07/20/2012 03:51 PM
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The World from Berlin
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'Merkel Is Driving Europe into the Abyss'
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After Madrid passed a crushing new round of austerity measures on Thursday, the country erupted in widespread protests. Germany did its part to approve the Spanish banking bailout on the same day, but German editorialists question on Friday whether the aid will have the desired effect at home or abroad.



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Spain may soon be getting aid for its troubled banking sector, but that appears to be of no comfort to the Spaniards. After Madrid passed another round of tough austerity measures on Thursday, tens of thousands took to the streets in some 80 cities around the country.



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The protests, which reportedly saw some 100,000 demonstrators in Madrid alone, were called by the CCOO and UGT trade unions, which reject the government's planned belt-tightening efforts. The two unions have threatened to call a general strike in September. Dozens of injuries and a handful of arrests were reported following scuffles with police.




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Prime Minister Mariano Rajoy's conservative People's Party (PP), which has an absolute majority in parliament, pushed the controversial plan to cut spending by some €65 billion ($80 billion) through parliament on Thursday, despite staunch resistance from the opposition.





The austerity measures include a significant boost in the value-added tax, the abolition of Christmas bonuses for state employees and cuts to unemployment payments. The deep reductions in state spending have been met with widespread resistance, with police officers, firefighters, soldiers, judges and public defenders all taking part in Thursday's protests.




German Parliament Approves Bank Bailout




The nation remains mired in a crushing recession, with more than 5.6 million unemployed. At a record of around 25 percent, the level is on par with the unemployment rate in the United States during the Great Depression. Meanwhile, it is becoming increasingly difficult for Madrid to access financial markets, as it continues to pay ever-higher interest rates in sovereign bond auctions.




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Though Spain has asked for aid to ease its banking crisis, sparked by the collapse of a real estate bubble in 2009, it would prefer not to receive a full-fledged bailout under the euro rescue package. German parliament approved the Spanish bank aid worth up to €100 billion on Thursday, and it is expected to be paid out in several tranches by the temporary euro bailout fund, the European Financial Security Facility (EFSF).



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The finance ministers of the 17 euro countries likewise gave the green light to the Spanish banking bailout on Friday. In addition to strict oversight of the banking sector, they will require Madrid to reduce its budget deficit to under 3 percent of gross domestic product by the end of 2014.




On Friday German commentators take stock of Spain's situation and ask whether German parliamentary approval of the Spanish banking bailout will ultimately make a difference. They also question whether yet another bailout is the right path for Germany and the European Union as a whole.




Financial daily Handelsblatt writes:




"German Chancellor Angela Merkel has managed once again to get a parliamentary majority. But who cares? No one. Regardless of whether the vote passes with or without the opposition, more questions than answers remain.




Since the financial crisis began two years ago, euro-zone leaders have passed one aid package after the next, increasing Germany's liability. Little has come of it. The situation in the debt-ridden countries has not improved."




"It's no wonder that Germans are asking why they should have to bail out banks with their hard-earned money when these institutions have only wasted and squandered everything."





Conservative daily Frankfurter Allgemeine Zeitung writes:





"At this point, it has become routine. With stoic expressions, parliamentarians have listened to the government's reasons why German aid to Europe is unavoidable -- and an exception has been made for Spanish banks after already bailing out Greece, Ireland and Portugal while Cyprus has come knocking."



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"No one wants to question the quality of the requirements for Spain, as described by Finance Minister Wolfgang Schäuble -- probably also because the Bundesbank president publicly pledged to 'broadly tackle' Spain's problems, not just focusing on the banks...."




"But this is all just a smokescreen. The reality is that Spain is getting aid with loosened conditions. Soon Italy will ask, too. And the other reality is that, instead of investors, once again (mainly German) taxpayers will have to pay for the faulty speculation of banks."




Center-left daily Süddeutsche Zeitung writes:




"There is no reason to over-dramatize the situation in Spain. But the social peace is fragile.



The outraged citizens have joined up with the unions. There isn't a single institution of public life that hasn't been hit by a major crisis of confidence. The royal family, the political system, the economic elite, the justice system and the media have all lost standing. Spain is saving and reforming like never before, writing a debt brake into the constitution and restructuring everything. But hope has become a rare commodity."



