For most of its 146 years, Deutsche Bank was the embodiment of German values: reliable and safe. Now, the once-proud institution is facing the abyss. SPIEGEL tells the story of how Deutsche's 1990s rush to join the world banking elite paved the way for its own downfall.
Following on from this recent post regarding the Hatton Garden heist with a value thought to be in the region of £35M (~$50M US) comes another Bank heist - this time on an all together much larger scale. Last month hackers thought to have utilised run of the mill script kiddie malware breached weak security controls at the Central Bank of Bangladesh. Multiple transfer requests totalling nearly $1 billion were then sent to the Federal Reserve Bank of New York, allowing $81 million to transfer before one of the routing banks Deutsche Bank queried with CBB after noticing a spelling mistake on a fake end party ; Sri Lankan NGO Shalika Fandation not Foundation. Bank Chairman Atiur Rahman has unsurprisingly quit after trying to hide the loss from the Government and Board of Directors until the story leaked to a newspaper in the Philippines.
Tired of waiting for IMF and World Bank recognition of its financial muscle, China stepped aside to lead the creation of an Asian Infrastructure Investment Bank (AIIB) inviting the rest of BRIC to join as cofounders. Unexpectedly, there's been a bit of a global stampede to get in an application as founding member. Here's a helpful infographic. And here are some widely divergent points of view pontificating on the geopolitics of finance.
"Never before had electronic equipment been so exposed to the elements. [T]hey could easily jam or run out of product. They could erroneously dispense several bank notes instead of just one—all without the owner's knowledge. They were activated by plastic or paper tokens that would only activate for the operating bank and, in some cases, only that particular bank location. Some banks would keep the token in the machine and return it to the customer (by post) once the account had been debited. As a result, early ATMs were standalone, clunky, unfriendly, and inflexible."
The End of Banking: Money, Credit, and the Digital Revolution - "Unregulated banking with access to government guarantees is an enticing business model. It offers the profits of excessive risk-taking in good times, and allows passing on the inevitable losses to taxpayers in bad times." [more inside]
K. Mike Merrill at BigThink has some ideas on how to modernize Monopoly while helping players better understand the nature of our financial system.
Various outlets are reporting that, over the past month, Chase Bank has sent out letters to American porn actors that their Chase accounts will be closed as of May 11. One actress describes discovering her account had been closed without notice. Chase Bank has remained quiet about their actions (other than to tell the customers that their accounts were considered "high risk"), leaving many to wonder why this has happened, seemingly out-of-the-blue. There are indications that the DOJ may be involved.
Banks usually reserve the right to change the rules or rates for credit cards they issue at any time, and the only notice given is buried in a long legal document. Russian Dmitry Argarkov turned this on its head: After he received a junk-mail credit card offer, he modified the document to include terms ridiculously in his favor and sent it back. The bank signed and certified it without looking at it, and sent him a credit card. [more inside]
Building conversions can be a tricky business, but it's especially so when there is a fifty ton steel vault built into the structure. So what can you do with that old bank? Well, restaurants are popular. So are nightclubs and bars. Really big banks seem to be a natural for a hotel conversion (here's one in progress). And if all that sounds too fancy, well, how about a Walgreens? [more inside]
Wall Street begins playing again with the same matches that burned the economy in 2008 From the New York Times: "The banks that created risky amalgams of mortgages and loans during the boom — the kind that went so wrong during the bust — are busily reviving the same types of investments that many thought were gone for good. Once more, arcane-sounding financial products like collateralized debt obligations are being minted on Wall Street. " (View article on a single page) [more inside]
“If I tell you, you’re not going to believe me,” Torres said. He was crying as he told them an incredible story about being recruited by the Defense Intelligence Agency to participate in a secret operation testing the security of Washington-area banks. He said he’d been assigned to rob a half-dozen banks over four days. And he told them about Theo, the man who hired him and gave all the orders—even though Torres had never met him.
"Of the top 100 Swiss companies, 49 give shareholders a consulting vote on the pay of executives. A few other countries, including the United States and Germany, have introduced advisory "say on pay" votes in response to the anger over inequality and corporate excess that drove the Occupy Wall Street movement. Britain is also planning to implement rules in late 2013 that will give shareholders a binding vote on pay and "exit payments" at least every three years. Minder's initiative goes further, forcing all listed companies to have binding votes on compensation for company managers and directors, and ban golden handshakes and parachutes. It would also ban bonus payments to managers if their companies are taken over, and impose severe penalties — including possible jail sentences and fines — for breaches of these new rules."
