Category Archives: Financial Crisis

Barclays Bankers Bilk Their Clients

By Barry Elias | Thursday, 19 Nov 2015 10:45 PM

“Obfuscate and stonewall.”

That was a June 2011 directive from a Barclays managing director and head of automated electronic foreign exchange (FX) trading. It was the recommended response to inquiries from clients, the sales department, or virtually anyone else regarding bank transactions related to its BATS Last Look functionality, according to the New York State Department of Financial Services (DFS).

The managing director further stressed in the email that one should “avoid mentioning the existence of the whole system.”

Barclays’ “Last Look” functionality enabled traders to cancel the execution of client foreign exchange orders if they were deemed unprofitable to the bank, even if they would be profitable to the client.

Milliseconds became the difference as to whether a trade was executed profitably. Since it could take this amount of time to transmit an order across the globe, the bankers were at a disadvantage relative to the high frequency traders, who can execute within nanoseconds. Instead of quoting greater buy/sell spreads to accommodate potential price movements, which would disenfranchise the algorithmic traders, Barclays opted to possess the right of first refusal for the trade on behalf of its client.

Clients and others were not told the trade terminations were the result of this business policy decision. Senior employees instructed traders and information technology employees not to inform the sales staff of Last Look and the underlying policy. Instead, the information conveyed was vague, misleading, or inaccurate – and sometimes they were not given any explanation. Blaming the malfunction on technical latency issues was a recommended strategy from management.

This case was unleashed during the forex rigging probe, for which Barclays agreed to pay about $2.4 billion to the DFS, the U.S. Justice Department, and other agencies, which included $485 million for its manipulation of forex spot trading. This settlement was part of the more than $5.6 billion agreement by six banks for manipulating the $5.3 trillion daily foreign exchange market. The other five banks include Bank of America, Chase, Citigroup, JPMorgan, Royal Bank of Scotland, and UBS.

Barclays recently agreed to pay $150 million to resolve the “Last Look” allegations of abuse in the foreign exchange market through its electronic trading platform: a very serious charge, since it intentionally sought unfair advantages over clients and counterparties through this venue. The DFS also required the bank to fire its global head of electronic fixed income, currencies and commodities automated flow trading. Barclays has not named the dismissed individual and has admitted to wrongdoing in this case.

This settlement will bring the total litigation provisions for Barclays Bank to about $13 billion since the beginning of the financial crisis. Litigation costs for all financial institutions since 2008 have reached nearly $219 billion, most of it borne by U.S. banks, led by Bank of America with about $70 billion, according to Moody’s, a rating agency. They expect more to come, especially from Deutsche Bank’s exposure to foreign exchange litigation and the Royal Bank of Scotland’s exposure to U.S. mortgage litigation.

Barclays is still not off the hook: It is being investigated for other potential misconduct, including possible manipulation of precious metals markets and payments to Qatari investors in its 2008 rights issue.

Even after the crisis, Barclays continued down the road not to be traveled.

© 2015 Newsmax Finance. All rights reserved.

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The Time Is Ripe for a Third-Party Presidential Candidate

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Donald Trump essentially represents an independent third-party candidate, since he is a self-financed, non-ideologue, who seems to believe as I do that neither political party has a monopoly on poor public policy.

While never a politician or government employee, Trump brings transferable skills and experiences to the table: an innovative, creative and productive entrepreneurial record.

The following article was originally published on Friday, November 15, 2013.

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By Barry Elias | Friday, 15 Nov 2013 07:17 AM

The credibility and trustworthiness of both political parties have waned significantly over the past few decades.

Extreme political polarization in Congress and recent polling that indicates many people would not elect their current Congressman suggests the time is ripe for a centrist, third-party candidate for president.

Republicans and Democrats created the public policy landscape that caused the financial crisis, which continues to this day.

After a $29 trillion Wall Street bailout, Main Street has barely felt a nudge, and Obamacare and the government shutdown have further eroded the future of our fiscal integrity.

Andrew Huszar, a former Federal Reserve official in charge of administering the massive bond-buying program labeled quantitative easing (QE), suggested in a Wall Street Journal op-ed piece that this was the first time in the nearly 100-year history of the Fed in which mortgage bonds were purchased from banks.

The result was a huge windfall for banks. They received nearly $4 trillion in capital over a five-year period from the Fed and recorded massive profits as a result of low-borrowing costs, bond capital gains and brokerage commissions for the bond-purchasing transactions.

However, this $4 trillion expenditure created only $40 billion in economic growth, or 1/4 of 1 percent — a very poor return for the American people indeed.

Further, Democrats are beset by Obamacare and Republicans by the government shutdown and intransigent social policies.

The Real Clear Politics eight-poll average indicates Congressional net disapproval has grown from 22 percent to 75 percent over the past four or five years (a 53-point negative move). Since the beginning of his term, the president’s net approval has fallen from 44 percent to -11 percent (a 55-point negative move). Net approval of their own Congressperson fell from 47 percent in 1990 to 1 percent today (a 46-point negative move), according to the Gallup.

In 1992, Ross Perot won nearly 19 percent of the presidential vote when the political chasm was much smaller. Eighty years earlier, Theodore Roosevelt captured more than 27 percent of the vote in the 1912 presidential election running as the Progressive “Bull Moose” candidate, garnering more votes than his Republican counterpart, William Taft.

Today, a third-party presidential candidacy can be viable, since both party brands have been severely tarnished in recent decades.

This independent candidate must embrace the best of both parties — a fiscal conservative who demonstrates compassion toward the indigent and a social moderate who empathizes with the vast complexities of the human condition.

New Jersey Gov. Chris Christie will have a very difficult time surviving the Republican primary despite his social conservative credentials, and Hillary Clinton is beset with huge policy failures that will hurt her at the national level.

The issues surrounding Hillary Clinton include the Benghazi debacle and her overwhelming support for the sinking Obamacare legislation. The Affordable Care Act (ACA) is eerily reminiscent of the massive universal healthcare overhaul in 1993 that she chaired under President Bill Clinton, which was jettisoned in bipartisan fashion.

Recent efforts by Bill Clinton to remedy the ACA may prove insufficient in salvaging her reputation. Bill Clinton has recommended that President Obama fulfill his powerful, oft-repeated promise that you can keep your doctors and insurance plan if you so choose.

There is a tremendous void in the center that awaits an independent, third-party candidate for president — one who can champion a clear path toward economic prosperity, individual responsibility, equal opportunity and respectful empowerment for those facing tough times.

If ever there was a time for an unprecedented independent win, this is it.

© 2015 Newsmax Finance. All rights reserved.