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Deutsche Bank fined $630m over Russia money laundering claims

Authorities in US and UK issue fine after saying bank used offices in Moscow and London to move $10bn out of country

Deutsche Bank has been fined more than $630m (506m) for failing to prevent $10bn of Russian money laundering and exposing the UK financial system to the risk of financial crime.

The UKs Financial Conduct Authority imposed its largest ever fine 163m for potential money laundering offences on Germanys biggest bank, which it said had missed several opportunities to clamp down on the activities of its Russian operations as a result of weak systems to detect financial crime between 2012 and 2015.

A US regulator, the New York Department of Financial Services (DFS), also fined the bank $425m as it listed problems at Deutsche including one senior compliance officer stating he had to beg, borrow, and steal to get the resources to combat money laundering. As part of the settlement, the DFS has imposed a monitor, who will police the behaviour inside the bank for two years.

The latest run-in with regulators comes as Deutsches chief executive, John Cryan, tries to clean up the bank. Last month it paid $7.2bn to settle a decade-old toxic bond mis-selling scandal with the US Department of Justice .

The German bank admitted that the investigations into its Russian operations over so-called mirror trades had not yet finished. It said it was cooperating with other regulators and law enforcement authorities. The DoJ is reported to be among them.

Deutsches share price has been extremely volatile in recent months over concerns about the banks ability to pay fines, at one point dipping to less than 11 last autumn . Its share price before the financial crash was 117.

As the latest penalties were announced, the shares fell by 0.5% to 18.52 valuing the bank at 25bn, which is less than half that of the UKs Lloyds Banking Group, for example.

In a memo to staff Karl von Rohr, chief administrative officer of Deutsche,said: We deeply regret the banks role in the issues cited. He added that the number of staff employed to fight crime had risen 30% in 2016 and now stood at 700. Another 450 will be hired this year.

The FCA said Deutsches anti-money laundering (AML) controls were not tough enough to stop the bank being used by unidentified customers to transfer approximately $10bn from Russia to offshore bank accounts in a manner that is highly suggestive of financial crime. Money was moved via Deutsche Bank in the UK, to obank accounts overseas, including onesin Cyprus, Estonia, and Latvia, the FCA said.

Mark Steward, director of enforcement and market oversight at the regulator, said: Financial crime is a risk to the UK financial system. Deutsche Bank was obliged to establish and maintain an effective AML control framework. By failing to do so, Deutsche Bank put itself at risk of being used to facilitate financial crime and exposed the UK to the risk of financial crime.

The size of the fine reflects the seriousness of Deutsche Banks failings. We have repeatedly told firms how to comply with our AML requirements and the failings of Deutsche Bank are simply unacceptable. Other firms should take notice of todays fine and look again at their own AML procedures to ensure they do not face similar action.

The penalties relate to the bank failing to obtain information about its customers involved in mirror trades ones which mirror each other and have no economic purpose which allowed Deutsche Banks Russia-based subsidiary (DB Moscow) to execute more than 2,400 pairs of trades between April 2012 and October 2014.

Shares in major Russian companies were paid for in roubles through the Moscow office and then the same stock would be sold through London, sometimes on the same day, for a related customer, the New York regulator said. The sellers were registered in offshore locations and received payment for the shares in dollars. A dozen entities were identified.

The FCA said the purpose of $6bn mirror trades was the conversion of roubles into US dollars and the covert transfer of those funds out of Russia, which is highly suggestive of financial crime.

The regulators found almost $3bn in 3,400 suspiciousone-sided trades also occurred. The FCA believes that some, if not all, of these formed one side of mirror trades. They were often conducted by the same customers involved in the mirror trading.

This Russian mirror-trading scheme occurred while the bank was on clear notice of serious and widespread compliance issues dating back a decade. The offsetting trades here lacked economic purpose and could have been used to facilitate money laundering or enable other illicit conduct, and todays action sends a clear message that DFS will not tolerate such conduct, said New Yorks financial services superintendent, Maria Vullo.

The FCA described Deutsche Bank as being exceptionally cooperative and having committed to solve the problems in its AML systems. The bank received a 30% discount for its cooperation. This is a contrast to 2015 when the bank was fined for rigging Libor and accused of being obstructive towards regulators in their investigations into the global manipulation of the benchmark rate.

Last year, Deutsche said, it had taken disciplinary measures with regards to certain individuals in this matter and will continue to do so with respect to others as warranted.

Five previous Deutsche fines

January 2017 500m for Russian money-laundering offences.

January 2017 75m to resolve a US government lawsuit over hiding tax liabilities to the Internal Revenue Service in 2000.

December 2016 5.9bn for toxic bond mis-selling scandal.

November 2015 200m for breaching US sanctions with Iran and Syria.

April 2015 1.7bn for rigging Libor.

Read more: https://www.theguardian.com/business/2017/jan/31/deutsche-bank-fined-630m-over-russia-money-laundering-claims


Trump orders Dodd-Frank review in effort to roll back financial regulation

President says bill meant to prevent another financial crisis is crippling the economy as critics charge that Trump is caving in to Wall Street

Donald Trump moved to roll back the financial regulations brought in after the last financial crisis on Friday, directing a review of the Dodd-Frank Act, which was enacted to ensure there would never be another 2008-style meltdown.

The US president said his latest executive order was necessary because the regulations were too onerous on business and hurting the economy. But the move was largely symbolic only Congress can rewrite the legislation.

A second directive is expected to halt the implementation of an Obama-era rule that would have required brokers to act in a clients best interest when providing retirement advice, rather than seek the highest profits for themselves.

