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Reply With QuoteFed's Lacker: Libor scandal hurting confidence
But I'm sure the banking and financial industries don't need tighter regulation. I'm sure the magic of the free market will automatically prevent any further malfeasance. :rolleyes:
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For those of you who are not aware of what this scandal is about, LIBOR is the overnight lending rate between banks and basically sets the interest at which banks pay one another for borrowing. The rates started to go through the roof in 2008 when the financial meltdown started and it now turns out that Barclays (one of the world's largest banks) was complicit in rigging the rate for years. This has now led to the CEO standing down, and then chairman, who then redacted his own resignation as the CEO (Diamond) had originally sworn to stay in power.
Diamond Quit Barclays After 'Elastic Snapped'
Barclays stock has taken a real tjrashing in the last few days and a record 290 million fine from the SEC and UK authorities have left the bank in tatters:
http://marketdata.skynews.com/instru...TATION=9454489
The stock alone is one thing but confidence in Barclays is now dropping like a stone. Bob Diamond was widely believed to be perhaps the greatest financial genius in Europe at the time and he is now struggling to save his reputation, now that he has lost his job and his massive salary.
We are yet to see the full term knock on effect of what this will lead to, but already Barclays is being tapped to become the next "RBS group" or "Lloyds banking group" where their reputation is reduced to junk, public sentiment has nothing but anger towards them and is another black eye for banks and the financial sector, which is still reeling from some 5 years of battering.Barclays boss Bob Diamond and another member of his top team have quit their posts amid the growing rate-rigging scandal.
Chief executive Mr Diamond and Chief Operating Officer Jerry del Missier, who was later directly-linked to the scandal by the bank itself, fell on their swords 24 hours after Marcus Agius announced his intention to resign as chairman.
In an exclusive interview with Sky's Jeff Randall Mr Agius said Mr Diamond's resignation came "after something just snapped last night".
Today, in an extraordinary series of events, Mr Agius was appointed full-time chairman until a date to be fixed to lead the search for Mr Diamond's successor as the fallen chief executive faced a battle to retain almost £20m in bonuses.
In a conference call with journalists, Mr Agius later moved to provide some clarity on the role of Barclays' management in the scandal, claiming Mr del Missier was the most senior Barclays executive to instruct staff to lower Libor lending rates between banks to make Barclays appear strong.
However, he refused to comment on a report that this happened because Barclays was told in October 2008 by the deputy governor of the Bank of England Paul Tucker that Barclays did not have to submit its Libor rates as high as it had done.
All of the major leaders in the UK political circles (PM, deputy PM, Chancellor, Shadow Chancellor etc) have all called this the "Right and proper" thing to do but now the questions come in as to whether Gulliver at HSBC and Osorio at Lloyds are safe either. Eric Daniels already lost his fight over the same issue and now it is a question of who knew what and when...rather than being the exception to the rule, Fred Goodwin is now the standard in banking crisis that have engulfed the UK and EU.
The main reason for his departure in the end is believed to be due to his bonus wishes, but Diamond refused to give it up the Hester did a couple weeks ago:
Exclusive: Bank Boss Under Bonus Pressure
So apparently shareholders are less than amused by Barclay's antics but a simple increase in shareholder dividend certainly wasn't going to cut it, and even the resignations are not seen as enough to save the bank's reputation, just by themselves by the looks of it.A number of directors at Barclays believe that Bob Diamond, the Barclays chief executive, will have to hand back millions of pounds in past bonuses if he is to save his job, I have learned.
"It would have to be on a voluntary basis but a meaningful gesture of some kind is needed," a person close to the board tells me.
Leading shareholders are also applying pressure to the Barclays board to ensure that a more material financial sacrifice is made by Diamond ahead of his appearance in front of the Treasury Select Committee on Wednesday.
Last week, Diamond and three of his executive colleagues said they would waive any bonus entitlement for 2012 in light of the bank’s £290m fine for rigging the Libor benchmark interest rate.
