Deutsche Bank verkauft Cosmopolitan-Casino

Deutsche Bank built and operated a casino in Las Vegas, but now they’ve sold it.

Originally, Deutsche Bank said, they only wanted to finance the construction of the casino. But the construction company ran into difficulties and DeuBa took over the project to complete it. The hotel and gambling complex is said to have originally cost $3.9 billion, and the bank sold it to a real estate fund of a financial investor Blackstone for $1.26 billion. Deutsche Bank emphasized that they didn’t lose much money on the project because their casino earned so well.

(DOY tcha   BONK   fair COW fft   caw SEE no.)

„Es gibt ein paar tausend Banken in Europa, da kann man nicht alle kennen“

“There’s thousands of banks in Europe and you can’t know all of them”

is how BayernLB supervisory board member and former Bavarian state Economy Minister Erwin Huber (C.S.U.) supposedly explained in his April Fools Day testimony why he gave his approval to purchase the Hypo Alpe Adria yet knew nothing about the Carinthian bank. An S.P.D. politician responded, “Anyone who publicly documents their political inadequacy so authentically is, as the chair of the Economy Committee, a problem.” Mr. Huber has been chairing the Bavarian state parliament’s Economy Committee since October 2013.

Munich prosecutors had said they did not want to prosecute BayernLB’s supervisory board members for approving overpayment of >500 million euros in the purchase deal—plus some bribes that might be easier to prosecute, in separate trials—because the supervisory board was fooled by the dishonest representations of the bank’s management board, the defendants in the current trial. Three high-ranking C.S.U. politicians from the supervisory board have now testified at the management board’s criminal trial and stated that they were satisfied with the information presented to them by the management board in its argument for purchasing the HGAA.

Defendants in the trial of the BayernLB management board include Michael Kemmer, who moved on to become “managing director of the German Bankers’ Association” [Hauptgeschäftsführer des Bankenverbands], “an influential lobbyist.”

At the time BayernLB bought Hypo Alpe Adria, C.S.U. politicians on BayernLB’s supervisory board [Kontrollgremium] such as Bavarian finance minister Kurt Faltlhauser, interior minister Günther Beckstein and economics minister Erwin Huber wanted the Bavarian state bank to expand, into the Balkans. Bavaria’s then-governor Edmund Stoiber (C.S.U.) made a similar statement to journalists while on a visit to Croatia about then, ZDF heute journal reported.

Apparently BayernLB also bought a loss-plagued Hungarian bank that they want to sell.

(Ess   kipped   eye n   pah   t OW! zenned   BONK en   inn   oy ROPE ah,   dah   cannes   mon   nichh t   OLL ah   ken en.)

ISDAfix-Referenzwert

ISDAfix benchmark reference.

The International Swaps and Derivatives Association, Inc., website at ISDA.org said the ISDAfix is “the leading benchmark for annual swap rates for swap transactions worldwide.” Bloomberg* BusinessWeek.com’s April 2013 article called ISDAfix “a benchmark in the $379 trillion market for interest rate swaps, which corporations and governments use to fine-tune their borrowing costs.” Süddeutsche Zeitung’s August 2013 estimate was that a $450 trillion market was affected by this benchmark. A Reuters.com* Jan. 2014 market estimate was even higher: “The organization’s ISDAfix benchmark is an important reference point underlying contracts in the $630 trillion derivatives market, and ICAP collects data for the U.S. dollar-denominated part of it.”

The data used to set the US$ section of the ISDAfix benchmark were provided by thirteen banks to the New Jersey office of a U.K. broker or “intermediary trader” known as ICAP. U.K. financial data company Thomson Reuters* calculated the benchmark prices from ICAP’s banks’ data for the US$ section and from data it collected directly from banks for the other currencies. ICAP published its ISDAfix benchmark prices on a Reuters page every morning at 11 a.m. and updated them throughout the day based on reported transactions. ICAP’s data entry was not automated.

The S.Z. said Germany’s BaFin finance regulator started investigating ISDAfix fixing after Bloomberg reported that the U.S.A.’s Commodity Futures Trading Commission financial regulator was investigating perhaps fifteen banks and about a dozen current and former ICAP traders for possible pricing collusion.

Background from Bloomberg BusinessWeek.com:

“In their simplest form, swaps are used by investors to exchange a fixed interest rate for a floating one, or vice versa. They also come in profoundly more complicated flavors, and altogether they constitute more than half of the $639 trillion global derivatives market. ISDAfix, used by traders to settle contracts and value positions, is commonly found in hybrid securities known as structured notes that are popular with wealthy investors. While they affect everything from pension annuities to commercial real estate investments, ISDAfix rates are esoteric even by the standards of structured finance. …

“…Banks could earn millions by persuading ICAP brokers to delay their manual entry of data. Publishing stale prices can boost profits for banks dramatically. On a $500 million swap that matures in 20 years, for example, a delay that prevents the instrument from moving one basis point (0.01 percent) equals $1 million in profit for the dealer. […Also, ICAP’s] brokers match dealers by phone, then enter transactions into the 19901 screen by hand. The firm is paid commissions based on the size of the trades it matches.”

FT.com described a 2010 FT.com article saying that “prices capable of influencing Isdafix through the rate-setting process sometimes appeared to move in ways beneficial to a handful of banks.”

The ICAP brokerage was also hired to execute many ISDAfix-related trades for reasons that could have included exerting extra influence on ICAP-mediated benchmarks, said an online article from Rupert Murdoch’s Wall Street Journal*.

