We break from the usual to highlight a lady with brass: Kara M. Stein, appointed to the Securities and Exchange Commission in August 2013.
Last week, she refused to let the banks off the hook.
Stein broke from her fellow commissioners and dissented on a key vote: whether to grant five large Wall Street banks “waivers” from punishment for the crimes the banks have committed in the foreign-exchange market.
Yes, waivers.
The gang of five are UBS, Barclays, Citigroup, JPMorgan Chase, and Royal Bank of Scotland. All five agreed last week to plead guilty to rigging foreign-currency rates and pay fines totaling nearly $5.7 billion.
These institutions have committed so many crimes, the SEC has granted Barclays its third waiver since 2007; UBS, its seventh since 2008; JPMorgan, its sixth since 2008; RBS, its third since 2013; and Citigroup, its fourth since 2006.
Banks receive waivers so they can continue doing business in the U.S., which should be a privilege and not a right. Where are the waivers for retail investors who commit crimes?
Stein said the latest foreign-exchange scandal comes on top of the London Interbank Offered Rate (LIBOR) interest-rate scandal, on top of the mortgage scandal.
It’s all “the same behavior: a criminal conspiracy to manipulate,” she wrote in her dissent.
In the euro/dollar currency markets, traders conspired almost daily in an exclusive online chat room they referred to as “The Cartel” or “The Mafia.” Bank salespeople lied to customers to collect markups.
“This criminal behavior went on for years, unchecked and undeterred,” Stein wrote.
“It is troubling enough to consistently grant waivers for criminal misconduct. . . . This type of recidivism and repeated criminal misconduct should lead to revocations of prior waivers, not the granting of a whole new set of waivers. We have the tools, and with the tools the responsibility, to empower those at the top of these institutions to create meaningful cultural shifts, yet we refuse to use them.”
Amen.
Stein joined the SEC after serving as legal counsel to Sen. Jack Reed (D., R.I.). She helped draft the hotly disputed Dodd-Frank Wall Street Reform and Consumer Protection Act.
You can read her dissent online at the SEC website: http://www.sec.gov/news/statement/stein-waivers-granted-dissenting-statement.html.
earvedlund@phillynews.com
215-854-2808
@erinarvedlund
Read more at http://www.philly.com/philly/business/20150525_Lone_SEC_dissenter_objects_to_letting_banks_off_the_hook.html#6k0Fq936pEYtXM7p.99
May 26, 2015 | Categories: Uncategorized | Leave a comment
The DOJ slaps 5 U.S. and European banks with more fines (now totaling $9 billion) on Libor interest rate rigging and foreign-exchange manipulation. Three years probation? Couldn’t they just agree NEVER to break the law?
“Citicorp, Barclays, JPMorgan, RBS and UBS have each agreed to a three-year period of corporate probation, which, if approved by the court, will be overseen by the court and require regular reporting to authorities as well as cessation of all criminal activity. Citicorp, Barclays, JPMorgan and RBS have agreed to send disclosure notices to all of their customers and counter-parties that may have been affected…”
Does anyone have any estimates on how US dollar/Euro manipulation may have cost clients?
May 20, 2015 | Categories: Uncategorized | Tags: Barclays, foreign-exchange, JPMorgan, RBS | Leave a comment
Call it the “Madoff curse.”
Frank DiPascali, finance chief for Bernard Madoff who cooperate with the federal government, died this past week (of lung cancer) before he could be sentenced for enabling the biggest Ponzi scheme in U.S. history. He was 58.
Kudos to my old friend JB “Fake Bernie” for pointing on his blog how Ponzi schemer Madoff’s mastermind fundraiser Maurice ‘Sonny’ Cohn also died recently.
For whatever inexplicable reason, the SEC didn’t charge Sonny Cohn or his daughter Marcia B. Cohn — although they were paid roughly $98 million over ten years to bring in unsuspecting victims to financial ruin.
