Bankerster anxiety.......
http://www.zerohedge.com/news/2014-05-01/and-then-theres-oceans-will-rise-nuclear-winter-will-be-upon-us-and-world-we-know-it
Submitted by Tyler Durden on 05/01/2014 15:06 -0400
Submitted by Tyler Durden on 05/01/2014 17:34 -0400
Mary Jo White, the Chair of the Securities and Exchange Commission, will appear before the House Financial Services Committee this morning at 10 a.m. to boast about the past year’s accomplishments at the SEC and possibly handle a few queries about the growing public perception that stock markets are rigged.
http://www.zerohedge.com/news/2014-05-01/and-then-theres-oceans-will-rise-nuclear-winter-will-be-upon-us-and-world-we-know-it
And Then There's This: "The Oceans Will Rise; Nuclear Winter Will Be Upon Us; And The World As We Know It Will End"
As U.S. Justice Department prosecutors begin to bring the first criminal charges against global banks since the financial crisis, they are facing dire warnings of uncontainable collateral damage from none other than the sell-side's banking analysts... "Don’t play with matches," warned Brad Hintz, bringing up the specter of Enron (somehow suggesting we would better if that had not been prosecuted?) “The mere threat of requiring a hearing could cause customers to lose confidence in the institution and could cause a run on the bank,” warns a banking lawyer (well isn't that how it's supposed to be?). Too Big To Prosecute is starting to tarnish a little as Preet Bharara begins to bring the heat, adding, somewhat humorously that, banks have a "powerful incentive to make prosecutors believe that death or dire consequences await."
"But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large.Again, I'm not talking about HSBC. This is just a -- a more general comment. I think it has an inhibiting influence -- impact on our ability to bring resolutions that I think would be more appropriate. And I think that is something that we -- you all need to -- need to consider. So the concern that you raised is actually one that I share."
But now, as Bloomberg reports,
Stung by lawmakers’ criticism that multibillion-dollar settlements have done too little to punish Wall Street in the wake of the financial crisis,prosecutors are considering indictments in probes of Credit Suisse Group AG and BNP Paribas SA, a person familiar with the matter said.
And that has led to significant backlash from the industry - how dare he!!
The 2002 collapse of Arthur Andersen, the accounting firm indicted in the Enron scandal, “should be a lesson” for prosecutors, Brad Hintz, an analyst at Sanford C. Bernstein & Co., said today in an interview on Bloomberg Television. “Don’t play with matches.”...Criminal action would have to be handled so that any review of a bank’s charter wouldn’t spook customers or revoke a firm’s license, said Gil Schwartz, a partner at Schwartz & Ballen LLP and a former Federal Reserve lawyer. “The mere threat of requiring a hearing could cause customers to lose confidence in the institution and could cause a run on the bank,” Schwartz said.
And as Preet Bharara somewhat comedically notes...
“Companies, especially financial institutions, will do almost anything to avoid a tough enforcement action and therefore have a natural and powerful incentive to make prosecutors believe that death or dire consequences await,” he said. “I have heard assertions made with great force and passion that if we take any criminal action, the skies will darken; the oceans will rise; nuclear winter will be upon us; and the world as we know it will end.”
But the threats arnd fears of what is clearly TBTF's contagious effects remain...
“You can’t do a guilty plea of a systemically important financial institution without first getting the regulators on board a commitment that the conviction won’t put the bank out of business,” he said in an e-mail. “That seems to be going on here, not surprisingly.”
And this is with stocks at record highs and the entire farce of opaque bank balance sheets now a dim and disatnt memrory for all but the sanest.
“These are test cases,” said Phan. “There’s a pragmatism behind this. You look for a target that’s small enough and that will send a message.”Prosecuting banks would break with a practice of brokering settlements with companies that are considered integral to the financial system. Previous probes were resolved through so-called non-prosecution and deferred-prosecution agreements, which have been criticized by U.S. lawmakers for failing to hold banks accountable.“It’s about time,” said Buell, who was part of the prosecution team at the trial of Arthur Andersen, whose indictment put about 85,000 people out of work.“The argument that we can’t have guilty pleas because of debarment provisions that are written into various regulatory codes has always seemed to be a case of the tail wagging the dog.”
So, to summarize, regulator is actually taking a crack at the TBTFs for fraud they committed and the industry is in full Mutually Assured Destruction threat mode should it actually be forced to admit guilt... well played Fed... more leveraged, more interconnected, and more TBTF in the world's economy...
Even The CME Is Getting Tired Of Silver Manipulation
- Bond
- Capital Markets
- Central Banks
- Commodity Futures Trading Commission
- Federal Reserve
- JPMorgan Chase
- Las Vegas
- None
- Precious Metals
- Reuters
- Volatility
Everyone has seen them: those "inexplicable" bouts of furious selling in gold and silver, coming out of nowhere with no news or catalyst, which serve no rational price discovery purposes (because no normal seller takes out the bid stack, telegraphs a massive sell order and executes at the worst possible price) but merely are there to reprice the market higher or, as happens in 90% of the cases, lower.