We desperately need to overhaul how we approach financial regulation, said the White House press secretary, Sean Spicer. He said Dodd-Frank was a disastrous policy that was crippling the US economy.

Opponents of reform immediately accused Trump of caving in to Wall Street after a campaign pledge to hold banks accountable.

Donald Trump talked a big game about Wall Street during his campaign but as president, were finding out whose side hes really on, said Senator Elizabeth Warren, one of Trumps fiercest critics.

The Wall Street bankers and lobbyists whose greed and recklessness nearly destroyed this country may be toasting each other with champagne, but the American people have not forgotten the 2008 financial crisis and they will not forget what happened today.

Before signing the order, Trump met with his business advisory panel, which includes 18 executives from large US companies including GE, Citigroup, General Motors, Tesla and Disney.

We expect to be cutting a lot out of Dodd-Frank, because frankly I have so many people, friends of mine, that have nice businesses and they cant borrow money They just cant get any money because the banks just wont let them borrow because of the rules and regulations in Dodd-Frank. So well be talking about that in terms of the banking industry, Trump said.

The president was backed by Gary Cohn, director of the national economic council and a former Goldman Sachs banker. Americans are going to have better choices and Americans are going to have better products because were not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year, Cohn said in an interview with the Wall Street Journal. The banks are going to be able to price product more efficiently and more effectively to consumers.

Cohn, formerly the chief operating officer at Goldman, said the executive order was a table-setter for a bunch of stuff that is coming.

On the campaign trail, Trump accused Hillary Clinton and his Republican rival Ted Cruz of being in bed with Goldman Sachs. He also said hedge funds were getting away with murder.

Read more: https://www.theguardian.com/us-news/2017/feb/03/trump-dodd-frank-act-executive-order-financial-regulations


JP Morgan Chase to pay $55m to settle racial discrimination charges

Bank allegedly charged black and Hispanic mortgage customers more; JP Morgan denied wrongdoing, saying prices were set by independent brokers

JP Morgan Chase agreed to pay $55m to settle charges that the bank discriminated against thousands of minorities seeking home loans by charging them higher rates and fees.

The decision came after US attorney Preet Bharara filed a complaint on Wednesday alleging that the USs biggest bank discriminated against at least 53,000 African American and Hispanic mortgage seekers between 2006 and 2009 in violation of the Fair Housing Act.

Minority borrowers were owed tens of millions of dollars in damages, the government said, because JP Morgan allowed them to be charged higher rates and fees than similarly situated white borrowers.

Until 2009, JP Morgan used a network of wholesale mortgage brokers to sell its loan applications. The bank could have, but failed, to better monitor its wholesale brokers to discourage discrimination, according to the complaint. Brokers were given the discretion to adjust pricing based on factors unrelated to borrower risk, the government alleged.

As a result, the average black borrower paid about $1,126 more over the first five years of an average loan of $191,100, while the average Hispanic borrower paid about $968 more on an average loan of $236,800.

Even when Chase had reason to know there were disparities, however, Chase did not act to determine the full scope of these wholesale pricing disparities, nor did it take prompt and effective action to eliminate those disparities, nor did it engage in adequate efforts to remedy the impact of those disparities upon the borrowers, the government charged in the lawsuit.

JP Morgan denied wrongdoing. Weve agreed to settle these legacy allegations that relate to pricing set by independent brokers, said the bank in a statement. We deny any wrongdoing and remain committed to providing equal access to credit.

Read more: https://www.theguardian.com/business/2017/jan/18/jp-morgan-chase-settlement-racial-discrimination-charges-mortgage


Deutsche Bank and Credit Suisse agree multi-billion-dollar settlements with US

Banks to pay out for mis-selling mortgage securities, as Department of Justice launches legal action against Barclays

The US Department of Justice has extracted $12.5bn in settlements from Deutsche Bank and Credit Suisse for a decade-old toxic bond mis-selling scandal. It has also started legal proceedings against Barclays, which, in an unprecedented move, has refused to settle with the authorities.

Deutsche, Germanys biggest bank, will pay $7.2bn (5.9bn) to the DoJ. The sum is considerably less than the $14bn originally demanded. Credit Suisse has agreed to pay $5.3bn. Both settlements relate to the complex packaging of home loans, which was a lucrative business for the banking industry until the 2008 crisis.

The DoJ did not disclose the size of penalty it wanted to levy on Barclays, but it is understood to be $4bn. It accused the bank of plainly irresponsible and dishonest conduct.

The flurry of announcements just hours before the markets closed for the Christmas holiday came weeks before Donald Trump takes over as US president and follows months of negotiation between the banks and the DoJ, led by the US attorney general, Loretta Lynch.

The scandal dates back to 2005 and 2007, when banks packaged up home loans and used them to help create bonds known as residential mortgage-backed securities (RMBS) which were sold to investors. The mortgage repayments made by borrowers then provided a yield to the investor, so long as the borrower kept paying. The schemes fell apart when loans were made to borrowers who were unable to repay.

The penalties are part of Barack Obamas efforts to hold banks accountable, and the first major agreements to be reached with non-US banks. JP Morgan, Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch and Citi have all been punished already.

There are further penalties to come, notably for Royal Bank of Scotland. The bank could face a bill of as much as 9bn, analysts have said. Its shares rose 1% on hopes that it might soon be able to reach a settlement with the DoJ which it had hoped would take place this year or at least start to estimate its own bill.