A 25 Sep 2013 Bloomberg.com article seemed to indicate that brokers were particularly able to game off-market trading price benchmarks, particularly in slow economic times when those relying on brokers’ reported pricing data had fewer sales of their own to glean comparable pricing data from. “To promote market integrity, it is critical that benchmark interest rates be anchored in observable transactions,” said C.F.T.C. chair Gary Gensler in 2013.

Update on 26 Sep 2013: ICAP was fined £55 million “for control failures that allowed employees to engage in Libor rigging” said an online Financial Times article. After admitting L.I.B.O.R. control failures, which the U.K.’s Financial Conduct Authority also called a poor compliance culture, the huge brokerage firm argued against reducing its ISDAfix role, saying that would give undue influence to the banks submitting ISDAfix pricing data. ICAP, the world’s largest broker for interbank transactions, couldn’t have been gaming the ISDAfix benchmark’s timing because people would have noticed, ICAP said.

Update on 26 Jan 2014: It was announced that ICAP was to be removed from its middleman role in ISDAfix, which was to be restructured so that banks would submit US$ pricing data to Thomson Reuters directly, said Rupert Murdoch’s WSJ.com. Thomson Reuters has been collecting the non-US$ ISDAfix data directly from banks for years, said Reuters.com, but the US$ data from ICAP for >15 years: “[ICAP] had been providing ‘snapshots’ using transaction-based information from its BrokerTec platform in addition to information from recent deals, the second source said, but the process would now return purely to a poll of participating banks.” Apparently the snapshots involved removing some outliers and averaging the data. ICAP said, “We appreciate ISDA’s interest in having a consistent polling process across each of the relevant currencies and fixings.”

ISDA said moving ISDAfix pricing data for all currencies to Reuters is a first step toward their goal of defining the benchmark based on actual trades (“live prices from trading venues” said FT.com), not just data submitted by banks. The new system will also be automated: “The second stage will be the move to an automated, market-based ISDAfix rate setting process, which is expected to begin in the second quarter of 2014,” said an ISDA spokesperson. ISDA said they will create a code of conduct and oversight committee for the benchmark.

ICAP’s C.E.O. Michael Spencer helped create the ISDAfix benchmark fifteen years ago. Reporting on the ISDAfix benchmark described ISDA as the benchmark’s “overseer” and as a lobbying group.

Update on 09 Mar 2014: Thomson Reuters has been granted U.K. regulatory approval to create a benchmark services subsidiary to handle the ~160 benchmarks the company helps calculate, including L.I.B.O.R. International benchmark regulations are about to be tightened this summer, according to a letter sent last summer by the International Organization of Securities Commissions (“a global body of central banks. They include oversight of third parties and policies for managing conflicts of interest” –FT.com) warning companies they had one year before new stricter rules. “Administrators of financial market benchmarks have to prove by the July deadline that they have improved systems for monitoring submitted figures,” said FT.com.

* The U.K.’s Reuters press agency was reporting on financial news related to the ISDAfix and it belongs to Thomson Reuters (since the Canadian Thomson Corp. bought Reuters in 2008). The parent company of Bloomberg News “competes with ICAP in some businesses, including foreign-exchange and swaps trading, and with Thomson Reuters in providing financial news and data” according to their disclaimer in an ISDAfix article. Rupert Murdoch’s News Corp. owns the Wall Street Journal and owned Dow Jones from 2007 to 2010, when it sold it to the C.M.E., Chicago Mercantile Exchange/Chicago Board of Trade group.

(EESS dah feex   ref ah R-R-RENTS veaht.)

Den Schluss schmeissen

Foreigner German for “banging the close.”

Banging the close was one of two unethical things several currency market traders said they could do to game exchange rates because a handful of large banks controlled half the market, according to a June 2013 article in FAZ.net. Traders at the big banks could input trades before and after a huge trade’s 60-second window and have an effect on the rate, despite the fact that “The benchmark exchange rates are based on actual transactions and not on banks’ estimates like the L.I.B.O.R. reference rate is.” The second thing was to arrange their day’s work around a pending large trade; they would get a poorer exchange rate for the client in order to buy back her sold currency more cheaply than would have been the case.

The June 2013 article also said authorities were investigating benchmark manipulation in crude oil and swap markets.

(Dane   SHLOOSS   shmigh sen.)

Cuando bandoleaba

“When I was a bandit,” according to Eric Hobsbawm*. These “violent popular heroes” in “individual or minority rebellion within peasant societies” may have been aspirational to crooked central bankers.

Bankers at England’s central bank may have been among those manipulating currency exchange rates to line their own pockets, said Süddeutsche.de. Several members of the “Chief Dealers Subgroup” of the Bank of England’s “London Foreign Exchange Joint Standing Committee” were among >20 currency dealers recently suspended from large banks around the world. The dealers have been accused of using chatrooms and nicknames such as “The Cartell” or “The Bandits Club” to discuss prices for currency markets.

Süddeutsche Zeitung said there’s gossip that UBS, which also suspended a currency dealer who was a member of the subgroup, might again seek immunity in return for testimony in a potential trial, as it did in the L.I.B.O.R. scandal.

“What’s hanging in the air is whether this central bank knew about the manipulation for years and whether its employees were involved in the affair,” wrote Süddeutsche.de, saying [corruption] at a central bank would add “a new dimension” to recent banking scandals. The Bank of England published minutes of the subgroup’s meetings from 2005 to 2013 this week that are said to be of interest in possible shenanigans. The subgroup last met in February 2013.