"We decided to go on an adventure through the financial statements of one bank [Wells Fargo], to explore exactly what they do and do not show, and to gauge whether it is possible to make informed judgments about the risks the bank may be carrying. We chose a bank that is thought to be a conservative financial institution, and an exemplar of what a large modern bank should be."
What's Going On In Japan? "Really Japan is quite a remarkable case, since neither fiscal nor monetary policy seems to be working to achieve the anticipated results. This year Japan will have a fiscal deficit of around 10% of GDP and gross government debt will hit 235% of GDP, yet the country is still struggling to find growth. Instead of reiterating old dogmas (whether they come from Keynes or from Hayek) more people should be asking themselves what is happening here. This is not a simple repetition of something which was first time tragedy and is now second time tragedy, it is something new, and could well be a harbinger for more that is to come, elsewhere. Oh, why oh why are economists not more curious?" [more inside]
Be it the United States or the European Union, most Western countries are so highly indebted today that the markets have a greater say in their policies than the people. Why are democratic countries so pathetic when it comes to managing their money sustainably? This clear, well-written essay in Der Speigel lays out the current debt crisis - along with current, proposed solutions - in an understandable manner. Not included among the so-far-proposed solutions is one other that has opened up a veritable financial market and debt Pandora's Box - i.e. a central bank debt jubilee.
James Coyne, the former Governor of the Bank of Canada, died October 12 at the age of 102. Coyne will be best-remembered for the Coyne Affair in 1961, a watershed moment in Canadian monetary policy that has been the subject of scholarly articles and at least one Master's thesis. Coyne and the Prime Minister, John Diefenbaker, disagreed on monetary policy. After Diefenbaker failed to get a bill vacating the office of Bank Governor through the Senate, Coyne resigned, setting the modern precedent that the government, not the Bank, sets the fundamental direction of monetary policy in Canada but that the Bank implements policy independently. His son, columnist Andrew Coyne, pays tribute (obliquely) to James Coyne's legacy of integrity in public office. (Andrew once complimented his father's parsimoniousness in purchasing cars.)
The Bank of Canada has changed the design of its new $100 bill after receiving numerous comments from focus groups that the woman pictured looked like she was of Asian descent. [more inside]
Foreign Policy magazine asks, "Can poor people open a Swiss bank account?" (Bad news: You need more than a passport, some pocket change, and a healthy disdain for the IRS.)
Last year the CEO of Barclays Bank, Bob Diamond, told MPs that “There was a period of remorse and apology for banks. I think that period needs to be over.” Yesterday, Barclays was fined £290M by UK and US regulators for manipulating the key LIBOR lending rate. [more inside]
And when the day comes that you, the American taxpayer, own this Bank, you will be ready to make it a Bank for America—one that brings benefits not to the privileged only, but to all of our customers, and to all of our stakeholders too.
Mother Jones: The 10 'Occupy' candidates vying for seats in the US House Of Representatives and Senate and their prospects.
The BBC broadcasted the science and technology showcase show Tomorrow's World (titles on piano) on 7 July 1965 on BBC1, it ran for 38 years until it was cancelled at the beginning of 2003. Unlike the boosterism of US science programs, Tomorrow's World was more famous for it's live stunts and wry outlook ( James Burke experiences the "convenient" office of the future and the future of home gardening and crushing ennui). The BBC has an archive of episodes and clips for UK visitors, everyone else will have to be content with clips concerning Home Computers, New Banking, Nellie The School Computer, The Elliot Light Pen, Mobile Phones, and Moog Synthesizers.
Economics blog VoxEU debates Why do we need a financial sector? Serious, important and very dull articles discuss the trade-offs and myths of innovation, and whether the sector is overrated, critical or a contributor to the wider economy.
The Atlantic is in the middle of a four-part special report on the Israel / Palestinian peace process, called "Is Peace Possible?" which features multimedia presentations on and analyses of what they believe are the four core issues of the conflict: Borders, Security, Refugees, and Jerusalem. (The latter two will be released on Monday, November 7 and 14th, respectively) The report was put together in collaboration with the S. Daniel Abraham Center for Middle East Peace. [more inside]
Chext is a site that enables the user to enter transactions and track their bank balance via SMS. People sharing a bank account can also get updates when money is spent from the account by the other person. [more inside]
An image showing disparity in sentencing appears in a tweet by Electronic Frontier Foundation co-founder John Perry Barlow and raises questions of its validity. Paul R. Allen is clearly a real case and Roy Brown an actual criminal but what do the differences in their sentencing say about the state of justice in America? [more inside]
Homeowners are using a little known loophole in the bankruptcy laws to shed their second mortgages.
Open Letter TO JPMorgan Chase CEO Jamie Dimon. The Democrat from Springfield responds to the Chase CEO's letter to shareholders.
