Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Tuesday, March 25, 2014
Volcker rule goes into effect April 1 . 2014 ( full compliance by the big banks by July 21 , 2015 ) The final regulations to implement section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, known as the Volcker Rule, were published in the Federal Register on January 31, 2014, and become effective on April 1, 2014. ...... Does the looming implications of the Volcker explain to some degree the various banking / financial industry deaths that kicked off in the beginning of 2014 ? Well , as we have observed , JP Morgan and Deutsche Bank have been in the news lately ( banker / financial employee deaths ) , and interesting we see today that DB had prosecutors searching their offices in Germany ! Maybe bankers can't generate profits by trading , but note how the bankers plan to profit off their deaths ? And as the banksters begin to get cornered in by the Volcker rule , we see the BRICs getting feisty ( Russia , China and India coming together while the West tries to restrain Russia in Ukraine. ) .... S&P tries to rein in Brazil ( ahead of Election there this Fall ) , while the West tries sanction regimes to cool Putin's heels ...... So are we getting to a jump the shark moment ?
Connecting dots.........
Volcker Rule and the case of the curious financial industry death clusters .....
To: Chief Executive Officers of All National Banks and Federal Savings Associations, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties
Description: Final Regulations
Summary
On December 10, 2013, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission issued jointly developed final regulations to implement section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, known as the Volcker Rule. The final regulations were published in the Federal Register on January 31, 2014, and become effective on April 1, 2014.
National banks (other than certain limited-purpose trust banks), federal savings associations, and federal branches and agencies of foreign banks (collectively, banks) are required to fully conform their activities and investments to the requirements of the final regulations by the end of the conformance period, which the FRB has extended to July 21, 2015.
Highlights
The final regulations
prohibit banks from engaging in short-term proprietary trading of certain securities, derivatives commodity futures, and options on these instruments for their own accounts.
impose limits on banks’ investments in, and other relationships with, hedge funds and private equity funds.
provide exemptions for certain activities, including market making-related activities, underwriting, risk-mitigating hedging, trading in government obligations, insurance company activities, and organizing and offering hedge funds and private equity funds.
clarify that certain activities are not prohibited, including acting as agent, broker, or custodian.
scale compliance requirements based on the size of the bank and the scope of the activities. Larger banks are required to establish detailed compliance programs and their chief executive officers must attest to the OCC that the bank’s programs are reasonably designed to achieve compliance with the final regulations. Smaller banks engaged in modest activities are subject to a simplified compliance program.
Banks with trading assets and liabilities of at least $50 billion will be required to report metrics designed to monitor their permitted trading activities. These banks must
begin to measure and record the required metrics on a daily basis starting July 1, 2014, and report their daily metrics recorded during the month of July to the OCC by September 2, 2014.
continue to report metrics data for each calendar month within 30 days of month-end through 2014, unless the OCC notifies them in writing that they must report on a different basis.
beginning with information for the month of January 2015, report metrics within 10 days of the end of each calendar month, unless the OCC notifies the banks in writing that they must report on a different basis.
Note for Community Banks
Banks that do not engage in covered activities or investments are not required to establish a compliance program under the final regulations. This exemption extends to trading activities in certain exempt government and municipal obligations. Smaller banks, with total consolidated assets of $10 billion or less, engaged in modest proprietary trading activities for their own accounts are subject to a simplified compliance program. These banks may satisfy their compliance obligations under the final regulations by including in their existing policies and procedures appropriate references to the requirements of the final regulations. These policies and procedures should be appropriate to the size, scope, and complexity of the banks.
Further Information
Please contact Kurt Wilhelm, Director for Financial Markets, or Stephanie Boccio, Technical Expert for Credit and Market Risk, at (202) 649-6360; Ursula Pfeil, Counsel, or Tiffany Eng, Law Clerk, Legislative and Regulatory Activities, at (202) 649-5490; or Ted Dowd, Assistant Director, or Suzette Greco, Assistant Director, Securities and Corporate Practices, at (202) 649-5510.
The dismal list of financial executive deaths has recently increased to 11 in the last few months. Speculation has surrounded many of these deaths (and suicides) as to the reasoning; none more than the first - William Broeksmit, an executive who worked in Deutsche Bank's risk function and advised senior leadership who hanged himself in his South Kensington home in late January. However, as the WSJ reports, we now know why this poor man felt compelled to take his own life: he was "anxious about various authorities investigating areas of the bank where he worked" (and yes, we are well aware of the grammatical and temporal impossibilities suggested by this article's title).
While a Deutsche Bank spokeswoman said Tuesday that "Bill was not under suspicion of wrongdoing in any matter," according to statements read at a coroner's inquest in London, the former senior executive at Deutsche Bank, who committed suicide in late January, was concerned about investigations into the German bank.
William Broeksmit, an executive who worked in the bank's risk function and advised the firm's senior leadership, 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.
Mr. Broeksmit, an American born in Chicago who retired from Deutsche Bank in February 2013, hanged himself at his London home on Jan. 26, according to a statement read at the coroner's inquest.
...
A close colleague of Deutsche Bank co-Chief Executive Anshu Jain, Mr. Broeksmit was expected to be appointed the bank's chief risk officer in 2012, but the move was vetoed by BaFin, the German financial regulator, because of a lack of suitable experience, people familiar with the matter said at the time. ...
