Deutsche Bank Libor Fixing: "COULD WE PLS HAVE A LOW 6MTH FIX TODAY OLD BEAN?"

[John_Law]

Deutsche Bank Was Emphatic About Manipulating Libor

If you want proof that journalism is doomed, consider the Deutsche Bank Libor settlement. There was a time when I could make a good living just reading through Libor settlement documents, picking out funny ungrammatical quotes from e-mails and instant messages, block-quoting them, boldfacing the particularly ridiculous lines, and saying "come on!" or words to that effect after each quote. But now the Commodity Futures Trading Commission cuts out the middleman: It pulls out the funny quotes and puts them in a separate easy-to-use document, even bolding the silliest bits. The CFTC doesn't add "come on!" but it's implied. What is left for me to do?

So I mean just go read that then. Compared with other Libor manipulators, Deutsche Bank is paying much the largest settlement, a total of about $2.5 billion to the U.S. Commodity Futures Trading Commission, the U.S. Department of Justice, the New York Department of Financial Services and the U.K. Financial Conduct Authority. The fines are so big in part because the New York DFS is newly involved, and I must say that DFS already looks like an old pro at Libor settlements; its announcement does an even better job of collecting and artfully boldfacing funny quotes than the CFTC's does. It also doesn't help that Deutsche Bank stonewalled investigators: The FCA fined Deutsche Bank almost as much for failing "to deal with the Authority in an open and cooperative way" as it did for actually manipulating Libor.

But I like to think that Deutsche faced the stiffest penalty because it was the most egregious abuser of CAPS LOCK:

London U.S. Dollar Trader 1: COULD WE PLS HAVE A LOW 6MTH FIX TODAY OLD BEAN?

And:

New York U.S. Dollar Trader 2: LIBOR HIGHER TOMORROW?

U.S. Dollar LIBOR Submitter: shouldn't be

New York U.S. Dollar Trader 2: COME ON. WE ALWAYS NEED HIGHER LIBORS !!! HAHA

U.S. Dollar LIBOR Submitter: haha, i'll do my best fkcer

And:

London MMD Manager: DON'T FORGET TO SET A HIGH FIX TODAY!

Barclays Senior Euro Swaps Trader: I told them they're going to set it at 2.13

London MMD Manager: goodness! that's going to hurt

Come on.

One thing that I sometimes think about Libor manipulation is that it created a sort of market -- a demented and sad market, sure, but a market. Some banks bet on higher Libors and some banks bet on lower Libors, and their bets moved Libor not in the direct simple way that bets usually move prices (you buy a thing, your buying pushes up the price, etc.), but in an indirect corrupt way in which the derivatives traders with the bets convinced the Libor submitters at their banks to just change Libor to suit their bets. You could think both that the Libor manipulators were doing bad immoral things, and that they caused no net damage: Libor more or less reflected supply and demand for Libor, which is not quite the same as reflecting supply and demand for short-term unsecured interbank lending. The supply and demand for short-term unsecured interbank lending was often, roughly, nil; Libor was "the rate at which banks don't lend to each other." But there was a ton of demand for a number to be plugged into floating-rate debt and interest-rate derivatives, with some banks wanting that number to be high and some wanting it to be low, and their respective lying to each other could have created an uneasy equilibrium in that market.

There's some suggestive evidence for that view in the Deutsche Bank quotes. From the CFTC (emphasis and alteration the CFTC's):

London MMD Manager: Subject: “$ LIBORS: 83, 89, 96 and 11
LOWER MATE LOWER !!

U.S. Dollar LIBOR Submitter: will see what i can do but it’ll be tough as the cash is pretty well bid

London MMD Manager: [Another U.S. Dollar Panel Bank] IS DOIN IT ON PURPOSE BECAUSE THEY HAVE THE EXACT OPPOSITE POSITION - ON WHICH THEY LOST 25MIO SO FAR - LETS TAKE THEM ON!!

U.S. Dollar LIBOR Submitter: ok, let's see if we can hurt them a little bit more then

And from the DFS (emphasis DFS's):

On July 16, 2009, a managing director and the Head of the London Money Market Derivatives desk discussed the strength and accuracy of the Euro LIBOR panel in comparison to the EURIBOR panel.  The managing director asked, "u think the quality of the euro-libor panel is 4.5bps better than euribor?"  The Head of the London Money Market Derivatives desk responded yes, and the managing director replied, "not so sure, i have a hard time to believe if so many banks say they can better than the market while they are a part of it."  The Head of the London Money Market Derivatives desk stated, "theyre all lying anyway."  The managing director replied, "there is a philosophical saying: ‘one greek says: "all greeks are lying" who do u trust?"

That's some heavy philosophy on the trading desk. Come on.