Left-leaning daily Die Tageszeitung writes:




"The discontent (among politicians over the euro crisis) is more than justified. However, euro-zone leaders ought to take a hard look at themselves. They have only themselves to blame for the fact that -- after Greece, Ireland and Portugal -- now Spain is also on the brink. They recognized far too late that, in addition to a debt crisis, a banking crisis was swelling, too. And the strategy with which they are battling these crises is far too cowardly.



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Instead of seizing the problem at its roots and restructuring the financial sector (which would also mean bank failures), they are adding to the burdens of the states. This is only exacerbating the vicious circle of debt and banking crises."





"Chancellor Merkel is among the first to blame for this. She forced Spain under the bailout fund and is now trying to sell this as a success. But, in reality, Merkel is driving Europe into the abyss bit by bit."
Conservative daily Die Welt writes:



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"The broad majority (on the German vote) contradicts the sentiments of the people, which is certainly a political problem in a democracy. Skeptics and opponents of the euro are hardly present within parliament, which makes saving the euro appear to be an elite project. Still, this broad majority is a strong signal.



Unlike some members of the euro zone, Germany is not only economically stable, but also politically robust. But German stability is no natural law. Merkel's center-right coalition, stable only in its instability, must envy the opposition.  But the end of this alliance is nigh. 



The general election campaign is approaching. It will perhaps be the last time that a clear majority of parliamentarians votes in favor of European solidarity."





-- Kristen Allen



What Role for the State?

Kemal Derviş

20 July 2012






WASHINGTON, DCThe financial crisis of 2008 has spurred a global debate on how much government regulation of markets – and what kind – is appropriate. In the United States, it is a key theme in the upcoming presidential election, and it is shaping politics in Europe and emerging markets as well.




For starters, China’s impressive growth performance over the last three decades has given the world an economically successful example of what many callstate capitalism.” Brazil’s development policies have also accorded a strong role to the state.



.Questions concerning the state’s size and the sustainable role of government are central to the debate over the eurozone’s fate as well. Many critics of Europe, particularly in the US, link the euro crisis to the outsize role of government there, though the Scandinavian countries are doing well, despite high public spending. In France, the new center-left government faces the challenge of delivering on its promise of strengthening social solidarity while substantially reducing the budget deficit.


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Alongside the mostly economic arguments about the role of government, many countries are experiencing widespread disillusionment with politics and a growing distance between citizens and government (particularly national government). In many countries, participation rates in national elections are falling, and new parties and movements, such as the Pirate Party in Germany and the Five Star Movement in Italy, reflect strong discontent with existing governance.


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In the US, the approval rating of Congress is at a record-low of 14%. Many there, such as my colleague Bruce Katz at the Brookings Institution, believe that the only solution is to bring a larger share of governance and policy initiation to the state and municipal level, in close partnership with the private sector and civil society.



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But that approach, too, might have a downside. Consider Spain, where too much fiscal decentralization to regional governments contributed significantly to weakening otherwise strong public finances.



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A crucial problem for this global debate is that, despite the realities of twenty-first-century technology and globalization, it is still conducted largely as if governance and public policy were almost exclusively the domain of the nation-state. To adapt the debate to the real challenges that we face, we should focus on four levels of governance and identify the most appropriate allocation of public-policy functions to them.



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First, many policies – including support for local infrastructure, land zoning, facilitation of industrial production and training, traffic ordinances, and environmental regulations – can largely be determined at the local or metropolitan level and reflect the wishes of a local electorate.




Of course, defense and foreign policy will continue to be conducted primarily at the second level – the nation-state. Most nation-states maintain national currencies, and must therefore pursue fiscal and economic policies that support a monetary union. As the eurozone crisis has starkly reminded us, decentralization cannot extend too far into the budgetary sphere, lest it threaten the common currency’s survival.



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The US system is manageable, because the American states are largely constrained to running balanced budgets, while the federal government accounts for most fiscal policy. Moreover, banking regulation and deposit insurance are centralized in the US, as they must be in a monetary union. The eurozone has finally recognized this.



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So, governance at the nation-state level remains hugely important and is intimately linked to monetary sovereignty. The key problem in Europe today is whether eurozone members will advance towards something resembling a federal nation-state. Unless they do, it is difficult to see how the common currency can survive.