In fact, look no further than what happened first thing this morning, when an unknown seller, smashed all stops in one big sale, and took silver to its lowest price for 2014.
There was no news, so one can't even blame a rogue algo overreacting to some headline and taking momentum ignition strategies a little far.
In short: this was a premeditated and deliberate selling of silver with one simple purpose: push and reprice silver lower.
But this is nothing new: precious metal traders, especially those who are on the other side of the table of the BIS' Mikael Charoze or Benoit Gilson, and countless other commercial banks, are all too aware of this behavior and they take it for granted.
No, the real surprise is that suddenly none other than the CME is getting worried that manipulation this blatant is finally chasing regular retail traders away who are tired of being fleeced on a daily basis, leaving central banks and a few "fixing" banks to trade only with each other, which is not acceptable - after all it is the muppets' money that is fair game, not that of other cartel members.
According to Reuters, the CME, which at present has price fluctuation limits for futures contracts in some energy, agricultural commodities and financial products, but not for its precious and base metals products, is considering introducing daily limits on gold and silver futures.
"We don't have price limits in gold and silver. That's something that we are looking into," Miguel Vias, CME Group's director of metal products, said in a panel discussion at an industry event, in response to a question about how the exchange protects investors from excessive volatility.
The biggest concern for the exchange is the array of sophisticated trading programs that are capable of significantly pushing the market higher or lower, Vias said.
Oh, so it is the programs? And who programs these... programs? Could it be people? And perhaps one should look into whether actual people are ordering the programs to "significantly push the market higher or lower."
It gets better. While the clueless hacks which appear on TV speculate about plunging trading volumes, anyone with half a brain knows why most have shunned capital markets - people know the market is one rigged, manipulated casino, and never more so than now. But while until now this mostly impacted the stock and bond market, it is now moving over to gold and silver.
"Unusually big moves and the fears of price "slippage" - the difference between the price at which a market player wants to execute an order and the price at which they are able to do so - have turned some gold and silver futures investors away, he said. In the first four months of the year, COMEX gold futures volume dropped 10 percent from a year ago..."
But the best part is this:
The possible move reflects growing concern at the largest U.S. exchange of futures and options about big bouts of buying or selling that have caused huge fluctuations in prices without any apparent fundamental reason.
Funny, one could almost call huge fluctuations in price without a reason... manipulation. But better not, because what little confidence in a rigged system exists, may promptly dissolve even further.
Still, while this is merely the latest alleged case when the CME promises to clean up its act, we can be confident nothing will happen: "support for setting limits on price moves does not appear to be universal. "I think the breaks in trading are good, but I wouldn't support fixing price moves," said one U.S. trader."
Could said trader be manning the NY Fed trading desk at Liberty 33?
Ironically, there may be some hope, though not out of the CME. It appears the cannibalization in the PM manipulation industry is so bad, there may no longer be any silver "fixers" left. Also from Reuters, we learn that Deutsche Bank's exit from the London precious metal fixes will leave just two banks running a century-old system that sets the global silver price, likely stirring the debate about regulation of one of the most volatile commodity markets.
The bank's decision on Tuesday to resign its seat ends an unsuccessful four-month search for a buyer, as U.S. lawsuits alleging gold price-rigging by the five banks that set the benchmark turned potential suitors cold, sources said.
"You can't have a silver fixing with just two people, that's a bit of a nonsense really," a London-based precious metals trader said, adding just two participants would restrict liquidity and competition."It would just be two people talking to each other. I think the regulator should be stepping up a little bit here."
It should, but like the CME, it most likely won't:
Shortly before news of Deutsche's withdrawal on Tuesday, Britain's financial watchdog, the Financial Conduct Authority (FCA), said it could intervene if there were too few participants in commodity benchmarks such as gold and silver."If there is a risk of dislocation because people are withdrawing and we think that breaches or is a risk to our objectives, then we would set that as one of our activities but it is not entirely straightforward," head of enforcement and financial crime Tracey McDermott said on Tuesday.
And who can possibly forget the CFTC's own "quest" (or Bart "rotating door" Chilton's haircut for that matter) to root out evil silver manipulators (most of which just happen to be its superiors), which found nothing wrong.
In a five-year probe, the U.S. Commodity Futures Trading Commission investigated allegations that some of the world's biggest bullion banks including JPMorgan Chase & Co distorted silver futures prices.After 7,000 staff hours of investigation, the U.S. commodity regulator found no evidence of wrongdoing and dropped the probe last September.The banks faced similar accusations in a long-running class action antitrust lawsuit that was dismissed at the end of last month by a federal appeals court.
No, investors - at least those who are not close to the reserve money system - are on their own.
Whatever the outcome of the latest scrutiny, some users, including mining companies, which hedge production against the benchmark, may have little choice for now but to rely on it even with just two members."Whether it is good or bad or if it is down to two members, we have to use it," said Ounesh Reebye, vice president of metal sales at mining company Silver Wheaton, which is expected to produce 36 million ounces of silver this year.
