So a giant Swiss bank defrauds American taxpayers. It bid-rigs the muni-bond derivatives market. It pays kickbacks and bribes. The SEC charges it with fraud and settles the case for $160 million. It’s the second too-big-to-fail bank, after Bank of America, to cough up nine-figure settlements in the investigation. All signs point to more crimes at more big banks that will have to fork over big settlements.
How do you play that story?
You give it 379 words and stuff it inside on C3 and put it 11th in the Business & Finance blurbs if you’re The Wall Street Journal. That’s a bit better than when the paper stuffed the BofA news on C18 back in December.
The New York Times is better, fronting the news on Business Day.
Bloomberg has a decent piece, and has done some of the best coverage of the scandal (see this Bloomberg Markets story from last fall).
This is from Bloomberg today:
The case has revealed that Wall Street, during the same years when it was sowing the seeds of the financial crisis, was also cheating cities, states and school districts across the U.S. and using the unregulated derivatives markets to hide the kickbacks paid in the schemes.
— The Journal has been much better on the insider-trading scandals, though those are far less important than so many other ones on Wall Street.
Today it fronts a scoop that the feds are moving closer to a big fish, SAC Capital’s Stevie Cohen. They’re examining trades suggested for his personal account by two of his employees who’ve already been convicted in the insider-trading scandal Stevie Cohen’s. The Journal found the news in court filings and is quick to “to be sure” that there’s no information that the trades were based on inside information or that Cohen knew why they suggested them.
But:
In February and April, respectively, Mr. Freeman and Mr. Longueuil pleaded guilty to securities fraud and conspiracy in a scheme that Manhattan U.S. Attorney Preet Bharara had said, early on, involved paying “entire networks of corrupt insiders at public companies for blatantly illegal insider information”…
Like other hedge funds, SAC foots the bill for use of expert networks by its employees. The costs of particular calls to the experts sometimes are ultimately borne by portfolio managers.
Mr. Longueuil, after reading a Wall Street Journal exposé of the probe late last year, and fearing he might be caught, destroyed his computer drives with pliers and dumped the pieces in four garbage trucks, according to documents filed by the U.S.
This one’s getting interesting. Good work by the WSJ.
— Mother Jones’s Andy Kroll reports on a bizarre development sweeping the nation: Bankers 4 Liz Warren!
On her first day running the new Consumer Financial Protection Bureau (CFPB), Elizabeth Warren met with a group of bankers from her home state, Oklahoma. Going into that meeting, Roger Beverage, president of the Oklahoma Bankers Association, feared the havoc Warren, who had developed a reputation as a fierce consumer champion, would soon wreak upon his state’s banks. He and his colleagues in the banking industry, he recalls, “had this vision that she was akin to the Antichrist.”
Today, Beverage considers himself a Warren convert. He openly praises Warren—who was appointed by the White House to get the bureau up and running but has not been nominated to head it—saying she is “far and away” the most qualified person to become the bureau’s permanent director. “Ms. Warren has demonstrated that she is willing to work as hard as possible for the benefit of consumers, consumers’ families, and community banks,” Beverage says. “She would be an outstanding director, and I have encouraged both of our US senators to look past political rhetoric and look at what the woman has done.”
Beverage’s reversal reflects a noticeable thaw in relations between Warren and parts of the banking industry. This week, Camden Fine, president and CEO of the influential Independent Community Bankers Association, told a gathering of 1,000 bankers that the odds Obama would nominate Warren were “better than even,” later remarking to American Banker that “you would have to look favorably on a [Warren] nomination because clearly she understands our model.” Frank Keating, the head of the American Bankers Association, told a reporter that the ABA would support Warren if she were confirmed as CFPB director by the Senate. And Robert Palmer, who heads the Community Bankers Association of Ohio, captured the mood of small banks when he told Bloomberg Businessweek that if Warren “leaves, and the direction changes, we’re not going to be very receptive.”
This is fascinating. It’s still not quite clear what’s going on here beyond getting the charming Warren in face to face to prove she doesn’t have horns and a forked tongue. Perhaps she’s getting coopted, though I doubt that.
I’d guess that she’s cleverly playing up a split between community bankers and the too-big-to-fail behemoths. The former aren’t much fans of the latter, and they ultimately have more leverage with politicians, since every congressperson has multiple bankers in his district, but the TBTF banks are concentrated in Chuck Schumer territory and Charlotte.
Thing is, Republicans still hate her. But resistance among them seems to be falling away somewhat as the banks’ does. It’s looking more like she’ll get the chance to run the bureau she founded.
I’d guess that she’s cleverly playing up a split between community bankers and the too-big-to-fail behemoths.
Yes, she's cleverly giving props to community bankers who by and large provide useful, comprehensible and reasonably-priced services to people in their communities while criticizing the bankers who systematically ripped off their customers, looted the treasury and crashed the economy. Machiavellian, that woman!
#1 Posted by Weldon Berger, CJR on Fri 6 May 2011 at 06:47 PM
The quote from you is 'sposed to be italicized. In any event, most local banks seem to have behaved pretty responsibly this time around and most giant banks didn't, so clever or not it's perfectly reasonable and indeed should be expected that she'll approach the two species differently.
#2 Posted by Weldon Berger, CJR on Fri 6 May 2011 at 07:16 PM
Yeah basically she's pointing out to the community bankers that the big banks are the ones who get the bailouts, the low interest fed loans, and the big paydays that follow when they encourage bad practices throughout the industry, eventually crashing it.
These big banks crash the economy, putting smaller competitors - who don't have the political allies TBTF banks do - out of business, which increases their market share. If Liz is telling them "I'm not going to let them encourage bad practices that crash the economy and hurt your business." then I don't blame them for listening.
Speaking of co-opted, there was an interesting article about another regulatory agency which has problems that hopefully Warren will have dealt with.
http://www.nytimes.com/2011/05/08/business/energy-environment/08nrc.html
"Critics have long painted the [nuclear regulatory] commission as well-intentioned but weak and compliant, and incapable of keeping close tabs on an industry to which it remains closely tied. The concerns have greater urgency because of the crisis at the Fukushima Daiichi plant in Japan, which many experts say they believe was caused as much by lax government oversight as by a natural disaster...
Congressional critics and even the agency’s own internal monitors say the N.R.C. is prone to dither when companies complain that its proposed actions would cost time or money. The promise of lucrative industry work after officials leave the commission probably doesn’t help, critics say, pointing to dozens over the years who have taken jobs with nuclear power companies and lobbying firms.
Now, as most of the country’s 104 aging reactors are applying for, and receiving, 20-year extensions from the N.R.C on their original 40-year licenses, reform advocates say a thorough review of the system is urgently needed.
The agency’s shortcomings are especially vexing because Congress created it in the mid-1970s to separate the government’s roles as safety regulator and promoter of nuclear energy — an inherent conflict that dogged its predecessor, the Atomic Energy Commission.
“It wasn’t much of a change,” said Peter A. Bradford, a former N.R.C. commissioner who now teaches at Vermont Law School. “The N.R.C. inherited the regulatory staff and adopted the rules and regulations of the A.E.C. intact.”...
But Mr. Mulley argued that the prospect of one day landing a lucrative position with a private company almost certainly played a role in softening the positions of some commission employees.
“The N.R.C. is like a prep school for many of these guys, because they know they’ve got a good shot at landing much higher-paying work with the people they’re supposed to be keeping in line,” Mr. Mulley said. “They’re not going to do anything to jeopardize that.”"
#3 Posted by Thimbles, CJR on Tue 10 May 2011 at 10:55 AM