According to several private lawsuits, father and daughter Cohn were among the only non-Madoff folks to have keys to Madoff’s secret 17th floor offices. (Read this suit by the Sonking family filed against sonny and marcia cohn). That’s the 17th floor where $20 billion investor cash disappeared.
Marcia, did you sell your pad in East Hampton because of the smell of blood money?
May 8, 2015 | Categories: Uncategorized | Tags: Bernie Madoff, madoff, Marcia B. Cohn, Maurice, Sonny Cohn | Leave a comment
Vanguard’s Josh Barrickman is the new bond king. He writes a blog and cracks jokes like the rest of us.
Josh Barrickman works at Vanguard Group, where he and his team of 15 oversee bond portfolios for the Valley Forge-based investment giant.
Vanguard transformed retail investing via founder John Bogle’s idea of low-cost “indexing,” or putting money into a fund tied to the broader market’s performance.
And Barrickman, 39, runs the super-low-cost Vanguard Total Bond Market Index Fund, now the world’s largest bond index fund, with assets totaling $145 billion.
The Wall Street Journal recently crowned Barrickman the new bond king, noting that the Vanguard Total Bond Index Fund had surpassed in assets PIMCO’s flagship bond fund, once run by legendary bond manager Bill Gross.
Actually, the Vanguard Total Bond Index Fund surpassed PIMCO months ago, in large part because of Vanguard’s successful exchange-traded funds. Without ETFs, the Total Bond Index Fund holds about $117 billion, Barrickman said Tuesday.
“Our ETFs and index funds are really interchangeable,” he said. His team manages 30 bond index funds and 20 ETFs.
For retail investors, the fund’s extremely low cost is key.
According to the firm’s 2014 annual report, the Vanguard Total Bond Index mutual fund has an expense ratio of 0.20 percent – that is, the investor pays an annual fee equal to 0.20 percent of all the money he or she has in the fund. The ETF version costs just 0.07 percent, meaning the investor pays a fee equal to that percentage of his or her investment each year.
Returns have ranked in the middle of the pack. Ratings firm Lipper gives the fund only a 3 based on total return for the last five years. But the fund ranks as a Lipper Leader, with a 5 for its low expenses, meaning it ranked among the top 20 percent of the fund category for the last five years.
Barrickman, a native of Ashtabula, Ohio, graduated from Ohio Northern University, where he played college tennis, and then earned an M.B.A. at Lehigh University. In 1999, he joined Vanguard as a municipal bond trader, then worked as a bond index trader.
“I spent a lot of time with my grandfather as a youth, talking about stocks,” Barrickman says. “He followed the markets. He got me interested, and when the opportunity showed up at Vanguard, I was taken with it.”
As do many modern money managers, he sometimes writes a blog post.
“Whenever I explain indexing to friends and family, I always fall back on my favorite analogy: the car race. Imagine a race where one car represents the market and is set up in a certain way – with tires, fuel, suspension, and so on – all meeting precise specifications. The indexer is in another car, and its job is to finish in a dead heat with the market car,” he wrote in November.
In a December piece, “I Am Not Hal,” referring to the movie 2001: A Space Odyssey, he wrote, “If you’re picturing us letting computers do all the work, think again. While technology is an important tool, our bond index team is powered by the collective talent and experience of people doing business the old-fashioned, personal way – often by telephone.”
Barrickman wrote that he found it “a little strange that a recent headline asked whether the new ‘bond king’ is a machine.”
“While it’s true that I’m hard at work on my very own Iron Man suit, for the time being I’m, in fact, human. Occasionally, I even make jokes.”
The fund does things a bit differently from its competitors. For instance, Total Return Bond Index owns fewer mortgage bonds.
“We remove from our investment universe the holdings of the Federal Reserve of mortgages. We’re a little less exposed to mortgages. That’s a best practice, in our view,” he said.
Why? During the financial crisis, the Fed purchased mortgage bonds to prop up the prices artificially.