Perhaps it would be best to just have one gold and silver "price fixer" left, the Federal Reserve. That way at least some integrity to an otherwise broken and manipulated market will be restored. Until then, watch as trading volumes slowly but surely trickle down to zero as everyone finally realizes what we have been saying since 2009 - in a market so manipulated, so rigged, so artificial, a far better and enjoyable option for investors around the world is just to take their money to Las Vegas.
SEC doing its job ( protecting TBTFs ) ......
Is the SEC Chair Prejudicing the Justice Department and FBI on High Frequency Trading Cases?
By Pam Martens: May 1, 2014
U.S. Attorney General Eric Holder Testifying on High Frequency Trading Before the House Appropriations Committee on April 4, 2014
SEC Chair Mary Jo White may have prejudiced ongoing criminal investigations of high frequency trading by the Justice Department and FBI by delivering her verdict on Tuesday that “The markets are not rigged.” Why the former chair of the litigation department at Debevoise & Plimpton would pre-judge an investigation by her Federal colleagues that is just getting underway should be a matter of great public concern. (The New York State Attorney General, Eric Schneiderman, has also opened an investigation.)
The predicament that White’s statement has placed investigators in is that if they find criminal wrongdoing and prosecute it, the head of the SEC will be stripped of credibility and potentially forced to step down as a discredited Wall Street cop with her head buried in the sand. If they don’t bring any serious cases, there will be the lingering doubt as to whether the SEC inappropriately challenged their interpretation of securities laws.
That the Justice Department’s investigation is in its infancy was confirmed by U.S. Attorney General Eric Holder at a hearing on April 4 before the House Appropriations Committee. Congressman Jose Serrano of New York asked Holder what he was doing in regard to high frequency trading. Holder responded:
“As I indicated in my opening statement, I’ve confirmed that the Department of Justice is looking at this matter, this subject area, as well. The concern is that people are getting an inappropriate advantage, information advantage, I guess competitive advantage over others because of the way in which the system works. And apparently, as I understand it, and I’m just learning this, even milliseconds can matter, and so we’re looking at this to try to determine if any federal laws, any Federal criminal laws, have been broken. This is also obviously something that the head of the SEC, Mary Jo White, would be looking at as well.”
Congressman Jose Serrano Questioning Attorney General Eric Holder During House Hearing on April 4, 2014
In response to further probing from Serrano, Holder added: “I am really getting up to speed on this…At least this Attorney General has to better understand the facts of these kinds of things.”
Under the Securities Exchange Act of 1934, the SEC is designated as the Federal agency in charge of supervising stock exchanges where much of the illegal trading is said to be happening. However, the SEC can bring only civil cases and must refer cases to the Justice Department if it feels criminal laws have been violated.
That the U.S. Attorney General has conceded that this is all news to him strongly suggests that the SEC has not been pounding on his door since charges of illegal activity began to gain steam in 2012. Sal Arnuk and Joseph Saluzzi, Wall Street veterans and co-founders of Themis Trading LLC literally wrote the book on “Broken Markets” in 2012. They have continued to expose details of the rigged stock market on their blog.
Also in 2012, Wall Street Journal reporter, Scott Patterson, mapped out the exotic and corrupt order types permitted to be used by high frequency traders at the stock exchanges to fleece the little guy in his book, “Dark Pools,” which follows the trading career of Haim Bodek, who has set up his own web site to document how the stock market is being rigged.
One has to seriously question if the U.S. Attorney General would have ever opened an investigation had it not been for the fact that bestselling author Michael Lewis, in explaining the premise of his new book on high frequency trading, “Flash Boys,” flatly declared on 60 Minutes on March 30 that “stock market’s rigged.” The Lewis statement went viral around the world over the next week. As people began looking at the allegations in the Lewis book, as well as the earlier books and academic papers, there was insurmountable evidence that some market participants were being allowed to trade on information unavailable to the general public. Whether that is a new, high-tech form of illegal insider trading is what the criminal prosecutors are exploring.
Mary Jo White’s statement refuting that the markets are rigged is even more suspect because some of her former clients may be involved in the investigations of high frequency trading.
At the hearing before the House Financial Services Committee on Tuesday, White said she could not comment on a case involving Prudential Financial because she has recused herself from that case. The conflict causing the recusal could result from her own former legal ties to Prudential or those of her husband, John W. White, an attorney with Cravath, Swaine & Moore LLP. (Under Federal law, the conflicts of the spouse become the conflicts of the SEC Chair.)
At the time of White’s confirmation as SEC Chair, the U.S. Senate was aware that between White and her husband, they were currently, or had previously, represented every major Wall Street firm.
Published reports at the time White was undergoing the confirmation process were unclear as to how long she planned to recuse herself from cases involving her former clients – some reports said two years, others said one year.