One investor called that move "meaningless".
He said that because many shareholders believe that awarding any bonus for this year would have been impossible after Barclays’ tax avoidance settlement with the Government, the interest rate swaps mis-selling scandal and last week’s fines by regulators in the UK and US.
None of the shareholders to whom I’ve spoken think that the resignation of Marcus Agius, the chairman, will in itself be sufficient to restore faith in Diamond. Barclays confirmed this morning my disclosure yesterday that it was poised to commission an independent inquiry into the culture of the bank.
I’m told that Diamond is likely to reflect on the pressure to hand back some of the vast riches he was awarded during the 2005-08 period in which Barclays traders attempted to rig the Libor rate.
To be clear, there is no mechanism to force him to do that because clawback did not become an established element of directors’ contracts until recently.
So let's take a look at Diamond's salary:
in 2006, Diamond bagged over 10 million in bonuses (cash) alone, with his base salary and stock and share options above that, and 6.5 million and a share of 11 million respectively the following 2 years. Now a bad way to earn, i guess.
Looks like Aguis will lead the search for the next CEO, with Anthony Jenkins next in line from the Barclays board, or to keep in the theme of massive losses and fines, they may go with the former head of JPMorgan, Bill Winters.
Barclays CEO Diamond, COO del Missier Resign | Fox Business
Of course this is just the tip of the iceberg by the looks of it with a dozen banks around the world looking at similar if not the same case in conjunction with Barclays, of abuse of inter bank and lending practices. HSBC, Citi, UBS and others are all in the firing line atm.
Of course none of this even addresses the political fallout of all this including the apparent astonishing admission that the Deputy Governor of the Bank Of England managed to give the green light to all this years ago! Now the British leaders are bickering as to how best investigate all this, whether it be a select committee, judicial inquiry, public inquiry etc which is on top of the FSA investigating a civil investigation and the SFO to decide within a month or less whether to bring in criminal charges or not, too.
Barclays CEO Robert Diamond Resigns - WSJ.com
According to the Barclays documents submitted on Tuesday, Mr. Diamond didn't believe he received an instruction from Mr. Tucker. However Mr. del Missier, then president of Barclays's investment bank, concluded that an instruction had been passed down from the Bank of England not to keep Barclays's rate as high.
The Bank of England declined to comment Tuesday. A U.K. government spokesman didn't have an immediate response. The current Conservative-led government took power in 2010; in 2008, the now-opposition Labour Party was in power, led by then-Prime Minister Gordon Brown.It is likely Diamond will keep most, if not all of his compensation, 6 months of salary after a voluntary resignation, and will not lose most of his bonuses due to a time limit on claw backs, and will likely head back to the US, a multi-millionaire facing little to no punishment for any of his role in any of the rate rigging scandal.The U.K. government announced Monday a series of inquiries into ethical standards in the banking industry and as the U.K. Serious Fraud Office said it was considering criminal prosecutions against those who attempted to rig the rates.
Mr. Tucker, who is now the BOE's deputy governor of financial stability, hasn't been implicated in any way by the various authorities investigating the Libor-rigging scandal.
For Whitehall, this is seen as a massive win as they have long had multiparty support for populist anti bank rhetoric and all have championed this resignation:Under the terms of his employment agreement, Mr. Diamond is entitled to six months' salary after a voluntary resignation. He earned £1.35 million ($2.12 million) in salary last year. He isn't automatically entitled to a bonus for this year, but he could still receive payouts under long-term plans. The bank says it is still negotiating the terms of Mr. Diamond's departure.
A spokesman said Mr. Diamond's past bonuses were unlikely to be clawed back, because the attempts at rate manipulations happened more than three years ago and the term for clawbacks on those years' bonuses has expired.
Some of the notes do give more detail on the pressure from the Bank of England, too:On Tuesday U.K Chancellor George Osborne hailed Mr. Diamond's departurethe move.