Deutsche shares, which initially jumped 4%, ended almost 1% higher. Credit Suisse and Barclays slipped 1% in thin pre-holiday trading.

Barclays
Barclays Capital Bank building near Times Square in New York. Photograph: Alamy Stock Photo

Under the settlement, Deutsche will pay $3.1bn and provide $4.1bn in customer relief, such as loan modifications and other assistance to homeowners and borrowers, spread over five years. Credit Suisse will pay $2.5bn and compensation of $2.8 bn over five years.

Much of the focus was on Deutsche, run by Briton John Cryan, which had been contesting the authorities original $14bn fine. When that news first leaked, its shares plunged to 31-year lows over fears about its ability to withstand such a high bill.

There had been fears that Deutsche would need to embark on a cash call or even ask the German government for assistance, but the fact that $4.1bn of its payout for customer relief was not a lump sum helped soothe some of the anxiety.

A key area of concern has been removed, analysts at Goldman Sachs said, noting that the $1.2bn hit Deutsche would take in its fourth quarter was towards the lower end of market expectations.

Some analysts said Deutsche would need to press on with its restructuring to avoid a cash call. Positively, the deal is settled and out of the way, as it was thought that the issue could drag on into 2017, said Thomas Kinmonth, an analyst at ABN Amro, who added that without restructuring a cash call would have to be undertaken before 2019.

Deutsches shares have been pummelled on stock markets during 2016 over fears about its financial position. It had already set aside billions of euros in anticipation of the fine.

Barclays is the first bank to fail to reach a settlement and now faces lengthy court proceedings in New York to defend itself against claims it said were disconnected from the facts.

Two of its executives, Paul Menefee and John Carroll, are named by the DoJ. Crowell & Moring partner Glen McGorty, representing Carroll, said he would challenge these ill-conceived and baseless allegations, and expects to be fully vindicated.

The DoJ did not comment on the announcements by Deutsche and Credit Suisse, but as it filed legal papers against Barclays, Lynch said: As alleged in this complaint, Barclays jeopardised billions of dollars of wealth through practices that were plainly irresponsible and dishonest. With this filing, we are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people.

Where the money will go

The precise detail of the $6.9bn in customer relief, or redress, that Deutsche Bank and Credit Suisse will have to pay for their misdemeanours is yet to be finalised with the DoJ. The schemes, however, are likely to match those agreed with other banks for the mis-selling of residential mortgage bond securities..

Goldman Sachs agreed in April to pay $1.8bn in consumer relief as part of its $5bn settlement. This was described as writing off loans for underwater homeowners and distressed borrowers and making other payments for construction, rehabilitation and preservation of affordable housing. It also had to provide cash to support debt restructuring, to prevent foreclosure, and to back housing quality improvement programmes. Goldman was also told to put $240m into community projects to finance affordable homes for rent and sale.

The DoJ typically deploys monitors, lawyers or housing experts to police the terms of the customer relief. The banks involved in the DoJ settlements do not necessarily have direct relationships with the homeowners, but have packaged up their loans to back the bonds.

Read more: https://www.theguardian.com/business/2016/dec/23/deutsche-bank-credit-suisse-us-mortgage-securities-barclays


The Art of the Deal by Donald J Trump with Tony Schwartz digested read

A timely reissue of the business tycoon/president-elects collected entrepreneurial advice from 1987 is redacted by John Crace

I dont do it for the money. Ive got more money than Ill ever need. Some of it yours. Lets face it, you dont file for bankruptcy six times if youre planning on paying your dues. The key to making the best deal is to let others take the hit. I do it because I can. If you can get away with losing over $1bn on a deal, youd have to be a schmuck not to. Theres no way that Donald J Trump is ever going to let himself be one of those deadbeat Americans with no hope and no prospects. No sir. And thats why were shamelessly republishing this load of tosh from 1987. Heres a diary of a typical Trump week.

Monday 9am. Call my broker, Alan Greenberg, to buy $25m worth of stock in Holiday Inns. I sense its undervalued. As we speak, its value increases to $30m. My cock goes hard and I decide to sell.

Tuesday 3pm. Try to evict Carly Simon and Mia Farrow from their rent-controlled apartments, but both want to play hardball. Their loss. When you do battle with the Trumpster, theres only one winner.

Wednesday 1pm. Lunch with Ivana. Try to grope her pussy. Probably not the best time to tell her about Melania.

Thursday 5pm. Some kid at the door says hes my son. Tell him to come back when hes made his first $10m.

Friday 10am. The banks foreclose on Trump Taj Mahal casino putting thousands of people out of work. But at least I come away with $50m. My cock goes hard again.

My style of dealing is quite straightforward: 1) Get as much as you can for yourself; 2) Theres always somebody stupider than you out there; 3) Any attention is better than none; 4) Promise people the Earth even if you know you can never deliver; 5) Get yourself a top haircut.

The most important influence on me when I was growing up was my father, Fred Trump. He taught me everything I needed to know about making money. If he had a fault, it was that he was not narcissistic enough. Fred never named a tower after himself. He also wasted too much time buying properties for deadbeats. If theres one thing Ive learned from real estate, its that poor people on zero-hours contracts just dont know how to look after themselves.

My first deal in Cincinnati taught me that lesson. Having persuaded the banks to lend me the money, I put the day-to-day management of the rebuild in charge of a man I knew to be a conman. I figured he would con the contractors far more than he would con me, so I would end up ahead on the deal. No flies on the Don! Though I was glad to sell the houses off for a $10m profit before the market crashed.

