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Reverse Convertibles—Complex Investment Vehicles

March 11th, 2010

Before You Invest

Over the past few years, brokerage firms and banks have been issuing and marketing complex investments known in the industry as “structured products” to individual investors. These include “reverse convertibles,” which are popular in part because of the high yields they offer.

Also known as “revertible notes” or “reverse exchangeable securities”—and sold under a variety of proprietary names that may or may not use the term “structured” to describe the product—reverse convertibles are debt obligations of the issuer that are tied to the performance of an unrelated security or basket of securities.

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Posted in Finance Fraud

Tags: Assets, Banks, Bonds, Brokerage Firms, Debt Instrument, Debt Instruments, Debt Obligations, Elements, Financial Instruments, Fixed Income Products, Individual Investors, Inflation Risk, Investment Professionals, Investment Vehicles, Investments, Proprietary Names, Reverse Convertibles, Stocks, Structured Product, Structured Products

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Dubai World repayments plan to be presented to creditors

March 9th, 2010

Before You Invest

Dubai World’s proposals on how it wishes to restructure its debts to creditors will be presented to banks owed money this month, it has been confirmed.

Newspaper reports had suggested that a plan would be put forward as early as this week and Dubai World have confirmed that the process will occur before April.

“A formal proposal will be presented by Dubai World to creditors in March,” a government spokesman told AFP.

Last November, the state-owned company announced it was seeking to restructure its debts to banks around the world – sparking a loss of confidence in Dubai across global financial markets.

Dubai had borrowed heavily to fund its property boom, but the financial crisis saw house prices plummet by 50 per cent between 2008 and 2009.

Many of the banks most exposed to Dubai World are British – with Royal Bank of Scotland, Lloyds and Standard Chartered all reportedly owed in excess of $5 billion by the firm.

Its total debt is believed to stand in the region of $60 billion.

Posted in Finance Fraud

Tags: Bank Of Scotland, Banks, Confidence, Creditors, Debts, Dubai, Exposed, Financial Crisis, Formal Proposal, Global Financial Markets, Government Spokesman, House Prices, Last November, Lloyds, Newspaper Reports, Owned Company, Property Boom, Proposals, Repayments, Royal Bank Of Scotland

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This Day in Wall Street History 1933: Roosevelt declares bank holiday

March 5th, 2010

Before You Invest

When Franklin Roosevelt started his first term in the White House in 1933, he inherited a nation in the depths of the Depression. A record 13 million Americans were unemployed and businesses were drowning in red ink.

Perhaps even more pressing was the head-spinning string of bank failures that had triggered a frantic run on the nation’s savings vaults.

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Posted in Finance Fraud

Tags: Bank Failures, Bank Holiday, Banking Act, Banking System, Banks, Breach, Brink Of Disaster, Closure, Depositors, Financial Transactions, Franklin Roosevelt, Liquid Assets, Red Ink, Roosevelt Bank, Roosevelt Franklin, Source History, Vaults, Wall Street, Wall Street History, Withdrawals

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Goldman Sachs unpopular due to its success, ex-CEO claims

March 2nd, 2010

Before You Invest

Investment bank Goldman Sachs is unpopular because of its success, a former-chief executive officer (CEO) has claimed.

Jon Corzine, who also used to be chairman of the bank, made the comments during an interview with Bloomberg.

He told the news provider: “When you’re successful it brings envy.”

“People are broadly frustrated with the financial institutions, and since it is the leader of the industry and has shown great success over a long period of time, I think it’s more vulnerable.”

However, Mr Corzine added that bankers should also be more humble “in the overall scheme of public society” due to the anger provoked by the size of many compensation schemes unveiled by banks which have used state bailouts to remain in business.

Profits for Goldman Sachs during 2009 reached $13.4 billion after it benefitted from $10 billion worth of taxpayer aid as part of the Troubled Asset Relief Program during the financial crisis.

“People are very frustrated, angry about the compensation issues, particularly in the context of what people perceive as bailouts of each and every one of the folks that participated.”

Goldman Sachs is currently discussing the details of credit swaps undertaken with Greece during 2001 with the
European Union following allegations that it helped the country hide the full extent of its debt from regulators.

Posted in Finance Fraud

Tags: Allegations, Anger, Banks, Bloomberg, Business Profits, Ceo, Chief Executive Officer, Compensation Issues, Compensation Schemes, Envy, Financial Crisis, Financial Institutions, Full Extent, Goldman Sachs, Greece, Investment Bank, Jon Corzine, Period Of Time, Regulators, Swaps

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Allen Stanford calls for Ponzi lawsuit to be dismissed

February 20th, 2010

Before You Invest

Lawyers for Allen Stanford have called for the case alleging he masterminded a $7 billion Ponzi scheme to be thrown out of court.