Ms. Wilcox, citing written medical evidence from Mr. Broeksmit's doctor and psychologist, said the executive was sleeping badly during the summer of 2013, and his "self-esteem had been greatly undermined." He was also trying to stop smoking cigars and his alcohol intake was high, according to a medical report.
Here are all the recent untimely financial professional deaths we have witnessed in recent months:
1 - William Broeksmit, 58-year-old former senior executive at Deutsche Bank AG, was found dead in his home after an apparent suicide in South Kensington in central London, on January 26th.
2 - Karl Slym, 51 year old Tata Motors managing director Karl Slym, was found dead on the fourth floor of the Shangri-La hotel in Bangkok on January 27th.
3 - Gabriel Magee, a 39-year-old JP Morgan employee, died after falling from the roof of the JP Morgan European headquarters in London on January 27th.
4 - Mike Dueker, 50-year-old chief economist of a US investment bank was found dead close to the Tacoma Narrows Bridge in Washington State.
5 - Richard Talley, the 57 year old founder of American Title Services in Centennial, Colorado, was found dead earlier this month after apparently shooting himself with a nail gun.
6 - Tim Dickenson, a U.K.-based communications director at Swiss Re AG, also died last month, however the circumstances surrounding his death are still unknown.
7 - Ryan Henry Crane, a 37 year old executive at JP Morgan died in an alleged suicide just a few weeks ago. No details have been released about his death aside from this small obituary announcement at the Stamford Daily Voice.
8 - Li Junjie, 33-year-old banker in Hong Kong jumped from the JP Morgan HQ in Hong Kong this week.
9 - James Stuart Jr, Former National Bank of Commerce CEO, found dead in Scottsdale, Ariz., the morning of Feb. 19. A family spokesman did not say whatcaused the death
10 - Edmund (Eddie) Reilly, 47, a trader at Midtown’s Vertical Group, commited suicide by jumping in front of LIRR train
11 - Kenneth Bellando, 28, a trader at Levy Capital, formerly investment banking analyst at JPMorgan, jumped to his death from his 6th floor East Side apartment.
One can only wonder how many of these unfortunate deaths were due to the similar "investigation" concerns.
(Reuters) - German state prosecutors searched Deutsche Bank's (DBKGn.DE) offices in Frankfurt on Tuesday in another twist of the lender's 12-year legal battle with the heirs of late media mogul Leo Kirch.
Munich prosecutors said they were investigating employees of Deutsche Bank, Germany's biggest lender, as well as lawyers who represented the bank in the case on suspicion of attempted fraud.
They also searched the private home of one suspect in the German state of Hesse, home to Deutsche Bank's Frankfurt headquarters, as part of the case.
Deutsche Bank confirmed that its offices had been searched but declined to provide further details.
Deutsche Bank's legal battle with Kirch, one of Germany's most acrimonious corporate disputes, revolved around the media magnate's claim that ex-Deutsche Chief Executive and later Chairman Rolf Breuer triggered his media group's downfall by questioning its creditworthiness in a 2002 television interview.
Kirch sought for years to recoup about 2 billion euros in damages. He died in 2011 at age 84 but his heirs carried on his battle with Deutsche Bank.
The dispute ended last month in a deal costing Deutsche Bank about 925 million euros ($1.27 billion).
But now prosecutors are investigating whether Co-Chief Executive Juergen Fitschen, his predecessors Josef Ackermann and Rolf Breuer and several other people gave misleading evidence in the civil suit brought by Kirch's heirs.
On Monday, law firm Hengeler Mueller, which advised Deutsche Bank in the case, confirmed that its offices had been searched last week in connection with the case.
(Left) JPMorgan's European Headquarters at 25 Bank Street, London Where Gabriel Magee Died on January 27 or January 28, 2014 Under Suspicious Circumstances
Families of young JPMorgan Chase workers who have experienced tragic deaths over the past four months, have been kept in the dark on many details, including the fact that the bank most likely held a life insurance policy on their loved one – payable to itself. Banks in the U.S., as well as other corporations, are allowed to make multi-billion dollar wagers that their profits from life insurance policies on employees will outstrip the cost of paying premiums and other fees. Early deaths help those wagers pay off.
According to the December 31, 2013 financial filing known as the Call Report that JPMorgan made with Federal regulators, it has tied up $10.4 billion in illiquid, long term bets on the death of a large segment of its employees.
The program is known among regulators as Bank Owned Life Insurance or BOLI. Federal regulators specifically exempted BOLI in passing the final version of the Volcker Rule in December of last year which disallowed most proprietary trading or betting for the house. Regulators stated in the rule that “Rather, these accounts permit the banking entity to effectively hedge and cover costs of providing benefits to employees through insurance policies related to key employees.” We have italicized the word “key” because regulators know very well from financial filings that the country’s mega banks are not just insuring key employees but a broad-base of their employees.
Just four of the largest U.S. banks, JPMorgan Chase, Bank of America, Wells Fargo and Citigroup hold over $53 billion in investments in BOLI according to 2013 year-end Call Reports. Death benefits from life insurance is purchased at a multiple to the amount of the investments, meaning that $53 billion is easily enough to buy $1 million life insurance policies on 159,000 employees, and potentially a great deal more. Industry experts estimate that the total face amount of life insurance held by all banks in the U.S. on their employees now exceeds half a trillion dollars.
