5-point Strategy to defeat Regulators

http://rollingstone.com/politics/news/how-wall-street-killed-financial-reform-20120510
How Wall Street Killed Financial Reform
It's bad enough that the banks strangled the Dodd-Frank law. Even worse is the way they did it - with a big assist from Congress and the White House.
by: Matt Taibbi

That the banks have just about succeeded in strangling [reform] is probably not news to most Americans – it's how they succeeded that's the scary part. The banks followed a five-point strategy that offers a dependable blueprint for defeating any regulation – and for guaranteeing that when it comes to the economy, might will always equal right.

STEP 1: STRANGLE IT IN THE WOMB

STEP 2: SUE, SUE, SUE

STEP 3: IF YOU CAN'T WIN, STALL

STEP 4: BULLY THE REGULATORS

STEP 5: PASS A GAZILLION LOOPHOLES

The best way to explain where those hidden taxes come from is to compare a regulated market to an unregulated one. It's the difference between buying soap and buying drugs. You go into a corner store and there's a price tag on the soap, but you can always go across the street, or on the Internet, to see what soap costs someplace else. But when you go to buy an eight ball of coke, you have to ask your dealer what the price is, and it's not like you can compare prices online. If you're tough and streetwise and you know what coke costs, you might get it for a couple hundred bucks. But if you're some quivering Ivy Leaguer idling in a Lexus, the price might be $400.

That's how the swaps market works. It operates completely in the dark. If you're some Podunk town in Texas or Alabama and you need swaps financing, you've got to ask Goldman Sachs or Morgan Stanley what it costs. There's no exchange where you can compare prices. And modern investment bankers are ethically a notch below your average drug dealer. They will extract from their customer – a town, an airline, a chain of retail stores – whatever they think he'll pay. And that extra cost will be passed on to you by the overcharged customer, in the form of higher taxes, bigger home-heating bills, higher sewer rates or pricier airline tickets. Wall Street will be taking a bite out of you every time you write a check.

That's particularly true because most members of Congress know that the public seldom pays any attention to the fiendish complexities of things like derivatives reform.

But money never gets tired. It never gets frustrated. The system has become too complex for flesh-and-blood people, who make the mistake of thinking that passing a new law means the end of the discussion, when it's really just the beginning of a war.

The Scam Wall Street Learned From The Mafia

my brief notes, quoted verbatim from this blog post:

http://rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620
The Scam Wall Street Learned From the Mafia
How America's biggest banks took part in a nationwide bid-rigging conspiracy - until they were caught on tape
by: Matt Taibbi

Along with virtually every major bank and finance company on Wall Street, these wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars.

The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds. And they did it so cleverly that the victims never even knew they were being cheated.

In fact, stripped of all the camouflaging financial verbiage, the crimes committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. The only thing that made this trial different from a typical mob trial was the scale of the crime.

classic cartel activity: not just one corrupt bank, but many, all acting in careful concert against the public interest. we've seen numerous hints that such orchestrated corruption exists. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – "an open-and-shut case of anti-competitive behavior," as one former regulator described it. More recently, a major international investigation has been launched into the manipulation of Libor.

we may yet find out that the world's most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.

In a post-crash era where Wall Street trials almost never make it into court, and even the harshest settlements end with the evidence buried by the government and the offending banks permitted to escape with no admission of wrongdoing, this case finally dragged the whole ugly truth of American finance out into the open – and it was a hell of a show.

1. THE SCAM

the setting reflected the bizarre alternate universe that exists on Wall Street. Like so many court cases involving big banks, the proceeding looked more like a roomful of expensive lawyers negotiating a major corporate merger than a public search for justice. the spectators were not average citizens come to witness how they had been robbed blind by America's biggest banks. Instead, there were row after row of suits – other lawyers.

One of the main lines of defense for corrupt Wall Street institutions in recent years has been the extreme complexity of the infrastructure within which these crimes are committed.