In 1974, I moved into the New York property market when I bought the Commodore Hotel near Grand Central Station. It was rundown and operating at a loss and everyone thought it was a turkey, but I could immediately see its potential. As usual, I was proved 100% right and made $280m in an afternoon after renaming the hotel Trump Plaza.

I then built Trump Tower after buying a department store whose owner didnt understand its true worth. That project taught me that most politicians are just in the game for themselves. Its a mentality I just cant understand. With Trump Tower, I was determined to build as big as possible and the results speak for themselves. I have my own apartment on the top three floors and employ some limey called Nigel Farage as my lift attendant. It could be worse. I could have had Piers Morgan working for me. Can you believe that man? I met him once for five minutes on a reality game show and he hasnt stopped going on about it ever since. The guy must have nearly as big a personality disorder as me.

After Trump Tower came Trump Castle, Trump Palace, Trump Island, Trump White House and Trump Great Wall of Trump. Basically, it was the same deal every time. I was fabulously brilliant and made a huge amount of money for myself while everybody else lost big time. I was living the American dream. Bankrupt one day, rich the next. But my biggest success is the 120-storey Trump Toilet that can flush every Muslim, Mexican and gay back into the sewers where they belong. It might even come in useful for this book.

Digested read, digested: The American nightmare.

Read more: https://www.theguardian.com/books/2016/nov/20/the-art-of-the-deal-by-donald-j-trump-with-tony-schwartz-digested-read


How a power trip could doom the agency that took down Wells Fargo

Consumer Financial Protection Bureaus critics want to shut the agency down and claim its structure is unconstitutional and unaccountable to the public

The resignation last week of the chief executive of Wells Fargo should have been a high point for the Consumer Financial Protection Bureau (CFPB).

The CFPB announced in early September that it would receive the lions share of a $185m fine levied on Wells Fargo as punishment for encouraging employees to open millions of savings and credit accounts for customers without their knowledge or consent. The rest went to Los Angeles regulators and the Office of the Comptroller of the Currency.

Then came congressional hearings, at which Stumpf one of those rare individuals whom Democrats and Republicans could agree was a villain embarrassed himself by fumbling the questions and passing the buck up to his board of directors and down to the rank-and-file employees who actually opened the accounts.

Nor was that the only highlight for the CFPB of late. The agency has issued new rules governing prepaid cards, an alternative to checking accounts used by large numbers of unbanked Americans who cant afford the rising fees traditional banks levy on checking accounts, or for whom banks decline to open accounts.

As the wealth gap has widened, the prepaid industry has soared, from being worth $1bn in 2003 to $65bn by 2012. Users tend to be among the more vulnerable members of society: making less than $50,000, renters rather than homeowners, minorities and women, according to research by the Pew Charitable Trusts.

In other words, they tend to be vulnerable to abuse or simple misunderstanding. The CPFBs new rules will require clear disclosure about what fees the card issuer will charge to check a balance, for instance, and ensure that losses will be limited to what a conventional debit card holder would face if their card was lost or stolen.

So far, so good for the CPFB. A US appeals court, however, rained on the agencys parade, while members of Congress and others raised questions about whether the CFPB has embarked on some kind of power trip.

The court was considering an appeal in a case involving whether the CFPB had the right to impose a $103m fine on mortgage service PHH, for allegedly taking kickbacks for directing customers to a particular insurance company. The case reached the US court of appeals for the District of Columbia, where a three-judge panel headed by Brett Kavanaugh, a George W Bush appointee, handed down its ruling last Tuesday.

Unconstitutional, Kavanaugh thundered. Not the CFPB itself, but its structure, which is headed by a single individual, Richard Cordray, who serves for a fixed term. Typically, heads of such agencies serve either at the presidents pleasure or as part of a group, such as the five-member Securities and Exchange Commission.

So much for the brief, fleeting moment of bipartisanship as Democrats and Republicans joined in bashing Stumpf.

If you believe Republicans, the CFPB part of the Dodd-Frank reforms that followed the financial crisis of 2008 is, in the words of Kavanaugh, a grave threat to individual liberty, a phrase he used once every three pages or so in his 98-page decision.

Investors Business Daily agrees. The CFPB is an out-of-control and dangerous entity, it wrote the Frankensteins Monster of federal regulatory agencies that is almost entirely unaccountable to the public.

Translation: the CFPBs critics want to shut the agency down lest it become even more effective, and are taking a weird and sometimes mutually contradictory variety of approaches to doing so.

When the CFPB has been slower than it might have been to act, as in the case of Wells Fargo, Republicans have taken delight in accusing it of being asleep at the switch, in the words of Texas representative Jeb Hensarling, the CFPBs chief critic in the House.

When the CFPB has been proactive in its core areas mortgage lending, credit cards and student loans this has also attracted criticism. For instance, while its mission didnt include looking at for-profit colleges, the agencys emphasis on student loans led it realize that a disproportionate number of problems were tied to entities such as Corinthian colleges and ITT Technical Institute, which took advantage of the student loan system while at the same time misrepresenting graduation rates. It sued both schools for predatory lending, prompting their collapses.

Still, in at least one case, a federal judge (another George W Bush appointee) denied the agency access to information about how an accreditor signed off on programs offered by these colleges.

Although it is understandable that new agencies like the CFPB will struggle to establish the exact parameters of their authority, they must be especially prudent before choosing to plow headlong into fields not clearly ceded to them by Congress, tsk-tsked US district judge Richard J Leon.

