land you in extralegal detention for the rest of your life.  But now, when you’re Too Big to Jail, you can cop to laundering terrorist cash and violating the Trading With the Enemy Act, and not only will you not be prosecuted for it, but the government will go out of its way to make sure you won’t lose your license.  Some on the Hill put it to me this way:  OK, fine, no jail time, but they can’t even pull their charter?  Are you kidding?

But the Justice Department wasn’t finished handing out Christmas goodies.  A little over a week later, Breuer was back in front of the press, giving a cushy deal to another huge international firm, the Swiss bank UBS, which had just admitted to a key role in perhaps the biggest antitrust/price-fixing case in history, the so-called LIBOR scandal, a massive interest-rate­rigging conspiracy involving hundreds of trillions (“trillions,” with a “t”) of dollars in financial products.  While two minor players did face charges, Breuer and the Justice Department worried aloud about global stability as they explained why no criminal charges were being filed against the parent company.

“Our goal here,” Breuer said, “is not to destroy a major financial institution.”

A reporter at the UBS presser pointed out to Breuer that UBS had already been busted in 2009 in a major tax-evasion case, and asked a sensible question.  “This is a bank that has broken the law before,” the reporter said. “So why not be tougher?”

“I don’t know what tougher means,” answered the assistant attorney general.

Also known as the Hong Kong and Shanghai Banking Corporation, HSBC has always been associated with drugs.  Founded in 1865, HSBC became the major commercial bank in colonial China after the conclusion of the Second Opium War.  If you’re rusty in your history of Britain’s various wars of Imperial Rape, the Second Opium War was the one where Britain and other European powers basically slaughtered lots of Chinese people until they agreed to legalize the dope trade (much like they had done in the First Opium War, which ended in 1842).

A century and a half later, it appears not much has changed.  With its strong on-the-ground presence in many of the various ex-colonial territories in Asia and Africa, and its rich history of cross-cultural moral flexibility, HSBC has a very different international footprint than other Too Big to Fail banks like Wells Fargo or Bank of America.  While the American banking behemoths mainly gorged themselves on the toxic residential-mortgage trade that caused the 2008 financial bubble, HSBC took a slightly different path, turning itself into the destination bank for domestic and international scoundrels of every possible persuasion.

Three-time losers doing life in California prisons for street felonies might be surprised to learn that the no-jail settlement Lanny Breuer worked out for HSBC was already the bank’s third strike.  In fact, as a mortifying 334-page report issued by the Senate Permanent Subcommittee on Investigations last summer made plain, HSBC ignored a truly awesome quantity of official warnings.

In April 2003, with 9/11 still fresh in the minds of American regulators, the Federal Reserve sent HSBC’s American subsidiary a cease-and-desist­ letter, ordering it to clean up its act and make a better effort to keep criminals and terrorists from opening accounts at its bank.  One of the bank’s bigger customers, for instance, was Saudi Arabia’s Al Rajhi bank, which had been linked by the CIA and other government agencies to terrorism.  According to a document cited in a Senate report, one of the bank’s founders, Sulaiman bin Abdul Aziz Al Rajhi, was among 20 early financiers of Al Qaeda, a member of what Osama bin Laden himself apparently called the “Golden Chain.”  In 2003, the CIA wrote a confidential report about the bank, describing Al Rajhi as a “conduit for extremist finance.”  In the report, details of which leaked to the public by 2007, the agency noted that Sulaiman Al Rajhi consciously worked to help Islamic “charities” hide their true nature, ordering the bank’s board to “explore financial instruments that would allow the bank’s charitable contributions to avoid official Saudi scrutiny.” (The bank has denied any role in financing extremists.)

In January 2005, while under the cloud of its first double-secret­-probation agreement with the U.S., HSBC decided to partially sever ties with Al Rajhi.  Note the word “partially”: The decision­ would only apply to Al Rajhi banking and not to its related trading company, a distinction that tickled executives inside the bank.  In March 2005, Alan Ketley, a compliance officer for HSBC’s American subsidiary, HBUS, gleefully told Paul Plesser, head of his bank’s Global Foreign Exchange Department, that it was cool to do business with Al Rajhi Trading.  “Looks like you’re fine to continue dealing with Al Rajhi,” he wrote.  “You’d better be making lots of money!”