When the General Accountability Office (GAO) looked into the matter for Congress in 2003 and 2004, it found the insidious practice of continuing the life insurance even after the employee had left the company – nullifying any ability to consider him or her a “key” to the business. The GAO wrote: “Unless prohibited by state law, businesses can retain ownership of these policies regardless of whether the employment relationship has ended.” The GAO found that multiple companies held life insurance policies on the same individual.
In 2006, Congress passed the Pension Protection Act which included a section on these policies. Instead of outlawing BOLI and its corporate sibling, Corporate Owned Life Insurance (COLI), Congress grandfathered all of the millions of previously issued policies while tweaking a few tax and reporting rules.
One bedrock of insurance law dating back to the 19th Century is that a party must have an insurable interest in the life of another person in order to take out an insurance policy. The U.S. Supreme Court held in Warnock v. Davis in 1881 that “in all cases there must be a reasonable ground, founded upon the relations of the parties to each other, either pecuniary or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured. Otherwise the contract is a mere wager, by which the party taking the policy is directly interested in the early death of the assured. Such policies have a tendency to create a desire for the event. They are, therefore, independently of any statute on the subject, condemned, as being against public policy.”
While it is highly questionable that rank and file employees are “key” to the success of a business, there is certainly no question that their contribution to the business ends when they terminate their employment. And yet, somehow, banks are allowed to collect death benefits on terminated workers right under the nose of State insurance regulators. The explanation is likely the secrecy which surrounds these policies, limiting knowledge of death payments to just the bank and the insurance company.
One reason banks are enamored with taking out policies on other people’s lives and keeping the practice as hush-hush as possible with the willing consent of regulators is that the gullible U.S. taxpayer who bailed out the banks to the tune of trillions of dollars from 2008 to 2010 and is now subsidizing too-big-to-fail through an implied permanent Federal backstop, is also subsidizing these death wagers. Both the buildup in the cash value of the policy over time and the payment of the death benefit are tax-free income to the bank; the more workers they insure, the more tax-free income they receive to help their bottom line; and the less corporations pay in their share of Federal income taxes, shifting more and more of the burden to the struggling middle class.
Banks have also exploited other tricks with the billions invested in these policies.JPMorgan is the assignee for Patent number 5,806,042 at the U.S. Patent and Trademark Office, titled “System for Designing and Implementing Bank Owned Life Insurance (BOLI) With a Reinsurance Option.” Noteworthy features of this scheme include the following:
“The purposes of the consent requirements and statutory requirements for insurable interest are to insure that a bank does not take out a death benefit policy on the life of an employee which exceeds the bank’s loss. In general, a bank may take out a death benefit policy in the amount which is a multiple of 8-10 times the annual compensation of that employee…”
“Reinsuring the BOLI plan by a captive insurance subsidiary of the parent bank or holding company allows the bank to augment the cash value gains of the BOLI plan by providing cash revenue sources from fee income associated with investment and trust management. Reinsurance also minimizes the impact to the bank’s profit and loss statement by keeping the assets within the corporate structure of the bank holding company…”
“The administrative support subsystem performs periodic sweeps of social security records to identify death claims for covered employees who have terminated or retired…”
Whether JPMorgan is providing its own reinsurance through an affiliate or just suggesting this patented idea to others is unknown. What is known is that JPMorgan has multiple insurance subsidiaries in both the U.S. and the U.K. When the final Volcker Rule was published, it carried this notation in footnote 1813: “This requirement is not intended to preclude a banking entity from purchasing a life insurance policy from an affiliated insurance company.”
It is doubtful that regulators are fully aware that BOLI assets may actually remain under the control and management of the banks, rather than the insurance companies providing the death benefits.
On March 15 of last year when Senator Carl Levin opened the hearing on the $6.2 billion in losses of depositors’ money in the exotic derivative bets by JPMorgan’s London Whale trading fiasco, he chastised the bank for failing to make loans to worthy businesses. Levin said JPMorgan had “the lowest loan-to-deposit ratio of the big banks, lending just 61 percent of its deposits out in loans.” Apparently, said Levin, “it was too busy betting on derivatives to issue the loans needed to speed economic recovery.”
Ina Drew, the head of the Chief Investment Office (CIO) at JPMorgan responsible in 2012 for overseeing the London Whale trades (who has since left the firm) revealed in her testimony to Levin’s committee that she was also overseeing the “company-owned-life-insurance portfolio…”
Drew testified:
“The CIO engaged in a wide range of asset-liability management activities. As of the first quarter of 2012, the CIO managed the Company’s $350 billion investment securities portfolio (this portfolio exceeded $500 billion during 2008 and 2009), the $17 billion foreign exchange hedging book, the $13 billion employee retirement plan, the $9 billion company-owned-life insurance portfolio, the strategically-important MSR hedging book, and a series of other books including the cash and synthetic credit portfolios.”