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There is also a third, regional or continental, level of governance, which is most advanced in the European Union (and is being tested in Latin America, Africa, and Asia) and can be very useful.



Customs unions, free-trade areas, or a single market, as in Europe, allow greater mobility of goods and services, which can lead to benefits from economies of scale that remaining trade impediments at the global level do not permit. Europe’s borderless Schengen Area is another example of regional supra-national governance. There are also aspects of infrastructure that can best be addressed at the continental level.



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Finally, there is the global level. The spread of infectious disease, global trade and finance, climate change, nuclear non-proliferation, counterterrorism, and cyber security are just some of the issues that require broad international cooperation and global governance.



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In today’s interdependent world, the debate about the role of public policy, the size and functions of government, and the legitimacy of public decision-making should be conducted with the four levels of governance much more clearly in focus. The levels often will overlap (infrastructure and clean energy issues, for example), but democracy could be greatly strengthened if the issues were linked to the levels at which decisions can best be taken.


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As Pascal Lamy, the director of the World Trade Organization, has said, it is not only the “local” that has to be brought to the “global”; the inherentlylocalpolitical sphere has to internalize the global or regional context. That is a huge challenge for political leadership and communication, but, if it is not met, democracy and globalization will be difficult to reconcile.



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How to conduct democratic debate with reference to these local, national, continental, and global levels, and to structure a political space that better reflects economic and social space, will be the great challenge of the decades ahead.



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Kemal Derviş, a former minister of economics in Turkey, administrator of the United Nations Development Program (UNDP), and vice president of the World Bank, is currently Vice President of the Brookings Institution.



Put Your Seatbelts On, It’s About To Get Bumpy!
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July 20th, 2012 at 5:47 pm

 




It was just about a year ago today when the S&P was sitting at fresh highs and everyone was enjoying a rather upbeat summer. It was a nice summer, the markets were calm, and there was a surreal sense of optimism. Then, in the matter of a few days, things got real ugly, real quickly.



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Well, it doesn’t seem like too much has changed since then. We’ve had mixed earnings reports, ever-evolving worries in Europe, and the always looming fiscal mess in the U.S. Once again, are we in the calm before the storm?




It looks like things in Europe may start to heat up again. Riots turned violent again in Spain as protestors took to the street over austerity measures. With seemingly no resolution, a sinking tourism industry in the PIGS, and a typically hot summer August on its way, all signs point to further turmoil.





Technically, we’re currently seeing a number of bearish indicators setting up in the S&P and other markets. First, on the weekly chart of the SP500 Futures we can see what appears to be a bear flag formation developing. Note the recent rise in price since the beginning of June on decreasing volume.



Weekly SP500 Futures Chart Patterns
Chart Pattern Trading
Chart Pattern Trading


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Daily Chart Elliott Wave Count For SP500



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A second look at the S&P daily illustrates a down trend and 5 wave count bounce in the market, both are currently pointing to lower prices.



  • Completion of two intermediate cycles within longer term 5 wave pattern



  • Downwards wave one from April until beginning of June followed by wave 2 correction from June until present.

The wave two correction typically proceeds the longest wave, wave three, which is pointing towards a large move down (Note that in the first shorter term cycle the downwards wave three was the longest by far. We expect the same to be repeated in the longer term cycle.)




Elliott Wave Theory Chart Pattern Trading
Elliott Wave Theory Chart Pattern Trading



SP500 BIG PICTURE Wave Count




A look at the longer term view once again using the weekly chart, again supports our argument for a major correction. We have just completed a 5 wave pattern since the 2009 lows, and it is looking more like a big pull back is due. Remember most major trends end after the fifth wave.

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Stock Market Elliott Wave Count Chart Pattern Trading
Stock Market Elliott Wave Count Chart Pattern Trading




Copper Weekly Chart Patterns



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If we take a look at the copper ETF, “JJC”, we are provided with further justification. Copper is often referred to as “Dr.Copperdue to its industrial application and is known to be a leading indicator for equity markets. 



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Copper has significantly underperformed equity markets and is likely leading the next move down. A look at the weekly chart which points to a rather dismal outlook. There is a major head and shoulder patterns developing.