This week Wall Street On Parade asked John Nester, a spokesperson for the SEC, exactly how long White would be recusing herself. Nester responded: “The law is one year. It’s voluntarily two years under the Obama pledge.” We asked Nester to clarify which position White was taking and heard nothing further.
White was sworn in as SEC Chair on April 10, 2013. If she is still recusing herself it would appear that she has adopted the two-year recusal.
This raises the critical question as to why White would not comment on a matter affecting Prudential Financial but is prepared to flatly rule out that some of the major firms on Wall Street, her previous clients and/or potentially current clients of her husband’s law firm, might be engaged in rigging the market.
and......
SEC Chair Says Markets Are Not Rigged Versus SEC Diagram Showing How the Market Is Rigged
By Pam Martens and Russ Martens: April 30, 2014
SEC Chair, Mary Jo White, Testifies on Rigged Markets Before the House Financial Services Committee on April 29, 2014
The scene in the House Financial Services Committee hearing yesterday was surreal. After Mary Jo White bluntly told the panel that “The markets are not rigged,” (countering heavily publicized charges made by bestselling author Michael Lewis in his new book, “Flash Boys,” as well as a host of key market participants) members of Congress continued to ask about specific forms of market rigging that they know to be happening. While White refused to acknowledge that this obvious wrongdoing was occurring on her watch, she insisted repeatedly that these various non-problems were, nonetheless, being studied. Congressman David Scott from Georgia told White he sensed a lack of urgency on her part.
The remarks from Congressman Michael Capuano of Massachusetts were particularly heated and generally reflected the frustration with White’s responses from a large part of the Committee. Capuano said:
“Six years ago we had a humongous financial crisis — greatest in my lifetime, hopefully the last in my lifetime, we’ll see. Five years ago we passed a significant law to try to address some of the things that caused that crisis. Three years ago the SEC passed some proposed regulations, adopted proposed regulations, relative to credit rating agencies that came out of that Dodd-Frank bill – three years later those rules are still not finalized.
“A few years ago Supreme Court made a ruling that corporations are people and they can spend money any where they want…many of us asked the SEC to address that issue — to simply require corporations who make political donations to simply publicize them — and the SEC has now taken a walk on that request after several years of being asked.
“Recently you had one of your long term attorneys, who I understand is well respected within the agency, retire. At his retirement party, he basically criticized the SEC’s approach over the last several years as being too timid relative to enforcement actions against some of the biggest names on Wall Street, therefore leading to an attitude on Wall Street that what’s the big deal, we can get away with it; maybe pay a small fine relative to the rewards we reap.
“And now recently we’ve had a book that’s come out by a well respected author, whether you agree with all the details or not, certainly raises questions, serious questions, as to whether the whole market is rigged against especially small investors…After all these things — that the SEC really hasn’t done much about.”
Congressman Michael Capuano Grills SEC Chair Mary Jo White at House Financial Services Hearing, April 29, 2014
Congressman Capuano concluded by saying that there is a “seeming constant erosion of confidence in the SEC to actually do the job, the main job, it’s required to do” which is to instill confidence that there is a level playing field and an honest and free market.
White gave the surreal response, without providing any evidentiary support, that despite the perception, technology has benefitted the retail investor.
White’s biggest credibility problem is that the SEC, prior to her tenure as Chair, brought an enforcement action on September 14, 2012, outlining in very specific detail (see graph below from the SEC) how the New York Stock Exchange had rigged the market by providing a faster data feed of stock prices to some of its proprietary customers to the detriment of regular investors who were getting a slower data feed since June of 2008 – a four year period of a rigged market. The SEC fined the New York Stock Exchange a paltry $5 million and ordered it to hire a consultant to investigate the problem.
The SEC said in its enforcement action:
“Rule 603(a) of Regulation NMS— requires that exchanges distribute market data on terms that are ‘fair and reasonable’ and ‘not unreasonably discriminatory.’ This rule prohibits an exchange from releasing data relating to quotes and trades to its customers through proprietary feeds before it sends its quotes and trade reports for inclusion in the consolidated feeds…
“The disparities in data transmissions that Rule 603(a) prohibits can have important consequences that risk undermining investor confidence and interfering with the efficiency of the markets. For example, a delay in the release of data to the consolidated feeds in contrast to the proprietary feeds can cause an investor relying on the consolidated feeds to make a trading decision based on a potentially stale picture of current market conditions.”
The SEC explained in its enforcement action that stock exchanges are held to a higher standard than other market participants because they also function as self-regulatory agencies. The SEC wrote: “National securities exchanges, such as NYSE, are critical elements of the national market system. Because of this central role, an exchange is required to satisfy among the most significant regulatory responsibilities of any market participant. These regulatory responsibilities implicate both an exchange’s own operations and its role as a self-regulatory organization that acts as a co-regulator with the Commission and other authorities.”