In February 2006, a group of criminals pulled off the biggest cash heist in the history of the UK, making off with £53 million pounds. To date, only £23 million of the money has been recovered. Police are understandably upset about the dead ends in the case.
Interview with Gary Gorton (pdf) - Fascinating look at private institutional bank money creation (really) and subsequent run on the shadow banking system that hearkens back to the late-19th century banking crises with securitization playing the role of checking before the advent of deposit insurance. "Gorton is a lucid narrator of a complex tale." (via via)
Back in 2003, MetaFilter noted a very strange bank robbery in which the robber was also a particularly desperate victim. Seven years later, the story has become even more gnarled and mysterious, despite the ultimate conviction of a 'mastermind'. The Incredible True Story of the Collar Bomb Heist. [more inside]
Patsy Campbell has been fighting her foreclosure in Florida courts for the past 25 years. She has not made a mortgage payment since 1985 while foiling the efforts of several banks to evict her from her home in Okeechobee, Florida.
The Irish Banking Crisis: A Parable - What happened when the Irish stood up to the bankers in the 1970s? cf. Why Wall Street won't get shrunk & The Inequality That Matters [more inside]
M-Pesa, the mobile platform based money transfer system launched by Safaricom in Kenya, is changing the landscape of money in Africa, and around the world. Competition is heating up even while the service expands internationally allowing transactions to occur between Africa, UK and Asia. Bankers, regulators, startups and operators all want a piece of the pie as even the phone manufacturers themselves get into this potentially lucrative business.
Good morning, ladies and gentlemen. In a few hours, I will destroy the Greek economy. Unless, that is, you give me the sum of...one trillion dollars! (SLNYT, but with this much money I can afford to look frumpy)
Betting Against the American Dream. In 2005, just as Wall Street started to get cold feet about the housing market, the Magnetar hedge fund helped create a new wave of billion-dollar mortgage-backed securities, pushed bankers to include riskier sub-prime mortgages, and then shorted the securities, making millions when the bubble finally burst. Traders on both sides of the deals pocketed enormous fees even if their banks went under when the securities failed. Pulitzer Prize-winning ProPublica, This American Life, and NPR's Planet Money track down some of the big winners in the housing/financial crisis. No time to read or listen? It seemed so much like a scheme from The Producers, they even recorded a show tune to explain it all. (Previously, 2, 3)
His bank was threatening forclosure on his $350,000 home, so one Iowa man takes the next logical step: he bulldozes it to a pile of rubble. [embedded local news video]
Is it safe? While it looks that the banking system is in better shape than before, some companies still seem to want to hedge their bet. A German insurance company is suing the German central bank to force them open a checking account for them. "As an insurer, it’s our very own task to manage risks and regulators demand that from us,” Mallinckrodt said. “The Bundesbank is the only lender in Germany with no risk to become insolvent, so only an account there is risk free." [more inside]
Might the consumer banking revolution be coming? "Yodlee is the engine behind the online banking operations of most banks in America — and, for that matter, of mint.com... and it's now going to open up that database to software developers around the world." With mobile internet adoption soaring, the birth of iBanking may not be that far behind. An upgrade of payment and financial information systems could be closer than you think. [more inside]
A software engineer blogs about the inept and insecure way in which a bank asks customers to file a claim when they're the victim of fraudulent transactions. Dozens of customers chime in with similar experiences, over the course of months. The bank in question contributes nothing to the conversation, and the system remains both insecure and broken today [that last link is probably blocked by your browser or operating system, but don't worry - the form on the page doesn't work anyway].
Bank Notes - a collection of bank robbery notes, successful and otherwise.
Swiss private bank Wegelin says goodbye and good riddance to America. Swiss private bank Wegelin announced two weeks ago that it is to stop doing business in the United States. The St Gallen-based bank, Switzerland's oldest, said the decision had been taken in response to stricter measures introduced in the US against tax dodgers and planned changes to estate tax, which would make some non-US citizens liable to tax if they inherited US securities. In a letter to investors it said Swiss banks were likely to find themselves in an untenable position, as they would be expected to know which clients were liable to pay US tax – "an impossible undertaking", given the lack of clear definitions in the matter.
That's it. I am moving my all my money to Oakwood! The tiny town north of Houston has just three employees and not a single computer. It has no voice mail and no ATMs. This is the smallest bank in the USA. Still going strong.
Failed bank takeovers by the FDIC continue to increase at an alarming rate in 2009 (7 this past thursday, 52 so far in 2009) Here's an interview with a bank CEO who bought a failed bank for some insider info into how the process of buying failed banks works (this is the bank he bought). Via calculated risk. Previously
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