On the other hand there is also some evidence that this model is wrong, and that all, or at least most, of the banks worked together at the expense of the people not in the room. The Justice Department's settlement includes a guilty plea from DB Group Services (UK) Limited, a Deutsche Bank London subsidiary, and a deferred prosecution agreement with Deutsche Bank. The guilty plea is for wire fraud, for "engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating U.S. Dollar LIBOR contributions," while the deferred prosecution agreement is for antitrust violations for "rigging Yen LIBOR contributions with other banks." Fraud can be competitive, but antitrust suggests that they were all in it together.

And in fact there are many messages between Deutsche Bank manipulators and their buddies at other banks that suggest not a war of high-Libor banks against low-Libor banks, but rather a market that was easily manipulated by a plurality of banks acting together as a team. Here's one from the Justice Department:

Trader K-1: nice fixing!!!

Trader-3: indeed

Trader K-1: why so low?

Trader-3: why not !

Trader K-1: who gets f*cked on that? I assume its all you short end guys ripping off an end user.

In a way it's a shame that the Libor settlements are mostly about collecting and typesetting embarrassing instant messages. The interesting question in Libor manipulation is whether it caused a net harm: Did Bank X push Libor up while Bank Y pushed it down in ways that mostly reflected and equilibrated underlying interest-rate market dynamics? Or did the banks mostly work together in a way that systematically enriched them as a group at the expense of their clients as a group?

This seems like a very hard question, but also one that is of curiously little interest to the regulators. Among those regulators, the U.K. FCA has the most detailed mechanism for determining penalties; it is explicitly supposed to consider "the amount of benefit gained or loss avoided." It completely shrugged off that determination for Deutsche Bank:

Deutsche Bank sought to manipulate LIBOR and EURIBOR submissions in order to improve the profitability of its trading positions. The Authority has not determined the amount of benefit gained.

Isn't that question -- for Deutsche Bank, and for the Libor-manipulating banks as a whole -- the important one? Shouldn't the Libor manipulating banks be assessed on the economic impact of their manipulation, and not just on who had the most bad quotes?


http://www.bloombergview.com/articles/2015-04-23/deutsche-bank-was-emphatic-about-manipulating-libor?utm_campaign=trueAnthem:+Trending+Content&utm_content=553951d904d3016379000001&utm_medium=trueAnthem&utm_source=facebook

[Lark]

lindo não é?
O DB caiu 0.3% por causa disto. Uma brutalidade. E a multa nem squer chegou a tornar negativos os resultados anuais.
ah e claro, uns tempitos no xilindró para alguém, nem pensar.

mas o que é mesmo mesmo preocupante, são os 133 usd que dão aos àqueles gajos do maine, para comer, por mês. O DB ao pé disto são peanuts.

L

[Lark]

Isn't that question -- for Deutsche Bank, and for the Libor-manipulating banks as a whole -- the important one? Shouldn't the Libor manipulating banks be assessed on the economic impact of their manipulation, and not just on who had the most bad quotes?

hmmm talvez isso levasse o DB a ter resultados bem negativos. Claro que não pode ser. antes disso temos que tratar daquele assunto do Maine.

L

[Zel]

ha muitos mercados manipulados, eu por ex sei por um amigo trader numa das maiores casas mundiais de commodities que os 2 principais traders de carvao do mundo inteiro estavam em constante contacto telefonico a fazerem combinacoes. eu proprio vi uma manipulacao a acontecer a minha frente enquanto era profissional. no entanto manipulacao na maioria dos casos nao quer dizer poder infinito de fazer o que se quer ao preco q se qier e sempre que se quer.

[Zenith]

Regulação e supervisão máxima para os preguiçosos que dilapidam o erário público sacando subsídios.
Regulação e supervisação mínimas na alta finança para não inibir engenho e criatividade desses grandes pilares do mercado

[Zel]

Regulação e supervisão máxima para os preguiçosos que dilapidam o erário público sacando subsídios.
Regulação e supervisação mínimas na alta finança para não inibir engenho e criatividade desses grandes pilares do mercado

comeca pela incompetencia dos reguladores, que normalmente sao advogados e q nao percebem nada de trading

no meu trading room tivemos uma investigacao por manipulacao. sabes o que o regulador la foi fazer? investigar os emails... eh so o que sabem fazer.
em todo o caso aquela queixa em particular era ridicula e sem fundamento, mas se tivesse fundamento tb nao achavam nada

[Lark]

Regulação e supervisão máxima para os preguiçosos que dilapidam o erário público sacando subsídios.
Regulação e supervisação mínimas na alta finança para não inibir engenho e criatividade desses grandes pilares do mercado

hear, hear...