The situation today is that U.S. stock exchanges, functioning as “a co-regulator” with the SEC, continue to sell faster access to customers with deep pockets. The NYSE is selling faster access to high frequency traders by selling them the right to co-locate their computers next to the stock exchange’s computers which speeds up access to data.
The Securities and Exchange Commission not only knows this is going on but is actually filing the rule changes for the practice. On December 24 of this year, the SEC filed this rule change in the Federal Register, announcing that the New York Stock Exchange was changing its pricing for some of its co-location services and computer cabinets for outside users.
The notice says the NYSE will offer: “a one-time Cabinet Upgrade fee of $9,200 when a User requests additional power allocation for its dedicated cabinet such that the Exchange must upgrade the dedicated cabinet’s capacity. A Cabinet Upgrade would be required when power allocation demands exceed 11 kWs. However, in order to incentivize Users to upgrade their dedicated cabinets, the Exchange proposes that the Cabinet Upgrade fee would be $4,600 for a User that submits a written order for a Cabinet Upgrade by January 31, 2014…”
The Federal Register notice also documents that the NASDAQ stock market is also providing co-location services to high frequency traders: “The Exchange also believes that the Cabinet Upgrade fee is reasonable because it would function similar to the NASDAQ charges for comparable services. In particular, NASDAQ charges a premium initial installation fee of $7,000 for a ‘Super High Density Cabinet’ (between 10 kWs and 17.3 kWs) compared to $3,500 for other types of cabinets with less power.The Exchange charges only one flat rate for its initial cabinet fees ($5,000), regardless of the amount of power allocation.”
Faster data feeds and co-location of computers are only a small part of the arsenal high frequency traders and dark pools are using to rig the stock markets. As books and academic studies have outlined in great detail, market manipulators are also using direct access to business news feeds carrying market moving company and economic reports, exotic order types, specially routed fiber optic cable lines, artificial intelligence algorithms and a host of other devices to front run the trades of ordinary investors as well as those of pensions and 401(k) funds.
If Mary Joe White is genuinely concerned about the reputation of the SEC, she’ll give some straight answers in her next appearance on Capitol Hill.
and.....
High Frequency Trading Is Not Like a First Class Airline Ticket – Unless You Have Also Hijacked the Plane and Robbed the Passengers in Coach
By Pam Martens: April 29, 2014
Mary Jo White, the Chair of the Securities and Exchange Commission, will appear before the House Financial Services Committee this morning at 10 a.m. to boast about the past year’s accomplishments at the SEC and possibly handle a few queries about the growing public perception that stock markets are rigged.
White’s appearance before a Congressional panel comes at a time when the SEC is undergoing a serious discrediting of its oversight of Wall Street. Earlier this month, James Kidney, an SEC trial attorney who retired at the end of March, unleashed a firestorm of negative attention on morale inside the SEC. In a March 27 retirement speech, Kidney criticized upper management for policing “the broken windows on the street level” while ignoring the “penthouse floors.” Kidney blamed the demoralization at the agency on its revolving door to Wall Street as the best and brightest “see no place to go in the agency and eventually decide they are just going to get their own ticket to a law firm or corporate job punched.” (Retirement Remarks of SEC Attorney, James Kidney (Full Text).)
It also does not help White’s credibility that a self-regulatory body overseen by the SEC, the Financial Industry Regulatory Authority (FINRA), has an enforcement chief suffering from foot in mouth disease.
Last week Megan Leonhardt, writing at WealthManagement.com, tipped off the public that J. Bradley Bennett, Executive Vice President of Enforcement at FINRA, suggested that high frequency trading was no different than buying a first class ticket on an airplane. (Both Bradley and White previously worked for big Wall Street go-to law firms: Bradley at Baker Botts, White at Debevoise and Plimpton.)
What exactly is high frequency trading? As thoroughly detailed in the new Michael Lewis book, “Flash Boys,” and previously detailed in Wall Street Journal reporter Scott Patterson’s book, “Dark Pools,” and exquisitely explained for years by the brilliant Eric Hunsader of Nanex, as well as those courageous fellows, Sal Arnuk and Joseph Saluzzi atThemis Trading, high frequency trading is a rigged game where big money buys computer speed, hires physicists and programmers to design ever more complex algorithms and artificial intelligence programs which then ply their wares on U.S. stock exchanges to loot the pockets of ordinary investors.
Here is what is currently happening every day on Wall Street by high frequency traders. See if any part of this sounds to you like simply buying a first class seat on an airplane:
The New York Stock Exchange and Nasdaq (also supervised by the SEC) are selling the right to high frequency traders to co-locate their high speed computers next to the exchanges’ own computers so high frequency traders can get an early peek at order flow and jump in front of slower traders. The exchanges are also allowing exotic stock order types for high frequency traders which turn the little guy’s orders into sitting duck trades to be fleeced. The big broker dealers on Wall Street are no longer required to subject their stock orders coming from the public to sunshine; they simply match up the buy and sell orders inside their own firms in what are called “dark pools.”