In the U.K., the Bank of England acts as a regulator to help ensure financial stability, Süddeutsche.de said. The government body investigating possible currency market manipulation is Britain’s Financial Conduct Authority.

“Currency markets,” said a Süddeutsche.de op-ed, “are the world’s biggest financial market, with a daily turnover of US$5.3 trillion. …London is the center, [where] about half the world’s currency business is transacted. That’s also where the London Fixing is calculated. It is a fixed exchange rate between currencies, the most important one is published every day at 4 p.m. The business is controlled by a few major banks.” Investigations of about 15 banks for currency manipulation began in fall 2013, but the Bank of England was supposedly warned about a potential problem in 2006.

* Eric Hobsbawm’s book Bandits describes three subtypes: noble robbers like Robin Hood, avengers like the Brazilian cangaçeiro Lampiao and haiduks or “primitive resistance fighters.”

Flotter

Nimbler.

Also, more agile, speedy, swift, brisk, deft, lissome, slippy, nippy and “fly.”

Non-bank-owned “mortgage servicing” companies have been buying up mortgage servicing rights from large banks in the U.S.A., controlling 3% of the mortgage servicing market in 2010 and 17% in 2014 said NYTimes.com. Homeowners in trouble seeking help with their mortgage found themselves being asked to supply the same documentation over and over as their mortgage servicing was sold on from group to group.

Initially, some U.S. regulators thought that moving banks’ mortgage management responsibilities from mortgage servicers the banks owned to private companies the banks didn’t own would benefit consumers because the private companies would be “nimbler.”

One of the largest of these companies, Ocwen, has now been found to have been cutting numerous corners. It was also affiliated with companies that profit from foreclosures. The chair of Ocwen was chair of a company that bought foreclosed properties and turned them into rentals, but Ocwen told regulators that it maintained an “arms-length relationship” from his foreclosure company.

Though it’s been said the private mortgage servicers are unregulated in the U.S., there may instead be a bit of a patchwork of too-light regulation because in December 2013 the U.S.’s Consumer Financial Protection Bureau and 49 state attorneys general negotiated a $2.1 billion settlement with Ocwen for “mortgage servicing violations.” The C.F.P.B. commented that Ocwen “took advantage of borrowers at every stage of the process.”

Cut corners attributed to the private mortgage servicers have included:

  • Robosigning fake paperwork
  • Other missing paperwork that wasn’t counterfeited
  • Demanding wrongful fees
  • Wrongful evictions
  • Not updating technology and procedures and not hiring sufficient employees to handle the huge influx of mortgages despite assurances to the contrary and despite the overloaded software’s apparently accidental triggering of wrongful foreclosures
  • Profit-motivated rushing of processing
  • Possible hosing of the housing-derivatives investors who bought mortgage-based financial securities

The head of the state of New York’s Department of Financial Services, Benjamin Lawsky, installed an independent monitor at Ocwen who reported on the inadequate bookkeeping, as a result of which Mr. Lawsky stopped Wells Fargo’s sale or transfer of mortgage servicing rights for 184,000 mortgages, worth $39 billion, to Ocwen in February 2014.

Ocwen was headquartered in Atlanta, with staffing centers in India and Uruguay, an affiliate incorporated in the tax haven of Luxembourg and an affiliate based in the tax haven of the Cayman Islands.

The structure of the companies and possibly of the hedge funds investing in them during their recent rapid growth begs the question of whether mutual stock price embetterment has been an objective and, if so, how that was done. It looks as if moving profits and losses around the world for tax benefit could also have been envisioned. You have to note the big banks’ balls in selling off their buggy business as “rights” rather than paying people to take it as a favor. The ways innovated to make money off such a venture might be instructive. They might include gaming of a U.S. system in which state regulators have to do the job of federal regulators while families lose their homes.

Ocwen itself said that servicing mortgages has a limited lifespan and it has been seeking to diversify. FT.com reported the company was planning to sell up to $1 billion in a new type of debt this year: mortgage-servicing-rights-backed bonds.

(FLAW tah.)

Gehaltszulage, Taschengeld, Spesen

“Extra salary,”

“pocket money,”

and the German word that, depending on how loosely your company defines it, may mean money for expenses, room and board, sundries, fees, entertainment. “Ausser Spesen nichts gewesen” (ow! sah   SHPAY zen   nix    geh VEY zen) means a sales trip occurred in which few positive results were achieved apart from enjoying the per diem for expenses.

After the E.U. capped bankers’ bonuses at 1x to 2x annual salary, London banks have started renaming their lagniappes in ways that don’t easily translate into German. Last fall some of the bonus lolly was being paid as “top up” money, and now they’re being called “allowances.”

NYTimes.com said new nomenclature may also include “role-based pay” and “reviewable salary.”

Gray areas are being found, NYTimes.com said, between fixed pay and variable pay. The new bonuses can include giving employees variable pay at fixed, regular time intervals, not having it count toward a pension, resetting it every year like a salary, changing it in response to environmental factors like a bonus.

Renaming bonuses may make it harder to “claw” them back after risk management mistakes, as well as impede efforts to encourage employees to take a longer-term view by e.g. requiring bonuses to be paid out in installments over several years.

(G’HALT soo log en,   TOSH en geld,   SHPAY zen.)

Straftatbestand

A criminal offense, fulfilling the conditions to meet the definition of a crime.