[Zel]

alias para terem uma nocao dos limites da coisa os 2 traders de carvao em causa acabaram por rebentar

[Incognitus]

Regulação e supervisão máxima para os preguiçosos que dilapidam o erário público sacando subsídios.
Regulação e supervisação mínimas na alta finança para não inibir engenho e criatividade desses grandes pilares do mercado

Quem é esse espantalho que defende "Regulação e supervisação mínimas na alta finança" ?

[Zel]

as manipulacoes em causa sao faceis de fazer. pelo que percebi os traders tem de submeter uma lista de precos a reuters que depois tira os outliers e faz uma media. normalmente as manipulacoes que se fazem com os forwards so dao para influenciar temporariamente o p&l, portanto nao compensam muito. creio que o dinheiro esta em influenciar o spot pois isso determina o settlement dos contractos de futuros e forwards do eurodollar.

[Zel]

Regulação e supervisão máxima para os preguiçosos que dilapidam o erário público sacando subsídios.
Regulação e supervisação mínimas na alta finança para não inibir engenho e criatividade desses grandes pilares do mercado

Quem é esse espantalho que defende "Regulação e supervisação mínimas na alta finança" ?

o zenith e o lark gostavam de ter mais inimigos, querem sangue   

[Incognitus]

Regulação e supervisão máxima para os preguiçosos que dilapidam o erário público sacando subsídios.
Regulação e supervisação mínimas na alta finança para não inibir engenho e criatividade desses grandes pilares do mercado

hear, hear...

Hear, hear, talvez depois de se compreender QUEM é que defende essa regulação e supervisão mínima do sector financeiro, não? Senão é como se fosse um debate contra oponentes imaginários.

[Lark]

A New Ice-Bucket Challenge:
How Regulation is Stifling Innovation in Financial Services

By Linea Solem, Deluxe

Media outlets are buzzing with the barrage of images regarding the latest social media trend of the “ice bucket challenge”. The burden of regulatory compliance is dousing the fires of creativity and customer loyalty in banking. Just like a bucket of ice water can bring a chilly reality to one’s day, the growing regulatory burden appears to be stifling innovation in financial services.

A recent survey conducted by the ABA and routed as a call to action to members of Congress shared some sobering statistics from the banking sector that shows more regulation is resulting in fewer products and choices for consumers. Compliance considerations are clearly having an impact on the marketing of products or services in financial services based on the organizations that responded to the survey:

44% reduced current consumer financial products or services due to compliance regulatory burden

27% cancelled a new product launch, delivery channel or market  due to compliance considerations

31% are ‘holding off’ on new products, delivery channels or markets, while they determine the regulatory impact

The increased costs of compliance, including increased compliance staffing are reducing the amount of available investments both financial and human capital in the development of new financial products or services. The regulatory burden alone for the Dodd-Frank Act has added 14,000 pages of new rules, regulations and pending guidance. Dodd-Frank is requiring more than 60 million hours of paperwork for compliance; and we are only 50% through the mandated rules. That’s a lot of time that could have been used to identify customer needs and develop solutions to meet those needs. It is not surprising that over the past decade, the growing costs of compliance are fueling consolidation between smaller financial institutions. The era of growth and creating innovation of start-up de novos is a fading memory. Traditional community banks are faced with challenges of maintaining profitability while maintaining compliance to the same regulations are national banks with significantly more resources. The resulting impact means fewer choices for consumers in many communities.

An emerging shift in corporate governance, as demonstrated by recent Office of Comptroller of the Currency (OCC) guidance shows the need for maturity in risk management oversight, including gaining board-level approvals for key changes in product strategy, critical suppliers or risk appetite. The need for a cadence in approvals, and risk management has expanded timelines for product decisions, but also requires a level of acumen and organizational readiness to balance regulation and innovation in products and services. Risk & Governance committees are being established to facilitate the oversight process, but can require time and investment in people, process, and technology.

The Unintended Consequences of Regulation Stifling Innovation
While most financial regulations start from a good intentions point of view of protecting consumers, financial assets or the banking sector in general; there are unintended consequences in the execution and operations of compliance that can hinder creativity and innovation.

Fears of UDAAP Enforcement: Consumer protection rule-making and enforcement start from a good construct – to protect the consumer from unfair, deceptive, or abusive marketing practices. Creating simple-to-understand terms and conditions is a good thing. However, most financial products are complicated – even the simple checking account can contain an accountholder agreement longer than the play Romeo and Juliet. Enhancing customer disclosures and notices can improve customer understanding of their financial options. However the fines and enforcement are sponsoring a culture of fear, uncertainty and doubt in bank marketing team’s ability to be creative in marketing. Over-regulation of a particular product’s features or functionality risk commoditization of the product, resulting in a ‘vanilla’ approach to structuring a financial product or service. Last year’s ABA Bank Compliance Officer Survey showed that 78% of banks said they will or may need to change the nature, mix and volume of mortgage products. In the last three years, the market share of non-bank mortgage services has nearly tripled, and that shifts consumers into product systems that are less regulated.