"I think it's the right decision for Barclays. I think it's the right decision for the country because we need Barclays bank to focus on lending to our economy and not distracted by this argument about who should be in charge," he said on BBC radio. "I hope it's a first step to a new culture of responsibility in British banking."
Barclays Notes Suggest Government Pressure on Libor - WSJ.com
And then of course, just like that, the heads in Whitehall all turn on the guy they built up from the ground:
Diamond Resignation: Reaction - The Source - WSJ
Of course Osbourne, Miliband, Brown and co were all complicit in this as was Merv King, but it won't be any of their heads that roll, of course...just Diamond's.REACTION:
*U.K. Chancellor of the Exchequer George Osborne:
Mr. Osborne welcomed Mr. Diamond’s decision to resign and said he hoped it marked a first step toward “a new era of responsibility” in British banking.
Speaking to the British Broadcasting Corp., he said that recent revelations about attempts to rig interbank rates had “in a way opened a door on the very bad practices in banking” that had led to the 2008 financial crisis.
“We need to see a change in the culture of banking and today we saw a step towards that,” Mr. Osborne said. “We are determined to play our part in bringing about this change.”
Diamond did at least admit his role and apologize for it, in all this, which is more than what we have seen from anyone in Parliament:
Barclays Chief Says 'Sorry' - WSJ.com
Aguis also took his fair share of responsibility, but for UK lawmakers, it is nothing but relief:PLC Chief Executive Robert Diamond apologized for the interest-rate manipulation scandal that has engulfed the U.K. bank but resisted outside pressure to resign.
In a letter to employees, the 60-year-old Mr. Diamond, Barclays CEO since 2011, said he was "sorry" and vowed to impose new internal controls. "I am disappointed because many of these behaviours happened on my watch. It is my responsibility to make sure that it cannot happen again," Mr. Diamond wrote.
Video - Relief for Politicians After Diamond Resignation - WSJ.com
Here is a look at some of the candidates potentially to replace Diamond:
Video - Candidates in the Frame For Barclays CEO Post - WSJ.com
And then tomorrow will come the fallout, when Diamond testifies in front of a Treasury Select committee...this is just the start, and fire will probably engulf the entire bank by tomorrow.
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Secretary of State
Fed's Lacker: Libor scandal hurting confidence
But I'm sure the banking and financial industries don't need tighter regulation. I'm sure the magic of the free market will automatically prevent any further malfeasance. :rolleyes:
Vice President
You don't like pulling tonight's overnight inter-bank interest rate out of a hat?Originally Posted by jpn
You should always have an informed opinion, so after I inform you, please feel free to express my opinion...USCitizen
County Council Member
And this was done in spite of government regulation. Imagine how bad it woudl be if we rolled them back like the Republicans are proposing.
Secretary of State
And the beat goes on...
Secretary of State
No, regulations need to be in place. But it's a question of what sort of regulations. I'd be in favor of re-instituting the Glass-Steagall act of 1932, whose primary purpose was to separate commercial (consumer) banking from investment banking (gambling).
Frank-Dodd clearly isn't the solution, especially given the current fragile state of the US economy:
the Dodd-Frank Act is a sprawling piece of legislation, numbering over 2300 pages in length and requiring ... impede economic recovery by limiting access to ..... Secretary Geithner: “Fourth, we will not risk killing the freedom for innovation that ...
http://financialservices.house.gov/U...ank-REPORT.pdfCommon sense, simple, cheap and easy to comply with; that's the type of regulation that is required, and should be the goal of every piece of legislation passed. Not some sort of legislative largess that creates a morass of regulations, which does little more than employ more lawyers to battle the regulations in court.Job-killing bank regulations threaten to wipe out all the gains in private-sector employment since the recovery began, the industry warns. Washington, however, is hiring thousands more bureaucrats to enforce the rules.
Signed into law last year, the Dodd-Frank Act is the biggest rewrite of financial regulations since the New Deal. It was intended to rein in Wall Street "excesses." But the banking industry says burdensome red tape is hurting economic growth and jobs in a still-sluggish labor market.