Banking used to be a simple business to understand. The bank took in insured deposits and then loaned out the money at a higher rate than it paid on the deposits to people needing loans to buy homes, to start new businesses or expand existing ones. But then came the 1999 repeal of the Glass-Steagall Act, which had kept commercial banks separate from Wall Street trading houses since the Great Depression, and the partial repeal of the Bank Holding Company Act of 1956 which had barred commercial banks from merging with insurance companies.
As a result of those repeals through legislation known as the Gramm-Leach-Bliley Act, Wall Street’s behemoth banks are more dangerous than at any time since the 1929 crash. The banks are essentially everywhere you don’t want your insured deposits to be. Each mega bank now owns thousands of other businesses in fields like insurance, mergers and acquisitions, stock and bond underwriting, securitizations, commodities trading, structuring of exotic derivative bets, and the latest – making tens of billions of dollars in wagers on the deaths of their own employees.
Because nothing in the banks’ financial filings break out the number of lives the company has insured; how far down in rank the company insures its workers; or the total amount of life insurance it has in force, Wall Street On Parade sent two emails to two of JPMorgan’s top media relations personnel asking those questions. We gave them four days to respond. Despite pointing out that the questions go to the heart of the quality of earnings of JPMorgan Chase, an issue to which shareholders are entitled to transparency under U.S. securities laws, neither individual responded.
Because regulators have become willful enablers to some of the worst practices on Wall Street, the Wall Street worker must now look out for himself. Various state laws prohibit BOLI without the consent of the insured. New York State’s Department of Financial Service says this about BOLI policies on employees residing within New York: “Under some insurance programs, New York State insurance regulations require that employees approve the purchase of life insurance at initiation of coverage and have a notification and terminate right when they leave employment. Procedures that standardize notification and documentation should exist to ensure compliance with these insurance requirements and other applicable laws and regulations. Failure to comply could jeopardize the tax benefits associated with the insurance.”
Notice the big penalty for banks that don’t comply; they could simply lose the tax benefits.
Questions continue to mount over why a rash of suspicious deaths among executives in the financial services industry are occurring now when the worst of the crisis, layoffs, bankruptcies and bailouts occurred over five years ago – or at least Federal officials keep assuring us that the worst is over.
The underlying concern is that we still cannot get a clear assessment of global financial risks because of what we can’t see: the interconnectedness of global banking; offshore banking; off balance sheet vehicles; and regulatory arbitrage where U.S. financial institutions move high risk operations to foreign locales with light-touch regulators.
It now emerges that there are significant financial ties between JPMorgan Chase, which experienced three suspicious deaths of employees in their 30s in January and February of this year, and two Swiss insurers where a suspicious executive death occurred in August of 2013 and another this past January, the week before a JPMorgan executive was found dead on a 9th level rooftop of the bank’s European headquarters in London.
The Swiss insurance company deaths began on Monday, August 26, 2013, when the 53-year old CFO of Zurich Insurance Group, Pierre Wauthier, was found dead in his home near Lake Zug, Switzerland. Wauthier’s wife and two children were out of the country at the time and Wautheir was alone in the home, according to the Wall Street Journal. The police reported finding a typed suicide note. Typically suicide notes are handwritten so that the individual leaves no doubt in the minds of his loved ones that the words are genuinely his own.
Prior to joining Zurich Insurance Group in 1996, Wauthier worked for JPMorgan Chase for 11 years, his last position being Vice President of the Insurance Product Group in London. JPMorgan’s ties run deep with Zurich Insurance Group. JPMorgan is a market maker in the stock of Zurich Insurance Group, which raises red flags since it also puts out overweight, underweight and neutral ratings on the company which can move the share price up or down. JPMorgan also serves as an investment banker to the company, raising still more red flags for potentially conflicted research. (This is all a reminder of just how little has changed under the Dodd-Frank financial reform legislation in the U.S.)
In addition, JPMorgan is an asset manager for a large roster of mutual funds contained in the ILPs (Investment Linked Policy) offered by Zurich Insurance Group as life insurance products in Singapore. Some of these funds carry significant risk and have substantial exposure to the emerging markets that have been experiencing convulsions since the U.S. Federal Reserve announced its plans to “taper,” that is, to reduce the liquidity it has been providing to the markets through its more than $1 trillion a year bond purchases.
According to an online analysis at Zurich Insurance Group’s web site, one JPMorgan managed fund, the Global Natural Resources Fund, has lost 42.54 percent as of June 30, 2013, reflecting its performance since inception on April 2, 2012.
The custodian of the assets in these funds is J.P. Morgan Bank Luxembourg S.A., a location which will certainly provide no comfort to U.S. regulators who have spent almost two years attempting to understand what JPMorgan was doing with its London Whale trades which resulted in at least $6.2 billion in losses using depositor money at the FDIC insured banking unit of JPMorgan.
A brochure on the ILPs notes that the owner could potentially lose all of his principal, causing his insurance policy to lapse, and adds that JPMorgan can use a wide range of derivatives in the portfolios, including “credit default swaps” – the very instruments that caused the havoc in the London Whale debacle. (Being able to lose all of your money and have your life insurance lapse puts a whole new twist on the meaning of “insurance.”)