Big Data and Privacy: Privacy is fundamental in financial services. Online privacy preferences are a staple of web privacy statements. Privacy regulation has evolved as technology has evolved. Conflicts with privacy and technology, including surveillance have been headlines for the last year. Big data and the usage of data to drive customer experience and eMarketing can be a tricky ski slope. Traditional notice and choice concepts of fair information practices could not have anticipated how data analytics and big data have emerged. Creating regulation that could anticipate future uses of data would be difficult to enforce or interpret, especially with pace of technological change. Rather, collectively, the advances in innovation enabled by big data need to be balanced with clear customer awareness of data usage and respect for context.

Net Neutrality: While not directly a result of prudential banking regulators, the recent FCC actions are prompting an online debate over net neutrality and the risks that regulatory change could hinder innovation on the internet. The concept that all internet data is equal is under scrutiny. When the Internet was created, we could not have anticipated things like digital video streaming, Netflix, social media or You Tube. While big players in the internet service provider (ISP) space debate the interpretation of the ruling the implications to pricing and access to content for smaller and medium sized ISPs can’t be forgotten. Small businesses are a primary driver for economic growth, and profitability to financial institutions. The net neutrality debate stems from a legal interpretation of jurisdiction, but has creating an avalanche of concerns regarding competition, payments processing and evolution of payments.

The Evolution of Payments: Historically, no payment method has truly ever been totally obsolete – barter is still used today, just like checks are still written by consumers and businesses. The rapid emergence of technology has driven changes to payments, including testing our perceptions of traditional payment mechanisms. Mobile technology alone spurs innovation in customer access and usage. It is difficult for regulations to keep pace with technology innovation and can risk applying old business models to a new hybrid banking landscape. Debates over remotely written checks, industry efforts to electronify checks, and virtual currency are creating a hailstorm of questions about how to protect payments, but not halt innovation. Bottom line the debate can create confusion for end customers – both financial institutions and service providers need to monitor the influx of regulatory commentary and how it may affect the development of their payment strategy roadmap. Innovation in payments requires technology + meeting customer needs in a way that still delivers a protected transaction. Payments are a critical component to most financial institutions profitability, and as payments evolve, the regulatory oversight needs to evolve in parallel, but without slowing down technology innovations.

Enhancing Your Risk and Compliance Culture
While the pendulum for shifting governance and oversight has forced a more conservative approach, that correction can be balanced by broadening the risk acumen and organizational agility with an intentional strategic plan. Accountability is a critical success factor in the new landscape of demonstrating how risk is addressed. Organizations need to move behind checklist compliance to truly managing risk. Taking steps to invest in readiness for executives to make informed business decisions, and manage risk without halting innovation is an important element in risk process maturity.  Here are five simple things your organization can do to help minimize the stifling of creativity while meeting the burdens of regulatory compliance.

Create a Risk & Compliance Education & Awareness Plan: Develop an internal communication plan for all levels of the organization, to expand acumen on changes in regulation and regulator expectations. Executives will need to have more familiarity with the governance processes, and how they are evolving. Identify your internal stakeholders who manage different areas of risk, and define what types of training or education they may need to help them in the governance process.

Broaden Executive Management Reporting: With expanded risk & governance committees, assess internal scorecards and dashboards to ensure that the “hows” are being monitored and addressed. Governance is an ongoing process, not a once and done event. Consider starting quarterly educational scorecards for Audit Committees to broaden their industry awareness of changes in expectations and the organizational action in process to respond to market events. Look at the makeup of current decision makers and even board members, to identify what gaps in functional experience could make enabling technology and product innovation simpler to execute. Identifying the “Digital Director” can help streamline the navigation for technology innovation, and mobile opportunities.

Broaden Tools to Enable Consistent Governance: Risk process maturity comes from repeatability and scoping. Understand the decision makers for changes in nature and structure of process, and embed compliance requirements up front in the design phase. Ensure feedback loops are in place from your customer complaint process to not just “react” to complaints, but to show ownership in the risk monitoring. Structure standardized templates that directly speak to “how” compliance has already been address in product release plans.

Practice your Risk Posture Positioning: Proactive risk and compliance management requires taking a bit of the fear, uncertainty, and doubt off the table. Figure out how to tell the compliance story to your internal stakeholders, the board, and your regulator. Practice how you would defend the decisions made and how you met the compliance burden.

