Tags: because they're 1/5th as profitable?, cdos, Citi, Lawsuits
If the SEC really wanted to reduce the chances of embarrassing itself, besides better Internet monitoring software it really ought to look into filing securities lawsuits outside of New York. Every bank is incorporated in Delaware and does all of its activities everywhere – surely they could find a CDO investor in California. But the SEC keeps suing in New York, they keep drawing Judge Rakoff in the suspiciously random assignment system, and he always goes and does this:
A federal judge has raised questions about why he should approve the government’s $285 million civil settlement with Citigroup, suggesting that he is skeptical of the pact. … He posed nine questions to the parties, including how a fraud of this nature and magnitude could be the result simply of negligence. The judge also asked why the court should approve a settlement in a case in which the S.E.C. alleged a serious fraud but the defendant neither admits nor denies wrongdoing.
They’re good questions, including “Why … is the penalty in this case less than one-fifth* of the $535 million penalty assessed in SEC v. Goldman Sachs … ?” And you do get the sense that most other judges wouldn’t have bothered with them and would skip straight to “wow, that’s a lot of money, willing buyer willing seller, I’ll approve the settlement.”
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Tags: ABACUS, Banks, CDO-cubeds, CDO-squareds, cdos, Citi, Goldman Sachs, higher factors of CDOs, Magnetar, SEC
Citi today paid out some of its DVA gains to settle SEC charges that it sold investors a CDO-squared that facilitated its own naked CDS purchases on the underlying CDOs, while misleading investors into thinking that an independent collateral manager selected the underlying portfolio. If my grandmother reads Dealbreaker she’s now stopped.
Anyway. I’m proud of my time at Goldman, which I thought was a great place filled with smart and ethical people (really) and which also was a market leader in many areas, including paying fines for fraudulent CDO structuring fraud. In that line of business we were first both in time and in market share, settling Abacus for $550mm in July; JPMorgan’s $153.6mm Magnetar settlement came a week later and Citi didn’t get around to their $285mm entry (and Credit Suisse’s $2.5mm addition) until today.
Now, maybe it’s just my Goldman bias talking but I never really got the outrage at these things, which always seemed to come from importing an already incorrect understanding of how nonfinancial transactions work into a market-making, two-sided, financial markets context. But reading the Citi CDO documents, which are fascinating, I think makes it a little more comprehensible.
There are five points to which your free-floating rage could maybe attach:
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Tags: bonus watch, Citi, Vikram Pandit, yayy Vikram!
Uncle Vikula, who just started receiving a salary in January after choosing to make $1 a year until Citi turned a profit, may now be eligible for a very exciting three-part bonus. Read more »
Tags: Citi, credit card bills, murders, ummmm
Supposedly the three Citi officials were “angered” by the customer contesting his credit card bill. Read more »
Tags: bonus watch, bonuses, Citi, Math
Charlie Gasparino is hearing that senior bonuses at Citi this year will be paid out half in stock that vests in five years and half in cash that only 20 percent of which is immediately available (30% of the cash portion will supposedly be awarded in two years). For those who don’t know you’re supposed to stop pushing the Q-tip when there’s resistance who may be having trouble figuring out why some people wouldn’t be so happy about being paid in such a structure, Chaz’s source explains: Read more »