The outgoing E.U. parliament voted to pass draft rules making it a crime to manipulate interest rates in the European Union. After approval by the Member States, countries will have two years to implement the new rules, and their minimum penalty of at least four years in jail, into national laws. Countries may impose stricter penalties.

The E.U. parliament’s press release said the passed legislation criminalized more than interest rate manipulation:

“The draft rules lay down tougher criminal penalties, including prison terms, for serious market abuses such as unlawful disclosure of information, insider dealing or market manipulation and also inciting, aiding or abetting them.”

[…]

“Market manipulation offences punishable by a four-year jail term would include entering into a transaction or placing an order which gives false or misleading signals about the supply, demand or price of one or more financial instruments or providing false or misleading inputs to manipulate the calculation of benchmarks, such as the London Interbank Offered Rate (LIBOR) or Euro Interbank Offered Rate (EURIBOR).

“Insider dealing offences punishable by fouryears’ imprisonment include those in which inside information is used with intent to buy or sell financial instruments or to cancel or amend an order.”

(SHTROFF tot beh SHTOND.)

Trennbankengesetz

“Separated banks law,” proposals for which are in the works in Brussels.

Spiegel.de wrote that financial industry lobbyists can no longer induce many significant changes to the E.U.’s banking union but they’ve been trying so hard to affect the bank separation law now under discussion that interior commissioner Michel Barnier has ordered E.U. officials to stop meeting with bank lobbyists. That phase of the process is now officially over, he said, and the industry was abusing the system.

“In view of our workload and the sensitivity of our current dossier, until instructed otherwise Market D.G. employees should not meet with bankers, their representatives or their associations.” “Thank you for conscientiously following this order from our commissioner.” –From Spiegel.de-viewed excerpts of an email sent by Mr. Barnier’s general director Jonathan Faull to his employees in early December 2013.

Mr. Barnier’s spokesperson told the magazine he wants to implement the new bank structure reforms currently being drafted before the E.U. parliamentary election in May 2014.

Spiegel.de said the new rules would be based on the 2012 report of group of experts under Finnish central bank chief Erkki Liikanen that found banks “ought to separate their own securities trading, derivatives trading, loans to hedge funds and loans to private equity companies from the rest of their ‘customer business.'”

Trennbanken and Universalbanken [separated banks and universal banks] are two German ways to differentiate between “consumer banks” and post-deregulation’s sprawling “investment banks” or “speculating banks.”

It would be nice if the discussion introduced a new word for the investment banks’ term “Chinese walls” to describe their in-house arrangements for artificially blocking information flows that could generate in-house profits. “Chinese walls” seems insulting to China.

(TR-R-R-ENN bonk en geh ZETTS.)

Der breuer’sche Barolo

“Mr. Breuer’s Barolo,” in this case not a decent Italian red wine but possibly a secret project at Deutsche Bank in 2002 to deliberately bankrupt media magnate Leo Kirch’s empire and profit from breaking up and selling off his businesses. Leo Kirch claimed this happened until he died. Now supposedly an email has turned up containing evidence of at least some perjury. “Project Barolo” would have been the name of the secret undertaking, which took place when Rolf E. Breuer was the head of Deutsche Bank. The found email from a London investment division was cc’d to Mr. Breuer and dated January 2002.

ZDF heute journal’s Sina Mainitz said the Süddeutsche Zeitung reported prosecutors are now investigating whether four former members of Deutsche Bank’s management board [Vorstand] and the C.E.O. Jürgen Fitschen lied in the Kirch trial when they said they never made plans to break up the media empire. Mr. Kirch’s conglomerate collapsed after Mr. Breuer accidentally let slip in a February 2002 interview that Deutsche Bank thought the conglomerate, a Deutsche Bank client, might no longer be solvent. Mr. Kirch’s ability to obtain new loans was curtailed and his companies began filing for bankruptcy in April 2002.

(Dare   BROY ahsh eh   bar OH lo.)

Nach versteckten Risiken prüfen

Investigating/testing/auditing for hidden risks.

Update on 05 Dec 2013: Scheduled to take over responsibility for Europe’s largest banks at the end of 2014, the European Central Bank started its latest “stress test” on the risk management being exercised by the 128 largest European banks. This included 24 German ones, of which ARD tagesschau.de listed the following: Deutsche Bank, Commerzbank, some Landesbanks, DZ Bank, Hamburg Sparkasse and the Wüstenrot & Württembergische (not a bank but a “financial company”; many pies). Structures and solutions for the stress test were not yet entirely defined. National finance ministers were meeting to decide who would be responsible for banks found to have too many hidden risks: Italy wanted Europe to be on the hook for bailing them out, for example, and Germany wanted the national governments to be responsible first. The stress test was expected to last nearly one year.

(NOCHH   fair SHTECKED en   REE zee ken   prüü fen.)

Verschleierte Vermögensverwaltungsverträge

Veiled wealth management contracts.

270 tax police searched about 40 Commerzbank branches at their Frankfurt headquarters and elsewhere on 03 Dec 2013 seeking information about Italian partners who had advised the bank’s customers on how to avoid taxes using what only looked like tax-exempted life insurance, according to Bochum prosecutors who executed the razzia with Düsseldorf tax officials.