Clarify Roles and Responsibilities: It can take a village to manage risk and compliance in financial services. Ensure that lines of sight and organizational accountabilities are clear, so that ownership for governance is understood. If products or services are outsourced, ensure that the third party risk management governance model and process is updated to account for non-IT risks.

We need regulation in financial services, to avoid the repeat of the mistakes seen during the financial crisis. The structuring and marketing of financial products and services needs to continually evolve, but at a much faster pace due to the pace of technology innovation. The avalanche of regulation and the corresponding delays in product enhancement are an “ice-bucket” wake up call for financial services. As an industry, we need to understand how regulation can stifle innovation and take steps to address the fear, uncertainty and doubt within our organizations and identify ways to tip the scales and creating a more balanced governance model for compliance and innovation.

fonte

[Lark]

ECONOMY
Morning Bell: Dodd-Frank Financial Regulations Strangling Economy
Amy Payne   / July 20, 2012 / 39 comments 542 1
Has your bank raised its fees or stopped offering free checking accounts in the last couple of years? If so, you can thank the regulatory boondoggle that is the Dodd-Frank financial law.

Since its passage two years ago tomorrow, the number of large banks that offer free checking has declined sharply. In 2009, 96 percent of them offered free checking, but just 34.6 percent did in 2011.

Senator Chris Dodd (D-CT) and Representative Barney Frank (D-MA) argued that their namesake would save America from another financial crisis—but most of the law’s provisions have little or no connection to the most recent crisis.

For example, Dodd–Frank does not end bailouts and taxpayer support for big banks. Under the act, the Federal Deposit Insurance Corporation (FDIC) is permitted to purchase the assets of a failing firm, guarantee the obligations of a failing firm, take a security interest in the assets of a failing firm, and borrow on the failed firm’s total consolidated assets. (For Bank of America, that would be $2 trillion in bailout authority to be paid by taxpayers.)

Congress has proven, in fact, that it grossly misdiagnosed the factors responsible for the financial crisis, while ignoring primary culprits such as Fannie Mae and Freddie Mac. But in its haste to appear relevant and on top of things, Congress has unleashed a staggering amount of new regulations that are actually harming—not helping—the economy.

There’s a reason the financial regulation law has been called “Dodd-Frankenstein.” This monstrous creation will swell the ranks of regulators by 2,849 new positions, according to the Government Accountability Office. It created yet another new bureaucracy called the Consumer Financial Protection Bureau (CFPB) that has truly unparalleled powers.

This new bureau is supposed to regulate credit and debit cards, mortgages, student loans, savings and checking accounts, and most every other consumer financial product and service. And it’s not even subject to congressional oversight.

Frighteningly, the CFPB’s regulatory authority is just as vague as it is vast. More than half of the regulatory provisions in Dodd–Frank state that agencies “may” issue rules or shall issue rules as they “determine are necessary and appropriate.” This means, as The Economist put it, “Like the Hydra of Greek myth, Dodd-Frank can grow new heads as needed.”

Congress avoided making real law here and passed the responsibility for “fixing” the financial sector to these newly minted bureaucrats. And that hasn’t been going too well.

As Heritage’s Diane Katz explains in a two-year checkup of the law:

As of July 2, 63 percent of the deadlines have been missed, which has intensified the cloud of uncertainty enveloping the finance sector—and the economy—since passage of the act. Thousands of businesses do not know what the government demands they do differently or when they must do it.

The results of this haphazard regulation are dire, Katz says, because “consumers will experience tight credit, higher fees, and fewer service innovations. Job creation will suffer.” She adds that “financial firms of all sizes are shelling out hundreds of millions of dollars for regulatory compliance officers and attorneys rather than making loans for new homes and businesses.”

So the law that was supposed to fix the financial sector—and created something called the Consumer Financial Protection Bureau—is hurting consumers rather than “protecting” them. Congress should repeal Dodd-Frank before it can do any more damage.

fonte

[Lark]

Four Years of Dodd-Frank Damage
The financial law has restricted credit and let regulators create even more too-big-to-fail companies.
By PETER J. WALLISON
July 20, 2014 5:55 p.m. ET

When the Dodd-Frank Wall Street Reform and Consumer Protection Act took effect on July 21, 2010, it immediately caused a sharp partisan division. This staggeringly large legislation—2,300 pages—passed the House without a single Republican vote and received only three GOP votes in the Senate. Republicans saw the bill as ObamaCare for the financial system, a vast and unnecessary expansion of the regulatory state.

Four years later, Dodd-Frank's pernicious effects have shown that the law's critics were, if anything, too kind. Dodd-Frank has already overwhelmed the regulatory system, stifled the financial industry and impaired economic growth.