On December 16, 2013, Zurich Insurance Group announced that George Quinn, the CFO at another Swiss insurer, Swiss Re, would be replacing its CFO who died, Wauthier, as CFO effective May 1, 2014. Before Quinn had time to pack up his office, Swiss Re’s U.K.-based Director of Communications, Tim Dickenson, died a suspicious death. The company has declined to provide details to any media concerning the death: not the exact date of the death, the location or the circumstances. What we know from the Wall Street Journal is that Dickenson died sometime between January 19 and the death of JPMorgan’s Gabriel Magee whose body was discovered on January 28.
Wall Street On Parade emailed Swiss Re to see if perhaps they had withheld information at the time of death to wait for more formal findings. A Zurich-based spokesperson, Michael Gawthorne, responded that “As a matter of policy Swiss Re cannot give out private information about its employees. Many thanks for your understanding.” We wrote back asking for Dickenson’s age on the basis that this was surely public information. A testy response came back including this sentence: “If this information is on the public record, then I would kindly ask you to make use of the public record.” Media “Relations” apparently has a whole new meaning in Zurich.
Wall Street On Parade responded to Gawthorne that “Swiss Re is a publicly traded company whose shareholders have a right to material information that might influence their decision to buy or sell your shares.” Shareholders can hardly assess what is material when not a shred of information has been released during a period of an unprecedented string of deaths in the financial industry. And, let’s face it, Swiss secrecy has not worked out very well for the interests of the United States.
Dickenson had worked for Swiss Re since March of 2002 according to his LinkedIn profile. One would think that out of respect for his service to the company, it would release a statement of sorrow for the family, his age and bio. A search of Swiss Re’s web site turned up no media release.
Swiss Re also has significant financial ties to JPMorgan. In January 2010, Swiss Re obtained a $1 billion Letter of Credit facility from JPMorgan. According to BrightScope, JPMorgan’s Stable Value Fund is one of the three largest funds in the 401(k) plans Swiss Re offers to its U.S. workers. JPMorgan Cazenove (the marketing name for JPMorgan’s investment bank in the U.K.) has served as Swiss Re’s investment bank on past deals.
Swiss Re and Zurich Insurance Group also provide excess insurance lines to JPMorgan in its tower insurance structures to provide liability protection from securities fraud claims – a problem JPMorgan has been perennially addressing.
Recently, the three companies were teamed up on an investment in Switzerland that essentially gives investors a chance to bet on the direction of the firms’ share prices. Also included in the offering, called a Multi Barrier Reverse Convertible, was Credit Suisse Group, Julius Baer Group, and UBS. The investment product trades on the SIX Swiss Exchange.
On September 18, 2007 the Securities and Exchange Commission (SEC) brought and settled charges against a unit of Swiss Re, the Swiss Re Financial Products Corporation (SRFP), for illegally shorting stock the day of or the day before a secondary offering. The SEC complaint states that the “transactions were effected by several traders located in New York and London who were part of a group of traders that is no longer associated with SRFP or its affiliates…that, in each instance, the short sale occurred before the offering was priced; and that the firm covered all or part of the short position with shares it was allocated in the offering.” Swiss Re settled the matter by paying a $95,000 penalty and a disgorgement and prejudgment interest of $457,605.
The SEC’s past problems with the Zurich Insurance Group were far more serious than the shorting claims against Swiss Re. On December 11, 2008, the SEC announced it had settled civil securities fraud charges against Zurich Financial Services (the former name of Zurich Insurance Group) and Converium Holding AG, the new name of a unit of the company formerly known as Zurich Re (for reinsurance). According to the SEC, the scheme began in 1999 when the company “developed three reinsurance transactions for the purpose of obtaining the financial benefits of reinsurance accounting. However, in order for a company to obtain the benefits of reinsurance accounting, the reinsurance transaction must transfer risk. Here, Zurich designed the transactions to make it appear that risk was transferred to third-party reinsurers, when, in fact, no risk had been transferred outside of Zurich-owned entities.”
According to the SEC, the fraud was heightened when the company received “a significant windfall when it spun off Converium in a December 2001 initial public offering [IPO]. Converium continued the fraudulent scheme following the IPO.” Zurich Financial Services and Converium agreed to settle the SEC’s charges without admitting or denying the SEC’s findings, with Zurich Financial Services paying a $25 million penalty.
The year before the IPO settlement, the SEC charged another unit of Zurich Financial Services, Zurich Capital Markets Inc., “for its role in providing financing to hedge fund clients that engaged in market timing of mutual funds and facilitating the hedge funds’ deceptive trading tactics.” The SEC ordered the company to pay $16.8 million, which consisted of $12.8 million in disgorgement and prejudgment interest and a $4 million penalty.
Approximately one week after the death of Swiss Re’s Communications Director, Tim Dickenson, the body of a 39-year old technology Vice President, Gabriel Magee, at JPMorgan’s European headquarters building in London, was found on the 9th level rooftop of the building at approximately 8:02 a.m. in the morning of January 28. According to persons close to Magee, no suicide note was left and he had emailed his girlfriend the evening before from the office to say he would be home shortly. Magee’s area of specialty at JPMorgan was “Technical architecture oversight for planning, development, and operation of systems for fixed income securities and interest rate derivatives” according to his LinkedIn profile. A coroner’s inquest is scheduled for May 15 to determine how Magee died.