Where the head of enforcement for FINRA sees a first class airline ticket, Senator Ed Markey of Massachusetts sees a Formula-One race car hurtling out of control. In a letter to the SEC on January 18 of last year, Markey said: “Just as we do not allow people to drive a Formula-One race car at 200 MPH on the Massachusetts Turnpike, we should not allow a few Wall Street firms to trade millions of times faster than the average 401K investor on the S&P 500.”
The one thing Senator Markey got wrong in his letter is that it’s no longer “a few.” It’s now a thundering herd of high frequency traders in a vicious high-tech arms race.
At one time, the New York Stock Exchange was the most respected stock exchange in the world. Through lax regulation by the SEC, it’s become a pay-to-play minefield of conflicts. In this Google cache of a promotional piece aimed at high frequency traders, the New York Stock Exchange boasts that it is offering a “fully managed co-location space next to NYSE Euronext’s US trading engines in the new state-of-the-art data center.” The NYSE says it is for “High frequency and proprietary trading firms, hedge funds and others who need high-speed market access for a competitive edge.”
One of the key problems at the SEC in terms of getting its mind around the dangers posed by high frequency traders and making the stock markets fair to average folks may be the background of one of the key men studying the problem at the SEC, Gregg E. Berman, Associate Director of the Office of Analytics and Research in the Division of Trading and Markets.
Berman holds a B.S. in Physics from M.I.T. and a Ph.D. in Physics from Princeton. Prior to joining the SEC, Berman served in various executive positions over 11 years with RiskMetrics Group, a risk modeling firm incubated at JPMorgan in the early 90s and spun off as a separate firm in 1998.
RiskMetrics is acknowledged as the firm that created a highly complex model called Value at Risk, or VaR, which attempts to express how much money a financial institution or trading desk can lose over a set period of time, such as the next 24 hours, week or month. It was JPMorgan’s VaR models that played a role in the bank losing $6.2 billion of depositors’ money in the London Whale bets on exotic derivatives.
A patent at the U.S. Patent and Trademark Office names Berman and two others as inventors, and RiskMetrics as the assignee. The patent allows hedge funds to keep the actual positions in their portfolio a secret while providing a less than fully transparent risk analysis to investors.
Perhaps what the SEC requires is not a rocket scientist looking at the problem of high frequency trading but someone with the common sense of Ed Markey who can comprehend the pressing need to remove dangerous speeding vehicles from a highway originally created for the safety and fair use of everyone.
The SEC has made no secret of the fact that it plans to study the problem to death rather than risk the ire of the well-financed army of lobbyists for the high frequency traders and dark pools. Congress has been dodging taking action since the Senate Banking Committee hearing on December 18, 2012: “Computerized Trading Venues: What Should the Rules of the Road Be?” With each passing day, confidence in the fairness of U.S. markets becomes ever more difficult to restore.
and.....
Suspicious Deaths of Bankers Are Now Classified as “Trade Secrets” by Federal Regulator
By Pam Martens and Russ Martens: April 28, 2014
(Left) JPMorgan's European Headquarters at 25 Bank Street, London Where Gabriel Magee Died on January 27 or January 28, 2014
It doesn’t get any more Orwellian than this: Wall Street mega banks crash the U.S. financial system in 2008. Hundreds of thousands of financial industry workers lose their jobs. Then, beginning late last year, a rash of suspicious deaths start to occur among current and former bank employees. Next we learn that four of the Wall Street mega banks likely hold over $680 billion face amount of life insurance on their workers, payable to the banks, not the families. We ask their Federal regulator for the details of this life insurance under a Freedom of Information Act request and we’re told the information constitutes “trade secrets.”
According to the Centers for Disease Control and Prevention, the life expectancy of a 25 year old male with a Bachelor’s degree or higher as of 2006 was 81 years of age. But in the past five months, five highly educated JPMorgan male employees in their 30s and one former employee aged 28, have died under suspicious circumstances, including three of whom allegedly leaped off buildings – a statistical rarity even during the height of the financial crisis in 2008.
There is one other major obstacle to brushing away these deaths as random occurrences – they are not happening at JPMorgan’s closest peer bank – Citigroup. Both JPMorgan and Citigroup are global financial institutions with both commercial banking and investment banking operations. Their employee counts are similar – 260,000 employees for JPMorgan versus 251,000 for Citigroup.
Both JPMorgan and Citigroup also own massive amounts of bank-owned life insurance (BOLI), a controversial practice that pays the corporation when a current or former employee dies. (In the case of former employees, the banks conduct regular “death sweeps” of public records using former employees’ Social Security numbers to learn if a former employee has died and then submits a request for payment of the death benefit to the insurance company.)
Wall Street On Parade carefully researched public death announcements over the past 12 months which named the decedent as a current or former employee of Citigroup or its commercial banking unit, Citibank. We found no data suggesting Citigroup was experiencing the same rash of deaths of young men in their 30s as JPMorgan Chase. Nor did we discover any press reports of leaps from buildings among Citigroup’s workers.