According to Mr Stanford’s attorneys, the Securities and Exchange Commission (SEC) has not managed to lay out a strong enough case against the businessman.

Christina Sarchio, his legal representative, told Bloomberg that the latest’s SEC complaint, which is 32 pages long, does not stand up to examination.

“It doesn’t really have any specifics about what Allen Stanford said, to whom he said it or how the SEC even has jurisdiction over the certificates of deposit, because they’re not securities,” she said.

Mr Stanford, who is awaiting a trial scheduled to take place in January 2011, has been accused of carrying out a “massive” fraud that involved the sale of certificates of deposit through banks.

Last September, Mr Stanford had his nose broken in a prison brawl and had to spend two days in hospital before being returned to his cell.

Posted in Finance Fraud

Tags: Attorneys, Banks, Businessman, Certificates Of Deposit, Christina, Days In Hospital, Jurisdiction, Last September, Lawyers, Legal Representative, Massive Fraud, Ponzi Scheme, Securities And Exchange, Securities And Exchange Commission, Specifics, Stanford

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George Washington Bank fails; Ohio’s FirstMerit takes over

February 20th, 2010

Before You Invest

George Washington Savings Bank in Orland Park, Illinois was closed by state banking regulators, with Akron, Ohio-based FirstMerit Bank acquiring all the deposits and virtually all of the assets of the 120-year-old bank.

George Washington is the second Chicago-area bank to fail so far this year.

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Posted in Finance Fraud

Tags: Acquisition, Akron Ohio, Assets, Bank Failures, Banking Operations, Banks, Ceo, Chicago Area, Collapse, Fdic, Federal Deposit Insurance, Federal Deposit Insurance Corp, Firstmerit Bank, George Washington, Losses, Oak Lawn, Orland Park Illinois, Paul Greig, Regulators, South Suburban

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Discover pays $775 million to settle Morgan Stanley claim

February 12th, 2010

Before You Invest

(Reuters) — Discover Financial Services paid Morgan Stanley $775 million to settle claims related to sharing proceeds from an antitrust suit against credit card networks Visa Inc.

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Posted in Finance Fraud

Tags: Antitrust Suit, Banks, Credit Card Networks, Discover Cards, Discover Financial, Financial Services, Mastercard, Morgan Stanley, New York State, Proceeds, Reuters, Rival, State Supreme Court, Supreme Court Justice, Visa Cards, Visa Inc

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China Raises Bank Reserve Requirement to Cool Economy

February 12th, 2010

Before You Invest

(Bloomberg) — China ordered banks to set aside more deposits as reserves for the second time in a month to cool the fastest-growing economy after loan growth accelerated and property prices surged.

The reserve requirement will increase 50 basis points, or 0.5 percentage point, effective Feb.

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Tags: Bank Of China, Banks, Basis Points, Bloomberg, China Bank, Economy China, Fastest Growing Economy, Loan Growth, People Bank, People S Bank, Percentage Point, Reserve Requirement, Second Time

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UK bonus tax set to raise billions

January 26th, 2010

Before You Invest

The 50 per cent tax on banking bonuses in the UK may bring in as much as £3 billion ($4.8 billion) in revenue, it has been suggested.

Government sources told the Guardian that there have been higher-than-expected payouts made by large banks operating in the UK, meaning that initial forecasts regarding how much the levy would raise were significantly underestimated.

In December, British chancellor Alistair Darling said that he expected the one-off tax, which applies to bonuses of more than £25,000, was going to raise around £550 million.

The officially revised estimate of how much the tax will bring in will be revealed in the Pre-Election Budget in a few months’ time.

At that point, it will be clear how much each bank operating in the City of London is planning to pay its staff.

Among the firms yet to reveal their remuneration levels are HSBC, Royal Bank of Scotland and Barclays.

Last week, Credit Suisse revealed it was going to cut the bonuses of its UK-based managing directors by 30 per cent, while also instigating a five per cent cut for the rest of its staff around the world to shoulder the burden of the levy.

Posted in Finance Fraud

Tags: 50 Cent, Alistair Darling, Bank Of Scotland, Banks, Barclays, Billions, Bonus, British Chancellor, Budget, City Of London, Credit Suisse, Government Sources, Guardian, Initial Forecasts, Levy, Remuneration Levels, Royal Bank Of Scotland

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Citigroup Loses $7.6 Billion on Costs to Repay U.S.

January 19th, 2010

Before You Invest

(Bloomberg) — Citigroup Inc., the U.S. bank that is 27 percent owned by the Treasury Department, ended a three- quarter profit streak with a $7.6 billion loss on costs to exit the government’s bailout program.

The fourth-quarter loss of 33 cents a share was narrower than the record loss of $17.3 billion, or $3.40 a share, a year earlier, New York-based Citigroup said today in a statement.

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