The financial industry in 2012 New York City offers itself as almost a Medellín cartel of shady and unscrupulous dealings.
Northeast of HSBC’s headquarters sits that of Barclays, a venerable bank that of late admitted to fixing Libor, an obscure interest rate that underpins trillions of dollars in investments. A wee nudge here and there, and a clever bank insider could make tens of millions of dollars.
via In the Financial World, a Less Scrupulous Class of Lawbreaker – NYTimes.com.
Whoops! Better not do that again. All this technology, all these mistakes.
The runaway trading suggests that regulators have not been able to keep up with electronic programs that increasingly dominate the supercharged market and have helped undermine investor confidence in stocks.
Traders on Wednesday said that a rogue algorithm repeatedly bought and sold millions of shares of companies like RadioShack, Best Buy, Bank of America and American Airlines, sending trading volume surging. While the trading firm involved blamed a “technology issue,” the company and regulators were still trying to understand what went wrong.
via Wave of Volatile Trading Unsettles U.S. Markets – NYTimes.com.
Barclays: Too big to indict?
The question needs to be faced in the wake of the bank’s admitted efforts to manipulate the London interbank offered rate, known as Libor, the benchmark for countless interest rate determinations and approximately $450 trillion in derivative contracts.
If the Justice Department was looking for a textbook case of white-collar financial crime — including a conspiracy that was flourishing at the height of the financial crisis — this would seem tailor-made. As the facts released by the government make clear, there were two separate but overlapping schemes to manipulate Libor within Barclays. Yet the bank secured a nonprosecution agreement and agreed to pay a penalty of more than $450 million, a comparatively paltry sum for a bank that had more than £32 billion ($50 billion) in revenue in 2011. “The perception so far has been that the regulators have been toothless,” John C. Coffee Jr., professor of law and specialist in white-collar crime at Columbia Law School, told me this week.
via In Barclays Inquiry, the Calculation in Making a Deal – Common Sense – NYTimes.com.
Regulators on both sides of the Atlantic are expressing dismay. On Monday, San Francisco Federal Reserve Bank president John Williams acknowledged, reported Reuters, that Barclays’ behavior had eroded confidence in the integrity of the banking system. Which is bad news, he said, because “trust is absolutely critical to conduct any type of business.”
Come on. After what we’ve witnessed and learned in the last five years, is there anyone who still trusts the integrity of the global banking system? The great Greek cynic Diogenes had a significantly better chance of finding an honest man than we do today of locating someone with confidence in the premise that bankers get up in the morning every day determined to do the right thing by their customers and the larger economy. The evidence is overwhelming.
Robert Reich wonders whether “the unfolding Libor scandal will provide enough ammunition and energy to finally get the job [of breaking up the big banks] done.” The New York Times’ Joe Nocera expresses surprise that Americans don’t seem to be giving the debacle as much attention as the British, considering how fundamentally important it is, but hopes that as the scandal continues to unfold, increasing opportunities for outrage will encourage Americans to ” finally summon the will to change banking once and for all.” At Slate, Mathew Yglesias believes that the new revelations “should destroy the credibility of banks once and for all.”
To all three commentators, I can only say, have you looked at what our political system is currently doing with respect to bankers?
Giving them a “Get Out of Jail Free” card is what!
The best and the brightest don’t want to work on Wall Street anymore.
College students who were once attracted to prestigious banks like moths to bonfires are increasingly turning to other industries in search of success. Insiders say that pained testimonials of industry life can scare off would-be financiers from even applying for jobs at the most selective firms.
“This is a significant problem for Goldman,” said Adam Zoia, the chief executive of the placement firm Glocap Search, whose clients include many aspiring big-bank employees and hedge fund workers. “Their perch of being the investment bank to go to is definitely at risk.”
One former Goldman analyst recently decided to leave the firm after the rewards of a finance job no longer seemed to outweigh the costs. The former employee is now working at a small technology start-up for less money.
via Wall Street’s Latest Campus Recruiting Crisis Sparked by Goldman Controversy – NYTimes.com.
With U.S. cities moving this week to crack down on Occupy Wall Street encampments – including the one in New York’s Zuccotti Park – the staying power of the movement is in question. Whatever its future, it’s clear that so far, the Occupiers haven’t changed many minds on Wall Street over blame for the country’s hard times. The cognitive disconnect between the protesters and the captains of finance is alive and well.
David Mooney, chief executive officer of Alliant Credit Union in Chicago, one of the nation’s larger credit unions, used to work at one of Wall Street’s top banks, JPMorgan Chase. There’s a vast cultural gap between Wall Street and his new world, he says: Old friends from the Street, he says, now jokingly refer to him as a “socialist.” A credit union is supposed to be run in the interests of all members, he says, while commercial bankers tend to see consumers as customers who can be “exploited” by layering on more fees.
n a world of High Frequency Trading and black box trading that does nothing but create a platform for “financial hackers” to turn the market into their own proprietary financial playground, we need to figure out a way to revert the Stock and Bond Markets, and the derivative instruments created from these equities, back to their original purpose, a place to raise capital for growing business. Instead, today its a platform for financial engineers and hackers looking to exploit every and any opportunity. When 60pct or more of trades are from High Frequency/Algorithmic traders and the correlation for every market index rushes past .7, the market is no longer a market, its a platform.
The simplest way to change this is to place a very simple per share tax on every transaction. 10 cents a trade. Every share. Every option. Every Bond. Every currency transaction. Every trade.
The obvious response is that trading volume will plummet. So what? Let it. The next response is that traders will merely move their trades to foreign exchanges. Yes they will. Will transaction costs go up? Duh.. that is the point. The market thrived when spreads and transaction costs were much higher just a few short years ago. It will survive now.
via MARK CUBAN: ‘Tax The Hell Out Of Wall Street And Give It To Main Street’.
Truth and Traditions 