ZDF heute journal’s finance correspondent Valerie Haller said assets such as stock or bonds in “depots” at the bank that should have been subject to capital gains tax were instead “wrapped in fake life insurance” by the friendly insurer. The long (12-year) period of the fake life insurance instruments conveniently allowed some tax evasion statutes of limitations to expire. Unlike real life insurance, these instruments let customers continue investing the money wherever they chose while avoiding significant tax and remaining rather anonymous. Real life insurance that qualifies for German tax breaks must also insure against a risk (the death of the insuree), according to a German law passed in 2009 to tighten up these loopholes. After the 2009 law, said a 2012 S.Z. article, such life insurances bought by Germans had to be reported immediately to the Bundesfinanzministerium [Federal Finance Ministry] when bought in Germany, but when bought outside the country the sellers were only obligated to report them to the German government when the policies were paid out.

The Italians are rumored to have been working for an Italian insurance company called Generali, though that has not been confirmed. Handelsblatt.com heard it was Generali subsidiary PanEurope Ltd., headquartered in Ireland, and added that the scheme had a minimum deposit requirement of half a million euros but prosecutors thought this one had been used to avoid taxation on several hundred million. Reporting on a similar investigation in 2012 of German insurance customers at the Swiss bank Crédit Suisse, Süddeutsche.de said English names for the scheme included “insurance wrappers” and “private placement insurance.”

Commerzbank is only being called as a witness, the bank’s representatives said. They only managed das Depot, which translates as portfolio but has always sounded more like an armored box.

The Green party took advantage of the event to call once more for a German criminal code for companies, in addition to individual people, so that companies can be prosecuted for crimes.

(Fair SHLY ah teh   fair MƏG oongs fair VAULT oongs fair TRAY geh.)

L.I.B.O.R.-Klagen

L.I.B.O.R. lawsuits.

The U.S. company Fannie Mae has filed complaints seeking about half a billion euros in damages from multiple banks around the world for L.I.B.O.R. benchmark interest rate manipulation. Deutsche Bank is one of the defendants.

Update on 01 Nov 2013: ZDF heute journal financial correspondent Frank Bethmann said the many banks found to have participated in L.I.B.O.R. manipulation have been fined about 2.7 billion euros total by the world’s bank oversight authorities alone so far. Now more and more company lawsuits keep “fluttering in,” making them possibly the costlier threat. He said Deutsche Bank had now set aside 4.1 billion euros for legal fees. “But that shirt could prove too short as well, particularly in the U.S.A.”

Update on 06 Nov 2013: FAZ.net reported that insiders told Reuters news agency that before 2014 the E.U. competition commissioner wants to fine six banks a total of 1.5 billion euros for L.I.B.O.R. benchmark manipulation, including Barclays, Royal Bank of Scotland (R.B.S.), the Dutch Rabobank (“genossenschaftlich” bank meaning it started life as a mutual?), and the “broker” I.C.A.P. The Swiss bank U.B.S. will be excused from this fine—said to be the largest bank fine in E.U. history—because they were the first to testify. These six banks admitted this particular wrongdoing and as a result the E.U. said it will reduce those fines by 10%.

This set of fines is for the yen L.I.B.O.R. manipulation subscandal of the L.I.B.O.R. manipulation scandal. Deutsche Bank may be facing additional U.K. and U.S. fines for U.S. dollar L.I.B.O.R. manipulation.

Financial regulators around the world are also investigating more than a dozen banks for Eur.I.B.O.R. benchmark manipulation. On 06 Nov 2013 FAZ.net reported that insiders said the E.U. Commission was negotiating fines to half a dozen banks for that as well, including Deutsche Bank and possibly Royal Bank of Scotland and Société Générale. FAZ.net reported the U.K.’s Financial Times reported each of these six will have to pay up to 800 million euros for that set of fines. And that Bloomberg.com reported the British bank H.B.S.C. had withdrawn from those fine negotiations, giving up the proffered 10% fine rebate for admitting wrongdoing.

German Wikipedia said the Eur.I.B.O.R. is set on the basis of data submitted by 32 European “credit institutions,” minus the top 15% and bottom 15% outliers, to the “information agency” Thomson Reuters. The Eur.I.B.O.R. is then published by Reuters.

English Wikipedia said the Eur.I.B.O.R. was created by combining “domestic” benchmark rates, such as from Paris, Frankfurt and Helsinki, in 1999. It said there is still a separate Euro L.I.B.O.R. set in London, based on data from 16 banks.

(LEE boar CLOG en.)

Abwicklung von Hypo Alpe Adria

Winding up, closing down, resolution, clearing, of Austrian bank Hypo Alpe Adria. The E.U. Commission appeared to give its permission to break up the struggling bank on 02 Sep 2013. The European competition authority still had to give its approval.

In 2009 the country of Austria took back HGAA from the BayernLB, Bavarian Landesbank, and nationalized it. Hypo continued losing money. By 2012 Austrian taxpayers had given the bank 3 billion euros bailout, but still it needed ~800 million euros in the first half of 2013 and a projected 700 million in the second half, with expectations of ~5 billion euros more required by 2017. The plan is now to sell the Austrian branch to a British investor in Q4 2013, close the Italian branch and sell off the other southern European banks (250 branch offices employing 4300 workers) by 2015.

The reporting repeating the numbers cited by the Austrian finance ministry varies, and it’s hard to match up the cited numbers with the years given. Austrian finance minister Maria Fekter (Ö.V.P.) said the numerical uncertainty is partially because they don’t know how much they’ll get in the sale of the southern European branches. They also want to move HGAA’s failed loans, worst paper and unsellable divisions “away” into a “separate Abwicklungseinheit,” a separate clearing unit, also called an “Abbaubank,” literally breakdown or decomposition bank but apparently called in English a “restructuring unit,” “separate from the core bank.” Without the Abbaubank device, Austrian taxpayers might be on the hook for 16 billion euros, another Austrian finance ministry number, to wind down the HGAA.

