Saturday, July 21, 2012

On The Links With Obama

President Obama and CEO Robert Wolf

Reading the New York Times continues to be rewarding, despite its aggravating pay wall. This morning I saw a story about the uncanny way in which the Swiss banking firm UBS has avoided the legal consequences of a long series of financial crimes in the United States. The NYT writer sounds amazed at UBS's ability to obtain a series of wrist-slaps for some quite serous misbehavior.

Dated July 20, For UBS, a Record of Averting Prosecution:

At UBS, a series of immunity, nonprosecution and deferred prosecution agreements in recent years — evidently the government’s preferred approach to corporate crime — seems to have had scant, if any, deterrent effect.

They are far from the only offender, but ...

But in many ways, UBS is in a league of its own given its track record for scandals. Should UBS be implicated in the Libor rate-fixing conspiracy, it’s hard to imagine a better corporate candidate for a criminal indictment — even though it has already been granted conditional immunity from some aspects of the Libor scandal.

-- snip --

The bank’s recidivism seems rivaled only by its ability to escape prosecution:

UBS obtained a deferred prosecution agreement in 2009 for conspiring to defraud the United States of tax revenue by creating more than 17,000 secret Swiss accounts for United States taxpayers who failed to declare income and committed tax fraud ... [see the linked story for more]

In May 2011, UBS admitted that its employees had repeatedly conspired to rig bids in the municipal bond derivatives market over a five-year period, defrauding more than 100 municipalities and nonprofit organizations, and agreed to pay $160 million in fines and restitution. An S.E.C. official called UBS’s conduct “a ‘how to’ primer for bid-rigging and securities fraud.” UBS landed a nonprosecution agreement for that behavior, and the Justice Department lauded the bank’s “remedial efforts” to curb anticompetitive practices.

In what the S.E.C. called at the time the largest settlement in its history, in 2008 UBS agreed to reimburse clients $22.7 billion to resolve charges that it defrauded customers who purchased auction-rate securities, which were sold by UBS as ultrasafe cash equivalents even though top UBS executives knew the market for the securities was collapsing ...

There’s more — including UBS’s prominent role and big losses in the mortgage-backed securities debacle that helped bring on the financial crisis. The federal agency overseeing Fannie Mae and Freddie Mac sued UBS for securities law violations, accusing it of “materially false statements and omissions.”

In the continuing global interest rates investigations, UBS last summer revealed that it had received conditional immunity from the Justice Department and other authorities. It was shown this leniency even though the Justice Department has pointedly said that Barclays, not UBS, was the first bank to cooperate. … The department’s antitrust division stresses that it makes only one grant of immunity per conspiracy, so it isn’t clear how both Barclays and UBS managed to get it.

Well, things start to become clearer when you look at this other article in the NYT, dated July 19, Wolf to Leave UBS to Form New Firm:

One of President Obama’s biggest supporters on Wall Street is about to leave his perch at UBS, one of the world’s largest banks.

Robert Wolf, who is the UBS chairman for the Americas, is leaving at the end of the month to set up his own advisory shop. He will retain close ties to UBS, which will be the first client of his firm.

A 28-year veteran of Wall Street, Mr. Wolf has enjoyed his status as a prominent defender of the Obama administration and a top-ranking fund-raiser. He has garnered more than $500,000 to re-elect the president this year, and regularly plays golf and vacations with Mr. Obama on Martha’s Vineyard.

-- snip --

Mr. Wolf’s friendship with the president began before other financiers were seeking to curry favor with Mr. Obama during the 2008 campaign. The two met at a 2006 fund-raiser hosted by the billionaire George Soros and quickly became friends. During the financial crisis, he regularly advised Mr. Obama on the turmoil on Wall Street.

You can hear Mr. Wolf describe his close ties to Obama in his 2011 oral history interview with PBS Nightline. After being introduced to then-Senator Obama in 2006 by George Soros, Wolf became, in PBS's words, "an informal adviser to his presidential campaign. During the financial meltdown, Wolf was often Obama’s link to closed-door discussions of the crisis. Wolf was a member of the President’s Economic Recovery Advisory Board." PBS omitted to mention it but Wolf is also, of course, a heavy-hitter financial contributor (here) and campaign money bundler.