"The level of real GDP could be 2.7% less by the year 2015 than would otherwise be the case for the United States," said Stephen Wilson, outgoing chairman of the American Bankers Association. "This could result in 2.9 million fewer jobs being created.”
By comparison, the economy has created 1.78 million private jobs since the recovery officially began in June 2009.
Wilson says Dodd-Frank has resulted in more than 5,230 pages of proposed and final rules, which laid end-to-end would exceed the height of New York's Empire State Building — five times over.
Only a fourth of the rules have gone into effect so far, he says; yet the law in its first year has already imposed almost 20 million hours of paperwork on U.S. businesses. It took an estimated 5.5 million man-hours, in contrast, to build every iPhone sold.
Dodd-Frank compliance costs for the financial industry already top $12 billion. That is expected to swell as the remaining 77% of required rules are finalized.
Also, price controls imposed by Dodd-Frank will result in a 45% loss in debit card interchange revenue for banks, Wilson pointed out. Banks have laid off workers to raise revenue to meet higher capital reserves mandated under the law.
"In the end," he said, "it means fewer loans get made, slower job growth and a weaker economy.
Wilson, who also runs a small bank in Ohio, made the remarks last month during a speech on international finance in Tokyo.
The new regulatory regime, however, is a boon for lawyers and government workers.
A Government Accountability Office study this summer concluded that implementing Dodd-Frank rules would require 2,850 additional federal employees just through fiscal 2012 (which ends Sept. 30) — at a cost to taxpayers of $1.3 billion.
The Consumer Financial Protection Bureau will command the bulk of new hires and funding. Created by Dodd-Frank, the watchdog agency started with a staff of 1,225 and a budget of $330 million.
Patrice Ficklin, who heads CFPB's Office of Fair Lending, says she's hiring lawyers, statisticians, analysts and enforcement agents. These are high-paying jobs. In fact, the CFPB has hired at least a dozen employees at salaries of more than $225,000 a year.
The White House denies the financial regulations it championed are costing companies revenue and slowing hiring. It cites, for example, higher corporate profits.
"If you look at corporate profits, it's hard to make the case that regulations have caused companies to be scared about (hiring) or (that they're) hurting their job growth," argued Alan Krueger, President Obama's top economist.
"I think the main reason (for weak hiring) is that the companies feel that they could satisfy the demand that they face with the workers that they have," Krueger added in a recent CNBC interview. "Until they are more confident that consumers are coming back at a greater clip — that the demand will be there — I think we'll continue to see job growth at the kind of moderate pace that we've seen.
But analysts note that hiring still lags consumer spending. And they say profits are up mainly because businesses have slashed payrolls and other costs.
Even Rep. Barney Frank, D-Mass., admits the regulation he co-sponsored has cost jobs in the financial sector. But he says it's a "reasonable price" to pay to bring "greedy" bankers to heel. "If you lock up drug dealers," he said in a recent interview, "you're going to have fewer jobs.
U.S. Chamber of Commerce official David Hirschmann says employers remain uneasy about Dodd-Frank.
"Instead of creating jobs, the law has created uncertainty for job creators," he said. "The economic statistics bear that out.
Hirschmann added: "We are simply not going to see American companies spending capital until they can begin to navigate their way through this tangled web of regulation.
Dodd-Frank Hits Small Firms By forcing banks to increase the capital they have on hand to cover losses, Dodd-Frank has reduced capital available for small-business loans. This in turn has slowed hiring.
Tom Boyle of State Bank of Countryside in La Grange, Ill., says Dodd-Frank is "handicapping our ability to meet the credit needs" of small firms. "The consequences are real," Boyle said. "It means fewer loans get made. It means slower job growth.
Product marketer K&M of VA Inc., for one, wanted to expand this year but for the first time had trouble getting a line of credit. Owner Mike Bucci blames the new bank law. So does American Business Group, an Orlando, Fla.-based company that matches small-business buyers and sellers. If buyers can't access a loan thanks to Dodd-Frank, CEO Jessica Hadler Baines told IBD, "then the other option is to close the business down, putting more workers into unemployment.