Given the above set of facts, on March 21 of this year, we wrote to the regulator of national banks, the Office of the Comptroller of the Currency (OCC), seeking the following information under the Freedom of Information Act (See OCC Response to Wall Street On Parade’s Request for Banker Death Information):
The number of deaths from 2008 through March 21, 2014 on which JPMorgan Chase collected death benefits; the total face amount of BOLI life insurance in force at JPMorgan; the total number of former and current employees of JPMorgan Chase who are insured under these policies; any peer studies showing the same data comparing JPMorgan Chase with Bank of America, Wells Fargo and Citigroup.
The OCC responded politely by letter dated April 18, after first calling a few days earlier to inform us that we would be getting nothing under the sunshine law request. (On Wall Street, sunshine routinely means dark curtain.) The OCC letter advised that documents relevant to our request were being withheld on the basis that they are “privileged or contains trade secrets, or commercial or financial information, furnished in confidence, that relates to the business, personal, or financial affairs of any person,” or relate to “a record contained in or related to an examination.”
The ironic reality is that the documents do not pertain to the personal financial affairs of individuals who have a privacy right. Individuals are not going to receive the proceeds of this life insurance for the most part. In many cases, they do not even know that multi-million dollar policies that pay upon their death have been taken out by their employer or former employer. Equally important, JPMorgan is a publicly traded company whose shareholders have a right under securities laws to understand the quality of its earnings – are those earnings coming from traditional banking and investment banking operations or is this ghoulish practice of profiting from the death of workers now a major contributor to profits on Wall Street?
As it turns out, one aspect of the information cavalierly denied to us by the OCC is publicly available to those willing to hunt for it. On March 24 of this year, we reported that JPMorgan Chase held $10.4 billion in BOLI assets at its insured depository bank as of December 31, 2013.
We reached out to BOLI expert, Michael D. Myers, to understand what JPMorgan’s $10.4 billion in BOLI assets at its commercial bank might represent in terms of face amount of life insurance on its workers. Myers said: “Without knowing the length of the investment or its rate of return, it is difficult to estimate the face amount of the insurance coverage. However, a cash value of $10.4 billion could easily translate into more than $100 billion in actual insurance coverage and possibly two or three times that amount” said Myers, a partner in the Houston, Texas law firm McClanahan Myers Espey, L.L.P.
Myers’ and his firm have represented the families of deceased employees for almost two decades in cases involving corporate-owned life insurance against employers such as Wal-Mart Stores, Inc., Fina Oil and Chemical Co., and American Greetings Corp. (Families may be entitled to the proceeds of these policies if employee consent was required under State law and was never given and/or if the corporation cannot show it had an “insurable interest” in the employee — a tough test to meet if it’s a non key employee or if the employee has left the firm.)
As it turns out, the $10.4 billion significantly understates the amount of money JPMorgan has tied up in seeking to profit from workers’ deaths. Since Wall Street banks are structured as holding companies, we decided to see what type of financial information might be available at the Federal Financial Institutions Examination Council (FFIEC), a federal interagency that promotes uniform reporting standards among banking regulators.
The FFIEC’s web site provided access to the consolidated financial statements of the bank holding companies of not just JPMorgan Chase but all of the largest Wall Street banks. We conducted our own peer review study with the information that was available.
Four of Wall Street’s largest banks hold a total of $68.1 billion in BOLI assets. Using Michael Myers’ approximate 10 to 1 ratio, that would mean that over time, just these four banks could potentially collect upwards of $681 billion in tax free income from life insurance proceeds on their current and former workers. (Death benefits are received tax free as is the buildup in cash value in the policies.) The breakdown in BOLI assets is as follows as of December 31, 2013:
Bank of America $22.7 billion
Wells Fargo 18.7 billion
JPMorgan Chase 17.9 billion
Citigroup 8.8 billion
In addition to specifics on the BOLI assets, the consolidated financial statements also showed what each bank was reporting as “Earnings on/increase in value of cash surrender value of life insurance” as of December 31, 2013. Those amounts are as follows:
Bank of America $625 million
Wells Fargo 566 million
JPMorgan Chase 686 million
Citigroup 0
Given the size of these numbers, there is another aspect to BOLI that should raise alarm bells among both regulators and shareholders. The Wall Street banks are using a process called “separate accounts” for large amounts of their BOLI assets with reports of some funds never actually leaving the bank and/or being invested in hedge funds, suggesting lessons from the past have not been learned.
On May 20, 2008, Bloomberg News reported that Wachovia Corp. (now owned by Wells Fargo) and Fifth Third Bancorp reported major losses on failed gambles with BOLI assets. “Wachovia reported a $315 million first-quarter loss in its bank-owned life insurance program, known as BOLI, because of investments in hedge funds managed by Citigroup Inc. Fifth Third said in a lawsuit filed last month that it had losses of $323 million from Citigroup’s Falcon funds, which slumped more than 50 percent in the past year as the subprime market collapsed.” Citigroup’s Falcon Strategies hedge fund had lost as much as 75 percent of its value by May 2008.