But this backdoor arrangement with bin Laden’s suspected “Golden Chain” banker wasn’t direct enough – many HSBC executives wanted the whole shebang restored.  In a remarkable e-mail sent in May 2005, Christopher Lok, HSBC’s head of global bank notes, asked a colleague if they could maybe go back to fully doing business with Al Rajhi as soon as one of America’s primary banking regulators, the Office of the Comptroller of the Currency, lifted the 2003 cease-and-desist order: “After the OCC closeout and that chapter is hopefully finished, could we revisit Al Rajhi again?  London compliance has taken a more lenient view.”

After being slapped with the order in 2003, HSBC began blowing off its requirements both in letter and in spirit – and on a mass scale, too. Instead of punishing the bank, though, the government’s response was to send it more angry letters.  Typically, those came in the form of so-called “MRA” (Matters Requiring Attention) letters sent by the OCC. Most of these touched upon the same theme, i.e., HSBC failing to do due diligence on the shady characters who might be depositing money in its accounts or using its branches to wire money.  HSBC racked up these “You’re Still Screwing Up and We Know It” orders by the dozen, and in just one brief stretch between 2005 and 2006, it received 30 different formal warnings.

Nonetheless, in February 2006 the OCC under George Bush suddenly decided to release HSBC from the 2003 cease-and-desist­ order.  In other words, HSBC basically violated its parole 30 times in just more than a year and got off anyway.  The bank was, to use the street term, “off paper” – and free to let the Al Rajhis of the world come rushing back.

After HSBC fully restored its relationship with the apparently terrorist-friendly Al Rajhi Bank in Saudi Arabia, it supplied the bank with nearly 1 billion U.S. dollars.  When asked by HSBC what it needed all its American cash for, Al Rajhi explained that people in Saudi Arabia need dollars for all sorts of reasons.  “During summer time,” the bank wrote, “we have a high demand from tourists traveling for their vacations.”

The Treasury Department keeps a list compiled by the Office of Foreign Assets Control, or OFAC, and American banks are not supposed to do business with anyone on the OFAC list.  But the bank knowingly helped banned individuals elude the sanctions process.  One such individual was the powerful Syrian businessman Rami Makhlouf, a close confidant of the Assad family.  When Makhlouf appeared on the OFAC list in 2008, HSBC responded not by severing ties with him but by trying to figure out what to do about the accounts the Syrian power broker had in its Geneva and Cayman Islands branches.  “We have determined that accounts held in the Caymans are not in the jurisdiction of, and are not housed on any systems in, the United States,” wrote one compliance officer.  “Therefore, we will not be reporting this match to OFAC.”

Translation: We know the guy’s on a terrorist list, but his accounts are in a place the Americans can’t search, so screw them.

Remember, this was in 2008 – five years after HSBC had first been caught doing this sort of thing. And even four years after that, when being grilled by Michigan Sen. Carl Levin in July 2012, an HSBC executive refused to absolutely say that the bank would inform the government if Makhlouf or another OFAC-listed name popped up in its system – saying only that it would “do everything we can.”

The Senate exchange highlighted an extremely frustrating dynamic government investigators have had to face with Too Big to Jail megabanks: The same thing that makes them so attractive to shady customers – their ability to instantaneously move money around the world to places like the Cayman Islands and Switzerland – makes it easy for them to play dumb with regulators by hiding behind secrecy laws.

When it wasn’t banking for shady Third World characters, HSBC was training its mental firepower on the problem of finding creative ways to allow it to do business with countries under U.S. sanction, particularly Iran.  In one memo from HSBC’s Middle East subsidiary, HBME, the bank notes that it could make a lot of money with Iran, provided it dealt with what it termed “difficulties” – you know, those pesky laws.

“It is anticipated that Iran will become a source of increasing income for the group going forward,” the memo says, “and if we are to achieve this goal we must adopt a positive stance when encountering difficulties.”