“When the Fed started buying mortgages, we felt that adjusting would be best practices. We did not want to target an artificial investment universe, as it can lead to distortions,” he said Tuesday.
As a result, Barclays put together a custom benchmark for Vanguard in 2010 known as the Barclays U.S. Aggregate Float Adjusted Index.
“Specifically, the Barclays Agg has approximately 28 percent in mortgages, and the float adjusted version that we follow has approximately 20 percent,” said Vanguard spokeswoman Emily White.
What does Barrickman think of central banks outside the United States that now are charging “negative” interest rates?
“We’re in uncharted territory if you look at central bank actions. There’s uncertainty out there about how it’s all going to play out. We could potentially see higher volatility as the market collectively figures out what the next moves are.”
That said, Barrickman noted he and his team “don’t build in a type of rate view into our portfolio. It’s not our mandate. Our mandate is to deliver the return of the benchmark.”
Read more at http://www.philly.com/philly/business/20150506_Vanguard_s_Josh_Barrickman__the_new_bond_king__takes_a_blogging__personal_approach.html#FB7hwE4pf3etb6p6.99
May 6, 2015 | Categories: Uncategorized | Tags: Josh Barrickman, Total Bond Index Fund, Vanguard Group, Vanguard Total Bond Index Fund | Leave a comment
How can you invest like multimillionaire Mitt Romney? Through something called a self-directed IRA. The former presidential candidate held from $20 million to $100 million in one.
Self-directed individual retirement accounts let you invest in real estate, precious metals, even Eagles tickets.
What is a self-directed IRA? Simply, you decide what, beyond Wall Street’s offerings, to invest in your retirement account.
It’s a niche vehicle, with complex rules (see IRS Publication 590). Most banks and brokerages won’t offer self-directed IRAs because the Street makes little money from them.
You can buy and sell almost anything: private placements, oil and gas leases, tax liens, and deeds – everything except life insurance and collectibles such as jewelry, rugs, and antiques.
Outfits such as Blue Bell-based Camaplan, founded by Carl Fischer and Maggie Polisano, administer self-directed IRAs.
Camaplan places the accounts in custody with Bryn Mawr Trust. Its 3,500 clients own notes, real estate (single-family homes, condos, industrial warehouses, office, retail), private placements (trusts and hedge funds), and precious metals (gold, silver, platinum, palladium).
Local real estate developer Sheila Dragon uses IRA lender money to fund her projects. “It’s a great way to diversify. I offer my investors 10 to 15 percent returns annually,” she says. “But you have to be careful, because you’re handling someone’s retirement money.”
Some IRAs own the bizarre or the interesting, Fischer says: llamas, which they shear to sell wool; houses that Marcellus Shale oil frackers rent.
There are drawbacks. Tax-advantaged accounts have contribution limits, as do all IRAs, 401(k)s, and educational savings accounts, Fischer says. “Self-direction just allows you more choices” beyond stocks and bonds, he adds.
It’s key to avoid self-dealing, which prohibits using tax-advantaged assets for personal use. For example, if you buy a Jersey Shore vacation property inside an IRA, you can’t rent it out to family.
Fraudsters may exploit self-directed IRAs, because they permit investors to hold unregistered securities and the accounts’ custodians or trustees likely have not investigated the securities or the background of the promoters.
In 2011, the Securities and Exchange Commission’s Office of Investor Education and Advocacy and the North American Securities Administrators Association issued an Investor Alert to warn about self-directed IRAs. Visit the SEC website (investor.gov) for details.
earvedlund@phillynews.com
215-854-2808
@erinarvedlund
Read more at http://www.philly.com/philly/business/20150504_Monday_Money_Tip__The_wide_world_of_self-directed_IRAs.html#6Wlj52RsJTFPKuMq.99
May 4, 2015 | Categories: Uncategorized | Tags: Carl Fischer, individual retirement accounts, mitt romney, self-directed IRA | Leave a comment
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