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.
Wells Fargo Fined $185 Million for Fraudulently Opening Accounts [The New York Times] “For years, Wells Fargo employees secretly issued credit cards without a customer’s consent. They created fake email accounts to sign up customers for online banking services. They set up sham accounts that customers learned about only after they started accumulating fees. On Thursday, these illegal banking practices cost Wells Fargo $185 million in fines, including a $100 million penalty from the Consumer Financial Protection Bureau, the largest such penalty the agency has issued. Federal banking regulators said the practices, which date back to 2011, reflected serious flaws in the internal culture and oversight at Wells Fargo, one of the nation’s largest banks. The bank has fired at least 5,300 employees who were involved. In all, Wells Fargo employees opened roughly 1.5 million bank accounts and applied for 565,000 credit cards that may not have been authorized by customers, the regulators said in a news conference. The bank has 40 million retail customers.” [more inside]
"Our concern was an intuitive one about a potential future world in which we'd have to report our every economic move to a bank, and the effect this could have on marginalised people."
I'm going to imagine you have the basics: over ₤10M in the bank, a yacht, luxury London apartment, second home in Monaco, offshore bank account, and if not a private jet, at least access to one. Good, are you sitting comfortably in your designer Italian armchair? Then we can begin. -The Banker's Guide To Art
Peter Staley was a 24 year-old banker at J.P. Morgan when he was diagnosed with AIDS in 1985. His brother, Jes, worked there as well. In a Q&A with Fortune, they discuss how their paths diverged,
Vitalik Buterin invented the world's hottest new cryptocurrency and inspired a movement — before he'd turned 20 - "I think a large part of the consequence is necessarily going to be disempowering some of these centralized players to some extent because ultimately power is a zero sum game. And if you talk about empowering the little guy, as much as you want to couch it in flowery terminology that makes it sound fluffy and good, you are necessarily disempowering the big guy. And personally I say screw the big guy. They have enough money already." [more inside]
The End of €500 Bills. Larry Summers wants to get rid of the US $100 note. Is it fighting fraud, crime and money laundering or an actual War On Cash? Is it really a plan to simply drive up bank fees? What about the 9.6M US households that are unbanked? When even Monopoly goes all-electronic can anything be done to stop all-electronic banking?
A Colleague Drank My Breast Milk And Other Wall Street Tales I kept the conversation light. I shared a funny story about my first day on Wall Street, when I opened up a pizza box to find condoms instead of pepperoni slices. Unwrapped. I was “the new girl,” and the guys just wanted to see me blush. I did blush, and I lived. “It’s not that bad anymore,” I said with a laugh. [more inside]
The Baltic’s BDI index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertilizer, has dropped to 498 points and is over 95 percent down from its all-time high of 11,793 points in 2008 before the financial crisis first hurt the sector. This index can be used as an overall economic indicator as it shows where end prices are heading for items that use the raw materials that are shipped in dry bulk. It’s important to keep in mind, though, that what the index is measuring isn’t the use of those commodities, but the shipping of them. Judging by wait times at the Panama Canal, you'd think things are busy but that traffic jam seems to be easing. [more inside]
In 2008 both the U.S. and the U.K. spent big bucks bailing out their banks.
At the end of last year the US government announced that it had made a profit from its bank bailouts. The UK, on the other hand, probably won’t. So what did the Americans do right and we do wrong?British business blog Flip Chart Fairy Tales tries to account for the difference. [more inside]
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."
Let Us Face the Future - "All parties pay lip service to the idea of jobs for all. All parties are ready to promise to achieve that end by keeping up the national purchasing power and controlling changes in the national expenditure through Government action. Where agreement ceases is in the degree of control of private industry that is necessary to achieve the desired end. In hard fact, the success of a full employment programme will certainly turn upon the firmness and success with which the Government fits into that programme the investment and development policies of private as well as public industry." [more inside]
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]
The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare. "Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking." [more inside]
The NY Federal Reserve is supposed to monitor big banks and prevent another financial crisis. But when Carmen Segarra was hired, what she witnessed inside the Fed was so alarming that she bought a tiny recorder, and started secretly taping. This American Life reports. [more inside]
Al-Qaeda deliberately targeted the 9/11 attacks at the backbone of the world's financial system in lower Manhattan, to cripple US and world banking. That totally didn't happen and, national emergency aside, the US's (and world's) financial systems kept operating as normal, with no runs on banks and the NYSE trading at normal volumes just a week later. With the destruction of the physical infrastructure of banking and telecommunications in lower Manhattan, Alan Greenspan stranded in Zurich, and no one having any idea what was going on, how did that happen? Within 41 minutes, Federal Reserve Vice Chairman Roger Ferguson issued a short statement on Fedwire that the Fed fund transfer system was fully operational and the Fed would remain open until "an orderly closing could be achieved." Within 3 hours, the Fed issued a short statement that "The Federal Reserve System is open and operating. The discount window is available to meet liquidity needs." The financial system, the Fed declared, would not fail. [more inside]
The rise and fall of Lance Armstrong is not simply a story of one man’s moral failures. To understand Armstrong you have to understand the people who use their money and power to shape the culture of competitive sports. And if you follow the trail of money and power in this particular case, it will lead you to Thomas Weisel, which is where the real story begins.