The “positive stance” included a technique called “stripping,” in which foreign subsidiaries like HSBC Middle East or HSBC Europe would remove references to Iran in wire transactions to and from the United States, often putting themselves in place of the actual client name to avoid triggering OFAC alerts. (In other words, the transaction would have HBME listed on one end, instead of an Iranian client.)

For more than half a decade, a whopping $19 billion in transactions involving Iran went through the American financial system, with the Iranian connection kept hidden in 75 to 90 percent of those transactions.  HSBC has been headquartered in England for more than two decades – it’s Europe’s largest bank, in fact – but it has major subsidiary operations in every corner of the world. What’s come out in this investigation is that the chiefs in the parent company often knew about shady transactions when the regional subsidiary did not. In the case of banned Iranian transactions, for instance, there are multiple e-mails from HSBC’s compliance head, David Bagley, in which he admits that HSBC’s American subsidiary probably has no clue that HSBC Europe has been sending it buttloads of banned Iranian money.

“I am not sure that HBUS are aware of the fact that HBEU are already providing clearing facilities for four Iranian banks,” he wrote in 2003.  The following year, he made the same observation. “I suspect that HBUS are not aware that [Iranian] payments may be passing through them,” he wrote.

What’s the upside for a bank like HSBC to do business with banned individuals, crooks and so on? The answer is simple: “If you have clients who are interested in ‘specialty services’­ – that’s the euphemism for the bad stuff – you can charge ’em whatever you want,” says former Senate investigator Blum.  “The margin on laundered money for years has been roughly 20 percent.”

Those charges might come in many forms, from upfront fees to promises to keep deposits at the bank for certain lengths of time.  However you structure it, the possibilities for profit are enormous, provided you’re willing to accept money from almost anywhere.  HSBC, its roots in the raw battlefield capitalism of the old British colonies and its strong presence in Asia, Africa and the Middle East, had more access to customers needing “specialty services” than perhaps any other bank.

And it worked hard to satisfy those customers.  In perhaps the pinnacle innovation in the history of sleazy banking practices, HSBC ran a preposterous offshore operation in Mexico that allowed anyone to walk into any HSBC Mexico branch and open a U.S.-dollar account (HSBC Mexico accounts had to be in pesos) via a so-called “Cayman Islands branch” of HSBC Mexico.  The evidence suggests customers barely had to submit a real name and address, much less explain the legitimate origins of their deposits.

If you can imagine a drive-thru heart-transplant clinic or an airline that keeps a fully-stocked minibar in the cockpit of every airplane, you’re in the ballpark of grasping the regulatory absurdity of HSBC Mexico’s “Cayman Islands branch.”  The whole thing was a pure shell company, run by Mexicans in Mexican bank branches.

At one point, this figment of the bank’s corporate imagination had 50,000 clients, holding a total of $2.1 billion in assets.  In 2002, an internal audit found that 41 percent of reviewed accounts had incomplete client information.  Six years later, an e-mail from a high-ranking HSBC employee noted that 15 percent of customers didn’t even have a file.  “How do you locate clients when you have no file?” complained the executive.

It wasn’t until it was discovered that these accounts were being used to pay a U.S. company allegedly supplying aircraft to Mexican drug dealers that HSBC took action, and even then it closed only some of the “Cayman Islands branch” accounts.  As late as 2012, when HSBC executives were being dragged before the U.S. Senate, the bank still had 20,000 such accounts worth some $670 million – and under oath would only say that the bank was “in the process” of closing them.

Meanwhile, throughout all of this time, U.S. regulators kept examining HSBC.  In an absurdist pattern that would continue through the 2000s, OCC examiners would conduct annual reviews, find the same disturbing shit they’d found for years, and then write about the bank’s problems as though they were being discovered for the first time.  From the 2006 annual OCC review: “During the year, we identified a number of areas lacking consistent, vigilant adherence to BSA/AML policies. . . . Management responded positively and initiated steps to correct weaknesses and improve conformance with bank policy. We will validate corrective action in the next examination cycle.”

Translation: These guys are assholes, but they admit it, so it’s cool and we won’t do anything.

