Levine on Wall Street: Deutsche's LOL Market Manipulation
You're not too big to fail if you're ring-fenced
One way to address the too big to fail problem in global banking is just to shuffle some papers. In particular, without really changing its activities, Credit Suisse is planning to lump its bread-and-butter Swiss wealth management operations into one legal entity and its scary evil U.S. and U.K. investment banking operations into two other entities. That way if the investment banks run into trouble they can just be cast adrift while the Swiss operations are untouched, which in turn will make Credit Suisse's home regulators less worried about letting those operations fail. The question for Credit Suisse is presumably who will charge them more: investors and counterparties who have to fund an investment bank outside the ring fence, or regulators who will demand more capital for an un-ring-fenced operation. Seems like the regulators were more expensive, which was probably their (sensible) goal.
It's not insider trading if you're just
helping out a lobbyist
The Wall Street Journal has a story about an insider trading investigation over a government decision that was correctly predicted by a policy research firm just before it was announced, making the firm's clients a lot of money. The firm got its information from a lobbyist, who in turn got his information from a bunch of government employees including a Senate aide. The investigation is complicated by the difficulty of determining whether those communications were illegitimate leaks in violation of the government employees' job duties to keep information secret, or legitimate discussions about legislative matters between the government employees and their constituent. Because of course it is important for the law to crack down on insider trading, but only if that doesn't interfere with lobbying.
It's not market manipulation if you're
Here is a story about Federal Bureau of Investigation agents visiting the house of a Deutsche Bank currency trader to confront him with transcripts of chats in which he discussed manipulating currency markets. But, you see: "People close to Deutsche Bank say the incident stemmed from a misunderstanding based at least partly on the trader having made a joke, in writing, about his ability to manipulate markets." So, kids, here is one very simple but important piece of advice: Never make a joke, in writing, about your ability to manipulate markets. Actually, joking about any sort of illegal activity should probably take place off of monitored electronic communications. The joy you experience when your buddies type "lol bro u so good a manipulatin hahaha" in your chat room will not compensate for the sadness you experience when the feds knock on your door at 5 a.m.
It's not gonna happen for
that Fannie/Freddie privatization plan
I mean, maybe it will, I don't know. But the Barack Obama administration is not particularly interested in privatizing Fannie Mae and Freddie Mac by giving them to their preferred stock holders, because it worries that that "could re-create a duopoly that the market would perceive as too-big-to-fail market entities with an implicit government guarantee." Which is a fair enough worry.
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To contact the author on this story:
Matthew S Levine at firstname.lastname@example.org