[PEN-L:33322] Re: Re: the humbling?

[Nomiprins@xxxxxxx]

In a message dated 12/22/02 6:36:53 AM Eastern Standard Time, mpollak@xxxxxxxxx writes:


> > Just of curiousity, Nomi, what do you think of these fines that have been
> > leveled against the Wall Street banks?  Grouped together as a global
> > number, $1.4 billion certain sounds like a lot of money; it's got a b in
> > it.  


> Michael, I think precisely because it was grouped together, it sounds like much more than it is. But, broken down - around $500 mln of the $1.4bln goes to a 5-year independent research pot. That equates to a $10mln per year per bank tax deductible expense. The rest of the fine, $900 mln, is less than 1.5% of the $62bln in fees that the top ten banks collected since 1998. And in return for this tidy year end wrist slap, the banks have admitted no guilt - for anything, a precedent that will make it harder for those pressing civil or class action suits to recoup much.


 >Has any industry ever been fined this much for anything?
>

> Prudential Securities, alone, paid $1.5bln for scam partnerships between 1993-1995. The aggregation of these latest 'global' fines is another version of the same deception that allowed corporations to hide or fabricate figures. Combine and cloud. 


> > If so, this would
> > seem like a reductio ad absurdum argument against the idea >that fines can ever be an effective way of regulating >corporate behavior.
> >


   Absolutely. The fines broken down per bank are minimal. Less than a daily trading 
> revenue swing in any one product. Compared to the $650mln fine levied against Drexell Burnham for their junk bond scandals or the $470mln against Merrill Lynch for its role in the Orange County scam, $900 mln in fines for 10 banks is tiny.


> > One other question.  One reform is supposedly that it will henceforth be
> > illegal for banks to distribute LBO shares to executives or directors.
> > That seems like a reasonable change they wouldn't have done 
> > on their own,
> > no?  Or is there a loophole around it?


> That reform has some meat to it on the surface, though in the current market environment, there's no such thing as hot IPO stock. In practice, however, when the market turns around, banks could still give clients access to IPO shares via various camouflaging techniques: i.e. derivative securities or funds whose performance is linked to the IPO shares at their pre-offer prices. 


Nomi

>