Less than a week later, another JPMorgan employee, Ryan Crane, age 37, was found dead in his Stamford, Connecticut home on February 3, 2014. The Chief Medical Examiner’s office is still in the process of determining a cause of death. Crane was an Executive Director involved in trading at JPMorgan’s New York office. Crane’s death was not reported by any major media until February 13, ten days after his death, when Bloomberg News ran a brief story.
Two weeks later, a JPMorgan worker the press has alternately identified as Dennis Li or Dennis Li Junjie or Dennis Lee, died on February 18, 2014as a result of a purported fall from the 30-story Chater House office building in Hong Kong where JPMorgan occupied the upper floors. Li, age 33, is reported to have been an accounting major who worked in the finance department of JPMorgan. For days, however, the South China Morning Post, an English language Hong Kong newspaper, ran articles calling Li an investment banker.
Last week we reported that while the West was busy alienating Russia in every diplomatic way possible, without of course exposing its crushing overreliance on Russian energy exports to keep European industries alive, Russia was just as busy cementing its ties with China, in this case courtesy of Europe's most important company, Gazprom, which is preparing to announce the completion of a "holy grail" natural gas supply deal to Beijing. We also noted the following: "And as if pushing Russia into the warm embrace of the world's most populous nation was not enough, there is also the second most populated country in the world, India." Today we learn just how prescient this particular comment also was, when Reuters reported that Rosneft, the world's top listed oil producer by output, may join forces with Indian state-run Oil and Natural Gas Corp to supply oil to India over the long term, the Russian state-controlled company said on Tuesday.
Rosneft CEO Igor Sechin, an ally of President Vladimir Putin, travelled to India on Sunday, part of a wider Asian trip to shore up ties with eastern allies at a time when Moscow is being shunned by the West over its annexation of Crimea.
With EU nations threatening to cut their reliance on Russian oil and gas, Russian officials have started to look East.
Rosneft said it had also agreed with ONGC they may join forces in Rosneft's yet-to-be built liquefied natural gas plant in the far east of Russia to the benefit of Indian consumers.
We just have one question: will payment for crude and LNG be made in Rubles or Rupees? Or in gold. Because it certainly won't be in dollars.
Rosneft, which is increasing oil flows to Asia to diversify away from Europe, did not provide any additional details but said it had discussed potential cooperation with Reliance Industries and Indian Oil.
It did not have to: it is quite clear what is going on. While the US is bumbling every possible foreign policy move in Ukraine (and how could it not with John Kerry at the helm), and certainly in the middle east, where it is alienating Israel and Saudi just to get closer to Iran, Russia is aggressively cementing the next, biggest (certainly in terms of population and natural resources), and most important New Normal geopolitical Eurasian axis: China - Russia - India.
More:
The company said Sechin and the head of Indian conglomerate Reliance Industries also met and discussed potential cooperation in developing Russia's offshore resources, viewed by Moscow as a source of future oil production growth.
India was the last country in Sechin's Asian trip, where he also visited Japan, South Korea and Vietnam.
Russia is the world's top oil producer, pumping over 10 million barrels per day but mostly from west Siberian deposits, which are running out. Moscow is betting on offshore and unconventional oil to maintain the level.
At the same time, Russia is trying to diversify its energy flows away from its core European markets, withRosneft leading the race with plans to triple oil flows to China to over 1 million barrels per day in coming years.
Rosneft said Sechin also discussed potential shipments of Russia's East Siberia-Pacific Ocean (ESPO) oil blend to India's biggest refiner Indian Oil Corporation (IOC.NS) but did not provide details.
There is only one country missing - Germany. Because while diplomatically Germany is ideologically as close to the US as can be, its economy is far more reliant on China and Russia, something the two nations realize all too well. The second the German industrialists make it clear they are shifting their allegiance to the Eurasian Axis and away from the Group of 6 (ex Germany) most insolvent countries in the world, that will be the moment the days of the current reserve petrocurrency will be numbered.
If it was the intent of the West to bring Russia and China together - one a natural resource (if "somewhat" corrupt) superpower and the other a fixed capital / labor output (if "somewhat" capital misallocating and credit bubbleicious) powerhouse - in the process marginalizing the dollar and encouraging Ruble and Renminbi bilateral trade, then things are surely "going according to plan."
For now there have been no major developments as a result of the shift in the geopolitical axis that has seen global US influence, away from the Group of 7 (most insolvent nations) of course, decline precipitously in the aftermath of the bungled Syrian intervention attempt and the bloodless Russian annexation of Crimea, but that will soon change. Because while the west is focused on day to day developments in Ukraine, and how to halt Russian expansion through appeasement (hardly a winning tactic as events in the 1930s demonstrated), Russia is once again thinking 3 steps ahead... and quite a few steps east.
While Europe is furiously scrambling to find alternative sources of energy should Gazprom pull the plug on natgas exports to Germany and Europe (the imminent surge in Ukraine gas prices by 40% is probably the best indication of what the outcome would be), Russia is preparing the announcement of the "Holy Grail" energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may refrain from foreign borrowing this year. Translated: bypass western purchases of Russian debt, funded by Chinese purchases of US Treasurys, and go straight to the source.
Igor Sechin gathered media in Tokyo the next day to warn Western governments that more sanctions over Moscow's seizure of the Black Sea peninsula from Ukraine would be counter-productive.
