Re: Wall Street Coverup

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

In addition to Monday's fines, the banks are expected to pay billions of
dollars more as a result of private lawsuits brought by aggrieved investors.

The settlement, allowing the banks to avoid admitting guilt, will make
civil suits more difficult, although the documentation behind the
settlement is now in the public domain so that private suits lawyers do
not have to go to court to get the incriminating evidence, which
otherwise could be difficult to get as internal documents.

The big question is how much compensatory damages for pain and suffering
will the courts grant.  Most likely the banks will seek the equivalent
of bankruptcy to handle the liabilities.  Banks are not allowed to file
bankruptcy since they are theoretically regulated by the Fed.  They will
set up a super fund to limit the liabilities and move on.


this is far from the end of the story.

Henry C.K. Liu


STEPHEN BLOCK wrote:
> My question about these issues has always been the following: are not
> offenders normally compelled to pay restitution, or repayment of some sort
> to those whom they have defrauded? In this case, obviously that could amount
> to several hundreds of billions of dollars and so it may be considered
> impracticable. But what about the  "investors", including those who sunk
> their life savings into artificially propped up mutual funds, who risk
> living through an under-funded retirement as a consequence of this now
> admitted fraudulent activity? Has no one heard of the phrase "class action
> suit"? Have any yet been filed in these cases or are they trumped by this
> "settlement"?
>
> Obviously regulators can not be trusted to finish the job they have glossed
> over, so where are the lawyers, or is there truly nothing they can do?!
>
> S Block
>
>
> > The big news today is the $1.5 billion Wall Street settlement which
> > included findings of fraud against three banks - Citigroup's Salomon
> > Smith Barney unit, Credit Suisse First Boston and Merrill Lynch. The
> > regulators also released new evidence showing alleged conflicts of
> > interest at other leading banks including Goldman Sachs and Morgan Stanley.
> >
> > The banks were accused of betraying investors by promising companies
> > flattering stock research in exchange for investment banking work.
> >
> > Some were also accused of bribing their corporate clients' senior
> > executives with shares of lucrative initial public offerings in return
> > for business.
> >
> > Under the settlement, the banks, which neither admitted nor denied
> > wrongdoing will pay $1.4bn in restitution and to supply independent
> > research to investors.
> >
> > It also requires the banks to introduce structural reforms to insulate
> > research analysts from the influence of investment bankers.
> >
> > These reforms are widely expected to end the multi-million dollar pay
> > packets some analysts enjoyed in the bull market that were justified by
> > the amount of investment banking business they brought in.
> >
> > But on Monday it emerged that CSFB had offered an equity analyst at
> > rival JP Morgan Chase a package that could earn him up to $4m in the
> > first year.
> >
> > In addition to Monday's fines, the banks are expected to pay billions of
> > dollars more as a result of private lawsuits brought by aggrieved investors.
> >
> > But a group of culprit got off untouched.  They are institutional money
> > mnangers who followed the pitches of analysis even when they should have
> > known or actually knew such pitches were unreliable, to say the least.
> > The rationale was that money managers are all technical investors, not
> > fundamental investors. They care less why share prices go up. What they
> > care about is not be left behind when prices rise.  So they form a herd
> > movement that analysts can play on and their actions unduely enhance the
> > power of analysts to influence the market.  Money managers earn fees by
> > trading up the market but they are not oblidge to disgorge last years
> > fees when the market falls and their empolyer institutions earn their
> > profit partly from high trade volume.
> >
> > So this settlement settles nothing. Wall Street is structured to deliver
> > compensation to the professionals, not to provide an honest venue for
> > investment.  That is how the Chairman of Citigroup can earn over $1
> > billion in a 10 year contract. Most chairmen of investment banks earn
> > over $60 million a year on an average year and an average partner makes
> > $20-30 million. That kind of compensation without risk exposure is hard
> > to earn honestly.
> >
> > Henry C.K. Liu