Contracting corruption has been around since the construction of the Appian Way. The difference here is the almost unimaginable scope of the crime – and the fact that it's mobsters from Wall Street who are getting in on the action. Until recently, such activity has traditionally been the almost exclusive domain of the Mafia.

"When I think of bid rigging, I think of the convergence of organized crime and the government," says Eliot Spitzer. "The urge to become a monopolist," he says, "is as old as capitalism." The Mafia moved into bid rigging, he says, because it observed over time that monopolizing public contracts offers a far more lucrative business model than legbreaking.

"Organized crime learned their lessons from John D. Rockefeller," Spitzer explains. "It's much more efficient to control a market and boost the price 10 percent than it is to run a loan-sharking business on the street, where you actually have to use a baseball bat and collect every week."

2. THE TAPES

Almost every executive involved in the trial was absurdly young; many were just out of college when the bid-rigging scam started. The extreme youth of some of the conspirators was an obvious subtext of the trial, underscoring the fact that far more senior executives from bigger banks had been permitted by the government to evade testifying.

The brokers and providers used a dizzying array of methods for rigging deals. In some cases, the broker helped the "winner" by simply excluding other bidders, who may or may not have been in on the scam.

3. THE POLITICIANS

The case offers a clear and unvarnished blueprint of the architecture of American financial and political corruption.

Defense counsel showed us how employees were routinely directed by their boss, to make political contributions to select candidates, only to be reimbursed for those contributions later on.

More interesting, though, were the stories about political payoffs.

In 2001, CDR hired a consultant named Ron White, a Philadelphia bond attorney who happened to be the chief ­fundraiser for then-mayor John Street. CDR gave White two tickets to the 2003 Super Bowl in San Diego plus a limo – a gift worth $10,000. As his "guest," White took Corey Kemp, the city treasurer for Philadelphia, who, 16 days later, awarded CDR a $150,000 contract to advise the city on swap deals. But that wasn't the end of the gravy train: CDR doled out those swap deals to selected banks, who in return kicked back $515,000 to CDR for steering city business their way.

Even more startling was the way that a notorious incident involving former New Mexico governor and presidential candidate Bill Richardson resurfaced during the trial. Barack Obama had nominated Richardson to be commerce secretary – only to have the move blow up in his face when tales of Richardson accepting bribes began to make the rounds. Federal prosecutors never brought a case against Richardson

CDR paid Bill Richardson $100,000 in contributions and got $1.5 million in public money in return. And not just $1.5 million, but $1.5 million for work they didn't even do – the state still had to hire another firm to do the actual job. Nice non-work, if you can get it.

To grasp the full insanity of these revelations, one must step back and consider all this information together. It turns into a kind of unbroken Möbius strip of corruption – the banks pay middlemen to rig auctions, the middlemen bribe politicians to win business, then the politicians choose the middlemen to run the auctions, leading right back to the banks bribing the middlemen to rig the bids.

When we allow Wall Street to continually raid the public cookie jar, we're not just enriching a bunch of petty executives – we're effectively creating an alternate government, one in which money lifted from the taxpayer's pocket through mob-style schemes turns into a kind of permanent shadow tax, used to maintain the corruption and keep the thieves in place. And that cuts right to the heart of what this case is all about.

Wall Street is tired of making money by competing for business and weathering the vagaries of the market. What it wants instead is something more like the deal the government has – regularly collecting guaranteed taxes. What's crazy is that in order to justify that dream of regular, monopolistic tribute, they've begun to see themselves as a type of shadow government, watching out for the rest of us. Amazingly enough, this even became a defense at trial.


4. THE DEFENSE

The men and women who run these corrupt banks and brokerages genuinely believe that their relentless lying and cheating, and even their anti-competitive cartelstyle scheming, are all legitimate market processes that lead to legitimate price discovery.

And besides, it's not like ordinary people understand this stuff anyway. So how is it the place of some busybody federal prosecutor to waltz in here and say what's a fair price?

This incredible defense, perfectly expresses the awesome arrogance of the modern-day aristocrats who run our financial services sector. Corrupt or not, they built this financial infrastructure, and it's producing the prices they genuinely think are fair. And fair to them is the customer getting the absolute bare minimum, while they get instant millions for work they didn't do.