A year later, on July 24th, 2007, OCC had this to say: “During the past year, examiners identified a number of common themes, in that businesses lacked consistent, vigilant adherence to BSA/AML policies.  Bank policies are acceptable. . . . Management continues to respond positively and initiated steps to improve conformance with bank policy.”

Translation: They’re still assholes, but we’ve alerted them to the problem and everything’ll be cool.

By then, HSBC’s lax money-laundering controls had infected virtually the entire company.  Russians identifying themselves as used-car salesmen were at one point depositing $500,000 a day into HSBC, mainly through a bent traveler’s-checks operation in Japan.  The company’s special banking program for foreign embassies was so completely fucked that it had suspicious-activity­ alerts backed up by the thousands.  There is also strong evidence that the bank was allowing clients in Sudan, Cuba, Burma and North Korea to evade sanctions.

When one of the company’s compliance chiefs, Carolyn Wind, raised concerns that she didn’t have enough staff to monitor suspicious activities at a board meeting in 2007, she was fired.  The sheer balls it took for the bank to ignore its compliance executives and continue taking money from so many different shady sources­ while ostensibly it had regulators swarming­ all over its every move is incredible.  “You can’t make up more egregious money-laundering that permeated an entire institution,” says Spitzer.

By the late 2000s, other law enforcement agencies were beginning to catch HSBC’s scent.  The Department of Homeland Security started investigating HSBC for laundering drug money, while the attorney general’s office in West Virginia snooped around HSBC’s involvement in a Medicare-fraud case.  A federal intra-agency meeting was convened in Washington in September 2009, at which it was determined that HSBC was out of control and needed to be investigated more closely.

The bank itself was then notified that its usual OCC review was being “expanded.”  More OCC staff was assigned to pore through HSBC’s books, and, among other things, they found a backlog of 17,000 alerts of suspicious activity that had not been processed.  They also noted that the bank had a similar pileup of subpoenas in money-laundering cases.

Finally it seemed the government was on the verge of becoming genuinely pissed off.  In March 2010, after seeing countless ultimatums ignored, they issued one more, giving HSBC three months to clear that goddamned 17,000-alert backlog or else there would be serious consequences. HSBC met that deadline, but months later the OCC again found the bank’s money-laundering controls seriously wanting, forcing the government to take, well . . . drastic action, right?

Sort of! In October 2010, the OCC took a deep breath, strapped on its big-boy pants and . . . issued a second cease-and-desist order!

In other words, it was “Don’t Do It Again” – again. The punishment for all of that dastardly defiance was to bring the regulatory process right back to the same kind of double-secret-probation­ order they’d tried in 2003.

Not to say that HSBC didn’t make changes after the second Don’t Do It Again order. It did – it hired some people…

Read the rest of the article at – http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214#ixzz2MMBGVL1E 

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RBS to Pay $615 Million in Fines to US and UK

Comment from the brackpipe.com:  “The rigging [of the LIBOR rate] continued even after traders learned that Libor submissions were being probed.”  And RBS gets to keep its banking license?  

From the Globe and Mail:

Britain’s Royal Bank of Scotland will pay U.S. and British authorities $615-million (U.S.) and plead guilty to wire fraud in Japan to settle allegations it manipulated global benchmark interest rates.

“The RBS board acknowledges that there were serious shortcomings in our systems and controls and also in the integrity of a small group of our employees,” chairman Philip Hampton said on Wednesday.

“This is a sad day for RBS, but also an important one in continuing to put right the mistakes of the past.”

More than a dozen traders at RBS offices in London, Singapore and Tokyo manipulated the London interbank offered rate (Libor), which is used to price trillions of dollars worth of loans, from at least 2006 until 2010.

The rigging continued even after traders learned that Libor submissions were being probed.

In a bid to avoid a political firestorm, the part state-owned bank will cut into its staff bonuses to pay the fines, the second-largest so far in an international investigation that has already implicated Switzerland’s UBS and Britain’s Barclays.

Some £87.5-million ($137.1-million U.S.) will be paid to Britain’s Financial Services Authority, $150-million to the U.S. Department of Justice and $325-million to the U.S. Commodity Futures Trading Commission.