Last weeks ruling could have been a lot worse, and Hensarling is probably gnashing his teeth in fury, wishing that the DC court had gone further. Cordray will now serve at the presidents pleasure, rather than for a fixed five-year term unless the agency appeals and the decision is overturned.

This isnt impossible: its hard to argue how the presence of a single individual at the helm of an agency offers a threat to liberty, unless the agency under that individual restricted the ability of those it regulated to access the court system to complain about its judgments. The fact that PHH did precisely that in this instance is evidence that theres no tyranny at work.

What Hensarling and his buddies are really irate about is that the CFPB gets its funding independently thats the lack of accountability that Investors Business Daily was getting huffy about. In other words, its not politicized: the CFPB doesnt have to grovel to Congress annually to keep its budget.

The agency has reason to be concerned. Even as Dodd-Frank expanded the list of SEC responsibilities, Congress, perhaps under pressure from the financial services industry, actually cut the amount of money it had to work with.

The SECs 2017 budget will be unchanged, it now seems. But yet again, that entity only narrowly escaped a cut.

In contrast, the CFPB is financially independent of Congress, being funded directly by the Federal Reserve (and collecting its fines, as other agencies do) and that drives Hensarling and other opponents crazy.

They may characterize that as being unaccountable to ordinary Americans, but I think it actually enables the agency to listen to ordinary Americans rather than to the Very Loud Voices of the lobbyists who have a disproportionate impact on Congress.

So far, at least the CFPB doesnt seem to be using any superpowers it might have to threaten my life, liberty or pursuit of happiness.

Read more: https://www.theguardian.com/business/us-money-blog/2016/oct/16/wells-fargo-consumer-financial-protection-bureau-congress-critics


Ex-Wells Fargo CEO John Stumpf deserves jail not a plush retirement | Nomi Prins

If the Department of Justice lived up to its name, it would move forward with John Stumpfs criminal investigation

For former Wells Fargo CEO John Stumpf, this will be his first weekend as a wealthy retiree. So it goes in a world where big banks can screw over customers and the public, and the CEO who presided over these practices can slink off into the sunset unencumbered by the kind of real retribution that plagues small-time drug users and petty thieves. They go free. We pay the price.

Two days before the banks quarterly earnings announcement, Stumpf announced his immediate resignation. That decision came about a month after the firm was slapped with a $185m settlement for a fee-stealing scam that resulted in the axing of 5,300 low-level employees. He did not resign after settlements for any of the prior wrongdoing that took place under his purview for which the firm paid about $10bn in fines.

Make no mistake. Stumpf was the captain and commander of this $1.9tn empire. Its culture, as in all Wall Street culture, was defined from the top down, not the other way around. For his penance, all Stumpf had to do was forfeit $41m in restricted stock awards (stock he didnt even fully own yet).

The figure for Stumps exit hoard is currently valued around $134m, a pretty plush parachute. That includes his vested stock and other retirement plans. But that figure can rise. The firms stock took a beating due to this latest scandal (its still down 11%). With Stumpf out and this cross-selling or sales practice scrubbed in the wake of his departure, rising share prices to pre-scandal levels could place his take closer to $160m or above. So Stumps departure holds monetary value for him. In bankster terms, its a slam dunk trade.

Massachusetts senator Elizabeth Warren and other senators have called for his resignation, a return of every nickel he made during the scam and a Department of Justice and US Securities and Exchange Commission investigation. So far, Warren pointed out in a tweet, only one of those things has happened. He shouldnt be afforded impunity (like other big bank CEOs) for running Wells during an effective crime spree.

Her request for DoJ criminal investigations into Stumpfs role, in just this scandal, has not been honored. Even if it were to be, would it get very far? There have been zero criminal indictments for any mega-bank CEO, regardless of the breadth, depth and cost of the crimes committed by their institutions under their stewardships. Stumpfs chances look pretty damn good.

Stumpfs number two man, 29-year Wells veteran Timothy Sloan, is being touted as the anti-Stumpf; clean, not of the retail unit that swindled the banks average customers. Only it wasnt just the retail unit implicated in settlements. Wellss fines included $1.4bn for allegations of misleading investors in securities auctions, $5bn for loan services and foreclosure abuses, and $1.2bn for defrauding the US government regarding mortgages eligible for federal insurance.

Sloans roles spanned wholesale and commercial banking operations (areas implicated by these settlements.) Plus, as chief operating officer since November 2015, Sloan was responsible for ensuring good practices for that retail unit. Clean is relative. And meaningless.

The new board chairman, Stephen Sanger, said Stumpf believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the Company forward. Current challenges. Thats the kind of terminology that whitewashes the gravity of what he did. If the Department of Justice had the balls, it would move forward with Stumpfs criminal investigation and minimally slap him with an indictment. So far, it has not shown such aptitude.

Read more: https://www.theguardian.com/commentisfree/2016/oct/14/john-stumpf-retirement-wells-fargo-ceo-jail-time


Wells Fargo announces profit drop after CEO exits in fake accounts scandal

The bank said on Friday, days after John Stumpf announced his retirement, that earnings slipped in the third quarter, though the results beat expectations

Wells Fargo profits dropped by 2.6% as earnings slipped in the third quarter, the bank said on Friday, days after its chief executive and chairman, John Stumpf, announced his retirement in the wake of a scandal over sales practices.

In early September, Wells Fargo reached a $185m settlement with regulators following allegations that employees opened up to 2m bank and credit card accounts without customers authorization, in order to meet sales goals.