Moreover – and this is the most important part – they believe they should get permanent protection from the ravages of the market, i.e., from one another's competition. Imagine Jack Nicholson on the witness stand, dressed in a repairman's uniform and tool belt. Who's gonna fix those refrigerators? You? You, Lieutenant Weinberg? You can't handle the truth!

Capitalism is a system for determining objective value. What these Wall Street criminals have created is an opposite system of value by fiat. Prices are not objectively determined by collisions of price information from all over the market, but instead are collectively negotiated in secret, then dictated from above.

To the great credit of the jurors in the Carollo case, they didn't buy Wall Street's ludicrous defense.

---

In the end, though, the conviction of a few bit players seems like far too puny a punishment. A truly commensurate penalty would be something like televised stonings of the top 10 executives of every guilty bank, or maybe the forcible resettlement of every banker and broker in Lower Manhattan to some uninhabited Andean wasteland... anything to address the systemic nature of the crime.

Get busted for welfare fraud even once in America, and good luck getting so much as a food stamp ever again. Get caught rigging interest rates in 50 states, and the government goes right on handing you billions of dollars in public contracts.

Who ultimately loses in these deals? Well, to take just one example, the New Jersey Health Care Facilities Finance Authority, the agency that issues bonds for the state's hospitals, had their interest rates rigged by the Carollo defendants on $17 million in bonds. Since then, more than a dozen New Jersey hospitals have closed, mostly in poor neighborhoods.

this is what Wall Street learned from the Mafia: how to reach into the penny jars of dying hospitals and schools and transform their desperation and civic panic into fat year-end bonuses and the occasional "big lunch." Unlike the Mafia, though, they were smart enough to do their dirt without anyone noticing for a very long time, which is what defense counsel in this case were talking about when they argued that towns and cities "were not harmed" by the rigged bids, i.e. what taxpayers didn't know couldn't hurt them. This is logical thinking, to the sociopath – like saying it's not infidelity if your wife never finds out. But we did find out, and the scale of betrayal unveiled was epic. It was like finding out your husband didn't just cheat, but had a frequent-flier account with every brothel in North America for the past 10 years. At least now we know how bad it was. The trick is to find a way to make the cheaters pay.

Personal Brand

documenting some random thoughts before they disappear into ether

http://wikihow.com/Develop-Your-Personal-Elevator-Pitch

5. The Law of EF Hutton

People become Real Leaders because of ...

1. Charachter - who they are
2. Relationships - who they know
3. Knowledge - what they know
4. Intuition - what they feel
5. Experience - where they've been
6. Past Success - what they've done
7. Ability - what they can do

4. The Law of Navigation

Charting the Course with a Navigation Strategy

P redetermine a Course of action
L ay out your Goals
A djust your Priorities
N otify Key Personnel

A llow Time for acceptance
H ead into Action
E xpect Problems
A lways Point to the successes
D aily Review your plan

The 21 Irrefutable Laws of Leadership - John C Maxwell

The 21 Irrefutable Laws of Leadership - John C Maxwell
Follow Them and People will Follow You

John C Maxwell has combined insights from his 30+ years of leadership successes and mistakes with observations from the worlds of business, politics, sports, religion, and military conflict. The result is a revealing study of leadership delivered as only a communicator like Maxwell can.