The underlying message from the head of Russia's biggest oil company, Rosneft, was clear: If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances.
The Holy Grail for Moscow is a natural gas supply deal with China that is apparently now close after years of negotiations. If it can be signed when Putin visits China in May, he will be able to hold it up to show that global power has shifted eastwards and he does not need the West.
More details on the revelation of said "Holy Grail":
State-owned Russian gas firm Gazprom hopes to pump 38 billion cubic meters (bcm) of natural gas per year to China from 2018 via the first pipeline between the world's largest producer of conventional gas to the largest consumer.
"May is in our plans," a Gazprom spokesman said, when asked about the timing of an agreement. A company source said: "It would be logical to expect the deal during Putin's visit to China."
Summarizing what should be and is painfully obvious to all, but apparently to the White House, which keeps prodding at Russia, is the following:
"The worse Russia's relations are with the West, the closer Russia will want to be to China. If China supports you, no one can say you're isolated," said Vasily Kashin, a China expert at the Analysis of Strategies and Technologies (CAST) think thank.
Bingo. And now add bilateral trade denominated in either Rubles or Renminbi (or gold), add Iran, Iraq, India, and soon the Saudis (China's largest foreign source of crude, whose crown prince alsohappened to meet president Xi Jinping last week to expand trade further) and wave goodbye to the petrodollar.
As reported previoisly, China has already implicitly backed Putin without risking it relations with the West. "Last Saturday China abstained in a U.N. Security Council vote on a draft resolution declaring invalid the referendum in which Crimea went on to back union with Russia. Although China is nervous about referendums in restive regions of other countries which might serve as a precedent for Tibet and Taiwan,it has refused to criticize Moscow. The support of Beijing is vital for Putin. Not only is China a fellow permanent member of the U.N. Security Council with whom Russia thinks alike, it is also the world's second biggest economy and it opposes the spread of Western-style democracy."
This culminated yesterday, when as wereported last night, Putin thanked China for its "understanding over Ukraine." China hasn't exactly kept its feelings about closer relations with Russia under wraps either:
Chinese President Xi Jinping showed how much he values ties with Moscow, and Putin in particular, by making Russia his first foreign visit as China's leader last year and attending the opening of the Winter Olympics in Sochi last month.
Many Western leaders did not go to the Games after criticism of Russia's record on human rights. By contrast, when Putin and Xi discussed Ukraine by telephone on March 4, the Kremlin said their positions were "close".
The punchline: "A strong alliance would suit both countries as a counterbalance to the United States." An alliance that would merely be an extension of current trends in close bilateral relations, including not only infrastructure investment but also military supplies:
However, China overtook Germany as Russia's biggest buyer of crude oil this year thanks to Rosneft securing deals to boost eastward oil supplies via the East Siberia-Pacific Ocean pipeline and another crossing Kazakhstan.
If Russia is isolated by a new round of Western sanctions - those so far affect only a few officials' assets abroad and have not been aimed at companies - Russia and China could also step up cooperation in areas apart from energy.CAST's Kashin said the prospects of Russia delivering Sukhoi SU-35 fighter jets to China, which has been under discussion since 2010, would grow.
China is very interested in investing in infrastructure, energy and commodities in Russia, and a decline in business with the West could force Moscow to drop some of its reservations about Chinese investment in strategic industries. "With Western sanctions, the atmosphere could change quickly in favor of China," said Brian Zimbler Managing Partner of Morgan Lewis international law firm's Moscow office.
Russia-China trade turnover grew by 8.2 percent in 2013 to $8.1 billion but Russia was still only China's seventh largest export partner in 2013, and was not in the top 10 countries for imported goods. The EU is Russia's biggest trade partner, accounting for almost half of all its trade turnover.
And as if pushing Russia into the warm embrace of the world's most populous nation was not enough, there is also the second most populated country in the world, India.
Putin did take time, however, to thank one other country apart from China for its understanding over Ukraine and Crimea - saying India had shown "restraint and objectivity".
He also called Indian Prime Minister Manmohan Singh to discuss the crisis on Tuesday, suggesting there is room for Russia's ties with traditionally non-aligned India to flourish.
Although India has become the largest export market for U.S. arms, Russia remains a key defense supplier and relations are friendly, even if lacking a strong business and trade dimension, due to a strategic partnership dating to the Soviet era.
Putin's moves to assert Russian control over Crimea were seen very favorably in the Indian establishment, N. Ram, publisher of The Hindu newspaper, told Reuters. "Russia has legitimate interests," he added.
To summarize: while the biggest geopolitical tectonic shift since the cold war accelerates with the inevitable firming of the "Asian axis", the west monetizes its debt, revels in the paper wealth created from an all time high manipulated stock market while at the same time trying to explain why 6.5% unemployment is really indicative of a weak economy, blames the weather for every disappointing economic data point, and every single person is transfixed with finding a missing airplane.
DILMA ROUSSEFF may say she is committed to monetary and fiscal orthodoxy but few are convinced. Standard & Poor’s (S&P), for one, isn’t buying the Brazilian president’s attempts to shake off her anti-market vibe. On March 24th the agency cut Brazil’s credit rating. Debt denominated in local currency, the real, and foreign-currency bonds both fell by a notch, to BBB+ and BBB-, respectively.