In the quarter ending on 30 September, the banksaid, it earned $5.6bn or $1.03 per share, compared with $5.8bn or $1.05 per share in the same period a year earlier. The results beat analysts expectations, of $1.01 per share.

Under pressure from politicians and investors, Stumpf retired on Wednesday. John will not receive any severance payment. His retirement benefits are disclosed in our proxy statement, a spokeswoman told the Guardian.

Stumpf could however leave with as much as $130m, according to CNN Money analysis. Stumpf owns 2.4m shares of stock, worth $107m.

If Wells Fargos John Stumpf is leaving with all of his ill-gotten millions, thats still not real accountability, Massachusetts senator Elizabeth Warren tweeted after Stumpf announced his retirement.

Warren, a leading voice for accountability and reform in the financial sector, previously called on Stumpf to resign, return every nickel he made during the scam and submit to inquiry from Securities and Exchange Commission and the US Department of Justice.

A bank teller would face criminal charges and a prison sentence for stealing a handful of twenties from the cash drawer, she said.

Elizabeth Warren (@SenWarren)

A bank CEO should not be able to oversee a massive fraud & simply walk away to enjoy his millions in retirement.

October 12, 2016

Stumpf has forfeited stock awards worth $41m; had he stayed on, he was to forgo any salary while an independent investigation into sales practices was ongoing.

Carrie Tolstedt, who oversaw the retail banking business when the unauthorized accounts were created, retired earlier this year. According to Wells Fargo, Tolstedt will not receive severance and has waived about $19m in unvested stocks.

However, she is still to walk away with about $77m. In mid-September, the bank told US lawmakers Tolstedt owned 960,017 shares, then worth about $43.6m, and $34.1m worth of vested stock options.

Chief operating officer Tim Sloan was named to replace Stumpf as chief executive. In a statement, he said: I am deeply committed to restoring the trust of all of our stakeholders, including our customers, shareholders, and community partners.

We know that it will take time and a lot of hard work to earn back our reputation, but I am confident because of the incredible caliber of our team members. We will work tirelessly to build a stronger and better Wells Fargo for generations to come.

Asked in a call with investors on Friday if Wells Fargo should consider bringing in someone new to lead the bank, Sloan said that was a fair question but said the board was comfortable with and supportive of the current management team.

Sloan also said it was disturbing to hear claims of retaliation against staff members who tried to flag the practice of opening unauthorized accounts. Wells Fargo, he said, had reached out to staff members who were let go for not meeting their sales quotas and might be eligible for rehire. As of 1 October, the bank has eliminated sales quotas in its retail banking business.

Employees are the banks most important asset, Sloan said.

From 2011, more than 5,300 such employees were fired for creating unauthorized accounts. Stumpf said those firings were not part of an orchestrated effort.

Matt Moscardi, head of financial sector research at MSCI, said scapegoating former employees and firing those who did not meet quotas could hurt Wells Fargo. A significant drop in productivity, he said, would lead to a drop in revenue.

Fridays results do not reveal the long-term impact of the sales-practice scandal, which broke in mid-September, when the quarter was nearly over. The bank had noticeably higher non-interest expenses in the quarter, due partly to the $185m settlement.

In a presentation to investors released on Friday, Wells Fargoreported a drop in what it called banker and teller interactions in September, from both a year previously and from August, before the scandal broke.

Consumer checking account openings dropped by 25% from September 2015 and 30% from August 2016. Applications for Wells Fargo credit cards also fell sharply in September.

The bank said referrals for mortgages from retail branches were down 24% from August. Retail branch referrals account for 10% of all mortgage originations at what is the nations largest mortgage lender.

Wells Fargo revenue in the quarter was $22.33bn, up 2% from a year earlier.

  • The Associated Press contributed to this report

Read more: https://www.theguardian.com/business/2016/oct/14/wells-fargo-profits-down-third-quarter-john-stumpf


One month after the referendum, are predictions of Brexit blight coming true?

Though the Leave vote hit share values hard, many have recovered. But other sectors of the economy will be counting the cost for years

The overall impact of the historic referendum that saw the UK unexpectedly vote to leave the European Union has so far, in the space of a month, been less severe than some of the more apocalyptic warnings had suggested. But there have been winners and losers across the economy.

The pound

Sterling went on a rollercoaster ride on referendum night, ending up down 8% against the dollar as the results confirmed a victory for the Leave camp. Since then, its decline has continued and the pound is now at levels not seen since 1985, having lost about 12% against the US currency. Compared with the euro, the pound has fallen by 9% since the vote and is at a three-year low making holidays in euroland more expensive.

The decline comes as investors worry about weakness in the UK economy and the prospect of interest rate cuts to boost demand. This month the Bank of England left rates on hold but said most members of its monetary policy committee expected a cut in August if the economy did not improve.

The weak pound is a boon to exporters but will make imported goods more expensive. On Thursday, Unilever the business behind brands including Dove, Flora, Bertolli, Hellmans and Persil became the first major food and consumer goods company to warn that companies were likely to pass on increased costs to customers.

Stock markets

Markets were caught by surprise by the Leave result and a record $2tn was wiped off the value of global shares. But since then, there has been something of a recovery, particularly for the FTSE 100, which has regained all lost ground and more, and is currently at 11-month highs. However, the leading UK index is chock-full of companies with international operations, which are less exposed to any slump in the UK economy, and which earn in dollars, thus gaining from the new lower exchange rate.

The weak pound has also raised the prospect of UK-listed companies being snapped up by foreign rivals because suddenly they look cheap. Just last week chip designer ARM agreed to be taken over by Japans SoftBank for 24bn, while South African retailer Steinhoff has agreed to buy Poundland. Analysts believe more deals will follow.

