February 16, 2011
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A good, yet infuriating article today from Matt Taibbi at Rolling Stone. I think this sums up nicely why Main Street is fed up with Wall Street and their minions in Washington. An excerpt below but the whole article is definitely worth reading.
The deal looked like a classic case of insider trading. But in the summer of 2005, when Aguirre told his boss he planned to interview Mack, things started getting weird. His boss told him the case wasn’t likely to fly, explaining that Mack had “powerful political connections.” (The investment banker had been a fundraising “Ranger” for George Bush in 2004, and would go on to be a key backer of Hillary Clinton in 2008.)
Aguirre also started to feel pressure from Morgan Stanley, which was in the process of trying to rehire Mack as CEO. At first, Aguirre was contacted by the bank’s regulatory liaison, Eric Dinallo, a former top aide to Eliot Spitzer. But it didn’t take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm’s lawyers, Mary Jo White, was on the phone with the SEC’s director of enforcement. In a shocking move that was later singled out by Senate investigators, the director actually appeared to reassure White, dismissing the case against Mack as “smoke” rather than “fire.” White, incidentally, was herself the former U.S. attorney of the Southern District of New York — one of the top cops on Wall Street.
Pause for a minute to take this in. Aguirre, an SEC foot soldier, is trying to interview a major Wall Street executive — not handcuff the guy or impound his yacht, mind you, just talk to him. In the course of doing so, he finds out that his target’s firm is being represented not only by Eliot Spitzer’s former top aide, but by the former U.S. attorney overseeing Wall Street, who is going four levels over his head to speak directly to the chief of the SEC’s enforcement division — not Aguirre’s boss, but his boss’s boss’s boss’s boss. Mack himself, meanwhile, was being represented by Gary Lynch, a former SEC director of enforcement.
Aguirre didn’t stand a chance. A month after he complained to his supervisors that he was being blocked from interviewing Mack, he was summarily fired, without notice. The case against Mack was immediately dropped: all depositions canceled, no further subpoenas issued.
Source: Rolling Stone
February 2, 2011
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I am currently reading Liar’s Poker by Michael Lewis. The book is a classic but for those that may be unaware it chronicles the author’s time in the bond unit of Salomon Brothers – the Kings of Wall Street at the time. The book takes place in the mid-eighties and you could say it describes in great and entertaining detail the dirty underbelly of Wall Street.
Today I came across an article in the Boston Review that could have came straight out of a chapter in Liar’s Poker. The article, titled Legerdemath details Omer Rosen time on Citigroup’s corporate-derivatives team. The team’s directive was “to help companies decrease and manage their risks” but really it boiled down to making money for the bank.
In either case, whenever possible we used our superior knowledge to manipulate the pricing of the trade in our favor.
I learned to think we were simply smarter than the client. For unsophisticated clients, being smarter meant quoting padded rates. For the rest, a bit of “legerdemath” was required. Most brazenly, we taught clients phony math that involved settling Treasury-rate locks by referencing Treasury yields rather than prices.
Rosen was working for Citigroup in the early 2000’s. He recently had the following conversation with a friend:
Last year a friend in the credit-card division of one of the major banks told me that his group had received an award. “Great news,” I thought. He then explained that the group had managed to increase the rates charged on the bank’s entire portfolio of credit cards before regulation limiting such increases took effect. Does this sound like an industry that is learning?
With incentives still completely misaligned between customers and their finance “partners” on Wall Street it is no wonder the more things change the more they stay the same.
See the entire article here. http://www.bostonreview.net/BR36.1/rosen.php