Further Regulations on Banks - Forthcoming

Reading the following article in the Associated Press regarding the intense criticism that JP Morgan is now facing with this week's revealtion of their risky trading activities, you can't help but feel that tougher regulations on banks will be forthcoming. JP Morgan has clearly given the politicians a green light to tighten the banking environment even further.

Ironically this comes on the heels of community banks complaining that they are overregulated. William B. Grant, chairman and CEO of First United Bank of Trust in Oakland, Md., testified on behalf of the American Banker's Association (ABA) before the House Subcommittee on Financial Institutions and Consumer Credit. In his testimony he said that regulatory burden for community banks has multiplied tenfold in the last decade, with about 1,500 small banks disappearing from their communities during that time.
 
“While community banks pride themselves on being flexible and meeting any challenge, there is a tipping point beyond which community banks will find it impossible to compete,” Grant said.  “Each new regulation or law in isolation might be manageable, but wave after wave, one on top of the other, will certainly overrun many community banks.”

Granted, JP Morgan is a little more than a community bank. But now on the heels of their most recent actions, you can see what the new future will hold as Rep. Barney Frank, D-Mass states this about JP, "... that really blows up the argument, 'Oh, leave us alone, we don't need you to regulate us'" 

 

JP Morgan - Here We Go Again, Memories of 2008

Well, Alan Greenspan, former FED Chairman said this was going to happen again. In a 2009 CNBC interview, he stated:

"there is no doubt that somewhere in the future, we will be having this conversation again. It will not be for quite a period of time. But it will occur because the flaws in human nature are such that we cannot change that. It doesn't work".

The only thing thing that Mr. Greenspan underestimated was that only 3 years later, JP Morgan, the world's largest bank, would prove him right with their disclosure that its in-house trading operating lost $2 billion in the past six weeks. How or why did this happen? The bank traced its big loss to the firm's chief investment office which is run out of London by Ina Drew, the chief investment officer. That unit of the bank made losing bets on "synthetic credit securities" . Hmmm, does that term sound vaguely familiar? If it does, that's because these are the same kind of instruments that nearly led to the collapse of our economy in 2008, which as we all remember, prompting a $1 trillion goverment bailout.

JP Morgan CEO Jamie Dimon said the trading loss was an "egregious" failure in a unit managing risks. However, he added in a call with analysts, after the markets closed on Thursday that just because the bank did something "stupid", that doesn't mean other firms are having such trouble. Dimon further stated, "There were many errors, sloppiness and bad judgment." Dimon said. "These were grievous mistakes, they were self-inflicted."

Now granted, our economy has begun to recover from the 2008 debacle. But what does this risk prone behavior tell you today? It tells you that regardless of the mishaps of yesterday, like Greenspan said, this will happen again. Why? Because it is part of human nature. Greed that is. And where there's greed, there will always be fraud.

 

See What Others Are Saying About Fraud This Month...

In This Month's Fraud Survey - the question posed to Keep Your Eye on Fraud members on LinkedIn is.... Do Mass Serial Fraudsters Deserve The Death Penalty?

See what others are saying. Maybe you agree or disagree. But no one will ever know unless your voice is heard. So Click here now to voice your opinion.

Wal Mart BUSTED - Bribes in Mexico

When will they learn and what does it take? With all the news out there concerning the Foreign Corrupt Practices Act and prosecutions that have arisen from it, out in the spotlight this week appears Wal-Mart. Considered to be one of the world's biggest retailers, Wal-Mart could now be on the hook for hundreds of millions of dollars in legal expenses and penalties to resolve allegations of widespread bribery by officials with its Mexican subsidiary.

If these allegations are true, then the allegations will represent to be a huge black eye for one of the biggest global retailing companies. Wal-Mart thouh hasn't denied the allegations. Instead, they are saying it is once again investigating them—the way it did several years ago, before they brushed this all under the rug.

The story was broke by the NY times several days ago as they reported how back in September 2005, a senior Wal-Mart lawyer received an e-mail from a former Wal-Mart executive from the company’s largest foreign subsidiary, Wal-Mart de Mexico. The former exec described how Wal-Mart de Mexico had created a campaign of bribery to win market dominance as in their rush to build stores, the company had paid out bribes to obtain permits in virtually every corner of the country.

 
Read the NY Times article by clicking here
 

 

What Happens to Madoff Type Inmates?

So what does Bernie Madoff's fate hold? To answer that, examine for a moment the life of a former Florida hedge fund manager who pleaded guilty to running a Ponzi scheme, and for who died, alone, in a North Carolina federal prison a week ago. 

The deceased, 80 year old Arthur G. Nadel, inmate number 50690-018, was known for running around the country after the FEDS discovered his frauds and when he told his wife to just “sell the Subaru if you need money”.  Formerly of Sarasota, Fla., Nadel was arrested in January 2009, only weeks after Bernard Madoff’s decades-long Ponzi scheme became unraveled.

What did Nadel admit and plead guilty to? He pled guilty to 15 counts of securities fraud for defrauding customers of millions of dollars in a massive Ponzi scheme. During his scheme, he told his investors that their accounts had $350 million, when in reality they only had about $125,000 at the time the fraud was exposed. In the end, Nadel admitted to have run a $168 million fraud.

“I blame no one but myself for my actions,” Nadel said at his sentencing in October 2010. “I have been my own worst enemy. I have thrown away everything worth living for.”