Like UBS, RBS did not have to admit criminal liability in the United States, meaning it can retain its banking licence there and avoid a fire sale of its U.S. business Citizens.

The bank said John Hourican, head of RBS’s investment bank, had agreed to leave following the misconduct of staff in that business. Hourican had no involvement in or knowledge of the misconduct, RBS said.

Critics say the scandal over manipulation of Libor shows banks’ riskier activities should be separated from basic lending functions.

UBS agreed in December to pay fines of $1.5-billion to regulators in the United States, Britain and Switzerland over Libor rigging. Its unit in Japan, where much of the wrongdoing occurred, pleaded guilty to criminal fraud. U.S. prosecutors also filed criminal conspiracy charges against two former UBS traders allegedly at the heart of the scheme.

Barclays got a non-prosecution agreement and paid $453-million in penalties. Barclays’ three most senior executives, including then chief executive Bob Diamond, were also forced to leave the bank in the wake of the Libor debacle.

Goldman Sachs – Continuing to Set the Standard for Financial Douchebaggery

Comment from thebrackpipe.com:  So, Mr. Blankfein wrote in a November op-ed piece in The Wall Street Journal that tax increases are a necessary part of U.S. fiscal reform.  He wrote, “I believe that tax increases, especially for the wealthiest, are appropriate, but only if they are joined by serious cuts in discretionary spending and entitlements.”  I think what he meant to write was, “Tax increases are necessary but there is no way that I’m giving up MY cash.”

Article below by Liz Moyer, Steven Russolillo and Patrick McGee of the Wall Street Journal:

Goldman Sachs Group Inc. handed insiders including Chief Executive Lloyd Blankfein and his top lieutenants a total of $65 million in restricted stock just hours before this year’s higher tax rates took effect.

The New York securities firm gave 10 of its directors and executives early vesting on 508,104 shares previously awarded as part of prior years’ compensation, according to a series of filings with the Securities and Exchange Commission late Monday.

Almost half the shares were withheld to satisfy the insiders’ tax obligations, according to the filings.

Such vesting of previously granted restricted shares typically takes place in January, when Goldman also pays out bonuses for the prior year.

The early awards weren’t limited to the top officers, a Goldman spokesman said. He declined to say how many people at Goldman received the early vesting or to elaborate on the timing of the move.

Goldman’s decision is the latest illustration of the lengths large U.S. companies have gone to shield their stakeholders from the higher taxes that loomed throughout the so-called fiscal cliff standoff at the end of 2012. Congress on early Tuesday morning passed legislation that includes the largest tax increases in the past two decades.

Goldman’s move could shield its executives from increased tax rates, which will rise as high as 39.6% in 2013 from 35% last year.

Mr. Blankfein wrote in a November op-ed piece in The Wall Street Journal that tax increases are a necessary part of U.S. fiscal reform.

“I believe that tax increases, especially for the wealthiest, are appropriate, but only if they are joined by serious cuts in discretionary spending and entitlements,” he wrote.

Goldman isn’t the only U.S. company taking action in response to the higher taxes. Corporations announced more special dividends last month than in any other December since at least 1955.

Borrowing by blue-chip U.S. companies more than tripled from a year earlier in the final two months of 2012 to finance these payouts.

Warehouse retailer Costco Wholesale Corp., casino operator Las Vegas Sands Corp. LVS +0.06% and department store chain Dillard’s Inc. are among the large U.S. companies announcing accelerated or special dividends in late 2012.

The tax on dividends, about 15% in 2012 thanks to cuts that took place under President George W. Bush, will rise to as high as 20% in 2013.

At Goldman, Mr. Blankfein, President and Chief Operating Officer Gary Cohn and Chief Financial Officer David Viniar each received total vesting of 66,065 shares worth $8.4 million.

Mr. Blankfein received 2011 compensation valued at $16.2 million and Messrs. Cohn and Viniar each received $15.8 million, according to regulatory filings.

John Weinberg and Michael Evans, vice chairmen, each also received a total of 66,065 shares, according to Goldman’s disclosures this week.