We know a bit about what happened under Carinthian and Bavarian management of HGAA. What happened in Italy?

Austria will be holding a parliamentary election on 29 Sep 2013.

Update on 14 Mar 2014: It’s been decided that the Hypo Alpe Adria group will be wound down as a “bad bank,” into a “deregulated, private-economy-organized company” said Austrian finance minister Michael Spindelegger. About 18 billion euros in bad paper will be moved into this vehicle. The decision will increase Austria’s national debt >5%, from ~75% to >80% of the country’s gross national product. HGAA’s subsidiary banks in Italy and the Balkans are to be sold as quickly as possible. It should take the bad bank about a decade to finish closing down the organization, only after which the true costs will be known, said a social minister who will no longer be social minister a decade from now.

Update on 17 Jun 2014: The Austrian state of Carinthia owes ~12 billion euros because of guarantees it made for Hypo Alpe Adria. Carinthia’s annual budget is apparently ~1 billion euros.

A week ago Austria’s cabinet passed a special law that said Carinthia will no longer be responsible for all the bank’s debt that it has guaranteed. This should save the state ~800 million euros while stirring up a lot of trouble for Austria.

Austria’s federal government is deliberately avoiding bankruptcy for the troubled bank because they fear it would pull the state of Carinthia into bankruptcy. The cabinet passed this “special law” haircutting non-first-tranche holders of HAA debt, whose riskier tranche under normal circumstances would only come into play after a bankruptcy. The Green party said they should just declare the bank bankrupt and work out fair haircuts for all. Carinthia’s most important services such as day care centers and hospitals are mandated by law, said the Greens, so the bank’s creditors wouldn’t be able to pull much money out of the state government. “These investors have not earned the protection of the taxpayers.”

(OB vick loong   fon    HIPPO   I’ll pay   ODD ree ah.)

Anklagebehörde

“Prosecuting authority,” prosecutors’ office.

The Bavarian state bank BayernLB (Bayerische Landesbank), owned by the state of Bavaria and the Sparkasse banks (the largest German public bank), bought the Austrian bank HypoGroup Alpe Adria in 2007 and lost billions of euros as a result. On 07 Aug 2013 the Munich regional court Münchener Landgericht I announced it would not permit prosecution of charges brought against the entire Landesbank’s management board [Vorstand] while criticizing that charges hadn’t been brought against members of the higher-level overseeing “administrative board” [Verwaltungsrat], which gave permission for the sale. The supervisory Verwaltungsrat contained important C.S.U. politicians who might have been thus being protected by Bavarian prosecutors, the Bavarian judges imputed. Bavarian opposition parties S.P.D. and Freie Wähler [Free Voters] had filed complaints against BayernLB Verwaltungsrat members and state ministers Erwin Huber, Günther Beckstein and Kurt Faltlhauser plus some less important C.S.U. politicians for breach of trust of bank assets [“Veruntreuung von Bankvermögen”] in the Austrian acquisition, according to Süddeutsche.de and tagesschau.de.

BayernLB’s management board allegedly cited a falsely inflated purchase price to the supervisory administrative board, so theoretically criminal charges should be brought against management board members, according to tagesschau.de. But the Munich Landgericht I court denied prosecution of that on 07 Aug 2013, citing the latitude enjoyed by managers in negotiating sales. This allegedly angered Bavarian state prosecutors. Also angered by accusations they’d protected C.S.U. politicians by not bringing charges against members of the higher-level Verwaltungsrat [administrative board] supposed to monitor or do “controlling” of BayernLB’s management board, Bavarian state prosecutors responded that the management board members had failed to adequately inform the higher-level administrative board; indeed the supervisory Verwaltungsrat was deliberately defrauded with malice aforethought (“vorsätzlich arglistig getäuscht”) by members of the BayernLB management board, in the opinion of the prosecutors. The supervisory administrative board that okayed the deal consisted of people from the Bavarian state government (ruled by the C.S.U. since 1946) headed by Edmund Stoiber and people from the Sparkasse banks.

The German bank manager Bernie Ecclestone was accused of paying a bribe to was a member of BayernLB’s management board [Vorstand], not supervisory board [Verwaltungsrat].

In its 07 Aug 2013 announcement in the ongoing discussion about whom to prosecute at BayernLB, the Munich Landgericht noted that this sale of banks between state governments was partially a political act. But because no one could have foreseen events, the Munich Landgericht was only going to look into the BayernLB management board’s criminal culpability in overpayment of an additional 75 million euros lost by subsequently purchasing additional shares, and not into the BayernLB management board’s overpayment of 550 million euros in the 1.7-billion-euro deal as the prosecutors originally proposed.

Prosecutors filed a complaint about the Landgericht’s decision not to allow a criminal trial against the BayernLB management board for the lost half billion; the Munich higher regional court [Oberlandesgericht] “will now have to decide the dispute taking place in its own house.”