On Thursday, Wikileaks (previously) released the text (wikileaks) of a 19-page, international trade agreement being drafted "in secret" in Geneva by representatives of more than 50 countries, entitled the Trade in Services Agreement. [more inside]
"[S]tock jobbers[,]... confidence men,... an impecunious transportation entity", politicos, judges, scoundrels and Jackie O.: the near-death of Grand Central Terminal, and how it foretold the 2008 financial crisis. [sl Harper's]
An outsiders guide to the City of London.
Also of interest from the Guardian is the Joris Luyendijk banking blog which includes a ten best quotes from financial insiders and a helpful guide for novices.
Also of interest from the Guardian is the Joris Luyendijk banking blog which includes a ten best quotes from financial insiders and a helpful guide for novices.
If you're going to read one piece on fictional, passive aggressive banking services make it Kelly Stout's short "Alert!" [more inside]
Free Money for Everyone - "A wacky-sounding idea with surprisingly conservative roots may be our best hope for escaping endless, grinding economic stagnation." (via) [more inside]
Why do some banking systems never have crises and some have them all the time? Our system is Fragile by Design, the title of a new book by Calomiris and Haber. (The first chapter can be read here.) This essay lays out the argument, as does this PowerPoint. [more inside]
In 2014, Bitcoin (BTC) has become established as increasingly "real" money with government regulatory interest, law enforcement, and growing acceptance in commerce, but also as the reserve cryptocurrency for hundreds of "altcoins," making them also convertible to legacy money. Foremost among these is Litecoin (LTC), which introduced the scrypt hashing algorithm to cryptocurrency, democratizing coin mining by being best suited to common GPUs rather than Bitcoin's dedicated mining equipment. Recently donated LTC paid for a forest in Madagascar. Peercoin (PPC), next in prominence, introduces "proof of stake" where less energy is spent mining and existing coins pay interest. Dogecoin (DOGE), a fork of Litecoin (previously covered on Metafilter), continues heading to the moon, with more transactions than all other coins combined, thriving markets in digital goods, tipbots, an upcoming party in NYC's Bitcoin Center on Wall Street, much charity, and the recent announcement that new Dogecoins will be generated indefinitely. A selection of other foremost and interesting cryptocurrencies is within. [more inside]
...yesterday a new government report detailed an innovation that would preserve one of the largest job creators in the country, save billions of dollars specifically for the poor, and develop the very ladders of opportunity that Obama has championed as of late. What’s more, this could apparently be accomplished without Congressional action, but merely through existing executive prerogatives. What’s the policy? Letting the U.S. Postal Service (USPS) offer basic banking services to customers, like savings accounts, debit cards and even simple loans... a way to deliver needed amenities to the nearly 68 million Americans—over one-quarter of U.S. households—who have limited or no access to financial services. Instead of banks, these mostly low-income individuals use check-cashing stores, pawnshops, payday lenders, and other unscrupulous financial services providers who gouged their customers to the tune of $89 billion in interest and fees in 2012. - The Post Office Should Just Become a Bank
The secretive business havens of Cyprus and the Cayman Islands face a potent rival: Cheyenne, Wyoming. At a single address in this sleepy city of 60,000 people, more than 2,000 companies are registered. The building, 2710 Thomes Avenue, isn't a shimmering skyscraper filled with A-list corporations. It's a 1,700-square-foot brick house with a manicured lawn, a few blocks from the State Capitol.[more inside]
"It was as if, while Mark Zuckerberg was still in high school, Bowie was bracing for the 21st Century, the demand for everyone to “share” accessible versions of themselves. The self as a business card, to be distributed to anyone who asked for it. He also saw opportunity: on 1 September 1998, he launched BowieNet." Pushing Ahead Of The Dame (previously, previously) takes a look at David Bowie's late-90s, technophile projects and the future they foreshadowed - Omikron: The Nomad Soul (& BowieBanc & BowieNet)
PayPal locked down the developer’s account, and said it could only have 50% of the funds. The rest would be released as development continued, based on PayPal’s assessment of the situation. PayPal was, essentially, going to become a producer going forward. Crowdfunding's Secret Enemy is PayPal
If the NSA is able to break through banks' computer security, does that mean it solved the prime factorization problem? The New York Times reported recently that “the agency has circumvented or cracked much of the encryption, or digital scrambling, that guards global commerce and banking systems.” Since banks' encryption codes rely on the fact that nobody knows how to find the prime factors of really large numbers, it could mean that the NSA has found a way to do that. Or it could mean that the NSA has simply gotten lots of banks to give up their information, or found other ways around their encryption. But if they've cracked this long-standing math problem, might the secret leak? What would be the effects?