Markets have also been lifted by bargain hunters who believed valuations had fallen too far, as well as by the quick resolution to the political crisis threatening to engulf the government following Theresa Mays appointment as prime minister.

However, the mid-cap FTSE 250, which is more exposed to the UK economy than the 100 index, has yet to reach the level it was sitting at before the referendum result, despite recovering more than 13% from its lows. It is now down 2% from its pre-Brexit level.

Housing market

There has been a spate of profit warnings from estate agents, and many are making gloomy forecasts for the rest of the year. Agents in some upmarket parts of London have reported a bounce in interest from overseas buyers keen to take advantage of weak sterling, but for the mainstream market there are signs both interest and price growth have cooled.

On Friday, LSL, Britains second-biggest estate agent group owner of Your Move and Marsh & Parsons among others said business had slowed since the vote and warned that its annual profits would be significantly lower than anticipated. London-focused Foxtons issued a similar warning in late June.

Forecasts for the rest of the year are for falling interest from buyers and price drops, particularly in the most expensive parts of the market. French bank Socit Gnrale said last week that a price correction of even 40-50% in the most expensive London boroughs could be possible.

The Royal Institution of Chartered Surveyors (Rics) says its members expect sales to slump over the summer, because buyer inquiries fell significantly in June. Ricss findings were cited by the Bank of England when it announced that it was revising down its forecast for price rises.

Housebuilders

Shares in housebuilders lost around 40% of their value in the immediate aftermath of the Brexit vote, with investors worried that an economic slowdown in the UK would hit their business, despite the country seeing record low interest rates.

There has been some recovery since then, but the companies have failed to regain all their losses. Barratt Developments, Britains biggest housebuilder, is still down around 28%, and it has said that it may build fewer homes because of the current uncertainty.

Even before the vote, upmarket rival Berkeley had warned in June of a 20% drop in reservations of new homes.

Barratt
Barratts share price is down 28%. Photograph: Bloomberg via Getty Images

Commercial property

The commercial property market was already stalling in the months running up to the referendum as investors put plans on hold to await the result. The UKs decision to leave the EU has not encouraged them back.

Rics said last week that there had been a significant drop in confidence and demand among investors and tenants since the vote. Both rent and capital value expectations are now in negative territory, it reported, adding that office and retail properties have been hardest hit.

Funds invested in commercial property were forced to close their doors for a while, as panicked savers tried to withdraw their cash. Those barring withdrawals included funds run by Standard Life, M&G Investments and Aviva Investors. Last week, they started to reopen for business, but some investors who want to get their money out will take a hit. Aberdeen Asset Management, for example, is adjusting payments downwards by 7%.

Banks

The banking sector has been hard hit by the Brexit fallout, thanks to a combination of low interest rates, worries about future access to European financial markets and the prospect of a general downturn.

With expectations of another rate cut in August, the banks are braced for more strain on their stretched balance sheets, at the same time as the economy is slowing and the risk of bad debts is increasing.

Moreover, so-called passporting arrangements, under which banks can sell financial products throughout Europe even though the UK is not part of the single currency, could come under threat after Brexit.

Banks most exposed to the UK market have been hardest hit, with Lloyds Banking Group and Royal Bank of Scotland down 25% and challenger bank Virgin Money falling 35%.

Profit warnings

Estate agents have been the only businesses to issue profit warnings following the Brexit vote. However, British Airways owner International Airlines Group was quick off the mark to say the uncertainty would hit demand, closely following by easyJet. Last week, the budget airline added that the fall in the pound had cost it 40m.

Other travel companies are also suffering as, along with increased concerns about terror attacks, they face the prospect of UK holidaymakers ditching more expensive overseas trips and staying at home.

But executives at Heathrow airport said on Friday that the Leave vote had been good for business, with the falling pound encouraging international visitors to spend more in its shops, as well as making it easier to raise money from foreign investors.

FIRST SIGNS OF ECONOMIC IMPACT

The first real sign that Brexit is having an impact on the economy emerged last Friday, with a Markit survey showing business activity in services and manufacturing shrinking in July at its fastest rate since the global financial crisis in 2009. The data suggested that UK GDP could contract by 0.4% in the third quarter, according to Markit.

Until then, the data had been equivocal. The International Monetary Fund, which before the referendum had warned of possible recession if the Leave campaign won, cut its forecast for UK growth in 2017 by 0.9% points to 1.3% from its April estimate. But that is still similar to its forecasts for Germany and France.

A report from the Bank of Englands regional agents last week showed that a majority of firms were not planning to mothball investment or change their hiring plans.

The latest job figures looked upbeat: showing unemployment at its lowest level for more than a decade, with 31.7 million people in work in the three months to the end of May 176,000 more than for the three months to February 2016.

On the high street, however, the volume of retail sales fell by 0.9% between May and June. This compared to a rise of the same amount in the previous three months, and showed the effect of falling consumer confidence in the run-up to and immediate aftermath of the EU vote.

This was backed up by a survey from the British Retail Consortium and KPMG showing retail sales in the three months before the vote at their weakest for seven years, while market research group GfK recorded the biggest slide in consumer confidence for 21 years in a one-off poll following the referendum.

Inflation is on the rise, with official figures showing that dearer air fares and driving costs helped to push the consumer price index up by 0.5% in the year ending in June, up from 0.3% previously.

With higher prices on the way after the Brexit vote, inflation could breach its 2% target during 2017.