Copper Chart Pattern Trading
Copper Chart Pattern Trading



Major Market Pattern Analysis Conclusion:



Last summer turn into a bloodbath with nothing but red candlesticks taking stocks and commodities sharply lower. If you haven’t already, it’s time to lock in some profits. Short, intermediate, and long term cycles are pointing down, and the increasingly bearish technical developments cannot be ignored. We’ll be looking at entering multiple shorts potentially in the very near future once/if setups present themselves. Buckle up and stay tune for more


Money and the markets

Insatiable longing

Two new books probe the limits of capitalism

Jul 21st 2012
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How Much Is Enough? Money and the Good Life. By Robert Skidelsky and Edward Skidelsky. Other Press; 243 pages; $24.95. Allen Lane; £20. Buy from Amazon.com, Amazon.co.uk
What Money Can’t Buy: The Moral Limits of Markets. By Michael Sandel. Farrar, Straus and Giroux; 244 pages; $27. Buy from Amazon.com


MOST policymakers, and the economists who advise them, believe that the rich Western economies have suffered a mechanical malfunction. With the right monetary, fiscal and regulatory tools, the growth machine will eventually whirr into life. Others think the West’s true malaise is not mechanical but moral: a love of money, markets and material things.




How Much Is Enough? and “What Money Can’t Buy” are well-argued versions of this second view. In the former, Robert and Edward Skidelsky, a father-and-son pair of British academics, take as their text an essay written in 1930 by John Maynard Keynes.



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Keynes (of whom the elder Skidelsky has written a three-volume biography) mused that within a century “the economic problem” would be solved: in rich countries people would be at least four times wealthier, on average, and have to work perhaps 15 hours a week. He looks right about living standards, but horribly wrong about working hours.




In the rich world the modern economic problem, the Skidelskys say, is how to live well amid plenty, not how to survive amid scarcity. Yet the West still chases slavishly after ever-higher gross domestic product, a purely material measure that takes no account of the blessings of nature or leisure. Humanity has become insatiable, in short. It is time to stop and rediscover the “good life”. This they identify with a list of “basic goods”: health, security, respect, “personality” (autonomy, if you prefer), harmony with nature, and leisure.








You might expect the Skidelskys to make common cause with those economists who believe that maximisinghappiness” should be the goal of public policy. Not a bit of it. What makes people happy, they argue, is not necessarily good. They have little time for statistical measures of happiness—or the pursuit of any single metric. That would imply that the elements of the good life could be traded off against each other, which they deny. Nor do the Skidelskys ally themselves with environmentalists. Greens reject growth because they believe it cannot be sustained without wrecking the planet. But what if it can? Better, say the Skidelskys, to pursue the good life for its own sake.




Capitalism, they note, has “made possible vast improvements in material conditions”, but it also fuels human insatiability. One way it does this is by “increasinglymonetising’ the economy”.
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Monetisation is what vexes Michael Sandel, a Harvard political philosopher, in “What Money Can’t Buy”. Mr Sandel poses a single question: has the role of markets spread too far?





He argues that it has, and packs his book with examples. Some, such as the sale of a poor man’s kidney for transplanting into a rich man’s body, will make many people squirm. Others, such as the sale of naming rights for sports stadiums, may yield only a resigned shrug. But almost all give pause for thought. Mr Sandel poses two objections consistently.



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One is inequality: the more things money can buy, the more the lack of it hurts. The other Mr Sandel callscorruption”: buying and selling can change the way a good is perceived. Paying people to give blood does not work. Giving schoolchildren money as an incentive to read books may make reading a chore rather than a lifelong pleasure.




Mr Sandel does not say precisely where he thinks the limit should lie. That should be left, he hopes, to public debate. The Skidelskys are bolder, proposing policies that would encourage the pursuit of the good life rather than endless growth: a basic income; a tax on consumption rather than income; and an end to the tax-deductibility of company spending on advertising. This would reduce the incentive to work and the temptation to consume.




Does the rat race always detract from the good life? Only a few years ago, it would have been hard to imagine that whole libraries of books, music and information could be summoned to a phone in your palm; yet the pursuit of profit has helped to put them there.


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Nevertheless, “How Much Is Enough? is a good question. Even if just now the West could do with more, not less, GDP, the pursuit of wealth for its own sake is folly. Anyone who sets store by capitalism and markets will find both books uncomfortable reading. They should be read all the same.