According to the law firm Davis, Polk & Wardell's progress report, Dodd-Frank is severely taxing the regulatory agencies that are supposed to implement it. As of July 18, only 208 of the 398 regulations required by the act have been finalized, and more than 45% of congressional deadlines have been missed.

The effect on the economy has been worse. A 2013 Federal Reserve Bank of Dallas study showed that the GDP recovery from the recession that ended in 2009 has been the slowest on record, 11% below the average for recoveries since 1960.

ENLARGE
PHIL FOSTER
There is always a trade-off between regulation and economic growth, but Dodd-Frank—by far the most intrusive and costly financial regulation since the New Deal—placed few if any limitations on regulatory power. Written broadly and leaving regulators to fill in the details, the act has often left regulators in doubt about what Congress meant. Even after regulations have been finalized, interpreting them can be a trial. For example, the regulations implementing the inconsistent Volcker Rule, which prohibited banks and their affiliates from trading securities for their own account, took more than three years to write, but key provisions are still unclear.

These uncertainties, costs and restrictions have sapped the willingness or ability of the financial industry to take the prudent risks that economic growth requires. With many more regulations still to come, Dodd-Frank is likely to be an economic drag for many years.

None of this was necessary. The administration and Congress acted hastily. The Treasury Department sent draft legislation to Congress only a few months after taking office in 2009, and the law—spurred by a promise from then-Rep. Barney Frank for a "new New Deal"—passed a year later. The left's view had been settled: the crisis would be blamed on Wall Street greed and insufficient regulation. The act set out to implement that worldview by subjecting American finance to unprecedented government control.

It is now clear, however, that government housing policies—implemented primarily by Fannie Mae and Freddie Mac—forced a reduction in mortgage underwriting standards, which was the real cause of the crisis. The goal was to foster affordable housing for low-income and minority borrowers, but these loosened standards inevitably spread to the wider market, building an enormous housing bubble between 1997 and 2007.

By 2008 roughly 58% of all U.S. mortgages—32 million loans—were subprime or otherwise low quality. Of these 32 million loans, 76% were on the books of government agencies, primarily Fannie and Freddie, showing incontrovertibly where the demand for these loans originated. When the housing bubble burst, mortgage defaults soared to unprecedented levels. Although the left's narrative placed all blame on the private sector, these numbers show that private firms were responsible for less than a quarter of the problem.

Yet Dodd-Frank said nothing about government housing policies and ignored Fannie and Freddie. It focused on placing additional restrictions on financial firms, often for no apparent purpose other than to extend government control. For example, all bank holding companies with consolidated assets of more than $50 billion were automatically designated as systemically important financial institutions, although a bank of that size would not bring down the multitrillion-dollar U.S. financial system.

The Volcker Rule was inserted in the act, even though there is no evidence that banks trading securities for their own account had anything to do with the financial crisis.

Even the Constitution's checks and balances did not impede the left's objectives. To block Congress from limiting the Consumer Financial Protection Bureau's activities, Dodd-Frank set up the agency to be funded directly by the Federal Reserve. This is a clear evasion of the constitutional structure in which Congress appropriates funds for executive-branch operations.

Dodd-Frank also created the Financial Stability Oversight Council, consisting of the leaders of all federal financial regulators and headed by the Treasury secretary. FSOC has the extraordinary power to designate certain nonbank financial firms as systemically important financial institutions (SIFIs) if, in the judgment of the council, the firm's "material financial distress" would cause financial "instability." By definition, then, SIFI designation means a nonbank financial institution is "too big to fail." Although we are currently saddled (thanks to past government policies) with several enormous banks that may be too big to fail, the act gave the FSOC the power to create more too-big-to-fail institutions in other industries.

The SIFI process is underway, with AIG, Prudential Financial and GE Capital already designated. These firms are now subject to banklike regulation by the Fed—though the central bank has given no hint of what this regulation will ultimately entail.

The FSOC is now turning to asset-management firms and mutual funds, with what looks like an effort to bring large players in the capital markets and securities industry under Fed regulation. The obvious danger in subjecting the unique and innovative U.S. capital markets to banklike restrictions recently drove the House Financial Services Committee to pass a one-year moratorium on additional SIFI designations.

There is much more, but one example says it all. Several months ago J.P. Morgan Chase announced that it plans to hire 3,000 more compliance officers this year, to supplement the 7,000 brought on last year. At the same time the bank will reduce its overall head count by 5,000. Substituting employees who produce no revenue for those who do is the legacy of Dodd-Frank, and it will be with us as long as this destructive law is on the books.

wsj

[Lark]

podia estar aqui a postar até ao dia do juízo final
tens a certeza que queres isso?

L

[Incognitus]

Que há opiniões nesse sentido não se duvida. O que se duvida é que estejam a ser expressas neste debate.

E também se duvida que estejam a ser expressas simultaneamente.

