Independence in Accounting Standard Setting

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    Chanos condemns "monstrous idea" that banks love
    article posted November 13, 2009 by AAA HQ, last edited February 10, 2012 by Tracey Sutherland 
    912 Views, 1 Comment
    title:

    Chanos condemns "monstrous idea" that banks love

    citation:

    David Reilly (November 11, 2009), "Chanos Condemns ‘Monstrous Idea’ That Banks Love: David Reilly". Bloomberg News.

    brief description:

    Commentary by David Reilly of Bloomberg News:

         Famed hedge-fund manager James Chanos in recent speeches has outlined lessons from the financial crisis. A top one: “Accounting matters a lot.”

         Chanos, who has flagged numerous accounting frauds over the years including the one that ultimately brought down Enron, is concerned investors will quickly forget this and other warnings from the implosion of the financial system.

         He doesn't have to worry about banks missing this point. As Congressional debate over financial reform intensifies, banks are committed to ensuring that accounting rules serve their own needs.

         Their latest push concerns the possible creation by Congress of a council of regulators charged with overseeing firms whose failure might blow up the financial system. Banks want any such council, consisting primarily of banking regulators, to help determine how accounting rules are set, or have the power to shelve them during a crisis.

         The result would be more politicized accounting rules and a process that gives Congress a more direct way to influence what companies must tell investors. It would also mean investor interests take a back seat to those of the banking industry.

    journal/magazine/etc.:
    Bloomberg.com
    publication date:
    November 11, 2009

    Comment

     

    • Robert E Jensen

      "How a big US bank laundered billions from Mexico's murderous drug gangs," by Ed Vulliamy, The Guardian, April 3, 2011 ---
      http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs
      |Thank you Robert Walker for the heads up.

      As the violence spread, billions of dollars of cartel cash began to seep into the global financial system. But a special investigation by the Observer reveals how the increasingly frantic warnings of one London whistleblower were ignored

      On 10 April 2006, a DC-9 jet landed in the port city of Ciudad del Carmen, on the Gulf of Mexico, as the sun was setting. Mexican soldiers, waiting to intercept it, found 128 cases packed with 5.7 tons of cocaine, valued at $100m. But something else – more important and far-reaching – was discovered in the paper trail behind the purchase of the plane by the Sinaloa narco-trafficking cartel.

      During a 22-month investigation by agents from the US Drug Enforcement Administration, the Internal Revenue Service and others, it emerged that the cocaine smugglers had bought the plane with money they had laundered through one of the biggest banks in the United States: Wachovia, now part of the giant Wells Fargo.

      The authorities uncovered billions of dollars in wire transfers, traveller's cheques and cash shipments through Mexican exchanges into Wachovia accounts. Wachovia was put under immediate investigation for failing to maintain an effective anti-money laundering programme. Of special significance was that the period concerned began in 2004, which coincided with the first escalation of violence along the US-Mexico border that ignited the current drugs war.

      Criminal proceedings were brought against Wachovia, though not against any individual, but the case never came to court. In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Now that the year's "deferred prosecution" has expired, the bank is in effect in the clear. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine.

      More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.

      "Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank's $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement.

      Continued in article

      Bob Jensen's threads on how the big banks and brokerages are often Rotten to the Core ---
      http://www.trinity.edu/rjensen/FraudRotten.htm

      Note that I've closed the March 31, 2011 edition of FraudUpdates ---
      http://www.trinity.edu/rjensen/FraudUpdates.htm