1. The Law of the Lid
Leadership Ability Determines a Person's Level of Effectiveness

2. The Law of Influence
The True Measure of Leadership is Influence - Nothing More, Nothing Less

3. The Law of Process
Leadership Develops Daily, Not in a Day

4. The Law of Navigation
Anyone Can Steer the Ship, But It Takes a Leader to Chart the Course

5. The Law of EF Hutton
When the Real Leader Speaks, People Listen

6. The Law of Solid Ground
Trust is the Foundation of Leadership

7. The Law of Respect
People Naturally Follow Leaders Stronger Than Themselves

8. The Law of Intuition
Leaders Evaluate Everything with a Leadership Bias

9. The Law of Magnestism
Who You Are Is Who You Attract

10. The Law of Connection
Leaders Touch a Heart Before They Ask for a Hand

11. The Law of the Inner Circle
A Leader's Potential Is Determined by Those Closest to Him

12. The Law of Empowerment
Only Secure Leaders Give Power to Others

13. The Law of Reproduction
It Takes a Leader to Raise Up a Leader

14. The Law of Buy-In
People Buy Into the Leader, Then the Vision

15. The Law of Victory
Leaders Find a Way for the Team to Win

16. The Law of the Big Mo
Momentum Is a Leader's Best Friend

17. The Law of Priorities
Leaders Understand That Activity Is Not Necessarily Accomplishment

18. The Law of Sacrifice
A Leader Must Give Up to Go Up

19. The Law of Timing
When to Lead Is As Important As What to Do and Where to Go

20. The Law of Explosive Growth
To Add Growth, Lead Followers - To Mulitply, Lead Leaders

21. The Law of Legacy
A Leader's Lasting Value Is Measured by Succession

Introduction:
Leadership is leadership, no matter where you go or what you do. Times change. Technology marches forward. Cultures vary from place to place. But the true principles of leadership are constant... Leadership principles stand the test of time. They are irrefutable.

... keep in mind four ideas:
1. The laws can be learned.
2. The laws can stand alone.
3. The laws carry consequences with them.
4. These laws are the foundation of leadership.

Each law is like a tool, ready to be picked up and used to help you achieve your dreams and add value to other people. Pick up even one, and you will become a better leader. Learn them all, and people will gladly follow you.

brand values

notice i mentioned brand "values" not brand popularity or brand packaging or brand pricing or brand profit margins. truth lasts, while lies & deceit are not sustainable. what makes some brands seem more ethical than others? why do some brands suddenly fall out of grace? do you think you might be having a brand yourself? but, i don't wish to go into brand marketing and take discussion away from our reverend's focus on poverty.

moral virtues

I agree with Philip Booth that capitalism does reward moral virtues and punishes the lack of it. You can see that reflected in the brand values, or assets listed in the balance sheet as goodwill. Lack of it destroys capital as demonstrated by the likes of Bernie Ebbers, and lately the Murdochs & quite a few others in the recent limelight.. Hard work in itself will not always be rewarded, unless it is channelled in the right direction... As far as poverty is concerned, I am not sure that we can completely eradicate it. But personally, I think what we really need is a fair, equitable & just society across continents, rather than a rich society locally where everyone is rich! I don't think we really understand poverty, living in a country where there isn't anyone dying from famine or hunger or thirst. NHS seems to be more worried about people eating too much.

NHS Reform

Allowing private sector to compete with NHS doesn't exactly privatise NHS, but opens up NHS outwards to better serve their patients or lose them to better providers. Sure, it is there and better than nothing, and a comfort factor to know that I can get to a hospital and it is a cheap service. But that is exactly what NHS is dishing out now - endless wait for patients till they give up on the Hospital or Life itself.

Competition is necessary and vital for any public service to continue being efficient and responsive. Or we end up with decision makers with no responsibility or accountability for anything but their own pockets - look at Ed Milliband's recent call for responsible capitalism and Producers vs Predators in the economy. The political establishment does not always manage to not be swayed by big lobbies. nobody questioned the government emptying the taxpayers' coffers into casino banking.

Joe Rogers: "Competition - have you seen the trains lately?"

There is no competition there. You have no choice, but to use the train operator in your area! The Dept of Transport is one of the worst government departments, creating private monopolies, with no competition and holding the public to virtual ransom.

Greg Smith's resignation letter

Greg Smith - Executive Director, Goldman Sachs

Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Kicking the Can

Detroit’s auto industry ended up a despised and overpaid oligopoly with many political protectors that produced bad cars for its customers, and was subsequently blown away by a bunch of competitive companies from Japan. Worry about the customers, not the regulators.

The financial industry will be lost because no one will trust anyone doing business in that city.