banking

Good grief.

Not only are we talking tax felons. We’re talking cheap tax felons.

2/10 – The Guardian – HSBC files: Swiss bank aggressively pushed way for clients to avoid new tax – Part 3. HSBC developed a specialized product they presented to lots of their clients. Lots bought it.

Problem: If you have money hidden in Switzerland, there is a tax treaty that requires the banks to withhold 15% on the interest earnings and turn the withholding over the British treasury. No reporting of individual names or amounts, just one lump sum sent to England. Apparently letting the crown have 15% of your interest is too much for some blokes.

Wrinkle: …

Talk about pinching your pennies – HSBC had an evasion scheme for customers to avoid paying a 15% withholding tax on interest earned on hidden money.Read More »

The coverage by The Guardian and ICIJ mentioned in yesterday’s post is kicking off a lot of coverage. Twitter is lighting up with a few hundred tweets in a few minutes, but I’m learning that interest typically fades in a few days. By Friday, the twitterverse will be on to its next outrage.

Here are two more articles I found interesting. First is on UBS maybe having more trouble on aiding tax evasion. Second, when stock analysts say one of the too big to fail banks is too big to manage, it is capitalists making the criticism, not people outside the business world.

2/4 – Wall Street Journal – UBS Faces a New Tax-Evasion Probe – Authorities Investigate Whether Swiss Bank’s Clients Used ‘Bearer Securities’ to Hide Cash

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More good stuff on the banking fiascos – 2/10/15Read More »

Oh, and bring in some jelly donuts when the deal is getting close and you can bridge that last third of a billion difference.

S&P reached a settlement with the Department of Justice and a bunch of states over the ratings S&P gave to mortgage securities before the financial crisis. Top line settlement amount is $1.5B. See Wall Street Journal article, S&P to Pay $1.5 Billion to Resolve Crisis-Era Litigation.

Be advised the ridicule and abuse in this post will soon flow thick…

Settlement negotiations

Starting point from the DoJ side was $5B and acknowledgement of wrongdoing.  S&P wanted under a billion and acknowledgment of the whole deal being in retaliation for S&P downgrading the federal credit rating.

My version of the back and forth haggling that got them to common ground:

$5B.

Drop admission of guilt.

DoJ: Okay, $3.2B. S&P: We’ll break the billion mark.

DoJ drop to $1.5B and S&P up to $1.2B.

Bring in those yummy donuts. You know, the ones with the jelly filling and sprinkles. Then drop the retaliation claim and agree on $1.3B.

Done? Yup.

Everyone’s happy. Nobody has to admit they did anything wrong. Both claim complete, total vindication.

That’s my loose paraphrase. For the unabridged version, see the WSJ article How the Justice Department, S&P Came to Terms.

A different look at the sequencing

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To get $1.5 billion settlement, S&P doesn’t have to admit wrongdoing and Justice Department doesn’t have to admit retaliation. Split the dollar positions and it’s a done deal.Read More »

Here are a few possibilities for the record level of settlements for bank in ’14: Wrapping up the legacy issues from the financial crisis. Regulators are getting serious about pushing big banks to improve their operations. Or maybe regulators just want more money. Or maybe banks are getting worse at obeying the law.

Some articles for you to ponder:

12/30 – Wall Street Journal – For Banks, 2014 Was a Year of Big Penalties – Here’s my interpolation of the fines and legal costs for the largest banks, as presented in the article’s graph:

• $  3B – 2009
• $  3B – 2010
• $23B – 2011
• $44B – 2012
• $46B – 2013
• $65B – 2014

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What is behind the record $56 billion in bank fines in 2014?Read More »

Looks like it is really hard to prove individual culpability for conspiracy when a banker’s employer was aiding tax evasion. (I don’t use the word alleged in a sentence saying a bank committed a crime because UBS has already ‘fessed up and paid a $780,000,000 fine.)

11/4 – Wall Street journal – Acquittal in UBS Case Sets Back Tax Probe – A senior executive of UBS was on trial for allegedly helping Americans evade income taxes. The feds alleged that the banker ran a conspiracy to launder money and evade taxes, with said conspiracy involving cloak and dagger techniques to hide from authorities that the bank was knowingly and intentionally laundering money for its clients.

Didn’t turn out well for those who want to see a new federal penitentiary built to hold all the bankers who belong in jail.

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So you think tons of bankers should be in jail? Getting a jury to agree seems to be a problem.Read More »

Wall Street Journal reports Justice Dept. Seeks More Than $10 Billion Penalty Form BNP Paribas.

At issue is a large volume of transactions and dealings with countries for which the U.S. has banned any financial dealings. We’re talking loaning money and holding (likely hiding) deposits for countries like Iran, Sudan, and North Korea, along with businesses and individuals in those countries.

Negotiations are reportedly underway between the bank and the Justice Department, Manhattan U.S. Attorney, and Manhattan DA. From the article it sounds like the N.Y. Department of Financial Services is in the discussions. After reading about the Credit Suisse settlement, I’ll guess the SEC, FDIC, and OCC are in the conversation as well. Maybe the FRB.

What are the negotiating positions?

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Negotiations underway for multi-billion dollar settlement with BNP Paribas for violating trading sanctionsRead More »

JP Morgan signed a deferred prosecution agreement with the Department of Justice for not reporting suspicions raised by Morgan’s own staff that the trading in Madoff’s accounts was suspicious.

The Wall Street Journal reports: J.P. Morgan to Pay $1.7 Billion to Victims of Madoff Fraud.

The DPA, which you can read here, says …

Another multibillion settlement for JP Morgan – this time for not filing suspicious activity reports on Madoff accountsRead More »

Jonathan Weil compares the $13B settlement by JP Morgan to greenmail in his article, The JPMorgan Settlement Isn’t Justice.

After having read the settlement, he realizes this is worse than the typical case of neither admit nor deny guilt wording we usually see in settlements. In spite of the press releases from the government saying JPM admitted misrepresentation, the settlement and statement of facts is worded so vaguely that there aren’t actually any details of what the government believes was done wrong.

Thus, there is nothing to deny: …

Is the $13B JPMorgan settlement actually greenmail?Read More »

JP Morgan and the Department of Justice announced a huge settlement that covers a host of legal claims against the bank.

Price tag is $13 billion, but keep in mind that claims credit for $4B the bank separately negotiated with Fannie and Freddie. The Wall Street Journal report is J.P. Morgan, U.S. Settle for $13 Billion.

A few of the key terms: …

For $13B, JP Morgan settles a slew of legal issuesRead More »

If J.P. Morgan pays out $13 billion to settle claims over residential securities as expected, is it reasonable justice or is it unjust?

There is a divergence of opinion on that question. This post will explore both schools of thought.

Two main issues

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Is that $13B settlement with JP Morgan justice or a travesty?Read More »