Others whose restricted shares were vested on Monday included John Rogers, an executive vice president and chief of staff; Edith Cooper, executive vice president and global head of human capital management; Alan Cohen, executive vice president and global head of compliance; Gregory Palm, executive vice president and general counsel; and Sarah Smith, principal accounting officer.

Two other members of Goldman’s executive committee, Michael Sherwood and Mark Schwartz, didn’t have any shares vest on Dec. 31. Mr. Sherwo

The vesting comes at the end of a year in which Goldman shares rallied more than 40% amid reduced investor fear over the European debt crisis and a general improvement in the company’s business.

Some 483 companies announced special dividends in December, compared with 142 in the same month a year ago, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

All told, 1,056 special dividends were announced in 2012, Mr. Silverblatt said. That is up from 460 a year earlier and the most since 1973, according to Mr. Silverblatt. In the last two months of 2012, blue-chip U.S. nonfinancial companies sold $178 billion of bonds. That compares with $60.6 billion a year earlier, according to data tracker Dealogic.

Mr. Blankfein and other corporate chiefs had pushed Washington lawmakers to find a solution that would prevent a consumer spending slowdown that threatened to send the economy back into recession.

In a series of postings Wednesday on Twitter, Mr. Blankfein praised Congress’s action. “This agreement is a step forward to injecting growth and investor confidence into the U.S. economy.”

Douchebag Banks Brought to the Mat Over Foreclosure Abuses

Comment from thebrackpipe.com:  Well, well, well… let’s have a look at who is involved here – ‘Bank of America will pay the most to borrowers as part of the deal — nearly $8.6 billion. Wells Fargo will pay about $4.3 billion, JPMorgan Chase roughly $4.2 billion. Citigroup will pay about $1.8 billion and Ally Financial will pay $200 million. Those totals do not include $5.5 billion that the banks will reimburse federal and state governments for money spent on improper foreclosures.’

Article from the Associated Press:

WASHINGTON (AP) — U.S. states reached a landmark $25 billion deal Thursday with the nation’s biggest mortgage lenders overforeclosure abuses that occurred after the housing bubble burst.

The deal requires five of the largest banks to reduce loans for about 1 million households at risk of foreclosure. The lenders will also send checks of $2,000 to about 750,000 Americans who were improperly foreclosed upon. The banks will have three years to fulfill the terms of the deal.

It’s the biggest settlement involving a single industry since a 1998 multistate tobacco deal.

Federal and state officials announced at a news conference that 49 states had joined the settlement. Oklahoma announced a separate deal with the five banks.

The settlement ends a painful chapter that emerged from the financial crisis, when home values sank and millions edged toward foreclosure. Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn’t read or used fake signatures to speed foreclosures — an action known as robo-signing.

Under the deal, the states said they won’t pursue civil charges related to these types of abuses. Homeowners can still sue lenders in civil court on their own, and federal and state authorities can pursue criminal charges.

“There were many small wrongs that were done here,” said U.S. Housing and Urban Development Secretary Shaun Donovan. “This does not resolve everything. We will be aggressive about going after claims elsewhere.”

Reducing loan principal will help some homeowners who are current on their payments but are “underwater,” meaning they owe more than their homes are worth.

But consumer advocates and housing activists said the deal is flawed because it covers only a fraction of at-risk homeowners. Critics note that the settlement will apply only to privately held mortgages issued from 2008 through 2011.

Banks own about half of all U.S. mortgages — roughly 30 million loans. Those owned by mortgage giants Fannie Mae and Freddie Mac are not covered by the deal.

“The deal announced today is too small,” said Pico National Network, a faith-based group that is active on housing issues. “It falls far short of providing real justice for homeowners and American families.”

Economists also cited the size of the deal: Some said it was hardly enough to have much impact on the troubled housing market.

The settlement will be overseen by Joseph A. Smith Jr., North Carolina’s banking commissioner. Lenders that violate the deal could face $1 million penalties per violation and up to $5 million for repeat violators.

About $10 billion of the settlement total will be used to reduce mortgage payments for underwater homeowners. Paul Diggle, an economist at Capital Economics, said that’s a “drop in the ocean,” considering that 11 million borrowers are underwater “to the tune of $700 billion.”

Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled. Many lenders have refrained from foreclosing on homes as they awaited the settlement.

“We’ve got a lot of issues to work our way through in the housing market,” Vitner said. “What thissettlement does is allow that process to get started.”

Bank of America will pay the most to borrowers as part of the deal — nearly $8.6 billion. Wells Fargo will pay about $4.3 billion, JPMorgan Chase roughly $4.2 billion. Citigroup will pay about $1.8 billion and Ally Financial will pay $200 million. Those totals do not include $5.5 billion that the banks will reimburse federal and state governments for money spent on improper foreclosures.

The deal also ends a separate investigation into Bank of America and Countrywide for inflating appraisals of loans from 2003 through most of 2009. Bank of America acquired Countrywide in 2008.

“The settlement includes far reaching relief that will help many of our customers and complement our already extensive efforts to improve our borrower assistance efforts and servicing processes,” JPMorgan Chase said in a statement.

Under the deal, banks must make foreclosure their last resort. They are also barred from foreclosing on a homeowner who is being considered for a loan modification.

The banks and U.S. state attorneys general agreed to the deal late Wednesday after 16 months of contentious negotiations.

New York and California came on board late Wednesday. California has more than 2 million “underwater” borrowers, whose homes are worth less than their mortgages. New York has some 118,000 homeowners who are underwater.

In addition to the payments and mortgage reductions, the deal promises to reshape long-standing mortgage lending guidelines. It will make it easier for those at risk of foreclosure to make their payments and keep their homes.

Those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement.

Some critics say the proposed deal doesn’t go far enough. They have argued for a thorough investigation of potentially illegal foreclosure practices before a settlement is hammered out.

Under the deal:

— Roughly $1.5 billion for direct payouts, in the form of $2,000 checks, for about 750,000 Americans who were unfairly or improperly foreclosed upon; another $3.5 billion will go directly to states.

— At least $10 billion for reducing mortgage amounts.

— Up to $7 billion for other state homeowner programs.

— At least $3 billion for refinancing loans for homeowners who are current on their mortgage payments but who are underwater.

The deal is subject to final approval by a federal judge.

___

Associated Press Writers Michael Virtanen in Albany, N.Y., Pallavi Gogoi in New York and Christopher S. Rugaber and Marcy Gordon in Washington contributed to this report.

9 More Banks Subpoenaed Over Libor

Comment from thebrackpipe.com:  May the extent of the douch-baggery be fully exposed.  Is the banking industry all bad?  Seriously, help me out here because I don’t see how these institutions can ever be out for their customers and, god forbid, the greater good.  So, just some fun facts – among the banks subpoenaed are Bank of America (surprise, surprise), Credit Suisse (sounds about right), and Royal Bank of Canada .

Article below from the WSJ.com:

Nine more banks have received subpoenas in connection with a probe into alleged widespread interest-rate manipulation by banks, a person familiar with the investigation said.

The probe, a joint effort by the offices of New York Attorney General Eric Schneiderman and Connecticut Attorney General George Jepsen, could lead to civil enforcement action related to breaches of antitrust and fraud laws.

The subpoenas, which were issued in August and September but haven’t been previously reported, bring the total number of subpoenas in the case to 16. The banks involved in the probe include most members of the panel that helps set the dollar London interbank offered rate.

The investigation by the state prosecutors is part of a global probe, in which more than a dozen federal and other regulators across three continents are looking into allegations that several banks rigged Libor.

Representatives for Bank of America, Credit Suisse, Bank of Tokyo and Norinchukin Bank declined to comment. The other five banks subpoenaed in August and September that hadn’t previously been disclosed couldn’t be reached for comment. Two of the banks disclosed the subpeonas in financial filings.

The joint probe of the two attorneys general was reported by The Wall Street Journal earlier this year.

The New York-Connecticut Libor investigation focus on the ways Libor rates could have affected investors, state agencies and municipalities that invested in interest-rate swaps tied to the rate to help manage their debt costs. The losses that may have occurred because of rate manipulation could have a direct impact on state finances. Interest-rate investigations are also occurring in other states, including Massachusetts and Florida, the Journal previously reported.

