By Pam Martens: December 21, 2012 The Financial Industry Regulatory Authority (FINRA), the self regulatory body that oversees Wall Street firms, has an Investor Education Foundation whose aim is to boost financial literacy and warn folks about investment scams. Earlier this year, FINRA put out an advisory titled: “Weathering Tough Economic Times – 12 Tips for 2012.”  I have to take serious issue with one of their recommendations. Tip number one from FINRA is to set up a rainy day fund: “Set aside at least one month of your current salary (and work your way up to three months) in a federally insured savings account. This will give you a cushion to handle medical bills, a short job loss, a surprise car repair or other financial emergency – and help keep your finances under control.” A backup savings account that will last for three months is more like a brief shower fund … Continue reading →

By Pam Martens: December 20, 2012  It is close to five years since the Commodity Futures Trading Commission referred the Libor rate rigging matter to the U.S. Department of Justice. Yesterday was the first time the Justice Department brought a criminal charge in the matter – not against a U.S. bank where it would have a smoother road to prosecution, but against a Japanese subsidiary of the Swiss banking giant, UBS, and two of its former traders, Tom Hayes and Roger Darin.  The UBS subsidiary has received a deferred prosecution agreement, meaning it won’t be criminally prosecuted if it abides by the terms of the agreement, which includes not disputing the charges and continued cooperation.  UBS paid global fines of $1.5 billion in the matter with the bulk of that money going to the U.S. Department of Justice.  Hayes and Darin have been criminally charged in a complaint filed December … Continue reading →

By Pam Martens: December 19, 2012  UBS, the global banking behemoth based in Switzerland, has agreed to settle charges over rigging the international interest rate benchmark known as Libor with U.K., U.S. and Swiss authorities.  The total settlement with all regulators will total approximately $1.5 billion.  Later this morning, the U.S. Department of Justice and the Commodity Futures Trading Commission, which levied the bulk of the fines, will announce their findings.  The U.K.’s Financial Services Authority (FSA) earlier today revealed the details of an expansive conspiracy to rig rates that involved traders, managers, chat rooms, standing orders, at least 2,000 documented efforts to rig rates, and bribes and payoffs to other brokers.  According to the FSA:  UBS, through four of its traders, colluded with interdealer brokers to attempt to influence the Japanese Libor submissions of other banks. The brokers were in regular contact with various panel banks that contributed Japanese Libor … Continue reading →

By Pam Martens: December 18, 2012  At 9:30 a.m. this morning, the Senate Subcommittee on Securities, Insurance and Investment will hold a hearing on stock market structure, titled: “Computerized Trading Venues: What Should the Rules of the Road Be?”  One of the individuals testifying will be Dan Mathisson, head of U.S. Equity Trading for Credit Suisse.  Mathisson is an influential voice, writing a column for Traders Magazine and cited by Advanced Trading magazine for creating the modern algorithmic trading desk.  According to his prepared written testimony, Mathisson plans to give the Senators an earful on why stock exchanges should be stripped of their status as SROs – Self Regulatory Organizations.  Credit Suisse, for whom Mathisson works, is subject to regulation by the SROs, as are all other broker dealers who are members of exchanges, such as JPMorgan Chase, Citigroup, Morgan Stanley, Merrill Lynch, etc.  Increasingly, the broker dealers see themselves … Continue reading →

By Pam Martens: December 17, 2012  The photograph of the young children being led away from the Newtown, Connecticut elementary school with their eyes closed, hand placed upon the shoulder of the child in front of them, will be seared into our memory banks for the remainder of our lives.  It’s one of those photographs that capture and help to define both America’s history and her future: like the May 4, l970 photograph of the stunned, sobbing female student at Kent State kneeling next to her dead classmate — killed because the Ohio National Guard decided to open fire with live ammunition against students protesting the Vietnam War. Four students died with nine others wounded.  The students were protesting that day because their President, Richard Nixon, had lied to them – he had promised hope and change and an end to the Vietnam War in his election campaign, then escalated the … Continue reading →

December 17, 2012 Our thoughts and prayers go out to the children and adults of Newtown, Ct – both those now beyond harm and those who are trying to process this senseless and violent act of a young man just fourteen years older than his youngest victim.

By Pam Martens: December 14, 2012  Based on worries expressed by friends and comments I see under financial articles, there is great angst among Americans on a broad range of financial issues. I’ve frequently read comments indicating people are not opening their financial statements, just filing them away unopened, to avoid the stress of looking at their roller-coaster account balance.  Frankly, that’s a recipe for disaster. Errors can, and do, occur and checking that statement carefully is a hallmark of prudent investing.  The best way to deal with angst is not to pull the covers over one’s head but to be proactive.  Make a decisive plan and stay on course.  If your investments are causing you sleepless nights, at the top of your proactive plan should be: speak to my financial advisor about my unease.  Under law, investments are supposed to be “suitable” for the client.  That implies things like: don’t buy a risky growth … Continue reading →

By Pam Martens: December 13, 2012  The ink was barely dry on the $1.9 billion get-out-of-jail-free card that those corporate lawyers that now head up the U.S. Department of Justice handed global bank, HSBC, on Tuesday when long-overdue outrage erupted from the media.  There was so much attention to the HSBC stench that a potentially more fascinating and equally smelly deal from the Justice Department went down with little attention the very next day.  More on that in a moment.  On the Justice Department’s decision to add part of the drug money laundered by HSBC to its own coffers and call it a day without prosecuting HSBC or any of its employees, CNN quoted Notre Dame law professor, Jimmy Gurulé, an international expert on criminal law.  Gurulé said the settlement “makes a mockery of the criminal justice system,” adding that “there appears to be an exception for employees of large … Continue reading →

By Pam Martens: December 12, 2012  Yesterday, Lanny Breuer, the Assistant U.S. Attorney General for the criminal division of the Justice Department, appeared on CNBC to defend the deferred prosecution agreement with the global banking giant, HSBC – a deal which settled drug money laundering and other crimes for $1.9 billion without prosecuting any HSBC employee.  What Breuer was effectively defending was the five years that his former law partner, John Dugan, was HSBC’s primary banking regulator and did nothing to rein in the outrageously lawless behavior at the bank.  Dugan headed the Office of the Comptroller of the Currency (OCC), which regulates all national banks, from August 4, 2005 through August 14, 2010.  During that period, according to the Senate Permanent Subcommittee on Investigations, the OCC turned a blind eye to abuses at HSBC. In fact, it was not until Dugan left the OCC that a report was issued in … Continue reading →

By Pam Martens: December 11, 2012  On July 17 of this year, the Senate Permanent Subcommittee on Investigations released a 330-page report on banking giant HSBC, together with 100 documents and internal emails, evincing a culture of hubris and potentially criminal actions when it came to U.S. banking laws.   Today, the U.S. Department of Justice and multiple other U.S. regulators will tie all that up with a tidy red bow for a settlement of $1.921 billion; a small nick in HSBC’s profits of $22 billion last year. HSBC released a statement saying it was “profoundly sorry.”  During the July 17 Senate hearing on HSBC, Subcommittee Chairman, Carl Levin, questioned Chistopher Lok, the former head of global banknotes at HSBC Bank USA, about internal emails from HSBC that the Senate had in its possession.  In the first email, a subordinate tells Lok that a proposed bank customer has a “know your customer” … Continue reading →