Explaining its downgrade, S&P cited fiscal deficits in recent years, measly growth prospects, and the use of accounting tricks, state-owned banks and one-off revenues (like the sale of a concession for the exploitation of a big oil field) to flatter the budget balance. It sees only a “mixed” chance of reform before elections in October, which Ms Rousseff is expected to win, or indeed afterwards.
The president will breathe one sigh of relief. Brazil avoided a slide into speculative-grade territory (just, in the case of foreign-currency paper), which some had feared. S&P's outlook for Brazilian debt is stable, although the agency warned of further cuts if it sees a “sharp” deterioration in external and fiscal accounts, or an “unravelling” of Brazil's commitment to pragmatic policies.
Although the downgrade is a reputational blow to Ms Rousseff, it is unclear that it will have much of an effect in practical terms. Foreign fixed-income investors have shown an insatiable appetite for Brazilian paper in recent weeks, salivating at near-13% yields. That is a percentage point higher than in Turkey, where inflation is running well above Brazil's 6% or so a year, and where foreign-exchange reserves are much less plump. An influx of new capital has helped the real to stabilise at around 2.35 to the dollar; it climbed in early trading on March 25th.
Ibovespa, Brazil’s main equity index, also opened up following the announcement. Foreign investors may be holding their nerve on the off-chance that Ms Rousseff loses the election. That, says one investment banker, could cause the market to spike. In his words, foreign fund-managers cannot afford to go light on Brazil and miss that chance, so they are staying put for now. By the same token, he expects a sell-off if Ms Rousseff is re-elected. It seems unlikely that the president will embrace sounder economic policy before October’s polls; but if she wins, she will have to move fast to signal that orthodoxy is in her blood as well as in her speeches.
Russia considers promises of future pressure from the World’s top economies harmful for both sides, and invites its partners to continue cooperation, presidential spokesman Dmitry Peskov has said.
“Russia remains open for contacts on all levels, including the top level. We are interested in these contacts,” the Interfax news agency quoted Vladimir Putin’s press-secretary as saying.
Peskov also noted that cooperation between Russia and the rest of the G8 continued at the expert level and in other broader formats. “So far, we have not received any information on our partners’ intent to postpone or cancel these contacts,” he said.
These include such events as the Russia-Germany summit consultations scheduled for April and the invitation to Vladimir Putin to participate in the celebrations dedicated to the 70th anniversary of the allies’ landing in Normandy, France.
On Monday the leaders of the G7 countries issued a joint declaration in The Hague saying they would not participate in the June G8 summit in Russia’s Sochi and in the April G8 meeting of foreign ministers in Moscow. The declaration attacked Russia’s position over the crisis in Ukraine and the support for the Crimean Republic that has opted to secede from Ukraine and join the Russian Federation.
Commenting on this move Russian Foreign Minister Sergey Lavrov told the press on Monday evening that his country was not clinging to the G8 format, as all major world problems can be discussed at other international venues such as G20.“Generally speaking, there are also other formats for considering many questions, including the UN Security Council, the Middle East Quartet and the P5+1 on the Iranian nuclear problem,” Lavrov added.
The top Russian diplomat also attacked Australia for suggestions it could decide not to invite President Putin to the November G20 meeting in Brisbane. “The G20 was not established by Australia, which voiced the proposal not to invite Russia to the meeting. We created the format all together,” Lavrov said.
Foreign ministers from Brazil, Russia, India, China and South Africa (BRICS) also addressed the issue in their joint statement issued after the meeting held on the sidelines of the nuclear summit in The Hague. The statement said that the custodianship of the G20 belongs to all member-states equally and no one member-state can unilaterally determine its nature and character.
Since Russia’s annexation of Crimea, the United States has been issuing a series of retaliatory sanctions, all against particular Russian individuals. Moscow has responded in kind, with for tit-for-tat restrictions on American lawmakers. While they serve as useful shows of diplomatic strength, they have been largely toothless. Perhaps that's because if more restrictions come, they could be just as bad for the West as they are for Russians.
The original U.S.-led sanctions were against 11 executives and politicians — specifically, Vladimir Putin’s innermost circle — a development that most Russian politicians found vaguely amusing. A Russian official joked, "So what if I can’t get a visa to the United States? I didn’t want to go there anyway."
Amidst criticism from the EU and other nations, the U.S. Treasury has updated their sanctions list, bumping it up to twenty Russian officials. The sanctions include sixteen government officials, including Putin’s chief of staff, Sergie Ivanov; the speaker of the State Duma, Sergey Naryshkin; and Viktor Ozerov, chairman of the security and defense committee of the parliament’s upper house. The Treasury has also prevented United States banks and individuals from doing business with Bank Rossiya, as the bank is associated with Putin's inner circle. Still, no actual trade sanctions were issued against the country as a whole.
The European Union also joined in, sanctioning a total 33 officials, banning visas and freezing assets. Dmitry Rogozin, Deputy Prime Minister of Russia, was unfazed:
Submitted by Tyler Durden on 03/25/2014 15:49 -0400
AP PHOTO/SERGEI CHIRIKOV
No comments:
Post a Comment