The credit crunch could worsen if Dodd-Frank drives smaller banks out of business as predicted.
"Dodd-Frank and the related burdens are threatening not just our industry but our very banks," ABA's Wilson said. "The most conservative estimates predict that by the end of the decade, there will be 1,000 fewer banks in the United States.
That means fewer financial jobs in a sector that has already lost hundreds of thousands of workers.
Dodd-Frank Rules Will Crush Employment
Posted by on December 13, 2011
By Paul Sperry, for Investor’s Business Daily
Dodd-Frank Bank Regulations May Wipe Millions Of Jobs, Add Thousands Of Bureaucrats - Investors.com
If a man were behind four months on his mortgage and was talking to you about his plans to build an addition on his home you would think him daft and delusional. But in Washington, ignoring a current crisis to discuss grand dreams is called “boldness” and “vision.”
Vice President
e,
Can you list 5 laws from Dodd-Frank that are stifling the US economy?
I ask lots of people this question and they keep giving me blank stares.
You should always have an informed opinion, so after I inform you, please feel free to express my opinion...USCitizen
Secretary of State
Section 342 of the act introduces a brash example of social engineering that masquerades as consumer protection and financial reform. This section imposes gender and racial employment quotas on the financial services industry, which accounts for one-tenth of our economy. The quota provisions will affect over 50,000 financial services firms and other businesses, and the consequences will be enormous.
Dodd-Frank requires at least 29 federal bureaus to open Offices of Minority & Women Inclusion, involving ten branches of the Treasury Department, the Federal Reserve and its 12 regional banks, the Securities & Exchange Commission and the Federal Deposit Insurance Corp. The new diversity offices will implement rules to ensure "the fair inclusion and utilization" of minorities and women in all firms doing business with each agency. The offices will terminate contracts with any service provider that fails to meet these as yet undetermined standards. Just running these offices is estimated to cost over $58 million annually, says David Patten in a recent story on Newsmax.com.
What does this mean for the financial services sector? Assuming each firm hires at least one new worker to satisfy the new law, this provision could raise costs $4 billion or more annually, depending how far forthcoming regulations will extend. Firms doing business with the government will face additional expenses because they will now have to monitor the hiring practices of their subcontractors as well. In addition to these reporting burdens, firms must prove to their regulators and to government offices with which they do business that they are meeting or working toward racial and gender hiring guidelines. In many cases this will require additional hiring beyond the needs of the business.
Good Intentions Gone Haywire - Forbes.comThe second problem is regulation. Public companies have always had to put up with more regulation than private ones because they encourage ordinary people to risk their capital. But the regulatory burden has become heavier, especially after the 2007-08 financial crisis. America has introduced a raft of new rules, from the 2002 Sarbanes-Oxley legislation on accounting to the Dodd-Frank financial regulations of 2010. According to one calculation, Sarbanes-Oxley increased the annual cost of complying with securities law from $1.1m per company to roughly $2.8m. But that is nothing compared with the costs of distraction. In 2007 Oaktree Capital Management, a hedge-fund advisory firm, chose to raise $880m in a private placement rather than an IPO because, as the founders put it, “they were happy to sacrifice a little public market liquidity, and even take a slightly lower valuation, in return for a less onerous regulatory environment and the benefits of remaining private.”
The endangered public company: The big engine that couldn'tThe number of public companies has fallen dramatically over the past decade—by 38% in America since 1997 and 48% in Britain. The number of initial public offerings (IPOs) in America has declined from an average of 311 a year in 1980-2000 to 99 a year in 2001-11. Small companies, those with annual sales of less than $50m before their IPOs—have been hardest hit. In 1980-2000 an average of 165 small companies undertook IPOs in America each year. In 2001-09 that number fell to 30. Facebook will probably give the IPO market a temporary boost—several other companies are queuing up to follow its lead—but they will do little to offset the long-term decline.