Payday lenders target the working poor with quick loans at exorbitant interest rates. When a ballot initiative drive in Missouri threatened this lucrative business, the payday lenders fought back with everything they had--their money. A ProPublica report, published yesterday in the St. Louis Post-Dispatch documents the web of secret donations and intimidation that smothered the reform movement.
As Andrew Haldane, director of stability at the Bank of England, put it in a historical overview a few years ago, ‘there is one key difference between the situation today and that in the Middle Ages. Then, the biggest risk to the banks was from the sovereign. Today, perhaps the biggest risk to the sovereign comes from the banks. Causality has reversed.’ Yes, it has: and the sovereign at risk is us. The reason for that is that in the UK bank assets are 492 per cent of GDP. In plain English, our banks are five times bigger than our entire economy. (When the Icelandic and Cypriot banking systems collapsed the respective figures were 880 and 700 per cent.) We know from the events of 2008 and subsequently that the financial sector, indeed the whole world economy, is in an inherently unstable condition. Put the size together with the instability, and we are facing a danger that is no less real for not being on the front page this exact second. This has to be fixed, and it has to be fixed soon, and nothing about fixing it is easy.- "Let's Consider Kate," John Lanchester, London Review of Books (via)
Elizabeth Warren, in her new role as a member of the Senate banking committee, asks banking regulators: when did you last take a big Wall St bank to trial? (SLYT)
"Twenty five years ago I quit a job on Wall Street to write a book about Wall Street. Since then, every year or so, UPS has delivered to me a book more or less like my own, written by some Wall Street insider and promising to blow the lid off the place, and reveal its inner workings, and so on. By now, you might think, this game should be over. The reading public would know all it needed to know about Wall Street, and the publishing industry would be forced to look to some other industry for shocking confessions from insiders. Somehow this isn't the case."
"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."
Are you more honest than a banker? Under what circumstances would you lie, or cheat, and what effect does your deception have on society at large? Dan Ariely, bestselling author and professor of psychology and behavioural economics at Duke University visits the RSA to examine the mechanisms at work behind dishonest behaviour, and the implications this has for all aspects of our social and political lives. (28:46)
Eunuchs of the Universe: Tom Wolfe on Wall Street Today: [Daily Beast]
"As America teeters on a cliff, Tom Wolfe draws up a sterling indictment of our unscrupulous financial culture. Twenty-five years after Bonfire of the Vanities, the author returns to Wall Street to see what happened to the Masters of the Universe."
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]
IMF Economists are suggesting that The Chicago Plan, first proposed in 1936 as a way to avoid another Great Depression, is the answer to our current economic woes. [more inside]
Interest rate swap derivatives have not only turned sour for local governments and agencies across the United States. London-based banks are accused of massive mis-selling to dozens of Italian cities and regions. [more inside]
The National Bureau of Economic Research has published a new paper analyzing 138 years of economic history in 14 advanced economies, which proves that high levels of private debt cause severe recessions. (Via) Bonus SLYT: Money As Debt (1hr)
"Several executives involved in the transaction have either abruptly decided to retire or been sacked."
Last month, JP Morgan Chase announced it had lost $2 billion dollars in a 'hedging' maneuver. Today, Jamie Dimon, Morgan's chairman and CEO, testified before the Senate banking committee. [more inside]
One of the more conservative of the Fed's regional banks, the Dallas Federal Reserve, says "too-big-to-fail" banks must be broken up. Now. An interesting and important essay(pdf) from a most unlikely source.(via)
The Control Revolution And Its Discontents - "the long process of algorithmisation over the last 150 years has also, wherever possible, replaced implicit rules/contracts and principal-agent relationships with explicit processes and rules."
Greece gains another €130bn in bailout funds. It's a nice headline, but the reports suggest it still isn't enough and Newsnight paint a picture of a fracturing Greek society.
A serial intern in the finance sector speaks: "Applying for internships is so tiresome and bruising. It's like dating, you sit by the phone waiting for a call. Back in my days at university I would get up at 5.30am or 6am. First I'd go jogging, then send out an application for an internship. Every morning. It's so painful to hear 'no' all the time."
A Swarthmore College student-reporter's questioning of whether it is moral to go into banking sparks NYT columnist Nick Kristof to not only assert the affirmative, but to argue (in part) that in fact more well-educated, liberally-mined people should go into "conservative" industries like banking in order to reform it from the inside. In effect, Kristof suggests, socialist-leaning, educationally-empowered students should hunker down, swallow their disdain, and apply their ideals to change finance. Said student responds (in Slate): elite, ostensibly liberal-leaning students don't seem to be particularly discouraged from capitalism or going into banking in this climate, and probably never have been.