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On Wachovia, Whistle-Blowers, and Incentives
This article is from Stone Street Advisors.
I just read a very good article in the UK Guardian/Observer
about how Wachovia enabled hundreds of millions (if not billions) of
dollars of dirty money to flow through its various international
operations. I've seen much outrage (via twitter and other blogs) about
this debacle, especially since the article relates the plight of one
diligent whistle-blower who was silenced, and who experienced great
personal distress for his efforts. I wish I could say such secretive,
illegal behavior on the part of Wachovia was unique to that firm, but
unfortunately, it is not. No.where.close.
I've
seen bank and brokerage compliance/legal personnel spend infinitely
more time critiquing an address change on the account of a U.S. citizen
than on approving accounts/transactions for blind off-shore corporations
with mailing addresses in Miami. Think "ABC Import/Export" with a P.O.
Box in Miami and a legal address in the British Virgin Islands.
Nothing potentially shady about that, right?
Sure, there are KYC (Know Your Client) and AML (Anti-Money
Laundering) policies, procedures, and systems in-place, but in my
experience, they're analagous to many of the "Risk Management" policies,
procedures, and systems that were supposed to keep investment banks
from running themselves - and the global financial system - into the
ground. Those responsible for enforcement just simply are not empowered
nor incentivized to stop the actions of the producers, those who drive
revenue for the firm. And, if you produce enough revenue, you can bet
your ass that The Powers That Be will make sure to keep compliance off
your back, excepting clearly and painfully illegal transactions (and
even then, sometimes such things get through)...
It all comes down to incentives, and it starts all the way at the top
of both government and the executive ranks and oozes down into to the
deepest trenches. So long as both government and executive leaders -
and their underlings - are largely rewarded based on maximizing
short(er)-term results, we should be completely unsurprised that neither
are concerned with making tough choices and sticking to them for the
long-run.
Few people posess the fortitude and masochistic personality required
to pursue years-long regulatory/enforcement efforts. Like lawyers at
the SEC, why bother risking your career and health pursuing a big,
difficult case when you can "play the game" and jump to a more lucrative
gig in the private sector after 5, 10, or however many years? Many -
if not most - tasked with compliance/legal duties have no incentive to
"rock the boat," so-to-speak. In fact, they actually have negative
incentives for so-doing, similar to those experienced by the Wachovia
whistle-blower in the Guardian/Observer article.
Of course, the ultimate blame lays not with the regulators, enforcers
in either government or the private sector, nor does it lie in the
C-suites on Wall Street or in D.C, regardless of how easy it is to point
fingers there. No, the only ones with the ability to affect any change
are the shareholders and voters. The shareholders who elect the
members of these firms' Boards of Directors, the same directors who have
the ability and duty to make sure their firms' Executives are running
the firm with the best interest of the shareholders, the same
shareholders who are hurt when firms fail to act within the Law. And
voters, who elect the Legislature, the same Legislature that is
currently constricting the SEC's budget and thereby hampering its
ability to handle the tasks assigned it both before and as a result of
Dodd-Frank.
Surely, the flaws in the system are both myriad and complex, but
whining about them does not them change. Action, concentrated and
widespread action are the only thing that stands a chance of making a
difference. Absent that, we should be unsurprised that the status-quo,
for lack of a better word, sucks.
After all, The only thing necessary for the triumph of evil is for good men (and women!) to do nothing.
--The Analyst
* Pardon some generalizations, this is not intended to be a technical
discussion of the various issues discussed, but rather an observational
essay.
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What has anyone proposed that makes any fucking sense or has panned out other than the paper junkins on CNBC, and thats short term desperation. Sell your equities, buy the PM dips, plant some fucking crops, and learn a fucking skill OTHER than sitting around with your fingers in your butt waiting for Bald Beard to preach your future to you. "Oh you mean actually work? Eww, I cant get dirty! Then Ill REALLY never get laid. I still have hope if I make it rich!!!"
What kind of "action" does the author propose? Adding a bureaocracy is adding another tool to the cartels, fit to be bribed and used.
I guess this Stone Street dumbass has never read a shareholder proxy before. The MotherF'king board tells you to vote and then in the next sentence says your vote is not binding and they are going to do whatever the hell they want to anyway. Scana Corp proxy put up a vote for adding more shares and diluting the existing shareholder equity. How many Scana shareholders does this cocksucker Stone Street think voted for that??? Watch what they do.
How many shareholders did Bank of America ask when they did the Repo 105s and 108s at the end of every quarter?? How many shareholders did Wells Fargo ask before they did robo-signing on mortgages?? How many shareholders did they ask when they labeled derivatives contracts "hedging"
Hey Stone Street!!! If this is the best you can do as an "analyst", I suggest your talents are better suited for selling fertilizer. They're taking applications for that at CNBC.
Like Ted K said.
Remember Eisner at Disney, how much he was totally hated by the shareholders which voted in a majority to remove him, only to be told with this falsely politeand oh so fucking obsequious tone of voice by the phallus-sucking BoD members that the vote "may be taken into consideration as a non-binding opinion". Translation: "You are here to shell out the dough...bitchez! We grab it at no interest, and guess what assholes? THe law is on our side, we do not have to listen to you, we OWN Congress and the govermin, therefore, go fuck yourself!!"
Shareholders rights for ya!
You do not have to go further than that to realize how sick the American society is: the legal owners of a corporation (the shareholders) are the ones with the least real and effective rights.
And somehow, this is capitalism?