Rival versions of capitalism: The endangered public company | The EconomistAnd all this is going to really fix things? NOT!Boom time for lawyers
“I fear that the recently proposed regulation to implement the Volcker rule is extraordinarily complex and tries too hard,” Sheila Bair, a former head of the Federal Deposit Insurance Company (FDIC), told Congress in December. A notable pre-crisis critic of regulatory gaps, she now believes that in this case “regulators should think hard about starting over again with a simple rule.” Her comments were made before the Commodity Futures Trading Commission (CFTC), the fifth federal agency involved, issued its own proposal on proprietary trading on January 17th. That one is 489 pages long.
The Dodd-Frank act: Too big not to fail | The Economist
I'm sure that there's more around. Why do you figure that both Dodd AND Frank retired from, ahem, public service (self-service is more like it) when they did? Before all this started to come out from their legislation? Another 'vote and you'll find out what's in the bill, piece of shit.The result has been a revolution: one-third of America’s tax-reporting businesses now classify themselves as partnerships. They have adopted exotic forms of corporate organisation, such as Limited Liability Limited Partnerships (LLLPs), Publicly Traded Partnerships (PTPs) and Real Estate Investment Trusts (REITs).
The endangered public company: The big engine that couldn't
If a man were behind four months on his mortgage and was talking to you about his plans to build an addition on his home you would think him daft and delusional. But in Washington, ignoring a current crisis to discuss grand dreams is called “boldness” and “vision.”
Vice President
e,
I hate to say it, but the elimination of quotas in NYC due to Patrick Moynahan was the beginning of the end for many careers.
Quotas say "Fvk u" to business visas, which, from my POV, it a GOOD thing.
Sarbanes-Oxley, which was never enforced, was GWs baby after the late 2000 crash, and it's a good thing that was supposed to have the Directors and CEOs pay up for the Credit Default Swap fiasco, but was ignored in favor of screwing the taxpayer.
It is a FACT that ANY law good for society will hamper greedy, self-centered fvkkkers and I accept that as poor nurturing.
You should always have an informed opinion, so after I inform you, please feel free to express my opinion...USCitizen
Secretary of State
I'm not saying no regulations. I'm saying the regulations need to be better conceived, better written, and better implemented, easy to understand, enforce, and comply with. 'greedy, self-centered fvkkkers' shouldn't be able roll over everyone else and their right's to make their money, but creating legislative and regulatory monstrosities is NOT the answer.
If a man were behind four months on his mortgage and was talking to you about his plans to build an addition on his home you would think him daft and delusional. But in Washington, ignoring a current crisis to discuss grand dreams is called “boldness” and “vision.”
Secretary of State
I dont see the problem......No crime was committed .....The top dogs lost their jobs over being unethical....If the people dont like what the bank does they need to remove their money from the bank....no need for the government to get involved....I am not interested in the government in every aspect of my life.
Moderates are not republicans
Vice President
I will be the first to admit that the more I talk to business people the more I don't understand.
That intrinsic fact of various businesses makes some legislation not so easy to understand.
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Then why are you engaged in regulatory paper work?
Government is good if you get paid doing it's work?
You should always have an informed opinion, so after I inform you, please feel free to express my opinion...USCitizen
Secretary of State
You need to learn what your fucking talking about when you discuss me. I dont work for the government.
Moderates are not republicans
Vice President
You work for a family member doing regulatory paperwork.
You have posted such in the last two weeks.
You should always have an informed opinion, so after I inform you, please feel free to express my opinion...USCitizen
Moderator
Can you name five that are doing the economy any good? Banks should be able to do, with their own money and that of willing investors, anything they want. If they make money, good for them. If they fail, so sorry, don't expect me to pay for it. I was against the bailouts and still am. The only reason the government bailed them out is they didn't want the information to come out that it was their pressure on banks that caused the failures in the first place.
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Do you kiss your mother with that mouth?
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