Following are the names and circumstances of the five young men in their 30s employed by JPMorgan who experienced sudden deaths since December along with the one former employee.
Joseph M. Ambrosio, age 34, of Sayreville, New Jersey, passed away on December 7, 2013 at Raritan Bay Medical Center, Perth Amboy, New Jersey. He was employed as a Financial Analyst for J.P. Morgan Chase in Menlo Park. On March 18, 2014, Wall Street On Parade learned from an immediate member of the family that Joseph M. Ambrosio died suddenly from Acute Respiratory Syndrome.
Jason Alan Salais, 34 years old, died December 15, 2013 outside a Walgreens inPearland, Texas. A family member confirmed that the cause of death was a heart attack. According to the LinkedIn profile for Salais, he was engaged in Client Technology Service “L3 Operate Support” and previously “FXO Operate L2 Support” at JPMorgan. Prior to joining JPMorgan in 2008, Salais had worked as a Client Software Technician at SunGard and a UNIX Systems Analyst at Logix Communications.
Gabriel Magee, 39, died on the evening of January 27, 2014 or the morning of January 28, 2014. Magee was discovered at approximately 8:02 a.m. lying on a 9th level rooftop at the Canary Wharf European headquarters of JPMorgan Chase at 25 Bank Street, London. His specific area of specialty at JPMorgan was “Technical architecture oversight for planning, development, and operation of systems for fixed income securities and interest rate derivatives.” A coroner’s inquest to determine the cause of death is scheduled for May 20, 2014 in London.
Ryan Crane, age 37, died February 3, 2014, at his home in Stamford, Connecticut. 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 on February 3 was not reported by any major media until February 13, ten days later, when Bloomberg News ran a brief story.
Dennis Li (Junjie), 33 years old, died February 18, 2014 as a result of a purported fall from the 30-story Chater House office building in Hong Kong where JPMorgan occupied the upper floors. Li is reported to have been an accounting major who worked in the finance department of the bank.
Kenneth Bellando, age 28, was found outside his East Side Manhattan apartment building on March 12, 2014. The building from which Bellando allegedly jumped was only six stories – by no means ensuring that death would result. The young Bellando had previously worked for JPMorgan Chase as an analyst and was the brother of JPMorgan employee John Bellando, who was referenced in the Senate Permanent Subcommittee on Investigations’ report on how JPMorgan had hid losses and lied to regulators in the London Whale derivatives trading debacle that resulted in losses of at least $6.2 billion.
Related Articles:
http://www.infowars.com/hsbc-demands-to-know-how-customers-spend-cash/
HSBC Demands to Know How Customers Spend Their Money
Banks are becoming spies for the state
Paul Joseph Watson
Infowars.com
May 1, 2014
Infowars.com
May 1, 2014
Image: HSBC World HQ, London (Wiki Commons).
Who needs tax authorities keeping tabs on people when banks are increasingly taking on a similar role?
An HSBC customer who wrote to economist Martin Armstrong related how the bank, which itself was culpable of acting as a conduit for “drug kingpins and rogue nations” in 2012, is now interrogating its account holders on how they earn and spend their money.
I just got a call from HSBC Jersey conducting a ‘risk assessment’. They wanted to know why I had 6 different currency a/c’s & where all the money came from as well as how much money I earn in Asia & how I spend the cash. The funny thing is I only keep GBP 1,000 in the HSBC a/c’s anyway!!!!I managed to speak to a ‘manager’ & asked if he knew how much HSBC were sued for last October, he had no idea HSBC even had a case brought against them. Accordingly every expat is being interrogated as to what they use their money for while HSBC can continue it’s blatant misuse of funds.
The story is yet another illustration of how major banks are beginning to function more and more as spies for the state, quizzing their customers on their income and spending habits while demanding paperwork and explanations for them to take out their own cash.
In January it emerged that HSBC was restricting large cash withdrawals for UK customers from £5000 upwards, forcing them to provide documentation of what they plan to spend the money on, a form of capital control that more and more banks are beginning to adopt.
As we reported back in November, Chase Bank also recently imposed restrictions which prevent its customers from conducting over $50,000 in cash activity per month, as well as banning business customers from sending international wire transfers.
In the same month it was also reported that two of the biggest banks in America were stuffing their ATMs with 20-30 per cent more cash than usual in order to head off a potential bank run if the US defaults on its debt.
The recent spate of unusual banker suicides and mysterious deaths has also prompted concerns that the financial system isn’t as healthy as it is being portrayed by the mass media.
When journalists Pam Martens and Russ Martens attempted to uncover whether the deaths, which seem to be concentrated amongst JPMorgan Chase employees, were a statistical anomaly, they were told by the Office of the Comptroller of the Currency (OCC) that the information was being withheld because it pertained to “trade secrets”.
No comments:
Post a Comment