Before Bavaria bought it, according to the Guardian.co.uk, the Carinthian state government-owned Hypo Alpe Adria “acted as financier” for the horrifying Jörg Haider, charismatic leader of a terrifying populist racist Austrian political party that promoted hatreds in order to surf them to power. WienerTageszeitung.at wrote that HGAA had had to help support Haider’s Carinthian state government’s “patronage policies” [“gönnerhafte Politik”]. The recent Munich Landgericht I court decision about how to prosecute the Bavarian side did allow prosecution of an accusation that Jörg Haider, Kärntner Landeshauptmann [“Captain of Carinthia”] at the time of the sale, received a soccer stadium sponsorship bribe from BayernLB (2.5 million euros). An Austrian website also talked about overpayment for the expert opinion of an Austrian tax adviser associated with Haider as another possible bribe to him from the deal (6 million euros for six pages). No details found yet about money improperly funneled to Haider & Co. before the sale, when his party controlled the government that owned the bank.

According to the Manager-Magazin.de article, a 2007 audit by the Österreichische Nationalbank [Austrian National Bank] reported that Hypo Alpe Adria was shuffling fake capital around as early as spring 2006 to hide its losses, through obscurant Liechtenstein entities, and selling stock to itself to create the illusion of solvency. There was no Austrian regulatory follow-up on the audit report apparently.

BayernLB’s purchase of HGAA has already sparked multiple trials, with more to come. For example, Manager-Magazin.de wrote that Munich prosecutors initiated a criminal trial against BayernLB management board members on 05 May 2011—that trial hasn’t started yet—and BayernLB sued its former management board members for 200 million euros in damages in a civil trial that actually did start, on 19 Jun 2012. An Austrian criminal trial sentenced a Carinthian state party chief to five years in prison on 10 Oct 2012 for diverting money from the sale to his political party (a state government coalition partner with Jörg Haider’s FPÖ). The current head of the Bavarian C.S.U. party, Horst Seehofer, is to testify in Vienna before a commercial court [Handelsgericht Wien] about the schlamassel. When they gave Hypo Alpe Adria back to the country of Austria, did BayernLB sign a paper saying they would not sue for damages? The Vienna trial is about 3 billion euros of Bavarian taxpayer money that now-nationalized Hypo Alpe Adria does not want to return; this would be in addition to the 3.7 billion euros Bavaria already spent to bail out the bank.

Update on 24 Oct 2013: Bavarian prosecutors won their appeal! The Munich Oberlandesgericht overturned the Munich Landgericht’s decision and will be allowing full prosecution of ex-C.E.O. Werner Schmidt and six of the seven members of the BayernLB management board on the counts sought, for breach-of-trust losses of 550 million euros in the 2007 purchase of Hypo Alpe Adria in addition to the 75 million lost on extra HGAA stock bought after the purchase.

Update on 27 Feb 2014: Three former management board members of Hypo Alpe Adria were given prison sentences by an Austrian court for granting investors buy-back guarantees and thus, the court said, costing the bank several million euros. The Klagenfurt court [Schöffensenat] said they held back important information when they sold Hypo Alpe Adria to Bavarian state bank BayernLB. A 2.5-million-euro dividend they issued was also not in order, the court said.

In this breach of trust trial, former management board member Josef Kircher was sentenced to three years, some of which was changed to probation because he was willing to testify. Former management board member Siegfried Grigg was sentenced to three and a half years. The Flick Foundation was fined 600,000 euros. Former H.A.A. C.E.O. Wolfgang Kulterer was sentenced to one year. He has already been sentenced to several years in a related Hypo Alpe Adria matter in January 2014, when he admitted having kept mumm about side agreements. Former Hypo manager Tilo Berlin is also a defendent in the breach of trust trial but was unable to appear for health reasons, delaying resolution.

(ON clog ah beh HEARD ah.)

Kupferpreis

Price of copper.

After lobbying by firms claiming reducing copper supply would not drive up copper prices, in December 2012 exiting U.S. Securities and Exchange Commission chair Mary L. Schapiro gave the banks Goldman Sachs, JP Morgan Chase and BlackRock the S.E.C.’s approval to buy up 80% of the copper available on the market and hold it in warehouses as backing for new copper-based investment funds. The NYTimes.com article went on to say copper is used in so many manufacturing applications that it is sometimes tracked as an indicator for the economy as a whole.

(COOP fur prize.)

Erdgaspreis

Price of natural gas. A March 2013 article in Rupert Murdoch’s Wall Street Journal mentioned that the Commodity Futures Trading Commission said the Libor benchmarks manipulation scandal came to their attention after “firms and traders” were sanctioned for reporting false data to energy index compilers in attempts to manipulate natural gas prices between 2003 and 2005.

(ED gauze prize.)

Ölpreis

In 2011 a Goldman Sachs study apparently stated that market speculation had indeed helped drive up the price of oil for consumers. In 2012 U.S. Commodity Futures Trading Commissioner Bart Chilton said, “Using the Goldman Sachs research figure, and multiplying 10 cents times 233.9 million, would mean that theoretically there’s a ‘speculative premium’ of as much as $23.39 a barrel in the price of NYMEX crude oil.” Mr. Chilton has also said that the commodities business is a possible loophole for banks in the U.S.’s new frequently-postponed “Volcker rule” intended to reseparate banking from investment gambling.

Potential oil bottleneck points persist in privately held and/or operated oil infrastructure. Oil traders now own oil refineries. Pipelines are included in the infrastructure large banks have somehow acquired part ownership of. U.S. bank Morgan Stanley invested in the “global oil tanker operator” Heidmar in addition to “fuel chain supply manager” TransMontaigne. An F.A.Z. article described how the world’s three largest oil trading firms, Switzerland-based Gunvor, Vitol and Glencore—”prescient” commodity markets pioneer Marc Rich’s old firm—work today, supposedly on the basis of fast-computer-based price arbitrage rather than speculation. Moving into production, Glencore is now invested in oil wells, coal mines and metals mines, after its late-2012 fusion with Swiss competitor Xstrata.