Read more: https://www.theguardian.com/business/2016/jul/23/brexit-one-month-after-referendum-blight-predictions


UK loses triple-A credit rating after Brexit vote

Standard & Poors issues downgrade and pound hits 31-year low despite chancellors attempts to soothe markets

The UK has been stripped of its last AAA rating as credit agency Standard & Poors warned of the economic, fiscal and constitutional risks the country now faces as a result of the EU referendum result.

The two-notch downgrade came with a warning that S&P could slash its rating again. It described the result of the vote as a seminal event that would lead to a less predictable stable and effective policy framework in the UK.

The agency added that the vote to remain in Scotland and Northern Ireland creates wider constitutional issues for the country as a whole.

S&P was the last of the big three ratings agencies to have a blue-chip rating on the UKs credit-worthiness. Moodys, which stripped the UK of its top notch rating amid the austerity cuts of 2013, said last week it might further cut its view of the UK.

Rating agency moves have the potential to make it more expensive for the government to borrow.

The S&P move came after another torrid day on the financial markets. The pound hit fresh 31-year lows and 40bn was wiped off the value of the UKs biggest companies on Monday, despite efforts by George Osborne to quell investors concerns about the economic and political ramifications of the Brexit vote.

After three days of silence, the chancellor made a statement on Monday morning to try to calm the markets. However, sterling remained under sustained pressure on the foreign exchange markets as economists slashed their forecasts for UK economic growth. Wall Street was also weaker while continental bourses sold off sharply after Fridays record $2tn of losses on global stock markets.

Expectations are mounting that the Bank of England will cut interest rates possibly to zero from their historic low 0.5% to stimulate the economy, and yields on government bonds fell below 1% for the first time, which could spell cheaper mortgage rates.

In a live broadcast just after 7am, as dealers in London braced for another day of turmoil, Osborne insisted: Our economy is about as strong as it could be to confront the challenge our country now faces.

But moderate losses on the FTSE 100quickly deepened and at one point sterling was down 3.5% against the dollar, at $1.3122, its lowest level since 1985. Against the euro, the pound was down 2.4% at 1.19.

Speaking at the World Economic Forum in China, Nouriel Roubini, economist at New York University, described Brexit as a major significant financial shock that would create a whole bunch of economic, financial, political and also geopolitical uncertainties.

By the end of trading, the FTSE 100 index was down 2.6%, or 156.5 points, and below 6,000. The FTSE 250, the next tier of companies and more closely tied to the UK economy, was down 7%, coming on top of a 7% fall on Friday.

Its been another dramatic day of trading on the UK stock market, said Laith Khalaf, senior analyst at the financial firm Hargreaves Lansdown.

Companies likely to be impacted by a Brexit-induced recession were hit hard. In two days, about 40bn has been wiped off the value of banking stocks and 8bn off housebuilders. At one point, shares in the bailed-out Royal Bank of Scotland plunged 25%, while housebuilders such as Persimmon and Taylor Wimpey have lost more than 40% in just two trading days.

Michael Hewson, chief market analyst at CMC Markets, said while Osbornes statement had been measured his comments were unable to prevent the feeling that UK politics remains in a state of paralysis, with no clear contingencies in place to deal with the fallout of a leave vote.

The biggest faller in the FTSE 100 was short-haul airline easyjet, which plunged by 22% after warning that wary consumers would now rethink their travel plans. Exchange rate movements, the carrier added, would add 25m to costs.

Another profit warning came from the London-focused estate agent Foxtons. Its shares dived 25% after it said Brexit would hit sales for the rest of the year. Shares in so-called challenger banks such as Virgin Money were also pummelled.

Osborne spoke after it emerged that the Bank of England governor, Mark Carney, had cancelled a trip to Portugal to remain in the UK to oversee any response from Threadneedle Street.

The Banks financial policy committee, set in the aftermath of the financial crisis to look for threats to stability, will meet on Tuesday, when the Bank of England will again offer emergency loans to banks as part of its Brexit planning.

The fallout from the vote is being felt around the world. Italys main index fell 4%, extending Fridays record losses of 12.5%. In Germany and France there were losses of 3%. At the time of the London close, on Wall Street the main share indices were all down more than 1%.

The chancellor may have taken some comfort from the fall in yields on 10-year government bonds. Yields on these gilts, which move inversely to prices, fell below 1% for the first time. This fall in gilt yields will keep government borrowing costs down and lead to lower mortgage rates. However, they also mean pension companies have started cutting the amount paid to the newly retired.

Osborne refused to repeat his pre-vote warning of a Brexit recession, saying only that the economy would face adjustments. But analysts started to cut their forecasts for UK growth. Goldman Sachs, forecasts just 0.2% growth in 2017, down from 2% predicted previously.

The consultancy Oxford Economics said interest rates could be slashed to 0% within weeks. Morgan Stanley analysts said European and UK stocks would fall up to 10% over the coming months and sterling would fall to between $1.25 and $1.30.

Much of the markets focus has been on the pound, particularly after the speculator George Soros, who made $1bn when sterling fell out of the exchange rate mechanism in 1992, had warned of a black Friday in the event of Brexit. His spokesman stressed that he had not bet against the pound last week.

George Soros did not speculate against sterling while he was arguing for Britain to remain in the European Union, the spokesman told Reuters. However, because of his generally bearish outlook on world markets, Mr Soros did profit from other investments

Read more: https://www.theguardian.com/business/2016/jun/27/property-and-financial-shares-slide-as-referendum-fallout-hits-stock-markets


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