Like Hell it is!
I was a whistleblower. Let me tell you, it's not fun. If you are a family man, you better have a very understanding and helpful wife. I survived, hell, I've kinda thrived. I live in a backwater and I've established myself as a man of integrity. Having said all of that, I don't think voters or shareholders are going to change anything. They SHOULD, but I don't think they will. The vast majority of Americans are paralyzed with apathy. No, I believe we are headed for a major failure of our economy. That's what happens when people stop investing their time and honor back into the system. It must fail before any positive change can occur.
I for one am glad that no bankers were injured or jailed for this action of greed is good, unlike bcci. It's a good thing that we now reward the great business model;)
Please, the idea that shareholders have any say in american corporations is just insane. That was supposed to be part of the financial reform, but of course it was beaten back.
One coukd argue then the shareholders should go to jail. While the data may be correct the conclusions of the author aren't.
The largest shareholders are usually coporate officers and directors -- conflict of interest, anyone?
Ken Thompson still lives on the most exclusive street in "Old" Charlotte - Eastover. One and a half blocks from the Mint Museum. Tore down a beautiful 1920s house to build a crappy piece of sh*t.
He's laughing all the way to the bank.
Compliance, the second derivative of regulation, is well on its way to becoming a punchline.
The obvious solution is to incentivize the enforcers - how about letting them keep 1 percent of every fraud/laundering scheme they uncover?
Here are plenty of confiscation laws in place, we don't need more. What we need are high-level regulators and an attorney general willing to enforce the existing laws.
I have three business accounts and a personal account with WF. Why? Mainly inertia and laziness, but the Guardian article really pissed me off. By the end of next week they will be moved to a local bank.
Did that with Citi corp. Now starting to do it with another major institution. I'm just going to withdraw a certain amount each month out of the big bank world.
Put wanted posters with names and addresses of all banksters receiving above $1 million annual pay and tack them to telephone poles all around the country.
WANTED: FOR TREASON FRAUD AND POLITICAL BUTTFUCKING
Thanks for this article!
They say a cynic is a romantic who's heart has been broken.
That's the sad truth... I feel that way myself often. But in the long run cynicism is a cave for cowards to hide in...
As you say... (slightly paraphrasing Edmund Burke)...
"The only thing necessary for the triumph of evil is for good men (and women!) to do nothing.
I won't do a long dance... but here's my piece:
Enable the networked political microtransaction.
Which is a part of a more ambitious goal... the network(s) offering that capability as well as a capability for all other peer-to-peer transactions (sort of a specially designed Internet Wallet):
In the final analysis its about catalyzing a unique, user-owned, distributed and independent institution so-to-speak..., and essentially liquiifying P2P association and transaction with both existing currencies and eventually new currencies as well as creating a counter-balancing institution against oligarchy.
Anyway, just a thought...
Empowering the Commons: The Dedicated Account (Part I)
http://culturalengineer.blogspot.com/2010/08/empowering-commons-dedicated-account.html P.S. Need to move to New York area (also want to)... just throwing it out if anyone has any penthouses that need house sitting...Dear Analyst - Do you think there is any prospect that shareholders will affect change...the shareholders who generally are a diffuse glob of disorganized parties and have a financial interest in the money made by fraud, and a financial interest in not seeing their stock decimated by airing dirty laundry and prompting civil and criminal probes?
Do you think there is any prospect that voters will affect change...the voters who after the monumental financial crises of 2008 voted in 2008 and 2010 and their votes had no real affect on the Wall Street/government criminal enterprise?
The only thing that has any hope of stopping the continual rape and pillage of investors, pensioners, city and state funds, and taxpayers is to see the entire Wall Street RICO crime syndicate along with co-conspirators in the mortgage industry, the Fed, Treasury, SEC, and Congress arrested and perp walked in handcuffs to federal and state jails. Now. Not 2 years from now.
Prosecutors, in the style of the Maxiprocesso (Maxi Trial) of the Mafia in Sicily during the mid-1980s. have the power to get RICO convictions, RICO confiscations of mega-billions of dollars of ill-gotten gains, repayment of taxpayers, and 20 years-to-life hard time prison sentences for hundreds of Wall Street & DC criminals.
But the federal government won't prosecute the major financial mobs. And just recently the 50 State AGs reached a "settlement" with the bankstas and won't prosecute these brazen criminals.
This is the ONLY way the banking system will change. The banksters must go to Jail for the Fraud they perpetuated.
+30 years to life.
no. having said that i do believe "Dow 100,000" is well on its way as well as "the $10,000,000 a year harvard tuition" and "the Yankees win, theeeeeee Yankees win."
It says in the article's title it was billions, so I don't get how Analyst gets "maybe billions."
The number is well North of over $350 billion according to other sources.
Can't let the rich be exposed, TBTF TBTF TBTF!
To those that worked at Wachovia and had a hand in this racket do the rest of us a favor and put a bullet in your fucking head.
we are all doing what we can and maybe some day it
we be our best?
Not exactly news. I am so shell shocked with corruption at every level in this bannana republic that it wouldn't surprise me if every single TBTF is involved in money laundering.
"it wouldn't surprise me if every single TBTF is involved in money laundering".
Really....seriously?
Did you learn nothing from the whole MBS debacle? How could every large bank NOT be involved in money laundering?...otherwise, Mr. Garcia just takes his $400 billion business next door and YOU don't get your BONUS
The Banksters run their operation with impunity, what else is new?