Portanto essa opinião no mínimo não é algo para o qual existam dois lados aqui. O lado que podes achar aqui é o que defende:
* A necessidade de programas de apoios não serem abusados juntamente com;
* A necessidade do sector financeiro ser regulado.

[Lark]

The Republican Strategy To Repeal Dodd-Frank
Posted on January 7, 2015 by Simon Johnson | 32 Comments
By Simon Johnson

On January 7, 2015, Day 2 of the new Congress, the House Republicans put their cards on the table with regard to the 2010 Dodd-Frank financial reforms. The Republicans will chip away along all possible dimensions, using a combination of legislation and pressure on regulators – with the ultimate goal of relaxing the restrictions that have been placed on the activities of very large banks (such as Citigroup and JP Morgan Chase).

The initial target is the Volcker Rule, which limits the ability of megabanks to place very large proprietary bets – and their ability to incur massive losses, with big negative consequences for the rest of us. But we should expect the House Republican strategy to be applied more broadly, including all kinds of measures that will reduce capital requirements (i.e., make it easier for the largest banks to fund themselves with relatively more debt and less equity, taking more risk while remaining Too Big To Fail and thus benefiting from larger implicit government subsidies.)

The repeal of Dodd-Frank will not come in one fell swoop. Rather House Republicans are moving in several stages to reduce the scope of the Volcker Rule and to gut its effectiveness.

The first step in this direction came on Wednesday, with a bill brought to the floor of the House supposedly to “make technical corrections” to Dodd-Frank. This legislation was not considered in the House Financial Services Committee, and was rushed to the House floor without allowing the usual debate or potential for amendments (formally, there was a “suspension” of House rules).

Buried in this legislation is Title VIII, which will extend the deadline for one important aspect of Volcker Rule compliance to 2019. (The specific topic is by when big banks should divest themselves of some Collateralized Loan Obligations, CLOs – on how these investments function as internal hedge funds at the largest three banks, see this primer from Better Markets, a pro-reform group.)

Some very large banks and House Republicans previously asked to extend this deadline for CLO compliance through 2017, and a full extension was actually granted by the Federal Reserve in 2014. (Specifically, in April 2014 the Fed extended the divestment deadline for CLOs to 2017and then, in December 2014, extended the divestment for all covered funds under the Volcker Rule until 2017.)

Now that Citigroup, JP Morgan Chase and Wells Fargo already have the extension through 2017, they immediately ask for… an extension through 2019.

The strategy here is clear: delay for as long as possible. Perhaps the regulators will cave in, again, under pressure. Perhaps the White House will agree to another rollback of Dodd-Frank, for example attached to a spending bill – which is what happened in December 2014. (Remember that government spending is only authorized until September 2015, so there will be plenty of opportunities).

And perhaps, after November 2016, a Republican president will work with a Republican Congress to eliminate all parts of Dodd-Frank that crimp the style of very large leveraged financial firms.

On Wednesday, the Republican bill that would have weakened the Volcker Rule actually failed – under the suspension of the rules, it needed two-thirds of all members present in order to pass, and the vote was 276 in favor and 146 against. When enough Democrats hold together, they can make a difference.

But all of this is just a warm-up. In coming months we should expect: the largest few banks (always masquerading as representing the social interest) will pressure for a change in technical definitions, e.g., what kind of hedge fund they are allowed to own and what it means to “own” something. They will ask for more delays and “clarifications”. And they will argue that lending to some category of firms (“job creators”) should be exempt from any kind of restriction.

Section 716, which would have forced big banks to keep their derivatives business somewhat separated from their insured deposits, was repealed in December 2014. This measure primarily benefited Citigroup and JP Morgan Chase. At the time, some Democrats – including people close to the White House – said, not to worry, “we’ll always have the Volcker Rule.”

In fact, the signal from the repeal of Section 716 is that the store is open. The White House had previously said “no” to any proposed repeal of Dodd-Frank, including when attached to a spending bill. This moratorium has clearly been lifted, and the lobbyists are hard at work.

The House Republican rhetoric will be “technical fixes” and “job creation”. But the reality is that they are determined to strip away all meaningful restrictions imposed on Citigroup, JP Morgan Chase, and other megabanks – and to roll-back Dodd-Frank as far as possible, until it becomes meaningless or they are finally able to repeal it completely.

fonte

[Lark]

Wall St. Wins a Round in a Dodd-Frank Fight
By PETER EAVIS  DECEMBER 12, 2014 8:24 PM December 12, 2014 8:24 pm 63 Comments

Jamie Dimon, left, called lawmakers to express his support for repeal of the derivatives rule.



When Wall Street traders sense opportunity in the markets they pursue it with a sharklike intensity.

