Where is the fence?
When an auditor finds several problems in one small area of the accounting, a typical approach is to put a fence around it. That means, figure what the outer boundaries are. Is it just one month’s worth of transactions in one department of one branch? If a little testing at the boundaries indicates the problem is localized, you can start working on the problem.
On the other hand, if the problem carries across to the whole year, or it affects many other branches, there is bigger problem. If you realize several other departments have the same issue, then you have no idea how big the problem is.
The worst situation is when every time you think there is a fence around the problem, the problem jumps the fence. An auditor has a horrible feeling when there just doesn’t seem to be any boundary.
That is how the banking fiascos have felt over the last year or two. A minor inquiry from DoJ or some other regulator turns into full-blown investigation, then multiple regulators, and then six months or a year later most banks hand over a few billion collectively.
Then another investigation sprouts out of that one. And then there is half a dozen benchmark interest rates that have been manipulated.
Where is the fence showing the outer limits of fiascos created by the TBTF banks? I can’t see it.
Is there anything they aren’t playing games with?
There IS no fence showing the boundary or limit or end of fiascos
Possibly manipulating gold and silver prices?
2/23 – Wall Street Journal – Big Banks Face Scrutiny Over Pricing of Metals – DoJ started an investigation last November about how TBTF banks did the twice daily setting of price based on calls between a small group of banks. Process to set reference price for other contracts was changed last year.
Banks under suspicion are the usual group: HSBC, Barclays, Credit Suisse, Societe General, UBS, Standard Bank, Goldman Sachs, JP Morgan, and 3 others. A couple of names I didn’t see on the list: Standard Chartered, BofA, Wells Fargo, and BNP Paribas.
Metals involved are gold, silver, platinum, and palladium.
There are currently 25 lawsuits against the big banks over how they set precious metals prices. Those cases appear to be coalescing into class action status.
I wrote the following comments thinking the sarcasm was a little bit thick. When I read the WSJ article above, realized I had not used anywhere near enough ridicule and sarcasm…
2/23 – The Guardian – Revealed: Swiss account secret of HSBC chief Stuart Gulliver and Fortune – HSBC CEO used offshore accounts to hide bonus payment from colleagues – The CEO of HSBC used the bank’s services to park his bonuses totalling $7,600,000 in secret Panama accounts back in the 2007 timeframe.
Bonuses. Spare cash. Seven and a half million. After tax.
The reason he wanted to hide the money is that he wanted to hide the amount of his huge bonuses from his colleagues in Hong Kong. His peers there apparently got quite jealous of each other’s bonus amounts. He asserts it was quite legal and he paid all the appropriate taxes.
We generally think it is a good idea to eat your own cooking. In other words, it’s good for employees to actually use the services your company offers to the public.
I suppose that when a featured service a bank tries to cross-sell to all its customers is parking money in secret Panamanian bank accounts to hide the loot from prying eyes, it only makes sense that the CEO would try some of the bank’s good ol’ fashion home cookin’.
Not a big deal. Just checking out some of the bank’s new products. Hey, he was just trying to avoid petty intra-office jealousies. Come on, you know how catty and snotty those senior bank officers can be. Cut him some slack, dude.