July 20, 2012

UBS’s Track Record of Averting Prosecution


By JAMES B. STEWART




As the Justice Department weighs the possibility of criminal charges in the unfolding Libor rate-setting scandal, it may want to consider the record of the Swiss banking giant UBS.


      
At UBS, a series of immunity, nonprosecution and deferred prosecution agreements in recent yearsevidently the government’s preferred approach to corporate crime — seems to have had scant, if any, deterrent effect. “It’s depressing,” Representative Peter Welch, Democrat of Vermont, a member of the House oversight committee, told me this week after we discussed UBS’s recent transgressions. “The Justice Department has to decide: Is the day of consent decrees and settlements, where you pay a fine, one passed on to shareholders, are those days over? Are the days of jail time here?”


      
UBS, one of more than a dozen banks being investigated for manipulating interest rates for their own benefit, is hardly the only major global bank with a record of recidivism. Just this week, HSBC apologized after a Senate committee exposed a pattern of money laundering for “drug kingpins and rogue nations.” HSBC, which had been cited twice in the last decade for repeatedly violating money laundering laws, remains under civil and criminal investigation.


      
It was a rival, Barclays, that set off an international furor when it admitted to a wide-ranging conspiracy to manipulate the London interbank offered rate, commonly known as Libor, which is the benchmark for countless interest rate determinations and an estimated $450 trillion in derivative contracts. It obtained a nonprosecution agreement, in large part because of what the Justice Department called its “extraordinarycooperation, and agreed to pay American and British authorities a $450 million penalty. Barclays has had its own problems with accusations of money laundering and paid $298 million to settle charges that it circumvented United States prohibitions on funneling money to Iran.

      
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.

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As the Justice Department points out in its guidelines for charging a corporation with a crime: “A corporation, like a natural person, is expected to learn from its mistakes,” and “a history of similar misconduct may be probative of a corporate culture that encouraged, or at least condoned, such misdeeds, regardless of any compliance programs. Criminal prosecution of a corporation may be particularly appropriate where the corporation previously had been subject to noncriminal guidance, warnings or sanctions.”



UBS, with dual headquarters in Zurich and Basel, traces its roots to 1854. Last year it had more than $26 billion in revenue and nearly 65,000 employees worldwide. It was deemed too big to fail during the financial crisis, and had to be bailed out by the Swiss government after a $50 billion write-down on mortgage-backed securities.


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

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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. UBS bankers trolled for wealthy clients susceptible to tax evasion schemes at professional tennis matches, polo tournaments and celebrity events. One UBS banker smuggled diamonds in a toothpaste tube to accommodate a client. In return for the deferred prosecution agreement, UBS agreed to pay $780 million in fines and penalties and disclose the identities of many of its United States clients. At the same time it settled Securities and Exchange Commission charges that it acted as an unregistered broker-dealer and investment adviser to American clients and paid a $200 million fine. In October 2010 the government dropped the charges, saying UBS had fully complied with its obligations under the agreement.


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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.

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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. Seven of UBS’s top executives were said to have dumped their own holdings, totaling $21 million, even as they told the bank’s brokers to “mobilize the troops” and unload the securities on unsuspecting clients. As Andrew M. Cuomo, who was New York’s attorney general then, put it: “While thousands of UBS customers received no warning about the auction-rate securities market’s serious distress, David Shulman one of the company’s top executives used insider information to take the money and run.” Besides reimbursing clients and settling with the S.E.C., UBS paid a $150 million fine to settle consumer and securities fraud charges filed by New York and other states. It again escaped prosecution.


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There’s moreincluding 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.” The agency is seeking $1 billion in damages. (UBS has denied the charges and the case is pending.) UBS hasn’t been charged with any civil or criminal misconduct related to mortgage-backed securities.


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.



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Among the dozen or so banks caught up in the investigation, UBS hasn’t disclosed what role, if any, it played. But its conditional immunity indicates that UBS confessed and gave evidence against others. A corporation can avoid criminal conviction and fines for antitrust crimes “by being the first to confess participation in a criminal antitrust violation, fully cooperating with the division, and meeting other specified conditions,” according to the Justice Department.



.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. Libor is set each day based on submissions from major global banks for a variety of currencies. UBS is a member of the banking panels that determine United States dollar, British pound, euro, yen and Swiss franc Libor rates.



.UBS said its antitrust immunity was tied only to yen-related rates. That means it could still be prosecuted for antitrust crimes related to other currencies.