After scoring a victory in Washington that repeals a rule that the industry has long assailed, the large banks are most likely weighing where to strike next.

Wall Street won when the House of Representatives on Thursday passed a broad spending bill that contained a provision that rolls back a rule affecting derivatives, the financial product that helped cause the financial crisis of 2008. The Senate is expected to pass the budget legislation containing the repeal this weekend.

A repeal would show that, six years after the financial crisis, large banks have found a way to kill off regulations that were part of the Dodd-Frank Act, the sweeping legislation that Congress passed in 2010 to overhaul the financial system.

The House’s vote seemed to reverberate around Washington on Friday.

“I thought that, when Dodd Frank started, that the banks would not succeed in influencing it, having lost all the prestige they lost,” said Stanley Fischer, the vice chairman of the Federal Reserve, at a conference on Friday at the Peterson Institute for International Economics in Washington. “Boy, was I wrong,” he added.

Wall Street’s recent campaign also suggests that large banks now see fewer risks in openly fighting to overturn regulation. Citigroup, which received over $50 billion of bailout money after it nearly collapsed in 2008, helped write legislation that was behind the proposed repeal of the rule. And The Washington Post reported that Jamie Dimon, the chief executive of JPMorgan Chase, called lawmakers to express his support for the repeal. Only last year, Mr. Dimon was fighting to save his professional reputation after his bank racked up huge losses trading the type of instruments that the derivatives rule focused on.

In going after the rule, Wall Street used a well-orchestrated way to sway Washington.

The rule tried to chip away at some of the implied taxpayer subsidies that banks’ derivatives operations enjoy. Eroding such subsidies was a cause that Wall Street’s critics, like Senator Elizabeth Warren, Democrat of Massachusetts, could rally around.

But the regulation is arcane, and that created a problem for the opponents of the rule’s repeal. One way to stop Wall Street from killing off the rule was to vote against the whole spending bill and risk shutting down the government.

And it might have been hard for some members of Congress to contemplate going to such lengths for an esoteric measure, says Nolan McCarty, a professor of politics at Princeton. “It’s not the most important part of Dodd-Frank,” he said, “but the worst-case scenario is that they now have a playbook to go after the more important parts.”

There is no shortage of complex regulations in Dodd-Frank that the big banks want to eliminate or dilute.

They have, for instance, a special loathing for the Volcker Rule, which restricts banks from engaging in speculative trading. The Obama administration has trumpeted the Volcker Rule as a signature part of the overhaul. But for months, the banks have been lobbying the Federal Reserve to postpone by another year the date at which they must comply. A senior Fed official recently made remarks that seemed sympathetic to a delay.

Though securing such a concession might generate anger on Capitol Hill, the banks may now care less about such opposition. “You have a Senate that’s just changed hands, so that might change things,” said Donald N. Lamson, a partner at Shearman & Sterling, a law firm.

A victory over the derivatives rule would follow smaller — but still significant — gains for Wall Street in recent months. After strong pressure from the asset management industry, the Securities and Exchange Commission this year completed an overhaul of money market funds that fell well short of what other regulators had called for. In a gain for mortgage banks, the Federal Housing Finance Agency loosened contracts that demand that lenders take back shoddy mortgages that they might have sold to the government. Still, for the next couple of years, Wall Street may win only in smaller skirmishes, rather than the bigger battles.

The Obama administration strongly opposed the repeal of the derivatives rule. And parts of the spending bill will secure more money for regulatory agencies like the Securities and Exchange Commission and the Commodity Futures Trading Commission.

More broadly, the administration is expected to hold the line firmly on regulations that it says are crucial for the Dodd-Frank overhaul to do its job. The most prominent of these are capital regulations, which make banks stronger by demanding that they use less borrowed money to finance their lending and trading.

For instance, the Federal Reserve proposed increasing capital requirements for the country’s eight largest banks to levels that were substantially higher than in other countries. “That was by far the most important thing,” said Phillip L. Swagel, a professor of international economic policy at the University of Maryland, and an assistant secretary at the Treasury Department in the second administration of President George W. Bush.

Janet L. Yellen, chairwoman of the Fed, suggested that the Fed’s new capital rules might even prompt some large banks to shrink their operations. Indeed, after it was revealed that JPMorgan would theoretically need to increase its capital by least $20 billion under the new rules, banking analysts said that it might now make sense for the bank to pare back its activities.

Still, people who view Wall Street skeptically are unnerved by the campaign to repeal the derivatives rule. Professor McCarty was struck by how banks of different sizes seemed to work together to overturn the regulation. “That suggests there is a larger, longer-term strategy, in which the banks are going to work together,” he said.

nyt

[Lark]

e a carinha do jamie dimon ali acima?
chega para espantalho?

L