Apparently a landmark 2003 U.S. Federal Reserve decision allowed U.S. investment banks to start “trading oil cargoes.” In July 2013 the Fed announced it was “reviewing” that decision. Though Fed deregulation may have unleashed the Wall Street side of recent international commodities speculation problems, the Fed probably cannot fix it now without simultaneous coordinated reforms from other regulators around the world.

(ILL prize.)

Spotmarkt

Spot market, where financial instruments or commodities are sold for immediate delivery, unlike the futures market where they are sold for delivery at a later date. Wikipedia said a spot market can be an organized market, an exchange or over-the-counter (O.T.C.).

Regarding the spot market price of aluminum: Goldman Sachs was accused of bottlenecking aluminum at Goldman’s Metro International aluminum warehouses outside Detroit, increasing customers’ delivery wait times since purchasing M.I. in 2010 from six weeks to sixteen months by first lowering prices to attract a stockpile (“50,000 tons in 2008” to “~1.5 million currently”) and then, actually, trucking a minimum daily regulatory-defined shipment amount of 3000 tons back and forth among the 27 warehouses. There were also accusations of understaffing, reduced shifts and prioritizing putting aluminum into storage over taking it out. The shuttle-shuffled delays raised a premium added to the price of all aluminum, driving up the spot market price “according to an arcane formula” even for metals bought directly from mines or refineries to bypass these warehouses. While delaying delivery the warehouses also continued charging rent on the stored metal. Perfectly legal according to current international regulations, apparently set by the London Metal Exchange.

The London Metal Exchange might need more disentanglement from the entities it is supposed to regulate. According to the NYTimes.com article, it still receives 1% of the rents collected by the ~700 warehouses it regulates around the world. Until 2012 it was owned by its member regulees, including Goldman Sachs, JP Morgan Chase, Barclays and Citigroup. Many of its metals warehousing regulations were written by a board populated by executives from banks, trading companies and storage companies. In July 2012 the L.M.E. was sold to Hong Kong Exchanges and Clearing, part-owned by the Hong Kong government, for ~$2 billion. A NYTimes.com description of the 2012 sale said it “will allow the Asian company to control the world’s largest futures trading exchange for metals like aluminum, copper and zinc, as emerging market demand for commodities remains strong.” In 2012 Hong Kong Exchanges and Clearing was supposedly hoping to get an exemption from Chinese laws preventing foreign companies from owning these sorts of metals warehouses in China.

The U.S.’s Federal Reserve Board could, said NYTimes.com, quit extending exemptions that allow banks like Goldman Sachs to invest in nonfinancial enterprises. Though the Fed’s stated conditions in allowing banks to diversify into commodities investment were “only if there was no risk to the banking system” and if the deals “could ‘reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices,'” yet many people would say its deregulation achieves the opposite effects, that big “diversified” banks’ risk management still appears to endanger U.S. and world economies and now banks’ having bought up important infrastructure might be presenting them with irresistable temptations such as artificial bottlenecking or even information advantages not all traders always refrain from using.

Update on 25 Jul 2013: The U.S. Senate’s banking committee has criticized that the Federal Reserve is not communicating well with them. However, wrote the F.A.Z., the U.S. Congress could pass its own banking reregulation rules without waiting for the Federal Reserve.

It’s unclear whether shadow trades are involved here, but it’s also unclear why everyone hasn’t gone broke if this is how they’re doing business:

“Industry analysts and company insiders say that the vast majority of the aluminum being moved around Metro’s warehouses is owned not by manufacturers or wholesalers, but by banks, hedge funds and traders. They buy caches of aluminum in financing deals. Once those deals end and their metal makes it through the queue, the owners can choose to renew them, a process known as rewarranting.”

If Goldman is indeed paying aluminum owners, fellow speculators, to rewarrant their metal and leave it in the warehouses piling up rent owed to Goldman, that might indicate some creative profits or at least useful losses are being made.

Aluminum is economically important enough that Chancellor Angela Merkel’s government has been giving aluminum refineries, notoriously high-volume electricity consumers, various electricity rebates that must be paid for by individual consumers or “ratepayers” in their home electricity bills because, Germany’s government said, the preservation of the aluminium supply was that significant for their economy as a whole.

(SHPOTT mocked.)

Sich selbst als Geisel nehmen

“Taking yourself hostage.” Investigative journalism nonprofit ProPublica.org interviewed financial journalist Jesse Eislinger about bank regulation reform and the USA’s too-big-to-fail banks on 04 June 2013. Eislinger talked about the few oversized banks in the USA that get saved with taxpayer funds, and the smaller banks that don’t, and he interestingly compared the huge banks’ behavior to a scene in Mel Brooks’s Blazing Saddles when a man successfully takes himself hostage. US banks are allowed to grow too big, Eislinger said, because they claim it strengthens them to diversify into many sectors. In fact, they became and remain to this day unmanageable, as shown by the recent “London Whale” failure in 2012. When the “diversified” giant banks topple they essentially copy Mel Brooks’s autohostage joke by threatening to take out wide swathes of the US/world economy if not rescued by taxpayers. The situation is self-perpetuating as it now stands.

(Zichh   ZELBST   olls   GUY zel   nay men.)

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