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Barclays obtained antitrust immunity only for a conspiracy involving the euro interbank offered rate, suggesting that the Justice Department is treating the cases as separate conspiracies.



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nlike Barclays, UBS does not have immunity or a nonprosecution agreement from the criminal division, which means it could be charged with the full range of securities and commodities fraud.
When I asked UBS for comment about its record, a spokeswoman said that the bankacknowledges and takes responsibility for the mistakes and oversights that occurred in our past, and we have learned a great deal. New senior management is fully committed to protecting the firm’s reputation, our employees and shareholders from any misconduct by individuals. We continuously work to ensure compliance with the rules, and improve controls to keep mistakes from happening or to detect them as soon as possible, if they do occur.”



      
In the Libor scandal, UBS’s conditional immunity applies only to the company, not to individuals. While UBS seems to fit the profile for charging corporations with crime, it remains the case that individuals commit crimes, even if companies are liable for their acts. But so far, the only person from UBS to receive a jail term in connection with any of the bank’s multiple scandals and offenses is Bradley Birkenfeld, the original whistle-blower in the huge tax evasion case. Mr. Birkenfeld pleaded guilty to conspiracy to defraud the United States and was sentenced to 40 months in prison.




Another UBS banker, Renzo Gadola, pleaded guilty in the tax fraud case, cooperated, and was granted probation. A third was charged but hasn’t been tried and remains a fugitive. In another notorious case, British authorities charged a trader, Kweku Adoboli, with fraud and false accounting after UBS announced it had lost $2.3 billion in unauthorized trades. He pleaded not guilty and is awaiting trial. And in the municipal securities bid-rigging scandal, three former UBS bankers are facing trial and a fourth pleaded guilty but hasn’t been sentenced.



{Otherwise, no one at UBS has faced criminal charges, even though two high-ranking UBS officials settled New York and other states’ charges of insider trading for dumping their auction-rate securities.




One, Mr. Shulman, UBS’s global head of municipal securities, who was publicly criticized by Mr. Cuomo, paid $2.75 million to settle the charges and was suspended as a securities broker for two and a half years. Another, David D. Aufhauser, UBS’s general counsel, paid $6.5 million and was barred from practicing law in New York for two years. Mr. Shulman was suspended by UBS and Mr. Aufhauser left the bank. UBS declined to comment on the reason for his departure and named him an adviser to the bank.



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Neither man admitted or denied guilt, but in both cases, the allegations made by the authorities were incriminating. According to the complaints, Mr. Shulman sold his personal holdings within days of learning the market was in distress. Mr. Aufhauser was on an Acela train to Washington when UBS’s chief risk officer e-mailed him to warn that the auction-rate securities market was collapsing. Minutes later, he e-mailed his UBS broker to sell the securities in his account. (A lawyer said Friday that Mr. Aufhauser subsequently reversed the trade and didn’t profit from the order.)




 
{Today Mr. Shulman is listed as a “managing member” of BasePoint Capital L.L.C., a private investment firm in Greenwich, Conn. Mr. Aufhauser is a partner at the prominent Washington law firm Williams & Connolly. His biography on the firm’s Web site references his experience as “managing director and global general counsel of the UBS AG investment bank.”



Both Mr. Shulman and Mr. Aufhauser declined to comment.




Is it any wonder that despite repeated apologies and promises to change, UBS and other banks keep getting in trouble?


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Last week New York Times reporters Ben Protess and Mark Scott wrote that the Justice Department was building criminal cases against several individuals and institutions implicated in the Libor scandal, even as rumors swirled that more generous settlements with major banks were in the works. If prosecutions are forthcoming, it will be a welcome sign that banks and their employees will be held accountable for their misdeeds. As the recent wave of scandals suggests, years of leniency have failed to bring the hoped-for results or respect for the law.



-“My view is we’re well past the day where we can postpone putting guilty people behind bars,” said Mr. Welch, the representative from Vermont, who sent a letter this week to Attorney General Eric H. Holder Jr. urging the department to “aggressively prosecutebank officials who manipulated Libor.




“The whole point of prison terms is to deter conduct in that community, and we know jail sentences are an effective deterrent,” Mr. Welch added. Restoring public confidence means that people who commit crimes spend some time in jail.”