Barclays PLC paid about $450 million to U.S. and U.K. regulators as part of a settlement in which the British bank admitted that executives and traders had manipulated Libor. The deal led to the resignation of the firm’s CEO and chairman.

 

United States Government Sues Wells Fargo

From thebrackpipe.com: 

So folks, the U.S. government is suing Wells Fargo Bank in New York, blaming the nation’s largest originator of home mortgages for thousands of loan defaults over the last decade.   Check this out – Wells Fargo was pushing employees to and rewarding them to approve as many loans as possible regardless of financial soundness.  

Also, just a reminder that Bank of America was aggressively employing the same tactics and BofA will pay $1 Billion to resolve allegations.

Now, would you be okay working with these institutions for any reason whatsoever?  I guarantee they will continue to look for ways to essentially steal your money.

Below from NBC NewsWire Services:

A civil mortgage fraud lawsuit filed in U.S. District Court in Manhattan on Tuesday seeks to recover hundreds of millions of dollars that the Federal Housing Administration, which insured the loans, had to pay out after borrowers defaulted.

The lawsuit charges San Francisco-based Wells Fargo with falsely certifying that its loans met the standards necessary to be eligible for government insurance. U.S. Attorney Preet Bharara says the bank’s plan to reward employees for the number of loans they approved “was an accelerant to a fire already burning.”

Bharara’s office has brought similar cases in the past year, including one against Citigroup Inc unit CitiMortgage Inc, which settled the case for $158.3 million in February, and against Deutsche Bank, which paid $202.3 million in May to resolve its case.

The U.S. Attorney’s office in Brooklyn brought the biggest such case, against Bank of America Corp’s Countrywide unit, which agreed in February to pay $1 billion to resolve the allegations.

Wells Fargo & Co. has denied the allegations and is promising a vigorous defense.

Crackdown on More Hedge Fund Douche Baggery in Menlo Park

This is just too good to be true.  Another hedge fund d-bag caught up in his own ridiculous deceptions.   Orange jumpsuit please!

“In the latest victory for federal prosecutors cracking down on insider trading, a jury convicted a California hedge-fund manager who testified in his own defense and said his trades were based on legitimate research.

Doug Whitman, of Whitman Capital in Menlo Park, Calif., told jurors that he didn’t trade on confidential tips and refrained from trading when he thought he might have received inside information.

But he wasn’t able to overcome a series of secretly recorded telephone calls during which he is heard discussing “moles” and having a conversation about sending presents to the sources.”

Read full article by Chad Bray at the WSJ.com

Peregrine CEO Is Indicted

Check out the Peregrine chief d-dag.  31 charges of lying to government regulators and potentially 155 years in prison!  Hey, oh!

“The chief executive of Peregrine Financial Group was indicted last Monday on 31 charges of lying to government regulators regarding the failed brokerage’s operations.

Russell Wasendorf Sr. faces a maximum sentence of 155 years’ imprisonment on the charges and fines of about $7.75 million, according to a statement from the U.S. Attorney’s Office for the Northern District of Iowa.”

See full article by Jacob Bunge at WSJ.com

Goldman Sachs Let Off the Hook Yet Again

This is really unbelievable and completely unacceptable.  We should be appalled by our government’s non-response.  Do not be fooled my friends, Goldman Sucks is not being prosecuted because the bank still has plenty of cronies strategically placed in Washington DC.  So sad, the Goldman douche-bag machine is freely allowed to spread it’s BS and act criminally without consequence.

Seriously, the Justice department won’t bring charges against Goldman OR any of it’s employees!!!  Are you freakin’ kidding me?

From WSJ.com

“After a yearlong investigation, the Justice Department said Thursday that it won’t bring charges against Goldman Sachs Group Inc. or any of its employees for financial fraud related to the mortgage crisis.

In a statement, the Justice Department said “the burden of proof” couldn’t be met to prosecute Goldman criminally based on claims made in an extensive report prepared by a U.S. Senate panel that investigated the financial crisis.”