A cynical person might suspect that Wolf's close ties to Obama could possibly have something to do with UBS's knack for escaping prosecution by the U.S. Justice Department.


Anonymous said...

TSB: I'll get to your post but 1st:
This article explains why it is childishly simple for anyone to launder money and why it will continue to be so. I've been griped about the banks supporting the drug trade but it's really technology and globalization that have the crooks in the drivers seat. gwb

Anonymous said...

Great post TSB! Here is your answer from JR Cole this am:

it is clear that the United States has formally become a plutocracy, and with the failure of all campaign finance reform laws, we are stuck with our so-called representatives actually being paid agents for a handful of big corporations. gwb

Anonymous said...

TSB: Janet N said again yesterday we need to be extra vigilant in public places. "If you see something, say something." Here is something I saw this AM! Tell HS to get over to the FBI. Better take Batman and Robin too! gwb

TSB said...

GWB: The plutocracy part I can agree with, but I'm not sure those representatives are the paid agents of anybody else. I think it's just as often the other way around - government officials use their regulatory and taxing power to extract bucks from corporations that are at their mercy.

I looked up that FBI warning from May, and it was as vapid as they usually are. It starts out "although we have no specific or credible information indicating that terrorists plan to attack theaters in the United States", and the rest I paraphrase as: 'but some Somalian Muslims who are engaged in a civil war just suicide-bombed their National Theater to attack the Prime Minister while he was giving a speech, so, who knows, maybe somebody might take it into his head to attack a multiplex over here, I mean, anything could happen in this crazy world.' If the FBI is trying to cover that warning up, it's probably out of shame.

Anonymous said...

I always run the conspiracy theories by you first. That tutorial on international banking was pretty good though dontcha think? gwb

Anonymous said...

Now 26 generals and the security chief of Aleppo defected to Turkey!

TSB said...

GWB: On the banking system stuff, I liked their point about how national privacy laws prevent a lot of due diligence. Banking will never be completely transparent (and maybe shouldn't be).

Anonymous said...

TSB: I think in May the Independent put up a pay wall; long since taken down. I quit reading Robert Fisk but now going back over his last 2 months he has really done a great job of reporting on Syria. This one from early June was/still is really interesting. gwb

Anonymous said...

And after 20 years of secret and unbridled spending on "intelligence" we still can't deal with suicide bombers, lone gunmen, ied's, insider trading, bid-rigging on interest rates, war crimes (by torture, helicopter gunship or proxy thugs) or censorship. I doubt if the US is going to have much luck controlling the outcome in Syria by using "intelligence" to screen the rebels. gwb

Anonymous said...

TSB: This probably won't happen at Washington shipyards. Anyone here who wants to reduce stress or treat depression/anxiety has a medical marijuana card. They should at least give him credit for starting the second fire outside. 400 mill would buy some killer Bass Boats! gwb

Anonymous said...

TSB: This story fits right in with your USB post. gwb

I think if Obama were smart he would challenge Mitt to a discussion about off shore stashing and how it affects working blokes and the economy.

Anonymous said...

I donno TSB, maybe this has something to do with it? gwb

TSB said...

GWB: I see one of Cole's commenters pointed out that there is a difference between capital flight and crime. I agree. So long as U.S. laws are followed by U.S. persons, I don't see any scandal in capital being held overseas.

The MF Global thing is so typical of the revolving door. An investment banker becomes a senator and then goes back to being a banker; a lawyer-lobbyist becomes an Attorney-General and someday will go back to being a lobbyist. Everyone takes the next turn of the door into account when they act in their present positions. Life in DC would be much less profitable if "ex-people" (e.g., ex-senators, ex-congressmen, ex-regulators, ex-cabinet secretaries, ex-White house staffers, ex-Assistant Secretaries, ex-Ambassadors, etc.) were prohibited from having any professional dealings with public affairs for the rest of their lives.

Anonymous said...

TSB: I agree it's not a scandal, but it is a good point for discussion because they point out that the wealth of these people is vastly understated. Joseph Stigletz in "The Price of Inequality" gives great evidence that in the USA of today the opportunity and wealth gap is even greater than in "old" Europe. I'm just suggesting that "rising serfdom" will be a hot topic sometime soon. gwb