Bankers - good or bad? Discuss

Generali

Ilya_Ilyich wrote: »

They are all traitors, sacrificing humanity at the altar of Capital.

Does that include the lady that makes the teas downstairs? She's very nice and always has a kind word. I'll have to ask her on Monday if she does a bit of sacrificing on the weekends or perhaps she just leaves it for her vacation time.

We all need a hobby after all.

ILW

pqrdef wrote: »

Citigroup have settled a "civil fraud" case for $285m, without admitting or denying liability.

(What's this "civil fraud"? Shouldn't fraud be a crime?)

This isn't the case involving 3 British banks, although of course Citigroup is in that as well.

In this case, they marketed a $1bn CDO to 15 investors without telling anybody that, based on their inside knowledge of the product, they were taking a short position on it.

It defaulted 15 months later. Citigroup made $160m in fees and trading profits.

Did these (obviusly very rich) investors, never think to check out what they were buying?

Generali

ILW wrote: »

Did these (obviusly very rich) investors, never think to check out what they were buying?

The investors were, I believe, investment funds that would most likely have been investing normal peoples' pension money to some extent.

I kinda look after pension funds now (too long and boring to explain) and it's amazing some of the rubbish that's in there.

There are plenty of funds holding various forms of mortgage-linked investments, eg CDOs but there are many others, where an initial investment of a few million is now worth a grand or less.

That's where the problem lies IMO. I went to a meeting with the people running my pension.

"What's it invested in?" says I.

"Not telling", says salesman.

"!!!!!!? That's my bloody money".

"Yeah well screw you buddy, it's ours now".

I paraphrase of course.

Let us not forget what happened to the Amaranth Diversified Fund. A particular set of bets on gas futures led to a $6,000,000,000 initial loss (from a $9,000,000,000 fund) despite 'only' 39% of the fund being invested in commodities!!! The ultimate loss was bigger than 50% IIRC. Much of that money was invested by pension funds such as the San Diego Pension fund (that lost $175,000,000 from a $7,000,000,000 fund)!

This was in 2006 too so they can't even blame the financial turmoil of 2007-2xxx.

Ilya_Ilyich

ILW wrote: »

Did these (obviusly very rich) investors, never think to check out what they were buying?

Often it's impossible to have complete knowledge of the product without working for the issuing bank. Arguably the buyers should perform due diligence but that doesn't necessarily excuse Citi for intentionally selling a product that they knew would fail (or indeed may have designed specifically to do so). If someone offers you a bet on a dice roll you should check the dice is genuine but that doesn't mean it's chill to go around scamming people with a loaded die.

ILW

Seems that the buyers of these rubbish products should take as much blame as the sellers, they are supposed to be professionals.

If a second hand car dealer takes in a pup on a PX, it is his own fault for not checking it out.

Thrugelmir

A few quotes from an article called "The Worst Bank in the World? HBOS’s Calamitous Seven Year Life". Well worth a read.

May 2001: Fraser Mackay, head of specialist mortgages in Bank of Scotland’s Manchester branch, allegedly encourages some of his clients to take out equity-release loans with BoS on condition that they “invest” the money in the Vavasseur Corporation ‘Ponzi’ scheme. After the victims lose some $250m (because Vavasseur is a fraudulent scheme) the bank seeks to repossess their homes. Shin Gangar and Alan White of accountancy firm Dobb White & Co are later convicted and jailed for seven and a half years each for their role in the fraud. Despite its alleged complicity in peddling and/or legitimizing the fraud, BoS evades prosecution.

Feb 2002: A notorious flip-chart is found by The Sun in a disused Halifax branch in Manchester. A handwritten note on the flip-chart advises trainee business bankers to turn away business from “start-ups, taxi drivers, window cleaners, market traders, shops or supermarkets.”

Feb 2003: HBOS says annual profits rose 22% to £2.9bn for the year to December 2002. The bank is now selling three times more mortgages than its nearest rival, Abbey National. Crosby defends the bank’s push into corporate banking, including loans to entrepreneur Philip Green, even though other players are pulling back from that market for fear of stoking up bad debts.

Oct 2003: HBOS subsidiary Birmingham Midshires suspends three mortgage advisers after investigating allegations that customers were encouraged to lie about their salaries on mortgage application forms. Birmingham Midshires also suspends sales of “self-certification” mortgages (or “liar loans”). Other HBOS subsidiaries allegedly implicated in mortgage fraud include Bank of Scotland and The Mortgage Business.

Jan 2004: Crosby joins the FSA’s board of directors, after which the fines from the regulator mysteriously dry up. As a result of “regulatory capture” the FSA seems to have lost all appetite for investigating the bank’s misdemeanours.

July 2004: At a meeting to discuss sales of a corporate bond fund, Paul Moore, group head of regulatory risk, is told not to make a “f***ing enemy of me” by the bank’s saleswoman extraordinaire Jo Dawson. Following an in-depth survey of the bank’s retail division, Moore has concluded that the bank has become so sales and growth-obsessed important functions like risk management are being side-lined. But his warning is ignored by the audit committee, chaired by Anthony Hobson, and board of directors.

Oct 2004: A report by head of group regulatory risk Paul Moore warns that the bank’s sales-obsessed culture and inadequate internal controls mean it is headed for collapse. The report stated that HBOS is “going too fast” and had become “a serious risk to financial stability and consumer protection”. According to evidence later submitted to the Treasury Select Committee, the bank’s finance director Mike Ellis ensures that neither the audit committee nor the HBOS board has sight of Moore’s report

Nov 2004: When Moore, who was only doing his job, complains about this, Crosby personally fires him. A business manager at Bank of Scotland, Alistair Wilson, is shot dead on the front doorstep of his home in Nairn. Despite suggestions that Wilson may have uncovered serious financial irregularities at the bank, his murder remains unsolved to this day.

Aug 2005: Vegetables feature in the bizarre case of cabbages and cauliflowers. The vegetables are left on tellers’ desks in West of Scotland branches of Bank of Scotland to punish employees who miss sales targets. The scenario reinforces the impression that selling has become the bank’s top priority.

Oct 2006: The Farepak scandal, in which 150,000 savers from low-income families lose around £35m erupts. In some ways it is microcosm of what went wrong at the bank. HBOS had granted a £40 million overdraft facility to European Home Retail group, the parent of the fundamentally flawed Christmas hamper company. Yet as with other corporate customers, the bank allows the company to trade while technically insolvent, before finally putting it onto administration in on October 13th, 2006. The bank subsequently tries to profit from its demise.

http://www.ianfraser.org/a-brief-history-of-halifax-bank-of-scotland/

pqrdef

ILW wrote: »

Did these (obviusly very rich) investors, never think to check out what they were buying?

So is it OK to sell what you know to be a duff product on the basis that the customer is a fool for buying it?

The_White_Horse

pqrdef wrote: »

So is it OK to sell what you know to be a duff product on the basis that the customer is a fool for buying it?

caveat emptor

Thrugelmir

The_White_Horse wrote: »

caveat emptor

Banks should have operate to a moral and ethical code.

The PPI mis-selling sums up the extent to which banks became sales driven. Quantity over quality.

pqrdef

The_White_Horse wrote: »

caveat emptor

You aren't in the land-banking game are you?

Just because the buyer is an idiot doesn't make it OK for the seller to be a crook.

Should bent politicians be off the hook because we voted for them?